FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (Fee Required)
For the fiscal year ended December 26, 1993
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
Calabasas, California 91399
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (818) 876-2000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
------------------ -----------------------------------------
Common Stock, $1 par value New York Stock Exchange; Pacific Stock
Exchange; The Stock Exchange, London; The
Stock Exchanges of Zurich and Geneva; and
Amsterdam Stock Exchange N.V.
Securities registered pursuant to Section 12(g) of the Act: None
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 / /
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein and will not be
contained to the best of registrant's knowledge in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. /X/
At February 1, 1994, the aggregate market value of the voting stock
held by non-affiliates of the registrant was approximately $4,125,000,000.
At February 1, 1994, the registrant had 62,722,610 shares of common
stock, $1 par value, outstanding (9,775,996 shares held as treasury stock).
Part III incorporates information by reference from a definitive Proxy
Statement filed with the Securities and Exchange Commission within 120 days
after the close of the fiscal year ended December 26, 1993.
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PART I
Item 1. Business
The Registrant is Lockheed Corporation which, together with its
consolidated subsidiaries (unless the context otherwise indicates), will be
referred to hereinafter as the "company." Lockheed was incorporated in
California in 1932. In 1986, under a plan of reorganization approved
by its stockholders, the company's domicile was changed from California to
Delaware. Its executive offices are located at 4500 Park Granada
Boulevard, Calabasas, California 91399, and its telephone number is
(818) 876-2000.
Lockheed's primary businesses involve research, development, and
production of aerospace products and systems. During 1993, approximately
77 percent of sales were to the United States government--64 percent in
defense programs and 13 percent in nondefense. Sales to foreign
governments accounted for 13 percent of revenues and sales to commercial
customers 10 percent. Sales made to foreign governments through the United
States government are included in sales to foreign governments.
Industry Segments
Lockheed's operating companies are aligned into four segments:
Aeronautical Systems, Missiles and Space Systems, Electronic Systems, and
Technology Services.
The company is engaged in a number of classified programs, and the
results of operations related to those programs are included in the
company's consolidated financial statements and other financial data
included herein. While no specific references to individual classified
programs are--or could be--made, Management's Discussion and Analysis
provides comments regarding trends and results of the classes of products
that include these programs. The characteristics and business risks
associated with classified business do not differ materially from those of
the other programs and products in which the company participates.
Financial information about industry segments, foreign and domestic
operations, and export sales is included in the Selected Financial Data,
Management's Discussion and Analysis, and in Note 13 to the Consolidated
Financial Statements included in Part II.
Aeronautical Systems
The Aeronautical Systems segment comprises design and production of
fighter/bomber aircraft, special mission and high performance aircraft, and
systems for military operations, for airlift, for antisubmarine warfare,
and for reconnaissance and surveillance; and aircraft modification and
maintenance for military and civilian customers.
In the first quarter of 1993, the company completed the acquisition of
the former tactical military aircraft business of General Dynamics
Corporation. This division, now called the Lockheed Fort Worth Company, is
the prime contractor for the F-16 "Fighting Falcon" fighter aircraft. The
company ended 1993 with a backlog of nearly 600 firm orders for F-16
aircraft from the United States Air Force and international customers. The
company is also involved with upgrade and modification programs for the
existing fleet of F-16s, and is the principal subcontractor to develop and
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manufacture the FS-X fighter aircraft for Japan, which will resemble the
F-16.
As a result of the Lockheed Fort Worth Company acquisition, the
company's share of the F-22 air superiority fighter program increased to
two-thirds. A team, composed of the company as prime contractor with
teammates Boeing and Pratt & Whitney, is currently engaged in the
Engineering and Manufacturing Development phase of the program for the
United States Air Force. During 1993, the program completed preliminary
design review that finalized the interior and exterior lines of the
production aircraft.
The C-130 airlifter aircraft passed its 40th anniversary in 1993. As
production of existing models continues, the company is developing an
improved version, the C-130J. It will feature a two-person flight station,
fully integrated digital avionics, more powerful engines, and a new, more
efficient propeller system.
The company is engaged in upgrade programs for its high performance
aircraft. This includes re-engining the Air Force fleet of U-2 reconnais-
sance aircraft and modifying the F-117A aircraft with an advanced cockpit
update for full-color displays and automated flight management system,
including navigation, targeting, and mission planning systems.
The company's aircraft modification and maintenance programs include
major modification to C-130's for special military missions. In addition,
the company performs modifications, service life extensions,
modernizations, and maintenance services on both military and commercial
aircraft.
Missiles and Space Systems
The Missiles and Space Systems segment comprises military and civil
space systems, research laboratories, strategic fleet ballistic missiles,
tactical defense missiles, and communications systems.
The Trident II D-5 is the sixth generation of submarine-launched,
strategic deterrent, fleet ballistic missiles developed and produced by the
company for the U.S. Navy. The company is working on its eighth Trident
production and support contract. Lockheed also provides fleet ballistic
missiles and operations support to the United Kingdom.
The company delivered the first Milstar communications satellite to
the United States Air Force in 1993. It was launched in early 1994, and
is the first of several Milstar satellites designed to provide assured,
highly mobile, antijam, worldwide communication links to tactical troops as
well as strategic users.
As prime contractor for the Theater High Altitude Area Defense (THAAD)
program, the company is working under a four-year, $745 million contract
awarded in 1992 by the U.S. Army to develop a system capable of
intercepting, at high altitudes and long ranges, theater ballistic missiles
headed toward deployed military forces and population centers.
The company is a part of NASA's Hubble Space Telescope team, having
designed and built the spacecraft, provided systems integration, and
participated in the 1993 telescope repair mission. Lockheed continues to
support the Hubble, working each day with NASA at Goddard Space Center in
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Greenbelt, Maryland.
The company remains as a principal subcontractor on the space station,
and supported NASA on the modification of the space station as it went
through a major redesign in 1993. The Lockheed components include the
laboratory equipment, hardware and rotating joints for the station's
exterior, and the solar arrays to power the station.
In 1993, the company signed a contract to build spacecraft for
Motorola's Iridium TM/SM global communication system. This system will
consist of 66 low-Earth orbiting satellites sending signals that can link
any telephone to Motorola's small hand-held unit. Lockheed will design and
build the Iridium TM/SM bus, consisting of the structure, electrical power
system and attitude control system. The company completed the preliminary
design phase in 1993 and is scheduled to deliver the first Iridium TM/SM
bus in 1995.
Lockheed has created a partnership with two of the Russian
Federation's major aerospace firms, Khrunichev Enterprises and NPO Energia,
and incorporated Lockheed-Khrunichev-Energia International (LKEI), a
consortium with worldwide rights to Russia's Proton rocket. In the latter
part of 1993, LKEI and Space Systems Loral announced an agreement to
provide up to five launches for Loral beginning in 1995.
Lockheed's commercial space initiatives also include a new family of
Lockheed Launch Vehicles (LLV). The first demonstration flight is
scheduled for late 1994. LLV provides the capability to launch small
satellites and science missions into low-Earth orbit.
Electronic Systems
The Electronic Systems segment participates in both defense and
commercial markets.
For defense markets, the company develops and manufactures radar
frequency, infrared, and electro-optic countermeasures systems; mission
planning systems; surveillance systems; automated test equipment;
antisubmarine warfare systems; microwave systems; and avionics.
The company was chosen to produce the new Air Force Mission Support
System, a computer-based mission planner that automates many functions
including flight and route planning, weapons delivery, and threat analysis.
This segment also performs work on advanced cockpit display subsystems
for the F-22 fighter and C-130J airlifter. This technology can be used to
provide state-of-the-art cockpits for other new aircraft as well as
upgrades for older systems. The Sanders unit is also supporting a number
of Lockheed programs with state-of-the-art microwave monolithic integrated
circuits technology. Revolutionary advances in this technology permit
smaller, affordable electronic systems to operate more reliably and many
times faster than the highest-speed silicon processors.
The company also manufactures computer graphics equipment through its
CalComp subsidiary, other electronic products, and distributes computer
equipment and workstations through its Access Graphics subsidiary, for
commercial markets worldwide.
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Technology Services
The Technology Services segment comprises space shuttle processing,
engineering sciences and support, military equipment maintenance and
support services, airport facilities development and management, data
processing and transaction services.
The company marked its tenth year as NASA's space shuttle processing
contractor in 1993. During the year, the program successfully launched
seven shuttle missions.
In 1993, NASA again selected Lockheed for the engineering services
contract at the Johnson Space Center. Under the contract, the company will
help develop NASA manned spaceflight programs and provide them with
engineering and scientific support, and will operate and maintain NASA's
engineering and science facilities and laboratories.
The company provides information services directed to the state and
municipal services markets, including processing of parking and moving
violations and emergency medical services billing for cities. The company
also provides child support locating and collecting services and payment
processing for five states and the county of Los Angeles.
The company is expanding its presence in government and commercial
environmental markets, with contracts to decontaminate and decommission
sites and remediate soil contaminated with heavy metals for commercial
customers, as well as mixed-waste-technology demonstration projects for two
Department of Energy (DOE) locations. The company continues to provide
environmental monitoring and technical support services for the
Environmental Protection Agency.
General
No portion of the business of the company is considered to be
seasonal.
Consolidated funded backlog at December 26, 1993, and December 27,
1992, was $13.2 billion and $8.9 billion, respectively. Of the year-end
1993 backlog, $4.9 billion is not anticipated to be filled by December 25,
1994.
The company, along with others, is involved, or has been notified of
potential involvement, in several United States Environmental Protection
Agency "Superfund" sites. Federal, state, and local requirements relating
to the discharge of materials into the environment, the disposal of hazard-
ous wastes, and other factors affecting the environment have had and will
continue to have an impact on the manufacturing operations of the company.
Thus far, compliance with such provisions has been accomplished without
material effect on the company's capital expenditures, earnings, and com-
petitive position. For a further discussion, see Notes 1 and 11 to the
Consolidated Financial Statements included in Part II.
The company does not believe that expiration of any patent, trademark,
license, franchise, concession, or termination of any agreement relating
thereto would have a material effect on its business.
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Research and Development
During 1993, 1992, and 1991, the company performed $3.1 billion, $3.1
billion, and $3.3 billion, respectively, of research and development work
under customer contracts. In addition, it expended $449 million in 1993,
$420 million in 1992, and $384 million in 1991 on company-sponsored
research and development and bid and proposal efforts, a substantial
portion of which was included in overhead allocable to U. S. government
contracts.
During fiscal year 1993, the company did not undertake the development
of a new product or line of business requiring the investment of a material
amount of its total assets.
Raw Materials
The company has not experienced difficulty in recent years in obtain-
ing an adequate supply of any raw materials or other supplies needed in its
manufacturing processes. The company believes that its experience in ob-
taining such items will enable it to maintain its competitive position.
Procurement and Subcontracting
Many materials, items of equipment, and components used in the produc-
tion of the company's products are purchased from other manufacturers. The
company also purchases from outside sources such items as propulsion sys-
tems, guidance systems, telemetry and gyroscopic devices, and electronic
functional subsystems in support of its missiles and space programs. In
addition, the company often subcontracts major sections of aircraft, such
as wings, empennages, and landing gears, to other companies. The company
utilizes competitive bidding in its procurement practices wherever
feasible.
A significant portion of the equipment and components, especially
engines, propellers, selected avionics systems, and flight and engine
instruments, used by the company in the manufacture of its products under
United States government contracts is furnished without charge to the
company by the government. The company does not include in its sales that
value which is represented by such government-furnished equipment.
The company is dependent upon the ability of certain of its suppliers
and subcontractors to meet performance specifications, quality standards,
and delivery schedules in order to fulfill its commitments to its custo-
mers. While the company endeavors to assure the availability of multiple
sources of supply, in certain cases involving complex equipment, it relies
on a sole source. The failure of certain suppliers or subcontractors to
meet the company's needs would adversely affect the company's operations.
Although certain priorities under United States government contracts
may be available, it has been and may continue to be necessary for the
company to enter early orders for its materials with long lead time re-
quirements to assure continued availability of materials needed for its
programs under which such priorities are unavailable.
United States Government Contracts and Regulations
The company's United States government business is performed under
cost-reimbursement-type contracts (cost-plus-fixed-fee, cost-plus-
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incentive-fee, and cost-plus-award-fee) and under fixed-price-type contracts
(firm fixed-price and fixed-price incentive). During 1993, 39 percent
of the company's total sales to the government were under fixed-price-type
contracts, and 61 percent were under cost-reimbursement-type contracts.
Cost-plus-fixed-fee contracts provide for reimbursement of costs, to
the extent that such costs are allowable, and the payment of a fixed fee.
This type of contract differs from the cost-plus-incentive fee contract in
that the latter provides for increases or decreases in the contract fee,
within specified limits, based upon actual results as compared to contrac-
tual targets for such factors as cost, quality, schedule, and performance.
In addition, these contract types differ from the cost-plus-award-fee con-
tract in that the latter provides for an award fee to be paid upon a sub-
jective evaluation by the customer of the company's performance, judged in
such areas as quality, timeliness, ingenuity, and cost-effectiveness of
work.
Under firm fixed-price contracts, the company agrees to perform
certain work for a fixed price and, accordingly, realizes all the benefit
or detriment occasioned by decreased or increased costs of performing the
contract. Fixed-price incentive contracts are fixed-price-type contracts
providing for adjustment of profit and establishment of final contract
prices by a formula based on the relationship which final total costs bear
to total target costs, with the contractor absorbing costs which exceed a
stipulated ceiling price. Other factors affecting incentive compensation
under a fixed-price incentive contract, in addition to cost, may include
reliability, schedule, and performance.
Under United States government regulations, certain costs--including
certain financing costs and marketing expenses--are not allowable. The
government also regulates the methods under which costs are allocated to
government contracts. For information concerning the company's accounting
policies regarding sales and earnings, accounts receivable, and inventories
under government contracts, see Notes 1, 5, and 6, respectively, to the
Consolidated Financial Statements included in Part II.
United States government contracts are, by their terms, subject to
termination by the United States government either for its convenience or
for default of the contractor. Cost-reimbursement-type contracts provide
that, upon termination, the contractor is entitled to reimbursement of its
allowable costs; and, if the termination is for convenience, a total fee
proportionate to the percentage of the work completed under the contract.
Fixed-price-type contracts provide for payment upon termination for items
delivered to and accepted by the government; and, if the termination is for
convenience, for payment of the contractor's costs incurred plus the costs
of settling and paying claims by terminated subcontractors, other settle-
ment expenses, and a reasonable profit on its costs incurred. However, if
a contract termination is for default, (i) the contractor is paid such
amount as may be agreed upon for completed and partially completed products
and services accepted by the government, (ii) the government is not liable
for the contractor's costs with respect to unaccepted items, and is
entitled repayment of advance payments and progress payments, if any,
related to the terminated portions of the contracts, and (iii) the
contractor may be liable for excess costs incurred by the government in
procuring undelivered items from another source.
In addition to the right of the government to terminate, government
contracts are conditioned upon the continuing availability of Congressional
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appropriations. Congress usually appropriates funds on a fiscal-year basis
even though contract performance may take many years. Consequently, at the
outset of a major program, the contract is usually partially funded, and
additional monies are normally committed to the contract by the procuring
agency only as appropriations are made by Congress for future fiscal years.
Licenses are required from United States government agencies for
export from the United States of many of the company's products. The
Export Administration Act of 1979 forbids participation by Americans in
international boycotts of countries with which the United States maintains
friendly trading relations.
Competition and Risk
The company encounters extensive competition in all of its lines of
business from numerous other companies. Substantial efforts must be
undertaken continually on a long-term basis in order to maintain existing
levels of business. In some cases, investment in fixed assets is involved.
Emphasis is placed by all United States government agencies on the
technical and managerial capabilities of the corporations seeking business.
Consequently, the degree to which the company may participate in future
government business will depend to a large extent on the effectiveness and
innovativeness of its research and development programs, its ability to
offer better program performance than its competitors at a lower cost to
the government, and its readiness in facilities, equipment, and manpower to
undertake the programs for which it may be competing.
A significant portion of the company's sales is associated with long-
term contracts and programs for the United States government in which there
are significant inherent risks. These risks include the uncertainty of
economic conditions, dependence on Congressional appropriations and admin-
istrative allotment of funds, changes in governmental policies which may
reflect military and political developments, time required for design and
development, significant changes in contract scheduling, complexity of
designs and the rapidity with which product lines become obsolete due to
technological advances, constant necessity for design improvements, intense
competition for available government business, difficulty of forecasting
costs and schedules when bidding on developmental and highly sophisticated
technical work, and other factors characteristic of the industry. Foreign
sales involve additional risks due to possible changes in economic and
political conditions.
For a further discussion of the risks inherent in the current defense
industry environment, see the Management's Discussion and Analysis in Item
7, Part II.
At December 26, 1993, the company had approximately 83,500 employees,
the majority of whom are located in the United States. The company has a
continuing need for many skilled and professional personnel in order to
meet contract schedules and obtain new and ongoing orders for its products.
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Item 2. Properties
At December 26, 1993, the company operated approximately 40 manufac-
turing plants and research and development facilities throughout the U. S.
and the remainder consisted of sales offices, warehouses, and service
centers. These facilities had an aggregate floor space of approximately 43
million square feet, a summary of which is listed in the table which
follows. Of this floor space, approximately 36% was owned by the company,
approximately 23% was leased, with the balance being made available under
facilities contracts for use in the performance of contracts with the
United States government.
Floor Area
(thousands of square feet)
Company Government
Industry Segments: Owned Leased Owned Total
----------------- ------- ------ ---------- -----
Aeronautical Systems Segment:
Abilene, Texas ....................... 360 409 769
Fort Worth, Texas .................... 200 1,095 7,077 8,372
Burbank, California .................. 373 99 472
Palmdale, California ................. 1,918 165 754 2,837
Marietta, Georgia .................... 1,876 414 6,336 8,626
Charleston, South Carolina ........... 160 160
Ontario, California .................. 1,276 1,276
Greenville, South Carolina ........... 469 469
Tucson, Arizona ...................... 270 270
San Bernardino, California ........... 198 198
Various (8) .......................... 185 130 315
Missiles and Space Systems Segment:
Sunnyvale and Palo Alto, California .. 6,508 2,439 770 9,717
Austin, Texas ........................ 605 156 761
Santa Cruz, California ............... 194 50 244
Huntsville, Alabama .................. 62 57 119
Houston, Texas ....................... 174 174
Various locations (12) ............... 304 304
Electronic Systems Segment:
Nashua, New Hampshire ................ 2,501 163 2,664
Anaheim, California .................. 433 433
Scottsdale, Arizona .................. 68 49 117
Ottawa, Ontario, Canada .............. 108 108
Reno, Nevada ......................... 94 94
Various locations (64) ............... 12 319 331
Technology Services Segment:
Arlington, Texas ..................... 36 36
Kennedy Space Center, Florida ........ 126 48 2,296 2,470
White Sands, New Mexico .............. 243 243
Teaneck, New Jersey .................. 41 41
Las Vegas, Nevada .................... 135 4 139
Houston, Texas ....................... 313 34 347
Various locations (60) ............... 4 622 132 758
Corporate Office Facilities:
Calabasas, California ................ 350 350
Washington, D. C. .................... 52 52
Denver, Colorado ..................... 98 98
------ ------ ------ ------
Total 15,775 9,893 17,696 43,364
====== ====== ====== ======
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In addition to the amounts included in the above table, the company
owned or leased facilities with approximately 211,000 square feet in
Seattle, Washington, related to discontinued operations and approximately
652,000 square feet of non-operating facilities in Plainfield, New Jersey,
related to the merger of Lockheed Electronics Company into Lockheed
Sanders, Inc. As discussed in Note 3 to the Consolidated Financial
Statements, included in Part II, the company is consolidating its
Aeronautical Systems manufacturing facilities and intends to dispose of
surplus properties resulting from that consolidation.
The company believes its facilities are generally well maintained,
that it has sufficient productive capacity to meet its projected needs, and
such productive capacity is adequately utilized but under continual review.
A large part of the company's activity is related to engineering and
research and development which is not susceptible to productive capacity
analysis. In the area of manufacturing, most of the operations are of a
job-order nature rather than an assembly line process, and productive
equipment has multiple uses for multiple products.
Item 3. Legal Proceedings
The EPA issued a notice of violation to the company on October 25,
1990, alleging violation of the Clean Water Act by discharging chromium-
containing wastewater without pretreatment. The company believes the
matter is settled and will not result in liability or other financial
impact in excess of $500,000.
See also Note 11 to the Consolidated Financial Statements, which is
included in Part II.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
Executive Officers of the Registrant
As of February 1, 1994, the following individuals were executive
officers of the company. Information relating to the ages and five-year
position history of these individuals is listed below. No family rela-
tionship between officers exists. There were no arrangements or under-
standings between any officer and any other person pursuant to which he was
selected as an officer.
Of the top six members of senior management, five are 62 years of age
or older. In view of this situation, management and the Board of Directors
of the company are continuing to develop an orderly succession plan
primarily focusing on the many internal candidates for senior positions who
are regarded as qualified for those positions.
D. M. Tellep, 62, Chairman of the Board and Chief Executive Officer since
1-1-89; Director since 1987.
V. N. Marafino, 63, Vice Chairman of the Board and Chief Financial and
Administrative Officer since 8-1-88; Director since 1980.
V. D. Coffman, 49, Executive Vice President since 3-2-92. He was Vice
President from 10-3-88 to 3-2-92; President -- Space Systems Division,
Lockheed Missiles & Space Company, Inc., from 10-3-88 to 3-2-92. He
was a Vice President of Lockheed Missiles & Space Company, Inc., from
8-3-85 to 3-2-92 and an employee of that company since 1967.
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K. W. Cannestra, 63, President -- Aeronautical Systems Group since 11-7-88.
J. N. McMahon, 64, President -- Missiles and Space Systems Group and
President-- Lockheed Missiles & Space Company, Inc., since 8-1-88.
V. P. Peline, 63, President -- Electronic Systems Group since 3-2-87.
R. B. Young Jr., 59, Vice President since 4-4-83; President -- Technology
Services Group since 7-1-92; he was President -- Lockheed Engineering
& Sciences Company from 12-10-79 until 7-1-92.
D. O. Allen, 57, Vice President -- Information and Administrative Services
since 5-12-87.
M. S. Araki, 62, Executive Vice President, Missiles and Space Systems Group
and Executive Vice President -- Lockheed Missiles & Space Company,
Inc., since 10-3-88.
J. A. Blackwell, 53, Vice President since 4-28-93; and President --
Lockheed Aeronautical Systems Company since 4-28-93. He has been an
executive employee of Lockheed Aeronautical Systems Company since
9-27-86.
H. T. Bowling, 59, President -- Lockheed Aircraft Service Company since
2-6-89. He was Executive Vice President and General Manager --
Lockheed Aeronautical Systems Company - Ontario from 9-3-87 until
2-6-89.
V. M. Butler, 51, Vice President since 8-6-90; President -- Lockheed Air
Terminal, Inc., since 6-1-84.
R. P. Caren, 61, Vice President -- Science and Engineering since 1-1-88.
R. K. Cook, 62, Vice President -- Washington Area since 5-1-73.
R. B. Corlett, 54, Vice President -- Human Resources since 3-1-91. He was
an employee of Lockheed Advanced Development Company from 5-21-90
until 3-1-91, and an employee of Lockheed Aeronautical Systems Company
from 5-28-87 until 5-21-90.
J. F. Egan, 58, Vice President -- Corporate Development since 4-5-93; Vice
President, Planning and Technology -- Electronic Systems Group from
12-27-86 until 4-5-92.
G. R. England, 56, Vice President since 3-1-93; and President -- Lockheed
Fort Worth Company since 3-1-93. From 1975 until 3-1-93 he was an
executive employee of General Dynamics Corporation.
B. E. Ewing, 49, Vice President since 3-1-93; and Vice President Aircraft
Programs Operations -- Lockheed Fort Worth Company since 3-1-93. From
1-19-81 until 3-1-93 he was an employee of General Dynamics
Corporation.
R. R. Finkbiner, 54, Vice President -- Contracts and Pricing since 8-3-92.
He has been an employee of Lockheed Corporation since 3-19-90. From
1987 until 3-19-90 he was an employee of Ernst & Young.
D. M. Hancock, 52, Vice President since 3-1-93; and Vice President and F-16
Program Director -- Lockheed Fort Worth Company since 3-1-93. From
1966 until 3-1-93 he was an employee of General Dynamics Corporation.
K. N. Hollander, 52, Vice President -- International Business Development
since 7-1-90. From 1988 until 7-1-90 he was an employee of Ford
Aerospace, Inc.
J. R. Kreick, 49, Vice President since 1-1-88; President -- Lockheed
Sanders, Inc., since 1-1-90; President -- Sanders Associates, Inc.,
from 1-1-88 until 1-1-90.
G. M. Laden, 57, Vice President since 5-1-87; and Vice President and
Assistant General Manager -- Missile Systems Division, Lockheed
Missiles & Space Company, Inc., since 10-2-89. He was Vice President
and General Manager -- Austin Division, Lockheed Missiles & Space
Company, Inc., from 5-1-87 until 10-2-89.
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J. F. Manuel, 54, Vice President -- Domestic Business Development since
4-5-93. He was Staff Vice President -- Domestic Business Development
from 5-4-91 until 4-5-93; and has been an employee of the Corporation
since 9-12-79.
C. R. Marshall, 40, Vice President -- Secretary and Assistant General
Counsel since 1-1-92. From 7-25-86 until 1-1-92 she was a Corporate
Counsel for the Corporation.
L. D. Montague, 60, Vice President; and President -- Missile Systems
Division, Lockheed Missiles & Space Company, Inc., since 5-9-89. He
has been an executive employee of Lockheed Missiles & Space Company,
Inc., since 2-19-77.
S. N. Mullin, 58, Vice President since 10-3-88; President -- Lockheed
Advanced Development Company since 12-3-90. He was Vice President and
General Manager, Team Program Office, Advanced Tactical Fighter --
Lockheed Aeronautical Systems Company from 10-2-89 until 12-3-90.
From 8-15-88 until 10-2-89 he was Vice President and General Manager,
Advanced Tactical Fighter -- Lockheed Aeronautical Systems Company.
G. T. Oppliger, 57, Vice President since 6-3-91; and President -- Lockheed
Space Operations Company, Inc., since 8-1-91. He has been an employee
of Lockheed Space Operations Company, Inc., since 6-22-85.
A. G. Otsea, 64, Assistant Treasurer since 7-7-75.
R. P. Parten, 58, Vice President; and President -- Lockheed Engineering and
Sciences Company since 7-1-92. He has been an executive of that
company since 7-1-85.
S. M. Pearce, 56, Vice President - Corporate Communications since 7-17-90.
From 1979 until 7-17-90 she was an employee of Ford Aerospace, Inc.
J. B. Reagan, 59, Vice President; and Vice President and Assistant General
Manager -- Research and Development Division, Lockheed Missiles &
Space Company, Inc., since 1-1-91. He has been an employee of
Lockheed Missiles & Space Company, Inc., since 1959.
P. C. Reynolds, 60, Assistant Treasurer since 10-5-92. He has been an
employee of Lockheed Corporation since 1960.
R. E. Rulon, 51, Vice President and Controller since 2-3-92. He was Vice
President -- Internal Audit from 8-6-90 until 2-3-92, and has been an
executive employee of Lockheed Corporation since 1981.
C. R. Scanlan, 59, Vice President since 1-2-90; Executive Vice President,
Missiles and Space Systems Group and Executive Vice President,
Lockheed Missiles & Space Company, Inc., since 1-2-90. He has been an
employee of Lockheed Missiles & Space Company, Inc., since 1961.
W. E. Skowronski, 45, Vice President and Treasurer since 9-18-92. He was
Staff Vice President -- Investor Relations from 1-2-90 until 9-18-92.
He was Assistant Treasurer of Boston Edison Company from 8-8-83 until
1-2-90.
W. R. Sorenson, 52, Vice President -- Operations since 1-1-92. He was
Staff Vice President -- Manufacturing from 1-2-91 until 1-1-92. From
3-31-81 until 1-2-91 he was an employee of Lockheed Aeronautical
Systems Company.
D. F. Tang, 60, Vice President since 10-7-91; President -- Space Systems
Division, Lockheed Missiles & Space Company, Inc., since 3-2-92. He
was Vice President and Assistant General Manager -- Space Systems
Division of Lockheed Missiles & Space Company, Inc. from 11-19-88
until 3-2-92.
R. W. Taylor, 55, Vice President since 7-12-75; and Vice President --
Business Strategy -- Aeronautical Systems Group since 8-1-93. He was
Vice President -- Corporate Development from 10-2-89 until 8-1-93; and
President -- Information Systems Group from 4-4-83 until 10-2-89.
11
<PAGE>
R. E. Tokerud, 57, Vice President since 2-1-93; and President -- Lockheed
Support Systems, Inc., since 9-2-89. He has been an employee of the
Corporation since 4-12-65.
A. G. Van Schaick, 48, Vice President since 6-1-84; and Vice President
Business Operations -- Aeronautical Systems Group since 8-17-92. From
7-1-85 until 8-17-92 he was Vice President and Treasurer of the
Corporation.
W. T. Vinson, 50, Vice President and General Counsel since 1-1-92. From
1-2-90 until 1-1-92 he was Vice President, Secretary and Assistant
General Counsel. From 7-1-75 until 1-2-90 he was an employee of
Lockheed Missiles & Space Company, Inc.
PART II
TABLE OF CONTENTS
Item Page
- ---- ----
5. Market for the Registrant's Common Equity and 13
Related Stockholder Matters.
6. Selected Financial Data. 14 - 15
7. Management's Discussion and Analysis of Financial
Condition and Results of Operations. 16 - 27
8. Consolidated Financial Statements and Supplemen- 28 - 56
tary Data.
9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure. Not Applicable
12
<PAGE>
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters.
Common Stock Prices
(New York Stock Exchange -- composite transactions)
High Low Fiscal Close
------------------------------------------
1993 FISCAL QUARTERS
4th 72 3/8 62 1/2 69 3/8
3rd 68 1/2 59 3/4
2nd 66 58
1st 63 54 1/4
1992 FISCAL QUARTERS
4th 58 3/8 43 5/8 56 7/8
3rd 49 1/8 42 7/8
2nd 47 1/8 42 1/8
1st 46 39 5/8
Dividends Paid on Common Stock
1993
March 1 $.53
June 7 .53
September 7 .53
December 6 .53
1992
March 2 .50
June 3 .53
September 8 .53
December 7 .53
As of December 26, 1993, there were approximately 11,400 holders of record
of Lockheed common stock.
Independent Auditors: Ernst & Young, 515 South Flower Street
Los Angeles, California 90071
Common Stock: Stock symbol: LK
Listed: New York; Pacific; London; Zurich
and Geneva; and Amsterdam stock
exchanges
Transfer Agent: First Interstate Bank, 26610 West Agoura Road
Calabasas, California 91302
1-800-522-6645
13
<PAGE>
Item 6. Selected Financial Data
<TABLE>
<CAPTION>
In millions, except
percentages, ratios,
and per-share data 1993 1992 1991 1990 1989 1988 1987 1986 1985 1984
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Operating Results
Sales ($):
Aeronautical Systems 6,010 2,957 2,635 2,722 2,944 3,566 4,455 4,264 4,017 3,651
Missiles and Space Systems 4,238 4,587 4,859 5,116 4,780 4,706 4,614 4,448 4,277 3,364
Electronic Systems 1,396 1,289 1,122 963 1,107 1,256 1,226 429 105 139
Technology Services 1,427 1,267 1,193 1,157 1,060 905 783 801 824 628
- -------------------------------------------------------------------------------------------------
Total sales 13,071 10,100 9,809 9,958 9,891 10,433 11,078 9,942 9,223 7,782
- -------------------------------------------------------------------------------------------------
Program profits ($):
Aeronautical Systems 465 193 153 110 (365) 231 371 454 434 370
Missiles and Space Systems 348 401 360 379 368 364 364 310 273 230
Electronic Systems (1) 32 21 28 26 71 43 (6) (8) 8
Technology Services 32 18 42 44 24 34 36 23 27 18
- -------------------------------------------------------------------------------------------------
Total program profits 844 644 576 561 53 700 814 781 726 626
- -------------------------------------------------------------------------------------------------
Program profit margins (%):
Aeronautical Systems 7.7 6.5 5.8 4.0 6.5 8.3 10.6 10.8 10.1
Missiles and Space Systems 8.2 8.7 7.4 7.4 7.7 7.7 7.9 7.0 6.4 6.8
Electronic Systems 2.5 1.9 2.9 2.3 5.7 3.5 5.8
Technology Services 2.2 1.4 3.5 3.8 2.3 3.8 4.6 2.9 3.3 2.9
Consolidated
program profit margins 6.5 6.4 5.9 5.6 0.5 6.7 7.3 7.9 7.9 8.0
- -------------------------------------------------------------------------------------------------
Interest expense ($) 168 119 118 138 86 92 104 65 53 62
- -------------------------------------------------------------------------------------------------
Earnings ($):
Continuing operations
before accounting change 422 348 308 335 6 458 438 421 398 330
Net earnings (loss) 422 (283) 308 335 2 624 421 408 401 344
- -------------------------------------------------------------------------------------------------
Earnings per share ($):
Continuing operations
before accounting change 6.70 5.65 4.86 5.30 .10 7.61 6.67 6.38 6.06 5.08
Net earnings (loss) 6.70 (4.58) 4.86 5.30 .03 10.37 6.41 6.18 6.10 5.28
- -------------------------------------------------------------------------------------------------
Dividends per share ($) 2.12 2.09 1.95 1.80 1.75 1.55 1.30 0.95 0.75 0.45
- -------------------------------------------------------------------------------------------------
Average number of common
and common equivalent
shares outstanding 62.9 61.7 63.4 63.2 62.6 60.2 65.7 66.0 65.7 64.9
Common shares outstanding
at year-end 62.7 61.1 62.8 63.2 63.2 59.3 62.7 65.6 65.2 64.7
- -------------------------------------------------------------------------------------------------
Return on common equity (%) 18.8 15.3 12.8 15.3 0.3 20.1 22.2 24.9 29.9 33.4
Return on assets (%) 5.3 5.1 4.6 4.9 0.1 7.0 7.0 8.0 10.4 10.4
- -------------------------------------------------------------------------------------------------
Dividend payout ratio 0.3 0.4 0.4 0.3 17.5 0.2 0.2 0.1 0.1 0.1
- -------------------------------------------------------------------------------------------------
Unaudited. Certain reclassifications and restatements have been made to prior years' data to
conform to the 1993 presentation, including realignment of business segments and reclassification
of operations subsequently discontinued by the company. Aeronautical Systems reflects the purchase
of Lockheed Fort Worth Company in 1993. 1992 reflects the adoption of SFAS 106. Electronic Systems
reflects the purchase of Sanders and CalComp in 1986. Returns refer to continuing operations before
accounting change. Returns and trading turnover are calculated using average balances as a base.
Dividend yield represents the annual dividend rate divided by year-end stock price.
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
In millions, except percentages,
number of employees, ratios, and
per-share data 1993 1992 1991 1990 1989 1988 1987 1986 1985 1984
- --------------------------------------------------------------------------------------------------
Financial Position at Year-End
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Cash and cash equivalents ($) 147 294 266 372 86 269 40 72 64 35
- --------------------------------------------------------------------------------------------------
Accounts receivable ($) 1,644 1,590 1,590 1,880 1,786 1,816 1,868 1,558 1,550 1,014
- --------------------------------------------------------------------------------------------------
Inventories ($) 1,699 1,178 1,352 1,187 1,266 1,067 1,069 1,098 928 866
- --------------------------------------------------------------------------------------------------
Property, plant, and equipment ($):
Cost, net of depreciation
and amortization 1,950 1,882 1,839 1,859 1,903 1,858 1,828 1,758 1,284 1,008
Depreciation for the year 328 294 284 319 328 318 292 233 175 145
Additions during the year 321 327 312 340 399 371 408 461 435 333
- --------------------------------------------------------------------------------------------------
Total assets ($) 8,961 7,024 6,617 6,860 6,792 6,643 6,460 6,133 4,328 3,324
- --------------------------------------------------------------------------------------------------
Capitalization ($):
Debt
Short-term 21 30 29 40 19 47 11 7 4 15
Long-term including
current portion 2,168 1,220 1,172 1,482 1,367 906 1,377 1,742 762 563
ESOP guarantee 407 431 452 472 490
-----------------------------------------------------------------------
Total debt 2,596 1,681 1,653 1,994 1,876 953 1,388 1,749 766 578
Redeemable senior
preferred stock 13
Common stockholders' equity 2,443 2,042 2,503 2,309 2,062 2,476 2,087 1,866 1,511 1,152
-----------------------------------------------------------------------
Total capitalization 5,039 3,723 4,156 4,303 3,938 3,429 3,475 3,615 2,277 1,743
- --------------------------------------------------------------------------------------------------
Percentage of total capitalization
represented by (%):
Total debt 52 45 40 46 48 28 40 48 34 33
Total debt, ex-ESOP 43 34 29 35 35
Debt, net of cash 50 40 36 41 46 22 39 47 32 32
Debt, ex-ESOP, net of cash 42 28 24 29 34
- --------------------------------------------------------------------------------------------------
Other Data
Funded sign-ups ($) 17,371* 10,205 10,972 10,441 9,627 9,426 9,807 9,451 8,828 9,709
Funded backlog
at year-end ($) 13,156 8,856 8,751 7,588 7,106 7,369 8,376 9,649 8,815 9,209
Negotiated backlog
at year-end ($) 28,852 19,428 17,072 15,204 13,042 9,747 12,543 17,732 17,721 22,552
- --------------------------------------------------------------------------------------------------
Company-sponsored research
and development
(including bid and proposal
cost and development
cost-sharing) ($) 449 420 384 450 506 503 506 441 399 378
Customer-sponsored research
and development ($) 3,134 3,102 3,282 3,750 3,715 3,456 2,946 2,701 2,946 2,278
- --------------------------------------------------------------------------------------------------
Number of employees 83,500 71,700 72,300 73,000 82,500 85,600 97,200 94,200 84,500 78,400
- --------------------------------------------------------------------------------------------------
Market Data at Fiscal Year-End
Stock price per
common share ($) 69.38 56.88 44.00 33.63 39.00 42.75 36.75 50.63 48.00 43.63
Book value per
common share ($) 38.96 33.42 39.86 36.53 32.63 41.75 33.29 28.45 23.17 17.81
Market value ($) 4,350 3,475 2,763 2,125 2,465 2,535 2,304 3,321 3,130 2,823
- --------------------------------------------------------------------------------------------------
Market to book ratio 1.8 1.7 1.1 0.9 1.2 1.0 1.1 1.8 2.1 2.5
Price to earnings ratio 10.4 10.1 9.1 6.3 390.0 5.6 5.5 7.9 7.9 8.6
- --------------------------------------------------------------------------------------------------
Dividend yield (%) 3.1 3.7 4.5 5.4 4.6 3.7 3.8 2.0 1.7 1.4
- --------------------------------------------------------------------------------------------------
Annual trading volume 27.0 29.5 66.3 30.2 71.9 60.9 114.5 88.4 66.5 65.3
Annual trading turnover (x) 0.4 0.5 1.1 0.5 1.2 1.0 1.8 1.4 1.0 1.0
- --------------------------------------------------------------------------------------------------
* Includes acquisition of existing funded backlog of Lockheed Fort Worth Company
of approximately $7 billion at acquisition date.
</TABLE>
15
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
RESULTS OF OPERATIONS
Consolidated Sales and Program Profits
Consolidated sales were $13.1 billion in 1993, a 29 percent increase over
1992 due to the 1993 acquisition of Lockheed Fort Worth Company (LFWC), the
former tactical military aircraft business of General Dynamics Corporation.
Total sales increased three percent in 1992 compared with the previous
year. Revenues from U.S. government defense customers continued to decline
as a percentage of total sales, to 64 percent in 1993 from 67 percent in
1992 and 70 percent in 1991, while sales to foreign governments increased
to 13 percent of total sales in 1993, largely due to the LFWC acquisition,
compared with eight percent in 1992 and six percent in 1991. Sales made to
foreign governments through the U.S. government are included in sales to
foreign governments. Sales to commercial customers increased as an
absolute amount, but held steady as a percentage of total sales. The table
below illustrates the changing customer mix.
Sales by customer 1993 1992 1991
- ----------------------------------------------------------------
U.S. government
Defense 64% 67% 70%
Nondefense 13 15 15
- ----------------------------------------------------------------
77 82 85
Foreign governments 13 8 6
Commercial 10 10 9
- ----------------------------------------------------------------
100% 100% 100%
- ----------------------------------------------------------------
Total program profits increased by 31 percent in 1993 following growth of
about 12 percent in 1992. Program profit margins for 1993, 1992, and 1991
were 6.5 percent, 6.4 percent, and 5.9 percent, respectively. The 1993
results reflected, among other factors, the LFWC acquisition, the favorable
settlement of a major dispute with a customer, a reduction in accrued
future retiree medical costs due to reduced employment levels (reflected
in varying degrees in the program profits of each business segment), as
well as charges related to Aeronautical Systems Burbank property and the
closure of the Norton maintenance operation. The 1992 improvement compared
with 1991 reflected better performance in most business areas partly offset
by higher investment in certain emerging lines of business.
Operations by business segment are discussed beginning on page 18.
Interest Expense
Interest expense in 1993 increased by about 41 percent over 1992's amount
due to substantially higher debt outstanding during most of the year. The
higher debt was incurred to finance the purchase of LFWC. The average
interest rate on outstanding borrowings was lower in 1993 than in the
previous year. Interest expense was about the same in 1992 as in 1991, as
both average outstanding borrowing levels and the company's effective
borrowing rate showed little fluctuation from year to year.
16
<PAGE>
Other Income, Net
Net other income was negligible in 1993, lower than in 1992 primarily due
to lower interest income from the temporary investment of excess cash. Net
other income was higher in 1992 compared with 1991 primarily due to higher
interest income and the absence of costs associated with the 1991
stockholder proxy contest, partly offset by higher other costs.
Provision for Income Taxes
Income tax expense was higher in 1993 than in 1992 primarily due to the
effect of higher pretax earnings, with a higher effective tax rate (nearly
38 percent in 1993 versus close to 37 percent in 1992) also having an
impact. The increase in the effective tax rate was due to the settlement
of certain tax issues outstanding from prior periods for a higher amount
than had been accrued, and a higher nondeductible amount of intangible
asset amortization related to the purchase of LFWC. Congress enacted an
increase in the federal statutory tax rate from 34 percent to 35 percent in
1993, but the effect of this rate increase was offset by a related
favorable one-time adjustment of the company's net deferred tax assets.
Income tax expense was higher in 1992 compared with 1991, also due to
higher pretax earnings and a higher effective tax rate. The effective rate
(about 37 percent in 1992, compared with 35 percent in 1991) was higher
primarily because certain tax credits used in 1991 were not available to
the company in 1992.
Earnings Before Cumulative Effect of Change in Accounting Principle
Earnings increased 21 percent in 1993 compared with 1992 due to higher
program profits, partly offset by higher interest expense, lower other
income, and higher income tax expense. The per-share increase in earnings
was slightly lower (19 percent) due to the higher average number of shares
and equivalents outstanding in 1993.
Earnings growth in 1992 came primarily from higher program profits. Higher
other income also contributed, while higher income tax expense partly
offset the effect of these improvements. Earnings per share before the
effect of the change in accounting was higher in 1992 compared with 1991 as
a result of these same factors, plus a lower average number of common and
common equivalent shares outstanding during 1992, the result of the
company's common stock repurchase program under way at that time.
If inflation were taken into account, earnings would differ from the
reported results due to the recognition of additional depreciation expense.
Contracts in the aerospace industry generally reflect the impact of
anticipated inflation in the selling price, and often contain price
escalation clauses that protect against abnormal inflation. In the case of
depreciation, however, regulations that determine U.S. government contract
revenues do not allow inflation-adjusted depreciation to be taken into
account. Therefore, earnings would have been lower than reported if
inflation had been considered. Income taxes would not have been adjusted
because tax laws do not permit deduction of such additional inflationary
cost. Inflation rates in the United States have been relatively low in
recent years.
17
<PAGE>
Net Earnings (Loss)
The net loss in 1992, caused by the effect of a change in accounting
principle, was related to the company's adoption of the accrual method of
accounting for retiree medical costs specified by Statement of Financial
Accounting Standards No. 106 (SFAS 106). The company's 1992 adoption of a
new standard related to accounting for income taxes, SFAS 109, did not have
a significant impact.
Results of Operations by Business Segment
Aeronautical Systems
Aeronautical Systems sales more than doubled in 1993, reflecting the
acquisition of LFWC during the first quarter. Revenues grew about 12
percent in 1992 compared with 1991.
In millions 1993 1992 1991
- ----------------------------------------------------------------
Sales
Fighter aircraft programs $3,661 $ 363 $ 49
Airlift aircraft programs 915 1,169 1,150
Aircraft modification
and maintenance programs 517 538 431
Other aircraft programs
and support activities 917 887 1,005
- ----------------------------------------------------------------
Total $6,010 $2,957 $2,635
- ----------------------------------------------------------------
Program profits $ 465 $ 193 $ 153
- ----------------------------------------------------------------
The approximately ten-fold increase in fighter aircraft sales in 1993 was
primarily due to the acquisition of LFWC, whose business included the F-16
fighter program and one third of the F-22 advanced tactical fighter
engineering and manufacturing development (EMD) program. Also contributing
to the increase compared with 1992 were higher F-22 program revenues from
the original one-third portion of the program held by Lockheed. The
substantial growth in fighter aircraft revenues in 1992 compared with 1991
reflected the first full year of activity of the F-22 EMD program. Prior
to mid-1991, F-22 effort was limited to the design development and
prototype phase of the program.
Airlift aircraft sales were 22 percent lower in 1993 than in 1992,
principally due to five fewer deliveries of C-130 aircraft (30 versus 35 in
1992). Airlift aircraft sales were about the same in 1992 as in 1991.
Although fewer C-130 aircraft were delivered in 1992 (35 versus 43 in
1991), the effects of increased spares sales and changes in contract
pricing made up the difference.
Revenues from aircraft modification and maintenance activities were down
four percent in 1993 due to lower military and commercial aircraft
modification sales. Aircraft modification and maintenance sales were up
about 25 percent in 1992 over the prior year, primarily due to higher
military aircraft modification activities, with higher commercial revenues
also contributing.
18
<PAGE>
Other aircraft programs and support activities sales were up three percent
in 1993 over 1992, mostly due to the delivery of two P-3/CP-140 maritime
patrol aircraft (compared with one aircraft in 1992). Higher S-3 patrol
aircraft upgrade sales were more than offset by other programs and spares
sales which, on balance, were lower in 1993. Sales from other aircraft
programs and support activities dropped by about 12 percent in 1992 from
1991's level, mostly due to the end of significant commercial aircraft
subcontract activity in 1991. The sales increase associated with the
delivery of one P-3/CP-140 aircraft in 1992 (there were none in 1991) was
offset by lower S-3 aircraft upgrade revenues and lower spares sales.
Program profits in Aeronautical Systems in 1993 were more than twice the
1992 amount, reflecting the LFWC acquisition. Other factors essentially
offset one another. The sales variances described above had corresponding
effects on program profits. In addition, negative cost adjustments on
certain programs recorded in 1992 were absent in 1993. Program profit
margins generally improved in most program areas. However, C-130 airlifter
margins were lower in 1993, reflecting a change in customer mix. Also,
1993 saw higher spending on the development of an improved version of the
C-130 aircraft (the C-130J) than in 1992. Intangible asset amortization
related to the purchase of LFWC, reflected in program profits, amounted to
$84 million in 1993.
In addition, the following 1993 developments were significant. The U.S.
Navy and the company settled their dispute related to the termination of
the company's fixed-price contract for the P-7A aircraft development
program. The contract was terminated for default by the U.S. Navy in July
1990. The settlement provided that the termination for default be
converted to a termination of the contract by mutual agreement of the
parties. After adjustment for final resolution of subcontractor claims and
closure costs, the settlement amount of $111 million resulted in a reversal
of approximately $90 million of the pretax losses recognized on this
program in the fourth quarter of 1989. This reversal was reflected in
program profits for the third quarter of 1993.
The company recorded a charge to program profits in the third quarter of
1993 of $35 million, representing an expected excess of costs over
anticipated sales proceeds related to its Burbank, California, property.
(See Note 3 to the consolidated financial statements.)
Also during the third quarter of 1993, the company concluded that its wide-
body commercial aircraft modification and maintenance operations at Norton
Air Force Base would be discontinued, and recorded a charge to program
profits of $30 million related to the discontinuance.
Program profits in Aeronautical Systems grew about 26 percent in 1992 over
the 1991 level, primarily due to the first full year of the F-22 EMD
program, more favorable contract pricing resulting in higher margins on the
C-130 program, and improvements and favorable adjustments on certain other
aircraft programs. Partly offsetting these increases were higher costs
associated with the development of the C-130J airlifter, negative cost
adjustments to several programs and, to a lesser extent, higher costs
related to commercial aircraft maintenance operations.
19
<PAGE>
Missiles and Space Systems
Missiles and Space Systems sales declined by about eight percent in 1993
following a six percent reduction in 1992.
In millions 1993 1992 1991
- ----------------------------------------------------------------
Sales
Fleet ballistic missiles $1,281 $1,503 $1,563
Other missile systems 579 429 442
Space and other programs 2,378 2,655 2,854
- ----------------------------------------------------------------
Total $4,238 $4,587 $4,859
- ----------------------------------------------------------------
Program profits $ 348 $ 401 $ 360
- ----------------------------------------------------------------
Fleet ballistic missiles sales declined 15 percent in 1993, primarily
reflecting the completion of the development portion of the Trident II
program. Fleet ballistic missiles revenues were down four percent in 1992
compared with 1991 as Trident II development activities wound down and
production was relatively stable.
Other missile systems sales were 35 percent higher in 1993 than in 1992,
mostly due to the Theater High Altitude Area Defense (THAAD) defensive
missile program, which was just getting under way in 1992. This increase
was partly offset by lower revenues from most other missile programs,
including the Advanced Solid Rocket Motor (ASRM) program which was
cancelled in 1993. Other missile systems sales were three percent lower in
1992 compared with 1991, as slight increases in defensive missiles and the
ASRM program were more than offset by decreases in other programs.
Space and other programs sales were down 11 percent in 1993 compared with
1992 due to lower revenues from certain classified space programs and, to a
lesser extent, lower NASA sales. Higher sales from the Milstar military
communications satellite program partly offset the declines. Sales in
space and other programs declined by about seven percent in 1992 compared
with one year earlier, primarily due to reductions in certain classified
space programs partly offset by slight increases in Milstar, tactical
command and control, and NASA programs.
Missiles and Space Systems program profits were down about 13 percent in
1993 compared with 1992. The reduction reflected the impact of the lower
sales volume, the absence in 1993 of significant amounts of reliability
incentive fees from the Trident II program recognized in 1992 as testing
under the development portion of the program neared completion, and
negative cost adjustments on several programs. Higher operating margins in
most other programs, and the initial recognition of profits related to the
IRIDIUM TM/SM commercial satellite program, partly offset the declines.
Program profits in Missiles and Space Systems were up about 11 percent in
1992 over 1991, primarily due to the recognition of significantly higher
Trident II reliability incentive fees in 1992, and to the resumption of the
recording of profits on the Milstar program. The recognition of Milstar
profits had been deferred in 1991 while the program was being restructured.
In addition, operating margins were better in most business areas in 1992
than in 1991 and a prior year contract issue was favorably resolved, but
20
<PAGE>
these developments were mostly offset by initial development costs related
to the IRIDIUM TM/SM program.
Electronic Systems
Sales in Electronic Systems were about eight percent higher in 1993, com-
pared with a 15 percent increase registered in 1992.
In millions 1993 1992 1991
- ----------------------------------------------------------------
Sales
Defense electronics programs $ 619 $ 622 $ 603
Commercial product manufacturing 388 413 408
Commercial distribution activities 389 254 111
- ----------------------------------------------------------------
Total $1,396 $1,289 $1,122
- ----------------------------------------------------------------
Program profits (loss) $ (1) $ 32 $ 21
- ----------------------------------------------------------------
Revenues from defense electronics programs in 1993 were approximately equal
to 1992's level. Increases in countermeasures, information systems, and
avionics product lines were offset by decreases in defense system and
surveillance system programs. Defense electronics sales grew about three
percent in 1992 compared with 1991, mostly due to increases in
antisubmarine warfare, countermeasures, and other electronic support
programs, partly offset by reductions in surveillance systems revenues.
Sales from commercial product manufacturing dipped six percent in 1993,
principally due to further weakness and competitive pricing pressures in
the computer peripherals market. Commercial product manufacturing sales
were about the same in 1992 compared with 1991.
Commercial distribution sales grew 53 percent in 1993, reflecting expansion
of the Access Graphics subsidiary's business. Revenues from commercial
distribution activities more than doubled in 1992 compared with 1991,
mostly due to Access Graphics being included for the full year of 1992
versus only a portion of 1991.
A small program loss was incurred by Electronic Systems in 1993, compared
with program profits in 1992, due primarily to losses at CalComp. This
commercial manufacturing unit suffered significant operating losses due to
market weakness and pricing pressures, and also recorded charges related to
downsizing and restructuring. Program profits from defense programs
increased in 1993 due to improved operating performance at Sanders, and
profits from commercial distribution activities were higher in 1993 than in
1992 due to improved performance and higher sales.
In addition, Electronic Systems program profits were negatively affected in
1993 when the company recognized expense for future environmental
remediation costs that are expected to be allocated to the company's
commercial business. (See Notes 1 and 11 to the consolidated financial
statements for additional information on the company's accounting policies
related to environmental matters and the status of environmental matters
now before the company.)
21
<PAGE>
Electronic Systems program profits grew 52 percent in 1992 compared with
1991, with the defense and commercial business sectors contributing about
equally to the increase. In defense, the greater profits resulted from
improved performance as well as higher volume at Sanders. Commercial
distribution activities, included for the full year, were the primary cause
of the commercial profit improvement.
Purchase cost amortization related to the acquisition of Sanders and
CalComp, reflected in program profits each year, was $25 million in 1993
and in 1992, and $26 million in 1991.
Technology Services
Technology Services sales increased by 13 percent in 1993, after growing
about six percent in 1992.
In millions 1993 1992 1991
- ----------------------------------------------------------------
Sales
Space shuttle processing services $ 609 $ 600 $ 638
Engineering and scientific services 335 349 342
State and municipal government services 180 88 58
Other services 303 230 155
- ----------------------------------------------------------------
Total $1,427 $1,267 $1,193
- ----------------------------------------------------------------
Program profits $ 32 $ 18 $ 42
- ----------------------------------------------------------------
Space shuttle processing revenues increased about two percent in 1993,
following a decrease of about six percent in 1992. Fluctuations in levels
of activity in support of space shuttle operations were responsible for the
variances.
Sales from engineering and scientific services were down about four percent
in 1993 compared with 1992 mostly due to lower levels of NASA support work,
partly offset by higher environmental services revenue. Sales in 1992 were
relatively stable compared with 1991, up about two percent.
Revenues from state and municipal government services doubled in 1993,
mostly due to the expansion of children and family services and
transportation systems and services provided to state and local government
agencies. Sales in this business area were up by about one-half in 1992
compared with 1991, mostly from growth in the children and family services
and other municipal services business lines.
Other services revenues were 32 percent higher in 1993 compared with 1992,
and nearly 50 percent higher in 1992 compared with 1991, in both cases due
to significantly increased levels of contract field support services
provided to the military.
Program profits increased substantially in 1993, primarily due to higher
revenues and improved performance on contract field support programs,
improved performance in airport management and consulting operations, and a
reduction in accrued future retiree medical costs due to reduced employment
levels. Elsewhere in this segment, program profits were approximately the
same in 1993 as in 1992, reflecting both similar performance and a similar
22
<PAGE>
level of new business investment in each year. Program profits dropped by
about 57 percent in 1992 compared with 1991, mostly because of higher
investment in new business initiatives, particularly in state, county, and
municipal services and environmental lines of business.
FINANCIAL CONDITION
Liquidity and Cash Flows
Liquidity is primarily provided by cash generated from operating
activities. Net cash provided by operating activities during 1993 was $795
million, over 35 percent higher than in 1992, due to higher earnings plus
noncash-expending depreciation and amortization, partly offset by higher
operating capital requirements.
Operating cash flow was negatively impacted in 1993 by the withholding of a
portion (currently approximately $170 million) of certain progress billings
at LFWC by agreement with a U.S. government customer. These billings are
being withheld pending resolution of issues pertaining to LFWC's
manufacturing cost allocation system. The system issues are currently
being addressed and withheld amounts are expected to be substantially
reduced during 1994. With the exception of the temporary delay in cash
flows from operating activities and higher net inventories, management
expects the issues to be ultimately resolved with little, if any, effect on
the company's financial statements.
The company borrowed approximately $1.5 billion for the purchase of LFWC
during the first quarter of 1993. Initially in the form of short-term
obligations, these borrowings were subsequently refinanced with
intermediate and long-term debt. By the end of the year, operating and
other cash flows were sufficient to allow the company to reduce debt by
over $400 million from the high point reached at the end of the first
quarter.
Additions to property, plant, and equipment were $321 million in 1993,
approximately the same as in 1992. The amount expended on additions
compared favorably with the company's 1993 depreciation expense of $328
million. The company continually monitors its capital spending in relation
to current and anticipated business needs. As circumstances dictate,
facilities are added, consolidated, disposed of, or modernized. Note 3 to
the consolidated financial statements provides additional information
regarding the disposal of excess Aeronautical Systems property.
Significant numbers of employee stock options were exercised in 1993. The
cash inflow from these exercises amounted to about $71 million and resulted
in the issuance of approximately 1.6 million shares of company stock.
Cash dividends amounted to $2.12, $2.09, and $1.95 per share in 1993, 1992,
and 1991, respectively.
Capital Resources
Total debt, including the guarantee of salaried ESOP obligations, increased
to $2,596 million at December 26, 1993, up from $1,681 million outstanding
one year earlier, due to the financing of the purchase of LFWC. As
discussed above, debt was reduced subsequent to the acquisition date. Cash
flows are expected to allow a steady reduction of the higher debt levels
over the next few years.
23
<PAGE>
Most of Lockheed's debt at the end of 1993 and 1992 was in the form of
publicly issued fixed-rate notes. Total debt represented approximately 52
percent and 45 percent of the company's total capitalization at the
respective year-end dates, about 43 percent and 34 percent if the effect of
the guarantee of certain obligations of the salaried ESOP (accounted for as
a component of debt and an offset to stockholders' equity) is excluded.
The calculation of the debt ratio ex-ESOP reflects the fact that the assets
of the salaried ESOP trust, not reflected on the company's balance sheet,
are available for the service and repayment of the ESOP obligations
guaranteed by the company. At its peak at the end of the first quarter of
1993, total debt was about 59 percent of total capitalization, 51 percent
ex-ESOP.
The "net debt" ratio consists of total debt, net of cash, as a percentage
of total capitalization. Using this approach, the measures were 50
percent, 57 percent, and 40 percent at December 1993, March 1993, and
December, 1992. Ex-ESOP, the amounts were 42 percent, 48 percent, and 28
percent, respectively.
At December 26, 1993, the company had available committed credit lines
aggregating $1.3 billion from groups of domestic and foreign banks.
Generally, these lines are maintained to back up the company's commercial
paper borrowings. There were no commercial paper borrowings, nor any
borrowings outstanding under the committed lines, at year-end.
The company receives advances on certain contracts and uses them to finance
the inventories required to complete the contracted work. The amount of
such advances in excess of costs incurred on these contracts was $606
million at December 26, 1993, and was mostly related to contracts with
foreign government and commercial customers. These funds may be used for
working capital requirements and other general corporate purposes until
needed to complete the contracts.
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 December 26, 1993 was up by about $400 million or
20 percent compared with a year earlier due to the retention of earnings in
excess of cash dividends paid, the issuance of new shares upon the exercise
of employee stock options, and accounting benefits related to the salaried
ESOP (the reduction of guaranteed debt and certain tax benefits).
OTHER MATTERS
Company-Sponsored Research and Development
Spending on company-sponsored research and development is included in
results from operations and amounted to $449 million in 1993, a seven
percent increase over 1992. The company regularly monitors its research
and development effort to assure an appropriate level of spending in
relation to expected future benefits. Company-sponsored research and
development is necessary to support the company's technologies and maintain
its competitive position in the aerospace and electronics industries.
24
<PAGE>
Backlog
Funded backlog consists of unfilled firm orders for the company's products
for which funding has been both authorized and appropriated by the customer
(Congress, in the case of U.S. government customers). Negotiated (total)
backlog includes firm orders for which funding has not been appropriated.
The following table shows funded backlog by major category for the
company's two largest segments, and totals for the other two segments, at
the end of each of the last three years:
In millions 1993 1992 1991
- -----------------------------------------------------------------
Aeronautical Systems
Fighter aircraft programs $ 6,229 $ 286 $ 300
Airlift aircraft programs 1,283 891 1,204
Aircraft modification
and maintenance programs 460 504 514
Other aircraft programs
and support activities 1,361 1,599 1,740
- -----------------------------------------------------------------
9,333 3,280 3,758
Missiles and Space Systems
Fleet ballistic missiles 1,423 2,389 2,254
Other missile systems 90 317 194
Space and other programs 1,273 1,605 1,262
- -----------------------------------------------------------------
2,786 4,311 3,710
Electronic Systems 732 870 873
Technology Services 305 395 410
- -----------------------------------------------------------------
$13,156 $8,856 $8,751
- -----------------------------------------------------------------
Funded backlog was nearly 50 percent higher in 1993 compared with 1992 due
to increases in Aeronautical Systems, the most significant of which was the
acquisition of LFWC and its existing backlog. Funded backlog was lower in
the other segments. In 1992, funded backlog increased slightly, about one
percent, compared with 1991. An increase in Missiles and Space Systems was
mostly offset by decreases in the other segments.
In Aeronautical Systems, funded backlog almost tripled in 1993. The
addition of LFWC with its F-16 fighter program and one-third share of the
F-22 fighter program was most responsible for the increase. However, C-130
airlifter backlog was also significantly higher, primarily reflecting more
U.S. government aircraft on order. These increases were partly offset by
lower backlogs related to military aircraft modification work and maritime
patrol aircraft. Funded backlog in Aeronautical Systems declined by about
13 percent in 1992 compared with 1991, mostly due to the absence of foreign
and commercial C-130 airlifter sign-ups, partly offset by a higher U.S.
government C-130 backlog. Elsewhere in the segment, lower funded backlog
related to maritime patrol aircraft upgrade programs also had an effect.
Funded backlog in Missiles and Space Systems declined by about 35 percent
in 1993 compared with 1992, mostly due to a difference in the timing of the
funding for the Trident II fleet ballistic missile program. Annual funding
for this program, generally provided in the company's fourth quarter, was
25
<PAGE>
not obtained until the first quarter of 1994. The workdown of the initial
THAAD defensive missile development program backlog, reductions in certain
space programs, and lower Milstar and NASA backlogs, also contributed to
the decrease. These reductions were partly offset by increases related to
the start of the IRIDIUM TM/SM commercial satellite program. Missiles and
Space Systems backlog grew about 16 percent in 1992 compared with 1991 due
to higher funding of certain military space systems and defensive missile
programs, partly offset by lower funded backlog in certain other space
programs.
In Electronic Systems, funded backlog is primarily related to defense
electronics programs. In 1993, backlog was down about 16 percent compared
with a year ago, with increases in surveillance systems and avionics
programs more than offset by decreases in other defense electronics areas.
Commercial backlogs grew slightly. In 1992, funded backlog remained about
the same as in 1991, as increases in surveillance and avionics systems
backlogs offset the decreases in other defense programs and in the
commercial product sector.
In Technology Services, 1993 funded backlog was down about 23 percent from
1992, primarily due to lower backlog of contract field support services,
and timing differences in NASA funding of space shuttle processing and
engineering and scientific support activities. In 1992, funded backlog was
about four percent lower than in 1991, with changes in the timing of NASA
funding partly offset by increased funding on contract field support
programs. Service contracts represent the majority of this business
segment's revenues, and are generally funded with less lead time than other
contracts. As a result, funded backlog figures tend to be less of an
indicator of future activity for this segment than for the others.
The figures above do not include negotiated but unfunded amounts. Total
negotiated backlog, both funded and unfunded, amounted to $28.9 billion
in 1993, $19.4 billion in 1992, and $17.1 billion in 1991. The increase in
1993 was caused by many of the same factors responsible for the funded
backlog variances described above, with the addition of LFWC in the
Aeronautical Systems segment and the reductions in certain space programs
in the Missiles and Space Systems segment the most prominent. The increase
in 1992 compared with 1991 came from the win of the THAAD development
program in the Missiles and Space Systems segment and the follow-on space
shuttle processing contract in Technology Services, in addition to the
funded backlog variances already discussed.
As in previous years, a substantial portion of unfunded backlog is related
to programs for the U.S. government and is dependent on future governmental
appropriations for funding.
Defense Industry Environment
In recent years, significant changes in the global political climate have
redefined the needs of the Department of Defense (DoD). New requirements
emphasize a smaller, more technologically superior military, and the
industrial base to support it. In addition, initiatives to reduce the
federal budget deficit have placed increased downward pressure on defense
budget levels.
Defense budgets have been declining in real terms (after accounting for
inflation) since 1985. Industry analysts generally expect defense spending
to continue to decline through the latter part of the decade and then hold
26
<PAGE>
constant in real terms at a reduced level, but the ultimate outcome is
uncertain. Reduced budget levels, rapidly changing customer requirements,
and increased competition are expected for the defense industry in the
years to come.
The U.S. defense budget has a major impact on Lockheed's business base. In
1993, 64 percent of the company's sales were to DoD customers. The company
provides a wide variety of products and services, and Lockheed's major
programs have generally been well supported thus far during the budget
decline. The company is a leader in advanced technologies, research and
development, and limited production-rate manufacturing, all of which have
been emphasized during the ongoing debate over the focus of future defense
spending. However, uncertainty remains over the size and shape of future
defense budgets and their impact on specific programs.
The company has responded to these conditions and is focusing attention and
resources on its most promising businesses and opportunities in both the
defense and nondefense markets. The 1993 acquisition of Lockheed Fort
Worth Company further broadened Lockheed's portfolio of programs and
increased the company's presence in the international market. Other
measures, such as cost reduction efforts, are continuing. Employment
levels have been reduced to reflect changing business requirements, and
will continue to be monitored and adjusted where appropriate.
Management believes that the company is well-positioned for the future,
with the resources and capabilities to respond appropriately to further
industry developments.
Environmental Matters
The company is involved in a number of proceedings and potential
proceedings relating to environmental matters. These matters and their
impact on the company are discussed in Note 11 to the consolidated
financial statements.
As described in Note 11, a substantial portion of currently anticipated
environmental expenditures will be reflected in the company's sales and
costs of sales pursuant to U.S. government agreement or regulation.
However, a timing difference in cash flows is expected between incurrence
of certain of the costs related to the Burbank cleanup and allocation of
these costs as part of the company's general and administrative expense.
At the end of 1993, expenditures that had been made but not yet allocated
amounted to $52 million. This timing difference is expected to increase
through the end of 1995 before declining in subsequent years.
27
<PAGE>
Item 8. Consolidated Financial Statements and Supplementary Data
CONSOLIDATED STATEMENT OF EARNINGS
In millions, except per-share data 1993 1992 1991
- -------------------------------------------------------------------------
Sales
Aeronautical Systems $ 6,010 $ 2,957 $ 2,635
Missiles and Space Systems 4,238 4,587 4,859
Electronic Systems 1,396 1,289 1,122
Technology Services 1,427 1,267 1,193
-----------------------------------------------------------------------
Total sales 13,071 10,100 9,809
Costs and expenses 12,227 9,456 9,233
- -------------------------------------------------------------------------
Program profits
Aeronautical Systems 465 193 153
Missiles and Space Systems 348 401 360
Electronic Systems (1) 32 21
Technology Services 32 18 42
-----------------------------------------------------------------------
Total program profits 844 644 576
Interest expense (168) (119) (118)
Other income, net 24 16
- -------------------------------------------------------------------------
Earnings before income taxes and cumulative
effect of change in accounting principle 676 549 474
Provision for income taxes 254 201 166
- -------------------------------------------------------------------------
Earnings before cumulative effect
of change in accounting principle 422 348 308
Cumulative effect of change in
accounting principle for retiree
medical benefits, net of tax (631)
- -------------------------------------------------------------------------
Net earnings (loss) $ 422 $ (283) $ 308
=========================================================================
Earnings per share
Before cumulative effect of
change in accounting principle $ 6.70 $ 5.65 $ 4.86
Cumulative effect of change
in accounting principle (10.23)
-----------------------------------------------------------------------
Net earnings (loss) per share $ 6.70 $ (4.58) $ 4.86
=========================================================================
Average number of common and common
equivalent shares outstanding 62.9 61.7 63.4
- -------------------------------------------------------------------------
Number of common shares outstanding
at year-end 62.7 61.1 62.8
- -------------------------------------------------------------------------
See accompanying notes.
28
<PAGE>
CONSOLIDATED STATEMENT OF CASH FLOWS
In millions 1993 1992 1991
- --------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings (loss) $ 422 $(283) $ 308
Adjustments to reconcile net earnings (loss)
to net cash provided by operating activities
Cumulative effect of change
in accounting principle, net of tax 631
Depreciation and amortization 498 355 339
Changes in operating assets and liabilities
Accounts receivable 232 (23) 545
Gross inventories 498 292 (12)
Accounts payable 5 89 (118)
Salaries and related items (41) (31) 9
Income taxes 18 (15) 12
Customer advances and progress payments (824) (238) (204)
Other, net (13) (192) (171)
----------------------------------------------------------------------
Net cash provided by operating activities 795 585 708
- --------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant, and equipment (321) (327) (312)
Purchase of Lockheed Fort Worth Company (1,521)
Purchases of marketable securities (200)
Proceeds from sales of marketable securities 210
Capitalized restructuring and related costs (26) (22) (19)
Decrease (increase) in finance and
other long-term receivables 8 (11) (40)
Other, net 41 (47) 21
- --------------------------------------------------------------------------
Net cash used for investing activities (1,819) (397) (350)
- --------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Decrease in short-term borrowings (9) (2) (11)
Borrowings of long-term debt 1,581 341 246
Repayments of long-term debt (634) (294) (555)
Purchases of treasury shares (101) (25)
Cash dividends (132) (128) (124)
Proceeds from stock options exercised 71 24 5
- --------------------------------------------------------------------------
Net cash provided by
(used for) financing activities 877 (160) (464)
- --------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents (147) 28 (106)
Cash and cash equivalents, beginning of year 294 266 372
- --------------------------------------------------------------------------
Cash and cash equivalents, end of year $ 147 $ 294 $ 266
==========================================================================
Supplemental Disclosure Information
Cash paid during the year for
Interest $ 165 $ 101 $ 104
Income taxes 230 219 155
==========================================================================
See accompanying notes.
29
<PAGE>
CONSOLIDATED BALANCE SHEET
Dollar figures in millions,
except per-share data 1993 1992
- --------------------------------------------------------------------------
Assets
Current assets
Cash and cash equivalents $ 147 $ 294
Accounts receivable 1,644 1,590
Inventories 1,699 1,178
Other current assets 350 171
----------------------------------------------------------------------
Total current assets 3,840 3,233
Property, plant, and equipment, at cost
Land 93 91
Buildings, structures, and leasehold improvements 1,686 1,678
Machinery and equipment 2,812 2,679
----------------------------------------------------------------------
4,591 4,448
Less accumulated depreciation and amortization 2,641 2,566
----------------------------------------------------------------------
Net property, plant, and equipment 1,950 1,882
Noncurrent assets
Intangible assets related to tactical aircraft
programs acquired (net of accumulated
amortization of $84) 1,425
Excess of purchase price over fair value of assets
acquired (net of accumulated amortization of
$204 in 1993 and $171 in 1992) 782 815
Deferred tax assets, net 33 227
Other noncurrent assets 931 867
- --------------------------------------------------------------------------
$8,961 $7,024
==========================================================================
Liabilities and Stockholders' Equity
Current liabilities
Short-term borrowings $ 21 $ 30
Accounts payable 841 758
Salaries and related items 355 296
Income taxes, including deferred amounts of
$44 in 1993 and $72 in 1992 44 112
Customers' advances in excess of related costs 606 442
Current portion of long-term debt 28 323
Current portion of accumulated
retiree medical benefit obligation 155 106
Other current liabilities 483 375
----------------------------------------------------------------------
Total current liabilities 2,533 2,442
Long-term debt 2,547 1,328
Accumulated retiree medical benefit obligation 942 803
Other long-term liabilities 496 409
Commitments and contingencies
Stockholders' equity
Preferred stock
Common stock, $1 par value, 100,000,000 shares
authorized; 72,471,642 shares issued
(70,876,030 in 1992) 73 71
Additional capital 804 735
Retained earnings 2,427 2,121
Treasury shares, at cost (9,775,996 shares) (454) (454)
Guarantee of ESOP obligations (407) (431)
----------------------------------------------------------------------
Total stockholders' equity 2,443 2,042
- --------------------------------------------------------------------------
$8,961 $7,024
==========================================================================
See accompanying notes.
30
<PAGE>
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Guarantee
of ESOP
In millions, except Common Additional Retained Treasury Obliga-
per-share data Stock Capital Earnings Shares tions Total
- ------------------------------------------------------------------------------
At December 30, 1990 $70 $707 $2,332 $(328) $(472) $2,309
Net earnings 308 308
Reduction of ESOP
obligations guaranteed 20 20
Tax benefits from
dividends paid to ESOP 10 10
Stock options exercised 5 5
Dividends declared
on common stock
($1.95 per share) (124) (124)
Treasury shares purchased (25) (25)
- ------------------------------------------------------------------------------
At December 29, 1991 70 712 2,526 (353) (452) 2,503
Earnings before
cumulative effect of
change in accounting
principle 348 348
Cumulative effect of
change in accounting
principle, net of tax (631) (631)
Reduction of ESOP
obligations guaranteed 21 21
Tax benefits from
dividends paid to ESOP
on unallocated shares 6 6
Stock options exercised 1 23 24
Dividends declared
on common stock
($2.09 per share) (128) (128)
Treasury shares purchased (101) (101)
- ------------------------------------------------------------------------------
At December 27, 1992 71 735 2,121 (454) (431) 2,042
Net earnings 422 422
Reduction of ESOP
obligations guaranteed 24 24
Tax benefits from
dividends paid to ESOP
on unallocated shares
and stock options
exercised 16 16
Stock options exercised 2 69 71
Dividends declared
on common stock
($2.12 per share) (132) (132)
-----------------------------------------------------------------------------
At December 26, 1993 $73 $804 $2,427 $(454) $(407) $2,443
==============================================================================
See accompanying notes.
31
<PAGE>
Lockheed Corporation
Notes to Consolidated Financial Statements
Note 1 -- Summary of Significant Accounting Policies
- ----------------------------------------------------
Basis of consolidation--The consolidated financial statements for the years
ended December 26, 1993, December 27, 1992, and December 29, 1991, include
the accounts of wholly owned and majority-owned subsidiaries. The accounts
of Lockheed Finance Corporation (LFC), a wholly owned finance company
subsidiary, are included in the consolidated financial statements. LFC's
assets, revenues, and earnings are immaterial and therefore not separately
disclosed. Because LFC's business differs significantly from the rest of
Lockheed's operations, LFC's results of operations are presented as a
component of other income, net.
Certain reclassifications have been made to the 1992 and 1991 data to
conform to the 1993 presentation.
Cash and cash equivalents -- The company considers securities purchased
within three months of their date of maturity to be cash equivalents. Due
to the short maturity of these instruments, carrying value on the company's
consolidated balance sheet approximates fair value. Under Lockheed's cash
management system, certain divisions' and subsidiaries' cash accounts
reflect credit balances to the extent checks written have not been
presented for payment. The amounts of these credit balances included in
accounts payable were $154 million at December 26, 1993, and $178 million
at December 27, 1992.
Inventories -- Inventories are stated at the lower of cost or estimated net
realizable value. In the case of materials and spare parts, cost
represents average cost.
Work-in-process inventory includes direct production costs, allocable
operating overhead, and, except for commercial contracts and programs,
general and administrative expenses.
Inventories are primarily attributable to long-term contracts or programs
on which the related operating cycles are longer than one year. In
accordance with industry practice, these inventories are included in
current assets.
Property, plant, and equipment -- Depreciation is provided on most plant
and equipment using declining balance methods of depreciation during the
first half of the estimated useful lives of the assets; thereafter,
straight-line depreciation is used. Estimated useful lives generally range
from eight years to 33 years for buildings and structures and two years to
20 years for machinery and equipment. Leasehold improvements are amortized
over the useful lives of the related assets or the terms of the leases,
whichever is shorter.
Intangible assets related to tactical aircraft programs acquired --
Intangible assets related to the acquisition of Lockheed Fort Worth Company
(the former tactical military aircraft business of General Dynamics
Corporation) are amortized on a straight-line basis over an estimated
period of benefit of fifteen years.
32
<PAGE>
Excess of purchase price over fair value of net assets acquired -- The
excess of purchase price over fair value of net assets of acquired
businesses is amortized on a straight-line basis over the estimated periods
of benefit. Such periods do not exceed 40 years.
Sales and earnings -- Sales under cost-reimbursement-type contracts are
recorded as costs are incurred. Applicable estimated profits are included
in sales in the proportion that incurred costs bear to total estimated
costs. Sales and anticipated profits under certain fixed-price contracts
that require substantial performance over a long period of time before
deliveries begin are accounted for under the percentage-of-completion
(cost-to-cost) method. Under all other contracts, sales are recorded at
delivery or on completion of specified tasks, as applicable, and estimated
contract profits are taken into earnings in proportion to recorded sales.
Some contracts include provisions for adjusting prices to reflect
specification changes and other matters. For accounting purposes,
estimates of such adjustments are used in recording sales and costs and
expenses. Incentives or penalties applicable to performance on contracts
are considered in estimating sales and profit rates and are recorded when
there is sufficient information to assess anticipated contract performance.
When the adjustments are ultimately determined, any changes from the
estimates are reflected in earnings.
Any anticipated losses on contracts or programs are charged to earnings
when identified.
Research and development costs -- Company-sponsored research and
development costs (shown in Selected Financial Data on page 15) primarily
include research and development and bid and proposal effort related to
government products and services. Except for certain arrangements
described below, these costs are generally included as part of the general
and administrative costs that are allocated among all contracts and
programs under U.S. government contractual arrangements. Company-sponsored
product development costs not otherwise allocable are charged to expense
when incurred. Under certain arrangements in which a customer shares in
product development costs, the company's portion of such costs is expensed
as incurred. Customer-sponsored research and development costs incurred
pursuant to contracts are accounted for as program costs.
Environmental matters -- The company records a liability for environmental
matters when it is probable that a liability has been incurred and the
amount can be reasonably estimated. A substantial portion of the costs are
expected to be reflected in sales and costs of sales pursuant to U.S.
government agreement or regulation. At the time a liability is recorded
for future environmental costs, an asset is recorded for the probable
future recovery of those costs in pricing U.S. government business. With
the exception of applicable amounts representing current assets and
liabilities, these amounts are included in other noncurrent assets and
other long-term liabilities. The portion of those costs expected to be
allocated to commercial business is reflected in cost of sales at the time
the liability is established. Prior to 1993, environmental liabilities
were recorded by the company net of the estimated expenditures that would
be allocated and allowable in establishing prices of U.S. government
business. The 1992 amounts have been reclassified on the consolidated
balance sheet to conform to the 1993 presentation.
33
<PAGE>
Earnings per share -- Earnings per share are computed from the weighted
average number of common shares, including common share equivalents,
outstanding during each year. In general, this computation assumes that
dilutive stock options were exercised and the resulting proceeds were used
to purchase outstanding common stock. When there is no material difference
between the computations of primary and fully diluted earnings per share,
only the primary number is presented.
Note 2 - Acquisition
- --------------------
Effective February 28, 1993, the company acquired Lockheed Fort Worth
Company (LFWC), formerly the tactical military aircraft business (Fort
Worth Division) of General Dynamics Corporation, for approximately
$1.5 billion in cash, plus the assumption of certain liabilities related
to the business. The acquisition was accounted for as a purchase, and
financed by intermediate and long-term borrowings. LFWC is active in
research, design, and systems integration for manufacturing and upgrading
manned tactical aircraft and related products, including electronic warfare,
training, and mission support systems. The operating results of LFWC since
February 28, 1993, are reported in the company's Aeronautical Systems segment.
The excess of the purchase price over the fair value of the net assets
acquired represented intangible assets related to the aircraft programs
acquired and amounted to approximately $1.5 billion. These intangible
assets are being amortized over 15 years.
The following pro forma financial information combines Lockheed's and
LFWC's results of operations assuming that the acquisition took place at
the beginning of 1992. These pro forma results are not necessarily
indicative of future operations of the combined company.
In millions, except per-share data 1993 1992
- -------------------------------------------------------------
Sales $13,520 $12,941
Earnings before cumulative effect of
change in accounting principle 426 388
Net earnings (loss) 426 (243)
Earnings per share
Before change in accounting principle 6.77 6.29
Net earnings (loss) 6.77 (3.94)
- -------------------------------------------------------------
Note 3 - Restructuring Activities
- ---------------------------------
The company is holding and preparing for sale the excess property,
primarily in Burbank, California, resulting from the restructuring of its
Aeronautical Systems business in 1989. As a result of declining real
estate values, the company recorded a charge of $35 million in the third
quarter of 1993 representing the excess of capitalized and future costs
applicable to the restructuring properties over the anticipated proceeds at
time of sale. Until the properties are prepared for sale and sold, the
ultimate cost and sales value of the properties will continue to be subject
to change.
34
<PAGE>
Note 4 - Other Income, Net
- --------------------------
Other income, net consisted of the following components:
In millions 1993 1992 1991
- ---------------------------------------------------------
Interest income $ 14 $ 38 $ 31
Earnings before income taxes
of Lockheed Finance Corporation 6 6 6
Other (20) (20) (21)
- ---------------------------------------------------------
$ $ 24 $ 16
=========================================================
Note 5 - Accounts Receivable
- ----------------------------
Accounts receivable consisted of the following components:
In millions 1993 1992
- ------------------------------------------------------------
U.S. government, primarily on
long-term contracts $ 521 $ 538
Commercial and foreign government
Long-term contracts 48 111
Other 336 235
Unbilled costs and accrued profits,
primarily related to U.S. government
and foreign government contracts 739 706
- ------------------------------------------------------------
$1,644 $1,590
============================================================
Unbilled costs and accrued profits consisted primarily of revenues on
long-term contracts that had been recognized for accounting purposes but
not yet billed to customers. Of this total at December 26, 1993, it is
expected that approximately $670 million will be billed within 90 days.
The remaining amount of unbilled costs and accrued profits represent
amounts related to Lockheed's estimate of contract price adjustments that
are expected to be billed and collected on completion of negotiations.
35
<PAGE>
Note 6 - Inventories
- --------------------
Inventories consisted of the following components:
In millions 1993 1992
- -----------------------------------------------------------------
Work in process, primarily on
long-term contracts or programs $3,166 $1,524
Materials and spare parts 310 259
Advances to subcontractors 394 205
Finished goods 105 115
- -----------------------------------------------------------------
3,975 2,103
Less customer advances and
progress payments 2,276 925
- -----------------------------------------------------------------
$1,699 $1,178
=================================================================
A substantial portion of inventories was applicable to U.S. government
contracts. Under contractual arrangements whereby Lockheed receives
progress payments from the U.S. government, title to inventories identified
with the related contracts is vested in the government.
Inventories do not include any significant amounts of unamortized tooling,
learning curve and other deferred costs, claims, or other similar items
whose recovery is uncertain.
An analysis of general and administrative costs included in work in process
follows:
In millions 1993 1992 1991
- --------------------------------------------------------------------
Beginning of period $ 215 $ 186 $ 207
Incurred during the year 1,113 913 812
Charged to costs and expenses during the year (956) (884) (833)
- --------------------------------------------------------------------
$ 372 $ 215 $ 186
====================================================================
Included in costs and expenses in 1993, 1992, and 1991, were general and
administrative costs of approximately $110 million, $102 million, and $66
million, respectively, incurred by business units whose sales were
principally not under government contracts.
36
<PAGE>
Note 7 - Income Taxes
- ---------------------
The provision for income taxes consisted of the following components:
In millions 1993 1992 1991
- ------------------------------------------------------------
Current U.S. federal $ 83 $ 210 $ 199
Foreign 5 7 11
Deferred U.S. federal 166 (16) (44)
- ------------------------------------------------------------
$ 254 $ 201 $ 166
============================================================
All of the pretax earnings shown in the company's consolidated statement of
earnings were included in the computation of the provision for U.S. federal
income tax. For the approximate amounts of foreign pretax income, see Note
13.
Net provisions for state taxes on income are included in general and
administrative expenses which, as explained in Note 6, are primarily
allocable to government contracts. Such state taxes were $30 million in
1993, $43 million in 1992, and $35 million in 1991.
The following is a reconciliation of the difference between the actual
provision for income taxes and the provision computed by applying the
federal statutory tax rate on earnings before income taxes and cumulative
effect of change in accounting principle:
In millions 1993 1992 1991
- ------------------------------------------------------------
Computed income taxes
using statutory tax
rate (35% in 1993,
34% in 1992 and 1991) $ 237 $ 187 $ 161
Increases (reductions)
from
Amortization of purchase
costs 16 13 12
Revisions to prior years'
estimated income tax
liabilities
Tax credits (15)
Other revisions 16 5 12
Other, net (15) (4) (4)
- ------------------------------------------------------------
$ 254 $ 201 $ 166
============================================================
The company adopted Statement of Financial Accounting Standards No. 109
(SFAS 109), "Accounting for Income Taxes," in 1992. Deferred income tax
assets and liabilities on the consolidated balance sheet reflect the net
tax effects of temporary differences between the carrying amounts of assets
and liabilities for financial reporting purposes and the amounts used for
income tax purposes. SFAS 109 requires a valuation allowance if it is more
likely than not that some portion or all of the deferred tax assets will
not be realized. The company has no recorded deferred tax assets which
require a valuation allowance.
37
<PAGE>
Deferred tax assets and liabilities consisted of the following components:
December 26, December 27,
In millions 1993 1992
- -------------------------------------------------------------
Deferred tax assets related to:
Accumulated retiree medical
benefit obligation $384 $304
Accrued compensation and benefits 140 114
Other 27 25
- -------------------------------------------------------------
551 443
- -------------------------------------------------------------
Deferred tax liabilities related to:
Acquired intangible assets 257
Contract costing methods 170 158
Depreciation methods 85 83
Debt settlement costs 37 35
Restructuring costs 13 12
- -------------------------------------------------------------
562 288
- -------------------------------------------------------------
Net deferred tax assets (liabilities) $(11) $155
=============================================================
The computation of the deferred tax provision for 1991, the last year in
which the deferred method was used, included tax effects related to the
following:
In millions 1991
- -----------------------------------------------------------
Contract costing methods $ (9)
Foreign tax credits (3)
Undistributed earnings of foreign subsidiaries 11
Costing adjustment (10)
Transition adjustments for
changes in tax accounting methods (25)
Other, net (8)
- -----------------------------------------------------------
$ (44)
===========================================================
Note 8 - Employee Benefit Plans
- -------------------------------
DEFINED CONTRIBUTION PLANS
The company maintains contributory 401(k) savings plans for salaried
employees (the Salaried Plan) and hourly employees (the Hourly Plans)
which cover substantially all employees.
The Salaried Plan
In 1989, a leveraged Employee Stock Ownership Plan (ESOP) was created and
incorporated into the Salaried Plan. The ESOP purchased approximately 10.7
million shares of Lockheed stock with the proceeds from a $500 million note
issue which is guaranteed by Lockheed (see Note 10). These shares are held
38
<PAGE>
in a suspense account in a salaried ESOP trust until allocated to
participants as described below.
Under provisions of the Salaried Plan, employees' eligible contributions
are matched by the company at a 60 percent rate. The company's matching
obligation is accounted for as compensation and was $104 million in 1993,
$91 million in 1992, and $85 million in 1991. Since January 1992, one
half of the company match has consisted of cash contributions to
employee-selected investment options (including Lockheed stock) and one
half of the company match has consisted of Lockheed stock. In 1991, the
company match consisted entirely of Lockheed stock. The Lockheed stock
portion of the matching obligation is fulfilled, in part, with stock
allocated from the suspense account (approximately 710,000 shares per year)
through the year 2004. The balance of the stock portion of the matching
obligation is fulfilled through purchases of Lockheed stock from retiring
participants or on the open market. Approximately 77,000, 184,000, and 1.2
million shares of Lockheed stock were purchased on the open market by the
salaried ESOP trust in 1993, 1992, and 1991, respectively. The salaried
ESOP trust also sold on the open market approximately 110,000 and 285,000
shares purchased from retirees in 1993 and 1992, respectively.
Company payments to the salaried ESOP trust for the stock portion of the
matching obligation consist of dividends on the unallocated shares, and an
amount sufficient to fully service the ESOP debt and meet the company's
matching obligation to employees that is not otherwise covered through the
allocation of suspense account shares.
In 1993, compensation expense accrued and dividends on unallocated shares
exceeded the amount required to fully service the ESOP debt and fulfill the
company's matching obligation by approximately $2 million. The amount was
recognized as an addition to the company's other income, net. In 1992 and
1991, the company paid an amount in excess of compensation expense accrued
and dividends on unallocated shares. These additional payments were
recognized as additions to Lockheed's interest expense. The amount varied
in each year due to changes in the market value of company stock allocated
from the suspense account. The impact of the ESOP on the company also
includes special tax benefits on dividends paid on allocated and
unallocated ESOP shares. These various items are reflected in components
of the company's consolidated statement of earnings or as direct increases
to the company's retained earnings. The aggregate of these items resulted
in a net favorable effect to the company of about $12 million, $6 million,
and $5 million in 1993, 1992, and 1991, respectively.
39
<PAGE>
The salaried ESOP trust requirements and the company's payments are shown
in the following table:
In millions 1993 1992 1991
- -------------------------------------------------------------------
ESOP trust requirements:
Debt service (including interest of
$35 million in 1993, $38 million
in 1992, and $39 million in 1991) $ 59 $ 59 $ 59
Purchase of additional shares (required
to meet company matching obligation) 8 12 55
- -------------------------------------------------------------------
$ 67 $ 71 $ 114
===================================================================
Met by:
Dividends on unallocated shares $ 17 $ 18 $ 22
Company matching funds
(Lockheed stock portion) 52 45 85
Amounts recognized as
additions to Lockheed's
interest expense (other income) (2) 8 7
- -------------------------------------------------------------------
$ 67 $ 71 $ 114
===================================================================
The Hourly Plans
In 1990, ESOPs were created and incorporated into the Hourly Plans. The
company matches 60 percent of a participating employee's eligible
contribution to the Hourly Plans through payments to an ESOP trust. The
company's match consists of Lockheed stock purchased by the ESOPs on the
open market and from retiring participants. The company's required match,
which is reported as compensation, was $15 million in 1993, $16 million in
1992, and $17 million in 1991. Approximately 123,000, 311,000, and 370,000
shares were purchased on the open market to provide the company match in
1993, 1992, and 1991, respectively.
ESOP Ownership of the Company's Stock
The salaried and hourly ESOP trusts held approximately 16 million shares of
the company's stock at December 26, 1993, December 27, 1992, and December
29, 1991, representing about 26 percent, 26 percent, and 25 percent of the
total shares outstanding, respectively.
DEFINED BENEFIT PLANS
Most employees are covered by Lockheed-sponsored contributory or
noncontributory defined benefit pension plans. Normal retirement age is
65, but provision is made for earlier retirement. Benefits for salaried
plans are generally based on salary and years of service, while those for
hourly plans are based on negotiated benefits and years of service.
Substantially all benefits are paid from funds previously provided to
trustees. Lockheed's funding policy is to make contributions that are
consistent with U.S. government cost allowability and Internal Revenue
Service deductibility requirements, subject to the full-funding limits of
the Employee Retirement Income Security Act of 1974 (ERISA). When any
Lockheed funded plan exceeds the full-funding limits of ERISA, no
contribution is made to that plan. In addition, Lockheed has certain
40
<PAGE>
supplemental retirement and other benefit plans which are not material.
Under these plans, benefits are paid directly by Lockheed and charged
against liabilities previously accrued.
Net pension cost for 1993, 1992 and 1991, as determined by Statement of
Financial Accounting Standards No. 87 (SFAS 87), was $110 million, $76
million, and $90 million, respectively, as shown in the following table:
In millions 1993 1992 1991
- -------------------------------------------------------------------
Service cost - benefits earned during
the period $ 221 $ 176 $ 165
Interest cost on projected benefit
obligation 534 439 419
Actual return on plan assets (856) (358) (1,266)
Net amortization and deferral 214 (178) 775
Employee contributions (3) (3) (3)
- -------------------------------------------------------------------
$ 110 $ 76 $ 90
===================================================================
An analysis of the status of the plans follows:
December 26, December 27,
In millions 1993 1992
- --------------------------------------------------------------
Plan assets, at fair value $8,322 $6,608
==============================================================
Actuarial present value of benefit
obligations
Vested benefits $6,696 $5,021
Nonvested benefits 77 81
- --------------------------------------------------------------
Accumulated benefit obligation 6,773 5,102
Effect of projected future salary
increases 844 634
- --------------------------------------------------------------
Projected benefit obligation 7,617 5,736
- --------------------------------------------------------------
Plan assets in excess of projected
benefit obligation $ 705 $ 872
==============================================================
Consisting of
Unrecognized net asset existing at
the date of initial application of
SFAS 87 $ 422 $ 507
Unrecognized prior service cost (242) (148)
Unrecognized net gain 308 528
Prepaid pension expense 217 (15)
- --------------------------------------------------------------
$ 705 $ 872
==============================================================
At December 26, 1993 and December 27, 1992, approximately 48 percent and 49
percent, respectively, of the plan assets were equity securities and the
rest were primarily fixed income securities. The actuarial determinations
were based on various assumptions as illustrated in the following table.
Net pension costs in 1993, 1992, and 1991 were based on assumptions in
41
<PAGE>
effect at the end of the respective preceding year-end. Benefit
obligations as of each year-end were based on assumptions in effect as of
those dates.
1993 1992 1991
- --------------------------------------------------------------------------
Discount rate on benefit obligations 7.0% 8.0% 8.25%
Average of full-career compensation increases
for those employees whose benefits
are affected by compensation levels 6.0% 7.0% 7.0%
Expected long-term rate of return on plan assets 8.0% 8.0% 8.0%
- --------------------------------------------------------------------------
As required by SFAS 87, the projected benefit obligation includes the
effect of projected future salary increases, but not the effect of
projected future credited service. The excess of plan assets over the
projected benefit obligation will be required to fund the plans' continuing
benefit obligations that will result from, among other things, future
credited service. The change in this excess in 1993 from 1992 resulted
from an increase in the accumulated benefit obligation primarily due to the
lower discount rate, as well as the assumption of benefit obligations for
certain employees and retirees of the former Fort Worth Division of General
Dynamics Corporation, offset in part by plan assets acquired related to the
assumed benefit obligations, as well as earnings of the plan assets
exceeding benefit payments and expenses. The net pension cost for 1993
includes costs associated with the assumed obligations related to the Fort
Worth Division of General Dynamics.
The company has no present intention of terminating any of its pension
plans. However, if a qualified defined benefit pension plan is terminated,
the company would be required to vest all participants and purchase
annuities with plan assets to meet the accumulated benefit obligation for
such participants. At December 26, 1993, the cost to purchase annuities to
satisfy the accumulated benefit obligation of Lockheed's qualified defined
benefit plans would be in excess of $8.8 billion, compared to the $6.8
billion of accumulated benefit obligation reflected on the second table on
page 41. The main salaried retirement plan provides that, after
satisfaction of the accumulated benefit obligation and payment of federal
excise taxes and federal and state income taxes, remaining plan assets
would, in the event of plan termination within five years following a
change in control of the company, be transferred to a trust and applied to
the payment of certain other employee benefits otherwise payable to
employees and retirees (e.g. retiree medical benefits). To the extent that
contributions to a defined benefit plan were reimbursed under U.S.
government contracts, any remaining surplus amounts at the time of plan
termination are subject to equitable sharing under an agreement with the
government.
RETIREE MEDICAL PLANS
Lockheed currently provides medical benefits under a contributory group
medical plan for certain early (pre-65) retirees and under a
noncontributory group Medicare supplement plan for certain retirees aged 65
and over (post-65).
Under the accrual accounting methods of Statement of Financial Accounting
Standards No. 106 (SFAS 106), "Employers' Accounting for Postretirement
Benefits Other Than Pensions," the present value of the actuarially
42
<PAGE>
determined expected future cost of providing medical benefits is attributed
to each year of employee service. The service and interest cost recognized
each year is added to the accumulated retiree medical benefit obligation.
Net retiree medical benefit costs as determined under SFAS 106 were $102
million in 1993 and $91 million in 1992, and are shown in the following
table:
In millions 1993 1992
- -------------------------------------------------------
Service cost - benefits accrued
during the year $ 24 $18
Interest cost on accumulated
retiree medical benefit
obligation 84 76
Actual return on plan assets (5) (2)
Net amortization and deferral (1) (1)
- -------------------------------------------------------
$102 $91
=======================================================
Lockheed has implemented funding approaches to help manage future retiree
medical costs. A Voluntary Employees' Beneficiary Association (VEBA) trust
was established and began receiving funding in 1991, and other trusts
established under Internal Revenue Service (IRS) regulations began
receiving funding in 1992. At December 26, 1993, these trusts held $113
million in assets, of which 52 percent were equity securities and the rest
were primarily fixed income securities. In 1992, assets were held in
short-term investment fund accounts. The funded amounts are allowable
under government contracts in the pricing of the company's products and
services and are deductible in the year of contribution under IRS
regulations. Earnings on trust assets operate as a reduction to annual
SFAS 106 costs.
Upon adopting SFAS 106 effective the beginning of fiscal 1992, Lockheed
elected to record the transition obligation (present value of future
retiree medical benefits attributed to years prior to 1992) on the
immediate recognition basis. This resulted in a charge to 1992 earnings
for the cumulative effect of the accounting change of $631 million, or
$10.23 per share, after recognition of the deferred tax benefit of $325
million associated with this transition obligation.
Under SFAS 106, actual medical benefit payments to retirees reduce
Lockheed's accumulated retiree medical benefit obligation, and any trust
funding reduces the unfunded portion of this obligation on the company's
consolidated balance sheet. An analysis of the status of the retiree
medical benefit plans follows:
43
<PAGE>
December 26, December 27,
In millions 1993 1992
- --------------------------------------------------------------
Plan assets at fair value $ 113 $ 63
==============================================================
Actuarial present value of
benefit obligation:
Retirees $ 726 $585
Employees eligible to retire 233 160
Employees not eligible to retire 309 195
- --------------------------------------------------------------
Accumulated retiree medical
benefit obligation 1,268 940
Unrecognized net gain (loss) (58) 32
- --------------------------------------------------------------
Net unfunded retiree medical
benefit obligation $1,097 $909
==============================================================
In 1993, in response to economic conditions affecting a number of U.S.
government and commercial programs, the company undertook significant
workforce reductions at several of its companies. This action resulted in
a net curtailment gain of $28 million, representing a reversal of a portion
of the previously accrued obligation for future retiree medical costs. In
addition, the retiree medical benefit obligations at December 26, 1993, and
the 1993 net retiree medical benefit costs reflect the assumption of
benefit obligations for certain employees and retirees of the former Fort
Worth Division of General Dynamics Corporation.
Actuarial determinations were based on various assumptions as illustrated
in the following table. Net retiree medical costs for 1993 and 1992 were
based on assumptions in effect at the end of the respective preceding
years. Benefit obligations as of the end of each year reflect assumptions
in effect as of those dates.
1993 1992
- --------------------------------------------------------------
Discount rate 7.0% 8.25%
Expected long-term rate
of return on plan assets 8.0% 8.0%
Range of medical trend rates:
Initial: pre-65 retirees 11.0% 13.0%
post-65 retirees 7.5% 10.0%
Ultimate (20 years and after):
pre-65 retirees 5.0% 6.0%
post-65 retirees 2.0% 2.0%
- --------------------------------------------------------------
An increase of one percentage point in the assumed medical trend rates
would result in an accumulated retiree medical benefit obligation of $1.3
billion at December 26, 1993, and a 1993 net retiree medical benefit cost
of approximately $119 million. The company believes that the cost
containment features it has previously adopted and the funding approaches
under way will allow it to effectively manage its retiree medical expenses,
but it will continue to monitor the costs of retiree medical benefits and
may further modify the plans if circumstances warrant.
44
<PAGE>
POSTEMPLOYMENT BENEFITS
In November 1992, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 112 (SFAS 112), "Employers'
Accounting for Postemployment Benefits." This statement establishes
standards for accounting for benefits to former or inactive employees after
employment, other than retirement benefits. Lockheed will adopt SFAS 112
in 1994, the required implementation date. Adoption of SFAS 112 is not
expected to have a significant effect on the company's financial
statements.
Note 9 - Leases
- ---------------
Total rental expenses under operating leases, net of immaterial amounts
of sublease rentals and contingent rentals, were $112 million, $114
million, and $123 million for 1993, 1992, and 1991, respectively.
Future minimum lease commitments at December 26, 1993, for all operating
leases that have a remaining term of more than one year were $507 million
($104 million in 1994, $80 million in 1995, $69 million in 1996, $51
million in 1997, $47 million in 1998, and $156 million in later years).
Substantially all real estate leases contain renewal options ranging from
one year to 10 years. Certain major plant facilities and equipment are
furnished by the U.S. government under short-term or cancelable
arrangements.
Note 10 - Debt
- --------------
At December 26, 1993, the company had two loan agreements (the 1993
Agreements) with a group of domestic and foreign banks. One agreement
makes available $1 billion through August 30, 1996, while the other
agreement makes available $300 million through August 29, 1994. The
primary purpose of these agreements is to back up the company's commercial
paper borrowings.
There were no borrowings outstanding under either agreement, and no
commercial paper borrowings outstanding, at December 26, 1993 (considerable
commercial paper borrowing activity took place during the year, however,
primarily to provide the initial financing of the LFWC acquisition and for
temporary working capital needs).
Borrowings under the 1993 Agreements would be unsecured and bear interest,
at the company's option, at rates based on the Eurodollar rate or a bank
base rate (as defined). The 1993 Agreements contain financial covenants
relating to equity and debt, and provisions which relate to certain changes
in control.
45
<PAGE>
Long-term debt consisted of the following components:
In millions 1993 1992
- ------------------------------------------------------------
7 7/8% notes due 1993 $ 300
8 1/2% notes due 1996, redeemed 1993 200
Variable-rate notes due 1995 $ 200 80
Fixed-rate notes due 1995 to 2004 140 77
4 7/8% notes due 1996 275
5.65% notes due 1997 100
5 7/8% notes due 1998 300
9 3/8% notes due 1999 300 300
6 3/4% notes due 2003 300
9% notes due 2022 200 200
7 7/8% notes due 2023 300
Obligations under long-term capital leases 17 10
Other obligations 36 53
- ------------------------------------------------------------
2,168 1,220
Guarantee of ESOP obligations 407 431
- ------------------------------------------------------------
2,575 1,651
Less portion due within one year 28 323
- ------------------------------------------------------------
$ 2,547 $ 1,328
============================================================
All of the notes contain covenants relating to debt, and provisions which
relate to certain changes in control.
The variable-rate notes due in 1995 are unsecured and bear interest at
rates based on the Eurodollar rate.
The fixed-rate notes due in 1995 to 2004 are unsecured, were issued in
various denominations with various maturity dates, and bear interest at
fixed rates ranging from 4.55 percent to 8.34 percent.
The 9 3/8% notes due in 1999 stipulate that, in the event of both a
"designated event" and a related "rating decline" occurring within a
specified period of time, holders of the notes may require Lockheed to
redeem the notes and pay accrued interest. In general, a "designated
event" occurs when any one of certain ownership, control, or
capitalization changes takes place. A "rating decline" occurs when the
ratings assigned to Lockheed debt are reduced below investment-grade
levels.
Lockheed's leveraged ESOP (see Note 8) borrowed $500 million through a
private placement of notes in 1989. These notes bear interest at fixed
rates ranging from 8.27 percent to 8.41 percent, and are being repaid in
quarterly installments over terms ending in 2004. The ESOP note agreement
stipulates that, in the event that the ratings assigned to Lockheed's
long-term senior unsecured debt are below investment grade, holders of the
notes may require Lockheed to purchase the notes and pay accrued interest.
These notes are obligations of the ESOP but guaranteed by Lockheed and, in
accordance with financial accounting standards, are reported as debt on
Lockheed's balance sheet, with a corresponding offset to stockholders'
equity. As the ESOP notes are repaid, the amount guaranteed decreases, as
do the amounts reported as Lockheed debt and offsetting stockholders'
46
<PAGE>
equity. While the amount guaranteed affects Lockheed's consolidated
balance sheet, the issuance of the guarantee and the subsequent reductions
in its amount were not cash transactions and, accordingly, are not
reflected on the consolidated statement of cash flows.
Lockheed Finance Corporation (LFC) has a $155 million line of credit with a
group of banks. The agreement limits borrowings to an amount reduced by
the balance outstanding ($58 million at December 26, 1993) of LFC notes and
leases receivable sold to the banks with certain recourse provisions.
The company's long-term debt maturities, including those of LFC and the
guaranteed ESOP obligations, for the five years following December 26,
1993, are: $28 million in 1994; $272 million in 1995; $306 million in
1996; $162 million in 1997; and $373 million in 1998.
Statement of Financial Accounting Standards No. 107, "Disclosures about
Fair Value of Financial Instruments," requires the disclosure of the fair
value of financial instruments, both assets and liabilities recognized and
not recognized on the consolidated balance sheet, for which it is
practicable to estimate fair value. Unless otherwise indicated elsewhere
in the notes to the consolidated financial statements, the carrying value
of the company's financial instruments approximates fair value. The
estimated fair values of the company's long-term debt instruments at
December 26, 1993, aggregated $2,776 million, compared with a carrying
amount of $2,575 million on the consolidated balance sheet. The fair
values were estimated based on quoted market prices for those instruments
publicly traded. For privately placed debt, the fair values were estimated
based on the quoted market prices for the same or similar issues, or on
current rates offered to the company for debt of the same remaining
maturities.
Note 11 - Commitments and Contingencies
- ---------------------------------------
ENVIRONMENTAL MATTERS
In March 1991, the company entered into a consent decree with the U.S.
Environmental Protection Agency (EPA) relating to certain property in
Burbank, California, which obligates the company to design and construct
facilities to monitor, extract, and treat groundwater and operate and
maintain such facilities for approximately eight years. The company
currently estimates that expenditures required to comply with the terms of
the consent decree over the remaining term of the project will approximate
$120 million.
The company has also been operating under a cleanup and abatement order
from the California Regional Water Quality Control Board affecting its
facilities in Burbank, California. This order requires site assessment and
action to abate groundwater contamination by a combination of groundwater
and soil cleanup and treatment. Based on experience being derived from
initial remediation activities, the company currently estimates the
anticipated costs of these actions in excess of the requirements under the
EPA consent decree to approximate $175 million over the remaining term of
the project; however, this estimate will be subject to changes as work
progresses and as additional experience is gained.
47
<PAGE>
The company is also involved in several other proceedings and potential
proceedings relating to environmental matters, including disposal of
hazardous wastes and soil and water contamination. The company has not
incurred any material costs relating to these environmental matters. The
extent of the company's financial exposure cannot in all cases be
reasonably estimated at this time. A liability of approximately $55
million for those cases in which an estimate of financial exposure can be
determined has been recorded.
Under an agreement with the U.S. government, the Burbank groundwater
treatment and soil remediation expenditures are being allocated to all of
the company's operations as general and administrative costs (see Note 1),
and under existing government regulations these and other environmental
expenditures related to U.S. government business are allowable in
establishing the prices of the company's products and services. As a
result, a substantial portion of the expenditures will be reflected in the
company's sales and costs of sales pursuant to U.S. government agreement or
regulation. The company has recorded a liability for probable future
environmental costs as discussed above, and has recorded an asset for
probable future recovery of these costs in pricing of the company's
products and services for U.S. government business. The portion that is
expected to be allocated to commercial business has been reflected in cost
of sales.
OTHER MATTERS
Lockheed is a defendant in a number of shareholder lawsuits relating to the
fourth quarter 1989 write-off of $300 million on the P-7A aircraft
development program. The plaintiffs allege, among other things, that
disclosure with respect to potential losses under the contract was not made
on a timely basis. The company believes that if these actions, in the
aggregate, were decided adversely to it, the result would not have a
material impact on the company.
Lockheed Missiles and Space Company, Inc., a subsidiary of Lockheed, is a
defendant in a civil suit in the United States District Court for the
Northern District of California brought under the so-called qui tam
provisions of the False Claims Act, which permit an individual to bring
suit in the name of the government and share in any recovery received. The
suit, captioned United States ex rel. Margaret A. Newsham and Martin
Overbeek Bloem v. Lockheed Missiles and Space Company, Inc., was filed by
two ex-employees in 1988. The complaint sets forth numerous allegations of
improper conduct by Lockheed and seeks unspecified damages. The Department
of Justice conducted a thorough investigation of the matter after the
complaint was filed and has declined to take over prosecution of the case.
The company believes the litigation to be without merit and intends to
aggressively defend its position.
A number of other lawsuits and administrative proceedings are pending
against the company and its subsidiaries. Management believes the
lawsuits and administrative proceedings are either without merit or, if
decided adversely, would be covered by insurance or by contract or would
not be of material significance.
48
<PAGE>
The company has entered into standby letter of credit agreements and other
arrangements with financial institutions primarily relating to the
guarantee of future performance on certain contracts. At December 26,
1993, the company was contingently liable on outstanding letters of credit,
guarantees, and other arrangements aggregating approximately $406 million.
Lockheed Finance Corporation sold certain finance notes and leases
receivable with certain recourse provisions during 1993 and in previous
years. At December 26, 1993, the unpaid principal balance of these notes
and leases was about $58 million.
At December 26, 1993, LFC had entered into approximately $400 million in
interest rate swap agreements to reduce the impact of changes in interest
rates on its operations. The effect of these agreements is that the
aggregate of the carrying value of LFC's financial instruments approximates
their fair market value. LFC is exposed to credit loss, to the extent of
future interest rate differentials, in the event of nonperformance by the
intermediaries to the interest rate swap agreements. The company does not
anticipate nonperformance by the intermediaries.
Note 12 - Stockholders' Equity and Related Items
- ------------------------------------------------
EMPLOYEE STOCK OPTIONS
Lockheed's 1992 Employee Stock Purchase Program (1992 Program) authorizes
grants of options to purchase up to 3,000,000 shares of the company's
authorized but unissued common stock. Options granted under the 1992
Program and its predecessors, the 1986 Program and the 1982 Program, can be
exercised at a price not less than the fair market value of the stock on
the date that the option is granted. At December 26, 1993, 2,856,770
shares of the company's common stock were reserved for stock options
granted.
The 1992 Program is composed of two separate stock option plans. The first
plan provides for the grant of incentive stock options. The second plan
provides for the grant of nonstatutory stock options that may, at the
discretion of the board of directors, be accompanied by stock appreciation
rights.
The following table summarizes the options exercisable and available for
grant at December 26, 1993:
Exercisable
--------------------- Available
Number Price range for grant
- ----------------------------------------------------
1992 Program 226,973 $42.75-58.81 1,821,500
1986 Program 1,447,538 31.94-55.31
1982 Program 287,009 46.00-47.50
====================================================
49
<PAGE>
The following table summarizes the activity under the company's plans
during 1993:
Option Shares
price under
range option
- ------------------------------------------------
Outstanding at
December 27, 1992 $31.94-55.31 3,870,883
Granted 58.31-58.81 633,450
Terminated 40.19-58.81 (26,200)
Exercised 34.81-55.31 (1,621,363)
- ------------------------------------------------
Outstanding at
December 26, 1993 $31.94-58.81 2,856,770
================================================
PREFERRED STOCK
There are 2,500,000 shares of preferred stock, $1 par value, authorized
for issuance. At December 26, 1993, there was no preferred stock
outstanding and 1,000,000 shares of preferred stock were reserved for
issuance in connection with the rights described below.
In December 1986, Lockheed adopted a Shareholder Rights Plan and
distributed a dividend of one right for each outstanding share of common
stock. Upon becoming exercisable, each right entitles the holder to
purchase one one-hundredth of a share of Series A Junior Participating
Preferred stock (Series A Preferred), par value $1, at a price of $150,
which is subject to adjustment. Shares of common stock issued by the
company subsequent to the adoption of the plan have had rights attached.
The rights are not exercisable into common stock or transferable apart
from the common stock, and no separate rights certificates will be
distributed until ten business days after the public announcement that a
person or group either (i) has acquired, or has obtained the right to
acquire, beneficial ownership of 20 percent or more of the outstanding
common shares, or (ii) has commenced, or announced an intention to make,
a tender offer or exchange offer if, upon consummation, such person or
group would be the beneficial owner of 20 percent or more of the
outstanding common shares.
When such rights become exercisable, as described above, each right will
entitle its holder, other than such person or group referred to above, upon
payment of the exercise price, to receive Lockheed common shares with a
deemed market value of twice such exercise price. Such rights will not be
triggered in the event of a "qualifying offer" (basically defined as an all
cash offer, fully financed, to acquire a majority of outstanding shares not
owned by the offeror, which meets specified irrevocable criteria), or if
the 20 percent acquisition is made pursuant to a tender or exchange offer
for all outstanding common shares which a majority of the directors of the
company deem to be in the best interests of the company and its
stockholders. If there is a merger with an acquirer of 20 percent or more
of Lockheed's common stock and Lockheed is not the surviving corporation,
or more than 50 percent of Lockheed's assets, earning power, or cash flow
is transferred or sold, each right will entitle its holder, other than the
acquirer, to receive the acquiring company's common shares with a deemed
market value of twice such exercise price.
50
<PAGE>
All of the rights may be redeemed by the board of directors of the company
at a price of $.05 per right until the earlier of (i) ten business days
after the public announcement that a person or group has acquired
beneficial ownership of 20 percent or more of the outstanding common shares
or (ii) December 1996. After a person or group acquires 20 percent or more
of Lockheed's common shares, the board of directors may redeem the rights
only with the concurrence of a majority of the continuing directors (as
defined in the plan). The rights, which do not have voting rights and are
not entitled to dividends, expire in December 1996.
Note 13 - Information on Industry Segments, Foreign and
- -------------------------------------------------------
Domestic Operations, and Major Customers
- ----------------------------------------
Unaudited information on Lockheed's business segments is included in Part I
of this Form 10-K and Management's Discussion and Analysis beginning on
page 16.
Selected additional information is summarized below:
SELECTED FINANCIAL DATA BY BUSINESS SEGMENT
In millions 1993 1992 1991
- ---------------------------------------------------------------------
Depreciation and amortization
Aeronautical Systems $ 216 $ 106 $ 95
Missiles and Space Systems 164 156 157
Electronic Systems 72 74 70
Technology Services 14 11 10
Corporate* 32 8 7
- ---------------------------------------------------------------------
Total $ 498 $ 355 $ 339
=====================================================================
Expenditures for property, plant, and equipment
Aeronautical Systems $ 148 $ 140 $ 108
Missiles and Space Systems 98 133 159
Electronic Systems 35 40 34
Technology Services 10 12 10
- ---------------------------------------------------------------------
Total segments 291 325 311
Corporate 30 2 1
- ---------------------------------------------------------------------
Total $ 321 $ 327 $ 312
=====================================================================
Identifiable assets
Aeronautical Systems $4,336 $2,109 $2,248
Missiles and Space Systems 1,810 2,028 2,011
Electronic Systems 1,468 1,506 1,496
Technology Services 317 300 229
- ---------------------------------------------------------------------
Total segments 7,931 5,943 5,984
Lockheed Finance Corporation 112 121 111
Corporate 918 960 522
- ---------------------------------------------------------------------
Total $8,961 $7,024 $6,617
=====================================================================
*Depreciation and amortization is allocated to the operating segments.
51
<PAGE>
SELECTED FINANCIAL DATA BY GEOGRAPHIC AREA*
In millions 1993 1992 1991
- ------------------------------------------------------------
Sales
United States $12,390 $ 9,656 $ 9,481
Other 681 444 328
- ------------------------------------------------------------
Total $13,071 $10,100 $ 9,809
============================================================
Program profits
United States $ 827 $ 613 $ 545
Other 17 31 31
- ------------------------------------------------------------
Total $ 844 $ 644 $ 576
============================================================
Identifiable assets
United States $ 8,730 $ 6,777 $ 6,413
Other 231 247 204
- ------------------------------------------------------------
Total $ 8,961 $ 7,024 $ 6,617
============================================================
* Defined by the location of Lockheed operations and not necessarily
the locations of customers. Transfers between geographic areas
were not material in any year.
Identifiable assets in each segment or geographic area include the assets
used in Lockheed's operations, and any applicable excess of the purchase
price over the fair value of net assets acquired or intangible assets
acquired, as appropriate. Consistent with Securities and Exchange
Commission rules, identifiable assets are not reduced by identifiable
liabilities. Corporate assets consisted primarily of cash and cash
equivalents, property, plant, equipment, assets related to the probable
future recovery of certain environmental remediation costs, current and
deferred tax assets, and investments.
52
<PAGE>
SALES BY CUSTOMER CATEGORY
In millions 1993 1992 1991
- ---------------------------------------------------------------------
U.S. government*
Aeronautical Systems $ 4,477 $2,245 $1,984
Missiles and Space Systems 3,846 4,386 4,777
Electronic Systems 547 507 476
Technology Services 1,179 1,103 1,058
- ---------------------------------------------------------------------
Total $10,049 $8,241 $8,295
=====================================================================
Foreign governments
Aeronautical Systems $ 1,408 $ 551 $ 424
Missiles and Space Systems 282 172 54
Electronic Systems 81 126 133
- ---------------------------------------------------------------------
Total $ 1,771 $ 849 $ 611
=====================================================================
Commercial
Aeronautical Systems $ 125 $ 161 $ 227
Missiles and Space Systems 110 29 28
Electronic Systems 768 656 513
Technology Services 248 164 135
- ---------------------------------------------------------------------
Total $ 1,251 $1,010 $ 903
=====================================================================
* Sales made to foreign governments through the U.S. government
are included in sales to foreign governments.
Export sales were $1,743 million, $831 million, and $666 million in 1993,
1992, and 1991, respectively.
53
<PAGE>
Note 14 - Summary of Quarterly Information (Unaudited)
- ------------------------------------------------------
1993 Quarters
In millions, except -----------------------------
per-share data First Second Third Fourth
- --------------------------------------------------------------
Sales $2,508 $3,349 $3,475 $3,739
Program profits 158 200 226 260
Earnings before income taxes 126 149 187 214
Net earnings 76 94 117 135
Earnings per share 1.22 1.50 1.85 2.13
- --------------------------------------------------------------
1992 Quarters
-----------------------------
First Second Third Fourth
- --------------------------------------------------------------
Sales $2,226 $2,480 $2,474 $2,920
Program profits 125 147 161 211
Earnings before income taxes 105 122 136 186
Earnings before
change in accounting 66 77 86 119
Net earnings (loss) (565) 77 86 119
Earnings per share
Before change in accounting 1.06 1.24 1.40 1.95
Net earnings (loss) (9.04) 1.24 1.40 1.95
- --------------------------------------------------------------
54
<PAGE>
THE COMPANY'S RESPONSIBILITY FOR FINANCIAL REPORTING
Management prepared, and is responsible for, the consolidated financial
statements and all related financial information contained in this report.
The consolidated financial statements, which include amounts based on
estimates and judgments, were prepared in accordance with generally
accepted accounting principles appropriate in the circumstances. Other
financial information in this report is consistent with that in the
consolidated financial statements.
Management recognizes its responsibilities for conducting the company's
affairs in an ethical and socially responsible manner. The company has
written policy statements covering its business code of ethics which
emphasize the importance of total allegiance to codes of personal and
corporate conduct that leave no latitude for legal infractions or moral
improprieties. The importance of ethical behavior is regularly
communicated to all employees through ongoing education and review programs
that are designed to create a strong compliance environment.
Management maintains an accounting system and related internal controls
which it believes provide reasonable assurance, at appropriate cost, that
transactions are properly executed and recorded, that assets are
safeguarded, and that accountability for assets is maintained. An
environment that establishes an appropriate level of control consciousness
is maintained and monitored and includes examinations by an internal audit
staff.
The audit committee of the board of directors is composed of five outside
directors. This committee is convened at least four times a year and
frequently meets separately with representatives of the independent
auditors, company officers, and the internal auditors to review their
activities.
The consolidated financial statements have been audited by Ernst & Young,
independent auditors, whose report follows.
55
<PAGE>
REPORT OF ERNST & YOUNG, INDEPENDENT AUDITORS
Board of Directors and Stockholders
Lockheed Corporation
We have audited the accompanying consolidated balance sheet of Lockheed
Corporation at December 26, 1993 and December 27, 1992, and the related
consolidated statements of earnings, stockholders' equity, and cash flows
for each of the three years in the period ended December 26, 1993. Our
audits also included the financial statement schedules listed in the Index
at Item 14(a). These financial statements and schedules are the
responsibility of the company's management. Our responsibility is to
express an opinion on these financial statements and schedules based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial
position of Lockheed Corporation at December 26, 1993 and December 27,
1992, and the consolidated results of its operations and its cash flows for
each of the three years in the period ended December 26, 1993, in
conformity with generally accepted accounting principles. Also, in our
opinion, the related financial statement schedules, when considered in
relation to the basic financial statements taken as a whole, present fairly
in all material respects the information set forth herein.
As discussed in Notes 8 and 7 to the financial statements, effective
December 30, 1991 (the beginning of Lockheed's 1992 fiscal year), the
company adopted Statement of Financial Accounting Standards No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions,"
and Statement of Financial Accounting Standards No. 109, "Accounting for
Income Taxes."
ERNST & YOUNG
Los Angeles, California
February 7, 1994
56
<PAGE>
PART III
The information required to be set forth herein, Item 10, "Directors and
Executive Officers of the Registrant," Item 11, "Executive Compensation,"
Item 12, "Security Ownership of Certain Beneficial Owners and Management,"
and Item 13, "Certain Relationships and Related Transactions," except for a
list of the Executive Officers which is provided in Part I of this report,
is included in a definitive Proxy Statement pursuant to Regulation 14A,
which is incorporated herein by reference, filed with the Securities and
Exchange Commission not later than 120 days after the close of the fiscal
year ended December 26, 1993.
57
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a) Index to Consolidated Financial Statements, Consolidated Financial
Statement Schedules and Exhibits:
Page No.
--------
1. Consolidated Financial Statements included in Part II
Consolidated Statement of Earnings for Years
Ended December 26, 1993, December 27, 1992, and
December 29, 1991.................................... 28
Consolidated Statement of Cash Flows for Years Ended
December 26, 1993, December 27, 1992, and December 29,
1991 ................................................. 29
Consolidated Balance Sheet at December 26, 1993, Decem-
ber 27, 1992, and December 29, 1991 .................. 30
Consolidated Statement of Stockholders' Equity for
Years Ended December 26, 1993, December 27, 1992, and
December 29, 1991 .................................... 31
Notes to Consolidated Financial Statements ............ 32
The Company's Responsibility for Financial Reporting .. 55
Report of Ernst & Young, Independent Auditors ......... 56
2. Consolidated Financial Statement Schedules
V -- Property, Plant, and Equipment .............. F-2
VI -- Accumulated Depreciation and Amortization of
Property, Plant, and Equipment .............. F-3
VIII -- Valuation and Qualifying Accounts ........... F-4
IX -- Short-term Borrowings ....................... F-5
X -- Supplementary Income Statement Information .. F-6
3. Index to Exhibits ...................................... E-1
All other schedules have been omitted since the required information is not
present or is not present in amounts sufficient to require submission of
the schedule, or because the information required is included in the Con-
solidated Financial Statements and related notes.
(b) Reports on Form 8-K:
Form 8-K dated September 29, 1993, Item 5, Other Events.
F-1
<PAGE>
SCHEDULE V
LOCKHEED CORPORATION
PROPERTY, PLANT, AND EQUIPMENT
Years Ended December 26, 1993, December 27, 1992, and December 29, 1991
(Millions of Dollars)
Balance Add- Retire- Balance
Beginning itions ments Other End of
Description of Year at Cost or Sales Changes(1)Year(2)
1993:
Land...................... $ 91 $ 2 $ (5) $ 5 $ 93
Buildings and structures.. 1,358 96 (139) 32 1,347
Machinery and equipment... 2,571 245 (217) 138 2,737
Leasehold improvements.... 206 16 (5) 13 230
Construction in progress(3) 222 (38) (2) 2 184
-------- -------- -------- -------- -------
$ 4,448 $ 321 $ (368) $ 190 $ 4,591
======== ======== ======== ======== =======
1992:
Land...................... $ 90 $ 1 $ 91
Buildings and structures.. 1,318 $ 43 $ (3) 1,358
Machinery and equipment... 2,402 226 (57) 2,571
Leasehold improvements.... 208 10 (12) 206
Construction in progress(3) 174 48 222
-------- -------- -------- -------- -------
$ 4,192 $ 327 $ (72) $ 1 $ 4,448
======== ======== ======== ======== ========
1991:
Land...................... $ 90 $ 90
Buildings and structures.. 1,289 $ 56 $ (23) $ (4) 1,318
Machinery and equipment... 2,342 212 (158) 6 2,402
Leasehold improvements.... 173 41 (6) 208
Construction in progress(3) 170 3 1 174
-------- -------- -------- -------- --------
$ 4,064 $ 312 $ (187) $ 3 $ 4,192
======== ======== ======== ======== ========
Methods of depreciation for plant and equipment and leasehold improvements
are discussed in Note 1 to the Consolidated Financial Statements.
(1) Other changes in 1993 primarily consist of Lockheed Fort Worth Company
asset balances at acquisition.
(2) Includes $22 million at December 26, 1993, $14 million at
December 27,1992, and $16 million at December 29, 1991, of leases
capitalized in accordance with Statement of Financial Accounting
Standards No. 13.
(3) Construction in progress at December 26, 1993, December 27, 1992, and
December 29, 1991 includes approximately $170 million, $154 million,
and $128 million, respectively, of purchases that will be reclassified
to the other property, plant, and equipment catagories in the following
year. The remainder of the amount relates to projects that were in
process at year-end, including construction of facilities primarily for
the Aeronautical Systems and Missiles and Space Systems business
segments. The cost of completed fixed assets transferred from
construction in progress to another fixed asset category is recorded as
a negative addition to construction in progress and a positive addition
to the appropriate category.
F-2
<PAGE>
SCHEDULE VI
LOCKHEED CORPORATION
ACCUMULATED DEPRECIATION AND AMORTIZATION
OF PROPERTY, PLANT, AND EQUIPMENT
Years Ended December 26, 1993, December 27, 1992, and December 29, 1991
(Millions of Dollars)
Balance Retire- Balance
Beginning Pro- ments Other End of
Description of Year vision or Sales Changes Year(1)
1993:
Buildings and structures.. $ 634 $ 62 $ (79) $ 617
Machinery and equipment... 1,805 249 (165) $ 1 1,890
Leasehold improvements.... 127 17 (10) 134
-------- -------- -------- -------- --------
$ 2,566 $ 328 $ (254) $ 1 $ 2,641
======== ======== ======== ======== ========
1992:
Buildings and structures.. $ 583 $ 53 $ (2) $ $ 634
Machinery and equipment... 1,649 227 (71) 1,805
Leasehold improvements.... 121 14 (8) 127
-------- -------- -------- -------- --------
$ 2,353 $ 294 $ (81) $ $ 2,566
======== ======== ======== ======== ========
1991:
Buildings and structures.. $ 538 $ 56 $ (12) $ 1 $ 583
Machinery and equipment... 1,558 213 (109) (13) 1,649
Leasehold improvements.... 109 15 (3) 121
-------- -------- -------- -------- --------
$ 2,205 $ 284 $ (124) $ (12) $ 2,353
======== ======== ======== ======== ========
(1) Includes $8 million at December 26, 1993, $7 million at December 27,
1992, and $9 million at December 29, 1991, of accumulated amortization
of capital leases.
F-3
<PAGE>
SCHEDULE VIII
LOCKHEED CORPORATION
VALUATION AND QUALIFYING ACCOUNTS
Years Ended December 26, 1993, December 27, 1992, and December 29, 1991
(Millions of Dollars)
Balance Additions Deduct- Balance
Beginning Charged to ions and End of
Description of Year Earnings Other Year
Deducted from assets to which applicable:
1993:
Allowance for doubtful receivables:
Accounts receivable............. $ 12 $ 20 $ 7 $ 25
======= ======= ======= =======
1992:
Allowance for doubtful receivables:
Accounts receivable............. $ 9 $ 8 $ 5 $ 12
======= ======= ======= =======
1991:
Allowance for doubtful receivables:
Accounts receivable............. $ 9 $ 3 $ 3 $ 9
======= ======= ======= =======
F-4
<PAGE>
SCHEDULE IX
LOCKHEED CORPORATION
SHORT-TERM BORROWINGS(1)
Years Ended December 26, 1993, December 27, 1992, and December 29, 1991
(Millions of dollars)
Maximum Average Weighted
Category of Amount Amount Average
Aggregate Balance Weighted Outstanding Outstanding Interest
Short-Term at End Average During the During the Rate During
Year Borrowings of Period Interest Rate Year Year(2) the Year(3)
- ---- ---------- --------- ------------- ---- ------- ----------
1993 Commercial
Paper -0- -0- $1,551 $ 288 3.4%
1992 Commercial
Paper -0- -0- 140 30 4.5
1991 Not Applicable
(1) See Note 10 to the Consolidated Financial Statements.
(2) Averages are based on the amount outstanding each day multiplied by the
number of days outstanding divided by 364 days.
(3) Averages are based on the actual interest expense on commercial paper
borrowings divided by the average commercial paper borrowings
outstanding during the year.
F-5
<PAGE>
SCHEDULE X
LOCKHEED CORPORATION
SUPPLEMENTARY INCOME STATEMENT INFORMATION
Years Ended December 26, 1993, December 27, 1992, and December 29, 1991
(Millions of Dollars)
1993 1992 1991
----- ----- -----
Maintenance and repairs..................... $ 176 $ 182 $ 168
Most of the above amounts are accumulated in overhead and general and
administrative expense pools, and are subsequently allocated to the U.S.
government and foreign government contracts or commercial programs. The
remainder of the above amounts is charged directly to contracts, and is
ultimately included in the cost of sales in the same manner as overhead
expenses. See Notes 1 and 6 to the consolidated financial statements
included in Part II for a description of the company's accounting for
inventories.
F-6
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number
- -------
3.1 Certificate of Incorporation (A)
3.2 Amendment to Certificate of Incorporation (B)
3.3 Bylaws of Lockheed Corporation (C)
3.4 Amendment to Bylaws of Lockheed Corporation
4.1 Certificate of Incorporation (A)
4.2 Amendment to Certificate of Incorporation (B)
4.3 Bylaws of Lockheed Corporation (C)
4.4 Amendment to Bylaws of Lockheed Corporation (D)
4.5 The registrant undertakes to file with the Commission upon its
request any agreements otherwise excluded from Item 601(b)(4)
as not exceeding ten percent of the total assets of the
registrant and its subsidiaries on a consolidated basis.
10.1 Asset Purchase Agreement, dated as of December 8, 1992, between
the Registrant and General Dynamics Corporation (E)
10.2 $2,500,000,000 Loan Agreement dated February 8, 1993 (E)
10.3 Terms Agreement, dated April 13, 1993, among the Registrant and
Goldman, Sachs & Co., The First Boston Corporation, Merrill
Lynch, Pierce, Fenner & Smith Incorporated and J.P. Morgan
Securities, Incorporated. (F)
10.4 Terms Agreement, Dated May 4, 1993, among the Registrant and
Merrill Lynch, Pierce, Fenner & Smith Incorporated, the First
Boston Corporation, Goldman, Sachs & Company and J.P. Morgan
Securities Incorporated. (G)
10.5 $1,000,000,000 Loan Agreement dated August 30, 1993 (H)
10.6 $300,000,000 Loan Agreement dated August 30, 1993 (H)
11 Computation of Earnings per Share of Common Stock
12 Ratio of Earnings to Fixed Charges
21 Subsidiaries of the Registrant
23 Consent of Ernst & Young, Independent Auditors
99.1 Annual Report on Form 11-K for the Lockheed Salaried Employee
Savings Plan Plus (to be filed at a later date under
Form 10-K/A).
99.2 Annual Report on Form 11-K for the Lockheed Hourly Employee
Savings Plan Plus (to be filed at a later date under
Form 10-K/A).
99.3 Annual Report on Form 11-K for the Lockheed Space Operations
Company Hourly Employee Investment Plan Plus (to be filed at
a later date under Form 10-K/A).
99.4 Annual Report on Form 11-K for the Lockheed Corporation Hourly
Employee Savings and Stock Investment Plan - Fort Worth and
Abilene Divisions (to be filed at a later date under
Form 10-K/A).
------------
(A) Incorporated by reference to registrant's registration on Form 8-B
filed July 1, 1986, as Exhibit 3(a).
(B) Incorporated by reference to registrant's report on Form 10-Q for
the quarter ended June 28, 1987, as Exhibit 3.
(C) Incorporated by reference to registrant's report on Form 10-Q for
the quarter ended June 27, 1993, as Exhibit 3.
(D) Incorporated herein as Exhibit 3.4.
(E) Incorporated by reference to registrant's report on Form 10-K for
the year ended December 27, 1992.
(F) Incorporated by reference to registrant's report on Form 8-K
dated April 13, 1993.
(G) Incorporated by reference to registrant's report on Form 8-K
dated May 4, 1993.
(H) Incorporated by reference to registrant's report on Form 8-K
dated August 30, 1993.
E-1
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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)
/s/ C. R. MARSHALL
-----------------------------
C. R. Marshall
(Vice President and Secretary)
Date: March 7, 1994
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ D. M. TELLEP Chairman of the Board March 7, 1994
- ------------------------- and Chief Executive
D. M. Tellep Officer (Principal
Executive Officer) and
Director
/s/ V. N. MARAFINO Vice Chairman of the March 7, 1994
- ------------------------- Board, Chief Financial
V. N. Marafino and Administrative
Officer (Principal
Financial Officer) and
Director
/s/ R. E. RULON Vice President and March 7, 1994
- ------------------------- Controller (Principal
R. E. Rulon Accounting Officer)
/s/ L. V. CHENEY Director March 7, 1994
- -------------------------
L. V. Cheney
/s/ L. M. COOK Director March 7, 1994
- -------------------------
L. M. Cook
/s/ H. I. FLOURNOY Director March 7, 1994
- -------------------------
H. I. Flournoy
/s/ J. F. GIBBONS Director March 7, 1994
- -------------------------
J. F. Gibbons
<PAGE>
Signature Title Date
--------- ----- ----
/s/ R. G. KIRBY Director March 7, 1994
- -------------------------
R. G. Kirby
/s/ L. O. KITCHEN Director March 7, 1994
- -------------------------
L. O. Kitchen
/s/ J. J. PINOLA Director March 7, 1994
- -------------------------
J. J. Pinola
/s/ D. S. POTTER Director March 7, 1994
- -------------------------
D. S. Potter
/s/ F. SAVAGE Director March 7, 1994
- -------------------------
F. Savage
/s/ C. A. H. TROST Director March 7, 1994
- -------------------------
C. A. H. Trost
/s/ J. R. UKROPINA Director March 7, 1994
- -------------------------
J. R. Ukropina
/s/ D. C. YEARLEY Director March 7, 1994
- -------------------------
D. C. Yearley
<PAGE>
EXHIBIT 3.4
Amendment of Section 3.02 of the Bylaws
to Increase the Number of Directors
Resolved, that, effective Monday, February 7, 1994, Section 3.02
of Article III of the Bylaws of this Corporation be, and the same hereby
is, amended to read as follows:
"Section 3.02. Number. Except as otherwise fixed pursuant
to the provisions of Section 2 of Article Fourth of the Certifi-
cate in connection with rights to elect additional directors
under specified circumstances which may be granted to the holders
of any class or series of Preferred Stock, par value One Dollar
($1.00) per share of the Corporation ("Preferred Stock"), the
number of directors shall be fixed from time to time by resolu-
tion of the Board of Directors but shall not be less than three
(3). Effective February 7, 1994, the Board of Directors shall
consist of fourteen (14) directors until changed as herein pro-
vided."
<PAGE>
<TABLE>
<CAPTION>
Exhibit 11
LOCKHEED CORPORATION
COMPUTATION OF EARNINGS PER SHARE OF COMMON STOCK
(In millions except per-share data)
December December December December December
26, 1993 27, 1992 29, 1991 30, 1990 31, 1989
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
PRIMARY EARNINGS PER SHARE
Earnings from continuing operations and before cumulative effect
of change in accounting principle available for common stock ...... $ 422 $ 348 $ 308 $ 335 $ 6
======== ======== ======== ======== ========
Net earnings (loss) available for common stock ..................... $ 422 $ (283) $ 308 $ 335 $ 2
======== ======== ======== ======== ========
Applicable common stock shares:
Average outstanding during the period ............................ 62.2 61.5 63.2 63.2 62.5
Weighted average shares issuable upon exercise of common stock
equivalents outstanding based on the average market price
during the using the "treasury stock" method .................... .7 .2 .2 .1
-------- -------- -------- -------- --------
Total ........................................................ 62.9 61.7 63.4 63.2 62.6
======== ======== ======== ======== ========
Earnings from continuing operations and before cumulative effect
of change in accounting principle per share of common stock ....... $ 6.70 $ 5.65 $ 4.86 $ 5.30 $ .10
======== ======== ======== ======== ========
Net earnings (loss) per share of common stock ...................... $ 6.70 $ (4.58) $ 4.86 $ 5.30 $ .03
======== ======== ======== ======== ========
FULLY DILUTED EARNINGS PER SHARE
Earnings from continuing operations and before cumulative effect
of change in accounting principle available for common stock
shown above ....................................................... $ 422 $ 348 $ 308 $ 335 $ 6
======== ======== ======== ======== ========
Net earnings (loss) applicable to common stock shown above ......... $ 422 $ (283) $ 308 $ 335 $ 2
======== ======== ======== ======== ========
Applicable common stock shares:
Average outstanding during period ................................. 62.2 61.5 63.2 63.2 62.5
Weighted average shares issuable upon exercise of common stock
equivalents outstanding based on the higher of the closing or
the average market price during the period using the "treasury
stock" method .................................................... .9 .2 .2 .1
-------- -------- -------- -------- --------
Total ......................................................... 63.1 61.7 63.4 63.2 62.6
======== ======== ======== ======== ========
Earnings from continuing operations and before cumulative effect
of change in accounting principle per share of common stock ....... $ 6.68 $ 5.65 $ 4.86 $ 5.30 $ .10
======== ======== ======== ======== ========
Net earnings (loss) per share of common stock ...................... $ 6.68 $ (4.58) $ 4.86 $ 5.30 $ .03
======== ======== ======== ======== ========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 12
LOCKHEED CORPORATION
COMPUTATION OF RATIO OF
EARNINGS TO FIXED CHARGES
(In millions except ratios)
1993 1992 1991 1990 1989
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
EARNINGS FROM CONTINUING OPERATIONS BEFORE TAX
AND CHANGE IN ACCOUNTING PRINCIPLE $ 676 $ 549 $ 474 $ 430 $ (40)
FIXED CHARGES
Capitalized interest 0 1 1 1 1
Interest expense 168 119 118 138 86
Interest expense for finance subsidiary 1 1 1 12 18
Interest portion of rental expense 37 38 41 46 42
------ ------ ------ ------ ------
TOTAL FIXED CHARGES $ 206 $ 159 $ 161 $ 197 $ 147
====== ====== ====== ====== ======
TOTAL FIXED CHARGES EXCLUDING CAPITALIZED INTEREST $ 206 $ 158 $ 160 $ 196 $ 146
====== ====== ====== ====== ======
EARNINGS PLUS FIXED CHARGES EXCLUDING CAPITALIZED
EXPENSE $ 882 $ 707 $ 634 $ 626 $ 106
====== ====== ====== ====== ======
RATIO OF EARNINGS TO FIXED CHARGES 4.3 4.4 3.9 3.2 .7
====== ====== ====== ====== ======
</TABLE>
<PAGE>
EXHIBIT 21
Subsidiaries of Registrant
Listed below are the principal operating divisions and subsidiaries
of the company and the percentage of voting securities of such subsidiaries
owned by the company.
Percentage
Jurisdiction in of Voting
Which Incorporated Securities
or Organized Owned
------------------ ----------
Divisions:
Lockheed Advanced Development Company
Lockheed Aeronautical Systems Company
Lockheed Aircraft Service Company
Lockheed Fort Worth Company
Subsidiaries:
Lockheed Air Terminal, Inc. ......... Delaware 100
Lockheed Canada, Inc. ............... Canada 100
Lockheed Commercial Electronics
Company ........................... Delaware 100
Lockheed Engineering and Sciences
Company ........................... Texas 100
Lockheed Environmental Systems and
Technology Company ................ Nevada *
Lockheed Finance Corporation ........ California 100
Lockheed Information Management
Services Company .................. New York 100
Lockheed Missiles & Space Company,
Inc. .............................. California 100
Lockheed Sanders, Inc. .............. Delaware 100
Lockheed Space Operations Company ... Nevada 100
Lockheed Support Systems, Inc. ...... Oklahoma 100
MountainGate Data Systems, Inc. ..... California 100
CalComp Inc. ........................ California **
Access Graphics, Inc. ............... Delaware ***
* 100% owned subsidiary of Lockheed Engineering and Sciences Company
** 100% owned subsidiary of Lockheed Sanders, Inc.
*** 100% owned subsidiary of AGT Holdings Inc.,
which is a 100% owned subsidiary of CalComp Inc.
<PAGE>
EXHIBIT 23
CONSENT OF ERNST & YOUNG, INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements
(Form S-3 Nos. 33-3894, 33-18673, and 33-49327) of Lockheed Corporation;
(Form S-8 No. 33-49347) pertaining to the Lockheed Corporation Hourly
Employee Savings and Stock Investment Plan - Fort Worth and Abilene
Divisions; (Form S-8 No. 33-49003) pertaining to the Lockheed Corporation
1992 Employee Stock Option Program; (Form S-8 No. 2-78269) pertaining to
the Lockheed Corporation 1982 Employee Stock Purchase Program; (Form S-8
No. 2-64589) pertaining to the Lockheed Corporation 1977 Employee Stock
Purchase Plan; (Form S-8 No. 33-13205) pertaining to the Lockheed Salaried
Employee Savings Plan Plus, the Lockheed Hourly Employee Savings Plan Plus,
and the Lockheed Space Operations Company Hourly Employee Investment Plan
Plus; (Form S-8 No. 33-15575) pertaining to the Lockheed Corporation 1977
Employee Stock Purchase Plan, the Lockheed Corporation 1982 Employee Stock
Purchase Program, and the Lockheed Corporation 1986 Employee Stock Purchase
Program; and (Form S-8 No. 33-34758) pertaining to the Lockheed Salaried
Employee Savings Plan Plus, the Lockheed Hourly Employee Savings Plan Plus,
and the Lockheed Space Operations Company Hourly Employee Investment Plan
Plus; and the related Prospectuses of our report dated February 7, 1994,
with respect to the consolidated financial statements and schedules of
Lockheed Corporation included in this Annual Report (Form 10-K) for the
year ended December 26, 1993.
ERNST & YOUNG
Los Angeles, California
March 7, 1994
