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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
(x) Quarterly Report Pursuant To Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the quarterly period ended March 27, 1994
OR
( ) Transition Report Pursuant To Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the transition period from to
Commission file number 1-2193
LOCKHEED CORPORATION
(Exact name of registrant as specified in its charter)
State of Delaware 95-0941880
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4500 Park Granada Boulevard 91399
Calabasas, California (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code (818) 876-2000
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days.
Yes /x/ No / /
At March 27, 1994, 62,823,470 of the Registrant's 100,000,000 auth-
orized shares of Common Stock were outstanding, and 9,775,996 shares
were held as treasury stock. (3,359,952 shares were reserved for stock
options granted.)
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
CONDENSED CONSOLIDATED STATEMENT OF EARNINGS (Unaudited)
In millions, except First Quarter
per-share data 1994 1993
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Sales $ 3,025 $ 2,508
Costs and expenses 2,831 2,350
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Program profits 194 158
Interest expense (38) (32)
Other deductions, net (7)
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Earnings before income taxes 149 126
Provision for income taxes 57 50
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Net earnings $ 92 $ 76
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Earnings per share $ 1.45 $ 1.22
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Average number of common and common
equivalent shares outstanding 63.5 62.1
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Dividend per share $ .53 $ .53
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See accompanying notes.
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (continued).
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)
First Quarter
In millions 1994 1993
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CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 92 $ 76
Adjustments to reconcile net earnings to
net cash provided by operating activities
Depreciation and amortization 122 95
Changes in operating assets and liabilities 129 43
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Net cash provided by operating activities 343 214
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CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant, and equipment (66) (101)
Purchase of Lockheed Fort Worth Company (1,533)
Other, net (6) 3
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Net cash used for investing activities (72) (1,631)
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CASH FLOWS FROM FINANCING ACTIVITIES
Increase in total debt 8 1,351
Cash dividends (33) (33)
Stock options exercised 6 26
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Net cash provided by (used for)
financing activities (19) 1,344
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Increase (decrease) in cash and cash equivalents 252 (73)
Cash and cash equivalents, beginning of period 147 294
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Cash and cash equivalents, end of period $ 399 $ 221
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See accompanying notes.
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (continued).
CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited)
Dollar figures in millions, March 27, December 26,
except per-share data 1994 1993
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Assets
Current assets
Cash and cash equivalents $ 399 $ 147
Accounts receivable 1,568 1,644
Inventories 1,639 1,699
Other current assets 337 350
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Total current assets 3,943 3,840
Property, plant, and equipment (net of
accumulated depreciation and amortization
of $2,559 in 1994 and $2,641 in 1993) 1,920 1,950
Intangible assets related to tactical
aircraft programs acquired (net of
accumulated amortization of $109 in
1994 and $84 in 1993) 1,401 1,425
Excess of purchase price over fair value of
assets acquired (net of accumulated
amortization of $212 in 1994 and $204 in 1993) 774 782
Other noncurrent assets 967 964
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$9,005 $8,961
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Liabilities and Stockholders' Equity
Current liabilities
Short-term borrowings $ 18 $ 21
Accounts payable 754 841
Salaries and wages 402 355
Income taxes 103 44
Customers' advances in excess of related costs 568 606
Other current liabilities 677 666
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Total current liabilities 2,522 2,533
Long-term debt 2,554 2,547
Accumulated retiree medical benefit obligation 931 942
Other long-term liabilities 486 496
Stockholders' equity
Common stock, $1 par value, 100,000,000
shares authorized; 72,599,466 shares
issued (72,471,642 in 1993) 73 73
Additional capital 809 804
Retained earnings 2,487 2,427
Treasury shares, at cost (9,775,996 shares) (454) (454)
Guarantee of ESOP obligations (403) (407)
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Total stockholders' equity 2,512 2,443
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$9,005 $8,961
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See accompanying notes.
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (continued).
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
General Comment
The accompanying unaudited consolidated financial information is condensed
from that which would appear in annual financial statements and should be
read in conjunction with the consolidated financial statements included in
Lockheed's Annual Report on Form 10-K for the year ended December 26, 1993.
In the opinion of management, the interim financial data reflect all
adjustments necessary for a fair presentation. No material adjustments
other than a normal recurring nature were made. However, it should be
understood that accounting measurements at interim dates may be less
precise than those at year-end.
Inventories
Inventories consisted of the following components:
March 27, December 26,
In millions 1994 1993
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Work in process $3,254 $3,166
Materials and spare parts 289 310
Advances to subcontractors 330 394
Finished goods 117 105
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3,990 3,975
Less customer advances and
progress payments 2,351 2,276
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$1,639 $1,699
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (continued).
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(continued)
Long-term Debt
Long-term debt consisted of the following components:
March 27, December 26,
In millions 1994 1993
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Variable-rate notes due 1995 $ 200 $ 200
Fixed-rate notes due 1995 to 2004 140 140
4 7/8% notes due 1996 275 275
5.65% notes due 1997 100 100
5 7/8% notes due 1998 300 300
9 3/8% notes due 1999 300 300
6 3/4% notes due 2003 300 300
9% notes due 2022 200 200
7 7/8% debentures due 2023 300 300
Obligations under long-term
capital leases 20 17
Other obligations 44 36
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2,179 2,168
Guarantee of ESOP obligations 403 407
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2,582 2,575
Less portion due within one year 28 28
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$2,554 $2,547
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PART I. FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
SELECTED FINANCIAL DATA (Unaudited)
First Quarter
Dollar figures in millions 1994 1993
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Sales by segment
Aeronautical Systems $1,467 $ 847
Missiles and Space Systems 884 994
Electronic Systems 365 339
Technology Services 309 328
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Total sales $3,025 $2,508
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Program profits by segment
Aeronautical Systems $ 99 $ 54
Missiles and Space Systems 82 93
Electronic Systems 7 1
Technology Services 6 10
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Total program profits $ 194 $ 158
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Sales by customer
U. S. government: Defense 61% 66%
Nondefense 13 13
Foreign governments 16 10
Commercial 10 11
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Funded sign-ups* $3,302 $9,318
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March 27, December 26,
1994 1993
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Funded backlog** $13,433 $13,156
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Capitalization
Debt
Short-term borrowings 18 21
Long-term debt,
including current portion 2,179 2,168
Guarantee of ESOP obligations 403 407
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Total debt 2,600 2,596
Stockholders' equity 2,512 2,443
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Total capitalization 5,112 5,039
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Number of employees 80,700 83,500
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* 1993 included acquisition of existing funded backlog of Lockheed Fort
Worth Company of approximately $7 billion.
**Total negotiated backlog was $28.2 billion at March 27, 1994, and $28.9
billion at December 26, 1993, and includes programs under contract to the
United States and foreign governments for which funds have not yet been
allocated.
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PART I. FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Lockheed's operating cycle is long term and involves
various types of production contracts and varying
production delivery schedules. Accordingly, results
of a particular quarter, or quarter-to-quarter
comparisons of recorded sales and profits, may not be
indicative of future operating results. The following
comparative analysis should be viewed in this context.
CONSOLIDATED OPERATIONS
Consolidated sales of $3.0 billion in the first quarter of 1994 were 21
percent higher than first quarter 1993 sales of $2.5 billion. Higher
sales in the Aeronautical Systems and Electronic Systems segments were
partially offset by lower sales in the Missiles and Space Systems and
Technology Services segments. The increased sales in the Aeronautical
Systems segment were primarily due to three months revenues for the
Lockheed Fort Worth Company compared to one month in 1993.
Program profits of $194 million were 23 percent higher in 1994 compared
with $158 million in 1993. The change in program profits primarily
reflects the increases in sales in 1994 compared to 1993.
A discussion of operations by business segments begins on the next page.
INTEREST EXPENSE
Interest expense increased 19 percent in 1994 compared to the first
quarter of 1993. This increase was primarily due to higher average
borrowing levels during the first quarter of 1994 related to the
acquisition of the Lockheed Fort Worth Company in 1993.
OTHER DEDUCTIONS, NET
Net other deductions of $7 million in 1994 compared to net other income and
deductions of zero in 1993 primarily reflect lower interest income from
the investment of excess cash and greater miscellaneous expenses in
1994.
PROVISION FOR INCOME TAXES
Income tax expense increased in 1994 due to the increased earnings. The
company's current estimate of its 1994 effective tax rate is 38.5 percent,
slightly lower than the 39 percent estimated for 1993 at the end of the
first quarter.
NET EARNINGS
The higher net earnings in 1994 over 1993 reflect the higher sales and
program profits partly offset by the net other deductions and the higher
income tax expense.
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PART I. FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued).
OPERATIONS BY BUSINESS SEGMENT
Aeronautical Systems sales were $1.5 billion in the first quarter of 1994
compared to $847 million in the same period in 1993, a 73 percent increase.
More than three fourths of the increase was due to the inclusion of the
Lockheed Fort Worth Company for a full quarter in 1994 versus only one
month in 1993. Sales were also higher due to deliveries of 10 C-130
aircraft in 1994 compared to 5 deliveries in 1993, higher engineering and
manufacturing development activity on the F-22 tactical fighter program,
and greater aircraft maintenance activities. These sales increases were
partially offset by reduced sales from maritime patrol aircraft and in
certain other aircraft programs. The program profit increase in 1994
compared to 1993 primarily reflects the increase in sales. Increased
development activity on the improved version of the C-130 (C-130J) in 1994
compared to 1993 partially offset program profit increases.
Missiles and Space Systems revenues decreased approximately 11 percent in
the first quarter of 1994 compared to the same period in 1993. Lower
Trident II fleet ballistic missiles revenues reflect decreased production
contract requirements in 1994 versus 1993. Program cutbacks in certain
space systems programs also negatively impacted revenues. Partially
offsetting these decreases were increased revenues from the Theater High
Altitude Area Defense (THAAD) defensive missile program. Program profits
were approximately 12 percent lower, reflecting the lower revenues and the
absence in 1994 of incentive fees recognized on certain space programs
nearing completion in 1993, offset in part by performance incentives in
various missiles systems programs.
Electronic Systems sales were $365 million in the first quarter of 1994
compared to $339 million in the first quarter of 1993. This eight percent
increase primarily reflects higher commercial product manufacturing
activities offset in part by lower defense surveillance systems and
antisubmarine warfare program revenues. Program profits in the first
quarter of 1994 compared to 1993 reflected the improved performance in
defense electronics programs.
Revenues in the Technology Services group were six percent lower in the
first quarter of 1994 versus the same period in 1993 reflecting lower NASA
sales related to the shuttle processing program and other engineering
activities. Revenues were also affected by lower contract field support
activities. Partially offsetting these decreases were increased revenues
from various governmental programs and environmental services. Program
profit reductions in 1994 versus 1993 primarily reflect higher costs
associated with various business development projects as well as the
decline in revenues.
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PART I. FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued).
LIQUIDITY AND CAPITAL RESOURCES
During the first quarter of 1994, $343 million of cash was provided by
operating activities compared with $214 million during the same period in
1993. The difference was due to favorable fluctuations in working capital
items, higher net earnings, and higher non-cash items, such as depreciation
and goodwill amortization, which are included in net earnings. In
addition, Lockheed collected approximately $50 million of progress billings
previously withheld in connection with the Lockheed Fort Worth Company's
manufacturing cost allocation system.
Additions to property, plant, and equipment consumed $66 million in the
first quarter of 1994 compared with $101 million during the first quarter
of 1993. Although lower capital expenditures are planned for 1994, the
first quarter variance was primarily due to timing of outlays.
The company cash balance was $399 million at March 27, 1994, $252 million
more than at year-end December 26, 1993. Significant cash balances
should be maintained throughout the year. Excess cash is temporarily
invested in interest-bearing instruments.
The company's total debt was $2,600 million at March 27, 1994, relatively
unchanged from December 26, 1993. Included in the total debt amount is
$403 million of ESOP debt which has been guaranteed by the company. At
the end of the quarter, the company had no outstanding commercial paper
borrowings or borrowings under committed credit lines from a group of
domestic and foreign banks.
Cash on hand and temporarily invested, internally generated funds, and
available financing resources are sufficient to meet anticipated operating
and debt service requirements and discretionary investment needs.
Stockholders' equity at the end of March 1994 was approximately $2.5
billion, a $69 million increase over the balance at the end of 1993.
The increase in equity was due to the retention of first quarter earnings
in excess of cash dividends paid, and the issuance of new shares upon the
exercise of employee stock options.
ACCOUNTING MATTERS
Lockheed has adopted Statement of Financial Accounting Standards No. 112
(SFAS 112), "Employers' Accounting for Postemployment Benefits" as of
December 27, 1993. Due to the design of Lockheed's postemployment
benefit plans and previously employed accounting practices for the costs
of these benefits, the adoption of SFAS 112 had an insignificant impact on
Lockheed's financial results.
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PART II. OTHER INFORMATION
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
12 Computation of Ratio of Earnings to Fixed Charges.
The registrant undertakes to file with the Commission upon
its request any agreements otherwise excluded from Item
601 (b)(4) as not exceeding 10 percent of the total assets
of the registrant and its subsidiaries on a consolidated
basis.
(b) Reports on Form 8-K
Form 8-K dated March 7, 1994, Item 5, Other Events; and Item
7, Financial Statements, Pro Forma Financial Information and
Exhibits.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
LOCKHEED CORPORATION
(Registrant)
Date: May 6, 1994 By: /s/ C. R. MARSHALL
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C. R. Marshall
Vice President and Secretary
Date: May 6, 1994 By: /s/ R. E. RULON
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R. E. Rulon
Vice President and Controller
(Principal Accounting Officer)
Exhibit 12
COMPUTATION OF RATIO OF
EARNINGS TO FIXED CHARGES
(In millions except ratios)
FIRST QUARTER
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1994 1993
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EARNINGS BEFORE TAX $ 149 $ 126
FIXED CHARGES
Capitalized interest 0 0
Interest expense 38 32
Interest expense for finance subsidiary 0 0
Interest portion of rental expense 9 11
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TOTAL FIXED CHARGES $ 47 $ 43
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TOTAL FIXED CHARGES EXCLUDING CAPITALIZED INTEREST $ 47 $ 43
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EARNINGS PLUS FIXED CHARGES EXCLUDING CAPITALIZED INTEREST $ 196 $ 169
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RATIO OF EARNINGS TO FIXED CHARGES 4.2 3.9
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