1995 Annual Report - Lockheed Martin

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Notes to Consolidated Financial Statements ContinuedGeneral Electric Company (GE) to combine theaerospace and certain other businesses of GE (collectively,the GE Aerospace businesses) with thebusinesses of the Corporation in the form of affiliatedcorporations. The exchange consideration ofapproximately $3 billion for the GE Transactionconsisted of approximately $900 million in cash,convertible preferred stock (valued at $1 billion),retention by GE of certain accounts receivable andthe assumption of payment obligations related tocertain GE indebtedness ($750 million). The GETransaction was recorded under the purchasemethod of accounting. The GE Aerospace operationshave been included in the Corporation's resultsof operations since the closing date. If the GETransaction were presented on an unaudited proforma basis as if it had occurred as of January 1,1993, the Corporation's 1993 net sales wouldincrease by approximately $1 billion and net earningswould increase by less than 1.5%.Effective February 28, 1993, the Corporationacquired the tactical military aircraft business ofGeneral Dynamics Corporation (formerly, the GDFort Worth Division) for approximately $1.5 billionin cash, plus the assumption of certain liabilitiesrelated to the business. The acquisition wasrecorded under the purchase method of accounting.Pro forma financial data for 1993 related to thistransaction has not been presented based onmateriality considerations.Note 5 - ReceivablesReceivables consisted of the following components:(In millions)U.S. Government:Amounts billedUnbilled costs andaccrued profitsCommercial and foreigngovernments:Amounts billedUnbilled costs andaccrued profits,primarily relatedto commercial contracts1995$ 9251,622654675$3,876Unbilled costs and accrued profits consistedprimarily of revenues on long-term contractsthat had been recognized for accounting purposes1994$ 9841,383662444$3,473but not yet billed to customers. Approximately$185 million of the December 31, 1995 unbilledcosts and accrued profits are not expected to bebilled within one year.Note 6 - InventoriesInventories consisted of the following components:(In millions)Work in process, primarily onlong-term contracts andprograms in progressLess customer advances andprogress paymentsOther inventoriesCustomer advances and progress paymentsapplied above are those where the customer hastitle to, or a security interest in, inventories identifiedwith the related contracts. Other customeradvances are classified as current liabilities.Inventories include unamortized deferred costs ofapproximately $300 million at December 31, 1995which are anticipated to be recovered throughfuture contracts.An analysis of general and administrative costs,including research and development costs, includedin work in process inventories follows:(In millions)Beginning of yearIncurred during the yearCharged to costs andexpenses duringthe year:Research anddevelopmentOther general andadministrativeEnd of year1995$ 4801,704(548)(1,205)$ 4311995$3,721(1,772)1,949855$2,8041994$ 4991,761(659)(1,121)$ 4801994$4,291(1,785)2,506653$3,1591993$ 2431,882(696)(930)$ 499In addition, included in costs and expenses in1995, 1994 and 1993 were general and administrativecosts, including research and development costs, ofapproximately $230 million, $154 million and $155million, respectively, incurred by commercial businessunits or programs.66
Lockheed Martin CorporationNote 7 - Property, Plant and EquipmentProperty, plant and equipment consisted of the followingcomponents:(In millions)LandBuildingsMachinery and equipmentLess accumulated depreciationand amortizationNote 8 - Debt1995$ 3622,4945,3298,185(5,020)$3,165Long-term debt consisted of the followingcomponents:Type(Maturity Dates)(In millions)Notes Payable:Fixed rate(1996-2023)Variable rate(1995)Debentures(2011-2025)ESOP obligations(1996-2004)Payment obligationsassumed fromGE (1996)Other obligationsLess current maturitiesRange ofInterestRates4.5-9.4%(a)7.0-7.9%8.3-8.4%5.0%6.0-9.0%(a) Interest rates vary based on the Eurodollar rate.1995$2,172—828355303743,732(722)$3,0101994$ 3322,4195,4258,176(4,721)$3,4551994$2,215200703382310693,879(285)$3,594During the second quarter of 1995, theCorporation retired $200 million of variable rateNotes Payable and $43 million of fixed rate NotesPayable. During the fourth quarter, Martin MariettaMaterials, Inc. (Materials), a public company owned81% by the Corporation, issued $125 million of 7%debentures due in 2025.Included in Notes Payable are $300 million of9.375% notes due in 1999 which stipulate that, inthe event of both a "designated event" and a related"rating decline" occurring within a specified periodof time, holders of the notes may require the Corporationto redeem the notes and pay accrued interest.In general, a "designated event" occurs when anyone of certain ownership, control, or capitalizationchanges takes place. A "rating decline" occurs whenthe ratings assigned to the Corporation's debt arereduced below investment-grade levels.Included in Debentures are $150 million of7.75% obligations which may be redeemed by theCorporation at specified prices on or after April 15,2003. Also included in Debentures are $103 millionof 7% obligations ($175 million at face value) whichwere originally sold at approximately 54% of theirprincipal amount. These debentures, which areredeemable in whole or in part at the Corporation'soption at 100% of their face value, have an effectiveyield of 13.25%.A leveraged ESOP incorporated into theLockheed Salaried Savings Plan (401(k)) (see Note12) borrowed $500 million through a private placementof notes in 1989. These notes are being repaidin quarterly installments over terms ending in 2004.The ESOP note agreement stipulates that, in theevent that the ratings assigned to the Corporation'slong-term senior unsecured debt are below investmentgrade, holders of the notes may requirethe Corporation to purchase the notes and payaccrued interest. These notes are obligations of theESOP but guaranteed by the Corporation and arereported as debt on the Corporation's consolidatedbalance sheet.The Corporation's long-term debt maturitiesfor the five years following December 31, 1995, are:$722 million in 1996; $166 million in 1997; $374million in 1998; $350 million in 1999; $44 millionin 2000 and $2,076 million thereafter.Certain of the financing agreements of theCorporation contain certain restrictive covenantsrelating to debt, requirements for limitations onencumbrances and on sale and lease-back transactions,and provisions which relate to certain changesin control.SFAS No. 107, "Disclosures about Fair Valueof Financial Instruments," and SFAS No. 119,"Disclosure about Derivative Financial Instrumentsand Fair Value of Financial Instruments," requirethe disclosure of the fair value of financial instruments,both assets and liabilities recognized and notrecognized on the consolidated balance sheet, forwhich it is practicable to estimate fair value. Unlessotherwise indicated elsewhere in the notes to theconsolidated financial statements, the carrying valueof the Corporation's financial instruments approximatesfair value. The estimated fair values of theCorporation's long-term debt instruments atDecember 31, 1995, aggregated approximately
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1 9 9 5A n n u a lR e p o r t
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M i s s i o n S u c c e s sOur comm
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Mission Success"Mission Success" ex
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operating officer, Frank Lanza, wil
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Sector Operating CompaniesAeronauti
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Fromthe depthsof theEarth'soceans t
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Space
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A e r o n a u t i c sS e c t o rThe
Page 18: Making its debuton October 18, 1995
Page 21 and 22: Lockheed Martin Skunk Works, a nati
Page 23 and 24: Sanders solidified its position amo
Page 25 and 26: dispensers for fighter and bomber a
Page 28 and 29: E n e r g y & E n v i r o n m e n t
Page 31 and 32: The Rimfire highvoltage switch,show
Page 33 and 34: I n f o r m a t i o n & T e c h n o
Page 35 and 36: Motorists using theVerrazano-Narrow
Page 38 and 39: CalComp, a Lockheed Martin company,
Page 41 and 42: Lockheed Martin isa premier designe
Page 43 and 44: NASA last year chose Lockheed Marti
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Page 55 and 56: Lockheed Martin CorporationTotal In
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Page 81 and 82: Lockheed Martin CorporationJames A.
Page 83 and 84: Lockheed Martin Code of Ethics andB
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1995 Annual Report - Lockheed Martin

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