1995 Annual Report - Lockheed Martin

Management's Discussion and Analysis of Financial Condition and Results of Operations ContinuedLockheed and Martin Marietta, Lockheed Martin expects, in accordance with the terms of thesettlement, to pay a regular quarterly dividend of $0.40 per share for each of the next three quartersbeginning with the first quarter of 1996.After the adoption of the 1995 Omnibus Performance Award Plan, the Corporation's Boardof Directors authorized the repurchase of up to six million common shares under a systematicrepurchase plan. Additionally, the Board authorized the repurchase of up to nine million commonshares to counter the dilutive effect of common stock issued under the Corporation's other benefitand compensation programs and for other purposes related to such plans. Approximately 2.3 millioncommon shares were repurchased by the Corporation in the second half of 1995 for approximately$150 million.Capital Structure and ResourcesLong-term debt, including current maturities, declined to approximately $3.7 billion at the endof 1995 from approximately $3.9 billion at the end of 1994, while stockholders' equity grew to over$6.4 billion from nearly $6.1 billion a year ago. Total debt represented approximately 37 percentand 39 percent of total capitalization at December 31, 1995 and 1994, respectively. Most of theCorporation's debt is in the form of publicly issued, fixed-rate Notes Payable and Debentures.As stated previously, if the transactions with Loral are consummated, the Corporation's debtto capitalization ratio will increase to approximately 67 percent. Consequently, the ratings on theCorporation's long-term debt were downgraded to a lower investment grade.On March 15, 1995, the Corporation entered into a revolving credit agreement (the CreditAgreement) with a group of domestic and foreign banks. The Credit Agreement makes available$1.5 billion for commercial paper backup and general corporate purposes through March 14, 2000.Borrowings under the Credit Agreement would be unsecured and bear interest, at the Corporation'soption, at rates based on the Eurodollar rate or a bank base rate (as defined). The Credit Agreementcontains a financial covenant relating to leverage, and provisions which relate to certain changes incontrol. There have been no borrowings under the Credit Agreement.In connection with the proposed business combination with Loral, the Corporation intends toarrange with a syndicate of banks to obtain credit facilities of $10 billion (the New Credit Facilities),comprised of a $5 billion five-year unsecured revolving credit facility and a $5 billion 364-dayunsecured revolving credit facility. The New Credit Facilities would be available to finance thepurchase of Loral's common stock, to fund the $344 million investment in Loral Space, to refinancea portion of Loral's existing debt, to pay related transaction expenses, to provide for future workingcapital needs and for general corporate purposes. Alternatively, the Corporation may obtain all or aportion of the necessary financing through the issuance of commercial paper backed by the NewCredit Facilities. If the business combination with Loral is consummated, the Credit Facility will beterminated and replaced with the New Credit Facilities. Following the closing of the transactions, itis anticipated that the Corporation will refinance all or a portion of the borrowings under the NewCredit Facilities with funds raised in the public or private securities markets. The Corporation may