1995 Annual Report - Lockheed Martin

Lockheed Martin CorporationNote 10 - Other Income and ExpensesOther income and expenses, net consisted of thefollowing components:(In millions)Royalty incomeInterest incomeGain—Materialspublic offeringAcquisition termination feeOtherIn February 1994, Materials sold through aninitial public offering approximately 8.8 millionshares of its common stock. The Corporationretains approximately 81% of the outstanding stockof Materials. Minority interest of $84 million and$71 million was included in other liabilities atDecember 31, 1995 and 1994, respectively. A portionof the proceeds from the offering was used todefease in substance $125 million of 9.5% Notes.The Corporation recognized a pretax gain, net of aloss on debt defeasance, of $118 million fromMaterials' initial public offering. The net after-taxgain from these transactions was $70 million, or$.32 per common share assuming full dilution.During March 1994, the Corporation enteredinto an Agreement and Plan of Merger withGrumman Corporation (Grumman) and made anoffer to purchase for cash all outstanding sharesof common stock of Grumman. Subsequently,Grumman reached agreement with and acceptedNorthrop Corporation's competing offer to purchaseits outstanding common shares. In April 1994,the Corporation received $50 million plus reimbursementof expenses from Grumman pursuant tothe termination provisions of the Agreement andPlan of Merger. The Corporation recorded an aftertaxgain of $30 million, or $.14 per common shareassuming full dilution.Note 11 - Stockholders' Equityand Related Items1995$6433——(2)$951994$ 593411850(61)$2001993$3322——(11)$44Capital structure - The authorized capital structureof the Corporation is composed of 750 millionshares of common stock (199 million shares issued),50 million shares of series preferred stock (no sharesissued), and 20 million shares of Series A preferredstock (20 million shares issued). Approximately70 million common shares have been reserved forissuance under benefit and incentive plans.The Series A preferred stock has a par valueof $1 per share (liquidation preference of $50 pershare). As part of the consideration for the GETransaction, the Corporation issued to GE all of theauthorized and outstanding shares of Series A preferredstock. Dividends are cumulative and paid atan annual rate of $3.00 per share, or 6%. The sharesheld by GE are currently convertible into approximately13% of the shares of the Corporation's commonstock after giving effect to such conversion,have an aggregate liquidation preference of $1 billion,and are nonvoting except in special circumstances.Accordingly, 29 million common shareshave been reserved for this potential conversion. InMarch 1998 and thereafter, the Corporation will beentitled to redeem, at its option, any or all shares ofthe Series A preferred stock for either cash or commonstock. The Series A preferred stock is heldunder a Standstill Agreement which, among otherthings, imposes certain limitations on either theincrease or disposal of GE's interest in voting securitiesof the Corporation, on GE's solicitation ofproxies and stockholder proposals, on GE's votingof its shares and on GE's ability to place or removemembers of the Corporation's Board of Directors.In addition, the Standstill Agreement requires theCorporation to recommend to its shareholders theelection of two persons designated by GE to serve asdirectors of the Corporation.On July 27, 1995, the Corporation's Board ofDirectors authorized the repurchase of up to sixmillion common shares under a systematic repurchaseplan to counter the future dilutive effect ofcommon stock issued by the Corporation underits 1995 Omnibus Performance Award Plan. Additionally,the Board authorized the repurchase ofup to nine million common shares to counter thedilutive effect of common stock issued under theCorporation's other benefit and compensation programsand for other purposes related to such plans.Approximately 2.3 million common shares wererepurchased by the Corporation in the secondhalf of 1995.Stock option and award plans - On March 15, 1995,the stockholders approved the Lockheed Martin1995 Omnibus Performance Award Plan (OmnibusPlan). Under the Omnibus Plan, employees of theCorporation may be granted stock-based incentiveawards, including options to purchase commonstock, stock appreciation rights, restricted stock orother stock-based incentive awards. Employees may