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 SEPTEMBER 30, 1994 Commission File Number 1-11810
MARTIN MARIETTA CORPORATION
(Exact name of registrant as specified in its charter)
MARYLAND 52-1801551
(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 October 31, 1994
Common Stock, $1 par value 96,056,361 Shares
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MARTIN MARIETTA CORPORATION AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 1994
INDEX
Page No.
Part I. Financial Information:
Item 1. Financial Statements
Consolidated Condensed Balance Sheets -
September 30, 1994 and December 31, 1993 . . . . . . . . . . . . 3
Consolidated Condensed Statements of Earnings -
Three Months and Nine Months Ended September 30, 1994 and 1993 . 4
Consolidated Condensed Statements of Cash Flows -
Nine Months Ended September 30, 1994 and 1993 . . . . . . . . . 5
Notes to Consolidated Condensed Financial Statements. . . . . . . .6
Item 2. Management's Discussion of Financial Condition
and Operating Results . . . . . . . . . . . . . . . . . . . . .12
Part II. Other Information:
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . .18
Item 2. Change in Securities . . . . . . . . . . . . . . . . . . . . .19
Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . . . . . .19
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
Exhibit 11. Computation of Net Earnings Per Common Share. . . . . . . . . .22
Exhibit 12. Computation of Ratio of Earnings to Fixed Charges . . . . . . .24
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MARTIN MARIETTA CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(UNAUDITED)
September 30, December 31,
1994 1993
(Millions of Dollars)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 521.7 $ 373.1
Receivables 1,629.0 1,435.5
Inventories 1,076.3 358.8
Current deferred income taxes 55.6 238.6
Other current assets 42.1 42.2
-------- --------
TOTAL CURRENT ASSETS 3,324.7 2,448.2
OTHER NONCURRENT ASSETS 953.4 707.8
NONCURRENT DEFERRED INCOME TAXES 261.1 206.1
PROPERTY, PLANT AND EQUIPMENT 3,842.0 3,804.3
Less allowances for depreciation,
depletion and amortization 2,195.7 2,111.5
-------- --------
1,646.3 1,692.8
COST IN EXCESS OF NET ASSETS ACQUIRED 2,089.0 1,914.9
OTHER INTANGIBLES 718.8 775.1
-------- --------
$ 8,993.3 $ 7,744.9
======== ========
LIABILITIES AND SHAREOWNERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 456.9 $ 536.8
Other current liabilities 899.8 572.4
Salaries, benefits and payroll taxes 413.4 333.6
Income taxes 81.3 48.8
Current maturities of long-term debt 305.1 318.5
-------- --------
TOTAL CURRENT LIABILITIES 2,156.5 1,810.1
LONG-TERM DEBT 1,346.7 1,479.6
POST-RETIREMENT BENEFITS 790.8 740.6
OTHER NONCURRENT LIABILITIES 1,429.2 838.2
SHAREOWNERS' EQUITY:
Series A Preferred Stock, liquidation
preference $50 per share 1,000.0 1,000.0
Common stock, par value $1 a share 96.1 95.7
Additional paid-in capital 132.4 124.0
Retained earnings 2,041.6 1,656.7
-------- --------
3,270.1 2,876.4
-------- --------
$ 8,993.3 $ 7,744.9
======== ========
See accompanying notes to unaudited consolidated condensed financial statements.
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MARTIN MARIETTA CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
(UNAUDITED)
Three Months Ended Nine Months Ended
September 30, September 30,
1994 1993 1994 1993
(In Millions, except per share data)
Net sales $2,562.5 $2,466.1 $7,087.8 $6,248.0
Cost of sales, other costs and expenses 2,291.6 2,242.5 6,358.4 5,677.7
-------- -------- -------- --------
Earnings from Operations 270.9 223.6 729.4 570.3
Other income and expenses, net 8.4 17.1 194.8 39.0
-------- -------- -------- --------
279.3 240.7 924.2 609.3
Interest expense on debt 28.3 33.6 87.6 77.7
-------- -------- -------- --------
Earnings before Taxes on Income and
Cumulative Effect of Accounting Changes 251.0 207.1 836.6 531.6
Taxes on income 102.2 76.0 340.5 200.0
-------- -------- -------- --------
Earnings before Cumulative Effect
of Accounting Changes 148.8 131.1 496.1 331.6
Cumulative effect of changes in accounting
for post-retirement benefits other than
pensions and for post-employment benefits - - - (429.4)
-------- -------- -------- --------
Net Earnings (Loss) $ 148.8 $ 131.1 $ 496.1 $( 97.8)
======== ======== ======== ========
Earnings (Loss) Per Common Share
Assuming No Dilution:
Before cumulative effect of
accounting changes $ 1.39 $ 1.21 $ 4.70 $ 3.16
Cumulative effect of accounting changes - - - ( 4.51)
-------- -------- -------- --------
$ 1.39 $ 1.21 $ 4.70 $ (1.35)
======== ======== ======== ========
Assuming Full Dilution:
Before cumulative effect of
accounting changes $ 1.18 $ 1.04 $ 3.94 $ 2.86
Cumulative effect of accounting changes - - - *
-------- -------- -------- --------
$ 1.18 $ 1.04 $ 3.94 $ *
======== ======== ======== ========
Average Common Shares Outstanding:
Assuming No Dilution 96.0 95.6 95.9 95.2
======== ======== ======== ========
Assuming Full Dilution 126.1 125.8 126.1 115.8
======== ======== ======== ========
Cash Dividends Declared Per Common Share $ .24 $ .225 $ .69 $ .645
======== ======== ======== ========
<FN>
* Anti-dilutive
See accompanying notes to unaudited consolidated condensed financial statements.
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MARTIN MARIETTA CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Ended
September 30,
1994 1993
(Millions of Dollars)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Earnings (Loss) $ 496.1 $ ( 97.8)
Adjustments to reconcile net earnings (loss)
to net cash provided by operating activities:
Cumulative effect of changes in accounting - 429.4
Deferred income taxes 254.1 .9
Depreciation, depletion and amortization 235.9 239.0
Net change in receivables, inventories and payables ( 422.0) (408.7)
Gain - MM Materials, Inc. initial public offering ( 117.7) -
Acquisition agreement termination fee ( 50.0) -
Goodwill and other intangibles amortization 84.1 70.3
Other items ( 2.9) 4.4
-------- -------
NET CASH PROVIDED BY OPERATING ACTIVITIES 477.6 237.5
-------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net proceeds MM Materials, Inc. initial public offering 188.6 -
Additions to properties, net ( 134.5) ( 101.0)
Acquisition GE Aerospace - ( 883.2)
Other acquisition activities, net ( 121.9) ( 9.3)
(Additions)Reductions of investments ( 15.9) 101.0
Other 6.2 ( 18.9)
-------- -------
NET CASH USED FOR INVESTING ACTIVITIES ( 77.5) ( 911.4)
-------- -------
CASH FLOWS FROM FINANCING ACTIVITIES AND DIVIDENDS:
Debt transactions:
Increase in long-term debt 2.2 700.0
Repayment and defeasance of long-term debt ( 151.4) ( 3.3)
Equity transactions:
Issuances of common stock 8.8 16.2
Dividends declared:
Preferred stock ( 45.0) ( 30.3)
Common stock ( 66.1) ( 61.5)
-------- -------
NET CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES
AND DIVIDENDS ( 251.5) 621.1
-------- -------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 148.6 ( 52.8)
CASH AND CASH EQUIVALENTS at beginning of period 373.1 239.6
-------- -------
CASH AND CASH EQUIVALENTS at end of period $ 521.7 $ 186.8
======== =======
SUPPLEMENTAL SCHEDULE OF INVESTING AND FINANCING ACTIVITIES:
Non-cash consideration - Acquisition GE Aerospace:
Assumption of certain payment obligations $ - $ 750.0
Issuance of preferred stock - 1,000.0
-------- -------
$ - $1,750.0
======== =======
<FN>
See accompanying notes to unaudited consolidated condensed financial statements.
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MARTIN MARIETTA CORPORATION AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 1994
NOTES TO UNAUDITED 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 nine months
ended September 30, 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. Earnings for 1993 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.
3. In August 1994, Martin Marietta Corporation and Lockheed Corporation
announced that their respective Board of Directors had unanimously
approved a definitive agreement to merge the two corporations through
an exchange of common stock (the "Combination"). The Combination,
which is a "merger of equals" and does not involve the sale of either
corporation, is subject to regulatory and stockholder approvals and
is expected to close in the first quarter of 1995. The Combination
is expected to qualify as a pooling of interests for accounting and
financial reporting purposes. Under this accounting method, the assets
and liabilities of Lockheed and Martin Marietta will be carried forward
to the new corporation, Lockheed Martin Corporation, at their historical
recorded bases. Results of operations of Lockheed Martin will include
the results of both Lockheed and Martin Marietta for the entire fiscal
year in which the Combination occurs. When consummated, the reported
balance sheet amounts and results of operations of the separate
corporations for prior periods will be combined, reclassified and
conformed, as appropriate, to reflect the combined balance sheets and
statements of results of operations for Lockheed Martin Corporation.
On May 1, 1994, the Corporation completed its acquisition of the Space
Systems division of General Dynamics. This transaction has been accounted
for under the purchase method of accounting, wherein cost in excess of
net assets acquired of approximately $213 million was recognized by the
Corporation. The cost in excess of net assets acquired is being
amortized over a twenty-year period.
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MARTIN MARIETTA CORPORATION AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 1994
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Continued)
At September 30, 1994, Space Systems division had
customer deposits of approximately $1.3 billion which
primarily represent advance payments from its Atlas
program customers. In the Corporation's consolidated
balance sheet, customer deposits of $315 million and $388
million are classified as other current liabilities and
other noncurrent liabilities, respectively. Costs on
contracts and programs in progress (See Note 6) are net
of related customer deposits of $575 million. Operating
results of the Space Systems division have been included
with those of the Corporation from the closing date.
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 in the consolidated financial statements since
that date (See Note 16).
4. Martin Marietta Corporation has adopted a Stockholder
Rights Plan pursuant to which the Corporation distributed
one Common Stock Purchase Right with respect to
each share of its Common Stock outstanding as of the
close of business on September 9, 1994, and rights attach
to each additional such share issued thereafter until the
earlier of the Distribution Date under the Rights
Agreement or the date on which the Rights expire or are
redeemed. The Rights will expire immediately prior to
consummation of the transactions contemplated by the
above-mentioned agreement with Lockheed (See Note 3), or,
if the transactions are not consummated, then on
September 9, 2004, unless extended by the Corporation.
The Rights are not exercisable except upon the occurrence
of certain events described in the Rights Agreement.
When exercisable, each Right will entitle the
holder to purchase one share of Common Stock (or other
shares, securities or property, as the case may be, of
equivalent value) at an exercise price of $190.00
per share. The Rights will be redeemable at $0.01 per
Right.
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.
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MARTIN MARIETTA CORPORATION AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 1994
NOTES TO CONSOLIDATED UNAUDITED CONDENSED FINANCIAL STATEMENTS
(Continued)
6. Inventories:
September 30, December 31,
1994 1993
(Millions of Dollars)
Costs on contracts and programs in
progress,net of progress payments
and customer deposits $ 1,341.8 $ 454.2
Less: noncurrent amounts 343.5 169.0
998.3 285.2
Finished products 54.3 50.0
Products in process and raw materials 9.9 10.1
Expendable parts and supplies 13.8 13.5
$ 1,076.3 $ 358.8
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 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 September 30, 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 September 30, 1994, there were
no restrictions on dividends or other distributions
between Martin Marietta Technologies, Inc. and the
Corporation.
As of September 30, 1994, the Corporation has issued
letters of credit totaling $259 million relating to
certain long-term contracts and other contractual
obligations.
The Corporation's total interest payments were
approximately $80 million in 1994 and $45 million in 1993
for the nine months ended September 30.
8. Certain financing agreements of Martin Marietta
Corporation and its subsidiaries contain restrictive
covenants, including limitations on encumbrances and on
sale and lease-back transactions. Under an $800-million
Revolving Credit Agreement, the Corporation is also
subject to limitations on its financial leverage and a
minimum fixed charge coverage ratio as defined by the
agreement. At September 30, 1994, there were no amounts
outstanding under the credit facility.
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MARTIN MARIETTA CORPORATION AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 1994
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Continued)
9. Summarized financial information for Martin Marietta Technologies, Inc.,
a separate registrant not subject to quarterly filing requirements,
follows:
September 30, December 31,
1994 1993
(Millions of Dollars)
Current assets $ 2,642 $ 1,585
Noncurrent assets 3,789 3,163
Current liabilities 1,450 825
Long-term debt 1,034 1,161
Other noncurrent liabilities 1,642 886
Shareowners' equity 2,305 1,876
Three Months Ended Nine Months Ended
September 30, September 30,
1994 1993 1994 1993
Net sales $ 1,466 $ 1,389 $ 3,965 $ 3,996
Earnings from operations 184 157 476 416
Earnings before cumulative
effect of accounting changes 119 101 370 263
Cumulative effect of
accounting changes - - - (429)
Net earnings (loss) 119 101 370 (166)
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
pursuant to this authorization.
11. Selling, general and administrative expenses included in
cost of sales, other costs and expenses were $141.9
million in 1994 and $163.3 million in 1993 for the third
quarter and $442.7 million in 1994 and $383.2 million in
1993 for the nine months ended September 30.
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MARTIN MARIETTA CORPORATION AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 1994
NOTES TO CONSOLIDATED UNAUDITED CONDENSED FINANCIAL STATEMENTS
(Continued)
12. Other income and expenses, net:
Three Months Ended Nine Months Ended
September 30, September 30,
1994 1993 1994 1993
(Millions of Dollars)
Gain - Martin Marietta Materials, Inc.
initial public offering $ - $ - $ 117.7 $ -
Acquisition agreement termination fee - - 50.0 -
Royalty income 10.9 14.1 38.2 26.6
Minority interest - Martin Marietta
Materials, Inc. (4.2) - (7.7) -
Miscellaneous, net 1.7 3.0 (3.4) 12.4
$ 8.4 $ 17.1 $ 194.8 $ 39.0
13. The Corporation's effective income tax rate for the first nine
months was 40.7% in 1994 and 37.6% in 1993. The effective rates
in both years are higher than the statutory corporate federal income tax
rate 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 $52 million in 1994 and $183
million in 1993 for the nine months ended September 30.
14. The ratio of earnings to fixed charges for the nine months ended
September 30, 1994, was 8.83. See Exhibit 12, Computation of Ratio of
Earnings to Fixed Charges, on page 24.
15. 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 litigation and
other proceedings, including those pertaining to environmental matters,
relating to Martin Marietta, will have a material adverse effect on the
results of the Corporation's operations or its financial position.
* * * * * * * * * * * * * * * * * * * * * * * * * * *
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MARTIN MARIETTA CORPORATION AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 1994
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Continued)
16. The following unaudited pro forma combined summary
information presents the historical results of operations
of the Corporation and the General Dynamics Space Systems
division for the three and nine month periods ended
September 30, 1994 and 1993 with pro forma adjustments as
if the Space Systems division had been acquired as of the
beginning of the periods presented. In addition, the
historical results of operations of the GE Aerospace
Businesses are included for the nine-month period ended
September 30, 1993, with pro forma adjustments as if the
GE Transaction had been consummated as of the beginning
of the period. 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 Space Systems and GE transactions
had occurred on the dates indicated. Moreover, they are
not necessarily indicative of future results of
operations.
Pro Forma Information
Three Months Ended Nine Months Ended
September 30, September 30,
1994* 1993 1994 1993
(In Millions, except per share data)
Net Sales $ 2,563 $ 2,607 $ 7,211 $ 7,485
Earnings before Cumulative Effect
of Accounting Changes
Attributable to Common Stock $ 134 $ 120 $ 453 $ 283
Net Earnings (Loss)
Attributable to Common Stock $ 134 $ 120 $ 453 $ (146)
Earnings (Loss) Per Common Share
Assuming No Dilution:
Before Cumulative Effect
of Accounting Changes $ 1.39 $ 1.26 $ 4.72 $ 2.97
Net Earnings (Loss) Per
Common Share $ 1.39 $ 1.26 $ 4.72 $ (1.53)
* Actual results for the period.
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MARTIN MARIETTA CORPORATION AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 1994
MANAGEMENT'S DISCUSSION OF FINANCIAL CONDITION AND OPERATING RESULTS
Third Quarter and Nine Months Ended September 30, 1994 and 1993
Martin Marietta continued in excellent overall financial
condition during the third 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 third quarter of 1994 were
$148.8 million, or $1.18 per share fully diluted, up 14% over
third quarter 1993 earnings of $131.1 million, or $1.04 per
share. Backlog of undelivered orders at September 30, 1994
was at $16.9 billion compared with $16.7 billion reported at
year-end 1993. The Corporation's ratio of debt-to-capitalization
at September 30, 1994 was 34%, down from 39% reported at December
31, 1993.
In August 1994, Martin Marietta Corporation and Lockheed
Corporation announced that their respective Board of Directors
had unanimously approved a definitive agreement to merge the
two corporations through an exchange of common stock (the
"Combination"). The Combination, which is a "merger of
equals" and does not involve the sale of either corporation,
is subject to regulatory and stockholder approvals and is
expected to close in the first quarter of 1995. The
Combination is expected to qualify as a pooling of interests
for accounting and financial reporting purposes. Under this
accounting method, the assets and liabilities of Lockheed and
Martin Marietta will be carried forward to the new
corporation, Lockheed Martin Corporation, at their historical
recorded bases. Results of operations of Lockheed Martin will
include the results of both Lockheed and Martin Marietta for
the entire fiscal year in which the Combination occurs. When
consummated, the reported balance sheet amounts and results of
operations of the separate corporations for prior periods will
be combined, reclassified and conformed, as appropriate, to
reflect the combined balance sheets and statements of results
of operations for Lockheed Martin Corporation.
Martin Marietta Corporation has adopted a Stockholder Rights
Plan pursuant to which the Corporation distributed one Common
Stock Purchase Right with respect to each share of its Common
Stock outstanding as of the close of business on September 9,
1994, and rights attach to each additional such share issued
thereafter until the earlier of the Distribution Date under
the Rights Agreement or the date on which the Rights expire or
are redeemed. The Rights will expire immediately prior to
consummation of the transactions contemplated by the
above-mentioned agreement with Lockheed (See Note 3), or, if
the transactions are not consummated, then on September 9,
2004, unless extended by the Corporation. The Rights are not
exercisable except upon the occurrence of certain events
described in the Rights Agreement. When exercisable, each
Right will entitle the holder to purchase one share of Common
Stock (or other shares, securities or property, as the case
may be, of equivalent value) at an exercise price of $190.00
per share. The Rights will be redeemable at $0.01 per Right.
Rights will be redeemable at $0.01 per Right.
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MARTIN MARIETTA CORPORATION AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 1994
MANAGEMENT'S DISCUSSION OF FINANCIAL CONDITION AND OPERATING RESULTS
(Continued)
Third Quarter and Nine Months Ended September 30, 1994 and 1993
During the second quarter of 1994, the Corporation completed
its acquisition of the General Dynamics Space Systems division
for approximately $160 million in cash. This transaction has
been accounted for under the purchase method of accounting,
wherein cost in excess of net assets acquired of approximately
$213 million was recognized by the Corporation. The cost in
excess of net assets acquired is being amortized over a
twenty-year period. Operating results of the Space Systems
division have been included with those of the Corporation from
the closing date.
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. Martin Marietta Corporation
received $50 million, plus reimbursement of expenses, from
Grumman pursuant to the termination provisions of the March 6,
1994, Agreement and Plan of Merger. The $50 million payment
is included in other income and expenses, net for the nine
months ended September 30, 1994.
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 Notes 5 and 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.
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 in the consolidated
financial statements since that date.
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MARTIN MARIETTA CORPORATION AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 1994
MANAGEMENT'S DISCUSSION OF FINANCIAL CONDITION AND OPERATING RESULTS
(Continued)
Third Quarter and Nine Months Ended September 30, 1994 and 1993
LIQUIDITY AND CAPITAL: Net cash flow provided by operating
activities during the first nine months of 1994 was $478
million, compared with $238 million provided by operating
activities in the same period of 1993. The 1994 cash flow
results from earnings, depreciation, and deferred taxes which
exceeded working capital increases, due principally to the
increase in receivables and decrease in accounts payable in
the first nine months. The 1993 net 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 of tax
payments and certain working capital changes. Net capital
expenditures were $135 million in 1994 and $101 million in
1993 during the first nine-month periods. Acquisition
activities during the second quarter of 1994 (General
Dynamics' Space Systems acquisition and the Grumman
agreement termination fee) resulted in a net use of funds of
$110 million. Net proceeds, after expenses, of $189 million
were generated from the first quarter 1994, 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 Corporation's
and Martin Marietta Technologies, Inc.'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 September 30, 1994,
there was no amount outstanding under the credit facility. If
the proposed merger with Lockheed Corporation is consummated,
it is anticipated that Martin Marietta's existing credit
facility will be terminated effective immediately prior to
consummation of the merger and that Lockheed Martin
Corporation will obtain its own 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 Martin Marietta Technologies, Inc., and 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.
14 of 24
MARTIN MARIETTA CORPORATION AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 1994
MANAGEMENT'S DISCUSSION OF FINANCIAL CONDITION AND OPERATING RESULTS
(Continued)
Third Quarter and Nine Months Ended September 30, 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 pursuant to this authorization.
RESULTS OF OPERATIONS: Net sales increased $96 million, or
4%, in the third quarter of 1994 over the comparable period in
1993 , while nine-month 1994 sales increased $839 million, or
13%, over the same period a year ago.
The Electronics Group had sales of approximately $2.9 billion
in the first nine months of 1994. The Group's sales increased
3% in the third quarter and 9% in the nine months of 1994 over
the same periods in 1993. The Group's gains in the first
nine months of 1994 reflect primarily the sales performance of
Ocean & Radar Systems and Government Electronics Systems.
Space Group, with nine-month 1994 sales of approximately $2.4
billion, had sales increases of 14% in the third quarter and
9% in the first nine months of 1994 over the comparable
periods in 1993. The Group's third quarter sales reflect
increases from each of its operating units. Sales in the
nine-month period from the Group's Astro Space unit more than
offset revenue declines from the Group's Astronautics unit.
The Group's results include the operations of the former
Space Systems division of General Dynamics which was acquired
by the Corporation on May 1, 1994.
Information Group, with sales of $1.1 billion in the first
nine months of 1994, had sales increases of 8% in the third
quarter and 40% in the first nine months of 1994 over the
comparable periods of 1993. For comparison purposes, the
Group's 1993 sales were adjusted to reflect a 1994 change in
the method of recording intercompany activities related to the
Group's Internal Information Systems unit. This change had no
effect on the Corporation's consolidated net sales. The sales
performances of the Group's Management & Data Systems and
Automated Systems units were the principal reason for the
sales gain in the first nine-month period of 1994.
Services Group had sales of $348 million in the first nine
months of 1994. The Group's sales declined by $33 million in
the third quarter of 1994 from the same period sales a year
ago. In the first nine months of 1994, Services Group sales
increased by $36 million over the sales in the comparable
period of 1993.
15 of 24
MARTIN MARIETTA CORPORATION AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 1994
MANAGEMENT'S DISCUSSION OF FINANCIAL CONDITION AND OPERATING RESULTS
(Continued)
Third Quarter and Nine Months Ended September 30, 1994 and 1993
Martin Marietta Materials, Inc. had sales of $377 million in
the first nine months of 1994, representing increases of 12%
in the third quarter and 13% in the first nine months of 1994
over the comparable periods of 1993. Sales for the aggregates
operation were up 15% in the quarter and 16% during the first
nine months, and were the reason for this Group's overall
increase.
Earnings from operations were up $47 million, or 21%, in the
third quarter and $159 million, or 28%, in the first nine
months of 1994 over 1993. Electronics Group operating profits
increased 24% in the third quarter and 30% in the first nine
months of 1994 compared with the same periods of 1993. The
Group's 1994 operating profits were adversely affected by a
provision of $53 million in the first six months to cover
additional costs on the Aero & Naval Systems' Pratt &
Whitney jet engine thrust reverser program. These additional
estimated costs are associated with initial production
start-up problems and certain continuing redesign efforts.
Pratt & Whitney and the Corporation have agreed that
production thrust reversers being delivered to Pratt & Whitney
are being conditionally accepted subject to reservations of
rights by each corporation. Management believes that current
financial reserves are adequate for this program based on
information and conditions known at this time. The Group's
overall operating profit gains in the first nine months of
1994 reflect the performance of the Armament Systems,
Electronics & Missiles, Government Electronics, and
Ocean & Radar Systems units which more than offset the impact
of the charge taken on the Pratt & Whitney program.
Space Group profits grew 39% in the third quarter and 19% in
the first nine months of 1994 compared with the comparable
periods a year ago. The Group's third quarter and nine-month
results are principally due to profit gains by its Astro Space
unit.
The Information Group operating profits declined 36% in the
third quarter and increased 17% in the first nine months of
1994 over the same period in 1993. The third-quarter decrease
was due to lower profits principally because of award fee
timing, in the Group's Air Traffic Systems and Management &
Data Systems units. The nine months gain are principally
attributable to the performance of the Group's Management &
Data Systems and Automated Systems units. Services Group
operating profits declined $ 3 million in the third quarter
and rose $3 million in the first nine months of 1994 over
1993.
16 of 24
MARTIN MARIETTA CORPORATION AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 1994
MANAGEMENT'S DISCUSSION OF FINANCIAL CONDITION AND OPERATING RESULTS
(Continued)
Third Quarter and Nine Months Ended September 30, 1994 and 1993
Martin Marietta Materials Inc.'s operating profits
increased by 15% in the third quarter and 26% in the first
nine months of 1994 over the comparable periods. The profit
gains result primarily from the performance of the company's
aggregates operation.
Other income and expenses, net, for the nine months
ended September 30, was $195 million in 1994 compared
with $39 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 and the $50 million received from Grumman pursuant to
the termination provisions of the March 6, 1994, Agreement
and Plan of Merger.
Interest expense decreased $5 million in the third quarter
and increased $10 million in the first nine months of
1994 over 1993. The decrease in the third quarter is
primarily because the Corporation defeased in-substance
$328 million of notes ($125 million of 9.5% Notes during
February 1994 and $103 million of assumed GE payment
obligations during December 1993). The increase in the first
nine months of 1994 is due to the $1.4-billion increase in the
Corporation's 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 nine
months was 40.7% in 1994 and 37.6% in 1993. The effective
rates in both years are higher than the statutory corporate
federal income tax rate principally due to differences
between book and tax accounting arising from the amortization
of goodwill associated with the GE Transaction and state
income taxes.
* * * * * * * * * * * * * * * * * * * * * * * * * * *
17 of 24
MARTIN MARIETTA CORPORATION AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 1994
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
On August 29, 1994, Martin Marietta Corporation
("Martin Marietta") and Lockheed Corporation ("Lockheed")
entered into a definitive Agreement and Plan of Reorganization
that will, assuming that the transaction contemplated therein
(the "Combination") is consummated, result in Martin Marietta
and Lockheed becoming separate subsidiaries of a newly formed
holding company called Lockheed Martin Corporation. Martin
Marietta is a party to a number of lawsuits relating to the
Combination. Class certification has been requested in each
suit.
Lockheed, Martin Marietta and the directors of Lockheed
are parties to three lawsuits filed in the Superior Court of
the State of California (i) Richard Rampell and Frederick Rand
v. Daniel M. Tellep, et al., (filed August 31, 1994); (ii)
Stanton Discount Pharmacy, Inc. v. Daniel M. Tellep, et al.,
(filed September 12, 1994); and (iii) Rose Hadian v. Daniel M.
Tellep, et al., (filed October 27, 1994) and one lawsuit filed
in the Court of Chancery of the State of Delaware, Daniel
Lifshitz v. Lockheed Corporation, et al., (filed September 26,
1994). Martin Marietta, Lockheed and the directors of Martin
Marietta are parties to an additional lawsuit filed in the the
Superior Court of the State of California, Doris R. Fish v.
Marcus C. Bennett, et al., (filed October 26, 1994).
Each of these lawsuits generally alleges the breach, or
aiding and abetting a breach, of various fiduciary duties. In
particular, the lawsuits focus, among other things, on the
alleged unconscionability and gross unfairness of the
consideration to be offered in the Combination, alleged
director self-dealing and conflicts of interests, the alleged
negative effects of the $100 million termination fee and the
alleged duty to maximize stockholder value via an auction,
open bidding or other "market check" mechanism. The lawsuits
also seek similar relief, generally in the form of a request
that the Combination be enjoined, the entry of an order
directing the directors to carry out their fiduciary duties,
and a request for unspecified monetary damages. Martin
Marietta (and, with respect to the Fish suit, Martin
Marietta's directors) intends to contest the claims asserted
in these suits on, among other grounds, the fact that the
Combination is a "merger of equals," does not involve the sale
of the either Lockheed or Martin Marietta and that,
consequently, no auction is required.
In late June 1994, Martin Marietta received a subpoena from
the Department of Defense Inspector General's Office for
documents related to Martin Marietta's Compu-Scene image
generator product. The Government appears to be investigating
the exemption for and/or waiver of the submission of cost or
pricing data. Martin Marietta is responding to the subpoena
and is negotiating with the Government with respect to a
number of issues associated with document production.
18 of 24
MARTIN MARIETTA CORPORATION AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 1994
PART II - OTHER INFORMATION
(Continued)
Item 1. Legal Proceedings (continued)
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 2. Change in Securities
In August 1994, the Board of Directors of Martin Marietta
Corporation adopted a Stockholder Rights Plan. Reference is
made to Note 4 on page 7 for a summary of the Plan provisions.
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 and nine months ended September 30, 1994
and 1993, is presented on pages 22 and 23.
2. Exhibit 12, Martin Marietta Corporation and Consolidated Subsidiaries
Computation of Ratio of Earnings to Fixed Charges for the nine months
ended September 30, 1994, is presented on page 24.
(b) Reports on Form 8-K filed in the third quarter of 1994.
Current report on Form 8-K filed on September 1, 1994.
Item 5. - Other Events
The registrant filed information regarding the August 29, 1994,
definitive agreement between Martin Marietta Corporation and Lockheed
Corporation which provides for transactions that will result in
Martin Marietta and Lockheed becoming separate subsidiaries of a
holding Company that will be called Lockheed Martin Corporation. The
registrant also filed information regarding its adoption of a
Stockholder Rights Plan pursuant to which the registrant will
distribute Common Stock Purchase Rights to its stockholders in
accordance with the provisions of the Plan.
19 of 24
MARTIN MARIETTA CORPORATION AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 1994
PART II - OTHER INFORMATION
(Continued)
(b) Reports on Form 8-K filed in the third quarter of 1994.(continued)
Item 7. - Financial Statements and Exhibits
The registrant filed the following exhibits:
Exhibit 4 - A copy of Rights Agreement, dated as of August 29, 1994,
with First Chicago Trust Company of New York, Rights
Agent (incorporated by reference to Exhibit 1 to the
Registrant's Form 8-A dated September 1, 1994).
Exhibit 99.1- A copy of the press release issued by the Registrant
August 30, 1994, relating to the Stockholder Rights
Plan.
Exhibit 99.2- A copy of the joint press release issued by the
Registrant and Lockheed Corporation on August 30,
1994.
Current report on Form 8-K filed on September 30, 1994.
Item 5. - Other Events
The registrant filed information indicating that on
August 29, 1994 Martin Marietta Corporation and
Lockheed Corporation entered into a definitive
Agreement and Plan of Reorganization among Parent
Corporation, Martin Marietta Corporation and Lockheed
Corporation providing for transactions that will
result in the Registrant and Lockheed becoming
separate subsidiaries of Parent Corporation, a holding
company that will be called Lockheed Martin Corporation.
The Registrant also filed information regarding the
definitive Plan and Agreement of Merger, dated as of
August 29, 1994, among Martin Marietta Corporation,
Atlantic Sub, Inc. and Parent Corporation entered
into pursuant to the Reorganization Agreement.
Item 7. - Financial Statements and Exhibits
The registrant filed the following exhibits:
Exhibit 2.1 - A copy of Agreement and Plan of Reorganization, dated as
of August 29, 1994, among Parent Corporation, Martin
Marietta Corporation and Lockheed Corporation.
Exhibit 2.2 - A copy of Plan and Agreement of Merger, dated as of
August 29, 1994, among Martin Marietta Corporation,
Atlantic Sub, Inc. and Parent Corporation.
20 of 24
MARTIN MARIETTA CORPORATION AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 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: November 14, 1994 by: /s/ Marcus C. Bennett
Marcus C. Bennett
Vice President &
Chief Financial Officer
21 of 24
EXHIBIT 11
MARTIN MARIETTA CORPORATION AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 1994
COMPUTATION OF NET EARNINGS (LOSS) PER COMMON SHARE
Third Quarter and Nine Months Ended September 30, 1994 and 1993
Three Months Ended Nine Months Ended
September 30, September 30,
1994 1993 1994 1993
(In Millions, except per share data)
ASSUMING NO DILUTION:
Average number of common shares outstanding (1) 96.0 95.6 95.9 95.2
======= ======= ======= =======
Earnings before cumulative effect of
accounting changes $ 148.8 $ 131.1 $ 496.1 $ 331.6
Less: Preferred stock dividends 15.0 15.0 45.0 30.3
------- ------- ------- -------
Earnings before cumulative effect of accounting
changes applicable to common stock 133.8 116.1 451.1 301.3
Cumulative effect of accounting changes - - - (429.4)
------- ------- ------- -------
Net earnings (loss) applicable to common stock $ 133.8 $116.1 $ 451.1 $(128.1)
======= ======= ======= =======
Net earnings (loss) per common share:
Before cumulative effect of accounting
changes $ 1.39 $ 1.21 $ 4.70 $ 3.16
Cumulative effect of accounting changes - - - (4.51)
------- ------- ------- -------
$ 1.39 $ 1.21 $ 4.70 $ (1.35)
======= ======= ======= =======
<FN>
(1) Excludes common stock equivalents
since the dilutive effect on earnings
per share assuming no dilution is
less than 3%.
22 of 24
EXHIBIT 11 - Continued
MARTIN MARIETTA CORPORATION AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 1994
COMPUTATION OF NET EARNINGS (LOSS) PER COMMON SHARE
Third Quarter and Nine Months Ended September 30, 1994 and 1993
Three Months Ended Nine Months Ended
September 30, September 30,
1994 1993 1994 1993
(In Millions, except per share data)
ASSUMING FULL DILUTION:
Average number of common shares outstanding 96.0 95.6 95.9 95.2
Dilutive stock options-based on the treasury
stock method using the September 30 market
prices, if higher than average market price 1.2 1.3 1.3 1.3
Assumed conversion of the Convertible Preferred
Stock from the date of issuance 28.9 28.9 28.9 19.3
----- ----- ----- -----
126.1 125.8 126.1 115.8
===== ===== ===== =====
Earnings before cumulative effect of accounting
changes applicable to common stock $ 133.8 $ 116.1 $ 451.1 $ 301.3
Add: Preferred stock dividends 15.0 15.0 45.0 30.3
----- ----- ----- -----
Earnings before cumulative effect of
accounting changes 148.8 131.1 496.1 331.6
Cumulative effect of accounting changes - - - (429.4)
----- ----- ----- -----
Net earnings (loss) $ 148.8 $ 131.1 $ 496.1 $( 97.8)
===== ===== ===== =====
Net earnings (loss) per common share:
Before cumulative effect of accounting
changes $ 1.18 $ 1.04 $ 3.94 $ 2.86
Cumulative effect of accounting changes - - - *
----- ----- ----- -----
$ 1.18 $ 1.04 $ 3.94 $ *
===== ===== ===== =====
<FN>
* Anti-dilutive
23 of 24
EXHIBIT 12
MARTIN MARIETTA CORPORATION AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 1994
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
For the Nine Months Ended September 30, 1994
(In millions of dollars, except ratio)
EARNINGS:
Net earnings $ 496.1
Taxes on income 340.5
Interest expense 93.0
Amortization of debt premium and expense, net ( 5.4)
Portion of rents representative of an interest factor 17.1
Earnings of less than 50% owned associated companies, net ( .5)
-------
Adjusted earnings before taxes and fixed charges $ 940.8
=======
FIXED CHARGES:
Interest expense $ 93.0
Amortization of debt premium and expense, net ( 5.4)
Portion of rents representative of an interest factor 17.1
Capitalized interest 1.9
-------
Total fixed charges $ 106.6
=======
RATIO OF EARNINGS TO FIXED CHARGES 8.83
=======
24 of 24