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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, 1996 Commission file number 1-11437
[LOCKHEED MARTIN LOGO]
LOCKHEED MARTIN CORPORATION
(Exact name of registrant as specified in its charter)
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Maryland 52-1893632
(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)
_______________
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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Common Stock, $1 par value 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 [_]
State the aggregate market value of the voting stock held by non-affiliates of
the registrant. Approximately $17,701,659,740 as of January 31, 1997.
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,
192,888,667 shares outstanding as of January 31, 1997.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of Lockheed Martin Corporation's 1996 Annual Report to Shareholders
are incorporated by reference in Parts I, II and IV of this Form 10-K.
Portions of Lockheed Martin Corporation's 1997 Definitive Proxy Statement are
incorporated by reference in Part III of this Form 10-K.
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PART I
ITEM 1. BUSINESS
GENERAL
Lockheed Martin Corporation ("Lockheed Martin" or the "Corporation") was
incorporated in Maryland on August 29, 1994 to effect the combination (the
"Combination") of the businesses of Martin Marietta Corporation and Lockheed
Corporation. The Combination was consummated on March 15, 1995. Lockheed
Martin is a highly diversified global enterprise principally engaged in the
conception, research, design, development, manufacture and integration of
advanced-technology products and services.
LORAL TRANSACTION
On April 23, 1996, in accordance with the terms of an Agreement and Plan of
Merger (the "Loral Merger Agreement") with Loral Corporation ("Loral"), LAC
Acquisition Corporation ("LAC"), a wholly-owned subsidiary of Lockheed Martin,
purchased approximately 94.5% of the outstanding shares of common stock of Loral
for an aggregate consideration of $38 per share. Immediately thereafter in
accordance with the terms of the Loral Merger Agreement, LAC merged with and
into Loral (the "Loral Merger"). In the Loral Merger, each remaining share of
common stock of Loral not owned by LAC was converted into the right to receive
$38, each outstanding share of common stock of LAC was converted into shares of
common stock of Loral, and Loral changed its name to Lockheed Martin Tactical
Systems, Inc. ("Tactical Systems"). As a result of
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these transactions, Tactical Systems became a wholly-owned subsidiary of the
Corporation.
The Loral Merger Agreement contemplated a series of transactions that
resulted in (i) the distribution, to stockholders of Loral immediately prior to
the consummation of the Tender Offer, of shares of capital stock in Loral Space
& Communications, Ltd. ("Loral SpaceCom"), a newly-formed Bermuda company, which
now owns and manages substantially all of Loral's former space and satellite
telecommunications interests, including Loral's direct and indirect interests in
Globalstar, L.P. and Space Systems/Loral, Inc., and certain other assets of
Loral, and (ii) the acquisition by the Corporation of Loral's defense
electronics and systems integration businesses.
In connection with the transactions contemplated by the Loral Merger
Agreement and the related agreements between the Corporation and Loral, the
Corporation acquired shares of preferred stock of Loral SpaceCom that were
convertible into approximately 20% of Loral SpaceCom's common stock on a fully
diluted basis at the time acquired. The Corporation's ownership of the
preferred stock of Loral SpaceCom is subject to certain limitations and
restrictions set forth in the terms and conditions of the preferred stock and in
agreements between the Corporation and Loral SpaceCom.
BUSINESSES
On January 25, 1996, Lockheed Martin entered into an Agreement and Plans of
Merger and Complete Liquidation with certain of its direct and indirect wholly-
owned subsidiaries. As a result, on
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January 28, 1996, each of Lockheed Corporation, Lockheed Missiles and Space
Company, Inc., Lockheed Sanders, Inc., Martin Marietta Corporation and Martin
Marietta Technologies, Inc. were merged with and into Lockheed Martin. In
addition, following the Loral Merger, the Corporation consummated an internal
reorganization of certain of its operating sectors to integrate the Tactical
Systems' businesses acquired from Loral with the pre-existing businesses of the
Corporation.
On January 31, 1997, the Corporation entered into a memorandum of
understanding (the "Memorandum of Understanding") with Lehman Brothers Holdings,
Inc. and a management team led by Frank C. Lanza, Executive Vice President of
Lockheed Martin, and Robert V. LaPenta, Corporate Vice President of Lockheed
Martin, pursuant to which Lockheed Martin agreed to establish Newco Corporation
("Newco") consisting of certain component- and product-oriented businesses of
Lockheed Martin. Under the terms of the Memorandum of Understanding, Lehman
Brothers Capital Partners III, L.P. would own 50.1%, the management team would
own 15% and the Corporation would retain 34.9% of Newco. The closing of the
transaction is subject to a number of conditions, including the execution of a
definitive agreement on terms acceptable to the parties. In conjunction with
the establishment of Newco, the Corporation again reorganized certain of its
operating sectors and now conducts its principal business through five major
operating sectors: Space & Strategic Missiles; Electronics; Information &
Services (which includes the Corporation's interest in Newco); Aeronautics; and
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Energy & Environment. See "Business - Additional Activities and Business
Segment Reporting" on page 10 through page 11.
Space & Strategic Missiles Sector
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The Space & Strategic Missiles Sector's activities include the design,
development, engineering and production of civil, commercial and military space
systems, including: spacecraft, space launch vehicles, manned space systems and
their supporting ground systems and services; telecommunications systems and
services; strategic fleet ballistic missiles; and defensive missiles.
Major programs of the Space & Strategic Missiles Sector include the Titan
family of launch vehicles including the Titan IV expendable launch vehicle, the
Trident II submarine launched fleet ballistic missile, the MILSTAR
communications satellite, the Atlas expendable launch vehicle, the production of
various government and commercial communications and environmental monitoring
satellites, and the THAAD ground-based theater air defense system. During 1996,
the Space & Strategic Missiles Sector assumed responsibility for the
Corporation's manned space systems unit which manufactures the Space Shuttle
external tank. The Space & Strategic Missiles Sector is also engaged in a
substantial amount of classified activities.
In 1996, the U.S. Air Force awarded the Corporation a contract to develop
the next generation missile warning and tracking system called the Space-Based
Infrared System (SBIRS). The purpose of the SBIRS program is to provide early
detection of a ballistic missile
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attack world-wide. On December 20, 1996, Lockheed Martin was picked by the U.S.
Air Force as one of two contractors that will proceed with producing designs for
the Evolved Expendable Launch Vehicle (EELV). The Air Force envisions that the
EELV will replace existing Delta, Atlas and Titan space launch vehicles for use
in launching government and commercial payloads.
Net sales by the Sector represented approximately 29.4% of the
Corporation's consolidated net sales in 1996. Net sales to the United States
Government, excluding Foreign Military Sales, represented approximately 81% of
the Sector's net sales in 1996.
Electronics Sector
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The Electronics Sector's activities primarily relate to the design,
development, engineering and production of high performance electronic systems
for undersea, shipboard, land-based, airborne-and space-based applications.
Major business elements include: Naval Systems; Missiles and Air Defense;
Aerospace Systems & Electronics; and Commercial, Civil and Adjacent. The Naval
Systems element serves the global market with major lines of business in surface
ship and submarine combat systems, missile launching, anti-submarine warfare,
and navigation systems. The Missiles and Air Defense element produces anti-
armor missiles; indirect fire support weapons systems; smart munitions; and air
defense systems. The Aerospace Systems and Electronics element includes system
integration capabilities for both fixed wing and rotary wing aircraft; and major
lines of electronics subsystems such as: aircraft controls systems; electronic
warfare; electro-optic and
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night vision; radar; display; and computers for the military and commercial
aerospace market. The Commercial, Civil, and Adjacent element lines of business
include positions in growing niche markets such as telecommunications;
commercial satellite electronics; mail handling automation systems;
transportation; and electronics fabrication.
The Corporation is the prime contractor for the U.S. Navy's AEGIS fleet air
defense system, including the Vertical Launch System, and the U.S. Air Force's
and Navy's LANTIRN targeting and navigation system, and for the development and
production of EH-101 Merlin helicopters for the United Kingdom's Ministry of
Defence. In addition, the Sector manufacturers and installs bar code readers
and sorters for the U.S. Postal Service, produces the Target Acquisition
Designation Sight/Pilot Night Vision Sensor (TADS/PNVS) and test hardware for
the U.S. Army's PATRIOT Advanced Capability (PAC-3) missile. In 1997, the
Sector anticipates that an increased percentage of its revenues will be derived
from sales of the Multiple Launch Rocket System, the U.S. Army's general support
fire power system.
In 1996, the Corporation was chosen as one of two competitors for the first
phase of the military's Joint Air-to-Surface Standoff Missile (JASSM)
development program. JASSM is a conventional standoff weapon that the U.S. Air
Force and U.S. Navy envision replacing the Tri Service Standoff Attack Missile.
In addition, the Electronics Sector was recently awarded contracts for the
development of the combat system for the U.S. Navy's new attack submarine; the
production of the SQQ-89 surface ship Antisubmarine Warfare Combat System;
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and the production of Tray Management Systems for the U.S. Postal Service.
Effective January 1, 1997, the Corporation completed the divestiture of the
assets of its Armament Systems and Defense Systems businesses to General
Dynamics Corporation.
Net sales by the Electronics Sector, including sales by Armament Systems
and Defense Systems, represented approximately 24.9% of the Corporation's
consolidated net sales in 1996. Net sales to the United States Government,
excluding Foreign Military Sales, represented approximately 66.7% of the
Sector's net sales in 1996.
Information & Services Sector
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The Information & Services Sector is involved in the development,
integration and operation of large, complex information systems; engineering,
technical and management services for federal customers; transaction processing
systems and services for state and local government agencies; commercial
information technology outsourcing; manufacture and distribution of computer
peripherals, graphics engines and intranet software; and the provision of
internal information technology support to the Corporation.
In 1996, NASA awarded the Space Flight Operations Contract to United Space
Alliance (USA), a limited liability company owned by Lockheed Martin and The
Boeing Company, making USA the single prime contractor for Space Shuttle
operations. Through USA, the Sector performs processing services for NASA's
space shuttle program. Through its Services Group, the Information & Services
Sector provides a wide array of science and engineering, information
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management, operation and maintenance, logistics, assembly and test and
installation services to governmental agencies and prime contractors. The
Sector produces the Consolidated Automated Support System (CASS), including the
U.S. Navy's AN/USM-636 CASS, a comprehensive test platform that provides general
purpose analog and digital test capabilities. The Corporation's Access Graphics
and certain other businesses, together with CalComp Technology, Inc. (NASDAQ:
CLCP), a majority-owned affiliate of Lockheed Martin, are involved in commercial
markets for computer graphics, hardware distribution and data storage devices.
The Sector is upgrading the U.S. National Air Traffic Control System through
replacement of display systems at 20 FAA Control Centers and development of an
advanced tower management system. Similar work is under way in the United
Kingdom. In addition, the Sector performs a substantial amount of classified
work.
In 1996, Lockheed Martin and Intel signed an agreement to jointly develop a
new chip that will give desktop computer users real-time, three-dimensional
color graphics. The chips are based on Lockheed Martin military training and
simulation technology.
Net sales by the Information & Services Sector represented approximately
21.8% of Lockheed Martin's consolidated net sales in 1996. Net sales to the
United States Government, excluding Foreign Military Sales, represented
approximately 65.8% of the Sector's net sales in 1996.
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Aeronautics Sector
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The Aeronautics Sector is involved in the design, development, engineering
and production of fighter, bomber, special mission, airlift, antisubmarine
warfare, reconnaissance, surveillance and high performance aircraft; systems for
military operations; aircraft controls and subsystems; thrust reversers; and
aircraft modification and maintenance and logistics support for military and
civilian customers.
The Corporation is the prime contractor on the F-16 "Fighting Falcon"
fighter aircraft, leads the team responsible for the Air Force's F-22 air
superiority fighter program and provides the C-130 series airlift aircraft. In
the commercial aircraft business the Sector manufactures thrust reversers for
commercial jet engines. The Corporation is also involved in upgrading aircraft,
including the U-2 and SR-71 reconnaissance aircraft, the F-117 fighter bomber
and earlier model C-130s. Through the Skunk Works, the Aeronautics Sector
performs a substantial amount of classified work.
On July 2, 1996, the Corporation entered into a cooperative agreement with
NASA to build and demonstrate the prototype X-33 single-stage-to-orbit reusable
launch vehicle, the next generation of space shuttle. NASA's funding and the
industry team investment provide approximately $1.0 billion for the X-33 project
through 1999. On November 16, 1996, the Corporation was selected as one of two
defense contractors to proceed to the concept demonstration phase of the
government's Joint Strike Fighter (JSF) Program. Contract tasks include the
design, development, construction and flight test of this full-scale
demonstration aircraft.
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Net sales by the Aeronautics Sector represented approximately 20.8% of the
Corporation's consolidated net sales in 1996. Net sales to the United States
Government, excluding Foreign Military Sales, represented approximately 68.4% of
the Sector's net sales in 1996.
Energy & Environment Sector
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The Energy & Environment Sector is responsible for the Corporation's energy
and environmental remediation businesses, including the management of various
U.S. Department of Energy (DoE) activities. The Corporation is the largest
management and operations contractor within the DoE's system of laboratories and
other facilities and manages, among other facilities, the Sandia National
Laboratories, the Idaho National Engineering and Environmental Laboratory and
the Oak Ridge National Laboratory.
Net sales by the Sector represented less than 1% of the Corporation's
consolidated net sales in 1996. Net sales to the United States Government
represented approximately 85.1% of the Sector's net sales in 1996.
Additional Activities and Business Segment Reporting
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In addition to the above activities, Lockheed Martin has real estate
subsidiaries in Florida and Maryland, runs research laboratories and carries on
other miscellaneous activities.
In 1996, the Corporation completed its divestiture of Martin Marietta
Materials, Inc. ("Materials") in an exchange offer (the "Exchange Offer")
pursuant to which Lockheed Martin exchanged
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37,350,000 shares of Materials common stock for 7,913,136 shares of Lockheed
Martin common stock.
For business segment reporting in the Corporation's consolidated financial
statements, the Space & Strategic Missiles, Electronics, Information & Services
and Aeronautics Sectors each comprise reportable business segments. The Energy
& Environment Sector, together with the additional activities described in the
preceding paragraphs, are reported as Energy, Materials and Other and represents
the balance of the Corporation's revenues.
The Corporation's principal executive offices are located at 6801 Rockledge
Drive, Bethesda, Maryland 20817. The telephone number of the Corporation is
(301) 897-6000.
COMPETITION AND RISK
Lockheed Martin's sales to the U.S. Government, excluding Foreign Military
Sales, amounted to approximately 69.6% of net sales for the year ended December
31, 1996. Approximately 12.3% of net sales for fiscal year 1996 were sales to
foreign governments and approximately 18.0% of net sales were to commercial
customers of which 5.4% were international customers.
Lockheed Martin encounters extensive competition in all of its lines of
business with numerous other contractors on the basis of price, technical and
managerial capability. The on-going consolidation of the United States defense
industry has intensified this competition as competitors are now generally
larger and more capable. At the same time, the number of contracts awarded has
decreased. In some instances, for example, the ongoing competition
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for the Joint Strike Fighter and the Evolved Expendable Launch Vehicle, winning
the competition may be a significant determinant of whether the competitors are
able to remain in that line of business. More generally, the aerospace and
defense 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. Substantial efforts are
undertaken continually on a long-term basis in order to maintain existing levels
of business.
Approximately 70% of the 1996 sales of the Corporation were made to the
United States Government, either as a prime contractor or as a subcontractor,
for which there is intense competition. Accordingly, a significant portion of
the Corporation's sales are subject to inherent risks, including uncertainty of
economic conditions, changes in government policies and requirements that may
reflect rapidly changing military and political developments and the
availability of funds. Other characteristics of the industry are complexity of
designs, the difficulty of forecasting costs and schedules when bidding on
developmental and highly sophisticated technical work and the rapidity with
which product lines become obsolete due to technological advances and other
factors characteristic of the industry. Due to the intense competition for
available government business, the maintenance and/or expansion of government
business increasingly requires the Corporation to generate working capital and
invest in fixed assets.
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Certain risks inherent in the current defense and aerospace business
environment are discussed in "Management's Discussion and Analysis of Financial
Condition and Results of Operations" on page 51 through page 63 of the
Corporation's 1996 Annual Report to Shareholders (the "1996 Annual Report").
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.
The Corporation's international business involves 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 foreign countries. The Corporation expects that international sales as
a percentage of the overall sales of the Corporation will continue to increase
in future years as a result of, among other things, the continuing changes in
the United States defense industry.
A portion of Lockheed Martin's business includes classified programs that
cannot be specifically discussed, the operating results of which are included in
the Corporation's consolidated financial statements. The nature of and business
risks associated
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with classified programs do not differ materially from those of the
Corporation's other government programs and products.
PATENTS
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.
RAW MATERIALS AND SEASONALITY
The Corporation has not experienced significant difficulties in its ability
to obtain raw materials and other supplies needed in its manufacturing
processes, nor does the Corporation expect such difficulties to arise in the
future. No material portion of the business of the Corporation is considered to
be seasonal.
GOVERNMENT CONTRACTS AND REGULATIONS
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. Lockheed Martin generally would be
entitled to
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receive payment for work completed and allowable termination or cancellation
costs if any of its government contracts were to be 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.
In addition to the right of the United States Government to terminate,
government contracts are conditioned upon the continuing availability of
Congressional appropriations. Congress usually appropriates funds on a fiscal-
year basis even though contract performance may extend over many years.
Consequently, at the outset of a program, the contract is usually partially
funded, and additional funds are normally only appropriated to the contract by
Congress in future years.
BACKLOG
Lockheed Martin's total negotiated backlog at December 31, 1996, was
approximately $50.4 billion compared with approximately $41.1 billion at the
end of 1995. The total negotiated backlog of the Sectors at December 31, 1996
was as follows: Space & Strategic Missiles $19.5 billion, Electronics $10.9
billion, Information &
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Services, $6.4 billion and Aeronautics $13.4 billion. Unlike the other Sectors,
the Energy & Environment Sector is not a reportable business segment. The
reportable business segment of which Energy & Environment is part, Energy,
Materials and Other, had total negotiated backlog at December 31, 1996 of
approximately $167 million. Of this figure, almost all was attributable to the
Energy & Environment Sector. These figures are all approximate and include both
unfilled firm orders for the Corporation's products for which funding has been
both authorized and appropriated by the customer (Congress, in the case of
United States Government agencies) and firm orders for which funding has not
been appropriated.
Backlog information and comparisons thereof as of different dates may not
be accurate indicators of future sales or the ratio of Lockheed Martin's future
sales to the United States Government versus its sales to other customers.
Of the Corporation's total 1996 year-end backlog, approximately $32
billion, or 63%, is not expected to be filled within one year.
ENVIRONMENTAL REGULATION
Lockheed Martin's operations are subject to and affected by a variety of
federal, state, and local environmental protection laws and regulations. The
Corporation is 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 has been designated a "Potentially
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Responsible Party" (PRP) by the U.S. Environmental Protection Agency (EPA) or by
a state agency. At such third-party sites, the EPA or a state agency has
identified the site as requiring removal or 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
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this approach should minimize the Corporation's proportionate share of liability
at third-party sites where other PRPs share liability.
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, in combination with the Corporation's actual or potential liability
for environmental responses at its own facilities, 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.
In addition, Lockheed Martin manages various government-owned facilities on
behalf of the government. At such facilities, 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
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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
Lockheed Martin's consolidated financial position or results of operations. For
additional details, see "Legal Proceedings" on page 25 through page 30. See
also "Note 14 -- Commitments and Contingencies" of the "Notes to Consolidated
Financial Statements" on page 80 through page 81 and "Management's Discussion
and Analysis of Financial Condition and Results of Operations, Environmental
Matters" on page 62 through page 63 of the 1996 Annual Report.
RESEARCH AND DEVELOPMENT
Lockheed Martin conducts significant research and development activities,
both under contract funding and with Independent Research and Development (IR&D)
funds. Lockheed Martin expended approximately $1,042 million in 1996,
$778 million in 1995 and $813 million in 1994 using IR&D and bid and proposal
funds, a substantial portion of which was included in overhead allocable to
United States Government contracts.
During fiscal year 1996, the Corporation did not undertake the development
of a new product or line of business requiring the investment of a material
amount of the Corporation's total assets.
See "Research and Development and Similar Costs" in "Note 1--Summary of
Significant Accounting Policies" of the "Notes to
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Consolidated Financial Statements" on page 71 of the 1996 Annual Report.
EMPLOYEES
As of December 31, 1996, Lockheed Martin had approximately 190,000
employees, the majority of whom were located in the United States. The
Corporation has a continuing need for many skilled and professional personnel in
order to meet contract schedules and obtain new and ongoing orders for its
products. Approximately 33,300 of Lockheed Martin's employees are covered by
125 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.
FORWARD LOOKING STATEMENTS - SAFE HARBOR PROVISIONS
This Annual Report on Form 10-K contains statements which, to the extent
that they are not recitations of historical fact, constitute "forward looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended (the "Securities Act") and Section 21E of the Securities Exchange Act of
1934 (the "Exchange Act"). All forward looking statements involve risks and
uncertainties. The forward looking statements in this document are intended to
be subject to the safe harbor protection provided by Sections 27A of the
Securities Act and 21E of the Exchange Act. For a discussion identifying some
important factors
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that could cause actual results to vary materially from those anticipated in the
forward looking statements, see the Corporation's Securities and Exchange
Commission filings, including but not limited to, the discussion of "Competition
and Risk" and the discussion of "Government Contracts and Regulations" on pages
11 through 14 and 14 through 15, respectively, of this Annual Report on Form 10-
K and "Management's Discussion and Analysis of Financial Condition and Results
of Operations" on pages 51 through 63 of the 1996 Annual Report and "Note 1 -
Summary of Significant Accounting Policies", "Note 3 - Repositioning of Non-Core
Businesses and New Organizational Structure" and "Note 14 - Commitments and
Contingencies" of the Notes to Consolidated Financial Statements on pages 70
through 71, pages 72 through 73 and 80 through 81, respectively, of the Audited
Consolidated Financial Statements included in the 1996 Annual Report and
incorporated by reference into this Annual Report on form 10-K.
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ITEM 2. PROPERTIES
At December 31, 1996, including properties to be utilized by Newco, the
Corporation operated in approximately 460 offices, facilities, manufacturing
plants, warehouses, service centers, and laboratories throughout the United
States and internationally. Of these, the Corporation owned floor space at
approximately 77 locations aggregating approximately 46.8 million square feet.
The Corporation leased space at approximately 383 of its locations aggregating
approximately 26.9 million square feet. Additionally, the Corporation manages
and/or occupies various government-owned facilities at Marshall Space Flight
Center in Alabama; Livermore, Palmdale, San Diego, Santa Cruz, Sunnyvale and
Vandenberg Air Force Base in California; Cape Canaveral Air Force Station and
Kennedy Space Center in Florida; Marietta, Georgia; Kauai, Hawaii; Idaho Falls
and Scoville, Idaho; the United States Enrichment facilities at Paducah,
Kentucky and Piketon, Ohio; the NASA Michoud Assembly Facility near New Orleans,
Louisiana; Stennis Space Center in Mississippi; Las Vegas, Nevada; Sandia
National Laboratories in New Mexico; Johnson City and Knolls Atomic Power
Laboratory at Niskayuna, New York; the Department of Energy facility at Oak
Ridge, Tennessee; Houston and Ft. Worth, Texas, among others. The United States
Government also furnishes certain equipment and property used by the
Corporation.
The Corporation owns a corporate office building located in Bethesda,
Maryland in fee simple, and leases corporate office facilities at Westlake
Village, California, Bethesda, Maryland, and Arlington (Crystal City), Virginia.
In addition, the Corporation
- 22 -
<PAGE>
owns and leases major office and manufacturing facilities for various sectors at
the following locations, and with approximately the indicated square footage:
<TABLE>
<CAPTION>
SQUARE FOOTAGE (M)
------------------
SECTOR LOCATION OWNED LEASED
- ------ -------- ----- ------
<S> <C> <C> <C>
Space & Strategic Sunnyvale and Palo
Missiles Alto, CA 6.5 .7
Waterton and
Littleton, CO 4.0
East Windsor, NJ .7
King of Prussia, PA .9
Electronics Camden, AK 1.5
Orlando, FL 2.2
Eagen, MI .6
Nashua, NH 2.5
Moorestown, NJ .9 .2
Great Neck, NY 1.4
Syracuse, NY 1.5
Owego, NY 1.5
Akron, OH 2.6
Grand Prarie, TX 2.0
Manassas, VA 1.4
Information & Goodyear, AZ 1.0
Services San Jose, CA .5
Orlando, FL 1.0
Gaithersburg, MD .5
Camden, NJ .6
King of Prussia, PA .5 .6
Salt Lake City, UT .5
Reston, VA .8
Aeronautics Ontario, CA .9
Palmdale, CA 2.2
Marietta, GA 1.9
Middle River, MD 1.7
Greenville, SC .7
Ft. Worth, TX .2 .2
</TABLE>
The above information excludes facilities associated with the former
Defense Systems and Armament Systems business units located in Pittsfield,
Massachusetts and Burlington, Vermont which were divested effective as of
January 1, 1997.
- 23 -
<PAGE>
Finally, the Corporation owns various large tracts of land which are
available for sale or development. The location and approximate size of these
large tracts include:
<TABLE>
<CAPTION>
LOCATION ACREAGE
-------- -------
<S> <C>
1. Potrero Creek, CA 9,100
2. Beaumont Gateway, CA 2,800
3. Meridian Test Range, TX 2,784
4. Orlando, FL 2,000
5. Littleton, CO (Deer Creek) 1,000
6. Palmdale Trust, CA 650
7. Austin, TX 600
</TABLE>
A significant portion of the Corporation's activity is related to
engineering and research and development, which is not susceptible to productive
capacity analysis. In the area of manufacturing, most of the operations are of
a job-order nature, rather than an assembly line process, and productive
equipment has multiple uses for multiple products.
Management believes that all of the Corporation's major physical facilities
are in good condition and are adequate for their intended use.
- 24 -
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
The Corporation is primarily engaged in providing products and services
under contracts with the United States Government and, to a lesser degree, under
direct foreign sales 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 the Corporation's operations are being conducted in
accordance with these requirements. Such investigations could result in
administrative, civil or criminal liabilities, including repayments, fines or
penalties being imposed upon the Corporation, or could lead to suspension or
debarment from future government contracting. The Corporation is also a party
to or has its property subject to various other litigation and proceedings,
including matters arising under provisions relating to the protection of the
environment (collectively, "proceedings").
On June 7, 1990, Boggs, et al. v. Divested Atomic Energy Corporation, et
al., was filed against various defendants including Martin Marietta Energy
Systems ("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 $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 contracts between MMES and the Department of Energy.
- 25 -
<PAGE>
The Corporation's property in Burbank, California (a former aircraft
manufacturing facility) is the subject of a 1991 consent decree with the U.S.
Environmental Protection Agency ("EPA") which obligates the Corporation to
design and construct facilities to monitor, extract and treat groundwater. As is
common practice, at the time the Consent Decree was lodged, the EPA filed a suit
with the United States District Court for the Central District of California in
order to provide that Court with jurisdiction over the Consent Decree. The
Corporation intends to file an Answer and Counterclaim in March, 1997 in the
EPA's suit asserting indemnity/contribution claims against the government based
upon the government's ownership and operation of the former aircraft
manufacturing facility. The same facility is subject to a cleanup and abatement
order from the California Regional Water Quality Board which requires site
assessment and action to abate groundwater contamination through a combination
of groundwater and soil cleanup and treatment. (See "Note 14 -Commitments and
Contingencies" of the "Notes to Consolidated Financial Statements" on page 80
through page 81 of the 1996 Annual Report). On August 1, 1996, the Corporation
consummated a settlement with a group of 1,350 residents living in the vicinity
of the facility. The settlement, valued at approximately $67 million, resolved,
without litigation, claims of personal injury and property damage asserted by
the residents and alleged to be related to environmental contamination stemming
from historical operations of the former facility. The Corporation settled the
matter for business reasons after a lengthy mediation, without any admission of
liability, notwithstanding its continuing position that the
- 26 -
<PAGE>
facility does not and has not posed a risk to the community. As the result of
publicity surrounding the settlement, the Corporation has been named in two
purported federal class action suits and a series of state actions on behalf of
over 800 individual residents and former residents of Burbank alleging similar
claims of personal injury, property damage and fear of future illnesses. All of
these matters have been removed to federal court in Los Angeles and have been
proposed to be coordinated under the caption In re Burbank Environmental
Litigation. The Corporation believes that it has strong defenses to these claims
which it is preparing to assert. As with its remediation activities relating to
environmental matters, the Corporation has tendered these matters to its
insurance carriers who have provided a defense but are contesting coverage.
Following the filing of the lawsuits against the Corporation in connection
with its former Burbank facilities (In re Burbank Environmental Litigation),
lawyers from Los Angeles have filed a similar action against the Company in
connection with the Corporation's former operations in Redlands, California
(Carrillo v. LMC). More lawsuits are expected in the Redlands area, but the
Corporation believes the allegations of these actions to be without merit.
As the result of the consummation of the Loral Transaction, subject to
certain limited exceptions, the Corporation became responsible for liabilities
arising out of legal and environmental proceedings pertaining to the Loral
Corporation businesses acquired by the Corporation. On July 7, 1995, Loral
Corporation was served
- 27 -
<PAGE>
with a subpoena issued by the United States District Court for the Eastern
District of New York seeking documents relating to a number of programs
conducted at Loral Corporation's Defense Systems-East (Great Neck, New York)
operations. These operations now form a part of the Corporation's Electronics
Sector. The Corporation has been provided minimal information concerning the
focus of the investigation, but it appears to arise from anonymous complaints
provided to the United States Government by employees about testing and quality
control matters. The Corporation is unaware of any such issues and is
cooperating in the government's continuing investigation of this matter.
By letter dated September 21, 1995, the Corporation informed the Department
of Defense Inspector General's Office ("DoD IG") that the Corporation had become
aware of certain potential accounting issues which the Corporation was
investigating with respect to the LANTIRN program. On February 12, 1996, the
Corporation was served with a DoD IG subpoena seeking documents related to the
price proposal submitted in connection with a LANTIRN program contract awarded
in 1994. On July 16, 1996, two qui tam complaints against the Corporation were
unsealed in the United States District Court for the Middle District of Florida
at Orlando. The complaints allege various cost accounting issues on LANTIRN
program contracts and seek damages in the amount of $140 million. The
government has not yet made a decision as to whether to intervene in the lawsuit
and its investigation is continuing.
On January 23, 1996, a DoD IG subpoena was served on Lockheed Martin
Electronics & Missiles seeking documents relating to the
- 28 -
<PAGE>
software development portion of the Paperless LANTIRN Automated Depot ("PLAD")
contract. It is believed that the government is investigating allegations that
the Corporation's proposal for the PLAD contract was defectively priced.
On January 23, 1996, Lockheed Martin Electronics & Missiles was served with
a grand jury subpoena issued by the United States District Court for the Middle
District of Florida at Jacksonville seeking documents related to the manufacture
and testing of two circuit card assemblies used in the production of the
Hellfire I missile for the U.S. Army. On July 24, 1996, a second grand jury
subpoena was served on the Corporation related to the same subject matter and
the government's investigation of this matter is continuing.
On June 25, 1996, Lockheed Martin Engineering & Science Services was served
with a grand jury subpoena issued by the United States District Court for the
Southern District of Texas seeking documents related to two former employees of
a predecessor company, Lockheed Engineering & Sciences Company (LESC), and
apparently pertaining to an investigation of cost accounting issues in
connection with NASA service and support contracts. On August 13, 1996, the
Corporation was advised that the government's investigation of this matter is
expected to continue.
On November 27, 1996, Lockheed Martin Tactical Defense Systems - Great Neck
was served with a grand jury subpoena issued by the United States District Court
for the Eastern District of New York seeking documents related to tax and
financial reporting issues and
- 29 -
<PAGE>
the outsourcing of quality tasks contained in various contract proposals. The
Corporation expects this investigation to continue.
On January 23, 1997, Lockheed Martin Electro-Optical Systems was served
with a grand jury subpoena issued by the United States District Court for the
Central District of Los Angeles seeking documents relating to the accounting
treatment of contract payments received from the government. The Corporation
expects this investigation to continue.
On February 6, 1997, three former employees of the Corporation were served
with subpoenas ad testificandum issued by a federal grand jury in Jackson,
Tennessee. The individuals were employees of the Corporation's Armament Systems
business which was sold to General Dynamics Corporation effective January 1,
1997. Under the terms of the agreement with General Dynamics, the Corporation
retained responsibility for investigations of this type. The Corporation
expects this investigation to continue.
The Corporation is involved in various other legal and environmental
proceedings arising in the ordinary course of its business, but in the opinion
of management and counsel the probability is remote that the outcome of any such
litigation or proceedings, whether specifically described above or referred to
generally in this paragraph, will have a material adverse effect on the results
of the Corporation's operations or its financial position.
- 30 -
<PAGE>
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 1996.
ITEM 4(A). EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of Lockheed Martin Corporation are listed below.
There were no family relationships among any of the executive officers and
directors of the Corporation. All officers serve at the pleasure of the Board
of Directors.
<TABLE>
<CAPTION>
POSITIONS AND
OFFICES HELD WITH PRINCIPAL OCCUPATION AND
NAME CORPORATION BUSINESS EXPERIENCE
(AGE AT 12/31/96) (YEAR ELECTED) (PAST FIVE YEARS)
- --------------------- ------------------- -----------------------------------------
<S> <C> <C>
Norman R. Augustine Chairman of the Chairman of the Board of Lockheed Martin
(61) Board and Chief Corporation since January 1997 and Chief
Executive Executive Officer of Lockheed Martin
Officer; Director Corporation since January 1, 1996.
(1995) President of Lockheed Martin from March
1995 to December 1995. Chairman of the
Board of Martin Marietta from 1988 to
1995 and Chief Executive Officer from
1987 to 1995.
Marcus C. Bennett Executive Vice Executive Vice President of Lockheed
(60) President and Martin since July 1996; Senior Vice
Chief Financial President and Chief Financial Officer of
Officer; Director Lockheed Martin Corporation from March
(1995) 1995 to July 1996. Vice President and
Chief Financial Officer of Martin
Marietta from 1988 to 1995.
Vance D. Coffman President and Director since January 1996; President
(52) Chief Operating since June 1996; Chief Operating Officer
Officer; Director since January 1996; Executive Vice
(1996) President from January to June 1996;
President and Chief Operating Officer,
Space & Strategic Missiles Sector from
March 1995 to December 1995; previously
served in Lockheed Corporation as
Executive Vice President, from 1992 to
1995; and President of Lockheed Space
Systems Division from 1988 to 1992.
</TABLE>
- 31 -
<PAGE>
<TABLE>
<S> <C> <C>
James A. Blackwell, Sector President President and Chief Operating Officer,
Jr. (56) and Chief Aeronautics Sector since March 1995;
Operating Officer previously served in Lockheed
- Aeronautics Corporation as Vice President and
President from April 1993 to March 1995,
Lockheed Aeronautical Systems Company;
served as an executive employee of
Lockheed Aeronautical Systems Company
from 1986 until March 1995.
Melvin R. Brashears Sector President President and Chief Operating Officer
(51) and Chief Space & Strategic Missiles Sector, since
Operating Officer January 1996; Deputy, Space & Strategic
- Space & Missiles Sector from November 1995 to
Strategic December 1995; Executive Vice President
Missiles of Lockheed Missiles & Space Company,
Inc. from March 1995 - November 1995 and
President of Lockheed Commercial Space
Company; previously served in Lockheed
Corporation as Vice President and
Assistant General Manager, Space Systems
Division, Lockheed Missiles & Space
Company, Inc., from 1992 to 1995;
Director of Advanced Space Programs,
from 1991 to 1992.
Raymond S. Colladay President, President, Astronautics since February
(53) Astronautics 1997; previously Vice President Business
Development & Advanced Programs of
Martin Marietta and the
Corporation, respectively, from May
1993 to February 1997; Vice
President Strategic Defense Systems
of Martin Marietta from December 1990 to May 1993 .
Thomas A. Corcoran Sector President President and Chief Operating Officer,
(52) and Chief Electronics Sector since March 1995;
Operating Officer previously served in Martin Marietta
- Electronics Corporation as President, Electronics
Group, from April 1993 to March
1995; previously served at General
Electric Corporation as Vice
President and General Manager, from
1990 to 1993.
Dain M. Hancock President, President, Tactical Aircraft Systems
(55) Tactical Aircraft since March 1995; previously served in
Systems Lockheed Corporation as Vice President
from 1993 to March 1995; and Vice
President and F-16 Program Director,
Lockheed Fort Worth Company, from 1993
to March 1995. From 1966 until 1993 he
was an employee of General Dynamics
Corporation.
</TABLE>
- 32 -
<PAGE>
<TABLE>
<S> <C> <C>
K. Michael Henshaw President, President, Lockheed Martin Missiles &
(50) Missiles & Space Space since October 1996; Executive Vice
President, Lockheed Martin Missiles &
Space from July to October, 1996; Vice
President, Civil Space and Vice
President Business Development, Advanced
Programs & Technology of Lockheed Martin
Missiles & Space from January to July,
1996; Vice President, Lockheed Martin
Earth Observation & Space Science
Systems from August 1995 to January
1996; Vice President, Lockheed Martin
Earth Remote Sensing Programs from July
1994 to August 1995; Group Vice
President of Martin Marietta Corporation
from May 1993 to July 1994; Group Vice
President of Martin Marietta Advanced
Programs & Business Development from
April 1991 to May 1993.
John R. Kreik (52) President, President, Sanders; previously served in
Sanders Lockheed Corporation as President,
Lockheed Sanders, Inc. from 1990 to 1995.
Frank C. Lanza (65) Executive Vice Executive Vice President of Lockheed
President; Martin Corporation since April 1996 and
Director President and Chief Operating Officer of
the Corporation's C/3/I and Systems
Integration Sector from April 1996 to
February 1997; President and Chief
Operating Officer of Loral Corporation
from 1981 until its combination with
Lockheed Martin in April 1996; member
of the Board of the American Defense
Preparedness Association and Vice
Chairman of the General Partners
Committee of Globalstar Limited
Partnership.
John S. McLellan President, President, Aeronautical Systems since
(55) Aeronautical March 1995; previously served in
Systems Lockheed Corporation as Vice President
and Executive Vice President, Lockheed
Aeronautical Systems Company from March
1994 to March 1995; served as President,
Lockheed Aircraft Service Company-
Ontario from February 1992 to March
1994 and served as its Executive Vice
President from April 1989 to February 1992.
</TABLE>
- 33 -
<PAGE>
<TABLE>
<S> <C> <C>
Frank H. Menaker, Senior Vice Senior Vice President since July 1996;
Jr. (56) President and Vice President and General Counsel for
General Counsel Lockheed Martin Corporation March 1995
to July 1996, after having served in the
same capacity for Martin Marietta
Corporation since 1981.
Albert Narath (63) Sector President President and Chief Operating Officer,
and Chief Energy & Environment Sector, Lockheed
Operating Officer Martin Corporation from August 15, 1995
- Energy & to present; President, Sandia
Environment Corporation from April 1989 to August
14, 1995.
Robert E. Rulon Vice President Vice President and Controller since
(53) and Controller March 1995; previously served in
Lockheed Corporation as Vice President
and Controller from 1992 to 1995;
served as Vice President, Internal
Audit from 1990 to 1992.
Walter E. Vice President Vice President and Treasurer since March
Skowronski (48) and Treasurer 1995; previously served in Lockheed
Corporation as Vice President and
Treasurer from 1992 to 1995; served as
staff Vice President, Investor Relations
from 1990 to 1992.
Peter B. Teets (54) Sector President President and Chief Operating Officer,
and Chief Information & Services Sector since
Operating Officer March 1995; previously served in Martin
- Information & Marietta Corporation as Corporate Vice
Services President (since 1985) and President,
Space Group, from 1993 to 1995; served as
President, Astronautics Group from 1987
to 1993.
</TABLE>
- 34 -
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
There were approximately 42,609 holders of record of Lockheed Martin
Corporation Common Stock, $1 par value, as of December 31, 1996. The
Corporation's Common Stock is traded on the New York Stock Exchange, Inc.
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
------- -------------- -------- --------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
First .40 N/A 80.875/73.125 54.375/50.25
Second .40 .35 86.75/73.00 64.875/50.00
Third .40 .35 91.75/76.25 68.125/59.375
Fourth .40 .35 96.625/85.25 79.50/63.00
---- ----
Year 1.60 1.05 96.625/73.00 79.50/50.00
</TABLE>
/*/ The first day that the Corporation's Common Stock was publicly traded was
March 16, 1995
ITEM 6. SELECTED FINANCIAL DATA
The information required by this Item 6 is included under the caption
"Seven Year Summary" on page 85 of the 1996 Annual Report, and that information
is hereby incorporated by reference in this Form 10-K.
- 35 -
<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
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" on page 51 through page 63 of the 1996 Annual Report, 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
"Report of Ernst & Young LLP, Independent Auditors," "Consolidated Statement of
Earnings," "Consolidated Statement of Cash Flows," "Consolidated Balance Sheet,"
"Consolidated Statement of Stockholders' Equity," and "Notes to Consolidated
Financial Statements" on page 65 through page 84 of the Audited Consolidated
Financial Statements included in the 1996 Annual Report and "Management's
Discussion and Analysis of Financial Condition and Results of Operations" on
page 51 through page 63 of the 1996 Annual Report. 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.
- 36 -
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information concerning directors required by this Item 10 is included
under the caption "Election of Directors" in the Corporation's definitive Proxy
Statement to be filed pursuant to Regulation 14A no later than March 25, 1997
(the "1997 Proxy Statement"), and that information is hereby incorporated by
reference in this Form 10-K. Information concerning executive officers required
by this Item 10 is located under Part I, Item 4(a) on page 31 through page 34 of
this Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item 11 is included in the text and tables
under the caption "Compensation of Executive Officers" in the 1997 Proxy
Statement and that information, except for the information required by Item
402(k) and 402(l) of Regulation S-K, is hereby incorporated by reference in this
Form 10-K.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item 12 is included under the heading
"Securities Owned by Management" and "Voting Securities and Record Date" in the
1997 Proxy Statement and that information is hereby incorporated by reference in
this Form 10-K.
- 37 -
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Corporation is negotiating a Transaction Agreement pursuant to which
the Corporation anticipates repositioning certain non-core business units as a
new independent company. The transaction contemplates the creation of a new
company ("Newco") which will be 50.1% owned by Lehman Brothers Capital Partners
III, L.P. or its affiliates, 34.9% by the Corporation, and 15% by a management
team lead by Frank C. Lanza who, in addition to his services as a director of
the Corporation, serves as one of its executive vice presidents. The Transaction
Agreement is being negotiated on an arms-length basis. It is contemplated that
Newco will pay the Corporation a total purchase price for the businesses
(subject to adjustment in certain circumstances as will be provided in the
Transaction Agreement) of $525 million, consisting of 6,980,000 shares of Newco
Class A Common Stock and $479.835 million in cash. Mr. Lanza will be issued
1,500,000 shares of Class B Common Stock, or 7.5% of the equity securities of
Newco, in return for cash consideration of $7.5 million. A second individual
constituting a member of the proposed management team will also be issued
1,500,000 shares of Newco Class B Common stock in return for cash consideration
of $7.5 million. The proposed transaction is subject to a number of conditions,
including execution of a definitive agreement and regulatory approvals.
The Corporation has entered into an employment agreement with Mr. Lanza.
Under the agreement, during the three-year term of employment beginning on May
1, 1996, Mr. Lanza may, for good cause, give notice that he elects to terminate
employment under the agreement. Upon receipt of such notice, or upon termination
by the Corporation for other than substantial and serious cause, the agreement
requires Lockheed Martin to pay Mr. Lanza a lump sum payment equal to the base
salary and annual bonus that would have been paid during the remaining portion
of the three-year term of the agreement had he continued to be employed through
the full term. As of the date of the mailing of this Proxy Statement, the
Corporation is negotiating with Mr. Lanza as to the effect of the proposed
transaction under Mr. Lanza's employment agreement if that transaction closes.
- 38 -
<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 Lockheed Martin Corporation and
consolidated subsidiaries, and the related Report of Ernst & Young,
Independent Auditors, included in the 1996 Annual Report, are
incorporated by reference into Item 8 on page 36 of this Annual Report
on Form 10-K. Page numbers refer to the 1996 Annual Report:
Consolidated Statement of Earnings--
December 31, 1996, 1995 and 1994............................ 66
Consolidated Statement of Cash Flows--
December 31, 1996, 1995 and 1994............................ 67
Consolidated Balance Sheet--
December 31, 1996 and 1995.................................. 68
Consolidated Statement of Stockholders' Equity--
December 31, 1996, 1995 and 1994............................ 69
Notes to Consolidated Financial Statements--
December 31, 1996........................................ 70-84
Report of Ernst & Young LLP, Independent Auditors............... 65
(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.
- 39 -
<PAGE>
(b) The following report on Form 8-K was filed during the last quarter of
the period covered by this report:
(1) Lockheed Martin Corporation Current Report on Form 8-K filed with
the Securities and Exchange Commission on October 11, 1996.
During the first quarter of 1997, Lockheed Martin Corporation made the
following filing on Form 8-K:
(1) Lockheed Martin Corporation Current Report on Form 8-K filed with
the Securities and Exchange Commission on January 21, 1997.
(c) Exhibits
(2) Plan of Acquisition, Reorganization, Arrangement, Liquidation or
Succession.
(a) Agreement and Plan of Merger, dated as of January 7,
1996, among the Corporation, LMC Acquisition
Corporation and Loral Corporation (incorporated by
reference to the Schedule 14D-1 in respect of Loral
Corporation filed by the Corporation on January 12,
1996.
(b) Letter Amendment dated as of April 15, 1996, to the
Agreement and Plan of Merger dated as of January 7,
1996, by and among the Corporation, LAC Acquisition
Corporation and Loral Corporation (incorporated by
reference to Amendment No. 10 to Schedule 14D-1 in
respect of Loral Corporation filed by the Corporation
with the Commission on April 19, 1996).
(c) Restructuring, Financing and Distribution Agreement
dated as of January 7, 1996, by and among Loral
Corporation, Loral Aerospace Holdings, Inc., Loral
Aerospace Corp., Loral General Partner Inc., Loral
GlobalStar, L.P., Loral GlobalStar Limited, Loral Space
& Communications Ltd. and the Corporation (incorporated
by reference to the Schedule 14D-1 in respect of Loral
Corporation filed by the Corporation with the
Commission on January 12, 1996).
- 40 -
<PAGE>
(d) Letter Amendment dated as of April 15, 1996, to the
Restructuring, Financing and Distribution Agreement
dated as of January 7, 1996, by and among the
Corporation, Loral Corporation, Loral Space &
Communications Corporation, Loral Aerospace Holdings,
Inc., Loral Aerospace Corp., Loral General Partner
Inc., Loral GlobalStar, L.P., Loral GlobalStar Limited
and Loral Space & Communications Ltd. (incorporated by
reference to Amendment No. 11 to the Schedule 14D-1 in
respect of Loral Corporation filed by the Corporation
with the Commission on April 22, 1996).
(3)(i) Articles of Incorporation.
(a) Articles of Amendment and Restatement of Lockheed
Martin Corporation (formerly Parent Corporation) filed
with the State Department of Assessments and Taxation
of the State of Maryland on February 7, 1995
(incorporated by reference to Exhibit 3.1 to Lockheed
Martin Corporation's Registration Statement on Form S-4
(No. 33-57645) filed with the Commission on February 9,
1995).
(ii) Bylaws
(a) Copy of the Bylaws of Lockheed Martin Corporation as
amended on January 23, 1997.
(4) (a) Indenture dated May 16, 1996, between the Corporation,
Lockheed Martin Tactical Systems, Inc., and First Trust
of Illinois, National Association as Trustee
(incorporated by reference to Exhibit 4 of the
Corporation's filing on Form 8-K on May 16, 1996).
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 such instruments to the Securities
and Exchange Commission upon request.
- 41 -
<PAGE>
(b) See Exhibits 3.1 and 3.2.
(10)* (a) 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).
(b) Lockheed Martin Corporation 1995 Omnibus Performance
Award Plan (incorporated by reference to Exhibit 10.36
to Lockheed Martin Corporation's Registration Statement
on Form S-4 (No. 33-57645) filed with the Commission on
February 9, 1995).
(c) Lockheed Martin Corporation Directors Deferred Stock
Plan, as amended and restated February 27, 1997.
(d) Agreement Containing Consent Order, dated December 22,
1994, among the Corporation, Lockheed Corporation,
Martin Marietta Corporation and the Federal Trade
Commission (incorporated by reference to Exhibit 10.4
to Lockheed Martin Corporation's Registration Statement
on Form S-4 (No. 33-57645) filed with the Commission on
February 9, 1995).
(e) Reconfiguration Agreement, dated August 29, 1994, among
Martin Marietta Corporation, the Corporation and
General Electric Company (incorporated by reference to
Exhibit 10.2 to Lockheed Martin Corporation's
Registration
- 42 -
<PAGE>
Statement on Form S-4 (No. 33-57645) filed with the
Commission on February 9, 1995).
(f) Amendment to the Reconfiguration Agreement, dated
November 30, 1994, among Martin Marietta Corporation,
the Corporation and General Electric Company
(incorporated by reference to Exhibit 10.3 to Lockheed
Martin Corporation's Registration Statement on Form S-4
(No. 33-57645) filed with the Commission on February 9,
1995).
(g) Standstill Agreement, dated April 2, 1993, between
Martin Marietta Corporation and General Electric
Company (incorporated by reference to Exhibit 10.1 to
Lockheed Martin Corporation's Registration Statement on
Form S-4 (No. 33-57645) filed with the Commission on
February 9, 1995).
(h) Lockhead Martin Corporation Directors Deferred
Compensation Plan, as amended and restated February 27,
1997.
(i) Martin Marietta Corporation Post-Retirement Income
Maintenance Plan for Directors, as amended
(incorporated by reference to Exhibit 10(iii)(b) to
Martin Marietta Corporation's Annual Report on Form 10-
K for the fiscal year ended December 31, 1994).
(j) 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).
(k) 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)
- 43 -
<PAGE>
filed with Commission on February 9, 1995).
(l) Deferred Compensation and Estate Supplement Plan, as
amended (incorporated by reference to Exhibit
10(iii)(e) to Martin Marietta Corporation's Annual
Report on Form 10-K for the fiscal year ended December
31, 1994).
(m) 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).
(n) 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).
(o) Martin Marietta Corporation 1984 Stock Option Plan for
Key Employees, as amended (incorporated by reference to
Exhibit 10.12 to Lockheed Martin Corporation's
Registration Statement on Form S-4 (No. 33-57645) filed
with Commission on February 9, 1995).
(p) 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).
(q) 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).
- 44 -
<PAGE>
(r) 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).
(s) Martin Marietta Corporation Long Term Performance
Incentive Compensation Plan (incorporated by reference
to Exhibit 10(iii)(m) to Martin Marietta Corporation's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1994).
(t) Amended and Restated Martin Marietta Corporation Long-
Term Performance Incentive Compensation Plan
(incorporated by reference to Exhibit 10(iii)(n) to
Martin Marietta Corporation's Annual Report on Form 10-
K for the fiscal year ended December 31, 1994).
(u) 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).
(v) 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).
(w) 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).
(x) Form of Employment Agreement between Martin Marietta
Corporation and certain officers (incorporated by
reference to Exhibit 10.20 to Lockheed Martin
- 45 -
<PAGE>
Corporation's Registration Statement on Form S-4 (No.
33-57645) filed with the Commission on February 9,
1995).
(y) 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).
(z) Lockheed Corporation 1992 Employee Stock Option Program
(incorporated by reference to the Registration
Statement on Form S-8 (No. 33-49003) of Lockheed
Corporation filed with the Commission on September 11,
1992).
(aa) Amendment to Lockheed Corporation 1992 Employee Stock
Option Plan (incorporated by reference to Exhibit 10.22
to Lockheed Martin Corporation's Registration Statement
on Form S-4 (No. 33-57645) filed with the Commission on
February 9, 1995).
(bb) Lockheed Corporation 1986 Employee Stock Purchase
Program, as amended (incorporated by reference to
Exhibit 10.23 to Lockheed Martin Corporation's
Registration Statement on Form S-4 (No. 33-57645) filed
with the Commission on February 9, 1995).
(cc) Lockheed Corporation 1982 Employee Stock Purchase
Program, as amended (incorporated by reference to
Exhibit 10.24 to Lockheed Martin Corporation's
Registration Statement on Form S-4 (No. 33-57645) filed
with the Commission on February 9, 1995).
(dd) Incentive Retirement Benefit Plan for Certain
Executives of Lockheed Corporation, as amended
(incorporated by reference to Exhibit 10.25 to Lockheed
Martin Corporation's Registration Statement on Form S-4
(No. 33-57645) filed with the Commission on February 9,
1995).
(ee) Supplemental Retirement Benefit Plan for Certain
Transferred Employees of
- 46 -
<PAGE>
Lockheed Corporation, as amended (incorporated by
reference to Exhibit 10.26 to Lockheed Martin
Corporation's Registration Statement on Form S-4 (No.
33-57645) filed with the Commission on February 9,
1995).
(ff) Supplemental Benefit Plan of Lockheed Corporation, as
amended (incorporated by reference to Exhibit 10.27 to
Lockheed Martin Corporation's Registration Statement on
Form S-4 (No. 33-57645) filed with the Commission on
February 9, 1995).
(gg) Long-Term Performance Plan of Lockheed Corporation and
its Subsidiaries (incorporated by reference to Exhibit
10.28 to Lockheed Martin Corporation's Registration
Statement on Form S-4 (No. 33-57645) filed with the
Commission on February 9, 1995).
(hh) Lockhead Martin Corporation Supplemental Savings Plan,
as amended and restated as of January 1, 1997.
(ii) Deferred Compensation Plan for Directors of Lockheed
Corporation, as amended (incorporated by reference to
Exhibit 10.30 to Lockheed Martin Corporation's
Registration Statement on Form S-4 (No. 33-57645) filed
with the Commission on February 9, 1995).
(jj) Lockheed Corporation Retirement Plan for Directors, as
amended (incorporated by reference to Exhibit 10.31 to
Lockheed Martin Corporation's Registration Statement on
Form S-4 (No. 33-57645) filed with the Commission on
February 9, 1995).
(kk) Form of Lockheed Corporation Termination Benefits
Agreement effective January 1, 1991 (included in Form
8, Amendment No. 1 to Exhibit 28 of Form 8-K dated
November 5, 1990 of Lockheed Corporation and
incorporated herein by reference).
- 47 -
<PAGE>
(ll) Trust Agreement, as amended February 3, 1995, between
Lockheed Corporation and First Interstate Bank of
California (incorporated by reference to Exhibit 10.33
to Lockheed Martin Corporation's Registration Statement
on Form S-4 (No. 33-57645) filed with the Commission on
February 9, 1995).
(mm) Lockheed Corporation Directors' Deferred Compensation
Plan Trust Agreement, as amended (incorporated by
reference to Exhibit 10.34 to Lockheed Martin
Corporation's Registration Statement on Form S-4 (No.
33-57645) filed with the Commission on February 9,
1995).
(nn) Trust Agreement, dated December 22, 1994, between
Lockheed Corporation and J.P. Morgan California with
respect to certain employee benefit plans of Lockheed
Corporation (incorporated by reference to Exhibit 10.35
to Lockheed Martin Corporation's Registration Statement
on Form S-4 (No. 33-57645) filed with the Commission on
February 9, 1995).
(oo) Lockheed Martin Corporation Directors Charitable Award
Plan, as amended April 25, 1996.
(pp) 1983 Stock Option Plan (incorporated by reference from
Loral Corporation's 1983 Proxy Statement).
(qq) Amendment to the 1983 Stock Option Plan (incorporated
by reference from Loral Corporation's Form 10-K for the
fiscal year ended March 31, 1986, Exhibit 10.11).
(rr) Amended 1986 Stock Option Plan (incorporated by
reference from Loral Corporation's Form 10-Q for the
quarter ended June 30, 1988, Exhibit 10.1).
(ss) Amendment to the 1983 and 1986 Stock Option Plans
(incorporated by reference from Loral Corporation's
Form 10-K for the fiscal year ended March 31, 1990,
Exhibit 10.8).
(tt) 1991 Amendment to the 1986 Stock Option Plan
(incorporated by reference from Loral Corporation's
Form 10-K for the fiscal year ended March 31, 1991,
Exhibit 10.9).
(uu) Loral Corporation Incentive Compensation Plan for
Senior Executives (incorporated by reference from Loral
Corporation's 1994 Proxy Statement).
(vv) 1994 Stock Option and Incentive Stock Purchase Plan
(incorporated by reference from Loral Corporation's
1994 Proxy Statement).
(ww) Loral Corporation Restricted Stock Purchase Plan
(incorporated by reference from Loral Corporation's
Form 8-K dated May 13, 1987, Exhibit 10.28).
(xx) Amendment to the Loral Corporation Restricted Stock
Purchase Plan (incorporated by reference from Loral
Corporation's Form 10-Q for the quarter ended June 30,
1987, Exhibit 10.2).
(yy) Restated Employment Agreement between Loral Corporation
and Bernard L. Schwartz, dated as of April 1, 1990
(incorporated by reference from Loral Corporation's
Form 10-K for the fiscal year ended March 31, 1990,
Exhibit 10.11).
(zz) Extension and Modification Agreement between Loral
Corporation and Bernard L. Schwartz dated as of June
14, 1994 (incorporated by reference from Loral
Corporation's Form 10-K for the fiscal year ended March
31, 1995, Exhibit 10.11).
(aaa) Split-dollar life insurance agreement with Bernard L.
Schwartz, dated as of March 15, 1990 (incorporated by
reference from Loral Corporation's Form 10-K for the
fiscal year ended March 31, 1991, Exhibit 10.13).
(bbb) Split-dollar life insurance agreement with Bernard L.
Schwartz, dated as of December 10, 1990 (incorporated
by reference from Loral Corporation's Form 10-K for the
fiscal year ended March 31, 1991, Exhibit 10.14).
(ccc) Employment Contract between Loral Corporation and Frank
C. Lanza, dated as of April 1, 1987 (incorporated by
reference from Loral Corporation's Form 10-Q for the
quarter ender June 30, 1987, Exhibit 10.1 and Form 10-K
for the fiscal year ended March 31, 1982, Exhibit
10.11).
(ddd) Amendment to Employment Contract between Loral
Corporation and Frank C. Lanza, dated as of March 31,
1988 (incorporated by reference from Loral
Corporation's Form 10-K for the fiscal year ended March
31, 1988, Exhibit 10.19).
(eee) Amendment to Employment Contract between Loral
Corporation and Frank C. Lanza, dated as of March 21,
1990 (incorporated by reference from Loral
Corporation's Form 10-K for the fiscal year ended March
31, 1990, Exhibit 10.16).
(fff) Amendment to Employment Contract between Loral
Corporation and Frank C. Lanza, dated as of April 1,
1992 (incorporated by reference from Loral
Corporation's Form 10-K for the fiscal year ended March
31, 1992, Exhibit 10.17).
(ggg) Modification Agreement between Loral corporation and
Frank C. Lanza dated as of June 14, 1994 (incorporated
by reference from Loral Corporation's Form 10-K for the
fiscal year ended March 31, 1995, Exhibit 10.18).
(hhh) Split-dollar life insurance agreement with Frank C.
Lanza, dated as of August 5, 1985 (incorporated by
reference from Loral Corporation's Form 10-K for the
fiscal year ended March 31, 1991, Exhibit 10.18).
(iii) Loral Supplemental Executive Retirement Plan
(incorporated by reference to Exhibit 99.2 of the
Schedule 14D-9 filed by Loral Corporation with the
Commission on January 16, 1996).
(jjj) Loral Corporation Supplemental Bonus Plan (incorporated
by reference to Exhibit 99.3 of the Schedule 14D-9
filed by Loral Corporation with the Commission on
January 16, 1996).
(kkk) Loral Corporation Supplemental Severance Program
(incorporated by reference to Exhibit 99.4 of the
Schedule 14D-9 filed by Loral Corporation with the
Commission on January 16, 1996).
(lll) Form of Employment Protection Agreement between Loral
Corporation and Executives of Loral (incorporated by
reference to Exhibit 99.5 of the Schedule 14D-9 filed
by Loral Corporation with the Commission on January 16,
1996).
(mmm) Loral Corporation Employment Protection Plan
(incorporated by reference to Exhibit 99.6 of the
Schedule 14D-9 filed by Loral Corporation with the
Commission on January 16, 1996).
(nnn) Amendment to Lockheed Martin Corporation Supplemental
Excess Retirement Plan.
(ooo) Amendment to Terms of Outstanding Stock Option Relating
to Exercise Period for Employees of Divested Business.
(ppp) Lockheed Martin Corporation Post-Retirement Death
Benefit Plan for Elected Officers, as amended.
(qqq) Lockheed Martin Corporation Directors Retirement Plan,
as amended.
* Exhibits (10)(a) through (10)(c) and 10(h) through 10(qqq)
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 earnings per common share for the years
ended December 31, 1996, 1995 and 1994.
(12) Computation of ratio of earnings to fixed charges for
the year ended December 31, 1996.
- 48 -
<PAGE>
(13) 1996 Annual Report to Security Holders (including an
appendix describing graphic and image material). Those
portions of the 1996 Annual Report to Security Holders
which are not incorporated by references in this Annual
Report in Form 10-K shall not be deemed "filed" as part
of this Report.
(21) List of Subsidiaries of Lockheed Martin Corporation.
(23) Consent of Ernst & Young LLP, Independent Auditors
(included in this Form 10-K at page 53).
(24) Powers of Attorney.
(27) Financial Data Schedule.
Other material incorporated by reference:
None.
- 49 -
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
LOCKHEED MARTIN CORPORATION
Date: March 14, 1997 By: /s/ FRANK H. MENAKER, JR.
---------------------
Frank H. Menaker, Jr.
Senior 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.
SIGNATURES TITLE DATE
---------- ----- ----
/s/Norman R. Augustine* Chief Executive Officer
- -----------------------
NORMAN R. AUGUSTINE and Director February 27, 1997
/s/Marcus C. Bennett* Executive Vice President,
- ---------------------
MARCUS C. BENNETT Chief Financial Officer February 27, 1997
and Director
/s/Robert E. Rulon* Chief Accounting Officer February 27, 1997
- -------------------
ROBERT E. RULON
/s/Lynne V. Cheney* Director February 27, 1997
- -------------------
LYNNE V. CHENEY
/s/Vance D. Coffman* Director February 27, 1997
- --------------------
VANCE D. COFFMAN
- 50 -
<PAGE>
SIGNATURES TITLE DATE
---------- ----- ----
/s/Houston K. Flournoy* Director February 27, 1997
- -----------------------
HOUSTON K. FLOURNOY
/s/James F. Gibbons* Director February 27, 1997
- --------------------
JAMES F. GIBBONS
/s/Edward E. Hood, Jr.* Director February 27, 1997
- -----------------------
EDWARD E. HOOD, JR.
/s/Caleb B. Hurtt* Director February 27, 1997
- ------------------
CALEB B. HURTT
/s/Gwendolyn S. King* Director February 27, 1997
- ---------------------
GWENDOLYN S. KING
/s/Frank C. Lanza* Director February 27, 1997
- -----------------
FRANK C. LANZA
/s/Vincent N. Marafino* Director February 27, 1997
- -----------------------
VINCENT N. MARAFINO
/s/Eugene F. Murphy* Director February 27, 1997
- --------------------
EUGENE F. MURPHY
/s/Allen E. Murray* Director February 27, 1997
- -------------------
ALLEN E. MURRAY
/s/Frank Savage* Director February 27, 1997
- ----------------
FRANK SAVAGE
/s/Daniel M. Tellep* Director February 27, 1997
- --------------------
DANIEL M. TELLEP
- 51 -
<PAGE>
SIGNATURES TITLE DATE
---------- ----- ----
/s/Carlisle A.H. Trost* Director February 27, 1997
- -----------------------
CARLISLE A.H. TROST
/s/James R. Ukropina* Director February 27, 1997
- ---------------------
JAMES R. UKROPINA
/s/Douglas C. Yearley* Director February 27, 1997
- ----------------------
DOUGLAS C. YEARLEY
*By: /s/ STEPHEN M. PIPER March 14, 1997
----------------
(Stephen M. Piper, Attorney-in-fact**)
_____________________
**By authority of Powers of Attorney filed with this Annual
Report on Form 10-K.
- 52 -
<PAGE>
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Annual Report (Form 10-K)
of Lockheed Martin Corporation of our report dated January 20, 1997 (except
Note 3, as to which the date is February 3, 1997), included in the 1996 Annual
Report to Shareholders of Lockheed Martin Corporation.
We also consent to the incorporation by reference in the following Registration
Statements:
(1) Registration Statement Number 33-58067 of Lockheed Martin Corporation on
Form S-3, dated March 14, 1995;
(2) Registration Statement Numbers: 33-58073, 33-58075, 33-58077, 33-58079, 33-
58081, 33-58085, 33-58089 and 33-58097 of Lockheed Martin Corporation on
Forms S-8, each dated March 15, 1995;
(3) Post-Effective Amendment No. 1, dated March 15, 1995 to Registration
Statement Number 33-57645 of Lockheed Martin Corporation on Form S-8;
(4) Registration Statement Number 33-63155 of Lockheed Martin Corporation on
Form S-8, dated October 3, 1995;
(5) Registration Statement Number 33-06255 of Lockheed Martin Corporation on
Form S-8, dated June 19, 1996;
(6) Registration Statement Numbers: 33-06479, 33-06481, 33-06483, 33-06485,
33-06487, 33-06515 and 33-06517 of Lockheed Martin Corporation on Form S-8,
each dated June 21, 1996;
(7) Registration Statement Numbers: 33-20117 and 33-20139 of Lockheed Martin
Corporation on Form S-8 each dated January 22, 1997; and
(8) Post-Effective Amendment No. 1, dated January 22, 1997 to Registration
Statement Number 33-58083 on Form S-8.
of our report dated January 20, 1997 (except Note 3, as to which the date is
February 3, 1997), with respect to the consolidated financial statements
incorporated herein by reference.
ERNST & YOUNG LLP
Washington, D.C.
March 7, 1997
53
<PAGE>
Exhibit 3(ii)(a)
LOCKHEED MARTIN CORPORATION
B Y- L A W S
Adopted August 26, 1994
(Amended February 6, 1995)
(Amended April 27, 1995)
(Amended September 28, 1995)
(Amended January 1, 1996)
(Amended January 7, 1996)
(Amended April 25, 1996)
(Amended January 23, 1997)
<PAGE>
TABLE OF CONTENTS
BYLAWS
OF
LOCKHEED MARTIN CORPORATION
<TABLE>
<CAPTION>
ARTICLE I
STOCKHOLDERS
<S> <C> <C>
Section 1.01. Annual Meetings............................................ 1
Section 1.02. Special Meetings........................................... 1
Section 1.03. Place of Meetings.......................................... 1
Section 1.04. Notice of Meetings......................................... 1
Section 1.05. Conduct of Meetings........................................ 2
Section 1.06. Quorum..................................................... 2
Section 1.07. Votes Required............................................. 2
Section 1.08. Proxies.................................................... 2
Section 1.09. List of Stockholders....................................... 2
Section 1.10. Inspectors of Election..................................... 3
Section 1.11. Director Nominations and Stockholder Business.............. 3
ARTICLE II
BOARD OF DIRECTORS
Section 2.01. Powers..................................................... 5
Section 2.02. Number of Directors........................................ 5
Section 2.03. Election of Directors...................................... 5
Section 2.04. Chairman of the Board...................................... 6
Section 2.05. Vice Chairman.............................................. 6
Section 2.06. Removal.................................................... 6
Section 2.07. Vacancies.................................................. 6
Section 2.08. Regular Meetings........................................... 6
Section 2.09. Special Meetings........................................... 6
Section 2.10. Notice of Meetings......................................... 6
Section 2.11. Presence at Meeting........................................ 7
Section 2.12. Presiding Officer and Secretary at Meetings................ 7
Section 2.13. Quorum..................................................... 7
Section 2.14. Compensation............................................... 7
Section 2.15. Voting of Shares by Certain Holders........................ 8
</TABLE>
1
<PAGE>
TABLE OF CONTENTS
(Continued)
<TABLE>
<CAPTION>
ARTICLE III
COMMITTEES
<S> <C> <C>
Section 3.01. Executive Committee........................................ 8
Section 3.02. Finance Committee.......................................... 8
Section 3.03. Audit & Ethics Committee................................... 9
Section 3.04(a) Compensation Committee..................................... 10
Section 3.04(b) Stock Option Subcommittee.................................. 10
Section 3.05. Nominating Committee....................................... 11
Section 3.06. Other Committees........................................... 11
Section 3.07. Meetings of Committees..................................... 11
ARTICLE IV
OFFICERS
Section 4.01. Executive Officers -- Election and Term of Office.......... 11
Section 4.02 Chairman of the Board...................................... 12
Section 4.03. President.................................................. 12
Section 4.04. Vice Presidents............................................ 12
Section 4.05. Secretary.................................................. 12
Section 4.06. Treasurer.................................................. 12
Section 4.07. Subordinate Officers....................................... 13
Section 4.08. Other Officers and Agents.................................. 13
Section 4.09. When Duties of an Officer May Be Delegated................. 13
Section 4.10. Officers Holding Two or More Offices....................... 13
Section 4.11. Compensation............................................... 13
Section 4.12. Resignations............................................... 13
Section 4.13. Removal.................................................... 13
ARTICLE V
STOCK
Section 5.01. Certificates............................................... 14
Section 5.02. Transfer of Shares......................................... 14
Section 5.03. Transfer Agents and Registrars............................. 14
Section 5.04. Stock Ledgers.............................................. 14
Section 5.05. Record Dates............................................... 14
</TABLE>
2
<PAGE>
TABLE OF CONTENTS
(Continued)
<TABLE>
<S> <C> <C>
Section 5.06. New Certificates........................................... 15
ARTICLE VI
INDEMNIFICATION
Section 6.01. Indemnification of Directors, Officers, and Employees...... 15
Section 6.02. Standard................................................... 15
Section 6.03. Advance Payment of Expenses................................ 16
Section 6.04. General.................................................... 16
ARTICLE VII
SUNDRY PROVISIONS
Section 7.01. Seal....................................................... 16
Section 7.02. Voting of Stock in other Corporations...................... 16
Section 7.03. Amendments................................................. 17
</TABLE>
3
<PAGE>
BYLAWS
OF
LOCKHEED MARTIN CORPORATION
(Incorporated under the laws of Maryland, August 26, 1994, and herein referred
to as the "Corporation")
ARTICLE I
STOCKHOLDERS
Section 1.01. ANNUAL MEETINGS. The Corporation shall hold an annual meeting
of stockholders for the election of directors and the transaction of any
business within the powers of the Corporation on such date during the month of
April in each year as shall be determined by the Board of Directors, except that
the 1995 annual meeting of stockholders shall be held on February 6, 1995.
Subject to Article I, Section 1.11 of these Bylaws, any business of the
Corporation may be transacted at such annual meeting. Failure to hold an annual
meeting at the designated time shall not, however, invalidate the corporate
existence or affect otherwise valid corporate acts.
Section 1.02. SPECIAL MEETINGS. At any time in the interval between annual
meetings, special meetings of the stockholders may be called by the Chairman of
the Board, President, or by the Board of Directors or by the Executive Committee
by vote at a meeting or in writing with or without a meeting. Special meetings
of stockholders shall also be called by the Secretary of the Corporation on the
written request of stockholders entitled to cast at least a majority of all the
votes entitled to be cast at the meeting.
Section 1.03. PLACE OF MEETINGS. All meetings of stockholders shall be held
at such place within the United States as may be designated in the notice of
meeting.
Section 1.04. NOTICE OF MEETINGS. Not less than thirty (30) days nor more
than ninety (90) days before the date of every stockholders' meeting, the
Secretary shall give to each stockholder entitled to vote at such meeting and
each other stockholder entitled to notice of the meeting, written or printed
notice stating the time and place of the meeting and, in the case of a special
meeting, the purpose or purposes for which the meeting is called, either by mail
or by presenting it to him or her personally or by leaving it at his or her
residence or usual place of business. If mailed, such notice shall be deemed to
be given when deposited in the United States
<PAGE>
mail addressed to the stockholder at his or her post office address as it
appears on the records of the Corporation, with postage thereon prepaid.
Notwithstanding the foregoing provision for notice, a waiver of notice in
writing, signed by the person or persons entitled to such notice and filed with
the records of the meeting, whether before or after the holding thereof, or
actual attendance at the meeting in person or by proxy, shall be deemed
equivalent to the giving of such notice to such persons. Any meeting of
stockholders, annual or special, may adjourn from time to time without further
notice to a date not more than one hundred twenty (120) days after the original
record date at the same or some other place.
Section 1.05. CONDUCT OF MEETINGS. Each meeting of stockholders shall be
conducted in accordance with such rules and procedures as the Board of Directors
may determine subject to the requirements of applicable law and the Charter. The
Chairman of the Board, or in his or her absence the President, or in their
absence the person designated in writing by the Chairman of the Board, or if no
person is so designated, then a person designated by the Board of Directors,
shall preside as chairman of the meeting; if no person is so designated, then
the meeting shall choose a chairman by a majority of all votes cast at a meeting
at which a quorum is present. The Secretary or in the absence of the Secretary a
person designated by the chairman of the meeting shall act as secretary of the
meeting.
Section 1.06. QUORUM. At any meeting of stockholders, the presence in
person or by proxy of stockholders entitled to cast a majority of the votes
thereat shall constitute a quorum; but this section shall not affect any
requirement under statute or under the Charter of the Corporation for the vote
necessary for the adoption of any measure. In the absence of a quorum, the
stockholders present in person or by proxy, by majority vote and without further
notice, may adjourn the meeting from time to time to a date not more than 120
days after the original record date until a quorum shall attend. At any such
adjourned meeting at which a quorum shall be present, any business may be
transacted which might have been transacted at the meeting as originally
notified.
Section 1.07. VOTES REQUIRED. Unless applicable law or the Charter of the
Corporation provides otherwise, at a meeting of stockholders, the vote of a
majority of the votes entitled to be cast at a meeting, duly called and at which
a quorum is present, shall be required to take or authorize action upon any
matter which may properly come before the meeting. Unless the Charter provides
for a greater or lesser number of votes per share or limits or denies voting
rights, each outstanding share of stock, regardless of class, shall be entitled
to one vote on each matter submitted to a vote at a meeting of stockholders; but
no share shall be entitled to any vote if any installment payable thereon is
overdue and unpaid.
Section 1.08. PROXIES. A stockholder may vote the shares owned of record by
him or her either in person or by proxy executed in writing by the stockholder
or by his or her duly
-2-
<PAGE>
authorized attorney-in-fact. No proxy shall be valid after eleven (11) months
from its date, unless otherwise provided in the proxy. Every proxy shall be in
writing, subscribed by the stockholder or his or her duly authorized attorney,
and dated, but need not be sealed, witnessed or acknowledged.
Section 1.09. LIST OF STOCKHOLDERS. At each meeting of stockholders, a true
and complete list of all stockholders entitled to vote at such meeting, stating
the number and class of shares held by each, shall be furnished by the
Secretary.
Section 1.10. INSPECTORS OF ELECTION. In advance of any meeting of
stockholders, the Board of Directors may appoint Inspectors of Election to act
at such meeting or at any adjournment or adjournments thereof. If such
Inspectors are not so appointed or fail or refuse to act, the chairman of any
such meeting, upon the demand of stockholders present in person or by proxy
entitled to cast 25% of all the votes entitled to be cast at the meeting, shall
make such appointments.
If there are three (3) or more Inspectors of Election, the decision, act or
certificate of a majority shall be effective in all respects as the decision,
act or certificate of all. The Inspectors of Election shall determine the number
of shares outstanding, the voting power of each, the shares represented at the
meeting, the existence of a quorum, the authenticity, validity and effect of
proxies; shall receive votes, ballots, assents or consents, hear and determine
all challenges and questions in any way arising in connection with the vote,
count and tabulate all votes, assents and consents, and determine the result;
and do such acts as may be proper to conduct the election and the vote with
fairness to all stockholders. On request, the Inspectors shall make a report in
writing of any challenge, question or matter determined by them, and shall make
and execute a certificate of any fact found by them.
No such Inspector need be a stockholder of the Corporation.
Section 1.11. DIRECTOR NOMINATIONS AND STOCKHOLDER BUSINESS.
(a) Nominations and Stockholder Business at Annual Meetings of
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Stockholders. Nominations of persons for election to the Board of Directors of
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the Corporation and the proposal of business to be considered by the
stockholders may be made at an annual meeting of stockholders (i) pursuant to
the Corporation's notice of meeting, (ii) by or at the direction of the Board of
Directors or (iii) by any stockholder of the Corporation who was a stockholder
of record at the time of giving of notice provided for in this Section 1.11(a),
who is entitled to vote at the meeting and who complied with the notice
procedures set forth in this Section 1.11(a).
For nominations or other business to be properly brought before an annual
meeting by
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a stockholder pursuant to clause (iii) of paragraph (a) of this Section 1.11,
the stockholder must have given timely notice thereof in writing to the
Secretary of the Corporation. To be timely, a stockholder's notice shall be
delivered to the Secretary at the principal executive offices of the Corporation
not less than sixty (60) days nor more than ninety (90) days prior to the first
anniversary of the preceding year's annual meeting; provided, however, that in
the event that the date of the annual meeting is advanced by more than thirty
(30) days or delayed by more than sixty (60) days from such anniversary date,
notice by the stockholder to be timely must be so delivered not earlier than the
90th day prior to such annual meeting and not later than the close of business
on the later of the 60th day prior to such annual meeting or the 10th day
following the day on which public announcement of the date of such meeting is
first made. Such stockholder's notice shall set forth (i) as to each person whom
the stockholder proposes to nominate for election or reelection as a director,
(A) the name, age, business address and residence address of such person, (B)
the class and number of shares of capital stock of the Corporation that are
beneficially owned by such person, and (C) all other information relating to
such person that is required to be disclosed in solicitations of proxies for
election of directors, or is otherwise required, in each case pursuant to
Regulation 14A (or any successor provision) under the Securities Exchange Act of
1934, as amended (the "Exchange Act") (including such person's written consent
to being named in the proxy statement as a nominee and to serving as a director
if elected); (ii) as to any other business that the stockholder proposes to
bring before the meeting, a brief description of the business desired to be
brought before the meeting, the reasons for conducting such business at the
meeting and any material interest in such business of such stockholder and the
beneficial owner, if any, on whose behalf the proposal is made; and (iii) as to
the stockholder giving the notice and the beneficial owner, if any, on whose
behalf the nomination or proposal is made, the name and address of such
stockholder, as they appear on the Corporation's books, and of such beneficial
owner and the class and number of shares of stock of the Corporation which are
owned beneficially and of record by such stockholder and such beneficial owner.
Notwithstanding anything in this paragraph (a) of this Section 1.11 to the
contrary, in the event that Section 2.02 of these Bylaws is amended, altered or
repealed so as to increase or decrease the maximum or minimum number of
directors and there is no public announcement of such action at least seventy
(70) days prior to the first anniversary of the preceding year's annual meeting,
a stockholder's notice required by this Section 1.11(a) shall also be considered
timely, but only with respect to nominees for director, if it shall be delivered
to the Secretary at the principal executive offices of the Corporation not later
than the close of business on the 10th day following the day on which such
public announcement is first made by the Corporation.
(b) Director Nominations and Stockholder Business at Special Meetings
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of Stockholders. Only such business shall be conducted at a special meeting of
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stockholders as shall have been brought before the meeting pursuant to the
Corporation's notice of meeting.
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Nominations of persons for election to the Board of Directors may be made at a
special meeting of stockholders at which directors are to be elected pursuant to
the Corporation's notice of meeting (i) by or at the direction of the Board of
Directors or (ii) provided that the Board of Directors has determined that
directors shall be elected at such special meeting, by any stockholder of the
Corporation who is a stockholder of record at the time of giving of notice
provided for in this Section 1.11, who is entitled to vote at the meeting and
who complied with the notice procedures set forth in this Section 1.11. In the
event the Corporation calls a special meeting of stockholders for the purpose of
electing one or more directors to the Board, any such stockholder may nominate a
person or persons (as the case may be) for election to such position(s) as
specified in the Corporation's notice of meeting, if the stockholder's notice
required by paragraph (a) of this Section 1.11 shall be delivered to the
Secretary at the principal executive offices of the Corporation not earlier than
the 90th day prior to such special meeting and not later than the close of
business on the later of the 60th day prior to such special meeting or the 10th
day following the day on which public announcement is first made of the date of
the special meeting and of the nominees proposed by the Board of Directors to be
elected at such meeting.
(c) General. Only such persons who are nominated in accordance with the
-------
procedures set forth in this Section 1.11 shall be eligible to serve as
directors and only such business shall be conducted at a meeting of stockholders
as shall have been brought before the meeting in accordance with the procedures
set forth in this Section 1.11. The presiding officer of the meeting shall have
the power and duty to determine whether a nomination or any business proposed to
be brought before the meeting was made in accordance with the procedures set
forth in this Section 1.11 and, if any proposed nomination or business is not in
compliance with this Section 1.11, to declare that such defective nomination or
proposal be disregarded.
For purposes of this Section 1.11, "public announcement" shall mean
disclosure in a press release reported by the Dow Jones New Service, Associated
Press or comparable news service or in a document publicly filed by the
Corporation with the Securities and Exchange Commission pursuant to Sections 13,
14 or 15(d) of the Exchange Act.
Notwithstanding the foregoing provisions of this Section 1.11, a
stockholder shall also comply with all applicable requirements of state law and
of the Exchange Act and the rules and regulations thereunder with respect to the
matters set forth in this Section 1.11. Nothing in this Section 1.11 shall be
deemed to affect any rights of stockholders to request inclusion of proposals in
the Corporation's proxy statement pursuant to Rule 14a-8 (or any successor
provision) under the Exchange Act.
ARTICLE II
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BOARD OF DIRECTORS
Section 2.01. POWERS. The business and affairs of the Corporation shall be
managed under the direction of its Board of Directors. The Board of Directors
may exercise all the powers of the Corporation, except such as are by statute or
the Charter or the Bylaws conferred upon or reserved to the stockholders.
Section 2.02. NUMBER OF DIRECTORS. The number of directors of the
Corporation shall be not less than four (4) nor more than twenty-five (25). By
vote of a majority of the Board of Directors, the number of directors may be
increased or decreased, from time to time, within the limits above specified;
provided, however, that except as set forth in the Charter of the Corporation,
the tenure of office of a director shall not be affected by any decrease in the
number of directors so made by the Board.
Section 2.03. ELECTION OF DIRECTORS. Except as set forth in the Charter of
the Corporation, the members of the Board of Directors shall be elected each
year at the annual meeting of stockholders, and each director shall hold office
until the next annual meeting of stockholders held after his or her election and
until his or her successor will have been elected and qualified. No person,
other than a person granted an exemption from this provision by the Board of
Directors, shall be eligible to be elected as a director for a term which
expires after the first annual meeting of stockholders after he or she reaches
the age of 70 years.
Section 2.04. CHAIRMAN OF THE BOARD. The Board of Directors shall designate
from its membership a Chairman of the Board, who shall preside at all meetings
of the stockholders and of the Board of Directors. He may sign with the
Secretary or an Assistant Secretary certificates of stock of the Corporation,
and he shall perform such other duties as may be prescribed by the Board of
Directors.
Section 2.05. VICE CHAIRMAN. The Board of Directors shall designate from
its membership no more than two Vice Chairmen of the Board, who shall perform
such functions and duties as requested by the Chairman of the Board.
Section 2.06. REMOVAL. Any director or the Board of Directors may be
removed from office as a director at any time, but only for cause, by the
affirmative vote at a duly called meeting of stockholders of at least 80% of the
votes which all holders of the then outstanding shares of capital stock of the
Corporation would be entitled to cast at an annual election of directors, voting
together as a single class.
Section 2.07. VACANCIES. Vacancies in the Board of Directors, except for
vacancies resulting from an increase in the number of directors, shall be filled
only by a majority vote of
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the remaining directors then in office, though less than a quorum, except that
vacancies resulting from removal from office by a vote of the stockholders may
be filled by the stockholders at the same meeting at which such removal occurs.
Vacancies resulting from an increase in the number of directors shall be filled
only by a majority vote of the Board of Directors. Any director elected to fill
a vacancy shall hold office until the next annual meeting of stockholders and
until his or her successor will have been elected and qualified.
Section 2.08. REGULAR MEETINGS. After each meeting of stockholders at which
a Board of Directors, or any class thereof, shall have been elected, the Board
of Directors shall meet as soon as practicable for the purpose of organization
and the transaction of other business, at such time and place within or without
the State of Maryland as may be designated by the Board of Directors. Other
regular meetings of the Board of Directors shall be held on such dates and at
such places within or without the State of Maryland as may be designated from
time to time by the Board of Directors.
Section 2.09. SPECIAL MEETINGS. Special meetings of the Board of Directors
may be called at any time, at any place, and for any purpose by the Chairman of
the Board, the President, the Chairman of the Executive Committee, any three (3)
directors, or by any officer of the Corporation upon the request of a majority
of the Board.
Section 2.10. NOTICE OF MEETINGS. Notice of the place, day, and hour of
every regular and special meeting of the Board of Directors shall be given to
each director twenty-four (24) hours (or more) before the meeting, by
telephoning the notice to such director, or by delivering the notice to him or
her personally, or by sending the notice to him or her by telegraph, or by
facsimile, or by leaving the notice at his or her residence or usual place of
business, or, in the alternative, by mailing such notice three (3) days (or
more) before the meeting, postage prepaid, and addressed to him or her at his or
her last known post office address, according to the records of the Corporation.
If mailed, such notice shall be deemed to be given when deposited in the United
States mail, properly addressed, with postage thereon prepaid. If notice be
given by telegram or by facsimile, such notice shall be deemed to be given when
the telegram is delivered to the telegraph company or when the facsimile is
transmitted. If the notice be given by telephone or by personal delivery, such
notice shall be deemed to be given at the time of the communication or delivery.
Unless required by these Bylaws or by resolution of the Board of Directors, no
notice of any meeting of the Board of Directors need state the business to be
transacted thereat. No notice of any meeting of the Board of Directors need be
given to any director who attends or to any director who, in a writing executed
and filed with the records of the meeting either before or after the holding
thereof, waives such notice. Any meeting of the Board of Directors, regular or
special, may adjourn from time to time to reconvene at the same or some other
place, and no further notice need be given of any such adjourned meeting.
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Section 2.11. PRESENCE AT MEETING. Members of the Board, or of any
committee thereof, may participate in a meeting by means of conference telephone
or similar communications equipment by means of which all persons participating
in the meeting can hear each other at the same time. Participation in this
manner shall constitute presence in person at the meeting.
Section 2.12. PRESIDING OFFICER AND SECRETARY AT MEETINGS. Each meeting of
the Board of Directors shall be presided over by the Chairman of the Board of
Directors or in his or her absence by the President or if neither is present by
such member of the Board of Directors as shall be chosen by the meeting. The
Secretary, or in his or her absence an Assistant Secretary, shall act as
secretary of the meeting, or if no such officer is present, a secretary of the
meeting shall be designated by the person presiding over the meeting.
Section 2.13. QUORUM. At all meetings of the Board of Directors, a majority
of the Board of Directors shall constitute a quorum for the transaction of
business. Except in cases in which it is by statute, by the Charter, or by the
Bylaws otherwise provided, the vote of a majority of such quorum at a duly
constituted meeting shall be sufficient to pass any measure. In the absence of a
quorum, the directors present by majority vote and without notice other than by
announcement may adjourn the meeting from time to time until a quorum shall be
present. At any such adjourned meeting at which a quorum shall be present, any
business may be transacted which might have been transacted at the meeting as
originally notified.
Section 2.14. COMPENSATION. Directors shall not receive any stated salary
for their services as Directors but, by resolution of the Board of Directors,
annual retainers, fees and expenses of attendance, if any, may be provided to
Directors for attendance at each annual, regular or special meeting of the Board
of Directors or of any committee thereof; but nothing contained herein shall be
construed to preclude any Director from serving the Corporation in any other
capacity and receiving compensation therefor.
Section 2.15. VOTING OF SHARES BY CERTAIN HOLDERS. Notwithstanding any
other provision of the Charter of the Corporation or these Bylaws, Title 3,
Subtitle 7 of the Corporations and Associations Article of the Annotated Code of
Maryland (or any successor statute) shall not apply to any acquisition by
General Electric Company of shares of stock of the Corporation.
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ARTICLE III
COMMITTEES
Section 3.01. EXECUTIVE COMMITTEE. The Board of Directors, by resolution
adopted by a majority of the Board of Directors, may provide for an Executive
Committee of two (2) or more directors. If provision be made for an Executive
Committee, the members thereof shall be elected by the Board of Directors to
serve at the pleasure of the Board of Directors. Unless a Chairman of the Board
shall have been selected by the Board of Directors, the President shall act as
chairman thereof. During the intervals between the meetings of the Board of
Directors, the Executive Committee shall possess and may exercise such powers in
the management of the business and affairs of the Corporation as may be
authorized by the Board of Directors, subject to applicable law. All action by
the Executive Committee shall be reported to the Board of Directors at its
meeting next succeeding such action, and shall be subject to revision and
alteration by the Board of Directors. Vacancies in the Executive Committee shall
be filled by the Board of Directors.
Section 3.02. FINANCE COMMITTEE. The Board of Directors by resolution
adopted by a majority of the Board of Directors may provide for a Finance
Committee of three (3) or more directors. If provision is made for a Finance
Committee, the members of the Finance Committee shall be elected by the Board of
Directors to serve at the pleasure of the Board of Directors. The Board of
Directors shall designate from among the membership of the Finance Committee a
chairman. During the intervals between the meetings of the Board of Directors,
the Finance Committee shall, except when such powers are by statute or the
Charter or the Bylaws either reserved to the full Board of Directors or
delegated to another committee of the Board of Directors, possess and may
exercise all of the powers of the Board of Directors in the management of the
financial affairs of the Corporation, including but not limited to establishing
bank lines of credit or other short-term borrowing arrangements and investing
excess working capital funds on a short-term basis. The Finance Committee will
review the financial condition of the Corporation, the financial impact of all
benefit plans and all proposed changes to the capital structure of the
Corporation, including the incurrence of long-term indebtedness and the issuance
of additional equity securities, and will make suitable recommendations to the
Board of Directors. It will likewise review on an annual basis the proposed
capital expenditure and contributions budgets of the Corporation and make
recommendations to the Board of Directors for their adoption. It will monitor
the financial impact of all trusteed benefit plans sponsored by the Corporation
and of any amendments or modifications thereto and will appoint and monitor the
performance of the committee(s) responsible for managing the assets and
administration of the Corporation's trusteed benefit plans. All action by the
Finance Committee shall be reported to the Board of Directors at its meeting
next succeeding such action and shall be subject to
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revision and alteration by the Board of Directors. Vacancies in the Finance
Committee shall be filled by the Board of Directors.
Section 3.03. AUDIT AND ETHICS COMMITTEE. The Board of Directors by
resolution adopted by a majority of the Board of Directors shall provide for an
Audit and Ethics Committee of three or more directors who are not officers or
employees of the Corporation, and who otherwise independent of management and
free from any relationship that, in the opinion of the Board of Directors, would
interfere with the exercise of the independent judgment of each member as a
Committee member. The members of the Audit and Ethics Committee shall be elected
by the Board of Directors to serve at the pleasure of the Board of Directors.
The Board of Directors shall designate from among the membership of the Audit
and Ethics Committee a chairman. The Audit and Ethics Committee shall, except
when such powers are by statute or the Charter or the Bylaws either reserved to
the full Board of Directors or delegated to another committee of the Board of
Directors, possess and may exercise the powers of the Board of Directors
relating to all accounting and auditing matters of this Corporation. The Audit
and Ethics Committee shall recommend to the Board of Directors the selection of
and monitor the independence of the independent public accountants for this
Corporation and prior to the end of the Corporation's fiscal year shall review
the scope and timing of the work to be performed and the compensation to be paid
to the accountants selected by the Board; review with the Corporation's
management and the independent public accountants the financial accounting and
reporting principles appropriate for the Corporation, the policies and
procedures concerning audits, accounting and financial controls, and any
recommendations to improve existing practices, and the qualifications and work
of the Corporation's internal auditing staff; review with the Corporation's
independent public accountants the results of their audit and their report
including any changes in accounting principles and any significant amendments;
and shall meet with the Corporation's internal audit department representative
to review the plan and scope of work of the internal auditing staff. The
Committee shall hold quarterly meetings, and shall separately meet in executive
session, with the Corporation's independent public accountants and internal
audit department representative to review and resolve all matters of concern
presented to the Committee. The Committee shall monitor compliance with the Code
of Ethics and Standards of Conduct and shall review and resolve all matters of
concern presented to it by the Corporate Ethics Committee or the Corporate
Ethics Office. The Committee shall review and monitor the adequacy of the
Corporation's policies and procedures, as well as the organizational structure,
for ensuring compliance with environmental, health and safety laws and
regulations; review, at least annually, the Corporation's record of compliance
with any environmental, health and safety laws and regulations and the policies
and procedures relating thereto; review with the Corporation's management
significant environmental, health and safety litigation and regulatory
proceedings in which the Corporation is or may become involved; and review the
accounting and financial reporting issues, including the adequacy of disclosure,
for all environmental matters. The Committee shall have the power to investigate
any matter falling within its jurisdiction, and
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it shall also perform such other functions and exercise such other powers as may
be delegated to it from time to time by the Board of Directors. All action by
the Audit and Ethics Committee shall be reported to the Board of Directors at
its meeting next succeeding such action and shall be subject to revision and
alteration by the Board of Directors. Vacancies in the Audit and Ethics
Committee shall be filled by the Board of Directors.
Section 3.04(a). COMPENSATION COMMITTEE. The Board of Directors by
resolution adopted by a majority of the Board of Directors may provide for a
Compensation Committee of three (3) or more directors who are not officers or
employees of the Corporation. If provision is made for a Compensation Committee,
the members of the Compensation Committee shall be elected by the Board of
Directors to serve at the pleasure of the Board of Directors. The Board of
Directors shall designate from among the membership of the Compensation
Committee a chairman. The Compensation Committee shall recommend to the Board of
Directors the compensation to be paid for services of senior elected officers of
the Corporation as established by resolution of the Board of Directors from time
to time. The Compensation Committee shall have the power to fix the compensation
of all other elected officers and to approve the benefits provided by any bonus,
supplemental, and special compensation plans, including pension, insurance, and
health plans, but excluding performance-based executive compensation plans, and
such powers as are by statute or the Charter or the Bylaws reserved to the full
Board of Directors. The Compensation Committee shall also perform such other
functions and exercise such other powers as may be delegated to it from time to
time by the Board of Directors. All action by the Compensation Committee shall
be reported to the Board of Directors at its meeting next succeeding such action
and shall be subject to revision and alteration by the Board of Directors.
Vacancies in the Compensation Committee shall be filled by the Board of
Directors.
Section 3.04(b). STOCK OPTION SUBCOMMITTEE. The Board of Directors by
resolution adopted by a majority of the Board of Directors may provide for a
Stock Option Subcommittee of three (3) or more directors of the Compensation
Committee who meet the qualifications of an independent director under Section
162(m) of the Internal Revenue Code. If provision is made for a Stock Option
Subcommittee, the members of the Stock Option Subcommittee shall be elected by
the Board of Directors to serve at the pleasure of the Board of Directors. The
Board of Directors shall designate from among the membership of the Stock Option
Subcommittee a chairman. The Stock Option Subcommittee shall serve as the Stock
Option Subcommittee of the Board and shall administer any performance-based
executive compensation plan and approve awards granted thereunder. The Stock
Option Subcommittee shall also perform such other functions and exercise such
other powers as may be delegated to it from time to time by the Board of
Directors. All action by the Stock Option Subcommittee shall be reported to the
Board of Directors at its meeting next succeeding such action and shall be
subject to revision and alteration by the Board of Directors. Vacancies in the
Stock Option
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Subcommittee shall be filled by the Board of Directors.
Section 3.05. NOMINATING COMMITTEE. The Board of Directors by
resolution adopted by a majority of the Board of Directors may provide for a
Nominating Committee of three (3) or more Directors who are not officers or
employees of the Corporation. If provision is made for a Nominating Committee,
the members of the Nominating Committee shall be elected by the Board of
Directors to serve at the pleasure of the Board of Directors. The Board of
Directors shall designate from among the membership of the Nominating Committee
a committee chairman. The Nominating Committee shall make recommendations to the
Board of Directors concerning the fees and compensation for directors, the
composition of the Board including its size and the qualifications for
membership, and the Nominating Committee shall recommend to the Board of
Directors nominees for election to fill any vacancy occurring in the Board and
to fill new positions created by an increase in the authorized number of
directors of the Corporation. Annually the Nominating Committee shall recommend
to the Board of Directors a slate of directors to serve as management's nominees
for election by the stockholders at the annual meeting. Vacancies in the
Nominating Committee shall be filled by the Board of Directors.
Section 3.06. OTHER COMMITTEES. The Board of Directors may by
resolution provide for such other standing or special committees, composed of
two (2) or more directors, and discontinue the same at its pleasure. Each such
committee shall have such powers and perform such duties, not inconsistent with
law, as may be assigned to it by the Board of Directors.
Section 3.07. MEETINGS OF COMMITTEES. Each committee of the Board of
Directors shall fix its own rules of procedure, consistent with the provisions
of any rules or resolutions of the Board of Directors governing such committee,
and shall meet as provided by such rules or by resolution of the Board of
Directors, and it shall also meet at the call of its chairman or any two (2)
members of such committee. Unless otherwise provided by such rules or by such
resolution, the provisions of the article of these Bylaws entitled the "Board of
Directors" relating to the place of holding and notice required of meetings of
the Board of Directors shall govern committees of the Board of Directors. A
majority of each committee shall constitute a quorum thereof; provided, however,
that in the absence of any member of such committee, the members thereof present
at any meeting, whether or not they constitute a quorum, may appoint a member of
the Board of Directors to act in the place of such absent member. Except in
cases in which it is otherwise provided by the rules of such committee or by
resolution of the Board of Directors, the vote of a majority of such quorum at a
duly constituted meeting shall be sufficient to pass any measure.
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ARTICLE IV
OFFICERS
Section 4.01. EXECUTIVE OFFICERS -- ELECTION AND TERM OF OFFICE. The
Executive Officers of the Corporation shall be a Chairman of the Board, a
President, such number of Vice Presidents as the Board of Directors may
determine, a Secretary and a Treasurer. The Chairman and the President shall be
chosen from among the Directors. The Executive Officers shall be elected
annually by the Board of Directors at its first meeting following each annual
meeting of stockholders and each such officer shall hold office until the
corresponding meeting of the Board of Directors in the next year and until his
or her successor shall have been duly chosen and qualified or until his or her
death or until he or she shall have resigned, or shall have been removed from
office in the manner provided in this Article IV. Any vacancy in any of the
above offices may be filled for the unexpired portion of the term by the Board
of Directors at any regular or special meeting.
Section 4.02. CHAIRMAN OF THE BOARD. The Chairman of the Board shall
be the Chief Executive Officer of the Corporation and shall preside at all
meetings of the stockholders and of the Board of Directors. Subject to the
authority of the Board of Directors, he shall have general charge and
supervision of the business and affairs of the Corporation. He shall have the
authority to sign and execute in the name of the Corporation all deeds,
mortgages, bonds, contracts or other instruments. He shall have the authority to
vote stock in other corporations, and he shall perform such other duties of
management as may be prescribed by resolution or as otherwise may be assigned to
him by the Board of Directors. He shall have the authority to delegate such
authorization and power as vested in him by these Bylaws to some other officer
or employee or agent of the Corporation as he shall deem appropriate.
Section 4.03. PRESIDENT. The President shall be the Chief Operating
Officer of the Corporation. He or she shall have general charge and supervision
of the operations of the Corporation and shall have such other powers and duties
of management as from time to time may be assigned to him or her by the Board of
Directors or the Chief Executive Officer.
Section 4.04. VICE PRESIDENTS. The Corporation shall have one (1) or
more Vice Presidents, including Executive and Senior Vice Presidents as
appropriate, as elected from time to time by the Board of Directors. The Vice
Presidents shall perform such duties as from time to time may be assigned to
them by the President.
Section 4.05. SECRETARY. The Secretary shall attend all meetings of
the stockholders and of the Board of Directors and record all votes and minutes
or proceedings, in books provided for that purpose; shall see that all notices
of such meetings are duly given in
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accordance with the provisions of the Bylaws of the Corporation, or as required
by law; may sign certificates of stock of the Corporation with the Chairman of
the Board; shall be custodian of the corporate seal; shall see that the
corporate seal is affixed to all documents, the execution of which, on behalf of
the Corporation, under its seal, is duly authorized, and when so affixed may
attest the same; and in general, shall perform all duties incident to the office
of a secretary of a corporation, and such other duties as from time to time may
be assigned to the Secretary by the Chairman of the Board.
Section 4.06. TREASURER. The Treasurer shall have charge of and be
responsible for all funds, securities, receipts and disbursements of the
Corporation, and shall deposit, or cause to be deposited, in the name of the
Corporation, all monies or other valuable effects in such banks, trust
companies, or other depositories as shall, from time to time, be selected by the
Board of Directors; and in general, shall render such reports and perform such
other duties incident to the office of a treasurer of a corporation, and such
other duties as from time to time may be assigned to him or her by the
President.
Section 4.07. SUBORDINATE OFFICERS. The subordinate officers shall
consist of such assistant officers and agents as may be deemed desirable and as
may be appointed by the Chief Executive Officer or the President. Each such
subordinate officer shall hold office for such period, have such authority and
perform such duties as the Chief Executive Officer or the President may
prescribe.
Section 4.08. OTHER OFFICERS AND AGENTS. The Board of Directors may
create such other offices and appoint or provide for the appointment of such
other officers and agents, attorneys-in-fact and employees as it shall deem
necessary, who shall bear such titles, have such authority, receive such
compensation, and provide such security for faithful service and hold their
offices for such terms and shall exercise such powers and perform such duties as
shall be determined from time to time by the Board of Directors.
Section 4.09. WHEN DUTIES OF AN OFFICER MAY BE DELEGATED. In the case
of the absence or disability of an officer of the Corporation or for any other
reason that may seem sufficient to the Board of Directors, the Board of
Directors, or any officer designated by it, may, for the time being, delegate
such officer's duties and powers to any other person.
Section 4.10. OFFICERS HOLDING TWO OR MORE OFFICES. Any two (2) of the
above mentioned offices, except those of a Vice President, may be held by the
same person, but no officer shall execute, acknowledge or verify any instrument
in more than one capacity, if such instrument be required by law, by the Charter
or by these Bylaws, to be executed, acknowledged or verified by any two (2) or
more officers.
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Section 4.11. COMPENSATION. The Board of Directors shall have power to
fix the compensation of all officers and employees of the Corporation.
Section 4.12. RESIGNATIONS. Any officer may resign at any time by
giving written notice to the Board of Directors or to the President or the
Secretary of the Corporation. Any such resignation shall take effect
simultaneously with or at any time subsequent to its delivery as shall be
specified therein; and, unless otherwise specified therein, the acceptance of
such resignation shall not be necessary to make it effective.
Section 4.13. REMOVAL. Any officer of the Corporation may be removed,
with or without cause, by the Board of Directors, if such removal is determined
in the judgment of the Board of Directors to be in the best interests of the
Corporation, and any officer of the Corporation duly appointed by another
officer may be removed, with or without cause, by such officer.
ARTICLE V
STOCK
Section 5.01. CERTIFICATES. Each stockholder shall be entitled to a
certificate or certificates which shall represent and certify the number and
kind of shares of stock owned by him or her in the Corporation. Such
certificates shall be signed by the Chairman of the Board and countersigned by
the Secretary or an Assistant Secretary, and sealed with the seal of the
Corporation or a facsimile of such seal. Stock certificates shall be in such
form, not inconsistent with law or with the Charter, as shall be approved by the
Board of Directors. When certificates for stock of any class are countersigned
by a transfer agent, other than the Corporation or its employee, or by a
registrar, other than the Corporation or its employee, any other signature on
such certificates may be a facsimile. In case any officer of the Corporation who
has signed any certificate ceases to be an officer of the Corporation, whether
because of death, resignation or otherwise, before such certificate is issued,
the certificate may nevertheless be issued and delivered by the Corporation as
if the officer had not ceased to be such officer as of the date of its issue.
Section 5.02. TRANSFER OF SHARES. Shares of stock shall be
transferable only on the books of the Corporation only by the holder thereof, in
person or by duly authorized attorney, upon the surrender of the certificate
representing the shares to be transferred, properly endorsed. The Board of
Directors shall have power and authority to make such other rules and
regulations concerning the issue, transfer and registration of certificates of
stock as it may deem expedient.
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Section 5.03. TRANSFER AGENTS AND REGISTRARS. The Corporation may have
one (1) or more transfer agents and one (1) or more registrars of its stock,
whose respective duties the Board of Directors may, from time to time, define.
No certificate of stock shall be valid until countersigned by a transfer agent,
if the Corporation has a transfer agent, or until registered by a registrar, if
the Corporation has a registrar. The duties of transfer agent and registrar may
be combined.
Section 5.04. STOCK LEDGERS. Original or duplicate stock ledgers,
containing the names and addresses of the stockholders of the Corporation and
the number of shares of each class held by them respectively, shall be kept at
an office or agency of the Corporation in such city or town as may be designated
by the Board of Directors. If no other place is so designated such original or
duplicate stock ledgers shall be kept at an office or agency of the Corporation
in New York, New York or Bethesda, Maryland.
Section 5.05. RECORD DATES. The Board of Directors is hereby empowered
to fix, in advance, a date as the record date for the purpose of determining
stockholders entitled to notice of, or to vote at, any meeting of stockholders,
or stockholders entitled to receive payment of any dividend or the allotment of
any rights, or in order to make a determination of stockholders for any other
proper purpose. Such date in any case shall be not more than ninety (90) days
and, in case of a meeting of stockholders, not less than thirty (30) days, prior
to the date on which the particular action, requiring such determination of
stockholders, is to be taken. If a record date is not set and the transfer books
are not closed, the record date for the purpose of making any proper
determination with respect to stockholders shall be fixed in accordance with
applicable law.
Section 5.06. NEW CERTIFICATES. In case any certificate of stock is
lost, stolen, mutilated or destroyed, the Board of Directors may authorize the
issue of a new certificate in place thereof upon such terms and conditions as it
may deem advisable; or the Board of Directors may delegate such power to any
officer or officers or agents of the Corporation; but the Board of Directors or
such officer or officers, in their discretion, may refuse to issue such new
certificate save upon the order of some court having jurisdiction in the
premises.
ARTICLE VI
INDEMNIFICATION
Section 6.01. INDEMNIFICATION OF DIRECTORS, OFFICERS, AND EMPLOYEES.
The Corporation shall indemnify and hold harmless to the fullest extent
permitted by, and under, applicable law as it presently exists and as is further
set forth in
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Section 6.02 below or as may hereafter be amended any person who is or was a
director, officer or employee of the Corporation or who is or was serving at the
request of the Corporation as a director, officer or employee of another
corporation or entity (including service with employee benefit plans), who by
reason of this status or service in that capacity was, is, or is threatened to
be made a party or is otherwise involved in any action, suit or proceeding,
whether civil, criminal, administrative, or investigative. Such indemnification
shall be against all liability and loss suffered and expenses (including, but
not limited to, attorneys' fees, judgments, fines, penalties, and amounts paid
in settlement) actually and reasonably incurred by the individual in connection
with such proceeding; provided, however, that the Corporation shall not be
required to indemnify a person in connection with an action, suit or proceeding
initiated by such person unless the action, suit or proceeding was authorized by
the Board of Directors of the Corporation.
Section 6.02. STANDARD. Maryland General Corporation Law Section
2-418, on August 29, 1994, provided generally that a corporation may indemnify
any individual made a party to a proceeding by reason of service on behalf of
the corporation unless it is established that:
(i) The act or omission of the individual was material to
the matter giving rise to the proceeding; and
(1) Was committed in bad faith; or
(2) Was the result of active and deliberate
dishonesty; or
(ii) The individual actually received an improper personal benefit
in money, property, or services; or
(iii) In the case of any criminal proceeding, the individual had
reasonable cause to believe that the act or omission was unlawful.
Section 6.03. ADVANCE PAYMENT OF EXPENSES. The Corporation shall pay
or reimburse reasonable expenses in advance of a final disposition of the
proceeding and without requiring a preliminary determination of the ultimate
entitlement to indemnification provided that the individual first provides the
Corporation with: (a) a written affirmation of the individual's good faith
belief that the individual meets the standard of conduct necessary for
indemnification under the laws of the State of Maryland; and (b) a written
undertaking by or on behalf of the individual to repay the amount advanced if it
shall ultimately be determined that the applicable standard of conduct has not
been met.
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Section 6.04. GENERAL. The Board of Directors, by resolution, may
authorize the management of the Corporation to act for and on behalf of the
Corporation in all matters relating to indemnification within any such limits as
may be specified from time to time by the Board of Directors, all consistent
with applicable law.
The rights conferred on any person by this Article VI shall not be
exclusive of any other rights which such person may have or hereafter acquire
under any statute, provision of the Charter of the Corporation, these Bylaws,
agreement, vote of the stockholders or disinterested directors or otherwise.
Repeal or modification of this Article VI or the relevant law shall
not affect adversely any rights or obligations then existing with respect to any
facts then or theretofore existing or any action, suit or proceeding theretofore
or thereafter brought or threatened based in whole or in part upon any such
facts.
ARTICLE VII
SUNDRY PROVISIONS
Section 7.01. SEAL. The corporate seal of the Corporation shall bear
the name of the Corporation and the words "Incorporated 1994 Maryland" and
"Corporate Seal."
Section 7.02. VOTING OF STOCK IN OTHER CORPORATIONS. Any shares of
stock in other corporations or associations, which may from time to time be held
by the Corporation, may be represented and voted at any of the stockholders'
meetings thereof by the Chairman or President of the Corporation or by proxy or
proxies appointed by the Chairman or President of the Corporation. The Board of
Directors or Chairman, however, may by resolution or delegation appoint some
other person or persons to vote such shares, in which case such person or
persons shall be entitled to vote such shares upon the production of a certified
copy of such resolution or delegation.
Section 7.03. AMENDMENTS. The Board of Directors shall have the
exclusive power, at any regular or special meeting thereof, to make and adopt
new Bylaws, or to amend, alter, or repeal any Bylaws of the Corporation,
provided such revisions are not inconsistent with the Charter or statute.
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C E R T I F I C A T E A S T O B Y L A W S
I, _____________________________________________, ____________ Vice
President and Secretary of LOCKHEED MARTIN CORPORATION hereby certify that the
foregoing is a true, correct and complete copy of the Bylaws of LOCKHEED MARTIN
CORPORATION and that such Bylaws are in full force and effect as of the date of
this certificate.
WITNESS my hand and the seal of LOCKHEED MARTIN CORPORATION, this ____
day of ____________, 19__.
----------------------------------
Vice President and Secretary
CORPORATE SEAL
<PAGE>
Exhibit 10.(c)
LOCKHEED MARTIN CORPORATION
DIRECTORS DEFERRED STOCK PLAN
<PAGE>
LOCKHEED MARTIN CORPORATION
DIRECTORS DEFERRED STOCK PLAN
TABLE OF CONTENTS
ARTICLE I TITLE, PURPOSE AND AUTHORIZED SHARES
ARTICLE II DEFINITIONS
ARTICLE III PARTICIPATION
ARTICLE IV DEFERRAL ACCOUNTS
4.1. Stock Unit Account
4.2. Dividend Equivalents; Dividend Equivalent Stock Account
4.3. Vesting of Stock Unit Account and Dividend Equivalent Stock
Account
4.4. Distribution of Benefits
4.5. Adjustments in Case of Changes in Common Stock
4.6. Corporation's Right to Withhold
4.7. Limitations on Rights Associated with Units
4.8. Restrictions on Resale
ARTICLE V ADMINISTRATION
5.1. Formula Plan
5.2. Decisions Final; Delegation; Reliance; and Limitation on
Liability
ARTICLE VI PLAN CHANGES AND TERMINATION
6.1. Amendments
6.2. Term
6.3. Distribution of Shares
ARTICLE VII MISCELLANEOUS
7.1. Limitation on Directors' Rights
7.2. Beneficiaries
7.3. Benefits Not Assignable; Obligations Binding Upon Successors
7.4. Governing Law; Severability
7.5. Compliance With Laws
7.6. Plan Construction
7.7. Headings Not Part of Plan
7.8. Stockholder Approval; Effective Date
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LOCKHEED MARTIN CORPORATION
DIRECTORS DEFERRED STOCK PLAN
March 15, 1995
As Amended February 27, 1997
ARTICLE I
TITLE, PURPOSE AND AUTHORIZED SHARES
This Plan shall be known as "Lockheed Martin Corporation Directors
Deferred Stock Plan" and shall become effective on March 15, 1995. The purpose
of this Plan is to attract, motivate and retain experienced and knowledgeable
directors of the Corporation and to further align their economic interest with
the interests of stockholders generally. The total number of shares of Common
Stock that may be delivered pursuant to awards under this Plan is 50,000,
subject to adjustments contemplated by Section 4.6.
ARTICLE II
DEFINITIONS
Whenever the following terms are used in this Plan they shall have the
meaning specified below unless the context clearly indicates to the contrary:
Accounts means a Director's Stock Unit Account and Dividend
Equivalent Stock Account.
Average Fair Market Value means the average of the Fair Market
Values of a share of Common Stock of the Corporation during the last
10 trading days preceding the applicable date of determination.
Award means the crediting of a Unit or Units under this Plan.
Each Award shall be approved by the Board of Directors or a committee
appointed by the Board of Directors in accordance with Section 5.1.
Award Date means June 1 of each year, commencing in 1995.
Beneficiary shall have the meaning specified in Section 7.2(b).
Board of Directors or Board means the Board of Directors of the
Corporation.
Code means the Internal Revenue Code of 1986, as amended.
Common Stock means shares of Common Stock of the Corporation, par
value $1.00 per share, subject to adjustments made under Section 4.5
or by operation of law.
Corporation means Lockheed Martin Corporation, a Maryland
corporation, and its successors and assigns.
Director means a member of the Board of Directors of the
Corporation who is eligible to receive compensation in the form of
retainer fees for services in such capacity and who is not an officer
or employee of the Corporation or any of its subsidiaries.
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Disability means a "permanent and total disability" within the
meaning of Section 22(e)(3) of the Code.
Dividend Equivalent means the amount of cash dividends or other
cash distributions paid by the Corporation on that number of shares of
Common Stock equivalent to the number of Stock Units then credited to
a Director's Stock Unit Account and Dividend Equivalent Stock Account,
which amount shall be allocated as additional Stock Units to the
Director's Dividend Equivalent Stock Account.
Dividend Equivalent Stock Account means the bookkeeping account
maintained by the Corporation on behalf of a Director which is
credited with Dividend Equivalents in the form of Stock Units in
accordance with Section 4.2.
Effective Date means March 15, 1995.
Exchange Act means the Securities Exchange Act of 1934, as
amended from time to time.
Fair Market Value means the closing price of the Stock as
reported on the composite tape of New York Stock Exchange issues (or,
if the Stock is not so listed or if the principal market on which it
is traded is not the New York Stock Exchange, such other reporting
system as shall be selected by the Board) on the relevant date, or, if
no sale of the Stock is reported for that date, the next preceding day
for which there is a reported sale.
Merger means the business combination described in Article I.
Plan means the Lockheed Martin Corporation Directors Deferred
Stock Plan.
Stock means Common Stock.
Stock Unit or Unit means a non-voting unit of measurement that is
deemed for bookkeeping purposes to be equivalent to an outstanding
share of Common Stock of the Corporation and includes fractional
units.
Stock Unit Account means the bookkeeping account maintained by
the Corporation on behalf of each Director which is credited with
Stock Units in accordance with Section 4.1.
ARTICLE III
PARTICIPATION
Each Director shall become a participant in the Plan upon the approval
of an Award to the Director.
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ARTICLE IV
DEFERRAL ACCOUNTS
4.1. Stock Unit Account.
The Stock Unit Account of each Director shall be credited on each
Award Date with a number of Units determined by dividing $10,000 by the Average
Fair Market Value of the Common Stock on the Award Date, provided that the Board
of Directors previously approved the Award. A Director who is not serving as a
director on an Award Date is not eligible for any portion of the Award for the
applicable year.
4.2. Dividend Equivalents; Dividend Equivalent Stock Account.
(a) Allocation of Dividend Equivalents. Each Director shall be
entitled to receive Dividend Equivalents on the Units credited to his or her
Stock Unit Account and Dividend Equivalent Account, whether before or after a
termination of service, which Dividend Equivalents shall be credited to the
Director's Dividend Equivalent Stock Account in accordance with Section 4.2(b)
below.
(b) Dividend Equivalent Stock Account. The Director's Dividend
Equivalent Stock Account shall be credited with an additional number of Units
determined by dividing the amount of Dividend Equivalents by the Fair Market
Value of a share of Common Stock as of each dividend payment date. The Units
credited to a Director's Dividend Equivalent Stock Account shall be allocated
(for purposes of distribution) in accordance with Section 4.4(b) and shall be
subject to adjustment in accordance with Section 4.5.
4.3. Vesting of Stock Unit Account and Dividend Equivalent Stock
Account.
The rights of each Director in respect of his or her Stock Unit
Account and related Dividend Equivalent Stock Account shall vest immediately on
crediting.
4.4. Distribution of Benefits.
(a) Commencement of Benefits Distribution. Subject to the terms of
this Section 4.4, each Director shall be entitled to receive a distribution of
his or her Accounts upon a termination of service (including but not limited to
a retirement or resignation) as a Director of the Corporation. Benefits shall be
distributed at the time or times set forth in Section 4.4.
(b) Manner of Distribution. The benefits payable under this Plan
shall be distributed to the Director (or, in the event of his or her death, the
Director's Beneficiary) in a lump sum, unless the Director elects in writing (on
forms provided by the Corporation) by the time specified in Section 4.4(f), to
receive a distribution of his or her benefits in respect of such Units in
approximately equal annual installments (before giving effect to post-
termination crediting of additional Dividend Equivalents before the applicable
payment date) for up to five years thereafter. Elections with respect to any
Units in the Stock Unit Account shall apply to all Dividend Equivalent Units
attributable to those Stock Units, and to all Dividend Equivalent Units
attributable to those Dividend Equivalent Units. Subject to Section 4.4(f),
installment payments shall commence as of the date benefits become distributable
under Section 4.4(a). Notwithstanding the foregoing, if the vested balance
remaining in a Director's Stock Unit Account and Dividend Equivalent Stock
Account is less than 50 shares, then the remaining balance shall be distributed
in shares in a lump sum.
(c) Effect of Death or Disability. Notwithstanding Sections 4.4(a)
and (b), if a Director's service as a director terminates by reason of
Disability, or a Director or former Director dies, the
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distribution of a Director's Accounts (including remaining Account balances of a
former Director) shall be made immediately in a lump sum.
(d) Form of Distribution. Stock Units credited to a Director's
Stock Unit Account and Dividend Equivalent Stock Account shall be paid and
distributed by means of a distribution of an equivalent whole number of shares
of the Common Stock. Fractions shall be accumulated and converted to Units, but
any fractional interest in a Unit shall be paid in cash on final distribution.
In the event of a termination of service or retirement, a Director may elect, in
accordance with the provisions of Section 4.4(f), to have Stock Units credited
to the Director's Stock Unit Account and Dividend Share Equivalent Account paid
and distributed in the form of cash or a combination of whole shares of Common
Stock and cash. Any such election shall be made at times and in the manner
specified in Section 4.4(f).
(e) Sub-Accounts. The Administrator shall retain sub-accounts of a
Director's Accounts as may be necessary to determine which Units are subject to
any distribution elections under Section 4.4(b).
(f) Timing of Elections. A Director may elect an installment
distribution as provided in Section 4.4(b) only with respect to Units credited
on a June 1 which is at least 12 months following his or her election.
Notwithstanding the preceding sentence, a Director's election to receive an
installment distribution may be made with respect to Units credited during the
Director's first year of service on the Board, within 30 days after the Director
commenced service as a Director (but in any event prior to the date on which the
Units are credited). In addition, in the event of a termination of service or
retirement, at least six months prior to receipt by a Director of any
distribution of benefits under the Plan, the Director shall make a written
election (on forms to be provided by the Corporation) as to the percentage the
Director elects to receive in the form of cash and the percentage the Director
elects to receive in the form of whole shares of Common Stock.
4.5. Adjustments in Case of Changes in Common Stock. If there shall
occur any recapitalization, stock split (including a stock split in the form of
a stock dividend), reverse stock split, merger, combination, consolidation, or
other reorganization or any extraordinary non-cash dividend or other
extraordinary distribution in respect of the Stock (whether in the form of
Stock, other securities, or other property), or any split-up, spin-off,
extraordinary redemption, or exchange of outstanding Stock, or there shall occur
any other similar corporate transaction or event in respect of the Stock, or a
sale of substantially all the assets of the Corporation as an entirety,
proportionate and equitable adjustments consistent with the effect of such event
on stockholders generally (but without duplication of benefits if Dividend
Equivalents are credited) shall be made in the number and type of shares of
Common Stock (or other cash, property or securities in respect thereof)
reserved, and of Units, under this Plan.
4.6. Corporation's Right to Withhold. The Corporation shall satisfy
state or federal income tax withholding obligations, if any, arising upon
distribution of a Director's accounts by reducing the number of shares of Common
Stock otherwise deliverable to the Director by the appropriate number of shares
(based on the Average Fair Market Value) required to satisfy such tax
withholding obligation. If the Corporation, for any reason, cannot satisfy the
withholding obligation in accordance with the preceding sentence, the Director
shall pay or provide for payment in cash of the amount of any taxes which the
Corporation may be required to withhold with respect to the benefits hereunder.
4.7. Limitations on Rights Associated with Units. A Director's
Accounts shall be memorandum accounts on the books of the Corporation. The Units
credited to a Director's Accounts shall be used solely as a device for the
determination of the number of shares of Common Stock to be eventually
distributed to such Director in accordance with this Plan. The Units shall not
be treated as property or as a trust fund of any kind, although the Corporation
shall reserve shares of Common Stock to satisfy its obligations under this Plan.
All shares of Common Stock or other amounts attributed to the Units shall be and
remain the sole property of the Corporation, and each Director's rights in the
Units is limited to the right to receive shares of Common Stock in the future as
herein provided. No Director shall be entitled to
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any voting or other stockholder rights with respect to Units granted under this
Plan. The number of Units credited under this Section shall be subject to
adjustment in accordance with Section 4.5.
4.8. Restrictions on Resale. Stock distributed in respect of those
Stock Units that were first credited under Section 4.1 within six months of the
distribution (and Dividend Equivalent Account Units credited under Section 4.2
solely in respect thereof) may be legended or otherwise restricted so as to
prevent a sale of the Stock within six months of the initial crediting of those
Stock Units. Installments shall be deemed payable and paid in the order (i.e.,
last-in, last-out) of the accrual of the underlying Units.
ARTICLE V
ADMINISTRATION
5.1. Administration. This Plan shall be construed, interpreted and,
to the extent required, administered by the Board or a committee appointed by
the Board to act on its behalf under this Plan. To the extent that the Plan is
administered by a committee of the Board of Directors, the committee shall
consist exclusively of "non-employee directors" as that term is defined in Rule
16b-3 ("Rule 16b-3") promulgated by the Securities and Exchange Commission under
Section 16 of the Exchange Act. Notwithstanding the foregoing, but subject to
Section 6.1 hereof, the Board shall have no discretionary authority with respect
to the amount or price of any Award granted under this Plan and no director
shall participate in any decision relating solely to his or her benefits (other
than approval of the Award). Subject to the foregoing, the Board may resolve any
questions and make all other determinations and adjustments required by this
Plan, maintain all the necessary records for the administration of this Plan,
and provide forms and procedures to facilitate the implementation of this Plan.
5.2. Decisions Final; Delegation; Reliance; and Limitation on
Liability. Any determination of the Board or committee made in good faith shall
be conclusive. In performing its duties, the Board or the committee shall be
entitled to rely on public records and on information, opinions, reports or
statements prepared or presented by officers or employees of the Corporation or
other experts believed to be reliable and competent. The Board or the committee
may delegate ministerial, bookkeeping and other non-discretionary functions to
individuals who are officers or employees of the Corporation.
Neither the Corporation nor any member of the Board, nor any other
person participating in any determination of any question under this Plan, or in
the interpretation, administration or application of this Plan, shall have any
liability to any party for any action taken or not taken in good faith under
this Plan or for the failure of an Award (or action or payment in respect of an
Award) to satisfy Code requirements for realization of intended tax
consequences, to qualify for exemption or relief under Rule 16b-3, or to comply
with any other law, compliance with which is not required on the part of the
Corporation.
ARTICLE VI
PLAN CHANGES AND TERMINATION
6.1. Amendments. The Board of Directors shall have the right to
amend this Plan in whole or in part from time to time or may at any time suspend
or terminate this Plan; provided, however, that no amendment or termination
shall cancel or otherwise adversely affect in any way, without his or her
written consent, any Director's rights with respect to Stock Units and Dividend
Equivalents credited to his or her Stock Unit Account or Dividend Equivalent
Stock Account.
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6.2. Term. This Plan shall continue for a period of 10 years from
the Effective Date, but continuance of this Plan is not assumed as a contractual
obligation of the Corporation. In the event that the Board of Directors decides
to terminate this Plan, it shall notify the Directors of its action in an
instrument in writing, and this Plan shall be terminated at the time therein set
forth, and all Directors shall be bound thereby.
6.3. Distribution of Shares. If this Plan terminates pursuant to
Section 6.2, the distribution of the Accounts of a Director shall be made at the
time provided in Section 4.4(a) and in a manner consistent with the elections
made pursuant to Sections 4.4(b) and (f), if any.
ARTICLE VII
MISCELLANEOUS
7.1. Limitation on Directors' Rights. Participation in this Plan
shall not give any Director the right to continue to serve as a member of the
Board or any rights or interests other than as herein provided. No Director
shall have any right to any payment or benefit hereunder except to the extent
provided in this Plan. This Plan shall create only a contractual obligation on
the part of the Corporation as to such amounts and shall not be construed as
creating a trust. This Plan, in and of itself, has no assets. Directors shall
have only the rights of general unsecured creditors of the Corporation with
respect to amounts credited or vested and benefits payable, if any, on their
Accounts.
7.2. Beneficiaries.
(a) Beneficiary Designation. Upon forms provided and in accordance
with procedures established by the Corporation, each Director may designate in
writing (and change a designation of) the Beneficiary or Beneficiaries (as
defined in Section 7.3(b)) that the Director chooses to receive the Common Stock
payable under this Plan after his or her death, subject to applicable laws
(including any applicable community property and probate laws).
(b) Definition of Beneficiary. A Director's "Beneficiary" or
"Beneficiaries" shall be the person or persons, including a trust or trusts,
validly designated by the Director or, in the absence of a valid designation,
entitled by will or the laws of descent and distribution to receive the
Director's benefits under this Plan in the event of the Director's death.
7.3. Benefits Not Assignable; Obligations Binding Upon Successors.
Benefits of a Director under this Plan shall not be assignable or transferable
and any purported transfer, assignment, pledge or other encumbrance or
attachment of any payments or benefits under this Plan, or any interest therein,
other than pursuant to Section 7.2, shall not be permitted or recognized.
Obligations of the Corporation under this Plan shall be binding upon successors
of the Corporation.
7.4. Governing Law; Severability. The validity of this Plan or any
of its provisions shall be construed, administered and governed in all respects
under and by the laws of the State of Maryland. If any provisions of this
instrument shall be held by a court of competent jurisdiction to be invalid or
unenforceable, the remaining provisions hereof shall continue to be fully
effective.
7.5. Compliance With Laws. This Plan and the offer, issuance and
delivery of shares of Common Stock and/or the payment and deferral of
compensation under this Plan are subject to compliance with all applicable
federal and state laws, rules and regulations (including but not limited to
state and federal reporting, registration, insider trading and other securities
laws) and to such approvals by any listing agency or any regulatory or
governmental authority as may, in the opinion of counsel for the Corporation, be
necessary or advisable in connection therewith. Any securities delivered under
this Plan
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shall be subject to such restrictions, and the person acquiring the
securities shall, if requested by the Corporation, provide such assurances and
representations to the Corporation as the Corporation may deem necessary or
desirable to assure compliance with all applicable legal requirements.
7.6. Plan Construction. It is the intent of the Corporation that
this Plan satisfy and be interpreted in a manner that satisfies the applicable
requirements of Rule 16b-3 so that Directors will be entitled to the benefits of
Rule 16b-3 or other exemptive rules under Section 16 of the Exchange Act and
will not be subjected to avoidable liability thereunder. Any contrary
interpretation shall be avoided.
7.7. Headings Not Part of Plan. Headings and subheadings in this
Plan are inserted for reference only and are not to be considered in the
construction of this Plan.
DFRSTK3.DOC
3/6/97
9
<PAGE>
Exhibit 10(h)
LOCKHEED MARTIN CORPORATION
DIRECTORS DEFERRED COMPENSATION PLAN
<PAGE>
LOCKHEED MARTIN CORPORATION
DIRECTORS DEFERRED COMPENSATION PLAN
March 15, 1995
As Amended December 7, 1995
As Amended April 24, 1996
As Amended February 27, 1997
ARTICLE I
PURPOSE
The purpose of this Plan is to give each non-employee Director of Lockheed
Martin Corporation the opportunity to be compensated for his or her service as a
Director on a deferred basis. The Plan is also intended to establish a method
of paying Director's compensation which will aid the Corporation in attracting
and retaining as members of the Board persons whose abilities, experience and
judgment can contribute to the success of the Corporation. In addition, by
providing Directors with the option of accruing earnings based on the
performance of Lockheed Martin Common Stock, the Plan is intended to more
closely align the economic interests of Directors with the interests of
stockholders generally.
ARTICLE II
DEFINITIONS
Whenever the following terms are used in this Plan, they shall have the
meaning specified below, unless the context clearly indicates to the contrary:
Account means the bookkeeping account maintained by the Corporation on
behalf of a participating Director which is credited with the Director's
Deferred Compensation, including investment earnings credited under Section 4.2.
Beneficiary shall have the meaning specified in Section 7.2(b).
Board of Directors or Board means the Board of Directors of the
Corporation.
Committee means the Committee appointed to administer this Plan, as
provided in Section 6.1 hereof.
Corporation means Lockheed Martin Corporation, a Maryland corporation and
its successors.
Deferred Compensation means Director's Fees deferred pursuant to this Plan
and investment earnings credited thereto under Section 4.2.
Election Form means the form by which a Director elects to participate in
this Plan.
Director means a member of the Board of Directors of the Corporation who is
eligible to receive compensation in the form of Director's Fees and who is not
an officer or employee of the Corporation or any of its subsidiaries.
Director's Fees means the fees payable to a Director for services as a
Director and for services on any Committee of the Board, including the amount of
any retainer paid to a non-employee for services as Chairman of the Board, but
excluding any amounts credited or stock distributed to a Director under the
Lockheed Martin Corporation Directors Deferred Stock Plan.
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Effective Date means the effective date referred to in Section 7.8.
Plan means the Lockheed Martin Corporation Directors Deferred Compensation
Plan.
ARTICLE III
PARTICIPATION
3.1 Timing of Deferral Elections. In order to defer Director's fees
earned in any calendar year, a Director must make a deferral election by
executing and filing an Election Form before the commencement of that calendar
year or, in the case of a new Director, before the commencement of the
Director's term of office in that calendar year. The deferral election shall
specify the manner in which earnings (or losses) on the deferred amount shall
accrue in accordance with Section 4.2 below. To the extent that a Director
elects that any portion of a deferred amount shall accrue earnings based on the
Lockheed Martin Common Stock Investment Option, such an election shall be given
effect only if (i) the election is irrevocably made at least six (6) months
prior to the effective date of the allocation or (ii) the crediting of the
deferred amount to the Lockheed Martin Common Stock Investment Option has been
approved by the Board of Directors (or a committee thereof that is comprised of
persons specified in Section 6.1). To the extent that a Director makes an
election to have Deferred Compensation credited to the Lockheed Martin Common
Stock Investment Option which is not in compliance with (i) or (ii) above, the
amount elected to be deferred into the Lockheed Martin Common Stock Investment
Option shall initially be allocated to the Interest Option until such time as
the allocation to the Lockheed Martin Common Stock Investment Option would be in
compliance with (i) or (ii) above, at which time the deferred amount shall
automatically be reallocated.
3.2 Terms of Deferral Elections. A Director's deferral election for a
calendar year shall specify the percentage (which may equal 100%) of the
Director's Fees to be earned by the Director for that year which are to be
deferred under this Plan. A Director's deferral election shall remain in effect
for each subsequent calendar year, unless the Director duly files a revised
Election Form or written revocation of the election before the beginning of the
subsequent calendar year. A Director's deferral election shall be irrevocable
during any calendar year in which it is in effect.
ARTICLE IV
CREDITING OF ACCOUNTS
4.1 Crediting of Director's Fees. Director's Fees that a Director has
elected to defer shall be credited to the Director's Account as of the first day
of the month in which the Director's Fees would have been payable to the
Director if no deferral election had been made under this Plan. The elected
deferral percentage shall apply to all Director's Fees earned by the Director
during a calendar year.
4.2 Crediting of Investment Earnings. Subject to the provisions of
Section 3.1 above, as of the last day of each month, a Director's Account shall
be credited to reflect investment earnings (or loss) for the month, based on the
Director's investment selections under this Section 4.2. A Director may elect
to have his or her Account credited with investment earnings (or losses) for
each month as if the Director's Account balance had been invested in the
following:
(a) Interest Option. Interest at a rate equal to one twelfth (1/12) of the
annual prime rate as set by Citibank, N.A., New York, New York, on the last day
of the preceding month.,
3
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(b) S&P 500 Option. A return (or loss) equal to that of the published
index for the Standard & Poors 500 (with dividends) for the month will accrue.
(c) Lockheed Martin Common Stock Investment Option. Earnings (or losses)
shall be credited as if such amount had been invested in Lockheed Martin Common
Stock at the published closing price of the Corporation's Common Stock on the
New York Stock Exchange on the last trading day preceding the day as to which
such amount is deferred (or reallocated) into the Lockheed Martin Common Stock
Investment Option; this portion of a Director's Account shall reflect any
subsequent appreciation or depreciation in the market value of Lockheed Martin
Common Stock based on the published closing price of the stock on the New York
Stock Exchange on the last trading day of each month and shall reflect dividends
on the stock as if such dividends were reinvested in shares of Lockheed Martin
Common Stock.
(d) A combination of (a), (b) and (c).
A Director's initial investment selections must be made by the date that the
Director's initial deferral election takes effect. A Director may change his or
her investment selections with respect to all amounts credited to the Director's
Account, including amounts deferred in prior periods, provided that any such
change that would result in an increase or decrease in the portion of the
Director's Account allocated to the Lockheed Martin Common Stock Investment
Option shall only be effective if it is made pursuant to an irrevocable written
election made at least six months following the date of the Director's most
recent "opposite way" election with respect to either the Plan or any other plan
maintained by Lockheed Martin that provides for Discretionary Transactions (as
defined in Rule 16b-3). Subject to the foregoing, a change of investment
selections must be made by filing a revised Election Form in advance of the
month in which the change is to take effect.
4.3 Account Balance as Measure of Deferred Compensation. The Deferred
Compensation payable to a Director (or the Director's Beneficiary) shall be
measured by, and shall in no event exceed, the sum of the amounts credited to
the Director's Account.
ARTICLE V
PAYMENT OF DEFERRED COMPENSATION
5.1 Manner of Distribution.
(a) Lump sum payments. Subject to the provisions of Section 5.6, a
Director's Deferred Compensation shall be paid as a lump sum cash payment equal
to the balance credited to the Director's Account on the December 31 that is
coincident with or next follows the date of the termination of the Director's
status as a Director, unless the Director has elected to receive installment
payments in accordance with Section 5.1(b).
(b) Installment payments. A Director may elect to have the Director's
Deferred Compensation distributed in annual installments over a maximum period
of ten (10) years. The amount of each annual installment shall be determined by
dividing the Director's Account balance (or the portion of the Account balance
to which the installment election applies) on the December 31 preceding the
payment date by the number of years remaining in the elected installment period.
A Director's election to receive installment payments with respect to Director's
fees deferred in any calendar year must be made on an Election Form duly filed
no later than the latest date on which a deferral election may be made for that
calendar year under Section 4.1. A Director's installment election shall remain
in effect with respect to Director's fees deferred in each subsequent calendar
year, unless the Director duly files a revised Election Form before the
beginning of the subsequent calendar year. An installment election shall be
irrevocable with respect to Director's fees deferred (and allocable investment
earnings) in any calendar year for which the installment election is in effect.
4
<PAGE>
(c) Deferral For Directors Fees Earned in 1996. A Director may elect to
have the Director's Deferred Compensation earned during the 1996 calendar year
credited and paid as a lump sum under (a) or annual installments under (b)
except that payment (or installments, as the case may be) will be made (or
commence) on January 1, 1998, or as soon as practicable thereafter regardless of
whether the Director has terminated service as a Director.
5.2 Commencement of Payments. Subject to the provisions of Section 5.6
and except as provided in Sections 5.1(c) and 5.4, the payment of Deferred
Compensation to a Director shall be made or commence in January of the first
calendar year following the year in which the Director ceases to be a Director,
whether due to resignation, retirement, disability, death, or otherwise.
Installment payments shall continue to be made in January of each succeeding
year until all installments have been paid.
5.3 Death Benefits. Subject to the provisions of Section 5.6, in the
event that a Director dies before payment of the Director's Deferred
Compensation has commenced or been completed, the balance of the Director's
Account shall be distributed to the Director's Beneficiary commencing in the
January following the date of the Director's death in accordance with the manner
of distribution (lump sum or annual installments) elected by the Director for
payments during the Director's lifetime. However, upon good cause shown by a
Beneficiary or personal representative of the Director, the Committee, in its
sole discretion, may reject a Director's installment election and instead cause
the Director's death benefits to be paid in a lump sum.
5.4 Emergency Withdrawals. In the event of an unforeseeable emergency
prior to the commencement of distributions or after the commencement of
installment payments, the Committee may approve a distribution to a Director (or
Beneficiary after the death of a Director) of the part of the Director's Account
balance that is reasonably needed to satisfy the emergency need. An Emergency
withdrawal will be approved only in a circumstance of severe financial hardship
to the Director (or Beneficiary after the death of the Director) resulting from
a sudden and unexpected illness or accident of the Director (or Beneficiary, as
applicable) or of a dependent of the Director (or Beneficiary, as applicable),
loss of property due to casualty, or other similar extraordinary or
unforeseeable circumstance arising from events beyond the control of the
Director (or Beneficiary, as applicable). The investment earnings credited to
the Director's Account shall be determined as if the withdrawal had been debited
from the Director's Account on the first day of the month in which the
withdrawal occurs.
5.5 Status of Certain Directors. For purposes of Section 5.2, a retired
Director who continues to advise the Board of Directors under an Advisory
Services Agreement shall be treated as an active Director for the period that he
or she continues to serve under such agreement, if the Director so elects on or
before April 25, 1996. An election under this Section 5.5 shall not otherwise
alter the Director's rights under this plan. Once made, an election under this
Section 5.5 shall be irrevocable.
5.6 Corporation's Right to Withhold. There shall be deducted from all
payments under this Plan the amount of taxes, if any, required to be withheld
under applicable federal or state tax laws. The Directors and their
Beneficiaries will be liable for payment of any and all income or other taxes
imposed on Deferred Compensation payable under this Plan.
5.7 Section 16 Limitations on Distributions. Notwithstanding anything
contained herein to the contrary, no distribution of any portion of a Director's
Account credited to the Lockheed Martin Common Stock Investment Option shall be
made unless (I) the Board of Directors or Committee has approved the
distribution or (ii) at least six months have passed from the date the
Director's service on the Board has terminated.
5
<PAGE>
ARTICLE VI
ADMINISTRATION, AMENDMENT AND TERMINATION
6.1 Administration by Committee. This Plan shall be administered by a
Committee consisting of exclusively "non-employee directors" as that term is
defined in Rule 16b-3 ("Rule 16b-3") promulgated by the Securities and Exchange
Commission under Section 16 of the Securities Exchange Act of 1934 (the
"Exchange Act"). The Committee shall act by vote of a majority or by unanimous
written consent of its members. The Committee's resolution of any question
regarding the interpretation of this Plan shall be subject to review by the
Board, and the Board's determination shall be final and binding on all parties.
6.2 Amendment and Termination. This Plan may be amended, modified, or
terminated by the Board at any time, except that no such action shall (without
the consent of affected Directors or, if appropriate, their Beneficiaries or
personal representatives) adversely affect the rights of Directors or
Beneficiaries with respect to compensation earned and deferred under this Plan
prior to the date of such amendment, modification, or termination.
ARTICLE VII
MISCELLANEOUS
7.1 Limitation on Directors' Rights. Participation in this Plan shall not
give any Director the right to continue to serve as a member of the Board or any
rights or interests other than as herein provided. No Director shall have any
right to any payment or benefit hereunder except to the extent provided in this
Plan. This Plan shall create only a contractual obligation on the part of the
Corporation as to such amounts and shall not be construed as creating a trust.
The Plan, in and of itself, has no assets. Directors shall have only the rights
of general unsecured creditors of the Corporation with respect to amounts
credited to or payable from their Accounts.
7.2 Beneficiaries.
(a) Beneficiary Designation. Subject to applicable laws (including any
applicable community property and probate laws), each Director may designate in
writing the Beneficiary that the Director chooses to receive any payments that
become payable after the Director's death, as provided in Section 5.3. A
Director's Beneficiary designation shall be made on forms provided and in
accordance with procedures established by the Corporation and may be changed by
the Director at any time before the Director's death.
(b) Definition of Beneficiary. A Director's "Beneficiary" or
"Beneficiaries" shall be the person or persons, including a trust or trusts,
validly designated by the Director or, in the absence of a valid designation,
entitled by will or the laws of descent and distribution to receive the amounts
otherwise payable to the Director under this Plan in the event of the Director's
death.
7.3 Rights Not Assignable; Obligations Binding Upon Successors. A
Director's rights under this Plan shall not be assignable or transferable and
any purported transfer, assignment, pledge or other encumbrance or attachment of
any payments or benefits under this Plan, or any interest thereon, other than
pursuant to Section 7.2, shall not be permitted or recognized. Obligations of
the Corporation under this Plan shall be binding upon successors of the
Corporation.
6
<PAGE>
7.4 Governing Law; Severability. The validity of this Plan or any of its
provisions shall be construed, administered, and governed in all respects under
and by the laws of the State of Maryland. If any provisions of this instrument
shall be held by a court of competent jurisdiction to be invalid or
unenforceable, the remaining provisions hereof shall continue to be fully
effective.
7.5 Annual Statements. The Corporation shall prepare and send a statement
to the Director (or to the Director's Beneficiary after the Director's death)
showing the balance credited to the Director's Account as of December 31 of each
year for which an Account is maintained with respect to the Director.
7.6 Headings Not Part of Plan. Headings and subheadings in this Plan are
inserted for reference only and are not to be considered in the construction of
this Plan.
7.7 Consent to Plan Terms. By electing to participate in this Plan, a
Director shall be deemed conclusively to have accepted and consented to all of
the terms of this Plan and to all actions and decisions of the Corporation,
Board, or Committee with regard to the Plan. Such terms and consent shall also
apply to and be binding upon each Director's Beneficiary or Beneficiaries,
personal representatives, and other successors in interest.
7.8 Effective Date. This Plan shall became effective on March 15, 1995.
7.9 Plan Construction. It is the intent of the Corporation that this Plan
satisfy and be interpreted in a manner that satisfies the applicable
requirements of Rule 16b-3 so that Directors will be entitled to the benefits of
Rule 16b-3 or other exemptive rules under Section 16 of the Exchange Act and
will not be subjected to avoidable liability thereunder. Any contrary
interpretation shall be avoided.
7
<PAGE>
Exhibit 10(hh)
LOCKHEED MARTIN CORPORATION
---------------------------
SUPPLEMENTAL SAVINGS PLAN
-------------------------
(Amended and Restated as of January 1, 1997)
ARTICLE I
---------
PURPOSES OF THE PLAN
--------------------
The purposes of the Lockheed Martin Corporation Supplemental Savings
Plan (the "Supplemental Savings Plan") are to provide certain key management
employees of Lockheed Martin Corporation and its subsidiaries (the "Company")
the opportunity to defer compensation that cannot be contributed under the
Lockheed Martin Salaried Savings Program (the "Qualified Savings Plan") because
of the limitations of Code section 401(a)(17), 402(g), or 415(c)(1)(A), and to
provide those employees with matching credits equal to the matching
contributions that would have been made by the Company on their behalf under the
Qualified Savings Plan if the amounts deferred had been contributed to the
Qualified Savings Plan.
ARTICLE II
----------
DEFINITIONS
-----------
Unless the context indicates otherwise, the following words and phrases
shall have the meanings hereinafter indicated:
1. ACCOUNT -- The bookkeeping account maintained by the Company for
each Participant which is credited with the Participant's Deferred Compensation,
Matching Credits, and earnings (or losses) attributable to the Investment
Options selected by the Participant, and which is debited to reflect
distributions. The portions of a Participant's Account allocated to different
Investment Options will be accounted for separately.
2. ACCOUNT BALANCE -- The total amount credited to a Participant's
Account at any time, including the portions of the Account allocated to each
Investment Option.
3. BENEFICIARY -- The person or persons designated by the Participant
as his or her beneficiary under the Qualified Savings Plan.
4. BOARD -- The Board of Directors of Lockheed Martin Corporation.
5. CODE -- The Internal Revenue Code of 1986, as amended.
6. COMMITTEE -- The committee described in Section 1 of Article IX.
7. COMPANY -- Lockheed Martin Corporation and its subsidiaries.
8. COMPANY STOCK INVESTMENT OPTION -- The Investment Option under which
the Participant's Account is credited as if invested under the
<PAGE>
-2-
investment option in the Qualified Savings Plan for the common stock of the
Company.
9. COMPENSATION -- An employee's base salary from the Company, as
defined in the Qualified Savings Plan.
10. DEFERRAL AGREEMENT -- The written agreement executed by an Eligible
Employee on the form provided by the Company under which the Eligible Employee
elects to defer Compensation for a Year.
11. DEFERRED COMPENSATION -- The amount of Compensation deferred and
credited to a Participant's Account under the Supplemental Savings Plan for a
Year.
12. ELIGIBLE EMPLOYEE -- A salaried employee who is eligible to
participate in the Qualified Savings Plan as of the thirtieth (30th) day
preceding the last day on which a Deferral Agreement may be made for a Year, and
whose annual rate of Compensation equals or exceeds $150,000 as of November 1 of
the Year preceding the Year for which a Deferral Agreement is to take effect,
and who satisfies such additional requirements for participation in this
Supplemental Savings Plan as the Committee may from time to time establish. In
the exercise of its authority under this provision, the Committee shall limit
participation in the Plan to employees whom the Committee believes to be a
select group of management or highly compensated employees within the meaning of
Title I of the Employee Retirement Income Security Act of 1974, as amended.
13. EXCHANGE ACT -- The Securities Exchange Act of 1934.
14. INVESTMENT OPTION -- A measure of investment return pursuant to
which Deferred Compensation credited to a Participant's Account shall be further
credited with earnings (or losses). The Investment Options available under this
Supplemental Savings Plan shall correspond to the investment options available
under the Qualified Savings Plan.
15. MATCHING CREDIT -- Any amount credited to a Participant's Account
under Article IV.
16. PARTICIPANT -- An Eligible Employee for whom Compensation has been
deferred under this Supplemental Savings Plan; the term shall include a former
employee whose Account Balance has not been fully distributed.
17. QUALIFIED SAVINGS PLAN -- The Lockheed Martin Salaried Savings Plan
or any successor plan.
18. SECTION 16 PERSON -- A Participant who at the relevant time is
subject to the reporting and short-swing liability provisions of Section 16 of
the Exchange Act.
19. SUPPLEMENTAL SAVINGS PLAN -- The Lockheed Martin Corporation
Supplemental Savings Plan, which was originally adopted by the Board of
Directors of Lockheed Corporation, effective January 1, 1984, as the Lockheed
<PAGE>
-3-
Corporation Supplemental Savings Plan, and which has been amended and restated
(and re-named) pursuant to action of the Board on July 25, 1996.
20. YEAR -- The calendar year.
<PAGE>
-4-
ARTICLE III
-----------
ELECTION OF DEFERRED AMOUNT
---------------------------
1. Timing of Deferral Elections. An Eligible Employee may elect to
----------------------------
defer Compensation for a Year by executing and delivering to the Company a
Deferral Agreement no later than November 30 of the preceding Year. An Eligible
Employee's Deferral Agreement shall be irrevocable when delivered to the Company
and shall remain irrevocably in effect for all succeeding Years, except that the
Deferral Agreement may be modified or revoked with respect to any succeeding
year by the Eligible Employee's execution and delivery to the Company of a new
or modified Deferral Agreement on or before November 30 of such succeeding Year.
Notwithstanding the foregoing, deferral elections for the 1997 Year may be made
as late as February 28, 1997, in recognition of the fact that the right to enter
into Deferral Agreements for the 1997 Year has generally been suspended pending
the distribution of prospectuses for the Plan, as amended and restated;
provided, however, no Deferral Agreement for the 1997 Year shall take effect, or
apply to Compensation earned, before the date that the Eligible Employee's
Deferral Agreement is executed and delivered to the Company.
2. Amount of Deferred Compensation. Unless an Eligible Employee elects
-------------------------------
to make no deferral for a Year, the Eligible Employee's Deferred Compensation
for a Year shall equal (i) his or her Compensation from the time when his or her
Deferral Agreement takes effect during the Year (as elected under Section 3 of
this Article III) until the last day of the Year, multiplied by (ii) the
percentage of Compensation that the Eligible Employee has elected to contribute
to the Qualified Savings Plan (whether in the form of pre-tax salary reduction
contributions, after-tax contributions, or a combination thereof) for that Year.
An Eligible Employee who has elected to make a deferral for a Year under this
Supplemental Savings Plan shall be precluded from modifying his or her rate of
contributions to the Qualified Savings Plan for that Year after the date on
which his or her Deferral Agreement for that Year (including any continuing
Deferral Agreement) has become irrevocable under Section 1 of this Article III.
3. Time when Deferral Agreement Takes Effect. The Eligible Employee may
-----------------------------------------
elect to have his or her Deferral Agreement take effect after the occurrence of
either of the following triggering events:
(a) the Eligible Employee's pre-tax salary reduction contributions
under the Qualified Savings Plan for the Year equal the applicable
limit under Code section 402(g), or
(b) the Compensation paid to the Eligible Employee for the Year
equals the applicable compensation limit under Code section 401(a)(17),
or, if earlier, the annual additions (within the meaning of Code
section 415(c)(2)) of the Eligible Employee for the Year under the
Qualified Savings Plan and any other plan maintained by the Company
equal the applicable limit under Code section 415(c)(1)(A).
An Eligible Employee's Deferral Agreement shall first take effect and apply to
that portion of Compensation earned by the Eligible Employee for a particular
<PAGE>
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payroll period that exceeds the amount at which, or with respect to which, the
triggering event occurs.
ARTICLE IV
----------
MATCHING CREDITS
----------------
The Company shall credit to the Account of a Participant as Matching
Credits the same percentage of the Participant's Deferred Compensation as it
would have contributed as matching contributions to the Qualified Savings Plan
if the amount of the Participant's Deferred Compensation had been contributed as
pre-tax salary reduction or after-tax contributions to the Qualified Savings
Plan.
ARTICLE V
---------
CREDITING OF ACCOUNTS
---------------------
1. Crediting of Deferred Compensation. Deferred Compensation shall be
----------------------------------
credited to a Participant's Account as of the day on which such amount would
have been credited to the Participant's account under the Qualified Savings Plan
if the Participant's Deferred Compensation had been contributed as pre-tax
salary reduction or after-tax contributions to the Qualified Savings Plan.
2. Crediting of Matching Credits. Matching Credits shall be credited to
-----------------------------
a Participant's Account as of the day on which the Deferred Compensation to
which they relate are credited under Section 1.
3. Crediting of Earnings. Earnings shall be credited to a Participant's
---------------------
Account based on the Investment Option or Options to which his or her Account
has been allocated, beginning with the day as of which any amounts (or any
reallocation of amounts) are credited to the Participant's Account. Any amount
distributed from a Participant's Account shall be credited with earnings through
the day on which the distribution is processed. The manner in which earnings are
credited under each of the Investment Options shall be determined in the same
manner as under the Qualified Savings Plan.
4. Selection of Investment Options. The amounts credited to a
-------------------------------
Participant's Account under this Supplemental Savings Plan shall be allocated
among the Investment Options in the same percentages as the Participant's
account under the Qualified Savings Plan is allocated among those Investment
Options. In the event that an Account is maintained for a Participant under this
Supplemental Savings Plan at a time when an account is no longer maintained for
the Participant under the Qualified Savings Plan, the Participant may allocate
and reallocate his or her Account Balance among the Investment Options in
accordance with the procedures and limitations on allocations and reallocations
under the Qualified Savings Plan.
<PAGE>
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ARTICLE VI
----------
PAYMENT OF BENEFITS
-------------------
1. General. The Company's liability to pay benefits to a Participant or
-------
Beneficiary under this Supplemental Savings Plan shall be measured by and shall
in no event exceed the Participant's Account Balance, which shall be fully
vested and nonforfeitable at all times. All benefit payments shall be made in
cash and, except as otherwise provided, shall reduce allocations to the
Investment Options in the same proportions that the Participant's Account
Balance is allocated among those Investment Options.
2. Commencement of Payment. The payment of benefits to a Participant
-----------------------
shall commence as soon as administratively feasible following the Participant's
termination of employment with the Company and his or her entitlement to
commence receiving benefits under the Qualified Savings Plan.
3. Form of Payment. At the time an Eligible Employee first completes a
---------------
Deferral Agreement, he or she shall irrevocably elect the form of payment of his
or her Account Balance from among the following options:
(a) A lump sum.
(b) Annual payments for a period of 5, 10, 15, or 20
years, as designated by the Participant. The amount
of each annual payment shall be determined by
dividing the Participant's Account Balance on the
date such payment is processed by the number of years
remaining in the designated installment period. The
installment period may be shortened, in the sole
discretion of the Committee, if the Committee at any
time determines that the amount of the annual
payments that would be made to the Participant during
the designated installment period would be too small
to justify the maintenance of the Participant's
Account and the processing of payments.
4. Prospective Change of Payment Election. The Committee may, in its
--------------------------------------
discretion, permit a Participant to modify his or her payment election under
Section 3 of this Article VI at the time the Participant enters into a Deferral
Agreement for a Year; if accepted, any such modification shall apply to all
amounts credited to the Participant's Account under this Supplemental Savings
Plan. No such modification will be effective if made within one year of the date
of the Participant's termination of employment.
5. Death Benefits. Upon the death of a Participant before a complete
--------------
distribution of his or her Account Balance, the Account Balance will be paid to
the Participant's Beneficiary in an immediate lump sum.
6. Acceleration upon Change in Control.
-----------------------------------
(a) Notwithstanding any other provision of this Supplemental
Savings Plan, the Account Balance of each Participant shall be
<PAGE>
-7-
distributed in a single lump sum within fifteen (15) calendar days
following a "Change in Control."
(b) For purposes of this Supplemental Savings Plan, a Change in
Control shall include and be deemed to occur upon the following events:
(1) A tender offer or exchange offer is consummated for the
ownership of securities of the Company representing 25% or more of
the combined voting power of the Company's then outstanding voting
securities entitled to vote in the election of directors of the
Company.
(2) The Company is merged, combined, consolidated,
recapitalized or otherwise reorganized with one or more other
entities that are not Subsidiaries and, as a result of the merger,
combination, consolidation, recapitalization or other
reorganization, less than 75% of the outstanding voting securities
of the surviving or resulting corporation shall immediately after
the event be owned in the aggregate by the stockholders of the
Company (directly or indirectly), determined on the basis of record
ownership as of the date of determination of holders entitled to
vote on the action (or in the absence of a vote, the day immediately
prior to the event).
(3) Any person (as this term is used in Sections 3(a)(9) and
13(d)(3) of the Exchange Act, but excluding any person described in
and satisfying the conditions of Rule 13d-1(b)(1) thereunder),
becomes the beneficial owner (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company
representing 25% or more of the combined voting power of the
Company's then outstanding securities entitled to vote in the
election of directors of the Company.
(4) At any time within any period of two years after a tender
offer, merger, combination, consolidation, recapitalization, or
other reorganization or a contested election, or any combination of
these events, the "Incumbent Directors" shall cease to constitute at
least a majority of the authorized number of members of the Board.
For purposes hereof, "Incumbent Directors" shall mean the persons
who were members of the Board immediately before the first of these
events and the persons who were elected or nominated as their
successors or pursuant to increases in the size of the Board by a
vote of at least three-fourths of the Board members who were then
Board members (or successors or additional members so elected or
nominated).
(5) The stockholders of the Company approve a plan of
liquidation and dissolution or the sale or transfer of substantially
all of the Company's business and/or assets as an entirety to an
entity that is not a Subsidiary.
(c) Notwithstanding the provisions of Section 6(a), if a
distribution in accordance with the provisions of Section 6(a) would
<PAGE>
-8-
result in a nonexempt transaction under Section 16(b) of the Exchange
Act with respect to any Section 16 Person, then the date of
distribution to such Section 16 Person shall be delayed until the
earliest date upon which the distribution either would not result in a
nonexempt transaction or would otherwise not result in liability under
Section 16(b) of the Exchange Act.
(d) This Section 6 shall apply only to a Change in Control of
Lockheed Martin Corporation and shall not cause immediate payout of an
Account Balance in any transaction involving the Company's sale,
liquidation, merger, or other disposition of any subsidiary.
(e) The Committee may cancel or modify this Section 6 at any time
prior to a Change in Control. In the event of a Change in Control, this
Section 6 shall remain in force and effect, and shall not be subject to
cancellation or modification for a period of five years, and any
defined term used in Section 6 shall not, for purposes of Section 6, be
subject to cancellation or modification during the five year period.
7. Deductibility of Payments. In the event that the payment of benefits
-------------------------
in accordance with the Participant's election under Section 3 of this Article VI
would prevent the Company from claiming an income tax deduction with respect to
any portion of the benefits paid, the Committee shall have the right to modify
the timing of distributions from the Participant's Account as necessary to
maximize the Company's tax deductions. In the exercise of its discretion to
adopt a modified distribution schedule, the Committee shall undertake to have
distributions made at such times and in such amounts as most closely approximate
the Participant's election, consistent with the objective of maximum
deductibility for the Company. The Committee shall have no authority to reduce a
Participant's Account Balance or to pay aggregate benefits less than the
Participant's Account Balance in the event that all or a portion thereof would
not be deductible by the Company.
8. Change of Law. Notwithstanding anything to the contrary herein, if
-------------
the Committee determines in good faith, based on consultation with counsel, that
the federal income tax treatment or legal status of this Supplemental Savings
Plan has or may be adversely affected by a change in the Internal Revenue Code,
Title I of the Employee Retirement Income Security Act of 1974, or other
applicable law or by an administrative or judicial construction thereof, the
Committee may direct that the Accounts of affected Participants or of all
Participants be distributed as soon as practicable after such determination is
made, to the extent deemed necessary or advisable by the Committee to cure or
mitigate the consequences, or possible consequences of, such change in law or
interpretation thereof.
9. Tax Withholding. To the extent required by law, the Company shall
---------------
withhold from benefit payments hereunder, or with respect to any amounts
credited to a Participant's Account hereunder, any Federal, state, or local
income or payroll taxes required to be withheld and shall furnish the recipient
and the applicable government agency or agencies with such reports, statements,
or information as may be legally required. However, the amount of Deferred
Compensation or Matching Credits to be credited to a Participant's
<PAGE>
-9-
Account will not be reduced or adjusted by the amount of any tax that the
Company is required to withhold with respect thereto.
ARTICLE VII
-----------
EXTENT OF PARTICIPANTS' RIGHTS
------------------------------
1. Unfunded Status of Plan. This Supplemental Savings Plan constitutes
-----------------------
a mere contractual promise by the Company to make payments in the future, and
each Participant's rights shall be those of a general, unsecured creditor of the
Company. No Participant shall have any beneficial interest in any specific
assets that the Company may hold or set aside in connection with this
Supplemental Savings Plan. Notwithstanding the foregoing, to assist the Company
in meeting its obligations under this Supplemental Savings Plan, the Company may
set aside assets in a trust or trusts described in Revenue Procedure 92-64,
1992-2 C.B. 422 (generally known as a "rabbi trust"), and the Company may direct
that its obligations under this Supplemental Savings Plan be satisfied by
payments out of such trust or trusts. It is the Company's intention that this
Supplemental Savings Plan be unfunded for federal income tax purposes and for
purposes of Title I of the Employee Retirement Income Security Act of 1974.
2. Nonalienability of Benefits. A Participant's rights to benefit
---------------------------
payments under this Supplemental Savings Plan shall not be subject in any manner
to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance,
attachment, or garnishment by creditors of the Participant or the Participant's
Beneficiary.
ARTICLE VIII
------------
AMENDMENT OR TERMINATION
------------------------
1. Amendment. The Board may amend, modify, suspend or discontinue this
---------
Supplemental Savings Plan at any time subject to any shareholder approval that
may be required under applicable law, provided, however, that no such amendment
shall have the effect of reducing a Participant's Account Balance or postponing
the time when a Participant is entitled to receive a distribution of his or her
Account Balance.
2. Termination. The Board reserves the right to terminate this
-----------
Supplemental Savings Plan at any time and to pay all Participants their Account
Balances in a lump sum immediately following such termination or at such time
thereafter as the Board may determine; provided, however, that if a distribution
in accordance with the provisions of this Section 2 would otherwise result in a
nonexempt transaction under Section 16(b) of the Exchange Act, the date of
distribution with respect to any Section 16 Person shall be delayed until the
earliest date upon which the distribution either would not result in a nonexempt
transaction or would otherwise not result in liability under Section 16(b) of
the Exchange Act.
<PAGE>
-10-
ARTICLE IX
----------
ADMINISTRATION
--------------
1. The Committee. This Supplemental Savings Plan shall be administered
-------------
by the Compensation Committee of the Board or such other committee of the Board
as may be designated by the Board and constituted so as to permit this
Supplemental Savings Plan to comply with the requirements of Rule 16b-3 of the
Exchange Act. The members of the Committee shall be designated by the Board. A
majority of the members of the Committee (but not fewer than two) shall
constitute a quorum. The vote of a majority of a quorum or the unanimous written
consent of the Committee shall constitute action by the Committee. The Committee
shall have full authority to interpret the Plan, and interpretations of the Plan
by the Committee shall be final and binding on all parties.
2. Delegation and Reliance. The Committee may delegate to the officers
-----------------------
or employees of the Company the authority to execute and deliver those
instruments and documents, to do all acts and things, and to take all other
steps deemed necessary, advisable or convenient for the effective administration
of this Supplemental Savings Plan in accordance with its terms and purpose,
except that the Committee may not delegate any authority the delegation of which
would cause this Supplemental Savings Plan to fail to satisfy the applicable
requirements of Rule 16b-3. In making any determination or in taking or not
taking any action under this Supplemental Savings Plan, the Committee may obtain
and rely upon the advice of experts, including professional advisors to the
Company. No member of the Committee or officer of the Company who is a
Participant hereunder may participate in any decision specifically relating to
his or her individual rights or benefits under the Supplemental Savings Plan.
3. Exculpation and Indemnity. Neither the Company nor any member of the
-------------------------
Board or of the Committee, nor any other person participating in any
determination of any question under this Supplemental Savings Plan, or in the
interpretation, administration or application thereof, shall have any liability
to any party for any action taken or not taken in good faith under this
Supplemental Savings Plan or for the failure of the Supplemental Savings Plan or
any Participant's rights under the Supplemental Savings Plan to achieve intended
tax consequences, to qualify for exemption or relief under Section 16 of the
Exchange Act and the rules thereunder, or to comply with any other law,
compliance with which is not required on the part of the Company.
4. Facility of Payment. If a minor, person declared incompetent, or
-------------------
person incapable of handling the disposition of his or her property is entitled
to receive a benefit, make an application, or make an election hereunder, the
Committee may direct that such benefits be paid to, or such application or
election be made by, the guardian, legal representative, or person having the
care and custody of such minor, incompetent, or incapable person. Any payment
made, application allowed, or election implemented in accordance with this
Section shall completely discharge the Company and the Committee from all
liability with respect thereto.
<PAGE>
5. Proof of Claims. The Committee may require proof of the death,
---------------
disability, incompetency, minority, or incapacity of any Participant or
Beneficiary and of the right of a person to receive any benefit or make any
application or election.
6. Claim Procedures. The procedures when a claim under this Plan is
----------------
denied by the Committee are as follows:
(A) The Committee shall:
(i) notify the claimant within a reasonable time
of such denial, setting forth the specific
reasons therefor; and
(ii) afford the claimant a reasonable opportunity
for a review of the decision.
(B) The notice of such denial shall set forth, in addition
to the specific reasons for the denial, the following:
(i) identification of pertinent provisions of this
Plan;
(ii) such additional information as may be relevant
to the denial of the claim; and
(iii) an explanation of the claims review procedure
and advice that the claimant may request an
opportunity to submit a statement of issues
and comments.
(C) Within sixty days following advice of denial of a claim,
upon request made by the claimant, the Committee shall
take appropriate steps to review its decision in light
of any further information or comments submitted by the
claimant. The Committee may hold a hearing at which the
claimant may present the basis of any claim for review.
(D) The Committee shall render a decision within a
reasonable time (not to exceed 120 days) after the
claimant's request for review and shall advise the
claimant in writing of its decision, specifying the
reasons and identifying the appropriate provisions of
the Plan.
<PAGE>
-12-
ARTICLE X
---------
GENERAL AND MISCELLANEOUS PROVISIONS
------------------------------------
1. Neither this Supplemental Savings Plan nor a Participant's
Deferral Agreement, either singly or collectively, shall in any way obligate the
Company to continue the employment of a Participant with the Company, nor does
either this Supplemental Savings Plan or a Deferral Agreement limit the right of
the Company at any time and for any reason to terminate the Participant's
employment. In no event shall this Plan or a Deferral Agreement, either singly
or collectively, by their terms or implications constitute an employment
contract of any nature whatsoever between the Company and a Participant. In no
event shall this Plan or a Plan Agreement, either singly or collectively, by
their terms or implications in any way limit the right of the Company to change
an Eligible Employee's compensation or other benefits.
2. Any amount credited to a Participant's Account under this
Supplemental Savings Plan shall not be treated as compensation for purposes of
calculating the amount of a Participant's benefits or contributions under any
pension, retirement, or other plan maintained by the Company, except as provided
in such other plan.
3. Any written notice to the Company referred to herein shall
be made by mailing or delivering such notice to the Company at 6801 Rockledge
Drive, Bethesda, Maryland 20817, to the attention of the Vice President, Human
Resources. Any written notice to a Participant shall be made by delivery to the
Participant in person, through electronic transmission, or by mailing such
notice to the Participant at his or her place of residence or business address.
4. In the event it should become impossible for the Company or
the Committee to perform any act required by this Plan, the Company or the
Committee may perform such other act as it in good faith determines will most
nearly carry out the intent and the purpose of this Supplemental Savings Plan.
5. By electing to become a Participant hereunder, each
Eligible Employee shall be deemed conclusively to have accepted and consented to
all the terms of this Supplemental Savings Plan and all actions or decisions
made by the Company, the Board, or Committee with regard to the Supplemental
Savings Plan.
6. The provisions of this Supplemental Savings Plan and the
Deferral Agreements hereunder shall be binding upon and inure to the benefit of
the Company, its successors, and its assigns, and to the Participants and their
heirs, executors, administrators, and legal representatives.
7. A copy of this Supplemental Savings Plan shall be available
for inspection by Participants or other persons entitled to benefits under the
Plan at reasonable times at the offices of the Company.
<PAGE>
-13-
8. The validity of this Supplemental Savings Plan or any of
its provisions shall be construed, administered, and governed in all respects
under and by the laws of the State of Maryland, except as to matters of federal
law. If any provisions of this instrument shall be held by a court of competent
jurisdiction to be invalid or unenforceable, the remaining provisions hereof
shall continue to be fully effective.
9. This Supplemental Savings Plan and its operation,
including but not limited to, the mechanics of deferral elections, the issuance
of securities, if any, or the payment of cash hereunder is subject to compliance
with all applicable federal and state laws, rules and regulations (including but
not limited to state and federal insider trading, registration, reporting and
other securities laws) and such other approvals by any listing, regulatory or
governmental authority as may, in the opinion of counsel for the Company, be
necessary or advisable in connection therewith.
10. This Supplemental Savings Plan is intended to constitute
an "excess benefit plan" within the meaning of Rule 16b-3(b)(2) under the
Securities Exchange Act of 1934, and it shall be construed and applied
accordingly. It is the intent of the Company that this Supplemental Savings Plan
satisfy and be interpreted in a manner, that, in the case of Participants who
are or may be Section 16 Persons, satisfies any applicable requirements of Rule
16b-3 of the Exchange Act or other exemptive rules under Section 16 of the
Exchange Act and will not subject Section 16 Persons to short-swing profit
liability thereunder. If any provision of this Supplemental Savings Plan would
otherwise frustrate or conflict with the intent expressed in this Section 10,
that provision to the extent possible shall be interpreted and deemed amended so
as to avoid such conflict. To the extent of any remaining irreconcilable
conflict with this intent, the provision shall be deemed disregarded. Similarly,
any action or election by a Section 16 Person with respect to the Supplemental
Savings Plan to the extent possible shall be interpreted and deemed amended so
as to avoid liability under Section 16 or, if this is not possible, to the
extent necessary to avoid liability under Section 16, shall be deemed
ineffective. Notwithstanding anything to the contrary in this Supplemental
Savings Plan, the provisions of this Supplemental Savings Plan may at any time
be bifurcated by the Board or the Committee in any manner so that certain
provisions of this Supplemental Savings Plan are applicable solely to Section 16
Persons. Notwithstanding any other provision of this Supplemental Savings Plan
to the contrary, if a distribution which would otherwise occur is prohibited or
proposed to be delayed because of the provisions of Section 16 of the Exchange
Act or the provisions of the Supplemental Savings Plan designed to ensure
compliance with Section 16, the Section 16 Person involved may affirmatively
elect in writing to have the distribution occur in any event; provided that the
Section 16 Person shall concurrently enter into arrangements satisfactory to the
Committee in its sole discretion for the satisfaction of any and all
liabilities, costs and expenses arising from this election.
<PAGE>
-14-
ARTICLE XI
----------
EFFECTIVE DATE
--------------
This amendment and restatement of the Supplemental Savings
Plan shall generally become effective on January 1, 1997.
<PAGE>
Exhibit 10(oo)
Lockheed Martin Corporation
Directors Charitable Award Plan
Plan Document Amended and Restated
Effective June 1, 1995
Amended April 25, 1996
The Lockheed Martin Corporation Directors Charitable Award Plan ("Plan") was
originally adopted effective July 1, 1994 as the Martin Marietta Corporation
Directors Charitable Award Plan ("Prior Plan"). Effective March 15, 1995,
Lockheed Martin Corporation (the "Corporation") assumed the rights and
obligations of Martin Marietta Corporation under the Prior Plan. Effective June
1, 1995, the Corporation adopted the Prior Plan and amended and restated the
Prior Plan to make it applicable to members of the Board of Directors of the
Corporation.
1. PURPOSE OF THE PLAN
The Plan allows each eligible Director of the Corporation to recommend
that the Corporation make a donation of up to $1,000,000 to the
eligible tax-exempt organization(s) (the "Donee(s)") selected by the
Director, with the donation to be made, in the Director's name, in ten
equal annual installments, with the first installment to be made as
soon as is practicable after the Director's death. The purpose of the
Plan is to recognize the interest of the Corporation and its Directors
in supporting worthy educational institutions and/or charitable
organizations.
2. ELIGIBILITY
All persons serving as Directors of the Corporation as of June 1, 1995,
shall be eligible to participate in the Plan. Any Director who joins
the Corporation's Board of Directors after that date shall be
immediately eligible to participate in the Plan upon election to the
Board. Individuals who were Directors of Martin Marietta Corporation on
March 15, 1995 are also eligible for benefits under the Plan.
3. AMOUNT AND TIMING OF DONATION
Each eligible Director may choose one organization to receive a
Corporation donation of $1,000,000, or up to five organizations to
receive donations aggregating $1,000,000. Each recommended organization
must be designated to
<PAGE>
receive a donation of at least $100,000. The donation will be made by
the Corporation in ten equal annual installments, with the first
installment to be made as soon as is practicable after the Director's
death, and each later installment to be made at approximately the same
time in the following years. If a Director recommends more than one
organization to receive a donation, each will receive a prorated
portion of each annual installment as follows: Each annual installment
payment will be divided among the recommended organizations in the same
proportions as the total donation amount has been allocated among the
organizations by the Director.
4. DONEES
In order to be eligible to receive a donation, a recommended
organization must be a tax-exempt charitable organization or
educational institution and must initially, and at the time a donation
is to be made, be able to demonstrate receipt of an IRS notice of
qualification to receive tax deductible contributions, if requested by
the Corporation, and be reviewed and approved by the Directors
Charitable Award Plan Committee (the "Committee"). The Committee may
disapprove a donation if it determines that a donation to the
organization would be detrimental to the best interests of the
Corporation. A Director's private foundation is not eligible to receive
donations under the Plan. If an organization recommended by a Director
ceases to qualify as a Donee, and if the Director does not submit a
form to change the recommendation before his or her death, the amount
recommended to be donated to the organization will instead be donated
to the Director's remaining qualified Donee(s) on a prorata basis. If
all of a Director's recommended organizations cease to qualify, the
amount will be donated to organizations selected by the Corporation. A
Director may not receive any property or economic benefit from an
organization as a result of recommending it as a Donee under the Plan;
a violation of this requirement will render the Director's
recommendation of the Donee void.
5. RECOMMENDATION OF DONATION
When a Director becomes eligible to participate in the Plan, he or she
shall make a written recommendation to the Corporation, on a form
approved by the Corporation for this purpose, designating the Donee(s)
which he or she intends to
-2-
<PAGE>
be the recipient(s) of the Corporation donation to be made on his or
her behalf. A Director may revise or revoke any such recommendation
prior to his or her death by signing a new recommendation form and
submitting it to the Corporation.
A Director may choose to place restrictions on the use of funds he or
she recommends to be donated to an organization. The Corporation will
advise the Donee of the restrictions, but the Corporation will not be
responsible for monitoring the use of the funds by the organization to
ensure compliance with the restrictions. However, the Committee may, in
its discretion, suspend any remaining donation installments for the
organization if it becomes aware that the funds are not being used in a
manner which is consistent with the restrictions.
6. VESTING
A Director will become vested in the Plan upon the completion of sixty
full months of service as a Director, or if he or she dies, retires or
becomes disabled while serving as a Director. Service as a member of
the Board of Directors of Lockheed Corporation prior to June 1, 1995
will be counted as vesting service. If a Director terminates Board
service before becoming vested (other than on account of death,
retirement or disability), no donation will be made on his or her
behalf. A Director will be considered to have retired if he or she has
attained mandatory retirement age as set forth in the Corporation's
By-laws or if he or she terminates service from the Board during April,
1996.
7. FUNDING AND PLAN ASSETS
The Corporation may fund the Plan or it may choose not to fund the
Plan. If the Corporation elects to fund the Plan in any manner, neither
the Directors (or their heirs or assigns) nor their recommended
Donee(s) shall have any rights or interests in any assets of the
Corporation identified for such purpose. Nothing contained in the Plan
shall create, or be deemed to create, a trust, actual or constructive,
for the benefit of a Director or any Donee recommended by a Director to
receive a donation, or shall give, or be deemed to give, any Director
or recommended Donee any interest in any assets of the Plan or the
Corporation. If the Corporation elects to fund the Plan through life
insurance policies, a participating Director agrees to
-3-
<PAGE>
cooperate and fulfill the enrollment requirements necessary to obtain
insurance on his or her life.
8. AMENDMENT OR TERMINATION
The Board of Directors of the Corporation may, at any time, by a
majority vote and without the consent of the Directors participating in
the Plan, amend, modify, or waive any term of the Plan or suspend, or
terminate the Plan for any reason, including, but not limited to,
changes in applicable tax laws; provided however, that, subject to
Section 4, no such amendment or termination shall, without the consent
of the relevant Director or relevant Donee (if the Director has died)
eliminate, reduce, or modify the obligation of the Corporation to make
contributions on behalf of a Director who prior to the date of the
amendment is adopted dies, retires, becomes disabled or has completed
sixty full months of service as a Director.
9. ADMINISTRATION
The Plan shall be administered by the Committee. The Committee shall be
responsible for executing and delivering documents necessary and
appropriate to the administration of the Plan and for making
determinations as to the eligibility of Donees. The Board of Directors
shall have the authority to interpret the Plan and make determinations
as to eligibility of Directors. The determinations of the Committee (or
the Board of Directors, as the case may be) on the foregoing matters
shall be conclusive and binding on all interested parties.
10. DIRECTORS CHARITABLE AWARD PLAN COMMITTEE
The Directors Charitable Award Plan Committee shall be a committee of
four members consisting of the persons who from time to time may be the
Corporation's Chief Financial Officer, Treasurer, Secretary, and Vice
President, Corporate Communications. The Chief Financial Officer shall
act as the Chairperson of the Committee.
-4-
<PAGE>
11. GOVERNING LAW
The Plan shall be construed and enforced according to the laws of
Maryland, and all provisions thereof shall be administered according to
the laws of said state.
12. MISCELLANEOUS PROVISIONS
A Director's rights and interest under the Plan may not be assigned or
transferred. The expenses of the Plan will be borne by the Corporation.
-5-
<PAGE>
13. CHANGE OF CONTROL
(a) If there is a Change of Control of the Corporation, all Directors
participating in the Plan shall immediately become vested. For the
purpose of the Plan, the term "Change of Control" shall have the same
meaning as is defined for the term in Section 10(b) of the Martin
Marietta Corporation Amended Omnibus Securities Award Plan. In the
event of a Change of Control other than 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 of August 29, 1994, the Corporation shall immediately create an
irrevocable trust to make the anticipated Plan donations, and shall
immediately transfer to the trust sufficient assets (which may include
insurance policies) to make all the Plan donations in respect to the
individuals who were Directors immediately before the Change of
Control. In addition, once a Change of Control occurs, Section 3 and 13
of this Plan may not be amended.
(b) Notwithstanding the foregoing, effective June 1, 1995, the term
"Change of Control" shall have the same meaning as is defined for the
term in Section 7(b) of the Lockheed Martin Corporation 1995 Omnibus
Performance Award Plan.
14. CONSENT
By electing to participate in the Plan, a 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 of each
participant.
15. EFFECTIVE DATE
The Plan as amended and restated is effective June 1, 1995. The
recommendations of a Director will be effective when he or she
completes all of the Plan enrollment requirements (including, if the
Plan is funded with insurance, satisfaction of any requirements to
qualify for the insurance).
-6-
<PAGE>
16. RIGHTS UNDER PRIOR PLAN
The rights of any individual who was a member of the Board of Directors
of Martin Marietta Corporation on March 15, 1995 (an "MMC Director")
shall be determined solely under this Plan as amended and restated
effective June 1, 1995, except that each MMC Director is fully vested
as of March 15, 1995 in the Plan's benefits. Any MMC Director shall be
entitled to a single benefit attributable to service both as a member
of the Board of Directors of Martin Marietta Corporation and of the
Corporation. After March 15, 1995, Directors of Martin Marietta
Corporation (other than individuals who were Directors on that date)
shall not be eligible to participate in the Plan.
-7-
<PAGE>
Exhibit 10(nnn)
Amendment to Lockheed Martin Corporation
Supplemental Excess Retirement Plan
At its meeting held on October 24, 1996, the Board of Directors of
Lockheed Martin Corporation adopted the following resolution:
RESOLVED, That the Martin Marietta Corporation Supplemental
Excess Retirement Plan be amended as set forth in the amendment
attached hereto as Exhibit A;
RESOLVED FURTHER, That the proper officers of the Corporation
be and each hereby is authorized to execute and deliver such
instruments, agreements, certifications and other documents, and to
take all such further actions as such officers shall determine in their
sole discretion to be necessary or advisable to effect the intent of
the foregoing resolution.
<PAGE>
EXHIBIT A
Amendment to Martin Marietta Corporation
Supplemental Excess Retirement Plan
The Martin Marietta Corporation Supplemental Excess Retirement Plan hereby
is amended as follows:
1. Effective January 28, 1996, the Plan is amended to replace each
reference to "Martin Marietta Corporation" with "Lockheed Martin Corporation".
2. Effective January 1, 1996, the following is added as the last sentence
of Section 5.2 of the Plan:
Notwithstanding anything herein to the contrary, a Participant who retires
under Section 4 of this Plan and Section IV(3) of the Lockheed Martin
Retirement Income Plan on or after January 1, 1996 shall be eligible for
benefits under this Section.
3. Effective January 1, 1997, the following is added as the last sentence
of Sections 5.1, 5.2 and 5.3 of the Plan:
For purposes of calculating benefits under this Section for Participants
who retire on or after January 1, 1997, the benefits payable under the
Retirement Plan shall be calculated by including incentive compensation
payments in Pensionable Earnings during the year earned and not in the
following year.
<PAGE>
Exhibit 10(ooo)
Amendment to Terms of Outstanding Stock Options Relating to Exercise Period
for Employees of Divested Businesses
At its meeting held on September 26, 1996, the Board of Directors of
Lockheed Martin Corporation adopted the following resolution:
RESOLVED, That effective this date, the terms of the Martin
Marietta Corporation 1984 Stock Option Plan for Key Employees and the
award agreements pursuant to which all outstanding stock options
granted pursuant to the Martin Marietta Corporation Amended Omnibus
Securities Award Plan; the Lockheed Corporation 1986 Employee Stock
Purchase Program; the Lockheed Corporation 1992 Employee Stock Option
Program; and the Lockheed Martin Corporation 1995 Omnibus Performance
Award Plan were awarded are amended to include the following provision:
"SPECIAL RULE AS TO OPTION EXPIRATION UPON DIVESTMENT OF
BUSINESS OPERATIONS--
"Divestiture - If the Corporation divests (as defined below)
all or substantially all of a business operation of the Corporation and
such divestiture results in the termination of the recipient's
employment with the Corporation or its Subsidiaries and transfer of
such employment to the other party to the divestiture, the remaining
term of options granted under this award agreement which have vested as
of the effective date of the divestiture ("Effective Date"), if longer
than (one) 1 year following the Effective Date, shall be reduced to one
(1) year following Effective Date. Options which have not vested as of
the Effective Date shall be treated in accordance with provisions of
this award pertaining to termination of employment. For the purposes of
this provision, the term "divestiture" shall mean a transaction which
results in the transfer of control of the business operation divested
to any person, corporation, association, partnership,
<PAGE>
joint venture or other business entity of which less than 50% of the
voting stock or other equity interests (in the case of entities other
than corporations), is owned or controlled, directly or indirectly, by
the Corporation, one or more of the Corporation's Subsidiaries, or by a
combination thereof.
<PAGE>
Exhibit 10(ppp)
LOCKHEED MARTIN CORPORATION
POST-RETIREMENT DEATH BENEFIT
PLAN FOR ELECTED OFFICERS
(Adopted May 25, 1995)
(Amended July 25, 1996)
ARTICLE I
---------
PURPOSE OF THE PLAN
-------------------
The Lockheed Martin Corporation Post-Retirement Death Benefit
Plan for Elected Officers is intended to provide a means for attracting and
retaining capable individuals as senior executive employees of the Corporation.
It is further intended to encourage the Corporation's most talented and
experienced executives to remain with the Corporation until retirement age while
at the same time enabling the Corporation to provide for the orderly transfer of
senior executive responsibility after these executives reach retirement age. The
Plan is effective May 25, 1995.
ARTICLE II
----------
DEFINITIONS
-----------
Unless the context indicates otherwise, for the purposes of this Plan, the
following words and phrases shall have the meanings hereinafter indicated:
1. BENEFICIARY -- The person or persons (including a trust or trusts)
validly designated by a Participant, on the form provided by the Corporation, to
receive the post-retirement death benefit provided under this Plan. In the
absence of a valid designation, or if the designated Beneficiary has predeceased
the Participant, the Beneficiary shall be the person or persons entitled by will
or the laws of descent and distribution to receive the amounts otherwise payable
to the Participant under this Plan; a Participant may amend his or her
Beneficiary designation at any time before the Participant's death.
2. BOARD or BOARD OF DIRECTORS-- The Board of Directors of Lockheed
Martin Corporation.
<PAGE>
3. COMPENSATION COMMITTEE or COMMITTEE -- The Compensation
Committee of the Board of Directors.
4. CORPORATION -- Lockheed Martin Corporation and its
subsidiaries.
5. ELIGIBLE EXECUTIVE -- An officer of the Corporation who has
been elected to that position by the Board of Directors.
6. EMPLOYEE -- A person employed by the Corporation on a full-
time salaried basis.
7. PARTICIPANT -- A former Employee of the Corporation who at
the time of Retirement was an Eligible Executive.
8. PLAN -- The Lockheed Martin Corporation Post-Retirement Death
Benefit Plan for Elected Officers, as in effect at any time and from time to
time.
9. PREDECESSOR PLAN -- A plan sponsored on March 14, 1995 by
Martin Marietta Corporation or Lockheed Corporation providing for the payment of
a death benefit upon the death of a retired executive.
10. RETIREMENT -- Separation from service from the Corporation
that meets the requirements of Article III.
ARTICLE III
-----------
ELIGIBILITY
-----------
An Employee who is an Eligible Executive at the time of his or her
separation from service with the Corporation shall become a Participant in the
Plan and eligible for the benefits under the Plan if the Employee satisfies all
of the following requirements (or those requirements which have not been
expressly waived by the Compensation Committee with respect to an Eligible
Executive) at the time of his or her separation from service:
a) the Eligible Executive's separation from service occurs on or after
the Eligible Executive attains age 55;
2
<PAGE>
b) the Eligible Executive's separation from service occurs on or
before December 31 of the year in which the Eligible Executive
attains age 65; and
c) the separation from service is for any reason other than
i) involuntary termination for cause; or
ii) to accept full time employment in a comparable position with
another employer.
A separation from service with the Corporation that meets all the requirements
of this Article III shall be considered Retirement from the Corporation except
that separation from employment with the Corporation in order to accept
employment with any of its subsidiaries or affiliates shall not constitute
Retirement under the terms of the Plan and shall not result in commencement of
entitlement to any benefit. Any Employee who at the time of his or her
separation from service does not meet all the requirements of this Article III
for Retirement shall not be eligible for benefits under this Plan.
ARTICLE IV
----------
TERM AND AMOUNT OF BENEFITS
---------------------------
1. The Plan shall provide a benefit payable upon the death of
a Participant subsequent to Retirement in the amount of one hundred fifty
percent (150%) of the Participant's annualized base salary for the pay period
immediate prior to his or her Retirement. The amount payable under this Plan
shall be reduced by the amount payable under a Predecessor Plan, to the extent
the benefit under the Predecessor Plan has not been waived by the Participant.
2. The coverage provided under this Plan shall commence
immediately on termination of employment for Retirement and continue during the
lifetime of a Participant unless sooner terminated by reason of the
circumstances described in the succeeding subsection.
3
<PAGE>
3. If, following the date on which a Participant becomes a
Participant, the Board of Directors reasonably finds 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.
4
<PAGE>
ARTICLE V
---------
MANNER OF PAYMENT
-----------------
1. A written designation of Beneficiary(ies) and contingent
Beneficiary(ies) may be made by the Participant in accordance with the
procedures established by the Compensation Committee (or its delegates
authorized in accordance with Article VIII 2). The Participant may change his or
her designation from time to time by written notice made by the Participant or,
if applicable, his assignee in accordance with the Compensation Committee's
procedures.
2. Benefits under the Plan shall be payable to the Beneficiary
or Beneficiaries properly designated by the Participant in accordance with
paragraph 1 of Article V. If, at the time of the Participant's death, there is
no properly designated Beneficiary as to all or any part of the benefit, or if
the designated beneficiary does not survive the Participant, the benefit will be
paid at the option of the Compensation Committee to any of the following
survivors of the Participant: wife, husband, mother, father, child, or children;
or to the executors or administrators of the Participant.
3. Payments to any named Beneficiary or Beneficiaries pursuant
to any applicable law to any survivor or survivors of the Participant or to the
estate of a Participant, or pursuant to a Beneficiary designation or the terms
of this Plan shall completely discharge all liabilities of the Corporation with
respect to the amounts so paid.
4. At the written request of the Participant or Beneficiary to
the Compensation Committee, Plan benefits may be paid in (a) lump sum, (b)
annual installments over a fixed period of years not to exceed ten years, or (c)
such other arrangements as may be agreed upon by the Participant or Beneficiary
and the Compensation Committee. The maximum number of annual installments that
may be elected will be reduced as is necessary to insure that each annual
installment will be at least $10,000.
5
<PAGE>
5. Benefits under the Plan shall be paid by the Corporation
from its general funds. This Plan constitutes a mere contractual promise by the
Corporation to make payments in the future, and each Participant's (or
Beneficiary's) rights shall be those of a general, unsecured creditor of the
Corporation. No Participant or Beneficiary shall have any beneficial interest in
any specific assets that the Corporation may hold or set aside in connection
with this Plan.
ARTICLE VI
----------
CHANGE OF CONTROL
-----------------
1. Within 15 days of a change of control, in full satisfaction
of all of its obligations under this Plan, the Corporation shall pay to each
Participant in the Plan, a lump sum payment equal to the benefit that would be
payable with respect to the Participant upon his or death. Upon payment of these
amounts, the Plan shall terminate and no amount shall be payable to or on behalf
of any Employee or Eligible Executive who, as of the date of the change of
control, had not yet become a Participant by satisfying all the requirements of
Article III.
2. For purposes of this Plan, a change in control shall include
and be deemed to occur upon the following events:
(a) A tender offer or exchange offer is consummated for the
ownership of securities of the Corporation representing 25% or more of the
combined voting power of the Corporation's then outstanding voting securities
entitled to vote in the election of directors of the Corporation.
(b) The Corporation is merged, combined, consolidated,
recapitalized or otherwise reorganized with one or more other entities that are
not Subsidiaries and, as a result of the merger, combination, consolidation,
recapitalization or other reorganization, less than 75% of the outstanding
voting securities of the surviving or resulting corporation shall immediately
after the event be owned in the aggregate by the stockholders of the Corporation
(directly or indirectly), determined on the basis of record ownership as of the
date of determination of holders entitled to vote on the action (or in the
absence of a vote, the day immediately prior to the event).
6
<PAGE>
(c) Any person (as this term is used in Sections 3(a)(9) and
13(d)(3) of the Securities Exchange Act of 1934, but excluding any person
described in and satisfying the conditions of Rule 13d-1(b)(1) thereunder),
becomes the beneficial owner (as defined in Rule 13d-3 under the Securities
Exchange Act of 1934), directly or indirectly, of securities of the Corporation
representing 25% or more of the combined voting power of the Corporation's then
outstanding securities entitled to vote in the election of directors of the
Corporation.
(d) At any time within any period of two years after a tender
offer, merger, combination, consolidation, recapitalization, or other
reorganization or a contested election, or any combination of these events, the
"Incumbent Directors" shall cease to constitute at least a majority of the
authorized number of members of the Board. For purposes hereof, "Incumbent
Directors" shall mean the persons who were members of the Board immediately
before the first of these events and the persons who were elected or nominated
as their successors or pursuant to increases in the size of the Board by a vote
of at least three-fourths of the Board members who were then Board members (or
successors or additional members so elected or nominated).
(e) The stockholders of the Corporation approve a plan of
liquidation and dissolution or the sale or transfer of substantially all of the
Corporation's business and/or assets as an entirety to an entity that is not a
Subsidiary.
3. This Article VI shall apply only to a change in control of
Lockheed Martin Corporation and shall not apply to any transaction involving the
Corporation's sale, liquidation, merger, or other disposition of any subsidiary.
4. The Committee may cancel or modify this Article VI at any
time prior to a change in control. In the event of a change in control, this
Article VI shall remain in force and effect, and shall not be subject to
cancellation or modification until such time as all payments have been made in
accordance with paragraph 1 of Article VI.
ARTICLE VII
-----------
AMENDMENT AND TERMINATION
-------------------------
7
<PAGE>
The Compensation Committee may from time to time recommend amendments
of the Plan to the Board of Directors for their review and approval. The Board
of Directors may terminate the Plan or amend the Plan in any respect and at any
time; provided however, that no amendment or termination shall have the effect
of reducing the death benefit then being paid, or to be paid, on behalf of any
Participant. Any Participant may, however, at the Participant's election, by
written notice to the Compensation Committee terminate participation in the
Plan.
8
<PAGE>
ARTICLE VIII
------------
ADMINISTRATION
--------------
1. This Plan shall be administered by the Compensation
Committee or such other committee as may be designated by the Board. The
Committee shall have full authority to interpret the Plan, and interpretations
of the Plan by the Committee shall be final and binding on all parties.
2. The Committee may delegate to the officers or employees of
the Corporation the authority to execute and deliver those instruments and
documents, to do all acts and things, and to take all other steps deemed
necessary, advisable or convenient for the effective administration of this Plan
in accordance with its terms and purpose
3. In making any determination or in taking or not taking any
action under this Plan, the Committee may obtain and rely upon the advice of
experts, including professional advisors to the Corporation. No member of the
Committee or officer of the Corporation who is a Participant thereunder may
participate in any decision specifically relating to his or her individual
rights or benefits under the Plan.
4. Neither the Corporation nor any member of the Board or of
the Committee, nor any other person participating in any determination of any
question under this Plan, or in the interpretation, administration or
application thereof, shall have any liability to any party for any action taken
or not taken in good faith under this Plan.
5. If a minor, person declared incompetent, or person
incapable of handling the disposition of his or her property is entitled to
receive a benefit, make an application, or make an election thereunder, the
Committee may direct that such benefits be paid to, or such application or
election be made by, the guardian, legal representative, or person having the
care and custody of such minor, incompetent, or incapable person. Any payment
made, application allowed, or election implemented in accordance with this
section shall completely discharge the Corporation and the Committee from all
liability with respect thereto.
9
<PAGE>
6. The Committee may require proof of the death, disability,
incompetence, minority, or incapacity of any Participant or Beneficiary and of
the right of a person to receive any benefit or make any application or
election.
7. The procedures when a claim under this Plan is denied by the
Committee are as follows:
(A) The Committee shall:
(i) notify the claimant within a reasonable time of such
denial, setting forth the specific reasons therefor; and
(ii) afford the claimant a reasonable opportunity for a
review of the decision.
(B) The notice of such denial shall set forth, in addition to
the specific reasons for the denial, the following:
(i) identification of pertinent provisions of this Plan;
(ii) such additional information as may be relevant to the
denial of the claim; and
(iii) an explanation of the claims review procedure and
advice that the claimant may request an opportunity to submit a statement of
issues and comments.
(C) Within sixty days following advice of denial of a claim,
upon request made by the claimant, the Committee shall take appropriate steps to
review its decision in light of any further information or comments submitted by
the claimant. The Committee may hold a hearing at which the claimant may present
the basis of any claim for review.
(D) The Committee shall render a decision within a reasonable
time (not to exceed 120 days) after the claimant's request for review and shall
advise the claimant in writing of its decision, specifying the reasons and
identifying the appropriate provisions of the Plan.
ARTICLE VIII
------------
10
<PAGE>
GENERAL AND MISCELLANEOUS PROVISIONS
------------------------------------
1. The maintenance of this Plan by the Corporation shall not
in any way obligate the Corporation to continue the employment of an Employee or
a Participant with the Corporation; nor does the Plan limit the right of the
Corporation at any time and for any reason to terminate an Employee's
employment. In no event shall this Plan by its terms or implications constitute
an employment contract of any nature whatsoever between the Corporation and an
Employee or a Participant.
2. By becoming a Participant thereunder, each Eligible
Executive (and his or her Beneficiary) shall be deemed conclusively to have
accepted and consented to all of the terms of this Plan and all actions or
decisions made by the Corporation, the Board, or Committee with regard to the
Plan.
3. The validity of this Plan or any of its provisions shall be
construed, administered, and governed in all respects under and by the laws of
the State of Maryland, except as to matters of Federal law. If any provisions of
this instrument shall be held by a court of competent jurisdiction to be invalid
or unenforceable, the remaining provisions hereof shall continue to be fully
effective.
11
<PAGE>
Exhibit 10(qqq)
LOCKHEED MARTIN CORPORATION
DIRECTORS RETIREMENT PLAN
-------------------------
May 25, 1995
Amended April 24,1996
ARTICLE I
PURPOSE
The purpose of this Plan is to provide retirement income to persons
who have performed substantial services as non-employee Directors of Lockheed
Martin Corporation and thereby to aid the Corporation in attracting and
retaining as members of the Board persons whose abilities, experience and
judgment can contribute to the success of the Corporation.
ARTICLE II
DEFINITIONS
Whenever the following terms are used in this Plan, they shall have
the meaning specified below, unless the context clearly indicates to the
contrary:
Beneficiary shall have the meaning specified in Section 6.2(b).
Board of Directors or Board means the Board of Directors of the
Corporation.
Committee means the Committee appointed to administer this Plan, as
provided in Section 5.1 hereof.
Corporation means Lockheed Martin Corporation, a Maryland corporation
and its successors.
Director means a member of the Board of Directors of the Corporation
who is eligible to receive compensation in the form of Retainer Fees and who is
not an officer or employee of the Corporation or any of its subsidiaries; where
indicated by the context, the term Director shall include a retired or former
Director.
Effective Date means March 15, 1995.
Plan means the Lockheed Martin Corporation Directors Retirement Plan.
Retainer Fee means the annual fee payable to a Director for service
as a Board member, including the value of the amount annually credited to each
Director under the Lockheed Martin Corporation Directors Deferred Stock Plan,
but not including any fees for services as a member of a committee of the Board.
Retirement Age means the age for mandatory retirement of Directors
from Board membership, as specified in the Corporation's by-laws on the date a
Director retires, resigns, or otherwise ceases to be a member of the Board.
<PAGE>
-2-
ARTICLE III
ELIGIBILITY FOR BENEFITS
3.1 Five-year Service Requirement. Except as provided in Sections
4.1 and 4.6, a Director shall be eligible to receive benefits under this Plan
only if the Director has served as a member of the Board for five (5) or more
years, and the Director retires, resigns, or otherwise ceases to be a member of
the Board after the Effective Date.
3.2 Credited Service. For purposes of Section 3.1 and Article IV, a
Director's years of service as a Board member shall be deemed to include all
periods in which he or she served as a director of the Corporation, Lockheed
Corporation, or Martin Marietta Corporation, including all periods in which he
or she served as a director while an employee of one or more of those
corporations. A Director shall be credited with a year of service for each
twelve (12) month period of Board service; fractional years of service shall not
be taken into account under this Plan.
ARTICLE IV
BENEFITS
4.1 Retirement at Retirement Age. If a Director retires from the
Board on or after attainment of Retirement Age, the Corporation shall make
annual payments to the Director in the amount of the Retainer Fee for life. Such
payments shall commence in the January following the year in which the Director
retires and shall be made in each successive January ending with the January
payment for the calendar year of the Director's death. Upon the approval of the
Nominating Committee of the Board, a Director who retires from the Board on or
after attainment of Retirement Age, but with less than five (5) years of service
on the Board, may be treated as having satisfied the eligibility requirement of
Section 3.1. Notwithstanding the foregoing, an initial payment prorated to
reflect the number of months remaining in the year shall be made to the Director
as soon as practicable following his retirement.
4.2 Resignation before Retirement Age. If a Director retires,
resigns, or otherwise ceases to be a member of the Board before attaining
Retirement Age, the Corporation shall make annual payments to the Director in
the amount of the Retainer Fee for a number of years equal to the number of full
years the Director had served on the Board. Such payments shall commence in the
January following the year in which the Director ceases to be a member of the
Board and shall be made in each successive January until the payments have been
completed.
4.3 Death Benefits. Upon the death of an active Director, whether
or not such Director has served as a Director for five (5) years, or a retired
or former Director entitled to benefits under Section 4.1 or 4.2, the
Corporation shall make annual payments to the Director's Beneficiary in the
<PAGE>
-3-
amount of the Retainer Fee for a number of years equal to (i) the number of full
years the Director had served on the Board, less (ii) the number of years, if
any, for which payments were made to the Director under Section 4.1 or 4.2,
provided that the number of annual payments to a Director's Beneficiary shall in
no event exceed twenty (20). Such payments shall commence in the January
following the year of the Director's death and shall be made in each successive
January until the payments have been completed.
4.4 Retainer Fee used to Determine Benefits. All benefits payable
to or with respect to a Director shall be based upon the amount of the Retainer
Fee in effect on the Date the Director retires, resigns, or otherwise ceases to
be a member of the Board.
4.5 Coordination with Predecessor Plans. The payments to a Director
or Beneficiary under Section 4.1, 4.2, or 4.3 shall be adjusted to reflect
payments made or to be made under the Post-Retirement Income Maintenance Plan
for Directors of Martin Marietta Corporation (the "Martin Marietta Plan") and
the Lockheed Corporation Retirement Plan for Directors (the "Lockheed Plan") in
the following manner:
(a) With respect to any Director who received a lump sum payment
under the Martin Marietta Plan, each annual benefit payment under this Plan
(commencing with the earliest year in which a benefit is otherwise payable)
shall be reduced by an amount equal to the annual retainer fee that was taken
into account in determining the amount of the lump sum payment to the Director
under the Martin Plan; that reduction shall be made for a number of years equal
to the number of years of accrued benefits for which the Director received the
lump sum payment under the Martin Plan; thereafter, any benefits payable to the
Director or the Director's Beneficiary under this Plan shall be unaffected by
this Section 4.5.
(b) With respect to any Director who has accrued the right to
receive benefits under the Lockheed Plan and who has not waived that right in
favor of the benefits payable under this Plan:
(i) the amount of any annual benefit payment that would be
made to the Director or the Director's Beneficiary under this Plan in
January of a year shall be reduced by the sum of the monthly benefit
payments, if any, made to the Director or the Director's surviving
spouse under the Lockheed Plan in the preceding calendar year;
(ii) if a lump sum payment has been made to the Director or
the Director's surviving spouse under the Lockheed Plan, each annual
benefit payment under this Plan (commencing with the earliest year in
which a benefit is otherwise payable) shall be reduced by an amount
equal to the annual retainer fee that was taken into account in
determining the amount of the lump sum payment under the Lockheed
Plan; that reduction shall be made for the number of years equal to
the number of years of accrued benefits for which the lump sum
payment was made under the Lockheed Plan; thereafter, any benefits
payable to the Director or
<PAGE>
-4-
the Director's Beneficiary under this Plan shall be unaffected by
this Section 4.5; and
(iii) if the benefit payments to the Director or the
Director's surviving spouse under the Lockheed Plan will commence
later than the date on which benefit payments would otherwise
commence to be made to the Director or the Director's Beneficiary
under this Plan, payments under this Plan shall commence no earlier
than January of the calendar year following the year in which benefit
payments will commence under the Lockheed Plan, advanced by one year
for each full year that the Director has served on the Board of the
Corporation (excluding years of service as a director of Lockheed
Corporation).
4.6 Provisions for Directors Retiring during April, 1996.
Notwithstanding any other provision of the Plan to the contrary, a Director who
retires from the Board during April, 1996 shall receive annual payments for life
in accordance with Section 4.1, regardless of whether the Director has served
five years on the Board and regardless of whether the Director has attained age
70 at the time of retirement. The amount of the annual payment shall equal the
amount of the Annual Retainer in effect at the time of the Director's retirement
as set forth in Section 4.4, except that the annual amount shall be increased
from time to time to reflect any increases made in the Annual Retainer payable
with respect to Directors on or before the end of the year in which the retired
Director attains age 70.
ARTICLE V
ADMINISTRATION, AMENDMENT AND TERMINATION
5.1 Administration by Committee. This Plan shall be administered by
a Committee of three consisting of the (i) Chief Financial Officer of the
Corporation, (ii) Secretary of the Corporation, and (iii) Treasurer of the
Corporation. The Committee shall act by vote or by written consent of a majority
of its members. The Committee's resolution of any question regarding the
interpretation of this Plan shall be subject to review by the Board, and the
Board's determination shall be final and binding on all parties.
5.2 Amendment and Termination. This Plan may be amended, modified,
or terminated by the Board at any time, except that no such action shall
(without the consent of affected Directors or, if appropriate, their
Beneficiaries or personal representatives) adversely affect the rights of
Directors or Beneficiaries with respect to benefit rights accrued under this
Plan prior to the date of such amendment, modification, or termination.
ARTICLE VI
MISCELLANEOUS
<PAGE>
-5-
6.1 Limitation on Directors' Rights. Participation in this Plan
shall not give any Director the right to continue to serve as a member of the
Board or any rights or interests other than as herein provided. No Director
shall have any right to any payment or benefit hereunder except to the extent
provided in this Plan. This Plan shall create only a contractual obligation on
the part of the Corporation and shall not be construed as creating a trust. The
Plan, in and of itself, has no assets. Directors shall have only the rights of
general unsecured creditors of the Corporation with respect to benefits payable
under this Plan.
6.2 Beneficiaries.
(a) Beneficiary Designation. Subject to applicable laws (including
any applicable community property and probate laws), each Director may designate
in writing the Beneficiary that the Director chooses to receive any payments
that become payable after the Director's death, as provided in Section 4.3. A
Director's Beneficiary designation shall be made on forms provided and in
accordance with procedures established by the Corporation and may be changed by
the Director at any time before the Director's death.
(b) Definition of Beneficiary. A Director's "Beneficiary" or
"Beneficiaries" shall be the person or persons, including a trust or trusts,
validly designated by the Director or, in the absence of a valid designation,
entitled by will or the laws of descent and distribution to receive the amounts
otherwise payable to the Director under this Plan in the event of the Director's
death.
6.3 Rights Not Assignable; Obligations Binding Upon Successors. A
Director's rights under this Plan shall not be assignable or transferable and
any purported transfer, assignment, pledge or other encumbrance or attachment of
any payments or benefits under this Plan, or any interest thereon, other than
pursuant to Section 6.2, shall not be permitted or recognized. Obligations of
the Corporation under this Plan shall be binding upon successors of the
Corporation.
6.4 Governing Law; Severability. The validity of this Plan or any
of its provisions shall be construed, administered, and governed in all respects
under and by the laws of the State of Maryland. If any provisions of this
instrument shall be held by a court of competent jurisdiction to be invalid or
unenforceable, the remaining provisions hereof shall continue to be fully
effective.
6.5 Corporation's Right to Withhold. There shall be deducted from
all payments under this Plan the amount of taxes, if any, required to be
withheld under applicable federal or state tax laws. The Directors and their
Beneficiaries will be liable for payment of any and all income or other taxes
imposed on benefits payable under this Plan.
6.6 Headings Not Part of Plan. Headings and subheadings in this
Plan are inserted for reference only and are not to be considered in the
construction of this Plan.
<PAGE>
EXHIBIT 11
LOCKHEED MARTIN CORPORATION
COMPUTATION OF EARNINGS PER COMMON SHARE
<TABLE>
<CAPTION>
Year ended December 31,
1996 1995 1994
-------- ------- --------
(In millions, except per share data)
<S> <C> <C> <C>
ASSUMING NO DILUTION:
Average number of common shares outstanding 189.1 189.3 187.0
====== ====== ======
Earnings before cumulative effect of
change in accounting $1,347 $ 682 $1,055
Less: Preferred stock dividends (60) (60) (60)
------ ------ ------
Earnings before cumulative effect of change
in accounting applicable to common stock 1,287 622 995
Cumulative effect of change in accounting - - (37)
------ ------ ------
Net earnings applicable to common stock $1,287 $ 622 $ 958
====== ====== ======
Earnings per common share:
Before cumulative effect of change in accounting $ 6.80 $ 3.28 $ 5.32
Cumulative effect of change in accounting - - (.20)
------ ------ ------
$ 6.80 $ 3.28 $ 5.12
====== ====== ======
</TABLE>
<PAGE>
EXHIBIT 11 - CONTINUED
LOCKHEED MARTIN CORPORATION
COMPUTATION OF EARNINGS PER COMMON SHARE
<TABLE>
<CAPTION>
Year ended December 31,
1996 1995 1994
-------- ------- --------
(In millions, except per share data)
<S> <C> <C> <C>
ASSUMING FULL DILUTION:
Average number of common shares outstanding 189.1 189.3 187.0
Dilutive stock options-based on the treasury stock
method using the year-end market prices,
if higher than average market price 5.0 5.0 2.4
Assumed conversion of the Convertible Series A
Preferred Stock 28.9 28.9 28.9
------ ------ ------
223.0 223.2 218.3
====== ====== ======
Earnings before cumulative effect of change
in accounting $1,347 $ 682 $1,055
Cumulative effect of change in accounting - - (37)
------ ------ ------
Net earnings $1,347 $ 682 $1,018
====== ====== ======
Earnings per common share:
Before cumulative effect of change in accounting $ 6.04 $ 3.05 $ 4.83
Cumulative effect of change in accounting - - (.17)
------ ------ ------
$ 6.04 $ 3.05 $ 4.66
====== ====== ======
</TABLE>
<PAGE>
EXHIBIT 12
LOCKHEED MARTIN CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
FOR THE YEAR ENDED DECEMBER 31, 1996
(IN MILLIONS OF DOLLARS, EXCEPT RATIO)
<TABLE>
<CAPTION>
1996
------
<S> <C>
EARNINGS:
Net earnings $1,347
Taxes on income 686
Interest expense 700
Amortization of debt premium and discount, net (1)
Portion of rents representative of an interest factor 123
------
Adjusted earnings before taxes and fixed charges $2,855
======
FIXED CHARGES:
Interest expense $ 700
Amortization of debt premium and discount, net (1)
Portion of rents representative of an interest factor 123
Capitalized interest 2
------
Total fixed charges $ 824
======
RATIO OF EARNINGS TO FIXED CHARGES 3.5
======
</TABLE>
<PAGE>
EXHIBIT 13
LOCKHEED MARTIN
Annual Report 1996
[GRAPHIC APPEARS HERE]
<PAGE>
[GRAPHIC APPEARS HERE]
Contents
2 To Our Shareholders
10 Operating Companies
Operating Highlights
16 Space & Strategic Missiles
22 Electronics
30 Information & Services
40 Aeronautics
46 Energy & Environment
50 Financial Section
86 Corporate Directory
88 General Information
<TABLE>
<CAPTION>
Financial Highlights
================================================================================================================
(In millions, except per share data) 1996/(a)/ 1995
================================================================================================================
<S> <C> <C>
Net sales $26,875 $22,853
- ----------------------------------------------------------------------------------------------------------------
Net earnings 1,347/(b)/ 682/(c)/
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Earnings per common share,
assuming full dilution 6.04/(b)/ 3.05/(c)/
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Cash dividends per
common share 1.60 1.34
- ----------------------------------------------------------------------------------------------------------------
Total assets 29,257 17,558
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Short-term borrowings 1,110 --
- ----------------------------------------------------------------------------------------------------------------
Current maturities of long-term debt 180 722
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Long-term debt 10,188 3,010
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Shareholders' equity 6,856 6,433
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Negotiated backlog 50,406 41,125
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</TABLE>
See Notes 1, 2, 4, 8, 10 and 14 to the Consolidated Financial Statements.
(a) Amounts include the effects of the April 1996 business combination with
Loral Corporation.
(b) Earnings for 1996 include the effects of a nonrecurring pretax gain of $365
million resulting from divestitures which increased net earnings by $351
million, or $1.58 per common share assuming full dilution. The gain was
substantially offset by nonrecurring pretax charges, net of state income tax
benefits, of $307 million, approximately one-half of which related to the
Corporation's conservative strategy toward its environmental remediation
business, with the remainder related to a number of other corporate actions to
improve efficiency, increase competitiveness and focus on core businesses. These
charges decreased net earnings by $209 million, or $.94 per common share
assuming full dilution.
(c) Earnings for 1995 include the effects of pretax charges totaling $690
million for merger related and consolidation expenses. These charges reduced net
earnings by $436 million, or $1.96 per common share assuming full dilution.
<PAGE>
M i s s i o n
S u c c e s s
Our commitment to achive superior performance
and total customer satisfaction
in every goal we set and every task we undertake
The future of spaceflight has a name -- VentureStar./(TM)/ Not only does
Lockheed Martin's reusable launch vehicle demonstrator for this program, the
X-33, advance the science and technology of space transportation, it's also a
bold business solution. By dramatically reducing the cost of getting into space,
VentureStar will make it possible for future entrepreneurs to take their ideas
to heights never before imagined.
[PHOTOGRAPH OF VENTURESTAR/(TM)/ APPEARS HERE]
<PAGE>
[ARTWORK APPEARS HERE]
Dear Fellow Shareholder,
Our first full year operating as Lockheed Martin was virtually all that we had
hoped. We began the year by announcing our strategic combination with Loral and
ended by posting our 13th half-billion-dollar-plus program win of the year.
Along the way, we defied the skeptics -- and the odds -- by rapidly
restructuring, achieving major efficiencies, and successfully integrating 17
business cultures into a world-class team that, through synergy, achieved a
strong track record.
In less than two years, we have moved into the front ranks of the
industry's consolidation and put some huge challenges behind us to create a
leading diversified global technology company. But perhaps the most meaningful
measure is how these successes have translated into increased shareholder value.
- --------------------------------------------------------------------------------
Shareholder Value
A good place to start is with the numbers: In 1996 stock in your company rose in
value from $79 to $91.50 per share, at year end, a 16 percent increase. And if
you reinvested the $1.60 payout of dividends, your annual return was 18 percent.
This brings total returns for Lockheed Martin, since it began trading March 16,
1995, to 39 percent -- which stacks up pretty well against Standard & Poor's 500
Stock Index performance of 27 percent for the same period.
We will never rest on our laurels. Our goal is to consistently deliver
shareholder returns better than the overall market performance. Our employees
are both committed and incentivized to maximize shareholder returns since they
own approximately 17 percent of Lockheed Martin's outstanding shares. Add to
that, our aggressive stock ownership guidelines for nearly 2,000 individuals in
our management ranks; we expect our management team to maintain holdings of two
times to five times annual salary, depending on position.
Supporting this market performance, Lockheed Martin's fully diluted
earnings in 1996 were $6.04 per share, versus $3.05 in 1995. Earnings per share,
excluding nonrecurring items in both years, increased 8 percent to $5.40 in
1996, versus $5.01 in 1995. Our continued emphasis on strong cash management
yielded $1 billion in free cash flow during 1996, after expending $244 million
of cash payments and $150 million of capital outlays for our integration and
consolidation program. On the sales front, we recorded $26.9 billion in 1996,
compared with $22.9 billion in 1995. During the year, we brought in nearly $30
billion in new orders, and at year end, backlog stood at more than $50 billion
- -- an impressive number, though we constantly remind ourselves that we need to
add $1 million of new business every four working minutes just to sustain our
revenues.
- --------------------------------------------------------------------------------
Enhanced
- --------------------------------------------------------------------------------
Competitiveness
If our shareholders already have benefited in the near-term from our
consolidation activities, so too will our employees and customers over the
longer term. Through our increased competitiveness, we have achieved one of the
most significant new business win-streaks in the history of our industry, and
are now beginning to hire (and re-hire) a substantial number of employees to
fill the new jobs that have been created.
In addition, through our consolidation and restructuring actions, Lockheed
Martin expects to generate over $6 billion in savings through 1999, most of
which is attributable to the Lockheed and Martin Marietta merger. The real
payoff comes after 1999, when all up-front costs have abated, and we expect to
sustain approximately $2.6 billion in annual savings or $13 billion over every
five-year period thereafter -- savings in which both our customers and
shareholders will share. The portion that goes to our U.S. government customers,
alone, is enough to fund the purchase of 2 Titan IV Centaur rockets, 10 Trident
II missiles, 800 Hellfire missiles, 3 C-130Js, 8 F-16s and 100 Army Tactical
Missile Systems... all incidentally, Lockheed Martin products!
As noted, the outlook for our employees has brightened, too. We are now
hiring at a number of Lockheed Martin operating companies where we won major
programs last year -- at least partly due to enhanced competitiveness from our
consolidation activities and synergy from our combined strengths and ongoing
cost-cutting efforts.
It doesn't take a rocket scientist, although we have lots of them, to
figure out that these consolidation activities are a "win-win" for all
concerned. But it does, in our case, take a whole lot of talent across every
imaginable discipline to make these changes a reality.
2
<PAGE>
[ARTWORK APPEARS HERE]
- -------------------------------------------------------------------------------
"As we approach the new
millennium, virtually every
business organization in the world
is seeking to reengineer itself..."
- --------------------------------------------------------------------------------
Mission Success
From our customers' point of view, a major achievement was our record of
continued mission success -- which we define on the opening page of this report.
Of 307 measurable events last year, we realized a 93 percent mission success
rating, including 7 of 7 Space Shuttle launches, 4 of 4 Peacekeeper launches, 11
of 11 fleet ballistic missile launches, 13 of 13 expendable space launch vehicle
flights, and 8 of 8 new spacecraft deployments. Add to that, our mission success
in completing, on schedule, installation of LANTIRN pods on F-14 Tomcats to give
Navy aircraft new night fighting capabilities; joining without a hitch the major
fuselage sections of the first F-22 air dominance fighter, which is on track for
its first flight in May; conducting the first flight of the C-130J; successful
operation of a new air traffic control center in Taiwan; stunning performance of
the Advanced Threat Infrared Countermeasures/Common Missile Warning System
during U.S. Army tests; the F-16's five millionth flight hour; completing, with
flying colors, a test series on our new super lightweight fuel tank for the
Space Shuttle -- and many more.
The key to these and literally thousands of other mission success stories
were the countless tasks performed with great dedication by our 190,000
employees. In a year of major consolidation, turmoil and change in the industry,
this is an enormous tribute to the talent, commitment -- and concentration -- of
the men and women of Lockheed Martin, without whom, none of this would have been
possible.
- --------------------------------------------------------------------------------
The Strategy That Worked
Behind all the statistics are some important strategic actions we have taken
with the objectives of keeping Lockheed Martin on its growth curve and building
shareholder value. As we approach the new millennium, virtually every business
organization in the world is seeking to reengineer itself to adapt to a changing
environment and seek a competitive edge in the emerging global marketplace. But
perhaps no industry has had a greater imperative to change than aerospace and
defense which, of course, comprises a substantial part of Lockheed Martin's
business base.
As is now widely known, the defense industry has been severely impacted by
the end of the Cold War. Since the late eighties, the U.S. defense budget has
declined significantly, and the procurement portion has virtually collapsed --
falling by more than two-thirds in real terms. Any company looking to the future
has had to take at least the basic thrust of Darwin's point seriously that "it
is not the strongest of the species that survives, nor the most intelligent, but
rather the one most adaptable to change."
Moving aggressively, Lockheed Martin adopted a three-pronged strategy: (1)
Build market share in core businesses through investment and acquisitions, and
integrate those businesses to maximize efficiencies; (2) Move into adjacent
markets through reasonable investment in selected, closely-related businesses;
and (3) Shed less well-positioned and non-core businesses through divestiture.
In short, reengineer Lockheed Martin --and do it fast.
Putting its stake in the ground early, Lockheed Martin moved aggressively
to pick strong partners in complementary businesses and at valuations that, in
many cases, were a fraction of those prevailing today. Capping a series of
acquisitions and mergers since 1993, Lockheed Martin's strategic combination
with Loral, completed in April 1996, was the perfect fit to balance our core
businesses and strengthen our competitive position in faster growing markets.
3
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[PHOTO APPEARS HERE]
4
<PAGE>
-----------------------------
"In 1996, we made impressive
[ARTWORK APPEARS HERE] progress on our corporate-wide
consolidation plans."
-----------------------------
Loral's electronics and systems integration businesses represent an
especially strong complement to the rest of Lockheed Martin. Electronics not
only drives much of the growth in the commercial marketplace but also accounts
for 45 percent of the Defense Department acquisition budget -- up from only five
percent at the end of World War II. The systems integration area also gives us
outstanding growth opportunities -- with an expanding number of civil government
and commercial applications. Areas expected to grow in the relatively near term
include command, control, communications and intelligence; simulation and
training; federal government outsourcing of information systems and services;
advanced air traffic control systems; and space-related electronics. The markets
served by the former Loral businesses, combined with the synergies and
efficiencies created with heritage Lockheed Martin operations, have improved our
outlook for long-term top-line and bottom-line growth, as well as cash flow.
===========================
Consolidation on Track
Business combinations, although much publicized, merely assure a position at the
starting gate on the fast track of reengineering. The really tough challenge is
the timely implementation of consolidation and restructuring activities
following a merger or acquisition. Our overarching objectives have been to
eliminate duplication, close unneeded facilities, institute best practices,
capitalize on economies of scale, generate synergy and, generally, maximize
efficiencies. It's a difficult and often painful process -- definitely not for
the timid. But it's critical to reducing costs, enhancing competitiveness,
accelerating growth and creating more jobs -- all of which ultimately benefit
customers, employees, U.S. taxpayers and, of course, our shareholders.
In 1996, we made impressive progress on our corporate-wide consolidation
plans. We reorganized three sectors, closed a number of unneeded facilities,
relocated and combined some major programs, and unfortunately announced the
elimination of a net 1,600 jobs in connection with this reorganization. The
latter item was the most difficult, and some critics of our industry used it
as an opportunity, once again, to fire superficial charges and slogans like
"payoffs for layoffs."
Everyone is of course, entitled to their own opinions. But no one is
entitled to their own facts. The facts in this case are that major layoffs in
this industry are driven by declines in the defense budget and would probably
have been much greater if not for restructuring actions that, quite literally,
let companies like Lockheed Martin grow while budgets shrink. We also did the
best we could to cushion the blow for those dedicated and able individuals whose
jobs were affected. For example, many employees were offered transfers to other
parts of Lockheed Martin where their skills were in demand -- and for those who
were laid off, we provided severance packages, job relocation assistance and
various other means of support. And, as noted earlier, due to the enhanced
competitiveness and synergies realized from consolidation, we have won major new
programs and begun hiring, and rehiring, in a number of important areas.
===========================
Speaking of Winning...
The synergism (a very descriptive, if sometimes over-used, word from the Greek,
sunergos, which means "working together") gained from Lockheed Martin's
Photograph, left to right:
Vance D. Coffman
President and Chief Operating Officer
Norman R. Augustine
Chairman and Chief Executive Officer
Daniel M. Tellep
Chairman (1995-1996) and Director
5
<PAGE>
[ARTWORK APPEARS HERE]
17 heritage companies was a salient factor in our 1996 business wins. Of our
major competitions last year, we won an extraordinary 68 percent of the programs
and 63 percent of the dollars bid. Looking just at the 21 we named as our 1996
"Focus Programs" -- those that have significant strategic value -- we achieved a
65 percent win rate of dollars bid. And in January, we won the first of our 1997
programs, the high-priority Navy/DARPA Arsenal Ship program. A few examples of
our key 1996 wins are noteworthy:
[ ]VentureStar(TM) -- NASA selected Lockheed Martin to build a demonstrator of a
completely reusable launch vehicle designed to revolutionize the economics of
access to space. Without the aeronautics, space and electronics capabilities
brought together in our 1995 merger, we very likely would not have won this
program. Our VentureStar concept is coming to life with an all-star team from
several operating sectors, working as a `virtual company,' without respect to
organizational boundaries or locations. While the $1 billion of activities
under this cooperative agreement with NASA are reimbursable over its multi-
year term, its treatment as a research and development program is such that
we do not include these dollars in our year-end 1996 backlog.
[ ]Joint Strike Fighter -- Lockheed Martin was selected to lead one of two
competing teams to develop the next-generation multi-role fighter for the
U.S. Air Force, Navy and Marine Corps, and British Royal Navy. Again, our
talented, highly resourceful team prevailed to offer a compelling
combination: the best, lowest risk, most affordable design. Contracted
activities under this phase of the program are expected to approximate $720
million, which again are reimbursable but not included in the reported year-
end backlog.
[ ]Space Based Infrared System (SBIRS) -- The Air Force selected Lockheed Martin
to lead a team to develop SBIRS, an advanced missile warning and tracking
system. Lockheed Martin will provide the satellites, ground stations and
systems integration for a total systems solution against the threat of enemy
missile attack, whether from ICBMs or Tactical Ballistic Missiles such as the
SCUD, which was widely used in the war in the Persian Gulf.
[ ]Evolved Expendable Launch Vehicle (EELV) -- Lockheed Martin was named one of
two competitors for the next phase of the U.S. Air Force's EELV program, a
family of lower cost launchers that will eventually replace Delta, Atlas and
Titan.
[ ]Joint Air-to-Surface Standoff Missile (JASSM) -- Lockheed Martin was one of
two teams selected to compete in a two-year program to design and develop the
JASSM next-generation precision-strike missile for the Air Force and Navy.
JASSM will allow pilots to knock out enemy targets with pinpoint accuracy
from safe distances.
[ ]Hanford Management & Integration -- Lockheed Martin is part of a team that
will manage activities of the Department of Energy's Hanford Site, a former
plutonium production facility in Washington state.
[ ]Maneuver Control System -- Lockheed Martin will provide the program
management and systems integration for a critical part of the Army's
futuristic command and control architecture.
[ ]New Attack Submarine -- Lockheed Martin was awarded a U.S. Navy contract to
provide the command, control, communications and intelligence for the New
Attack Submarine. Including production options, the potential program value
is approximately $1 billion.
The potential value of all of these programs combined could range from $100
billion to $500 billion and these programs are extremely important to our
business base, profit and sales growth, as well as to our technological
capabilities. We salute the men and women of Lockheed Martin who are working
together to apply the best practices from so many proud heritages to make such
accomplishments possible.
====================
From Many...One
Of all the challenges surrounding mergers, acquisitions, consolidation and
restructuring, none is, in fact, more difficult, important -- or rewarding --
than integrating
6
<PAGE>
[ARTWORK APPEARS HERE]
many heritage cultures into one coherent and dynamic new entity. In forging the
new Lockheed Martin from 17 different company traditions, we learned hard-earned
lessons, which help account for the synergy supporting our track record this
past year:
First, have a vision and a strategy that everyone can embrace -- Hope is
not a strategy.
Second, pick strong, healthy partners and then make synergy happen -- Be
first to choose.
Third, act quickly and decisively to minimize disruption -- Uncertainty is
often worse than bad news, and it's usually better to be 80 percent correct in
time than 100 percent correct too late.
Fourth, organize to gain the power of a big company with the agility of a
small one -- Strength with speed is the beginning of efficiency and
effectiveness.
Fifth, start at the top and challenge every assumption --Show that the
effort is serious and inclusive.
Sixth, treat diverse corporate cultures as an asset, not an excuse --
Embrace the "best of the best" in both people and practices to make the new
culture stronger than the sum of its parts.
Seventh, communicate... communicate... communicate -- With all
constituencies, internal and external.
Eighth, keep your eye on the ball -- There is still a business to run:
Stock market reports have no asterisks indicating "excused for restructuring".
Ninth, intensify your focus on customer services -- Make the process of
change transparent, but the benefits apparent to your customers.
Founded on three fundamental principles -- ethics, mission success and
teamwork -- the new Lockheed Martin culture is, in the final analysis, a tribute
to a pervasive collegial spirit. Creating Lockheed Martin has, in a sense, been
like creating a new company with new policies, procedures, standards,
organizations, employee benefits -- but with almost 200,000 employees ready for
action on Day 1. In view of this challenge, the Lockheed Martin team was
particularly honored when we were chosen one of the world's 100 best managed
corporations in Industry Week's 1996 survey.
Finally, related to the subject of managing consolidation and
restructuring, in 1996, we continued to implement our carefully prepared long-
term management succession plan. Effective January 1, Norm Augustine, who had
been serving as vice chairman and CEO, assumed the post of chairman and CEO,
replacing Dan Tellep, who retains his seat on the board and will continue to
make valuable contributions to the Corporation. Vance Coffman was elected to the
position of president and chief operating officer. In addition, Marc Bennett was
named executive vice president and chief financial officer, and Frank Menaker
was named to the position of senior vice president and general counsel.
======================
Portfolio Shaping
As part of our strategy to exit certain businesses that did not fit well with
our long-term direction, we completed, in 1996, the planned divestiture of
Martin Marietta Materials (Materials), the nation's second largest producer of
crushed rock. Splitting off our 81 percent interest in Materials, we launched an
exchange offer that provided a financially-efficient means of distributing
approximately 37 million shares of Materials in exchange for approximately 8
million shares of Lockheed Martin common stock, removing $125 million in
Materials' debt from our balance sheet and unlocking new growth opportunities
for Materials. Other portfolio shaping during the year included repositioning
our CalComp subsidiary and the sale of Lockheed Martin Defense Systems and
Lockheed Martin Armament Systems to General Dynamics for $450 million. This
transaction closed in 1997.
Through internal cash generation plus a variety of transactions, including
the sale of unneeded real estate, debt was reduced by over $700 million since
the end of April 1996. Future divestitures and strong cash flow from operations
should continue to enhance our financial flexibility and firepower.
In February 1997, Lockheed Martin announced the repositioning of certain
non-core business units into a new independent company to be jointly owned by
Lehman Brothers Capital Partners III, L.P., Lockheed Martin, and a management
team
7
<PAGE>
[ARTWORK APPEARS HERE]
led by Frank C. Lanza, executive vice president of Lockheed Martin. The business
units have nearly 4,900 employees and combined 1996 annual revenues exceeding
$650 million. At closing (which remains subject to a number of contingencies),
the transaction is expected to generate in excess of $400 million in cash
proceeds (net of taxes), allowing the Corporation to continue its good progress
in reducing debt. The Corporation's retention of a partial interest in this
joint venture provides an opportunity to continue building additional
shareholder value while at the same time concentrating on our core businesses.
In conjunction with this transaction, we realigned the businesses that formerly
comprised the C/3/I & Systems Integration Sector among the Corporation's
Electronics and Information & Services Sectors.
===================
Growth Markets
We are accelerating our entry into closely related non-defense markets -- very
deliberately, though, as we are determined to defy the old pattern of aerospace
industry diversification, which was in retrospect largely unblemished by
success. Just a few examples give an idea of this opportunity-rich strategy: We
have entered the fast-growing information services outsourcing field, and
Fieldcrest Cannon last year chose us to provide those services; we are
developing, jointly with Intel Corporation, a 3-D chip that will render richer,
more life-like graphics for PC users; we are providing wireless communications
components for a new Personal Communications Services network, allowing that
network to use the existing cable infrastructure; and last year we began to
install our E-ZPass electronic toll service on six bridges and tunnels
connecting New York and New Jersey, just one of many state and local services
programs.
Lockheed Martin has successfully applied its defense and aerospace
technologies to new commercial products and services including medical imaging
and filmless X-rays; fingerprint recognition technology for the FBI; and
graphics boards for Sega's popular arcade games. We are using our technology
expertise to develop large commercial and civil infrastructure projects from
full turnkey telecommunications systems and space imaging to implementing the
nation's largest privatized child support payment system.
Our international business -- especially defense, space, electronics,
systems integration, information and services -- is also important and growing.
Today, Lockheed Martin's international business represents about 18 percent of
total sales, and we expect it to grow significantly over the next several years.
Toward that end, we are actively pursuing strategic alliances with partners on
every continent to pool resources, spread risks, enhance market opportunities
and apply diverse technology solutions. Examples of this strategy include a
partnership with Russian industry to jointly market the Atlas and Proton launch
vehicles, and a consortium of Asian companies to develop regional mobile
telecommunications services, as well as many other international companies with
whom we are teamed on major programs.
=================
A Few Clouds
As successful as 1996 was, a company of our size and breadth seemingly always
suffers some disappointments. In our case, these included losing the maritime
patrol aircraft competition in the United Kingdom; failing thus far to achieve
an intercept in developmental tests of the Theater High Altitude Area Defense
(THAAD) system; and losing our initial DarkStar unmanned aerial reconnaissance
vehicle during its second test flight. Our contract with the Department of
Energy to remediate contaminated waste at the Pit 9 facility in Idaho still
faces significant schedule, technical and cost issues.
The good news is that in each of these cases, we learned valuable lessons
from the global marketplace to the desolate reaches of the White Sands Missile
Test Range, and we are marshalling our resources to remedy the underlying
problems.
==================
Looking Ahead
With all that has been accomplished in the past year, it is no time to be
complacent: On January 1, 1997, the register of accomplishment went back to
zero, and while Lockheed Martin has surged forward in the race to consolidate,
integrate, diversify and build shareholder value, we are constantly challenged
by formidable competitors, both in the U.S. and abroad.
8
<PAGE>
---------------------------------------
[ARTWORK APPEARS HERE] "We believe that there will be
significant growth in our
commercial markets and that the
aerospace and defense industry
will continue to consolidate."
---------------------------------------
We believe that there will be significant growth in our commercial markets
and that the aerospace and defense industry will continue to consolidate. We
welcome both. With regard to the latter, a few healthy competitors benefit the
customer and the country more than a large number of weakened competitors by
offering a more efficient, lower cost, stable defense industrial base. And we
would rather compete against strong, healthy companies interested, as are we, in
the long term, than weak ones worrying only about survival and thereby taking
unpredictable risks.
The pending Boeing-McDonnell Douglas and Raytheon-Hughes-Texas Instruments
combinations are a clear signal that the state of the industry is still very
turbulent. Survival will depend not only on size, but also on speed and
competitiveness to capitalize on fast-moving changes in global markets,
technologies, and the geopolitical landscape. Companies that today make up
Lockheed Martin were all once much smaller players in a much larger industry --
Davids against Goliaths-- and happily, we haven't lost our slingshot aim should
it be needed from time-to-time in the future.
=======================
Ready For the 21st
============
Century
1997 should be another landmark year for Lockheed Martin, with opportunities for
winning new business, delivering on our promises to customers, rewarding
employees, and producing superior financial returns for our shareholders. We
have just about completed our integration efforts. And we are somewhat ahead of
our plan for realizing cost savings, synergies and improved competitiveness.
In today's highly demanding marketplace, particularly in the high-tech
world, businesses must be brilliant each and every day to survive and thrive.
Lockheed Martin is off to a fast start with a solid business base, broad
technological capabilities, financial strength, enhanced competitiveness through
consolidation and, above all, 190,000 enormously talented employees. Ironically,
this greatest of all assets does not even appear on our balance sheet.
Finally, to our customers, our employees and you, our shareholders, we
intend to bring an even stronger, faster, better Lockheed Martin into the 21st
century -- and to keep going for the gold. And we thank you, once again, for
your support in these dynamic but opportunity-laden times.
February 14, 1997
- --------------------------------------------------------------------------------
/s/ Vance D. Coffman
Vance D. Coffman
President and Chief Operating Officer
/s/ Norman R. Augustine
Norman R. Augustine
Chairman and Chief Executive Officer
/s/ Daniel M. Tellep
Daniel M. Tellep
Chairman (1995-1996) and Director
9
<PAGE>
[ARTWORK APPEARS HERE]
- -------------------
Operating Companies
- -------------------
Space & Strategic Missiles
[PHOTO OF MEL BRASHERS APPEARS HERE]
Mel Brashears
President and Chief Operating Officer
- - Lockheed Martin
Astronautics
Denver, CO
- - Lockheed Martin
Manned Space Systems
New Orleans, LA
- - Lockheed Martin
Missiles & Space
Sunnyvale, CA
- - Lockheed Martin
Special Programs
Fairfax, VA
- - Lockheed Martin Telecommunications
Sunnyvale, CA
Electronics
[PHOTO OF THOMAS A. CORCORAN APPEARS HERE]
Thomas A. Corcoran
President and Chief Operating Officer
- - Lockheed Martin Advanced Technology Laboratories
Camden, NJ
- - Lockheed Martin Canada
Montreal, Quebec
- - Lockheed Martin
Commercial Electronics
Hudson, NH
- - Lockheed Martin
Control Systems
Johnson City, NY
Fort Wayne, IN
- - Lockheed Martin
Electronics & Missiles
Orlando, Ocala, FL
Troy, AL
Rancho Santa Margarita, CA
- - Lockheed Martin Fairchild
Defense Systems
Syosset, Yonkers, NY
- - Lockheed Martin
Federal Systems
Manassas, VA
Great Neck, NY
- - Lockheed Martin
Federal Systems
Owego, NY
- - Lockheed Martin Government Electronic Systems
Moorestown, NJ
- - Lockheed Martin
IR Imaging Systems
Lexington, MA
- - Lockheed Martin Ocean,
Radar & Sensor Systems
Syracuse, NY
- - Lockheed Martin
Tactical Defense Systems
Eagan, MN
- - Lockheed Martin
Tactical Defense Systems
Akron, OH
- - Lockheed Martin
Vought Systems
Grand Prairie, TX
Camden, AR
- - Sanders
A Lockheed Martin Company
Nashua, NH
[ARTWORK APPEARS HERE]
Information & Services
[PHOTO OF PETER B. TEETS APPEARS HERE]
Peter B. Teets
President and Chief Operating Officer
- - Lockheed Martin
Air Traffic Management
Rockville, MD
- - Lockheed Martin
Commercial Systems Group
Orlando, FL
. Access Graphics
A Lockheed Martin Company
Boulder, CO
. CalComp Technology
Anaheim, CA*
. Formtek
A Lockheed Martin Company
Palo Alto, CA
. Integrated Business Solutions
A Lockheed Martin Company
Orlando, FL
. MDSI
A Lockheed Martin Company
Reno, NV
. Real 3D
A Lockheed Martin Company
Orlando, FL
- - Lockheed Martin Enterprise Information Systems
Orlando, FL
*Majority-owned, publicly traded affiliate of
Lockheed Martin Corporation
10
<PAGE>
[ARTWORK APPEARS HERE]
- - Lockheed Martin IMS
Teaneck, NJ
- - Lockheed Martin
Information Systems
Orlando, FL
. Lockheed Martin
Electro-Optical Systems
Pomona, CA
. Lockheed Martin
Services Group
Cherry Hill, NJ
. KAPL
A Lockheed Martin Company
Niskayuna, NY
. Lockheed Martin
Environmental Services
Houston, TX
. Lockheed Martin Information
Support Services
Falls Church, VA
. Lockheed Martin
Naval Systems Services
Crystal City, VA
. Lockheed Martin
Space Mission
Systems & Services
Houston, TX
. Lockheed Martin Systems
Support & Training Services
Horsham, PA
. Lockheed Martin
Technical Operations
Sunnyvale, CA
- - Lockheed Martin Systems
Integration Group
Bethesda, MD
. Lockheed Martin
C2 Integration Systems
Manassas, VA
. Lockheed Martin
Command & Control Systems
Colorado Springs, CO
. Lockheed Martin
Federal Systems
Gaithersburg, MD
. Lockheed Martin
Management & Data Systems
King of Prussia, PA
. Lockheed Martin
Tactical Defense Systems
Goodyear, AZ
- - Lockheed Martin Western
Development Laboratories
San Jose, CA
[ARTWORK APPEARS HERE]
Aeronautics
[PHOTO OF JAMES A. BLACKWELL, JR. APPEARS HERE]
James A. Blackwell, Jr.
President and Chief Operating Officer
- - Lockheed Martin
Tactical Aircraft Systems
Fort Worth, TX
- - Lockheed Martin
Aeronautical Systems
Marietta, GA
- - Lockheed Martin
Skunk Works
Palmdale, CA
- - Lockheed Martin
Aircraft & Logistics Centers
Greenville, SC
. Lockheed Martin
Aeronautics International
Ontario, CA
. Lockheed Martin
Aerostructures
Baltimore, MD
. Lockheed Martin
Aircraft Center
Greenville, SC
. Lockheed Martin
Logistics Management
Arlington, TX
[ARTWORK APPEARS HERE]
Energy & Environment
[PHOTO OF ALBERT NARATH APPEARS HERE]
Albert Narath
President and Chief Operating Officer
- - Innovative Ventures Corp.
Oak Ridge, TN
- - Lockheed Martin Advanced
Environmental Systems Inc.
Albuquerque, NM
- - Lockheed Martin Energy
Research Corp.
Oak Ridge, TN
- - Lockheed Martin Energy
Systems Inc.
Oak Ridge, TN
- - Lockheed Martin
Hanford Corp.
Richland, WA
- - Lockheed Martin Idaho
Technologies Company
Idaho Falls, ID
- - Lockheed Martin Nevada
Technologies Inc.
Las Vegas, NV
- - Lockheed Martin Specialty
Components Inc.
Largo, FL
- - Lockheed Martin
Utility Services Inc.
Bethesda, MD
- - Sandia Corporation
A Lockheed Martin Company
Albuquerque, NM
- - Technology Ventures Corp.
Albuquerque, NM
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Major Affiliates and
Other Investments
- -- Airport Group International
- -- Space Imaging Inc.
- -- United Space Alliance
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Land
From the
Depths of
the Oceans
to the far
Reaches
of Space
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Sea
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Sky
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Space
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Space & Strategic Missiles
The past year was one of monumental achievement in the field of space
science, and Lockheed Martin was a leading player. The discovery of possible
traces of microscopic fossils in Martian meteor samples collected in
Antarctica energized America's space program.
By November 1996, within months of that landmark discovery, Mars Global
Surveyor, built by Lockheed Martin Astronautics, was enroute to Mars. The
spacecraft will reach Mars in September 1997 to compile a database on Martian
atmospheric and surface features. Launched in December 1996, Mars Pathfinder
will land on the planet's surface in mid-1997. Lockheed Martin built the entry
capsule which will protect Pathfinder on its descent through the Martian
atmosphere. Astronautics also is building two spacecraft as part of NASA's Mars
Surveyor program that will be launched to Mars in late 1998 and early 1999.
The Space & Strategic Missiles Sector recorded an outstanding number of
mission successes in 1996 with its fleet of launch vehicles. In 1996 there were
seven Atlas launches serving commercial satellite customers; one Proton launch,
the first for the ILS International Launch Services joint venture company with
our Russian partners; four Titan launches carrying classified Department of
Defense payloads; and the first mission of the Multi-Service Launch System, a
reconfigured Minuteman missile the U.S. Air Force will use to launch small
payloads.
Lockheed Martin's Atlas family of launchers addresses a wide range of
medium payloads at the heart of the commercial business. In April, an Atlas IIA
launched the first of the new-generation Inmarsat communications satellites,
Inmarsat-3F1, which was built by Lockheed Martin Telecommunications. Also last
year, through its contracting affiliate Lockheed Martin Commercial Launch
Services, ILS signed up the first commercial customer for the newest Atlas, the
IIAR, which is scheduled for the first launch in late 1998. The customer, Space
Systems/Loral, has signed up for three firm launches. In April, the first
commercial Proton was launched under the auspices of ILS from Baikonur
cosmodrome. Carrying a European Astra 1F satellite, the launch was a dramatic
symbol of new post-Cold War business relationships.
Just before year's end, the Air Force also selected two of four competing
companies, including Lockheed Martin Astronautics, to produce more detailed
designs for the new Evolved Expendable Launch Vehicle (EELV) family of more
efficient, lower cost launchers. The Air Force expects to select one of the two
remaining companies in June 1998 to complete development of the new EELV family
of vehicles that are intended to replace the existing Delta, Atlas and Titan
space launch vehicles for use in launching a wide range of government and
commercial payloads. The potential of this award is in the billions of dollars.
And as an impressive symbol of Lockheed Martin's leadership in the
space-based telecommunications arena, three Lockheed Martin telecommunications
satellites were launched in September in a span of just five days from three
different continents, aboard three different launch vehicles -- an industry
record. Two of the satellites were lofted into space aboard Lockheed Martin
launch vehicles. One of the satellites, GE-1, built for GE Americom, was the
first based on the advanced A2100 satellite bus designed and manufactured by
Lockheed Martin Missiles & Space.
Made totally of lightweight composites, the A2100 is modular in design,
affording a simplified and more flexible assembly process. As a result, the
A2100 can be configured to meet customer needs without costly reengineering.
The A2100 offers the most payload power per kilogram of any production satellite
and is designed to deliver a solid 15-year mission life. It is the heart of the
total system solutions offered by Lockheed Martin Telecommunications in the
direct broadcast, mobile telephony, broadband and fixed satellite system
markets.
The A2100 will be the satellite for the Asia Cellular Satellite (ACeS)
system. When operational in 1999, ACeS will allow users in Southeast Asia, China
and India to access voice, facsimile and paging services through hand-held
mobile and fixed telephones. ACeS is indicative of the complementary
capabilities across the breadth of the Corporation. Aside from providing the
satellite, Lockheed Martin
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On September 8 an Atlas IIA launcher and Centaur upper stage lofted into space
GE-1, the first A2100 next-generation telecommunications satellite. Lockheed
Martin Astronautics manufactured the launcher and upper stage, and Lockheed
Martin Missiles & Space built the satellite for GE Americom. The launch and
satellite deployment demonstrate the complementary capabilities of Lockheed
Martin companies to offer its customers total system solutions.
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In 1996, the U.S. Air Force selected the A2100 satellite bus and a Lockheed
Martin-led team to develop the Space Based Infrared System (SBIRS), a
next-generation missile warning and tracking system.
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offers a turnkey system with launcher, ground infrastructure, tracking and
systems engineering. ACeS will be launched on a commercial Proton under the ILS
banner.
Advanced satellite production took a bold step forward in 1996 with the
completion of the Commercial Satellite Center in Sunnyvale, CA, the world's
first facility designed exclusively for assembly, integration and testing of a
single commercial satellite product line, the A2100. The vision is for Lockheed
Martin to be the primary provider of cost effective commercial satellites in a
very competitive global marketplace. The new facility initially will be capable
of producing up to eight satellites a year under a fast 18-month delivery cycle,
down from the typical 24-month delivery cycle. It is anticipated that Missiles &
Space will produce 16 satellites per year at the new Center, each with a 12-
month delivery cycle -- the most efficient production in the industry. Among the
outstanding features of the new facility is the industry's largest Class 100,000
clean-room -- the size of two football fields. Class 100,000 refers to a
standard of purity requiring no more than 100,000 particles in a cubic foot of
air and none larger than 80 times smaller than the diameter of a human hair.
In 1996, the U.S. Air Force selected the A2100 satellite bus and a Lockheed
Martin-led team to develop the Space Based Infrared System (SBIRS), a
next-generation missile warning and tracking system that will provide initial
detection of a ballistic missile attack on the U.S., its deployed forces or
allies. The initial contract calls for delivery of a system of five
geosynchronous satellites, to replace the aging Defense Support Program
satellites and ground infrastructure. SBIRS represents the first military
application of the A2100 satellite bus and underscores the company's commitment
to providing the government with the same advantages commercial customers enjoy.
SBIRS also is indicative of the total systems capability inherent in Lockheed
Martin, which is responsible for overall systems integration, ground
infrastructure and provision of the launch vehicles. The value of the SBIRS
initial contract to Lockheed Martin is $1.8 billion. In a related development
last year, the Air Force and industry partners chose Missiles & Space's LM700
commercial satellite bus for the first experimental SBIRS Low-Earth-Orbit
satellite, marking the first sale of this commercial space hardware to a
government agency.
Leveraging its considerable experience in building spacecraft, Lockheed
Martin Missiles & Space last year delivered the first of 21 second-generation
Global Positioning System (GPS) satellites and the first of 125 Iridium(R)
personal communications spacecraft. GPS IIR will improve the system's
performance over the current satellites, fulfilling its mission of providing
ever more precise navigation data to any user with a GPS receiver anywhere in
the world. Iridium is a personal communications system that will use 66
low-Earth-orbit satellites to provide voice, facsimile, paging, and data
capability to customers globally. The system is based on the
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Mars Global Surveyor, built by Lockheed Martin Astronautics, was launched to
Mars in November in the continuing exploration of Earth's mysterious neighbor.
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Missiles & Space LM700 satellite bus. Initial commercial service is expected to
begin in 1998.
Last year NASA's Jet Propulsion Laboratory selected Missiles & Space to
join a team that will build, integrate and test the Space Infrared Telescope
Facility, a cryogenically-cooled space observatory that will conduct infrared
astronomy during a 36-month mission beginning in 2001. In addition, NASA
selected Lockheed Martin Astronautics to build the Stardust spacecraft that will
be launched into the comet Wild-2 to collect samples and return them to Earth in
2006. Closer to home, the Global Geospace Science Polar spacecraft was launched
last year with its mission to study solar-induced phenomena in the polar regions
of the Earth. A significant long-term engineering effort is the International
Space Station. In 1996, Missiles & Space began rigorous testing of the solar
array E-wing, a new solar array design that will power the facility during its
lifetime on orbit.
Lockheed Martin Manned Space Systems successfully completed in
1996 a series of tests on the new Super Lightweight Tank for the Space Shuttle.
The tests demonstrated the tank's ability to far exceed the stresses of launch.
Made of an advanced aluminum-lithium alloy, the new tank will enhance the Space
Shuttle's cargo carrying ability to support building the space station. The
first of 25 Super Lightweight Tanks under contract is on schedule for a first
flight in December 1997.
In the missile defense arena, the Air Force in November chose a Lockheed
Martin Missiles & Space team to develop and demonstrate the Airborne Laser (ABL)
weapon system, a proposed boost-phase defense against theater ballistic
missiles. During the course of the work the industry team is to demonstrate that
the required laser technologies can be integrated onto an airborne platform to
shoot down hostile tactical missiles at ranges of hundreds of kilometers.
The U.S. Army and Lockheed Martin Missiles & Space continued their Theater
High Altitude Area Defense (THAAD) testing in 1996. Each test has provided
valuable data to aid in refining the system's performance. THAAD is the first
weapon system designed specifically to defend against theater ballistic missiles
using hit-to-kill technology, a technique pioneered and successfully
demonstrated by Lockheed Martin -- the only company in the world to have done
so. The Air Force completed four successful test flights of the Peacekeeper
intercontinental ballistic missile in 1996, with support from Lockheed Martin
Astronautics.
1996 was a year of profound discovery and achievement in the field of space
science, and Lockheed Martin played a key role in those developments bringing
its combined expertise in launch vehicles, spacecraft, satellites and systems
integration to bear. Lockheed Martin's significant technology assets, spanning
the entire Corporation, will continue to offer customers total system solutions
and turnkey operations. []
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Lockheed Martin Missiles & Space is involved in critical areas of solar array
manufacture for the International Space Station. When deployed, the solar
arrays will occupy an acre of space. Missiles & Space is integrating thousands
of individual silicon cells onto a flexible backing. The station is designed as
humanity's first permanent foothold in space.
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Electronics
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Lockheed Martin Electronics Sector delivered another strong performance
in 1996, winning substantial new business, recording its second consecutive year
of backlog growth, and exceeding all financial targets. Electronics' commitment
to its vision -- achieving global growth, demonstrating the "values" of a
successful contemporary enterprise, and making "the whole greater than the
sum of its parts" -- was clearly reflected in several strategic contract awards
and major accomplishments during the year.
- -----A Lockheed Martin team led by Electronics & Missiles was selected for the
program definition and risk reduction phase of the Joint Air-to-Surface Standoff
Missile (JASSM) program, a joint Air Force/Navy initiative to enable military
aircraft to defeat advanced air defense systems and well-defended targets. The
development and production phase of the program, scheduled to begin in 1998, has
a potential value of over $1 billion.
- -----Lockheed Martin Federal Systems of Manassas, VA, was awarded a contract to
provide the command, control, communications and intelligence system for the
U.S. Navy's New Attack Submarine, reinforcing the company's role as a leading
provider of submarine combat systems. Including production options, the
potential program value for the contract is $1 billion.
- -----Ocean, Radar & Sensor Systems captured contracts totaling more than $100
million to supply the AN/SQQ-89 undersea warfare combat system to the U.S. Navy.
This competitive win represents a return of the company to the forefront of the
antisubmarine warfare market and a program with a potential value of $750
million.
- -----The U.S. Postal Service selected Lockheed Martin Federal Systems of Owego,
NY, to provide the Tray Management System to automate large mail facilities in
Florida, Louisiana and Texas. The potential value of the Tray Management System
program is $1 billion through the year 2000.
- -----The Electronics Sector restructured its portfolio of companies to maximize
its ability to perform more effectively for customers and win new business. The
addition of former Loral businesses strengthened Electronics' market positions
in several areas, including tactical missiles and electro-optic fire control
systems, surface ship and submarine combat systems, and radar systems for
defense and civil applications. The assets of two non-strategic business units,
with product lines in the area of gun systems and combat vehicles, were sold to
General Dynamics Corporation for $450 million, enabling the sector to focus its
attention on the core technologies and markets. This transaction closed in early
January 1997.
- -----Electronics implemented an extensive consolidation plan which, when
completed in 1998, will result in the closing of four facilities, the
elimination of 1.9 million square feet of capacity, and a reduction in operating
costs of about $85 million annually. Restructuring actions initiated in 1995
were completed in 1996 ahead of schedule and with the total anticipated cost
savings.
The Electronics & Missiles company continued to leverage its outstanding
technology in night vision and precision targeting with the introduction of the
LANTIRN system on the F-14 Tomcat. LANTIRN allows the F-14 to conduct
carrier-based strike missions against land targets, day or night. In addition,
the first Tomcat LANTIRN pod was delivered a month ahead of schedule and was
fielded an unprecedented 223 days after contract award.
A joint venture between Electronics & Missiles and Northrop Grumman was
awarded U.S. Army contracts totaling $164 million to begin production of the
Longbow Hellfire Missile System. The Longbow Hellfire is a helicopter-launched,
fire-and-forget antiarmor missile guided to its target by an internal millimeter
wave radar. Over the life of the program, Longbow has a potential value of $1
billion. Electronics & Missiles also signed a long-term agreement with Rafael of
Haifa, Israel to jointly market the AGM-142/Popeye family of standoff strike
missiles to U.S. and international customers. In 1996, the joint venture
received its first international order, a contract from the Australian Air
Force.
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Sanders, a Lockheed Martin company, and the Space & Strategic Missiles Sector
are jointly developing phased array antennae for Astrolink/(TM)/ satellites.
Sanders' Supertile is an array element that offers significant technical, weight
and cost advantages over conventional multibeam antennae. When completed,
Astrolink will be an interlinked global satellite system designed to meet the
growing demands for voice, data and video communications.
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Sanders, a Lockheed Martin company, was selected to provide computer-based
mission planning subsystems and its Common Mapping Production System for Israeli
Air Force F-15I aircraft. As a teammate and subcontractor to Datamat of Italy,
Sanders was chosen to produce and integrate mission planning systems to support
Italian Air Force Tornado and AM-X aircraft. The company also is producing the
Air Force Mission Support System for the U.S. Air Force to assist aircrews in
flight planning, target area tactics, post-flight analysis and other mission
tasks.
An industry leader in electronic countermeasures, Sanders continued its
successful development of major systems designed to protect military aircraft
from hostile threats. The Tri-Service Advanced Threat Infrared
Countermeasures/Common Missile Warning System (ATIRCM/CMWS) defeated enemy
missiles in a dramatic series of tests at White Sands Missile Range in November.
The Integrated Defensive Electronic Countermeasures (IDECM) Radio Frequency
Countermeasures (RFCM) program, under development by Sanders for the Navy's
F/A-18E/F aircraft, was selected to upgrade the defensive electronics for the
U.S. Air Force B-1B. The company also received $60 million in orders for its
Combat Direction Finding System, a Navy shipboard system that detects and tracks
hostile radar signals and supports over-the-horizon targeting.
In the commercial arena, Sanders, under an agreement with Lucent
Technologies, is providing critical wireless communications components for a new
Personal Communications Services (PCS) network being built in Southern
California for Cox California Inc. Sanders' PCS-Over-Cable equipment permits the
network to use the existing cable TV infrastructure, offering an alternative to
costly microwave towers.
Government Electronic Systems solidified its role as a leader in surface
ship combat systems, seaborne radar and total ship systems integration during
the year. The company continued its superb performance as prime contractor for
the U.S. Navy's AEGIS combat system for cruisers and destroyers. The Congress
expressed its approval of the program's performance by authorizing multi-year
procurement of AEGIS destroyers, a first for the program that has a total
potential contract value of $4 billion. In the international marketplace, the
company delivered a fourth AEGIS system for the Japanese Maritime Self Defense
Force in 1996, and is exploring combat systems sales opportunities with Spain,
Australia and Turkey.
Government Electronic Systems also leads an industry team that won an
important strategic contract to provide the Defense Advanced Research Project
Agency and the Navy with an initial
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A leader in electronic countermeasures, Sanders continued its successful
development of major systems designed to protect military aircraft from hostile
threats.
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design for the Arsenal Ship, a highly-automated floating missile battery
featuring stealth technology. The company also created new prospects for synergy
and expansion of its role in the surface ship area, assuming responsibility for
Lockheed Martin's Vertical Launch System product lines and Marine Systems
business.
Lockheed Martin Federal Systems in Manassas, VA, is leading the way in
developing advanced high performance space processing systems for Department of
Defense, classified, NASA and commercial applications. In December 1996, the
first radiation-hardened high performance 32-bit flight computer, produced by
Federal Systems, was launched aboard NASA's Mars Pathfinder spacecraft.
Based on its superior design and development of next-generation real-time
reconnaissance cameras, Lockheed Martin Fairchild Defense Systems was the Naval
Research Laboratories' choice to develop an advanced camera, using the world's
largest charge-coupled-device (CCD) detector, a focal plane array that captures
the camera's imagery. The CCD is the basis of today's electronic cameras. The
Naval Research Laboratories' win further strengthened our position in this high-
technology field, leading to Lockheed Martin Fairchild Defense Systems winning
the bid to build the state-of-the-art reconnaissance system for the Air Force's
Theater Airborne Reconnaissance System.
Lockheed Martin Vought Systems is a leader in advanced defense systems for
the U.S. Army and allied forces with the Multiple Launch Rocket System (MLRS).
In 1996, Nissan Aerospace of Japan ordered MLRS assembly kits, parts and
tooling. The assembled hardware will be delivered to the Japanese Self Defense
Force. Norway and Denmark, which first ordered MLRS in 1996, bring the total to
12 allied nations with the highly capable artillery system.
The Army last year chose to upgrade MLRS launchers with a capability to
fire extended-range rockets and missiles, including the Army Tactical Missile
System (ATACMS), manufactured by Vought Systems. The Army also ordered a
longer-range ATACMS, the Block 1A. Vought Systems received a contract to supply
ATACMS to Turkey in the first international sale of the system. In another
important development, the company successfully launched a modified ATACMS
missile from a Vertical Launch System (VLS) canister, demonstrating that the
missile can be fired from naval vessels
[PHOTO APPEARS HERE]
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Gallium Arsenide wafers, manufactured by Sanders' Microelectronics Division, are
the basis for a variety of commercial and defense electronics products from
telecommunications, to medical imagery, to circuits for advanced fighter
avionics.
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The combination of multiple sensors on the Apache Helicopter makes it a
versatile, highly survivable, all-weather, day/night antiarmor platform.
Manufactured by Lockheed Martin Electronics & Missiles, the Longbow fire control
radar, Target Acquisition Designation Sight/Pilot Night Vision Sensor
(TADS/PNVS), and Hellfire II/Longbow missiles provide an integrated system than
protects pilots at safe ranges and strikes targets with pinpoint accuracy.
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[PHOTO APPEARS HERE]
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employing VLS. The sea-launched Navy Tactical Missile System is now in
development. Vought Systems also introduced a new lightweight launcher for the
PAC-3 Missile system in 1996, and is developing the PAC-3 Missiles for the U.S.
Army under a $700 million contract. Initial fielding of the missile is planned
for 1999.
Lockheed Martin's broad experience in helicopter avionics and platform
integration is demonstrated in the success of the British Royal Navy's EH101
Merlin program. In 1996, the U.K. Ministry of Defence selected Lockheed Martin
Aerospace Systems Integration Corp. (ASIC) to provide spare parts and repair
services for the Merlin fleet. Lockheed Martin Federal Systems in Owego, NY,
through its U.K. subsidiary ASIC, leads an international team and is responsible
for delivering 44 Merlin weapon systems with advanced mission avionics for anti-
submarine and anti-surface ship warfare capability by 2001.
The Merlin and the U.S. Navy Light Airborne Multi-Purpose System (LAMPS)
helicopter programs mark Federal Systems as a premier platform integrator.
Through its U.K. company, Lockheed Martin Tactical Systems U.K. Ltd., Federal
Systems in Owego is pursuing an advanced airborne surveillance system for the
Ministry of Defence called ASTOR.
Federal Systems also will modernize the combat support systems at 93 Air
Force bases worldwide under a program with a potential value of more than $900
million. The Global Combat Support System will use commercial off-the-shelf
software as part of the solution to modernize the service's information systems
infrastructure.
Testing is underway on software applications being developed by Federal
Systems to modernize the information systems on U.S. Army bases. The goal of
the Sustaining Base Information Services (SBIS) contract is to improve such
functions as safety, security, finance, personnel and training. Software code
development to date has been produced at less than half the standard industry
cost. In November, one application of the software, to support training and
exercise missions, was installed at Fort Knox, KY, and Fort Drum, NY.
Ocean, Radar & Sensor Systems won strategic contracts to develop the U.S.
Navy's surface ship minehunting capability, next-generation surface ship sonar
and next-generation remote minehunting reconnaissance for submarines. The
[PHOTO APPEARS HERE]
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The U.K. Merlin Helicopter is a premier anti-submarine and anti-surface ship
platform. Lockheed Martin's systems integration gives Merlin its all-weather,
high-performance capabilities.
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company continues to support the Seawolf program with the recent award of
additional Seawolf electronics systems to the current inventory of BSY-2 Combat
System, Ship Control System, and Weapons Storage and Handling Systems.
Additional new initiatives included a $50 million order for the AN/TPS-59 (V)3
tactical ballistic missile radar system, the first system of this type to go
into production in the U.S. inventory.
Lockheed Martin Control Systems, a leading producer of electronic flight
controls and engine controls for both commercial and military aircraft, as well
as control and other electronic systems for the transportation industry, pursued
and won new commercial business in 1996. Control Systems and Orion Bus
Industries agreed to jointly develop and produce Hybrid Electric Transit Buses
for major metropolitan users. Hybrid vehicles produce significantly lower
emissions than a conventional vehicle, with greatly improved fuel economy and
reduced maintenance. Control Systems will provide drive trains for the new
buses, which are expected to enter production in late 1997.
A supplier of systems integration services to the U.S. Navy and prime
systems contractor for the Navy's P-3C maritime patrol aircraft, Lockheed Martin
Tactical Defense Systems in Eagan, MN, was chosen to modify a P-3C aircraft with
the Cooperative Engagement Capability, a system designed to improve the
coordination, use and dissemination of real-time data from various fleet
sensors. All improvements will make the P-3 Orion, which is flown by 14 nations,
a viable worldwide asset to maritime patrol activity well into the 21st century.
Lockheed Martin Canada is leading an industry team to pursue the Canadian
Maritime Helicopter Program, designed to provide a successor to the Sea King
helicopter. Lockheed Martin Canada also has been the prime systems integrator
for the recently delivered Canadian Patrol Frigates. Lockheed Martin Canada also
produces a new family of integrated underwater defense and intrusion detection
systems.
Overall, the Electronics Sector continued to win in the global marketplace
and increase its market share. With a stronger, streamlined portfolio of
companies, the demonstrated ability to reduce costs, and an unyielding
commitment to ethics, Lockheed Martin Electronics is solidly positioned for a
successful future.[_]
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Federal Systems also will modernize the combat support systems at 93 Air Force
bases worldwide under a program with a potential value of more than $900
million.
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Information & Services
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Several significant accomplishments in 1996 by the Information & Services Sector
strengthened and expanded Lockheed Martin's role in its traditional businesses
and positioned the Corporation to take advantage of opportunities in rapidly
growing commercial information technology and federal, state and local
government services businesses. Our strategy is to grow fast and profitably in
rapidly-growing markets.
A major achievement in 1996 was the successful transition of Space Shuttle
processing operations to United Space Alliance (USA). In an unprecedented step
that marks a new government/contractor approach to the management of America's
Space Shuttle program, NASA awarded the Space Flight Operations Contract to USA,
making the joint venture between Lockheed Martin and The Boeing Company the
single prime contractor for Space Shuttle operations. The total contract, valued
at approximately $7 billion over six years, consolidates 12 previous contracts
under USA and provides for an additional 16 contracts to be brought under USA
management. During 1996, employees of Lockheed Martin Space Operations and its
successor, USA, achieved 100 percent mission success by safely launching and
landing seven Space Shuttle missions.
In its Commercial Systems business, Information & Services formed a new
company, Real 3D, to exploit its real-time, three-dimensional graphics
technology. This technology has been developed over three decades of experience
providing the military with advanced simulation systems and is protected by more
than 40 patents in computer image generation.
Real 3D accomplished a key strategic objective in 1996 when it reached
agreement with semiconductor industry leader Intel Corporation to jointly
develop a new chip that will give desk-top computer users real-time,
three-dimensional color graphics rich in texture detail that is five to ten
times better than currently available. The chips are scheduled to go into
production in 1997. Real 3D will also bring its real-time 3D graphics technology
to the laptop computer market through an alliance with Chips & Technologies,
Inc., a leader in laptop computer graphics. In another important development,
Real 3D strengthened its ongoing relationship with Sega Enterprises, a world
leader in arcade video games. Real 3D completed design and began production of
the latest generation chip set for Sega arcade video games and, late in the
year, received a new contract from Sega to begin developing even more advanced
technology for the arcade video game market.
Information & Services expects a multi-billion-dollar market for 3D
graphics technologies by the end of the decade. The worldwide production of 3D
graphics chips is forecast to grow to 115 million chips by the year 2000, up
from 7.8 million chips in 1996.
Additionally, Information & Services continued to expand its role in the
commercial information technology outsourcing business in 1996 as textile maker
Fieldcrest Cannon selected Lockheed Martin's Integrated Business Solutions to
operate its extensive information networking, E-Mail and desktop computer
operations. As a result of this 10-year outsourcing agreement, Fieldcrest Cannon
will be able to lower its information technology costs and improve customer
service.
Publicly traded CalComp Technology, Inc. (NASDAQ:CLCP) was created in 1996
with the acquisition by CalComp of Summagraphics Corp., Austin, TX, bringing
together companies with complementary technologies and product offerings in the
Computer Aided Design and graphics arts markets. CalComp's 1996 operating
losses, combined with the consolidation of Summagraphics, demanded restructuring
actions late in the year to address cost and competitiveness issues. In
addition, the acquisition of new ink-jet technology was announced to enhance
CalComp's position as a leading producer of large-format printers, plotters,
digitizers, cutters and scanners.
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Lockheed Martin Real 3D has developed arcade graphics boards for Sega
Enterprises' popular and fastmoving games. This real-time graphics technology
is derived from astronaut training and high-performance mission rehearsal
simulators for the Air Force. The next move in the commercial marketplace for
Real 3D is in the area of graphic chip sets for personal computers through a
partnership with Intel Corporation.
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This modern toll plaza is representative of Lockheed Martin IMS' leadership in
electronic toll collection, making the ride for millions of motorists around the
country quicker and more comfortable by reducing traffic congestion. Electronic
toll collection is indicative of the way Lockheed Martin applies its
state-of-the-art systems integration capabilities to a wide range of government
and commercial products and services.
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[PHOTO OF TOLL PLAZA APPEARS HERE]
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[PHOTO OF TOLL PLAZA APPEARS HERE]
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[PHOTO OF DATA CENTER APPEARS HERE]
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Lockheed Martin's Integrated Business Solutions provides computer outsourcing
services to CVS Corporation and Fieldcrest Cannon. This Data Center in Orlando,
Florida, serves as a behind-the-scenes nerve center providing the technology to
keep CVS competitive in the marketplace.
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Formtek, a leading developer and integrator of enterprise-wide information
management systems, received key orders in 1996 from Volvo Truck Corporation in
Sweden and Daelim Engineering Company in Korea. In addition, the company was
named prime contractor for the Electronic Data Integration and Management
initiative at Lockheed Martin's new Commercial Satellite Center in Sunnyvale,
CA.
Also in 1996, Lockheed Martin solidified its position as a dynamic systems
integrator and supplier of advanced technology systems for the civil/commercial
marketplace. Key among these advanced technology systems is air traffic control
modernization in the United States and abroad. Addressing the critical need to
upgrade aging U.S. air traffic control systems, Lockheed Martin Air Traffic
Management delivered a display computer replacement for the Federal Aviation
Administration (FAA) and installed display system equipment at the first of 20
FAA en route centers, both 10 months ahead of schedule. In Taiwan, Lockheed
Martin's advanced integrated air traffic control system went operational last
year, providing en route, terminal and tower service to one of the fastest
growing air traffic regions in the world. The company also is completing
development of an advanced air traffic control system for the Civil Aviation
Authority, United Kingdom, that will handle increased traffic over England and
Wales.
Over the next five years, orders for key domestic air traffic control
programs are expected to reach $1.5 billion, and international programs could
contribute an additional $2 billion.
State and local government markets represent a major growth line of
business for the Corporation. Lockheed Martin IMS, a premier provider of data
processing and systems integration services, serves more than 200 state and
municipal clients. A nationally recognized innovator of "intelligent"
technologies that are revolutionizing America's highways, IMS was selected in
1996 by the Port Authority of New York and New Jersey to integrate electronic
toll systems at six bridges and tunnels used by more than 300,000 motorists
daily, including the George Washington Bridge and both Lincoln and Holland
tunnels. IMS was also selected to launch the state of Maryland's first
electronic toll project on three Baltimore Harbor crossings and the John F.
Kennedy
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In 1996, Information Systems was also
a leader in simulation and training systems
for defense.
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Memorial Highway. IMS is working on a total of ten electronic toll projects in
eight states.
Aside from its reputation as a pioneer in the intelligent transportation
field, IMS is a leader in reengineering human services programs. In a major
child support privatization effort in Maryland, IMS was selected to take over
the operation of child support enforcement services in the City of Baltimore and
Queen Anne's County, Maryland. The state of Florida joined 22 other state,
county and municipal jurisdictions around the country who have selected IMS to
provide child support enforcement services. The company designs and develops
automated child support systems which locate absent parents, collects and
distributes child support payments to millions of families.
Also in 1996, IMS -- in partnership with Citibank -- solidified its
position as a leader in electronic benefits transfer (EBT), winning three
separate procurements involving 14 states. The Citibank-IMS team was selected to
develop systems to distribute food stamps and other public benefits
electronically to more than three million recipients in seven Northeastern
states -- the largest project of its kind to date. Citibank and IMS are now
involved in EBT projects in 26 states and the District of Columbia with more
than seven million recipients. With President Clinton's signing of federal
welfare reform legislation, Lockheed Martin expects to play an even larger role
in 1997 and beyond to assist states in streamlining the administration of human
services programs, and in developing and implementing new and creative methods
for helping low-income Americans make it on their own.
Another significant technology solution is the Automated Fingerprint
Identification System (AFIS), developed by Lockheed Martin Information Systems.
In 1996, the FBI selected AFIS as a powerful crime fighting tool. Scheduled to
begin full operation in 1998, AFIS is designed to rapidly search a national
database of fingerprint sets. More than 50,000 identification verification
requests are expected per day from state and local law enforcement agencies.
Turnaround time on these requests, which now takes months, can be shortened to
24 hours.
In 1996, Information Systems was also a leader in simulation and training
systems for defense. Building upon technology developed for the U.S. Army's
Close Combat Tactical Trainer, Information Systems was selected to provide the
U.K. Ministry of Defence with high-fidelity simulators, training facilities, and
distributed interactive simulation capabilities for the U.K. Combined Arms
Tactical Trainer (CATT) program.
In another simulation/training milestone, Lockheed Martin Electro-Optical
Systems will supply third-generation Multiple Integrated Laser Engagement System
(MILES) training equipment to the U.S. Marine Corps and the Norwegian Army, a
program with a potential value of more than $100 million. This represents the
first two procurements of third-generation MILES and demonstrates
Electro-Optical Systems as a leader in advanced laser-based tactical engagement
simulation.
Lockheed Martin Enterprise Information Systems (EIS) develops internal
information systems solutions for the Corporation. EIS has been key to the
Lockheed Martin merger process by providing core services such as networks, data
center consolidation, telecommunications, distributed computing and
geographically distributed system design, application and
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consulting. While continually reducing costs, EIS provides state-of-the-art
information systems through its web-based technologies, electronic commerce
expertise and common systems and services for the Corporation.
As a result of the strategic combination of Lockheed Martin and Loral and
subsequent reorganization actions taken in 1996, Information & Services' federal
services business was strengthened. With seven lines of business, 19,000
employees, and annual sales of more than $1.5 billion, the Information &
Services Sector's Services Group establishes Lockheed Martin as an industry
leader in providing technical, engineering and management services to federal
government customers. The Services Group achieved a strong competitive win rate
in 1996 and captured several significant contract awards.
In information support services, Services Group won one of six contracts
awarded by the Defense Information Systems Agency in a program to help military
and civil agencies upgrade their information systems. Services Group will share
in the total $3 billion of the program. It is also providing information
technology support services at the Department of Energy's Hanford Site in
Washington state as part of the winning team that was selected in 1996 to
perform environmental clean-up activities.
Services Group also provides a wide range of scientific and engineering
support services to NASA. In 1996, NASA's Marshall Space Flight Center awarded
Services Group a five-year, $90 million contract for design, engineering,
operations and maintenance services at its Mission Operations Support Center in
Huntsville, AL. At Johnson Space Center in Houston, NASA's new Mission Control
Center, which was designed and developed by Services Group, began full operation
in support of the Space Shuttle program in May.
Services Group won several Department of Defense contracts in 1996 as well,
including a U.S. Air Force contract to continue its support of the Tethered
Aerostat Radar System in Florida and a U.S. Army contract for field range
testing and laboratory support at Dugway Proving Ground in Utah.
In the Information & Services Sector's Systems Integration Group, Lockheed
Martin Management & Data Systems is capitalizing on its experience in large
systems integration in leading a team on a major U.S. Army command and control
program. Selected by the Army in 1996, Management & Data Systems will provide
program management, software development and systems integration for the
Maneuver Control
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The Services Group achieved a strong
competitive win rate in 1996 and captured
several significant contract awards.
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System Block IV, which gives tactical commanders the automated capability for
planning, coordinating and controlling battlefield operations.
Management & Data Systems, in conjunction with Lockheed Martin
Telecommunications, has also led the thrust into the mobile satellite
telecommunications market, providing the ground infrastructure and overall
systems engineering for the Asia Cellular Satellite (ACeS) system serving areas
of Southeast Asia. Launch of the system is scheduled for 1999.
Lockheed Martin Command & Control Systems is in an advantageous position
for future defense information systems business with its successful work on the
U.S. Air Force Theater Battle Management Core Systems program, designed to
reengineer three separate systems into a single integrated, open tactical
command and control system for battle commanders. In 1996, the Air Force
selected Command & Control Systems to provide engineering and technical services
at the Cheyenne Mountain Complex in Colorado Springs, a vital part of the
nation's missile warning and defense system.
Lockheed Martin C2 Integration Systems in November provided the U.S.
Transportation Command with enhanced Global Transportation Network (GTN)
software that can track thousands of passenger, cargo and equipment movements,
as well as shipment planning, booking and billing. The enhanced GTN was used to
support our forces in Bosnia.
Indicative of Corporate-wide synergies in large systems integration
programs, Lockheed Martin Federal Systems is teamed with companies in the Space
& Strategic Missiles Sector on the Space Based Infrared System (SBIRS) for the
U.S. Air Force, providing the fixed and mobile ground systems for mission data
processing, satellite telemetry, tracking and control, and communications.
Two companies -- Lockheed Martin Federal Systems and Lockheed Martin
Western Development Laboratories -- were the Air Force's choice in 1996 to
provide increased operational capability, reduce costs and upgrade the
scheduling and satellite operations systems for the Satellite Control Network.
These satellites perform communications, weather, surveillance and special
missions for the Defense Department, NATO and NASA. Lockheed Martin will
modernize the network, replacing an older, manually intensive system for
communicating with satellites using new commercial technologies to reduce
operator workload, lower costs and increase efficiency. In addition, we will
sustain the system for directing and controlling the satellites until it can be
replaced by the newer technology. This work underscores Lockheed Martin's
ability to use commercial technologies to increase system performance and reduce
costs for its customers. The company has a long record of success, having
performed significant design, development and system integration work on the
network over the past three decades. [ ]
[PHOTO APPEARS HERE]
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Lockheed Martin Air Traffic Management's New En Route Centre (NERC) represents a
major advance in air traffic control technology. Scheduled to be up and running
this year, NERC will handle the increased air traffic over England and Wales.
With its 200 workstations, the Centre's operations room is the largest in the
world devoted to air traffic control.
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[PHOTOGRAPH APPEARS HERE]
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[PHOTOGRAPH APPEARS HERE]
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These Satellite Earth Stations in Hawaii are part of a worldwide network
providing the communications backbone for all agencies of the Department of
Defense. Lockheed Martin Western Development Laboratories provided 24 terminals
to form the initial Defense Department SATCOM Network. Designed and tested to
ensure reliable operation under extreme climates, the network is meeting the
Defense Department's heavy-route satellite communications needs.
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Aeronautics
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With advanced products like the F-22, C-130J, X-33 and F-16, Lockheed Martin's
Aeronautics Sector is at work on designs of the future, programs of the future
and partnerships of the future. Aeronautics is a leader in each of its core
lines of business: tactical aircraft, airlift, maritime patrol/surveillance,
reconnaissance/advanced development programs, modification/
maintenance/logistics and thrust reversers. That leadership manifested itself
dramatically in 1996, as Aeronautics won key competitions, achieved important
milestones on existing programs, reached agreement on strategic industry
alliances and proceeded with necessary consolidations of its facilities.
Vice President Al Gore announced on July 2 that NASA had chosen
VentureStar(TM) as the winner of the X-33 single-stage-to-orbit reusable launch
vehicle technology demonstrator program. NASA's funding, combined with an
industry team investment, gives the X-33 cooperative agreement a program value
exceeding $1 billion.
In another event of long-ranging significance, then-Secretary of Defense
William Perry announced November 16 that the U.S. government had awarded
Lockheed Martin one of two concept demonstration contracts for the next-
generation Joint Strike Fighter. This innovative weapon system is being
developed to replace several different types of tactical aircraft in the U.S.
Air Force, U.S. Navy, U.S. Marine Corps and Britain's Royal Navy with
approximately 3,000 affordable, lethal, survivable and highly common multirole
fighters beginning in 2008. Several other nations have joined the program as
observers and others have expressed interest in potential acquisition of the
Joint Strike Fighter. Additional international orders could result in eventual
production of more than 5,000 aircraft through the years 2050 to 2060. Lockheed
Martin views the Joint Strike Fighter program as a top new-business priority.
In the Middle East, the United Arab Emirates selected an advanced variant
of the F-16 Fighting Falcon as one of two finalists in its multi-billion-dollar
fighter aircraft competition for up to 80 aircraft, which may be decided in
early 1997. The United Arab Emirates' decision is an important expression of
confidence in the long-term viability of the F-16 and its evolving technology,
which continues to meet all customer expectations and needs.
Each of these competitions was a watershed event for Lockheed Martin, for
its competitors and for the industry. We are honored to have been selected by
our customers. While the Aeronautics Sector positioned itself well for future
market leadership through these key selections, it also achieved noteworthy
milestones throughout its lines of business.
In the tactical aircraft line of business, the F-22, which will provide air
dominance for U.S. forces in the 21st century, is Lockheed Martin's top priority
among ongoing programs. Assembly of the first F-22 continued on schedule toward
first flight on May 29, 1997. In another important development on the F-22
program, Lockheed Martin and the Air Force adopted recommendations made in
December by the F-22 Joint Cost Estimate Team to restructure the Engineering and
Manufacturing Development phase of the program within existing budget levels.
Lockheed Martin and the Air Force both view this as a positive commitment that
will ensure affordability during the production phase while preserving the
Initial Operational Capability date of 2004. The F-22's unprecedented
integration of next-generation stealth, supercruise engines and advanced
avionics will enable U.S. forces to prevent armed conflict or win quickly and
decisively with minimal casualties on both sides if combat becomes necessary.
The year also contained good news for the F-16 program, with 39 new
aircraft orders, 21 from Egypt and the balance coming from the U.S. Air Force
and other nations. These orders, and others that are expected, helps to ensure
that production of the F-16 will continue well into the next century.
Entering 1997, we are pursuing F-16 sales in several regions of the world.
As the Central European market for western defense systems emerged, Lockheed
Martin launched campaigns to win competitions in Poland, the Czech Republic and
Hungary as those nations prepare to modernize their air forces.
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The first U.S. Air Force C-130J flew in June and a total of five aircraft were
flying in the test program by the end of 1996. Testing has confirmed the
superior maneuverability, reliability, cost effectiveness and overall
performance of the newest member of the Hercules family of transport aircraft.
Manufactured by Lockheed Martin Aeronautical Systems, Hercules aircraft are
operated by 64 countries woldwide.
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[PHOTOGRAPH OF C-130J APPEARS HERE]
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1996 is the year we recognized the Aeronautics Sector as the home of Lockheed
Martin's Fighter Enterprise.
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Latin America, meanwhile, holds strong potential for F-16 sales should the U.S.
Government decide that its policy interests are served by offering U.S. fighter
aircraft there.
In Asia, production of the F-2 for the Japan Air Self Defense Force began.
As the principal U.S. subcontractor to Mitsubishi Heavy Industries, Lockheed
Martin is building aft fuselages, wing boxes and other major components of the
F-2. Japanese government plans call for delivery of 130 F-2s between 1999 and
2011.
With the F-22 air dominance fighter nearing first flight and production,
our Joint Strike Fighter configuration proceeding to concept demonstration, the
F-16 continuing to attract new sales and with the new programmed depot
maintenance and advanced systems upgrade work we secured on the F-117 program,
1996 is the year we recognized the Aeronautics Sector as the home of Lockheed
Martin's "Fighter Enterprise."
In the airlift line of business, the C-130J program received orders from
the U.S. government for thirteen C-130J aircraft. Sales campaigns for the newest
Hercules model were initiated in Norway and Italy with solid prospects for
orders in 1997. C-130J backlog stands at 41 aircraft on firm order with options
for 63 aircraft.
As an example of our continuing interest in international collaboration, we
signed an important agreement with Alenia Aerospazio of Italy to develop and
market the C-27J, a derivative of the Alenia G.222 that would incorporate the
C-130J's advanced avionics, cockpit displays and propulsion system. We believe
there is significant global market potential for this light airlifter but have
agreed with Italy that the C-27J program depends first upon an Italian
government order for C-130Js in order to move forward.
In maritime patrol/surveillance, the Aeronautics Sector formed an alliance
with Northrop Grumman to develop and market an affordable Airborne Early Warning
& Control System that could be installed on Lockheed Martin C-130 and P-3
aircraft as well as on Northrop Grumman E-2C Hawkeye aircraft. We already are
seeing significant interest in this system and could receive our first orders in
1997.
While we were disappointed that the Orion 2000 was not selected in
Britain's Replacement Maritime Patrol Aircraft competition, the configuration
offers the same general technology and performance improvements as does the
C-130J. Considering that more than 80 percent of the world's maritime patrol and
surveillance aircraft are P-3s, we think the long-term prospects for Orion 2000
are significant due to its affordability and capability.
In the reconnaissance/advanced development programs line of business, 1996
was the year in which the famed Skunk Works reasserted itself as the premier
advanced design and rapid prototyping organization in the aerospace industry.
The Skunk Works is leading the X-33 team and building the two Joint Strike
Fighter aircraft specified by the concept demonstration contract. The Skunk
Works also designed Lockheed Martin's Joint Air-to-Surface Standoff Missile
(JASSM), which was one of two designs the Department of Defense downselected for
the next phase of that competition, and launched the DarkStar unmanned
reconnaissance vehicle. Despite
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The Department of Defense selected Lockheed Martin in November to receive one of
two contracts for the concept demonstration phase of the Joint Strike Fighter, a
next-generation multi-role combat aircraft.
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[PHOTO APPEARS HERE]
the unfortunate loss of the DarkStar flight test vehicle, the program has
recovered solidly as another DarkStar vehicle originally intended for pole
testing was modified for flight testing and Congress appropriated funds for two
additional DarkStars.
During 1996, the Aeronautics Sector made significant progress in its
consolidation efforts. The Skunk Works announced that it would move all of the
work done at its Ontario, CA, plant to its Palmdale, CA, facilities in a
consolidation that will result in the closure of the Ontario plant in 1998. In
additional moves, the Aeronautics Sector announced in October that continuing
declines in defense procurement spending had led to the decision to close an
aircraft components plant in Charleston, SC. Meanwhile, the Aeronautics Sector
said it would establish a Center of Excellence for sheet metal manufacturing in
Pinellas County, FL.
Also in October, the Aeronautics Sector announced that it would consolidate
several operating companies doing business in the modification/maintenance/
logistics and aerostructures lines of business into a unified organization
called Lockheed Martin Aircraft & Logistics Centers. The new organization began
operating January 1, 1997, with headquarters in Greenville, SC. The
consolidation positions the Aeronautics Sector as a stronger, more cost-
effective competitor in that business and demonstrates Lockheed Martin's
commitment to grow its modification, maintenance and logistics and
aerostructures lines of business.
Through Lockheed Martin Aircraft & Logistics Centers, the Aeronautics
Sector is pursuing a strategy to support the U.S. government's transition to
contracted logistics support and commercialization. This strategy includes
winning modification, maintenance and logistics contracts for as many as
possible of the aircraft Lockheed Martin originally produced. In 1996, we made
significant strides in that direction as our Aircraft Center unit captured
contracts for U.S. Navy P-3 and C-9 programmed depot maintenance, and as
Logistics Management began leading a major campaign to secure U.S. Air Force C-5
programmed depot maintenance at Kelly Air Force Base in San Antonio. The Air
Force is slated to make a decision in July 1997. Additionally, Aeronautics
International secured a major C-130 maintenance contract from the Royal Saudi
Air Force.
Historic competitive selections, achievement of important program
milestones, establishment of long-term domestic and international partnerships,
continued implementation of advanced design and manufacturing methods, sensible
consolidation of facilities and the strength of the Skunk Works made 1996 an
exciting and rewarding year that bodes well for the Aeronautics Sector's
continued leadership in its core lines of business well into the 21st century.
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The F-22 air dominance fighter is a critical U.S. Air Force program. In 1996,
major milestones were successfully met in F-22 construction when the wings,
forward, mid and aft fuselages were mated. Lockheed Martin Aeronautical Systems
and Lockheed Martin Tactical Aircraft Systems are building this highly agile,
stealthy fighter which, when deployed, will be vital to deterring armed conflict
or winning quickly and decisively with minimal casualties if fighting becomes
necessary.
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[PHOTOGRAPH APPEARS HERE]
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[PHOTOGRAPH APPEARS HERE]
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Energy & Environment
The national laboratories have been aptly described as the jewels in
America's scientific crown. Lockheed Martin's Energy & Environment Sector
recorded a successful year in managing three of those jewels for the Department
of Energy, with the goal of creating a unified, cohesive system of laboratories.
As valuable national assets, the Department of Energy labs operated and managed
by Lockheed Martin continued to advance the frontiers of science and technology.
Lockheed Martin pursued that aim in 1996 through continued attention to
streamlining management, reducing costs and strengthening core missions. In
addition, the Energy & Environment Sector last year broadened the cooperation
among the three labs; the Idaho National Engineering and Environmental
Laboratory, Oak Ridge National Laboratory and Sandia National Laboratories. A
system-of-labs team was created to improve synergies, and integrate operations
in such areas as procurement, financial systems, training, environmental
management and construction, to name a few. We have made significant progress.
For example, the procurement team has already saved more than $4.5 million on
joint software development as the three labs leverage their combined buying
power.
Instituting these changes brings the operations of the labs closer to those
of a business and it is that approach that will open the way for more
opportunities in the commercial marketplace. For example, last year, researchers
at Sandia and General Motors worked together to develop an economical way to
make durable aluminum engines by spraying a wear-resistant coating onto the
cylinder walls. Scientists at Sandia last year also made the world's first
working microelectronic device to be fabricated using extreme ultraviolet light.
The device, a common building block of all integrated circuits, is hundreds of
times smaller than the width of a human hair. A new era in computing is
unfolding at Sandia with tests of the teraflops, the fastest supercomputer in
the world. How fast is teraflops? It would take someone operating a hand-held
calculator about 30,000 years to calculate a problem the teraflops can compute
in a second.
At Oak Ridge National Laboratory researchers made significant breakthroughs
that may someday lead to night-vision cameras in commercial aircraft and
automobiles, similar to the night-vision equipment now used by military aircraft
pilots. Through a revolutionary Uncooled Microcantilever Infrared Camera
developed at Oak Ridge last year, the cost could be significantly reduced to
install such infrared night-vision imaging systems in automobiles, for example,
where such cameras would allow drivers to see past oncoming headlight glare and
beyond what they can see with headlights. The Department of Energy in 1996
awarded Lockheed Martin two-year extensions to manage and operate Oak Ridge
National Laboratory and the Oak Ridge Y-12 plant which is managed by Lockheed
Martin Energy Systems.
The Idaho National Engineering and Environmental Laboratory (INEEL) and
Lockheed Martin Idaho Technologies, which operates the lab for the Department of
Energy, are engaged in some of the most advanced agricultural research in the
world. Only a few miles from Yellowstone National Park, the research involves
bringing together diverse technologies ranging from the Global Positioning
System to artificial intelligence. The goal is precision farming -- the
application of advanced technologies integrated into an agricultural system that
preserves resources and improves efficiency. By determining how all of the
technological tools work together, the INEEL team will build a system that
allows farmers to manage their crops better.
With the end of the Cold War, the Department of Energy labs are finding
innovative ways to turn weapons technology into useful commercial products, as
well as safely store nuclear material. In 1996, the INEEL licensed a new
technology that turns a byproduct of nuclear weapons production into harmless
rock. The new material is ideal for concrete casks used to store the spent fuel
from commercial nuclear reactors.
The Corporation's extensive technological capabilities and experience in
environmental remediation were instrumental in the Department of Energy's
decision
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Scientists at Oak Ridge National Laboratory, with funding from the Department of
Energy and National Science Foundation, study the effect of concentrations of
carbon dioxide and other so-called greenhouse gases on a forested ecosystem. The
research should provide insight, for example, into how changes in climate affect
plant photosynthesis, and by extension, food production.
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[PHOTO APPEARS HERE]
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Micromachines developed at Sandia National Laboratories represent a classic case
of technology transfer after the Cold War. First developed as the tiny
components of locks to safeguard nuclear weapons, they now are applied to a
variety of commercial products. Microscopic gears and drives may be
incorporated into automobile airbags or used to power an artificial heart.
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[PHOTO OF MICRO COMPONENTS APPEARS HERE]
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Energy & Environment enters 1997 with a working system of Department of Energy
laboratories that is realizing savings through more efficient, dynamic
business management.
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to choose Lockheed Martin Advanced Environmental Systems as a member of one of
two teams to remediate the tank farms at the Hanford Site, a former plutonium
production facility in Washington state. The team is tasked with cleaning
Hanford's vast underground storage tanks under the Tank Waste Remediation System
program. Representing the first Department of Energy privatization contract in
Washington state, Lockheed Martin Advanced Environmental Systems will prepare
the one-time nuclear weapons program facility for a new post-Cold-War mission.
On a disappointing note, our contract with the Department of Energy to remediate
contaminated waste at the Pit 9 facility in Idaho still faces scheduling delays,
as well as significant technical and cost issues.
After 40 years of producing components vital to the nation's nuclear
deterrent, Lockheed Martin Specialty Components was selected last year by the
Federal Aviation Administration to develop an advanced X-ray machine to
automatically detect, within five seconds, a wide range of explosives in airport
packages and luggage. Unlike its predecessors, the new system will see luggage
contents in three dimensions.
Energy & Environment enters 1997 with a working system of Department of
Energy laboratories that is realizing savings through more efficient, dynamic
business management. Building on the technological capabilities throughout the
Corporation and the labs, Energy & Environment is well positioned to forge new
industrial and government partnerships to compete in a rapidly changing
marketplace. [_]
[PHOTO APPEARS HERE]
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The Holifield Radioactive Ion Beam Facility at Oak Ridge National Laboratory is
probing the secrets of nuclear physics. In August, researchers generated the
first beam, preparing the facility for scientists from around the world to
conduct experiments.
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<TABLE>
<CAPTION>
Financial Section
<S> <C>
Management's Discussion and 51
Analysis of Financial Condition
and Results of Operations
The Corporation's Responsibility 64
for Financial Reporting
Report of Ernst & Young LLP, 65
Independent Auditors
Consolidated Statement 66
of Earnings
Consolidated Statement 67
of Cash Flows
Consolidated Balance Sheet 68
Consolidated Statement 69
of Stockholders' Equity
Notes to Consolidated 70
Financial Statements
Seven Year Summary 85
</TABLE>
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Management's Discussion and Analysis Lockheed Martin Corporation
of Financial Condition and
Results of Operations
Lockheed Martin Corporation (Lockheed Martin or the Corporation) is a highly
diversified global enterprise principally engaged in the conception,
research, design, development, manufacture and integration of advanced-
technology products and services. The following discussion should be read in
conjunction with the audited consolidated financial statements included
herein.
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Business Combination with Loral Corporation
On January 7, 1996, the Corporation entered into an Agreement and Plan of
Merger (the Loral Merger Agreement) with Loral Corporation (Loral) pursuant
to which the Corporation agreed to purchase all of the issued and outstanding
shares of common stock of Loral (together with the associated preferred stock
purchase rights) for an aggregate consideration of $38 per share in cash (the
Tender Offer). The Tender Offer was made as part of a series of transactions
that resulted in (i) the distribution to Loral stockholders of shares of
capital stock in Loral Space & Communications, Ltd. (Loral SpaceCom), a
newly-formed company, which now owns and manages substantially all of Loral's
former space and satellite telecommunications interests, and (ii) the
acquisition by the Corporation of Loral's defense electronics and systems
integration businesses (collectively, the Loral Transaction). As a result of
the Loral Transaction, Loral changed its name to Lockheed Martin Tactical
Systems, Inc. (Tactical Systems) and became a wholly-owned subsidiary of the
Corporation. The operations of Tactical Systems have been included in the
results of operations of the Corporation from April 1, 1996.
In connection with the Loral Transaction, the Corporation acquired shares
of preferred stock of Loral SpaceCom that were convertible into 20 percent of
Loral SpaceCom's common stock on a fully diluted basis at the acquisition
date. The Corporation's ownership of the preferred stock of Loral SpaceCom is
subject to certain limitations and restrictions set forth in the terms and
conditions of the preferred stock and in agreements between the Corporation
and Loral SpaceCom.
The total purchase price paid with respect to the above transactions,
including acquisition costs, was approximately $7.6 billion. The Loral
Transaction has been accounted for using the purchase method of accounting.
The funds for the consummation of the Loral Transaction were provided
through the issuance of commercial paper by the Corporation and through
borrowings under revolving credit facilities with a syndicate of commercial
banks. Approximately $6.6 billion of commercial paper was issued and
approximately $1 billion was borrowed under the revolving credit facilities
to finance the Loral Transaction on the closing date. During the second
quarter of 1996, the Corporation issued $5 billion of debt securities, the
net proceeds from which were used to repay the $1 billion borrowed under the
revolving credit facility and to reduce the amount of commercial paper
outstanding.
-----------------------------------------------------------------------------
Repositioning of Non-Core Businesses
On January 31, 1997, the Corporation signed a memorandum of understanding
to reposition certain non-core business units as a new independent company
(Newco). Under the proposed transaction, Lehman Brothers Capital Partners
III, L.P., a merchant banking partnership associated with Lehman Brothers
Holdings, will own 50.1 percent of the new company, Lockheed Martin will
retain a 34.9 percent equity stake and the new company's management team
will own the remaining 15 percent. The business units have approximately
4,900 employees and combined 1996 annual revenues exceeding $650 million.
The proposed transaction is subject to the parties entering into a
mutually acceptable definitive purchase agreement, certain regulatory
approvals and other customary conditions, and is expected to close during
the first half of 1997.
-----------------------------------------------------------------------------
Results of Operations
The Corporation's operating cycle is long-term and involves various types of
production contracts and varying production delivery schedules. Accordingly,
results of a particular year, or year-to-year comparisons of recorded sales
and profits, may not be indicative of future operating results. The following
comparative analysis should be viewed in this context.
51
<PAGE>
Management's Dicussion and Analysis
of Financial Condition and Results of Operations
Continued
The Corporation's consolidated results of operations for 1996 include
the operations of Tactical Systems from April 1, 1996. On February 3, 1997,
concurrent with the announcement of the proposed transaction with Newco, the
Corporation announced a new organizational structure which reassigned
management responsibility for certain business units. As a result, the
Corporation's operations are now divided into five business segments: Space &
Strategic Missiles; Electronics; Information & Services; Aeronautics; and
Energy, Materials and Other. The operations of Tactical Systems have been
reflected, for 1996 segment reporting purposes, in the Information &
Services, Electronics, and Energy, Materials and Other segments. Prior year
data has been reclassified to conform to the new structure.
The Corporation's consolidated net sales for 1996 were a record $26.9
billion. Net sales for the year were 18 percent greater than 1995 net sales,
which in turn were relatively unchanged compared to 1994 net sales. The 1996
increase principally resulted from the inclusion of the operations of
Tactical Systems. This increase more than offset sales decreases in the
Aeronautics segment. Sales increases for 1995 in the Space & Strategic
Missiles segment and the Information & Services segment were largely offset
by sales declines in the Aeronautics segment and the Electronics segment. The
U.S. Government remained the Corporation's largest customer, comprising 70
percent of the Corporation's net sales for 1996 compared to 69 percent in
1995 and 72 percent in 1994.
-----------------------------------------------------------------------------
Net Sales
In millions
[GRAPH APPEARS HERE]
(a) Includes the effects of the April, 1996 business combination with Loral
Corporation.
-----------------------------------------------------------------------------
The Corporation's operating profit (earnings before interest and taxes)
was approximately $2.7 billion in 1996, which was significantly greater than
the $1.4 billion reported in 1995 and the $2.0 billion reported in 1994.
However, the reported amounts for each of the three years presented included
the financial impacts of various nonrecurring events, the details of which
are described below. Excluding the effects of these nonrecurring events for
each year, operating profit for 1996 would have been approximately 29 percent
greater than the 1995 amount, which in turn would have been approximately 14
percent greater than the 1994 amount. A significant portion of the 1996
increase resulted from the inclusion of the operations of Tactical Systems.
Additional growth in operating profit in 1996 resulted from increases in
the Space & Strategic Missiles and Electronics segments, slightly offset by
declines in the Aeronautics segment.
During the third quarter of 1996, the Corporation announced its
intention to distribute via an exchange offer its remaining 81 percent
interest in Martin Marietta Materials, Inc. (Materials) to its stockholders
(the Exchange Offer). Under the terms of the Exchange Offer, the
Corporation's stockholders were given the opportunity to exchange each
Lockheed Martin common share held for 4.72 common shares of Materials on a
tax-free basis. The Exchange Offer expired by its terms on October 18, 1996
and was oversubscribed. On October 23, 1996, approximately 7.9 million shares
of the Corporation's common stock were exchanged for the 37.35 million shares
of Materials common stock held by the Corporation. Upon the closing of this
transaction, the Corporation had no remaining ownership interest in Materials
and had reduced its common shares outstanding by approximately four percent.
The Corporation recognized a pretax gain of $365 million related to this
exchange in the fourth quarter of 1996.
52
<PAGE>
Lockheed Martin Corporation
During the fourth quarter of 1996, the Corporation recorded nonrecurring
pretax charges, net of state income tax benefits, of $307 million.
Approximately one-half of the charges reflected the financial impacts of a
conservative strategy on the part of the Corporation toward its environmental
remediation business with regard to current business conditions, existing
contractual issues on a Department of Energy (DOE) program and the pursuit of
other environmental opportunities. The remaining charges resulted from a
number of other corporate actions to improve efficiencies, increase
competitiveness and focus on core businesses.
During the first quarter of 1995, the Corporation recorded a pretax
charge of $165 million for merger related expenses in connection with the
formation of Lockheed Martin. During the second quarter of 1995, the
Corporation recorded a pretax charge of $525 million in conjunction with a
corporate-wide consolidation plan under which the Corporation would close
certain facilities and laboratories and eliminate duplicative field offices
in the U.S. and abroad, eliminating up to approximately 12,000 positions.
This charge represented the portion of the accrued costs and net realizable
value adjustments that were not probable of recovery.
In February 1994, Materials sold through an initial public offering
(IPO) approximately 8.8 million shares, or 19 percent of its common stock.
A portion of the proceeds from the offering was used to defease in
substance certain long-term debt. The Corporation recognized a pretax gain,
net of a loss on debt defeasance, of $118 million from the Materials IPO.
During March 1994, the Corporation entered into an Agreement and Plan of
Merger with Grumman Corporation (Grumman) which was subsequently terminated
by Grumman. In April 1994, the Corporation received $50 million plus
reimbursement of expenses pursuant to the termination provisions of the
Agreement and Plan of Merger.
Reported net earnings for 1996 were approximately $1.3 billion, or $6.04
per common share assuming full dilution. Both amounts represent increases
from the reported 1995 net earnings of $682 million, or $3.05 per share, and
-----------------------------------------------------------------------------
Net Earnings
In millions
[GRAPH APPEARS HERE]
(a) Includes the effects of the April, 1996 business combination with Loral
Corporation.
(b) Excluding the effects of the Materials exchange, the divestiture of two
business units, and the charges associated with the environmental remediation
business and other Corporate actions, 1996 net earnings would have been
$1,205 million.
(c) Excluding the effects of the merger related and consolidation charges,
1995 net earnings would have been $1,118 million.
(d) Excluding the effects of the Materials IPO, the acquisition termination
fee, and the change in ESOP accounting, 1994 net earnings would have been
$955 million.
-----------------------------------------------------------------------------
Earnings Per Common Share,
Assuming Full Dilution
In dollars
[GRAPH APPEARS HERE]
(a) Includes the effects of the April, 1996 business combination with Loral
Corporation.
(b) Excluding the effects of the Materials exchange, the divestiture of two
business units, and the charges associated with the environmental remediation
business and other Corporate actions, 1996 net earnings per share would have
been $5.40.
(c) Excluding the effects of the merger related and consolidation charges,
1995 earnings per share would have been $5.01.
(d) Excluding the effects of the Materials IPO, the acquisition termination
fee, and the change in ESOP accounting, 1994 earnings per share would have
been $4.37.
-----------------------------------------------------------------------------
53
<PAGE>
Management's Dicussion and Analysis
of Financial Condition and Results of Operations
Continued
from the reported 1994 net earnings of $1.0 billion, or $4.66 per share.
However, the 1996 reported amounts include the after-tax effects of the
Materials exchange and the provision for the after-tax effect of the
Corporation's divestiture of its Armament Systems and Defense Systems
business units which were sold to General Dynamics Corporation (General
Dynamics). The latter transaction, which concluded with the Corporation's
receipt of $450 million in cash on January 2, 1997, had no pretax effect on
the results of operations for 1996. On a combined basis, the Materials
exchange and the divestiture noted above increased net earnings by $351
million, or $1.58 per share. The 1996 reported amounts also include the
after-tax impact of the nonrecurring charges described above, which decreased
net earnings by $209 million, or $.94 per share. The 1995 reported amounts
include the after-tax effects of the merger related and consolidation charges
identified above of $436 million, or $1.96 per share. The 1994 reported net
earnings include the favorable after-tax effects of the Materials IPO ($70
million, or $.32 per share), the Grumman termination fee ($30 million, or
$.14 per share) and a charge due to the adoption of a change in accounting
for ESOPs ($37 million, or $.17 per share). Excluding the effects of these
nonrecurring items, net earnings for 1996 would have been approximately $1.2
billion, or $5.40 per share, representing eight percent increases from the
adjusted 1995 amounts of approximately $1.1 billion, or $5.01 per share. The
1995 amounts, excluding the effects of the nonrecurring items, were 17
percent and 15 percent greater, respectively, than the adjusted 1994 amounts
of $955 million, or $4.37 per share.
-----------------------------------------------------------------------------
Dividends per Common Share
In dollars
[GRAPH APPEARS HERE]
-----------------------------------------------------------------------------
The Corporation's debt to capitalization ratio increased from 37 percent
at December 31, 1995 to 63 percent at December 31, 1996, with total debt
(including short-term borrowings) increasing from $3.7 billion to $11.5
billion. As mentioned previously, this increase primarily represents funds
borrowed to finance the Loral Transaction. Stockholders' equity increased
from $6.4 billion at December 31, 1995 to nearly $6.9 billion at December 31,
1996. The Corporation paid common dividends of $302 million in 1996, or $1.60
per common share. The Corporation's backlog of undelivered orders exceeded
$50 billion at the end of 1996.
-----------------------------------------------------------------------------
Industry Considerations
The Corporation's primary lines of business are in high technology systems
for aerospace and defense, serving both government and commercial customers.
In recent years, domestic and worldwide political and economic developments
have strongly affected these markets, requiring significant adaptation by
market participants.
Since the mid-1980s, the U.S. defense budget has declined significantly,
with the procurement portion falling by more than two thirds in real terms.
As a result of this long-term decline in demand, substantial overcapacity
existed in the defense/aerospace industry. As with many industries, the
response to such long-term declines in demand has been a combination of plant
closings, consolidations and other actions that preserve an efficient
industrial base. In recent years, the Justice Department and the Federal
Trade Commission
54
<PAGE>
Lockheed Martin Corporation
have approved most defense/aerospace industry business combinations. Lockheed
Martin has been at the forefront of the industry's rapid consolidation. Since
1993, the Corporation has made several strategic acquisitions and alliances
which affect many facets of its business, including tactical military
aircraft production, space launch systems and defense and commercial
electronics. These acquisitions are examples of actions that have broadened
the Corporation's business portfolio, created opportunities for increased
efficiency and cost competitiveness, improved access to new markets and
reduced exposure to future defense budget program reductions. In addition,
the Corporation has continued to undertake cost reduction efforts throughout
its operating units while monitoring and adjusting employment levels
consistent with changing business requirements. During 1996, the
Corporation's efforts resulted in a number of wins in several significant
competitions, including the Joint Strike Fighter, VentureStar(TM), Space
Based Infrared System (SBIRS) and Evolved Expendable Launch Vehicle programs,
among others.
Currently, the defense/aerospace industry is undergoing another phase of
consolidation. In the past few months, The Boeing Company (Boeing) acquired
the aerospace and defense businesses of Rockwell International Corporation,
and has announced it will combine with McDonnell Douglas Corporation. Also,
the Raytheon Company has announced it will acquire the military businesses of
GM Hughes Electronics Corporation and Texas Instruments Corporation. The
synergies which may result from these business combinations, if approved,
could create more formidable competitors within the industry.
The Corporation's executive management and Board of Directors continue to
review and monitor the Corporation's strategic plans. These plans include
assessing business combinations and joint ventures with companies engaged in
similar or closely related businesses, building market share in core
businesses and divesting less well-positioned and non-core businesses.
Examples of recent actions include the Loral Transaction, the exchange of the
remaining ownership interest in Materials, the divestiture of the Armament
Systems and Defense Systems business units, the transition of Space Shuttle
processing operations to United Space Alliance (USA), a joint venture with
Boeing which has become NASA's prime Space Shuttle operations contractor, and
the proposed transaction with Newco. It is important to note that the
accounting implications of unconsolidated entities such as Newco and USA are
markedly different from those of consolidated entities. The Corporation
accounts for these unconsolidated entities under the equity method of
accounting. Net sales and earnings from operations for such entities are not
included in the consolidated amounts for the Corporation; instead, the
Corporation's proportionate share of net earnings or losses from these
entities are recorded as other income and expenses.
To date, the Corporation's major programs generally have been well
supported, but uncertainty exists over the size and scope of future defense
and space budgets and their impact on specific programs. Some of the
Corporation's programs have been delayed, curtailed or terminated, and
future spending reductions and funding limitations could further impact
these programs or have similar effects on other existing or emerging
programs.
As a U.S. Government contractor, the Corporation's government contracts
and operations are subject to government oversight. The government may
investigate and make inquiries of the Corporation's business practices and
conduct audits of contract performance and cost accounting. These
investigations may lead to claims against the Corporation. Under U.S.
Government procurement regulations and practices, an indictment of a
government contractor could result in that contractor being fined and/or
suspended for a period of time from eligibility for bidding on, or for award
of, new government contracts; a conviction could result in debarment for a
specified period of time. Although the outcome of such investigations and
inquiries cannot be predicted, in the opinion of management there are no
claims, audits or investigations pending against the Corporation that are
likely to have a material adverse effect on either the Corporation's business
or its consolidated financial position or results of operations.
55
<PAGE>
Management's Dicussion and Analysis
of Financial Condition and Results of Operations
Continued
The Corporation remains exposed to other inherent risks associated with
U.S. Government contracting. These risks include technological uncertainties
and obsolescence, changes in government policies and dependence on annual
Congressional appropriation and allotment of funds.
Progress has been made in expanding the Corporation's presence in
related commercial and nondefense markets, most notably in space and
telecommunications activities, information management and systems
integration. Although these lines of business are not dependent on defense
budgets, they share many of the risks associated with the Corporation's
primary businesses, as well as others unique to the commercial marketplace.
Such risks include development of competing products, technological
feasibility, product obsolescence and the risks inherent in conducting
business internationally.
-----------------------------------------------------------------------------
Discussion of Business Segments
The Corporation's operations are divided into five business segments: Space &
Strategic Missiles; Electronics; Information & Services; Aeronautics; and
Energy, Materials and Other. As previously mentioned, the Corporation
recently announced a new organizational structure that combined the Tactical
Systems businesses with those of Lockheed Martin and reassigned certain
heritage Lockheed Martin business units. The discussion of business segments
that follows reflects this new structure. Certain amounts for the prior years
have been reclassified to conform with the 1996 presentation.
The following table displays net sales for the Lockheed Martin business
segments for each of the three years in the period ended December 31, 1996
which correspond to the segment information presented in Note 15 to the
consolidated financial statements.
<TABLE>
<CAPTION>
(In millions) 1996 1995 1994
==================================================================
<S> <C> <C> <C>
Net Sales
Space & Strategic Missiles $ 7,904 $ 7,813 $ 7,000
Electronics 6,705 3,357 4,059
Information & Services 5,863 4,173 3,986
Aeronautics 5,596 6,617 7,091
Energy, Materials and Other 807 893 770
------------------------------------------------------------------
$26,875 $22,853 $22,906
==================================================================
</TABLE>
Operating profit by industry segment for each of the three years in the
period ended December 31, 1996 is also presented in Note 15 to the
consolidated financial statements. The following table displays the pretax
impact of the nonrecurring items discussed earlier as reflected in each
segment's operating profit for each of the three years presented.
<TABLE>
<CAPTION>
(In millions) 1996 1995 1994
==============================================================
<S> <C> <C> <C>
Nonrecurring Items
Space & Strategic Missiles $ (25) $(263) $ --
Electronics -- (93) --
Information & Services (86) (24) --
Aeronautics (46) (138) --
Energy, Materials and Other 215 (172) 168
--------------------------------------------------------------
$ 58 $(690) $ 168
==============================================================
</TABLE>
The 1996 total in the above table reflects the $365 million pretax gain from
the exchange of Materials, offset by $307 million of pretax charges relating
to the Corporation's environmental remediation business and other corporate
actions. The 1995 total reflects the merger related and consolidation
expenses, while the 1994 total consists of the $118 million Materials IPO
gain and the receipt of the $50 million acquisition termination fee from the
proposed Grumman acquisition.
The following table depicts operating profit excluding nonrecurring
items for each of the three years in the period ended December 31, 1996. The
subsequent discussion of significant operating results of each business
segment
56
<PAGE>
Lockheed Martin Corporation
excludes the impact of the nonrecurring items. This discussion should
also be read in conjunction with the industry segment information contained
in Note 15 to the consolidated financial statements.
<TABLE>
<CAPTION>
(In millions) 1996 1995 1994
-----------------------------------------------------------
<S> <C> <C> <C>
Operating Profit,
Excluding Nonrecurring
Items
Space & Strategic Missiles $ 998 $ 726 $ 495
Electronics 673 317 451
Information & Services 327 291 214
Aeronautics 487 532 511
Energy, Materials and Other 190 201 140
-----------------------------------------------------------
$2,675 $2,067 $1,811
===========================================================
</TABLE>
[ ] Space & Strategic Missiles -- Net sales of the Space & Strategic Missiles
segment increased by one percent in 1996 compared to 1995 and by 12 percent
in 1995 compared to 1994. Increases in commercial satellite volume and
classified program activities in 1996 were largely offset by the timing of
Atlas II and Atlas E launches (seven successful launches in 1996 versus
twelve in 1995) and from reduced volume on the Trident fleet ballistic
missile program. The increase in 1995 compared to 1994 can be attributed
primarily to the inclusion for the full year of the former Space Systems
Division of General Dynamics, which the Corporation acquired on May 1, 1994.
The operations of this unit consisted primarily of the Atlas launch services
program, which recorded 12 successful launches in 1995 versus four launches
in the eight months of 1994 when the program results were included in the
Corporation's results of operations. The 1995 net sales were also favorably
impacted by an increase in activity in various classified programs
throughout the segment.
Operating profit for the segment increased by 37 percent in 1996
compared to 1995 and by 47 percent in 1995 compared to 1994. The increase in
1996 was attributable to the increases in commercial satellite volume and
classified program activities discussed above, margin expansion from improved
cost performance on the Corporation's Titan and Atlas launch vehicle programs
and timing of the recognition of award and incentive fees on certain space
programs. The 1995 increase was attributable to the inclusion of the Atlas
launch services program for the full year, the receipt of a favorable
settlement resulting from the termination of the Advanced Solid Rocket Motor
program and the inclusion of charges in 1994 related to certain fixed-price
programs, including a charge of $22 million related to the cancellation and
final settlement on the Mobile Satellite Antenna subcontract and charges
totaling $43 million related to a military command, control and communication
program for a foreign government.
[ ] Electronics -- Net sales of the Electronics segment doubled in 1996 compared
to 1995, due to the inclusion of the operations of certain Tactical Systems
companies since April 1, 1996. Excluding the operations of the Tactical
Systems companies, 1996 net sales for the segment increased by 12 percent
compared to 1995. This increase was principally attributable to volume
increases in a variety of government and commercial electronics programs and
the inclusion of the operations of the aircraft controls business formerly
owned by General Electric Company, which was acquired in the fourth quarter
of 1995. Net sales for 1995 decreased by 17 percent compared to 1994 as a
result of volume decreases in various programs, particularly in the AEGIS
surface ship combat systems program and the AN/BSY-2 submarine combat system
program. In addition, the 1995 sales performance represented an expected
transition at certain business units from mature production programs into
new development programs.
Operating profit for the segment increased by 112 percent in 1996 due to
the inclusion of the operations of the Tactical Systems companies discussed
above. Excluding the operations of the Tactical Systems companies, operating
profit in 1996 for the segment increased by 28 percent compared to 1995.
This increase was principally the result of the production volume increases
discussed above as well as the inclusion in 1995 of contract charges related
to the LANTIRN program close-out. Operating profit in 1995 decreased by
57
<PAGE>
Management's Dicussion and Analysis
of Financial Condition and Results of Operations
Continued
30 percent compared to 1994, reflecting the sales volume decreases described
previously, the negative earnings implications of contract charges related
to the LANTIRN program close-out and from investments in new businesses, and
substantial completion of subcontract activities on the Patriot and other
mature production programs.
[ ] Information & Services -- Net sales of the Information & Services segment
increased by 40 percent in 1996 compared to 1995 due to the inclusion of the
operations of certain Tactical Systems companies since April 1, 1996.
Excluding the operations of the Tactical Systems companies, 1996 net sales
for the segment were comparable to 1995 levels. Increases in commercial
product distribution activities in 1996 were largely offset by the transfer
of the Corporation's contracts for Space Shuttle processing operations to
USA during 1996, as mentioned above. Net sales for 1995 increased by five
percent compared to 1994 due to increases in sales for commercial product
manufacturing and distribution activities and in information management
activities.
Operating profit for the segment increased by 12 percent in 1996 due to
the inclusion of the operations of the Tactical Systems companies discussed
above. However, excluding the operations of the Tactical Systems companies,
operating profit in 1996 for the segment decreased by 30 percent compared to
1995. This decrease was principally the result of charges taken in the
current year related to certain information systems contracts and accounts,
and from losses taken at two of the Corporation's subsidiaries. Operating
profit in 1995 increased by 36 percent compared to 1994, reflecting
increased award fee recognition, the impact of sales volume increases and
improvements in margin performance throughout the segment.
[ ] Aeronautics -- Net sales of the Aeronautics segment decreased by 15 percent
in 1996 compared to 1995, and by seven percent in 1995 compared to 1994. The
net sales decreases in both years were principally due to fewer deliveries
of F-16 fighter aircraft and C-130 airlift aircraft. Net sales for 1995
reflect the delivery of eight P-3 maritime patrol aircraft to the Republic
of Korea. There were no comparable deliveries of P-3 aircraft in 1996 or
1994.
Operating profit decreased by eight percent in 1996 compared to 1995 as
a result of the volume decreases discussed above. Operating profit in 1995
increased by four percent compared to 1994 despite the sales decrease for
that period, primarily as a result of recognition of earnings related to the
P-3 aircraft deliveries, which more than offset the 1995 increase in C-130J
development costs, and the inclusion in 1994 of charges taken against
earnings in connection with the Pratt & Whitney fan reverser program.
[ ] Energy, Materials and Other -- Net sales of this segment decreased by ten
percent in 1996 compared to 1995 after increasing by 16 percent in 1995
compared to 1994. The 1996 net sales decrease was principally the result of
the divestiture of Materials during the fourth quarter of 1996 as described
above. The 1995 increase reflected the January 1995 Materials acquisition of
the construction aggregates business of Dravo Corporation as well as the
commencement of activities under the Idaho National Engineering and
Environmental Laboratory Management and Operations and Pit 9 contracts in
the fourth quarter of 1994.
Operating profit for this segment decreased by five percent in 1996
compared to 1995. Losses on certain of the Corporation's environmental
programs were largely offset by gains from the sale of a portion of the
Corporation's investment portfolio. Operating profit increased by 44
percent in 1995 compared to 1994 due to the inclusion of a full year of
activities under the Idaho National Engineering and Environmental
Laboratory Management and Operations contract and earnings growth from
increased production volume at Materials.
--------------------------------------------------------------------------
Backlog
Total negotiated backlog of $50.4 billion at December 31, 1996 included both
unfilled firm orders for the Corporation's products for which funding has
been both authorized and appropriated by the customer (Congress, in the case
of U.S. Government agencies) and firm orders for which funding has
58
<PAGE>
Lockheed Martin Corporation
not been appropriated. The following table shows total backlog by segment at
the end of each of the last three years:
<TABLE>
<CAPTION>
(In millions) 1996 1995 1994
-------------------------------------------------------------
<S> <C> <C> <C>
Backlog
Space & Strategic Missiles $19,463 $18,066 $17,778
Electronics 10,937 5,271 5,061
Information & Services 6,431 3,005 3,174
Aeronautics 13,408 14,775 16,146
Energy, Materials and Other 167 8 73
-------------------------------------------------------------
$50,406 $41,125 $42,232
=============================================================
</TABLE>
Total Space & Strategic Missiles backlog increased by eight percent in 1996
compared to 1995 and by two percent in 1995 compared to 1994. The increase
in 1996 occurred principally from new orders received for Titan, Atlas and
Proton launch vehicle services and the SBIRS program. The increase in 1995
occurred principally because of growth in new orders for classified
programs.
----------------------------------------------------------------------------
Negotiated Backlog
In Millions
[GRAPH APPEARS HERE]
(a) Includes the effect of the April, 1996 business combination with Loral
Corporation.
-----------------------------------------------------------------------------
In the Electronics segment, total backlog more than doubled in 1996
compared to 1995 due to the addition of the backlog of the Tactical Systems
companies acquired in 1996. Excluding the acquired backlog of the Tactical
Systems companies, backlog in 1996 for the segment decreased by three percent
compared to 1995. This decrease was principally the result of the net effect
of close-outs of completed government electronics contracts during the year.
Total backlog for 1995 increased by four percent compared to 1994. The
primary reasons for the 1995 increase were key new awards for U.K. Apache
helicopter night vision/fire control systems, HYDRA-70 munitions and
electronic warfare countermeasures.
Total Information & Services backlog increased by 114 percent in 1996
compared to 1995 due to the addition of the backlog of the Tactical Systems
companies acquired in 1996. Excluding the acquired backlog of the Tactical
Systems companies, backlog in 1996 for the segment increased by 25 percent
compared to 1995. This increase was principally the result of new
information management services contract awards. Total backlog for 1995
decreased by five percent compared to 1994, primarily caused by reduced
contract volume in the segment's space shuttle processing program. Total
backlog for this segment will be negatively impacted in 1997 as a result of
the pending divestiture of the business units that will compose Newco.
In the Aeronautics segment, total backlog decreased by nine percent in
1996 compared to 1995 and by eight percent in 1995 compared to 1994. In both
years, F-16 fighter aircraft backlog decreased, primarily reflecting
deliveries of aircraft exceeding new orders. Decreases in backlog for the F-
22 air dominance fighter aircraft program, currently in the development
phase, also contributed to the 1996 decrease. In 1995, this decrease was
partially offset by the receipt of orders from the United Kingdom and
Australia to provide 37 C-130J airlift aircraft, with options for 58
additional aircraft for those two nations and New Zealand. It should be noted
that Aeronautics' backlog at December 31, 1996 does not include activity
related to the VentureStar(TM) and Joint Strike Fighter program wins due to
their unique nature as cooperative research agreements and developmental
59
<PAGE>
Management's Dicussion and Analysis
of Financial Condition and Results of Operations
Continued
prototype activities. These two programs combined would have generated
orders of $1.5 billion in 1996 if reported on an equivalent basis.
---------------------------------------------------------------------------
Liquidity and Cash Flows
Cash provided by operating activities was approximately $1.6 billion in
1996, compared with $1.3 billion and $1.5 billion of cash provided in 1995
and 1994, respectively. As in the prior years, positive cash flows were
derived in large part from operating profits before deducting non-cash
charges for depreciation and amortization of property and intangible assets,
offset in part by working capital increases. The 1996 and 1995 amounts also
include the effect of merger related and consolidation payments of $244
million and $208 million, respectively.
---------------------------------------------------------------------------
Net Cash Provided by Operating
Activities
In Millions
[GRAPH APPEARS HERE]
(a) Includes the effects of the April, 1996 business combination with Loral
Corporation.
---------------------------------------------------------------------------
Cash used for investing activities was approximately $8.0 billion in
1996, a significant increase from the $699 million and $502 million reported
in 1995 and 1994, respectively. The Corporation used approximately $7.3
billion of cash in 1996 to finance the Loral Transaction. Also, additions to
property, plant and equipment, net of purchased operations, were 47 percent
higher in 1996 compared to 1995, reflecting the inclusion of the capital
spending activity of the Tactical Systems business units as well as
approximately $150 million related to the Lockheed Martin integration and
consolidation program. The 1995 amount was approximately two percent lower
than the comparable 1994 amount. The Corporation continually monitors its
capital spending in relation to current and anticipated business needs.
Facilities are added, consolidated, modernized or disposed of as business
circumstances dictate.
Approximately $5.7 billion of cash was provided by financing activities
during 1996, compared with cash used for financing activities of $579
million in 1995 and $718 million in 1994. Approximately $7.6 billion of
indebtedness was incurred in 1996 in connection with the consummation of the
Loral Transaction through the issuance of commercial paper by the
Corporation and through borrowings under a revolving credit facility which
existed at that time. The Corporation subsequently issued $5 billion of
long-term debt securities, the entire amount registered under the
Corporation's shelf registration statement which became effective on May 10,
1996, using the net proceeds to repay the $1 billion borrowed under the
credit facility and to reduce the amount of commercial paper outstanding.
These debt securities are guaranteed by Tactical Systems. Approximately $180
million of long-term debt will mature in 1997.
During the second quarter of 1996, the Corporation's Board of Directors
terminated the systematic common stock repurchase plan which had been
established in 1995 to counter the future dilutive effect of common stock
issued by the Corporation under its 1995 Omnibus Performance Award Plan. A
separate program authorized in 1995 for the repurchase of up to nine million
common shares to counter the dilutive effect of common stock issued under
the Corporation's other benefit and compensation programs and for other
purposes related to such plans remains in effect. Approximately 2.3 million
common shares were repurchased by the Corporation in 1995 for approximately
$150 million; no shares were repurchased in 1996.
60
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Lockheed Martin Corporation
The Corporation receives advances on certain contracts and uses them to
finance the inventories required to complete the contracted work.
Approximately $2.4 billion of advances related to work in process at
December 31, 1996 have been received from customers and were recorded as
reductions of inventories in the Corporation's consolidated financial
statements. In addition, advances of approximately $2.6 billion at the end
of 1996 have been recognized as current liabilities, mostly related to
contracts with foreign governments and commercial customers.
---------------------------------------------------------------------------
Capital Structure and Resources
Long-term debt, including current maturities, increased to approximately
$10.4 billion at the end of 1996 from approximately $3.7 billion at the end
of 1995. Total debt (including short-term borrowings) represented
approximately 63 percent of total capitalization at December 31, 1996,
compared with 37 percent at December 31, 1995. Most of the Corporation's
debt is in the form of publicly issued, fixed-rate Notes Payable and
Debentures. Included in long-term debt at December 31, 1996 are $1.2 billion
of debt obligations of the former Loral Corporation. Stockholders' equity
grew to nearly $6.9 billion at December 31, 1996 from approximately $6.4
billion one year ago. Stockholders' equity activity for 1996 included a
reduction of $750 million in connection with the exchange of the
Corporation's common stock for its Materials shares.
During 1996, in contemplation of the Loral Transaction, the Corporation
arranged revolving credit facilities of $10 billion through a syndicate of
commercial banks. The credit facilities consisted of a 364-day unsecured
revolving credit facility in the amount of $5 billion (the Short-Term Credit
Facility) and a 5-year unsecured revolving credit facility in the amount of
$5 billion (the 5-Year Credit Facility). In connection with the
establishment of these credit facilities, the Corporation and Loral each
terminated their previously existing revolving credit facilities.
Approximately $6.6 billion of commercial paper was issued and
approximately $1 billion was borrowed under the 5-Year Credit Facility to
finance the Loral Transaction on the closing date. As stated previously, the
Corporation issued $5 billion in debt securities during the second quarter
of 1996, the net proceeds from which were used to repay the $1 billion
borrowed under the 5-Year Credit Facility and to reduce the amount of
commercial paper outstanding. On July 26, 1996, the Corporation terminated
the Short-Term Credit Facility. On December 20, 1996, the Corporation
amended its 5-Year Credit Facility to reduce the amount from $5 billion to
$3.5 billion (the Amended 5-Year Credit Facility). The Corporation also
entered into a one-year credit facility in the amount of $1.5 billion
(together, the Credit Facilities).
No borrowings were outstanding under the Credit Facilities at December
31, 1996. However, the Amended 5-Year Credit Facility supports commercial
paper borrowings of approximately $2.4 billion outstanding at December 31,
1996. Of this amount, $1.25 billion has been classified as long-term debt in
the Corporation's consolidated balance sheet based on management's ability
and intention to maintain this debt outstanding for at least one year. On
January 2, 1997, the Corporation received $450 million in connection with
the sale of its Armament Systems and Defense Systems business units to
General Dynamics. The net proceeds were used to further reduce the amount of
commercial paper outstanding.
During the third quarter of 1996, the Corporation entered into interest
rate swap agreements to fix the interest rates on $875 million of its
commercial paper borrowings. These agreements will mature during 1997. The
Corporation is exposed to the risk of nonperformance by the intermediaries
to those agreements, though such nonperformance is not anticipated.
The Corporation has entered into standby letter of credit agreements and
other arrangements with financial institutions primarily relating to the
guarantee of future performance on certain contracts. In connection with the
Loral Transaction, the Corporation assumed the obligations of Loral as
guarantor under the Revolving Credit Agreement of Globalstar, L.P., an
affiliate of Loral SpaceCom, up to a maximum principal amount of $250
million, subject to the assumption by certain of the Globalstar partners of
a portion of the Corporation's obligations as guarantor. At
61
<PAGE>
Management's Dicussion and Analysis
of Financial Condition and Results of Operations
Continued
December 31, 1996, the Corporation had contingent liabilities on outstanding
letters of credit, guarantees and other arrangements aggregating
approximately $1.5 billion.
Cash on hand and temporarily invested, internally generated funds, and
available financing resources as detailed above are expected to be
sufficient to meet the anticipated operating, consolidation and debt service
requirements, discretionary investment needs and capital expenditures of the
Corporation. Consistent with the Corporation's desire to generate cash to
reduce debt, management anticipates that, subject to prevailing financial,
market and economic conditions, the Corporation may divest other non-core
businesses or surplus properties. The pending transaction with Newco, which
management estimates will generate cash in excess of $400 million, is
expected to close during the first half of 1997.
---------------------------------------------------------------------------
Environmental Matters
As more fully described in Note 14 to the consolidated financial statements,
the Corporation entered into a consent decree with the U.S. Environmental
Protection Agency (EPA) relating to certain property in Burbank, California,
which obligated the Corporation to design and construct facilities to
monitor, extract and treat groundwater, and to operate and maintain such
facilities for approximately eight years. A second consent decree is being
finalized which will obligate the Corporation to fund the continued
operation and maintenance of these facilities through the year 2018. The
Corporation has also been operating under a cleanup and abatement order from
the California Regional Water Quality Control Board affecting its Burbank
facilities. This order requires site assessment and action to abate
groundwater contamination by a combination of groundwater and soil cleanup
and treatment. Anticipated future costs for these projects are estimated to
approximate $200 million.
The Corporation is performing an environmental investigation in
Redlands, California under two administrative orders from the California
Regional Water Quality Control Board (Santa Ana Region). These orders
require assessment of the former Lockheed Propulsion Company (LPC)
facilities in Redlands, as well as assessment of a plume of groundwater
contamination in the vicinity of the former facilities. Investigation to
date has failed to reveal any significant contamination at the former LPC
site, and the Corporation contests that it is responsible for the
groundwater plume which is not contiguous to the site. Nonetheless, the
Corporation is complying with the orders and is working with local water
purveyors to assure that public water supplies are maintained.
The Corporation records appropriate financial statement accruals for
environmental issues in the period in which liability is established and the
amounts can be reasonably estimated. In addition to the matters with respect
to the Burbank property described above, the Corporation has accrued
approximately $340 million at December 31, 1996 for other matters in which
an estimate of financial exposure could be determined. Management believes,
however, that it is unlikely that any additional liability it may incur for
known environmental issues would have a material adverse effect on its
consolidated financial position or results of operations.
The Corporation is a party to various proceedings and potential
proceedings related to environmental clean-up issues, including matters at
various sites where it has been designated a Potentially Responsible Party
(PRP) by the EPA or by a state agency. In the event the Corporation is
ultimately found to have liability at those sites where it has been
designated a PRP, the Corporation anticipates that the actual burden for the
costs of remediation will be shared with other liable PRPs. 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, the costs and expenses for investigation and remediation of
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
62
<PAGE>
Lockheed Martin Corporation
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. Among the variables
management must assess in evaluating costs associated with these sites are
changing cost estimates, continually evolving governmental environmental
standards and cost allowability issues. Therefore, the nature of these
environmental matters makes it extremely difficult to estimate the timing
and amount of any future costs that may be necessary for remedial matters.
The Corporation is currently unable to predict the outcome of these matters,
inasmuch as the actual costs of remedial actions have not been determined
and the allocation of liabilities among parties that ultimately may be found
liable remains uncertain.
In 1994, the Corporation was awarded a $180 million fixed price contract
by the DOE for the Phase II design, construction and limited test of
remediation facilities, and the Phase III full remediation of waste found in
Pit 9, located on the Idaho National Engineering and Environmental
Laboratory reservation. The Corporation has incurred and continues to incur
significant unanticipated costs and schedule impacts due to complex
technical and contractual matters which threaten the viability of the
overall Pit 9 program. The Corporation is currently working to identify and
quantify the overall effects, including the financial impact, of these
matters, and discussions with the DOE are continuing; however, no resolution
of these technical and contractual matters has been achieved to date. Upon
completion of the Corporation's investigation into the circumstances which
gave rise to these schedule, technical and cost issues, the Corporation will
provide the DOE an appropriate request for equitable adjustment. The total
amount of such request for equitable adjustment has not yet been determined.
63
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Lockheed Martin Corporation
The Corporation's Responsibility
for Financial Reporting
The management of Lockheed Martin Corporation prepared and is
responsible for the consolidated financial statements and all related
financial information contained in this report. The consolidated financial
statements, which include amounts based on estimates and judgments, have been
prepared in accordance with generally accepted accounting principles applied
on a consistent basis.
The Corporation maintains a system of internal accounting controls
designed and intended to provide reasonable assurance that assets are
safeguarded, transactions are properly executed and recorded in accordance
with management's authorization, and accountability for assets is maintained.
An environment that establishes an appropriate level of control consciousness
is maintained and monitored and includes examinations by an internal audit
staff and by the independent auditors in connection with their annual audit.
The Corporation's management recognizes its responsibility to foster a
strong ethical climate. Management has issued written policy statements which
document the Corporation's business code of ethics. The importance of ethical
behavior is regularly communicated to all employees through the distribution
of written codes of ethics and standards of business conduct and through
ongoing education and review programs designed to create a strong compliance
environment.
The Audit and Ethics Committee of the Board of Directors is composed of
eight outside directors. This Committee meets periodically with the
independent auditors, internal auditors and management to review their
activities.
The consolidated financial statements have been audited by Ernst & Young
LLP, independent auditors, whose report follows.
/s/ Marcus C. Bennett /s/ Robert E. Rulon
Marcus C. Bennett Robert E. Rulon
Executive Vice President and Vice President and Controller
Chief Financial Officer
64
<PAGE>
Lockheed Martin Corporation
Report of Ernst & Young LLP,
Independent Auditors
Board of Directors and Stockholders
Lockheed Martin Corporation
We have audited the accompanying consolidated balance sheet of Lockheed
Martin Corporation as of December 31, 1996 and 1995, and the related
consolidated statements of earnings, stockholders' equity, and cash flows for
each of the three years in the period ended December 31, 1996. These
financial statements are the responsibility of the Corporation's management.
Our responsibility is to express an opinion on these 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 Lockheed Martin Corporation at December 31, 1996 and 1995, and the
consolidated results of its operations and its cash flows for each of the
three years in the period ended December 31, 1996, in conformity with
generally accepted accounting principles.
The Corporation changed its method of accounting for Employee Stock
Ownership Plans effective January 1, 1994 as discussed in Note 1 to the
consolidated financial statements.
/s/ Ernst & Young LLP
Washington, D.C.
January 20, 1997, except for Note 3,
as to which the date is February 3, 1997
65
<PAGE>
Consolidated Statement Lockheed Martin Corporation
of Earnings
<TABLE>
<CAPTION>
--------------------------------------
Year Ended December 31,
(In millions, except per share data) 1996 1995 1994
===========================================================================================================
<S> <C> <C> <C>
Net sales $26,875 $22,853 $22,906
Costs and expenses:
Cost of sales 24,594 20,881 21,127
Merger related and consolidation expenses -- 690 --
- -----------------------------------------------------------------------------------------------------------
Earnings from operations 2,281 1,282 1,779
Other income and expenses, net 452 95 200
- -----------------------------------------------------------------------------------------------------------
2,733 1,377 1,979
Interest expense 700 288 304
- -----------------------------------------------------------------------------------------------------------
Earnings before income taxes and cumulative effect
of change in accounting 2,033 1,089 1,675
Income tax expense 686 407 620
- -----------------------------------------------------------------------------------------------------------
Earnings before cumulative effect
of change in accounting 1,347 682 1,055
Cumulative effect of change in accounting -- -- (37)
- -----------------------------------------------------------------------------------------------------------
Net earnings $ 1,347 $ 682 $ 1,018
===========================================================================================================
Earnings per common share:
Assuming no dilution:
Before cumulative effect of change in accounting $ 6.80 $ 3.28 $ 5.32
Cumulative effect of change in accounting -- -- (.20)
- -----------------------------------------------------------------------------------------------------------
$ 6.80 $ 3.28 $ 5.12
===========================================================================================================
Assuming full dilution:
Before cumulative effect of change in accounting $ 6.04 $ 3.05 $ 4.83
Cumulative effect of change in accounting -- -- (.17)
- -----------------------------------------------------------------------------------------------------------
$ 6.04 $ 3.05 $ 4.66
===========================================================================================================
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
66
<PAGE>
Lockheed Martin Corporation
Consolidated Statement
of Cash Flows
<TABLE>
<CAPTION>
---------------------------------------------------------
Year Ended December 31,
(In millions) 1996 1995 1994
================================================================================================================================
<S> <C> <C> <C>
Operating Activities
Earnings before cumulative effect of change in accounting $ 1,347 $ 682 $1,055
Adjustments to reconcile earnings to net cash
provided by operating activities:
Merger related and consolidation -- expenses -- 690 --
-- payments (244) (208) --
Depreciation and amortization 732 605 638
Amortization of intangible assets 465 296 279
Deferred federal income taxes (251) (116) 73
Materials transactions (365) -- (118)
Changes in operating assets and liabilities:
Receivables (328) (394) (169)
Inventories (125) 430 (221)
Customer advances and amounts in excess
of costs incurred 544 (294) 20
Other (139) (399) (64)
- --------------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 1,636 1,292 1,493
- --------------------------------------------------------------------------------------------------------------------------------
Investing Activities
Additions to properties, net of purchased operations (737) (500) (509)
Loral transaction (7,344) -- --
Other acquisition, investment and divestiture activities (35) (294) (125)
Net proceeds -- Materials public offering -- -- 189
Other 87 95 (57)
- --------------------------------------------------------------------------------------------------------------------------------
Net cash used for investing activities (8,029) (699) (502)
- --------------------------------------------------------------------------------------------------------------------------------
Financing Activities
Increases (decreases) in short-term borrowings, net 1,110 (14) (7)
Increases in long-term debt 7,000 125 43
Repayments and extinguishments of long-term debt (2,105) (287) (512)
Issuances of common stock 97 61 32
Purchases of common stock -- (150) --
Dividends on common stock (302) (254) (214)
Dividends on preferred stock (60) (60) (60)
- --------------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used for) financing activities 5,740 (579) (718)
- --------------------------------------------------------------------------------------------------------------------------------
Net (decrease) increase in cash and cash equivalents (653) 14 273
Cash and cash equivalents at beginning of year 653 639 366
- --------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ -- $ 653 $ 639
================================================================================================================================
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
67
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LOCKHEED MARTIN CORPORATION
Consolidated Balance Sheet
<TABLE>
<CAPTION>
-----------------------------------
December 31,
(In millions) 1996 1995
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ -- $ 653
Receivables 4,999 3,876
Inventories 3,053 2,835
Deferred income taxes 1,088 580
Other current assets 800 264
- ----------------------------------------------------------------------------------------------------------------------------------
Total current assets 9,940 8,208
Property, plant and equipment 3,721 3,134
Intangible assets related to contracts and programs acquired 1,767 1,553
Cost in excess of net assets acquired 10,394 2,794
Other assets 3,435 1,869
- ----------------------------------------------------------------------------------------------------------------------------------
$29,257 $17,558
- ----------------------------------------------------------------------------------------------------------------------------------
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 1,294 $ 787
Customer advances and amounts in excess of costs incurred 2,600 1,570
Salaries, benefits and payroll taxes 991 567
Income taxes 925 292
Short-term borrowings 1,110 --
Current maturities of long-term debt 180 722
Other current liabilities 1,604 1,246
- ----------------------------------------------------------------------------------------------------------------------------------
Total current liabilities 8,704 5,184
Long-term debt 10,188 3,010
Post-retirement benefit liabilities 2,077 1,795
Other liabilities 1,432 1,136
Stockholders' equity:
Series A preferred stock, $50 liquidation preference per share 1,000 1,000
Common stock, $1 par value per share 193 199
Additional paid-in capital 92 683
Retained earnings 5,823 4,838
Unearned ESOP shares (252) (287)
- ----------------------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 6,856 6,433
- ----------------------------------------------------------------------------------------------------------------------------------
$29,257 $17,558
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
68
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Lockheed Martin Corporation
Consolidated Statement of
Stockholders' Equity
<TABLE>
<CAPTION>
Additional Unearned Guarantee Total
Preferred Common Paid-in Retained ESOP of ESOP Stockholders'
(In millions) Stock Stock Capital Earnings Shares Obligations Equity
==================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1993 $ 1,000 $ 198 $ 689 $ 3,721 $ -- $(407) $ 5,201
Earnings before cumulative effect
of change in accounting -- -- -- 1,055 -- -- 1,055
Cumulative effect of change in
accounting -- -- -- (37) (350) 407 20
Dividends declared on preferred
stock ($3.00 per share) -- -- -- (60) -- -- (60)
Dividends declared on common
stock ($1.14 per share) -- -- -- (214) -- -- (214)
Stock awards and options, and
ESOP activity -- 1 45 5 33 -- 84
- ----------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1994 1,000 199 734 4,470 (317) -- 6,086
Net earnings -- -- -- 682 -- -- 682
Dividends declared on preferred
stock ($3.00 per share) -- -- -- (60) -- -- (60)
Dividends declared on common
stock ($1.34 per share) -- -- -- (254) -- -- (254)
Repurchases of common stock -- (2) (148) -- -- -- (150)
Stock awards and options, and
ESOP activity -- 2 97 -- 30 -- 129
- ----------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1995 1,000 199 683 4,838 (287) -- 6,433
Net earnings -- -- -- 1,347 -- -- 1,347
Dividends declared on preferred
stock ($3.00 per share) -- -- -- (60) -- -- (60)
Dividends declared on common
stock ($1.60 per share) -- -- -- (302) -- -- (302)
Stock awards and options, and
ESOP activity -- 2 151 -- 35 -- 188
Stock exchanged for
Materials shares -- (8) (742) -- -- -- (750)
- ----------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1996 $1,000 $193 $ 92 $5,823 $(252) $ -- $6,856
==================================================================================================================================
</TABLE>
See accompanying Notes to Consolidated Financial Statements. 69
<PAGE>
Notes to Consolidated Financial Statements
December 31, 1996
=============================================================================
Note 1 -- Summary of Significant
Accounting Policies
[ ]Organization -- Lockheed Martin Corporation (Lockheed Martin or the
Corporation) is engaged in the design, manufacture, integration and operation
of a broad array of products and services ranging from aircraft, spacecraft
and launch vehicles to energy management, missiles, electronics, and
information systems. The Corporation serves customers in both domestic and
international defense and civilian markets, with its principal customers
being agencies of the U.S. Government.
[ ]Basis of consolidation and use of estimates -- The consolidated financial
statements include the accounts of wholly-owned and majority-owned
subsidiaries. All material intercompany balances and transactions have been
eliminated in consolidation. The preparation of consolidated financial
statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions, in particular
estimates of anticipated contract costs and revenues utilized in the earnings
recognition process, that affect the reported amounts in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
[ ]Classifications -- Receivables and inventories are primarily attributable to
long-term contracts or programs in progress for which the related operating
cycles are longer than one year. In accordance with industry practice, these
items are included in current assets.
Certain amounts for the prior years have been reclassified to conform
with the 1996 presentation.
[ ]Cash and cash equivalents -- Cash and cash equivalents are net of outstanding
checks that are funded daily as presented for payment. Cash equivalents are
generally comprised of highly liquid instruments with maturities of three
months or less when purchased. Due to the short maturity of these
instruments, carrying value on the Corporation's consolidated balance sheet
approximates fair value.
[ ]Inventories -- Inventories are stated at the lower of cost or estimated net
realizable value. Costs on long-term contracts and programs in progress
represent recoverable costs incurred for production, allocable operating
overhead, and, where appropriate, research and development and general and
administrative expenses, less amounts attributed to cost of sales. Pursuant
to contract provisions, agencies of the U.S. Government and other customers
have title to, or a security interest in, certain inventories as a result of
progress payments and advances. General and administrative expenses related
to commercial products and services provided essentially under commercial
terms and conditions are expensed as incurred. Costs of other product and
supply inventories are principally determined by the first-in, first-out or
average cost methods.
[ ]Property, plant and equipment -- Property, plant and equipment are carried
principally at cost. Depreciation is provided on plant and equipment
generally using accelerated methods of depreciation during the first half of
the estimated useful lives of the assets; thereafter, straight-line
depreciation generally is used. Estimated useful lives generally range from 8
years to 40 years for buildings and 2 years to 20 years for machinery and
equipment.
[ ]Intangible assets -- Intangible assets related to contracts and programs
acquired are amortized over the estimated periods of benefit (15 years or
less) and are displayed on the consolidated balance sheet net of accumulated
amortization of $505 million and $400 million at December 31, 1996 and 1995,
respectively. Cost in excess of net assets acquired (goodwill) is amortized
ratably over appropriate periods, primarily 40 years, and is displayed on the
consolidated balance sheet net of accumulated amortization of $617 million
and $438 million at December 31, 1996 and 1995, respectively. The carrying
values of intangible assets are reviewed if the facts and circumstances
indicate potential impairment of their carrying value, and any impairment
determined is recorded in the current period.
[ ]Environmental matters -- The Corporation records a liability for
environmental matters when it is probable that a liability has been incurred
and the amount can be reasonably estimated. A substantial portion of these
costs are expected to be reflected in sales and cost of sales pursuant to
U.S. Government agreement or regulation. At the time a liability is recorded
for future environmental costs, an asset is recorded for estimated future
recovery considered probable through the pricing of products and services to
agencies of the U.S. Government. The portion of those costs expected to be
allocated to commercial business is reflected in costs and expenses at the
time the liability is established.
[ ]Sales and earnings -- Sales and anticipated profits under long-term
fixed-price production contracts are recorded on a percentage of completion
basis, generally using units of delivery as the measurement basis for effort
accomplished. Estimated contract profits are taken into earnings in
proportion to recorded sales. Sales under certain long-term fixed-price
contracts which, among other things, provide for the delivery of minimal
quantities or require a significant amount of development effort in relation
to total contract value, are recorded using the percentage of completion
cost-to-cost method of accounting where sales and profits are recorded based
on the ratio of costs incurred to estimated total costs at completion.
Sales under cost-reimbursement-type contracts are recorded as costs are
incurred. Applicable estimated profits are included in earnings in the
proportion that incurred costs bear to total estimated costs. Sales of
products and services provided essentially under commercial terms and
conditions are recorded upon shipment or completion of specified tasks.
Amounts representing contract change orders, claims or other items are
included in sales only when they can be reliably estimated and realization is
probable. Incentives or penalties and awards applicable to performance on
contracts are considered in estimating sales and profit rates, and are
recorded when there is
70
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Lockheed Martin Corporation
sufficient information to assess anticipated contract performance. Incentive
provisions which increase or decrease earnings based solely on a single
significant event are generally not recognized until the event occurs.
When adjustments in contract value or estimated costs are determined,
any changes from prior estimates are reflected in earnings in the current
period. Anticipated losses on contracts or programs in progress are charged
to earnings when identified.
[ ]Research and development and similar costs -- Corporation-sponsored research
and development costs primarily include research and development and bid and
proposal effort related to government products and services. Except for
certain arrangements described below, these costs are generally included as
part of the general and administrative costs that are allocated among all
contracts and programs in progress under U.S. Government contractual
arrangements. Corporation-sponsored product development costs not otherwise
allocable are charged to expense when incurred. Under certain arrangements in
which a customer shares in product development costs, the Corporation's
portion of such unreimbursed costs is expensed as incurred. Customer-
sponsored research and development costs incurred pursuant to contracts are
accounted for as contract costs.
[ ]Derivative financial instruments -- The Corporation uses derivative financial
instruments to manage its exposure to fluctuations in interest rates and
foreign exchange rates. The Corporation designates its interest rate swap
agreements as hedges of specific debt instruments and recognizes the interest
differentials as adjustments to interest expense over the terms of the
related debt obligations. Forward exchange contracts are also designated as
qualifying hedges of firm commitments or specific anticipated transactions.
Gains and losses on these contracts are recognized in income when the hedged
transactions occur. At December 31, 1996, the amounts of forward exchange
contracts outstanding, as well as the amounts of gains and losses recorded
during the year, were not material. The Corporation does not hold or issue
financial instruments for trading purposes.
[ ]Earnings per common share -- Earnings per common share were based on the
weighted average number of common shares outstanding during the year.
Earnings per common share, assuming no dilution, were computed based on net
earnings less the dividend requirement for preferred stock. The weighted
average number of common shares outstanding, assuming no dilution, was
approximately 189.1 million in 1996, 189.3 million in 1995 and 187.0 million
in 1994.
Earnings per common share, assuming full dilution, were computed
assuming 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 223.0 million in 1996,
223.2 million in 1995 and 218.3 million in 1994.
[ ]Accounting Changes -- Effective January 1, 1996, the Corporation adopted
Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of." SFAS No. 121 requires that certain long-lived assets to be held and used
be reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable.
Additionally, SFAS No. 121 requires that certain long-lived assets to be
disposed of be reported at the lower of carrying amount or fair value less
costs to sell. The impact of the adoption of this standard was not material
to the Corporation's consolidated earnings or financial position.
Also in 1996, the Corporation adopted SFAS No. 123, "Accounting for
Stock-Based Compensation." SFAS No. 123 allows companies to continue to
measure compensation cost for stock-based employee compensation plans using
the intrinsic value method of accounting as prescribed in Accounting
Principles Board (APB) Opinion No. 25, "Accounting for Stock Issued to
Employees," and related interpretations. The Corporation has elected to
continue its APB Opinion No. 25 accounting treatment for stock-based
compensation, and has adopted the provisions of SFAS No. 123 requiring
disclosure of the pro forma effect on net earnings and earnings per share as
if compensation cost had been recognized based upon the estimated fair value
at the date of grant for options awarded.
The Corporation elected to adopt, effective January 1, 1994, the
American Institute of Certified Public Accountants Statement of Position
(SOP) No. 93-6, "Employers' Accounting for Employee Stock Ownership Plans,"
to account for its Employee Stock Ownership Plans (ESOPs). SOP No. 93-6
requires that unallocated common shares held by an ESOP trust be considered
outstanding for voting and other Corporate purposes, but excluded from
weighted average outstanding shares in calculating earnings per share.
Adoption of this accounting method resulted in a cumulative effect adjustment
which reduced net earnings for 1994 by $37 million, or $.17 per common share
assuming full dilution. For 1996, 1995 and 1994, the weighted average
unallocated ESOP shares excluded in calculating earnings per share totalled
approximately 9.1 million, 10.3 million and 11.5 million common shares,
respectively.
- ------------------------------------------------------------------------------
Note 2 -- Business Combination
with Loral Corporation
On January 7, 1996, the Corporation and its wholly-owned subsidiary, LAC
Acquisition Corporation (LAC), entered into an Agreement and Plan of Merger
(the Loral Merger Agreement) with Loral Corporation (Loral) pursuant to
which LAC agreed to purchase all of the issued and outstanding shares of
common stock of Loral (together with the associated preferred stock purchase
rights) for an aggregate consideration of $38 per share in cash (the Tender
Offer). The Tender Offer was made as part of a series of transactions that
resulted in (i) the distribution to stockholders of Loral immediately prior
to the consummation of the Tender Offer of
71
<PAGE>
Notes to Consolidated Financial Statements
Continued
shares of capital stock in Loral Space & Communications, Ltd. (Loral
SpaceCom), a newly-formed company, which now owns and manages substantially
all of Loral's former space and satellite telecommunications interests, and
(ii) the acquisition by the Corporation of Loral's defense electronics and
systems integration businesses (collectively, the Loral Transaction).
In accordance with the terms of the Tender Offer and the Loral Merger
Agreement, on April 23, 1996, LAC purchased approximately 94.5 percent of the
outstanding shares of common stock of Loral. Subsequent to the consummation
of the Tender Offer, on April 29, 1996, LAC merged with and into Loral and
each remaining share of common stock of Loral not owned by LAC was converted
into the right to receive $38. Each outstanding share of common stock of LAC
was converted into shares of common stock of Loral, and Loral changed its
name to Lockheed Martin Tactical Systems, Inc. (Tactical Systems). As a
result of these transactions, Tactical Systems became a wholly-owned
subsidiary of the Corporation. The operations of Tactical Systems have been
included in the results of operations of the Corporation from April 1, 1996.
In connection with the above transactions, the Corporation acquired
shares of preferred stock of Loral SpaceCom that were convertible into 20
percent of Loral SpaceCom's common stock on a fully diluted basis at the
acquisition date. The Corporation's ownership of the preferred stock of Loral
SpaceCom is subject to certain limitations and restrictions set forth in the
terms and conditions of the preferred stock and in agreements between the
Corporation and Loral SpaceCom.
The total purchase price paid with respect to the above transactions,
including acquisition costs, was approximately $7.6 billion. The Loral
Transaction has been accounted for using the purchase method of accounting.
Purchase accounting adjustments have been recorded to allocate the purchase
price to assets acquired and liabilities assumed based on fair values at the
date of acquisition. A summary of assets acquired and liabilities assumed
follows:
<TABLE>
<CAPTION>
(In millions)
=============================================================================
<S> <C>
Working capital, excluding cash acquired $ (805)
Property, plant and equipment 1,073
Intangible assets related to contracts and
programs acquired 440
Cost in excess of net assets acquired 8,045
Other assets 1,110
Long-term debt (1,857)
Post-retirement benefit liabilities (464)
Other liabilities (198)
-----------------------------------------------------------------------------
Net investment 7,344
Cash acquired 277
-----------------------------------------------------------------------------
Total cost of acquisition $ 7,621
=============================================================================
</TABLE>
The following unaudited pro forma combined earnings data presents the
results of operations of the Corporation and Tactical Systems for the years
ended December 31, 1996 and 1995, as if the Loral Transaction had been
consummated as of the beginning of the periods presented. This pro forma
combined earnings data does not purport to be indicative of results of
operations that would have resulted if the Loral Transaction had occurred on
the applicable dates indicated above. Moreover, this data is not intended to
be indicative of future results of operations.
<TABLE>
<CAPTION>
(In millions, except per share data) 1996 1995
=============================================================================
<S> <C> <C>
Pro forma net sales $28,235 $28,859
Pro forma net earnings 1,356 572
Pro forma earnings per common share:
Assuming no dilution 6.85 2.71
Assuming full dilution 6.08 2.56
=============================================================================
</TABLE>
The funds for the consummation of the Loral Transaction were provided
through the issuance of commercial paper by the Corporation and through
borrowings under revolving credit facilities with a syndicate of commercial
banks. These credit facilities consisted of a 364-day unsecured revolving
credit facility in the amount of $5 billion (the Short-Term Credit Facility)
and a 5-year unsecured revolving credit facility in the amount of $5 billion
(the 5-Year Credit Facility). In connection with the establishment of these
credit facilities, the Corporation and Loral each terminated their previously
existing revolving credit facilities. Approximately $6.6 billion of
commercial paper was issued and approximately $1 billion was borrowed under
the 5-Year Credit Facility to finance the Loral Transaction on the closing
date. During the second quarter of 1996, the Corporation issued $5 billion of
debt securities. The net proceeds from the sale of the debt securities were
used to repay the $1 billion borrowed under the 5-Year Credit Facility and to
reduce the amount of commercial paper outstanding. On July 26, 1996, the
Corporation terminated the Short-Term Credit Facility. The Corporation
amended its 5-Year Credit Facility on December 20, 1996. (See Note 8.)
-----------------------------------------------------------------------------
Note 3 -- Repositioning of Non-Core Businesses and New Organizational
Structure
On January 31, 1997, the Corporation entered into a memorandum of
understanding under which certain of its non-core business units will be
repositioned as a new independent company. These business units, which are
primarily composed of high-technology, product-oriented companies,
contributed approximately 2% of the Corporation's 1996 consolidated net
sales. The Corporation will retain a 34.9% interest in the new company.
The proposed transaction is subject to the parties entering into a
mutually acceptable definitive purchase agreement, regulatory approvals, and
other customary conditions, and is expected to close during the first half
of 1997.
72
<PAGE>
Lockheed Martin Corporation
On February 3, 1997, concurrent with the announcement of this
transaction, the Corporation announced a new organizational structure which
reassigned management responsibility for certain business units. As a
result, the Corporation's operations are now divided into five business
segments. The operations of Tactical Systems have been reflected, for 1996
segment reporting purposes, in the Electronics, Information & Services, and
Energy, Materials and Other segments. The segment data displayed in Note 15
has been presented in accordance with the new structure, and prior year data
has been reclassified to conform to the new presentation.
-----------------------------------------------------------------------------
Note 4 -- Restructuring and Other Charges
During the fourth quarter of 1996, the Corporation recorded nonrecurring
pretax charges, net of state income tax benefits, of $307 million, which
decreased net earnings by $209 million, or $.94 per common share assuming
full dilution. Approximately one-half of the charges reflected the financial
impacts of a conservative strategy on the part of the Corporation toward its
environmental remediation business with regard to current business
conditions, existing contractual issues on a Department of Energy (DOE)
program, and the pursuit of other environmental opportunities. The remaining
charges resulted from a number of other corporate actions to improve
efficiencies, increase competitiveness and focus on core businesses.
During the first quarter of 1995, the Corporation recorded a pretax
charge of $165 million for merger related expenses in connection with the
formation of Lockheed Martin. During the second quarter of 1995, the
Corporation recorded a pretax charge of $525 million in conjunction with a
corporate-wide consolidation plan under which the Corporation would close
certain facilities and laboratories and eliminate duplicative field offices
in the U.S. and abroad, eliminating up to approximately 12,000 positions. The
charge represented the portion of the accrued costs and net realizable value
adjustments that were not probable of recovery. The after-tax effect of these
charges was $436 million, or $1.96 per common share assuming full dilution.
As of December 31, 1996, cumulative merger related and consolidation payments
were approximately $452 million, which primarily relate to the formation of
the Corporation, the elimination of positions and the closure of foreign and
domestic offices and facilities.
During 1996, the Corporation incurred costs anticipated in the 1995
consolidation plan which had not met the requirements for accrual earlier.
These costs include relocation of personnel and programs, retraining, process
re-engineering and certain capital expenditures, among others. Management
estimates that, consistent with the original 1995 consolidation plan, $750
million of such costs will be incurred in the future, and currently
anticipates that the remaining consolidation actions will be substantially
completed by the end of 1998.
Under existing U.S. Government regulations, certain costs incurred for
consolidation actions that can be demonstrated to result in savings in excess
of the cost to implement can be deferred and amortized for government
contracting purposes and included as allowable costs in future pricing of the
Corporation's products and services. Included in other assets at December 31,
1996 is approximately $250 million of deferred costs that will be reflected
in future sales and cost of sales.
-----------------------------------------------------------------------------
Note 5 -- Receivables
Receivables consisted of the following components:
<TABLE>
<CAPTION>
(In millions) 1996 1995
=============================================================================
<S> <C> <C>
U.S. Government:
Amounts billed $1,012 $ 925
Unbilled costs and accrued profits 2,317 1,622
Commercial and foreign governments:
Amounts billed 875 654
Unbilled costs and accrued profits,
primarily related to commercial contracts 795 675
-----------------------------------------------------------------------------
$4,999 $3,876
=============================================================================
</TABLE>
Unbilled costs and accrued profits consisted primarily of revenues on
long-term contracts that had been recognized for accounting purposes but not
yet billed to customers. Approximately $360 million of the December 31, 1996
unbilled costs and accrued profits are not expected to be billed within one
year.
-----------------------------------------------------------------------------
Note 6 -- Inventories
Inventories consisted of the following components:
<TABLE>
<CAPTION>
(In millions) 1996 1995
=============================================================================
<S> <C> <C>
Work in process, primarily related to
long-term contracts and programs
in progress $4,456 $3,752
Less customer advances and
progress payments (2,446) (1,772)
-----------------------------------------------------------------------------
2,010 1,980
Other inventories 1,043 855
-----------------------------------------------------------------------------
$3,053 $2,835
=============================================================================
</TABLE>
Inventories at December 31, 1996 included unamortized deferred costs of
approximately $360 million which are anticipated to be recovered through
future contracts. Customer advances and progress payments applied above were
those where the customer has title to, or a security interest in, inventories
identified with the related contracts. Other customer advances were
classified as current liabilities. Also included in 1996 inventories above
were approximately $370 million of costs which are not expected to be
recovered within one year.
73
<PAGE>
Notes to Consolidated Financial Statements
Continued
An analysis of general and administrative costs, including research and
development costs, included in work in process inventories follows:
<TABLE>
<CAPTION>
(In millions) 1996 1995 1994
=============================================================================
<S> <C> <C> <C>
Beginning of year $ 431 $ 480 $ 499
Incurred during the year 2,154 1,704 1,761
Charged to costs and
expenses during the year:
Research and development (784) (548) (659)
Other general and administrative (1,341) (1,205) (1,121)
-----------------------------------------------------------------------------
End of year $ 460 $ 431 $ 480
=============================================================================
</TABLE>
In addition, included in costs and expenses in 1996, 1995 and 1994 were
general and administrative costs, including research and development costs,
of approximately $574 million, $320 million and $223 million, respectively,
incurred by commercial business units or programs.
-----------------------------------------------------------------------------
Note 7 -- Property, Plant and Equipment
Property, plant and equipment consisted of the following components:
<TABLE>
<CAPTION>
(In millions) 1996 1995
=============================================================================
<S> <C> <C>
Land $ 248 $ 362
Buildings 2,876 2,463
Machinery and equipment 5,328 5,329
-----------------------------------------------------------------------------
8,452 8,154
Less accumulated depreciation
and amortization (4,731) (5,020)
-----------------------------------------------------------------------------
$3,721 $3,134
=============================================================================
</TABLE>
-----------------------------------------------------------------------------
Note 8 -- Debt
Long-term debt consisted of the following components:
<TABLE>
<CAPTION>
Type Range of
(Maturity Dates) Interest
(In millions) Rates 1996 1995
=============================================================================
<S> <C> <C> <C>
Notes Payable (1997-2022) 5.7-9.4% $ 5,547 $2,172
Debentures (2003-2036) 7.0-9.1% 3,156 828
Commercial Paper 5.6-7.3% 1,250 --
ESOP obligations
(1997-2004) 8.3-8.4% 324 355
Payment obligations
assumed from
General Electric 5.0% -- 303
Other obligations 6.0-11.4% 91 74
-----------------------------------------------------------------------------
10,368 3,732
Less current maturities (180) (722)
-----------------------------------------------------------------------------
$10,188 $3,010
=============================================================================
</TABLE>
During the second quarter of 1996, the Corporation issued $5 billion of
long-term fixed rate debt securities, the entire amount registered under the
Corporation's shelf registration statement which became effective on May 10,
1996. These Notes and Debentures range in maturity from two years to 40
years, with interest rates ranging from between 6.55% and 7.75%. The
registered holders of $300 million of 40 year Debentures may elect, between
March 1 and April 1, 2008, to have each of their Debentures repaid by the
Corporation on May 1, 2008. The debt securities are guaranteed by Tactical
Systems (see Note 17).
In February 1996, the Corporation entered into interest rate hedging
agreements to offset a portion of its exposure to rising interest rates
related to the anticipated long-term financings. These agreements were closed
in the second quarter of 1996 in connection with the Corporation's issuance
of its long-term debt securities. The Corporation realized a gain of
approximately $150 million on the closing of these agreements, which has been
deferred and is being amortized and recognized as an adjustment to interest
expense over the terms of the related debt obligations.
At the effective date of the Loral Transaction, the Corporation assumed
approximately $1.9 billion of debt obligations of the former Loral
Corporation.
Included in Debentures are $103 million of 7% obligations ($175 million
at face value) which were originally sold at approximately 54% of their
principal amount. These debentures, which are redeemable in whole or in part
at the Corporation's option at 100% of their face value, have an effective
yield of 13.25%.
A leveraged ESOP incorporated into the savings plan for heritage
Lockheed Corporation (Lockheed) employees borrowed $500 million through a
private placement of notes in 1989 (see Note 12). These notes are being
repaid in quarterly installments over terms ending in 2004. The ESOP note
agreement stipulates
74
<PAGE>
Lockheed Martin Corporation
that, in the event that the ratings assigned to the Corporation's long-term
senior unsecured debt are below investment grade, holders of the notes may
require the Corporation to purchase the notes and pay accrued interest. These
notes are obligations of the ESOP but are guaranteed by the Corporation and
included as debt on the Corporation's consolidated balance sheet.
On December 20, 1996, the Corporation amended its 5-Year Credit Facility
to reduce its amount from $5 billion to $3.5 billion (the Amended 5-Year
Credit Facility). The Corporation also entered into a one year credit
facility in the amount of $1.5 billion (collectively, the Credit Facilities).
Borrowings under the Credit Facilities would be unsecured and bear interest,
at the Corporation's option, at rates based on the Eurodollar rate or a bank
Base Rate (as defined). Each bank's obligation to make loans under the Credit
Facilities is subject to, among other things, compliance by the Corporation
with various representations, warranties, covenants and agreements,
including, but not limited to, covenants limiting the ability of the
Corporation and certain of its subsidiaries to encumber their assets and a
covenant not to exceed a maximum leverage ratio.
No borrowings were outstanding under the Credit Facilities at December
31, 1996. However, the Amended 5-Year Credit Facility supports commercial
paper borrowings of approximately $2.4 billion outstanding at December 31,
1996, of which approximately $1.25 billion has been classified as long-term
debt in the Corporation's consolidated balance sheet based on management's
ability and intention to maintain this debt outstanding for at least one
year. During the third quarter of 1996, the Corporation entered into interest
rate swap agreements to fix the interest rates on $875 million of its
commercial paper borrowings. These agreements will mature during 1997. The
effects of these interest rate swap agreements are recorded periodically as
an adjustment to interest expense related to commercial paper borrowings. The
Corporation is exposed to the risk of nonperformance by the intermediaries to
these agreements, though such nonperformance is not anticipated.
Excluding commercial paper classified as long term, the Corporation's
long-term debt maturities for the five years following December 31, 1996,
are: $180 million in 1997; $875 million in 1998; $850 million in 1999; $44
million in 2000; $799 million in 2001; and $6,370 million thereafter.
Certain of the Corporation's other financing agreements contain
restrictive covenants relating to debt, limitations on encumbrances, and sale
and lease-back transactions, and provisions which relate to certain changes
in control.
SFAS No. 107, "Disclosures about Fair Value of Financial Instruments,"
and SFAS No. 119, "Disclosure about Derivative Financial Instruments and Fair
Value of Financial Instruments," require the disclosure of the fair value of
financial instruments, including assets and liabilities recognized and not
recognized on the consolidated balance sheet, for which it is practicable to
estimate fair value. Unless otherwise indicated elsewhere in the notes to the
consolidated financial statements, the carrying value of the Corporation's
financial instruments approximates fair value. The estimated fair values of
the Corporation's long-term debt instruments at December 31, 1996, aggregated
approximately $10.7 billion, compared with a carrying amount of approximately
$10.4 billion on the consolidated balance sheet. The fair values were
estimated based on quoted market prices for those instruments publicly
traded. For privately placed debt, the fair values were estimated based on
the quoted market prices for similar issues, or on current rates offered to
the Corporation for debt of the same remaining maturities.
Interest payments were $655 million in 1996, $275 million in 1995 and
$276 million in 1994.
- -------------------------------------------------------------------------------
Note 9 -- Income Taxes
The provision for federal and foreign income taxes consisted of the following
components:
<TABLE>
<CAPTION>
(In millions) 1996 1995 1994
=============================================================================
<S> <C> <C> <C>
Federal income taxes:
Current $914 $510 $538
Deferred (251) (116) 73
-----------------------------------------------------------------------------
Total federal income taxes 663 394 611
Foreign income taxes 23 13 9
-----------------------------------------------------------------------------
Total income taxes provided $686 $407 $620
=============================================================================
</TABLE>
Net provisions for state income taxes are included in general and
administrative expenses, which are primarily allocable to government
contracts. Such state income taxes were $45 million for 1996, $86 million for
1995 and $50 million for 1994.
The Corporation's effective income tax rate varied from the statutory
federal income tax rate because of the following tax differences:
<TABLE>
<CAPTION>
1996 1995 1994
=============================================================================
<S> <C> <C> <C>
Statutory federal tax rate 35.0% 35.0% 35.0%
Increase (reduction) in tax rate from:
Nondeductible amortization 4.2 3.2 2.1
Revisions to prior years'
estimated liabilities (1.6) (3.4) (.9)
Divestitures (5.6) -- --
Other, net 1.8 2.6 .8
-----------------------------------------------------------------------------
33.8% 37.4% 37.0%
=============================================================================
</TABLE>
75
<PAGE>
Notes to Consolidated Financial Statements
Continued
The primary components of the Corporation's federal deferred income tax
assets and liabilities at December 31 were as follows:
<TABLE>
<CAPTION>
(In millions) 1996 1995
=============================================================================
<S> <C> <C>
Deferred tax assets related to:
Accumulated post-retirement
benefit obligations $ 700 $ 554
Accrued compensation and benefits 333 223
Merger related and
consolidation reserves 217 168
Contract accounting methods 619 165
Other 180 137
-----------------------------------------------------------------------------
2,049 1,247
Deferred tax liabilities related to:
Intangible assets 486 365
Prepaid pension asset 297 89
Property, plant and equipment 178 213
-----------------------------------------------------------------------------
961 667
-----------------------------------------------------------------------------
Net deferred tax assets $1,088 $ 580
=============================================================================
</TABLE>
Federal and foreign income tax payments, net of refunds received, were
$1.1 billion in 1996, $223 million in 1995 and $502 million in 1994.
-----------------------------------------------------------------------------
Note 10 -- Other Income and Expenses
Other income and expenses, net, consisted of the following components:
<TABLE>
<CAPTION>
(In millions) 1996 1995 1994
=============================================================================
<S> <C> <C> <C>
Royalty income $ 47 $64 $ 59
Interest income 60 33 34
Materials transactions 365 -- 118
Acquisition termination fee -- -- 50
Other (20) (2) (61)
-----------------------------------------------------------------------------
$452 $95 $200
=============================================================================
</TABLE>
During the third quarter of 1996, the Corporation announced its
intention to distribute via an exchange offer its remaining 81 percent
interest in Martin Marietta Materials, Inc. (Materials) to its stockholders
(the Exchange Offer). Under the terms of the Exchange Offer, the
Corporation's stockholders were given the opportunity to exchange each
Lockheed Martin common share held for 4.72 common shares of Materials on a
tax-free basis. The Exchange Offer expired by its terms on October 18, 1996
and was oversubscribed. On October 23, 1996, approximately 7.9 million shares
of the Corporation's common stock were exchanged for the 37.35 million shares
of Materials common stock held by the Corporation. Upon the closing of this
transaction, the Corporation had no remaining ownership interest in Materials
and had reduced its common shares outstanding by approximately 4 percent.
This fourth quarter, 1996 exchange was accounted for at fair value, resulting
in the reduction of the Corporation's stockholders' equity by $750 million
and the recognition of a pretax gain of $365 million.
In November, 1996, the Corporation announced the proposed divestiture of
two of its business units, Defense Systems and Armament Systems. This
transaction, which concluded with the Corporation's receipt of $450 million
in cash on January 2, 1997, had no pretax effect on the results of operations
for 1996. At December 31, 1996, $450 million, representing the net assets of
the two business units, is included in other current assets.
On a combined basis, the Materials exchange and divestiture noted above
increased net earnings by $351 million, or $1.58 per common share assuming
full dilution.
In February 1994, Materials sold through an initial public offering
(IPO) approximately 8.8 million shares, or 19% of its common stock. A portion
of the proceeds from the offering was used to defease in substance certain
long-term debt. The Corporation recognized a pretax gain, net of a loss on
debt defeasance, of $118 million from the Materials IPO. The net after-tax
gain from these transactions was $70 million, or $.32 per common share
assuming full dilution.
During March 1994, the Corporation entered into an Agreement and Plan of
Merger with Grumman Corporation (Grumman) which was subsequently terminated
by Grumman. In April 1994, the Corporation received $50 million plus
reimbursement of expenses pursuant to the termination provisions of the
Agreement and Plan of Merger. The Corporation recorded an after-tax gain of
$30 million, or $.14 per common share assuming full dilution.
-----------------------------------------------------------------------------
Note 11 -- Stockholders' Equity and Related Items
[ ]Capital structure -- The authorized capital of the Corporation is composed of
750 million shares of common stock (192.7 million shares issued), 50 million
shares of series preferred stock (no shares issued), and 20 million shares of
Series A preferred stock (20 million shares issued). Approximately 70 million
common shares have been reserved for issuance under benefit and incentive
plans.
The Series A preferred stock has a par value of $1 per share
(liquidation preference of $50 per share). The Corporation issued all of the
authorized and outstanding shares of Series A preferred stock to General
Electric Company (GE) in 1993 in connection with the acquisition of the GE
Aerospace businesses. Dividends are cumulative and paid at an annual rate of
$3.00 per share, or 6%. The shares held by GE are currently convertible into
approximately 13% of the shares of the Corporation's common stock after
giving effect to such conversion, have an aggregate liquidation preference of
$1 billion, and are nonvoting except in special circumstances.
76
<PAGE>
Lockheed Martin Corporation
Accordingly, 29 million common shares have been reserved for this potential
conversion. In April 1998 and thereafter, the Corporation will be entitled to
redeem, at its option, any or all shares of the Series A preferred stock for
either cash or common stock. The Series A preferred stock is held under a
Standstill Agreement which, among other things, 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 stockholder 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 stockholders the
election of two persons designated by GE to serve as directors of the
Corporation.
During the second quarter of 1996, the Corporation's Board of Directors
terminated the systematic common stock repurchase plan which had been
established in 1995 to counter the future dilutive effect of common stock
issued by the Corporation under its 1995 Omnibus Performance Award Plan. A
separate program authorized in 1995 for the repurchase of up to nine million
common shares to counter the dilutive effect of common stock issued under the
Corporation's other benefit and compensation programs and for other purposes
related to such plans remains in effect. Approximately 2.3 million common
shares were repurchased by the Corporation in 1995 under these programs; no
shares were repurchased in 1996.
[ ]Stock option and award plans -- On March 15, 1995, the stockholders approved
the Lockheed Martin 1995 Omnibus Performance Award Plan (Omnibus Plan). Under
the 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.
Employees may also be granted cash-based incentive awards, such as
performance units. These awards may be granted either individually or in
combination with other awards. The Omnibus Plan requires that options to
purchase common stock have an exercise price of not less than 100% of the
market value of the underlying stock on the date of grant. The number of
shares of Lockheed Martin common stock currently authorized to be issued in
respect of awards under the Omnibus Plan is 12 million shares. The Omnibus
Plan does not impose any minimum vesting periods on options or other awards.
The maximum term of an option or any other award is ten years. 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 to the merger of Lockheed and Martin Marietta Corporation (Martin
Marietta) in 1995 (the Business Combination), Lockheed and Martin Marietta
had also utilized share-based and cash-based incentive award plans. The
Agreement and Plan of Reorganization relating to the Business Combination
provided 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 Business Combination. Effective
with the adoption of the Omnibus Plan, no further grants of share-based or
cash-based incentive awards have been or will be made under any of Lockheed's
or Martin Marietta's prior plans. Accordingly, shares available for grant
under these prior plans were removed from registration in 1995.
The following table summarizes the stock option activity of the
Corporation's plans during 1994, 1995 and 1996:
<TABLE>
<CAPTION>
Number of Shares
(In thousands)
------------------------- Weighted
Available Options Average
for Grant Outstanding Exercise Price
=============================================================================
<S> <C> <C> <C>
December 31, 1993 3,784 8,469 $29.57
Additions 2,119 -- --
Granted (2,403) 2,397 $42.65
Exercised -- (1,463) $27.10
Terminated 152 (159) $38.04
-------------------------------------------------------------
December 31, 1994 3,652 9,244 $33.21
Additions 12,000 -- --
Granted (2,228) 2,228 $59.38
Removed from registration (3,674) -- --
Exercised -- (1,943) $30.47
Terminated 81 (109) $51.63
-------------------------------------------------------------
December 31, 1995 9,831 9,420 $39.74
Granted (2,649) 2,649 $75.04
Exercised -- (2,241) $32.65
Terminated 141 (170) $63.32
-------------------------------------------------------------
December 31, 1996 7,323 9,658 $50.65
=============================================================================
</TABLE>
Approximately 5.2 million, 6.5 million and 5.7 million outstanding
options were exercisable at December 31, 1994, 1995 and 1996, respectively.
Information regarding options outstanding at December 31, 1996 follows
(number of options in thousands):
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------------------------------------------ -----------------------------
Weighted Weighted Average Weighted
Range of Number of Average Remaining Contractual Number of Average
Exercise Prices Options Exercise Price Life Options Exercise Price
==========================================================================================================================
<S> <C> <C> <C> <C> <C>
Less than $39.99 3,408 $30.79 5 years 3,408 $30.79
$40.00 - $59.99 3,676 $51.98 8 years 2,241 $50.09
Greater than $60.00 2,574 $75.06 9 years 5 $75.79
----- -----
Total 9,658 $50.65 7 years 5,654 $38.48
==========================================================================================================================
</TABLE>
77
<PAGE>
Notes to Consolidated Financial Statements
Continued
All stock-based incentive awards granted in 1996 and 1995 under the
Omnibus Plan were stock options which have 10 year terms and vest over a two
year service period. Exercise prices of options awarded in both years were
equal to the market price of the stock on the date of grant. Pro forma
information regarding net earnings and earnings per share as required by SFAS
No. 123 has been determined as if the Corporation had accounted for its
employee stock options under the fair value method. The fair value for these
options was estimated at the date of grant using a Black-Scholes option
pricing model with the following weighted-average assumptions for 1996 and
1995, respectively: risk-free interest rates of 5.58% and 6.64%; dividend
yield of 1.70%; volatility factors related to the expected market price of
the Corporation's common stock of .186 and .216; and weighted-average
expected option life of five years. The weighted average fair values of
options granted during 1996 and 1995 were $17.24 and $16.09, respectively.
For purposes of pro forma disclosures, the options' estimated fair
values are amortized to expense over the options' vesting periods. Therefore,
the pro forma results for 1995 presented below include only 50% of the total
pro forma expense for options awarded in that year. The Corporation's pro
forma information follows:
<TABLE>
<CAPTION>
(In millions, except per share data) 1996 1995
-------------------------------------------------------------
<S> <C> <C>
Pro forma net earnings $1,322 $ 671
Pro forma earnings per common share:
Assuming no dilution 6.67 3.23
Assuming full dilution 5.93 3.01
-------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
Note 12 -- Post-Retirement Benefit Plans
The Corporation maintains separate plans for post-retirement benefits for its
employees based on their association with the former heritage companies of
Lockheed and Martin Marietta, and with Tactical Systems.
Defined Contribution Plans
The Corporation maintains a number of defined contribution plans which cover
substantially all employees, the most significant of which are the 401(k)
plans for salaried employees (the Salaried Plans) and hourly employees (the
Hourly Plans). Under the provisions of these 401(k) plans, employees'
eligible contributions are matched by the Corporation at established rates.
The Corporation's matching obligations were $202 million in 1996, $180
million in 1995, and $192 million in 1994. Matching obligations for 1996
include contributions related to employees of Tactical Systems since the date
of acquisition.
The Salaried Plan for heritage Lockheed employees includes an ESOP which
purchased 17.4 million shares of the Corporation's common stock with the
proceeds from a $500 million note issue which is guaranteed by the
Corporation (see Note 8). A portion of the Corporation's match consisted of
the Corporation's common stock (50% through June 30, 1995, and 100%
thereafter), which was partially fulfilled with stock released from the ESOP
at approximately 1.2 million shares per year based upon the debt repayment
schedule through the year 2004, with the remainder being fulfilled through
purchases of common stock from terminating participants or in the open
market. Interest incurred on the ESOP debt totaled $29 million, $31 million
and $33 million in 1996, 1995 and 1994, respectively. Dividends received by
the ESOP with respect to unallocated shares held are used for debt service.
The ESOP held approximately 21 million issued shares of the Corporation's
common stock at December 31, 1996, of which approximately 12 million were
allocated and 9 million were unallocated. The fair value of the unallocated
ESOP shares at December 31, 1996 was approximately $800 million. Effective
January 1, 1997, heritage Martin Marietta salaried employees became eligible
to participate in this plan.
The Hourly Plans for heritage Lockheed employees include non-leveraged
ESOPs. The Corporation's match to these plans were made through cash
contributions to the ESOP trusts which were used, in part, to purchase common
stock from terminating participants and in the open market for allocation to
participant accounts. These ESOP trusts held approximately 2 million issued
and outstanding shares of common stock at December 31, 1996.
Dividends paid to the salaried and hourly ESOP trusts on the allocated
shares are paid annually by the ESOP trusts to the participants based upon
the number of shares allocated to each participant.
Defined Benefit Plans
Most employees are covered by contributory or noncontributory defined benefit
pension plans. Benefits for salaried plans are generally based on average
compensation and years of service, while those for hourly plans are generally
based on negotiated benefits and years of service. Substantially all benefits
are paid from funds previously contributed to trustees. The Corporation's
funding policy is to make contributions that are consistent with U.S.
Government cost allowability and Internal Revenue Service deductibility
requirements, subject to the full-funding limits of the Employee Retirement
Income Security Act of 1974 (ERISA). When any funded plan exceeds the full-
funding limits of ERISA, no contribution is made to that plan.
The net pension cost related to the Corporation's defined benefit plans
included the following components:
<TABLE>
<CAPTION>
(In millions) 1996 1995 1994
------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost--benefits
earned during the year $ 463 $ 342 $ 429
Interest cost 1,050 881 828
Net amortization and
other components 889 1,534 (1,067)
Actual return on assets (2,243) (2,571) 65
------------------------------------------------------------------------
Net pension cost $ 159 $ 186 $ 255
------------------------------------------------------------------------
</TABLE>
78
<PAGE>
Lockheed Martin Corporation
The following table sets forth the defined benefit plans' funded status
and amounts recognized in the Corporation's consolidated balance sheet:
<TABLE>
<CAPTION>
(In millions) 1996 1995
- -------------------------------------------------------------------------------
<S> <C> <C>
Plan assets at fair value $18,402 $13,813
- -------------------------------------------------------------------------------
Actuarial present value of benefit obligations:
Vested $13,486 $10,684
Non-vested 236 115
- -------------------------------------------------------------------------------
Accumulated benefit obligation 13,722 10,799
Effect of projected future
salary increases 1,694 1,589
- -------------------------------------------------------------------------------
Projected benefit obligation (PBO) 15,416 12,388
- -------------------------------------------------------------------------------
Plan assets greater than PBO 2,986 1,425
Reconciling items:
Unrecognized net asset existing at the date
of initial application of SFAS No. 87 (196) (287)
Unrecognized prior-service cost 461 499
Unrecognized gain (2,484) (1,381)
- -------------------------------------------------------------------------------
Prepaid pension asset $ 767 $ 256
- -------------------------------------------------------------------------------
</TABLE>
The increases in the fair value of plan assets, the PBO and the prepaid
pension asset are primarily related to the inclusion of the defined benefit
plans of Tactical Systems in 1996. The fair value of plan assets also
increased due to favorable investment returns in 1996.
At December 31, 1996, approximately 56 percent of the plan assets were
equity securities with the remainder primarily being fixed income securities
and cash equivalents. Actuarial determinations were based on various
assumptions displayed in the following table. Net pension costs in 1996, 1995
and 1994 were based on assumptions in effect at the end of the respective
preceding year. Benefit obligations as of each year-end were based on
assumptions in effect as of those dates.
<TABLE>
<CAPTION>
1996 1995 1994
------------------------------------------------------------
<S> <C> <C> <C>
Assumptions:
Discount rates 7.8% 7.5% 8.2-8.5%
Rates of increase in future
compensation levels 6.0 6.0 5.5-6.0
Expected long-term
rate of return on assets 9.0 8.8 8.0-8.8
------------------------------------------------------------
</TABLE>
Retiree Medical And Life Insurance Plans
Certain health care and life insurance benefits are provided to eligible
retirees by the Corporation. These benefits are paid by the Corporation or
funded through several trusts.
The net periodic post-retirement benefit cost included the following
components:
<TABLE>
<CAPTION>
(In millions) 1996 1995 1994
---------------------------------------------------------
<S> <C> <C> <C>
Service cost--benefits
earned during the year $ 40 $ 34 $ 54
Interest cost 181 177 164
Net amortization and
other components 13 44 (29)
Actual return on assets (73) (82) (3)
Curtailment gain (15) -- (21)
---------------------------------------------------------
Net post-retirement cost $146 $173 $165
---------------------------------------------------------
</TABLE>
The Corporation has made contributions to trusts (including Voluntary
Employees' Beneficiary Association (VEBA) trusts and 401(h) accounts)
established to pay future medical benefits to eligible retirees and
dependents.
The following table sets forth the post-retirement benefit plans'
obligations and funded status as of December 31:
<TABLE>
<CAPTION>
(In millions) 1996 1995
---------------------------------------------------------------------
<S> <C> <C>
Plan assets at fair value $ 736 $ 590
---------------------------------------------------------------------
Actuarial present value of benefit obligations:
Active employees, eligible to retire $ 334 $ 344
Active employees, not eligible to retire 454 428
Former employees 1,819 1,504
---------------------------------------------------------------------
Accumulated post-retirement
benefit obligation (APBO) 2,607 2,276
---------------------------------------------------------------------
Assets less than APBO 1,871 1,686
Unrecognized prior service cost -- 16
Unrecognized gain 206 93
---------------------------------------------------------------------
Post-retirement benefit unfunded liability $2,077 $1,795
</TABLE>
Actuarial determinations were based on various assumptions displayed in
the following table. Net retiree medical costs for 1996, 1995 and 1994 were
based on assumptions in effect at the end of the respective preceding years.
Benefit obligations as of the end of each year reflect assumptions in effect
as of those dates.
<TABLE>
<CAPTION>
1996 1995 1994
----------------------------------------------------------
<S> <C> <C> <C>
Assumptions:
Discount rates 7.8% 7.5% 8.2-8.5%
Expected long-term
rate of return on assets 9.0 8.8 8.0-8.8
----------------------------------------------------------
</TABLE>
The medical trend rates used in measuring the APBO were 7.5% in 1996 and
8% in 1995, and were assumed to gradually decrease to 4.5% by the year 2004.
An increase of one percentage point in the assumed medical trend rates would
result in an
79
<PAGE>
Notes to Consolidated Financial Statements
Continued
increase in the APBO of approximately 7.6% at December 31, 1996, and a 1996
post-retirement benefit cost increase of approximately 8.1%. The Corporation
believes that the cost containment features it has previously adopted and the
funding approaches underway will allow it to effectively manage its retiree
medical expenses, but it will continue to monitor the costs of retiree
medical benefits and may further modify the plans if circumstances warrant.
- --------------------------------------------------------------------------------
Note 13 -- Leases
Total rental expense under operating leases, net of immaterial amounts of
sublease rentals and contingent rentals, were $320 million, $236 million and
$265 million for 1996, 1995 and 1994, respectively.
Future minimum lease commitments at December 31, 1996, for all operating
leases that have a remaining term of more than one year were approximately
$1.1 billion ($254 million in 1997, $207 million in 1998, $174 million in
1999, $124 million in 2000, $99 million in 2001, and $264 million in later
years). Certain major plant facilities and equipment are furnished by the
U.S. Government under short-term or cancelable arrangements.
- --------------------------------------------------------------------------------
Note 14 -- Commitments and Contingencies
The Corporation or its subsidiaries are parties to or have property subject
to litigation and other proceedings, including matters arising under
provisions relating to the protection of the environment. In the opinion of
management and counsel, the probability is remote that the outcome of these
matters will have a material adverse effect on the results of the
Corporation's operations or its financial position. These matters include the
following items:
[ ]Environmental matters -- In 1991, the Corporation entered into a consent
decree with the U.S. Environmental Protection Agency (EPA) relating to
certain property in Burbank, California, which obligated the Corporation to
design and construct facilities to monitor, extract, and treat groundwater,
and to operate and maintain such facilities for approximately eight years. A
second consent decree is being finalized which will obligate the Corporation
to fund the continued operation and maintenance of these facilities through
the year 2018. The Corporation estimates that expenditures required to comply
with the consent decrees over their remaining terms will be approximately
$110 million.
The Corporation has also been operating under a cleanup and abatement
order from the California Regional Water Quality Control Board affecting its
facilities in Burbank, California. This order requires site assessment and
action to abate groundwater contamination by a combination of groundwater and
soil cleanup and treatment. Based on experience derived from initial
remediation activities, the Corporation estimates the anticipated costs of
these actions in excess of the requirements under the EPA consent decree to
approximate $90 million over the remaining term of the project.
In addition, the Corporation is involved in other proceedings and
potential proceedings relating to environmental matters, including disposal
of hazardous wastes and soil and water contamination. The extent of the
Corporation's financial exposure cannot in all cases be reasonably estimated
at this time. A liability of approximately $340 million for those cases in
which an estimate of financial exposure can be determined has been recorded.
Under an agreement with the U.S. Government, the Burbank groundwater
treatment and soil remediation expenditures referenced above are being
allocated to the Corporation's operations as general and administrative costs
and, under existing government regulations, these and other environmental
expenditures related to U.S. Government business, after deducting any
recoveries from insurance or other responsible parties, are allowable in
establishing the prices of the Corporation's products and services. As a
result, a substantial portion of the expenditures will be reflected in the
Corporation's sales and cost of sales pursuant to U.S. Government agreement
or regulation. The Corporation has recorded an asset for the portion of these
costs that are probable of future recovery in pricing of the Corporation's
products and services for U.S. Government business. The portion that is
expected to be allocated to commercial business has been reflected in cost of
sales. The recorded amounts do not reflect the possible future recovery of
portions of the environmental costs through insurance policy coverage or from
other potentially responsible parties, which the Corporation is pursuing as
required by agreement and U.S. Government regulation. Any such recoveries,
when received, would reduce the Corporation's liability as well as the
allocated amounts to be included in the Corporation's U.S. Government sales
and cost of sales.
[ ]Waste remediation contract -- In 1994, the Corporation was awarded a $180
million fixed price contract by the DOE for the Phase II design, construction
and limited test of remediation facilities, and the Phase III full
remediation of waste found in Pit 9, located on the Idaho National
Engineering and Environmental Laboratory reservation. The Corporation has
incurred and continues to incur significant unanticipated costs and schedule
impacts due to complex technical and contractual matters which threaten the
viability of the overall Pit 9 program. The Corporation is currently working
to identify and quantify the overall effects, including the financial impact,
of these matters, and discussions with the DOE are continuing; however, to
date no resolution of these technical and contractual matters has been
achieved. Upon completion of the Corporation's investigation into the
circumstances which gave rise to these schedule, technical and cost issues,
the Corporation will provide the DOE an appropriate request for equitable
adjustment. The total amount of such request for equitable adjustment has not
yet been determined.
[ ]Letters of credit and other matters -- The Corporation has entered into
standby letter of credit agreements and other arrangements with financial
institutions primarily relating to the guarantee of future performance on
certain contracts. In connection with the Loral Transaction, the Corporation
assumed the
80
<PAGE>
Lockheed Martin Corporation
obligations of Loral as guarantor under the Revolving Credit Agreement of
Globalstar, L.P., an affiliate of Loral SpaceCom, up to a maximum principal
amount of $250 million, subject to the assumption by certain of the
Globalstar partners of a portion of the Corporation's obligations as
guarantor. At December 31, 1996, the Corporation had contingent liabilities
on outstanding letters of credit, guarantees, and other arrangements
aggregating approximately $1.5 billion.
- --------------------------------------------------------------------------------
Note 15 -- Information on Industry Segments
and Major Customers
The Corporation operates in four principal business segments: Space &
Strategic Missiles, Electronics, Information & Services, and Aeronautics. All
other activities of the Corporation fall within the Energy, Materials and
Other segment.
. Space & Strategic Missiles -- Engaged in the design, development, engineering
and production of civil, commercial and military space systems, including
spacecraft, space launch vehicles, manned space systems and their supporting
ground systems and services; telecommunications systems and services;
strategic fleet ballistic missiles; and defensive missiles.
. Electronics -- Engaged in the design, development, engineering and production
of high performance electronic systems for undersea, shipboard, land-based,
airborne and space-based applications. Major defense product lines include
surface ship and submarine combat systems; anti-armor missiles; indirect fire
support weapons systems; air defense systems; aircraft system integration;
and electronic warfare. Major commercial product lines include satellite
electronics; mail handling automation systems; and transportation systems.
. Information & Services -- Engaged in the development, integration and
operation of large, complex information systems; engineering, technical, and
management services for federal customers; transaction processing systems and
services for state and local government agencies; commercial information
technology outsourcing; manufacture and distribution of computer peripherals,
graphics engines and intranet software; and the provision of internal
information technology support to the Corporation.
. Aeronautics -- Engaged in the design, development, engineering and production
of fighter, bomber, special mission, airlift, antisubmarine warfare,
reconnaissance, surveillance and high performance aircraft; systems for
military operations; aircraft controls and subsystems; thrust reversers; and
aircraft modification and maintenance and logistics support for military and
civilian customers.
. Energy, Materials and Other -- The Corporation manages certain facilities for
the DOE. 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, while
the employees at such facilities are employees of the Corporation, applicable
employee benefit plans are separate from the Corporation's plans. The
Corporation also provides environmental remediation services to commercial
and U.S. Government customers, and has investments in other businesses.
Through October, 1996, the Corporation provided construction aggregates and
specialty chemical products to commercial and civil customers through its
Materials subsidiary (see Note 10).
Selected Financial Data By Business Segment
<TABLE>
<CAPTION>
(In millions) 1996 1995 1994
------------------------------------------------------------
<S> <C> <C> <C>
Net sales
Space & Strategic Missiles $ 7,904 $ 7,813 $ 7,000
Electronics 6,705 3,357 4,059
Information & Services 5,863 4,173 3,986
Aeronautics 5,596 6,617 7,091
Energy, Materials and Other 807 893 770
-----------------------------------------------------------
$26,875 $22,853 $22,906
-----------------------------------------------------------
Operating profit
Space & Strategic Missiles $ 973 $ 463 $ 495
Electronics 673 224 451
Information & Services 241 267 214
Aeronautics 441 394 511
Energy, Materials and Other 405 29 308
-----------------------------------------------------------
$2,733 $1,377 $1,979
-----------------------------------------------------------
Depreciation and
amortization
Space & Strategic Missiles $188 $206 $218
Electronics 239 122 136
Information & Services 121 69 79
Aeronautics 126 142 126
Energy, Materials and Other 58 66 79
-----------------------------------------------------------
$732 $605 $638
-----------------------------------------------------------
Amortization of
intangible assets
Space & Strategic Missiles $ 52 $ 56 $ 61
Electronics 209 85 69
Information & Services 124 57 45
Aeronautics 79 89 89
Energy, Materials and Other 1 9 15
-----------------------------------------------------------
$465 $296 $279
-----------------------------------------------------------
</TABLE>
81
<PAGE>
Notes to Consolidated Financial Statements
Continued
<TABLE>
<CAPTION>
(In millions) 1996 1995 1994
----------------------------------------------------------
<S> <C> <C> <C>
Expenditures for property,
plant and equipment
Space & Strategic Missiles $264 $165 $175
Electronics 213 100 102
Information & Services 104 63 66
Aeronautics 75 58 96
Energy, Materials and Other 81 114 70
----------------------------------------------------------
$737 $500 $509
----------------------------------------------------------
Identifiable assets
Space & Strategic Missiles $ 3,758 $ 3,750 $ 4,222
Electronics 11,363 3,869 3,386
Information & Services 6,111 2,679 2,375
Aeronautics 4,201 3,827 4,316
Energy, Materials and Other 3,824 3,433 3,680
----------------------------------------------------------
$29,257 $17,558 $17,979
----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Net Sales By Customer Category
(In millions) 1996 1995 1994
----------------------------------------------------------
<S> <C> <C> <C>
U.S. Government/(a)/
Space & Strategic Missiles $ 6,401 $ 6,315 $ 5,815
Electronics 4,469 2,282 2,793
Information & Services 3,860 2,731 2,834
Aeronautics 3,830 4,274 4,970
Energy, Materials and Other 154 168 152
----------------------------------------------------------
$18,714 $15,770 $16,564
----------------------------------------------------------
Foreign governments
Space & Strategic Missiles $ 38 $ 112 $ 290
Electronics 1,668 832 1,035
Information & Services 140 77 157
Aeronautics 1,466 1,966 1,958
Energy, Materials and Other -- -- --
----------------------------------------------------------
$3,312 $2,987 $3,440
----------------------------------------------------------
Commercial
Space & Strategic Missiles $1,465 $1,386 $ 837
Electronics 568 259 212
Information & Services 1,863 1,349 1,072
Aeronautics 300 377 163
Energy, Materials and Other 653 725 618
----------------------------------------------------------
$4,849 $4,096 $2,902
----------------------------------------------------------
</TABLE>
/(a)/ Sales made to foreign governments through the U.S. Government are included
in sales to foreign governments.
Export sales were $4.7 billion, $3.7 billion and $3.6 billion in 1996, 1995
and 1994, respectively.
- --------------------------------------------------------------------------------
Note 16 -- Summary of Quarterly
Information (Unaudited)
<TABLE>
<CAPTION>
(In millions, 1996 Quarters
--------------------------------------
except per share data) First Second/(a)/ Third/(a)/ Fourth/(a)//(b)/
----------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $5,109 $7,076 $7,028 $7,662
Earnings from
operations 472 693 675 441
Net earnings 272 299 311 465
Earnings per common
share, assuming
full dilution 1.22 1.33 1.38 2.11
================================================================
</TABLE>
<TABLE>
<CAPTION>
1995 Quarters
-----------------------------------------
(In millions,
except per share data) First/(c)/Second/(c)/ Third Fourth
======================================================================
<S> <C> <C> <C> <C>
Net sales $5,644 $5,606 $5,551 $6,052
Earnings (loss)
from operations 290 (55) 510 537
Net earnings (loss) 137 (53) 287 311
Earnings (loss) per common
share, assuming full dilution .62 (d) 1.29 1.38
======================================================================
</TABLE>
/(a)/ Net sales and earnings for the second, third and fourth quarters of 1996
include the operations of Tactical Systems (see Note 2).
/(b)/ Earnings for the fourth quarter of 1996 include the effects of certain
nonrecurring items (see Notes 4 and 10).
/(c)/ Earnings for the first and second quarters of 1995 include the effects of
merger related and consolidation expenses (see Note 4).
/(d)/ Loss per common share, assuming full dilution, of $.24 has not been
presented above as such amount was anti-dilutive when compared to the loss
per common share, assuming no dilution, of $.36.
82
<PAGE>
Lockheed Martin Corporation
- --------------------------------------------------------------------------------
Note 17 -- Summarized Consolidating Financial Information
The $5 billion of debt obligations issued by the Corporation in the second
quarter of 1996 are fully and unconditionally guaranteed by Tactical Systems.
Pursuant to SEC disclosure requirements, summarized consolidating financial
information follows:
<TABLE>
<CAPTION>
Non-
Lockheed Tactical Guarantor
(In millions) Martin/(a)/ Systems/(b)/ Entities Eliminations Consolidated
=======================================================================================================================
<S> <C> <C> <C> <C> <C>
Earnings Data
------------------------------------
For the year ended December 31, 1996
Net sales $19,066 $ 303 $9,152 $(1,646) $26,875
Earnings from operations 1,728 52 597 (96) 2,281
Net earnings 1,347 308 575 (883) 1,347
-----------------------------------------------------------------------------------------------------------------------
For the year ended December 31, 1995
Net sales $19,516 $ -- $4,216 $ (879) $22,853
Earnings from operations 1,060 -- 292 (70) 1,282
Net earnings 682 -- 286 (286) 682
-----------------------------------------------------------------------------------------------------------------------
For the year ended December 31, 1994
Net sales $19,857 $ -- $3,580 $ (531) $22,906
Earnings from operations 1,569 -- 241 (31) 1,779
Net earnings 1,018 -- 189 (189) 1,018
=======================================================================================================================
Cash Flows Data
------------------------------------
For the year ended December 31, 1996
Net cash provided by (used for):
Operating activities $ 931 $ 353 $ 352 $ -- $ 1,636
Investing activities (7,737) (90) (202) -- (8,029)
Financing activities 6,101 (257) (104) -- 5,740
-----------------------------------------------------------------------------------------------------------------------
Net (decrease) increase in cash
and cash equivalents (705) 6 46 -- (653)
Cash and cash equivalents:
Beginning of year 640 -- 13 -- 653
-----------------------------------------------------------------------------------------------------------------------
End of year $ (65) $ 6 $ 59 $ -- $ --
-----------------------------------------------------------------------------------------------------------------------
For the year ended December 31, 1995
Net cash provided by (used for):
Operating activities $1,067 $ -- $ 225 $ -- $ 1,292
Investing activities (370) -- (329) -- (699)
Financing activities (678) -- 99 -- (579)
-----------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash
and cash equivalents 19 -- (5) -- 14
Cash and cash equivalents:
Beginning of year 621 -- 18 -- 639
-----------------------------------------------------------------------------------------------------------------------
End of year $ 640 $ -- $ 13 $ -- $ 653
-----------------------------------------------------------------------------------------------------------------------
For the year ended December 31, 1994
Net cash provided by (used for):
Operating activities $1,409 $ -- $ 84 $ -- $ 1,493
Investing activities (349) -- (153) -- (502)
Financing activities (762) -- 44 -- (718)
-----------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash
and cash equivalents 298 -- (25) -- 273
Cash and cash equivalents:
Beginning of year 323 -- 43 -- 366
-----------------------------------------------------------------------------------------------------------------------
End of year $ 621 $ -- $ 18 $ -- $ 639
=======================================================================================================================
</TABLE>
83
<PAGE>
Notes to Consolidated Financial Statements Lockheed Martin Corporation
Continued
<TABLE>
<CAPTION>
Non-
Lockheed Tactical Guarantor
(In millions) Martin/(a)/ Systems/(b)/ Entities Eliminations Consolidated
==============================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Balance Sheet Data
-----------------------
As of December 31, 1996
Current assets --Public $6,754 $ 603 $ 2,583 $ -- $ 9,940
--Affiliated/(c)/ 79 28 270 (377) --
Noncurrent assets --Public 10,198 1,347 7,772 -- 19,317
--Affiliated/(c)/ 7,873 8,806 4,599 (21,278) --
Current liabilities --Public 5,962 135 2,607 -- 8,704
--Affiliated/(c)/ 333 28 16 (377) --
Long-term debt 8,972 1,204 12 -- 10,188
Other noncurrent liabilities--Public 2,781 857 (129) -- 3,509
Equity 6,856 8,560 12,718 (21,278) 6,856
------------------------------------------------------------------------------------------------------------------------------
As of December 31, 1995
Current assets --Public $6,992 $ -- $ 1,216 $ -- $ 8,208
--Affiliated/(c)/ 262 -- 448 (710) --
Noncurrent assets --Public 8,236 -- 1,114 -- 9,350
--Affiliated/(c)/ 1,541 -- 4,451 (5,992) --
Current liabilities --Public 4,453 -- 731 -- 5,184
--Affiliated/(c)/ 448 -- 262 (710) --
Long-term debt 2,880 -- 130 -- 3,010
Other noncurrent liabilities--Public 2,817 -- 114 -- 2,931
Equity 6,433 -- 5,992 (5,992) 6,433
==============================================================================================================================
</TABLE>
/(a)/ Data is related to the parent company only.
/(b)/ Data is related to Tactical Systems, Inc. only and pertains to operations
from April 1, 1996.
/(c)/ Amounts represent activity with Lockheed Martin affiliated companies.
84
<PAGE>
Lockheed Martin Corporation
Consolidated Financial Data
Seven Year Summary
<TABLE>
<CAPTION>
(In millions, except per share data) 1996 1995 1994 1993 1992 1991 1990
================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
Operating Results
Net sales $26,875 $22,853 $22,906 $22,397 $16,030 $15,871 $16,089
Costs and expenses 24,594 21,571 21,127 20,857 14,891 14,767 15,178
- --------------------------------------------------------------------------------------------------------------------------------
Earnings from operations 2,281 1,282 1,779 1,540 1,139 1,104 911
Other income and expenses, net 452 95 200 44 42 (49) 34
- --------------------------------------------------------------------------------------------------------------------------------
2,733 1,377 1,979 1,584 1,181 1,055 945
Interest expense 700 288 304 278 177 176 180
- --------------------------------------------------------------------------------------------------------------------------------
Earnings before income taxes and cumula-
tive effect of changes in accounting 2,033 1,089 1,675 1,306 1,004 879 765
Income tax expense 686 407 620 477 355 261 161
- --------------------------------------------------------------------------------------------------------------------------------
Earnings before cumulative effect of
changes in accounting 1,347 682 1,055 829 649 618 604
Cumulative effect of changes
in accounting -- -- (37) -- (1,010) -- --
- --------------------------------------------------------------------------------------------------------------------------------
Net earnings (loss) $ 1,347 $ 682 $ 1,018 $ 829 $ (361) $ 618 $ 604
================================================================================================================================
Per Common Share
Assuming no dilution:
Before cumulative effect of changes
in accounting $ 6.80 $ 3.28 $ 5.32 $ 3.99 $ 3.31 $ 3.05 $ 2.97
Cumulative effect of changes
in accounting -- -- (.20) -- (5.15) -- --
- --------------------------------------------------------------------------------------------------------------------------------
$ 6.80 $ 3.28 $ 5.12 $ 3.99 $ (1.84) $ 3.05 $ 2.97
================================================================================================================================
Assuming full dilution:
Before cumulative effect of changes
in accounting $ 6.04 $ 3.05 $ 4.83 $ 3.75 $ 3.31 $ 3.05 $ 2.97
Cumulative effect of changes
in accounting -- -- (.17) -- (5.15) -- --
- --------------------------------------------------------------------------------------------------------------------------------
$ 6.04 $ 3.05 $ 4.66 $ 3.75 $ (1.84) $ 3.05 $ 2.97
================================================================================================================================
Cash Dividends $ 1.60 $ 1.34 $ 1.14 $ 1.09 $ 1.04 $ .98 $ .90
================================================================================================================================
Condensed Balance Sheet Data
Current assets $ 9,940 $ 8,208 $ 8,143 $ 6,961 $ 5,157 $ 5,553 $ 5,442
Property, plant and equipment 3,721 3,134 3,455 3,643 3,139 3,155 3,200
Intangible assets related to contracts
and programs acquired 1,767 1,553 1,696 1,832 42 52 59
Cost in excess of net assets acquired 10,394 2,794 2,831 2,697 841 864 882
Other assets 3,435 1,869 1,854 1,949 1,648 895 883
- --------------------------------------------------------------------------------------------------------------------------------
Total $29,257 $17,558 $17,979 $17,082 $10,827 $10,519 $10,466
================================================================================================================================
Current liabilities--other $ 7,414 $ 4,462 $ 5,177 $ 4,690 $ 3,176 $ 3,833 $ 4,235
Short-term borrowings 1,110 -- -- -- -- -- --
Current maturities of long-term debt 180 722 285 346 327 298 30
Long-term debt 10,188 3,010 3,594 4,026 1,803 1,997 2,392
Post-retirement benefit liabilities 2,077 1,795 1,859 1,848 1,579 54 --
Other liabilities 1,432 1,136 978 971 460 112 38
Stockholders' equity 6,856 6,433 6,086 5,201 3,482 4,225 3,771
- --------------------------------------------------------------------------------------------------------------------------------
Total $29,257 $17,558 $17,979 $17,082 $10,827 $10,519 $10,466
================================================================================================================================
Common Shares Outstanding at Year End 192.7 198.6 199.1 197.9 194.1 201.4 200.7
================================================================================================================================
</TABLE>
85
<PAGE>
Corporate Directory
(As of February 1, 1997)
Board of Directors
Norman R. Augustine
Chairman and Chief Executive Officer,
Lockheed Martin Corporation
Marcus C. Bennett
Executive Vice President and
Chief Financial Officer,
Lockheed Martin Corporation
Lynne V. Cheney
Senior Fellow for Public Policy Research,
American Enterprise Institute
Vance D. Coffman
President and Chief Operating Officer,
Lockheed Martin Corporation
Houston I. Flournoy
Special Assistant to the President, Governmental Affairs,
University of Southern California
James F. Gibbons
Professor of Electrical Engineering,
Stanford University
Edward E. Hood, Jr.
Retired Vice Chairman,
General Electric Company
Caleb B. Hurtt
Retired President and
Chief Operating Officer,
Martin Marietta Corporation
Gwendolyn S. King
Senior Vice President,
Corporate and Public Affairs,
PECO Energy Company
Frank C. Lanza
Executive Vice President,
Lockheed Martin Corporation
Vincent N. Marafino
Retired Executive Vice President,
Lockheed Martin Corporation
Eugene F. Murphy
President and Chief Executive Officer,
GE Aircraft Engines
Allen E. Murray
Retired Chairman
and Chief Executive Officer,
Mobil Corporation
Frank Savage
Chairman, Alliance Capital
Management International
Bernard L. Schwartz
Chairman and Chief Executive Officer,
Loral Space & Communications Ltd.
Daniel M. Tellep
Retired Chairman and
Chief Executive Officer,
Lockheed Martin Corporation
Carlisle A. H. Trost
Retired Chief of Naval Operations
James R. Ukropina
Partner, O'Melveny & Myers
Douglas C. Yearley
Chairman, President and
Chief Executive Officer,
Phelps Dodge Corporation
Committees
Audit and Ethics Committee
Mr. Hood, Chairman.
Mses. Cheney and King, Messrs. Flournoy,
Marafino, Tellep, Trost and Ukropina
Compensation Committee
Mr. Murray, Chairman.
Messrs. Gibbons, Hood, Murphy, Schwartz,
Trost and Yearley
Executive Committee
Mr. Augustine, Chairman.
Messrs. Hood, Marafino, Murray, Tellep,
Ukropina and Yearley
Finance Committee
Mr. Ukropina, Chairman.
Mrs. King and Messrs. Hurtt, Marafino, Savage,
Schwartz, Tellep and Yearley
Nominating Committee
Mr. Murphy, Chairman.
Mrs. Cheney and Messrs. Flournoy, Gibbons, Hurtt,
Murray and Savage
Stock Option Subcommittee
Mr. Murray, Chairman.
Messrs. Gibbons, Hood, Trost and Yearley
Officers
Dean O. Allen
Vice President
Joseph D. Antinucci
Vice President
Norman R. Augustine
Chairman and Chief Executive Officer
William F. Ballhaus, Jr.
Vice President
Marcus C. Bennett
Executive Vice President and
Chief Financial Officer
James A. Blackwell, Jr.
Vice President and President and
Chief Operating Officer,
Aeronautics Sector
Harold T. Bowling
Vice President
Melvin R. Brashears
Vice President and President and
Chief Operating Officer,
Space & Strategic Missiles Sector
William B. Bullock
Vice President
86
<PAGE>
Michael F. Camardo
Vice President
Joseph R. Cleveland
Vice President
Vance D. Coffman
President and Chief Operating Officer
Raymond S. Colladay
Vice President
Thomas A. Corcoran
Vice President and President and
Chief Operating Officer,
Electronics Sector
Robert B. Corlett
Vice President
Robert B. Coutts
Vice President
Peter DeMayo
Vice President
Philip J. Duke
Vice President
John F. Egan
Vice President
Ronald R. Finkbiner
Vice President
Jack S. Gordon
Vice President
John Hallal
Vice President
Dain M. Hancock
Vice President
Alfred G. Hansen
Vice President
K. Michael Henshaw
Vice President
Arthur E. Johnson
Vice President
John R. Kreick
Vice President
Robert V. LaPenta
Vice President
Frank C. Lanza
Executive Vice President
Gary P. Mann
Vice President
John F. Manuel
Vice President
Carol R. Marshall
Vice President
Russell T. McFall
Vice President
Janet L. McGregor
Vice President
John S. McLellan
Vice President
Frank H. Menaker, Jr.
Senior Vice President and General Counsel
John E. Montague
Vice President
Jay A. Musselman
Vice President
Albert Narath
Vice President and President and
Chief Operating Officer,
Energy & Environment Sector
Gerald T. Oppliger
Vice President
David S. Osterhout
Vice President
Daniel W. Patterson
Vice President
Stephen Pavlosky
Vice President
Susan M. Pearce
Vice President
Robert J. Polutchko
Vice President
John B. Ramsey
Vice President
Robert E. Rulon
Vice President and Controller
Walter E. Skowronski
Vice President and Treasurer
Michael A. Smith
Vice President
William R. Sorenson
Vice President
John V. Sponyoe
Vice President
Kenneth R. Swimm
Vice President
Peter B. Teets
Vice President and President and
Chief Operating Officer,
Information & Services Sector
Joseph T. Threston
Vice President
Robert E. Tokerud
Vice President
Robert H. Trice, Jr.
Vice President
Lillian M. Trippett
Vice President, Corporate Secretary
and Associate General Counsel
Leonard L. Victorino
Vice President
William T. Vinson
Vice President and Chief Counsel
87
<PAGE>
Lockheed Martin Corporation
General Information
As of December 31, 1996, there were approximately 42,609 holders of record of
Lockheed Martin common stock and 192,746,026 shares outstanding.
<TABLE>
<CAPTION>
Common Stock Prices (New York Stock Exchange-composite transactions)
(In dollars) High Low Close
================================================================================
<S> <C> <C> <C>
1996 Quarters
1st 80 7/8 73 1/8 75 7/8
- --------------------------------------------------------------------------------
2nd 86 3/4 73 84
- --------------------------------------------------------------------------------
3rd 91 3/4 76 1/4 90 1/8
- --------------------------------------------------------------------------------
4th 96 5/8 85 1/4 91 1/2
- --------------------------------------------------------------------------------
<CAPTION>
1995 Quarters
1st* 54 3/8 50 1/4 52 7/8
- --------------------------------------------------------------------------------
2nd 64 7/8 50 63 1/8
- --------------------------------------------------------------------------------
3rd 68 1/8 59 3/8 67 1/8
- --------------------------------------------------------------------------------
4th 79 1/2 63 79
- --------------------------------------------------------------------------------
</TABLE>
*March 16, 1995-March 31, 1995, reflecting the completion of the merger
March 15, 1995.
Transfer Agent & Registrar
First Chicago Trust Company of New York
P. O. Box 2536, Suite 4694
Jersey City, New Jersey 07303-2536
Telephone: 1-800-519-3111
Dividend Reinvestment Plan
Lockheed Martin's Dividend Reinvestment and Stock Purchase Plan offers
stockholders an opportunity to purchase additional shares through automatic
dividend reinvestment and/or voluntary cash investments. For more information,
contact our transfer agent, First Chicago Trust Company of New York at
1-800-519-3111.
Independent Auditors
Ernst & Young LLP
1225 Connecticut Avenue, N.W.
Washington, D.C. 20036
Common Stock
Stock symbol: LMT
Listed: New York
Annual Report on Form 10-K
Stockholders may obtain, without charge, a copy of Lockheed Martin's Annual
Report on Form 10-K, as filed with the Securities and Exchange Commission for
the year ended December 31, 1996 by writing to:
Lockheed Martin Investor Relations
6801 Rockledge Drive
Bethesda, MD 20817
For accessing the Lockheed Martin homepage on the Internet use the Uniform
Resource Locator: http://www.shareholder.com/lmt.
Updates on earnings, dividends and company news are available by calling
Lockheed Martin Shareholder Direct at 1-800-LMT-9758, 24 hours a day, seven days
a week.
88
<PAGE>
Principal photography by Eric Schulzinger. Designed and produced by Taylor &
Ives, Inc., NYC.
This Annual Report contains statements which, to the extent that they are not
recitations of historical fact, constitute "forward looking statements" within
the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. All forward looking statements involve risks
and uncertainties. The forward looking statements in this document are intended
to be subject to the safe harbor protection provided by Sections 27A and 21E.
For a discussion identifying some important factors that could cause actual
results to differ materially from those anticipated in the forward looking
statements, see the Corporation's Securities and Exchange Commission filings
including, but not limited to, the discussion of "Competition and Risk" and the
discussion of "Government Contracts and Regulations" on pages 11 through 14 and
pages 14 through 15, respectively, of the Corporation's Annual Report on Form
10-K for the fiscal year ended December 31, 1996 (Form 10-K); "Management's
Discussion and Analysis of Financial Condition and Results of Operations" on
pages 51 through 63 of this Annual Report and "Note 1--Summary of Signifcant
Accounting Policies","Note 3--Repositioning of Non-Core Businesses and New
Organizational Structure" and "Note 14--Commitments and Contingencies" of the
Notes to Consolidated Financial Statements on pages 70 through 71, 72 through 73
and 80 through 81, respectively, of the Audited Consolidated Financial
Statements included in this Annual Report and incorporated by reference into the
Form 10-K.
Setting the Standard
Lockheed Martin's Code of Ethics and Business Conduct is called "Setting the
Standard." We aim to set the standard for ethical business conduct through these
six guiding ethical principles and values:
Honesty: to be truthful in all our endeavors; to be honest and forthright with
one another and with our customers, communities, suppliers, and shareholders.
Integrity: to say what we mean, to deliver what we promise, and to stand for
what is right.
Respect: to treat one another with dignity and fairness, appreciating the
diversity of our workforce and the uniqueness of each employee.
Trust: to build confidence through teamwork and open, candid communication.
Responsibility: to speak up - without fear of retribution - and report concerns
in the work place, including violations of laws, regulations and company
policies, and seek clarification and guidance whenever there is doubt.
Citizenship: to obey all the laws of the United States and the other countries
in which we do business and to do our part to make the communities in which we
live better.
- --------------------------------------------------------------------------------
Shareholders desiring to read "Setting the Standard, Lockheed Martin's Code of
Ethics and Business Conduct" or obtain additional information about the
Corporation's ethics program may visit the Lockheed Martin Home Page on the
World Wide Web: http://www.lmco.com or write to the Corporation care of Carol R.
Marshall, Vice President, Ethics and Business Conduct, P.O. Box 34143, Bethesda,
MD 20827-0143. E-mail: [email protected]
<PAGE>
[ARTWORK APPEARS HERE]
LOCKHEED MARTIN [LOGO APPEARS HERE]
Lockheed Martin Corporation
6801 Rockledge Drive
Bethesda, MD 20817
<PAGE>
APPENDIX TO THE EDGAR VERSION OF THE 1996 ANNUAL REPORT TO
SECURITY HOLDERS FILED PURSUANT TO RULE 304 OF REGULATION S-T
This appendix is being filed pursuant to Rule 304 of Regulation S-K and
represents Lockheed Martin Corporation's good faith effort to fairly and
accurately describe certain graphic and image material that is included in the
paper version of the 1996 Annual Report to Shareholders (the "1996 Annual
Report") but has been omitted from the EDGAR version.
A description of the pictures omitted from the 1996 Annual Report in its
EDGAR format follows. Generally, the omitted pictures are described in the
associated captions and represent products produced by Lockheed Martin
Corporation which are products produced by Lockheed Martin Corporation which are
discussed at various locations in the text of the document. In some instances,
the pictures are of officers, directors and employees of the Corporation or of
persons using the Corporation's products. The pictures are included primarily to
add visual interest to the 1996 Annual Report and are neither individually nor
in the aggregate material to an understanding of the Report.
The 1996 Annual Report in its EDGAR format also omits certain graphic
material. This material is also described fully in the text. A description of
the omitted graphic material follows:
Page 52 - The omitted graph sets forth in columnar format net sales, in millions
of dollars, for the years 1994, 1995 and 1996 and corresponds to the textual
description of net sales.
Page 53 - The graph omitted at the top of the page sets forth in columnar format
net earnings, in millions of dollars, for the years 1994, 1995, and 1996 as well
as including a column pertaining to 1994 to which footnote (a) relates and a
column pertaining to 1995 to which footnote (b) relates. The graph corresponds
to the textual description of net earnings.
Page 53 - The graph omitted at the bottom of the page sets forth in columnar
format earnings per common share, assuming full dilution, in dollars, for the
years 1994, 1995 and 1996 and includes a column pertaining to 1994 to which
footnote (a) relates and a column pertaining to 1995 to which footnote (b)
relates. The graph corresponds to the textual description of earnings per common
share.
Page 54 - The omitted graph sets forth in columnar format dividends per common
share for each of 1994, 1995 and 1996.
Page 59 - The omitted graph sets forth in columnar format negotiated backlog, in
millions of dollars, for the years 1994, 1995 and 1996 and corresponds to the
textual description of negotiated backlog.
Page 60 - The omitted graph sets forth in columnar format net cash provided by
operating activities in each of 1996 (including the effects of the Loral
Transaction), 1995 and 1994 and follows the associated textual discussion.
<PAGE>
EXHIBIT 21
LIST OF SUBSIDIARIES OF
LOCKHEED MARTIN CORPORATION
<TABLE>
<CAPTION>
State or Percentage
Country of of Securities
Name of Subsidiary Incorporation Owned
------------------ ------------- -------------
<S> <C> <C>
Lockheed Martin Tactical Systems, Inc. New York 100%
LC Acquiring Corp. Delaware 100%
Lockheed Martin Federal Systems, Inc. Delaware 100%
Lockheed Martin Vought Systems Corporation Delaware 100%
Lockheed Martin Aerospace Corp. Delaware 100%
Lockheed Martin Aerospace Holdings, Inc. Delaware 100%
Lockheed Martin Fairchild Corp. Delaware 100%
</TABLE>
Lockheed Martin Corporation has a number of other subsidiaries, but all of them,
considered in the aggregate as a single subsidiary, would not constitute a
significant subsidiary. Accordingly, the names of the particular subsidiaries
are omitted.
<PAGE>
EXHIBIT 24
POWER OF ATTORNEY
LOCKHEED MARTIN CORPORATION
The undersigned hereby constitutes Frank H. Menaker, Jr. and Stephen M.
Piper, and each of them, jointly and severally, his or her lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him or her and in his or her name, place and stead, in any and all
capacities, including, but not limited to, that listed below, in connection with
the preparation, execution and filing with the Securities and Exchange
Commission (hereinafter referred to as the "Commission"), under the Securities
Exchange Act of 1934 of an Annual Report on Form 10-K of Lockheed Martin
Corporation ("Lockheed Martin") and any amendments thereto for Lockheed Martin's
fiscal year ended December 31, 1996 with exhibits thereto, including, but not
limited to, Lockheed Martin's Audited Consolidated Financial Statements as of
December 31, 1996 and 1995 and for each of the three years in the period ended
December 31, 1996 and Management's Discussion and Analysis of Financial
Condition and Results of Operations for Lockheed Martin's fiscal year ended
December 31, 1996, and other documents in connection therewith (collectively,
the "Form 10-K"), and all matters required by the Commission in connection with
the Form 10-K, granting unto said attorneys-in-fact and agents, and each of
them, full power and authority to do and perform each and every act and thing
requisite or necessary to be done as fully to all intents and purposes as he or
she might or could do in person, hereby ratifying and confirming all that said
attorney's-in-fact and agents, and each of them, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
/s/ Norman R. Augustine February 27, 1997
- -----------------------
Norman R. Augustine
Chief Executive Officer and Director
<PAGE>
POWER OF ATTORNEY
LOCKHEED MARTIN CORPORATION
The undersigned hereby constitutes Frank H. Menaker, Jr. and Stephen M.
Piper, and each of them, jointly and severally, his or her lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him or her and in his or her name, place and stead, in any and all
capacities, including, but not limited to, that listed below, in connection with
the preparation, execution and filing with the Securities and Exchange
Commission (hereinafter referred to as the "Commission"), under the Securities
Exchange Act of 1934 of an Annual Report on Form 10-K of Lockheed Martin
Corporation ("Lockheed Martin") and any amendments thereto for Lockheed Martin's
fiscal year ended December 31, 1996 with exhibits thereto, including, but not
limited to, Lockheed Martin's Audited Consolidated Financial Statements as of
December 31, 1996 and 1995 and for each of the three years in the period ended
December 31, 1996 and Management's Discussion and Analysis of Financial
Condition and Results of Operations for Lockheed Martin's fiscal year ended
December 31, 1996, and other documents in connection therewith (collectively,
the "Form 10-K"), and all matters required by the Commission in connection with
the Form 10-K, granting unto said attorneys-in-fact and agents, and each of
them, full power and authority to do and perform each and every act and thing
requisite or necessary to be done as fully to all intents and purposes as he or
she might or could do in person, hereby ratifying and confirming all that said
attorney's-in-fact and agents, and each of them, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
/s/ Marcus C. Bennett February 27, 1997
- -----------------------
Marcus C. Bennett
Executive Vice President, Chief Financial Officer and Director
<PAGE>
POWER OF ATTORNEY
LOCKHEED MARTIN CORPORATION
The undersigned hereby constitutes Frank H. Menaker, Jr. and Stephen M.
Piper, and each of them, jointly and severally, his or her lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him or her and in his or her name, place and stead, in any and all
capacities, including, but not limited to, that listed below, in connection with
the preparation, execution and filing with the Securities and Exchange
Commission (hereinafter referred to as the "Commission"), under the Securities
Exchange Act of 1934 of an Annual Report on Form 10-K of Lockheed Martin
Corporation ("Lockheed Martin") and any amendments thereto for Lockheed Martin's
fiscal year ended December 31, 1996 with exhibits thereto, including, but not
limited to, Lockheed Martin's Audited Consolidated Financial Statements as of
December 31, 1996 and 1995 and for each of the three years in the period ended
December 31, 1996 and Management's Discussion and Analysis of Financial
Condition and Results of Operations for Lockheed Martin's fiscal year ended
December 31, 1996, and other documents in connection therewith (collectively,
the "Form 10-K"), and all matters required by the Commission in connection with
the Form 10-K, granting unto said attorneys-in-fact and agents, and each of
them, full power and authority to do and perform each and every act and thing
requisite or necessary to be done as fully to all intents and purposes as he or
she might or could do in person, hereby ratifying and confirming all that said
attorney's-in-fact and agents, and each of them, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
/s/ Robert E. Rulon February 27, 1997
- -----------------------
Robert E. Rulon
Chief Accounting Officer
<PAGE>
POWER OF ATTORNEY
LOCKHEED MARTIN CORPORATION
The undersigned hereby constitutes Frank H. Menaker, Jr. and Stephen M.
Piper, and each of them, jointly and severally, his or her lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him or her and in his or her name, place and stead, in any and all
capacities, including, but not limited to, that listed below, in connection with
the preparation, execution and filing with the Securities and Exchange
Commission (hereinafter referred to as the "Commission"), under the Securities
Exchange Act of 1934 of an Annual Report on Form 10-K of Lockheed Martin
Corporation ("Lockheed Martin") and any amendments thereto for Lockheed Martin's
fiscal year ended December 31, 1996 with exhibits thereto, including, but not
limited to, Lockheed Martin's Audited Consolidated Financial Statements as of
December 31, 1996 and 1995 and for each of the three years in the period ended
December 31, 1996 and Management's Discussion and Analysis of Financial
Condition and Results of Operations for Lockheed Martin's fiscal year ended
December 31, 1996, and other documents in connection therewith (collectively,
the "Form 10-K"), and all matters required by the Commission in connection with
the Form 10-K, granting unto said attorneys-in-fact and agents, and each of
them, full power and authority to do and perform each and every act and thing
requisite or necessary to be done as fully to all intents and purposes as he or
she might or could do in person, hereby ratifying and confirming all that said
attorney's-in-fact and agents, and each of them, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
/s/ Lynne V. Cheney February 27, 1997
- -----------------------
Lynne V. Cheney
Director
<PAGE>
POWER OF ATTORNEY
LOCKHEED MARTIN CORPORATION
The undersigned hereby constitutes Frank H. Menaker, Jr. and Stephen M.
Piper, and each of them, jointly and severally, his or her lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him or her and in his or her name, place and stead, in any and all
capacities, including, but not limited to, that listed below, in connection with
the preparation, execution and filing with the Securities and Exchange
Commission (hereinafter referred to as the "Commission"), under the Securities
Exchange Act of 1934 of an Annual Report on Form 10-K of Lockheed Martin
Corporation ("Lockheed Martin") and any amendments thereto for Lockheed Martin's
fiscal year ended December 31, 1996 with exhibits thereto, including, but not
limited to, Lockheed Martin's Audited Consolidated Financial Statements as of
December 31, 1996 and 1995 and for each of the three years in the period ended
December 31, 1996 and Management's Discussion and Analysis of Financial
Condition and Results of Operations for Lockheed Martin's fiscal year ended
December 31, 1996, and other documents in connection therewith (collectively,
the "Form 10-K"), and all matters required by the Commission in connection with
the Form 10-K, granting unto said attorneys-in-fact and agents, and each of
them, full power and authority to do and perform each and every act and thing
requisite or necessary to be done as fully to all intents and purposes as he or
she might or could do in person, hereby ratifying and confirming all that said
attorney's-in-fact and agents, and each of them, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
/s/ Vance D. Coffman February 27, 1997
- -----------------------
Vance D. Coffman
Director
<PAGE>
POWER OF ATTORNEY
LOCKHEED MARTIN CORPORATION
The undersigned hereby constitutes Frank H. Menaker, Jr. and Stephen M.
Piper, and each of them, jointly and severally, his or her lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him or her and in his or her name, place and stead, in any and all
capacities, including, but not limited to, that listed below, in connection with
the preparation, execution and filing with the Securities and Exchange
Commission (hereinafter referred to as the "Commission"), under the Securities
Exchange Act of 1934 of an Annual Report on Form 10-K of Lockheed Martin
Corporation ("Lockheed Martin") and any amendments thereto for Lockheed Martin's
fiscal year ended December 31, 1996 with exhibits thereto, including, but not
limited to, Lockheed Martin's Audited Consolidated Financial Statements as of
December 31, 1996 and 1995 and for each of the three years in the period ended
December 31, 1996 and Management's Discussion and Analysis of Financial
Condition and Results of Operations for Lockheed Martin's fiscal year ended
December 31, 1996, and other documents in connection therewith (collectively,
the "Form 10-K"), and all matters required by the Commission in connection with
the Form 10-K, granting unto said attorneys-in-fact and agents, and each of
them, full power and authority to do and perform each and every act and thing
requisite or necessary to be done as fully to all intents and purposes as he or
she might or could do in person, hereby ratifying and confirming all that said
attorney's-in-fact and agents, and each of them, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
/s/ Houston I. Flournoy February 27, 1997
- -----------------------
Houston I. Flournoy
Director
<PAGE>
POWER OF ATTORNEY
LOCKHEED MARTIN CORPORATION
The undersigned hereby constitutes Frank H. Menaker, Jr. and Stephen M.
Piper, and each of them, jointly and severally, his or her lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him or her and in his or her name, place and stead, in any and all
capacities, including, but not limited to, that listed below, in connection with
the preparation, execution and filing with the Securities and Exchange
Commission (hereinafter referred to as the "Commission"), under the Securities
Exchange Act of 1934 of an Annual Report on Form 10-K of Lockheed Martin
Corporation ("Lockheed Martin") and any amendments thereto for Lockheed Martin's
fiscal year ended December 31, 1996 with exhibits thereto, including, but not
limited to, Lockheed Martin's Audited Consolidated Financial Statements as of
December 31, 1996 and 1995 and for each of the three years in the period ended
December 31, 1996 and Management's Discussion and Analysis of Financial
Condition and Results of Operations for Lockheed Martin's fiscal year ended
December 31, 1996, and other documents in connection therewith (collectively,
the "Form 10-K"), and all matters required by the Commission in connection with
the Form 10-K, granting unto said attorneys-in-fact and agents, and each of
them, full power and authority to do and perform each and every act and thing
requisite or necessary to be done as fully to all intents and purposes as he or
she might or could do in person, hereby ratifying and confirming all that said
attorney's-in-fact and agents, and each of them, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
/s/ James F. Gibbons February 27, 1997
- -----------------------
James F. Gibbons
Director
<PAGE>
POWER OF ATTORNEY
LOCKHEED MARTIN CORPORATION
The undersigned hereby constitutes Frank H. Menaker, Jr. and Stephen M.
Piper, and each of them, jointly and severally, his or her lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him or her and in his or her name, place and stead, in any and all
capacities, including, but not limited to, that listed below, in connection with
the preparation, execution and filing with the Securities and Exchange
Commission (hereinafter referred to as the "Commission"), under the Securities
Exchange Act of 1934 of an Annual Report on Form 10-K of Lockheed Martin
Corporation ("Lockheed Martin") and any amendments thereto for Lockheed Martin's
fiscal year ended December 31, 1996 with exhibits thereto, including, but not
limited to, Lockheed Martin's Audited Consolidated Financial Statements as of
December 31, 1996 and 1995 and for each of the three years in the period ended
December 31, 1996 and Management's Discussion and Analysis of Financial
Condition and Results of Operations for Lockheed Martin's fiscal year ended
December 31, 1996, and other documents in connection therewith (collectively,
the "Form 10-K"), and all matters required by the Commission in connection with
the Form 10-K, granting unto said attorneys-in-fact and agents, and each of
them, full power and authority to do and perform each and every act and thing
requisite or necessary to be done as fully to all intents and purposes as he or
she might or could do in person, hereby ratifying and confirming all that said
attorney's-in-fact and agents, and each of them, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
/s/ Edward E. Hood, Jr. February 27, 1997
- -----------------------
Edward E. Hood, Jr.
Director
<PAGE>
POWER OF ATTORNEY
LOCKHEED MARTIN CORPORATION
The undersigned hereby constitutes Frank H. Menaker, Jr. and Stephen M.
Piper, and each of them, jointly and severally, his or her lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him or her and in his or her name, place and stead, in any and all
capacities, including, but not limited to, that listed below, in connection with
the preparation, execution and filing with the Securities and Exchange
Commission (hereinafter referred to as the "Commission"), under the Securities
Exchange Act of 1934 of an Annual Report on Form 10-K of Lockheed Martin
Corporation ("Lockheed Martin") and any amendments thereto for Lockheed Martin's
fiscal year ended December 31, 1996 with exhibits thereto, including, but not
limited to, Lockheed Martin's Audited Consolidated Financial Statements as of
December 31, 1996 and 1995 and for each of the three years in the period ended
December 31, 1996 and Management's Discussion and Analysis of Financial
Condition and Results of Operations for Lockheed Martin's fiscal year ended
December 31, 1996, and other documents in connection therewith (collectively,
the "Form 10-K"), and all matters required by the Commission in connection with
the Form 10-K, granting unto said attorneys-in-fact and agents, and each of
them, full power and authority to do and perform each and every act and thing
requisite or necessary to be done as fully to all intents and purposes as he or
she might or could do in person, hereby ratifying and confirming all that said
attorney's-in-fact and agents, and each of them, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
/s/ Caleb B. Hurtt February 27, 1997
- -----------------------
Caleb B. Hurtt
Director
<PAGE>
POWER OF ATTORNEY
LOCKHEED MARTIN CORPORATION
The undersigned hereby constitutes Frank H. Menaker, Jr. and Stephen M.
Piper, and each of them, jointly and severally, his or her lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him or her and in his or her name, place and stead, in any and all
capacities, including, but not limited to, that listed below, in connection with
the preparation, execution and filing with the Securities and Exchange
Commission (hereinafter referred to as the "Commission"), under the Securities
Exchange Act of 1934 of an Annual Report on Form 10-K of Lockheed Martin
Corporation ("Lockheed Martin") and any amendments thereto for Lockheed Martin's
fiscal year ended December 31, 1996 with exhibits thereto, including, but not
limited to, Lockheed Martin's Audited Consolidated Financial Statements as of
December 31, 1996 and 1995 and for each of the three years in the period ended
December 31, 1996 and Management's Discussion and Analysis of Financial
Condition and Results of Operations for Lockheed Martin's fiscal year ended
December 31, 1996, and other documents in connection therewith (collectively,
the "Form 10-K"), and all matters required by the Commission in connection with
the Form 10-K, granting unto said attorneys-in-fact and agents, and each of
them, full power and authority to do and perform each and every act and thing
requisite or necessary to be done as fully to all intents and purposes as he or
she might or could do in person, hereby ratifying and confirming all that said
attorney's-in-fact and agents, and each of them, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
/s/ Gwendolyn S. King February 27, 1997
- -----------------------
Gwendolyn S. King
Director
<PAGE>
POWER OF ATTORNEY
LOCKHEED MARTIN CORPORATION
The undersigned hereby constitutes Frank H. Menaker, Jr. and Stephen M.
Piper, and each of them, jointly and severally, his or her lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him or her and in his or her name, place and stead, in any and all
capacities, including, but not limited to, that listed below, in connection with
the preparation, execution and filing with the Securities and Exchange
Commission (hereinafter referred to as the "Commission"), under the Securities
Exchange Act of 1934 of an Annual Report on Form 10-K of Lockheed Martin
Corporation ("Lockheed Martin") and any amendments thereto for Lockheed Martin's
fiscal year ended December 31, 1996 with exhibits thereto, including, but not
limited to, Lockheed Martin's Audited Consolidated Financial Statements as of
December 31, 1996 and 1995 and for each of the three years in the period ended
December 31, 1996 and Management's Discussion and Analysis of Financial
Condition and Results of Operations for Lockheed Martin's fiscal year ended
December 31, 1996, and other documents in connection therewith (collectively,
the "Form 10-K"), and all matters required by the Commission in connection with
the Form 10-K, granting unto said attorneys-in-fact and agents, and each of
them, full power and authority to do and perform each and every act and thing
requisite or necessary to be done as fully to all intents and purposes as he or
she might or could do in person, hereby ratifying and confirming all that said
attorney's-in-fact and agents, and each of them, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
/s/ Frank C. Lanza February 27, 1997
- -----------------------
Frank C. Lanza
Director
<PAGE>
POWER OF ATTORNEY
LOCKHEED MARTIN CORPORATION
The undersigned hereby constitutes Frank H. Menaker, Jr. and Stephen M.
Piper, and each of them, jointly and severally, his or her lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him or her and in his or her name, place and stead, in any and all
capacities, including, but not limited to, that listed below, in connection with
the preparation, execution and filing with the Securities and Exchange
Commission (hereinafter referred to as the "Commission"), under the Securities
Exchange Act of 1934 of an Annual Report on Form 10-K of Lockheed Martin
Corporation ("Lockheed Martin") and any amendments thereto for Lockheed Martin's
fiscal year ended December 31, 1996 with exhibits thereto, including, but not
limited to, Lockheed Martin's Audited Consolidated Financial Statements as of
December 31, 1996 and 1995 and for each of the three years in the period ended
December 31, 1996 and Management's Discussion and Analysis of Financial
Condition and Results of Operations for Lockheed Martin's fiscal year ended
December 31, 1996, and other documents in connection therewith (collectively,
the "Form 10-K"), and all matters required by the Commission in connection with
the Form 10-K, granting unto said attorneys-in-fact and agents, and each of
them, full power and authority to do and perform each and every act and thing
requisite or necessary to be done as fully to all intents and purposes as he or
she might or could do in person, hereby ratifying and confirming all that said
attorney's-in-fact and agents, and each of them, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
/s/ Vincent N. Marafino February 27, 1997
- -----------------------
Vincent N. Marafino
Director
<PAGE>
POWER OF ATTORNEY
LOCKHEED MARTIN CORPORATION
The undersigned hereby constitutes Frank H. Menaker, Jr. and Stephen M.
Piper, and each of them, jointly and severally, his or her lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him or her and in his or her name, place and stead, in any and all
capacities, including, but not limited to, that listed below, in connection with
the preparation, execution and filing with the Securities and Exchange
Commission (hereinafter referred to as the "Commission"), under the Securities
Exchange Act of 1934 of an Annual Report on Form 10-K of Lockheed Martin
Corporation ("Lockheed Martin") and any amendments thereto for Lockheed Martin's
fiscal year ended December 31, 1996 with exhibits thereto, including, but not
limited to, Lockheed Martin's Audited Consolidated Financial Statements as of
December 31, 1996 and 1995 and for each of the three years in the period ended
December 31, 1996 and Management's Discussion and Analysis of Financial
Condition and Results of Operations for Lockheed Martin's fiscal year ended
December 31, 1996, and other documents in connection therewith (collectively,
the "Form 10-K"), and all matters required by the Commission in connection with
the Form 10-K, granting unto said attorneys-in-fact and agents, and each of
them, full power and authority to do and perform each and every act and thing
requisite or necessary to be done as fully to all intents and purposes as he or
she might or could do in person, hereby ratifying and confirming all that said
attorney's-in-fact and agents, and each of them, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
/s/ Eugene F. Murphy February 27, 1997
- -----------------------
Eugene F. Murphy
Director
<PAGE>
POWER OF ATTORNEY
LOCKHEED MARTIN CORPORATION
The undersigned hereby constitutes Frank H. Menaker, Jr. and Stephen M.
Piper, and each of them, jointly and severally, his or her lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him or her and in his or her name, place and stead, in any and all
capacities, including, but not limited to, that listed below, in connection with
the preparation, execution and filing with the Securities and Exchange
Commission (hereinafter referred to as the "Commission"), under the Securities
Exchange Act of 1934 of an Annual Report on Form 10-K of Lockheed Martin
Corporation ("Lockheed Martin") and any amendments thereto for Lockheed Martin's
fiscal year ended December 31, 1996 with exhibits thereto, including, but not
limited to, Lockheed Martin's Audited Consolidated Financial Statements as of
December 31, 1996 and 1995 and for each of the three years in the period ended
December 31, 1996 and Management's Discussion and Analysis of Financial
Condition and Results of Operations for Lockheed Martin's fiscal year ended
December 31, 1996, and other documents in connection therewith (collectively,
the "Form 10-K"), and all matters required by the Commission in connection with
the Form 10-K, granting unto said attorneys-in-fact and agents, and each of
them, full power and authority to do and perform each and every act and thing
requisite or necessary to be done as fully to all intents and purposes as he or
she might or could do in person, hereby ratifying and confirming all that said
attorney's-in-fact and agents, and each of them, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
/s/ Allen E. Murray February 27, 1997
- -----------------------
Allen E. Murray
Director
<PAGE>
POWER OF ATTORNEY
LOCKHEED MARTIN CORPORATION
The undersigned hereby constitutes Frank H. Menaker, Jr. and Stephen M.
Piper, and each of them, jointly and severally, his or her lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him or her and in his or her name, place and stead, in any and all
capacities, including, but not limited to, that listed below, in connection with
the preparation, execution and filing with the Securities and Exchange
Commission (hereinafter referred to as the "Commission"), under the Securities
Exchange Act of 1934 of an Annual Report on Form 10-K of Lockheed Martin
Corporation ("Lockheed Martin") and any amendments thereto for Lockheed Martin's
fiscal year ended December 31, 1996 with exhibits thereto, including, but not
limited to, Lockheed Martin's Audited Consolidated Financial Statements as of
December 31, 1996 and 1995 and for each of the three years in the period ended
December 31, 1996 and Management's Discussion and Analysis of Financial
Condition and Results of Operations for Lockheed Martin's fiscal year ended
December 31, 1996, and other documents in connection therewith (collectively,
the "Form 10-K"), and all matters required by the Commission in connection with
the Form 10-K, granting unto said attorneys-in-fact and agents, and each of
them, full power and authority to do and perform each and every act and thing
requisite or necessary to be done as fully to all intents and purposes as he or
she might or could do in person, hereby ratifying and confirming all that said
attorney's-in-fact and agents, and each of them, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
/s/ Frank Savage February 27, 1997
- -----------------------
Frank Savage
Director
<PAGE>
POWER OF ATTORNEY
LOCKHEED MARTIN CORPORATION
The undersigned hereby constitutes Frank H. Menaker, Jr. and Stephen M.
Piper, and each of them, jointly and severally, his or her lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him or her and in his or her name, place and stead, in any and all
capacities, including, but not limited to, that listed below, in connection with
the preparation, execution and filing with the Securities and Exchange
Commission (hereinafter referred to as the "Commission"), under the Securities
Exchange Act of 1934 of an Annual Report on Form 10-K of Lockheed Martin
Corporation ("Lockheed Martin") and any amendments thereto for Lockheed Martin's
fiscal year ended December 31, 1996 with exhibits thereto, including, but not
limited to, Lockheed Martin's Audited Consolidated Financial Statements as of
December 31, 1996 and 1995 and for each of the three years in the period ended
December 31, 1996 and Management's Discussion and Analysis of Financial
Condition and Results of Operations for Lockheed Martin's fiscal year ended
December 31, 1996, and other documents in connection therewith (collectively,
the "Form 10-K"), and all matters required by the Commission in connection with
the Form 10-K, granting unto said attorneys-in-fact and agents, and each of
them, full power and authority to do and perform each and every act and thing
requisite or necessary to be done as fully to all intents and purposes as he or
she might or could do in person, hereby ratifying and confirming all that said
attorney's-in-fact and agents, and each of them, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
/s/ Daniel M. Tellep February 27, 1997
- -----------------------
Daniel M. Tellep
Director
<PAGE>
POWER OF ATTORNEY
LOCKHEED MARTIN CORPORATION
The undersigned hereby constitutes Frank H. Menaker, Jr. and Stephen M.
Piper, and each of them, jointly and severally, his or her lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him or her and in his or her name, place and stead, in any and all
capacities, including, but not limited to, that listed below, in connection with
the preparation, execution and filing with the Securities and Exchange
Commission (hereinafter referred to as the "Commission"), under the Securities
Exchange Act of 1934 of an Annual Report on Form 10-K of Lockheed Martin
Corporation ("Lockheed Martin") and any amendments thereto for Lockheed Martin's
fiscal year ended December 31, 1996 with exhibits thereto, including, but not
limited to, Lockheed Martin's Audited Consolidated Financial Statements as of
December 31, 1996 and 1995 and for each of the three years in the period ended
December 31, 1996 and Management's Discussion and Analysis of Financial
Condition and Results of Operations for Lockheed Martin's fiscal year ended
December 31, 1996, and other documents in connection therewith (collectively,
the "Form 10-K"), and all matters required by the Commission in connection with
the Form 10-K, granting unto said attorneys-in-fact and agents, and each of
them, full power and authority to do and perform each and every act and thing
requisite or necessary to be done as fully to all intents and purposes as he or
she might or could do in person, hereby ratifying and confirming all that said
attorney's-in-fact and agents, and each of them, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
/s/ Carlisle A. H. Trost February 27, 1997
- ------------------------
Carlisle A. H. Trost
Director
<PAGE>
POWER OF ATTORNEY
LOCKHEED MARTIN CORPORATION
The undersigned hereby constitutes Frank H. Menaker, Jr. and Stephen M.
Piper, and each of them, jointly and severally, his or her lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him or her and in his or her name, place and stead, in any and all
capacities, including, but not limited to, that listed below, in connection with
the preparation, execution and filing with the Securities and Exchange
Commission (hereinafter referred to as the "Commission"), under the Securities
Exchange Act of 1934 of an Annual Report on Form 10-K of Lockheed Martin
Corporation ("Lockheed Martin") and any amendments thereto for Lockheed Martin's
fiscal year ended December 31, 1996 with exhibits thereto, including, but not
limited to, Lockheed Martin's Audited Consolidated Financial Statements as of
December 31, 1996 and 1995 and for each of the three years in the period ended
December 31, 1996 and Management's Discussion and Analysis of Financial
Condition and Results of Operations for Lockheed Martin's fiscal year ended
December 31, 1996, and other documents in connection therewith (collectively,
the "Form 10-K"), and all matters required by the Commission in connection with
the Form 10-K, granting unto said attorneys-in-fact and agents, and each of
them, full power and authority to do and perform each and every act and thing
requisite or necessary to be done as fully to all intents and purposes as he or
she might or could do in person, hereby ratifying and confirming all that said
attorney's-in-fact and agents, and each of them, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
/s/ James R. Ukropina February 27, 1997
- -----------------------
James R. Ukropina
Director
<PAGE>
POWER OF ATTORNEY
LOCKHEED MARTIN CORPORATION
The undersigned hereby constitutes Frank H. Menaker, Jr. and Stephen M.
Piper, and each of them, jointly and severally, his or her lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him or her and in his or her name, place and stead, in any and all
capacities, including, but not limited to, that listed below, in connection with
the preparation, execution and filing with the Securities and Exchange
Commission (hereinafter referred to as the "Commission"), under the Securities
Exchange Act of 1934 of an Annual Report on Form 10-K of Lockheed Martin
Corporation ("Lockheed Martin") and any amendments thereto for Lockheed Martin's
fiscal year ended December 31, 1996 with exhibits thereto, including, but not
limited to, Lockheed Martin's Audited Consolidated Financial Statements as of
December 31, 1996 and 1995 and for each of the three years in the period ended
December 31, 1996 and Management's Discussion and Analysis of Financial
Condition and Results of Operations for Lockheed Martin's fiscal year ended
December 31, 1996, and other documents in connection therewith (collectively,
the "Form 10-K"), and all matters required by the Commission in connection with
the Form 10-K, granting unto said attorneys-in-fact and agents, and each of
them, full power and authority to do and perform each and every act and thing
requisite or necessary to be done as fully to all intents and purposes as he or
she might or could do in person, hereby ratifying and confirming all that said
attorney's-in-fact and agents, and each of them, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
/s/ Douglas C. Yearley February 27, 1997
- -----------------------
Douglas C. Yearley
Director
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the
consolidated balance sheet and consolidated statement of earnings and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 4,999
<ALLOWANCES> 0
<INVENTORY> 3,053
<CURRENT-ASSETS> 9,940
<PP&E> 8,452
<DEPRECIATION> 4,731
<TOTAL-ASSETS> 29,257
<CURRENT-LIABILITIES> 8,704
<BONDS> 10,188
0
1,000
<COMMON> 193
<OTHER-SE> 5,663
<TOTAL-LIABILITY-AND-EQUITY> 29,257
<SALES> 26,875
<TOTAL-REVENUES> 26,875
<CGS> 24,594
<TOTAL-COSTS> 24,594
<OTHER-EXPENSES> 452
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 700
<INCOME-PRETAX> 2,033
<INCOME-TAX> 686
<INCOME-CONTINUING> 1,347
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,347
<EPS-PRIMARY> 6.80
<EPS-DILUTED> 6.04
</TABLE>
