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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported) January 28, 1999
____________
LOCKHEED MARTIN CORPORATION
(Exact name of registrant as specified in its charter)
Maryland 1-11437 52-1893632
(State or other jurisdiction of (Commission File Number) (IRS Employer
Incorporation) Identification No.)
6801 Rockledge Drive, Bethesda, Maryland 20817
(Address of principal executive offices) (Zip Code)
(301) 897-6000
(Registrant's telephone number, including area code)
____________
Not Applicable
(Former name or address, if changed since last report)
______________________________________________________________________________
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Item 5. Other Events
The Corporation is filing this Current Report on Form 8-K to
provide the information contained in the Corporation's press release (and the
the two attachments, including financial tables) regarding its financial
performance for fiscal 1998, dated January 28, 1999, which is included as
Exhibit 99 to this Form.
Item 7. Financial Statements and Exhibits
Exhibit No. Description
----------- -----------
99 Lockheed Martin Corporation Press Release (and
the two attachments, including financial tables)
dated January 28, 1999.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
LOCKHEED MARTIN CORPORATION
/s/ Marian S. Block
----------------------
Marian S. Block
Vice President, Associate General
Counsel and Assistant Secretary
28 January 1999
INDEX TO EXHIBITS
Exhibit No. Description
- ----------- -----------
99 Lockheed Martin Corporation Press Release (and the two
attachments, including financial tables) dated January 28, 1999.
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Exhibit 99
For Immediate Release
LOCKHEED MARTIN REPORTS
1998 FINANCIAL RESULTS
BETHESDA, Maryland, January 28, 1999 -- Lockheed Martin (NYSE:LMT) today
announced that, based on net earnings adjusted to exclude nonrecurring and
unusual items, its diluted earnings per share for the fourth quarter of 1998
were $0.81, compared with $0.89 per share in the same 1997 period. For the
year, comparable calculations resulted in diluted earnings per share of $3.11,
versus $3.02 for 1997. All share and per share amounts in this press release
have been adjusted to reflect the December 31, 1998 two-for-one stock split.
(Nonrecurring and unusual items and their impact on results are described
later.)
Net earnings for fourth quarter 1998, adjusted to exclude nonrecurring and
unusual items, were $308 million, compared with $363 million for the same 1997
period. For the entire year 1998, comparable net earnings were $1.18 billion,
compared with $1.29 billion for 1997.
Including nonrecurring and unusual items, net earnings for fourth quarter
1998 were $125 million, or $0.33 per diluted share, compared with $371 million,
or $0.91 per diluted share, for the same 1997 period before the deemed preferred
stock dividend described on the attached financial tables. For the entire year,
net earnings and diluted earnings per share on the same basis were $1 billion,
or $2.63 per diluted share, compared with $1.3 billion, or $3.04 per diluted
share, for 1997.
Fourth-quarter 1998 net sales were $7.18 billion, compared with $7.88
billion in the fourth quarter 1997. For the year 1998, net sales were $26.26
billion, versus $28.07 billion in 1997. Sales comparisons reflect the
divestiture of a commercial information technology (IT) product distribution
business from the Information & Services segment and a commercial aerostructures
business in November 1997 and the sale of a commercial electronics manufacturing
business in January 1998. Excluding the sales of divested businesses, fourth
quarter and full year 1997 net sales would have been $7.56 billion and $26.14
billion, respectively.
"1998 was a year of strong performance by our Electronics businesses and
disappointing performances primarily by the Space & Strategic Missiles segment
and our commercial information products companies. Overall sales
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and earnings growth were below our expectations, reflecting these performance
issues as well as delays of commercial space launches and military aircraft
deliveries from 1998 into 1999. On the other hand, cash flow exceeded
expectations. Free cash flow for the year was $1.57 billion, well
above our $1 billion target, driven by lower net tax payments, reduced capital
expenditures, and lower working capital requirements. Debt reductions also
exceeded expectations, as the strong cash performance allowed more than $1
billion of long and short-term debt to be retired," said Vance Coffman, Chairman
and Chief Executive Officer of Lockheed Martin.
The nonrecurring and unusual item included in the 1998 fourth quarter
resulted from events related to CalComp Technology, Inc. (CalComp), a majority-
owned public subsidiary of the Corporation. In the fourth quarter, CalComp made
a decision to divest certain of its businesses and concluded an evaluation of
its remaining operations. Later in the quarter, Lockheed Martin notified
CalComp that it would not increase existing credit for CalComp to support
ongoing operations. Subsequently, Lockheed Martin agreed to provide financing,
subject to certain conditions, for a plan providing for the timely non-
bankruptcy shutdown of CalComp's business. The above actions resulted in a
nonrecurring and unusual pretax charge of $233 million, or $183 million after
taxes, related to the impairment of assets and estimated costs required to
accomplish the shutdown of operations.
Nonrecurring and unusual items in the fourth quarter of 1997 included a
tax-free gain of $311 million resulting from a transaction with the General
Electric Company (GE) and after-tax charges of $303 million. The GE transaction
resulted in Lockheed Martin exchanging its Access Graphics and Aerostructures
units, the Corporation's investment in the Globalstar telecommunications
partnership and approximately $1.6 billion in cash for all outstanding shares of
Lockheed Martin Series A convertible preferred stock held by GE. The preferred
stock had been convertible into approximately 58 million shares of Lockheed
Martin common stock. The charges were identified in connection with the
Corporation's review of non-strategic lines of business, and non-core
investments and certain other assets.
As shown on the attached financial tables, the deemed preferred stock
dividend related to the aforementioned transaction with GE had a significant
impact on the 1997 earnings per share calculation, but did not impact reported
1997 earnings. Due to the unusual nature of this item, and because the
preferred stock redemption was an equity transaction, the earnings per share
amounts discussed herein exclude its impact.
In the Aeronautics segment, net sales of $6 billion and profit margins of
10.9 percent in 1998 were flat compared to 1997 results. Excluding the
commercial aerostructures business, divested in late 1997, sales increased 3
percent. Sales and profits were negatively impacted by delayed deliveries of
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the C-130J airlift aircraft, caused by later than expected receipt of Federal
Aviation Administration (FAA) certification and final customer acceptance
issues, offset by improved program performance in the tactical aircraft
business. FAA certification had been expected early in 1998, but was not
received until September 1998.
In the Electronics segment, net sales in 1998 increased 4 percent to $7.3
billion compared to 1997. Excluding the impact of the divested commercial
electronics business from 1997 results, sales growth was 8 percent. The sales
increase reflected competitive wins and follow-on business captured by the
segment during the past two years. Profit margins increased to 10 percent due
to performance improvements on various contracts. Thomas Corcoran, formerly
president and COO of the Electronics sector, was named president and COO of the
Space & Strategic Missiles sector in October 1998. Robert Coutts, formerly
President of Lockheed Martin's Government Electronics Systems unit, was named to
replace Corcoran.
The Space & Strategic Missiles segment's net sales of $7.5 billion in 1998
represented a decline of 10 percent compared to the prior year, primarily due to
the delay of commercial satellite launches from 1998 to 1999, reduced fleet
ballistic missile volume, lower classified sales and competitive losses in
certain key programs. Profit margin declined from 14.2 percent to 13.1 percent
in 1998 to reflect fewer launches in the sales mix and commercial satellite
performance issues. These were partially offset by an adjustment related to
recognition of improved performance in a launch vehicle business and the
favorable impact of a restructured commercial satellite program. Coffman stated
that changes made in the commercial satellite business are expected to improve
future performance and competitiveness.
In the Information & Services segment, net sales were $5.2 billion compared
to $6.5 billion in 1997. Profit margins decreased from 4.2 percent in 1997 to 4
percent in 1998. Excluding the impact of divested businesses in 1997 results,
sales increased 3 percent. Sales and profits were negatively impacted by the
performance of the commercial information products group, particularly CalComp
Technology.
"With the corrective actions taken and our productivity initiatives, we
anticipate improved operating and financial performance in 1999," Coffman said.
"The Corporation expects to achieve initial productivity benefits in 1999 from
the LM21 Best Practices initiative launched in 1998. It is expected that these
improvements will benefit the company's competitive position, and will also
serve to expand margins. When fully implemented by the year 2001, LM21 is
expected to produce annual savings of $2.5 to $3 billion. We also will continue
our focus on producing strong cash flow and solid returns in 1999," he
concluded.
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Headquartered in Bethesda, Maryland, Lockheed Martin is a highly
diversified global enterprise principally engaged in the research, design,
development, manufacture and integration of advanced-technology systems,
products and services. The Corporation's businesses span space and
telecommunications, electronics, information and services, aeronautics, energy
and systems integration. Employing more than 170,000 people worldwide, Lockheed
Martin had 1998 sales surpassing $26 billion.
###
NEWS MEDIA CONTACT: James Fetig 301/897-6352
INVESTOR RELATIONS CONTACT: James Ryan, 301/897-6584 or
Randa Middleton, 301/897-6455
Web site: www.lmco.com
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NOTE: Statements which are not historical facts are forward-looking statements
made pursuant to the safe harbor provision of the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements may use
terminology such as "anticipated," "expected," "believe," "should,"
"outlook," and "estimated." The undertakings contained in these
statements involve risks and uncertainties that could cause actual
results to differ materially from anticipated results. These risks
include the effects of government budgets and requirements, economic
conditions, competitive environment, timing of awards and contracts; the
outcome of contingencies including litigation and environmental
remediation, and program performance in addition to other factors not
listed. See in this regard the Corporation's filings with the Securities
and Exchange Commission. The Corporation does not undertake any
obligation to publicly release any revisions to forward looking
statements to reflect events or circumstances or changes in expectations
after the date of this press release or the occurrence of anticipated
events.
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Attachment 1
1998 HIGHLIGHTS
---------------
In announcing 1998 earnings, Vance Coffman, Lockheed Martin's Chairman and CEO,
cited additional events, program awards and Mission Success highlights for the
year.
- - The Corporation formed Lockheed Martin Global Telecommunications (LMGT) to
concentrate and extend the Corporation's role in the expanding
telecommunications services marketplace. In conjunction with this strategy,
the Corporation announced plans to acquire the COMSAT Corporation. This
transaction is intended to position the Corporation to become a major global
telecommunications service provider. As a result of the formation of LMGT and
the announcement of the COMSAT transaction, the Corporation announced the
divestiture of its telephone numbering administration businesses.
- - The National Aeronautics and Space Administration (NASA) awarded Lockheed
Martin the Consolidated Space Operations Contract (CSOC) valued at more than
$3 billion over 10 years.
- - Lockheed Martin was selected to develop and build the Joint Air-to-Surface
Standoff Missile (JASSM) advanced cruise missile, a program valued at more
than $2 billion.
- - The United Arab Emirates selected Lockheed Martin's new Block 60 F-16 as its
advanced fighter aircraft. The Corporation hopes to reach agreement on
definitive terms during 1999 .
- - The U.S. Air Force awarded Lockheed Martin contracts for development of the
Evolved Expendable Launch Vehicle (EELV) family of launchers as well as
launch services for nine missions .
- - A total of 150 F-16 fighter aircraft and 19 C-130J airlift aircraft were
delivered.
- - The F-22 Raptor met all criteria set by the Department of Defense and
Congress to proceed to initial production and the Corporation was awarded
initial production contracts .
- - The X-35 Joint Strike Fighter (JSF) program successfully completed its Final
Design Review, and the first major airframe component in the production phase
of Japan's F-2 fighter program was delivered .
- - During the year, Lockheed Martin successfully launched six Atlas, two Titan,
one Athena, and three Russian Proton vehicles, one Payload Launch Vehicle and
one Multi-Service Launch System in a National Ballistic Missile Defense
Office test, and delivered five Space Shuttle External Tanks. The United
Space Alliance, a Lockheed Martin joint venture, launched five Space
Shuttles. The Corporation successfully manufactured and deployed one
military, five civil and 43 commercial satellites/payloads, including 39
buses for the Iridium(TM) global telecommunications system and the first of
eight solar array flight wings that will power the International Space
Station.
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- - The Corporation was awarded defense programs valued at approximately $2
billion in Europe, Australia, and Asia, including the upgrade of six Royal
Australian Navy frigates; deployment of four Tactical Air Defense Radar
Systems for the Australian Defence Force; delivery of Low-Altitude Navigation
and Targeting Infrared System for Night (LANTIRN) targeting systems for F-16s
in the air forces of Egypt, Denmark, and Taiwan; and production of MK 41
Vertical Launching Systems for the Japanese, Dutch, German, Australian and
Spanish navies.
- - The U.S. Navy awarded Lockheed Martin a new contract valued at $2 billion for
future computer program development for the AEGIS program.
- - The U.S. Army Communications & Electronics Command awarded Lockheed Martin a
contract valued at approximately $1.8 billion for Rapid Response to Critical
Requirements Support.
- - The U.S. Air Force awarded the Corporation a $1.8 billion contract to provide
logistics support, engineering, material management and depot repair for the F
F-117 stealth fighter.
- - The U.S. Department of Energy extended Lockheed Martin's management of Sandia
National Laboratories for five more years, through FY 2003.
- - The U.S. Air Force awarded Lockheed Martin Vought Systems an advanced
technical demonstration contract for the Low Cost Autonomous Attack System
(LOCAAS). Vought Systems also received an engineering and manufacturing
development contract for the Guided Multiple Launch Rocket System, an
international cooperative program in which the United States, the United
Kingdom, Germany, France and Italy are participating.
- - The Royal Navy fielded its first squadron of Merlin helicopters, developed by
Lockheed Martin and its British and European industrial partners to give the
United Kingdom the world's most advanced anti-submarine, anti-surface warfare
rotary-wing aircraft. Delivery of additional Merlin Mark 1 helicopters is
continuing under a contract valued at approximately $2.5 billion.
- - Air Sovereignty Operations Centers (ASOCs) developed by Lockheed Martin were
declared operational in Hungary and Poland. ASOCs operate in conjunction with
existing national civilian and military air traffic control systems, giving
nations an integrated view of their airspace and permitting cross-border
sharing of airspace information. Ten additional ASOCs are expected to become
operational in Central Europe over the next two years.
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LOCKHEED MARTIN CORPORATION
ATTACHMENT II
Consolidated Results
(In millions, except per share data)
<TABLE>
<CAPTION>
QUARTER ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
1998 1997 % Change 1998 1997 % Change
<S> <C> <C> <C> <C> <C> <C>
Net Sales $7,180 $7,878 -9% $26,266 $28,069 -6%
Earnings before
Interest and Taxes $466 $666 -30% $2,522 $2,779 -9%
Interest Expense $206 $227 -9% $861 $842 2%
Pre-tax Earnings $260 $439 -41% $1,661 $1,937 -14%
Income Taxes $135 $ 68 99% $660 $637 4%
Effective Tax
Rate 52% 15% N/M 40% 33% N/M
Net Earnings $125 $371 -66% $1,001 $1,300 -23%
Basic Earnings
(Loss)per Share:*
Earnings before
Redemption of
Preferred Stock $ 0.33 $ 0.98 -66% $ 2.66 $ 3.37 -21%
Redemption of
Series A Preferred
Stock $ 0.00 -$4.90 N/M $ 0.00 -$4.93 N/M
Net Earnings (Loss)
per Common Share $ 0.33 -$3.92 N/M $ 2.66 -$1.56 N/M
Average Basic
Shares 378.8 373.0 376.5 370.6
Diluted Earnings
(Loss)per Share:*
Earnings before
Redemption of
Preferred Stock $ 0.33 $ 0.91 -64% $ 2.63 $ 3.04 -14%
Redemption of
Series A Preferred
Stock $ 0.00 -$4.50 N/M $ 0.00 -$4.28 N/M
Net Earnings (Loss)
per Common Share $ 0.33 ** N/M $ 2.63 ** N/M
Average Diluted
Shares 383.0 406.4 381.1 427.0
</TABLE>
* As more fully described in the 1997 Annual Report to Shareholders, the
Corporation reacquired all of its outstanding Series A preferred stock
resulting in a deemed dividend of $1,826 million. For purposes of computing
net earnings applicable to common stock, the deemed preferred stock dividend
was deducted from 1997 net earnings.
<PAGE>
** Antidilutive
LOCKHEED MARTIN CORPORATION
Segment Results
Excluding Nonrecurring and Unusual Items
(In millions, except for percentages)
<TABLE>
<CAPTION>
QUARTER ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
1998 1997 % Change 1998 1997 % Change
<S> <C> <C> <C> <C> <C> <C>
Space & Strategic
Missiles*
Net Sales $1,835 $2,475 -26% $7,461 $8,303 -10%
Segment EBIT $214 $309 -31% $976 $1,183 -17%
Margins 11.7% 12.5% 13.1% 14.2%
Amortization of
Goodwill & Contract
Intangibles $7 $7 0% $29 $29 0%
Electronics**
Net Sales $2,166 $1,877 15% $7,342 $7,069 4%
Segment EBIT $184 $210 -12% $733 $645 14%
Margins 8.5% 11.2% 10.0% 9.1%
Amortization of
Goodwill & Contract
Intangibles $57 $54 6% $226 $228 -1%
Information &
Services***
Net Sales $1,481 $1,510 -2% $5,212 $6,468 -19%
Segment EBIT $43 $50 -14% $208 $274 -24%
Margins 2.9% 3.3% 4.0% 4.2%
Amortization of
Goodwill & Contract
Intangibles $24 $26 -8% $100 $107 -7%
Aeronautics****
Net Sales $1,626 $1,945 -16% $5,996 $6,045 -1%
Segment EBIT $180 $217 -17% $654 $656 0%
Margins 11.1% 11.2% 10.9% 10.9%
Amortization of
Goodwill & Contract
Intangibles $20 $20 0% $80 $80 0%
Energy & Other
Net Sales $72 $71 1% $255 $184 39%
Segment EBIT $78 $26 200% $184 $167 10%
Margins N/M N/M N/M N/M
</TABLE>
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* 1998 results include approximately $100 million of losses and performance
related charges in the commercial satellite product area, offset by
approximately $50 million related to the favorable impact of the
restructure of a commercial satellite program which occurred in the fourth
quarter. In addition, 1998 results were improved in the third quarter by an
adjustment of approximately $120 million in the Atlas launch vehicle
program due to the retirement of certain risk factors.
** 1997 and 1998 results include the operations of LM Commercial Electronics
divested effective February 22, 1998.
*** 1997 results include the operations of certain businesses split off as L3
Communications Corporation effective March 30, 1997, and the operations of
Access Graphics exchanged with General Electric Company effective November
17, 1997.
****1997 results include the operations of Aerostructures exchanged with
General Electric Company effective November 17, 1997.
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LOCKHEED MARTIN CORPORATION
Other Financial Information
(In millions, except for percentages)
Reconciliation of Earnings Excluding Nonrecurring and Unusual Items
<TABLE>
<CAPTION>
QUARTER ENDED DECEMBER 31,
1998 1997
<S> <C> <C>
Net Earnings As Reported $ 125 $ 371
Gain on Redemption of Preferred Shares $ 0 -$311
Nonrecurring and Unusual Items $ 183 $ 303
Adjusted Net Earnings $ 308 $ 363
Diluted Earnings per Share As Reported $ 0.33 $ 0.91
Effect of Nonrecurring and Unusual Items $ 0.48 -$0.02
Adjusted Diluted Earnings per Share $ 0.81 $ 0.89
<CAPTION>
YEAR ENDED DECEMBER 31,
1998 1997
<S> <C> <C>
Net Earnings As Reported $1,001 $ 1,300
Gain on Redemption of Preferred Shares $ 0 -$311
Nonrecurring and Unusual Items $ 183 $ 303
Adjusted Net Earnings $1,184 $ 1,292
Diluted Earnings Per Share As Reported $ 2.63 $ 3.04
Effect of Nonrecurring and Unusual Items $ 0.48 -$0.02
Adjusted Diluted Earnings per Share $ 3.11 $ 3.02
</TABLE>
Other Financial Information
<TABLE>
<CAPTION>
QUARTER ENDED DECEMBER 31,
1998 1997
<S> <C> <C>
EBIT to Sales Margin 6.5% 8.5%
Amortization of Goodwill and Contract
Intangibles Resulting from Prior
Acquisitions (pretax) $ 109 $ 109
Depreciation of Fixed Assets $ 128 $ 163
EBITDA $ 703 $ 938
<CAPTION>
YEAR ENDED DECEMBER 31,
1998 1997
<S> <C> <C>
EBIT to Sales Margin 9.6% 9.9%
Amortization of Goodwill and Contract
Intangibles Resulting from Prior
Acquisitions (pretax) $ 436 $ 446
Depreciation of Fixed Assets $ 545 $ 606
EBITDA $3,503 $3,831
</TABLE>
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12/31/98 12/31/97
Backlog $45,345 * $ 47,059
Total Debt $10,886 * $ 11,898
Long-term (including current maturities) $ 9,843 * $ 11,404
Short-term $ 1,043 * $ 494
Cash and Cash Equivalents $ 285 * $ 0
Stockholders' Equity $ 6,137 * $ 5,176
Total Debt-to-Capital 63.9% * 69.7%
* Preliminary data
