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United States Filed March 9, 2000
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________
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, 1999 Commission file number 1-11437
LOCKHEED MARTIN CORPORATION
(Exact name of registrant as specified in its charter)
Maryland 52-1893632
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
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
------------------- ---------------------
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 filers 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 $7.36 billion as of January 31, 2000.
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,
398,164,999 shares outstanding as of January 31, 2000.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of Lockheed Martin Corporation's 1999 Annual Report to Shareholders are
incorporated by reference in Parts I and II of this Form 10-K.
Portions of Lockheed Martin Corporation's 2000 Definitive Proxy Statement are
incorporated by reference in Part III of this Form 10-K.
PART I
ITEM 1. BUSINESS
General
Lockheed Martin Corporation ("Lockheed Martin," which also may be referred
to as "we," "us," or "our") is a highly diversified global enterprise that
principally researches, designs, develops, manufactures and integrates advanced
technology systems, products and services. In March 1995, we were formed by
combining the businesses of Martin Marietta Corporation (Martin Marietta) and
Lockheed Corporation (Lockheed). We are a Maryland corporation.
Throughout this Form 10-K, we "incorporate by reference" information from
parts of other documents filed with the Securities and Exchange Commission
(SEC). The SEC allows us to disclose important information by referring to it in
this manner and you should review such information.
Our principal executive offices are located at 6801 Rockledge Drive,
Bethesda, Maryland 20817. Our telephone number is (301) 897-6000. Our home page
on the Internet is www.lockheedmartin.com. You can learn more about us by
reviewing our SEC filings on that web site. We are making our web site content
available for your information only. It should not be relied upon for investment
purposes, nor is it incorporated by reference into this Form 10-K.
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Transaction Agreement with COMSAT Corporation
In September 1998, we entered into an agreement with COMSAT Corporation
(COMSAT) to combine the business of COMSAT with the business of one of our
subsidiaries in a two-phase transaction (Merger Agreement) with an estimated
value for COMSAT's stockholders of approximately $2.7 billion as of the date of
the Merger Agreement. The Merger Agreement was approved by Lockheed Martin's and
COMSAT's Boards of Directors.
In connection with the first phase of this transaction, we completed a cash
tender offer (Tender Offer) on September 18, 1999, at which time we accepted for
payment approximately 26 million shares of COMSAT common stock, representing
approximately 49 percent of the outstanding common stock of COMSAT, for $45.50 a
share pursuant to the terms of the Merger Agreement. The total value of this
phase of the transaction was $1.2 billion, and such amount is included in
investments in equity securities in the December 31, 1999 financial statements.
The consummation of the Tender Offer was subject to, among other things,
the approval of the second phase of the transaction (Merger) by the stockholders
of COMSAT and certain regulatory approvals, including approval by the Federal
Communications Commission (FCC) and antitrust clearance by the Department of
Justice (DOJ). On August 20, 1999, the stockholders of COMSAT approved the
Merger at COMSAT's annual stockholders meeting. On September 15, 1999, the FCC
issued an order allowing us to merge a COMSAT common carrier subsidiary into one
of our subsidiaries. The order also designated the subsidiary as an "authorized
carrier" under the Communications Satellite Act of 1962 (Satellite Act), thereby
allowing the subsidiary to acquire and hold up to 49 percent of COMSAT's common
stock. On
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September 16, 1999, the DOJ, whose analysis included consideration of
both phases of the proposed transaction, stated that it did not intend to move
to enjoin consummation of the proposed transaction. We account for our 49
percent investment in COMSAT under the equity method of accounting.
On September 17, 1999, PanAmSat Corporation (PanAmSat) filed pleadings in
the United States District Court of Appeals for the District of Columbia Circuit
(Court) seeking a review of the FCC order described above. Lockheed Martin and
COMSAT intervened in the matters before the Court in support of the FCC.
PanAmSat characterizes the FCC's order as arbitrary, capricious or otherwise
contrary to law on a number of grounds including allegations that the FCC has
permitted us to take de facto control of COMSAT in violation of the
Communications Act of 1934 and the Satellite Act, that the Satellite Act never
intended for a single authorized carrier to hold such a large block of COMSAT's
common stock and that the FCC erred or violated its own rules in issuing the
order. We believe that PanAmSat's appeal is without merit and we intend to
continue our support of the actions taken by the FCC.
The second phase of the transaction, which will result in consummation of a
merger of COMSAT with another of our subsidiaries, is to be accomplished by an
exchange of one share of our common stock for each remaining share of COMSAT
common stock. Consummation of the Merger remains contingent upon the
satisfaction of certain conditions, including the enactment of federal
legislation necessary to remove existing restrictions that prohibit anyone from
owning more than 50% of COMSAT's outstanding common stock. Legislation necessary
to remove these restrictions cleared the U.S. Senate on July 1, 1999. On
November 10, 1999, the U.S. House of Representatives also passed legislation
that, if adopted into law, would remove these restrictions.
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There are substantial differences between the two bills, and significant
issues raised by the House bill in particular which, if not resolved
satisfactorily, would likely have a Significant Adverse Effect on COMSAT (as
defined in the Merger Agreement). We hope these issues will be favorably
resolved in conference. In early 2000, sponsors of the two different bills
announced a compromise agreement that, if adopted, would address many of the
issues raised by the House bill. It is now expected that legislation that
reflects the compromise agreement will be enacted before May 2000. There is no
assurance that legislation will be passed, that it will be passed in this time
frame, or that any legislation that does become law would not have an adverse
effect on COMSAT's business. If Congress enacts legislation that we determine in
good faith, after consultation with COMSAT, would reasonably be expected to have
a Significant Adverse Effect on COMSAT, we would have the right to elect not to
complete the Merger.
Before the Merger can occur, we must file Hart-Scott-Rodino notification
and report forms with the Federal Trade Commission and the DOJ regarding our
acquisition of minority interests in two businesses held by COMSAT. In addition,
following the passage of legislation, we must submit, and the FCC must approve,
an application for authorization to transfer control of COMSAT to us before the
Merger may occur. The precise nature of the FCC approval requirement will,
however, depend upon the details of any legislation enacted by Congress.
We do not know when or if Congress will adopt satellite reform legislation,
or whether any legislation that is adopted will permit the completion of the
Merger or whether the necessary governmental approvals will be obtained. If the
Merger is not completed on or before September
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18, 2000, under the terms of the Merger Agreement, COMSAT or we could terminate
the Merger Agreement, or elect not to exercise this right and extend this date.
If consummated, the Merger will be accounted for under the purchase method of
accounting. If the Merger is not consummated, we will not be able to achieve all
of our objectives with respect to the COMSAT transaction and will be unable to
exercise control over COMSAT.
In August 1998, we formed Lockheed Martin Global Telecommunications, Inc., a
wholly-owned subsidiary (LMGT), to focus on expanding our presence in the
global telecommunications services market. Subsequently, we transferred various
assets, including investments in several existing joint ventures from some of
our other business areas to LMGT. The transfer was effective in January 1999. A
second transfer of additional assets occurred later in 1999. If the COMSAT
transaction is consummated, we intend to combine COMSAT's operations with those
of LMGT. Whether or not the COMSAT transaction is consummated, given the
substantial investments necessary for the growth of the global
telecommunications services business, LMGT may seek strategic partners and may
also seek to access the public markets to raise capital. There can be no
assurance that LMGT will be successful in these endeavors.
Business Segments
We operate through four principal business segments:
. Systems Integration -- Includes missiles and fire control, naval
-------------------
electronics and surveillance systems, platform integration, aerospace
electronics, control systems, and command, control, communications,
computers and intelligence (C4I) lines of business;
. Space Systems -- Includes space launch, commercial and government
-------------
satellites, and strategic
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missiles lines of business;
. Aeronautical Systems -- Includes tactical aircraft, airlift, and
--------------------
aeronautical research and development lines of business; and
. Technology Services - Includes federal technology services line of
-------------------
business.
All other operations are grouped in "Corporate and Other," which includes
LMGT (which has operational responsibility for our investment in COMSAT) and
certain other joint ventures and businesses. "Corporate and Other" also includes
three lines of businesses identified as possible candidates for strategic
alliances or divestiture.
Comparative segment revenues, profits and related financial information for
1999, 1998, and 1997 are provided in the table entitled "Selected Financial Data
by Business Segment" in "Note 17-Information on Industry Segments and Major
Customers" on pages 62-63 of our 1999 Annual Report to Shareholders.
Systems Integration
Our Systems Integration segment is comprised of multiple operating units,
engaged mainly in U.S. defense work. Systems Integration's core businesses are
missiles and fire control; naval electronics and surveillance systems;
electronics platform integration; aerospace electronics; control systems; and
command, control, communications, computers and intelligence (C4I) systems.
Major products and capabilities include anti-armor, air-to-surface and surface-
to-surface missiles; air and theater missile defense systems; electro-optical
and fire control systems; surface ship and submarine combat systems; anti-
submarine and undersea warfare systems; avionics and ground
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combat vehicle integration; command and control (C2) systems for naval, airborne
and ground applications; simulation and training systems; logistics management;
government and commercial information technology systems; intelligence,
surveillance and reconnaissance systems; air traffic control systems; postal
automation systems; land, sea and air-based radars; and electronic warfare
systems. Portions of the segment's activities involve classified programs for
the U.S. Government.
In 1999, the segment's net sales represented 42.9% of our net sales.
The Missiles and Fire Control business produces air and missile defense
systems, tactical battlefield missiles and precision guided weapons and
munitions. The Naval Electronics and Surveillance Systems business provides
products and services, including shipboard electronics integration, surface ship
and submarine combat systems, sensors and missile launching systems. The
Electronics Platform Integration business performs systems integration of
mission specific combat suites in areas including anti-submarine warfare,
electronic warfare, surveillance and reconnaissance, and postal automation. The
C4I (Command, Control, Communications, Computers and Intelligence) business
provides intelligence, reconnaissance and surveillance systems; federal
information management solutions such as automated fingerprint identification
systems; and simulation and training systems and services. The C4I business
also includes Air Traffic Management which develops and integrates advanced air
traffic control systems, including area, terminal, and tower automation, radar
and flight data processing, and system infrastructure development; and
implements advanced capabilities for communications, navigation and
surveillance/air traffic management.
In September 1999 and January 2000, we identified several operations within
the segment
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as candidates for potential divestiture. These include the:
. Aerospace Electronics business, and
. Control Systems business.
Major new business wins during 1999 included training systems for the C-130
and F-16, two of the world's most widely used military aircraft; the ground
systems portion of a major classified program; and the Tactical Tomahawk Weapon
Control System for U.S. Navy surface and undersea combatants. Enhancing our
stature as an international business partner, we were part of a multinational
team selected by the governments of the United States, Germany and Italy to
develop the Medium Extended Air Defense System (MEADS). Other significant
international programs initiated during 1999 include a frigate upgrade program
for the Royal Australian Navy; sales of radars and maritime traffic management
systems to customers in Europe, Asia and Africa; and a postal automation program
in the United Kingdom, marking further expansion of a business in a fast-growing
market to which we have transferred core skills. Examples of our ability to
effectively transfer skills to an adjacent market with growth potential include
our selection in 1999 by General Motors Corporation to provide information
management services for three of the auto manufacturer's organizations and an
order from New York City Transit for 125 Hybrid Electric Vehicles.
During 1999, Systems Integration companies also received follow-on orders
for established programs including the U.S. Navy's AEGIS weapon control system;
the Army Tactical Missile System (ATACMS); the Multiple Launch Rocket System
(MLRS); the Low Altitude Navigation and Targeting Infrared System for Night
(LANTIRN) system, used aboard U.S. and international aircraft; and the Navy's
SH-60R multi-mission helicopters.
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In support of the United States' air and missile defense initiatives, we
demonstrated the feasibility of hit-to-kill technology during 1999 with two
successful test flights of the Theater High Altitude Area Defense (THAAD)
system. In addition, we had two intercepts of target warheads by the Patriot
Advanced Capability-3 (PAC-3) Missile. Other significant program milestones
during 1999 included the first powered flight of the Joint Air-to-Surface
Standoff Missile (JASSM), under development by the U.S. Air Force, the U.S. Navy
and international customers; completion of the Display System Replacement
program for the U.S. Federal Aviation Administration; and delivery of the
Integrated Automated Fingerprint Identification System to the Federal Bureau of
Investigation. In addition, Systems Integration businesses continued to
document their software development capabilities via independent assessments
under the Carnegie Mellon Software Engineering Institute (SEI) Capability
Maturity Model (CMM). At December 31, 1999, four Systems Integration businesses
were assessed at Level 5, the highest rating possible. This earned us more
Level 5 assessments than any other company and four out of only 12 earned by the
more than 1,200 companies assessed through 1999.
The segment is heavily dependent on both military and civilian agencies as
a customer. In 1999, U.S. Government customers accounted for over three-
quarters of the segment's total net sales.
Space Systems
In January 2000, we announced that the Space Systems segment was
consolidated into one operating unit named the Lockheed Martin Space Systems
Company, with headquarters in
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Denver, Colorado. Reporting to the Space Systems Company are operations in
Sunnyvale, California, Denver, Colorado and New Orleans, Louisiana as well as
operating units such as Special Programs, International Launch Services (ILS)
and Commercial Space Systems. The segment conducts most of its business through
its Denver Operations, Sunnyvale Operations and Michoud Operations units. A
substantial portion of the segment's activities involves classified programs for
the U.S. Government.
In 1999, the segment's total net sales represented 22.8% of our net sales.
The segment's Denver Operations unit designs, develops, manufactures and
integrates advanced technology systems for space and defense. Principal
products include the Titan and Atlas family of launch vehicles. Through our
joint venture with two Russian aerospace companies, (which joint venture is
consolidated in our financial statements), we also provide Proton rocket launch
vehicle services. In July 1999, we signed a memorandum of agreement with our
Russian partner, Khrunichev State Research and Production Space Center, that
granted us and our subsidiary, ILS, exclusive rights to market the new Russian-
built Angara launch vehicle that is currently in development. During 1999,
there was an industry-wide slowdown of new launch orders and delays in launches
due to several launch failures, including failures involving our Titan IV and
Proton launch vehicles as well as failures of third party launch vehicles.
The segment's Sunnyvale Operations unit designs, develops, manufactures and
integrates strategic missiles and spacecraft for communications, Earth
observation, scientific and navigation missions for military and civilian
government agencies and commercial customers. Principal products include the
Trident II submarine-launched fleet ballistic missile, the A2100 commercial
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communications satellite and the MILSTAR defense communications satellites. The
unit also plays a role in the National Aeronautics & Space Administration's
(NASA) International Space Station program and markets and sells communications
spacecraft to commercial telecommunications customers, including some customers
in which we have an ownership interest.
The segment's Michoud Operations unit manufactures the Super Lightweight
Tank, the latest iteration of the Space Shuttle External Tank for NASA. This
unit also designs, develops and manufactures, for us and commercial customers,
large aluminum and composite structures (including fuel tanks for space
vehicles), cryogenic propellant feed systems and thermal protection systems for
cryogenic structures. Currently, Michoud is developing the X-33 liquid oxygen
tanks and main propellant feed system.
Space Imaging LLC (of which we and Raytheon Company together own more than
half) is a supplier of satellite images, satellite imaging access, and related
products and services. Space Imaging launched the world's first one-meter
resolution, commercial imaging satellite, called the IKONOS satellite, in
September 1999. The spacecraft and the Athena launch vehicle used to launch the
IKONOS satellite were built by the segment's Sunnyvale and Denver Operation
units.
United Space Alliance, LLC, which we jointly own with The Boeing Company,
is responsible for the day-to-day operation and management of the Space Shuttle
fleet for NASA. It also performs the modification, testing and checkout
operations required to prepare space shuttles for launch.
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The segment is heavily dependent on both military and civilian agencies of
the U.S. Government as customers. In 1999, U.S. Government customers accounted
for over four-fifths of the segment's net sales.
Aeronautical Systems
In January 2000, we announced that the Aeronautical Systems segment was
consolidated into one operating unit named the Lockheed Martin Aeronautics
Company, with headquarters in Fort Worth, Texas. The new company announced its
management team in March 2000. The company will include operations in Fort
Worth, Texas (Tactical Aircraft Systems); Marietta, Georgia (Aeronautical
Systems); Palmdale, California (Skunk Works); and plants in Clarksburg, West
Virginia; Johnstown, Pennsylvania; Meridian, Mississippi; and Pinellas, Florida.
The segment includes tactical aircraft, airlift, and aeronautical research and
development lines of business. Portions of the segment's activities involve
classified programs for the U.S. Government, particularly at Skunk Works.
In 1999, the segment's net sales represented 21.5% of our total net sales.
The segment is involved in numerous large defense programs including:
. F-22 air-superiority fighter - has significantly improved capabilities
over current U.S. Air Force aircraft;
. F-16 multi-role fighter - presently the world's premier, low-cost multi-role
fighter;
. Joint Strike Fighter - currently in the concept demonstration phase
potentially leading to the next generation, multi-role fighter and has the
potential to be the largest tactical aircraft program in the U.S., and
perhaps the world;
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. C-130J transport - latest generation of C-130 Hercules tactical transport
aircraft; and
. X-33 reusable launch vehicle - a subscale demonstrator flight vehicle which
eventually may lead to development of a commercial reusable launch vehicle
program.
We are the team leader for the F-22 air-superiority fighter aircraft
program. The F-22 is the latest generation of fighter aircraft and continues to
proceed through its engineering and manufacturing development phase, meeting or
exceeding all key performance parameters. In 1999, the F-22 met the test
criteria set by the Department of Defense (DoD) resulting in full contract award
for the second lot of Production Representative Test Vehicles (6 aircraft) and
long lead procurement authorization for Production Lot 1 (10 aircraft). In 2000,
the F-22 must complete stringent DoD test criteria prior to full contract award
for Production Lot 1 (10 aircraft) and long lead award for Lot 2 (16 aircraft).
During 1999, the F-22 program received significant Congressional focus as a
potential target for reduction or extension of its funding so that its funds
could be used to pay for other programs. Although the F-22 program remains a
high priority for the DOD and the armed services, it is likely that the program
will continue to have Congressional focus during 2000.
We are the prime contractor on the F-16 "Fighting Falcon" tactical fighter
aircraft and continue to provide upgrades for the U.S. Air Force and our
international customers. To date, over four thousand of these aircraft have
been sold. During 1999, Israel selected us for more than 50 F-16s (with an
option to order 60 more aircraft) and Greece also selected us for more than 50
F-16s. The Israel contract was signed in January 2000 and we expect the Greece
contract to be signed in the near future. In 1998, the United Arab Emirates
(UAE) selected our new "Block 60" F-16 as it's advanced fighter aircraft, and
extensive contract negotiations continued
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throughout 1999. In March 2000, we signed a multi-billion dollar contract and we
now have to go through the U.S. Government review process including license
approval, interagency review, and Congressional notification and approval.
For the next generation Joint Strike Fighter, various branches of the U.S.
military and other countries' militaries are working together on a set of
requirements that should allow a near-common design for this aircraft. In 1999,
we completed various design reviews of our Joint Strike Fighter. We also
continued to fabricate two concept demonstration aircraft. In 2000, we
anticipate that flight tests of the concept demonstration aircraft will be made.
We are one of the two remaining competitors for the program down-select award,
which currently is planned to be made in 2001.
The C-130J is an advanced technology tactical transport aircraft offering
improved performance and reliability and reduced operating and support cost over
prior C-130 models. The "J" model incorporates state-of-the-art cockpits and
avionics, a more powerful and efficient propulsion system and numerous
manufacturing innovations into a proven, mission-tested airframe. In 1999, we
delivered 30 C-130J aircraft. In the second quarter of 1999, we recognized cost
growth on the C-130J program that resulted in reduced expectations about the
profitability for the program.
Since 1996, we have been working with NASA to develop the X-33, a subscale
technology demonstrator of a reusable launch vehicle. In 1998, we completed the
final design review of the X-33. After a failure of a composite liquid hydrogen
(LH2) tank in November 1999, we adjusted our plan to allow for the manufacture
of a metallic LH2 tank so that the
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expected rollout of the X-33 flight vehicle is early 2002, with an expected
first flight in mid-2002. We will then decide whether to proceed with the
development of a full-scale, commercial reusable launch vehicle program.
We also are involved in other programs such as the joint Japan/U.S.
production of the F-2 aircraft and provide sustaining engineering, modifications
and upgrades for existing aircraft, including the U-2 reconnaissance aircraft,
and earlier model C-130s. In 1999, under our Total Systems Performance
Responsibility (TSPR) contract with the U.S. Air Force, a new logistics support
system for the F-117A was created that includes the role of sustainment,
integration, modification, depot support and system upgrades.
The segment is dependent on the U.S. military, NASA and international
governments as customers. In 1999, U.S. Government customers accounted for over
half of the segment's net sales.
Technology Services
The Technology Services segment provides a wide array of management,
engineering, scientific, logistic, and information services to government
agencies. Principal customers include the DoD, Department of Energy (DoE), NASA,
Federal Aviation Administration, and other agencies of the federal government.
The segment provides its services through eight operating units. Three of these
are engaged in work for the DoE that is performed under contracts where we
receive a fee for performing management services and are reimbursed for the cost
of operations (known as "Government Owned Contractor Operated"). Only the fee is
recorded in our net sales.
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In 1999, the segment's net sales of $2.3 billion (not including
intercompany sales) represented 8.9% of our total net sales. In addition, the
segment had $0.6 billion of intercompany revenue from value-added services to
other components of Lockheed Martin. Also, the segment's energy units had an
additional $4.0 billion in Government Owned Contractor Operated activity not
reported as sales. Including these amounts, the segment's total equivalent sales
were $6.9 billion in 1999.
Space Operations provides engineering, science, information services at
eight NASA centers, and other government and commercial locations across the
country. Core competencies include mission operations, flight hardware and
payload development and integration, satellite operations, propulsion testing,
engineering and technical support for life sciences, and software design and
development. In 1999, Space Operations phased in the $3.4 billion Consolidated
Space Operations Contract, a major initiative that is expected to save NASA
billions of dollars through productivity improvements in the agency's space
operations.
Aircraft and Logistics Centers provides aircraft maintenance and
modification services and contractor logistics support for defense and
commercial customers around the world. Its core competencies include
government-privatization projects in the U.S. and overseas, depot-level and
field maintenance services, aircraft avionics upgrades, engineering support,
engine maintenance and overhaul services, customer site support, and logistic
services. The unit operates and manages international aircraft depots and
manufacturing facilities in Saudi Arabia and Argentina and is responsible for
managing a joint venture in China for aircraft maintenance engineering. In
1999, it established a government-privatization partnership with Tinker Air
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Force Base that won a $2.6 billion contract to operate the Kelly Aviation
Center.
Systems Support and Training Services provides a wide range of professional
and technical support services. Services for the DoD include operation,
maintenance, logistics, and engineering services for weapons systems and
training ranges; instructor services and flight-simulator engineering support
for aircrew training; and assembly, installation, integration, upgrade, and
repair services for a variety of computer, communications, command and control,
radar, target, and surveillance systems. Support for the FAA's National Airspace
System includes logistic and engineering services. The unit also performs
environmental research and analysis for the Environmental Protection Agency
(EPA). In 1999, it began work on the billion-dollar Rapid Response program,
under which we provide support to ensure that critical defense systems maintain
full functionality.
Technical Operations performs a complete set of space and space-related
services for DoD, classified, and other federal agencies and commercial
customers. These services include requirement analysis, architecture trade
studies, systems integration, operation and maintenance, sustainment, system
enhancement, and life-cycle support. They are performed in the functional areas
of space launches, space missions, and information analysis. In 1999, Technical
Operations supported well over half of the U.S. government's satellites,
including those associated with several national systems critical to the
nation's security.
Information Support Services provides a full spectrum of information
technology support to federal, state, and local government agencies. Principal
customers include the Social Security Administration, Patent and Trademark
Office, EPA, and the Departments of Defense, Energy,
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Justice, and Health and Human Services. Specific types of information technology
support include software design, development, and maintenance, e-commerce,
telecommunications, supercomputing, network management, data center operations,
seat management, information technology outsourcing, and information security.
Among its current programs, Information Support Services is developing the
system architecture for the Health Care Financing Administration.
Knolls Atomic Power Laboratory designs nuclear reactors for the U.S. Navy.
It also supports the existing fleet of nuclear powered ships and trains the Navy
personnel who operate those ships.
Sandia National Laboratories supports the stewardship of the U.S. nuclear
weapon stockpile, developing sophisticated research and technology in the areas
of engineering sciences, materials, and processes; pulsed power;
microelectronics and photonics; and computational and information sciences.
Energy Programs manages and operates facilities supporting the nuclear energy
defense programs of both the United States and the United Kingdom. At the DoE's
Y-12 plant in Oak Ridge, Tennessee, Energy Programs supports the remanufacture
of weapon components for the U.S. nuclear stockpile, the stewardship of
materials associated with the stockpile, and the modernization of the complex.
In 1999, Energy Programs formed a joint venture with two British firms that was
awarded a $3.5 billion contract to manage the Atomic Weapons Establishment for
the United Kingdom Ministry of Defense. In connection with our September 1999
announcement to focus more on core businesses, Energy Programs divested a
subsidiary that held an
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environmental management prime contract at the DoE's Hanford facility in 1999.
The segment also has two other businesses identified as candidates for
divestiture.
The segment is heavily dependent on both military and civilian agencies as
a customer. In 1999, U.S. Government customers accounted for nine-tenths of the
segment's total net sales.
Corporate and Other
The Corporate and Other segment includes LMGT (which has operational
responsibility for our 49% investment in COMSAT) and certain other joint
ventures and businesses, including Lockheed Martin IMS Corporation, Enterprise
Information Systems, and Integrated Business Solutions. In 1999, the segment's
net sales represented 3.9% of our total net sales.
COMSAT is a publicly traded entity and discloses its financial information
separately from us. If the COMSAT Merger is consummated, we intend to combine
COMSAT's operations with those of LMGT. The following briefly summarizes the
latest developments in LMGT's most significant projects:
ASTROLINK International LLC provides a worldwide, digital Ka-band
geosynchronus satellite system focusing on the high-growth area of broadband
data services, carrying traffic for Internet, intranet, extranet, multimedia and
corporate data networks. In April 1999, LMGT committed to a total investment of
$420 million in ASTROLINK for an approximate 45% ownership interest. Concurrent
with LMGT's investment commitment, TRW Inc. and Telespazio
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SpA. (a wholly owned subsidiary of Telecom Italia) each committed to invest $250
million in ASTROLINK. In December 1999, Liberty Media Corporation committed to
invest $425 million, which diluted our ownership interest to approximately 31%.
We have a 33% equity investment in ACeS International Limited which plans
to deliver voice, fascimile and Internet services through hand-held mobile and
fixed terminals in the Asia-Pacific region. The ground infrastructure for
providing ACeS service to customers has been completed. A Garuda 1 satellite was
launched in February 2000 and is being moved into geosynchronus orbit.
Commercial operations are expected to begin in the third quarter of 2000.
We have a 50% investment in Americom Asia-Pacific, LLC, a joint venture
with GE American Communications, Inc. that is scheduled to launch a satellite in
the fourth quarter of 2000 to serve broadcasters in the Asia-Pacific region. As
of December 31, 1999, the sole asset of the joint venture is the GE-1A
satellite, currently in the final stages of construction by Lockheed Martin
Commercial Space Systems.
Lockheed Martin Intersputnik, Ltd is a strategic venture principally owned
by us with the Moscow-based Intersputnik International Organization of Space
Communications as our minority partner. It deployed its first satellite in the
fourth quarter of 1999 and commercial operations are expected to begin in the
first quarter of 2000.
The segment also includes three businesses that have been identified by
management as having high growth potential, but are distinct from our core
business segments. These units will require additional capital and expertise to
fully maximize their value, and we may seek support
21
through strategic partnerships or joint ventures, by accessing public equity
markets, or by divestiture. The outcome of those efforts cannot be predicted.
These units are:
. Lockheed Martin IMS - serves state and local government services markets;
. Enterprise Information Systems - provides internal information technology
services; and
. Integrated Business Solutions - provides commercial information technology
outsourcing services.
We also run research laboratories, own real estate and conduct other
miscellaneous activities. We have approximately a 13.5% fully diluted interest
(in the form of convertible preferred stock) in Loral Space & Communications
Ltd. In February 2000, Lockheed Martin and Loral Space each filed certain
notices under the Hart-Scott-Rodino Antitrust Improvement Act (HSR Act) with the
FTC and the DOJ to convert 45.9 million shares of Loral Space convertible
preferred stock to an equal number of shares of Loral Space common stock. We
will be able to convert the convertible preferred stock following the expiration
of the HSR Act waiting period on March 5, 2000, unless such period is extended
by a request from the FTC for additional information. Also in February 2000,
Lockheed Martin and Loral Space entered into an agreement that would facilitate
our ability to divest our interest in Loral Space, but in no case earlier than
mid-May 2000.
22
Patents
We own numerous patents and patent applications, some of which, together
with licenses under patents owned by others, are utilized in our operations.
Although these patents and licenses are, in the aggregate, important to the
operation of our 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 our business.
Raw Materials and Seasonality
Although certain aspects of our business require relatively scarce raw
materials, we have not experienced difficulty in our ability to obtain raw
materials and other supplies needed in our manufacturing processes, nor do we
expect this to be an issue in the future. No material portion of our business
is considered to be seasonal.
Competition and Risk
We compete with numerous other contractors on the basis of price, as well as
technical and managerial capability. Our ability to successfully compete for and
retain such business is highly dependent on technical excellence, management
proficiency, strategic alliances, cost-effective performance and the ability to
recruit and retain key personnel.
During the past year, competition in some markets has intensified. For
example, the Space Systems segment has experienced increased competition,
particularly in its launch vehicles and commercial satellite businesses.
23
Consolidation of the U.S. and global defense and space industries has
intensified competition. Consolidation among U.S. defense, space and aerospace
companies has resulted in a reduction of the number of principal prime
contractors for the DOD and NASA. As a result of this consolidation, we
frequently partner on various programs with our major suppliers, some of which
are, from time to time, our competitors on other programs. We are required to
generate working capital and invest in fixed assets to maintain and expand our
government business. Winning the competition for a contract is often the
determinant of whether a competitor is able to remain in that line of business.
U.S. Government programs are also subject to uncertain future funding
levels, which can result in the extension or termination of programs. Our
business is also highly sensitive to changes in national and international
priorities and U.S. Government budgets. For most of the last decade, we have
been adversely impacted by U.S. Government budgetary and policy constraints that
led to fewer available contracts. The Clinton administration has requested
increased budgets for the U.S. military in the Year 2000. There can be no
assurance, however, that these announced plans will result in increased hardware
or services procurements or increased research and development spending, or that
we would win any contracts funded by any budgetary increases.
In 1999, approximately 70% of our net sales were made to the U.S.
Government, either as a prime contractor or as a subcontractor; approximately
20% of our net sales were made to other types of government entities; and
approximately 10% of our net sales were made to commercial customers (mainly
launch services, satellites and information technology services). Accordingly, a
24
substantial portion of our 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. Certain risks
inherent in the current aerospace and defense business environment are discussed
in "Management's Discussion and Analysis of Financial Condition and Results of
Operations" on page 21 through page 37 of our 1999 Annual Report to
Shareholders.
At December 31, 1999, our backlog was approximately split evenly between
cost reimbursement and fixed-price-type contracts. Cost-reimbursement-type
contracts generally have lower profit margins than fixed-price-type contracts.
Production contracts are mainly fixed-price-type contracts and developmental
contracts are nearly all cost reimbursement contracts. Earnings may vary
materially depending on 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.
25
Our international business (mainly foreign military sales to various
governments in Europe, Asia and Middle East) tends to have more risk than our
domestic business due to the greater potential for changes in foreign economic
and political environments. Our business is also highly sensitive to changes in
foreign national priorities and government budgets. International transactions
frequently involve increased financial and legal risks arising from stringent
contractual terms and conditions and the widely differing legal systems and
customs in foreign countries.
Government Contracts and Regulations
Our businesses are heavily regulated in most of our markets. We deal with
numerous U.S. Government agencies and entities, including all of the branches of
the U.S. military and NASA. Similar government authorities exist in our
international markets.
The U.S. Government, and other governments, may terminate any of our
government contracts and, in general, subcontracts, at their convenience as well
as for default based on performance. If any of our government contracts were to
be terminated for convenience, we generally would be entitled to receive payment
for work completed and allowable termination or cancellation costs.
Upon termination for convenience of a fixed-price type contract, we
normally are 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 on the contract or adjustment for loss if
26
completion of performance would have resulted in a loss. Upon termination for
convenience of a cost-reimbursement type contract, we normally are entitled, to
the extent of available funding, to reimbursement of allowable costs plus a
portion of the fee. The amount of the fee recovered, if any, is related to the
portion of the work accomplished prior to termination and is determined by
negotiation.
U.S. Government contracts also are conditioned upon the continuing
availability of Congressional appropriations. Long-term government contracts
and related orders are subject to cancellation if appropriations for subsequent
performance periods become unavailable. 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 Congress annually determines if additional funds are appropriated to
the contract.
A portion of our business is classified by the government and cannot be
specifically described. The operating results of these classified programs are
27
included in our consolidated financial statements. The business risks associated
with classified programs do not differ materially from those of our other
government programs and products.
Backlog
At December 31, 1999, our total negotiated backlog was $45.9 billion
compared with $45.3 billion at the end of 1998. The total negotiated backlog of
the sectors at December 31, 1999, was as follows: Systems Integration - $15.2
billion, Space Systems - $14.8 billion, Aeronautical Systems - $9.0 billion,
Technology Services - $4.4 billion, and Corporate and Other - $2.5 billion. Of
our total 1999 year-end backlog, approximately $28.2 billion, or 61.4%, is not
expected to be filled within one year. At December 31, 1999, our backlog was
approximately split evenly between cost reimbursement and fixed-price-type
contracts.
These amounts include both unfilled firm orders for our 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 not
been appropriated.
Environmental Regulation
Our operations are subject to and affected by a variety of federal, state
and local environmental protection laws and regulations. We are involved in
environmental responses at some of our facilities and former facilities, and at
third-party sites not owned by us where we have been designated a "Potentially
Responsible Party" (PRP) by the EPA or by a state agency.
At these third-party sites, the EPA or a state agency has identified the
site as requiring remedial action under the federal "Superfund" or 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, we
are potentially liable to government environmental agencies for the full cost of
funding such remediation. In the unlikely event that we were required to fund
the entire cost of such remediation, the statutory framework provides that we
may pursue rights of contribution from the other PRPs.
At third-party sites, we continue to pursue a course of action designed to
minimize and mitigate our potential liability through assessing the legal basis
for our involvement, including an analysis of such factors as (i) the amount and
nature of materials disposed of by us, (ii) the allocation process, if any, used
to assign costs to all involved parties, and (iii) the scope of the response
action that is or may reasonably be required. We also continue to pursue active
participation in steering committees, consent orders and other appropriate and
available avenues. Management believes that this approach should minimize our
proportionate share of liability at third-party sites where other PRPs share
liability.
28
In addition, we manage 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 we relied (and
continue to rely with respect to past practices) upon government funding to pay
such costs. While the government remains responsible for capital and operating
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 fines and penalties no
longer constituting allowable costs under the contracts pursuant to which such
facilities are managed.
Description of Certain Environmental Matters
--------------------------------------------
We are responding to three administrative orders issued by the California
Regional Water Quality Control Board (Regional Board) in connection with our
former Lockheed Propulsion Company facilities in Redlands, California. Under the
orders, we are investigating the impact and potential remediation of regional
groundwater contamination by perchlorates and chlorinated solvents. The
Regional Board has approved our plan to maintain public water supplies with
respect to chlorinated solvents during this investigation, and we continue to
negotiate with local water purveyors to implement this plan, as well as to
address water supply concerns relative to perchlorate contamination. We
estimate that expenditures required to implement work currently approved will be
approximately $140 million. We also are coordinating with the U.S. Air Force,
which is conducting preliminary studies of the potential health effects of
exposure to perchlorates in connection with several sites across the country,
including the Redlands site. The results of these studies indicate that current
efforts with water purveyors regarding percholate issues are appropriate;
however, we currently cannot project the
29
extent of our ultimate clean-up obligation with respect to perchlorates, if any.
We entered into a consent decree with the EPA in 1991 relating to certain
property in Burbank, California, which obligated us to design and construct
facilities to monitor, extract and treat groundwater, and to operate and
maintain such facilities for approximately eight years. We entered into a
follow-on consent decree in 1998 which obligates us to fund the continued
operation and maintenance of these facilities through the year 2018, although
responsibility for actual operation of the facilities is to be assumed by the
City of Burbank in late 2000. We have also been operating under a cleanup and
abatement order from the Regional Board affecting our facilities and former
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. As a result of our operations in Burbank, we are
also one of several parties who are under administrative orders from the EPA to
design, build, and operate a groundwater treatment system in Glendale,
California as part of the same San Fernando Valley Superfund site that includes
Burbank. Like the Burbank treatment plant, the city of Glendale is expected to
ultimately assume operational responsibility for the Glendale treatment plant.
We estimate that total expenditures required over the remaining terms of the EPA
and Regional Board consent decrees and administrative orders for Burbank and
Glendale will be approximately $100 million. Under an agreement reached with the
U.S. Government and filed with the U.S. District Court in January 2000, an
amount equal to approximately 50% of these future expenditures will be
reimbursed by the U.S. Government as a responsible party under the Comprehensive
Environmental Response, Compensation and Liability Act.
We are involved in other proceedings and potential proceedings relating to
environmental
30
matters, including disposal of hazardous wastes and soil and water
contamination. The extent of our financial exposure cannot in all cases be
reasonably estimated at this time. In addition to the amounts with respect to
the Redlands, Burbank and Glendale properties described above, a liability of
approximately $200 million for the other cases in which an estimate of financial
exposure can be determined has been recorded.
Under an agreement with the U.S. Government in 1990, the Burbank
groundwater treatment and soil remediation expenditures referenced above are
being allocated to our 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 potentially responsible parties, are allowable in
establishing the prices of our products and services. As a result, a
substantial portion of the expenditures is being reflected in our sales and cost
of sales pursuant to U.S. Government agreement or regulation. Although the
Defense Contract Audit Agency has questioned certain elements of our practices
with respect to the aforementioned agreement, it is management's opinion that
the treatment of these environmental costs is appropriate and consistent with
the terms of such agreement. On October 4, 1999, we filed a certified claim with
the Defense Corporate Executive (DCE) and requested from the DCE the issuance of
a final decision regarding the propriety of our U.S. Government accounting
practices for the treatment of environmental costs. A final decision is
expected to be issued by March 31, 2000. We have recorded an asset for the
portion of environmental costs that are probable of future recovery in pricing
of our 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
31
other PRPs, which we are pursuing as required by agreement and U.S. Government
regulation. Any such recoveries, when received, would reduce allocated amounts
to be included in our U.S. Government sales and cost of sales. For additional
details, see "Note 16 -- Commitments and Contingencies" of the "Notes to
Consolidated Financial Statements" on page 59 through page 61 and "Management's
Discussion and Analysis of Financial Condition and Results of Operations,
Environmental Matters" on page 36 through page 37 of the 1999 Annual Report to
Shareholders.
Research and Development
We conduct research and development activities under customer contract
funding and with Independent Research and Development (IR&D) funds. IR&D efforts
consist of projects involving basic research, applied research, development, and
systems and other concept formulation studies. In 1999, we spent approximately
$1.1 billion of IR&D and bid and proposal funds, a substantial portion of which
was included in general and administrative costs allocable to U.S. Government
contracts.
During 1999, we did not undertake the development of a new product or line
of business requiring the investment of a material amount of our total assets,
other than increasing investments in the development or improvement of launch
vehicles. Effective January 1999, we transferred certain businesses to LMGT.
See "Research and development and similar costs" in "Note 1-- Summary of
Significant Accounting Policies" of the "Notes to Consolidated Financial
Statements" on page 46 of the 1999 Annual Report to Shareholders.
32
Employees
At December 31, 1999, we had approximately 147,000 employees, the majority
of whom were located in the United States. We have a continuing need for
numerous skilled and professional personnel to meet contract schedules and
obtain new and ongoing orders for our products. Approximately one-fifth of our
employees is covered by over a hundred separate collective bargaining agreements
with various international and local unions. Management considers employee
relations generally to be good.
Forward-Looking Statements - Safe Harbor Provisions
This report contains, is based on or incorporates by reference statements
which constitute "forward-looking statements" within the meaning of the
Securities Act of 1933 and the Securities Exchange Act of 1934. The words
"believe," "estimate," "anticipate," "project," "intend," "expect" and similar
expressions are intended to identify forward-looking statements.
All forward-looking statements involve risks, uncertainties and factors,
including statements and assumptions with respect to future revenues, program
performance and cash flows, the outcome of contingencies including litigation
and environmental remediation, and anticipated costs of capital investments and
planned dispositions. These risks, uncertainties and factors include: the
ability to achieve or quantify savings for our customers or ourselves as a
result of our reorganization efforts, including the recently announced business
area streamlining and staff reductions, or in our global cost-cutting program;
our ability to grow earnings and
33
generate cash flow in accordance with our beliefs; difficulties during space
launches; the ability to obtain or the timing of obtaining future government
awards; the availability of government funding and customer requirements;
economic conditions, competitive environment, international business and
political conditions, timing of awards and contracts; timing and customer
acceptance of product delivery and launches; the outcome of contingencies,
including completion of any acquisitions and divestitures, litigation and
environmental remediation, program performance, and our ability to consummate
the COMSAT transaction. These are only some of the numerous factors which may
affect the forward-looking statements in this Annual Report on Form 10-K.
Readers are cautioned not to place undue reliance on these forward-looking
statements that speak only as of the date of this Annual Report on Form 10-K.
We do 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 Annual Report on Form 10-K or to reflect the occurrence
of unanticipated events. The forward-looking statements in (or incorporated by
reference in) this document are intended to be subject to the safe harbor
protection provided by the federal securities laws.
For a discussion identifying some important factors that could cause actual
results to vary materially from those anticipated in the forward-looking
statements, see our SEC filings, including but not limited to, the discussion of
"Competition and Risk" and "Government Contracts and Regulations" of this Annual
Report on Form 10-K, "Management's Discussion and Analysis of Financial
Condition and Results of Operations" on page 21 through page 37 of the 1999
Annual Report to Shareholders, "Note 1 - Summary of Significant Accounting
34
Policies," "Note 2 - Transaction Agreement with Comsat Corporation," and "Note
16 - Commitments and Contingencies" of the Notes to Consolidated Financial
Statements on page 44 through page 48, and page 59 through page 61,
respectively, of the Audited Financial Statements included in the 1999 Annual
Report to Shareholders.
ITEM 2. PROPERTIES
At December 31, 1999, we operated in 442 offices, facilities, manufacturing
plants, warehouses, service centers and laboratories throughout the United
States and internationally. Of these, we owned floor space at 62 locations
aggregating approximately 41.0 million square feet and we leased space at 380
locations aggregating approximately 24.5 million square feet. At December 31,
1999, we managed and/or occupied various major government-owned facilities.
The U.S. Government also furnishes certain equipment used by us.
At December 31, 1999, our core operating units had major operations at the
following locations:
. Systems Integration - - Camden, Arkansas; Goodyear, Arizona; San Jose,
California; Colorado Springs, Colorado; Orlando, Florida; Gaithersburg and
Rockville, Maryland; Eagan, Minnesota; Manchester, Merrimack and Nashua, New
Hampshire; Moorestown/Mt. Laurel, New Jersey; Johnson City, Owego, Yonkers,
Syosset and Syracuse, New York; Akron, Ohio; King of Prussia, Pennsylvania;
Grand Prairie, Texas; Manassas, Reston and Fairfax, Virginia.
. Space Systems - - Sunnyvale and Palo Alto, California; Waterton and
Littleton Colorado; and Newtown, Pennsylvania;
35
. Aeronautical Systems - - Palmdale, California; Marietta, Georgia; and Fort
Worth, Texas;
. Technology Services - - Livermore, California; Cherry Hill, New Jersey;
Albuquerque, New Mexico; Greenville, South Carolina; Oak Ridge, Tennessee;
San Antonio, Texas and
. Corporate and Other - - Orlando, Florida; Bethesda and Rockville, Maryland;
Teaneck, New Jersey; and Arlington (Crystal City), Virginia.
36
At December 31, 1999, a summary of our floor space by core operating unit
consisted of:
(Square feet in millions)
Leased Owned Gov't Owned Total
------ ----- ----------- -----
Systems Integration 13.2 18.5 0.2 31.9
Space Systems 2.0 12.0 5.1 19.1
Aeronautical Systems 1.0 4.5 15.0 20.5
Technology Services 5.5 0.1 34.8 40.4
Corporate & Other* 2.8 5.9 0.0 8.7
---- ---- ---- -----
Total 24.5 41.0 55.1 120.6
==== ==== ==== =====
(* includes owned discontinued operations square footage of 3.9 million
square feet located primarily in Burbank, California and Great Neck, New
York)
At December 31, 1999, we owned various large tracts of land which are
available for sale or development. The location and approximate size of these
tracts include:
LOCATION ACREAGE
-------- -------
1. Potrero Creek, California 9,100
2. Beaumont, California 2,800
3. Palmdale, California 650
4. Austin, Texas 250
37
A portion of our 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 our major physical
facilities are in good condition and are adequate for their intended use.
ITEM 3. LEGAL PROCEEDINGS
We are parties or have property subject to litigation and other
proceedings, including matters arising under provisions relating to the
protection of the environment, both as specifically described below or arising
in the ordinary course of our business. In the opinion of management, the
probability is remote that the outcome of any such litigation or other
proceedings, will have a material adverse effect on our results of operations or
financial position.
We are primarily engaged in providing products and services under contracts
with the U.S. Government and, to a lesser degree, under direct foreign sales
contracts, some of which are funded by the U.S. Government. These contracts are
subject to extensive legal and regulatory requirements and, from time to time,
agencies of the U.S. Government investigate whether our operations are being
conducted in accordance with these requirements. U.S. Government investigations
of us, whether relating to these contracts or conducted for other reasons, could
result in administrative, civil or criminal liabilities, including repayments,
fines or penalties being imposed upon us, or could lead to suspension or
debarment from future U.S. Government contracting. U.S. Government
investigations often take years to complete and many result in no adverse action
against us. For the U.S. government investigations noted below, it is too early
for us
38
to determine whether adverse decisions relating to these investigations
could ultimately have a material adverse effect on our results of operations or
financial condition.
The following describes previously reported matters (including one reopened
government investigation), including any developments of these matters. There
were no new matters in the fourth quarter of 1999.
Since January 14, 1999, six class action complaints have been filed against
the Corporation and certain of its officers and directors. These six actions
have been consolidated into two actions, both pending in the United States
District Court for the Central District of California. The complaints allege
that the defendants violated Sections 10(b) and 20(a) of the Securities Exchange
Act of 1934 in that they or persons they controlled allegedly (a) employed
devices, schemes and artifices to defraud; (b) made untrue statements of
material facts or omitted to state material facts necessary in order to make
statements, in light of the circumstances under which they were made, not
misleading; or (c) engaged in acts, practices and a course of business that
operated as a fraud or deceit upon class members in connection with their
purchases of our common stock. According to the complaints, class members were
damaged as, in reliance on the integrity of the market, they paid artificially
inflated prices for our stock. Plaintiffs seek judgments awarding (a) damages
and costs; (b) equitable or injunctive relief, including the imposition of a
constructive trust upon defendants' alleged insider-trading proceeds; and (c)
other just and proper relief.
The first three actions, filed by plaintiffs Yousefi, Edmonds and
Kretchmeyer, allege claims on behalf of a putative class of shareholders who
purchased stock between August 13,
39
1998 and December 23, 1998. The defendants in these actions are Lockheed Martin,
Vance D. Coffman, Marcus C. Bennett, James A. Blackwell, Jr., Thomas A.
Corcoran, Vincent N. Marafino and Norman R. Augustine. These actions were
consolidated under the caption In re Lockheed Martin Corp. Securities
Litigation, CV 99-00372 LGB. The lead plaintiffs filed a consolidated amended
complaint on November 30, 1999.
The second three actions, filed by plaintiffs Kops, Shenker and Kensington
Capital Corp., allege claims on behalf of a putative class of shareholders who
purchased Lockheed Martin stock between January 28, 1999 and June 9, 1999. The
defendants in these actions are Lockheed Martin, Vance D. Coffman, Marcus C.
Bennett, Philip J. Duke, and Thomas A. Corcoran. These actions were
consolidated under the caption Kops v. Lockheed Martin Corporation et. al., CV
99-6171 LGB. It is anticipated that the plaintiffs will file a consolidated
amended complaint. We will move to dismiss all complaints at the appropriate
time. We believe that the complaints' allegations are without merit and intend
to vigorously defend these actions.
In 1994, we were awarded a $180 million fixed price contract by the U.S.
Department of Energy (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. We incurred significant unanticipated costs and
scheduling issues due to complex technical and contractual matters which
threatened the viability of the overall Pit 9 program. Based on an
investigation by management to identify and quantify the overall effect of these
matters, we submitted a request for equitable adjustment (REA) to the DOE on
March 31, 1997 that sought, among other things, the recovery of a portion of
unanticipated costs incurred by us and the restructuring of the contract to
provide for a more
40
equitable sharing of the risks associated with the Pit 9 project. We have been
unsuccessful in reaching any agreements with the DOE on cost recovery or other
contract restructuring matters.
On June 1, 1998, the DOE, through Lockheed Martin Idaho Technologies
Company (LMITCO), its management contractor, terminated the Pit 9 contract for
default. On that same date, we filed a lawsuit against the DOE in the U.S.
Court of Federal Claims in Washington, D.C., challenging and seeking to overturn
the default termination. In addition, on July 21, 1998, we withdrew the REA
previously submitted to the DOE and replaced it with a certified REA. The
certified REA is similar in substance to the REA previously submitted, but its
certification, based upon more detailed factual and contractual analysis, raises
its status to that of a formal claim. On August 11, 1998, LMITCO, at the DOE's
direction, filed suit against us in the U.S. District Court in Idaho, seeking,
among other things, recovery of approximately $54 million previously paid by
LMITCO to us under the Pit 9 contract. We are defending this action while
continuing to pursue our certified REA. Discovery has been ongoing since August
2, 1999. In the U.S. Court of Federal Claims, on October 1, 1999, the Court
stayed DOE's Motion to Dismiss our lawsuit, finding that the Court has
jurisdiction. The Court ordered discovery to commence and gave leave to the DOE
to convert its motion to dismiss to a motion for summary judgment if supported
by discovery. We continue to assert our position in the litigation while
continuing our efforts to resolve the dispute through non-litigation means.
Since July 1995, we have been served with grand jury subpoenas issued by
the U.S. District Court for the Eastern District of New York seeking documents
related to the
41
performance of various government contracts by the former Unisys Corporation
Defense Systems facility at Great Neck, New York. We acquired the facility when
we acquired Loral Corporation in April 1996. Loral Corporation acquired the
facility from Unisys Corporation. We are cooperating with the government's
continuing investigation of this matter.
On February 21, 2000, we were served with a grand jury subpoena issued by
the United States District Court for the Southern District of Texas in Houston
seeking documents related to cost accounting issues in connection with NASA
service and support contracts performed by Lockheed Engineering & Sciences
Company and its successors, Lockheed Martin Engineering & Sciences Services and
Lockheed Martin Space Operations. We have been advised that the United States
Attorney's Office for the Southern District of Texas has reopened the
investigation, after previously having advised us in 1997, that the grand jury
investigation was closed.
We have been served, along with a number of our current and former
employees, with grand jury subpoenas issued by the U.S. District Court for the
Middle District of Florida and subpoenas issued by the Department of Defense
Inspector General relating to the LANTIRN program. The U.S. Attorney's Office
for the Middle District of Florida has advised us that the grand jury is
investigating allegations of fraud in connection with certain LANTIRN program
contracts. These allegations, in part, were first made in qui tam complaints
filed against us and unsealed on July 16, 1996. We are cooperating with the
government's continuing investigation of this matter.
Lockheed Martin Technical Operations Company, our wholly-owned subsidiary,
and certain of its current and former employees, were served with grand jury
subpoenas issued by the
42
United States District Court for the District of Colorado seeking documents
relating to efforts to obtain and to perform a contract with the U.S. Air Force
for space operations, maintenance and support services. We are cooperating with
the government's continuing investigation of this matter.
On March 15, 1999, Lockheed Martin Fairchild Systems was served with a
grand jury subpoena issued by the United States District Court for the Southern
District of New York. The subpoena seeks documents related to quality assurance
requirements for the production of a radar warning receiver by Loral Electronic
Defense Systems. We acquired Loral Electronic Defense Systems in April 1996. We
are cooperating with the government's investigation of this matter.
On July 15, 1999, Lockheed Martin Sanders was served with a grand jury
subpoena issued by the United States District Court for the Central District of
California. The subpoena seeks documents relating to the 1990 international
sale of area defense radar systems by the predecessor of Lockheed Martin Sanders
and the compensation of an international sales consultant in connection with
that sale. We are cooperating with the government's continuing investigation of
this matter.
For the past few years, we have been in litigation with residents in the
Redlands and Burbank areas regarding allegations of personal injury, property
damage, and other tort claims arising from our alleged contribution to
contamination of groundwater. With regard to the claims in Burbank, the first of
possibly several trials relating to liability is expected to commence in state
court in Los Angeles during the third quarter of 2000. With regard to claims in
the Redlands matter, on April 22, 1999, the San Bernardino Superior Court in
California issued a
43
procedural order in one of the filed cases, certifying a medical monitoring
class as well as a punitive damages class. No ruling has been made yet on the
merits, and the first trial on the merits in Redlands is not expected until the
third quarter of 2001. With regard to all of these matters, we believe that the
allegations are without merit and we will continue to defend them.
We are subject to federal and state requirements for protection of the
environment, including those for discharge of hazardous materials and
remediation of contaminated sites. As a result, we are a party to or have our
property subject to various other lawsuits or proceedings involving
environmental protection matters. Due in part to their complexity and
pervasiveness, such requirements have resulted in us being involved with related
legal proceedings, claims and remediation obligations. See "Item 1. Business -
Environmental Regulation."
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 1999.
44
ITEM 4(a). EXECUTIVE OFFICERS OF THE REGISTRANT
Our executive officers are listed below. There were no family relationships
among any of our executive officers and directors. All officers serve at the
pleasure of the Board of Directors.
Name Positions and Principal Occupation and
(Age at 12/31/99) Offices Held Business Experience
- ----------------- ------------ (Past Five Years)
---------------
Vance D. Coffman Chairman of the Board, Chairman of the Board since April 1998, Chief Executive
(55) Chief Executive Officer Officer since August 1997, and President since October
and President 1999; Vice Chairman of the Board from August 1997 to
April 1998; Board member since 1996; President from June
1996 to July 1997 and Chief Operating Officer from
January 1996 to July 1997; Executive Vice President from
January to June 1996; President and Chief Operating
Officer, Space & Strategic Missiles Sector from March
1995 to December 1995; previously served as Executive
Vice President of Lockheed from 1992 to 1995; and
President of Lockheed Space Systems Division from 1988
to 1992.
45
Michael F. Executive Vice President - Executive Vice President - Technology Services since
Camardo (57) Technology Services October 1999; President, Lockheed Martin Technology
Services Group from March 1995 through September 1999;
President, Martin Marietta Services Group from April
1993 to March 1995.
Robert B. Coutts Executive Vice President - Executive Vice President - Systems Integration since
(49) Systems Integration October 1999; President and Chief Operating Officer,
Electronics Sector from October 1998 through September
1999; President, Lockheed Martin Government Electronics
Systems from January 1997 until September 1998;
President Lockheed Martin Aero and Naval Systems from
September 1994 to December 1996; previously served as
Vice President, Sourcing for the Martin Marietta
Corporation.
Philip J. Duke Executive Vice President - Executive Vice President- Shared Services since October
(54) Shared Services 1999; Vice President and Chief Financial Officer from
February 1999 through September 1999; Vice President
Finance from July 1996 to January 1999; Vice President
Finance, Space & Strategic Missiles Sector from March
1995 to July 1996; previously served as Vice President
Finance, Martin Marietta from 1994 to 1995.
46
Dain M. Hancock Executive Vice President - Executive Vice President - Aeronautical Systems since
(58) Aeronautical Systems November 1999 and President of the Lockheed Martin
Aeronautics Company since January 2000; President of
Lockheed Martin Tactical Aircraft Systems from March
1995 to November 1999; Vice President of Lockheed
Corporation from March 1993 to March 1995.
Arthur E. Johnson Vice President - Strategic Vice President - Strategic Development since October
(52) Development 1999; President and Chief Operating Officer, Information
& Services Sector from August 1997 through September
1999; President, Lockheed Martin Systems Integration
Group from January 1997 to August 1997; President,
Lockheed Martin Federal Systems Group from January 1996
to January 1997; and President, Loral Federal Systems
Group from January 1994 to January 1996.
Christopher E. Vice President and Vice President and Controller since November 1999; prior
Kubasik (38) Controller to joining Lockheed Martin, with Ernst & Young LLP since
1983, partner since 1996.
Frank H. Menaker, Senior Vice President and Senior Vice President and General Counsel since July
Jr. (59) General Counsel 1996; Vice President and General Counsel for Lockheed
Martin Corporation from March 1995 to July 1996, having
served in the same capacity for Martin Marietta
Corporation from 1981 until March 1995.
47
Janet L. McGregor Vice President and Vice President and Treasurer since May 1999; Vice
(45) Treasurer President-Finance for Electronics Sector from August
1996 to May 1999; Vice President and Assistant Treasurer
from March 1995 to August 1996; previously served as
Treasurer of Martin Marietta Corporation from 1992 until
March 1995.
Albert E. Smith Executive Vice President - Executive Vice President - Space Systems since October
(50) Space Systems 1999 and President of Lockheed Martin Space Systems
Company since January 2000; President, Lockheed Martin
Missiles & Space from June through September 1999;
President, Lockheed Martin Aerospace Electronic Systems
from December 1998 to June 1999; President, Sanders, a
Lockheed Martin Company, from February to December 1998;
President, Harris Corporation, a supplier of electronic
components, from April 1996 to February 1998; Executive
Vice President, Lockheed Martin Missiles & Space from
January 1996 to April 1996; Vice President and Assistant
General Manager-Commercial, Lockheed Martin Space
Systems Division from 1993 to January 1996.
48
John V. Sponyoe Chief Executive Officer of Chief Executive Officer of Lockheed Martin Global
(60) Lockheed Martin Global Telecommunications since August 1998; President of
Telecommunications Lockheed Martin's Electronics Platform Integration (EPI)
Group from April 1997 to August 1998; Corporate Vice
President, from January 1997 to present; President,
Federal Systems Owego from 1994 until April 1997.
Robert J. Stevens Executive Vice President - Executive Vice President and Chief Financial Officer
(48) Finance and Chief since October 1999; Vice President of Strategic
Financial Officer Development from November 1998 through September 1999;
President and Chief Operating Officer, Energy &
Environment Sector from January 1998 to June 1999;
President, Air Traffic Management Division from June
1996 through January 1998; Executive Vice President and
Senior Vice President and Chief Financial Officer of Air
Traffic Management from December 1993; previously served
as an executive employee of Loral Corporation from
August 1987.
49
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
At January 31, 2000, we had approximately 398,164,999 holders of record of
our Common Stock, $1 par value. In January 2000, we announced that we reduced
our dividend rate to $0.11 per quarter. The decreased dividend will be effective
for dividends declared in the first quarter of 2000. Our 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:
Common Stock -- Dividends Paid and Market Prices
------------------------------------------------
Quarter Dividends Paid Market Prices (High-Low)
- ------- -------------- ------------- --------
1999 1998 1999 1998
---- ---- ---- ----
First $0.22 $0.20 $ 43 - 34.63 $58.94 - $48.75
Second 0.22 0.20 46 - 33.75 58.50 - 49.97
Third 0.22 0.20 39.94 - 30.19 54.25 - 43.63
Fourth 0.22 0.22 33.38 - 16.38 56.75 - 41.00
----- -----
Year $0.88 $0.82 46 - 16.38 58.94 - 41.00
===== =====
ITEM 6. SELECTED FINANCIAL DATA
50
The information required by this Item 6 is included under the caption
"Consolidated Financial Data- Ten-Year Summary" on page 64 through page 65 of
the 1999 Annual Report to Shareholders, and that information is incorporated by
reference in this Form 10-K.
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 21 through page 37 of the 1999 Annual Report to
Shareholders, and that information is incorporated by reference in this Form 10-
K.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Corporation's primary exposure to market risk relates
to interest rates and foreign currency exchange rates. Financial instruments
held by the Corporation which are subject to interest rate risk principally
include variable rate commercial paper and fixed rate long-term debt. The
Corporation's long-term debt obligations are generally not callable until
maturity. The Corporation may use interest rate swaps to manage its exposure to
fluctuations in interest rates; however, there were no such agreements
outstanding at December 31, 1999. Based on its portfolio of variable rate
short-term debt and fixed rate long-term debt outstanding at December 31, 1999,
the Corporation's exposure to interest rate risk is not material.
The Corporation uses forward exchange contracts to manage its exposure to
fluctuations in foreign exchange rates. These contracts are designated as
qualifying hedges of firm commitments or specific anticipated transactions, and
related gains and losses on the contracts are recognized in income when the
hedged transaction occurs. At December 31, 1999, the amounts of forward
exchange contracts outstanding, as well as the amounts of gains and losses
recorded during the year, were not material. Based on the above, the
Corporation's exposure to foreign currency exchange risk is not material. The
Corporation does not hold or issue derivative financial instruments for trading
purposes.
For additional discussion of derivative financial instruments, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations, Other Matters" on page 37 of the 1999 Annual Report to Shareholders,
and "Derivative financial instruments" and "New accounting pronouncements to be
adopted" in "Note 1 - Summary of Significant Accounting Policies" of the "Notes
to Consolidated Financial Statements" on page
51
46 and page 47 of the Audited Financial Statements included in the 1999 Annual
Report to Shareholders, and that information is 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" in the Audited Consolidated Financial Statements included
on page 39 through page 63 of the 1999 Annual Report to Shareholders. This
information is incorporated by reference in this Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
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 our definitive Proxy Statement to
be filed pursuant to Regulation 14A no later than March 2000 (the "2000 Proxy
Statement"), and that information is 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) of this Form 10-K.
52
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 2000 Proxy
Statement and that information, except for the information required by Item
402(k) and 402(l) of Regulation S-K, is 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 headings
"Security Ownership of Certain Beneficial Owners," "Securities Owned by
Directors, Nominees and Named Executive Officers" and "Voting Securities and
Record Date" in the 2000 Proxy Statement, and that information is incorporated
by reference in this Form 10-K.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
53
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, included in the 1999 Annual Report to
Shareholders, are incorporated by reference into Item 8 of this Annual
Report on Form 10-K. Page numbers refer to the 1999 Annual Report to
Shareholders:
Consolidated Statement of Earnings--
Years ended December 31, 1999, 1998, and 1997...................... 40
Consolidated Statement of Cash Flows--
Years ended December 31, 1999, 1998, and 1997...................... 41
Consolidated Balance Sheet--
December 31, 1999 and 1998......................................... 42
Consolidated Statement of Stockholders' Equity--
Years ended December 31, 1999, 1998 and 1997....................... 43
54
Notes to Consolidated Financial Statements--
December 31, 1999................................................... 44-63
(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.
(3) Ernst & Young LLP
The report of Lockheed Martin's independent auditors with respect to
the above-referenced financial statements appears on page 39 of the
1999 Annual Report to Shareholders and that report is incorporated
by reference in this Form 10-K. The consent of Lockheed Martin's
independent auditors appears as Exhibit 23 of this Annual Report on
Form 10-K.
55
(b) The following reports on Form 8-K were 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 4, 1999.
(2) Lockheed Martin Corporation Current Report on Form 8-K filed with
the Securities and Exchange Commission on October 27, 1999.
(3) Lockheed Martin Corporation Current Report on Form 8-K filed with
the Securities and Exchange Commission on October 29, 1999, as
amended November 2, 1999.
(4) Lockheed Martin Corporation Current Report on Form 8-K filed with
the Securities and Exchange Commission on November 22, 1999.
During the first quarter of 2000 (up until this report was filed),
Lockheed Martin Corporation made the following filings on Form 8-K:
(1) Lockheed Martin Corporation Current Report on Form 8-K filed with
the Securities and Exchange Commission on January 27, 2000.
56
(c) Exhibits
(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 last amended on February 24,
2000.
57
(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).
(b) Form of Indenture between the Corporation and U.S. Bank
Trust National Association as Trustee (incorporated by
reference to Exhibit 4(a) of the Corporation's filing
on Form S-3 (No. 333-71409) on January 29, 1999).
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.
(b) See Exhibits 3(i) and 3(ii).
(10)* (a) Lockheed Martin Corporation 1995 Omnibus Performance
Award Plan (incorporated by reference to Exhibit 10.36
to Lockheed Martin Corporation's Registration Statement
on
58
Form S-4 (No. 33-57645) filed with the Commission on
February 9, 1995).
(b) Lockheed Martin Corporation Directors Deferred Stock
Plan, as amended (incorporated by reference to Exhibit
10(b) to Lockheed Martin Corporation's Annual Report on
Form 10-K for the year ended December 31, 1998).
(c) 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).
(d) Lockheed Martin Corporation Directors Deferred
Compensation Plan, as amended (incorporated by
reference to Exhibit 10(d) to Lockheed Martin
Corporation's Annual Report on Form 10-K for the year
ended December 31, 1998).
59
(e) Resolutions relating to Lockheed Martin Corporation
Financial Counseling Program for directors, officers,
company presidents, and other key employees, as amended
(incorporated by reference to Exhibit 10(e) to Lockheed
Martin Corporation's Annual Report on Form 10-K for the
year ended December 31, 1997).
(f) 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).
(g) 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).
(h) 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
60
(No. 33-57645) filed with Commission on February 9,
1995).
(i) 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).
(j) 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. 33-51645) filed
with the Commission on February 19, 1995).
61
(k) 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).
(l) 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).
(m) 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).
62
(n) Martin Marietta Corporation Deferred Compensation Plan
for Selected Officers, as amended (incorporated by
reference to Exhibit 10(v) to Lockheed Martin
Corporation's Annual Report on Form 10-K for the year
ended December 31, 1997).
(o) 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).
(p) 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).
(q) 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).
63
(r) 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).
(s) Supplemental Retirement Benefit Plan for Certain
Transferred Employees of 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).
(t) 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).
(u) Lockheed Martin Corporation Supplemental Savings Plan,
as amended and restated (incorporated by reference to
Exhibit 10(ee) to Lockheed Martin Corporation's Annual
64
Report on Form 10-K for the year ended December 31,
1997).
(v) 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).
(w) 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).
(x) 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).
(y) Lockheed Corporation Directors' Deferred Compensation
Plan Trust Agreement, as amended (incorporated by
65
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).
(z) 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).
(aa) Lockheed Martin Corporation Directors Charitable Award
Plan (incorporated by reference to Exhibit 10(oo) to
Lockheed Martin Corporation's Annual Report on Form 10-
K for the year ended December 31, 1996).
66
(bb) 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).
(cc) Amendment to Lockheed Martin Corporation Supplemental
Excess Retirement Plan (incorporated by reference to
Exhibit 10(nnn) to Lockheed Martin Corporation's Annual
Report on Form 10-K for the year ended December 31,
1996).
(dd) Amendment to Terms of Outstanding Stock Option Relating
to Exercise Period for Employees of Divested Business.
(ee) Lockheed Martin Corporation Post-Retirement Death
Benefit Plan for Elected Officers, as amended
(incorporated by reference to Exhibit 10(ppp) to
Lockheed Martin Corporation's Annual Report on Form 10-
K for the year ended December 31, 1996).
67
(ff) Lockheed Martin Corporation Directors Retirement Plan,
as amended (incorporated by reference to Exhibit 10(ff)
to Lockheed Martin Corporation's Annual Report on Form
10-K for the year ended December 31, 1998).
(gg) Deferred Performance Payment Plan of Lockheed Martin
Corporation Space & Strategic Missiles Sector
(incorporated by reference to Exhibit 10(ooo) to
Lockheed Martin Corporation's Annual Report on Form 10-
K for the year ended December 31, 1997).
(hh) Resolutions of Board of Directors of Lockheed Martin
Corporation dated June 27, 1997 amending Lockheed
Martin Non-Qualified Pension Plans (incorporated by
reference to Exhibit 10(ppp) to Lockheed Martin
Corporation's Annual Report on Form 10-K for the year
ended December 31, 1997).
(ii) Form of Retention Agreement, including Addendum
(incorporated by reference to Exhibit 10(u) to Lockheed
Martin Corporation's Annual Report on Form 10-K for the
year ended December 31, 1997).
68
(jj) Lockheed Martin Corporation Directors Equity Plan
(incorporated by reference to Exhibit 10(jj) to
Lockheed Martin Corporation's Annual Report on Form 10-
K for the year ended December 31, 1998).
(kk) Lockheed Martin Corporation Management Incentive
Compensation Plan (incorporated by reference to Exhibit
10(ll) to Lockheed Martin Corporation's Annual Report
on Form 10-K for the year ended December 31, 1998).
(ll) Lockheed Martin Corporation Deferred Management
Incentive Compensation Plan (incorporated by reference
to Exhibit 10(ll) to Lockheed Martin Corporation's
Annual Report on Form 10-K for the year ended December
31, 1998).
(mm) Lockheed Martin Corporation Divested Business Deferred
Management Incentive Compensation Plan.
(nn) Form of Release, Noncompete and Confidentiality
Agreement for Mr. Blackwell.
(oo) Form of Professional Services Agreement for
Mr. Blackwell.
69
* Exhibits (10)(a) through (10)(oo) 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.
(12) Computation of ratio of earnings to fixed charges for the year
ended December 31, 1999.
(13) Portions of Lockheed Martin Corporation 1999 Annual Report to
Shareholders incorporated by reference in this Annual Report on
Form 10-K.
(23) Consent of Ernst & Young LLP, Independent Auditors for Lockheed
Martin Corporation.
(24) Powers of Attorney.
(27) Financial Data Schedule.
Other material incorporated by reference:
None.
70
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 9, 2000 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/ Vance D. Coffman* Chairman, Chief Executive
- --------------------
VANCE D. COFFMAN Officer and President March 9, 2000
/s/ Robert J. Stevens* Executive Vice President and March 9, 2000
- ---------------------
ROBERT J. STEVENS Chief Financial Officer
71
/s/ Christopher E. Kubasik* Vice President and Controller March 9, 2000
- --------------------------
CHRISTOPHER E. KUBASIK (Chief Accounting Officer)
/s/ Norman R. Augustine* Director March 9, 2000
- -----------------------
NORMAN R. AUGUSTINE
/s/ Marcus C. Bennett* Director March 9, 2000
- ---------------------
MARCUS C. BENNETT
/s/ Lynne V. Cheney* Director March 9, 2000
- -------------------
LYNNE V. CHENEY
/s/ Houston I. Flournoy* Director March 9, 2000
- -----------------------
HOUSTON I. FLOURNOY
/s/ James F. Gibbons* Director March 9, 2000
- --------------------
JAMES F. GIBBONS
/s/ Edward E. Hood, Jr.* Director March 9, 2000
- -----------------------
EDWARD E. HOOD, JR.
72
SIGNATURES TITLE DATE
- ---------- ----- ----
/s/ Caleb B. Hurtt* Director March 9, 2000
- ------------------
CALEB B. HURTT
/s/ Gwendolyn S. King* Director March 9, 2000
- ---------------------
GWENDOLYN S. KING
/s/ Eugene F. Murphy* Director March 9, 2000
- --------------------
EUGENE F. MURPHY
/s/ Frank Savage* Director March 9, 2000
- ----------------
FRANK SAVAGE
Director
- -----------------------
CARLISLE A.H. TROST
/s/ James R. Ukropina* Director March 9, 2000
- ---------------------
JAMES R. UKROPINA
73
SIGNATURES TITLE DATE
- ---------- ----- ----
/s/ Douglas C. Yearley* Director March 9, 2000
- ----------------------
DOUGLAS C. YEARLEY
*By: /s/ Broc Romanek March 9, 2000
-----------------
(Broc Romanek, Attorney-in-fact**)
___________________________
**By authority of Powers of Attorney filed with this Annual
Report on Form 10-K.
74