FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
QUARTERLY REPORT UNDER SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended MARCH 31, 1994 Commission File Number 1-11810
MARTIN MARIETTA CORPORATION
(Exact name of registrant as specified in its charter)
MARYLAND 52-1801151
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
6801 Rockledge Drive, Bethesda, MD 20817
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (301) 897-6000
Former Name: NONE
Former name, former address and former fiscal year,
if changes since last report.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES X NO
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding as of April 30, 1994
Common Stock, $1 par value 95,866,841 shares
1 of 21
MARTIN MARIETTA CORPORATION AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended March 31, 1994
INDEX
Page No.
Part I. Financial Information:
Item 1. Financial Statements
Consolidated Condensed Balance Sheets -
March 31, 1994 and December 31, 1993 . . . . . . . . . . . . 3
Consolidated Condensed Statements of Operations -
Three Months Ended March 31, 1994 and 1993 . . . . . . . . . 4
Consolidated Condensed Statements of Cash Flows -
Three Months Ended March 31, 1994 and 1993 . . . . . . . . . 5
Notes to Consolidated Condensed Financial Statements. . . . . 6
Item 2. Management's Discussion of Financial Condition
and Operating Results . . . . . . . . . . . . . . . . . .11
Part II. Other Information:
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . .15
Item 4. Submission of Matters to a Vote of Security Holders . . .15
Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . . .17
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
Exhibit 11. Computation of Net Earnings Per Common Share. . . . . . .19
Exhibit 12. Computation of Ratio of Earnings to Fixed Charges . . . .21
2 of 21
MARTIN MARIETTA CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
March 31, December 31,
1994 1993
------ ------
(Thousands of Dollars)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 253,893 $ 373,095
Receivables 1,509,491 1,435,515
Inventories 210,216 358,749
Current deferred income taxes 243,410 238,642
Other current assets 45,221 42,239
---------- ---------
TOTAL CURRENT ASSETS 2,262,231 2,448,240
OTHER NONCURRENT ASSETS 759,840 707,772
NONCURRENT DEFERRED INCOME TAXES 149,345 206,119
PROPERTY, PLANT AND EQUIPMENT 3,905,479 3,804,334
Less allowances for depreciation,
depletion and amortization 2,237,723 2,111,581
---------- ---------
1,667,756 1,692,753
COST IN EXCESS OF NET ASSETS ACQUIRED 1,904,462 1,914,894
OTHER INTANGIBLES 747,476 775,113
---------- ----------
$7,491,110 $7,744,891
========== ==========
LIABILITIES AND SHAREOWNERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 283,569 $ 536,799
Other current liabilities 464,541 572,343
Salaries, benefits and payroll taxes 368,163 333,602
Income taxes 119,416 48,847
Current maturities of long-term debt 317,512 318,525
---------- ----------
TOTAL CURRENT LIABILITIES 1,553,201 1,810,116
LONG-TERM DEBT 1,352,062 1,479,571
POST-RETIREMENT BENEFITS 760,069 740,630
OTHER NONCURRENT LIABILITIES 798,744 838,222
SHAREOWNERS' EQUITY:
Series A Preferred Stock, liquidation
preference $50 per share 1,000,000 1,000,000
Common stock, par value $1 a share 95,847 95,697
Additional paid-in capital 126,540 123,999
Retained earnings 1,804,647 1,656,656
---------- ----------
3,027,034 2,876,352
---------- ----------
$ 7,491,110 $ 7,744,891
========== ==========
See accompanying notes to consolidated condensed financial statements.
3 of 21
MARTIN MARIETTA CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
Three Months Ended
March 31,
1994 1993
------- -------
(Thousands of dollars
except per share data)
Net sales $ 2,034,341 $ 1,168,644
Cost of sales, other costs and expenses 1,827,465 1,044,023
---------- ----------
Earnings from Operations 206,876 124,621
Other income and expenses, net 134,983 7,154
---------- ----------
341,859 131,775
Interest expense on debt 30,704 11,220
---------- ----------
Earnings before Taxes on Income
and Cumulative Effect of Accounting Changes 311,155 120,555
Taxes on income 126,600 44,200
---------- ----------
Earnings before Cumulative Effect
of Accounting Changes 184,555 76,355
Cumulative effect of changes in accounting for
for post-retirement benefits other than
pensions and for post-employment benefits - (429,432)
---------- ----------
Net Earnings (Loss) $ 184,555 $ (353,077)
========== ===========
Earnings (Loss) Per Common Share
Assuming No Dilution:
Before cumulative effect of
accounting changes $ 1.77 $ .81
Cumulative effect of accounting changes - (4.53)
---------- ----------
$ 1.77 $ (3.72)
========== ===========
Assuming Full Dilution:
Before cumulative effect of
accounting changes $ 1.47 $ .81
Cumulative effect of accounting changes - (4.53)
---------- ----------
$ 1.47 $ (3.72)
========== ===========
Average Number of Common Shares Outstanding:
Assuming No Dilution 95,796,788 94,831,346
=========== ===========
Assuming Full Dilution 125,902,316 94,831,346
=========== ===========
Cash Dividends Declared Per Common Share $ .225 $ .21
=========== ===========
See accompanying notes to consolidated condensed financial statements.
4 of 21
MARTIN MARIETTA CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
Three Months Ended
March 31,
1994 1993
------- -------
(Thousands of Dollars)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Earnings (Loss) $ 184,555 $ (353,077)
Adjustments to reconcile net earnings (loss)
to net cash provided by operating activities:
Cumulative effect of changes in accounting for
post-retirement benefits other than pensions
and post-employment benefits - 429,432
Deferred income taxes 52,006 (4,175)
Depreciation, depletion and amortization 77,927 54,472
Net change in receivables, inventories
and payables ( 301,927) 22,625
Gain - MM Materials, Inc. initial public offering ( 117,724) -
Goodwill and intangible amortization 28,700 2,112
Other items ( 463) 595
--------- ---------
NET CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES ( 76,926) 151,984
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net proceeds MM Materials, Inc. initial
public offering 188,602 -
Additions to properties, net ( 45,050) ( 23,775)
Reductions of investments 383 48,026
Other ( 15,480) ( 20,880)
--------- ---------
NET CASH PROVIDED BY INVESTING ACTIVITIES 128,455 3,371
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES AND DIVIDENDS:
Debt transactions:
Repayment and defeasement of long-term debt ( 136,858) ( 571)
Equity transactions:
Issuances of common stock 2,691 4,031
Dividends declared:
Preferred stock ( 15,000) -
Common stock ( 21,564) ( 19,856)
--------- ---------
NET CASH USED FOR FINANCING ACTIVITIES
AND DIVIDENDS ( 170,731) ( 16,396)
--------- ---------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS ( 119,202) 138,959
CASH AND CASH EQUIVALENTS at beginning of period 373,095 239,642
--------- ---------
CASH AND CASH EQUIVALENTS at end of period $ 253,893 $ 378,601
========= =========
See accompanying notes to consolidated condensed financial statements.
5 of 21
MARTIN MARIETTA CORPORATION AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended March 31, 1994
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. In the opinion of management, the accompanying unaudited consolidated
condensed financial statements reflect all adjustments (consisting of
normal recurring accruals) necessary for a fair statement of the results
for the interim periods. The results of operations for the three months
ended March 31, 1994, are not necessarily indicative of the results to
be expected for the full year. The Corporation has continued to
follow the accounting policies as stated in Note A to the financial
statements included in its 1993 Annual Report.
2. 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 condensed financial statements with
regard to the number of shares and per share data for prior periods
have been restated to reflect the split.
3. 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.
4. 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. (see Note 15)
5. In February 1994, Martin Marietta Materials, Inc. sold through an
initial public offering, approximately 8.8 million shares of
its common stock. After the public sale, the Corporation owns
approximately 81% of the outstanding stock of the company. A portion of
the proceeds from the offering was used to defease in-substance certain
long-term debt of Martin Marietta Materials (see Note 7). The Corporation,
through its subsidiary Martin Marietta Technologies, Inc., recognized an
after-tax gain of $70.2 million, or 56 cents per share fully diluted, from
Materials' initial public offering, net of the after-tax loss on the debt
defeasance of $4.7 million.
6 of 21
MARTIN MARIETTA CORPORATION AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended March 31, 1994
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Continued)
6. Inventories:
March 31, December 31,
1994 1993
------ ------
(Thousands of Dollars)
Costs on contracts and programs in
progress net of progress payments $ 289,404 $ 454,162
Less: noncurrent amounts 162,051 168,999
-------- --------
127,353 285,163
Finished products 58,705 50,029
Products in process and raw materials 10,496 10,106
Expendable parts and supplies 13,662 13,451
-------- --------
$ 210,216 $ 358,749
======== ========
7. In February 1994, Martin Marietta Materials Inc.,a majority-owned
subsidiary of Martin Marietta Technologies Inc., defeased in-substance
the aggregate principal amount of $125 million of 9.5% Notes due in 1995.
These Notes were classified as long-term debt at December 31, 1993.
Martin Marietta Corporation has guaranteed the payment of certain debt
and other obligations of Martin Marietta Technologies, Inc. The total of
such guarantees, including the 9.5% Notes which were defeased in-substance,
was $1.1 billion at March 31, 1994. 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 March 31, 1994, there were no restrictions on dividends or other
distributions between Martin Marietta Technologies, Inc. and the
Corporation.
As of March 31, 1994, the Corporation has issued letters of credit totaling
$324 million relating to certain long-term contracts and other contractual
obligations.
The Corporation's total interest payments were approximately $19 million
in 1994 and $16 million in 1993 for the three months ended March 31.
8. 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.
Under an $800-million Revolving Credit Facility Agreement, the Corporation
is also subject to limitations on its financial leverage and a minimum
coverage ratio as defined by the agreement. At March 31, 1994,
there were no amounts outstanding under the credit facility.
7 of 21
MARTIN MARIETTA CORPORATION AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended March 31, 1994
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Continued)
9. Summarized financial information for Martin Marietta Technologies,
Inc., a separate registrant not subject to quarterly filing
requirements, follows:
March 31, December 31,
1994 1993
------ ------
(Millions of Dollars)
Current assets $ 1,616 $ 1,585
Noncurrent assets 3,176 3,163
Current liabilities 664 825
Long-term debt 1,036 1,161
Other noncurrent liabilities 1,057 886
Shareowners' equity 2,035 1,876
Three Months Ended March 31,
1994 1993
------ ------
Net sales $ 1,138 $ 1,169
Earnings from operations 139 125
Earnings before cumulative
effect of accounting changes 159 44
Cumulative effect of
accounting changes - (429)
Net earnings (loss) 159 (353)
10. The Corporation may purchase approximately 32.4 million shares under a
1993 authorization from the Board of Directors for repurchase 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 have been made by
the Corporation in the open market pursuant to this authorization.
11. Selling, general and administrative expenses included in cost of
sales, other costs and expenses for the quarter ended March 31, were
$149.4 million in 1994 and $89.4 million in 1993.
8 of 21
MARTIN MARIETTA CORPORATION AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended March 31, 1994
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Continued)
12. The Corporation's effective income tax rate for the first
three months was 40.7% in 1994 and 36.7% in 1993. The effective rate
for 1994 is higher than the current corporate federal income tax rate
of 35% principally due to differences between book and tax accounting
arising from the amortization of goodwill (cost in excess of net assets
acquired) associated with the GE Transaction and state income taxes.
Income tax payments were approximately $6 million in 1994 and $11
million in 1993 for the three months ended March 31.
13. The ratio of earnings to fixed charges for the three months ended March
31, 1994, was 9.34. See Exhibit 12, Computation of Ratio of Earnings to
Fixed Charges on page 21.
14. 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, 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.
* * * * * * * * * * * * * * * * * * * * * * * * * * *
9 of 21
MARTIN MARIETTA CORPORATION AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended March 31, 1994
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Continued)
15. The following unaudited pro forma combined summary information
presents the historical results of operations of the Corporation and
the GE Aerospace Businesses for the three months ended March 31, 1993
with pro forma adjustments as if the GE Transaction had been consummated
as of the beginning of the period presented. The pro forma information
is based upon certain estimates and assumptions that management of
the Corporation believes are reasonable in the circumstances. The
unaudited pro forma information is not necessarily indicative of what
the results of operations actually would have been if the GE Transaction
had occurred on the date indicated. Moreover, they are not necessarily
indicative of future results of operations.
Pro Forma Information
Three Months Ended
March 31,1993
-------------
(Millions,Except Per Share)
Net Sales $ 2,192
=======
Earnings before Cumulative Effect
of Accounting Changes
Attributable to Common Stock $ 73
=======
Net Earnings (Loss)
Attributable to Common Stock $ (356)
=======
Earnings (Loss) Per Common Share
Assuming No Dilution:
Before Cumulative Effect
of Accounting Changes $ .77
=======
Net Earnings (Loss) Per
Common Share $ (3.75)
=======
10 of 21
MARTIN MARIETTA CORPORATION AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended March 31, 1994
MANAGEMENT'S DISCUSSION OF FINANCIAL CONDITION AND OPERATING RESULTS
First Quarter Ended March 31, 1994 and 1993
Martin Marietta continued in excellent overall financial condition during the
first quarter of 1994. The Corporation maintains adequate capital resources
to operate, compete and grow in an increasingly challenging and competitive
marketplace. Net earnings for the first quarter of 1994 were $184.6 million, or
$1.47 per share fully diluted, including a gain of $70.2 million, or 56 cents
per share resulting from Martin Marietta Materials' initial public offering.
Net earnings for the quarter excluding the gain were $114.4 million, up 50%
over first quarter 1993 earnings of $76.4 million before changes in accounting.
Backlog of undelivered orders at March 31, 1994 remained high at $15.9 billion,
compared with $16.7 billion reported at year-end 1993. The Corporation's ratio
of debt-to-capitalization at March 31, 1994 was 36%, down from 39% reported at
December 31, 1993.
First quarter 1993 earnings include an after-tax charge of $429 million, or
$4.53 per share, resulting from the Corporation's adoption of accounting
changes for post-retirement and post-employment benefits.
On May 1, 1994, the Corporation completed its previously announced acquisition
of General Dynamics' Space Systems division for $209 million in cash. The
purchase method of accounting will be used to record this transaction.
Operating results of the Space Systems division will be included with those
of the Corporation from the closing date. (see Martin Marietta Corporation
Current Report on Form 8-K filed May 13, 1994.)
On March 6, 1994, the Corporation entered into an Agreement and Plan of Merger
with the Grumman Corporation and on March 8, 1994, the Corporation made an offer
to purchase for cash all outstanding shares of common stock of Grumman
Corporation. Subsequently, Grumman reached agreement with and accepted Northrop
Corporation's competing offer to purchase its outstanding common shares. In
April 1994, Martin Marietta Corporation received $50 million from Grumman
pursuant to the termination provisions of the March 6, 1994, Agreement and Plan
of Merger.
In February 1994, Martin Marietta Materials, Inc. sold through an underwritten
initial public offering, approximately 8.8 million shares of its common stock.
After the public sale, the Corporation owns approximately 81% of the outstanding
stock of the company. A portion of the proceeds from the offering was used to
defease in-substance certain long-term debt of Martin Marietta Materials (see
Note 5). The Corporation, through its subsidiary Martin Marietta Technologies,
Inc., recognized an after-tax gain of $70.2 million, or 56 cents per share fully
diluted, from Materials' initial public offering, net of the after-tax loss on
the debt defeasance of $4.7 million.
11 of 21
MARTIN MARIETTA CORPORATION AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended March 31, 1994
MANAGEMENT'S DISCUSSION OF FINANCIAL CONDITION AND OPERATING RESULTS
(Continued)
First Quarter Ended March 31, 1994 and 1993
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.
LIQUIDITY AND CAPITAL Net cash flow used for operating activities during
the first three months of 1994 was $77 million, compared with $152 million
provided by operating activities in the same period of 1993. The 1994 cash flow
was due to working capital increases, due principally to the large decrease in
accounts payable in the quarter, which exceeded earnings and depreciation. The
1993 cash flow was principally from earnings, before deducting depreciation and
the noncash charge resulting from the adoption of accounting changes for post-
retirement and post-employment benefits. Net capital expenditures were $45
million in 1994 and $24 million in 1993 during the first three-month periods.
Net proceeds, after expenses, of $189 million were generated from the initial
public offering of Martin Marietta Material's common stock. Cash of $136
million was used to defease in-substance $125 million of 9.5% Notes due in 1995.
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 outstanding public senior debt (which is issued through Martin
Marietta Technologies, Inc. and guaranteed by Martin Marietta Corporation) is
rated A by Standard & Poor's, A3 by Moody's,and A by Duff & Phelps. Martin
Marietta's commercial paper ratings are A-1 by Standard & Poor's, P-2 by
Moody's, and Duff-1 by Duff & Phelps. Martin Marietta Technologies, Inc., and
Martin Marietta Corporation's principal borrowing facility is an $800-million
revolving credit facility which expires on March 31, 1996. This borrowing
facility may be used for general corporate purposes. At March 31, 1994,
there was no amount outstanding under the credit facility.
Martin Marietta Technologies, Inc., has a shelf registration on file
with the Securities and Exchange Commission for the offering of up to $300
million in debt securities which may be issued from time to time. Such debt
securities would be obligations of the 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 given time is
dependent, among other things, upon market conditions.
12 of 21
MARTIN MARIETTA CORPORATION AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended March 31, 1994
MANAGEMENT'S DISCUSSION OF FINANCIAL CONDITION AND OPERATING RESULTS
(Continued)
First Quarter Ended March 31, 1994 and 1993
Under a 1993 authorization from the Board of Directors, the Corporation may
repurchase approximately 32.4 million of its common shares for use in connection
with the Corporation's Amended Omnibus Securities Award Plan, Performance
Sharing Plan and for general corporate purposes. There have been no share
repurchases made, in the open market, pursuant to this authorization.
RESULTS OF OPERATIONS Net sales increased $866 million, or 74%, in the first
three-month period of 1994 over the same period a year ago primarily because of
the inclusion of the former GE Aerospace businesses in 1994.
The Electronics Group with sales of approximately $848 million in the first
quarter of 1994, had sales increases of 123% over the same period in 1993.
These gains reflect the sales performance of Ocean, Radar & Sensor Systems,
Government Electronics and Defense Systems.
Space Group had three-month 1994 sales of approximately $646 million, a increase
of 10% in the first three months of 1994 over 1993. Sales from the Group's
Astro Space unit partially offset revenue declines from the Group's
Astronautics unit.
Information Group with sales of $341 million in the first quarter of 1994 posted
a sales increase of 164% over the same period of 1993. Sales from the Group's
Management & Data Systems and Automated Systems units were the principal reason
for the sales gain.
Services Group, with sales of $109 million in the first three months of 1994,
had sales gains of $91 million in the first quarter of 1994 over 1993.
The sales gains are principally attributable to sales from Martin Marietta
Services, Inc.
Martin Marietta Materials, Inc. had sales of $95 million in the first three
months of 1994, representing a 16% increase over the comparable period of 1993.
Sales for the aggregates operation were up 20% during the first three months,
and were the reason for this Group's overall increase.
Earnings from operations were up $82 million, or 66%, in the first three months
of 1994 over 1993. Electronics Group operating profits rose significantly in
the first quarter of 1994 compared with the same period of 1993. In addition
to the effect of the inclusion of the business operations of the former GE
Aerospace company, the gain in 1994 reflects improved performance on the
Patriot and Hellfire missile programs and on the LANTIRN electro optics
program.
13 of 21
MARTIN MARIETTA CORPORATION AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended March 31, 1994
MANAGEMENT'S DISCUSSION OF FINANCIAL CONDITION AND OPERATING RESULTS
(Continued)
First Quarter Ended March 31, 1994 and 1993
These Electronics Group gains were tempered by the Aero & Naval Systems
division's provision for additional cost now anticipated on the Pratt & Whitney
aircraft engine fan reverser program, associated with the certification phase of
this production program. Certification tests and any asssociated redesign are
expected to be completed in the second quarter of 1994.
Space Group profits grew 7% in the first three months of 1994 compared with
the first quarter a year ago. In 1994, Astro Space profits offset lower
Astronautics earnings, which were principally due to award fee timing. The
Information and Services Groups each had modest gains in operating profits
in the first quarter of 1994 over the period in 1993.
Martin Marietta Materials Inc.'s operating profits increased by $7 million, or
189% in the first quarter 1994 over the comparable period in 1993. The profit
gain was primarily from the company's aggregates operation.
Other income and expenses, net, for the three months ended March 31, was $135
million in 1994 compared with $7 million in 1993. The increase in 1994 was due
principally to the pre-tax gain of $118 million which resulted from the Martin
Marietta Materials' initial public offering.
Interest expense was $20 million, or 174%, higher in the first three months of
1994 over 1993. The increase in 1994 was due to the $1.4-billion increase in
the 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.
The Corporation's effective income tax rate for the first three months was 40.7%
in 1994 and 36.7% in 1993. The effective rate for 1994 is higher than the
current corporate federal income tax rate of 35% principally due to differences
between book and tax accounting arising from the amortization of goodwill
associated with the GE Transaction and state income taxes.
* * * * * * * * * * * * * * * * * * * * * * * * * * *
14 of 21
MARTIN MARIETTA CORPORATION AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended March 31, 1994
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Martin Marietta Energy Systems, Inc. ("MMES"), a wholly-owned subsidiary of
Martin Marietta Technologies, Inc., manages certain facilities on behalf of the
Department of Energy (DOE) under contracts with DOE. MMES and the DOE are
currently engaged in discussions with the General Counsel for the Tennessee
Department of Environment and Conservation ("TDEC") related to the cleanup of
hazardous waste associated with the closure of two surface impoundments at the
DOE's Oak Ridge K-25 Site. There exists a possibility that monetary assessments
in excess of $100,000 may be levied by the TDEC against the DOE and MMES.
Martin Marietta is involved in various other legal and environmental litigation
and proceedings arising in the ordinary course of its business. In the opinion
of management (which opinion is based in part upon consideration of the opinion
of counsel) and in the opinion of counsel, the probability is remote that the
outcome of any litigation or proceedings, whether or not specifically described
above or otherwise referred to herein, will have a material adverse effect on
the results of Martin Marietta's operations or its financial position.
Item 4. Submission of Matters to a Vote of Security Holders
At the Annual Meeting of Stockholders held on April 28, 1994, the
stockholders of Martin Marietta Corporation:
- Elected Marcus C. Bennett, A. James Clark, Edwin I. Colodny, James L.
Everett, III, and Allen E. Murray to the Board of Directors of the
Corporation for three-year terms expiring in 1997. Lamar Alexander,
Norman R. Augustine, John J. Byrne, Edward L. Hennessy, Jr., Edward E.
Hood, Jr., Caleb B. Hurtt, Gwendolyn S. King, Melvin R. Laird,
Gordon S. Macklin, Eugene F. Murphy, John W. Vessey, Jr., and
A. Thomas Young continue their terms as directors. The following table
sets forth the votes for each director.
Votes Cast For Votes Withheld
Marcus C. Bennett 79,703,098 1,784,953
A. James Clark 79,696,710 1,791,341
Edwin I. Colodny 79,686,286 1,801,765
James L. Everett, III 79,694,928 1,793,123
Allen E. Murray 79,688,240 1,799,811
15 of 21
MARTIN MARIETTA CORPORATION AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended March 31, 1994
PART II - OTHER INFORMATION
(Continued)
Item 4. Submission of Matters to a Vote of Security Holders (continued)
- Rejected a stockholder proposal which recommended stockholder approval
by a majority of votes cast on matters brought before stockholder
meetings at which a quorum is present. The resolution, comments and
recommendation concerning the proposal were set forth in the Corporation's
definitive Proxy Statement dated March 21, 1994. There were 20,172,152
votes for the proposal, 53,407,242 votes against the proposal, 3,133,806
abstentions and 4,774,851 broker nonvotes.
- Rejected a stockholder proposal which recommended that the Corporation
endorse the Coalition for Environmentally Responsible Economies'
principles for corporate environmental accountability. The resolution,
comments and recommendation concerning the proposal were set forth in the
Corporation's definitive Proxy Statement dated March 21, 1994. There were
6,506,592 votes for the proposal, 61,445,321 votes against the proposal,
8,763,985 abstentions and 4,772,153 broker nonvotes.
- Rejected a stockholder proposal which recommended that the Board of
Directors reinstate the election of directors annually, instead
of the staggered three-year terms currently in place. The resolution,
comments and recommendation concerning the proposal were set forth in the
Corporation's definitive Proxy Statement dated March 21, 1994. There were
29,876,248 votes for the proposal, 44,706,308 votes against the proposal,
2,130,644 abstentions and 4,774,851 broker nonvotes.
- Rejected a stockholder proposal which recommended stockholder
approval of severance agreements. The resolution, comments and
recommendation concerning the proposal were set forth in the Corporation's
definitive Proxy Statement dated March 21, 1994. There were 28,714,318
votes for the proposal, 44,837,860 votes against the proposal, 3,161,022
abstentions and 4,774,851 broker nonvotes.
- Rejected a stockholder proposal which recommended a change in voting
requirements for removal of directors. The resolution, comments and
recommendation concerning the proposal were set forth in the Corporation's
definitive Proxy Statement dated March 21, 1994. There were 20,840,892
votes for the proposal, 52,739,397 votes against the proposal, 3,132,911
abstentions and 4,774,851 broker nonvotes.
16 of 21
MARTIN MARIETTA CORPORATION AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended March 31, 1994
PART II - OTHER INFORMATION
(Continued)
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
1. Exhibit 11, Martin Marietta Corporation and Consolidated
Subsidiaries Computation of Net Earnings (Loss) Per Common Share
for the three months ended March 31, 1994 and 1993, is presented
on pages 19 and 20.
2. Exhibit 12, Martin Marietta Corporation and Consolidated Subsidiaries
Computation of Ratio of Earnings to Fixed Charges for the three months
ended March 31, 1994, is presented on page 21.
(b) Reports on Form 8-K filed in the first quarter of 1994.
None.
(c) Current Report on Form 8-K filed on May 13, 1994.
Item 2 - Acquisition or Disposition of Assets
The Registrant filed information in connection with an Asset Purchase
Agreement by and between Martin Marietta and General Dynamics
Corporation, pursuant to which the Registrant acquired substantially all
of the assets and business (together with certain associated
liabilities), of General Dynamics' Space Systems Group. The acquisition
was effective on May 1, 1994. The cash purchase consideration of $208.5
million is subject to a post-closing adjustment based upon changes in
the economic value of the Group as reflected in the Group's financial
statements between that existing on August 29, 1993 and that existing
on the date of closing.
Item 7 - Financial Statements and Exhibits.
(a) Financial Statements of Business Acquired
General Dynamics' Space Systems Group Combined Financial
Statements For the Years Ended December 31, 1993, 1992, and 1991
Together with Auditors' Report
(b) Pro Forma Financial Statements
Unaudited Pro Forma Combined Condensed Financial Statements
Notes to Unaudited Pro Forma Combined Condensed Financial
Statements
17 of 21
MARTIN MARIETTA CORPORATION AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended March 31, 1994
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MARTIN MARIETTA CORPORATION
(Registrant)
Date: May 16, 1994 by: S/Marcus C. Bennett
Marcus C. Bennett
Vice President &
Chief Financial Officer
18 of 21
EXHIBIT 11
MARTIN MARIETTA CORPORATION AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended March 31, 1994
COMPUTATION OF NET EARNINGS (LOSS) PER COMMON SHARE
Three Months Ended
March 31,
1994 1993
------ ------
ASSUMING NO DILUTION:
Average number of common shares outstanding (1) 95,796,788 94,831,346
=========== ===========
Earnings before cumulative effect of
accounting changes $ 184,555 $ 76,355
Less: Preferred stock dividends 15,000 -
----------- -----------
Earnings before cumulative effect of accounting
changes applicable to common stock 169,555 76,355
Cumulative effect of accounting changes - (429,432)
----------- -----------
Net earnings (loss) applicable to common stock $ 169,555 $ (353,077)
=========== ===========
Net earnings (loss) per common share:
Before cumulative effect of accounting
changes $ 1.77 $ .81
Cumulative effect of accounting changes - (4.53)
----------- -----------
$ 1.77 $ (3.72)
=========== ===========
(1) Excludes common stock equivalents
since the dilutive effect on earnings
per share assuming no dilution is
less than 3%.
19 of 21
EXHIBIT 11 - Continued
MARTIN MARIETTA CORPORATION AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended March 31, 1994
COMPUTATION OF NET EARNINGS (LOSS) PER COMMON SHARE
Three Months Ended
March 31,
1994 1993
------ ------
ASSUMING FULL DILUTION:
Average number of common shares outstanding 95,796,788 94,831,346
Dilutive stock options-based on the treasury
stock method using the March 31 market
prices, if higher than average market price 1,164,062 -
Assumed conversion of the Convertible Preferred
Stock from the date of issuance 28,941,466 -
----------- -----------
125,902,316 94,831,346
=========== ===========
Earnings before cumulative effect of accounting
changes applicable to common stock $ 169,555 $ 76,355
Add: Preferred stock dividends 15,000 -
----------- -----------
Earnings before cumulative effect of
accounting changes 184,555 76,355
Cumulative effect of accounting changes - (429,432)
----------- -----------
Net earnings (loss) $ 184,555 $ (353,077)
=========== ===========
Net earnings (loss) per common share:
Before cumulative effect of accounting
changes $ 1.47 $ .81
Cumulative effect of accounting changes - (4.53)
----------- -----------
$ 1.47 $ (3.72)
=========== ===========
20 of 21
EXHIBIT 12
MARTIN MARIETTA CORPORATION AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended March 31, 1994
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
For the Three Months Ended March 31, 1994
(In thousands of dollars, except ratio)
EARNINGS:
Net earnings $ 184,555
Taxes on income 126,600
Interest expense 31,985
Amortization of debt premium and expense, net ( 1,281)
Portion of rents representative of an interest factor 5,711
Earnings of less than 50% owned associated companies, net 5
----------
Adjusted earnings before taxes and fixed charges $ 347,575
==========
FIXED CHARGES:
Interest expense $ 31,985
Amortization of debt premium and expense, net ( 1,281)
Portion of rents representative of an interest factor 5,711
Capitalized interest 790
----------
Total fixed charges $ 37,205
==========
RATIO OF EARNINGS TO FIXED CHARGES 9.34
==========
21 of 21