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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
QUARTERLY REPORT UNDER SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended JUNE 30, 1994 Commission File Number 1-11810
MARTIN MARIETTA CORPORATION
(Exact name of registrant as specified in its charter)
MARYLAND 52-1801151
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
6801 Rockledge Drive, Bethesda, MD 20817
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (301) 897-6000
Former Name: NONE
Former name, former address and former fiscal year,
if changes since last report.
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 the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding as of JULY 31, 1994
Common Stock, $1 par value 95,948,640 shares
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MARTIN MARIETTA CORPORATION AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended June 30, 1994
INDEX
Page No.
Part I. Financial Information:
Item 1. Financial Statements
Consolidated Condensed Balance Sheets -
June 30, 1994 and December 31, 1993 . . . . . . . . . . . . 3
Consolidated Condensed Statements of Operations -
Three Months and Six Months Ended June 30, 1994 and 1993 . . 4
Consolidated Condensed Statements of Cash Flows -
Six Months Ended June 30, 1994 and 1993 . . . . . . . . . . 5
Notes to Consolidated Condensed Financial Statements. . . . . 6
Item 2. Management's Discussion of Financial Condition
and Operating Results . . . . . . . . . . . . . . . . . .11
Part II. Other Information:
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . .16
Item 4. Submission of Matters to a Vote of Security Holders . . .17
Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . . .17
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
Exhibit 11. Computation of Net Earnings Per Common Share. . . . . . .19
Exhibit 12. Computation of Ratio of Earnings to Fixed Charges . . . .21
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MARTIN MARIETTA CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
June 30, December 31,
1994 1993
(Millions of Dollars)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 88.8 $ 373.1
Receivables 1,722.7 1,435.5
Inventories 1,012.3 358.8
Current deferred income taxes 225.5 238.6
Other current assets 40.6 42.2
TOTAL CURRENT ASSETS 3,089.9 2,448.2
OTHER NONCURRENT ASSETS 1,001.6 707.8
NONCURRENT DEFERRED INCOME TAXES 286.8 206.1
PROPERTY, PLANT AND EQUIPMENT 3,945.0 3,804.3
Less allowances for depreciation,
depletion and amortization 2,285.3 2,111.5
1,659.7 1,692.8
COST IN EXCESS OF NET ASSETS ACQUIRED 2,109.8 1,914.9
OTHER INTANGIBLES 734.7 775.1
$ 8,882.5 $ 7,744.9
LIABILITIES AND SHAREOWNERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 368.4 $ 536.8
Other current liabilities 966.1 572.4
Salaries, benefits and payroll taxes 399.4 333.6
Income taxes 182.7 48.8
Current maturities of long-term debt 304.9 318.5
TOTAL CURRENT LIABILITIES 2,221.5 1,810.1
LONG-TERM DEBT 1,348.9 1,479.6
POST-RETIREMENT BENEFITS 772.8 740.6
OTHER NONCURRENT LIABILITIES 1,385.4 838.2
SHAREOWNERS' EQUITY:
Series A Preferred Stock, liquidation
preference $50 per share 1,000.0 1,000.0
Common stock, par value $1 a share 95.9 95.7
Additional paid-in capital 127.2 124.0
Retained earnings 1,930.8 1,656.7
3,153.9 2,876.4
$ 8,882.5 $ 7,744.9
See accompanying notes to consolidated condensed financial statements.
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MARTIN MARIETTA CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1994 1993 1994 1993
(In Millions, except per share data)
<S> <C> <C> <C> <C>
Net sales $2,491.0 $2,613.3 $4,525.3 $3,781.9
Cost of sales, other costs and expenses 2,239.4 2,391.2 4,066.8 3,435.2
Earnings from Operations 251.6 222.1 458.5 346.7
Other income and expenses, net 51.4 14.7 186.4 21.9
303.0 236.8 644.9 368.6
Interest expense on debt 28.6 32.9 59.3 44.1
Earnings before Taxes on Income and
Cumulative Effect of Accounting Changes 274.4 203.9 585.6 324.5
Taxes on income 111.7 79.8 238.3 124.0
Earnings before Cumulative Effect
of Accounting Changes 162.7 124.1 347.3 200.5
Cumulative effect of changes in accounting
for post-retirement benefits other than
pensions and for post-employment benefits - - - (429.4)
Net Earnings (Loss) $ 162.7 $ 124.1 $ 347.3 $(228.9)
Earnings (Loss) Per Common Share
Assuming No Dilution:
Before cumulative effect of
accounting changes $ 1.54 $ 1.14 $ 3.31 $ 1.95
Cumulative effect of accounting changes - - - ( 4.52)
$ 1.54 $ 1.14 $ 3.31 $ (2.57)
Assuming Full Dilution:
Before cumulative effect of
accounting changes $ 1.29 $ .99 $ 2.76 $ 1.81
Cumulative effect of accounting changes - - - *
$ 1.29 $ .99 $ 2.76 $ *
Average of Common Shares Outstanding:
Assuming No Dilution 95.9 95.3 95.8 95.1
Assuming Full Dilution 125.9 125.3 125.9 110.7
Cash Dividends Declared Per Common Share $ .225 $ .21 $ .45 $ .42
<FN>
* Anti-dilutive
See accompanying notes to consolidated condensed financial statements.
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MARTIN MARIETTA CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
<CAPTION>
Six Months Ended
June 30,
1994 1993
(Millions of Dollars)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Earnings (Loss) $ 347.3 $ (228.9)
Adjustments to reconcile net earnings (loss)
to net cash provided by operating activities:
Cumulative effect of changes in accounting - 429.4
Deferred income taxes 61.1 .5
Depreciation, depletion and amortization 158.8 149.0
Net change in receivables, inventories and payables ( 515.5) (176.8)
Gain - MM Materials, Inc. initial public offering ( 117.7) -
Acquisition agreement termination fee ( 50.0) -
Goodwill and other intangibles amortization 55.4 32.7
Other items .4 ( .5)
NET CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES ( 60.2) 205.4
CASH FLOWS FROM INVESTING ACTIVITIES:
Net proceeds MM Materials, Inc. initial public offering 188.6 -
Additions to properties, net ( 101.9) ( 79.7)
Acquisition GE Aerospace - ( 883.2)
Other acquisition activities, net ( 113.0) ( 3.4)
Reductions of investments ( 8.7) 97.0
Other 30.5 ( 25.1)
NET CASH USED FOR INVESTING ACTIVITIES ( 4.5) ( 894.4)
CASH FLOWS FROM FINANCING ACTIVITIES AND DIVIDENDS:
Debt transactions:
Increase in long-term debt - 700.0
Repayment and defeasement of long-term debt ( 149.9) ( 3.0)
Equity transactions:
Issuances of common stock 3.4 7.7
Dividends declared:
Preferred stock ( 30.0) ( 15.3)
Common stock ( 43.1) ( 39.9)
NET CASH USED FOR FINANCING ACTIVITIES AND DIVIDENDS ( 219.6) 649.5
NET DECREASE IN CASH AND CASH EQUIVALENTS ( 284.3) ( 39.5)
CASH AND CASH EQUIVALENTS at beginning of period 373.1 239.6
CASH AND CASH EQUIVALENTS at end of period $ 88.8 $ 200.1
SUPPLEMENTAL SCHEDULE OF INVESTING AND FINANCING ACTIVITIES:
Non-cash consideration - Acquisition GE Aerospace:
Assumption of certain payment obligations $ - $ 750.0
Issuance of preferred stock - 1,000.0
$ - $1,750.0
<FN>
See accompanying notes to consolidated condensed financial statements.
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MARTIN MARIETTA CORPORATION AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended June 30, 1994
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. In the opinion of management, the accompanying unaudited consolidated
condensed financial statements reflect all adjustments (consisting of
normal recurring accruals) necessary for a fair statement of the results
for the interim periods. The results of operations for the six months
ended June 30, 1994, are not necessarily indicative of the results to
be expected for the full year. The Corporation has continued to
follow the accounting policies as stated in Note A to the financial
statements included in its 1993 Annual Report.
2. On September 30, 1993, a 2-for-1 split of the Corporation's common stock
in the form of a 100% stock dividend became effective. All references
in the consolidated condensed financial statements with regard to the
number of shares and per share data for prior periods have been restated
to reflect the split.
3. First quarter 1993 earnings have been restated from the amounts
originally reported to reflect the Corporation's adoption in 1993 of
Statement of Financial Accounting Standards No. 112, "Employers
Accounting for Post-employment Benefits." The after-tax charge
for the change in accounting for post-employment benefits was $17.4
million or 18 cents per common share. The loss per common share from
the changes in accounting for post-retirement benefits and post-
employment benefits was $4.53 in the first quarter of 1993.
4. On May 1, 1994, the Corporation completed its acquisition of the Space
Systems division of General Dynamics. This transaction has been
accounted for under the purchase method of accounting, wherein cost
in excess of net assets acquired of approximately $220 million was
recognized by the Corporation. The cost in excess of net assets acquired
is being amortized over a twenty-year period. At June 30, 1994, Space
Systems division had customer deposits of approximately $1.2 billion
which represent primarily advance payments from its Atlas program
customers. In the Corporation's consolidated balance sheet, customer
deposits of $297 million and $400 million are classified as other
current liabilities and other noncurrent liabilities, respectively.
Costs on contracts and programs in progress (See Note 6) are net of
related customer deposits of $497 million. Operating results of the
Space Systems division have been included with those of the Corporation
from the closing date.
On November 22, 1992, Martin Marietta Corporation entered into a
Transaction Agreement with General Electric Company (GE) to combine
the aerospace and certain other businesses of GE (collectively, the "GE
Aerospace businesses") with the businesses of Martin Marietta Corporation
in the form of affiliated corporations. The transaction (the "GE
Transaction"), was consummated on April 2, 1993, and GE Aerospace
operations have been included since that date. (See Note 15)
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MARTIN MARIETTA CORPORATION AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended June 30, 1994
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Continued)
5. In February 1994, Martin Marietta Materials, Inc., sold through an initial
public offering, approximately 8.8 million shares of its common stock.
After the public sale, the Corporation owns approximately 81% of the
outstanding stock of the company. A portion of the proceeds from the
offering was used to defease in-substance certain long-term debt of Martin
Marietta Materials (see Note 7). The Corporation, through its subsidiary
Martin Marietta Technologies, Inc., recognized an after-tax gain of $70.2
million, or 56 cents per share fully diluted, from Materials' initial public
offering, net of the after-tax loss on the debt defeasance of $4.7 million.
6. Inventories:
June 30, December 31,
1994 1993
(Millions of Dollars)
Costs on contracts and programs in
progress net of progress payments $ 1,343.8 $ 454.2
Less: noncurrent amounts 413.7 169.0
930.1 285.2
Finished products 58.2 50.0
Products in process and raw materials 10.5 10.1
Expendable parts and supplies 13.5 13.5
$ 1,012.3 $ 358.8
7. In February 1994, Martin Marietta Materials Inc.,a majority-owned
subsidiary of Martin Marietta Technologies Inc., defeased in-substance
the aggregate principal amount of $125 million of 9.5% Notes due in 1995.
These Notes were classified as long-term debt at December 31, 1993.
Martin Marietta Corporation has guaranteed the payment of certain debt
and other obligations of Martin Marietta Technologies, Inc. The total of
such guarantees, including the 9.5% Notes which were defeased in-substance,
was $1.1 billion at June 30, 1994. Exposure to credit risk in the event
of non-payment by the obligor is represented by the contractual amount of
the relative instruments. No loss is anticipated under these guarantees.
As of June 30, 1994, there were no restrictions on dividends or other
distributions between Martin Marietta Technologies, Inc. and the
Corporation.
As of June 30, 1994, the Corporation has issued letters of credit totaling
$328 million relating to certain long-term contracts and other contractual
obligations.
The Corporation's total interest payments were approximately $65 million
in 1994 and $29 million in 1993 for the six months ended June 30.
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MARTIN MARIETTA CORPORATION AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended June 30, 1994
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Continued)
8. Certain financing agreements of Martin Marietta Corporation and its
subsidiaries contain restrictive covenants, including limitations on
encumbrances and on sale and lease-back transactions. Under an
$800-million Revolving Credit Agreement, the Corporation is also subject
to limitations on its financial leverage and a minimum coverage ratio as
as defined by the agreement. At June 30, 1994, there were no amounts
outstanding under the credit facility.
9. Summarized financial information for Martin Marietta Technologies, Inc.,
a separate registrant not subject to quarterly filing requirements,
follows:
June 30, December 31,
1994 1993
(Millions of Dollars)
Current assets $ 2,233 $ 1,585
Noncurrent assets 3,861 3,163
Current liabilities 1,373 825
Long-term debt 1,035 1,161
Other noncurrent liabilities 1,518 886
Shareowners' equity 2,168 1,876
Three Months Ended Six Months Ended
June 30, June 30,
1994 1993 1994 1993
Net sales $ 1,361 $ 1,438 $ 2,499 $ 2,607
Earnings from operations 153 134 292 259
Earnings before cumulative
effect of accounting changes 92 86 251 162
Cumulative effect of
accounting changes - - - (429)
Net earnings (loss) 92 86 251 (267)
10. The Corporation may purchase approximately 32.4 million shares under a
1993 authorization from the Board of Directors for repurchase of the
Corporation's common shares for use in connection with the Corporation's
Amended Omnibus Securities Award Plan, Performance Sharing Plan and for
general corporate purposes. No share repurchases have been made by
the Corporation pursuant to this authorization.
11. Selling, general and administrative expenses included in cost of sales,
other costs and expenses were $151.4 million in 1994 and $130.5 million
in 1993 for the second quarter and $300.8 million in 1994 and $219.9
million in 1993 for the six months ended June 30.
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MARTIN MARIETTA CORPORATION AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended June 30, 1994
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Continued)
12. The Corporation's effective income tax rate for the first six
months was 40.7% in 1994 and 38.2% in 1993. The effective rates
in both years are higher than the corporate federal income tax rate
principally due to differences between book and tax accounting
arising from the amortization of goodwill (cost in excess of net assets
acquired) associated with the GE Transaction and state income taxes.
Income tax payments were approximately $43 million in 1994 and $98
million in 1993 for the six months ended June 30.
13. The ratio of earnings to fixed charges for the six months ended June
30, 1994, was 9.10. See Exhibit 12, Computation of Ratio of Earnings to
Fixed Charges on page 21.
14. In the opinion of management and counsel, the probability is remote
that the outcome of litigation and other proceedings, including those
pertaining to environmental matters, relating to Martin Marietta and its
subsidiaries, will have a material adverse effect on the results of the
Corporation's operations or its financial position.
* * * * * * * * * * * * * * * * * * * * * * * * * * *
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MARTIN MARIETTA CORPORATION AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended June 30, 1994
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Continued)
15. The following unaudited pro forma combined summary information
presents the historical results of operations of the Corporation and
the General Dynamics Space Systems division for the three and six month
periods ended June 30, 1994 and 1993 with pro forma adjustments as if the
Space Systems division had been acquired as of the beginning of the
periods presented. In addition, the historical results of operations of
the GE Aerospace Businesses are included for the six-month period ended
June 30, 1993, with pro forma adjustments as if the GE Transaction had been
consummated as of the beginning of the period. The pro forma information
is based upon certain estimates and assumptions that management of the
Corporation believes are reasonable in the circumstances. The unaudited
pro forma information is not necessarily indicative of what the results of
operations actually would have been if the Space Systems and GE transactions
had occurred on the date indicated. Moreover, they are not necessarily
indicative of future results of operations.
Pro Forma Information
Three Months Ended Six Months Ended
June 30, June 30,
1994 1993 1994 1993
(In Millions, except per share data)
Net Sales $ 2,580 $ 2,649 $ 4,648 $ 4,878
Earnings before Cumulative Effect
of Accounting Changes
Attributable to Common Stock $ 149 $ 93 $ 322 $ 167
Net Earnings (Loss)
Attributable to Common Stock $ 149 $ 93 $ 322 $ (262)
Earnings (Loss) Per Common Share
Assuming No Dilution:
Before Cumulative Effect
of Accounting Changes $ 1.56 $ .98 $ 3.36 $ 1.76
Net Earnings (Loss) Per
Common Share $ 1.56 $ .98 $ 3.36 $ (2.75)
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MARTIN MARIETTA CORPORATION AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended June 30, 1994
MANAGEMENT'S DISCUSSION OF FINANCIAL CONDITION AND OPERATING RESULTS
Second Quarter and Six Months Ended June 30, 1994 and 1993
Martin Marietta continued in excellent overall financial condition during the
second quarter of 1994. The Corporation maintains adequate capital resources to
operate, compete and grow in an increasingly challenging and competitive
marketplace. Net earnings for the second quarter of 1994 were $162.7 million,
or $1.29 per share fully diluted, up 31% over second quarter 1993 earnings of
$124.1 million, or 99 cents per share. Backlog of undelivered orders at June 30,
1994 remained high at $17.6 billion, up from $16.7 billion reported at year-end
1993. The Corporation's ratio of debt-to-capitalization at June 30, 1994 was
34%, down from 39% reported at December 31, 1993. At its July 1994, meeting,
the Board of Directors increased the dividend rate on the Corporation's common
stock by six cents, or 6.7%, on a annualized basis. This action will be
effective with the September 30, 1994 dividend payment.
During the second quarter of 1994, the Corporation completed its previously
announced acquisition of the General Dynamics Space Systems division for
approximately $160 million in cash. This transaction has been accounted for
under the purchase method of accounting, wherein cost in excess of net assets
acquired of approximately $220 million was recognized by the Corporation. The
cost in excess of net assets acquired is being amortized over a twenty-year
period. Operating results of the Space Systems division have been included
with those of the Corporation from the closing date.
On March 6, 1994, the Corporation entered into an Agreement and Plan of Merger
with the Grumman Corporation and on March 8, 1994, the Corporation made an offer
to purchase for cash all outstanding shares of common stock of Grumman
Corporation. Subsequently, Grumman reached agreement with and accepted Northrop
Corporation's competing offer to purchase its outstanding common shares. Martin
Marietta Corporation received $50 million, plus reimbursement of expenses, from
Grumman pursuant to the termination provisions of the March 6, 1994, Agreement
and Plan of Merger. The $50 million payment was included in other income and
expenses, net for the second quarter and six months ended June 30, 1994.
In February 1994, Martin Marietta Materials, Inc. sold through an underwritten
initial public offering, approximately 8.8 million shares of its common stock.
After the public sale, the Corporation owns approximately 81% of the outstanding
stock of the company. A portion of the proceeds from the offering was used to
defease in-substance certain long-term debt of Martin Marietta Materials (see
Note 5). The Corporation, through its subsidiary Martin Marietta Technologies,
Inc., recognized an after-tax gain of $70.2 million, or 56 cents per share fully
diluted, from Materials' initial public offering, net of the after-tax loss on
the debt defeasance of $4.7 million.
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MARTIN MARIETTA CORPORATION AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended June 30, 1994
MANAGEMENT'S DISCUSSION OF FINANCIAL CONDITION AND OPERATING RESULTS
(Continued)
Second Quarter and Six Months Ended June 30, 1994 and 1993
On November 22, 1992, Martin Marietta Corporation entered into a Transaction
Agreement with General Electric Company (GE) to combine the aerospace and
certain other businesses of GE (collectively, the "GE Aerospace businesses")
with the businesses of Martin Marietta Corporation in the form of affiliated
corporations. The transaction (the "GE Transaction"), was consummated on April
2, 1993, and GE Aerospace operations have been included since that date.
LIQUIDITY AND CAPITAL Net cash flow used for operating activities during the
first six months of 1994 was $60 million, compared with $205 million provided
by operating activities in the same period of 1993. The 1994 cash usage was
because of working capital increases, due principally to the increase in
receivables and decrease in accounts payable in the first six months, which
exceeded earnings and depreciation. The 1993 cash flow was principally from
earnings, before deducting depreciation and the noncash charge resulting from
the adoption of accounting changes for post-retirement and post-employment
benefits. Net capital expenditures were $102 million in 1994 and $80 million
in 1993 during the first six-month periods. Acquisition activities during the
second quarter of 1994. (General Dynamics' Space Systems acquisition and the
Grumman agreement termination fee) resulted in a net use of funds of $113
million. Net proceeds, after expenses, of $189 million were generated from the
first quarter 1994, initial public offering of Martin Marietta Material's
common stock. Cash of $136 million was used to defease in-substance $125
million of 9.5% Notes due in 1995.
Martin Marietta's internal cash flows and access to capital markets are expected
to continue to be sufficient to provide the capital resources necessary to
support operating needs and cover debt service requirements. The Corporation's
outstanding public senior debt (which is issued through Martin Marietta
Technologies, Inc. and guaranteed by Martin Marietta Corporation) is rated A by
Standard & Poor's, A3 by Moody's,and A by Duff & Phelps. Martin Marietta's
commercial paper ratings are A-1 by Standard & Poor's, P-2 by Moody's, and
Duff-1 by Duff & Phelps. Martin Marietta Technologies, Inc., and Martin
Marietta Corporation's principal borrowing facility is an $800-million revolving
credit facility which expires on March 31, 1996. This borrowing facility may be
used for general corporate purposes. At June 30, 1994, there was no amount
outstanding under the credit facility.
Martin Marietta Technologies, Inc., has a shelf registration on file with the
Securities and Exchange Commission for the offering of up to $300 million in
debt securities which may be issued from time to time. Such debt securities
would be obligations of Martin Marietta Technologies, Inc., that would be fully
and unconditionally guaranteed by Martin Marietta Corporation. The
Corporation's ability to issue such debt securities at any given time is
dependent, among other things, upon market conditions.
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MARTIN MARIETTA CORPORATION AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended June 30, 1994
MANAGEMENT'S DISCUSSION OF FINANCIAL CONDITION AND OPERATING RESULTS
(Continued)
Second Quarter and Six Months Ended June 30, 1994 and 1993
Under a 1993, authorization from the Board of Directors, the Corporation may
repurchase approximately 32.4 million of its common shares for use in
connection with the Corporation's Amended Omnibus Securities Award Plan,
Performance Sharing Plan and for general corporate purposes. There have been no
repurchases made pursuant to this authorization.
RESULTS OF OPERATIONS Net sales decreased $122 million, or 5%, in the second
quarter of 1994 from the comparable period in 1993 , while six-month 1994 sales
increased $743 million, or 20%, over the same period a year ago.
The Electronics Group had sales of approximately $1.8 billion in the first six
months of 1994. The Group's sales declined 20% in the second quarter, while
sales grew 14% in the first half of 1994 over the same period in 1993. The
declines in the second quarter are principally due to lower sales from Defense
Systems, Electronics & Missiles, and Ocean & Radar Systems. The Groups'
gains in the first half of 1994 reflect primarily the sales performance of
Ocean & Radar Systems and Government Electronics Systems.
Space Group with six-month 1994 sales of approximately $1.5 billion, had sales
increases of 3% in the second quarter and 6% in the first six months of 1994
over the comparable periods in 1993. Sales in the six-month period from the
Group's Astro Space unit more than offset revenue declines from the Group's
Astronautics unit. The Group's second quarter results include the operations
of the former Space Systems division of General Dynamics which was acquired by
the Corporation on May 1, 1994.
Information Group with sales of $708 million in the first half of 1994, had a
sales decrease of 6% in the second quarter from the same period of 1993.
However, the Group posted a 37% increase in sales in the first six months of
1994 over the comparable period of 1993. The decline in the second quarter was
primarily due to a 1994 change in the method of recording intercompany
activities related to the Group's Internal Information Systems unit. This
change had no effect on the Corporation's consolidated net sales. The sales
performances of the Group's Management & Data Systems and Automated Systems
units were the principal reason for the sales gain in the first six-month
period.
Services Group had sales of $230 million in the first six months of 1994. The
Group's sales declined by $22 million in the second quarter of 1994 from the
same period sales a year ago. In the first half of 1994, Services Group sales
increased by $69 million over the sales in the comparable period of 1993. The
period to period changes are principally attributable to sales from Martin
Marietta Services, Inc.
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MARTIN MARIETTA CORPORATION AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended June 30, 1994
MANAGEMENT'S DISCUSSION OF FINANCIAL CONDITION AND OPERATING RESULTS
(Continued)
Second Quarter and Six Months Ended June 30, 1994 and 1993
Martin Marietta Materials, Inc. had sales of $232 million in the first six
months of 1994, representing increases of 11% in the second quarter and 13% in
the first half of 1994 over the comparable periods of 1993. Sales for the
aggregates operation were up 15% in the quarter and 17% during the first six
months, and were the reason for this Group's overall increase.
Earnings from operations were up $29 million, or 13%, in the second quarter and
$112 million, or 32%, in the first six months of 1994 over 1993. Electronics
Group operating profits declined 28% in the second quarter and rose 35% in the
first six months of 1994 compared with the same periods of 1993. The Group's
1994 operating profits were adversely affected by a provision of $37 million in
the second quarter and $53 million for the first six months to cover additional
cost now anticipated on the Aero & Naval Systems' Pratt & Whitney jet engine
thrust reverser program. The additional costs are associated with initial
production start-up problems and certain redesign efforts. The Group's overall
operating profit gains in the first half of 1994 reflect the performance of the
Electronics & Missiles, Government Electronics, and Ocean & Radar Systems units
which more than offset the impact of the charge taken on the Pratt & Whitney
program.
Space Group profits grew 15% in the second quarter and 11% in the first half of
1994 compared with the comparable periods a year ago. The Group's second
quarter results reflect modest profit gains by its Astronautics and Manned
Space Systems units, while the gains in the first six months are principally
attributable to its Astro Space unit's earnings.
The Information Group had gains in operating profits of $14 million in the
second quarter and $19 million in the first half of 1994 over the same periods
in 1993. Services Group operating profits were essentially flat in the second
quarter and rose $5 million in the first six months of 1994 over 1993. Martin
Marietta Materials Inc.'s operating profits increased by 21% in the second
quarter and 29% in the first six months of 1994 over the comparable periods in
1993. The profit gains result primarily from the performance of the company's
aggregates operation.
Other income and expenses, net, for the six months ended June 30, was $186
million in 1994 compared with $22 million in 1993. The increase in 1994 was due
principally to the pre-tax gain of $118 million which resulted from the Martin
Marietta Materials' initial public offering and the $50 million received from
Grumman pursuant to the termination provisions of the March 6, 1994, Agreement
and Plan of Merger.
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MARTIN MARIETTA CORPORATION AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended June 30, 1994
MANAGEMENT'S DISCUSSION OF FINANCIAL CONDITION AND OPERATING RESULTS
(Continued)
Second Quarter and Six Months Ended June 30, 1994 and 1993
Interest expense decreased $4 million in the second quarter and increased $15
million in the first six months of 1994 over 1993. The decrease in the second
quarter is primarily because the Corporation defeased in-substance $125 million
of 9.5% Notes during February 1994. The increase in the first half of 1994 is
due to the $1.4-billion increase in the Corporation's long-term debt during the
second quarter of 1993. The Corporation issued $700 million in long-term debt
in April 1993, and assumed $750 million of GE payment obligations (including
approximately $16 million of accrued interest) in connection with the GE
Transaction.
The Corporation's effective income tax rate for the first six months was 40.7%
in 1994 and 38.2% in 1993. The effective rates in both years are higher than
the corporate federal income tax rate principally due to differences between
book and tax accounting arising from the amortization of goodwill associated
with the GE Transaction and state income taxes.
* * * * * * * * * * * * * * * * * * * * * * * * * * *
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MARTIN MARIETTA CORPORATION AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended June 30, 1994
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Reference is made to Item 3. Legal Proceedings of the Corporation's Annual
Report on Form 10-K for fiscal year ended December, 1993, which discusses in
detail litigation relating to a contract with the Navy for the full-scale
development of the Supersonic Low Altitude Target (SLAT) and documents
associated with six Independent Research and Development (IRAD) tasks,
collectively known as Navy Missile Systems. On May 16, 1994, the Department of
Justice, Civil Division, filed an amended complaint in the United States
District Court for the District of Maryland, thereby intervening in a qui tam
action, United States of America ex rel Jerry J. Mayman v. Martin Marietta
Corporation. The complaint alleges that Martin Marietta's method of allocating
its portion of the IRAD costs for the years 1984 through 1987 constitutes a
violation of the False Claims Act (the "Act") and represents a breach of Martin
Marietta's SLAT contract. The Complaint seeks unspecified multiple damages and
civil penalties. Martin Marietta denies that it is in violation of the Act or
any common law principle and is defending itself against the allegations.
On May 26, 1994, the Equal Employment Opportunity Commission (EEOC) filed a
class action Complaint against Martin Marietta alleging violations of the Age
Discrimination in Employment Act (ADEA) by Martin Marietta Astronautics. The
class, as included in the EEOC's Complaint, consists of approximately 2200
class members. The Complaint, EEOC v. Martin Marietta Corporation, was filed
in the United States District Court for the District of Colorado and seeks
reinstatement, payment of lost wages and benefits in an amount to be determined
at trial, and a permanent injunction enjoining Martin Marietta from engaging in
age discrimination. Martin Marietta denies that it has violated the ADEA and
is defending itself in this action.
Reference is made to Item 3. Legal Proceedings of the Corporation's Annual
Report on Form 10-K for the fiscal year ended December 31, 1993, which
discusses in detail investigations by the Department of Defense into a matter
involving allegations concerning payments, certifications and acquisition of
competitive information and related claims in connection with contracts with
the United Arab Republic of Egypt for the sale of radar by one of the GE
Aerospace businesses which are now part of Martin Marietta. The matter, which
was voluntarily disclosed to the Department of Defense by GE, continues to be
actively reviewed by the Department of Defense.
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MARTIN MARIETTA CORPORATION AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended June 30, 1994
PART II - OTHER INFORMATION
Item 1. Legal Proceedings (continued)
Martin Marietta is involved in various other legal and environmental litigation
and proceedings arising in the ordinary course of its business. In the opinion
of management (which opinion is based in part upon consideration of the opinion
of counsel) and in the opinion of counsel, the probability is remote that the
outcome of any litigation or proceedings, whether or not specifically described
above or otherwise referred to herein, will have a material adverse effect on
the results of Martin Marietta's operations or its financial position.
Item 4. Submission of to a Vote of Security Holders
Reference is made to Item 4. Submission of Matters to a Vote of Security
Holders of the Martin Marietta Corporation Quarterly Report on Form 10-Q
for the quarter ended March 31, 1994.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
1. Exhibit 11, Martin Marietta Corporation and Consolidated
Subsidiaries Computation of Net Earnings (Loss) Per Common Share
for the three months and six months ended June 30, 1994 and 1993,
is presented on pages 19 and 20.
2. Exhibit 12, Martin Marietta Corporation and Consolidated Subsidiaries
Computation of Ratio of Earnings to Fixed Charges for the six months
ended June 30, 1994, is presented on page 21.
(b) Reports on Form 8-K filed in the second quarter of 1994.
Reference is made to Item 6.(c) Report on Form 8-K filed on May 13, 1994
of the Martin Marietta Corporation Quarterly Report on Form 10-Q for the
quarter ended March 31, 1994.
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MARTIN MARIETTA CORPORATION AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended June 30, 1994
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MARTIN MARIETTA CORPORATION
(Registrant)
Date: August 15, 1994 by: /s/ Marcus C. Bennett
Marcus C. Bennett
Vice President &
Chief Financial Officer
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<TABLE>
EXHIBIT 11
MARTIN MARIETTA CORPORATION AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended June 30, 1994
COMPUTATION OF NET EARNINGS (LOSS) PER COMMON SHARE
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1994 1993 1994 1993
(In Millions, except per share data)
<S> <C> <C> <C> <C>
ASSUMING NO DILUTION:
Average number of common shares outstanding (1) 95.9 95.3 95.8 95.1
Earnings before cumulative effect of
accounting changes $ 162.7 $ 124.1 $ 347.3 $ 200.5
Less: Preferred stock dividends 15.0 15.3 30.0 15.3
Earnings before cumulative effect of accounting
changes applicable to common stock 147.7 108.8 317.3 185.2
Cumulative effect of accounting changes - - - (429.4)
Net earnings (loss) applicable to common stock $ 147.7 $108.8 $ 317.3 $(244.2)
Net earnings (loss) per common share:
Before cumulative effect of accounting
changes $ 1.54 $ 1.14 $ 3.31 $ 1.95
Cumulative effect of accounting changes - - - (4.52)
$ 1.54 $ 1.14 $ 3.31 $ (2.57)
<FN>
(1) Excludes common stock equivalents
since the dilutive effect on earnings
per share assuming no dilution is
less than 3%.
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</TABLE>
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<TABLE>
EXHIBIT 11 - Continued
MARTIN MARIETTA CORPORATION AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended June 30, 1994
COMPUTATION OF NET EARNINGS (LOSS) PER COMMON SHARE
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1994 1993 1994 1993
(In Millions, except per share data)
<S> <C> <C> <C> <C>
ASSUMING FULL DILUTION:
Average number of common shares outstanding 95.9 95.3 95.8 95.1
Dilutive stock options-based on the treasury
stock method using the June 30 market
prices, if higher than average market price 1.1 1.1 1.2 1.1
Assumed conversion of the Convertible Preferred
Stock from the date of issuance 28.9 28.9 28.9 14.5
125.9 125.3 125.9 110.7
Earnings before cumulative effect of accounting
changes applicable to common stock $ 147.7 $ 108.8 $ 317.3 $ 185.2
Add: Preferred stock dividends 15.0 15.3 30.0 15.3
Earnings before cumulative effect of
accounting changes 162.7 124.1 347.3 200.5
Cumulative effect of accounting changes - - - (429.4)
Net earnings (loss) $ 162.7 $ 124.1 $ 347.3 $(228.9)
Net earnings (loss) per common share:
Before cumulative effect of accounting
changes $ 1.29 $ .99 $ 2.76 $ 1.81
Cumulative effect of accounting changes - - - *
$ 1.29 $ .99 $ 2.76 $ *
<FN>
* Anti-dilutive
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</TABLE>
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EXHIBIT 12
MARTIN MARIETTA CORPORATION AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended June 30, 1994
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
For the Six Months Ended June 30, 1994
(In millions of dollars, except ratio)
EARNINGS:
Net earnings $ 347.3
Taxes on income 238.3
Interest expense 61.8
Amortization of debt premium and expense, net ( 2.6)
Portion of rents representative of an interest factor 11.4
Earnings of less than 50% owned associated companies, net ( .2)
Adjusted earnings before taxes and fixed charges $ 656.0
FIXED CHARGES:
Interest expense $ 61.8
Amortization of debt premium and expense, net ( 2.6)
Portion of rents representative of an interest factor 11.4
Capitalized interest 1.5
Total fixed charges $ 72.1
RATIO OF EARNINGS TO FIXED CHARGES 9.10
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