Lockheed Martin 1999 Annual Report Download - page 50

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Lockheed Martin Corporation
For purposes of pro forma disclosures, the options’
estimated fair values are amortized to expense over the
options’ vesting periods. The Corporation’s pro forma infor-
mation follows:
(In millions, except per share data) 1999 1998 1997
Pro forma net earnings $351 $ 965 $1,267
Pro forma earnings (loss) per share:
Basic $ .92 $2.56 $ (1.65)
Diluted $ .91 $2.53 $ (1.65)
Note 14—Post-Retirement Benefit Plans
Defined contribution plans— The Corporation maintains a
number of defined contribution plans which cover substan-
tially all employees, the most significant of which are the
401(k) plans for salaried employees and hourly employees.
Under the provisions of these 401(k) plans, employees’
eligible contributions are matched by the Corporation at
established rates. The Corporation’s matching obligations
were $222 million in 1999, $226 million in 1998 and
$212 million in 1997.
The Lockheed Martin Corporation Salaried Savings
Plan includes an ESOP which purchased 34.8 million
shares of the Corporation’s common stock with the pro-
ceeds from a $500 million note issue which is guaranteed
by the Corporation. The Corporation’s match consisted of
shares of its common stock, which was partially fulfilled
with stock released from the ESOP at approximately 2.4
million shares per year based upon the debt repayment
schedule through the year 2004, with the remainder being
fulfilled through purchases of common stock from terminating
participants or in the open market, or through newly issued
shares from the Corporation. Interest incurred on the ESOP
debt totaled $20 million, $23 million and $26 million in
1999, 1998 and 1997, respectively. Dividends received
by the ESOP with respect to unallocated shares held are
used for debt service. The ESOP held approximately
42.6 million issued shares of the Corporation’s common
stock at December 31, 1999, of which approximately
32.2 million were allocated and 10.4 million were unallo-
cated. Unallocated common shares held by the ESOP are
considered outstanding for voting and other Corporate pur-
poses, but excluded from weighted average outstanding
shares in calculating earnings per share. For 1999, 1998
and 1997, the weighted average unallocated ESOP
shares excluded in calculating earnings per share totaled
approximately 11.3 million, 13.6 million and 15.8 million
common shares, respectively. The fair value of the unallo-
cated ESOP shares at December 31, 1999 was approxi-
mately $228 million.
Certain plans for hourly employees include non-
leveraged ESOPs. The Corporation’s match to these plans
was made through cash contributions to the ESOP trusts
which were used, in part, to purchase common stock from
terminating participants and in the open market for alloca-
tion to participant accounts. These ESOP trusts held approx-
imately 3.7 million issued and outstanding shares of
common stock at December 31, 1999.
Dividends paid to the salaried and hourly ESOP trusts
on the allocated shares are paid annually by the ESOP
trusts to the participants based upon the number of shares
allocated to each participant.
Defined benefit pension plans, and retiree medical
and life insurance plans—
Most employees are covered by
defined benefit pension plans, and certain health care and
life insurance benefits are provided to eligible retirees by
the Corporation. The Corporation has made contributions to
trusts (including Voluntary Employees’ Beneficiary Association
trusts and 401(h) accounts, the assets of which will be used
to pay expenses of certain retiree medical plans) established
to pay future benefits to eligible retirees and dependents.
Benefit obligations as of the end of each year reflect assump-
tions in effect as of those dates. Net pension and net retiree
medical costs for 1999 and 1998 were based on assump-
tions in effect at the end of the respective preceding years.
Effective October 1997, the Corporation changed its
expected long-term rate of return on assets related to its
defined benefit pension and retiree medical plans.