[LOGO OF MARTIN MARIETTA APPEARS HERE]
MARTIN MARIETTA CORPORATION 1993 ANNUAL REPORT
[ART APPEARS HERE]
Principal Elements
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Martin Marietta Electronics Group
Bethesda, MD
Thomas A. Corcoran, President
Martin Marietta Aero & Naval Systems
Balitmore, MD
Dr. William F. Ballhaus, President
Martin Marietta Armament Systems
Burlington, VT
Kenneth J. Leenstra, General Manager
Martin Marietta
Communications Systems
Camden, NJ
Gregory B. Roberts, Vice President
Martin Marietta Control Systems
Binghamton, NY
James D. Scanlon, General Manager
Martin Marietta Defense Systems
Pittsfield, MA
Stephen Pavlosky, President
Martin Marietta Electronics & Missiles
Orlando, FL
Joseph D. Antinucci, President
Martin Marietta
Government Electronic Systems
Moorestown, NJ
Joseph T. Threston, Vice President
Martin Marietta
Ocean, Radar & Sensor Systems
Syracuse, NY
Dr. Alexander L. Horvath, President
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Martin Marietta Information Group
Bethesda, MD
Peter A. Bracken, President
Martin Marietta Automation Systems
Daytona Beach, FL
John Hallal, General Manager
Martin Marietta Information Systems
Bethesda, Md
Gary P. Mann,
Vice President & General Manager
Martin Marietta
Internal Information Systems
Valley Forge, PA
Joseph R. Cleveland, General Manager
Martin Marietta
Management & Data Systems
Valley Forge, PA
Kenneth R. Swimm, President
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Martin Marietta Space Group
Bethesda, MD
Peter B. Teets, President
Martin Marietta Astronautics
Denver, CO
James W. McAnally, President
Martin Marietta Astro Space
East Windsor, NJ
Michael A. Smith, President
Martin Marietta
Manned Space Systems
New Orleans, LA
Thomas C. Wirth, President
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Martin Marietta Energy Group
Oak Ridge, TN
Clyde C. Hopkins, President
Martin Marietta Energy Systems
Oak Ridge, TN
Gordon G. Fee, President
Martin Marietta
Specialty Components, Inc.
Largo, FL
Dr. Charles A. Hall, President
Martin Marietta
Utility Services, Inc.
Oak Ridge, TN
Wendell E. Fields, Vice President
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Martin Marietta Materials, Inc.
Raleigh, NC
Stephen P. Zelnak, Jr., President
Martin Marietta Aggregates
Raleigh, NC
Stephen P. Zelnak, Jr., President
Martin Marietta
Magnesia Specialties, Inc.
Raleigh, NC
Philip J. Sipling, President
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Sandia Corporation
Albuquerque, NM
Dr. Albert Narath, President
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Martin Marietta Services Group
Cherry Hill, NJ
Michael F. Camardo, President
KAPL, Inc.
Schenectady, NY
John J. Freeh, President
Martin Marietta Assembly Services
Americus, GA
Donald E. Richardson, Plant Manager
Martin Marietta
EPA National Computer Center
Research Triangle Park, NC
Thomas B. Shafer, Vice President
Martin Marietta Field Services
Littleton, CO
Fred Lyssy, Director
Martin Marietta
Fleet Combat System Service
Arlington, Va
Stanley J. Pryzby, Director
Martin Marietta Range Services
Colorado Springs, CO
Robert B. Alleger, Vice President
Martin Marietta Software Services
Baltimore, MD
Linda R. Renfro, Vice President
Martin Marietta
Space & Aeronautic Services
Landover, MD
David J. Posek, Vice President
Martin Marietta
Technical Support Services
Cherry Hill, NJ
Kenneth S. Morton, Vice President
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Martin Marietta Technology
San Diego, CA
Robert J. Whalen, Vice President
Advanced Development Operations
San Diego, CA
Allan H. Wegner, Vice President
Martin Marietta Laboratories
Baltimore, MD
Ronald H. Schack, Vice President
Martin Marietta Corporation designs, manufactures,
integrates and operates systems and products in
leading edge technologies, including aerospace,
electronics, information management and energy,
and produces materials for construction and
industrial applicatiions.
Cover, clockwise from left:
F-16 equipped with LANTIRN low-
altitude navigation and targeting
system; Inmarsat 3 satelite, artist's
concept; Venus as seen by Magellan
spacecraft; AEGIS-cruiser USS
Antietam launching missile from
Vertical Launching System; aggregate
detail; spatial light modulator
research; fingerprint identification
detail; atomic energy symbol; (center)
ground antenna for Tracking and
Data Relay Satellite System.
MARTIN MARIETTA CORPORATION 1993 ANNUAL REPORT
CONTENTS
Financial Highlights 2
Letter to Shareowners 3
Operations Review 6
Space Group
Electronics Group
Energy Group
Information Group
Materials Group
Services Group
Sandia National Laboratories
Technology Operations
Financial Report 39
Directors and Officers 64
Stockholder Information 66
Principal Elements 67
FINANCIAL HIGHLIGHTS
dollars in millions, except per share 1993 1992
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Sales $9,435.7 $5,945.3
Earnings before cumulative effect
of accounting changes $450.3 $345.4
Net Earnings $20.9 $345.4
Earnings Per Share before accounting
changes, assuming full dilution $3.80 $3.60
Return (before accounting
changes) on average equity 19% 18%
Cash dividends per common share $.87 $.795*
Debt-to-capitalization ratio 39% 20%
Common shares outstanding
at year-end 95,697,411 94,458,146*
Number of stockholders 32,766 33,772
*Adjusted to reflect the 2-for-1 stock split in September 1993
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The year 1993 was momentous for Martin Marietta Corporation. As a result of
combining with GE Aerospace, the Corporation doubled in size, thereby
producing record sales which, along with a strong balance sheet, have
positioned Martin Marietta for continued success in a difficult defense
environment and for growth in commercial, civil government and international
markets.
Sales of $9.4 billion fueled earnings of $450 million, or fully diluted
earnings per share of $3.80, before the after-tax charge of $429 million for
the cumulative effect of changes in accounting for post-retirement and post-
employment benefits. The impact of these required accounting changes resulted
in net earnings of $21 million. Debt-to-capitalization, which increased to 44%
as a consequence of our consolidation with GE Aerospace, has been reduced to
39%, even after allowing for the accounting changes.
Backlog of firm orders reached an all-time high of $16.7 billion, not
including $3.7 billion in yet-unexercised contract options and approximately
$12 billion in equivalent sales under Department of Energy contracts. The
Corporation's financial health, including cash flow, remains sound and bodes
well for possible future acquisitions, investment in existing businesses, debt
reduction and other opportunities for increasing stockholder value.
1993 also marked the third year of the Corporation's "Peace Dividend"
strategy, designed to meet the challenges of today's aerospace and defense
markets and position Martin Marietta for the next century. This long-term
approach to Martin Marietta's diversified, high-technology businesses calls
for:
. growing our share of the defense market through cost competitiveness,
technology advances and by exploitation of opportunities for acquisition and
consolidation;
. continued expansion into closely related civil government and commercial
markets, especially in the areas of information systems and technical
services; and
. enhancing share value by maintaining a strong balance sheet and pursuing
avenues that promise good return and further reward for the Corporation's
stockholders.
The combination with GE Aerospace in April 1993 made Martin Marietta the
world's largest aerospace/electronics company and was a watershed event in the
history of the Corporation. That transaction was followed eight months later
by an agreement, now pending government approval, to purchase General
Dynamics' Space Systems Division, producer of the Atlas space launch vehicle
and the high-energy Centaur upper stage booster.
This acquisition, expected to be completed in the first half of 1994, will
position Martin Marietta to produce space launch vehicles in the intermediate-
size payload range, complementing the Corporation's long-established position in
the large payload market with the Titan family of heavy-lift vehicles.
Combining certain aspects of the Titan and Atlas programs also presents
opportunities for cost savings that are expected to benefit the national space
and defense programs.
We will continue to seek acquisition opportunities that further position
Martin Marietta for the future in its core markets. As in the past, however,
our interest will focus on acquisitions that promise a strategic fit with
Martin Marietta, enhance growth, are appropriately priced and assure long-term
value to the Corporation's stockholders.
In a notable expansion of the Corporation's commercial aerospace business,
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GE Aircraft Engines signed an agreement late in the year naming Martin
Marietta the sole-source supplier of thrust reversers for GE's CF6 family of
jet engines. This agreement will more than double the Corporation's annual
thrust reverser sales, making Martin Marietta one of the world's leading
suppliers in this billion-dollar annual market.
These strategic moves, as well as strong sales and backlog of orders, have
underpinned the 33% total return enjoyed by holders of Martin Marietta common
stock during the year. Since the day prior to our announcement of the GE
Aerospace transaction in late November 1992 to year-end 1993, total return to
stockholders exceeded 54%. During the year, the Corporation's annual common
stock dividend paid was increased for the 21st time since 1961.
In another move to enhance the value of the Corporation's stock, Martin
Marietta Materials Group was incorporated as a wholly owned subsidiary of the
Corporation and a registration statement was filed with the Securities and
Exchange Commission for an offering of its common stock. Martin Marietta
Materials is one of the nation's largest producers of crushed stone, sand and
gravel for construction markets as well as a major supplier of magnesia-based
products, and this offering should allow the subsidiary to achieve a market
value comparable to its standing in its industry. Martin Marietta Corporation
will retain slightly more than 80% of the new company's outstanding stock.
The major management challenge of 1993 was Martin Marietta's organizational
consolidation with GE Aerospace, which has proven to be remarkably successful,
primarily due to the exemplary teamwork of all our employees. Within a month
after the transaction closed, operating units from the two organizations were
consolidated into fully integrated, market-related groups. Management talent
from both organizations was chosen for key positions in the new organization.
The ongoing consolidation activities are guided by two simple formulas
describing what we believe to be the essential arithmetic for merging two
organizations: with regard to cost, 1+1= 1-1/2; with regard to market synergy,
1+1=3.
Facilities consolidations, announced in September 1993 and proceeding on
schedule toward implementation, will reduce capacity by approximately five
million square feet. The restructuring, together with other consolidation
activities, is expected to save the Corporation more than $1.5 billion in net
operating costs over the next five years alone.
With the GE Aerospace combination, we have created a new corporation with
extraordinary technological breadth, capable of winning business neither
organization might have considered alone. For example, the Services Group's
competitive cost structure was combined with Aero & Naval Systems' technical
experience to win the contract to continue maintenance of sonar arrays for the
Navy. The elements of our corporation already are sharing personnel, technical
information, capabilities and equipment for existing programs and developing
markets for new business. Expanded buying power is being exploited with pooled
purchasing agreements, and products are being adapted for new markets.
Fully one-third of the new company's sales is in civil government and
commercial sectors. Of this, work for international customers now accounts for
approximately 13% of sales. The addition of GE Aerospace also resulted in
Information Systems and Services Groups reaching the critical mass necessary
to compete effectively in growing global markets.
Aerospace and defense remain significant markets for Martin Marietta. We are
determined to expand our share of this business, as witnessed by our 1993
business contract activity. Although 1994 is expected to be another
challenging year for these markets, with defense
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share of this business, as witnessed by our 1993 business contract activity.
Although 1994 is expected to be another challenging year for these markets,
with defense programs still being cut and the civil space program basically
flat, we believe, as we have for nearly a decade, that the Department of
Defense budget will reach its low point by about 1997.
The Energy Group for some years has managed Department of Energy facilities in
Tennessee, Florida, Kentucky and Ohio. With the end of the Cold War, these
operations have assumed new responsibilities for transfering technology into
the private sector and for aggressively marketing nuclear fuel for utilities
throughout the world. Martin Marietta continues to seek opportunities for
growth in this core business, and in 1993 the Corporation was awarded a
contract to manage the Department of Energy's Sandia National Laboratories,
headquartered in Albuquerque, New Mexico. Also, as part of the combination
with GE Aerospace, Martin Marietta assumed responsibility for managing Knolls
Atomic Power Laboratory near Schenectady, New York, for the Navy and the
Department of Energy.
Martin Marietta's performance in development, production and support of
major defense, space and civil government programs as well as commercial
projects is reported in the Operations Review that follows. However, the year
was not without its disappointments. The Corporation's long and proud history
of Mission Success was interrupted by the failure of several important space
missions.
In response, the Corporation convened an independent review team comprising
Martin Marietta senior engineers and outside experts to focus on Mission
Success processes and controls. The team delivered its report in December, and
its recommendations are being implemented. Since mid-October, the company has
recorded seven consecutive successful space missions: the first Titan
IV/Centaur launch, which placed the Milstar communications satellite into
orbit; the fifth Titan II launch, which successfully deployed the Deep Space
Program Science Experiment spacecraft; a Defense Satellite Communications
Systems spacecraft; the Telstar 401 spacecraft; and three space shuttle
launches, which are fueled by the Martin Marietta-built external tank.
Martin Marietta Corporation continues its dedication to Mission Success and
to ethical conduct in all its businesses. We are enormously grateful to the
more than 92,000 Martin Marietta employees who practice these core values in
their day-to-day activities. These have been extraordinarily difficult times
for them. They have endured enormous change in their working lives and great
uncertainty in the marketplace, yet they have stayed the course with
dedication and determination.
We are also grateful for the wise counsel of Martin Marietta's Board of
Directors, an exceptional group of individuals whose guidance and leadership
have been essential in the successful execution of our corporate strategy.
Respectfully,
/s/ Norman R. Augustine
Norman R. Augustine
Chairman and Chief Executive Officer
/s/ A. Thomas Young
A. Thomas Young
President and Chief Operating Officer
February 8, 1994
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Martin Marietta Space Group is an industry leader in domestic and
international space programs, producing the Titan family of space launch
vehicles, the external tank for the Space Shuttle and satellites and
spacecraft systems for military, civil government and commercial customers.
The Group provides spacecraft payload integration services and ground-based
support for space systems. Headquartered in Bethesda, Maryland, operating
units and launch facilities are located in Colorado, Louisiana, New Jersey,
Florida, California and Pennsylvania.
With the combination of the Martin Marietta and GE Aerospace businesses, the
Corporation is capable of providing a full range of launch vehicle and
satellite manufacturing and operations for commercial and government
customers. Consolidations and cost-reduction initiatives within the Group,
together with key productivity investments and continued development of next-
generation satellite platforms, ideally position the Group within an extremely
competitive marketplace.
(Picture of Peter B. Tests
President Space Group
Appears Here)
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Astronautics
Titan IV, the largest expendable launch vehicle in the U.S. inventory,
achieved a number of major developmental milestones in 1993: The solid rocket
motor upgrade, which will provide increased reliability and 25% more lift
capability, completed final ground test firings. The new high-energy Centaur
upper stage also completed testing, providing Titan IV/Centaur the capability
to place twice as much payload in geosyncronous orbit than any other launch
vehicle. The first Titan IV/Centaur was launched successfully from Cape
Canaveral Air Force Station, Florida, in early February 1994, placing the
Milstar communications satellite into orbit.
The launch was the first Titan IV mission since a Titan IV failure in August
1993 due to a solid rocket motor burn-through. Also in 1993, Astronautics
finished production of its 27th Titan IV core vehicle as part of a 41-unit
contract.
Titan II's fifth space mission since 1986 -- the first U.S. flight to the
moon in more than two decades -- was launched in early 1994. Its payload, the
Deep Space Program Science Experiment spacecraft, also called "Clementine," is
a joint program of the Ballistic Missile Defense Organization and the National
Aeronautics and Space Administration (NASA). It also will perform a research
flyby of the asteroid Geographos.
In support of the U.S. Air Force, three Peacekeeper ICBMs were test-launched
from Vandenberg Air Force Base, California. Four more launches are planned for
1994. Work continued on the Multi-Service Launch System being developed by
Martin Marietta to provide the United States a flexible, smaller launch system
that can be used for a variety of purposes.
In September, Martin Marietta Astronautics' Transfer Orbit Stage (TOS)
boosted NASA's Advanced Communications Technology Satellite, produced by
Martin Marietta Astro Space,
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into orbit from Space Shuttle Discovery following its launch from Kennedy
Space Center, Florida. This was the second mission for the TOS and the first
time it has flown on a space shuttle.
Early in the year, NASA's Jet Propulsion Laboratory awarded Martin Marietta
a contract to build the propulsion module subsystem for the Cassini spacecraft
mission that will study Saturn, its moon Titan and the rest of the Saturnian
system. Scheduled for launch in October 1997 on a Martin Marietta Titan
IV/Centaur rocket, Cassini will execute two gravity-assisted flybys of Venus,
then one each of Earth and Jupiter before rendezvousing with Saturn in June
2004. The project is under joint development by NASA, the European Space
Agency and the Italian Space Agency.
In October, the Army awarded Martin Marietta Astronautics a contract to
develop Block II of the All Source Analysis System. Under the six-year
contract, Martin Marietta will act as the integrating contractor for this
Department of Defense command and control system that is expected to
significantly improve a battlefield commander's intelligence data and asset
deployment capabilities.
Under a contract from the Advanced Research Projects Agency, Martin Marietta
continued development of a robotic semiautonomous surrogate vehicle that will
navigate over difficult terrain while acquiring and recognizing potential
targets.
Work continued on upgrading the Air Force command complex inside Cheyenne
Mountain in Colorado. Under the Granite Sentry program, Martin Marietta is
applying state-of-the-art software and associated systems to improve efficiency
and reduce operating costs at the joint North American Aerospace Defense Command
and United States Space Command facility.
When complete, the upgraded facility will provide real-time integration and
display of missile, space and air defense data, supporting the assessment of air
and missile threats to the United States.
In the area of defense conversion, Martin Marietta is working with Rose Health
Care Systems of Denver, Colorado, to investigate the use of photonics for pre-
screening mammograms. The technology may enable the identification of tumors
invisible to the human eye.
Martin Marietta also is under contract to the federal Department of
Transportation to apply aerospace technologies such as those developed for
semiautonomous vehicles to the Intelligent Vehicle Highway System program.
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Astro Space
In December, Telstar 401, the first of three advanced communications
satellites for AT&T, was launched. Telstar 401 will be used extensively to
carry educational programming at reduced costs, with users including the
Satellite Educational Resources Consortium, the Public Broadcasting Service's
Ready to Learn and Adult Learning Service and the National Technological
University. Telstar 401 is the first Series 7000 spacecraft, the newest and
largest of Martin Marietta's family of communications satellites. Telstar 402
is planned for launch in 1994, and launch of Telstar 403 is under
consideration.
Series 7000 spacecraft include such advanced technical features as arcjet
thrusters that consume less fuel for station-keeping, thereby extending
spacecraft life, and variable-output solid-state power amplifiers offering
increased mission flexibility.
INTELSAT, the International Satellite Consortium, ordered three more INTELSAT
VIII satellites in 1993, bringing total orders for Series 7000 satellites to 10.
Two Defense Satellite Communications Systems III spacecraft were launched and
deployed successfully in July and late November, continuing a record of
communications support to the U.S. Armed Forces uninterrupted since 1982.
Martin Marietta's color video camera for the Space Shuttle made its first
flight during the Hubble repair mission. The Corporation has a contract to
deliver 40 cameras and 12 monitors for use on the Shuttle orbiters.
Launches scheduled for 1994 include two Global Geospace Science satellites
for NASA, the BS-3N television direct broadcast satellite for Japan and
NOAA-J, the latest in a series of more than 50 civil and military weather
satellites that began in 1960 and is expected to continue into the next
century. The first of four Inmarsat-3 spacecraft for the International
Maritime Satellite Consortium is scheduled for launch in 1995.
Astro Space's long involvement in building environmental satellites continues
with the Mission to Planet Earth EOS-AM, the first in NASA's Earth observing
system, due to be launched in 1998.
Martin Marietta is continuing to develop the A2100 spacecraft, which will
serve as a basic platform for the next generation of communications
satellites. The A2100 will offer increased capacity at lower weight, fewer
parts and reduced time between order and delivery, which means lower cost
without sacrificing
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orbit life. GE1, the first A2100, is due to be launched in 1996 for GE Americom.
Astro Space also continues to develop the remote sensing system Landsat 7 for
Earth observation.
The failures of the Mars Observer, NOAA-13 and Landsat 6 spacecraft in 1993
were the subject of analysis by a special Mission Success review team
organized by the Corporation. The team's recommendations to strengthen the
Mission Success program are being implemented.
Manned Space Systems
Martin Marietta Manned Space Systems celebrated its 20th year as prime
contractor on the Space Shuttle External Tank project at NASA's Michoud Assembly
Facility in Louisana. Over these years, the Corporation has produced 68 external
tanks, including four delivered ahead of schedule in 1993. Current production
plans call for an additional 51 tanks through the year 2000.
The 154-foot external tank is the largest element of the shuttle and has a
dual role during the first eight and one-half minutes of each launch. It feeds
cryogenic liquid propellants to the three main engines and serves as the
structural backbone of the vehicle, absorbing four million pounds of thrust.
After main engine cut-off, the tank separates from the shuttle and falls back
into the Earth's atmosphere, disintegrating harmlessly over the ocean.
Among major innovations under study by Manned Space Systems for NASA are a
new super-lightweight external tank and, through a Technology Reinvestment
Project, the development of hybrid propulsion technology that will use both
cast solid fuel and cryogenic liquid oxidizer in a single motor.
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(Picture Appears Here)
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Martin Marietta Electronics Group designs, develops and produces high-
performance defense and electronic systems for undersea, shipboard, land-based
and airborne applications. Major product lines include advanced-technology
missiles; night navigation and targeting systems for aircraft; submarine and
surface ship combat systems; airborne, ship- and land-based radar; control
systems and thrust reversers for aircraft; ordnance and armament systems; and
secure communication systems.
Largest and most diverse of Martin Marietta's groups, Electronics offers
opportunities for significant synergies within our traditional defense
marketplace, expansion in foreign markets and potential growth in adjacent
commercial markets.
In 1993, Electronics Group took a number of significant steps to enhance
operating efficiency, reduce costs and eliminate capacity in excess of future
needs, including a decision to close two regional manufacturing facilities and
combine similar product operations from several sites. These actions will
eliminate nearly three million square feet of facility space.
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Electronics & Missiles
The Hellfire II program transitioned from development to production in May with
an Army award to build 3,905 units. Hellfire II, a laser-guided missile,
features an improved dual warhead and greater resistance to countermeasures and
will be carried by the Army Apache and the Marine Corps Super Cobra helicopters.
International interest in Hellfire II for air, surface and naval launch
platforms also is growing.
Javelin, a joint venture with Texas Instruments, Inc., is a man-portable,
shoulder-launched, "fire-and-forget" weapon capable of defeating all current and
projected armor capabilities; it was awarded funding for an initial production
phase of up to 700 units. Work continued on Longbow, an integrated fire control
radar and "fire-and-forget" missile for the Apache and Comanche helicopters.
Longbow development is a joint venture with Westinghouse Electric Corporation.
Martin Marietta delivered its 5,000th Patriot missile in 1993. As principal
subcontractor to Raytheon Company, Martin Marietta is responsible for missile
bodies, electronic subassemblies and launchers. The Corporation will deliver
Patriot missiles and launchers to Saudi Arabia, Kuwait and the U.S. Army under
an agreement extending production into 1996.
Martin Marietta delivered 60 TADS/PNVS systems in 1993, for a total of 860
units since the program began. TADS/PNVS is a night navigation and targeting
system that enables Apache helicopter pilots to fly at very low altitudes in
total darkness and poor weather and locate and attack ground targets at
standoff distances. Electronics & Missiles has a firm backlog of 67 TADS/PNVS
systems, with additional follow-on orders pending for the Army and a number of
international customers.
A total of 261 LANTIRN low-altitude navigation and targeting systems for U.S.
Air Force F-15 and F-16 fighter planes was delivered. Orders for 139 systems
were received from Greece, Saudi Arabia and Bahrain.
In work for the Air Force and Advanced Research Projects Agency, Martin
Marietta is developing a combat system to automatically locate, identify and
provide attack information on surface-to-surface missiles while they are still
on the ground.
Martin Marietta Ordnance Systems manages the Milan, Tennessee, Army Ammunition
Plant, the service's largest facility of its kind. In 1993, the plant produced
12.4 million ordnance items for U.S. military services and government-approved
international customers.
(Picture of The Army's Apache
Helicopter Appears Here)
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Control Systems
Martin Marietta Control Systems is the leading supplier of fly-by-wire flight
controls and engine controls. It also produces integrated controls that combine
flight, engine and weapons functions in a single system.
Among new awards were two from Saab-Scania AB of Sweden. Martin Marietta is
providing an upgraded flight control computer for Saab's JAS 39 Gripen fighter.
The computer receives and processes data from the pilot and various sensors and
directs movement of the plane's control surfaces. It also provides autopilot,
autothrottle and airbrake functions. For the new Saab 2000 airliner, Martin
Marietta will provide rudder control and powered elevator control units. Over
the next 15 years, it is estimated that 400 Saab 2000s will be built.
In another international contract, Martin Marietta was selected by the
government of India's Aeronautical Development Establishment to supply the
Integrated Flight Control System for that nation's Light Combat Aircraft. The
system is expected to include a flight control computer, air data sensor, rate
and acceleration sensors and actuators.
For Air Force C-17 Globe-master aircraft, Martin Marietta supplies the
Electronic Flight Control System, consisting of 11 separate computing units.
And for the F/A-18 aircraft, during 1993 Martin Marietta delivered 57 sets of
flight control electronics and won the contract for engineering and
development of the flight control computer for the F/A-18E/F. Development
continued on flight control electronics for the V-22 tiltrotor aircraft.
Martin Marietta electronic systems also control GE commercial jet engines. The
GE 90, which will power the Boeing 777 jetliner, and the GE F414, destined for
the Navy's F/A-18E/F, are operated by the Full Authority Digital Electronic
Control, or FADEC, designed and produced by Martin Marietta. FADEC also is in
successful service on the Airbus A320, Boeing 747 and 767 and McDonnell Douglas
MD-11.
More than 10 million hours of service with a strong safety record have been
achieved by FADEC. Second-generation FADEC IIs are in place on the GE CFM56-5C
engines that power the Airbus A340 and the GE CF6-80E1, installed on the Airbus
A330, both of which entered service in 1993.
Moving into related markets, the Corporation received two new contracts from
GE Transportation Systems, one to provide the Logic Power Supply for GE's
electric locomotives and one for an auxiliary blower system for GE's off-high-
way vehicles.
Commercial opportunities also are being developed in the automotive sector,
where Martin Marietta is supplying power-steering systems for electric vehicles
being produced by Chrysler Corporation. Other products in development are
traction motor controls and auxiliary power converters.
In response to the need to reduce the use of ozone-depleting chemicals in the
electronics industry, Martin Marietta has developed a new, benchtop-size, low-
cost cleaning system -- JetClean(R)-- for circuit boards and other small
electronic components. Using low-cost alcohol instead of more costly ozone-
depleting chemicals, JetClean has been purchased by 46 electronics
manufacturers.
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Aero & Naval Systems
The first of four Vertical Launching Systems (VLS) capable of firing the
Seasparrow anti-air missile was delivered to the Federal Republic of Germany
and installed aboard the frigate Brandenburg. Vertical Launching Systems are
primary missile batteries for surface ships. The first of 10 additional
Seasparrow-capable launchers has been completed and awaits shipment to the
Australia-New Zealand (ANZAC) defense alliance. Launch systems also were
delivered to Japan for its second Kongo-class AEGIS destroyer, Kirishima. The
first two VLS-equipped Canadian Tribal-class destroyers, Algonquin and
Iroquois, successfully launched surface-to-air missiles during sea trials this
year. Contracts to supply the VLS for an additional five Arleigh Burke- and
Spruance-class destroyers and the first of Japan's new DD 2230-class
destroyers also were awarded.
Martin Marietta's technology in thrust reversers, the devices that help slow
jet aircraft upon landing, places the company at the fore-front of this $1-
billion-a-year global market.
Under terms of a contract modification, Martin Marietta will be the sole
source for thrust reversers for GE's CF6 jet engines, more than doubling sales
and extending production into the next century. The contract also expands
Martin Marietta's role in spares and product support.
The Corporation delivered four thrust reversers to Pratt & Whitney for its
PW4168 jet engine for Federal Aviation Administration flight certification
tests. This engine will power the new Airbus Industrie A330.
Continuing its leadership position in the development and production of sonar
arrays to detect ships and submarines, Martin Marietta received its first
production award for 10 TB-29 thin-line towed arrays and eight receivers and
associated support equipment, with options for additional equipment that would
extend the contract through 1995. The TB-29 is the primary towed sonar array for
the Navy's new Seawolf-class attack submarine and will be retrofitted on Los
Angeles-class attack submarines and Ohio-class ballistic missile submarines.
Martin Marietta delivered three Wide Aperture Array advanced tactical sonar
systems to the Navy. These listening devices are mounted on the hulls of Los
Angeles- and Seawolf-class attack submarines. Martin Marietta also successfully
tested the first two Light Weight Planar Arrays, incorporating composite
technologies that provide substantial weight savings for future attack
submarines.
Martin Marietta delivered seven tail cones and rudder fairings for Air Force
C-17 Globemaster transport aircraft and continued additional work on Navy
Trident II D-5 missiles.
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Communications Systems
Martin Marietta Communications Systems develops and produces communications
systems and support equipment for air, space, land, sea and undersea
applications and specializes in high-volume production of secure voice and data
communications equipment for government and commercial customers.
In 1993, Martin Marietta was awarded a follow-on contract for the Improved
Remotely Monitored Battlefield Sensor System, a lightweight version of the
proven REMBASS, which employs remotely monitored sensors placed along likely
approaches to detect and classify human or vehicular intruders, providing
tactical intelligence for special operations forces.
The Corporation has pioneered the development of advanced automated and
integrated communications systems for naval platforms. A follow-on contract was
awarded for the Integrated Radio Room, the automated external communications
suite for the Ohio-class ballistic missile submarine, providing reliable
communication with satellites, aircraft, shore facilities and other ships.
As a subcontractor to McDonnell Douglas, Martin Marietta is designing three
communications subsystems for the Space Station. These systems will control all
of the station's radio communications and external video.
The Corporation produces both product and systems solutions for data capture,
storage, transfer and uninterrupted communications and is currently developing
storage systems for the medical market.
Also, in early fall, the Stra-tegic/Tactical Optical Disk System, a high-
performance data storage and retrieval system being developed for the Air Force,
operated successfully during flight readiness tests.
Armament Systems
Martin Marietta Armament Systems' broad product base includes Gatling gun and
ammunition handling systems for air, land and sea. Turrets for helicopters,
including the Army Comanche, and other sea and air defense applications, round
out the production base of more than 30 domestic and international programs.
Martin Marietta also has begun development of the next generation high-rate-of-
fire gun.
After three years of development, the Corporation completed work on the
Blazer air defense turret for the Marine Corps' Light Armored Vehicle Air
Defense system. The Blazer turret fires both a 25mm Gatling gun and the
Stinger surface-to-air missile. Managed by an advanced fire control system
also developed by Armament Systems, the Blazer will protect rapid deployment
forces against a variety of close-in air and surface threats.
Martin Marietta is teamed with FMC to develop the Army's new Advanced Field
Artillery System and the Future Armored Resupply Vehicle. The Corporation leads
the industry in applying advanced technology to the automation of storage,
transport and uploading of ammunition for artillery systems.
The year also brought an important development in a potential adjacent market
when a consortium led by Armament Systems received a grant from the Technology
Reinvestment Project. The grant will fund further development of a mobile
electric generator, powered by the same rotary engine technology that Martin
Marietta is developing for use in unmanned aerial vehicles. Both products have
potential military and commercial applications.
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Ocean, Radar & Sensor Systems
Martin Marietta Ocean, Radar & Sensor Systems develops and manufactures
submarine and surface ship combat and torpedo defense systems as well as radar,
surveillance and avionic systems.
Full-scale development continued for the AN/BSY-2 Combat System for the
Seawolf-class attack submarine. BSY-2 is the Navy's first fully integrated
submarine combat system, featuring information processing, operator displays
and controls for weapons systems and seven major acoustic systems, including
the Wide Aperture Array. The team also won a contract to develop combat
systems concepts for the Navy's new attack submarine, the follow-on to the
Seawolf, positioning Martin Marietta as a leading contender for full system
development.
Martin Marietta is the sole-source supplier of the Navy's Surface Ship Torpedo
Defense program, developing a major combat system that will employ
cost-saving, off-the-shelf hardware. The group is leading an international
consortium competing for full-scale development of the joint U.S./United Kingdom
program.
Demonstrating its rapid response capability, Martin Marietta shipped a
ground-based radar system, the FPS-117, to Kuwait in September, within 90 days
of contract award. The FPS-117 is a solid-state, minimally attended, three-
dimensional radar that provides long-range surveillance for air defense and
air traffic control.
The Marine Corps expanded the scope of its AN/TPS-59 Upgrade Program,
beginning the modification of mobile ground-based radar to include tactical
ballistic missile defense. More than 100 Martin Marietta ground-based radar
systems are in production or operation for more than a dozen nations.
Martin Marietta won a Navy contract for initial development of the next
generation APS-series airborne early-warning radar while continuing airborne
early-warning radar projects for international customers including Egypt,
Israel, Japan, Singapore and Taiwan.
A joint technical team from Martin Marietta and the Republic of China's
(Taiwan) Aero Industry Development Center is cooperating on co-assembly of an
advanced airborne radar system, the multi-mode APG-67, for Taiwan's new
Indigenous Defensive Fighter. This compact, lightweight radar is a prime
candidate for upgrading the avionics on military aircraft worldwide;
derivative versions are being marketed in several other countries.
Martin Marietta is teamed with Sanders Associates, a Lockheed subsidiary, to
develop the electronic warfare system for the F-22 and successfully completed
preliminary design reviews in 1993.
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Government Electronic Systems
Martin Marietta is prime contractor to the Navy for AEGIS, the world's most
advanced surface ship combat system. AEGIS is capable of automatically and
simultaneously detecting, tracking and engaging hundreds of aircraft and
missiles.
In 1993, the final AEGIS cruiser combat system was installed aboard the Port
Royal, successfully completing the Ticonderoga-class cruiser program. At the
same time, the AEGIS destroyer program expanded, and Martin Marietta is now
under contract with the Navy to provide 29 combat systems for Arleigh Burke-
class destroyers through 1997.
The heart of the AEGIS system, the AN/SPY-1 phased- array radar, is produced
by Government Electronic Systems at Moorestown, New Jersey.
The AEGIS program won a fourth contract for a destroyer for the Japanese
Maritime Self-Defense Force. The first Japanese AEGIS destroyer, Kongo, was
commissioned in March. The Corporation is also upgrading ships already in
service, adding new features that include shipboard tactical ballistic missile
defense.
In September, Martin Marietta delivered the first-ever solid-state, active-
array antenna. This antenna is an element of the COBRA counter-battery radar
system, which is designed to locate hostile mortar, artillery and rocket
batteries rapidly and accurately under adverse battlefield conditions. COBRA
is being developed jointly by a multi-national, four-company consortium
comprising Martin Marietta; Siemens, Germany; Thorn-EMI,United Kingdom; and
Thomson-CSF, France.
Martin Marietta also won a contract from the Technology Reinvestment Project
to build and demonstrate an advanced phased-array radar for commercial
aviation. The technology will be applied to air traffic control and weather
surveillance operations.
Defense Systems
During 1993, the Army awarded Martin Marietta a contract to further develop
liquid propellant advanced technology for artillery. The Corporation
successfully tested the new artillery system, firing the liquid propellant gun
in a fully automated three-round burst. The event signaled a critical
achievement in the continuing development of a second-generation LP gun system.
In March 1993, the Army awarded Defense Systems a contract for Land Combat
Depot Support. In this initial entry into the land combat vehicle after-market
business, the Corporation will overhaul transmissions for the Army's Bradley
fighting vehicle.
The Corporation also won a Navy contract to produce 30 MK6 Inertial
Measurement Units for the Trident II missile and delivered the final Phalanx
Close-In Weapon System to the Navy eight months ahead of schedule.
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Martin Marietta Energy Group's command of technologies, information management
and materials places it at the leading edge of developments affecting the
production of energy, environmental clean-up, manufacturing technology and
laboratory research. Headquartered in Oak Ridge, Tennessee, the Group
comprises Martin Marietta Energy Systems, which manages three major Department
of Energy facilities in Oak Ridge; Martin Marietta Specialty Components,
manager of the Department of Energy's Pinellas Plant in Largo, Florida; and
Martin Marietta Utility Services, manager of the Department of Energy
enrichment plants in Kentucky and Ohio that are currently leased by the United
States Enrichment Corporation. Successful management of these diverse
facilities is leading to additional opportunities for increasing public-
private sector cooperation, technology transfer and product development.
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President Energy Group
Appears Here)
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Energy Systems
Martin Marietta Energy Systems is managing contractor for Department of Energy
research and development, manufacturing technology and environmental
management operations in three states. A key national need is being addressed
at Oak Ridge, Tennessee, where conceptual design for the Advanced Neutron
Source (ANS) was completed in 1993. When the ANS enters operation early in the
21st century, thousands of researchers from universities, laboratories and
industries around the world will be able to use the facility to probe
materials to determine their atomic structure. This research could lead to
stronger metals, advanced plastics and breakthroughs in understanding
biological structures, including deoxyri-bonucleic acid (DNA), the basic
building block of living systems.
Energy Systems increased its emphasis on working with American industry by
providing access to nearly 50 years accumulated expertise in advanced materials
and ceramics, robotics, instrumentation and control technologies, environmental
protection and waste management and high-precision manufacturing.
An example of this program occurred in response to the Clinton
Administration's call for a "clean car." Oak Ridge experts in high-temperature,
lightweight materials and technologies involving alternative fuels are now
applying their knowledge to lowering the cost of the manufacturing process for
engines. The use of advanced ceramics for internal combustion engines should
improve the durability and efficiency of automobiles of the future.
The Oak Ridge Centers for Defense and Manufacturing Technology at Y-12 also
operate technology transfer programs to help small businesses solve technical
problems through use of the Centers' expertise in materials science, measurement
science and state-of-the-art manufacturing processes.
Energy Systems manages an extensive environmental restoration and waste
management program at five Department of Energy sites.
The new Oak Ridge Center for Environmental Technology is working with the
private sector, academia and government to accelerate the development,
demonstration
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and commercialization of environmental technologies -- the vital steps
necessary to reduce escalating costs incurred in cleanup of hazardous waste
sites, treatment and disposal of toxic waste and other forms of waste
management and environmental protection.
In 1993, the Oak Ridge technology transfer program helped establish 68
Cooperative Research and Development Agreements and granted 21 licenses to
industrial firms for use of technologies developed as part of the nation's
defense program.
Specialty Components
Since June 1992, Specialty Components has been the management and operating
contractor for the Department of Energy's Pinellas Plant in Largo, Florida,
which for 38 years has supplied electronic components for national defense
systems. With production at the plant scheduled to end in late 1994, Specialty
Components is taking steps to reposition the business and its employees for
commercial opportunities within the private sector.
The Pinellas facility also has entered into partnership with Energy Systems
at Oak Ridge, the state of Florida and the Department of Energy to create a
Cooperative Research and Development Agreement that opens the Pinellas Plant's
doors to Florida companies that wish to draw upon the facility's technology,
capabilities and expertise.
Utility Services
Martin Marietta Utility Services was organized to support the U. S. Enrichment
Corporation, a newly created government corporation that manages the enrichment
of uranium fuel for sale to nuclear power plants throughout the world. Martin
Marietta worked with the Department of Energy and the Enrichment Corporation to
assure a smooth transition of responsibilities and management from the
Department of Energy to the new company.
Uranium enrichment production continued at the Paducah, Kentucky, and
Portsmouth, Ohio, Gaseous Diffusion Plants, providing enrichment services to 61
electric utilities in 11 countries and generating $1.5 billion in revenues for
the U.S. Treasury.
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Martin Marietta Information Group designs, develops, integrates and operates
information systems and simulation and automated test systems for government and
commercial customers. The Group is headquartered in Bethesda, Maryland.
Information Group is a major participant in the global information technology
marketplace. Sales are increasing in Asia and the Middle East, and in domestic
markets, particularly to civil government where modernization of information
systems in such areas as law enforcement, health care and services is on the
rise. The Group also is expanding into related commercial markets, providing
products and consulting services.
In 1993, to reduce operating costs, the Group began collocating Automation
Systems and portions of Information Systems and Internal Information Systems in
Orlando. Internal Information Systems is consolidating processing centers and
upgrading voice communications across the Corporation, increasing productivity
and realizing significant savings.
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Management & Data Systems
Martin Marietta Management & Data Systems provides command and control systems
and information processing services to the Department of Defense, NASA, the
intelligence community, the Federal Aviation Administration and commercial
customers. By leveraging its strengths in systems engineering and integration,
program management and software development, the Corporation has successfully
pursued closely related markets requiring technically advanced, information
processing system solutions.
Martin Marietta is developing a worldwide distributed information management
system for the federal government for installation at 94 sites with over 800
users. The Corporation also was awarded a long-term contract to redesign a
satellite support system. Management & Data Systems, a leader in object-
oriented software design, has over 20 years experience with the system and is
developing a state-of-the-art distributed computer system to modernize the
entire network.
In 1993, Management & Data Systems, teamed with Services Group, won the
Federal Aviation Administration's (FAA) National Airspace System
implementation support contract to provide field support services to help
integrate new equipment into the existing air traffic control system. Under a
separate contract, Martin Marietta continues as the FAA's largest systems
integration contractor in its program to modernize the nation's airspace
management system. As part of this ongoing contract, the Corporation is
helping to integrate the efforts of more than 50 major contractors. Martin
Marietta continues to pursue work with other transportation systems such as
highway, rail, water and international airspace systems.
With significant contracts from the International Maritime Satellite
Organization, Motorola and the Public Broadcasting Service, Martin Marietta has
established itself as a commercial ground systems contractor for communications
satellites.
The Corporation also is building a turnkey satellite command and control
ground system in support of Orion Satellite Corporation's first communications
satellite, expected to be launched in 1994.
In a cooperative effort between Strategic Systems in Valley Forge,
Pennsylvania, and Astronautics in Denver, Martin Marietta won the Ballistic
Missile Defense Options Assessment contract that will demonstrate innovative
software development techniques for application to the Ballistic Missile
Defense system. The program aims to improve battle management command, control
and communications.
Also in the ground systems arena, and working with Martin Marietta Astro
Space, Management & Data Systems is designing, developing and integrating
software for flight operations and information processing for the Department
of Defense Landsat 7 program. The Corporation also pro-
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vides information technology products and services to commercial customers
worldwide, including training and software tools, design and development of
processing systems, systems integration services and re-engineering of
business processes and systems. Federal Express and GE Capital are among the
Corporation's customers.
Information Systems
Martin Marietta Information Systems provides information management products and
services for civil government, military and commercial customers. Its business
areas include development of computer-based simulation and training systems and
systems integration and modernization.
In 1993, Martin Marietta completed development of the new information system
for the federal Department of Housing and Urban Development, linking the HUD
computer center with its disaster-recovery facility, headquarters and all 81
regional and field offices, thereby facilitating the agency's customer
responsiveness. The Corporation is in the third year of this 12-year contract.
Information Systems added a number of new clients for its information
processing services, including ProSource Distribution Services, JP Foodservice
and INFONET.
Martin Marietta also began implementing the Accounting Database for the
Evaluation of Performance Trends for the Department of the Treasury. This
general ledger system permits the agency to generate financial statements
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similar to those in private industry.
Work continued for the Department of Justice and the Immigration and
Naturalization Service to expand the scope of the Systematic Alien Verification
of Entitlement program, which will give private industry on-line access for
verifying alien resident registration and entitlement status. Martin Marietta
will expand the pilot program in 1994.
The Department of Labor used the Corporation's professional services and data
processing support to expand its UI-Internet System, allowing each state access
to information on unemployment benefit claims. Martin Marietta also continues
its work for the Department of Agriculture, whose system collects and analyzes
agricultural information from the national headquarters and 45 state statistical
offices.
Martin Marietta is the prime contractor for the National Test Facility, a
complex supercomputing and simulation resource used to support strategic and
theater defense planning. Under direction of the Air Force, the Test Facility
was linked to the Martin Marietta-operated Theater Air Command and Control
Simulation Facility at Kirtland Air Force Base, New Mexico, providing support
for testing theater missile defense concepts. The Test Facility also was
connected to the Advanced Research Projects Agency's Distributed Simulation
Internet, bringing the simulation resource program nationwide.
Key to Martin Marietta's simulation success is its family of Compu-Scene(R)
technology products. Compu-Scene VI was purchased in 1993 by the Marine Corps
for use in helicopter pilot training. Other Martin Marietta image-generator
systems are being developed for Navy and Marine Corps fixed-wing, helicopter
and tilt-rotor aircraft training.
In 1993, Martin Marietta was awarded contracts to provide armor-training
systems in the Middle East and Europe, including crew gunnery trainers and
driver trainers for M-60, M-48 and Leopard tanks, and state-of-the-art M1A2
Platoon Gunnery Trainers and Tank Driver Trainers. Martin Marietta's Fort
Knox, Kentucky, Driver Training Facility features a unique network for
consolidating and tracking individual student performance. Platoon Gunnery
Trainers are fully networked individual crew stations that can be used for
tactical team training or as individual crew trainers.
Martin Marietta delivered 20 full-motion M1 tank training systems to the Army
and replicated the integrated commander/gunner display station for the M1A2 main
battle tank.
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Automation Systems
Martin Marietta Automation Systems provides computer-based automated test
control and automated logistics systems for civil government, military and
commercial clients.
In 1993, the Consolidated Automated Support System (CASS) successfully
completed operational evaluation by the Navy. Currently, Martin Marietta is
under contract to provide 200 CASS systems to the Navy.
The Corporation has developed a commercial variant of CASS for factory
application, the CASS Integrated Test Equipment, or CITE 2000. In 1993, six
CITE and one CASS systems were delivered to the Navy's principal contractor
for the Joint Stand Off Weapon.
Martin Marietta delivered the Equipment Management System to the Air Force.
This inventory management system is designed to track all Air Force equipment,
except weapons, consumables and fuel, in support of 3,000 logistics personnel
responsible for recording an inventory of approximately 250,000 items. The Air
Force system is the forerunner of a computer-based paperless inventory
management system for tri-service application.
Martin Marietta continues to operate the Air Force LANTIRN low-altitude
navigation and targeting system Automated Depot. This integrated software system
employs a distributed computer network that virtually eliminates depot
paperwork.
Automation Systems also provides automated machinery control systems for
military vessels around the world, encompassing seven ship classes for the
navies of nine countries. These systems use open-architecture, advanced
microprocessor technology for shipboard propulsion control and for remote
monitoring and control of key systems.
Martin Marietta also manufactures portable test units for Apache helicopters,
Army trucks, Bradley fighting vehicles, M1A1 tanks and HMMWV multi-purpose
vehicles. Use of Martin Marietta-built testing equipment has cut trouble-
shooting time by more than 25%.
In 1993, Automation Systems won a competitive procurement for 900 of the
portable test units, bringing the total under contract during the last 15 years
to more than 13,000 units.
During the year, Automation Systems also introduced an advanced technology
upgrade for gas turbine engine controllers. The first of these controllers will
be manufactured for the Navy's Arleigh Burke-class destroyers.
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Late in the year, Martin Marietta Materials, Inc., was established as a wholly
owned subsidiary of Martin Marietta Corporation. Martin Marietta Materials
comprises Martin Marietta Aggregates and Martin Marietta Magnesia Specialities,
Inc., all headquartered in Raleigh, North Carolina. In December, Martin Marietta
Materials filed a registration statement with the Securities and Exchange
Commission for an underwritten public offering of its common stock, to be
offered initially in the first quarter of 1994. Martin Marietta will retain
slightly more than 80% of the new company's outstanding stock.
Martin Marietta Aggregates, which produces crushed stone, sand and gravel for
the construction industry, is well-positioned to meet the increasing demand
generated by infrastructure rebuilding and the recovery in commercial
construction. Aggregates increased shipments by 15% as both infrastructure and
commercial construction improved in 1993. At 65 million tons, shipments of
crushed stone, sand and gravel reached a record level. Increased funding for
highways, along with a resurgence in residential construction, created a
significant increase in demand in many market areas.
Aggregates increased capacity by making three acquisitions during the year. A
sand and gravel operation near Omaha, Nebraska, was purchased, as were limestone
quarries near Frederick, Maryland and Pana, Illinois. The company completed a
major expansion at its underground mine near Indianapolis, Indiana, that nearly
doubled capacity. A new stone quarry was opened in the high-growth area north
of Indianapolis adjacent to the Aggregates' existing River Avenue sand and
gravel operation.
In the Southeast, Martin Marietta experienced strong growth in Georgia, where
Aggregates has built or acquired significant new capacity during the past five
years. Rail shipments into Florida from quarries near Macon and Columbus,
Georgia, increased sharply. Shipments improved in North Carolina as the major
metropolitan areas of Charlotte, Raleigh-Durham and Greensboro emerged from the
recession.
In the Midwest, heavy rains and the mid-year floods hampered construction
activity and quarry operations, but extensive repairs of flood damage created
heavy demand in the latter part of the year and is expected to continue well
into 1994.
In 1993, Martin Marietta Magnesia Specialties moved forward with its expansion
in the wastewater treatment market. A new facility was completed at the
Manistee, Michigan, plant to produce FloMag(R) slurry products used to
neutralize acid wastewater. This product will open new markets for treating
wastewater from food processing plants, municipalities, plating shops and
dyestuff operations. During the year, the Corporation also received a patent on
its granular FloMag product used to remove heavy metals from industrial process
effluent.
In the refractory area, Martin Marietta is a leading supplier of heat-
resistant products and services used to line furnaces in steel making. In
1993, the Corporation expanded into Mexico while continuing to develop new
products in the United States. Martin Marietta began importing natural
magnesite from China to reduce cost and to broaden its product line. The
combination of low-cost, lower-quality imported material with the
Corporation's high-quality magnesite is expected to provide a complete range
of products at a competitive cost.
Magnesia Specialties continues to focus on providing high-quality, value-added
products to its refractory and chemical customers.
In 1993, the Corporation's refractory products set nine heat-life records in
steel mills in the United States. Research and development programs continue
to provide new products that meet the special needs of customers.
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Martin Marietta Services Group provides technical and management services around
the globe for the Department of Defense, NASA and a growing number of civil
government agencies. Key to Services Group's success has been the ability to
leverage technology resident elsewhere in the Corporation with a more
competitive cost structure. Headquartered in Cherry Hill, New Jersey, the
Group operates at over 130 locations around the world. The Group also provides
management and engineering support to the Department of Energy's Knolls Atomic
Power Laboratory in Schenectady, New York.
In 1993, Martin Marietta won a nine-year follow-on contract to support NASA's
Life Sciences Directorate at the Johnson Space Center in Houston, Texas. The
scope of the program was recently increased to include support for mission
integration for nine dockings between the space shuttle and the Russian Mir
spacecraft. As a part of this contract, Martin Marietta Services Group
provided substantial support to the October 18, 1993, Space Shuttle mission
dedicated to understanding the effects of weightlessness on human health and
productivity. Services Group also designed, built and tested major systems for
the Spartan 201 science satellite that was launched in April.
During the year, Services Group continued to receive high marks from its
customers for its support of key Department of Defense facilities, especially
for operation of the Atlantic Fleet Weapons Training Facility for the Navy and
the Alaskan Radar Warning System for the Air Force. Services Group also helps
deploy threat simulators used for training Army units at Fort Bliss, Texas, and
other locations and supports Navy AEGIS combat systems in a number of locations.
In 1993, the Group won a contract to operate the Pacific Air Force Alaskan Range
used for combat training.
Services also is teamed with Management & Data Systems in a contract to
provide field support services to the Federal Aviation Administration in
implementation of the National Airspace System, which is designed to
significantly upgrade the government's air traffic control system.
The combination of GE Government Services with Martin Marietta Technical
Services broadened both capability and customer base and positioned the
Corporation to win a contract to support agency-wide modernization of
Department of Defense computer information systems.
Martin Marietta also supports the Social Security Administration in its 10-
year computer-modernization program. Software developed by the Corporation
helped the administration process more than 280,000 benefit claims from 850
field offices with an 18% increase in accuracy during 1993. The Corporation
earned a 97% award fee for the late-1993 rating period, its second consecutive
rated as "well above highly successful."
Operation of the Environmental Protection Agency's National Computer Center
in Raleigh, North Carolina, and Washington, D.C., began in 1992. In 1993,
responsibility was extended to include full operation of the National
Environmental Supercomputer Center in Bay City, Michigan.
Synergies from the Martin Marietta-GE Aerospace combination also have
resulted in opportunities for competitive pricing. Services Group won the
contract to continue maintenance of sonar arrays for the Navy. These arrays
are towed behind submarines and surface ships for detection of ships and
submarines. The Group's competitive cost structure, combined with Aero & Naval
Systems' technical experience, enabled Martin Marietta to retain the business,
thereby strengthening the Corporation's position as a provider of fleet combat
services.
International operations continue in Japan, Taiwan, Turkey, Egypt, Oman,
Germany, Puerto Rico and the Caribbean. Especially noteworthy was a contract won
in 1993 to provide a new aerostat radar for Kuwait, replacing a system lost in
the Gulf War.
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In October, Martin Marietta's Sandia Corporation began managing and operating
the Department of Energy's Sandia National Laboratories, with facilities in
Albuquerque, New Mexico; Livermore, California; Tonopah, Nevada; and Kauai,
Hawaii. Martin Marietta also formed Technology Ventures Corporation to assist
in the commercialization of technologies developed by federal laboratories and
universities in New Mexico.
With assets valued at more than $1 billion, Sandia National Laboratories'
specialized facilities are used for process development, environmental testing,
high-performance computing and research on radiation effects, combustion and
microelectronics.
Over the past 40 years, Sandia has expanded its missions from nuclear
weapons activities to include additional advanced military technologies, energy
and the environment, arms control techniques, advanced manufacturing processes,
information science and technology and electronics. With the downsizing of the
federal defense budget, Sandia has assumed responsibility for transferring
commercially viable technologies to the private sector.
As one of the national laboratories designated to maintain the U.S. nuclear
arsenal, Sandia ensures that these weapons will function as required should they
ever be needed. Sandia conducts quality assurance evaluations on nuclear weapons
to ensure their safety and reliability and, as a means of aiding dismantlement,
has developed special physical and robotic processes to minimize radiation
exposure to personnel.
Sandia also has developed environmental technologies for nuclear waste
management and waste minimization in weapons production, maintenance and
dismantlement. These efforts also include developing technologies for
detoxification of chemical waste in soil and groundwater and improving detection
devices and analytical techniques for monitoring contamination.
In its efforts to strengthen the nation's economic security by transferring
technology to the private sector, Sandia has entered into 140 Cooperative
Research and Development Agreements with companies including AT&T, General
Motors, Motorola and Sun Microsystems.
Work on new energy technologies continued in 1993, with particular focus on
renewable sources, oil and gas recovery and conservation. Much of this work
involves joint projects with private companies.
Sandia scientists and engineers are focused on helping entire industries
become more competitive. Examples include Cooperative Research and Development
Agreements with the National Center for Manufacturing Sciences, the Specialty
Metals Processing Consortium, the Edison Welding Institute, SEMATECH (the
consortium of U.S. semiconductor manufacturers) and the Department of
Defense. In April, Sandia and SEMATECH signed a multi-year working agreement
to develop technologies for the next generation of integrated circuits.
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Martin Marietta's Advanced Development Operations and Laboratories work with
operating units to formulate shared visions of new products that anticipate
future requirements in space, defense, information systems and commercial
markets. From research in electronics, materials and information processing,
Martin Marietta scientists and engineers focus on developing products and
technologies that meet these needs.
The research and development operations from Martin Marietta and former GE
Aerospace are consolidated under a single technology organization with
operating elements in California, Maryland, New Jersey and New York.
In San Diego, Advanced Development Operations demonstrated the ability of the
Low-Cost Anti-Armor Submunition, a millimeter-wave radar seeker that can be
launched from a variety of platforms against tanks and other ground targets,
to quickly acquire and discriminate target classes. Flight tests and drop
tests are expected to begin in early 1994. This new low-cost seeker technology
promises to be applicable to numerous future programs employing target
acquisition radar.
A major development program is under way to compete for the Army's Corps
Surface-to-Air Missile program. The Corporation's team includes Ocean, Radar &
Sensor Systems and the Laboratories in Syracuse, New York, working on sensor
radars; Electronics & Missiles, Orlando, Florida, developing the missile
airframe and propulsion system and integrating the seeker; and Advanced
Development Operations, which is preparing seekers and high-power amplifiers for
the radars.
Martin Marietta Laboratories in Baltimore is leading a multi-partner team
comprising aerospace firms, suppliers, universities and government laboratories
that received one of the first contracts to be awarded under the U.S.
Government's dual-use technology initiative. The program will develop low-cost,
broadband, active anti-vibration techniques, utilizing company expertise in
ceramics and shape memory alloys. Among a variety of potential applications,
this research in vibration isolation should help make airplane cabins more
comfortable and improve tooling for ultra-fine machining.
The Laboratories in Baltimore also has developed a prototype lightweight,
broadband, variable-depth sonar. The acoustic projection system was subjected to
Navy and independent testing and demonstrated an improved capability to help
detect submarines and mines in shallow waters.
Martin Marietta continued development of high-speed, real-time parallel signal
processors for underwater imaging and radar and produced units as small as
five-by-seven inches. Research on signal processing for automated target
recognition led to new capabilities in human speech
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and fingerprint identification and in speech compression.
In a technical breakthrough in optical signal processing, Martin Marietta
developed new devices that provide a 1,000-fold improvement in performance over
current processors.
The Laboratories in Moorestown, New Jersey, teamed with other industry leaders
and research scientists to win an Army contract for Rapid Prototyping of
Application-Specific Signal Processors. This program is expected to result in a
significant decrease in the time needed to design and develop digital
processors, benefiting equipment manufacturers in both defense and commercial
markets.
Martin Marietta engineers in Syracuse successfully demonstrated 17
transmit/receive modules made from Microwave High-Density Interconnect
technology, replacing conventional wire bonds and reducing the size of the units
by at least one-half. Developed for the Air Force, these modules offer
performance, reliability and cost improvements for defense and civil radar
systems and communications antennas.
In a related technology bid, Martin Marietta is now teamed with GE and Texas
Instruments in a competition for a contract to develop high-density microwave
packaging for advanced radar systems.
Martin Marietta is a leader in the technology of phased arrays. These multi-
directional radars transmit without mechanical scanning, permitting lighter
weight and more reliable pointing and tracking systems. During the year, the
Corporation demonstrated for the Air Force a unique millimeter-wave phased-array
radar. Fiber-optic-controlled phased-array technology also is being developed
for the Army for future microwave radar systems and for advanced, low-cost
components for computers of the future.
38
MARTIN MARIETTA CORPORATION 1993 FINANCIAL REPORT
CONTENTS
Statement of Earnings 40
Balance Sheet 41
Statement of Cash Flows 42
Statement of Shareowners' Equity 43
Notes to Financial Statements 44
Report of Independent Auditors 55
Statement of Financial Responsibility 55
Analysis of Financial Condition and Operating Results 56
Quarterly Performance 62
Five Year Summary 63
1993
39
Statement of Earnings
for years ended December 31
(add 000, except per share) 1993 1992 1991
Net sales $9,435,689 $5,954,292 $6,075,415
Cost of sales, other costs and expenses 8,647,224 5,405,123 5,537,926
- -----------------------------------------------------------------------------------------------------------------------------------
Earnings from Operations 788,465 549,169 537,489
Other income and expenses, net 46,997 21,144 (58,980)
- -----------------------------------------------------------------------------------------------------------------------------------
835,462 570,313 478,509
Interest expense on debt 110,173 57,890 57,660
- -----------------------------------------------------------------------------------------------------------------------------------
Earnings before taxes on income and
cumulative effect of accounting changes 725,289 512,423 420,849
Taxes on income 275,000 167,000 107,700
- -----------------------------------------------------------------------------------------------------------------------------------
Earnings before Cumulative Effect of Accounting Changes 450,289 345,423 313,149
Cumulative effect of changes in accounting for post-retirement
benefits other than pensions and for post-employment benefits (429,432) - -
- -----------------------------------------------------------------------------------------------------------------------------------
Net Earnings $ 20,857 $ 345,423 $ 313,149
===================================================================================================================================
Net Earnings (Loss) Per Common Share
Assuming no dilution:
Before cumulative effect of accounting changes $4.25 $3.60 $3.15
Cumulative effect of accounting changes (4.51) - -
- -----------------------------------------------------------------------------------------------------------------------------------
$(.26) $3.60 $3.15
- -----------------------------------------------------------------------------------------------------------------------------------
Assuming full dilution:
Before cumulative effect of accounting changes $3.80 $3.60 $3.15
Cumulative effect of accounting changes * - -
- -----------------------------------------------------------------------------------------------------------------------------------
* $3.60 $3.15
===================================================================================================================================
*Anti-dilutive
40
Balance Sheet
at December 31
Assets
(add 000) 1993 1992
Current Assets:
Cash and cash equivalents $ 373,095 $ 239,642
Receivables 1,435,515 790,283
Inventories 358,749 300,878
Current deferred income taxes 238,642 61,242
Other current assets 42,239 42,296
- -----------------------------------------------------------------------------------------------------------------------------------
Total Current Assets 2,448,240 1,434,341
- -----------------------------------------------------------------------------------------------------------------------------------
Other Noncurrent Assets 707,772 800,445
Noncurrent Deferred Income Taxes 206,119 -
Property, Plant and Equipment, net 1,692,753 1,257,139
Cost in Excess of Net Assets Acquired 1,914,894 26,224
Other Intangibles 775,113 81,456
- -----------------------------------------------------------------------------------------------------------------------------------
$7,744,891 $3,599,605
===================================================================================================================================
Liabilities and Shareowners' Equity
(add 000) 1993 1992
Current Liabilities:
Accounts payable $ 536,799 $ 247,825
Other current liabilities 572,343 125,069
Salaries, benefits and payroll taxes 333,602 177,847
Income taxes 48,847 31,681
Current maturities of long-term debt 318,525 3,814
- -----------------------------------------------------------------------------------------------------------------------------------
Total Current Liabilities 1,810,116 586,236
- -----------------------------------------------------------------------------------------------------------------------------------
Long-term Debt 1,479,571 474,726
Post-retirement Benefits 740,630 101,978
Other Noncurrent Liabilities 838,222 194,195
Noncurrent Deferred Income Taxes - 297,254
Shareowners' Equity:
Series A preferred stock, liquidation preference $50 per share 1,000,000 -
Common stock, par value $1 a share, authorized 500,000,000 shares 95,697 47,229
Additional paid-in capital 123,999 85,992
Retained earnings 1,656,656 1,811,995
- -----------------------------------------------------------------------------------------------------------------------------------
2,876,352 1,945,216
- -----------------------------------------------------------------------------------------------------------------------------------
$7,744,891 $3,599,605
===================================================================================================================================
The notes on pages 44 to 54 are integral parts of these statements
Martin Marietta Corporation
and Consolidated Subsidiaries
41
Statement of Cash Flow
for years ended December 31
(add 000) 1993 1992 1991
Cash Flows from Operating Activities:
Net earnings $ 20,857 $ 345,423 $ 313,149
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Cumulative effect of changes in accounting for
post-retirement benefits other than pensions
and for post-employment benefits 429,432 - -
Depreciation, depletion and amortization 349,982 226,147 225,072
Deferred income taxes 15,420 11,840 (327,180)
Net changes in receivables, inventories and payables (272,055) 220,230 (121,503)
Commercial Titan deferred revenue - (147,088) 37,339
Goodwill and intangible amortization 86,216 12,802 9,518
Other items 10,407 8,643 42,522
- -----------------------------------------------------------------------------------------------------------------------------------
Net Cash Provided by Operating Activities 640,259 677,997 178,917
- -----------------------------------------------------------------------------------------------------------------------------------
Cash Flows from Investing Activities:
Additions to properties, net of purchased operations (214,810) (170,889) (212,326)
Retirement of properties, net of sold facilities 35,139 13,710 15,404
Acquisition GE Aerospace (883,199) - -
Purchases of operations (15,989) (18,809) (21,309)
Reductions (additions) to investments 108,959 (19,317) -
Other (18,488) (73) 15,959
- -----------------------------------------------------------------------------------------------------------------------------------
Net Cash Used for Investing Activities (988,388) (195,378) (202,272)
- -----------------------------------------------------------------------------------------------------------------------------------
Cash Flows from Financing Activities and Dividends:
Debt transactions:
Decrease in short-term borrowings - - (25,000)
Increase in long-term debt 700,135 4,282 207,972
Repayments of long-term debt (107,213) (197,553) (6,447)
Equity transactions:
Issuances of common stock 17,023 20,856 40,614
Purchases of common stock - (165,067) (36,023)
Dividends:
Preferred stock (45,333) - -
Common stock (83,030) (76,050) (74,680)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Cash Provided by (Used for) Financing Activities and Dividends 481,582 (413,532) 106,436
- -----------------------------------------------------------------------------------------------------------------------------------
Net Increase in Cash and Cash Equivalents 133,453 69,087 83,081
Cash and Cash Equivalents at beginning of year 239,642 170,555 87,474
- -----------------------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at end of year $ 373,095 $ 239,642 $ 170,555
===================================================================================================================================
Supplemental Schedule of Investing and Financing Activities
Non-cash consideration-Acquisition GE Aerospace:
Assumption of certain payment obligations $ 750,000 - -
Issuance of preferred stock 1,000,000 - -
- -----------------------------------------------------------------------------------------------------------------------------------
$1,750,000 - -
===================================================================================================================================
42
Statement of Shareowners' Equity
for years ended December 31
Additional Total
Preferred Common Paid-in Retained Shareowners'
(add 000) Stock Stock Capital Earnings Equity
- -----------------------------------------------------------------------------------------------------------------------------------
Balance at January 1, 1991 $ - $48,866 $ 187,944 $1,304,153 $1,540,963
Net earnings for 1991 - - - 313,149 313,149
Cash dividends declared on
common stock ($.75 a share) - - - (74,680) (74,680)
Stock awards and options exercised,
net of stock tendered in payment - 1,032 43,291 - 44,323
Other common stock issued - 319 15,852 - 16,171
Common stock purchased - (687) (35,336) - (36,023)
- -----------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1991 - 49,530 211,751 1,542,622 1,803,903
Net earnings for 1992 - - - 345,423 345,423
Cash dividends declared on
common stock ($.795 a share) - - - (76,050) (76,050)
Stock options exercised,
net of stock tendered in payment - 480 20,376 - 20,856
Other common stock issued - 310 15,841 - 16,151
Common stock purchased - (3,091) (161,976) - (165,067)
- -----------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1992 - 47,229 85,992 1,811,995 1,945,216
Net earnings for 1993 - - - 20,857 20,857
Preferred stock issued 1,000,000 - - - 1,000,000
Cash dividends declared on
preferred stock ($2.25 a share) - - - (45,333) (45,333)
Cash dividends declared on
common stock ($.87 a share) - - - (83,030) (83,030)
Stock awards and options exercised,
net of stock tendered in payment - 407 22,412 - 22,819
Other common stock issued - 228 15,595 - 15,823
Issuance of shares to effect 2-for-1 stock split - 47,833 - (47,833) -
- -----------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1993 $1,000,000 $95,697 $ 123,999 $1,656,656 $2,876,352
===================================================================================================================================
The notes on pages 44 to 54 are integral parts of these statements.
Martin Marietta Corporation
and Consolidated Subsidiaries
43
Notes to
Financial Statements
Martin Marietta Corporation
and Consolidated Subsidaries
Note A:
Accounting Policies
- ------------------------------------------------------------------------------
Consolidation Basis Consolidated financial statements include the accounts of
all significant majority-owned subsidiaries of the Corporation. All material
intercompany transactions have been eliminated in consolidation.
Certain amounts for the prior periods have been reclassified to conform with
the 1993 presentation.
Cash and Cash Equivalents Cash and cash equivalents generally comprise highly
liquid instruments with original maturities of three months or less from date of
purchase.
As of December 31, book cash balances amounted to net overdrafts of
$43,620,000 in 1993 and $26,390,000 in 1992 and are attributable to the float of
the Corporation's outstanding checks.
Investments Valuation Marketable investment securities
are carried at the lower of aggregate cost or market value. Specific costs are
used to compute realized gains or losses.
Investments in associated companies are accounted for by the equity method
wherever the Corporation is able to significantly influence operating and
financial matters. Other investments are carried at cost less valuation
allowances where appropriate.
Revenues Recognition Long-term, fixed-price contracts generally are accounted
for under percentage-of-completion methods, and sales include a proportion of
the earnings expected to be realized in the ratio that costs incurred bear to
estimated total costs. Sales are recorded on cost-type contracts as costs are
incurred. Under all other contracts, sales are recorded when deliveries are made
or as work is performed.
Contracts and programs in progress are reviewed quarterly, and sales and
earnings are adjusted in current accounting periods based on revisions in
contract value and estimated costs at completion. Performance incentives are
incorporated in certain contracts that provide increased or decreased earnings
based on performance to established targets. Incentives based upon cost
performance are recorded currently, and other incentives and awards are recorded
when the amounts reasonably can be estimated or are awarded. Provisions for
estimated losses on contracts and programs are recorded when identified.
Commercial Titan sales for the initial program, completed in 1992, were
recorded upon the delivery of launch services. Cost of sales attributable to
each launch was determined under the program-average cost method. Cost of sales
on any future Commercial Titan vehicles will be determined on a specific
contract identification basis.
Sales in the Materials segment are recorded upon shipment of products or
performance of services.
Inventories Valuation Inventories are stated at the lower of cost or market.
Costs on contracts and programs in progress represent recoverable costs incurred
for production, research and development and selling, general and
administration, less amounts attributed to cost of sales, generally under
percentage-of-completion accounting methods. Costs of other product and supply
inventories are principally determined by the first-in, first-out (FIFO) method.
44
- --------------------------------------------------------------------------------
Properties and Depreciation Property, plant and equipment, including capital
leases, are carried at cost, including interest cost capitalized during
construction on significant capital programs.
Depreciation and amortization of properties are computed over estimated
service lives generally using accelerated methods, except for Materials and
other businesses that utilize the straight-line method. Depletion of mineral
deposits is calculated over estimated recoverable quantities by the unit-of-
production method.
Intangible Assets Costs in excess of net assets acquired are amortized ratably
over appropriate periods ranging from 20 to 40 years. Other intangibles
represent amounts assigned principally to the value of programs acquired and are
amortized over periods not exceeding 15 years.
Income Taxes Current income tax provisions represent estimated amounts payable
or recoverable for each year after adjustments for permanent differences.
Deferred income tax provisions represent the tax effect of all significant
temporary differences between financial statements and income taxes.
Research and Development and Similar Costs Research and development and similar
costs are charged to operations as incurred unless reimbursable under specific
contractual arrangements. Independent research and development, systems studies,
other concept formulation studies and bid and proposal work relating to
government contracts represent a major portion of these expenses. Such amounts
are allocated when appropriate to government contracts through overhead under
government-mandated cost accounting procedures.
Preoperating costs are generally charged to operations as incurred, except
that such costs for significant new products or services and start-up costs of
certain facilities may be deferred for amortization over periods not to exceed
five years.
Earnings Per Common Share Earnings per share are based on the weighted
average number of common shares outstanding during the year.
Earnings per share, assuming no dilution, were computed in 1993 based on net
earnings less the dividend requirement of preferred stock. The weighted average
number of common shares outstanding assuming no dilution were 95,346,614 in
1993, 95,868,708 in 1992 and 99,341,210 in 1991.
Fully diluted earnings per share in 1993 asssumed that the average number of
common shares was increased by the conversion of preferred stock from the date
of issue and by dilutive stock options. The weighted average number of common
shares outstanding, assuming full dilution, were 118,347,041 in 1993, 95,868,
708 in 1992 and 99,341,210 in 1991.
On September 30, 1993, a 2-for-1 split of the Corporation's common stock
in the form of a 100% stock dividend became effective. All references in the
consolidated financial statements with regard to the number of shares and per
share data have been restated to reflect the split.
- --------------------------------------------------------------------------------
Note B:
Business Combination with GE Aerospace
- --------------------------------------------------------------------------------
On November 22, 1992, Martin Marietta Corporation entered into a Transaction
Agreement with General Electric Company (GE) to combine the aerospace and
certain other businesses of GE (collectively, the "GE Aerospace businesses")
with the businesses of Martin Marietta Corporation in the form of affiliated
corporations. The transaction (the "GE Transaction"), was consummated on April
2, 1993, and GE Aerospace operations have been included since that date.
The exchange consideration of approximately $3 billion for the GE
Transaction consisted of cash, preferred stock, retention by GE of certain
accounts receivable and the assumption of payment obligations related to certain
GE indebtedness. The GE Transaction has been accounted for under the purchase
method of accounting, wherein approximately $1.9 billion in goodwill was
recognized by the Corporation after recording approximately $700 million in
other intangibles (representing the estimated fair-market value of certain
assets) and other purchase adjustments necessary to allocate the purchase price
to the value of assets acquired and liabilities assumed. Goodwill is being
amortized over a 40-year period, and the other intangibles are being amortized
over a 15-year period.
The Martin Marietta securities owned by GE are held under a Standstill
Agreement. Among other things, the Standstill Agreement provides for certain
limitations on either the increase or disposal of GE's interest in voting
securities of Martin Marietta, on GE's solicitation of proxies and shareowner
proposals, on GE's voting of its shares and on GE's ability to place or remove
members of Martin Marietta's Board of Directors. In addition, the Standstill
Agreement requires Martin Marietta to recommend to its shareowners the election
of persons designated by GE to serve as directors of Martin Marietta. Generally,
the Standstill Agreement provides that GE's designees will at all times
constitute at least 10% of Martin Marietta's Board of Directors.
In 1986, the Board of Directors adopted a Shareholder Rights Plan to
distribute, under certain circumstances, one Common Stock Purchase Right for
each outstanding share of the Corporation's common stock. The Rights Plan was
amended during 1990. Under the amended plan, the Rights became exercisable if a
person or group acquires, in a transaction not approved by the Board of
Directors, 15% or more of the Corporation's common stock or announces a tender
offer for 30% or more of the stock. The GE Transaction was approved by the Board
of Directors of the Corporation and therefore did not constitute a "Change of
Control" for purposes of the shareholder rights plan. The new Martin Marietta
Corporation has not adopted a shareholder rights plan.
The following unaudited pro forma information presents the results of
operations of the Corporation and the GE Aerospace businesses for the years
ended December 31, 1993 and 1992, with pro forma adjustments as if the GE
Transaction had been consummated as of the beginning of the periods presented.
This pro forma information does not purport to be indicative of what would have
occurred had the acquisition been made as of those dates or of results which may
occur in the future.
45
Note B: (continued)
Business Combination with GE Aerospace
- --------------------------------------------------------------------------------
Pro Forma Information (Unaudited)
(millions, except per share) 1993 1992
Net Sales $ 10,459 $ 11,232
- --------------------------------------------------------------------------------
Earnings before cumulative
effect of accounting changes
attributable to common stock $ 401 $ 418
- --------------------------------------------------------------------------------
Net earnings (loss)
attributable to common stock $ (28) $ 418
- --------------------------------------------------------------------------------
Earnings (loss) per common share
assuming no dilution:
Before cumulative effect
of accounting changes $ 4.21 $ 4.36
Net earnings (loss)
per common share $ (.29) $ 4.36
- --------------------------------------------------------------------------------
Note C:
Receivables
- --------------------------------------------------------------------------------
(add 000) 1993 1992
Receivables under long-term contracts:
United States Government:
Amounts billed $ 331,816 $149,472
Unbilled costs and accrued profits 749,748 646,586
Amounts withheld, due upon
completion of contracts 42,999 22,112
- --------------------------------------------------------------------------------
1,124,563 818,170
Other customers:
Amounts billed 105,916 28,442
Unbilled costs and accrued profits 290,260 146,556
- --------------------------------------------------------------------------------
Total receivables under
long-term contracts 1,520,739 993,168
Less noncurrent amounts 197,931 295,138
- --------------------------------------------------------------------------------
1,322,808 698,030
Other Activities:
Commercial accounts receivable 85,209 82,226
Notes and other current receivables 43,525 15,847
- --------------------------------------------------------------------------------
1,451,542 796,103
Less allowances 16,027 5,820
- --------------------------------------------------------------------------------
Total $1,435,515 $790,283
================================================================================
Unbilled costs and accrued profits will be billed on the basis of contract terms
and delivery schedules.
Amounts billable after one year are included in order noncurrent assets.
Note D:
Proposed Transactions
- --------------------------------------------------------------------------------
In December 1993, the Corporation signed an agreement to purchase the Space
Systems Division of General Dynamics Corporation for approximately $209 million
in cash. The transaction is subject to regulatory approval and the satisfaction
of certain other conditions and is expected to close during the first half of
1994. The purchase method of accounting will be used to record this transaction.
In December 1993, Martin Marietta Materials, Inc., a wholly owned subsidiary
of Martin Marietta Technologies, Inc., filed a registration statement with the
Securities and Exchange Commission for an underwritten public offering of its
common stock. The proposed offering will consist of 7,650,000 shares plus a 30-
day overallotment option for the underwriters to purchase up to 1,147,500
additional shares. The initial public offering by Martin Marietta Materials is
dependent upon market conditions, but is expected to close in February 1994,
after which the Corporation will own approximately 83% of the outstanding stock
of the company, or 81% if the overallotment is exercised.
Note E:
Inventories
- --------------------------------------------------------------------------------
(add 000) 1993 1992
Costs on contracts and
programs in progress $1,284,534 $311,224
Less: progress payments 830,372 14,693
noncurrent amounts 168,999 67,348
- --------------------------------------------------------------------------------
285,163 229,183
Other Activities:
Finished products 50,029 45,967
Products in process and raw
materials 10,106 11,586
Expendable parts and supplies 13,451 14,142
- --------------------------------------------------------------------------------
Total $ 358,749 $300,878
According to provisions of certain U.S. Government contracts, the customer has
title to, or a security interest in, inventories for contracts and programs
in progress of approximately $310,350,000 for 1993 and $3,700,000 for 1992.
Selling, general and administrative costs in connection with production
under long-term government contracts were charged to inventories as incurred in
the amounts of $377,470,000 in 1993 and $316,780,000 in 1992. The estimated
amounts remaining in inventories were $126,990,000 at December 31, 1993, and
$17,860,000 at December 31, 1992.
Costs on contracts and programs in progress at December 31, 1993 and 1992,
did not include any significant amounts of production costs or other deferred
costs or claims and similar items subject to uncertainty concerning their
realization.
46
Note F:
Property, Plant and Equipment, Net
- --------------------------------------------------------------------------------
(add 000) 1993 1992
Land $ 195,398 $ 150,878
Mineral deposits 38,575 35,343
Buildings 836,694 696,077
Machinery and equipment 2,733,667 2,261,945
- --------------------------------------------------------------------------------
3,804,334 3,144,243
Less allowances for depreciation, depletion and
amortization 2,111,581 1,887,104
- --------------------------------------------------------------------------------
Total $1,692,753 $1,257,139
================================================================================
Note G:
Debt
- --------------------------------------------------------------------------------
(add 000) 1993 1992
Long-term debt:
Payment obligations assumed $ 622,162 $ -
9 1/2% Notes due 1995 125,000 125,000
8 1/2% Notes due 1996 100,000 100,000
9% Notes due 2003 100,000 100,000
6 1/2% Notes due 2003 400,000 -
7% Debentures due 2011 101,511 100,439
7 3/8% Debentures due 2013 150,000 -
7 3/4% Debentures due 2023 150,000 -
Other notes and obligations 49,423 53,101
- --------------------------------------------------------------------------------
Total 1,798,096 478,540
Less current maturities 318,525 3,814
- --------------------------------------------------------------------------------
Long-term debt $1,479,571 $ 474,726
Payment obligations assumed as part of the exchange consideration for the GE
Transaction relate to certain GE indebtedness. Approximately $304 million of
these obligations at December 31, 1993, mature in 1994 and carry an effective
interest rate of 4.4%, and $318 million mature in 1996 and carry an effective
interest rate of 5.025%. In December 1993, $103 million of the debt obligations
were defeased in substance.
The 9 1/2% Notes, 8 1/2% Notes and 9% Notes are not redeemable prior to
maturity.
The 6 1/2% Notes were issued on April 22, 1993, and are not redeemable
prior to maturity.
The 7% Debentures were sold at 53.835% of their principal amount of
$175,000,000 in 1981. These debentures are carried net of original issue
discount, which is being amortized by the interest method over the life of the
issue. The effective interest rate is 13 1/4%. The debentures are redeemable
in whole or in part at the Corporation's option at any time at 100% of their
principal amount.
The 7 3/8% Debentures and 7 3/4% Debentures were issued on April 22, 1993.
The 7 3/8% Debentures are not redeemable prior to maturity. The 7 3/4%
Debentures may not be redeemed by the Corporation prior to April 15, 2003, but
on or after that date may be redeemed by the Corporation at specified
redemption prices.
Other notes and obligations include a $17-million, 8 5/8% Real Estate
Mortgage secured by property in Maryland having a net book value of
approximately the same amount at December 31, 1993.
Maturities of long-term debt during the five-year period ending December 31,
1998, are $318,525,000 in 1994, $129,600,000 in 1995, $421,976,000 in 1996,
$674,000 in 1997 and $681,000 in 1998.
At December 31, 1993, the independently determined market value of the 7%
Debentures exceeded book value by approximately $70 million. The independently
determined aggregate market value of the Corporation's other outstanding debt
approximated book value.
Interest payments were $96,840,000 in 1993, $61,020,000 in 1992 and
$55,320,000 in 1991. Interest expense on debt was net of capitalized interest
of $2,857,000 in 1993, $3,717,000 in 1992 and $5,757,000 in 1991 and included
commitment fees of approximately $2,210,000 in 1993 and $750,000 in 1992 and
1991.
As of December 31, 1993, the Corporation has issued letters of credit
totaling $347,560,000 relating to certain long-term contracts and other
contractual obligations.
In 1993, Martin Marietta Technologies, Inc., a wholly owned subsidiary (see
Note J, page 48), and Martin Marietta Corporation replaced a previous credit
facility with a 364-day revolving credit facility in the amount of $900 million
expiring on March 30, 1994, and a three-year revolving credit facility in the
amount of $1.3 billion that expires on March 31, 1996. Effective September 1,
1993, Martin Marietta Technologies, Inc., reduced the amounts committed under
the facilities. The $900-million facility was reduced to $500 million and the
$1.3-billion facility was reduced to $800 million. These borrowing facilities
may be used for general corporate purposes. Under these credit facilities, the
Corporation is subject to limitations on its financial leverage and a minimum
coverage ratio as defined by the agreements.
The financing agreements of Martin Marietta Corporation and its subsidiaries
contain certain restrictive covenants, including requirements for limitations on
encumbrances and on sale and lease-back transactions.
47
Note H:
Shareowners' Equity
- --------------------------------------------------------------------------------
The current authorized capital structure of Martin Marietta Corporation includes
20,000,000 shares of Series A Preferred Stock with par value of $1 a share
(liquidation preference $50 per share), which pays dividends at an annual rate
of $3.00 per share (6%) and are cumulative. In 1993, the Preferred Stock
dividends became effective from the date of closing of the GE Transaction. As
part of the consideration for the GE Transaction, the Corporation issued to GE
all of the authorized and outstanding shares of Series A Preferred Stock of
Martin Marietta, which shares are convertible into approximately 23% of the
shares of Martin Marietta common stock after giving effect to such conversion
(calculated as of December 31, 1993), and have an aggregate liquidation
preference of $1 billion. The Series A Preferred Stock is nonvoting stock
except in special circumstances, and GE and Martin Marietta have entered into a
Standstill Agreement that imposes certain limitations on GE's ability to, among
other things, acquire or dispose of Martin Marietta voting securities (see Note
B, page 45).
The Corporation's capital structure also includes 30,000,000 shares of
Preferred Stock with par value of $1 a share, none of which is currently issued.
In 1993, the Board of Directors authorized the repurchase of approximately
32.4 million of the Corporation's common shares for use in connection with the
Corporation's Amended Omnibus Securities Award Plan, Performance Sharing Plan
and for general corporate purposes. No share repurchases were made by the
Corporation during 1993.
The Corporation contributed 228,086 shares in 1993, 310,608 shares in 1992
and 318,663 shares in 1991 of its common stock to the Martin Marietta
Performance Sharing Plan for Salaried Employees in accordance with provisions
set forth in that plan.
Under Maryland General Corporation Law, shares of common stock reacquired by
a corporation constitute unissued shares. For financial reporting purposes,
reacquired shares are recorded as reductions to issued common stock and to
additional paid-in capital.
At December 31, 1993, retained earings were unrestricted.
Note I:
Contingencies
- --------------------------------------------------------------------------------
In the opinion of management and counsel, the probability is remote that the
outcome of litigation and other proceedings, including those pertaining to
environmental matters (see Analysis of Financial Condition and Operating
Results, page 58), relating to Martin Marietta and its subsidiaries, will have a
material adverse effect on the results of the Corporation's operations or its
financial position.
Note J:
Martin Marietta Technologies, Inc.
- --------------------------------------------------------------------------------
The GE Transaction resulted in a newly formed Maryland corporation, Martin
Marietta Corporation. The former Martin Marietta Corporation changed its name to
Martin Marietta Technologies, Inc.
Upon consummation of the GE Transaction, Martin Marietta had the same common
stockholders (holding the same number of shares) as Martin Marietta
Technologies, Inc., had immediately prior to the GE Transaction. GE's sole
equity interest in Martin Marietta following the consum-mation of the GE
Transaction is its ownership of all of the authorized and outstanding shares of
Series A Preferred Stock of Martin Marietta Corporation.
Summarized financial information for Martin Marietta Technologies, Inc., a
wholly owned subsidiary of the Corporation, follows:
(millions) 1993) 1992
Current assets $1,585 $1,434
Noncurrent assets 3,163 2,166
Current liabilities 825 586
Long-term debt 1,161 475
Other noncurrent liabilities 886 594
Shareowners' equity 1,876 1,945
- -------------------------------------------------------------------------------
Net sales $5,628 $5,954
Earnings from operations 583 549
Earnings before cumulative effect
of accounting changes 358 345
Cumulative effect of
accounting changes (427) -
Net earnings (loss) (69) 345
- --------------------------------------------------------------------------------
Martin Marietta Corporation has guaranteed the payment of certain debt and
other obligations of Martin Marietta Technologies, Inc. The total of such
guarantees was $1.2 billion at December 31, 1993. Exposure to credit risk in the
event of non-payment by the obligor is represented by the contractual amount of
the relative instruments. No loss is anticipated under these guarantees. As of
December 31, 1993, there were no restrictions on dividends or other
distributions between Martin Marietta Technologies, Inc., and the Corporation.
Note K:
Leases
- --------------------------------------------------------------------------------
Total rental expense for all operating leases was $145,200,000 in 1993,
$82,760,000 in 1992 and $97,280,000 in 1991.
Future minimum rental commitments for all noncancelable operating leases
are: $112,040,000 for 1994, $85,160,000 for 1995, $58,930,000 for 1996,
$41,630,000 for 1997, $33,330,000 for 1998 and $55,270,000 for later years.
48
Note L:
Stock Option and Award Plans
- --------------------------------------------------------------------------------
Number of Shares Option Price
- --------------------------------------------------------------------------------
Available Options Per Share Total
for Grant Outstanding Range (add 000)
- --------------------------------------------------------------------------------
YEAR 1992:
January 1 3,224,900 3,681,750 $11.665-$29.25 $ 86,973
Additions 1,287,778 - - -
Options granted (1,189,800) 1,189,800 25.75 30,637
Exercised - (1,429,100) 11.665- 29.25 (30,936)
Deregistered (3,250,300) - - -
Canceled 31,400 (31,400) 19.750- 29.25 (759)
Expired (6,000) - - -
- --------------------------------------------------------------------------------
December 31 97,978 3,411,050 $11.665-$29.25 $ 85,915
- --------------------------------------------------------------------------------
Exercisable at December 31 1,208,050
YEAR 1993:
January 1 97,978 3,411,050 $11.665-$29.25 $ 85,915
Additions 2,095,300 - - -
Options granted (1,217,600) 1,217,600 40.375- 44.50 49,173
Awards granted (170,000) -
Exercised - (803,850) 11.665- 29.25 (19,347)
Canceled 8,800 (8,800) 19.938- 40.375 (259)
Expired - (3,600) - -
- --------------------------------------------------------------------------------
December 31 814,478 3,812,400 $19.750-$44.50 $115,482
- --------------------------------------------------------------------------------
Exercisable at December 31 1,490,800
- --------------------------------------------------------------------------------
In 1992, the Corporation adopted an Omnibus Securities Award Plan, which was
subsequently amended in 1993. Under the Amended Omnibus Securities Award Plan
(Amended Omnibus Plan), employees of the Corporation may be granted stock-based
incentive awards, including options to purchase common stock, stock appreciation
rights, restricted stock or other stock-based incentive awards. These awards may
be granted either singly or in combination with other awards. Under the Amended
Omnibus Plan, the number of shares of stock available for awards in 1992 was
1.3% of the shares of common stock outstanding on December 31, 1991, and the
number of shares of stock available for awards for each year in the period 1993
through 1996 shall not exceed 1.7% of the shares of common stock outstanding on
December 31 of the previous year. The Amended Omnibus Plan further provides that
for the years 1993, 1994 and 1995, an additional 0.5% of the shares of common
stock outstanding on December 31 of the previous year may be granted if a
corresponding percentage decrease in shares available for award is made the
following year. Effective with the adoption of the Omnibus Securities Award Plan
in 1992, no further grants of options, stock appreciation rights or restricted
stock could be made under any of the Corporation's prior plans. However, all
outstanding grants and awards under those prior plans will remain in effect in
accordance with their terms.
Under the Amended Omnibus Plan, the Corporation grants options to purchase
its common stock at a price equal to the market value at the date of grant.
These options become exercisable in three equal annual installments beginning
one year after date of grant and expire 10 years from such date. The Amended
Omnibus Plan allows the Corporation to provide for financing of purchases,
subject to certain conditions, by interest-bearing notes payable to the
Corporation.
Prior stock option plans included the same grant pricing, vesting and
expiration terms as the Amended Omnibus Plan. The 1984 Plan allows the
Corporation to provide for financing of purchases, subject to certain
conditions, by interest-bearing notes payable to the Corporation.
The 1979 and 1984 Plans included stock appreciation rights granted
simultaneously in equal number with the grant of stock options. These rights
may be exercised independently of the options and entitle a grantee to receive
in cash an amount equal to a percentage of the increase in the market value of
the Corporation's common stock. The 1979 Plan limits these payments to 100% of
the option price.
The Amended Omnibus Plan provides for the award and issuance of common
stock at par value subject to certain restrictions for a specified period of
time. A total of 170,000 restricted shares was awarded under the Amended
Omnibus Plan during 1993; no awards were made during 1992. Under the awards
outstanding, participants are entitled to cash dividends and to vote their
respective shares, but they are prohibited from selling or transferring shares
during a restricted period. Upon adoption of the Omnibus Securities Award Plan
in 1992 (as amended in 1993), no further awards could be made under the
Restricted Stock Award Plan adopted in 1989, but the outstanding awards
(totaling 116,000 shares) under that plan remain in effect in accordance with
their terms.
49
Note M:
Post-Employment Benefit Plans
- --------------------------------------------------------------------------------
Martin Marietta and its consolidated subsidiaries sponsor a number of
retirement plans that cover substantially all employees. Defined benefit plans
for salaried and certain hourly employees provide benefits based on employees'
years of service and compensation, either on a final or career average basis.
Defined benefit plans for other hourly employees generally provide benefits of
stated amounts for specified periods of service.
The Corporation's defined benefit pension plans comply with three principal
standards: the Employee Retirement Income Security Act of 1974 as amended
(ERISA), which in conjunction with the Internal Revenue Code, determines legal
minimum and maximum deductible funding requirements; U.S. Government Cost
Accounting Standards (CAS), which in conjunction with Federal Acquisition
Regulations, establish rules for determining and measuring contractors'
pension costs; and Statement of Financial Accounting Standards No. 87,
"Employers' Accounting for Pensions" (FAS 87), which establishes rules for
financial reporting. FAS 87 requires the recognition of actuarial values on a
"termination" rather than an "ongoing" basis and specifies that certain key
actuarial assumptions be adjusted annually to reflect current, rather than
long-term, trends in the economy.
Consistent with the requirements of ERISA and CAS, it is the Corporation's
funding policy to stabilize annual contributions as a percentage of payroll by
utilizing the entry-age-normal actuarial cost method, with assumptions selected
on the basis of long-term trends.
On December 31, 1993, retirement plan assets, which are held in a master
trust, were invested principally in listed stocks and bonds and cash
equivalents.
Certain health care and life insurance benefits are provided to eligible
retirees by Martin Marietta or its consolidated subsidiaries. These benefit
plans are funded by the Corporation through several trusts. For recently retired
participants, the health benefits generally provide for cost sharing through
participant contributions and copayments. For salaried employees who retired
after 1992, there is an annual limit on the Corporation's contribution per
participant.
Prior to 1993, the Corporation recognized the costs of retiree health
benefits on a claims-paid basis. These costs were $33 million in 1992 and $27
million in 1991.
TheCorporation has adopted Statement of Financial Accounting Standards No.
106, "Employers' Accounting for Post-retirement Benefits Other Than Pensions"
(FAS 106),
- --------------------------------------------------------------------------------
The net pension cost of defined benefit plans included the following components
(add 000):
1993 1992 1991
Service cost-benefits earned during
the period $ 164,663 $ 116,142 $ 108,715
Interest cost 272,581 183,114 172,084
Net amortization and other components 112,472 (113,846) 1,789
Actual return on assets (402,644) (76,242) (180,715)
- --------------------------------------------------------------------------------
Net pension cost $ 147,072 $ 109,168 $ 101,873
================================================================================
Assumptions used as of December 31:
Plan discount rates 7.5% 6.3%-7.5% 6.5%-7.8%
Rates of increase in future
compensation levels 6.0% 6.0% 6.0%
Expected long-term rate of return on
assets 8.75% 8.0% 8.0%
The following table sets forth the defined benefit plans'
funded status and amounts recognized in the Corporation's
consolidated balance sheet as of December 31 (add 000): 1993 1992
Plan assets at fair value $4,048,738 $2,538,400
================================================================================
Actuarial present value of benefit
obligations:
Vested $3,376,739 $2,202,994
Non-vested 65,860 24,364
- --------------------------------------------------------------------------------
Accumulated Benefit Obligation (ABO) $3,442,599 $2,227,358
================================================================================
Projected Benefit Obligation (PBO) $4,240,711 $2,838,914
================================================================================
Reconciling Items:
Assets in excess of ABO $ 606,139 $ 311,042
Effect of estimated future pay increases (798,112) (611,556)
- --------------------------------------------------------------------------------
Assets less than PBO (191,973) (300,514)
Unrecognized prior-service cost 63,830 102,161
Unrecognized net assets (36,757) (40,602)
Unrecognized loss 216,770 285,038
- --------------------------------------------------------------------------------
Prepaid pension cost $ 51,870 $ 46,083
================================================================================
50
effective January 1, 1993. FAS 106 requires that the cost of certain post-
retirement benefits be recognized under an accrual method of accounting
instead of the prior practice of expensing the cost of such benefits as paid.
The Corporation has elected to expense in the first quarter of 1993 the
liability accumulated through 1992 due to the change in accounting method.
This one-time transition obligation of $656 million resulted in an after-tax
charge to net income of $412 million in the first quarter of 1993.
The Corporation's policy is to fund amounts that are consistent with the
expense accrual under FAS 106, including an amortization payment for the
transition obligation.
Since 1988, the Corporation has made contributions to the irrevocable trusts
established to pay future health benefits to eligible retirees and dependents.
On December 31, 1993, plan assets were invested principally in listed stocks and
bonds and cash equivalents.
- --------------------------------------------------------------------------------
The net periodic post-retirement benefit cost for 1993 includes the following
components (add 000):
Service cost-benefits earned
during the period $ 23,153
Interest cost 69,133
Net amortization and other components 12,586
Actual return on assets (30,447)
- ---------------------------------------------------------
Net periodic cost $ 74,425
=========================================================
Assumptions used as of December 31:
Discount rate 7.5%
Expected long-term rate of return on assets 8.75%
- --------------------------------------------------------------------------------
The trend rate for health care inflation is 8.5% for 1993 and 1994, trending
down to 4.5% by 2001. The assumptions also include the impact of Medicare cost-
sharing provisions which, when used in conjunction with the health care
inflation rate, yields an effective health care cost-trend rate of
approximately 12.5%.
- --------------------------------------------------------------------------------
The following table sets forth the post-retirement health care plans' funded
status and estimated amounts recognized in the Corporation's consolidated
balance sheet as of December 31, 1993 (add 000):
Plan assets at fair value $ 279,577
- ------------------------------------------------------------------------------
Actuarial present value of benefit obligations:
Active employees, eligible to retire $ 67,038
Active employees, not eligible to retire 314,218
Former employees 743,297
- ------------------------------------------------------------------------------
Accumulated Projected Benefit
Obligation (APBO) $1,124,553
- ------------------------------------------------------------------------------
Assets less than APBO 844,976
Unrecognized prior-service cost 7,189
Unrecognized gain (111,535)
- ------------------------------------------------------------------------------
Post-retirement benefit liability $ 740,630
==============================================================================
- ------------------------------------------------------------------------------
A 1% increase in the health care cost trend rate would increase the APBO
by approximately 8.6%, and would increase the sum of the service cost and
interest cost by approximately 8.6%.
The Corporation has elected to adopt Statement of Financial Accounting
Standards No. 112, "Employers' Accounting for Post-employment Benefits" (FAS
112). FAS 112 mandates that the cost of certain post-employment benefits be
recognized under an accrual method of accounting instead of the current
practice of expensing the cost of such benefits as paid. The effect of this
change in accounting method resulted in a one-time, after-tax charge to net
income of $17 million.
Note N:
Other Income and Expenses
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(add 000) 1993 1992 1991
Interest income $ 8,245 $ 6,035 $ 12,664
Restructuring charge - - (70,000)
Royalty income 32,094 9,729 14,007
Miscellaneous, net 6,658 5,380 (15,651)
- -------------------------------------------------------------------------------
Total $ 46,997 $ 21,144 $ (58,980)
The restructuring charge in 1991 represents the estimated cost of closing and
selling related assets of the Corporation's International Light Metals operation
and resulted in an after-tax loss of $39 million, or 39 cents per share.
International Light Metals ceased operations in August 1992.
In 1991, miscellaneous includes the Corporation's equity in losses of
$17,470,000 from International Light Metals Corporation.
Note O:
Selling, General and Administrative Expenses
- --------------------------------------------------------------------------------
Selling, general and administrative expenses included in cost of sales, other
costs and expenses were $500,290,000 for 1993, $406,100,000 for 1992 and
$444,660,000 for 1991.
Note P:
Research and Development
- --------------------------------------------------------------------------------
Research and development expenses included in cost of sales, other costs and
expenses were $280,100,000 in 1993, $199,950,000 in 1992 and $183,580,000 in
1991 and included independent research and development, systems studies, other
concept formulation studies and bid and proposal work related to government
contract products and services.
51
Note Q:
Taxes on Income
- --------------------------------------------------------------------------------
Effective January 1, 1993, the Corporation adopted Statement of Financial
Accounting Standard No. 109, "Accounting for Income Taxes" (FAS 109). The impact
of adopting the standard on the Corporation's earnings and financial position
was not material. Prior years' financial statements have not been restated to
apply the provisions of FAS 109. Income taxes for 1992 and 1991 are based on
pre-tax financial statement income in accordance with Accounting Principles
Board Opinion No. 11.
- --------------------------------------------------------------------------------
(add 000) 1993 1992 1991
Federal income taxes:
Current $230,960 $135,340 $ 385,400
Deferred 11,900 9,800 (289,800)
- --------------------------------------------------------------------------------
Total federal income taxes 242,860 145,140 95,600
State income taxes:
Current 25,480 19,820 49,480
Deferred 3,520 2,040 (37,380)
- --------------------------------------------------------------------------------
Total state income taxes 29,000 21,860 12,100
Foreign income taxes 3,140 -- --
- --------------------------------------------------------------------------------
Total income taxes provided $275,000 $167,000 $ 107,700
================================================================================
The Corporation's effective income tax rate varied from
the statutory United States income tax rate because
of the following differences:
1993 1992 1991
Statutory tax rate 35.0% 34.0% 34.0%
Increase (reduction) in tax rate from:
Deferred tax reversal -- (1.3) (11.0)
Research and development credit -- (.3) --
Nondeductible amortization 1.4 -- --
State income taxes 2.6 2.8 1.9
Other items (1.1) (2.6) .7
- --------------------------------------------------------------------------------
2.9 (1.4) (8.4)
- --------------------------------------------------------------------------------
Effective tax rate 37.9% 32.6% 25.6%
================================================================================
- --------------------------------------------------------------------------------
52
- --------------------------------------------------------------------------------
The Corporation's effective income tax rate was reduced in 1991
principally as a result of the reversal of deferred taxes associated with long-
term contracts, previously provided at 46% or 40%, such rates being higher
than the reduced statutory rates in effect since 1988.
- --------------------------------------------------------------------------------
The componenets of the provision for
deferred income taxes for the years
ended December 31, are as follows Liability Deferred Deferred
(add 000): Method Method Method
- --------------------------------------------------------------------------------
1993 1992 1991
Deferral of profits on long-term
contracts $42,296 $ (1,660) $(312,860)
Tax depreciation and amortization 1,948 (9,230) (21,690)
Employee benefits (65,513) 8,280 30,530
Financial reserves 47,084 13,170 (24,370)
Other items (12,395) 1,280 1,210
- --------------------------------------------------------------------------------
$15,420 $11,840 $(327,180)
================================================================================
- --------------------------------------------------------------------------------
Deferred federal and state tax provisions include the tax effects of
financial reserves in 1992 for the ATARS reconnaissance system and reversals
for the ADATS air defense system, International Light Metals and Commercial
Titan; and in 1991 for International Light Metals and reversals for ADATS and
Commercial Titan.
Deferred income taxes on the consolidated balance sheet reflect the net tax
effects of temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for income tax
purposes. The Corporation does not believe a valuation allowance is required.
The primary components of the Corporation's deferred tax assets and
liabilities at December 31, 1993, were as follows:
- --------------------------------------------------------------------------------
Deferred Assets (Liabilities)
(add 000)
Deferral of profits on long-term contracts $201,760
Property, plant and equipment
and intangible assets (287,228)
Employee benefits 330,226
Financial reserves 122,457
Other items 77,546
- --------------------------------------------------------------------------------
$444,761
================================================================================
- --------------------------------------------------------------------------------
Profits on long-term contracts are reported on the completed contract
method for contracts entered into prior to March 1, 1986, and on the
percentage-of-completion capitalized cost method for contracts entered into
after February 28, 1986. The amounts also include the effect of the tax
deduction of certain costs in contracts-in-progress inventories.
Deferred income taxes relating to contracts are classified as current if
the related contract is expected to be completed within the following year;
otherwise, they are classified as noncurrent.
Income tax payments were $260,900,000 in 1993, $183,000,000 in 1992 and
$376,500,000 in 1991.
53
Note R:
Industry Segments (millions)
- -----------------------------------------------------------------------------------------------------------------------------------
Depreciation
Assets Employed Property Additions Depletion, Amortization
- -----------------------------------------------------------------------------------------------------------------------------------
1993 1992 1991 1993 1992 1991 1993 1992 1991
Electronics $2,948.7 $1,008.1 $1,103.1 $ 65.6 $ 61.0 $ 68.3 $146.4 $ 81.7 $ 79.0
Space 1,597.6 832.0 1,069.0 64.8 41.7 33.8 85.4 43.3 42.5
Information 1,161.9 270.6 306.9 22.9 18.9 47.4 51.6 42.3 48.5
Services 218.3 32.3 26.8 2.0 .8 1.8 3.2 .6 .5
Materials 463.7 418.7 393.1 54.4 49.5 46.1 34.4 39.8 39.7
Energy and Other 299.4 198.3 240.8 13.6 9.3 19.9 27.9 12.9 9.0
- -----------------------------------------------------------------------------------------------------------------------------------
Total operating segments 6,689.6 2,760.0 3,139.7 223.3 181.2 217.3 348.9 220.6 219.2
Corporate 1,025.8 713.8 660.0 .1 .3 .8 1.1 5.5 5.9
Investments 29.5 125.8 108.3
- -----------------------------------------------------------------------------------------------------------------------------------
Total $7,744.9 $3,599.6 $3,908.0 $223.4 $181.5 $218.1 $350.0 $226.1 $225.1
===================================================================================================================================
- -----------------------------------------------------------------------------------------------------------------------------------
Description of Industry Segments The Corporation operates in the following
principal business segments:
Electronics Group is engaged in the design, development, engineering and
production of high-performance electronic systems for undersea, shipboard, land-
based and airborne applications. Major product lines include advanced technology
missiles, night navigation and targeting systems for aircraft; submarine and
surface ship combat systems; airborne, ship- and land-based radar; control
systems; ordnance; and aircraft component manufacturing and assembly.
Space Group is engaged in the design, development, engineering and production of
civil and military space launch vehicles, satellites, spacecraft and space- and
ground-based strategic systems; surface- and space-based information and
communications systems; and the Space Shuttle External Tank and associated
electronics and instrumentation.
Information Group is engaged in the design, development, integration and
operation of information systems, including simulation and automated test
systems and image processing, for government and commercial applications.
Services Group provides technical and management services, including
engineering, operation and maintenance of radar, telemetry communications and
instrumentation systems, training and manufacturing assembly-for government and
industry.
Materials Group comprises aggregates operations principally engaged in producing
and selling crushed stone, sand and gravel, primarily for highways and general
construction, and magnesia specialties operations, which produce and sell
refractory materials and other magnesia products used in steel production,
chemical processing purification and other industrial applications.
Energy and Other operations consist of the Corporation's activities associated
with the U.S. Department of Energy research, fabrication, assembly and
technology transfer operations; real estate subsidiaries in Florida and
Maryland; research laboratories; International Light Metals from December 9,
1991, until August 31, 1992, when this business ceased operations; and other
miscellaneous activities.
Corporate assets consist principally of cash and cash equivalents, deferred
tax assets and general corporate properties and, in 1992 and 1991, benefit plan
trusts.
The Corporation is the managing contractor for Department of Energy
facilities in Tennessee, Kentucky, Ohio, Florida, New Mexico, California and New
York. The contractual arrangements provide for the Corporation to be reimbursed
for the cost of operations and receive a fee for performing management services.
The Corporation reflects only the management fee in its sales and earnings for
these government-owned facilities. In addition, applicable employee benefit
plans are separate from the Corporation's.
Sales made directly or under subcontract to the U.S. Government amount to
approximately $3.55 billion in 1993, $1.75 billion in 1992 and $1.89 billion in
1991 for Electronics; $3.20 billion in 1993, $3.04 billion in 1992 and $3.09
billion in 1991 for Space; $1.08 billion in 1993, $.36 billion in 1992 and $.39
billion in 1991 for Information; and $341 million in 1993, $65 million in 1992
and $42 million in 1991 for Services.
Goodwill and intangible amortization in 1993 was $35.3 million for
Electronics, $19.3 million for Space, $19.9 million for Information, $3.7
million for Services and $2.5 million for Materials.
See page 61 of the Analysis of Financial Condition and Operating Results for
sales and operating profit data for each reportable segment.
54
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Shareowners
Martin Marietta Corporation:
- --------------------------------------------------------------------------------
We have audited the accompanying balance sheet of Martin Marietta Corporation
and consolidated subsidiaries as of December 31, 1993 and 1992, and the related
statements of earnings, shareowners' equity and cash flows for each of the three
years in the period ended December 31, 1993. These financial statements are the
responsibility of the Corporation's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Martin Marietta
Corporation and consolidated subsidiaries at December 31, 1993 and 1992, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1993, in conformity with generally
accepted accounting principles.
As discussed in Note M and Note Q to the consolidated financial statements,
in 1993 the Corporation changed its method of accounting for post-retirement and
post-employment benefits and income taxes.
/s/ Ernst & Young
Washington, D.C.
January 21, 1994
STATEMENT OF FINANCIAL RESPONSIBILITY
Shareowners
Martin Marietta Corporation:
- --------------------------------------------------------------------------------
The management of Martin Marietta Corporation is responsible for the
consolidated financial statements and all related financial information
contained in this report. The financial statements, which include amounts based
on estimates and judgments, have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis.
The Corporation maintains a system of internal accounting controls designed
and intended to provide reasonable assurance that assets are safeguarded, that
transactions are executed and recorded in accordance with management's
authorization and that accountability for assets is maintained. An environment
that establishes an appropriate level of control-consciousness is maintained and
monitored and includes examinations by an internal audit staff and by the
independent auditors in connection with their annual audit.
The Audit and Ethics Committee of the Board of Directors, which consists of
eight outside directors, meets periodically and, when appropriate, separately
withthe independent auditors, management and the internal auditors to review the
activities of each.
The financial statements have been audited by Ernst & Young, independent
auditors, whose report appears on this page.
/s/ Marcus C. Bennett
Marcus C. Bennett
Vice President and Chief Financial Officer
55
ANALYSIS OF FINANCIAL CONDITION AND OPERATING RESULTS
Martin Marietta continued in excellent overall financial condition during 1993
and maintains adequate capital resources to operate, compete and grow in an
increasingly challenging and competitive marketplace.
Financial results for 1993, which include the aerospace businesses of GE
that were combined with Martin Marietta on April 2, 1993, produced earnings from
operations of $788 million-a 44% increase over 1992-on sales of $9.4 billion and
a year-end backlog of undelivered orders of $16.7 billion.
The Corporation's debt-to-capitalization ratio at December 31, 1993, was
39%, after absorbing a $1.4-billion increase in long-term debt associated with
the GE Transaction and a $429-million after-tax charge resulting from the
effects of certain changes in accounting adopted in 1993.
In July, the Board of Directors approved a two-for-one split of the
Corporation's common stock (in the form of a stock dividend) and increased the
dividend rate on common stock by 12 cents, or 7.1%, on a pre-split, annualized
basis. Both actions were effective in the third quarter of 1993.
The Corporation's 1993 after-tax earnings increased 30% from 1992, excluding
changes in accounting. Fully diluted earnings per share for the year, before the
effect of the accounting changes, were $3.80, up from the split-adjusted $3.60
reported for 1992. These increases in earnings and earnings per share were
achieved despite a significant increase in the Corporation's effective income
tax rate in 1993. The average number of shares also increased significantly in
1993, reflecting the effect of the convertible preferred stock issued in
connection with the GE Transaction. Martin Marietta's return on average
shareowners' equity for 1993 was 19%. At year-end, total shareowners' equity
reached a record $2.9 billion.
Conforming with the Corporation's acquisition strategy in aerospace and
defense-related businesses, the Corporation signed an agreement in December 1993
to purchase the Space Systems Division of General Dynamics Corporation. This
would allow the Corporation to enter the intermediate-lift space launch vehicle
market with the Atlas series of launch vehicles. The acquisition is subject to
certain regulatory approvals and the satisfaction of certain other conditions,
and is expected to close during the first half of 1994. It will be accounted for
under the purchase method of accounting. Operating results will be included with
those of the Corporation effective upon the closing date.
In December 1993, Martin Marietta Materials, Inc., a wholly owned subsidiary
of Martin Marietta Technologies, Inc., filed a registration statement with the
Securities and Exchange Commission for an underwritten public offering of Martin
Marietta Materials' common stock. The proposed offering will consist of
7,650,000 shares plus a 30-day over-allotment option for the underwriters to
purchase up to
56
1,147,500 additional shares. The initial public offering by Martin Marietta
Materials is dependent upon market conditions, but is expected in February 1994,
after which the Corporation will own approximately 83% of the outstanding stock
of the company, or 81% if the overallotment is exercised.
Business Environment
Martin Marietta's major business units principally serve government and
commercial customers in the aerospace and defense markets. These business units
also serve military and civil government customers as well as commercial
customers in the information, communications, construction aggregates and
specialty chemical businesses. Like many other businesses, Martin Marietta's
markets are increasingly affected by global and regional economic and political
cycles. In addition to these general marketplace conditions, the Corporation's
major business units also are affected by the unique characteristics of the
defense and aerospace industries.
The Corporation's defense and aerospace businesses are intensely competitive
and are subject to uncertainties, including those resulting from changes in
federal budget priorities, particularly the size and scope of the national
defense and space budgets. However, Martin Marietta's broadly diversified
programs and emphasis on high-priority programs and systems lessens somewhat the
Corporation's exposure to continued defense- and space-related spending
reductions. Defense budgets have been declining since the mid- to late-1980s,
and this general market decline and concomitant increased competition within the
defense and aerospace industries are expected to continue over the next few
years. Continued uncertainty exists over the size and scope of future defense
and space budgets and the resulting impact on specific programs. Consequently,
some of the Corporation's products and programs have been subject to stretch-
out, curtailment or termination. Additionally, since details of the fiscal year
1995 defense and space budgets are not known, ultimate spending reductions and
funding limitations could result in cancellations, deferments or delays in
existing or emerging programs.
Aerospace and defense businesses also have been adversely affected by
Department of Defense procurement methods over the past several years. In
addition to increased requirements for fixed-price development contracting,
defense contractors have been required to make greater investments in certain
new programs, the recoverability of which is sometimes dependent upon future
orders or the exercise of negotiated production options. As a result, the
Corporation's financial statements reflect an increased demand on working
capital. However, the Department of Defense recently reversed these policies,
and new contracts are beginning to reflect these changes. Changes in federal
income tax laws have also increased tax rates and accelerated cash payments for
taxes relating to long-term contracts. It should be noted that, recently,
contract progress payment rates have been decreased.
In September 1993, the Corporation announced a facilities consolidation plan
that is expected to reduce operating costs by $1.5 billion over the next five
years. Management believes the restructuring plan will enhance the Corporation's
ability to remain competitive and better serve its customers. Under the plan,
approximately five million square feet of capacity will be eliminated at
facilities in various locations. The consolidation plan, which focuses on
facilities, is concurrent with ongoing actions addressing employment levels. The
estimated cost of restructuring and integrating the former GE Aerospace
operations into the Corporation was recognized as part of the purchase price
allocation (see Business Combination with GE Aerospace on page 58). The $30-
million estimated cost of the Corporation's restructure plans that does not
relate to the assets acquired in the GE Transaction was charged to operating
earnings in 1993.
Certain of Martin Marietta's current U.S. Air Force launch vehicle contracts
contain mission success incentive provisions that could have a significant
effect on the future profitability of these programs. The provisions enable the
Corporation to earn significant fees for successful flights, but also
significantly reduce fee availability in the event of unsuccessful missions.
Additionally, the terms of certain of the Corporation's Department of Energy
contracts provide the opportunity to increase significantly the fee earned by
the Corporation based upon its performance and, at the same time, provide for
the Corporation's assumption of a significantly higher level of accountability
for its activities in managing Department of Energy facilities.
As a U.S. Government contractor, Martin Marietta's government contracts and
operations are subject to government investigations. The government may
investigate and make inquiries of the Corporation's business practices and
conduct audits of contract performance and cost classification. These
investigations may lead to claims which have been or may be asserted against the
Corporation. Under U.S. Government procurement regulations and practice, an
indictment of a government contractor could result in the contractor being
fined, suspended for a period of time from eligibility for bidding on, or for
award of, new government contracts; a conviction could result in debarment for a
specified term from government contracts. Although the outcome of such
investigations and inquiries cannot be predicted, in the opinion of management
there are no claims, audits or investigations pending against the Corporation
that are likely to have a material adverse effect on either the Corporation's
business or its consolidated financial position or results of operations.
Martin Marietta's expanding participation in civil and commercial markets is
affected in part by slow economic growth, as well as pressures to reduce public
sector spending levels. The Corporation's construction aggregates business is
sensitive to regional economic conditions and to cyclical swings in construction
spending and changes in levels of federal and state governments' infrastructure-
related spending. The Corporation's aggregates markets are concentrated
princi-
57
pally in the Southeast and Midwest and therefore are dependent upon the
economies of those regions. During 1993, those regions experienced economic
growth rates above the national average; however, there can be no assurance that
this trend will continue. Although shipments in the Midwest region were
adversely affected during the year by severe rains and flooding, the Corporation
anticipates that shipments will increase with the rebuilding of flood-damaged
areas. The Corporation continues to take advantage of strategic acquisition
opportunities that may arise in the construction aggregates industry.
The Corporation is involved in environmental clean-up matters, including
matters at various sites where it has been designated a Potentially Responsible
Party (PRP) by the U.S. Environmental Protection Agency. In the event the
Corporation is ultimately found to have liability at those sites where it has
been designated a PRP, while the Corporation is jointly and severally liable
with the other PRP's and, therefore, strictly liable for the entire cost of
remediation, it anticipates that the actual burden for the costs of remediation
will be shared with other PRPs. Additionally, the Corporation's insurers that
provided liability coverage for environmental matters during relevant periods
are participating in the Corporation's efforts under a reservation of rights.
The nature of these environmental matters makes it difficult to estimate the
timing and amount of any future costs that may be necessary for remedial
measures.
The Corporation currently is unable to predict the outcome of these matters,
inasmuch as the actual costs of remedial actions have not been determined and
the allocation of liabilities among parties that ultimately may be found liable
remains uncertain. The Corporation records appropriate financial statement
accruals for environmental issues in the period in which liability is
established and the amounts can reasonably be estimated. The Corporation's
accrued liability was approximately $50 million at December 31, 1993. Management
believes, however, that it is unlikely that any additional liability it may
incur for known environmental issues would have a material adverse effect on its
consolidated financial position or results of operations.
The consolidated financial statements and related information on pages 40
through 54 should be read in conjunction with the following review.
Business Combination With GE Aerospace
On November 22, 1992, Martin Marietta Corporation entered into a Transaction
Agreement with General Electric Company (GE) to combine the aerospace and
certain other businesses of GE (collectively the "GE Aerospace businesses") with
the businesses of Martin Marietta Corporation in the form of affiliated
corporations. The transaction (the "GE Transaction") was consummated on April 2,
1993.
The exchange consideration for the GE Transaction consisted of cash,
preferred stock, retention by GE of certain accounts receivable and the
assumption of payment obligations related to certain GE indebtedness. The GE
Transaction has been accounted for under the purchase method of accounting,
wherein approximately $1.9 billion in goodwill was recognized by the Corporation
after recording approximately $700 million in other intangibles (representing
the estimated fair-market value of certain assets) and other purchase
adjustments necessary to allocate the purchase price to the value of assets
acquired and liabilities assumed. Goodwill is being amortized over a 40-year
period, and the other intangibles are being amortized over a 15-year period.
Liquidity and Capital
At December 31, 1993, net working capital stood at $638 million and shareowners'
equity had increased to a record $2.9 billion, reflecting the issuance of $1
billion in preferred stock in connection with the GE Transaction and absorption
of a $429-million after-tax charge during the year from the changes in
accounting for post-retirement and post-employment benefits. In April 1993, the
Corporation assumed approximately $750 million of payment obligations (including
approximately $16 million of accrued interest) as part of the GE Transaction and
issued $700 million of long-term debt. Long-term debt was $1.8 billion at year-
end, and the ratio of long-term debt to total capitalization was 39% at December
31, 1993, compared with 20% a year earlier. The 39% debt-to-capitalization ratio
at year-end was down from the 44% ratio that reflected the consummation of the
GE Transaction.
Net cash flow provided by operating activities was $640 million in 1993,
$678 million in 1992 and $179 million in 1991. The 1993 cash flow was
principally from earnings before deducting non-cash charges for depreciation,
amortization and accounting changes, net of income tax payments of $261 million
made during the year. The cash flow from operating activities in 1992 was
principally from earnings, depreciation and decreases in receivables and
inventories, net of changes in Commercial Titan deferred revenue and $183
million in income tax payments made during the year. The 1991 cash flow was
principally from earnings and depreciation, net of increased demand for working
capital and income tax payments of $377 million.
Net capital expenditures were $215 million in 1993, $171 million in 1992 and
$212 million in 1991. In December 1993, the Board of Directors approved new
capital authorizations of $221 million.
Net cash consideration of $883 million was paid to GE in connection with the
GE Transaction. Cash flow of $109 million was generated primarily from the sale
of the majority of the Corporation's portfolio of marketable investment
securities. In December 1993, the Corporation defeased in-substance $103 million
of payment obligations assumed in connection with the GE Transaction.
Capital Structure and Resources
The GE Transaction had a significant impact on the capital structure and
resources of the Corporation in 1993. In addition to the issuance of $1 billion
of convertible preferred stock, the Corporation added $1.4 billion of long-term
debt and replaced its previous credit facility with two new facilities.
58
Martin Marietta's internal cash flows and access to capital markets are
expected to continue to be sufficient to provide the capital resources necessary
to support operating needs and cover debt service requirements. The
Corporation's senior debt (which is issued through Martin Marietta Technologies,
Inc. and guaranteed by Martin Marietta Corporation) is rated A by Standard &
Poor's, A2 by Moody's and A by Duff & Phelps. Martin Marietta's commercial paper
is rated A-1 by Standard & Poor's, P-2 by Moody's and Duff-1 by Duff & Phelps.
Upon consummation of the GE Transaction, Martin Marietta Technologies, Inc.,
a wholly owned subsidiary, and Martin Marietta Corporation replaced a previous
credit facility with a $900-million, 364-day revolving credit facility expiring
on March 30, 1994, and a three-year revolving credit facility in the amount of
$1.3 billion expiring on March 31, 1996. These borrowing facilities may be used
for general corporate purposes. The Corporation borrowed $500 million under the
three-year credit facility to partially finance the GE Transaction at closing.
The $500 million was subsequently repaid and has been replaced by long-term
debt securities issued to the public in April 1993. Effective September 1, 1993,
Martin Marietta Technologies, Inc., permanently reduced the amounts committed
under the facilities. The $900-million credit facility was reduced to $500
million, and the $1.3-billion facility was reduced to $800 million. At December
31, 1993, no amounts were outstanding under either credit facility. Martin
Marietta Technologies has a shelf registration on file with the Securities and
Exchange Commission for offering up to $300 million of debt securities, which
may be issued from time to time. Such debt securities would be obligations of
Martin Marietta Technologies, Inc., that would be fully and unconditionally
guaranteed by Martin Marietta Corporation. The Corporation's ability to issue
such debt securities at any time is dependent, among other things, upon market
conditions.
Under a 1993 authorization from the Board of Directors, the Corporation may
repurchase approximately 32.4 million shares, on a post-split basis, for use in
connection with the Corporation's Amended Omnibus Securities Award Plan,
Performance Sharing Plan and for general corporate purposes. No shares were
repurchased by the Corporation during 1993.
[GRAPH APPEARS HERE]
Backlog
The Corporation's firm backlog of undelivered orders was $16.7 billion at
December 31, 1993, compared with $8.9 billion at December 31, 1992, and $11.0
billion at December 31, 1991. Approximately 38% of the undelivered orders at
December 31, 1993, are expected to be filled within one year.
Reported backlog at December 31, 1993, does not include approximately $3.7
billion of negotiated and priced, but unexercised, production options for
certain of the Corporation's major aerostructure and satellite contracts and for
various electronics, space, information and services programs. The exercise of
these options is at the discretion of the customer and, in the case of U.S.
Government contracts, dependent on future government funding.
Reported backlog also does not include approximately $12 billion in
equivalent sales under the Corporation's Department of Energy management and
operations contracts, since the management fee earned is the only item reflected
in the consolidated financial statements. The underlying incurred costs
associated with operating these Department of Energy facilities are not
reflected in any way in the Corporation's reported sales. Martin Marietta has
contracts to manage Department of Energy facilities in Tennessee, Kentucky,
Ohio, Florida, New Mexico, California and New York. Management fees earned with
respect to Department of Energy management and operations contracts are
reflected with the Corporation's "Energy and Other" activities for segment
reporting purposes.
New Accounting Standards
The Corporation adopted Statement of Financial Accounting Standards No. 106,
"Employers Accounting for Post-retirement Benefits Other Than Pensions" (FAS
106), effective January 1, 1993. FAS 106 requires that the cost of certain post-
retirement benefits be recognized under an accrual method of accounting instead
of the prior practice of expensing the cost of such benefits as paid. The
Corporation elected to expense the liability accumulated through 1992 due to the
change in accounting method. This one-time transition obligation of $656 million
resulted in an after-tax charge to net income of $412 million in the first
quarter of 1993.
The Corporation elected to adopt Statement of Financial Accounting Standards
No. 112, "Employers Accounting for Post-employment Benefits" (FAS 112). FAS 112
mandates that the cost of certain post-employment benefits be recognized under
an accrual method of accounting instead of the current practice of expensing the
cost of such benefits as paid. The effect of this change in accounting method
59
resulted in a one-time, after-tax charge to net income of $17 million.
Effective January 1, 1993, the Corporation adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" (FAS 109). The
impact of adopting the standard on the Corporation's earnings and financial
position was not material. Prior years' financial statements have not been
restated to apply the provisions
of FAS 109. Income taxes for 1992 and 1991 are based on pre-tax financial
statement income in accordance with Accounting Principles Board Opinion No. 11.
Results of Operations
Net sales were approximately $9.4 billion in 1993 and $6.0 billion in 1992. Net
sales increased $3.48 billion, or 58%, in 1993 and declined $121 million, or 2%,
in 1992. Net sales for 1993 include sales of the former GE Aerospace businesses
that were combined with Martin Marietta Corporation in April 1993.
The Electronics Group had 1993 sales of $3.9 billion, which were $2.0
billion, or 106%, higher than in 1992. Sales in 1992 were $235 million, or 11%
lower, than in the previous year. The 1993 gains reflect the performance of
Ocean, Radar & Sensor Systems, Government Electronic Systems and Defense
Systems. The sales performance of those units was reduced by sales declines from
Postal Systems and the Group's LANTIRN targeting and navigation system. In 1992,
sales gains from Postal Systems and Aero & Naval Systems were offset by a 20%
decline in Electronics & Missiles sales. This decline was principally due to a
decrease in LANTIRN sales.
The Space Group, with 1993 sales of $3.4 billion, had a sales increase of
$387 million, or 13%, in 1993, after a decline of $49 million, or 2%, in 1992.
The Air Force Titan IV program, which had a sales increase of 7% in 1993 after
declining 6% in 1992, was the principal contributor to the Group's total sales
and earnings in both years. The $11.3-billion Titan IV fixed-price-incentive
program is the Corpo-ration's largest and contributed 1993 sales of $1.55
billion. In 1993, sales from the Group's Astro Space unit more than offset
anticipated revenue declines on the External Tank program, the completed
Commercial Titan program and several other space launch programs.
[GRAPH APPEARS HERE]
[GRAPH APPEARS HERE]
The Information Group had 1993 sales of $1.4 billion, which were $775
million, or 126%, higher than in 1992. Sales in 1992 were $38 million, or 7%,
greater than in 1991. Sales from the Group's Management & Data Systems and
Automated Systems units were the principal reason for the sales gains in 1993;
the sales increase in 1992 was principally from the Information Systems unit.
Services Group sales increased $378 million in 1993 and $25 million in 1992.
The large increase in 1993 is primarily attributable to sales from Martin
Marietta Services, Inc., included in the Group's results from April 2, 1993.
Materials Group sales increased by 11% in 1993 and 10% in 1992, mainly from
sales of construction aggregates, which grew 16% in 1993 and 12% in 1992.
Aggregates' sales performance reflects improvements in construction markets and
increased production capacity resulting from acquisitions and new production
facilities.
Electronics Group operating profits increased 126% in 1993 and decreased 20%
in 1992. The gains in 1993 reflect principally the performance of Ocean, Radar &
Sensor Systems, Government Electronic Systems and Defense Systems. The decline
in 1992 is due to reduced LANTIRN program activities and to recognition of
estimated losses and program investments in Postal Systems that offset improved
Aero & Naval Systems earnings.
Operating profits for the Space Group decreased 18% in 1993 and increased 7%
in 1992. In 1993, lower Titan IV and External Tank program profits were
partially offset by Astro Space earnings. During 1993, Martin Marietta's Space
Group suffered the failure of three satellites and a Titan IV launch vehicle.
Following a Martin Marietta-sponsored investigation, the Space Group established
a formal Mission Assurance program. Through this program, the Space Group is
strengthening its systems engineering, establishing formal Mission Success
offices within all of its operating units, expanding its product integrity
engineering system and increasing employee training. The failures did not result
in a material adverse impact on the Corporation's financial position or results
of operations as of and for the year ended December 31, 1993. This Group's gains
in 1992 reflect a 25% growth in profits on the Air Force Titan IV program and
include recognition of mission success incentives on that program.
60
- --------------------------------------------------------------------------------
Net Sales and Operating Profit
By Industry Segments
(millions)
Net Sales Operating Profit
- -------------------------------------------------------------------------------------------------------
1993 1992 1991 1993 1992 1991
Electronics $3,930.5 $1,906.0 $2,140.8 $333.5 $147.3 $183.8
Space 3,441.7 3,054.3 3,103.6 249.3 304.1 285.0
Information 1,391.6 617.0 579.2 127.1 34.0 43.7
Services 458.2 80.3 55.5 28.5 2.2 (2.1)
Materials 452.9 408.3 371.7 77.3 58.6 52.7
Energy and Other 117.4 121.5 76.9 42.6 45.0 33.3
- -------------------------------------------------------------------------------------------------------
9,792.3 6,187.4 6,327.7 858.3 591.2 596.4
Intersegment sales (356.6) (233.1) (252.3)
- ------------------------------------------------------------------------
Total operating segments $9,435.7 $5,954.3 $6,075.4
========================================================================
Corporate (31.3) (25.8) (34.2)
Investments 8.5 4.9 (83.7)
Interest expense (110.2) (57.9) (57.7)
- -------------------------------------------------------------------------------------------------------
Earnings before Taxes on Income
and Cumulative Effect of Accounting
Changes $ 725.3 $512.4 $420.8
========================================================================================================
Information Group operating profits increased $93 million, or 274%, in 1993
after declining by $10 million in 1992. Earnings from Management & Data Systems
and Automated Systems were the primary reasons for the 1993 gains. Services
Group operating profits rose $26 million in 1993 and $4 million in 1992.
Materials Group operating profits increased 32% in 1993 and 11% in 1992,
principally due to its aggregates operations. Aggregates profits rose 50% in
1993 and 20% in 1992. These gains were due to improvements in construction
markets and increased output from acquisitions and new production facilities.
Other income and expenses, net (see page 40) increased $26 million in 1993
and $80 million in 1992. The increase in 1993 is principally attributable to
higher royalty income earned in 1993 versus 1992. In 1991, other income and
expenses included a $70-million pre-tax charge ($39 million after-tax, or 39
cents per share) in connection with restructuring the Corporation's
International Light Metals operation and $17 million of equity losses
representing the Corporation's share of losses incurred by that operation,
which is now closed.
Interest expense on debt rose $52 million, or 90%, in 1993, after remaining
essentially flat between 1992 and 1991. The increase in 1993 was due to the
$1.4-billion increase in long-term debt during the second quarter of 1993. The
Corporation issued $700 million in long-term debt in April 1993, and assumed
$750 million of GE payment obligations (including approximately $16 million of
accrued interest) in connection with the GE Transaction. In 1992, lower interest
expense on the Corporation's Adjustable Rate Note issue, which was partially
redeemed on May 1, 1992, was offset by the full-year interest on the $200
million of notes issued by the Corporation in March 1991.
The effective income tax rate for 1993 was 37.9%, compared with 32.6% in
1992 and 25.6% in 1991. On August 10, 1993, the Omnibus Budget Reconciliation
Act of 1993 increased the corporate federal income tax rate from 34% to 35%,
effective January 1, 1993; its impact was reflected in the Corporation's third
quarter results. The Corporation's effective income tax rate for 1993 is higher
than the current corporate federal income tax rate of 35% due to differences
between book and tax accounting arising from the amortization of goodwill
associated with the GE Transaction and state income taxes. The effective income
tax rates varied from the statutory rate in 1991 principally as a result of the
reversal of deferred taxes associated with long-term contracts previously
provided at rates higher than statutory rates in effect since 1988.
The sum of per-share earnings, assuming full dilution, by quarter does not
equal earnings per share for the year ended December 31, 1993, because the
average number of shares outstanding increased during the second quarter of 1993
as a result of the assumed conversion of the convertible Series A preferred
stock.
The sum of per-share earnings by quarter does not equal earnings per share
for the year ended December 31, 1992, due to the effect of share repurchases
during 1992.
The impact of inflation has become less significant with lower inflation
rates in recent years. When the Corporation incurs higher costs to replace
productive facilities, increased depreciation generally is countered by
increased productivity, increased selling prices and other offsetting factors.
61
- ------------------------------------------------------------------------------------------------------------------------
(millions, except per share)
Earnings Earnings before Cumulative Effect
Quarter Net Sales from Operations of Accounting Changes Net Earnings (Loss)
- ------------------------------------------------------------------------------------------------------------------------
1993 1992 1993 1992 1993 1992 1993+ 1992
First $1,168.6 $1,371.5 $ 124.6 $ 120.9 $ 76.4 $ 74.6 $ (353.0) $ 74.6
Second 2,613.3 1,584.4 222.1 157.3 124.1 99.0 124.1 99.0
Third 2,466.1 1,548.8 223.6 147.1 131.1 96.1 131.1 96.1
Fourth 3,187.7 1,449.6 218.2 123.9 118.7 75.7 118.7 75.7
- ------------------------------------------------------------------------------------------------------------------------
Year $9,435.7 $5,954.3 $ 788.5 $ 549.2 $ 450.3 $ 345.4 $ 20.9 $ 345.4
========================================================================================================================
Earnings Per Common Share Common Dividends Paid and Stock Prices
before Cumulative Effect of Accounting Market Price
Quarter Changes, Assuming Full Dilution Dividends Paid High Low High Low
- ----------------------------------------------------------------------------------------------------------------------
1993+ 1992 1993 1992 1993 1992
First $ .81 $ .76 $ .21 $ .1875 $37.44 $32.00 $29.75 $25.00
Second .99 1.03 .21 .1875 39.94 35.81 27.44 24.94
Third 1.04 1.02 .225 .21 44.875 39.06 29.31 25.25
Fourth .94 .81 .225 .21 46.625 40.375 35.25 27.75
- ----------------------------------------------------------------------------------------------------------------------
Year $ 3.80* $ 3.60** $ 0.87 $ .795
===========================================================================
+ First quarter 1993 earnings have been restated from the amounts originally
reported to reflect the Corporation's adoption in 1993 of Statement of
Financial Accounting Standards No. 112, "Employers Accounting for Post-
employment Benefits." The after-tax charge for the change in accounting
for post-employment benefits was $17.4 million or 18 cents per common share.
The loss per common share from the changes in accounting for post-
retirement benefits and post-employment benefits was $4.53 in the first
quarter of 1993 and $4.51 for the full year.
* The sum of per-share earnings by quarter does not equal earnings per share for
the year because the average number of shares outstanding increased
during the second quarter of 1993 as a result of the assumed conversion of the
convertible Series A preferred stock.
** The sum of per-share earnings by quarter does not equal earnings per share
for the year due to the effect of share repurchases.
- --------------------------------------------------------------------------------
62
Five Year Summary
- --------------------------------------------------------------------------------
(add 000, except per share) 1993 1992 1991 1990 1989
Operating Results
Net sales $9,435,689 $5,954,292 $6,075,415 $6,125,939 $5,796,182
Cost of sales, other costs and expenses 8,647,224 5,405,123 5,537,926 5,683,462 5,331,544
- ----------------------------------------------------------------------------------------------------------------
Earnings from Operations 788,465 549,169 537,489 442,477 464,638
Other income and expenses, net 46,997 21,144 (58,980) 34,504 7,789
- ----------------------------------------------------------------------------------------------------------------
835,462 570,313 478,509 476,981 472,427
Interest expense on debt 110,173 57,890 57,660 41,790 43,084
- ----------------------------------------------------------------------------------------------------------------
Earnings before taxes on income and
cumulative effect of accounting changes 725,289 512,423 420,849 435,191 429,343
Taxes on income 275,000 167,000 107,700 107,600 122,400
- ----------------------------------------------------------------------------------------------------------------
Earnings before Cumulative Effect
of Accounting Changes 450,289 345,423 313,149 327,591 306,943
Cumulative effect of changes in accounting
for post-retirement benefits other than pen-
sions and for post-employment benefits (429,432) - - - -
- ----------------------------------------------------------------------------------------------------------------
Net Earnings $ 20,857 $ 345,423 $ 313,149 $ 327,591 $ 306,943
================================================================================================================
Per Common Share
Net earnings (loss)
Assuming no dilution:
Before cumulative effect of accounting changes $ 4.25 $ 3.60 $ 3.15 $ 3.26 $ 2.91
Cumulative effect of accounting changes (4.51) - - - -
- ----------------------------------------------------------------------------------------------------------------
$ (.26) $ 3.60 $ 3.15 $ 3.26 $ 2.91
================================================================================================================
Assuming full dilution:
Before cumulative effect of accounting changes $ 3.80 $ 3.60 $ 3.15 $ 3.26 $ 2.91
Cumulative effect of accounting changes * - - - -
- ----------------------------------------------------------------------------------------------------------------
* $ 3.60 $ 3.15 $ 3.26 $ 2.91
================================================================================================================
Cash Dividends $ 0.87 $ .795 $ 0.75 $ .69375 $ .6125
*Anti-dilutive
Condensed Balance Sheet Data
Current assets $2,448,240 $1,434,341 $1,627,649 $1,400,617 $1,440,605
Other noncurrent assets 707,772 800,445 847,418 760,441 663,150
Noncurrent deferred income taxes 206,119 - - - -
Property, plant and equipment, net 1,692,753 1,257,139 1,315,472 1,340,688 1,300,939
Cost in excess of net assets acquired 1,914,894 26,224 23,099 24,061 20,168
Other intangibles 775,113 81,456 94,394 84,722 80,517
- ----------------------------------------------------------------------------------------------------------------
Total $7,744,891 $3,599,605 $3,908,032 $3,610,529 $3,505,379
================================================================================================================
Current liabilities-other $1,491,591 $ 582,422 $ 884,240 $ 988,456 $ 922,148
Current maturities of long-term debt 318,525 3,814 74,908 5,191 4,179
Long-term debt 1,479,571 474,726 595,942 463,288 477,504
Post-retirement benefits 740,630 101,978 99,281 55,253 -
Other noncurrent liabilities 838,222 194,195 202,300 299,820 232,033
Noncurrent deferred income taxes - 297,254 247,458 257,558 514,555
Shareowners' equity 2,876,352 1,945,216 1,803,903 1,540,963 1,354,960
- ----------------------------------------------------------------------------------------------------------------
Total $7,744,891 $3,599,605 $3,908,032 $3,610,529 $3,505,379
================================================================================================================
- ----------------------------------------------------------------------------------------------------------------
Martin Marietta Corporation
and Consolidated Subsidiaries
63
Board of Directors
- --------------------------------------------------------------------------------
Norman R. Augustine
Chairman and Chief Executive Officer,
Martin Marietta Corporation
Lamar Alexander
Baker, Worthington, Crossley, Stansberry & Woolf
(attorneys)
Marcus C. Bennett
Vice President and Chief Financial Officer,
Martin Marietta Corporation
John J. Byrne
Chairman and Chief Executive Officer,
Fund American Enterprises Holdings, Inc.
(property and casualty insurance)
A. James Clark
Chairman and President, Clark Enterprises, Inc.
(multi-unit construction company)
Edwin I. Colodny
Of Counsel, Paul, Hastings, Janofsky & Walker
(attorneys)
James L. Everett, III
Retired Chairman, Philadelphia Electric Company
(public utility)
Edward L. Hennessy, Jr.
Retired Chairman, AlliedSignal, Inc.
(diversified manufacturer)
Edward E. Hood, Jr.
Retired Vice Chairman, General Electric Company
(diversified manufacturer)
Caleb B. Hurtt
Retired President and Chief Operating Officer,
Martin Marietta Corporation
Gwendolyn S. King
Senior Vice President, Philadelphia Electric Company
(public utility)
Melvin R. Laird
Senior Counselor, The Reader's Digest Association, Inc.
(publishing)
Gordon S. Macklin
Retired Chairman, Hambrecht & Quist, Inc.
(investment banking)
Eugene F. Murphy
President and Chief Executive Officer,
GE Aircraft Engines
(diversified manufacturer)
Allen E. Murray
Chairman and Chief Executive Officer,
Mobil Corporation
(petroleum, petrochemical and plastic products)
John W. Vessey, Jr.
Retired Chairman of the Joint Chiefs of Staff
A. Thomas Young
President and Chief Operating Officer,
Martin Marietta Corporation
Audit and Ethics Committee
Mr. Macklin, Chairman.
Mrs. King, Messrs. Alexander, Everett, Hood,
Laird, Murray and Vessey.
Compensation Committee
Mr. Murray, Chairman.
Messrs. Alexander, Clark, Everett, Hennessy,
Hurtt and Murphy.
Executive Committee
Mr. Augustine, Chairman.
Messrs. Clark, Colodny, Hood, Hurtt, Laird,
Macklin, Vessey and Young.
Finance Committee
Mr. Byrne, Chairman.
Mrs. King, Messrs. Clark, Colodny, Hood, Hurtt, Macklin and Murphy.
Nominating Committee
Mr. Everett, Chairman.
Messrs. Byrne, Colodny, Hennessy,
Laird and Vessey.
64
Officers
- --------------------------------------------------------------------------------
Norman R. Augustine
Chairman and Chief Executive Officer
A. Thomas Young
President and Chief Operating Officer
Marcus C. Bennett
Vice President and Chief Financial Officer
Richard G. Adamson
Vice President
Joseph D. Antinucci
Vice President
Peter A. Bracken
Vice President
Michael F. Camardo
Vice President
Thomas A. Corcoran
Vice President
James B. Feller
Vice President
Clyde C. Hopkins
Vice President
Alexander L. Horvath
Vice President
Bobby F. Leonard
Vice President
William B. Lytton
Vice President
James W. McAnally
Vice President
Frank H. Menaker, Jr.
Vice President and General Counsel
Dan A. Peterson
Vice President
Robert J. Polutchko
Vice President
Michael A. Smith
Vice President
Peter B. Teets
Vice President
Robert W. Tieken
Vice President
Stephen P. Zelnak, Jr.
Vice President
Janet L. McGregor
Treasurer
Lillian M. Trippett
Secretary
65
Martin Marietta Corporation
Stockholder Information
- --------------------------------------------------------------------------------
Notice of Proxy
A formal notice of the Annual Meeting of stockholders of the Corporation,
together with a proxy, will be mailed to each stockholder approximately four
weeks prior to the meeting. Proxies will be requested by the Board of Directors
at the meeting.
Form 10-K
The Corporation's Annual Report on Form 10-K, filed with the Securities and
Exchange Commission, is available upon written request to the Investor Relations
Office, 6801 Rockledge Drive, Bethesda, Maryland 20817.
Transfer Agent & Registrar
First Chicago Trust Company of New York
P.O. Box 2500
Jersey City, New Jersey 07303-2500
Telephone: (201)324-0137
Inquiries regarding your account records, issuance of stock certificates,
distribution of dividends and IRS Form 1099 should be directed to First Chicago
Trust Company of New York.
Dividend Reinvestment Plan
Martin Marietta's Dividend Reinvestment and Stock Purchase Plan offers
stockholders an opportunity to purchase additional shares through automatic
dividend reinvestment and/or voluntary cash investments. For more information,
contact our transfer agent, First Chicago Trust Company of New York.
Listings
Chicago Stock Exchange
New York Stock Exchange
Pacific Stock Exchange
Philadelphia Stock Exchange
Ticker Symbol: ML
Newspapers: MartM or MartMar
Independent Auditors
Ernst & Young
Executive Offices
6801 Rockledge Drive
Bethesda, Maryland 20817
Telephone: (301) 897-6000
Investor Relations
Telephone: (301) 897-6303
66
MARTIN MARIETTA CORPORATION AND CONSOLIDATED SUBSIDIARIES
Annual Report on Form 10-K for the Year Ended December 31, 1993
Appendix - Description of Graphic and Image Material
(Pursuant to Rule 304(b)(2) of Regulation S-T)
Contained Within the 1993 Annual Report to Shareowners
I. "Financial Highlights" (page 2)
A. Net Sales (Bar Graph)
($ Billions)
1. 1993 - $9.4
2. 1992 - $6.0
3. 1991 - $6.1
4. 1990 - $6.1
5. 1989 - $5.8
B. Earnings Before Cumulative Effect of Accounting
Changes (Bar Graph)
($ Millions)
1. 1993 - $450.3
2. 1992 - $345.4
3. 1991 - $313.2
4. 1990 - $327.6
5. 1989 - $306.9
C. Book Value Per Common Share at Year End (Bar Graph)
($ Dollars)
1. 1993 - $19.61*
2. 1992 - $20.59
3. 1991 - $18.21
4. 1990 - $15.77
5. 1989 - $13.33
*Fully diluted book value per share of
$22.89 is based on total shareowners' equity
and assumes conversion of preferred stock and
exercise of stock options.
II. "Analysis of Financial Condition and Operating Results"
(page 56 through page 61)
A. Sales by Customer (Pie Charts)
1. 1993 - DoD 67%
- Commercial 20%
- Other Government/Civil 7%
- NASA 6%
2. 1992 - DoD 69%
- Commercial 14%
- Other Government/Civil 8%
- NASA 9%
B. Contribution to Sales (Pie Charts)
1. 1993 - Electronics 41%
- Space 36%
- Information 13%
- Materials 5%
- Services 4%
- Energy and Other 1%
2. 1992 - Electronics 32%
- Space 51%
- Information 7%
- Materials 7%
- Services 1%
- Energy and Other 2%
C. Contribution to Operating Profit (Pie Charts)
1. 1993 - Electronics 39%
- Space 29%
- Information 15%
- Material 9%
- Services 3%
- Energy and Other 5%
2. 1992 - Electronics 25%
- Space 51%
- Information 6%
- Materials 10%
- Services less than 1%
- Energy and Other 8%