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1994
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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Form 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1994 Commission file number 1-11810
[MARTIN MARIETTA LOGO]
MARTIN MARIETTA CORPORATION
(Exact name of registrant as specified in its charter)
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Maryland 52-1801551
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
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6801 Rockledge Drive, Bethesda, Maryland 20817-1877 (301/897-6000)
(Address and telephone number of principal executive offices)
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Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of Each Class on which registered
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New York Stock Exchange, Inc.
Chicago Stock Exchange, Incorporated
Common Stock, $1 par value Pacific Stock Exchange, Incorporated
Philadelphia Stock Exchange, Inc.
7% Debentures due 2011 New York Stock Exchange, Inc.
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, and (2) has been subject to such filing
requirements for the past 90 days. Yes [x] No [ ]
Indicate by check mark if the disclosure of delinquent files pursuant to Item
405 or 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]
State the aggregate market value of the voting stock held by non-affiliates
of the registrant. Approximately $4,300,000,000 as of January 31, 1995.
Indicate the number of shares outstanding of each of the registrant's classes
of common stock, as of the latest practicable date. Common Stock, $1 par value,
96,067,318 shares outstanding as of January 31, 1995.
DOCUMENTS INCORPORATED BY REFERENCE
N/A
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________________________________________________________________________________
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PART I
ITEM 1. BUSINESS
General
Martin Marietta Corporation is a diversified enterprise principally engaged
in the conception, design, manufacture and integration of advanced technology
products and services for the United States Government and private industry.
Martin Marietta Corporation manages significant facilities for the Department of
Energy and produces construction aggregates and specialty chemical products.
In 1993, Martin Marietta Corporation consummated a transaction in which its
businesses and the Aerospace businesses of the General Electric Company were
combined. As a result, the then existing Martin Marietta Corporation, which was
formed in 1961 by the consolidation of the Glenn L. Martin Company (founded in
1909) and the American-Marietta Company (founded in 1913), was renamed Martin
Marietta Technologies, Inc. (Technologies). Technologies became a wholly-owned
subsidiary of a new corporation which assumed the Martin Marietta Corporation
name.
Martin Marietta Corporation and Technologies, although separate Maryland
corporations, are operated functionally as an integrated organization and this
Annual Report on Form 10-K treats them in this fashion. Unless the context
otherwise requires, references to "Martin Marietta" or the "Corporation" refer
to
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Martin Marietta Corporation, its consolidated subsidiaries (including
Technologies) and certain nonconsolidated associated companies or joint
ventures. See "Martin Marietta Technologies, Inc. - Reporting Status" on page
23 through page 24.
Business Segment Information
In 1994, Martin Marietta conducted business in six reportable industry
segments. These segments were: the Electronics Group, the Space Group, the
Information Group, the Services Group, the Materials Group, and Energy and Other
Operations.
Information concerning Martin Marietta's net sales, operating profit,
assets employed, and certain additional information attributable to each
reportable business segment for each year in the three-year period ended
December 31, 1994, is included in the "Analysis of Financial Condition and
Operating Results" on page 6 through page 12 of the Corporation's Current Report
on Form 8-K filed with the SEC on February 17, 1995 ("Current Report on Form 8-
K") and in "Note R: Industry Segments" of the "Notes to Consolidated Financial
Statements" on page 35 through page 36 of the Current Report on Form 8-K.
On August 29, 1994, Martin Marietta Corporation entered into an Agreement
and Plan of Reorganization to combine the businesses of Lockheed Corporation
("Lockheed") with the businesses of Martin Marietta (the "Combination"). The
Agreement and Plan of Reorganization was amended on February 7, 1995 (as
amended, the "Reorganization Agreement"). On March 15, 1995, the Combination
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was consummated and each of Martin Marietta and Lockheed became a wholly owned
subsidiary of Lockheed Martin Corporation ("Lockheed Martin") on the terms set
forth in the Reorganization Agreement. Lockheed Martin was formed by Lockheed
and Martin Marietta in August 1994 to hold the businesses of Martin Marietta and
Lockheed.
The business of Lockheed Martin consists of the businesses previously
conducted by Lockheed and Martin Marietta and their respective subsidiaries.
Further, although Lockheed Martin and its wholly owned subsidiaries, Lockheed
and Martin Marietta, are separate corporations, they will be operated
functionally as an integrated organization, Lockheed Martin.
The business of Lockheed Martin is organized into four major operating
sectors: Aeronautics; Electronics; Information and Technology Services; and
Space and Strategic Missiles. These sectors include businesses of Lockheed and
Martin Marietta and their respective subsidiaries. Other Lockheed Martin units
include Energy Systems, Sandia Corporation, Idaho Technologies and Martin
Marietta Materials, Inc. Consequently, the organization of various Martin
Marietta operations and contracts into industry segments described herein as
well as the assessment of the potential significance of such operations and
contracts to these segments in 1995 does not take into account changes that will
occur as a result of the Combination.
For additional details concerning the Combination, please see the
Registration Statement on Form S-4 of Lockheed Martin
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Corporation (Reg. No. 33-57645) filed with the Securities and Exchange
Commission on February 9, 1995.
Electronics Group
The Electronics Group carries out its operations through the following
organizations: Aero & Naval Systems, Armament Systems, Defense Systems,
Communications Systems, Control Systems, Electronics & Missiles, Government
Electronic Systems, and Ocean, Radar & Sensor Systems. The Group's activities
are diverse, but primarily relate to the design, development, engineering and
production of electronic systems for precision guidance, navigation, detection
and tracking of threats; missiles and missile launching systems; armaments;
aircraft controls and subsystems (thrust reversers); and secure communications
systems.
The Group is the prime contractor for the United States Navy's AEGIS fleet
air-defense system and produces the AEGIS Weapon System including the AN/SPY-1
radar. AEGIS was the Group's largest program in terms of sales in 1994 and is
expected to be the largest in 1995.
The Group serves as primary contractor for the development of the AN/BSY-2
Submarine Combat System for the Navy's new Seawolf attack submarine. The Group
produces the LANTIRN system, an advanced night vision, navigation and targeting
fire control system for fixed-wing aircraft and the Target Acquisition
Designation Sight/Pilot Night Vision Sensor (TADS/PNVS) for the Army's AH-64
Apache Attack helicopter. The Group also produces thrust reversers for use in
the General Electric Company's CF6 series of commercial
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aircraft engines under a requirements contract awarded in 1993 that is expected
to run for up to 15 years.
The Group's 1994 operating profits were adversely affected by a loss
provision of $83 million to cover additional costs anticipated on Aero and Naval
Systems' Pratt & Whitney jet engine thrust reverser program. The additional
costs are associated with initial production start-up problems and certain
redesign efforts.
Sales by the Group represented approximately 39% of the Corporation's total
sales in 1994. Sales to the United States Government represented approximately
86% of the Group's sales in 1994.
Space Group
The Space Group's operations are carried out through three organizations:
Astronautics, Astro Space and Manned Space Systems. The Group's activities
include the design, development, engineering and production of spacecraft, space
launch vehicles and supporting ground systems, electronics and instrumentation.
The Group serves as the prime integration, systems production and launch
contractor to the U.S. Air Force for the Titan series of expendable space launch
vehicles. These include the Titan II and Titan IV.
The design, development and fabrication of the Titan IV, together with the
provision of related payload integration and launch services, was the Group's
(and the Corporation's) largest program in 1994, constituting approximately 35%
of the Group's 1994
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sales. The first Titan IV equipped with a newly developed Centaur upper stage
was successfully launched in February, 1994. Subsequently, two additional Titan
IVs equipped with a Centaur upper stage have been successfully launched. The
new configuration allows the launching of significantly heavier payloads to
geosynchronous orbit. Titan IV is expected to continue to be the Group's
largest program over the next several years.
On May 2, 1994, the Corporation completed its acquisition of the Space
Systems Division of General Dynamics Corporation. The primary activity of the
Space Systems Division business relates to the Atlas series of space launch
vehicles and the Centaur upper stages used with Atlas and Titan IV launch
vehicles. Acquisition of the Atlas series of launch vehicles has allowed the
Corporation to enter the intermediate-lift launch market.
A third focus of the Group is the design, development, assembly and testing
of expendable external fuel tanks for the National Aeronautics and Space
Administration's (NASA) Space Shuttle program. The external tank program is
expected to remain a significant program in future years.
An additional area of operations is the design, development, production and
integration of military, civil and commercial spacecraft and related subsystems.
Spacecraft missions include communications (e.g., INTELSAT VIII, AsiaSat,
Echostar, Koreasat, GE-1, INMARSAT and the Defense Satellite Communications
System), global positioning (e.g., GPS Block IIR), weather monitoring (e.g., the
Television Infrared Observation Satellite program and the
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Defense Meteorological Satellite program), environmental/earth observing (e.g.,
Global Geospace Science Satellite, EOS AM, and Landsat satellites), and
planetary exploring (e.g., Mars Global Surveyor and Cassini).
Sales by the Group represented approximately 35% of the Corporation's total
sales in 1994. Sales to the United States Government represented approximately
79% of the Group's sales in 1994.
Information Group
The Information Group consists of four organizations: Automation Systems,
Information Systems, Internal Information Systems and Management & Data Systems.
The Group provides command and control systems, information processing services,
systems engineering, integration, program management, software development,
computer-based simulations and training products, computer-based test control,
machinery control, and automated logistics systems to civil, military and
commercial customers.
The Group is the prime contractor for the U.S. Navy's Consolidated
Automated Support System (CASS). CASS is an automated, self-contained
diagnostic unit for testing Navy electronic and avionic systems. Additionally,
the Group received a commercial CASS contract from the Spanish electronics
company CESELSA in 1994.
In 1994, the Group received a U.S. Air Force contract for visual and sensor
simulation upgrades to the B1-B, B-2 and F-15E
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weapon systems trainers located in the United States and Europe. Other
simulation and training contracts include U.S. Army contracts for M1A2 armor
training systems for use by the Kuwaiti military, tank platoon gunnery training
systems, and the next-generation Advanced Gunnery Training System.
The Group is in the fourth year of a 12-year contract with the U.S.
Department of Housing & Urban Development (HUD) to modernize HUD's data
processing systems, and it provides systems engineering and integration for the
Federal Aviation Administration Capital Investment Plan.
The Group also performs on a number of major contracts for classified
customers encompassing real-time command-and-control systems engineering and
systems integration, analysis, and program control for large distributed
Information Systems efforts.
Sales by the Group represented approximately 15% of the Corporation's total
sales in 1994. Sales to the United States Government represented approximately
93% of the Group's sales in 1994.
Services Group
The Services Group consists of Martin Marietta Services, Inc., Martin
Marietta Technical Services, Inc. and KAPL, Inc. The Group provides management,
engineering, logistics, information systems software and processing support, and
other technical services to military, civil government and international
customers as well as
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to other organizations within the Corporation. The Department of Defense is the
Group's largest customer.
The Group is responsible for the operation of the EPA's National Computer
Center in Raleigh, North Carolina, the Washington Information Center in
Washington, D.C., and the National Environmental Supercomputer Center in Bay
City, Michigan. The Group is in the third year of a five year contract to
provide information center support and various consulting and design services to
the EPA. Work for the EPA is expected to remain one of the Group's major
sources of revenue in 1995.
The Group provides scientific, engineering, operations and management
services support to NASA's Johnson Space Flight Center with respect to that
organization's efforts in life sciences experimentation. As part of that
contract, the Group was selected to provide such support on the ten upcoming
Russian/American Life Sciences Missions. The Group provides similar services
supporting NASA missions at Goddard Space Flight Center, Ames Research Center,
and the Dryden Flight Center.
The Group also provides quality control and engineering services, training,
installation and maintenance support of the U.S. Navy's AEGIS fleet air-defense
system for which the Corporation's Electronics Group is prime contractor.
In addition, the Group provides engineering, operation and maintenance
support for the U.S. Navy's Atlantic Fleet Weapons Training Facility located in
Puerto Rico and surrounding islands.
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The contract's period of performance expires in September 1995 and the Group is
currently competing for a new five-year contract.
KAPL, Inc., a component of the Group, provides high-level engineering and
scientific support to the Department of Energy's Knolls Atomic Power Laboratory.
Sales by the Group represented approximately 5% of the Corporation's total
sales in 1994. Sales to the United States Government represented essentially
all of the Group's sales in 1994.
Materials Group
In February 1994, an initial public offering of the common stock of Martin
Marietta Materials, Inc. (Materials) was consummated and 8,797,500 shares of
common stock (representing approximately 19% of the shares outstanding) were
sold at an initial offering price of $23.00 per share. The Corporation
continues to own all of the remaining shares and presently intends to maintain
such ownership. Maintenance by the Corporation of at least an 80% ownership
position will enable the Corporation to continue to include Materials in the
Corporation's consolidated group for federal income tax purposes. See "Note N:
Other Income and Expenses" of the "Notes to Consolidated Financial Statements"
on page 33 of the Current Report on Form 8-K.
On January 3, 1995, Materials purchased the assets of Dravo Corporation's
construction aggregates business for approximately
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$122 million in cash, adding over 20 million tons of annual production capacity.
Materials carries on its operations through two divisions, Aggregates and
Magnesia Specialties. Following the acquisition of the Dravo construction
aggregates business, the Aggregates division is the United States' second
largest producer of aggregates for the construction of highways and other
infrastructure projects and for the commercial and residential construction
industries. Materials has focussed on the production of construction aggregates
and has not integrated vertically into other construction materials businesses.
As a result of dependence upon the construction industry, the profitability
of construction aggregates producers is sensitive to regional economic
conditions, particularly to cyclical swings in construction spending and changes
in the level of infrastructure spending funded by the public sector. The
aggregates business is also highly seasonal, due primarily to the effect of
weather conditions on construction activity in the markets served. Materials'
aggregates business is concentrated principally in the Southeast, the Midwest
and, with the addition of the Dravo operations, along the Ohio and Mississippi
River systems from western Pennsylvania throughout the central and southern U.S.
Management believes that raw material reserves are sufficient to permit
production at present operational levels for the foreseeable future.
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Through its Magnesia Specialties Division, Materials manufactures and
markets magnesia-based products, including refractory products for the steel
industry and chemical products for industrial, environmental and agricultural
uses. Magnesia Specialties' refractory and dolomitic lime products are sold
primarily to the steel industry, and such sales may be affected by developments
in that industry.
Sales by the Group represented approximately 5% of the Corporation's total
sales in 1994.
Energy and Other Operations
Energy Group - The Energy Group's operations are performed through three
organizations: Martin Marietta Energy Systems, Inc., Martin Marietta Utility
Services, Inc. and Martin Marietta Specialty Components, Inc. In addition,
Martin Marietta Environmental Holdings Inc. was established in August 1994 to
conduct business in the field of environmental management.
The Group's primary programs are (i) the development of safe, economic, and
environmentally acceptable technologies for the efficient production and use of
energy; (ii) a manufacturing and developmental engineering organization engaged
primarily in programs related to the national defense; (iii) environmental and
other technical programs performed for the DOE and other federal agencies; (iv)
the production of enriched uranium for use as fuel in nuclear power plants and
other ancillary uranium enrichment services; and (v) the manufacturing of
electronic and
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electromechanical components primarily for nuclear weapons. An additional
mission is the transfer of technology to the private sector to enhance national
competitiveness.
Recent defense-related budget reductions have decreased production at some
of the Energy Group's facilities.
Sandia Corporation - The Corporation, through Sandia Corporation, a wholly-
owned subsidiary, manages and operates Sandia National Laboratories. Sandia is
a federally funded research and development center with significant
responsibilities for national security programs in defense as well as programs
in the fields of energy and the environment. A derivative activity is the
transfer of technology to the private sector to enhance national
competitiveness.
Martin Marietta Overseas Corporation - Martin Marietta Overseas Corporation
(MMOC), a wholly-owned subsidiary of Martin Marietta, is generally responsible
for contracts, joint ventures, teaming and other agreements with international
customers and parties. In recent years, the amount of business conducted by the
Corporation internationally (directly and through MMOC) has increased and
international business now constitutes approximately 17% of the Corporation's
business. Included in this percentage are Foreign Military Sales which, because
such sales are made through the U.S. Government, are also taken into account in
calculating the percentage of the Corporation's sales to the U.S. Government.
International business includes the production of commercial communications
satellites for customers such as AsiaSat, Japan
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Broadcasting Corporation, Korea Telecom, the 52-nation INMARSAT Consortium and
the 124-nation INTELSAT consortium, and the sale of airborne, ground and naval
surveillance radars, the Patriot Missile System, the LANTIRN system, and the
TADS/PNVS system to various allied nations.
Additional Activities - For information relating to activities undertaken
by the Corporation included within this reportable business segment, including
information pertaining to activities not discussed above, see "Note R: Industry
Segments" of the "Notes to Consolidated Financial Statements" on page 35 through
page 36 of the Current Report on Form 8-K.
Competition, Contracts and Risk
Martin Marietta competes with numerous other contractors on the basis of
price and technical capability. Its business involves rapidly advancing
technologies and is subject to many uncertainties including, but not limited to,
those resulting from changes in federal budget priorities, particularly the size
and scope of the defense budget, and dependence on Congressional appropriations.
Due to the intense competition for available government business, the
maintenance and/or expansion of government business increasingly requires the
Corporation to invest in its working capital and fixed asset base.
Approximately 80% of the 1994 sales of the Corporation were made to the
United States Government, either as a prime contractor or as a subcontractor,
principally to the Department of Defense
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(including Foreign Military Sales) and NASA, and additionally to the U.S.
Department of Energy, the U.S. Department of Housing & Urban Development, and
the U.S. Environmental Protection Agency. Accordingly, sales and earnings are
subject to the size, schedule and funding of government programs and are subject
to periodic review in light of changes in government policies and requirements,
availability of funds and technical or schedule progress.
Earnings may vary materially depending upon the types of long-term
government contracts undertaken, the costs incurred in their performance, the
achievement of other performance objectives and the stage of performance at
which the right to receive fees, particularly under incentive and award fee
contracts, is finally determined.
See "Note A: Accounting Policies" of the "Notes to Consolidated Financial
Statements" on page 20 through page 21 of the Current Report on Form 8-K for
information concerning Martin Marietta's accounting policies governing
recognition of revenues and earnings.
All government contracts and, in general, subcontracts thereunder are
subject to termination in whole or in part at the convenience of the United
States Government as well as for default. Long-term government contracts and
related orders are subject to cancellation if appropriations for subsequent
performance periods become unavailable. Martin Marietta generally would be
entitled to receive payment for work completed and allowable termination or
cancellation costs if any of its government contracts were to be
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terminated for convenience. Upon termination for convenience of cost-
reimbursement-type contracts, the contractor is normally entitled, to the extent
of available funding, to reimbursement of allowable costs plus a portion of the
fee related to work accomplished. Upon termination for convenience of fixed-
price-type contracts, the contractor is normally entitled, to the extent of
available funding, to receive the purchase price for delivered items,
reimbursement for allowable costs for work in process, and an allowance for
profit thereon or adjustment for loss if completion of performance would have
resulted in a loss.
A portion of Martin Marietta's business includes classified programs.
Although these programs are not discussed herein, the operating results relating
to those programs are included in the Corporation's consolidated financial
statements. The nature of and business risks associated with classified
programs do not differ materially from those of the Corporation's other
government programs and products.
An increasing percentage of Martin Marietta's business is conducted
internationally. While this is one of the Corporation's objectives,
international business may involve additional risks, such as exposure to
currency fluctuations, offset obligations and changes in foreign economic and
political environments. In addition, international transactions frequently
involve increased financial and legal risks arising from stringent contractual
terms and conditions and widely differing legal systems, customs and mores in
various foreign countries.
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The Corporation owns numerous patents and patent applications, some of
which, together with licenses under patents owned by others, are utilized in its
operations. While such patents and licenses are, in the aggregate, important to
the operation of the Corporation's business, no existing patent, license or
other similar intellectual property right is of such importance that its loss or
termination would, in the opinion of management, materially affect the
Corporation's business.
Certain risks inherent in the current defense and aerospace business
environment are discussed in "Analysis of Financial Condition and Operating
Results" on page 6 through page 12 of the Current Report on Form 8-K.
Backlog
Martin Marietta's backlog of orders at December 31, 1994, was $16.6 billion
compared with $16.7 billion at the end of 1993. The 1994 amount includes funded
backlog of $10.8 billion compared with $9.3 billion at the end of 1993.
Typically, the United States Government funds its major programs only to
the dollar level appropriated annually by the Congress despite total estimated
program values being significantly higher. Accordingly, the government funded
backlog reflected in the above amounts represents only the government's present
obligation and represents the amount from which Martin Marietta can be
reimbursed for work performed.
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Backlog information and comparisons thereof as of different dates may not
be accurate indicators of future sales or the ratio of Martin Marietta's future
sales to the United States Government versus its sales to other customers.
Of the Corporation's total 1994 year-end backlog, approximately $9.9
billion, or 59%, is not expected to be filled within one year.
Environmental Regulation
Martin Marietta's operations are subject to and affected by a variety of
federal, state, and local environmental protection laws and regulations,
including those regulating air and water quality, hazardous materials and solid
wastes. Management believes that, on an overall basis, all of the facilities,
owned or leased by the Corporation, are currently operated in substantial
compliance with applicable statutes and regulations. Some of these facilities
are currently subject to remedial actions for removing hazardous contamination
that exists from prior operations. The Corporation is actively involved in
environmental responses at certain of its facilities and at certain waste
disposal sites not currently owned by the Corporation (third-party sites) where
the Corporation, its former aluminum subsidiary, or one of the former GE
Aerospace businesses acquired by the Corporation from GE has been designated a
"Potentially Responsible Party" (PRP) by the U.S. Environmental Protection
Agency (EPA). At such third-party sites, the EPA or a state agency has
identified the site as requiring removal or
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remedial action under the federal "Superfund" and other related federal or state
laws governing the remediation of hazardous materials. Generally, PRPs that are
ultimately determined to be "responsible parties" are strictly liable for site
clean-ups and usually agree among themselves to share, on an allocated basis, in
the costs and expenses for investigation and remediation of the hazardous
materials. Under existing environmental laws, however, responsible parties are
jointly and severally liable and, therefore, the Corporation is potentially
liable for the full cost of funding such remediation. In the unlikely event
that the Corporation were required to fund the entire cost of such remediation,
the statutory framework provides that the Corporation may pursue rights of
contribution from the other PRPs.
At third-party sites, the Corporation continues to pursue a course of
action designed to minimize and mitigate its potential liability through
assessing the legal basis for its involvement, including an analysis of such
factors as (i) the amount and nature of materials disposed of by the
Corporation, (ii) the allocation process, if any, used to assign all costs to
all involved parties, and (iii) the scope of the response action that is or may
reasonably be required. The Corporation also continues to pursue active
participation in steering committees, consent orders and other appropriate and
available avenues. Management believes that this approach should minimize the
Corporation's proportionate share of liability at third-party sites where other
PRPs share liability.
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Although the Corporation's involvement and extent of responsibility varies
at each site, management, after an assessment of each site and consultation with
environmental experts and counsel, has concluded that the probability is remote
that the Corporation's actual or potential liability as a PRP in each or all of
these sites will have a material adverse effect on the Corporation's
consolidated financial position or results of operations. While the possibility
of insurance coverage is considered in the Corporation's efforts to minimize and
mitigate its potential liability, this possibility is not taken into account in
management's assessment of whether it is likely that its actual or potential
liability will have a material adverse effect on the Corporation's consolidated
financial position.
As part of its established environmental management program, the
Corporation is currently engaged in waste-minimization projects designed to
reduce generation of hazardous waste and to reduce future costs associated with
waste disposal. Capital investments for environmental control purposes
generally afford minimal financial return and result in increased operating
costs. New and revised requirements are being continually imposed which may
require further investment. Such requirements add to the costs of operations in
the industries in which Martin Marietta does business, but the amount of such
costs cannot reasonably be estimated.
In addition, Martin Marietta manages various government-owned facilities on
behalf of the government. At such facilities,
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environmental compliance and remediation costs have historically been the
responsibility of the government and the Corporation relied (and continues to
rely with respect to past practices) upon government funding to pay such costs.
While the government remains responsible for capital costs associated with
environmental compliance, responsibility for fines and penalties associated with
environmental noncompliance, in certain instances, is being shifted from the
government to the contractor with such fines and penalties no longer
constituting allowable costs under the contracts pursuant to which such
facilities are managed.
Management does not believe that adherence to presently applicable
environmental regulations at its own facilities or in its contract management
capacity at government-owned facilities will have a material adverse effect on
Martin Marietta's consolidated financial position or results of operations. For
additional details, see "Legal Proceedings" on page 28 through page 39. See
also "Note I: Contingencies" of the "Notes to Consolidated Financial
Statements" on page 27 and "Analysis of Financial Condition and Operating
Results, Environmental Matters" on page 6 through page 12 of the Current Report
on Form 8-K.
Research and Development
Martin Marietta conducts significant research and development activities,
both under contract funding and with Independent Research and Development (IR&D)
funds. A large portion of these activities are carried out at the Corporation's
Electronics Group,
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Space Group and Information Group facilities. Research and development projects
at these facilities relate to such diverse areas as sensor technologies, state-
of-the-art software, expert systems and computing technologies, space launch and
space platform technologies, and electronics. In addition, the Corporation's
Advanced Development & Technology Operations (ADTO), headquartered in San Diego,
California, is chartered to identify, develop and demonstrate advanced
technological concepts having broad applications in space, defense, information
and communications systems, and commercial fields. An element of ADTO is Martin
Marietta Laboratories, a research and development facility near Baltimore,
Maryland. Martin Marietta Laboratories conduct basic scientific and engineering
research projects in fields such as advanced materials, photonics, micro-
electronics and information processing.
In addition, the Corporation has an Electronics Laboratory in Syracuse, New
York, which conducts advanced research in solid-state microwave and millimeter-
wave technology, infrared sensor focal plane electronics and specialized
integrated microelectronic modules for radar, space, communications and infrared
sensor systems, and an Advanced Technology Laboratory in Moorestown, New Jersey,
which conducts research and development in advanced computing technologies.
Finally, in connection with the combination of the Corporation's businesses with
the Aerospace businesses of General Electric Company (GE) that was consummated
in
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April 1993, the Corporation is afforded access to the GE Corporate Research and
Development Laboratories.
See "Note P: Research and Development" of the "Notes to Consolidated
Financial Statements" on page 33 of the Current Report on Form 8-K.
Employees
As of January 31, 1995, Martin Marietta had approximately 90,000 employees,
including approximately 20,000 persons employed by the Energy Group, 9,000
persons employed by Sandia Corporation and 3,000 employed by KAPL, Inc.
Approximately 17,000 of Martin Marietta's employees are covered by 82 separate
collective bargaining agreements with various international and local unions.
Management considers employee relations generally to be good and believes that
the probability is remote that renegotiating these contracts will have a
material adverse effect on its business.
Martin Marietta Technologies, Inc. - Reporting Status
Martin Marietta Corporation and Martin Marietta Technologies, Inc. each
have securities registered pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (1934 Act), although it is anticipated that, as a result of
the Combination, this will cease to be the case in April 1995. The staff of the
Securities and Exchange Commission (SEC) has taken the position that Martin
Marietta Technologies, Inc. need not file separate 1934 Act reports provided
those reports filed by Martin Marietta Corporation include
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additional information concerning Martin Marietta Technologies, Inc. Such
additional information is included in this Annual Report on Form 10-K and in
"Note J: Martin Marietta Technologies, Inc." of the "Notes to Consolidated
Financial Statements" on page 28 of the Current Report on Form 8-K. In
addition, certain documents required to be filed as Exhibits to this Form 10-K
or incorporated by reference to previous filings with the SEC are incorporated
herein by reference to previous SEC filings by Technologies. At the time of
such filings, Technologies was known as Martin Marietta Corporation and filed
under Commission File Number 1-4552. See "Note C: Acquisition of GD Space
Systems and Business Combination with GE Aerospace" of the "Notes to
Consolidated Financial Statements" on page 23 of the Current Report on Form 8-K.
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ITEM 2. PROPERTIES
At December 31, 1994, excluding Martin Marietta Materials, Inc., the
Corporation operated in approximately 207 offices, facilities, plants and
laboratories located throughout the United States and internationally. Of
these, Martin Marietta owned approximately 18 locations, aggregating
approximately 16.8 million square feet, in fee simple and leased approximately
189 locations aggregating approximately 9.7 million square feet. In addition,
Martin Marietta manages various government-owned facilities, including the NASA
Michoud Assembly Facility at New Orleans, Louisiana, the Department of Energy
facilities at Oak Ridge, Tennessee, and Largo, Florida, the United States
Enrichment Corporation's facilities at Paducah, Kentucky, and Piketon, Ohio, the
Sandia National Laboratories at Albuquerque, New Mexico and Livermore,
California, the Knolls Atomic Power Laboratory at Niskayuna, New York, and an
Army ordnance plant at Milan, Tennessee. Martin Marietta personnel also occupy
government-owned facilities at Cape Canaveral Air Force Station and Kennedy
Space Center in Florida, at Marshall Space Flight Center in Alabama, at
Vandenberg Air Force Base in California and at Jericho, Vermont; Johnson City,
New York; and Pittsfield, Massachusetts. The United States Government also
furnishes certain equipment and property used by Martin Marietta.
Martin Marietta owns its headquarters office building located in Bethesda,
Maryland in fee simple. In addition, the Corporation owns 200 acres of land and
approximately 2.1 million square feet of
-25-
<PAGE>
buildings at Middle River, Maryland, near Baltimore; a 1.8 million square foot
office building and manufacturing park located in Syracuse, New York;
approximately 3,300,000; 3,100,000; 675,000; 500,000 and 1,200,000 square feet
of office and manufacturing facilities located in Orlando, Florida; Waterton,
Colorado; East Windsor, New Jersey; Utica, New York; and King of Prussia,
Pennsylvania, respectively; approximately 900,000 square feet of office space in
Littleton, Colorado; and approximately 700 acres of land which could be
developed in Orlando, Florida. The Syracuse and Utica, New York facilities are
occupied by the Electronics Group while the Waterton, Colorado and East Windsor,
New Jersey facilities are occupied by the Space Group. The King of Prussia,
Pennsylvania facilities are occupied by both the Space Group and the Information
Group.
In 1993, the Corporation embarked upon a five-year facilities consolidation
plan which is expected to reduce operating costs by $1.5 billion. Since the
combination with GE Aerospace in 1993, approximately five million square feet of
capacity has been eliminated from the Corporation's facilities in various
locations. Some of these reductions were contemplated prior to the
implementation of the facilities consolidation plan, but most reflect the
operation of that plan. These reductions have been partially offset by the
addition of nearly 1.8 million square feet of leased facilities resulting from
the acquisition of General Dynamics Corporation's Space Systems Division in
1994. For additional details, see "Analysis of Financial Condition and
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Operating Results" on page 6 through page 12 of the Current Report on Form 8-K.
Including the assets acquired from Dravo Corporation, Materials processes
or ships aggregates from 210 quarries and distribution yards in 20 states in the
Southwest, Midwest and Mid-Atlantic regions and in the Bahamas of which 46 are
located on land owned by Materials, 59 are located on land owned in part and
leased in part by Materials, 88 are on leased land, and 17 are on facilities
neither owned nor leased, where raw materials are removed under an agreement
with the owner. Materials conducts its specialty chemical products operations at
facilities in Woodville, Ohio and Manistee, Michigan and at smaller plants in
Bridgeport, Connecticut, River Rouge, Michigan and Pittsburgh, Pennsylvania.
Management believes that all of Martin Marietta's major physical facilities
are in good condition and are adequate for their intended use.
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ITEM 3. LEGAL PROCEEDINGS
Martin Marietta is primarily engaged in providing products and services
under contracts with the United States Government and, to a lesser degree, under
foreign government contracts, some of which are funded by the United States
Government. All such contracts are subject to extensive legal and regulatory
requirements and, from time to time, agencies of the United States Government
investigate whether Martin Marietta's operations are being conducted in
accordance with these requirements. Such investigations could result in
administrative, civil or criminal liabilities including reimbursements, fines or
penalties being imposed upon Martin Marietta or could lead to suspension or
debarment from future government contracting by Martin Marietta. Neither
management nor counsel is aware of any such investigation presently ongoing
which is likely to result in the suspension or debarment of the Corporation or
which is likely to result in the imposition of reimbursements, fines or
penalties which would have a material adverse effect on the Corporation's
financial position. Martin Marietta is also involved in various other legal and
environmental proceedings.
Martin Marietta Energy Systems, Inc. (MMES), a wholly-owned subsidiary of
Technologies, manages certain facilities on behalf of the Department of Energy
(DOE) under contracts with the DOE. MMES is involved in proceedings arising out
of work performed under these contracts including the following:
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- - On June 7, 1990, Boggs, et al. v. Divested Atomic Corporation, et al., was
----------------------------------------------------
filed against various defendants including MMES. Plaintiffs' request for
class certification was granted and the case is pending in the United
States District Court for the Eastern District of Ohio. Plaintiffs seek
monetary damages of $600 million based upon allegations that the defendants
discharged hazardous substances into the environment. In the event that
any damages are awarded in these proceedings, such damages will be
allowable costs under the contracts between MMES and the DOE.
- - On May 28, 1992, the Arkansas State Attorney General filed a civil suit
against MMES and the DOE relating to the shipment of hazardous waste (which
may have contained trace amounts of radioactivity) from facilities managed
for the DOE by MMES into the State of Arkansas. The suit, which is in the
United States District Court for the Eastern District of Arkansas, Western
Division, seeks civil penalties to be set by the Court plus an award to the
State of Arkansas for the costs of its investigation plus reasonable
attorney's fees and costs. MMES and the DOE have filed Motions to Dismiss
and the setting of a trial date has been postponed until the Court issues
its decision on these Motions. In the event that any damages are awarded
in these proceedings, such damages will be allowable costs under the
contracts between MMES and the DOE.
- - On December 28, 1993, MMES received a subpoena issued by a Federal Grand
Jury in the Eastern District of Virginia
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requiring the production of documents relating to subcontracts with two of
MMES' suppliers. MMES has produced the documents required. The prosecutor
has informed MMES that MMES is not, at this time, the target of the
investigation.
- - During 1994, MMES and the DOE engaged in discussions with the General
Counsel for the Tennessee Department of Environment and Conservation
("TDEC") related to the clean up of hazardous waste associated with the
closure of two surface impoundments at the DOE's Oak Ridge K-25 Site. The
matter was settled in 1994, and the terms of the settlement will not have a
material adverse effect on the Corporation.
On August 5, 1991, Technologies (then known as Martin Marietta Corporation)
was served with two subpoenas by the Department of Defense Inspector General
relating to documents pertaining 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 (IR&D) tasks,
collectively known as Navy Missile Systems. Technologies has complied with
these subpoenas and, in 1994, was informed that criminal prosecution had been
declined. In addition, the Civil Division of the Justice Department conducted a
civil fraud investigation dealing with the same or similar allegations and
issued Civil Investigative Demands for the testimony of several current and
former employees. 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
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a qui tam action which was filed under seal in July 1991, 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. In this regard, the
Corporation has filed a Motion to Dismiss on a number of different grounds. A
hearing was held on the Motion to Dismiss on February 2, 1995. The Court has
not yet ruled on the Motion.
The Inspector General of the Department of Defense has been investigating
alleged defective pricing and labor mischarging in the Pershing II program since
at least January 1987, when Technologies (then known as Martin Marietta
Corporation) was served with an Inspector General's subpoena. Subsequently,
Technologies was served with additional Inspector General's subpoenas seeking
records relating to the Pershing II program. In addition, current and former
employees were subpoenaed to appear and have testified before a Federal Grand
Jury in Orlando, Florida. In January 1994, the Corporation was informed that
criminal prosecution had been declined but that the Civil Division of the
Justice Department intended to further investigate the matter.
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<PAGE>
On January 6, 1994, the Corporation's Ordnance Systems facility at Milan,
Tennessee, received a Federal Grand Jury subpoena issued in the Western District
of Tennessee. The subpoena requested the production of certain purchase order
files. On January 20, 1994, the Corporation received a second subpoena in this
matter. The Corporation has complied with each subpoena. The Corporation has
not been identified as a target of the investigation and has not been informed
of its purpose.
On December 22, 1994, the Corporation's Ordnance Systems Facility received
a subpoena issued by the Inspector General's Office seeking documents related to
health and safety matters at the facility. Documents responsive to the subpoena
have been produced. The Corporation has not been informed of the purpose of the
investigation.
On January 20, 1994, the Corporation received two subpoenas issued by the
Defense Investigative Service relating to the LANTIRN program. One of the
subpoenas requests documents relating to repairs to the navigation and targeting
pods and relates to the charging of repair work under the warranty provisions of
the LANTIRN contract. The other pertains to purchases from a subcontractor and
relates to the disclosure of pricing data concerning these purchases. The
Corporation has responded to each subpoena. The Corporation has been identified
as a potential target in each of the investigations and during 1994 the
Government interviewed certain former employees of the Corporation in connection
with these investigations.
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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 2,200
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.
On November 29, 1994, the Corporation received a subpoena issued by the
Inspector General's Office seeking documents pertaining to testing of the
AN/BQG-5 Standalone Wide Aperture Array, which is produced by the Corporation's
Ocean, Radar & Sensor Systems Division. The Corporation has complied with the
subpoena.
On June 27, 1994, Martin Marietta received a subpoena from the Department
of Defense Inspector General's Office for documents related to Martin Marietta's
Compu-Scene IV image generator product. The Government appears to be
investigating the exemption for and/or waiver of the submission of cost or
pricing data. Martin Marietta has negotiated an agreement with the Government
to reduce the scope of the subpoena and is producing responsive documents.
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As a result of the combination of General Electric Company's Aerospace
businesses with the businesses of the Corporation (the "GE Transaction"),
subject to certain limitations and subject to certain limited rights to
indemnification all as discussed in Parent Corporation's Registration Statement
on Form S-4 (Registration No. 33-58494), Martin Marietta assumed liabilities
relating to or arising out of legal and environmental proceedings pertaining to
the GE Aerospace businesses transferred to Martin Marietta.
In April 1992, GE voluntarily disclosed to the U.S. Department of Defense a
matter involving allegations concerning payments, certifications, and
acquisition of competitive information and related claims in connection with
contracts with the Arab Republic of Egypt for the sale of radar units by one of
the GE Aerospace businesses which is now part of Martin Marietta. In 1994,
after negotiations involving the Corporation, the Department of Justice and GE,
the matter was settled. The terms of the settlement will not have a material
adverse effect on the Corporation.
On March 6, 1995, AT&T filed suit against Martin Marietta Corporation in
the United States District Court for the Eastern District of Virginia seeking
damages of approximately $250 million plus punitive damages for the alleged
breach of a spacecraft agreement and a launch agreement. Under the spacecraft
agreement, which the Corporation assumed as part of the GE Transaction, the
Corporation committed to build for AT&T three commercial communications
satellites. The first of these was launched
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successfully, but the second failed to achieve the proper orbit. AT&T's suit
seeks damages for the loss of this satellite and for delays in the delivery of a
replacement satellite. Under the launch agreement, which was assumed by the
Corporation's commercial launch vehicle subsidiary as part of the Corporation's
acquisition of General Dynamics Corporation's Space Systems Division in 1994,
the Corporation is under contract to launch the third satellite, which is
scheduled for delivery in the summer of 1995, during the second quarter of 1996
although, under certain circumstances, AT&T may be granted an earlier launch
slot. AT&T's suit also seeks damages for the failure of the Corporation to
offer AT&T a launch slot in 1995 and, in addition, seeks specific performance to
force the launch of the satellite in 1995. On the same day that AT&T filed its
suit, the Corporation sued AT&T in the District Court, County of Jefferson,
State of Colorado seeking a determination that there has been no breach of the
launch contract and sued in Federal District Court for the District of New
Jersey for payments which AT&T has withheld under the spacecraft agreement. The
Corporation believes that it has defenses to AT&T's claims and intends to defend
the action.
Martin Marietta is a party to a number of lawsuits relating to the
Combination. Class certification has been requested in each suit.
Lockheed, Martin Marietta and the directors of Lockheed are parties to
three lawsuits filed in the Superior Court of the State of California (i)
Richard Rampell and Frederick Rand v. Daniel M.
- -----------------------------------------------
-35-
<PAGE>
Tellep, et al., (filed August 31, 1994); (ii) Stanton Discount Pharmacy, Inc. v.
- -------------- ----------------------------------
Daniel M. Tellep, et al., (filed September 12, 1994); and (iii) Rose Hadian v.
- ------------------------ --------------
Daniel M. Tellep, et al., (filed October 27, 1994) and one lawsuit filed in the
- ------------------------
Court of Chancery of the State of Delaware, Daniel Lifshitz v. Lockheed
---------------------------
Corporation, et al., (filed September 6, 1994). Martin Marietta, Lockheed and
- -------------------
the directors of Martin Marietta are parties to an additional lawsuit filed in
the Superior Court of the State of California, Doris R. Fish v. Marcus C.
--------------------------
Bennett, et al., (filed October 26, 1994).
- ---------------
Each of these lawsuits generally alleges the breach, or aiding and abetting
a breach, of various fiduciary duties. In particular, the lawsuits focus, among
other things, on the alleged unconscionability and gross unfairness of the
consideration to be offered in the Combination, alleged director self-dealing
and conflicts of interests, the alleged negative effects of the $100 million
termination fee and the alleged duty to maximize stockholder value via an
auction, open bidding or other "market check" mechanism. The lawsuits also seek
similar relief, generally in the form of a request that the Combination be
enjoined, the entry of an order directing the directors to carry out their
fiduciary duties, and a request for unspecified monetary damages.
Settlement discussions with respect to the pending litigations began
between the parties on or about January 4, 1995. During these discussions,
counsel for the plaintiffs requested and shortly thereafter received document
discovery from Lockheed and Martin Marietta relating to the Combination. Counsel
for the plaintiffs
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<PAGE>
also announced their intention to consolidate all of the shareholder class
actions into a single case and to file an amended class action and derivative
complaint in California in the lead case, the Rampell Complaint referenced
-------
above, incorporating all of the existing claims from the original complaints,
and adding claims relating to: (i) the formation of Lockheed's Employee Stock
Ownership Plan in 1989 after the disclosure by Valhi, Inc. and persons related
to it that they owned 5.3% of the Lockheed Common Stock; (ii) Lockheed's plea
agreement of January 27, 1995 with the United States of America pursuant to
which Lockheed agreed to plead guilty to one count of conspiring to violate the
anti-bribery provisions of the Foreign Corrupt Practices Act and conspiring to
falsify its books, records and accounts and Lockheed's payment under the plea
agreement of $24.8 million in fines and penalties to the United States; (iii)
the compensation to be paid to certain Martin Marietta officers and executives
as a result of the Combination; and (iv) disclosures made and proposed to be
made to stockholders of stockholders of Lockheed and Martin Marietta. The
parties continued their discussions regarding a settlement of the claims alleged
in the complaints referred to above (as well as the claims expected to be
alleged in the revised Rampell Complaint) and, in the course of negotiations,
-------
reached an oral agreement in principle on January 30, 1995 with respect to the
terms of a proposed settlement of such claims. On February 2, 1995 the Rampell
Complaint was amended.
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<PAGE>
On March 10, 1995, a stipulation of settlement (a "Stipulation") was
executed pursuant to which, subject to Court approval, the parties settled each
of the above referenced proceedings. The Stipulation includes the following
elements: (a) Lockheed Martin agreed, subject to any restrictions imposed by
Maryland law, to pay a regular quarterly dividend of $.40 (rather than $.35, as
otherwise contemplated) per share on each outstanding share of Lockheed Martin
Common Stock for each of the first three quarters after consummation of the
Combination and approval of the settlement in which net income (excluding non-
recurring restructure costs and extraordinary charges and transaction expenses)
is sufficient to pay such a dividend; (b) Lockheed agreed to strengthen its
policies and procedures to help to ensure compliance with the Foreign Corrupt
Practices Act; and (c) Lockheed Martin agreed to the payment of $6 million in
counsel fees and expenses to plaintiffs' counsel with interest from the date
plaintiffs' counsel delivered to defendants' counsel a draft of the Stipulation.
The proposed settlement was expressly conditioned upon (i) the Combination
being consummated substantially on the terms set forth in the Reorganization
Agreement, (ii) Lockheed and Martin Marietta receiving evidence satisfactory to
them that the provisions of the proposed settlement will not result in the
pooling of interests method of accounting for the Combination being unavailable
under the requirements of APB No. 16; (iii) certification of the stockholder
classes (for the purpose of obtaining approval of the Stipulation and entry of
an appropriate judgment); (iv) court
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<PAGE>
approval of the Stipulation; and (v) final dismissal of the actions with
prejudice and release of the claims asserted in such actions with prejudice.
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.
See also "Note I: Contingencies" of the "Notes to Consolidated Financial
Statements" on page 27 of the Current Report on Form 8-K and "Analysis of
Financial Condition and Operating Results" on page 6 through page 12 of the
Current Report on Form 8-K.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of 1994.
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<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
There were approximately 32,000 holders of record of Martin Marietta
Corporation Common Stock, $1 par value, as of February 7, 1995. The exchanges
on which the Corporation's Common Stock was traded are listed on the cover of
this Form 10-K. In connection with the consummation of the Combination,
Lockheed Martin Corporation became the sole stockholder of Martin Marietta and
the Common Stock was delisted from each of the exchanges on which it had been
traded. Information concerning stock prices and dividends paid during the past
two years is as follows:
<TABLE>
<CAPTION>
Common Dividends Paid and Market Prices
---------------------------------------
Market Price
Quarter Dividends Paid High/Low High/Low
------- -------------- -------- --------
1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
First .225 .21 $47.25/$41.875 $37.44/$32.00
Second .225 .21 $45.00/$40.875 $39.94/$35.81
Third .24 .225 $51.00/$43.00 $44.875/$39.06
Fourth .24 .225 $47.25/$41.50 $46.625/$40.375
---- ----
Year .93 .87
</TABLE>
ITEM 6. SELECTED FINANCIAL DATA
The information required by this Item 6 is included under the caption
"Five-Year Summary" on page 38 of the Current Report on Form 8-K, and that
information is hereby incorporated by reference in this Form 10-K.
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<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information required by this Item 7 is included under the caption
"Analysis of Financial Condition and Operating Results" on page 6 through
page 12 of the Current Report on Form 8-K, and that information is hereby
incorporated by reference in this Form 10-K.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this Item 8 is included under the captions
"Consolidated Statement of Earnings," "Consolidated Balance Sheet,"
"Consolidated Statement of Cash Flows," "Consolidated Statement of
Shareowners' Equity," "Notes to Consolidated Financial Statements," and
"Quarterly Performance (Unaudited)" on page 16 through page 37 of the
Current Report on Form 8-K and "Analysis of Financial Condition and
Operating Results" on page 6 through page 12 of the Current Report on Form
8-K. This information is hereby incorporated by reference in this Form 10-
K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
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<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Board of Directors
The Board of Directors held twelve meetings during 1994, of which
eight were regularly scheduled meetings. Effective March 1, 1994,
directors, other than officers of the Corporation, received $36,000
annually for service on the Board and $1,000 per meeting attended,
including the Annual Meeting of Stockholders of the Corporation. Directors
were also reimbursed for expenses incurred in connection with attendance at
Board and Committee meetings.
Prior to the Combination, the Board had five standing Committees:
Audit and Ethics, Compensation, Executive, Finance, and Nominating.
Directors, other than officers of the Corporation, received $5,400 annually
for each Committee on which they served and $1,000 per Committee meeting
attended (effective March 1, 1994). Directors, other than officers of the
Corporation, who served as Chairmen of Committees received the following
additional compensation: Chairmen of the Audit and Ethics, Compensation,
Executive, and Finance Committees - $4,000 additional compensation per year
and the Chairman of the Nominating Committee - $2,000 additional
compensation per year.
Under the Directors Deferred Compensation Plan, an eligible director
had the option each year of deferring receipt of all or part of the fees
earned as a director until after termination of service as a director. A
director's annual election was irrevocable and interest was accrued on the
amount deferred. Under
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the terms of the plan, effective with the Combination, no further deferral
of amounts earned prior to the Combination is permitted, and each
participating director will receive a disbursement of the balance of his or
her deferred compensation account as of the date of the Combination. The
amount of each director's deferred compensation balance as of January 31,
1995 (including accrued interest) was as follows: Mr. Byrne, $580,000; Mr.
Clark, $561,000; Mr. Colodny, $32,000; Mr. Hood, $130,000; Mr. Laird,
$1,185,000; Mr. Macklin, $224,000; and General Vessey, $372,000.
Prior to the Combination, a $100,000 Life Insurance Plan was available
to directors. Upon consummation of the Combination, the benefit became
fully vested for directors who had served five years. Premiums were paid by
the Corporation.
A Financial Counseling Program which provides reimbursement for tax
and financial planning and tax preparation services is available to
directors, officers, and other key employees of the Corporation. The
Corporation pays a maximum of $6,000 annually per participant.
Non-employee directors are provided, under the Corporation's business
travel accident policy, with $100,000 coverage for death or dismemberment
resulting from an accident while traveling on the Corporation's business.
Martin Marietta previously maintained a Post-Retirement Income
Maintenance Plan for Directors which provided that a director who at the
time of retirement had served five continuous years, or such shorter period
otherwise approved by the Nominating Committee, and
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<PAGE>
who had attained mandatory retirement age would receive for life an annual
fee equal to the annual basic retainer in effect at the time of retirement.
A director who retired early after completing at least five years of
service was entitled to receive an annual fee equal to the annual retainer
in effect at the time of retirement for a period equal to the number of
years served on the Board. Under the terms of the plan, as a result of the
Combination, each director is entitled to receive a lump sum payment equal
to the present value (i.e., discounted value) of his or her vested plan
benefits determined as if he or she had retired from the Martin Marietta
Board on the date of the Combination. Years of service have been rounded
up to the nearest whole year. Thus, as a result of the Combination,
directors who had not attained retirement age as of that date are treated
as if they had retired early and are not eligible to receive a lifetime
retirement benefit. Any active director over the age of 62 with five years
of service who was not nominated to the Lockheed Martin Board will receive
a lump sum amount based on the present value (i.e., discounted value) of
the amounts that would be payable over the longer of the following periods;
(a) the director's life expectancy or (b) years of service as a Martin
Marietta Board member. In determining present value, an after-tax discount
rate will be used. The Plan was also recently amended to provide that (i)
non-continuous service will be aggregated for the purpose of satisfying the
service requirement and (ii) outside directors who were not nominated to
the Lockheed Martin Board will also receive board and committee fees that
would
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<PAGE>
have been paid had the director continued to serve on the Board for the
remaining term of election by Martin Marietta's stockholders. Directors
who have been nominated to the Lockheed Martin Board will receive a lump
sum payment based on the plan provisions prior to these amendments.
In view of the intended operation of the plan in the absence of a
change in control, the Martin Marietta Board determined to value the
benefit for directors eligible to receive a lifetime benefit on the basis
of the cost of an annuity contract issued by an insurance company providing
the same annual payments on an after-tax basis over the expected life of
the director. The cost of such annuity contracts may differ from the cost
of providing lump sum payments; however, the differences in cost are not
material.
The amount payable under the plan to each eligible director is
estimated to be as follows: Mr. Alexander, $236,000; Mr. Augustine,
$291,000; Mr. Byrne, $572,000; Mr. Clark, $377,000; Mr. Colodny, $243,000;
Mr. Everett, $465,000; Mr. Hennessy, $357,000; Mr. Hurtt, $243,000; Mr.
Laird, $427,000; Mr. Murray, $162,000; General Vessey, $428,000; and Mr.
Young, $190,000.
The Directors Charitable Award Plan provided that in the event of the
death of an incumbent director, Martin Marietta would make donations to
charities or other eligible tax-exempt organizations previously recommended
by the director in an aggregate amount of $1 million. Directors were
vested under this plan if (a) they had served for at least five years on
the Martin Marietta Board or (b)
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<PAGE>
their service on the Martin Marietta Board was terminated due to death,
disability or retirement. Under the terms of the plan, upon consummation
of the Combination, incumbent directors with fewer than five years of
service on the Board (Mrs. King and Messrs. Alexander, Bennett, Hood,
Macklin, Murphy and Murray), became vested under this plan. This plan did
not result in any economic benefit to directors.
The Audit and Ethics Committee was composed of directors who were not
employees of the Corporation. Its powers related to accounting and
auditing matters. The Committee recommended the selection and monitored
the independence of independent auditors for the Corporation, reviewed the
scope and timing of their work, reviewed with the Corporation's management
and independent auditors the financial accounting and reporting principles
used by the Corporation, as well as the policies and procedures concerning
audits and accounting and financial controls and any recommendations to
improve existing practices. It reviewed the results of the independent
audit as well as the activities of the corporate internal audit staff. In
addition, the Committee monitored compliance with the Corporation's Code of
Ethics and Standards of Conduct, reviewed and resolved all matters of
concern presented to it by the Corporate Ethics Office, and reviewed and
monitored the adequacy of the Corporation's policies and procedures, as
well as the organizational structure, for ensuring general compliance with
laws and regulations including environmental laws and regulations and the
policies and procedures
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<PAGE>
relating thereto; it reviewed with the Corporation's management significant
litigation and regulatory proceedings in which the Corporation was involved
and reviewed the accounting and financial reporting issues, including the
adequacy of disclosure for all environmental matters. The Audit and Ethics
Committee met three times during 1994.
The Compensation Committee was composed of directors who were not
employees of the Corporation. The Committee reviewed the compensation
policy and established standards of compensation for the Corporation. The
Committee recommended compensation to be paid to elected officers and
approved the compensation for all employees, other than elected officers,
who received a salary of $200,000 or more per year. The Committee approved
employee benefits provided by all special compensation plans, including
pension, insurance, and health plans; and it also served as the Stock
Option Committee. The Compensation Committee met seven times during 1994.
The Executive Committee had the authority to exercise, during the
intervals between the meetings of the Board of Directors, any of the powers
vested in the full Board subject to applicable law. The Executive
Committee did not meet during 1994.
The Finance Committee was authorized to exercise, during the intervals
between the meetings of the Board of Directors, the powers of the Board in
the financial affairs of the Corporation, including responsibilities
related to borrowing arrangements and the investment of the Corporation's
available cash resources. It reviewed changes in the capital structure of
the Corporation and
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<PAGE>
the proposed capital expenditure and contributions budgets. It reviewed
the financial impact of the implementation of employee benefit plans and
reviewed those plans to ensure that they are operated in accordance with
existing legal requirements and sound financial principles. The Finance
Committee met two times during 1994.
The Nominating Committee was composed of directors who were not
employees of the Corporation. It made recommendations to the Board
concerning the composition and compensation of the Board, including its
size and the qualifications for membership. It also recommended nominees
to fill vacancies or new positions on the Board and the Board's nominees
for election by the stockholders at the annual meeting of stockholders.
The Nominating Committee met five times during 1994.
During 1994, all incumbent directors attended at least 75 percent of
Board and Committee meetings. Average attendance at all Board and
Committee meetings was 95 percent.
Executive Officers Of The Registrant
The executive officers of Martin Marietta Corporation for the fiscal
year 1994 and 1995 through the date of the Combination are listed below.
There were no family relationships among any of the executive officers and
directors of the Corporation. All officers served at the pleasure of the
Board of Directors.
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<PAGE>
Principal
Positions and Occupation and
Offices Held Business
Name with Corporation Experience*
(Age at 3/30/95) (Year Elected) (Past Five Years)
---------------- ---------------- -----------------
Norman R. Augustine (59) Chairman of the Board
(1988), Chief
Executive Officer
(1987) and Director
(1986)
A. Thomas Young (56) President and Chief Executive Vice
Operating Officer President, 1989
(1990) and Director
(1989)
Marcus C. Bennett (59) Corporate Vice
President (1984),
Chief Financial
Officer (1988), and
Director (1993)
Peter A. Bracken (53) Corporate Vice President, Martin
President (1992) and Marietta Electronics,
President, Information Information & Missiles,
Group (1993) 1992-1993; Vice
President, Technical
Operations for
Information Systems,
1986-1992
Michael F. Camardo (53) Corporate Vice President, GE
President (1993) and Government Services,
President, Services Inc., 1990-1993;
Group (1993) President, GE
Government Services,
1988-1990
Thomas A. Corcoran (50) Corporate Vice Vice President and
President (1993) and General Manager,
President, Electronics General Electric
Group (1993) Company, 1990-1993;
General Manager, GE
Government
Communications, 1988-
1990
Philip J. Duke (49) Corporate Vice Vice President,
President - Finance Finance, Martin
(1994) Marietta Electronics,
1993-1994; Vice
President, Business
Operations, 1987-1993
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<PAGE>
Clyde C. Hopkins (65) Corporate Vice President, Martin
President (1991) and Marietta Energy
President, Energy Systems, Inc. 1988-1993
Group (1993)
Bobby F. Leonard (62) Corporate Vice
President, Human
Resources (1981)
Janet L. McGregor (41) Treasurer (1992) Deputy Treasurer, 1991-
1992; Assistant
Treasurer, 1984-1991
Frank H. Menaker, Jr. (54) Corporate Vice
President (1982) and
General Counsel (1981)
Peter B. Teets (53) Corporate Vice President, Martin
President (1985) and Marietta Astronautics
President, Space Group Group, 1987-1993
(1993)
Stephen P. Zelnak, Jr. (50) President and Chief Corporate Vice
Executive Officer, President, 1989-1994,
Martin Marietta President, Materials
Materials, Inc. (1994) Group, 1993-1994
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<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
As a result of the Combination, the Corporation became a wholly owned
subsidiary of Lockheed Martin Corporation. Upon consummation of the
Combination each outstanding share of Martin Marietta Common Stock was
converted into the right to receive one share of Lockheed Martin
Corporation Common Stock. Consequently, references to what were
historically the securities of Martin Marietta Corporation, now refer to
the securities of Lockheed Martin Corporation.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term Compensation/(1)/
Annual Compensation Awards
----------------------------------------- ---------------------------
Number
Restricted of Securities
Name and Other Annual Stock(3) Underlying All Other
Principal Position Year Salary Bonus Compensation/(2)/ Awards /(4)/ Options/SARs Compensation/(5)/
------------------ --- ------ ----- ----------------- ------------ ------------ -----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Norman R. Augustine 1994 $930,000 $900,000 $ 35,577 --- 100,000 $ 6,260
Chairman & Chief 1993 830,000 800,000 20,544 1,152,000 100,000 2,275
Executive Officer 1992 796,923 575,000 30,900 --- 60,000 1,750
A. Thomas Young 1994 610,000 575,000 19,849 --- 60,000 11,941
President & Chief 1993 535,000 500,000 32,620 864,000 60,000 10,087
Operating Officer 1992 501,731 375,000 131,193 --- 35,000 1,750
Peter B. Teets 1994 424,231 300,000 11,333 --- 30,000 5,250
Vice President 1993 391,827 250,000 278,410 432,000 20,000 4,859
1992 357,116 200,000 12,372 --- 15,000 1,750
Marcus C. Bennett 1994 410,000 300,000 9,839 --- 28,000 11,334
Vice President & 1993 370,000 250,000 10,116 432,000 18,000 9,321
Chief Financial
Officer 1992 351,923 190,000 13,422 --- 13,500 1,750
Thomas A. Corcoran/(6)/
Vice President 1994 346,336 240,000 281,939 --- 30,000 5,250
1993 220,833 200,000 88,070 526,500 20,000 3,288
1992 --- --- --- --- --- ---
</TABLE>
(1) There were no payouts under the Corporation's long-term incentive plans
(Martin Marietta Corporation Long Term Performance Incentive
Compensation Plan and Amended and Restated Martin Marietta Corporation
Long Term Performance Incentive Compensation Plan) during 1994, 1993 or
1992 to the named executives. During the first quarter of 1995, all
outstanding awards under these plans will be paid out in accordance
with the terms of the plans. Certain of these payments were
accelerated as a result of the Combination.
(2) Amounts reported under the column generally represent amounts
reimbursed for the payment of taxes and financial counseling fees.
Some executive officers of the Corporation received certain personal
benefits from the Corporation. The cost of the personal benefits
furnished to each executive officer, with the exception of Mr. Corcoran
in 1994 and 1993, Mr. Teets in 1993 and Mr. Young in 1992, did not
exceed the lesser of $50,000 or 10 percent of the total annual salary
and bonus of that executive officer as reported in the
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above table. Consistent with the Corporation's policies and
procedures, the amounts reported for Mr. Corcoran in 1994 and 1993
include payments of $141,044 and $86,468, respectively, for relocation.
In addition, the amount reported for Mr. Teets in 1993 includes
payments of $245,187 for relocation. On occasion, the Corporation
determines that it is in its best interest to pay membership fees,
dues, and other expenses related to employee participation in
professional and social organizations. Determinations are made on a
case-by-case basis rather than pursuant to a formal program or plan.
The amount reported for Mr. Young in 1992 includes a one-time
membership fee of $50,000.
(3) Dividends were paid on restricted stock at the same rate as paid to all
stockholders. The market close on December 31, 1994 is the basis for
the following dollar values. On December 31, 1994, Mr. Augustine held
a total of 47,000 restricted shares having a then current value of
$2,085,625; of those shares, 32,000 shares having a value of $1,420,000
vested at the consummation of the Combination. Mr. Young held a total
of 36,000 restricted shares having a then current value of $1,597,500;
of those shares, 24,000 shares having a value of $1,065,000 vested at
the consummation of the Combination. Mr. Teets held a total of 18,000
restricted shares having a then current value of $798,750; of those
shares, 12,000 shares having a value of $532,500 vested at the
consummation of the Combination. Mr. Bennett held a total of 17,000
shares having a then current value of $754,375; of those shares 12,000
shares having a value of $532,500 vested at the consummation of the
Combination. Mr. Corcoran held a total of 12,000 shares having a then
current value of $532,500. All 12,000 shares having a value of
$532,500 vested at the consummation of the Combination. Of the 129,000
restricted shares awarded in 1991, 58,000 shares remain subject to the
terms and conditions of the governing plan documents; 13,000 shares
have been forfeited. Assuming no other forfeitures occur with respect
to 1991 awards, restrictions on the remaining 58,000 shares will lapse
on July 25, 1996. In 1994, restricted stock totalling 5,000 shares was
awarded; restrictions on all 5,000 shares lapsed at the consummation of
the Combination.
(4) Messrs. Augustine, Young, Teets, and Bennett, each of whom was an
executive officer of Martin Marietta and is an executive officer of
Lockheed Martin, borrowed $341,066, $273,971, $102,373, and $114,155,
respectively, from the Corporation in 1994. The loans were used to
satisfy personal income tax obligations associated with the vesting of
restricted stock previously granted to these individuals by the
Corporation. The plan under which such restricted stock was granted
envisions that recipients may satisfy such tax obligations by
instructing the Corporation to withhold the appropriate number of
shares from the certificate delivered to the recipient when the
restricted stock vests. In this instance, as a result of possible
restrictions on sales by the Corporation's executive officers resulting
from the then proposed Combination and later potentially imposed by
Section 16 of the Securities Exchange Act of 1934 and rules relating to
accounting for the Combination as a pooling of interests, counsel for
the Corporation recommended that its executive officers not utilize
this tax withholding feature. As the restrictions on sales resulted
from the Corporation's actions in effecting the proposed Combination,
which is in the best interest of the Corporation, the Corporation
offered short-term loans to such persons to enable them to satisfy
their income tax obligations. The loans and their terms were approved
by disinterested members of the Corporation's Board of Directions. No
interest will be paid on the loans. All loans must be paid within five
(5) days following demand by the Corporation.
(5) Amounts reported under All Other Compensation primarily represent the
Corporation's matching contributions to the Martin Marietta Corporation
Performance Sharing Plan and payments of director life insurance
premiums where applicable.
(6) Mr. Corcoran became an employee of the Corporation on April 2, 1993.
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<PAGE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR/(1)/
Shown below is information on grants of options on Common Stock awarded
pursuant to the Martin Marietta Corporation Amended Omnibus Securities Award
Plan ("Amended Omnibus Plan")/(2)/ to the named executives.
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Annual Rates of Stock
Price Appreciation For
Individual Grants Option Term /(1)/
- ----------------------------------------------------------------- ---------------------
Number of % of Total
Securities Options/SARs
Underlying Granted to Exercise or
Options/SARs Employees Base Price Expiration
Name Granted in 1994 Per Share Date 5% 10%
- ---- ------------ ----------- ---------- ---------- -- ---
<S> <C> <C> <C> <C> <C> <C>
Norman R. Augustine 100,000 7.4% $44.875 7/27/04 $2,822,165 $7,151,919
A. Thomas Young 60,000 4.4% 44.875 7/27/04 1,693,299 4,291,152
Peter B. Teets 30,000 2.2% 44.875 7/27/04 846,649 2,145,576
Marcus C. Bennett 28,000 2.1% 44.875 7/27/04 790,206 2,002,537
Thomas A. Corcoran 30,000 2.2% 44.875 7/27/04 846,649 2,145,576
</TABLE>
(1) No SARs were granted in the last fiscal year.
(2) Awards were granted at the discretion of a disinterested committee, the
Compensation Committee, of the Board of Directors upon the
recommendation of management and were awarded based on past performance
or as incentive for future performance. Each award under this Plan was
evidenced by an award agreement setting forth the number and type of
stock-based awards subject to the terms and conditions applicable to the
award as determined by the Compensation Committee. Under the 1994 award
agreements issued pursuant to the Amended Omnibus Plan, options vest and
become exercisable in three approximately equal increments in multiples
of 100 shares on the first, second, and third anniversary dates of the
grant. Options awarded in 1994 expire three months following
termination of employment, except in instances following death,
disability or retirement. In the event of death, all outstanding
options vest immediately and will expire one year following the date of
death. In instances of disability or normal retirement, and in many
cases of early retirement, the award agreement states that the terms of
all outstanding options will be unaffected by such retirement or
disability.
(3) The dollar amounts set forth in these columns are the result of
calculations at the 5 percent and 10 percent rates set by the Securities
and Exchange Commission and, therefore, are not intended to forecast
possible future appreciation, if any, of the Corporation's Common Stock
price.
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<PAGE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES(1)
Shown below is information relating to the exercise of options on Common
Stock and stock appreciation rights (SARs) during the last completed fiscal
year and the fiscal year-end value of unexercised options of Common Stock
and SARs for the named executives.
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised In-the-Money
Options/SARs at Fiscal Year End Options/SARs at Fiscal Year End
------------------------------- ---------------------------------
Shares
Acquired Value
Name on Exercise Realized/(2)/ Exercisable Unexercisable/(3)/ Exercisable Unexercisable/(3)/
---- ----------- ------------- ----------- ------------------ ------------ -------------------
<S> <C> <C> <C> <C> <C> <C>
Norman R. Augustine 0 $ 0 280,000 206,800 $4,412,532 $1,012,200
A. Thomas Young 57,800 1,098,315 58,200 123,400 724,006 595,825
Peter B. Teets 20,800 428,946 20,600 53,400 268,915 239,850
Marcus C. Bennett 17,000 365,996 22,200 49,000 295,443 215,625
Thomas A. Corcoran 0 0 6,600 43,400 26,400 53,600
</TABLE>
(1) Includes shares that vested upon consummation of the Combination.
(2) Includes value realized from exercise of options of Common Stock and SARs.
(3) Of the shares shown as unexercisable as of December 31, 1994, the following
amounts vested and became exercisable as a result of the Combination: Mr.
Augustine, 106,800 shares valued at $1,012,200; Mr. Young, 63,400 shares
valued at $595,825; Mr. Teets, 23,400 shares valued at $239,850; Mr.
Bennett, 21,000 shares valued at $215,625; and Mr. Corcoran, 13,400 shares
valued at $53,600. Prior to the Combination, Mr. Augustine informed Martin
Marietta's Board of Directors that he intends to voluntarily refrain from
exercising options pertaining to 106,800 shares which vested on an
accelerated basis as a result of the Combination.
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<PAGE>
LONG-TERM INCENTIVE PLANS - AWARDS IN LAST FISCAL YEAR
The following table sets forth the awards under the Amended and Restated
Martin Marietta Corporation Long Term Performance Incentive Compensation Plan to
the named executives.
<TABLE>
<CAPTION>
Performance Estimated Future Payouts
Number of or Other Period Under Non-Stock Price-Based Plans
Shares, Units or Until Maturation -------------------------------------
Name Other Rights/(1)/ Payout/(1)/ Threshold Target/(2)/ Maximum
---- ----------------- ---------------- --------- ------ -------
<S> <C> <C> <C> <C> <C>
Norman R. Augustine 100,000 12/31/96 N/A N/A N/A
A. Thomas Young 60,000 12/31/96 N/A N/A N/A
Peter B. Teets 30,000 12/31/96 N/A N/A N/A
Marcus C. Bennett 28,000 12/31/96 N/A N/A N/A
Thomas A. Corcoran 30,000 12/31/96 N/A N/A N/A
</TABLE>
(1) If the Combination had not occurred, each of the awards made under the
Amended and Restated Martin Marietta Corporation Long Term Performance
Incentive Compensation Plan ("Plan") would have vested on December 31,
1996. Vested units would have been exchanged for an amount of cash
calculated under a formula which requires that a base amount
(established by the Compensation Committee at the time of grant) be
subtracted from earnings per share for the year ending December 31,
1996 and the resulting difference, if a positive number, be multiplied
by a factor (also established by the Compensation Committee at the time
of grant). The resulting value would then have been multiplied by the
number of units held to establish the cash payout. The Plan provides
that in the event of a change in control the cash payout for each unit
is determined by the Compensation committee. The Committee determined
that as a result of the Combination with Lockheed, the value of units
awarded in 1994 would be based on an estimate of 1996 EPS, discounted
to March 1995. It is estimated that this will result in each unit
awarded in 1994 being valued at $7.71.
(2) As a result of the consummation of the Combination, no further
performance units will be awarded under the Amended and Restated Long
Term Incentive Compensation Plan. In addition, since all outstanding
units awarded under the plan vested in their entirety and became
payable upon consummation of the Combination, no awards will be deemed
to be outstanding for purposes of the Reorganization Agreement.
The Corporation has two additional plans which covered executives who
occupied key positions: the Deferred Compensation and Estate Supplement
Plan and the Post-Retirement Death Benefit Plan for Senior Executives.
Under the Deferred Compensation and Estate Supplement Plan, officers and
senior executive personnel were eligible to receive a benefit after
retirement. Benefit levels were determined by a schedule approved by the
Martin Marietta Board and depended on the position of the executive and
years of plan participation. Each participant received a percentage of the
total scheduled benefit payable based on age at retirement, payable over
ten years commencing at retirement (or, to
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<PAGE>
a participant's estate, if a participant died while an active employee).
Upon consummation of the Combination, benefits under the plan became
payable in an amount equal to the present value of the earned benefit
determined as follows: (a) the total scheduled benefit was discounted to
present value and, (b) each participant was, on the date of the
Combination, entitled to receive a percent (determined by the number of
full years up to ten years, rounded up to the nearest whole year, of plan
participation, and ranging from 20% to 100%) of the amount determined by
such present value calculation. As a result of the Combination, benefits
paid under the plan to approximately 20 employee participants would be
approximately $8,200,000, including the following amounts payable to
executive officers: Mr. Augustine, $1,064,000; Mr. Young, $801,000; Mr.
Teets, $561,000; Mr. Bennett, $728,000; and Mr. Corcoran, $0 and other
executive officers, $1,704,000.
The Post-Retirement Death Benefit Plan was a death benefit program for
senior executives who hold specific positions approved for participation by
the Board of Directors. The plan provided death benefit coverage
commencing immediately upon retirement in amounts ranging from 15 percent
(upon retirement at age 55) to 150 percent (upon retirement at or after age
64) of final annualized salary, depending upon the age of the participant
at retirement. Benefits were grossed up for income tax purposes. This
plan has been discontinued as a result of the Combination. In lieu
thereof, a death benefit will be paid calculated based on the applicable
percentage (determined by age at retirement) and annualized salary
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<PAGE>
at the time of consummation of the Combination. If each participant could
retire on March 1, 1995 and the applicable percentage is assumed to be 100%
for each participant (which is assumed solely for purposes of this
calculation), the death benefits payable to such persons would be
approximately $6,400,000 in the aggregate.
Under the Martin Marietta Corporation Deferred Compensation Plan for
Selected Officers, benefits paid as a result of the Combination under the
Martin Marietta Corporation Amended and Restated Long Term Performance
Incentive Compensation Plan and the Deferred Compensation and Estate
Supplement Plan will be deferred for any individual who may be one of the
five most highly compensated executive officers of Lockheed Martin
Corporation. Amounts deferred (plus interest credited at a daily rate
equivalent to the Federal long-term rate) will be paid in a single sum as
of February 1 following the year in which the individual ceases to be an
officer of Lockheed Martin Corporation, or if earlier, the year in which
the amount could be deducted for federal income tax purposes.
The Martin Marietta Corporation Performance Sharing Plan ("Performance
Plan") generally covers all full-time salaried employees of the Corporation
with the exception of certain employees working at facilities operated by
the Corporation for the Department of Energy who participate in separate
401(k) plans. The Performance Plan permits eligible employees to make
regular savings through systematic payroll deductions. For the year ended
December 31, 1994, participants could contribute up to 17 percent of their
current base salary subject to the limitations imposed by the Internal
Revenue Code and direct the investment of such contributions into an
Indexed Equity Fund, a Fixed Income Fund, a fund which consisted of the
Corporation's Common Stock and is now comprised of Lockheed Martin Common
Stock, an Intermediate-Term Investment Grade Bond Fund, and a Long-Term
Investment Grade Bond Fund. Executive officers of the Corporation were
limited in 1994 to directing the investment of contributions among the
Indexed Equity Fund, the Fixed Income Fund, the Intermediate-Term
Investment Grade Bond Fund, and the Long-Term Investment Grade Bond Fund.
Effective April 3, 1995, five publicly traded mutual funds will be made
available to all participants as investment options. In addition,
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<PAGE>
the Corporation makes a matching contribution to the participant's account
equal to 50% of up to the first 7 percent of the compensation contributed
by the participant subject to limitations imposed by the Internal Revenue
Code. Performance Plan contributions are 100 percent vested.
Full distributions under the Performance Plan are generally made upon
the termination, layoff, retirement, disability or death of the
participant. Distributions of account balances invested in Martin Marietta
Corporation Common Stock (or Lockheed Martin Common Stock after the
Combination) are automatically distributed in kind unless a recipient
requests otherwise.
Set forth below is a pension plan table which shows the estimated annual
benefits payable upon retirement for specified earnings and years of
service under the Martin Marietta Retirement Income Plan for Salaried
Employees ("Plan"), which is the basic plan covering the named executive
officers of the Corporation on a non-contributing basis.
<TABLE>
<CAPTION>
PENSION PLAN TABLE/(1)/
Final Years of Service
Average --------------------------------------------------------
Earnings
-------- 15/(2)/ 20/(3)/ 25/(3)/ 30/(3)/ 40/(3)/
<S> <C> <C> <C> <C> <C>
$ 100,000 $ 21,198 $ 41,720 $ 46,935 $ 52,150 $ 57,757
150,000 32,448 63,720 71,685 79,650 88,007
200,000 43,698 85,720 96,435 107,150 118,257
300,000 66,198 129,720 145,935 162,150 178,757
400,000 88,698 173,720 195,435 217,150 239,257
500,000 111,198 217,720 244,935 272,150 299,757
600,000 133,698 261,720 294,435 327,150 360,257
700,000 156,198 305,720 343,935 382,150 420,757
800,000 178,698 349,720 393,435 437,150 481,257
900,000 201,198 393,720 442,935 492,150 541,757
1,000,000 223,698 437,720 492,435 547,150 602,257
1,200,000 268,698 525,720 591,435 657,150 723,257
</TABLE>
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<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
1,400,000 313,698 613,720 690,435 767,150 844,257
1,600,000 358,698 701,720 789,435 877,150 965,257
1,800,000 403,698 789,720 888,435 987,150 1,086,257
2,000,000 448,698 877,720 987,435 1,097,150 1,207,257
2,200,000 493,698 956,720 1,086,435 1,207,150 1,328,257
</TABLE>
(1) Calculated based on a formula in effect on January 1, 1995.
(2) Calculated under the Post-ERISA formula.
(3) Calculated under the Pre-ERISA formula.
Compensation covered by the Plan generally includes, but is not limited
to, base salary, bonuses (executive incentive compensation awards), and
overtime. The normal retirement age under the Plan is 65; however,
unreduced early retirement benefits are available at age 60 (age 62 prior
to 1995) and reduced benefits are available as early as age 55. The
calculation of retirement benefits under the Plan is generally based upon
an annual accrual rate, average compensation for the highest three years
(five years prior to 1995) of the ten years preceding retirement, and the
number of years of service. Maximum benefits payable under this Plan are
subject to the current Internal Revenue Code limitations. The amounts
listed in this table are not subject to any deduction for Social Security
benefits or other offset amounts.
When the Plan was amended to comply with the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), a modified version of the
existing benefit accrual formula was preserved for certain employees who
were participants in the Plan prior to October 1, 1975 ("Pre-ERISA
Formula"). Employees who became participants after that date accrue
benefits under a different formula ("Post-ERISA Formula"). In January
1991, the Plan was amended to provide that future accruals for all highly
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<PAGE>
compensated employees would be based on the Post-ERISA Formula. If as a
result of the amendment, an employee receives less from the Plan than would
have been otherwise received under the Pre-ERISA Formula, the Corporation
intends to make up the difference out of general corporate assets.
As of December 31, 1994, the estimated annual benefits payable upon
retirement at age 65 for the individuals named in the compensation table,
based on continued employment at current compensation, are as follows: Mr.
Augustine, $874,045; Mr. Young, $533,977; Mr. Teets, $487,038; Mr. Bennett,
$448,160; Mr. Corcoran, $367,448. These amounts include benefits payable
under the Corporation's Supplemental Excess Retirement Plan. The years of
credited service as of December 31, 1994, for Messrs. Augustine, Young,
Teets, Bennett, and Corcoran were 18 years, 12.8 years, 32.1 years, 36
years, and 27.5 years, respectively.
Sections 401(a)(17) and 415(d) of the Internal Revenue Code of 1986, as
amended, limit the annual benefits which may be paid under the Plan. As
permitted by ERISA, the Corporation maintains the Supplemental Excess
Retirement Plan which provides for the payment of benefits in excess of
those limits and payment of amounts equalizing the differences in the
accrual method for those certain employees who were not participants in the
Plan prior to October 1, 1975.
The Corporation has entered into employment agreements with certain of
its officers, including the named executive officers, in order to provide
continuity of management in the event of a change
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<PAGE>
of control. Under these agreements, following a change of control, which
was deemed to have occurred as a result of the Combination, an officer may,
for good cause (as that term is defined in the various agreements) and
within two years after the effective date of the Combination and within six
months after the date on which circumstances constituting good cause exist,
give notice that he or she elects to terminate employment under the
agreement. Upon receipt of such notice, or upon involuntary termination by
Martin Marietta, the agreements require Martin Marietta to pay the officer
an amount equal to three times his or her average annual taxable
compensation for the preceding five years, less one dollar, as well as any
other compensation or benefits due and any amount necessary to compensate
the officer for any excise tax imposed with respect to payments made under
the agreement or any other agreement between the officer and Martin
Marietta. Mr. Augustine has voluntarily waived his rights under his
employment agreement as it relates to the Combination.
The Corporation also assumed employment agreements for certain
individuals who transferred from GE. Those agreements generally provide
for a two year term of employment at the same (or greater) annual base
salary and bonus as the executive was receiving prior to the transfer of
employment. In the event the executive is still an employee of the
Corporation on April 2, 1995, a bonus is to be paid to the executive equal
to the amount of his or her then base salary and annual bonus. In the
event the executive is terminated prior to April 2, 1996, the agreement
states the executive will be
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offered a position by GE comparable in position, level, and compensation to
the position he or she held prior to the transfer, or if GE is unable to
provide such a position, GE will pay the executive a sum equal to his then
current base salary and annual bonus.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As a result of the Combination, the Corporation became a wholly owned
subsidiary of Lockheed Martin Corporation. Upon consummation of the
Combination each outstanding share of Martin Marietta Common Stock was
converted into the right to receive one share of Lockheed Martin
Corporation Common Stock. Consequently, references to what were
historically the securities of Martin Marietta Corporation, now refer to
the securities of Lockheed Martin Corporation.
Securities Owned by Management
The following table shows the number of shares of Common Stock
beneficially owned by each of the directors, the Chief Executive Officer,
and the four most highly compensated executive officers and by all
directors and executive officers as a group on December 31, 1994. The
number of shares shown for each director and each of the named executive
officers represented less than 1 percent of the shares of Common Stock
outstanding. The number of shares shown for all executive officers and
directors as a group represented 1.3 percent of the Common Stock of Martin
Marietta outstanding.
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<PAGE>
Individuals have sole voting and investment power over the stock unless
otherwise indicated in the footnotes.
<TABLE>
<CAPTION>
Name of Individual or Amount and Nature of
Identity of Group Beneficial Ownership
- ----------------- --------------------
<S> <C>
Lamar Alexander........................................... 100
Norman R. Augustine....................................... 429,380 /(1)(8)/
Marcus C. Bennett......................................... 67,529 /(2)(8)/
John J. Byrne............................................. 6,750
A. James Clark............................................ 21,612
Edwin I. Colodny.......................................... 2,000
Thomas A. Corcoran........................................ 32,000 /(3)/
James L. Everett, III..................................... 6,750 /(4)/
Edward L. Hennessy, Jr.................................... 2,224
Edward E. Hood, Jr........................................ 2,000
Caleb B. Hurtt............................................ 4,336
Gwendolyn S. King......................................... 200
Melvin R. Laird........................................... 69,100 /(5)/
Gordon S. Macklin......................................... 2,000
Eugene F. Murphy.......................................... 200
Allen E. Murray........................................... 3,000
Peter B. Teets............................................ 74,833 /(6)(8)/
John W. Vessey, Jr........................................ 400
A. Thomas Young........................................... 181,829 /(7)(8)/
All executive officers and directors as a group (26
individuals including those named above)............. 1,202,315 /(8)(9)/
</TABLE>
(1) Includes 47,000 shares awarded to Mr. Augustine under the Corporation's
restricted stock award plans. Of these shares, 15,000 shares will
remain subject to the terms and conditions described in the governing
plan documents. The remaining 32,000 shares vested upon the closing of
the Combination. Also includes 326,800 shares which are subject to
presently exercisable options. Prior to the closing of the
Combination, Mr. Augustine informed Martin Marietta's Board of
Directors that he intends to voluntarily refrain from exercising
options pertaining to 106,800 shares which vested on an accelerated
basis as a result of the Combination prior to the date the options
would have been exercisable had the Combination not been consummated.
(2) Includes 17,000 shares awarded to Mr. Bennett under the Corporation's
restricted stock award plans. Of these shares, 5,000 shares will
remain subject to the terms and conditions described in the governing
plan documents. The remaining 12,000 shares vested upon closing of the
Combination. Also includes 40,800 shares which are subject to
presently exercisable options.
(3) Includes 12,000 shares awarded to Mr. Corcoran under the Corporation's
restricted stock award plans which vested upon closing of the
Combination. Also includes 20,000 shares which are subject to
presently exercisable options.
(4) Shared voting and investment power.
(5) Includes approximately 66,100 shares held by Metropolitan Life
Insurance Company and its subsidiaries. Mr. Laird specifically
disclaims ownership of these shares.
(6) Includes 18,000 shares awarded to Mr. Teets under the Corporation's
restricted stock award plans. Of these shares, 6,000 shares will
remain subject to the terms and conditions described in the governing
plan documents. The remaining 12,000 shares vested upon closing of the
Combination. Also includes 42,000 shares which are subject to
presently exercisable options.
(7) Includes 36,000 shares awarded to Mr. Young under the Corporation's
restricted stock award plans. Of these shares, 12,000 shares will
remain subject to the terms and conditions described in the governing
plan documents. The remaining 24,000 shares vested upon closing of the
Combination. Also includes 114,200 shares which are subject to
presently exercisable options.
(8) From 1989 through 1992, and for a portion of 1993, the Corporation made
matching contributions to participants' accounts in the Martin Marietta
Corporation Performance Sharing Plan in Common Stock. Where
appropriate, the shares shown include an approximation of the number of
shares in the participant's account as of December 31, 1994. Executive
officers do not have investment power over these shares.
(9) Includes 792,100 shares of Common Stock which are subject to presently
exercisable options and 41,500 shares awarded under the Corporation's
restricted stock award plans which are subject to the terms and
conditions described in the governing plan documents.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Pursuant to the terms of the Standstill Agreement entered into by the
Corporation and General Electric Company ("GE") as part of the transaction
in which the Aerospace businesses of GE and the
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<PAGE>
businesses of the Corporation were combined (the "GE Transaction"), until
the consummation of the Combination, GE was entitled to representation upon
Martin Marietta's Board of Directors. See "General" page 1 through page 2.
Messrs. Edward E. Hood, Jr., retired Vice Chairman and a former director of
GE, and Eugene F. Murphy, President and Chief Executive Officer of GE
Aircraft Engines, served as GE's representatives on Martin Marietta's Board
of Directors.
As part of the Combination, Martin Marietta, Lockheed and GE entered
into an agreement, described in detail in the Registration Statement on
Form S-4 of Lockheed Martin Corporation (Reg. No. 33-57645), which, among
other things, modified the Standstill Agreement to anticipate the fact
that, in the Combination the Martin Marietta Series A Preferred Stock held
by GE would be converted to Lockheed Martin Series A Preferred Stock. The
Standstill Agreement was also modified so as to make it applicable to the
ongoing relationship between GE and Lockheed Martin in generally the same
manner as it had been applicable to the relationship between GE and the
Corporation. Consequently, GE is entitled to representation on the
Lockheed Martin Board of Directors and Messrs. Hood and Murphy currently
serve on the Lockheed Martin Board of Directors in this capacity. The
Standstill Agreement resulted from arm's-length negotiations between the
Corporation and GE.
A portion of the consideration received by GE in the GE Transaction
consisted of 20 million shares of Martin Marietta's
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<PAGE>
Series A Preferred Stock, par value $1.00 per share, which, until the
consummation of the Combination, was convertible into Martin Marietta
Common Stock and which, if converted, would have represented approximately
23% of the shares of Common Stock outstanding after giving effect to such
conversion. In the Combination each outstanding share of Martin Marietta
Series A Preferred Stock, all of which were held by GE, was converted into
the right to receive one share of Lockheed Martin Series A Preferred Stock.
The terms of the Lockheed Martin Series A Preferred Stock are substantially
the same as those of the Martin Marietta Series A Preferred Stock. The
Lockheed Martin Series A Preferred Stock is convertible into shares of
Lockheed Martin Common Stock and, if converted, would represent
approximately 13% of the Lockheed Martin Common Stock outstanding after
giving effect to the conversion.
Further, there are existing business relationships between the
Corporation and GE. These relationships are the product of arm's-length
negotiations between the corporations.
John J. Byrne, a director of Martin Marietta since 1978, is the Chief
Executive Officer of Fund American Enterprises, Inc. (Fund American).
Hanover Advisors, Inc., formerly a wholly-owned subsidiary of Fund
American, served as an investment manager for the Corporation's Master
Retirement Trust through August 1994. Pursuant to the arrangement, Hanover
Advisors receives management fees from the Corporation which aggregated
approximately $517,000 in 1994. These engagements resulted from arm's-
length negotiations
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<PAGE>
in which Mr. Byrne played no part. Mr. Byrne is not serving as a director
of Lockheed Martin.
Messrs. Richard G. Adamson, Marcus C. Bennett, Bobby F. Leonard and
Frank H. Menaker, Jr., serve as Directors (Mr. Bennett as Chairman) of
Martin Marietta Materials, Inc. See "Materials Group" on page 10 through
page 12. Following the consummation of the Combination, these individuals
continue to serve as directors (Mr. Bennett as Chairman) of Materials.
During 1994, Mr. Adamson was an Executive Officer of Martin Marietta,
Messrs. Bennett, Leonard and Menaker were Executive Officers of Martin
Marietta during 1994 and continued in this capacity until the consummation
of the Combination. Upon consummation of the Combination, Messrs. Bennett
and Menaker became Executive Officers of Lockheed Martin.
Messrs. Norman R. Augustine, Marcus C. Bennett, Peter B. Teets and A.
Thomas Young, each of whom was, until the consummation of the Combination,
an Executive Officer of Martin Marietta, and each of whom became, upon
consummation of the Combination, an Executive Officer of Lockheed Martin
borrowed $341,066, $114,155, $102,373 and $273,971, respectively, from the
Corporation in 1994. The loans were used to satisfy personal income tax
obligations associated with the vesting of restricted stock previously
granted to these individuals by the Corporation. The plan under which such
restricted stock was granted envisions that recipients may satisfy such tax
obligations by instructing the Corporation to withhold the appropriate
number of shares from the certificate delivered to the recipient when the
restricted stock vests. In this instance, as a
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result of possible restrictions on sales by the Corporation's Executive
Officers imposed by Section 16 of the Securities Exchange Act of 1934, by
prohibitions against conducting transactions while in possession of
material non public information and by the Corporation's desire that the
Combination qualify as a pooling of interests for accounting and financial
reporting purposes, in each instance resulting from the Combination,
counsel for the Corporation recommended that its Executive Officers not
utilize this tax withholding feature. As the restrictions on sale resulted
from the Corporation's actions in effecting the Combination which was in
the best interest of the Corporation, the Corporation offered short-term
loans to such persons to enable them to satisfy their income tax
obligations. The loans and their terms were approved by disinterested
members of the Corporation's Board of Directors. No interest will be paid
on the loans which will be due and payable at such time as counsel for the
Corporation advises the Corporation that the possible restrictions on sales
referred to above are no longer applicable. See Footnote Number 4 to the
Summary Compensation Table included in Item 11 - "Executive Compensation"
on page 52.
Mr. Alexander, a director of the Corporation, is counsel to Baker,
Donelson, Bearman and Caldwell, a law firm that provides legal services to
the corporation from time to time. Mr. Alexander is not serving as a
director of Lockheed Martin. Mr. Colodny, a director of the Corporation,
is Of Counsel to Paul, Hastings, Janofsky & Walker, a law firm that
provides legal services to the
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<PAGE>
Corporation from time to time. Mr. Colodny is serving as a director of
Lockheed Martin.
In addition, certain Executive Officers of Lockheed Martin serve as
officers of the Corporation. For additional information relating to the
relationship of Martin Marietta Corporation's directors and executive
officers to those of Lockheed Martin, please see Items 10 and 11 on page 43
through page 62.
As a result of the Combination, Martin Marietta is now a wholly owned
subsidiary of Lockheed Martin Corporation. The following directors of
Martin Marietta are serving as directors of Lockheed Martin: Messrs.
Augustine, Bennett, Clark, Colodny, Everett, Hennessy, Hood, Hurtt,
Macklin, Murphy, and Murray and Mrs. King. It is anticipated that,
following the filing of this Annual Report on Form 10-K, the existing
Martin Marietta directors will resign and will be replaced by a Board of
Directors consisting of employees of Lockheed Martin or the Corporation.
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<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)(1) List of Financial Statements filed as part of the Form 10-K.
Page
----
The following financial statements of Martin Marietta
Corporation and consolidated subsidiaries, included in
the Current Report on Form 8-K, are incorporated by
reference into Item 8 on page 42 of this Annual Report
on Form 10-K. Page numbers refer to the Current Report
on Form 8-K:
Consolidated Balance Sheet--
December 31, 1994 and 1993 17
Consolidated Statement of Earnings--
Years ended December 31, 1994, 1993 and 1992 16
Consolidated Statement of Shareowners' Equity--
Years ended December 31, 1994, 1993 and 1992 19
Consolidated Statement of Cash Flows--
Years ended December 31, 1994, 1993 and 1992 18
Notes to Consolidated Financial Statements--
Years ended December 31, 1994, 1993 and 1992 20-36
(2) List of Financial Statement Schedules filed as part
of this Form 10-K.
All schedules have been omitted because they are not applicable,
not required, or the information has been otherwise supplied in
the financial statements or notes to the financial statements.
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<PAGE>
Ernst & Young LLP
The report of Martin Marietta's independent auditors with respect
to the above-referenced financial statements appears on page 15
of the Current Report on Form 8-K and that report is hereby
incorporated by reference in this Form 10-K. The consent of
Martin Marietta's independent auditors appears on page 81.
KPMG Peat Marwick LLP
The report of the former GE Aerospace businesses' independent
auditors with respect to the GE Aerospace businesses'
consolidated statements of earnings and cash flows for the year
ended December 31, 1992, included in Parent Corporation's
Registration Statement on Form S-4 (Registration No. 33-58494),
which report is hereby incorporated by reference in this Form
10-K. The consent of the former GE Aerospace businesses'
independent auditors appears on page 82.
Arthur Andersen LLP
The report of the former General Dynamics Space Systems Group's
independent auditors with respect to the General Dynamics Space
Systems Group's combined financial statements as of December 31,
1993 and 1992 and for each of the three years in the period ended
December 31, 1993, included in Martin Marietta Corporation's
Current Report on Form 8-K, dated May 13, 1994, which report is
hereby incorporated by reference. The consent of the former
General Dynamics, Space Systems Group's independent auditors
appears on page 83.
(b) No reports on Form 8-K were filed during the last quarter of the
period covered by this report. During the first quarter of 1995,
Martin Marietta Corporation made the following filings on Form
8-K:
(1) Martin Marietta Corporation Current Report on Form 8-K filed
with the Securities and Exchange Commission on February 13,
1995;
(2) Martin Marietta Corporation Current Report on Form 8-K filed
with the Securities and Exchange Commission on February 17,
1995; and
(3) Martin Marietta Corporation Current Report on Form 8-K filed
with the Securities and Exchange Commission on March 15,
1995.
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<PAGE>
(c) Exhibits
(2) Plan of Acquisition, Reorganization, Arrangement,
Liquidation or Succession.
(a) Agreement and Plan of Reorganization dated August
29, 1994, as amended on February 7, 1995
(incorporated by reference to the Corporation's
Joint Proxy Statement/Prospectus contained in
Lockheed Martin Corporation's Registration
Statement on Form S-4 (No. 33-57645) filed with
the Commission on February 9, 1995).
(3)(i) Articles of Incorporation.
(a) Articles of Restatement of Martin Marietta
Corporation (formerly Parent Corporation) filed
with the State Department of Assessments and
Taxation of the State of Maryland on June 30, 1993
(incorporated by reference to Exhibit (c)(3)(i)(a)
to the Corporation's Annual Report on Form 10-K
for the fiscal year ended December 31, 1993).
(ii) Bylaws
(a) Copy of the Bylaws of Parent Corporation (now
Martin Marietta Corporation) as amended on January
13, 1993, effective April 2, 1993 (incorporated by
reference to Exhibit (c)(3)(ii)(a) to the
Corporation's Annual Report on Form 10-K for the
fiscal year ended December 31, 1993).
(4) (a) Indenture dated April 22, 1993, between the
Corporation, Technologies, and Continental Bank,
National Association as Trustee (incorporated by
reference to Exhibit 4 of the Corporation's filing
on Form 8-K on April 15, 1993).
No other instruments defining the rights of
holders of long-term debt are filed since the
total amount of securities authorized under any
such instrument does not exceed 10% of the total
assets of the Corporation on a consolidated basis.
The Corporation agrees to furnish a copy of
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<PAGE>
such instruments to the Securities and Exchange
Commission upon request.
(10)(iii)* (a) Martin Marietta Corporation Directors Deferred
Compensation Plan, as amended.
(b) Martin Marietta Corporation Post-Retirement Income
Maintenance Plan for Directors, as amended.
(c) Martin Marietta Corporation Financial Counseling
Program for directors, officers, company
presidents, and other key employees, as amended
(incorporated by reference to Exhibit 10.6 to
Lockheed Martin Corporation's Registration
Statement on Form S-4 (No. 33-57645) filed with
Commission on February 9, 1995).
(d) Martin Marietta Corporation Executive Incentive
Plan, as amended (incorporated by reference to
Exhibit 10.7 to Lockheed Martin Corporation's
Registration Statement on Form S-4 (No. 33-57645)
filed with Commission on February 9, 1995).
(e) Deferred Compensation and Estate Supplement Plan,
as amended.
(f) Martin Marietta Corporation Post-Retirement Death
Benefit Plan for Senior Executives, as amended
(incorporated by reference to Exhibit 10.9 to
Lockheed Martin Corporation's Registration
Statement on Form S-4 (No. 33-57645) filed with
Commission on February 9, 1995).
(g) Martin Marietta Corporation 1979 Stock Option Plan
for Key Employees, as amended (incorporated by
reference to Exhibit 10.11 to Lockheed Martin
Corporation's Registration Statement on Form S-4
(No. 33-57645) filed with Commission on February
9, 1995).
(h) Martin Marietta Corporation 1984 Stock Option Plan
for Key Employees, as amended (incorporated by
reference to Exhibit 10.12 to Lockheed Martin
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<PAGE>
Corporation's Registration Statement on Form S-4
(No. 33-57645) filed with Commission on February
9, 1995).
(i) Martin Marietta Corporation Amended Omnibus
Securities Award Plan, as amended March 25, 1993
(incorporated by reference to Exhibit 10.13 to
Lockheed Martin Corporation's Registration
Statement on Form S-4 (No. 33-57645) filed with
Commission on February 9, 1995).
(j) Format of the agreements between the Corporation
and certain officers to provide for continuity of
management in the event of a change in control of
the Corporation (incorporated by reference to
Exhibit 10.14 to Lockheed Martin Corporation's
Registration Statement on Form S-4 (No. 33-57645)
filed with Commission on February 9, 1995).
(k) Martin Marietta Corporation Supplemental Excess
Retirement Plan, as amended (incorporated by
reference to Exhibit 10.15 to Lockheed Martin
Corporation's Registration Statement on Form S-4
(No. 33-57645) filed with Commission on February
9, 1995).
(l) Martin Marietta Corporation Restricted Stock Award
Plan, as amended (incorporated by reference to
Exhibit 10.16 to Lockheed Martin Corporation's
Registration Statement on Form S-4 (No. 33-57645)
filed with Commission on February 9, 1995).
(m) Martin Marietta Corporation Long Term Performance
Incentive Compensation Plan.
(n) Amended and Restated Martin Marietta Corporation
Long-Term Performance Incentive Compensation Plan.
(o) Martin Marietta Corporation Directors' Life
Insurance Program (incorporated by reference to
Exhibit 10.17 to Lockheed Martin Corporation's
Registration Statement on Form S-4 (No. 33-57645)
filed with Commission on February 9, 1995).
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<PAGE>
(p) (1) Transaction Agreement dated November 22,
1992, among General Electric Company,
Technologies and the Corporation
(incorporated by reference from Parent
Corporation's Registration Statement
on Form S-4 (Registration No. 33-58494)
filed with the SEC on February 18, 1993).
(2) Form of Amendment Agreement, dated as of
February 17, 1993, among General Electric
Company, Technologies and the Corporation
(incorporated by reference from Parent
Corporation's Registration Statement on Form
S-4 (Registration No. 33-58494) filed with
the SEC on February 18, 1993).
(3) Form of Amendment Agreement, dated as of
March 28, 1993, among General Electric
Company, Technologies and the Corporation
(incorporated by reference from Parent
Corporation's Registration Statement on Form
S-4 (Registration No. 33-58494) filed with
the SEC on February 18, 1993).
(q) Martin Marietta Corporation Executive Special
Early Retirement Option and Plant Closing
Retirement Option Plan (incorporated by reference
to Exhibit 10.18 to Lockheed Martin Corporation's
Registration Statement on Form S-4 (No. 33-57645)
filed with Commission on February 9, 1995).
(r) Martin Marietta Supplementary Pension Plan for
Employees of Transferred GE Operations
(incorporated by reference to Exhibit 10.19 to
Lockheed Martin Corporation's Registration
Statement on Form S-4 (No. 33-57645) filed with
Commission on February 9, 1995).
(s) Form of Employment Agreement between Martin
Marietta Corporation and certain officers
(incorporated by reference to Exhibit 10.20 to
Lockheed Martin Corporation's Registration
Statement on Form S-4 (No. 33-57645) filed with
the Commission on February 9, 1995).
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(t) Martin Marietta Corporation Deferred Compensation
Plan for Selected Officers (incorporated by
reference to Exhibit 10.10 to Lockheed Martin
Corporation's Registration Statement on Form S-4
(No. 33-57645) filed with the Commission on
February 9, 1995).
* Exhibit (10)(iii)(a) through Exhibit
(10)(iii)(o) and Exhibit (10)(iii)(q)
through Exhibit (10)(iii)(t) constitute
management contracts or compensatory plans
or arrangements required to be filed as an
Exhibit to this Form pursuant to Item 14(c)
of this Report.
(11) Computation of net earnings per common share for
the years ended December 31, 1994, 1993 and 1992.
(12) Computation of ratio of earnings to fixed charges
for the year ended December 31, 1994.
(21) List of Subsidiaries of Martin Marietta
Corporation.
(23) (a) Consent of Ernst & Young LLP, Independent Auditors
for Martin Marietta Corporation (included in this
Form 10-K at page 81).
(b) Consent of KPMG Peat Marwick LLP, Independent
Auditors for the former GE Aerospace businesses
(included in this Form 10-K at page 82).
(c) Consent of Arthur Andersen LLP, Independent
Auditors for the General Dynamics Space Systems
Group (included in this Form 10-K at page 83).
(24) Powers of Attorney.
(27) Financial Statement Schedules (incorporated by
reference to Exhibit 27 to the Current Report on
Form 8-K).
(99) Other Exhibits
(a) Assumption Agreement among Martin Marietta
Materials, Inc. and Technologies dated as of
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November 12, 1993 (incorporated by reference
to Exhibit 10.01 to Martin Marietta
Materials, Inc.'s Registration Statement on
Form S-1 (Reg. No. 33-72648). Exhibit filed
with the SEC on December 8, 1993).
(b) Transfer and Capitalization Agreement dated
as of November 12, 1993, among Technologies,
Martin Marietta Investments, Inc., and
Martin Marietta Materials, Inc.
(incorporated by reference to Exhibit 10.02
to Martin Marietta Materials, Inc.'s
Registration Statement on Form S-1 (Reg. No.
33-72648). Exhibit filed with the SEC on
December 8, 1993).
(c) Form of Intercompany Services Agreement
between Martin Marietta Materials, Inc. and
the Corporation (incorporated by reference
to Exhibit 10.03 to Martin Marietta
Materials, Inc.'s Registration Statement on
Form S-1 (Reg. No. 33-72648). Exhibit filed
with the SEC on February 2, 1994).
(d) Form of Tax-Sharing Agreement between Martin
Marietta Materials, Inc. and the Corporation
(incorporated by reference to Exhibit 10.04
to Martin Marietta Materials, Inc.'s
Registration Statement on Form S-1 (Reg. No.
33-72648). Exhibit filed with the SEC on
February 2, 1994).
(e) Form of Corporate Agreement between Martin
Marietta Materials, Inc. and the Corporation
(incorporated by reference to Exhibit 10.05
to Martin Marietta Materials, Inc.'s
Registration Statement on Form S-1 (Reg. No.
33-72648). Exhibit filed with the SEC on
February 2, 1994).
(f) Form of Cash Management Agreement between
Martin Marietta Materials, Inc. and
Technologies (incorporated by reference to
Exhibit 10.08 to
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Martin Marietta Materials, Inc.'s
Registration Statement on Form S-1 (Reg. No.
33-72648). Exhibit filed with the SEC on
February 2, 1994).
(g) General Dynamics Space Systems Group
Combined Financial Statements for the years
ended December 31, 1993, 1992 and 1991.
(h) Audited Consolidated Financial Statements of
Martin Marietta and Subsidiaries as of
December 31, 1994 and 1993 and for the three
years in the period ended December 31, 1994.
(i) Quarterly Performance (unaudited)
(j) Five Year Summary
Other material incorporated by reference:
None.
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<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.
MARTIN MARIETTA CORPORATION
Date: March 28, 1995 By: /s/ FRANK H. MENAKER, JR.
---------------------
Frank H. Menaker, Jr.
Vice President and
General Counsel
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/ Norman R. Augustine Chairman of the March 28, 1995
------------------- Board, Chief
Norman R. Augustine* Executive Officer
/s/ Marcus C. Bennett Director, Vice March 28, 1995
------------------ President, Chief
Marcus C. Bennett* Financial and
Chief Accounting
Officer
/s/ Lamar Alexander Director March 28, 1995
---------------
Lamar Alexander*
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Signature Title Date
----------------------------------------------
/s/ John J. Byrne Director March 28, 1995
-------------
John J. Byrne*
/s/ A. James Clark Director March 28, 1995
--------------
A. James Clark*
/s/ Edwin I. Colodny Director March 28, 1995
----------------
Edwin I. Colodny*
/s/ James L. Everett, III Director March 28, 1995
---------------------
James L. Everett, III*
/s/ Edward L. Hennessy, Jr. Director March 28, 1995
----------------------
Edward L. Hennessy, Jr.*
/s/ Edward E. Hood, Jr. Director March 28, 1995
----------------------
Edward E. Hood, Jr.*
/s/ Caleb B. Hurtt Director March 28, 1995
--------------
Caleb B. Hurtt*
/s/ Gwendolyn S. King Director March 28, 1995
----------------------
Gwendolyn S. King*
/s/ Melvin R. Laird Director March 28, 1995
----------------------
Melvin R. Laird*
/s/ Gordon S. Macklin Director March 28, 1995
----------------------
Gordon S. Macklin*
/s/ Eugene F. Murphy Director March 28, 1995
----------------------
Eugene F. Murphy*
/s/ Allen E. Murray Director March 28, 1995
----------------------
Allen E. Murray*
/s/ John W. Vessey, Jr. Director March 28, 1995
----------------------
John W. Vessey, Jr.*
/s/ A. Thomas Young Director March 28, 1995
----------------------
A. Thomas Young*
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*By: /s/ STEPHEN M. PIPER March 28, 1995
--------------------
(Stephen M. Piper, Attorney-in-fact**)
_____________________
**By authority of Powers of Attorney filed with this Annual
Report on Form 10-K.
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CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Annual Report on
Form 10-K of Martin Marietta Corporation of our report dated January 20,
1995, included in Martin Marietta Corporation's Current Report on Form 8-K
dated February 17, 1995.
We also consent to the incorporation by reference of our report dated
January 20, 1995, included in Martin Marietta Corporation's Current Report
on Form 8-K dated February 17, 1995, with respect to Martin Marietta
Corporation's consolidated financial statements incorporated by reference
in the following Registration Statements:
(1) Registration Statement Number 33-59466-01 of Martin Marietta
Corporation and Martin Marietta Technologies, Inc. on Form S-3, dated
March 12, 1993;
(2) Registration Statement Number 33-58067 of Lockheed Martin Corporation
on Form S-3, dated March 14, 1995;
(3) Registration Statement Numbers: 33-58073, 33-58075, 33-58077, 33-
58079, 33-58081, 33-58083, 33-58085, 33-58089, and 33-58097 of
Lockheed Martin Corporation on Forms S-8, each dated March 15, 1995;
(4) Post-Effective Amendment No. 1, dated March 15, 1995 to Registration
Statement Number 33-57645 of Lockheed Martin Corporation on Form S-8.
ERNST & YOUNG LLP
Washington, DC
March 24, 1995
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Consent Of KPMG Peat Marwick LLP, Independent Auditors
------------------------------------------------------
The Board of Directors
General Electric Company:
The Board of Directors
Lockheed Martin Corporation:
We consent to the incorporation by reference of our report dated February
3, 1993 relating to the consolidated statements of earnings and cash flows
of GE Aerospace Businesses for the year ended December 31, 1992, which
report is incorporated by reference in the December 31, 1994 annual report
on Form 10-K of Martin Marietta Corporation, in the following Registration
Statements:
(1) Registration Statement Number 33-59466-01 of Martin Marietta
Corporation and Martin Marietta Technologies, Inc. on Form S-3, dated
March 12, 1993;
(2) Registration Statement Number 33-58067 of Lockheed Martin Corporation
on Form S-3, dated March 14, 1995;
(3) Registration Statement Numbers: 33-58073, 33-58075, 33-58077, 33-
58079, 33-58081, 33-58083, 33-58085, 33-58089, and 33-58097 of
Lockheed Martin Corporation on Form S-8, each dated March 15, 1995;
(4) Post-Effective Amendment No. 1, dated March 15, 1995 to Registration
Statement Number 33-57645 of Lockheed Martin Corporation on Form S-8.
Harrisburg, PA
March 24, 1995
-82-
<PAGE>
CONSENT OF ARTHUR ANDERSEN LLP
INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference in this Form 10-K of Martin Marietta Corporation of our report
dated January 20, 1994 on our audits of the combined financial statements
of the General Dynamics Space Systems Group as of December 31, 1993 and
1992 and for each of the three years in the period ended December 31, 1993
included in Martin Marietta Corporation's Form 8-K dated May 13, 1994.
We also hereby consent to the incorporation by reference of our report
dated January 20, 1994 on our audits of the combined financial statements
of the General Dynamics Space Systems Group as of December 31, 1993 and
1992 and for each of the three years in the period ended December 31, 1993
included in Martin Marietta Corporation's Form 8-K dated May 13, 1994 in
the following Registration Statements:
(1) Registration Statement Number 33-59466-01 of Martin Marietta
Corporation and Martin Marietta Technologies, Inc. on Form S-3, dated
March 12, 1993;
(2) Registration Statement Number 33-58067 of Lockheed Martin Corporation
on Form S-3, dated March 14, 1995;
(3) Registration Statement Numbers: 33-58073, 33-58075, 33-58077, 33-
58079, 33-58081, 33-58083, 33-58085, 33-58089, and 33-58097 of
Lockheed Martin Corporation on Forms S-8, each dated March 15, 1995;
(4) Post-Effective Amendment No. 1, dated March 15, 1995 to Registration
Statement Number 33-57645 of Lockheed Martin Corporation on Form S-8
ARTHUR ANDERSEN LLP
San Diego, California
March 24, 1995
-83-
<PAGE>
EXHIBIT 10(iii)(a)
MARTIN MARIETTA CORPORATION
DIRECTORS DEFERRED COMPENSATION PLAN
March 27, 1980
(Amended June 24, 1988)
(Amended September 22, 1988)
(Amended June 24, 1994)
SECTION 1. PURPOSE
The purpose of this Plan is to provide each eligible Director of Martin
Marietta Corporation with the opportunity of receiving deferred compensation
after termination of service as a Director. The Plan is also intended to
establish a method of paying Director's compensation which will aid Martin
Marietta in attracting and retaining as members of the Board persons whose
abilities, experience and judgment can contribute to the continued progress of
the Corporation.
SECTION 2. DEFINITIONS
(a) "Board" means the Board of Directors of Martin Marietta Corporation.
(b) "Committee" means the Committee appointed to administer this Plan, as
provided in Section 9 hereof.
(c) "Committee Fees" means the fees payable to a Director for service on a
Committee of the Board and for services as Chairman of a Committee of the Board.
(d) "Corporation" means Martin Marietta Corporation.
(e) "Deferred Compensation" means compensation deferred pursuant to this
Plan.
(f) "Deferred Compensation Account" means the account or accounting entry
which signifies the total amount of Deferred Compensation with respect to each
Participant, adjusted from time to time as provided in the Plan.
(g) "Deferred Compensation Election Form" means the form by which eligible
Directors elect to become Participants.
(h) "Director" or "Directors" means a member or members of the Board.
(i) "Director's Fees" means the fees payable to a Director for service on
the Board.
(j) "Participant" means an eligible Director who has elected to participate
in the Plan and to defer his compensation on the terms and conditions set forth
herein.
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(k) "Plan" means the Directors Deferred Compensation Plan as described
herein and as amended from time to time.
(l) "Valuation Date" means the last business day of a calendar year.
(m) "Change of Control"shall include the following: (i) a tender offer or
exchange offer is made whereby the effect of such offer is to take over and
control the affairs of the Corporation and such offer is consummated for the
ownership of securities of the Corporation representing 25% or more of the
combined voting powers of the Corporation's then outstanding voting securities;
(ii) the Corporation is merged or consolidated with another corporation and, as
a result of such merger or consolidation, less than 75% of the outstanding
voting securities of the surviving or resulting corporation shall then be owned
in the aggregate by the former stockholders of the Corporation, other than
affiliates within the meaning of the Securities Exchange Act of 1934, as amended
from time to time ("Exchange Act") or any party to such merger or consolidation;
(iii) the Corporation transfers substantially all of its assets to another
corporation or entity which is not a wholly owned subsidiary of the Corporation;
(iv) any "person" (as such term is used in Sections 3(a)(9) and 13(d)(3) of the
Exchange Act) is or becomes the beneficial owner, directly or indirectly, of
securities of the Corporation representing 25% or more of the combined voting
power of the Corporation's then outstanding securities, and the effect of such
ownership is to take over and control the affairs of the Corporation; and (v) as
the result of a tender offer, merger, consolidation, sale of assets, or
contested election, or any combination of such transactions, the persons who
were members of the Board of Directors of the Corporation immediately before the
transaction, cease to constitute at least a majority thereof.
SECTION 3. ELIGIBILITY
Each Director who receives Director's Fees for service on the Board shall
be eligible to participate in the Plan.
SECTION 4. PARTICIPATION
In order to participate in the Plan for a particular calendar year, an
eligible Director must make a valid election by executing and filing with the
Committee, before the commencement of such calendar year (or, in the case of a
new Director, before the commencement of his term of office in such calendar
year), a Deferred Compensation Election Form. Such election shall --
(a) be valid if and only if it (i) contains a statement that the Director
elects to defer all or a stated percentage of the compensation due to him for
service as a Director and for services on any Committee of the Board for such
calendar year, and (ii) specifies that the Participant's Deferred Compensation
shall be paid to him in a lump-sum or specifies the number (not to exceed 10) of
annual installments in which his Deferred Compensation for such calendar year
shall be paid to him pursuant to Section 5(a) below;
<PAGE>
Page 3 Directors Deferred Compensation Plan
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(b) apply to such calendar year and also to each succeeding calendar year
during all or part of which the Participant remains eligible until the calendar
year following the year in which the Participant files with the Committee a
revised Deferred Compensation Election Form or a written revocation of the
election; and
(c) with respect to each such calendar year to which it applies pursuant to
paragraph (b) above, be irrevocable as to all matters described in paragraph (a)
above upon the commencement of each such calendar year subject only to
modification by the Committee in the event of severe financial hardship as
provided in Section 5(a) below.
Upon receipt of a Directors' valid election, the Committee shall establish
an individual Deferred Compensation Account for such Director and shall credit
to his Deferred Compensation Account all of the Deferred Compensation which
would otherwise have been payable to such Director for the calendar year to
which the election applies. Director's Fees and Committee Fees shall be
credited as of the first day of each month.
SECTION 5. PAYMENT OF DEFERRED COMPENSATION AND METHOD OF COMPUTATION
(a) Except as provided below in the case of severe financial hardship,
payments of Deferred Compensation to Participants (or, if applicable, to their
beneficiary or personal representative) under the Plan shall be made or, in the
case of installment payments, commence in January of the first calendar year
following the termination of the Participant's status as a Director due to
resignation, retirement, death or otherwise, and, in the case of installment
payments, shall continue to be made in January of each succeeding year until all
installments have been paid.
In the event that the Participant (or, if applicable, the beneficiary)
incurs a severe financial hardship the Committee, in its absolute discretion,
may revise the payment schedule. Such severe financial hardship must have been
caused by an accident, illness, or event beyond the control of the Participant
(or, if applicable, the beneficiary); and the Committee shall revise the payment
schedule as previously established only to the extent reasonably necessary to
eliminate the severe financial hardship.
(b) The amounts to be paid to a Participant (or beneficiary or personal
representative) pursuant to Section 5(a) hereof shall be computed and paid in
accordance with the following procedures (subject only to modification by the
Committee in the event of severe financial hardship as provided in Section 5(a)
above:
Payment in cash at a deferred date or dates, either in a lump sum or annual
installments, of the total amount which would have accumulated in the
Participant's Deferred Compensation Account by the Valuation Date immediately
preceding each payment if such deferred compensation had, as soon as practicable
but no less frequently than monthly following the date
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Page 4 Directors Deferred Compensation Plan
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on which the Director's Fees and Committee Fees were credited, either (i) been
deposited in an account which paid monthly interest, (ii) been invested in an
indexed equity fund, (iii) been invested in a fixed income fund, or (iv) been
deposited or invested in a permissible combination of such deposits and
investments, all in accordance with the previous written designation by the
Committee concerning the method to be used to measure the funds deemed to have
been accumulated in the Deferred Compensation Account. Prior to December 31
each year, the Committee shall, following a review of the applicable Deferred
Compensation Election Form and consultation with the Participant, designate the
method to be used to measure the accumulation of funds with respect to amounts
to be deferred by the Participant for the next calendar year. The Committee's
designation of the method or methods of measuring the accumulation of funds
shall be in multiples of twenty-five percent (25%) of the compensation being
deferred, and said designation shall not be changed at any time commencing with
the first day of the calendar year to which the designation applies. In the
event that a previously designated method for measuring the funds deemed to have
been accumulated in the Deferred Compensation Account is no longer available,
the Committee, in its absolute discretion, shall designate an alternative method
for measuring the future accumulation of funds. The amounts credited as
interest under (i) above shall be based on the prime rate as set by Citibank,
N.A., New York, New York, on the last business day of the month preceding the
date on which interest is credited to the Deferred Compensation Account.
Interest shall be credited on the first day of each month on those funds on
deposit in the account during the previous month. The amounts credited as gains
or losses on funds deemed to have been invested in an indexed equity fund under
(ii) above shall be based on the indexed equity fund available as an investment
option under the Martin Marietta Performance Sharing Plan. The amounts credited
as gains on funds deemed to have been invested in a fixed income fund under
(iii) above shall be based on the fixed income fund available as an investment
option under the Martin Marietta Performance Sharing Plan for Salaried
Employees. If annual installments were elected, the amount to be distributed
with respect to each installment shall be the balance of the Participant's
Deferred Compensation Account as of the preceding Valuation Date, including
credited interest and the putative gain or loss on those funds deemed to have
been invested divided by the number of installments which remain to be paid,
until all distributions to which a Participant is entitled under this Plan shall
have been made.
SECTION 6. VALUATION DATE
As of each Valuation Date the Deferred Compensation Account of each
Participant shall be valued by the Committee. The value thereof shall be
communicated in writing to each Participant within thirty (30) days after such
Valuation Date.
SECTION 7. DEATH OF PARTICIPANT
Upon the death of a Participant, all amounts, if any, then remaining
undistributed, or which shall thereafter become distributable, from his Deferred
Compensation Account pursuant to this Plan shall be distributed to such
beneficiary as the Participant shall have designated in
<PAGE>
Page 5 Directors Deferred Compensation Plan
- --------------------------------------------------------------------------------
writing to the Corporation, or, in the absence of such designation, to his
personal representative. The distribution of funds, including accumulations
thereon, shall be made at the time specified in Section 5(a) hereof and in one
or more installments in accordance with the election previously made by the
Participant (subject to modification by the Committee in the event of severe
financial hardship as also provided in Section 5(a) above).
SECTION 8. PARTICIPANT'S RIGHTS UNSECURED; NO DUTY TO INVEST
The right of a Participant to receive any distribution hereunder shall be
an unsecured claim against the general assets of the Corporation. Assets, if
any, which may be set aside by the Corporation for accounting purposes shall not
in any way be held in trust for or be subject to any prior claim by a Director,
his beneficiary, or personal representative. Neither the Corporation nor the
Committee shall have any duty whatsoever to invest any amounts credited to any
Deferred Compensation Accounts established under the Plan.
SECTION 9. ADMINISTRATION OF THE PLAN - COMMITTEE
The Plan shall be administered by a Committee of three, consisting of the
persons who from time to time shall be (1) the Chief Financial Officer of the
Corporation; (2) the Secretary of the Corporation; and (3) the Treasurer of the
Corporation. The Committee shall act by vote or by written consent of a
majority of its members. The Plan may be amended, modified, or terminated by
the Board except that no such action shall (without the consent of the
Participant, or, if appropriate, his beneficiary, distributee or personal
representative) alter the rights of a Participant with respect to compensation
earned and deferred or any accumulation thereon pursuant to this Plan prior to
the date of such amendment, modification or termination.
SECTION 10. ALIENATION
(a) Subject to the provisions of paragraph (b) of this Section 10, no
amount, the payment of which has been deferred under this Plan, shall be subject
in any manner to anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance, levy or charge, and any attempt so to alienate, sell, transfer,
assign, pledge, encumber, levy or charge the same shall be void; nor shall any
such amount be in any manner liable for or subject to the debts, contracts,
liabilities, engagements or torts of the person entitled to such benefit.
(b) The restraints in paragraph (a) of this Section 10 shall not apply to a
Participant's personal representative.
SECTION 11. WITHHOLDING
There shall be deducted from all payments under this Plan the amount of any
taxes required to be withheld by any Federal, state, or local government. The
Participants and their beneficiaries, distributees, and personal representatives
will bear any and all Federal, foreign,
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Page 6 Directors Deferred Compensation Plan
- --------------------------------------------------------------------------------
state, local or other income or other taxes imposed on amounts paid under this
Plan.
SECTION 12. CONSENT
By electing to become a Participant each Director shall be deemed
conclusively to have accepted and consented to all the terms of this Plan and
all actions or decisions made by the Corporation, the Board, or the Committee
with regard to the Plan. Such terms and consent shall also apply to and be
binding upon the beneficiaries, distributees, and personal representatives and
other successors in interest in each Participant.
SECTION 13. SEVERABILITY
In the event any provision of this Plan would serve to invalidate the Plan,
that provision shall be deemed to be null and void, and the Plan shall be
construed as if it did not contain the particular provision that would make it
invalid.
SECTION 14. CHANGE OF CONTROL
In the event of a "Change of Control" a Plan Participant (or beneficiary or
personal representative) shall be entitled to receive a lump sum payment of the
balance of the Participant's Deferred Compensation Account as of the date of the
Change of Control. This Section and Section 2(m) may not be amended after the
occurrence of a Change of Control.
<PAGE>
EXHIBIT 10(iii)(b)
POST-RETIREMENT INCOME MAINTENANCE PLAN
FOR DIRECTORS
October 22, 1981
(Amended December 15, 1983)
(Amended December 5, 1985)
(Amended January 1, 1986)
(Amended June 24, 1988)
(Amended January 26, 1989)
(Amended June 25, 1993)
(Amended June 24, 1994)
(Amended October 1, 1994)
(Amended Effective January 1, 1995)
1. RESOLVED, That the unfunded Post-Retirement Income Maintenance Plan ("the
Plan") established by the Board of Directors at its meeting held on October
22, 1981, as amended December 15, 1983, December 5, 1985, January 1, 1986,
June 24, 1988, January 26, 1989, June 25, 1993, June 24, 1994, October 1,
1994, be and it hereby is amended effective January 1, 1995, pursuant to
which any member of the Board of Directors who retires on or after December
15, 1983, is eligible.
2. RESOLVED FURTHER, That pursuant to the amended Plan, a director, who at
the time of retirement from the Board shall have served five continuous
years and have attained mandatory retirement age as defined in the
Corporation's By-Laws, Section 2.03, receives for life an annual fee equal
to the annual Board retainer in effect at the time of retirement, such fee
to be paid in annual installments commencing the first October 30th
following the Participants retirement and shall continue to be made October
30th of each succeeding year until full payment under the terms of this
Plan has been paid.
3. RESOLVED FURTHER, That a director, who at the time of retirement from the
Board has attained mandatory retirement age as defined in the Corporation's
By-Laws, Section 2.03, but has not served five continuous years, upon
approval by the Nominating Committee, shall receive for life an annual fee
equal to the annual Board retainer in effect at the time of retirement,
such fee to be paid in annual installments commencing the first October
30th following the Participants retirement and shall continue to be made
October 30th of each succeeding year until full payment under the terms of
this Plan has been paid.
4. RESOLVED FURTHER, That a director who retires early after completing at
least five continuous years of service is entitled to receive an annual fee
equal to the annual Board retainer in effect at the time of retirement.
Such retainer shall be paid in equal annual installments for a period equal
to the number of full years the retired director served on the Board.
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Page 2 Post-Retirement Income Maintenance Plan for Directors
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5. RESOLVED FURTHER, That retired directors who have been employees or
officers of the Corporation are eligible to participate in the Plan.
6. RESOLVED FURTHER, That a retired director who participates in the Plan or
a director who dies while serving on the Board and would otherwise be
eligible to receive benefits had he retired immediately prior to death
shall be a "Plan Participant".
7. RESOLVED FURTHER, That nothing in the Plan, nor any action or
acquiescence in the administration of the Plan, shall be considered to
create any benefit, cause of action, right of sale, transfer, assignment,
pledge, encumbrance, or other such right in any heirs or assigns of a Plan
Participant or the estate of a Plan Participant, except that in the event
of death of any Plan Participant prior to receiving payments equal to the
number of full years of active service on the Board, the surviving lawful
spouse, if any, will be entitled to the remainder of the Plan benefit
payments for such service period or ten years, whichever comes first. In no
event will the spouse be required to forfeit benefits by reason of that
portion of annual payments made in advance which would have covered a
period of time after the Participant's death.
8. RESOLVED FURTHER, That any former director who retired prior to June 24,
1988, and such director or his spouse is currently receiving retirement
benefits, shall continue to receive such benefits under the Plan in effect
at the time of the director's retirement, unless such director or his
spouse shall make an irrevocable election to consent to participation in
the Plan, as amended.
9. RESOLVED FURTHER, That any director who had attained mandatory retirement
age on December 1, 1992 as defined in the Corporation's By-Laws, Section
2.03, and whose continuing service on the Board was authorized pursuant to
a Board resolution adopted on December 3, 1992, shall qualify to receive
benefits under the Plan based on the mandatory retirement age in effect
pursuant to the Corporation's By-Laws, Section 2.03, on December 1, 1992.
10. RESOLVED FURTHER, In the event of a "Change in Control" a Plan
Participant shall be entitled to receive a lump sum payment equal to the
present value of his vested plan benefits, determined as if he had retired
from the Board on the date of the Change in Control using the lowest
applicable discount rate permitted by the Internal Revenue Code.
Notwithstanding the foregoing, in the event of a Change in Control
occurring as a result of the transactions contemplated by the Agreement and
Plan of Reorganization among Parent Corporation, Martin Marietta
Corporation and Lockheed Corporation dated as August 29, 1994, a Plan
Participant, who at the time of the Change in Control has attained age 62,
has completed at least five continuous years of service, and who does not
continue as a Director of Lockheed Martin Corporation immediately following
the transaction, shall be entitled to receive a lump sum payment,
determined as though he
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Page 3 Post-Retirement Income Maintenance Plan for Directors
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had attained mandatory retirement age at the time of the Change in Control,
if such payment would exceed the payment determined under the immediately
preceding sentence provided however that for this purpose, (i) for any
Board member on the date of the change in control, all periods of service
as a Board member shall be aggregated and treated as continuous service;
(ii) a Plan Participant's years of service shall be rounded to the next
highest number if not whole years, whether continuous or not, and (iii) any
director not continuing as a director of Lockheed Martin Corporation, in
addition to the foregoing, shall be paid such committee and board fees that
would have been paid had such director continued to serve on the Board of
Directors and its committees for the remainder of the term of years
approved by the stockholders of the Corporation. A "Change in Control"
shall include the following: (i) a tender offer or exchange offer is made
whereby the effect of such offer is to take over and control the affairs of
the Corporation and such offer is consummated for the ownership of
securities of the Corporation representing 25% or more of the combined
voting powers of the Corporation's then outstanding voting securities; (ii)
the Corporation is merged or consolidated with another corporation and, as
a result of such merger or consolidation, less than 75% of the outstanding
voting securities of the surviving or resulting corporation shall then be
owned in the aggregate by the former stockholders of the Corporation, other
than affiliates within the meaning of the Securities Exchange Act of 1934,
as amended from time to time ("Exchange Act") or any party to such merger
or consolidation; (iii) the Corporation transfers substantially all of its
assets to another corporation or entity which is not a wholly owned
subsidiary of the Corporation; (iv) any "person" (as such term is used in
Sections 3(a)(9) and 13(d)(3) of the Exchange Act) is or becomes the
beneficial owner, directly or indirectly, of securities of the Corporation
representing 25% or more of the combined voting power of the Corporation's
then outstanding securities, and the effect of such ownership is to take
over and control the affairs of the Corporation; and (v) as the result of a
tender offer, merger, consolidation, sale of assets, or contested election,
or any combination of such transactions, the persons who were members of
the Board of Directors of the Corporation immediately before the
transaction, cease to constitute at least a majority thereof. The Plan
provisions effectuating this resolution may not be amended after the
occurrence of a Change in Control.
11. RESOLVED FURTHER, That in the event of the death of any active outside
director whether or not such director has served as a director for five
years, his spouse or beneficiary shall be entitled to receive a lump sum
payment equal to the amount such director would have received in Board and
Committee retainer fees had he continued to serve as a director for the
entire period that he could have served as a director under the
Corporation's By-Laws; and received the same dollar amount of compensation
being paid immediately prior to death, provided however that no more than
ten years of such imputed additional service shall be taken into account,
such benefit shall not be included in the actuarial computation which would
be required in the event of a Change of
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Page 4 Post-Retirement Income Maintenance Plan for Directors
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Control.
12. RESOLVED FURTHER, That the proper officers of this Corporation be and
they hereby are authorized to prepare the Post-Retirement Income
Maintenance Plan document to effectuate the intent of the foregoing
resolutions including any further amendments and to execute such further
documents and do all such other acts and things and to take all such steps
as they shall deem necessary or advisable or proper in order to fully carry
out the intent of the foregoing resolutions.
<PAGE>
EXHIBIT 10(iii)(e)
DEFERRED COMPENSATION AND ESTATE SUPPLEMENT PLAN
As Approved by the Board of Directors
August 23, 1979
(Amended April 28, 1983)
(Amended July 28, 1983)
(Amended April 26, 1984)
(Amended October 25, 1984)
(Amended July 24, 1986)
(Amended October 27, 1988)
(Amended January 26, 1989)
(Amended October 1, 1994)
(Amended October 27, 1994)
SECTION 1. ESTABLISHMENT AND PURPOSE
The Martin Marietta Corporation Deferred Compensation and Estate Supplement
Plan is established effective September 1, 1979, for senior executive personnel.
It is intended to provide a means for attracting and retaining, until
retirement, capable individuals as executive employees of the Corporation. It
is further intended to encourage executives to voluntarily retire from key
executive positions no later than age 65 to enhance advancement opportunities
within the Corporation, and thereby make employment by the Corporation more
attractive.
SECTION 2. DEFINITIONS
The following terms, as used herein, shall have the following meanings:
"Board of Directors" means the Board of Directors of Martin Marietta
Corporation as it may be comprised from time to time.
"Chief Executive Officer" means the Chief Executive Officer of the
Corporation.
"Corporation" means Martin Marietta Corporation including its affiliates
and subsidiaries.
"Employee" means a person employed by the Corporation in a full-time basis.
"Participant" means an Employee who, as of the effective date of this Plan,
is employed in a position which is included in the group listed in Addendum A to
this Plan or an Employee who, subsequent to the effective date of this Plan, is
employed in a position which is included in the group listed in Addendum A to
this Plan and who has been recommended by the Compensation Committee and
approved by the Board of Directors for participation as provided in Section 3.
"Plan" means the Martin Marietta Corporation Deferred Compensation and
Estate Supplement Plan, as in effect at any time.
<PAGE>
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Deferred Compensation and Estate Supplement Plan
"Designated Benefit" means the amount shown on Addendum A for the position
held by the Participant.
"Voluntary Resignation" means severance from employment in order to accept
full-time employment in a comparable position with another employer, whether or
not the Participant applied for immediate early retirement under the applicable
employee pension plan.
SECTION 3. ELIGIBILITY AND PARTICIPATION
3.1 Participation in the Plan shall be at the sole discretion of the Board
of Directors and shall be limited to Employees who are employed in positions
which are listed in Addendum A to the Plan, which shall be part of the Plan.
The initial Participants in the Plan shall be those Employees who hold the
positions listed in Addendum A on the effective date of the Plan. Subsequent
Participants shall be those Employees who hold the positions listed in Addendum
A and who shall have been individually approved for participation at the sole
discretion of the Board of Directors.
3.2 From time to time, the Chief Executive Officer shall recommend
eligible Employees to the Compensation Committee of the Board of Directors for
their review, comments, and recommendations as to participation in the Plan.
Recommendations of the Compensation Committee will be forwarded to the Board of
Directors for approval.
3.3 An employee who is assigned to a qualifying position and approved as a
Participant by the Board of Directors shall generally be deemed to have been
approved for participation as of the date the employee was first assigned to a
qualifying position, but not earlier than September 1, 1979. Final
determination of effective dates shall be subject to approval by the Board of
Directors.
3.4 Participants in the Plan as it was structured prior to this amendment
will be eligible for the benefit as provided for by the provisions of the Plan
prior to this amendment or as provided for including this amendment dated
January 26, 1989, whichever is greater.
3.5 Eligibility for payment of benefits from the Plan shall be determined
in accordance with and subject to the terms hereof.
3.6 To be eligible to receive deferred income payments upon retirement, a
Participant, whose eligibility commences on or after January 1, 1989, must have
one full year of participation in this Plan with a total of five years or more
as a Martin Marietta employee and retire no earlier than the first day of the
month coinciding with or next following attainment of age 56, and no later than
the first day of the month coinciding with or next following attainment of age
65, unless a later retirement age is specifically approved for a Participant by
the Board
-2-
<PAGE>
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Deferred Compensation and Estate Supplement Plan
of Directors. The five year Martin Marietta service and one year Participant
qualifying periods are waived in the case of a Participant who dies prior to
retirement and while still actively employed in a position listed on Addendum A,
or at the discretion of the Chairman of the Board.
3.7 A Participant who retires prior to age 56, or is discharged for cause,
or continues employment beyond age 65, or who separates from employment by
reason of Voluntary Resignation, shall cease to be a Participant under this Plan
and no benefits shall be payable from this Plan unless specifically authorized
by the Board of Directors.
SECTION 4. PAYMENT AND DURATION OF BENEFITS
4.1 In the event that a Participant shall simultaneously hold more than
one position listed in Addendum A, only the higher of the Designated Benefit
amounts, for which participation has been approved shall be payable.
4.2 In the event a Participant shall be transferred to a position listed
in Addendum A with a higher Designated Benefit, the Participant shall retain the
Designated Benefit amount previously approved by the Board unless participation
at the higher level is approved by the Board of Directors. Upon approval at the
higher level, participation shall be at the higher Designated Benefit level.
All prior years will be adjusted to that higher level after the Participant has
completed one full year at that level or at the discretion of the Board of
Directors.
4.3 Unless otherwise determined by the Board of Directors, if a
Participant is transferred to another covered position listed in Addendum A with
a lower Designated Benefit, the higher Designated Benefit of the previous
position may remain in effect while the Participant is assigned to a covered
position listed in Addendum A with a lower Designated Benefit unless the Board
of Directors specifically effects the lower Designated Benefit, in which case,
the Participant shall retain the prior years of credit at the higher level and
the year of transition will be prorated in months at the appropriate levels.
4.4 A Participant who retires during the period beginning with the first
day of the month coinciding with or next following attainment of age 62, and
ending on the first day of the month coinciding with or next following
attainment of age 65, unless a later retirement date is specifically approved
for the Participant by the Board of Directors, and has a minimum of ten years as
a Participant in the Plan shall be eligible for a benefit payment from this Plan
as follows:
(a) The total benefit payable shall be the Designated Benefit, provided (i)
this is the highest level which has been attained, (ii) participation at
this level has been approved by the Board of Directors, and (iii) the
Participant has completed
-3-
<PAGE>
- --------------------------------------------------------------------------------
Deferred Compensation and Estate Supplement Plan
at least one full year of participation at this level; or,
(b) Should a Participant be transferred to a position with a higher
Designated Benefit, such higher benefit level being approved by the Board
of Directors, and retire prior to completion of one full year at the higher
level, the benefit payment will be prorated based on participation at
various Designated Benefit levels. To calculate the total benefit payable
under the Plan, a benefit amount shall be calculated for each full year as
a Participant at the lower level by multiplying 10% times the Designated
Benefit for the lower level. In the year where the Designated Benefit was
changed to the higher level by the Board of Directors, the benefit amount
for that year will be prorated based on the number of months in the Plan at
each level. The maximum total benefit payable shall be the sum of the
highest full years as calculated above limited to ten years; or
(c) Should a Participant be transferred to a position with a lower
Designated Benefit, such lower benefit level being approved by the Board of
Directors, the benefit payment will be prorated based on participation at
various Designated Benefit levels. To calculate the total benefit payable
under the Plan, a benefit amount shall be calculated for each full year as
a Participant at the higher level by multiplying 10% times the Designated
Benefit for the higher level and for each full year at the lower level by
multiplying 10% times the Designated Benefit for the lower level. In the
year where the Designated Benefit was changed to the lower level by the
Board of Directors, the benefit amount for that year will be prorated based
on the number of months in the Plan at each level. The maximum total
benefit payable shall be limited to the sum of the highest full years as
calculated above limited to ten years.
4.5 A Participant age 56 or greater with a minimum of one full year
participation in the Plan and a total of five or more years as a Martin Marietta
employee, (unless such minimum participation requirements are waived in
accordance with the provisions of Section 3.6), may elect to receive a reduced
benefit upon retirement provided however such retirement shall be on or before
the first day of the month coinciding with or next following attainment of age
65, unless a later retirement date is specifically approved for the Participant
by the Board of Directors. The total benefit payable shall be the amount
calculated as provided in Section 4.4 above, provided that a Participant who
falls into a category consistent with Section 4.4(a) except as to age or years
of service, shall first multiply the Designated Benefit by a fraction, the
numerator of which is the number of full years completed as a Participant
(limited to a maximum of ten) and the denominator of which is ten years,
multiplied times the percentage set forth in the table below for the
Participant's age at retirement.
-4-
<PAGE>
- --------------------------------------------------------------------------------
Deferred Compensation and Estate Supplement Plan
<TABLE>
<CAPTION>
Age When Employment Ends Percent of Total
and Benefit Payment Begins: Benefit Payable:
----------------------------- --------------------
<S> <C>
55 years or less Zero
56 years 15%
57 years 30%
58 years 45%
59 years 60%
60 years 75%
61 years 90%
62 to 65 years 100%
65 years or more Zero*
</TABLE>
* If employment continues beyond the first day of the month following the
attainment of age 65, and is specifically approved by the Board of
Directors, the applicable percentage is 100%.
4.6 A Participant who is transferred to a position not listed in Addendum
A but continues in the employment of the Corporation shall cease participation
in this Plan as of the date of such transfer, and the benefit payable, if any,
upon his actual retirement date (or date of death) shall be calculated as if he
retired early on the date of his transfer.
4.7 If a Participant dies prior to retirement and while still actively
employed by the Corporation in a position listed in Addendum A, the full amount
to which such Participant would be entitled at age 65 with ten years as a
Participant will be payable to the Participant's beneficiary(ies). This benefit
amount will be payable under the same terms and conditions as the benefit
payable to a beneficiary upon death of the Participant after retirement as
provided in Section 5 below, and as if the Participant retired with the full
benefit on the first of the month coinciding with or next following the date of
his death.
4.8 The total benefit payable to a participant shall be determined on the
basis of the Plan as in effect on the date of commencement of benefits. The
total benefit amount shall be payable over a ten-year period following
retirement in equal, annual installments with one tenth (1/10th) of the total
payable each year. The first payment shall be on the first day of the month
coinciding with or next following the Participant's retirement in accordance
with Section 3.6. Subsequent installments shall be payable on the anniversary
date of the initial payment.
4.9 (a) In the event of a Change of Control of the Corporation, the
Participant's Designated Benefit shall become immediately payable.
Notwithstanding the preceding sentence and subject to Section 4.9(e), the amount
payable shall be limited to the Safe Harbor Amount, less $1.00. For this
purpose the Safe Harbor Amount shall be an amount equal to three times
-5-
<PAGE>
- --------------------------------------------------------------------------------
Deferred Compensation and Estate Supplement Plan
the Participant's base amount, as defined by Section 280G of the Internal
Revenue Code of 1986, as amended, less all other amounts which are counted for
purposes of calculating the Safe Harbor Amount under Section 280G by reason of
the provisions of the 1979 and 1984 Stock Option Plans for Key Employees.
For purposes of this Section, a "Change of Control" shall mean a change of
control of the Corporation that shall be deemed to have occurred, if and when,
without the affirmative vote of two-thirds of the Continuing Directors (as that
term is hereinafter defined,
(i) any "person" (as such term is used in Section 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended ("Exchange Act")) becomes the
"beneficial owner" (as defined in Rule 13d under the Exchange Act),
directly or indirectly, of securities of the Corporation representing 30
percent or more of the combined voting power of the Corporation's then
outstanding securities; or
(ii) during any calendar year, individuals who at the beginning of such
period were members of the Board of Directors of the Corporation cease as
the result of a tender offer, merger, consolidation, sale of assets or
contested election, or any combination of such transactions, to constitute
at least 75% thereof.
The provisions of this Section may not be amended after the occurrence of a
Change of Control.
(b) In the event that a transaction occurs that would be a change of
control under Section 4.9(a) but for the fact that the transaction was approved
by the affirmative vote of two-thirds of the Continuing Directors (as that term
is hereinafter defined), a Participant who is currently serving in a position on
Addendum A (as attached herein) shall be entitled to receive the present value
of his benefit earned to date (as hereinafter defined). Such present value
shall be determined in accordance with reasonable actuarial practices, but in no
event shall be less than the present value of the benefit that would have been
payable had the participant retired early on September 30, 1994. In the case of
a retired Participant, the Participant's Designated Benefit shall become
immediately payable.
(c) For the purposes of this Section,
(i) the term "Continuing Directors" shall mean a director who either (x)
was a member of the Board of Directors of the Corporation immediately prior
to the Change of Control (or transaction); or (y) was designated (before
his or her election as director) as a Continuing Director by a majority of
the then Continuing Directors.
-6-
<PAGE>
- --------------------------------------------------------------------------------
Deferred Compensation and Estate Supplement Plan
(ii) the term "benefit earned to date" shall mean the Participant's
Designated Benefit multiplied by a fraction, the numerator of which is the
Participant's years of participation in the Plan prior to the transaction
(rounded to the next highest number if not whole years) and the denominator
of which is ten.
(d) Upon payment of all Participants' benefits in accordance with Sections
(a) or (b) above, the Plan shall terminate.
(e) Notwithstanding anything herein to the contrary, payments under this
Section shall be paid to the Participant in a single lump sum as soon as
practical after the transaction or on a deferred basis upon a determination by
the Compensation Committee that such deferral is in the best interests of the
Corporation.
SECTION 5. COMMENCEMENT AND DURATION OF BENEFITS
5.1 A written designation of beneficiary(ies) and contingent
beneficiary(ies) may be made by the Participant with the Compensation Committee
of the Board of Directors and changed from time to time by written notice to the
Corporate Secretary.
5.2 The benefit amount determined under Section 4 shall be payable as
determined in Section 4.8, in a level amount, in ten equal, annual installments
to the Participant during the Participant's lifetime with the provision that if
such Participant shall die after retirement and before ten annual payments have
been made, such payments shall continue for the remainder of such ten-year
period to (i) the beneficiary(ies) of the Participant, or (ii) if the
beneficiary(ies) does not survive the Participant, or does survive the
Participant but does not survive the ten-year period and there is no surviving
contingent beneficiary(ies), any remaining payments shall be made, unless the
Participant provided otherwise, to the estate(s) of the Participant.
5.3 In the event that a Participant has not named a beneficiary under this
Plan and shall die after retirement and before ten annual payments have been
made, the remaining payments shall be made to the beneficiary(ies) designated
under the Group Life Insurance Plan for Salaried Employees or if no
beneficiary(ies) has been designated under the latter Plan, or if such
beneficiary(ies) has predeceased the Participant any remaining payments shall be
made to the Participant's estate. In no event shall payment of the benefit from
this Plan extend beyond ten annual payments.
5.4 Any amount required to be withheld under applicable federal, state, or
local income tax or other laws, shall be withheld and any payment from this Plan
shall be reduced by the amount so withheld.
-7-
<PAGE>
- --------------------------------------------------------------------------------
Deferred Compensation and Estate Supplement Plan
5.5 Any payments under this Plan shall be made from the general funds of
the Corporation. No assets of the Corporation shall be segregated or earmarked
to represent any liability for benefits hereunder.
SECTION 6. AMENDMENT AND TERMINATION
The Compensation Committee may, from time to time, recommend to the Board
of Directors amendments to the Plan or to Addendum A attached hereto, except
that the Chairman of the Board is authorized to modify Addendum A, from time to
time, to reflect changes in the organizational nomenclature and to include any
other Senior Executive position which may be created for a specified period of
time to reflect the Corporation's succession planning for a Senior Executive
position already included in Addendum A., and to report periodically such
changes to the Board of Directors. The Board of Directors may terminate the
Plan or amend the Plan or Addendum A attached hereto, in any respect and at any
time; provided, however, that no such amendment or termination shall have the
effect of reducing benefits then being paid to or on behalf of, or which may
thereafter become payable to or on behalf of, any retired Participant, or of
reducing the calculation of the benefit amount of any active Participant to a
level lower than that which would have been payable had such Participant retired
early on the day prior to the effective date of such amendment or termination.
Amendments to the Plan will not be applicable to Plan Participants who have
retired or otherwise ceased to be active Participants prior to the effective
date of such amendments.
SECTION 7. ADMINISTRATION AND CLAIM REVIEW PROCEDURE
7.1 This Plan shall be administered by the Compensation Committee of the
Board of Directors under the bylaws of the Corporation.
7.2 Any Participant or beneficiary whose written claim for benefits under
the Plan is denied shall be furnished a written notice of denial of claim by the
Chairman of the Compensation Committee within a reasonable period of time after
receipt of the claim. Within sixty days after receipt of a notice of denial of
claim, a Participant or beneficiary may request a review of the claim by the
Compensation Committee as a whole upon written application to the Secretary of
the Corporation.
7.3 The Compensation Committee shall conduct a full and fair review of a
denial of claim when so requested and shall render a decision as promptly as
possible, but no later than one hundred and twenty days after receipt of a
request for review. Any decision by the Compensation Committee concerning a
review of a denial of claim shall be furnished to the Participant in writing by
the Secretary of the Corporation.
-8-
<PAGE>
- --------------------------------------------------------------------------------
Deferred Compensation and Estate Supplement Plan
7.4 A decision by the Board of Directors or any duly constituted Committee
to which the Board has delegated its authority with respect to any matter
pertaining to the Plan shall be conclusive and binding on all interested
parties.
SECTION 8. GENERAL PROVISIONS
8.1 Nothing in this Plan shall be deemed to give any person the right to
remain in the employ of the Corporation or to remain in any of the positions
listed in Addendum A or affect the right of the Corporation to terminate any
Participant's employment with or without cause.
8.2 No right or interest of any person entitled to a benefit under the
Plan shall be subject to voluntary or involuntary alienation, assignment, or
transfer of any kind.
8.3 This Plan shall be construed and administered in accordance with the
laws of the State of Maryland.
SECTION 9. TERMINATION OF BENEFITS IN CERTAIN CASES
If, following the date on which a Participant shall be qualified to receive
benefits under the Plan, the Board of Directors shall reasonably find that a
Participant, without the prior written consent of the Board of Directors, is
engaged in the operation or management of a business, whether as owner,
controlling stockholder, partner, director, officer, employee, consultant, or
otherwise, which at such time is in competition with the Corporation or any of
its subsidiaries or affiliates, or has disclosed to unauthorized persons
information relative to the business of the Corporation or any of its
subsidiaries or affiliates which the Participant shall have had reason to
believe is confidential, or shall be found by the Board of Directors to have
committed an act during or after the term of the Participant's employment which
would have justified the Participant being discharged for cause, all benefits to
which such Participant shall otherwise be entitled under this Plan shall
terminate. This section shall be uniformly applied to Participants similarly
situated.
-9-
<PAGE>
EXHIBIT 10(iii)(m)
MARTIN MARIETTA CORPORATION LONG TERM
PERFORMANCE INCENTIVE COMPENSATION PLAN
1. PURPOSE
-------
The purpose of the Long Term Performance Incentive Compensation Plan
("Plan") is to retain the services of key employees in positions which
contribute materially to the successful operation of the business of the
Corporation by rewarding such employees for their efforts in increasing the
earnings of the Corporation, thereby enhancing the long term value of the
Corporation to the shareholders. It is intended that this purpose will be
effected through the granting of performance units, as provided herein.
2. DEFINITIONS
-----------
As used in the Plan, the following terms when capitalized, shall have
the meanings set forth below:
"Award" shall mean the granting by the Committee of Units in
accordance with this Plan.
"Base Value" shall, with respect to a particular Window Period, be
the amount which is subtracted from the Earnings
Value to produce the Redemption Value and shall have
the value set forth in the Base Value Schedule. The
Committee shall establish the Base Values for each
Award of Units made.
"Board of Directors" means the Board of Directors of Martin Marietta
Corporation.
"Chairman" means the Chairman of the Board of Directors and
Chief Executive Officer.
"Committee" means the Compensation Committee of the Board of
Directors.
"Corporation" means Martin Marietta Corporation and its
Subsidiaries.
<PAGE>
"Early Retirement" has the meaning set forth in paragraph 2 of Article
IV of the Martin Marietta Retirement Income Plan for
Salaried Employees.
"Earnings Per Share" means the Corporation's annual net earnings per share
as set forth on its audited consolidated Financial
Statements, prepared in accordance with generally
accepted accounting principles, and which have been
audited by the Corporation's independent auditors in
accordance with generally accepted auditing standards
and filed with the Securities and Exchange Commission
on Form 10-K, as may be adjusted in accordance with
Section 6(c).
"Earnings Value" of a Unit means, for a particular Window Period, the
product of (i) the Corporation's Earnings Per Share
for the immediately preceding calendar year,
multiplied by (ii) the Multiplier applicable to the
Award of the Unit.
"Employee" means officers and other key employees of the
Corporation but excludes directors who are not also
officers or employees of the Corporation.
"Multiplier" means the number set forth on the Base Value Schedule
which is multiplied by Earnings Per Share to produce
the Earnings Value for a particular Window Period.
The Committee shall establish a Multiplier for each
Award of Units it makes.
"Normal Retirement" means retirement on or after the normal retirement
date, as defined in subparagraph (a), paragraph 1 of
Article IV of the Martin Marietta Retirement Income
Plan for Salaried Employees.
"Participant" means an Employee who is awarded Units under the
Plan.
"Redemption Value" of a Unit means, with respect to a particular Window
Period, the difference, if any, between the Earnings
Value for that year and the Base Value for that year.
If the difference is zero or a negative number, the
Redemption Value for that Window Period will be
zero.
"Subsidiary" means a corporation of which Martin Marietta
Corporation owns, directly or indirectly, stock
having at least 50% of the power to vote, under
normal circumstances, in the election of directors.
"Unit" means a non-monetary award under this Plan
representing a promise by the Corporation to pay an
amount in accordance with the terms of this Plan.
2
<PAGE>
"Window Period" means the thirty (30) day period each year during
which Participants may exchange vested Units for the
Redemption Value. The period will commence on a date
stated in written notification to Participants of the
Earnings Value for that year, such notification to be
provided as soon as practicable after the public
announcement of the Corporation's Earnings Per Share
for the immediately preceding year.
3. EFFECTIVE DATE
--------------
The Plan will become effective on November 12, 1990.
4. ELIGIBLE EMPLOYEES
------------------
Awards of Units may be granted only to exempt salaried employees of the
Corporation.
5. TERMS OF AWARDS OF UNITS
------------------------
Awards of Units under this Plan will be made from time to time by the
Committee. Units awarded to Employees may be exchanged by such Employee for the
Redemption Value of the Units in accordance with the terms of this Plan.
(a) Except as provided in Sections 6 and 7, each Award of Units shall be
divided into three approximately equal installments of one hundred (100)
Unit increments. If the Participant is still an Employee on the December 31
following the one year anniversary of an Award of Units, the first
installment of such Award shall become vested on that December 31. If the
Participant is still an Employee on the December 31 following the second
anniversary of an Award of Units, the second installment of such Award
shall become vested on that December 31. If the Participant is still an
Employee on the December 31 following the third anniversary of an Award of
the Units, the third installment of such Award shall become vested on that
December 31. To the extent an Award is not divisible by one hundred (100),
the portion not divisible by one hundred (100) shall be allotted to the
third installment. To the extent that the installments of an Award are not
equal in number of Units, the smaller installment or installments of such
Award shall be allotted to the earlier installments.
(b) For each Award of Units, there will be six (6) Window Periods available
for exchanging vested Units for the Redemption Value. Vested Units may be
exchanged for their Redemption Value in one hundred (100) Unit increments
in the first Window Period immediately following the date on which the
first installment of that Award vests and in each of the next five Window
Periods. All vested Units not previously exchanged for their Redemption
Value shall be exchanged in the sixth and final Window Period applicable to
that Award. If the Redemption Value for the sixth and final Window
3
<PAGE>
Period is zero, the Units will be cancelled. Except as set forth in
Sections 6(b) and (d), vested Units may be exchanged for their Redemption
Value only at the times set forth in this Section 5(b).
(c) The amount exchanged for the Units during a Window Period will be equal
to the Redemption Value times the number of Units being exchanged. The
Corporation shall pay the Redemption Value for Units from its general
assets. Payments will be made in a single lump sum cash payment as soon as
practicable after the Participant indicates his intent to exchange all or
part of his vested Units during a Window Period.
(d) A Unit shall not be assignable or transferable by the Participant to
whom granted otherwise than by will or by the laws of descent and
distribution and shall be exercisable during the Participants' lifetime
only by the Participant or in the event of disability by the legal guardian
or representative.
(e) An Award of Units will be evidenced by a certificate that will specify
the number of Units, the Base Values, and the Multiplier applicable to the
Award.
6. ADJUSTMENTS
-----------
(a) If there shall be any significant change affecting the outstanding
number of shares of the Corporation's common stock through merger,
consolidation, reorganization, recapitalization, stock dividend, stock
split or combination, or otherwise, the Committee may make appropriate
proportional adjustments to the aggregate number of Units or the Base Value
Schedule to be consistent with the purposes of this Plan.
(b) In the event of a proposed dissolution or liquidation of the
Corporation, each Unit awarded under the Plan shall terminate as of a date,
to be fixed by the Committee. The date shall in no event be later than the
Window Period following the sixth anniversary of the Award of the Units. At
least thirty (30) days' written notice of the date so fixed shall be given
to each Employee awarded Units (or other person entitled to exercise the
Unit). Such Employee (or other person entitled to exercise the Unit) shall
have the right (provided that by the date of exchange of the Unit the
Employee remained in the employ of the Corporation for at least one year
from the date the Unit was awarded) during the period of thirty (30) days
preceding such termination to exchange any or all of the Units for the
Redemption Value paid for Units in that Award in the immediately preceding
Window Period, or if the date for exchange would fall within a Window
Period, the Redemption Value applicable to that Award in that Window
Period. The right to exchange Units shall apply to all Units, including
those which would not otherwise be vested.
(c) In the event that there is an unusual nonrecurring event or events that
significantly affects the Corporation's Earnings Per Share in a particular
year, the Committee may in its sole discretion, consistent with the
purposes of the Plan and subject to ratification by the Board of Directors,
make an adjustment to the Earnings Per Share (solely for the purposes of
this Plan) so that the Earnings Value for the applicable Window Period is
determined without regard to the nonrecurring event or
4
<PAGE>
events.
(d) In the event of a Change of Control, all Units, including Units as to
which such exchanges would not otherwise then be vested, shall, within
sixty (60) days of the Change of Control, be exchanged for the Redemption
Value paid for Units in the immediately preceding Window Period, or if the
date for exchange would fall within a Window Period, the Redemption Value
applicable to that Window Period.
For purposes of this paragraph, the term "Change of Control" shall mean the
following:
(i) A tender offer or exchange offer is made whereby the effect of
such offer is to take over and control the affairs of the Corporation
and such offer is consummated for the ownership of securities of the
Corporation representing 25% or more of the combined voting powers of
the Corporation's then outstanding voting securities.
(ii) The Corporation is merged or consolidated with another
corporation and, as a result of such merger or consolidation, less
than 75% of the outstanding voting securities of the surviving or
resulting corporation shall then be owned in the aggregate by the
former stockholders of the Corporation, other than affiliates within
the meaning of the Securities Exchange Act of 1934 (the "Exchange
Act") or any party to such merger or consolidation.
(iii) The Corporation transfers substantially all of its assets to
another corporation or entity which is not a wholly owned Subsidiary
of the Corporation.
(iv) Any "person" (as such term is used in Sections 3(a)(9) and
13(d)(3) of the Exchange Act) is or becomes the beneficial owner,
directly or indirectly, of securities of the Corporation representing
25% or more of the combined voting power of the Corporation's then
outstanding securities, and the effect of such ownership is to take
over and control the affairs of the Corporation.
(v) During any period of two (2) consecutive years, individuals who
at the beginning of such period constitute the Board of Directors of
the Corporation cease for any reason to constitute at least a majority
thereof unless the election, or the nomination for election by the
Corporation's stockholders, of each new director was approved by a
vote of at least two thirds of the directors then still in office who
were directors at the beginning of the period. For purposes of the
Plan, ownership of voting securities shall take into account and
include ownership as determined by applying the provisions of
Rule 13d-3(d)(1)(i) of the Exchange Act (as then in effect).
7. DEATH. TERMINATION OF EMPLOYMENT. OR RETIREMENT
-----------------------------------------------
(a) If a Participant dies while employed by the Corporation, the
Participant's Units will be exchanged for the Redemption Value in the
Window Period coincident with or next following the date
5
<PAGE>
of the death of the Participant, whichever is earlier. In cases of Normal
Retirement or of disability, Units may be exchanged in any of the three
Window Periods coincident with or next following the date of retirement or
disability, whichever is earlier, but in no event later than the sixth
Window Period applicable to that Award of the Units. In cases of
termination of a Participant's employment by the Corporation, with or
without cause, or Early Retirement (except as provided in Section 7(b)),
the Units will be exchanged during the Window Period coincident with or
next following the date of termination of employment, whichever is earlier.
Nothing contained in the Plan or in any Unit granted hereunder shall confer
upon any Employee any right of continued employment by the Corporation nor
limit in any way the right of the Corporation to terminate the Employee's
employment at any time.
(b) Except as otherwise provided in this Paragraph, a Unit may be exchanged
pursuant to this Section 7 only to the extent the Participant was vested at
the time of termination of employment or as provided in Section 6 and, in
any event, may not be exchanged later than the sixth Window Period
applicable to that Award. In the event a Participant ceases to be an
Employee, the Units which are not vested at the time of his termination
shall be cancelled and the Participant shall have no right to exchange any
cancelled Units for their Redemption Value.
In cases of death or disability while employed by the Corporation or Normal
Retirement where an Employee has applied for and is receiving benefits
pursuant to a retirement plan for Martin Marietta salaried employees, all
outstanding Units shall become vested upon such death, disability, or
Normal Retirement and may be exchanged pursuant to Section 6 or as provided
in Section 7. In cases of Early Retirement where a Participant has applied
for and is receiving benefits pursuant to a retirement plan for Martin
Marietta salaried employees, all outstanding Units shall become vested upon
such Early Retirement at the discretion of the Chairman, and, to the extent
vested, may be exchanged pursuant to Section 6 or as provided in Section 7.
8. LEAVE OF ABSENCE
----------------
For the purpose of the Plan, an Employee on leave of absence will
be considered as still in the employ of the Corporation unless otherwise
provided in an agreement between the Employee and the Corporation.
9. ADMINISTRATION
--------------
(a) The Committee
(i) Except where discretion is specifically delegated to the
Chairman in Section 7(b), the Plan shall be administered by the
Compensation Committee of the Board of Directors. Notwithstanding the
foregoing, if the rights of the Chairman under Section 7(b) to Units
under this Plan are at issue, the Committee, and not the Chairman,
shall have the discretion to make any determination with respect to
the rights of the Chairman.
6
<PAGE>
(ii) A majority of the members of the Committee shall constitute a
quorum. The vote of a majority of a quorum shall constitute action by
the Committee.
(iii) The Committee shall determine the Employees who will participate
in the Plan, the number of Units subject to each Award, and shall have
the authority to adopt rules and regulations for administering the
Plan.
(iv) Whenever the Committee makes an Award of Units, the Committee
shall determine the Base Values and the Multiplier applicable to the
Units in the Award.
(v) As and to the extent authorized by the Board of Directors or the
By-Laws, the Committee may exercise the powers and authority related
to the Plan which are vested in the Board of Directors. The Committee
may delegate to the officers or Employees of the Corporation the
authority to execute and deliver documents and to take such other
steps deemed necessary or convenient for the efficient administration
of the Plan.
(vi) As soon as practicable after the Corporation announces its
Earnings Per Share, the Committee will determine whether any
adjustments are necessary pursuant to Section 6(a).
(b) Finality of Determinations
The Board of Directors shall have the power to interpret the Plan. All
interpretations, determinations, and actions by the Board of Directors, by
the Chairman or by the Committee, to the extent authorized by the Plan, the
Board of Directors or the By-laws shall be final, conclusive, and binding
upon all parties.
10. AMENDMENT
---------
The Board of Directors shall have the power, in its discretion, to amend or
modify the Plan.
7
<PAGE>
EXHIBIT 10(iii)(n)
AMENDED AND RESTATED
MARTIN MARIETTA CORPORATION LONG TERM
PERFORMANCE INCENTIVE COMPENSATION PLAN
February 25, 1993
August 27, 1994 (Amended)
1. PURPOSE
-------
The purpose of the Amended and Restated Long Term Performance Incentive
Compensation Plan ("Plan") is to retain the services of key employees in
positions which contribute materially to the successful operation of the
business of the Corporation by rewarding such employees for their efforts in
increasing the earnings of the Corporation, thereby enhancing the long-term
value of the Corporation to the shareholders. It is intended that this purpose
will be effected through the granting of performance units, as provided herein.
The Plan was originally adopted by the Compensation Committee of the Board of
Directors on November 12, 1990. The Plan was amended and restated by the Board
of Directors, effective July 23, 1992. All Awards granted prior to July 23, 1992
will be governed by the terms of the Plan as adopted on November 12, 1990. All
Awards granted on or after that date shall be governed by this Amended and
Restated Plan.
2. DEFINITIONS
-----------
As used in the Plan the following terms when capitalized, shall have the
meanings set forth below:
"Award" shall mean the granting by the Committee of Units in
accordance with this Plan.
"Base Earnings Share" shall mean, with respect to a particular Redemption
Period for an Award, the value established by the
Committee for use in computing the Redemption Value.
"Board of Directors" means the Board of Directors of Martin Marietta
Corporation.
"Chairman" means the Chairman of the Board of Directors and
Chief Executive Officer.
"Committee" means the Compensation Committee of the Board of
Directors.
"Corporation" means Martin Marietta Corporation and its
Subsidiaries.
"Earnings Per Share" means the Corporation's annual net earnings per share
for the fiscal year
1
<PAGE>
LONG TERM PERFORMANCE INCENTIVE COMPENSATION PLAN
- -------------------------------------------------
immediately preceding a Redemption Period as set
forth on its audited consolidated financial
statements, prepared in accordance with generally
accepted accounting principles, and which have been
audited by the Corporation's independent auditors in
accordance with generally accepted auditing standards
and as will be filed with the Securities and Exchange
Commission on Form 10-K, but as may be adjusted in
accordance with Section 6(c).
"Employee" means officers and other key employees of the
Corporation but excludes directors who are not also
officers or employees of the Corporation.
"Multiplier" means the number which is used to obtain the
Redemption Value for a particular Redemption Period
for an Award. The Committee shall establish a
Multiplier for each Award of Units it makes.
"Participant" means an Employee who is awarded Units under the
Plan.
"Redemption Period" shall mean the time period designated by the
Committee during which Units may be exchanged for the
Redemption Value.
"Redemption Value" of a Unit means, the dollar value resulting from the
product of the Multiplier, and the result of
subtracting the Base Earnings Per Share from the
Earnings Per Share for the applicable Redemption
Period. If the Earnings Per Share is less than or
equal to the Base Earnings Per Share, the Redemption
Value for that Redemption Period will be zero.
"Subsidiary" means a corporation of which Martin Marietta
Corporation owns, directly or indirectly, stock
having at least 50% of the power to vote, under
normal circumstances, in the election of directors.
"Unit" means a non-monetary award under this Plan
representing a promise by the Corporation to pay an
amount in accordance with the terms of this Plan.
3. EFFECTIVE DATE
--------------
The Plan was originally effective on November 12, 1990; as amended and
restated, it is effective on July 23, 1992.
4. ELIGIBLE EMPLOYEES
------------------
2
<PAGE>
LONG TERM PERFORMANCE INCENTIVE COMPENSATION PLAN
- -------------------------------------------------
Awards of Units may be granted only to exempt salaried employees of the
Corporation.
5. TERMS OF AWARDS OF UNITS
------------------------
Awards of Units under this Plan will be made from time to time by the
Committee. Units awarded to Employees on or after July 23, 1992 may be exchanged
by such Employee for the Redemption Value of the Units in accordance with the
terms of this Amended and Restated Plan.
(a) For each Award of Units, the Committee shall determine the following
terms:
(i) whether the Units in the Award are non forfeitable immediately or
the terms or conditions under which all or a portion of any Award shall
become non forfeitable;
(ii) the Redemption Period or Periods applicable to such Award;
(iii) the Base Earnings Per Share(s) and Multiplier(s) applicable to the
Redemption Period(s) for each such Award; and
(iv) such other terms as the Committee deems appropriate.
An Award of Units may have one or multiple Redemption Periods, Base
Earnings Per Share, or Multipliers applicable to it.
(b) An Award of Units shall be evidenced by a certificate that will specify
the number of Units and the terms designated as applicable to that Award by
the Committee in accordance with Section 5(a) above, a form of which shall
be made an Exhibit to this Plan.
(c) The amount exchanged for the Units during a Redemption Period will be
equal to the Redemption Value times the number of Units being exchanged.
The Corporation shall pay the Redemption Value for Units from its general
assets. Payments will be made in a single lump sum cash payment during the
Redemption Period or as soon as practicable thereafter.
(d) A Unit shall not be assignable or transferable by the Participant to
whom granted otherwise than by will or by the laws of descent and
distribution and shall be exercisable during the Participant's lifetime
only by the Participant or in the event of disability by the legal guardian
or authorized representative of such Participant.
6. ADJUSTMENTS
-----------
(a) If there shall be any significant change affecting the outstanding
number of shares of the Corporation's common stock through merger,
consolidation, reorganization, recapitalization, stock dividend, stock
split or combination, or otherwise, the Committee may make
3
<PAGE>
LONG TERM PERFORMANCE INCENTIVE COMPENSATION PLAN
- -------------------------------------------------
appropriate proportional adjustments to the aggregate number of Units or
such terms described in Section 5(a) as is necessary to be consistent with
the purposes of this Plan.
(b) In the event that there is an unusual nonrecurring event or events that
significantly affects the Corporation's Earnings Per Share in a particular
year, the Committee may in its sole discretion, consistent with the
purposes of the Plan and subject to ratification by the Board of Directors,
make an adjustment to the Earnings Per Share (solely for the purposes of
this Plan) so that the Earnings Per Share for the applicable Redemption
Period is determined without regard to the nonrecurring event or events.
(c) In the event of a proposed dissolution or liquidation of the
Corporation, each Unit awarded under the Plan shall terminate as of a date,
to be fixed by the Committee. At least thirty (30) days' written notice of
the date so fixed shall be given to each Employee awarded Units (or other
person entitled to exercise the Unit). During the period of thirty (30)
days preceding such termination, all outstanding Units shall be exchanged
for the Redemption Value paid for Units in that Award in the immediately
preceding Redemption Period applicable to that Award, or if the date for
exchange would fall within a Redemption Period, the Redemption Value
applicable to that Award in that Redemption Period, or if there has not yet
been a Redemption Period for such Units, the Redemption Value will be $1.00
per Unit. The right to exchange Units shall apply to all Units, including
those which would not otherwise be vested.
(d) In the event of a Change of Control, all Units, including Units which
are not yet vested, shall, within sixty (60) days of the Change of Control,
be exchanged for a Redemption Value based upon using 200% of the Base
Earnings Per Share applicable to each Award as the Earnings Per Share.
For purposes of this paragraph, the term "Change of Control" shall mean the
occurrence of the following transactions under circumstances where the
transaction was not approved by the affirmative vote of two-thirds of the
Continuing Directors (as that term is hereinafter defined):
(i) A tender offer or exchange offer is made whereby the effect of
such offer is to take over and control the affairs of the Corporation
and such offer is consummated for the ownership of securities of the
Corporation representing 25% or more of the combined voting powers of
the Corporation's then outstanding voting securities.
(ii) The Corporation is merged or consolidated with another
corporation and, as a result of such merger or consolidation, less
than 75% of the outstanding voting securities of the surviving or
resulting corporation shall then be owned in the aggregate by the
former stockholders of the Corporation, other than affiliates within
the meaning of the Securities Exchange Act of 1934 (the "Exchange
Act") or any
4
<PAGE>
LONG TERM PERFORMANCE INCENTIVE COMPENSATION PLAN
- -------------------------------------------------
party to such merger or consolidation.
(iii) The Corporation transfers substantially all of its assets to
another corporation or entity which is not a wholly owned Subsidiary
of the Corporation.
5
<PAGE>
LONG TERM PERFORMANCE INCENTIVE COMPENSATION PLAN
- -------------------------------------------------
(iv) Any "person" (as such term is used in Sections 3(a)(9) and
13(d)(3) of the Exchange Act) is or becomes the beneficial owner,
directly or indirectly, of securities of the Corporation representing
25% or more of the combined voting power of the Corporation's then
outstanding securities, and the effect of such ownership is to take
over and control the affairs of the Corporation.
(v) As the result of a tender offer, merger, consolidation, sale of
assets, or contested election, or any combination of such
transactions, the persons who were members of the Board of Directors
of the Corporation immediately before the transaction, cease to
constitute at least a majority thereof.
(e) In the event that a transaction occurs that would be a Change of
Control under Section 6(d) but for the fact that the transaction was approved by
the affirmative vote of two-thirds of the Continuing Directors (as that term in
hereinafter defined), each Unit including those not yet vested, shall within
sixty (60) days of the effective date of the transaction, be exchanged for an
amount to be determined by the Committee.
(f) For the purposes of this Section, the term "Continuing Directors"
shall mean a Director who either (a) was a member of the Board of Directors of
the Corporation immediately prior to the Change in Control; or (b) was
designated (before his or her election as director) as a Continuing Director by
a majority of the then Continuing Directors.
7. DEATH, TERMINATION OF EMPLOYMENT, OR RETIREMENT
-----------------------------------------------
(a) If a Participant's employment with the Corporation is terminated,
whether by the Participant or by the Corporation and in the latter case
whether with or without cause, then (i) Units which are not vested on the
effective date of such termination shall expire upon such termination and
(ii) those Units which are vested on the effective date of such termination
shall be exchanged during the earliest Redemption Period applicable to that
Award which is coincident with or following the date of termination.
(b) If a Participant retires from the Corporation prior to reaching age 65
but on or after reaching age 55, then (i) Units which are not vested on the
effective date of such retirement shall expire upon such retirement and
(ii) those Units which are vested on the effective date of such retirement
shall be exchanged during the earliest Redemption Period applicable to that
Award which is coincident with or following the date of retirement;
provided, however, that, in the sole discretion of the Chief Executive
Officer, Units which are not otherwise vested may become vested. In such
event, all outstanding Units shall be exchanged during the earliest
Redemption Period applicable to that Award which is coincident with or
following the date of retirement.
(c) If a Participant retires from the Corporation on or after reaching age
65 or ceases active
6
<PAGE>
LONG TERM PERFORMANCE INCENTIVE COMPENSATION PLAN
- -------------------------------------------------
employment with the Corporation as the result of a disability under
circumstances entitling the Participant to the commencement of benefits
under a long-term disability plan maintained by the Corporation, then (i)
all outstanding Units shall become vested and (ii) all outstanding Units
shall be exchanged during the earliest Redemption Period applicable to that
Award which is coincident with or following, the date of disability or
retirement.
(d) If a Participant dies while employed by the Corporation, then (i) all
outstanding Units shall become vested and (ii) all outstanding Units shall
be redeemed during the earliest Redemption Period applicable to that Award
which is coincident with or following the date of death. The Redemption
Value shall be paid to the Participant's estate.
(e) Nothing contained in the Plan or in any Unit granted hereunder shall
confer upon any Employee any right of continued employment by the
Corporation nor limit in any way the right of the Corporation to terminate
the Employee's employment at any time.
8. LEAVE OF ABSENCE
----------------
For the purpose of the Plan, an Employee on leave of absence will be
considered as still in the employ of the Corporation unless otherwise provided
in an agreement between the Employee and the Corporation.
9. ADMINISTRATION
--------------
(a) The Committee
(i) Except where discretion is specifically delegated to the Chief
Executive Officer in Section 7(b), the Plan shall be administered by
the Compensation Committee of the Board of Directors. Notwithstanding
the foregoing, if the rights of the Chief Executive Officer under
Section 7(b) to Units under this Plan are at issue, the Committee, and
not the Chief Executive Officer, shall have the discretion to make any
determination with respect to the rights of the Chief Executive
Officer.
(ii) A majority of the members of the Committee shall constitute a
quorum. The vote of a majority of a quorum shall constitute action by
the Committee.
(iii) The Committee shall determine the Employees who will participate
in the Plan, the number of Units subject to each Award, and shall have
the authority to adopt rules and regulations for administering the
Plan.
(iv) Whenever the Committee makes an Award of Units, the Committee
shall determine the terms of such Award as set forth in Section 5(a).
(v) As and to the extent authorized by the Board of Directors or the
By-Laws, the
7
<PAGE>
LONG TERM PERFORMANCE INCENTIVE COMPENSATION PLAN
- -------------------------------------------------
Committee may exercise the powers and authority related to the Plan
which are vested in the Board of Directors. The Committee may delegate
to the officers or employees of the Corporation the authority to
execute and deliver documents and to take such other steps deemed
necessary or convenient for the efficient administration of the Plan.
(vi) As soon as practicable after the Corporation announces its
Earnings Per Share, the Committee will determine whether any
adjustments are necessary pursuant to Section 6(a).
(b) Finality of Determinations
The Board of Directors shall have the power to interpret the Plan. All
interpretations, determinations, and actions by the Board of Directors, by
the Chief Executive Officer or by the Committee, to the extent authorized
by the Plan, the Board of Directors or the By-Laws shall be final,
conclusive, and binding upon all parties.
10. AMENDMENT
---------
The Board of Directors shall have the power, in its discretion, to amend or
modify the Plan, except that no amendment or other action shall, except with the
consent of the Participant, adversely affect any Award previously granted.
8
<PAGE>
EXHIBIT 11
MARTIN MARIETTA CORPORATION AND SUBSIDIARIES
FORM 10-K
For the Year Ended December 31, 1994
COMPUTATION OF EARNINGS (LOSS) PER COMMON SHARE
<TABLE>
<CAPTION>
Year Ended December 31
1994 1993 1992
---- ---- ----
ASSUMING NO DILUTION:
- --------------------
<S> <C> <C> <C>
Average number of common shares
outstanding (1) 95,929,404 95,346,614 95,868,708
============ ============= ============
Earnings before cumulative effect of
accounting changes $635,633,000 $ 450,289,000 $345,423,000
Less: Preferred stock dividends 60,000,000 45,333,000 -
------------ ------------- ------------
Earnings before cumulative effect of
accounting changes applicable to
common stock 575,633,000 404,956,000 345,423,000
Cumulative effect of accounting changes - (429,432,000) -
------------ ------------- ------------
Net earnings (loss) applicable to common stock $575,633,000 $ (24,476,000) $345,423,000
============ ============= ============
Earnings (loss) per common share:
Before cumulative effect of accounting
changes $6.00 $4.25 $3.60
Cumulative effect of accounting changes - (4.51) -
----- ----- -----
Net earnings (loss) $6.00 $(0.26) $3.60
===== ===== =====
</TABLE>
(1) Excludes common stock equivalents since the dilutive effect on earnings per
share assuming no dilution is less than 3%.
<PAGE>
EXHIBIT 11 - continued
MARTIN MARIETTA CORPORATION AND SUBSIDIARIES
FORM 10-K
For the Year Ended December 31, 1994
COMPUTATION OF EARNINGS (LOSS) PER COMMON SHARE
<TABLE>
<CAPTION>
Year Ended December 31
1994 1993 1992
---- ---- ----
ASSUMING FULL DILUTION:
- ----------------------
<S> <C> <C> <C>
Average number of common shares outstanding 95,929,404 95,346,614 95,868,708
Dilutive stock options - based on the treasury stock
method using the December 31 market price,
if higher than average market price 1,063,977 1,294,357 -
Assumed conversion of the Convertible Preferred
Stock from the date of issuance 28,941,466 21,706,100 -
------------ ------------ ----------
125,934,847 118,347,071 95,868,708
============ ============ ==========
Earnings before cumulative effect of accounting
changes applicable to common stock $575,633,000 $404,956,000 $345,423,000
Add: Preferred stock dividends 60,000,000 45,333,000 -
------------ ------------ ------------
Earnings before cumulative effect of
accounting changes applicable to
common stock 635,633,000 450,289,000 345,423,000
Cumulative effect of accounting changes - (429,432,000) -
------------ ------------ ------------
Net earnings applicable to common stock $635,633,000 $20,857,000 $345,423,000
============ ============ ============
Earnings per common share:
Before cumulative effect of accounting
changes $5.05 $3.80 $3.60
Cumulative effect of accounting changes - * -
----- ----- -----
Net earnings $5.05 $ * $3.60
===== ===== =====
</TABLE>
* Anti-dilutive
<PAGE>
EXHIBIT 12
MARTIN MARIETTA CORPORATION AND SUBSIDIARIES
FORM 10-K
For the Year Ended December 31, 1994
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(IN THOUSANDS, EXCEPT RATIO)
<TABLE>
<S> <C>
EARNINGS:
Net earnings $635,633
Taxes on income 436,300
Interest expense 121,881
Amortization of debt discount (premium) (7,111)
Portion of rents representative of an interest factor 22,752
Earnings of less than 50%-owned associated companies (556)
----------
Adjusted earnings before taxes and fixed charges $1,208,899
==========
FIXED CHARGES:
Interest expense $121,881
Amortization of debt discount and expense (7,111)
Portion of rents representative of an interest factor 22,752
Capitalized interest 2,706
----------
Total fixed charges $140,228
==========
RATIO OF EARNINGS TO FIXED CHARGES 8.62
==========
</TABLE>
<PAGE>
EXHIBIT 21
----------
Significant Subsidiaries
1) Martin Marietta Technologies, Inc.
Incorporated in Maryland
100% owned by Martin Marietta Corporation
2) Martin Marietta Materials, Inc.
Incorporated in North Carolina
81.1% owned by Martin Marietta Corporation
3) Martin Marietta Energy Systems, Inc.
Incorporated in Delaware
100% owned by Martin Marietta Corporation
<PAGE>
EXHIBIT 24
POWER OF ATTORNEY
I, Norman R. Augustine, individually and in my capacities as chief
executive officer and a director of Martin Marietta Corporation (the
"Corporation"), hereby constitute and appoint Frank H. Menaker, Jr. and Stephen
M. Piper, and each of them, with full power of substitution and resubstitution,
my true and lawful attorneys-in-fact to execute and file, in my name and in the
capacities indicated below, the Corporation's Annual Report on Form 10-K for the
year ended December 31, 1994, with exhibits thereto and other documents in
connection therewith and any and all amendments (including post-effective
amendments) or supplements thereto.
Name Capacities Date
- ---- ---------- ----
/s/ Norman R. Augustine Chief Executive February 23, 1995
- ------------------------- Officer and
Norman R. Augustine Director
<PAGE>
POWER OF ATTORNEY
I, Lamar Alexander, individually and in my capacity as a director of Martin
Marietta Corporation (the "Corporation"), hereby constitute and appoint Frank H.
Menaker, Jr. and Stephen M. Piper, and each of them, with full power of
substitution and resubstitution, my true and lawful attorneys-in-fact to execute
and file, in my name and in the capacity indicated below, the Corporation's
Annual Report on Form 10-K for the year ended December 31, 1994, with exhibits
thereto and other documents in connection therewith and any and all amendments
(including post-effective amendments) or supplements thereto.
Name Capacity Date
- ---- -------- ----
/s/ Lamar Alexander Director February 23, 1995
- ----------------------
Lamar Alexander
<PAGE>
POWER OF ATTORNEY
I, Marcus C. Bennett, individually and in my capacities as Director, Vice
President, Chief Financial and Chief Accounting Officer of Martin Marietta
Corporation (the "Corporation"), hereby constitute and appoint Frank H. Menaker,
Jr. and Stephen M. Piper, and each of them, with full power of substitution and
resubstitution, my true and lawful attorneys-in-fact to execute and file, in my
name and in the capacities indicated below, the Corporation's Annual Report on
Form 10-K for the year ended December 31, 1994, with exhibits thereto and other
documents in connection therewith and any and all amendments (including
post-effective amendments) or supplements thereto.
Name Capacities Date
- ---- ---------- ----
/s/ Marcus C. Bennett Director, Vice President, February 23, 1995
- ------------------------- Chief Financial and
Marcus C. Bennett Chief Accounting Officer
<PAGE>
POWER OF ATTORNEY
I, John J. Byrne, individually and in my capacity as a director of Martin
Marietta Corporation (the "Corporation"), hereby constitute and appoint Frank H.
Menaker, Jr. and Stephen M. Piper, and each of them, with full power of
substitution and resubstitution, my true and lawful attorneys-in-fact to execute
and file, in my name and in the capacity indicated below, the Corporation's
Annual Report on Form 10-K for the year ended December 31, 1994, with exhibits
thereto and other documents in connection therewith and any and all amendments
(including post-effective amendments) or supplements thereto.
Name Capacity Date
- ---- -------- ----
/s/ John J. Byrne Director February 23, 1995
- -------------------------
John J. Byrne
<PAGE>
POWER OF ATTORNEY
I, A. James Clark, individually and in my capacity as a director of Martin
Marietta Corporation (the "Corporation"), hereby constitute and appoint Frank H.
Menaker, Jr. and Stephen M. Piper, and each of them, with full power of
substitution and resubstitution, my true and lawful attorneys-in-fact to execute
and file, in my name and in the capacity indicated below, the Corporation's
Annual Report on Form 10-K for the year ended December 31, 1994, with exhibits
thereto and other documents in connection therewith and any and all amendments
(including post-effective amendments) or supplements thereto.
Name Capacity Date
- ---- -------- ----
/s/ A. James Clark Director February 23, 1995
- -------------------------
A. James Clark
<PAGE>
POWER OF ATTORNEY
I, Edwin I. Colodny, individually and in my capacity as a director of
Martin Marietta Corporation (the "Corporation"), hereby constitute and appoint
Frank H. Menaker, Jr. and Stephen M. Piper, and each of them, with full power of
substitution and resubstitution, my true and lawful attorneys-in-fact to execute
and file, in my name and in the capacity indicated below, the Corporation's
Annual Report on Form 10-K for the year ended December 31, 1994, with exhibits
thereto and other documents in connection therewith and any and all amendments
(including post-effective amendments) or supplements thereto.
Name Capacity Date
- ---- -------- ----
/s/ Edwin I. Colodny Director February 23, 1995
- -------------------------
Edwin I. Colodny
<PAGE>
POWER OF ATTORNEY
I, James L. Everett, III, individually and in my capacity as a director of
Martin Marietta Corporation (the "Corporation"), hereby constitute and appoint
Frank H. Menaker, Jr. and Stephen M. Piper, and each of them, with full power of
substitution and resubstitution, my true and lawful attorneys-in-fact to execute
and file, in my name and in the capacity indicated below, the Corporation's
Annual Report on Form 10-K for the year ended December 31, 1994, with exhibits
thereto and other documents in connection therewith and any and all amendments
(including post-effective amendments) or supplements thereto.
Name Capacity Date
- ---- -------- ----
/s/ James L. Everett, III Director February 23, 1995
- -------------------------
James L. Everett, III
<PAGE>
POWER OF ATTORNEY
I, Edward L. Hennessy, Jr., individually and in my capacity as a director
of Martin Marietta Corporation (the "Corporation"), hereby constitute and
appoint Frank H. Menaker, Jr. and Stephen M. Piper, and each of them, with full
power of substitution and resubstitution, my true and lawful attorneys-in-fact
to execute and file, in my name and in the capacity indicated below, the
Corporation's Annual Report on Form 10-K for the year ended December 31, 1994,
with exhibits thereto and other documents in connection therewith and any and
all amendments (including post-effective amendments) or supplements thereto.
Name Capacity Date
- ---- -------- ----
/s/ Edward L. Hennessy, Jr. Director February 23, 1995
- ---------------------------
Edward L. Hennessy, Jr.
<PAGE>
POWER OF ATTORNEY
I, Edward E. Hood, Jr., individually and in my capacity as a director of
Martin Marietta Corporation (the "Corporation"), hereby constitute and appoint
Frank H. Menaker, Jr. and Stephen M. Piper, and each of them, with full power of
substitution and resubstitution, my true and lawful attorneys-in-fact to execute
and file, in my name and in the capacity indicated below, the Corporation's
Annual Report on Form 10-K for the year ended December 31, 1994, with exhibits
thereto and other documents in connection therewith and any and all amendments
(including post-effective amendments) or supplements thereto.
Name Capacity Date
- ---- -------- ----
/s/ Edward E. Hood, Jr. Director February 23, 1995
- -------------------------
Edward E. Hood, Jr.
<PAGE>
POWER OF ATTORNEY
I, Caleb B. Hurtt, individually and in my capacity as a director of Martin
Marietta Corporation (the "Corporation"), hereby constitute and appoint Frank H.
Menaker, Jr. and Stephen M. Piper, and each of them, with full power of
substitution and resubstitution, my true and lawful attorneys-in-fact to execute
and file, in my name and in the capacity indicated below, the Corporation's
Annual Report on Form 10-K for the year ended December 31, 1994, with exhibits
thereto and other documents in connection therewith and any and all amendments
(including post-effective amendments) or supplements thereto.
Name Capacity Date
- ---- -------- ----
/s/ Caleb B. Hurtt Director February 23, 1995
- -------------------------
Caleb B. Hurtt
<PAGE>
POWER OF ATTORNEY
I, Gwendolyn S. King, individually and in my capacity as a director of
Martin Marietta Corporation (the "Corporation"), hereby constitute and appoint
Frank H. Menaker, Jr. and Stephen M. Piper, and each of them, with full power of
substitution and resubstitution, my true and lawful attorneys-in-fact to execute
and file, in my name and in the capacity indicated below, the Corporation's
Annual Report on Form 10-K for the year ended December 31, 1994, with exhibits
thereto and other documents in connection therewith and any and all amendments
(including post-effective amendments) or supplements thereto.
Name Capacity Date
- ---- -------- ----
/s/ Gwendolyn S. King Director February 23, 1995
- -------------------------
Gwendolyn S. King
<PAGE>
POWER OF ATTORNEY
I, Melvin R. Laird, individually and in my capacity as a director of
Martin Marietta Corporation (the "Corporation"), hereby constitute and appoint
Frank H. Menaker, Jr. and Stephen M. Piper, and each of them, with full power of
substitution and resubstitution, my true and lawful attorneys-in-fact to execute
and file, in my name and in the capacity indicated below, the Corporation's
Annual Report on Form 10-K for the year ended December 31, 1994, with exhibits
thereto and other documents in connection therewith and any and all amendments
(including post-effective amendments) or supplements thereto.
Name Capacity Date
- ---- -------- ----
/s/ Melvin R. Laird Director February 23, 1995
- -------------------------
Melvin R. Laird
<PAGE>
POWER OF ATTORNEY
I, Gordon S. Macklin, individually and in my capacity as a director of
Martin Marietta Corporation (the "Corporation"), hereby constitute and appoint
Frank H. Menaker, Jr. and Stephen M. Piper, and each of them, with full power of
substitution and resubstitution, my true and lawful attorneys-in-fact to execute
and file, in my name and in the capacity indicated below, the Corporation's
Annual Report on Form 10-K for the year ended December 31, 1994, with exhibits
thereto and other documents in connection therewith and any and all amendments
(including post-effective amendments) or supplements thereto.
Name Capacity Date
- ---- -------- ----
/s/ Gordon S. Macklin Director February 23, 1995
- -------------------------
Gordon S. Macklin
<PAGE>
POWER OF ATTORNEY
I, Eugene F. Murphy, individually and in my capacity as a director of
Martin Marietta Corporation (the "Corporation"), hereby constitute and appoint
Frank H. Menaker, Jr. and Stephen M. Piper, and each of them, with full power of
substitution and resubstitution, my true and lawful attorneys-in-fact to execute
and file, in my name and in the capacity indicated below, the Corporation's
Annual Report on Form 10-K for the year ended December 31, 1994, with exhibits
thereto and other documents in connection therewith and any and all amendments
(including post-effective amendments) or supplements thereto.
Name Capacity Date
- ---- -------- ----
/s/ Eugene F. Murphy Director February 23, 1995
- -------------------------
Eugene F. Murphy
<PAGE>
POWER OF ATTORNEY
I, Allen E. Murray, individually and in my capacity as a director of
Martin Marietta Corporation (the "Corporation"), hereby constitute and appoint
Frank H. Menaker, Jr. and Stephen M. Piper, and each of them, with full power of
substitution and resubstitution, my true and lawful attorneys-in-fact to execute
and file, in my name and in the capacity indicated below, the Corporation's
Annual Report on Form 10-K for the year ended December 31, 1994, with exhibits
thereto and other documents in connection therewith and any and all amendments
(including post-effective amendments) or supplements thereto.
Name Capacity Date
- ---- -------- ----
/s/ Allen E. Murray Director February 23, 1995
- -------------------------
Allen E. Murray
<PAGE>
POWER OF ATTORNEY
I, John W. Vessey, Jr., individually and in my capacity as a director of
Martin Marietta Corporation (the "Corporation"), hereby constitute and appoint
Frank H. Menaker, Jr. and Stephen M. Piper, and each of them, with full power of
substitution and resubstitution, my true and lawful attorneys-in-fact to execute
and file, in my name and in the capacity indicated below, the Corporation's
Annual Report on Form 10-K for the year ended December 31, 1994, with exhibits
thereto and other documents in connection therewith and any and all amendments
(including post-effective amendments) or supplements thereto.
Name Capacity Date
- ---- -------- ----
/s/ John W. Vessey, Jr. Director February 23, 1995
- -------------------------
John W. Vessey, Jr.
<PAGE>
POWER OF ATTORNEY
I, A. Thomas Young, individually and in my capacity as a director of
Martin Marietta Corporation (the "Corporation"), hereby constitute and appoint
Frank H. Menaker, Jr. and Stephen M. Piper, and each of them, with full power of
substitution and resubstitution, my true and lawful attorneys-in-fact to execute
and file, in my name and in the capacity indicated below, the Corporation's
Annual Report on Form 10-K for the year ended December 31, 1994, with exhibits
thereto and other documents in connection therewith and any and all amendments
(including post-effective amendments) or supplements thereto.
Name Capacity Date
- ---- -------- ----
/s/ A. Thomas Young Director February 23, 1995
- -------------------------
A. Thomas Young
<PAGE>
EXHIBIT 99(g)
GENERAL DYNAMICS SPACE SYSTEMS GROUP
COMBINED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
TOGETHER WITH AUDITORS' REPORT
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To General Dynamics Corporation:
We have audited the accompanying combined balance sheets of the GENERAL
DYNAMICS SPACE SYSTEMS GROUP as of December 31, 1993 and 1992, and the related
combined statements of operations and net investment and cash flows for each
of the three years in the period ended December 31, 1993. These combined
financial statements are the responsibility of the Group's management. Our
responsibility is to express an opinion on these combined financial statements
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 combined financial statements referred to above present
fairly, in all material respects, the financial position of the General
Dynamics Space Systems Group as of December 31, 1993 and 1992, and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 1993, in conformity with generally accepted
accounting principles.
The accompanying combined financial statements have been prepared assuming
that the Group will continue as a going concern. As discussed in Note 1, the
Group has suffered pretax losses from operations in each year since inception,
aggregating approximately $577 million as of December 31, 1993. These losses
have been funded by General Dynamics Corporation. These factors raise
substantial doubt about the Group's ability to operate on a standalone basis
without continued financial support. The accompanying combined financial
statements do not include any adjustments that might result from the outcome
of this uncertainty.
As discussed in Note 9 to the combined financial statements, effective January
1, 1993, the Group changed its method of accounting for postretirement
benefits other than pensions.
/s/ ARTHUR ANDERSEN & CO.
ARTHUR ANDERSEN & CO.
San Diego, California
January 20, 1994
<PAGE>
GENERAL DYNAMICS SPACE SYSTEMS GROUP
COMBINED BALANCE SHEETS
AS OF DECEMBER 31, 1993 AND 1992
<TABLE>
<CAPTION>
1993 1992
(Amounts in thousands)
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash $ 419 $ 170
Accounts receivable 31,427 4,896
Contracts in process 1,449,901 1,352,536
Other current assets 6,126 1,921
---------- ----------
Total current assets 1,487,873 1,359,523
NONCURRENT ASSETS:
Property, plant and equipment, net 80,769 87,455
---------- ----------
$1,568,642 $1,446,978
========== ==========
LIABILITIES AND NET INVESTMENT
CURRENT LIABILITIES:
Customer deposits $1,018,252 $ 862,839
Accounts payable and other current liabilities 94,668 93,103
Contract loss reserves 178,948 240,227
---------- ----------
Total current liabilities 1,291,868 1,196,169
DEFERRED TAXES 38,233 41,490
COMMITMENTS AND CONTINGENCIES
NET INVESTMENT BY GENERAL DYNAMICS CORPORATION 238,541 209,319
---------- ----------
$1,568,642 $1,446,978
========== ==========
</TABLE>
The accompanying notes are an integral part of
these combined balance sheets.
<PAGE>
GENERAL DYNAMICS SPACE SYSTEMS GROUP
COMBINED STATEMENTS OF OPERATIONS AND NET INVESTMENT
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
<TABLE>
<CAPTION>
1993 1992 1991
(Amounts in thousands)
<S> <C> <C> <C>
NET SALES $529,006 $504,650 $367,099
OPERATING COSTS AND EXPENSES 556,943 556,254 382,237
------- -------- --------
OPERATING LOSS (27,937) (51,604) (15,138)
OTHER INCOME (EXPENSES), net 3,359 (384) 1,062
-------- -------- --------
Loss before income taxes (24,578) (51,988) (14,076)
BENEFIT FOR INCOME TAXES 9,000 16,912 4,946
-------- -------- --------
Net loss (15,578) (35,076) (9,130)
NET INTERDIVISIONAL ACTIVITY 44,800 (73,904) 29,584
NET INVESTMENT BY GENERAL DYNAMICS
CORPORATION:
Beginning of period 209,319 318,299 297,845
-------- -------- --------
End of period $238,541 $209,319 $318,299
======== ======== ========
</TABLE>
The accompanying notes are an integral part of
these combined financial statements.
<PAGE>
GENERAL DYNAMICS SPACE SYSTEMS GROUP
COMBINED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
<TABLE>
<CAPTION>
1993 1992 1991
(Amounts in thousands)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(15,578) $(35,076) $ (9,130)
Adjustments to reconcile net
loss to net cash provided by (used in)
operating activities:
Depreciation and amortization 13,389 13,459 18,838
Deferred income taxes (3,257) 39,250 41,839
Investment write-off - 10,000 -
Decrease (increase) in:
Accounts receivable (26,531) 6,434 9,050
Contracts in process (97,365) (167,150) (237,868)
Other current assets (4,205) 2,696 1,005
Increase (decrease) in:
Customer deposits 155,413 180,704 196,445
Accounts payable and other
current liabilities 1,565 27,110 17,740
Contract loss reserves (61,279) 2,061 (44,834)
--------- -------- --------
Net cash provided by (used in)
operating activities (37,848) 79,488 (6,915)
--------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant
and equipment (6,703) (5,431) (22,654)
--------- -------- --------
Net cash used in investing
activities (6,703) (5,431) (22,654)
--------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net interdivisional activity 44,800 (73,904) 29,584
--------- -------- --------
Net cash provided by (used in)
financing activities 44,800 (73,904) 29,584
--------- -------- --------
NET INCREASE IN CASH $ 249 $ 153 $ 15
CASH AT BEGINNING OF YEAR 170 17 2
--------- --------- ---------
CASH AT END OF YEAR $ 419 $ 170 $ 17
========= ========= =========
SUPPLEMENTAL DISCLOSURES:
Notes received as customer deposits $ 67,616 $ 39,774 $ -
========= ========= =========
</TABLE>
The accompanying notes are an integral part of
these combined financial statements.
<PAGE>
GENERAL DYNAMICS SPACE SYSTEMS GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1992 AND 1991
(Amounts in thousands)
1. DESCRIPTION OF BUSINESS AND SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES
Description of Business
The General Dynamics Space System Group (the Group) specializes in the
design, engineering, manufacturing and support of space launch vehicles and
related launch services. The major programs of the Group include the
Commercial Atlas Expendable Launch Vehicle (Atlas) program and the
Titan/Centaur program (Titan). Atlas includes the production and launch of
Atlas/Centaur vehicles for various U.S. and foreign Government, Civil, and
commercial customers. Titan includes the production of fifteen Centaur upper
stages for launch on the Titan IV launch vehicle. The Group is a
subcontractor to Martin Marietta on Titan.
Reporting Entity, Principles of Consolidation
The accompanying combined financial statements of the Group include the
accounts of General Dynamics Space Systems Division (GDSS), which is the
primary operating entity providing launch vehicles and services. GDSS is a
division of General Dynamics Corporation (GD). Also included are the accounts
of Commercial Launch Services, Inc., which is a wholly owned subsidiary of GD
that provides sales and marketing services to GDSS, and General Dynamics
Space Services Corporation, also a wholly owned subsidiary of GD which
provides engineering services to GDSS and other corporations in the aerospace
industry.
All intercompany transactions within the Group have been eliminated.
Assumption Regarding Going Concern
The accompanying combined financial statements have been prepared assuming
that the Group will continue as a going concern. The Group has suffered
pretax losses from operations in each year since inception, aggregating
approximately $577 million as of December 31, 1993. These losses have been
funded by GD. These factors raise substantial doubt about the Group's ability
to operate on a standalone basis without continued financial support. The
accompanying combined financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
<PAGE>
Asset Purchase Agreement
On December 22, 1993, GD and Martin Marietta Corporation entered into an Asset
Purchase Agreement (the Agreement) to sell certain assets and liabilities of
the Group (excluding primarily certain property, plant and equipment) to
Martin Marietta Corporation for approximately $208,500, subject to certain
post-closing adjustments. GD management expects the transaction to be
completed during the second quarter of 1994.
Sales and Earnings Under Long-Term Contracts and Programs
The Atlas program is accounted for using the completed contract method of
accounting. Sales are recognized upon launch at the contract price. Atlas
revenues approximated $273,000, $245,000 and $130,000 for the years ended
December 31, 1993, 1992 and 1991, respectively. Cost of sales is based upon
the estimated unit cost. General and administrative expenses and product
development costs are treated as contract costs to the extent allocable to a
firm contract, otherwise these costs are expensed as incurred.
All other programs and contracts are accounted for using the
percentage-of-completion method of accounting. Sales and earnings on fixed
price type and cost reimbursement contracts are recognized as costs are
incurred on each individual contract. The sales and earnings on these
contracts are based, in part, on estimates. These estimates are revised
periodically and adjustments to sales and earnings resulting from such
revisions are recorded on a cumulative basis in the period of revision.
Any anticipated losses on contracts or programs are charged to earnings when
identified. Such losses encompass all costs, including general and
administrative expenses, allocable to the contracts. Revenue arising from the
claims process is not recognized either as income or as an offset against a
potential loss until it can be reliably estimated and its realization is
probable.
General and Administrative Expenses
General and administrative expenses are allocated to contracts in process and
included in operating costs and expenses at the time of sales recognition with
the exception of certain Atlas contracts as discussed above. Total general
and administrative expenses incurred amounted to approximately $65,000 in
1993, $62,000 in 1992, and $60,000 in 1991.
Certain GD corporate general and administrative costs attributed to the
Group's operations are charged to the Group by GD. Total allocated corporate
expenses were approximately $12,000, $8,000 and $5,000 in 1993, 1992 and 1991,
respectively. No assurances can be given that such expenses would not vary
significantly if the Group had operated as an unaffiliated entity.
<PAGE>
Research and Development Costs
Customer-sponsored research and development costs are accounted for as direct
costs.
Company-sponsored research and development costs, including bid and proposal
costs, amounted to approximately $9,000 in 1993, $12,000 in 1992 and $10,000 in
1991. Specifically reimbursable costs are allocated to contracts in process and
included in operating costs and expenses at time of sales recognition.
Contracts in Process
Contracts in process for the Atlas program are stated at cost incurred less
cost allocated to delivered units. All other contracts in process are stated
at cost incurred, plus estimated earnings, less progress payments. Incurred
costs consist of, among other things, production costs and related overhead,
which includes general and administrative expenses allocated to contracts.
Revenue which has not yet been billed is included in contracts in process.
Property, Plant and Equipment
The Group uses straight-line and accelerated methods of depreciation for its
depreciable assets.
Customer Deposits
Customer deposits represent primarily advance payments from Atlas program
customers. In the event of contract termination, a certain portion of the
deposit would be refunded to the customer in accordance with contract terms.
At December 31, 1993, customer deposits are net of $67,616 of notes receivable
from a related party received in connection with one specific contract in the
Atlas program. These notes are due 60 days prior to launch, which is currently
scheduled for the fourth quarter of 1994, and bear interest at rates ranging
from 6.5% to 7%.
Classification
Consistent with industry practice, contracts in process, customer deposits and
other assets and liabilities relating to long-term contracts and programs are
classified as current although a portion of these amounts is not expected to
be realized within one year.
<PAGE>
2. ATLAS PROGRAM
During 1993, 1992 and 1991, the Group recognized $29,000, $53,000 and
$8,000, respectively, of losses on certain contracts in the Atlas program
representing primarily the costs to investigate launch failures, related
corrective actions, the estimated impact of launch delays on existing
contracts, and certain other increases in expected costs.
All of the aforementioned losses, as well as losses identified in
earlier periods, have been reflected in contract loss reserves in the
accompanying balance sheets.
The Group's investment in the Atlas program includes recorded amounts
of inventoried costs, customer deposits and liabilities relating to the
previously discussed losses. The Group's ability to recover its significant
investment in the Atlas program is dependent upon, among other things, the
vehicle demonstrating the level of reliability required by its customers. In
addition, the Group has a remaining firm commitment for the purchase of rocket
engines of approximately $300,000 and other firm commitments of approximately
$165,000 as of December 31, 1993.
3. ACCOUNTS RECEIVABLE
Accounts receivable consist of the following as of December 31:
<TABLE>
<CAPTION>
1993 1992
<S> <C> <C>
Government: long-term contracts
or programs $13,172 $2,212
Commercial and other 18,255 2,684
------- ------
$31,427 $4,896
======= ======
</TABLE>
Direct sales to the U.S. Government were approximately $387,000, $359,000, and
$243,000 in 1993, 1992 and 1991, respectively.
4. CONTRACTS IN PROCESS
Contracts in process consist of the following as of December 31:
<TABLE>
<CAPTION>
1993 1992
<S> <C> <C>
Government contracts in process $ 194,969 $ 298,453
Commercial programs in process 1,385,138 1,289,883
---------- ----------
1,580,107 1,588,336
Less--Advances and progress payments (130,206) (235,800)
---------- ----------
$1,449,901 $1,352,536
========== ==========
</TABLE>
<PAGE>
Substantially all government contracts in process represent unbilled costs
incurred plus estimated earnings that will be billed to the customer upon the
completion of certain milestones.
Under the contractual arrangements by which progress payments are received,
the U.S. Government asserts that it has a security interest in the contracts
in process identified by the related contracts.
5. PROPERTY, PLANT AND EQUIPMENT, NET
Property, plant and equipment is stated at cost. The major classes of
property, plant and equipment are as follows:
<TABLE>
<CAPTION>
1993 1992
<S> <C> <C>
Land and improvements $ 1,750 $ 1,750
Buildings and improvements 75,564 72,660
Machinery and equipment 80,299 76,500
-------- --------
157,613 150,910
Less--Accumulated depreciation
and amortization (76,844) (63,455)
-------- --------
$ 80,769 $ 87,455
======== ========
</TABLE>
Certain plant facilities aggregating approximately 815 square feet are
provided by the U.S. Government at an annual lease cost of approximately $873.
6. ACCOUNTS PAYABLE AND OTHER CURRENT LIABILITIES
Accounts payable and other current liabilities consist of the following at
December 31:
<TABLE>
<CAPTION>
1993 1992
<S> <C> <C>
Accounts payable $57,358 $73,178
Accrued salaries and wages 17,654 12,982
Other current liabilities 19,656 6,943
------- -------
$94,668 $93,103
======= =======
</TABLE>
7. INCOME TAXES
The Group is included in GD's consolidated federal income tax return. Under the
provisions of an informal tax sharing agreement with GD, the Group computes
federal income taxes to approximate a separate company basis. Taxes currently
payable or refundable based on this computation are reflected in the Group's
intercompany account balance with GD. Such intercompany balance is reflected in
Net Investment by General Dynamics Corporation in the accompanying combined
financial statements. Deferred taxes are shown separately in the accompanying
combined financial statements.
<PAGE>
The benefit for federal income taxes is summarized as follows:
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
Current $ (5,743) $(56,162) $(46,785)
Deferred (3,257) 39,250 41,839
---------- ---------- ----------
$ (9,000) $ (16,912) $ (4,946)
========== ========== ==========
</TABLE>
Deferred federal income taxes result primarily from differences in accounting
for long-term contracts, certain accrued costs, contract loss reserves, and
depreciation for financial reporting and income tax reporting purposes.
Earnings under long-term contracts (other than Atlas, see Note 1) are recorded
either under the percentage-of-completion or completed contract methods of
accounting for income tax reporting purposes.
The provision for state and local income taxes, which is primarily allocable
to U.S. Government contracts, is included in operating costs and expenses.
8. COMMITMENTS AND CONTINGENCIES
Outsourcing of Information Technology Operations
In November 1991, GD signed an agreement with Computer Sciences
Corporation (CSC) for the sale of the information technology operations of GD's
Data Systems Division. Under a related agreement, CSC has the exclusive right to
provide information technology services to the Group for the next ten years. The
agreement provides for minimum aggregate payments to CSC during the first three
years of the service agreement and payments equal to 90 percent of the Company's
estimated annual usage thereafter.
Atlas Program Commitments
The Group has offered different types of launch insurance coverage to
its customers under certain Atlas contracts. This insurance coverage is
generally designed to protect the customer from incurring losses relating to
any one or a combination of the following:
- Launch failure
- Damage or other loss to the satellite during launch and flight
- Satellite performance for specified period subsequent to launch
Generally, the Group has sold this insurance to its customers at fixed
premium rates. However, the Group generally does not purchase the related
insurance until sometime thereafter. The future availability and cost of this
insurance is subject to market conditions which can vary greatly and
significantly impact the profitability of launch contracts. The Group has
committed to providing, in certain circumstances, significant amounts of
launch insurance coverage falling outside of the insurance contract currently
in place.
The Company has entered into debt and lease guarantees in connection with
certain contracts in the Atlas program. As of December 31, 1993, the Company was
contingently liable on guarantees and other arrangements aggregating up to a
maximum of approximately $104,000.
<PAGE>
Rental Expense and Lease Commitments
Rent expense, substantially all of which is minimum rental expense, was
approximately $7,000, $7,000 and $10,000 in 1993, 1992 and 1991, respectively.
Rental commitments under existing operating leases at December 31, 1993, are
approximately $5,000 in 1994, $4,000 in 1995, $4,000 in 1996, $4,000 in 1997,
$4,000 in 1998 and $3,000 thereafter.
Legal
The Group is involved in various legal matters in the ordinary course
of its business activities. Management does not expect these matters to have
a significant impact on the Group's financial condition or results of its
operations.
9. RETIREMENT PLANS AND POSTRETIREMENT BENEFITS
The Group participates in five GD sponsored trustee noncontributory retirement
plans covering substantially all of its employees. Under certain of the
plans, retirement benefits are primarily a function of both the employee's
years of service and level of compensation. Under other plans, benefits are a
function only of years of service.
It is GD's policy to fund retirement plans to the maximum extent deductible
under existing federal income tax regulations. Such contributions are intended
to provide not only for benefits attributed to service to date but also for
those expected to be earned in the future.
Assumptions used in accounting for the plans are as follows as of December 31:
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
Discount rates 7% 8% 8%
Varying rates of increase in
compensation levels based on age 4.5-10% 4.5-10% 4.5-10%
Expected long-term rate on assets 8% 8% 8%
</TABLE>
The Group's net periodic pension cost calculated pursuant to Statement of
Financial Accounting Standards NO. 87, "Employers' Accounting for Pensions,"
included the following:
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
Year ended December 31:
Service costs - benefits earned
during period $ 9,404 $ 9,096 $ 8,935
Interest cost on projected
benefit obligation 15,325 12,651 11,004
Actual return on plan assets (26,289) (11,863) (33,501)
Net amortization and deferral 11,309 (1,275) 23,243
------- ------- --------
$ 9,749 $ 8,609 $ 9,681
======== ======= ========
</TABLE>
Increases in prior service cost resulting from plan amendments are amortized
on a straight-line basis over the average remaining service period of
employees expected to receive benefits under the plan. If the unrecognized
<PAGE>
gain or loss at the beginning of the year exceeds 10 percent of the greater of
the projected benefit obligation or the market related value of plan assets,
the excess is amortized on a straight-line basis over the average remaining
service period of employees expected to receive benefits under the plan.
GD's stock is not included in the assets of any of the plans. At December 31,
1993, approximately 54 percent of the assets are invested in U.S. Government
securities, 34 percent in common stock and equivalents and 12 percent in
diversified corporate fixed income securities. In the event GD terminates
certain plans with assets that exceed accumulated benefits, the U.S. Government
may receive an equitable interest in those assets.
The following table sets forth the Group's share of the plans' funded status:
<TABLE>
<CAPTION>
1993 1992
<S> <C> <C>
Actuarial present value of
benefit obligations:
Vested benefit obligation $(207,191) $(143,870)
========= =========
Accumulated benefit obligation (210,639) (146,899)
========= =========
Projected benefit obligation (246,417) (172,103)
Plans' assets at fair value 223,214 195,992
--------- ---------
Plans' assets (less than) in excess
of projected benefit obligation (23,203) 23,889
Unrecognized net gain (7,752) (35,542)
Prior service cost not yet recognized
in net periodic pension cost 33,191 15,219
Unrecognized net asset at January 1, 1986 (5,274) (5,910)
--------- ---------
Accrued pension cost recognized
in the combined balance sheets $ (3,038) $ (2,344)
========= =========
</TABLE>
The Group provides certain health care and life insurance benefits for retired
employees. The cost of these benefits totaled $1,756, $1,450 and $750 in 1993,
1992 and 1991, respectively, based on the claims paid.
Effective January 1, 1993, the Group adopted FAS No. 106, "Employers' Accounting
for Postretirement Benefits Other Than Pensions", which requires the recognition
of postretirement benefits over the period in which active employees become
eligible for such benefits. Previously, the Group recognized these costs on the
cash basis. The Group has elected to implement this new standard by recognizing
the transition obligation prospectively over the average estimated remaining
service life of active employees. The remaining transition obligation at January
1, 1994, is approximately $9,000.
<PAGE>
Item 7 (b)
UNAUDITED PRO FORMA
COMBINED CONDENSED FINANCIAL STATEMENTS
The following unaudited pro forma combined condensed financial statements
have been prepared by Martin Marietta Corporation's (the "Corporation's")
management from its historical consolidated financial statements and from the
historical financial statements of General Dynamics Space Systems Group which
are included in this Current Report on Form 8-K. The unaudited pro forma
combined condensed statement of earnings reflect adjustments as if the
transaction had occurred on January 1, 1993. The unaudited pro forma combined
condensed balance sheet reflects adjustments as if the transaction had occurred
on December 31, 1993. See "Note 1 -- Basis of Presentation." The pro forma
adjustments described in the accompanying notes are based upon preliminary
estimates and certain assumptions that management of the Corporation believes
are reasonable in the circumstances.
The unaudited pro forma combined condensed financial statements are not
necessarily indicative of what the financial position or results of operations
actually would have been if the transaction had occurred on the applicable dates
indicated. Moreover, they are not intended to be indicative of future results
of operations or financial position. The unaudited pro forma combined condensed
financial statements should be read in conjunction with the historical
consolidated financial statements of the Corporation and the related notes
thereto which were included in the Corporation's Annual Report on Form 10-K for
the year ended December 31, 1993, which was filed with the Securities and
Exchange Commission on February 28, 1994. The unaudited pro forma combined
condensed financial statements should also be read in conjunction with the
historical financial statements of General Dynamics Space Systems Group which
are included in this Current Report on Form 8-K.
<PAGE>
<TABLE>
<CAPTION>
Unaudited Pro Forma Combined
Condensed Statement of Earnings
($ in millions, except per share data)
For the Year Ended December 31, 1993
Martin GD Space Pro Forma Pro Forma
Marietta Systems Adjustments Combined
<S> <C> <C> <C> <C> <C>
Net sales $9,435.7 $529.0 2(d) ($149.0) $9,815.7
Cost of sales, other costs and expense 8,647.2 556.9 2(d) (149.0) 9,041.2
2(e) (13.9)
-------- ------- ------- --------
Earnings from operations 788.5 (27.9) 13.9 774.5
Other income and expenses, net 47.0 3.3 - 50.3
-------- ------- -------- --------
835.5 (24.6) 13.9 824.8
Interest expense on debt 110.2 - - 110.2
-------- ------- -------- --------
Earnings before taxes on income and
cumulative effect of accounting chan 725.3 (24.6) 13.9 714.6
Taxes on income 275.0 (9.0) 2(f) 5.3 271.3
-------- ------- -------- --------
Earnings before cumulative effect of
accounting changes 450.3 (15.6) 8.6 443.3
Cumulative effect of changes in accounting for
postretirement benefits other than pensions
and for post-employment benefits (429.4) - - (429.4)
-------- ------- -------- --------
Net Earnings (Loss) $20.9 ($15.6) $8.6 $13.9
======== ======= ======== ========
Net Earnings (Loss) Per Common Share
Assuming no dilution:
Before cumulative effect of accounting changes $4.25 N/A $4.18
Cumulative effect of accounting changes (4.51) N/A (4.51)
-------- ------- -------
($0.26) N/A ($0.33)
======== ======= =======
Assuming full dilution:
Before cumulative effect of accounting changes $3.80 N/A $3.75
Cumulative effect of accounting changes * N/A *
-------- ------- -------
* N/A *
======== ======= =======
</TABLE>
*Anti-dilutive
<PAGE>
<TABLE>
<CAPTION>
Unaudited Pro Forma Combined
Condensed Balance Sheet
($ in millions)
As of December 31, 1993
Martin GD Space Pro Forma Pro Forma
Marietta Systems Adjustments Combined
<S> <C> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $373.1 $0.4 2(a) ($208.5) $164.6
2(b) (0.4)
Receivables 1,435.5 31.4 1,466.9
Inventories 358.8 1,449.9 2(c) (140.0) 1,668.7
Current deferred income taxes 238.6 - - 238.6
Other current assets 42.2 6.1 - 48.3
-------- -------- --------- --------
Total Current Assets 2,448.2 1,487.8 (348.9) 3,587.1
Other Noncurrent Assets 707.8 - - 707.8
Noncurrent Deferred Income Tax Benefit 206.1 - 2(c) 22.9 229.0
Property, Plant & Equipment, net 1,692.8 80.8 2(b) (42.8) 1,739.8
2(c) 9.0
Cost in Excess of Net Assets Acquired 1,914.9 - 2(c) 144.7 2,059.6
Other Intangibles 775.1 - - 775.1
-------- -------- --------- --------
$7,744.9 $1,568.6 ($215.1) $9,098.4
======== ======== ========= ========
LIABILITIES AND SHAREOWNERS' EQUITY
Current Liabilities
Accounts payable $536.8 $94.7 $ - $631.5
Customer deposits - 1,018.3 - 1,018.3
Other current liabilities 572.3 178.9 - 751.2
Salaries, benefits and payroll taxes 333.6 - - 333.6
Income taxes 48.9 - - 48.9
Current maturities of long-term debt 318.5 - - 318.5
-------- -------- --------- --------
Total Current Liabilities 1,810.1 1,291.9 - 3,102.0
Noncurrent Deferred Income Tax Liability - 38.2 2(b) (38.2) -
Long-term Debt 1,479.6 - - 1,479.6
Postretirement Benefits 740.6 - 2(c) 6.6 747.2
Other Noncurrent Liabilities 838.2 - 2(c) 55.0 893.2
Shareowners' Equity 2,876.4 238.5 2(c) (238.5) 2,876.4
-------- -------- --------- --------
$7,744.9 $1,568.6 ($215.1) $9,098.4
======== ======== ========= ========
</TABLE>
<PAGE>
NOTES TO UNAUDITED PRO FORMA
COMBINED CONDENSED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying unaudited pro forma combined condensed statement of
earnings presents the historical results of operations of the Corporation and
the General Dynamics Space Systems Group for the year ended December 31, 1993,
with pro forma adjustments as if the transaction had taken place on January 1,
1993. The unaudited pro forma combined condensed balance sheet presents the
historical balance sheets of the Corporation and the General Dynamics Space
Systems Group as of December 31, 1993, as if the transaction had been
consummated as of December 31, 1993, in a transaction accounted for as a
purchase in accordance with generally accepted accounting principles.
No reclassifications have been made to the historical financial statements
of the General Dynamics Space Systems Group in preparing the pro forma combined
condensed financial statements.
2. PRO FORMA ADJUSTMENTS
The following adjustments give pro forma effect to the transaction:
(a) To record the cash purchase consideration at closing in the
amount of $208.5 million.
(b) To reflect the excluded assets and liabilities at closing.
(c) To adjust the acquired assets and assumed liabilities to their
estimated fair values, including the recording of the cost in
excess of net assets acquired of $144.7 million.
(d) Adjustments for the elimination of the Titan/Centaur program
intercompany sales and cost of sales which would not have been
recognized if the transaction had occurred on January 1, 1993.
(e) Adjustments for: (i) items charged to General Dynamics Space
Systems Group which would or would not have been incurred if the
transaction had occurred on January 1, 1993; (ii) additional
depreciation expense on the step-up of certain fixed assets
to fair value over an estimated life of ten years; and (iii) the
amortization of excess costs over acquired net assets over an
estimated life of 20 years. Such depreciation and amortization
expenses are subject to possible adjustment resulting from
completion of the valuation analyses.
(f) The tax effect, using a 38% statutory rate, on the pro forma
adjustments.
The pro forma combined condensed statements of earnings do not reflect
the total cost savings or economies of scale that the Corporation's
management believes would have been achieved had the transaction occurred
on January 1, 1993.
<PAGE>
NOTES TO UNAUDITED PRO FORMA
COMBINED CONDENSED FINANCIAL STATEMENTS -- Continued
3. COMPUTATION OF PRO FORMA EARNINGS PER SHARE
(Dollars in Millions, except share and per share data)
<TABLE>
<CAPTION>
For the Year Ended
December 31, 1993
Pro Forma
Historical Combined
<S> <C> <C>
ASSUMING NO DILUTION:
Average number of common shares
outstanding (1) 95,346,614 95,346,614
========== ==========
Earnings before cumulative effect
of accounting changes $ 450.3 $ 443.3
Less: Preferred stock dividends 45.3 45.3
------ ------
Earnings before cumulative effect
of accounting changes applicable
to common stock 405.0 398.0
Cumulative effect of accounting changes ( 429.4) ( 429.4)
------ ------
Net loss applicable to common stock $( 24.4) $( 31.4)
====== ======
Net earnings (loss) per common share:
Before cumulative effect
of accounting changes $ 4.25 $ 4.18
Cumulative effect of
accounting changes (4.51) (4.51)
------ ------
$( .26) $( .33)
==== ====
</TABLE>
(1) Excludes common stock equivalents since the
dilutive effect on earnings per share assuming
no dilution is less than 3%.
<PAGE>
NOTES TO UNAUDITED PRO FORMA
COMBINED CONDENSED FINANCIAL STATEMENTS -- Continued
3. COMPUTATION OF PRO FORMA EARNINGS PER SHARE (Continued)
(Dollars in Millions, except share and per share data)
<TABLE>
<CAPTION>
For the Year Ended
December 31, 1993
Pro Forma
Historical Combined
<S> <C> <C>
ASSUMING FULL DILUTION:
Average number of common shares
outstanding 95,346,614 95,346,614
Dilutive stock options -- based
on the treasury stock method
using the December 31 market
prices, if higher than average
market price 1,294,357 1,294,357
Assumed conversion of the Convertible
Preferred Stock from the date of
issuance 21,706,100 21,706,100
----------- -----------
118,347,071 118,347,071
=========== ===========
Earnings before cumulative effect
of accounting changes applicable
to common stock $ 405.0 $ 398.0
Add: Preferred stock dividends 45.3 45.3
------ ------
Earnings before cumulative effect
of accounting changes 450.3 443.3
Cumulative effect of accounting changes ( 429.4) ( 429.4)
------ ------
Net earnings $ 20.9 $ 13.9
====== ======
Net earnings per common share:
Before cumulative effect of
accounting changes $ 3.80 $ 3.75
Cumulative effect of accounting
changes * *
----- -----
$ * $ *
===== =====
</TABLE>
* Anti-dilutive
<PAGE>
EXHIBIT 99(h)
Audited Consolidated Financial Statements
Martin Marietta Corporation and Subsidiaries
As of December 31, 1994 and 1993 and for the three
years in the period ended December 31, 1994
with Report of Independent Auditors
1 of 31
<PAGE>
Contents
Report of Independent Auditors . . . . . . . . . . . . . . . 3
Audited Consolidated Financial Statements
Consolidated Statement of Earnings . . . . . . . . . . . . . 4
Consolidated Balance Sheet . . . . . . . . . . . . . . . . . 5
Consolidated Statement of Cash Flows . . . . . . . . . . . . 6
Consolidated Statement of Shareowners' Equity . . . . . . . 7
Notes to Consolidated Financial Statements . . . . . . . . . 8
2 of 31
<PAGE>
Report of Independent Auditors
Board of Directors and Shareowners
Martin Marietta Corporation
We have audited the accompanying consolidated balance sheet
of Martin Marietta Corporation and subsidiaries as of
December 31, 1994 and 1993, and the related consolidated
statements of earnings, shareowners' equity and cash flows for
each of the three years in the period ended December 31, 1994.
These financial statements are the responsibility of
the Corporation's management. Our responsibility is to
express an opinion on these consolidated financial statements
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 Martin
Marietta Corporation and subsidiaries at December 31, 1994
and 1993, and the consolidated results of their operations
and their cash flows for each of the three years in the
period ended December 31, 1994, in conformity with generally
accepted accounting principles.
As discussed in Note M and Note Q to the consolidated financial
statements, in 1993 the Corporation changed its methods of
accounting for post-retirement and post-employment benefits and
income taxes.
Washington, D.C.
January 20, 1995
3 of 31
<PAGE>
Martin Marietta Corporation and Subsidiaries
Consolidated Statement of Earnings
<TABLE>
<CAPTION>
Year ended December 31
1994 1993 1992
(in millions, except per share)
<S> <C> <C> <C>
Net sales $9,874 $9,436 $5,954
Cost of sales, other costs and expenses 8,896 8,648 5,405
----------------------------------------
Earnings from Operations 978 788 549
Other income and expenses, net 209 47 21
----------------------------------------
1,187 835 570
Interest expense on debt 115 110 58
----------------------------------------
Earnings before taxes on income and cumulative
effect of accounting changes
1,072 725 512
Taxes on income 436 275 167
----------------------------------------
Earnings before Cumulative Effect of Accounting
Changes 636 450 345
Cumulative effect of changes in accounting for
post-retirement benefits other than pensions
and for post-employment benefits - (429) -
----------------------------------------
Net Earnings $ 636 $ 21 $ 345
========================================
Net Earnings (Loss) Per Common Share
Assuming no dilution:
Before cumulative effect of accounting
changes $6.00 $4.25 $3.60
Cumulative effect of accounting changes - (4.51) -
----------------------------------------
$6.00 $ (.26) $3.60
========================================
Assuming full dilution:
Before cumulative effect of accounting
changes $5.05 $3.80 $3.60
Cumulative effect of accounting changes - * -
----------------------------------------
$5.05 * $3.60
========================================
</TABLE>
*Anti-dilutive
See accompanying Notes to Consolidated Financial Statements.
4 of 31
<PAGE>
Martin Marietta Corporation and Subsidiaries
Consolidated Balance Sheet
<TABLE>
<CAPTION>
December 31
1994 1993
(in millions)
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $ 358 $ 373
Receivables 1,529 1,435
Inventories, net 603 359
Current deferred income taxes 180 239
Other current assets 90 42
-------------------------
Total Current Assets 2,760 2,448
Other Noncurrent Assets 1,194 708
Noncurrent Deferred Income Taxes 157 206
Property, Plant and Equipment, net 1,649 1,693
Cost in Excess of Net Assets Acquired 2,074 1,915
Other Intangibles 704 775
------------------------
$8,538 $7,745
========================
Liabilities and Shareowners' Equity
Current Liabilities:
Accounts payable $ 578 $ 537
Other current liabilities 760 572
Salaries, benefits, and payroll taxes 350 334
Income taxes 115 49
Current maturities of long-term debt 8 318
------------------------
Total Current Liabilities 1,811 1,810
Long-term Debt 1,346 1,479
Post-retirement Benefit Liabilities 783 741
Customer Deposits 402 -
Other Noncurrent Liabilities 825 838
Shareowners' Equity:
Series A preferred stock, liquidation preference $50 per
share 1,000 1,000
Common stock, par value $1 a share, authorized 500,000,000
shares 96 96
Additional paid-in capital 132 124
Retained earnings 2,143 1,657
------------------------
3,371 2,877
------------------------
$8,538 $7,745
========================
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
5 of 31
<PAGE>
Martin Marietta Corporation and Subsidiaries
Consolidated Statement of Cash Flows
<TABLE>
<CAPTION> Year ended December 31
1994 1993 1992
(in millions)
<S> <C> <C> <C>
Cash Flows from Operating Activities
Net earnings $ 636 $ 21 $ 345
Adjustments to reconcile net earnings to net cash provided
by operating activities:
Cumulative effect of changes in accounting for post-
retirement benefits other than pensions and for post-
employment benefits - 429 -
Depreciation, depletion and amortization 338 350 226
Deferred income taxes 265 16 12
Net changes in receivables, inventories and payables (429) (273) 73
Gain - initial public offering (118) - -
Acquisition termination fee (50) - -
Amortization of intangibles 113 86 13
Other items (2) 11 9
---------------------------------------
Net Cash Provided by Operating Activities 753 640 678
---------------------------------------
Cash Flows from Investing Activities
Additions to properties, net of purchased operations (269) (215) (171)
Net proceeds - initial public offering 189 - -
Acquisition GE Aerospace - (883) -
Other acquisition activities, net (125) (16) (19)
(Additions) reductions to investments (16) 109 (19)
Other 40 16 15
---------------------------------------
Net Cash Used for Investing Activities (181) (989) (194)
---------------------------------------
Cash Flows from Financing Activities
Debt transactions:
Increase in long-term debt 6 700 4
Repayments and extinguishments of long-term debt (451) (107) (198)
Equity transactions:
Issuances of common stock 8 17 20
Purchases of common stock - - (165)
Dividends:
Preferred stock (60) (45) -
Common stock (90) (83) (76)
---------------------------------------
Net Cash (Used for) Provided by Financing Activities (587) 482 (415)
---------------------------------------
Net (Decrease) Increase in Cash and Cash Equivalents (15) 133 69
Cash and Cash Equivalents at beginning of year 373 240 171
---------------------------------------
Cash and Cash Equivalents at end of year $ 358 $ 373 $ 240
=======================================
Supplemental Schedule of Investing and Financing Activities
Non-cash consideration-Acquisition GE Aerospace:
Assumption of certain payment obligations $ - $ 750 $ -
Issuance of preferred stock - 1,000 -
---------------------------------------
$ - $ 1,750 $ -
=======================================
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
6 of 31
<PAGE>
Martin Marietta Corporation and Subsidiaries
Consolidated Statement of Shareowners' Equity
for years ended December 31
<TABLE>
<CAPTION> Additional Total
Preferred Common Paid-in Retained Shareowners'
Stock Stock Capital Earnings Equity
(in millions)
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1991 $ - $50 $212 $1,543 $1,805
Net earnings - - - 345 345
Cash dividends declared on common
stock ($.795 a share) - - - (76) (76)
Stock options exercised, net of stock
tendered in payment - - 20 - 20
Other common stock issued - - 16 - 16
Common stock purchased - (3) (162) - (165)
--------------------------------------------------------------------
Balance at December 31, 1992 - 47 86 1,812 1,945
Net earnings - - - 21 21
Preferred stock issued 1,000 - - - 1,000
Cash dividends declared on preferred
stock ($2.25 a share) - - - (45) (45)
Cash dividends declared on common
stock ($.87 a share) - - - (83) (83)
Stock awards and options exercised,
net of stock tendered in
payment - 1 22 - 23
Other common stock issued - - 16 - 16
Issuance of shares to effect 2-for-1
stock split - 48 - (48) -
--------------------------------------------------------------------
Balance at December 31, 1993 1,000 96 124 1,657 2,877
Net earnings - - - 636 636
Cash dividends declared on preferred
stock ($3.00 a share) - - - (60) (60)
Cash dividends declared on common
stock ($.93 a share) - - - (90) (90)
Stock awards and options exercised,
net of stock tendered in
payment - - 8 - 8
--------------------------------------------------------------------
Balance at December 31, 1994 $1,000 $96 $132 $2,143 $3,371
====================================================================
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
7 of 31
<PAGE>
Martin Marietta Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1994
Note A: Accounting Policies
Consolidation Basis
Consolidated financial statements include the accounts of all
significant majority-owned subsidiaries of Martin Marietta
Corporation (the "Corporation"). All material intercompany
transactions have been eliminated in consolidation.
Certain amounts for the prior periods have been reclassified to
conform with the 1994 presentation.
Cash and Cash Equivalents
Cash and cash equivalents are generally comprised of highly
liquid instruments with maturities of three months or less when
purchased.
As of December 31, book cash balances amounted to net overdrafts
of $15 million in 1994 and $44 million in 1993 and are
attributable to the float of the Corporation's outstanding
checks.
Investments
Investments in associated companies are accounted for by the
equity method wherever the Corporation is able to significantly
influence operating and financial matters. Other investments are
carried at cost less valuation allowances where appropriate.
Revenue Recognition
Long-term, fixed-price contracts generally are accounted for
under percentage-of-completion methods, and sales include a
proportion of the earnings expected to be realized in the
ratio that costs incurred bear to estimated total costs.
Sales are recorded on cost-type contracts as costs are
incurred. Under all other contracts, sales are recorded when
deliveries are made or as work is performed.
8 of 31
<PAGE>
Martin Marietta Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
Note A: Accounting Policies (continued)
Revenue Recognition (continued)
Contracts and programs in progress are reviewed quarterly, and
sales and earnings are adjusted in current accounting periods
based on revisions in contract value and estimated costs at
completion. Performance incentives are incorporated in certain
contracts that provide for increased or decreased earnings based
on performance to established targets. Incentives based upon
cost performance are recorded currently, and other incentives
and awards are recorded when the amounts reasonably can be
estimated or are awarded. Provisions for estimated losses on
contracts and programs are recorded when identified.
Sales for the Atlas launch vehicle program, which vehicles
are sold principally to customers, including the U.S.
Government, on commercial terms ("Commercial Atlas"), are
recorded upon delivery of launch services. Cost of sales
attributable to each launch is determined under the program
average cost method.
Martin Marietta Materials, Inc. (" Materials") sales are
recorded upon shipment of products or performance of
services.
Inventories
Inventories are stated at the lower of cost or market. Costs
on contracts and programs in progress represent recoverable
costs incurred for production, research and development and
selling, general and administration, less amounts attributed
to cost of sales, generally under percentage-of-completion
accounting methods. Costs for the Commercial Atlas program
represent recoverable costs incurred for production, less
amounts attributable to cost of sales, under the program
average cost method. General and administrative costs related
to the Commercial Atlas program are expensed as incurred.
Costs of other product and supply inventories are principally
determined by the first-in, first-out (FIFO) method.
Properties and Depreciation
Property, plant and equipment, including capital leases, are
carried at cost, including interest cost capitalized during
construction on significant capital programs.
Depreciation and amortization of properties are computed over
estimated service lives generally using accelerated methods,
except for Materials and other businesses that utilize the
straight-line method. Depletion of mineral deposits is
calculated over estimated recoverable quantities by the
unit-of-production method.
9 of 31
<PAGE>
Martin Marietta Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
Note A: Accounting Policies (continued)
Intangible Assets
Costs in excess of net assets acquired ("goodwill") are
amortized ratably over appropriate periods ranging from 20 to
40 years. Other intangibles represent amounts assigned
principally to the value of programs acquired and are amortized
over periods not to exceed 15 years.
The carrying values of intangible assets are reviewed if
the facts and circumstances indicate impairment of their
carrying value. Any impairment in the carrying value of such
intangibles is recorded when identified.
Income Taxes
Current income tax provisions represent estimated amounts
payable or recoverable for each year after adjustments for
permanent differences. Deferred income tax provisions
represent the tax effect of all significant temporary
differences between financial statements and income taxes.
Research and Development and Similar Costs
Research and development and similar costs are charged to
operations as incurred unless reimbursable under specific
contractual arrangements. Independent research and
development, systems studies, other concept formulation
studies and bid and proposal work relating to government
contracts represent a major portion of these expenses. Such
amounts are allocated when appropriate to government
contracts through overhead under government-mandated cost
accounting procedures.
Preoperating costs are generally charged to operations as
incurred, except that such costs for significant new products
or services and start-up costs of certain facilities may be
deferred for amortization over periods not to exceed five years.
Earnings Per Common Share
Earnings per share are based on the weighted average number of
common shares outstanding during the year.
Earnings per share, assuming no dilution, were computed in 1994
and 1993 based on net earnings less the dividend requirement
of preferred stock. The weighted average number of
common shares outstanding assuming no dilution were
approximately 95,929,000 in 1994, 95,347,000 in 1993 and
95,869,000 in 1992.
10 of 31
<PAGE>
Martin Marietta Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
Note A: Accounting Policies (continued)
Earnings Per Common Share (continued)
Fully diluted earnings per share in 1994 and 1993 assumed that
the average number of common shares was increased by the
conversion of preferred stock. The weighted average number of
common shares outstanding, assuming full dilution, was
approximately 125,935,000 in 1994, 118,347,000 in 1993 and
95,869,000 in 1992.
Note B: Pending Combination with Lockheed Corporation
On August 29, 1994, the Corporation, Lockheed Corporation
("Lockheed") and Lockheed Martin Corporation ("Lockheed
Martin", formerly Parent Corporation) (collectively, "the
Companies") entered into an Agreement and Plan of Reorganization
whereby the Companies would merge through an exchange of
stock (the "Combination"). On January 11, 1995, the Federal
Trade Commission ("FTC") announced it would not challenge the
Combination based upon a provisionally accepted Consent Order
that is subject to final review at the expiration of a public
comment period on March 28, 1995. Under the terms of the Consent
Order, among other things, the Companies will be prohibited from
enforcing the exclusivity provisions of certain teaming arrangements
with other parties, from sharing non-proprietary information
about competitors between certain components of the Companies,
and from modifying any of the Companies' products in a discriminatory
manner. The Combination is subject to, among other things, the
the approvals of the shareholders of the Corporation and Lockheed.
It is anticipated that the Combination, which is expected to
close in the first quarter of 1995, will constitute a tax-free
reorganization and qualify for the pooling of interests method
of accounting. Under this accounting method, the assets and
liabilities of the Corporation and Lockheed will be carried
forward to Lockheed Martin at their historical recorded
bases. Results of operations of Lockheed Martin for 1995 will
include the results of both the Corporation and Lockheed for the
entire fiscal year. When consummated, the reported balance
sheet amounts and results of operations of the separate
corporations for prior periods will be combined, reclassified and
conformed, as appropriate, to reflect the combined balance
sheets and results of operations for Lockheed Martin. The
managements of Lockheed and the Corporation currently estimate
that costs and expenses which are expected to be incurred
in connection with consummating the Combination and
integrating the operations of Lockheed and the Corporation could
total approximately $850 million (see Note L).
Under the terms of the Agreement, each outstanding share of the
Corporation's Common Stock will be converted into the right to
receive one share of Lockheed Martin Common Stock and each
outstanding share of Lockheed Common Stock will be converted
into the right to receive 1.63 shares of Lockheed Martin Common
Stock. In addition, each outstanding share of the Corporation's
Series A Preferred Stock, all of which is held by
11 of 31
<PAGE>
Martin Marietta Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
Note B: Pending Combination with Lockheed Corporation (continued)
General Electric Company ("GE") subject to a Standstill Agreement
(see Note H), will be converted into the right to receive one
share of Lockheed Martin Series A Preferred Stock. On August 29,
1994, the Corporation, Lockheed Martin and GE entered into an
agreement which modifies the Standstill Agreement to anticipate
the conversion of shares from the Corporation to Lockheed
Martin. The Lockheed Martin Preferred Stock is essentially
the same as to terms and convertibility, and if converted,
would represent approximately 13% of the shares of Lockheed
Martin common stock after giving effect to such conversion.
The Corporation and Lockheed have entered into a
Confidentiality and Standstill Agreement. Among
other things, this agreement protects the confidentiality
of information shared between the Corporation and Lockheed,
and prohibits until March 29, 1997 the acquisition by one party
of any voting securities of the other party or participation
in ther solicitation of proxies and shareowner proposals
other than those required to effect the Combination.
The following unaudited pro forma financial information
presents the results of operations of Lockheed Martin for the
years ended December 31, 1994, 1993 and 1992, as if the
Combination had been consummated on January 1, 1992. The
pro forma amounts displayed below primarily reflect the
elimination of intercompany transactions and assume that any
impact of conforming accounting policies is insignificant. This
pro forma information does not purport to be indicative of
actual or future results of operations that would have occurred
or will occur upon consummation of the Combination or
further analysis regarding conforming of accounting policies.
<TABLE>
<CAPTION>
Pro Forma Information (unaudited)
1994 1993 1992
(in millions, except per share)
<S> <C> <C> <C>
Net sales $22,915 $22,376 $15,925
Earnings before cumulative effect of
accounting changes $ 1,061 $ 865 $ 678
Earnings per share before cumulative
effect of accounting changes, assuming
full dilution $ 4.61 $ 3.91 $ 3.46
</TABLE>
The 1992 information presented above excludes the cumulative
effect of the adoption of Statement of Financial Accounting
Standards ("SFAS") No. 106, "Employers' Accounting for Post-
retirement Benefits Other Than Pensions" , and SFAS No. 112,
"Employers' Accounting for Post-employment Benefits", which
would reduce earnings by $1.06 billion, or $5.41 per share.
This cumulative effect includes the impact of conforming the
Corporation's historical 1993 adoption to that of Lockheed.
12 of 31
<PAGE>
Martin Marietta Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
Note C: Acquisition of GD Space Systems and Business Combination
with GE Aerospace
On May 1, 1994, the Corporation completed its acquisition for
cash of the Space Systems division of General Dynamics
Corporation (the "Space Systems division"). This transaction
was accounted for under the purchase method of accounting,
wherein goodwill of approximately $213 million was
recognized by the Corporation. Goodwill is being amortized over
a 20-year period. Operations of the Space Systems division have
been included in the consolidated financial statements from the
closing date. Pro forma financial data related to this
transaction has not been presented based on materiality
considerations.
On November 22, 1992, the Corporation entered into a
Transaction Agreement with General Electric Company to combine
the aerospace and certain other businesses of GE (collectively,
the "GE Aerospace businesses") with the businesses of the
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 in the
consolidated financial statements since that date. If the GE
Transaction were presented on an unaudited pro forma basis
as if it had occurred as of January 1, 1993, the
Corporation's 1993 net sales would increase by approximately
$1 billion and earnings before the cumulative effect of
accounting changes would increase by less than 3%.
The exchange consideration of approximately $3 billion for
the GE Transaction consisted of cash, preferred stock,
retention by GE of certain accounts receivable and the
assumption of payment obligations related to certain GE
indebtedness. The GE Transaction was accounted for under the
purchase method of accounting, wherein approximately $1.9
billion in goodwill was recognized by the Corporation after
recording approximately $700 million in other intangibles
(representing the estimated fair-market value of certain
assets) and other purchase adjustments necessary to allocate
the purchase price to the value of assets acquired and
liabilities assumed. Goodwill is being amortized over a
40-year period, and other intangibles are being amortized over
a 15-year period.
13 of 31
<PAGE>
Martin Marietta Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
Note D: Receivables
<TABLE>
<CAPTION>
1994 1993
(in millions)
<S> <C> <C>
Receivables under long-term contracts:
United States Government:
Amounts Billed $ 349 $ 332
Unbilled costs and accrued profits 716 750
Amounts withheld, due upon completion of contracts 79 43
------------------------
1,144 1,125
Other customers:
Amounts billed 106 106
Unbilled costs and accrued profits 354 290
------------------------
Total receivables under long-term contracts 1,604 1,521
Less noncurrent amounts 205 198
------------------------
1,399 1,323
Other Activities:
Commercial accounts receivable 77 85
Notes and other current receivables 57 43
------------------------
1,533 1,451
Less allowances 4 16
------------------------
Total $1,529 $1,435
========================
</TABLE>
Unbilled costs and accrued profits are billed on the basis of contract
terms and delivery schedules. Amounts billable after one year are
included in other noncurrent assets.
Note E: Inventories
<TABLE>
<CAPTION>
1994 1993
(in millions)
<S> <C> <C>
Costs on contracts and programs in progress $1,745 $1,284
Less: progress payments 493 830
noncurrent amounts 729 169
---------------------
523 285
Other inventories 80 74
--------------------
Total $603 $ 359
====================
</TABLE>
14 of 31
<PAGE>
Martin Marietta Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
Note E: Inventories (continued)
According to the provisions of certain U.S. Government
contracts, the customer has title to, or a security interest
in, inventories for contracts and programs in progress of
approximately $384 million for 1994 and $310 million for 1993.
Selling, general and administrative costs in connection with
production under long-term government contracts were charged to
inventories as incurred in the amounts of $406 million in 1994
and $377 million in 1993. The estimated amounts remaining in
inventories were $83 million at December 31, 1994, and $75
million at December 31, 1993.
At December 31, 1994, the Space Systems division had customer
deposits of approximately $1.2 billion which primarily
represent advance payments from its Atlas program customers.
In the Corporation's consolidated balance sheet, costs on
contracts and programs in progress are offset by related
customer deposits of $593 million at December 31, 1994. Customer
deposits, at year-end 1994, of $188 million and $402 million are
classified as current and noncurrent liabilities, respectively.
Costs on contracts and programs in progress at December 31,
1994 and 1993, did not include any significant amounts of
production costs or other deferred costs or claims and similar
items subject to uncertainty concerning their realization.
<TABLE>
<CAPTION>
Note F: Property, Plant and Equipment
1994 1993
(in millions)
<S> <C> <C>
Land $ 193 $ 195
Mineral deposits 45 39
Buildings 808 837
Machinery and equipment 2,784 2,734
------------------------
3,830 3,805
Less allowances for depreciation, depletion
and amortization 2,181 2,112
------------------------
Total $ 1,649 $1,693
========================
</TABLE>
15 of 31
<PAGE>
Martin Marietta Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
<TABLE>
<CAPTION>
Note G: Debt
1994 1993
(in millions)
<S> <C> <C>
Long-term debt:
Payment obligations assumed $ 310 $ 622
9-1/2% Notes - 125
8-1/2% Notes due 1996 100 100
9% Notes due 2003 100 100
6-1/2% Notes due 2003 400 400
7% Debentures due 2011 103 101
7-3/8% Debentures due 2013 150 150
7-3/4% Debentures due 2023 150 150
Other notes and obligations 41 49
-----------------------
Total 1,354 1,797
Less current maturities 8 318
-----------------------
Long-term debt $1,346 $1,479
=======================
</TABLE>
Payment obligations assumed as part of the exchange
consideration for the GE Transaction relate to certain GE
indebtedness. The payment obligations outstanding at December
31, 1994 mature in 1996 and carry an effective interest rate of
5.025%.
In February 1994, the $125 million of 9-1/2% notes were defeased
in substance (see Note N).
The 6-1/2% Notes, 7-3/8% Debentures, 8-1/2% Notes and 9% Notes
are not redeemable prior to maturity. The 7-3/4% Debentures may
not be redeemed by the Corporation prior to April 15, 2003, but
on or after that date may be redeemed by the Corporation at
specified redemption prices.
The 7% Debentures were sold at 53.835% of their principal
amount of $175 million in 1981. These debentures are carried
net of original issue discount, which is being amortized by
the interest method over the life of the issue. The effective
interest rate is 13-1/4%. The debentures are redeemable
in whole or in part at the Corporation's option at any time at
100% of their principal amount.
Maturities of long-term debt during the five-year period ending
December 31, 1999, are $8 million in 1995, $416 million in
1996, and $1 million in each year from 1997 through 1999.
16 of 31
<PAGE>
Martin Marietta Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
Note G: Debt (continued)
The independently determined aggregate market value of the
Corporation's outstanding debt was lower than book value by
approximately $30 million at December 31, 1994 and
approximately $117 million above book value at December 31, 1993.
Interest payments were $124 million in 1994, $97 million in
1993 and $61 million in 1992. Interest expense on debt was net
of capitalized interest of $3 million in 1994 and 1993, and $4
million in 1992.
As of December 31, the Corporation has issued performance-related
standby letters of credit totalling $99 million in 1994 and
$94 million in 1993 supporting obligations under certain
long-term and other contracts.
Martin Marietta Technologies, Inc., a wholly owned subsidiary
of the Corporation ("Technologies"), has a $800 million
revolving credit facility guaranteed by the Corporation which
expires on March 31, 1996. This borrowing facility may be
used for general corporate purposes. Under this credit
facility, the Corporation is subject to limitations on its
financial leverage and a minimum coverage ratio requirement as
defined by the agreement. At December 31, 1994, the
Corporation had no borrowings under this credit facility. If
the proposed merger with Lockheed is consummated, the
Corporation's existing credit facility will be terminated
prior to consummation of the merger and Lockheed Martin will
obtain its own credit facility.
The financing agreements of the Corporation and its
subsidiaries contain certain restrictive covenants, including
requirements for limitations on encumbrances and on sale
and lease-back transactions.
Note H: Shareowners' Equity
The authorized capital structure of the Corporation includes
30,000,000 shares of Preferred Stock with par value of $1 a
share, none of which is outstanding, and 20,000,000 shares
of Series A Preferred Stock with par value of $1 a share
(liquidation preference $50 per share). Dividends are
cumulative and paid at an annual rate of $3.00 per share or 6%.
As part of the consideration for the GE Transaction, the
Corporation issued to GE all of the authorized and outstanding
shares of Series A Preferred Stock of the Corporation, which
shares are convertible into approximately 23% of the shares
of the Corporation's common stock after giving effect to
such conversion, and have an aggregate liquidation preference
of $1 billion. The Series A Preferred Stock is nonvoting
except in special circumstances, including the approval of the
Combination. The Series A Preferred stock is held under
a Standstill Agreement. Among other things, the Standstill
17 of 31
<PAGE>
Martin Marietta Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
Note H: Shareowners' Equity (continued)
Agreement imposes certain limitations on either the increase or
disposal of GE's interest in voting securities of the
Corporation, on GE's solicitation of proxies and shareowner
proposals, on GE's voting of its shares and on GE's ability
to place or remove members of the Corporation's Board of
Directors. In addition, the Standstill Agreement requires
the Corporation to recommend to its shareholders the election
of persons designated by GE to serve as directors of the
Corporation.
In 1993, the Board of Directors authorized the repurchase of
approximately 32.4 million shares of the Corporation's common
stock for use in connection with the Corporation's Amended
Omnibus Securities Plan, Performance Sharing Plan and for
general corporate purposes. No share repurchases were made by
the Corporation during either 1994 or 1993.
During 1994, the Corporation adopted a Stockholder Rights
Plan pursuant to which the Corporation distributed one Common
Stock Purchase Right with respect to each share of its
Common Stock outstanding as of the close of business on
September 9, 1994, and to each additional share issued
thereafter. The Rights are not exercisable except upon the
occurrence of certain events described in the Rights Agreement.
When exercisable, each Right will entitle the holder to purchase
one share of Common Stock (or other shares, securities or
property, as the case may be, of equivalent value) at an
exercise price of $190.00 per share. The Rights are redeemable
at $0.01 per Right. The Rights will expire immediately prior to
consummation of the Combination (see Note B), or, if the
Combination is not consummated, on September 9, 2004, unless
extended by the Corporation.
The Corporation contributed 228,000 shares in 1993 and 311,000
shares in 1992 of its common stock to the Corporation's
Performance Sharing Plan for Salaried Employees in accordance
with provisions set forth in that plan.
Under Maryland General Corporation Law, shares of common stock
reacquired by a corporation constitute unissued shares. For
financial reporting purposes, reacquired shares are recorded as
reductions to issued common stock and to additional paid-in
capital. At December 31, 1994, retained earnings were
unrestricted.
18 of 31
<PAGE>
Martin Marietta Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
Note I: Contingencies
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 (see
Analysis of Financial Condition and Operating Results,
Environmental Matters) relating to the Corporation and
its subsidiaries, will have a material adverse effect on the
results of the Corporation's operations or its financial
position.
Note J: Martin Marietta Technologies, Inc.
The Corporation has guaranteed payment of certain debt
obligations of Technologies which are registered with the
Securities and Exchange Commission ("SEC"). The total of such
guarantees was approximately $1 billion at December 31, 1994.
In accordance with SEC disclosure requirements, summarized
financial information for Technologies and its consolidated
subsidiaries follows:
<TABLE>
<CAPTION> As of December 31
1994 1993
(in millions)
<S> <C> <C>
Current assets $1,603 $1,585
Noncurrent assets 4,033 3,163
Current liabilities 868 825
Long-term debt 1,036 1,161
Other noncurrent liabilities 1,362 886
Shareowner's equity 2,370 1,876
</TABLE>
<TABLE>
<CAPTION>
Year ended December 31
1994 1993
(in millions)
<S> <C> <C>
Net sales $5,570 $5,628
Earnings from operations 637 583
Earnings before cumulative effect of accounting changes 494 358
Cumulative effect of accounting changes - (427)
Net earnings (loss) 494 (69)
</TABLE>
As of December 31, 1994, there were no restrictions on
dividends or other distributions between Technologies and the
Corporation.
19 of 31
<PAGE>
Martin Marietta Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
Note K: Leases
Total rental expense for all operating leases was $166 million
in 1994, $145 million in 1993 and $83 million in 1992.
Future minimum rental commitments for all noncancelable
operating leases are: $110 million for 1995, $82 million for
1996, $60 million for 1997, $47 million for 1998, $40 million
for 1999 and $102 million for later years.
<TABLE>
<CAPTION>
Note L: Stock Option and Award Plans
Number of Shares Option Price
Available Options Per Share Total
for Grant Outstanding Range (in
millions)
<S> <C> <C> <C> <C>
Year 1993:
January 1 97,978 3,411,050 $11.665-$29.250 $ 86
Additions 2,095,300 - - -
Options granted (1,217,600) 1,217,600 40.375-44.500 49
Awards granted (170,000) - - -
Exercised - (803,850) 11.665-29.250 (20)
Canceled 8,800 (8,800) 19.938-40.375 -
Expired - (3,600) 19.938-29.250 -
----------------------------------------------------------------
December 31 814,478 3,812,400 $19.750-$44.500 $115
----------------------------------------------------------------
Exercisable at December 31 1,490,800
Year 1994:
January 1 814,478 3,812,400 $19.750-$44.500 $115
Additions 2,119,116 - - -
Options granted (1,353,650) 1,353,650 44.500-44.875 61
Awards granted (5,000) - - -
Exercised - (575,900) 19.750-40.375 (15)
Canceled 57,000 (57,000) 25.750-44.875 (2)
Expired - (7,700) 19.938-29.250 -
----------------------------------------------------------------
December 31 1,631,944 4,525,450 $19.750-$44.875 $159
----------------------------------------------------------------
Exercisable at December 31 1,963,700
</TABLE>
Under the Corporation's Amended Omnibus Securities Award Plan
(Omnibus Plan), employees of the Corporation may be granted
stock-based incentive awards, including options to purchase
common stock, stock appreciation rights, restricted stock or
other stock-based incentive awards. These awards may
be granted either singly or in combination with other awards.
The number of shares of stock available for awards for
20 of 31
<PAGE>
Martin Marietta Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
Note L: Stock Option and Award Plans (continued)
each year in the period 1993 through 1996 shall not exceed
1.7% of the shares of common stock outstanding on December 31
of the previous year. The Omnibus Plan further provides that
for the years 1993, 1994 and 1995, an additional 0.5% of the
shares of common stock outstanding on December 31 of the
previous year may be granted if a corresponding percentage
decrease in shares available for award is made the following
year. Effective with the adoption of the Omnibus Plan in
1992, no further grants of options, stock appreciation rights or
restricted stock could be made under any of the Corporation's
prior plans. However, all outstanding grants and awards under
those prior plans remain in effect in accordance with their
terms.
Under the Omnibus Plan, the Corporation grants options to
purchase its common stock at a price equal to the market value
at the date of grant. These options become exercisable in
three equal annual installments beginning one year after date
of grant and expire 10 years from such date. The Omnibus
Plan allows the Corporation to provide for financing of
purchases, subject to certain conditions, by
interest-bearing notes payable to the Corporation.
Prior stock option plans included the same grant pricing,
vesting and expiration terms as the Omnibus Plan. The 1984 Plan
allows the Corporation to provide for financing of purchases,
subject to certain conditions, by interest-bearing notes payable
to the Corporation.
The 1984 Plan included stock appreciation rights granted
simultaneously in equal number with the grant of stock
options. These rights may be exercised independently of the
options and entitle a grantee to receive in cash an amount
equal to a percentage of the increase in the market value of the
Corporation's common stock.
The Omnibus Plan provides for the award and issuance of common
stock at par value subject to certain restrictions for a
specified period of time. A total of 5,000 restricted shares in
1994 and 170,000 restricted shares in 1993 were awarded under
the Omnibus Plan. Under the awards outstanding,
participants are entitled to cash dividends and to vote
their respective shares, but they are prohibited from selling
or transferring shares during a restricted period.
Under the terms of some of these, and other cash award plans,
consummation of the Combination will result in the
acceleration of payment of certain benefits that would
otherwise have been payable over time, early vesting of certain
benefits that would otherwise not be fully vested, and the use of
modified formulae for calculating the amounts of such benefits,
21 of 31
<PAGE>
Martin Marietta Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
Note L: Stock Option and Award Plans (continued)
the effect of which has been included in the estimated costs
and expenses to be incurred in connection with consummating the
Combination. In addition, the Agreement and Plan of Reorganization
provides for each outstanding stock option, stock appreciation
right and other stock-based incentive award to be converted
into a similar instrument of Lockheed Martin upon
consummation of the Combination.
Note M: Post-Employment Benefit Plans
The Corporation and its consolidated subsidiaries sponsor a
number of retirement plans that cover substantially all
employees. Defined benefit plans for salaried and certain hourly
employees provide benefits based on employees' years of service
and average compensation, for a specified period of
time before retirement. Defined benefit plans for other hourly
employees generally provide benefits of stated amounts for
specified periods of service.
The Corporation's accounting for defined benefit pension
plans complies with three principal standards: the
Employee Retirement Income Security Act of 1974 as amended
(ERISA), which in conjunction with the Internal Revenue Code,
determines legal minimum and maximum deductible funding
requirements; U.S. Government Cost Accounting Standards (CAS),
which in conjunction with Federal Acquisition Regulations,
establish rules for determining and measuring contractors'
pension costs; and Statement of Financial Accounting Standards
No. 87, Employers Accounting for Pensions (SFAS
No. 87), which establishes rules for financial reporting.
The latter requires recognition of actuarial values on a
"termination" rather than an "ongoing" basis and specifies that
certain key actuarial assumptions be adjusted annually to
reflect current, rather than long-term, trends in the
economy.
Consistent with the requirements of ERISA and CAS, it is
the Corporation's funding policy to stabilize annual
contributions as a percentage of payroll by utilizing the
entry-age-normal actuarial cost method, with assumptions selected
on the basis of long-term trends.
On December 31, 1994, retirement plan assets, which are
held in a master trust, were invested principally in listed
stocks and bonds and cash equivalents.
22 of 31
<PAGE>
Martin Marietta Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
Note M: Post-Employment Benefit Plans (continued)
The net pension cost of the Corporation's defined benefit plans
includes the following components:
<TABLE>
<CAPTION>
1994 1993 1992
(in millions)
<S> <C> <C> <C>
Service cost-benefits earned during the year $195 $165 $116
Interest cost 311 273 183
Net amortization and other components (327) 112 (114)
Actual return on assets (14) (403) (76)
----------------------------------
Net pension cost $165 $147 $109
==================================
Assumptions used as of December 31:
Plan discount rates 8.25% 7.5% 6.3-7.5%
Rates of increase in future compensation levels 5.5% 6.0% 6.0%
Expected long-term rate of return on assets 8.75% 8.75% 8.0%
</TABLE>
The following table sets forth the defined benefit plans' funded
status and amounts recognized in the Corporation's consolidated
balance sheet as of December 31:
<TABLE>
<CAPTION>
1994 1993
(in millions)
<S> <C> <C>
Plan assets at fair value $4,026 $4,049
=======================
Actuarial present value of benefit obligations:
Vested 3,358 3,377
Non-vested 53 66
-----------------------
Accumulated Benefit Obligation (ABO) $3,411 $3,443
=======================
Projected Benefit Obligation (PBO) $4,155 $4,241
=======================
Reconciling Items:
Assets in excess of ABO $ 615 $ 606
Effect of estimated future pay increases (745) (798)
-----------------------
Assets less than PBO (129) (192)
Unrecognized prior-service cost 357 64
Unrecognized net assets (33) (37)
Unrecognized (gain) loss (138) 217
-----------------------
Prepaid pension cost $ 57 $ 52
=======================
</TABLE>
23 of 31
<PAGE>
Martin Marietta Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
Note M: Post-Employment Benefit Plans (continued)
Certain health care and life insurance benefits are provided to
eligible retirees by the Corporation or its consolidated
subsidiaries. These benefit plans are funded by the Corporation
through several trusts. For recently retired participants, the
health benefits generally provide for cost sharing
through participant contributions and copayments. For
salaried employees who retired after 1992, there is an annual
limit on the Corporation's contribution per participant.
The Corporation adopted Statement of Financial Accounting
Standards No. 106, "Employers' Accounting for Post-retirement
Benefits Other Than Pensions" (SFAS No. 106), effective January
1, 1993. SFAS No. 106 requires that the cost of certain
post-retirement benefits be recognized under an accrual
method of accounting instead of the prior practice of expensing
the cost of such benefits as paid. The Corporation elected to
expense, in the first quarter of 1993, the liability
accumulated through 1992 due to the change in accounting
method. This one-time transition obligation of $656 million
resulted in an after-tax charge to net income of $412 million
in the first quarter of 1993. The Corporation's policy is to
fund amounts that are consistent with the expense accrual under
SFAS No. 106, including an amortization payment for the
transition obligation.
Since 1988, the Corporation has made contributions to the
irrevocable trusts established to pay future health benefits to
eligible retirees and dependents. On December 31, 1994, plan
assets were invested principally in listed stocks and bonds and
cash equivalents.
The net periodic post-retirement benefit cost for the years
ending December 31 included the following components:
<TABLE>
<CAPTION>
1994 1993
(in millions)
<S> <C> <C>
Service cost-benefits earned during the year $30 $23
Interest cost 83 69
Net amortization and other components (16) 12
Actual return on assets (2) (30)
Curtailment gain (21) -
-------------------
Net periodic cost $74 $74
===================
Assumptions used as of December 31:
Discount rate 8.25% 7.5%
Expected long-term rate of return on assets 8.75% 8.75%
</TABLE>
24 of 31
<PAGE>
Martin Marietta Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
Note M: Post-Employment Benefit Plans (continued)
The trend rate assumption for health care inflation is 7.5% for
1995, trending down to 4.5% by 2001. The assumptions also
include the impact of Medicare cost-sharing provisions which,
when used in conjunction with the health care inflation rate,
yields an effective health care cost-trend rate of
approximately 10%.
Prior to 1993, the Corporation recognized the costs of
retiree health benefits on a claims-paid basis. These costs
were $33 million in 1992.
The following table sets forth the post-retirement health care
plans' funded status and estimated amounts recognized in the
Corporation's consolidated balance sheet as of December 31:
<TABLE>
<CAPTION> 1994 1993
(in millions)
<S> <C> <C>
Plan assets at fair value $ 274 $ 280
========================
Actuarial present value of benefit obligations:
Active employees, eligible to retire $ 200 $ 67
Active employees, not eligible to retire 193 314
Former employees 690 744
------------------------
Accumulated Projected Benefit
Obligation (APBO) $1,083 $1,125
========================
Assets less than APBO $ 809 $ 845
Unrecognized prior-service cost (gain) loss (56) 7
Unrecognized loss (gain) 30 (111)
------------------------
Post-retirement benefit liability $ 783 $ 741
========================
</TABLE>
A 1% increase in the health care cost trend rate would increase
the APBO by approximately 9.6%, and would increase the sum of
the service cost and interest cost by approximately 11.1%.
The Corporation adopted Statement of Financial Accounting
Standards No. 112, "Employers' Accounting for Post-employment
Benefits" (SFAS No. 112) in 1993. SFAS No. 112 requires that
the cost of certain post-employment benefits be recognized under
an accrual method of accounting instead of the current practice
of expensing the cost of such benefits as paid. The effect of
this change in accounting method resulted in a one-time,
25 of 31
<PAGE>
Martin Marietta Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
Note M: Post-Employment Benefit Plans (continued)
after-tax charge to net income of $17 million in 1993. At
December 31, a liability for post-employment benefits of $27
million in 1994 and $28 million in 1993 is included in other
noncurrent liabilities.
<TABLE>
<CAPTION>
Note N: Other Income and Expenses
1994 1993 1992
(in millions)
<S> <C> <C> <C>
Gain - initial public offering $ 118 $ - $ -
Minority interest (10) - -
Acquisition termination fee 50 - -
Royalty income 57 32 10
Miscellaneous, net (6) 15 11
--------------------------------------------
Total $ 209 $ 47 $ 21
============================================
</TABLE>
In February 1994, Materials sold through an initial public
offering approximately 8.8 million shares of its common stock.
After the public sale, Technologies owns approximately 81% of
the outstanding stock of Materials. Minority interest of $71
million is included in other noncurrent liabilities at
December 31, 1994. A portion of the proceeds from the offering
was used to defease in substance $125 million of 9.5% Notes.
Technologies recognized a pretax gain, net of a loss on debt
defeasance, of $118 million from the Materials' initial
public offering. The net after-tax gain from these
transactions was $70 million, or 56 cents per share fully
diluted.
During March 1994, the Corporation entered into an
Agreement and Plan of Merger with Grumman Corporation and
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. In
April 1994, the Corporation received $50 million plus
reimbursement of expenses from Grumman pursuant to the
termination provisions of the Agreement and Plan of Merger.
Note O: Selling, General and Administrative Expenses
Selling, general and administrative expenses included in cost of
sales, other costs and expenses were $530 million for 1994, $500
million for 1993 and $406 million for 1992.
26 of 31
<PAGE>
Martin Marietta Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
Note P: Research and Development
Research and development expenses included in cost of sales,
other costs and expenses were $243 million in 1994, $280
million in 1993 and $200 million in 1992, and included
independent research and development, systems studies, other
concept formulation studies and bid and proposal work related to
government contract products and services.
Note Q: Taxes on Income
Effective January 1, 1993, the Corporation adopted Statement
of Financial Accounting Standard No. 109, "Accounting for
Income Taxes", (SFAS No. 109). The impact of adopting this
standard on the Corporation's earnings and financial position
was not material. Prior years' financial statements have not
been restated to apply the provisions of SFAS No. 109. Income
taxes for 1992 are based on pretax financial statement income in
accordance with Accounting Principles Board Opinion No. 11.
<TABLE>
<CAPTION>
1994 1993 1992
(in millions)
<S> <C> <C> <C>
Federal income taxes:
Current $149 $231 $135
Deferred 221 12 10
------------------------------------------
Total federal income taxes 370 243 145
State income taxes:
Current 16 25 20
Deferred 44 4 2
------------------------------------------
Total state income taxes 60 29 22
Foreign income taxes 6 3 -
------------------------------------------
Total income taxes provided $436 $275 $167
==========================================
</TABLE>
27 of 31
<PAGE>
Martin Marietta Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
Note Q: Taxes on Income (continued)
The Corporation's effective income tax rate varied from the statutory
United States income rate because of the following tax differences:
<TABLE>
<CAPTION>
1994 1993 1992
(in millions)
<S> <C> <C> <C>
Statutory tax rate 35.0% 35.0% 34.0%
Increase (reduction) in tax rate from:
State income taxes 3.6 2.6 2.8
Nondeductible amortization 1.7 1.4 -
Deferred tax reversal - - (1.3)
Other items 0.4 (1.1) (2.9)
-------------------------------------------
5.7 2.9 (1.4)
-------------------------------------------
Effective tax rate 40.7% 37.9% 32.6%
===========================================
<FN>
The components of the provision for deferred income taxes for
the years ended December 31 were as follows:
</TABLE>
<TABLE>
<CAPTION>
Liability Liability Deferred
Method Method Method
1994 1993 1992
(in millions)
<S> <C> <C> <C>
Deferral of profits on long-term contracts $110 $42 $(1)
Tax depreciation and amortization 66 2 (9)
Employee benefits (30) (64) 8
Financial reserves 128 47 13
Other items (9) (11) 1
--------------------------------------
$265 $16 $12
======================================
</TABLE>
Deferred income taxes 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. The Corporation does not
believe a valuation allowance is required at December 31, 1994 or 1993.
28 of 31
<PAGE>
Martin Marietta Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
Note Q: Taxes on Income (continued)
The primary components of the Corporation's deferred income tax
assets and liabilities at December 31 were as follows:
<TABLE>
<CAPTION>
Deferred assets (liabilities)
1994 1993
(in millions)
<S> <C> <C>
Deferral of profits on long-term contracts $133 $202
Property, plant and equipment and intangible assets (353) (287)
Employee benefits 360 330
Financial reserves 103 122
Other items 94 78
----------------------
$337 $445
======================
</TABLE>
For tax purposes, profits on long-term contracts are reported
on the completed contract method for contracts entered into
prior to March 1, 1986, and on the percentage-of-completion
capitalized cost method for contracts entered into thereafter.
The amounts also include the effect of the tax deduction of
certain costs on contracts and programs in progress inventories.
Deferred income taxes relating to contracts are classified as
current if the related contract is expected to be completed
within the following year; otherwise, they are classified as
noncurrent.
Income tax payments were $136 million in 1994, $261 million in
1993 and $183 million in 1992.
29 of 31
<PAGE>
Martin Marietta Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
Note R: Industry Segments
<TABLE>
<CAPTION>
Depreciation,
Assets Employed Property Additions Depletion, Amortization
1994 1993 1992 1994 1993 1992 1994 1993 1992
(millions)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Electronics $2,867 $2,949 $1,008 $82 $66 $ 61 $ 126 $146 $ 82
Space 2,506 1,598 832 97 65 42 100 85 43
Information 1,289 1,162 271 23 23 19 37 52 42
Services 203 218 32 4 2 1 3 3 1
Materials 482 464 419 52 54 50 39 35 40
Energy and Other 236 299 198 16 13 9 32 28 13
--------------------------- ---------------------- -----------------------
Total operating
segments 7,583 6,690 2,760 274 223 182 337 349 221
Corporate 914 1,026 714 2 - - 1 1 5
Investments 41 29 125 - - - - - -
--------------------------- ---------------------- -----------------------
Total $8,538 $7,745 $3,599 $276 $223 $182 $338 $350 $226
=========================== ====================== =======================
</TABLE>
Description of Industry Segments
The Corporation operates in the following principal business
segments:
Electronics Group is engaged in the design, development,
engineering and production of high-performance electronic
systems for undersea, shipboard, land-based and airborne
applications. Major product lines include advanced
technology missiles, night navigation and targeting systems
for aircraft; submarine and surface ship combat systems;
airborne, ship- and land-based radar; control systems;
ordnance; and aircraft component manufacturing and assembly.
Space Group is engaged in the design, development, engineering
and production of civil, commercial and military space launch
vehicles, satellites, spacecraft and space- and ground-based
strategic systems; surface- and space-based information and
communications systems; and the Space Shuttle External Tank
and associated electronics and instrumentation.
Information Group is engaged in the design, development,
integration and operation of information systems, including
simulation and automated test systems and image processing,
for government and commercial applications.
Services Group provides technical and management services,
including engineering, operation and maintenance of radar,
telemetry communications and instrumentation systems,
training and manufacturing assembly - for government and
industry.
30 of 31
<PAGE>
Martin Marietta Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
Note R: Industry Segments (continued)
Materials is comprised of aggregates operations principally
engaged in producing and selling crushed stone, sand and
gravel, primarily for highways and general construction, and
magnesia specialties operations, which produce and sell
refractory materials and other magnesia products used in steel
production, chemical processing purification and other industrial
applications.
Energy and Other operations consist of the Corporation's
activities associated with the U.S. Department of Energy
research, fabrication, assembly and technology transfer
operations; real estate subsidiaries in Florida and Maryland;
research laboratories; and other miscellaneous activities.
Corporate assets consist principally of cash and cash
equivalents, deferred tax assets and general corporate
properties and, in 1992, benefit plan trusts.
The Corporation is the managing contractor for Department
of Energy facilities in Tennessee, Kentucky, Ohio, Florida,
New Mexico, California and New York. The contractual
arrangements provide for the Corporation to be reimbursed for
the cost of operations and receive a fee for performing
management services. The Corporation reflects only the
management fee in its sales and earnings for these
government-owned facilities. In addition, applicable employee
benefit plans are separate from the Corporation's plans.
Sales made directly or under subcontract to the U.S.
Government amounted to approximately $3.36 billion in 1994,
$3.55 billion in 1993 and $1.75 billion in 1992 for
Electronics; $2.74 billion in 1994, $3.20 billion in 1993 and
$3.04 billion in 1992 for Space; $1.44 billion in 1994, $1.08
billion in 1993 and $360 million in 1992 for Information; and
$357 million in 1994, $341 million in 1993 and $65 million in
1992 for Services.
Goodwill and intangible amortization was $44 million in 1994 and
$35 million in 1993 for Electronics, $33 million in 1994 and
$19 million in 1993 for Space, $27 million in 1994 and $20
million in 1993 for Information, $5 million in 1994 and $4
million in 1993 for Services and $3 million in 1994 and
1993 for Materials.
See the Net Sales and Operating Profit by Industry Segment
table included in the Analysis of Financial Condition and
Operating Results for sales and operating profit data for each
reportable segment.
31 of 31
<PAGE>
EXHIBIT 99(i)
<TABLE>
<CAPTION>
Martin Marietta Corporation and Subsidiaries
Quarterly Performance (unaudited)
(in millions, except per share)
Earnings Earnings before Cumulative Effect
Quarter Net Sales from Operations of Accounting Changes Net Earnings (Loss)
1994 1993 1994 1993 1994 1993 1994 1993
<S> <C> <C> <C> <C> <C> <C> <C> <C>
First $2,034 $1,169 $207 $124 $184 $ 76 $184 $(353)
Second 2,491 2,613 252 222 163 124 163 124
Third 2,563 2,466 271 224 149 131 149 131
Fourth 2,786 3,188 248 218 140 119 140 119
--------------------------------------------------------------------------------------------------
Year $9,874 $9,436 $978 $788 $636 $450 $636 $21
==================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Earnings Per Common Share
before Cumulative Effect of Accounting
Quarter Changes, Assuming Full Dilution
1994 1993
<S> <C> <C>
First $1.47 $ .81
Second 1.29 .99
Third 1.18 1.04
Fourth 1.11 .94
------------------------------------------
Year $5.05 $3.80*
==========================================
* The sum of per-share earnings by quarter does
not equal earnings per share for the year
because the average number of shares
outstanding increased during the second
quarter of 1993 as a result of the assumed
conversion of the convertible Series A
preferred stock.
</TABLE>
<TABLE>
<CAPTION>
Common Stock Price Range and Dividends Per Share
Quarter High Low High Low Dividends Paid
1994 1993 1994 1993
<S> <C> <C> <C> <C> <C> <C>
First $47.25 $41.875 $37.44 $32.00 $.225 $ .21
Second 45.00 40.875 39.94 35.81 .225 .21
Third 51.00 43.000 44.875 39.06 .24 .225
Fourth 47.25 41.500 46.625 40.375 .24 .225
--------------------------------------------------------------------
Year $ .93 $ .87
==================
</TABLE>
<PAGE>
EXHIBIT 99(j)
<TABLE>
<CAPTION>
Five Year Summary
(in millions, except per share)
1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
Operating Results
Net sales $9,874 $9,436 $5,954 $6,076 $6,126
Cost of sales, other costs and expenses 8,896 8,648 5,405 5,538 5,683
---------------------------------------------------------------------------
Earnings from Operations 978 788 549 538 443
Other income and expenses, net 209 47 21 (59) 34
---------------------------------------------------------------------------
1,187 835 570 479 477
Interest expense on debt 115 110 58 58 42
---------------------------------------------------------------------------
Earnings before taxes on income and
cumulative effect of accounting
changes 1,072 725 512 421 435
Taxes on income 436 275 167 108 108
---------------------------------------------------------------------------
Earnings before Cumulative Effect of
Accounting Changes 636 450 345 313 327
Cumulative effect of changes in
accounting for post-retirement
benefits other than pensions and for
post-employment benefits - (429) - - -
---------------------------------------------------------------------------
Net Earnings $ 636 $ 21 $345 $313 $327
===========================================================================
Per Common Share
Assuming no dilution:
Before cumulative effect of accounting
changes $6.00 $4.25 $3.60 $3.15 $3.26
Cumulative effect of accounting changes - (4.51) - - -
---------------------------------------------------------------------------
Net earnings (loss) $6.00 $(0.26) $3.60 $3.15 $3.26
---------------------------------------------------------------------------
Assuming full dilution:
Before cumulative effect of accounting
changes $5.05 $3.80 $3.60 $3.15 $3.26
Cumulative effect of accounting changes - * - - -
---------------------------------------------------------------------------
Net earnings $5.05 * $3.60 $3.15 $3.26
===========================================================================
Cash Dividends $0.93 $0.87 $0.795 $0.75 $0.69375
*Anti-dilutive
Condensed Balance Sheet Data
Current assets $2,760 $2,448 $1,434 $1,628 $1,401
Other noncurrent assets 1,194 708 801 847 760
Noncurrent deferred income taxes 157 206 - - -
Property, plant and equipment, net 1,649 1,693 1,257 1,316 1,341
Cost in excess of net assets acquired 2,074 1,915 26 23 24
Other intangibles 704 775 81 94 85
---------------------------------------------------------------------------
Total $8,538 $7,745 $3,599 $3,908 $3,611
===========================================================================
Current liabilities-other $1,803 $1,492 $ 582 $ 884 $ 989
Current maturities of long-term debt 8 318 4 75 5
Long-term debt 1,346 1,479 475 596 463
Post-retirement benefit liabilities 783 741 102 99 55
Customer deposits 402 - - - -
Other noncurrent liabilities 825 838 194 202 300
Noncurrent deferred income taxes - - 297 248 258
Shareowners' equity 3,371 2,877 1,945 1,804 1,541
---------------------------------------------------------------------------
Total $8,538 $7,745 $3,599 $3,908 $3,611
===========================================================================
</TABLE>
