March 22, 1999
United States
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________
Form 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year Commission file
ended December 31, 1998 number 1-11437
LOCKHEED MARTIN CORPORATION
(Exact name of registrant as specified in its charter)
Maryland 52-1893632
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6801 Rockledge Drive, Bethesda, Maryland 20817-1877 (301/897-6000)
(Address and telephone number of principal executive offices)
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of Each Class on which registered
------------------- ---------------------
Common Stock, $1 par value New York Stock Exchange, Inc.
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days. Yes [x] No [ ]
Indicate by check mark if the disclosure of delinquent filers pursuant to Item
405 or Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K [ ]
State the aggregate market value of the voting stock held by non-affiliates of
the registrant. Approximately $14.5 billion as of January 31, 1999.
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date. Common Stock, $1 par value,
393,414,606 shares outstanding as of January 31, 1999.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of Lockheed Martin Corporation's 1998 Annual Report to Shareholders are
incorporated by reference in Parts I and II of this Form 10-K.
Portions of Lockheed Martin Corporation's 1999 Definitive Proxy Statement are
incorporated by reference in Part III of this Form 10-K.
PART I
ITEM 1. BUSINESS
General
Lockheed Martin Corporation (the "Corporation," which also may be referred to
as "we," "us," or "our") is a highly diversified global enterprise that
principally researches, designs, develops, manufactures and integrates advanced
technology products and services. In March 1995, we were formed by combining
the businesses of Martin Marietta Corporation ("Martin Marietta") and Lockheed
Corporation ("Lockheed"). We are a Maryland corporation.
Throughout this Form 10-K, we "incorporate by reference" information from
parts of other documents filed with the Securities and Exchange Commission
("SEC"). The SEC allows us to disclose important information by referring to it
in this manner and you should review such information.
Our principal executive offices are located at 6801 Rockledge Drive, Bethesda,
Maryland 20817. Our telephone number is (301) 897-6000. Our home page on the
Internet is www.lockheedmartin.com. You can learn more about us by reviewing
our SEC filings on that web site. We are making our web site content available
for your information only. It should not be relied upon for investment
purposes, nor is it incorporated by reference into this Form 10-K.
Transaction Agreement with COMSAT Corporation
In September 1998, we entered into an agreement with COMSAT Corporation
("COMSAT") to combine COMSAT with one of our subsidiaries in a two-phase
transaction with
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an estimated value for COMSAT of approximately $2.7 billion as of that date. In
the first phase of this transaction, acting through a subsidiary, we commenced a
cash tender offer to purchase up to 49% of the outstanding shares of COMSAT
common stock at $45.50 per share, subject to certain adjustments.
Subject to the terms of the agreement, the tender offer will be extended
for periods of up to 60 days until at least the earlier of (i) September 18,
1999 or (ii) satisfaction of certain conditions to closing, including (1) the
condition that at least one-third of the outstanding shares of COMSAT common
stock be validly tendered (and not withdrawn), (2) the approval of the merger by
the COMSAT stockholders and (3) receipt of certain regulatory approvals,
including Federal Communications Commission ("FCC") approval for us to purchase
more than 10% of COMSAT's outstanding shares, and antitrust clearance by the
Department of Justice. Currently, the tender offer expires on May 3, 1999. Until
we complete the merger, we will account for the COMSAT investment resulting from
the tender offer under the equity method of accounting.
The second phase of the transaction is the completion of the merger through
the exchange of one share of our common stock for each share of COMSAT common
stock not purchased in the tender offer. COMSAT shareholders are voting on the
proposed merger at COMSAT's annual meeting of stockholders scheduled for June
18, 1999. We will account for our merger with COMSAT under the purchase method
of accounting. Consummation of the merger is subject to, among other things, the
closing of the tender offer, the enactment of federal legislation necessary to
allow us to acquire the remaining COMSAT shares and certain additional
regulatory approvals. The speed at which the legislative process progresses will
affect the timing of the second phase of the transaction. If the first phase
tender offer is consummated and if the necessary legislation is not enacted or
the additional
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regulatory approvals are not obtained, we will not be able to consummate the
merger nor will we be able to control COMSAT.
Current FCC regulations do not allow a company that is not an "FCC
authorized common carrier" to purchase more than 10% of COMSAT. We have filed an
application with the FCC for our acquisition subsidiary to acquire a COMSAT
common carrier subsidiary through a merger and for FCC designation of that
subsidiary as an FCC authorized common carrier allowed to purchase up to 49% of
COMSAT. On January 21, 1999, the Chairman of the House Committee on Commerce and
the Chairman of the Senate Subcommittee on Communications sent a letter to the
FCC urging it not to take any action to permit any company to purchase more than
10% of COMSAT prior to Congress amending the Communications Satellite Act of
1962 that would involve privatization of Intelstat and lifting ownership limits
on COMSAT.
If the FCC does not proceed with its review of our filings related to the
tender offer or does not otherwise proceed on the schedule that we anticipate,
we may not be able to complete the tender offer by September 18, 1999. If the
tender offer is not completed by this date, under the terms of the merger
agreement, any of the parties may terminate the merger agreement. The parties
may elect not to do this or elect to amend the merger agreement so that the
merger can be completed at a date later than September 18, 1999. In addition, if
Congress does not make progress on satellite reform legislation, even if the
tender offer is completed, the merger may not occur in 1999. On the other hand,
if Congress timely acts on the legislation, the merger may occur in 1999.
In August 1998, we formed Lockheed Martin Global Telecommunications, Inc., a
wholly-owned subsidiary ("LMGT"), to focus on expanding our presence in the
global telecommunications services market. Subsequently, we transferred certain
investments in
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joint ventures and business units from some of our sectors to LMGT. The transfer
was effective in January 1999. If the COMSAT transaction is consummated, we
intend to combine COMSAT's operations with LMGT's operations.
Business Segments
We operate through five business sectors:
. Space & Strategic Missiles sector -- designs, develops, manufactures and
---------------------------------
integrates space systems, including spacecraft, space launch vehicles, manned
space systems and their supporting ground systems and services; strategic
fleet ballistic missiles; and defensive missiles;
. Electronics sector -- designs, develops, manufactures and integrates high
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performance electronic systems for undersea, shipboard, land, airborne and
space-based applications;
. Aeronautics sector -- designs, develops, manufactures and integrates airlift,
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tactical and reconnaissance aircraft as well as surveillance/command,
maintenance/modification/logistics and other development programs;
. Information & Services sector designs, develops, integrates and operates
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large, complex information systems which include command and control,
intelligence, simulation and training and air traffic management; and provides
state and local government transaction processing, commercial information
technology services and performs a broad range of engineering, science and
technology services for federal government customers; and
. Energy & Environment sector conducts and operates nuclear operations
---------------------------
management, nuclear materials management and technology-driven remediation
programs.
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For business segment reporting in our consolidated financial statements, the
Space & Strategic Missiles, Electronics, Aeronautics and Information & Services
sectors each comprise reportable business segments. The Energy & Environment
sector and our other activities are reported as Energy and Other.
Comparative segment revenues, profits and related financial information for
1998, 1997 and 1996 are provided in the table entitled "Selected Financial Data
by Business Segment" in "Note 17 - Information on Industry Segments and Major
Customers" on page 44 of our 1998 Annual Report to Shareholders.
Space & Strategic Missiles Sector
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Our Space & Strategic Missiles sector conducts most of its business through
its Astronautics, Missiles & Space and Michoud Space Systems companies. A
substantial portion of the sector's activities involves classified programs for
the U.S. Government. In 1998, the sector's net sales represented 28.4% of our
total net sales.
The sector's Astronautics company designs, develops, manufactures and
integrates advanced technology systems for space and defense. Principal products
include the Titan and Atlas family of launch vehicles. Through our joint venture
with two Russian aerospace companies, (which joint venture is consolidated in
our financial statements), we also provide Proton rocket launch vehicle
services. In 1998, we experienced postponements of some Proton launches of
commercial satellites due to delays in payload deliveries. In 1998, the U.S. Air
Force awarded us a contract modification to complete the production of Titan IV
space launch vehicles and provide launch services through 2002. In August 1998,
Titan II and IV booster launches were delayed
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following the failure of a mission. In early 1999, the U.S. Air Force, after
extensive analysis, announced that the Titan launch vehicles may return to
operational status. In addition, in 1998, we received separate agreements from
the U.S Air Force to develop the Evolved Expendable Launch Vehicle ("EELV") and
to provide launch services for nine U.S. Government missions using an EELV to be
named "Atlas V."
The sector's Missiles & Space company designs, develops, manufactures and
integrates strategic missiles and spacecraft for communications, Earth
observation, scientific and navigation missions for military and civilian
government agencies and commercial customers. Principal products include the
Trident II submarine-launched fleet ballistic missile and MILSTAR defense
communications satellites. The company also plays a role in the National
Aeronautics & Space Administration's ("NASA") international Space Station
program. Through its Commercial Space Systems unit, the company markets and
sells communications spacecraft to commercial telecommunications customers,
including some customers in which we have an ownership interest.
During 1998, the Missiles & Space company's Theater High Altitude Area Defense
("THAAD") system failed to achieve an intercept of a ballistic target during
testing. In response to this flight failure, we agreed with the U.S. Army to a
contract modification providing for cost sharing in the event a pre-determined
number of direct hits is not achieved during 1999.
In 1998, the Missiles & Space company discovered a manufacturing defect in
traveling wave tube amplifiers (TWTAs), which are satellite components made by
another company, following observed failures of TWTAs in some of its orbiting
satellites. The investigation and resolution of the defect led to a decision to
ground and repair five satellites, including one
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already shipped and awaiting launch. The delay moved the expected launch dates
of some of these satellites from 1998 to 1999.
The sector's Michoud Space Systems company manufactures the Super Lightweight
Tank, the latest iteration of the Space Shuttle External Tank for NASA. This
company also designs, develops and manufactures, for us and commercial
customers, large aluminum and composite structures (including fuel tanks for
space vehicles), cryogenic propellant feed systems and thermal protection
systems for cryogenic structures. Currently, Michoud is developing the X-33
liquid oxygen tanks and main propellant feed system.
Space Imaging, LP, which we principally own with Raytheon Company, collects
and distributes a wide variety of satellite- and aerially-derived digital Earth
information products. In 1999, we expect Space Imaging to launch an advanced
commercial imaging satellite built by the sector's Missiles & Space company. In
1998, during testing, this satellite's gyroscopic components showed an
unacceptably short on-orbit lifetime prediction. To undertake the steps
necessary to restore the expected life of the satellite, the first satellite
launch was delayed from late 1998 into 1999.
During 1998, we reassigned management responsibility for the United Space
Alliance, LLC, which we jointly own with The Boeing Company, from the
Information & Services sector to this sector. United Space Alliance is
responsible for the day-to-day operation and management of the Space Shuttle
fleet for NASA. It also performs the modification, testing and checkout
operations required to prepare space shuttles for launch.
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The sector is heavily dependent on both military and civilian agencies of the
U.S. Government as customers. In 1998, U.S. Government customers accounted for
over three-quarters of the sector's net sales.
Electronics Sector
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Our Electronics sector is comprised of numerous business units, engaged mainly
in U.S. defense work. Major product lines include surface ship and submarine
combat systems; anti-submarine warfare systems; air defense systems; tactical
battlefield missiles; engine controls; radar and fire control systems;
electronic warfare systems; electro-optic and night vision systems; displays;
systems integration of mission specific combat suites; and postal automation
systems. The sector's major lines of business include: Naval Electronics and
Surveillance Systems; Missiles and Fire Control; Aerospace Electronics; and
Platform Integration. The sector also has a Control Systems business. A
portion of the sector's activities involve classified programs for the U.S.
Government. In 1998, the sector's net sales represented 28.0% of our total net
sales.
Naval Electronics and Surveillance Systems provides products and services,
including shipboard electronics integration, surface ship and submarine combat
systems, sensors and missile launching systems. Missiles and Fire Control
produces air defense systems, tactical battlefield missiles and precision guided
weapons and munitions. Aerospace Electronics manufactures major electronics
subsystems such as: information warfare and countermeasures systems,
surveillance and reconnaissance systems and space electronics products.
Platform Integration performs systems integration of mission specific combat
suites in areas including anti-submarine warfare, electronic warfare,
surveillance and reconnaissance, and postal automation. Control Systems produces
flight and engine controls, space vehicle power and control systems, hybrid
diesel electronic propulsion
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systems and electronics for the rail transportation industry.
In 1998, we continued our role as a major supplier of shipboard combat
systems for surface combatants for the U.S. Navy. We are the prime contractor
for the U.S. Navy's AEGIS fleet air defense system and, in 1998, the U.S. Navy
awarded us two new AEGIS contracts: one for future AEGIS program computer
development and one to produce multiple AEGIS weapon systems.
In 1998, we enhanced our stature as an international business partner through
leadership or membership on teams selected to execute defense programs for
countries in Europe and Asia, and Australia. These programs involve the
development and deployment of advanced electronic systems on airborne-, naval-
and land-based platforms. In 1998, several international joint development
groups selected us to participate in their programs.
In 1998, the Electronics and Aeronautics sectors worked together to enter
the air-launched cruise missile market with a contract to develop and build the
Joint Air-to-Surface Standoff Missile ("JASSM") system for the U.S. Air Force
and Navy. In April 1998, our wholly-owned subsidiary, Lockheed Martin
Integrated Systems, Inc. ("LMIS"), was awarded a contract to complete JASSM's
Program Definition and Risk Reduction phase. In November 1998, LMIS executed the
contract for engineering and manufacturing development in a 40-month program.
Production on the missile is expected to begin in early 2001.
The sector continues to selectively pursue non-defense business
opportunities where it can utilize its technical and large-scale integration
capabilities. Our postal business -- under which we provide material handling
systems and equipment to sort mail, technology for bar code
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reading, and address and handwriting recognition systems to the U.S. Postal
Service and international customers -- continues to grow. In 1998, our postal
business obtained contracts from postal agencies in the U.S. and Australia, and
we acquired three companies that manufacture and market high-speed processing
systems, bar code readers and sorters.
The sector is heavily dependent on the U.S. military as a customer. In
1998, U.S. Government customers accounted for over two-thirds of the sector's
net sales.
Aeronautics Sector
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Our Aeronautics sector conducts its business through four operating companies:
Aeronautical Systems, Aircraft & Logistics Centers, Skunk Works and Tactical
Aircraft Systems. A portion of the sector's activities involve classified
programs for the U.S. Government, particularly at Skunk Works. In 1998, the
sector's net sales represented 22.8% of our total net sales.
The sector is involved in large defense programs including:
. F-22 air-superiority fighter -- that has significantly improved capabilities
over current U.S. Air Force aircraft;
. F-16 multi-role fighter -- presently the world's premier, low-cost multi-role
fighter;
. Joint Strike Fighter -- currently in the concept demonstration phase
potentially leading to the next generation, multi-role fighter and has the
potential to be the largest tactical aircraft program in the U.S., and perhaps
the world;
. C-130J transport -- latest generation of C-130 Hercules tactical transport
aircraft; and
. X-33 reusable launch vehicle -- a subscale demonstrator flight vehicle which
eventually may
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lead to development of a commercial reusable launch vehicle
program.
We are the team leader for the F-22 air superiority fighter aircraft
program. The F-22 is the latest generation of fighter aircraft and continues to
proceed through its engineering and manufacturing development phase, meeting or
exceeding all key performance parameters. In 1998, the F-22 met the flight
test criteria set by the Department of Defense, allowing them to award us an
initial contract for the first two production aircraft -- termed Production
Representative Test Vehicles -- and for long lead procurement for Production Lot
1 (consisting of six aircraft). The Lot 1 production contract award is
anticipated to occur in late 1999.
We are the prime contractor on the F-16 "Fighting Falcon" tactical fighter
aircraft and continue to provide upgrades for the U.S Air Force and our
international customers. To date, we have sold over four thousand of these
aircraft. In 1998, the United Arab Emirates selected our new "Block 60" F-16 as
its advanced fighter aircraft, and we are working to sign a multi-billion dollar
contract during 1999.
For the next generation Joint Strike Fighter, various branches of the U.S.
military and other countries' militaries are working together on a set of
requirements that should allow a near-common design. In 1998, we completed the
basic aerodynamic design of our Joint Strike Fighter concept and completed
various design reviews. We also continued to fabricate two concept
demonstration aircraft. In 2000, we anticipate that flight tests of the concept
demonstration aircraft will be made. We are one of the two remaining
competitors for the program down-select award, which currently is planned to be
made in 2001.
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The C-130J is an advanced technology tactical transport aircraft offering
improved performance and reliability and reduced operating and support cost over
prior C-130 models. The "J" model incorporates state-of-the-art cockpits and
avionics, a more powerful and efficient propulsion system and numerous
manufacturing innovations into a proven, mission-tested airframe. In 1998, we
received Federal Aviation Administration ("FAA") certification for the C-130J
and made nineteen deliveries. As a result of the later than expected FAA
certification due to ice removal and final acceptance issues, we were unable to
complete all of the deliveries planned for 1998. We intend to resolve the 1998
delivery issues and expect to meet our customers' current schedules in 1999.
Since 1996, we have been working with NASA to develop the X-33, a subscale
technology demonstrator of a reusable launch vehicle. In 1998, we completed the
final design review of the X-33. In 1999, we expect to complete major milestones
pertaining to vehicle assembly and integration leading to the anticipated roll-
out and first flight of a subscale prototype in 2000. We will then decide
whether to proceed with the development of a full-scale, commercial reusable
launch vehicle program.
We also provide sustaining engineering, modifications and upgrades for
existing aircraft, including the F-117 fighter, the U-2 reconnaissance aircraft,
and earlier model C130s and are involved in other programs such as the joint
Japan/U.S. production of the F-2 aircraft.
The sector is dependent on the U.S. military, NASA and international
governments as customers. In 1998, U.S. Government customers accounted for
approximately one-half of the sector's net sales.
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Information & Services Sector
- -----------------------------
Our Information & Services sector provides government and commercial customers
with engineering, scientific, management, technical and information technology
systems and services through numerous business units. The sector's four primary
lines of business are: (i) systems integration and command, control,
communications, computer and intelligence ("C4I") systems; (ii) federal
technology services; (iii) state and municipal systems support services; and
(iv) commercial information technology services. A portion of the sector's
activities involves classified programs for the U.S. Government. The sector
also provides internal information system support to the Corporation and its
affiliates. In 1998, the sector's net sales represented approximately 19.8% of
our total net sales.
Through the sector's systems integration and C4I line of business, in 1998,
we continued to upgrade the U.S. National Air Traffic Control System through a
contract to replace display systems at 20 FAA Air Route Traffic Control
Centers. In December 1998, Seattle became the first center to begin operations
with the new system. In 1998, we expanded our international business. For
example, we obtained contracts to provide air traffic control for two airports
in China and to design and implement an automated system for the United Kingdom
census. In addition, we entered into a joint venture in Poland to provide
information technology services in Poland and Eastern Europe.
Through the sectors' federal technology services line of business, we provide
a wide array of scientific and engineering, information management, operation
and maintenance, logistics, assembly and test and installation services to
governmental agencies and prime contractors. In 1998, NASA awarded us the
Consolidated Space Operations Contract to consolidate mission and
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data services operations at five of NASA's major centers. This is a multi-
billion dollar, five-year contract, with an option for five more years. In
addition, the U.S. Army awarded us, along with two other contractors, a contract
with the potential for revenue of $1.5 billion for the Rapid Response to
Critical System Requirement program to ensure that critical systems maintain
full functionality and operability.
Services to state and local government customers include systems development,
integration and operational support in the areas of welfare reform, municipal
services, children and family services, transportation, information resource
management and integrated technology solutions. In late 1998, we enhanced our
stop light and radar photo enforcement business through an acquisition. In
December 1998, we agreed, subject to regulatory processes, to divest our
communications industry services business, which serves as the North American
Numbering Plan administrator and as the local number portability administrator
for the U.S. and Canada.
We continue to focus on our commercial information technology services. In
1998, we won an information technology services contract from Policy Management
Systems Corporation for support related to insurance industry software systems
and automation, administration and information services. In the fourth quarter
of 1998, we notified CalComp Technology, Inc. ("CalComp"), our majority-owned
public subsidiary, that we would not increase existing credit to support
CalComp's ongoing operations. Subsequently, we agreed to provide financing,
subject to certain conditions, for a plan providing for the timely non-
bankruptcy shutdown of CalComp's business. In 1999, we may explore exiting
other non-core commercial product operations.
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The sector is dependent on the military and civilian agencies of the U.S.
Government as customers. In 1998, U.S. Government customers accounted for
nearly three-quarters of the sector's net sales.
Energy & Environment Sector
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Our Energy & Environment sector, consisting of nine principal operating
companies, is in three lines of business: nuclear operations management for
the DOE, nuclear materials management for the Department of Energy ("DOE") and
technology-driven remediation programs. Under most of the sector's contracts, we
receive a fee for performing management services and are reimbursed for the cost
of operations. Only the fee we receive is recorded in our net sales and
earnings. In 1998, the sector's net sales represented less than 1% of our total
net sales.
As one of the largest management and operations contractors for the DOE, we
manage defense, energy research and environmental programs. We manage the DOE's
Y-12 facility in Oak Ridge, Tennessee and part of DOE's Nevada Test Site as part
of its defense program area. In 1998, we received notification of DOE's
intention to extend the Y-12 contract to mid-2001 and, in 1999, we received a
three-year extension for a nuclear waste management subcontract at DOE's
Hanford, Washington site. In May 1999, our management contract for uranium
enrichment at a former DOE site (now privatized under the United States
Enrichment Corporation) will expire. In addition, we manage the laboratories
at Sandia National Laboratories, Oak Ridge National Laboratory and Idaho
National Engineering and Environmental Laboratory. In 1998, the DOE extended
our Sandia contract for another five years. In 1999, the Oak Ridge and Idaho
National Engineering management contracts will undergo competition for a new
contract. We have decided not to bid on the Idaho National Engineering contract
and have decided to not independently bid on
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the Oak Ridge contract, but we may consider other options. For a discussion
relating to pending litigation involving Pit 9 located on the Idaho National
Engineering and Environmental Laboratory reservation, see "Item 3. Legal
Proceedings."
The sector is heavily dependent on the DOE, and to a much lesser extent, the
Department of Defense ("DOD"), as customers. In 1998, U.S. Government
customers accounted for approximately three-quarters of the sector's net sales.
Additional Activities
- ----------------------
In August 1998, we formed LMGT to expand our presence in the global
telecommunications services market. Effective in January 1999, we transferred
the following operations from other sectors to LMGT:
. our assets and liabilities relating to telecommunication activities of the
Missiles & Space company, Lockheed Martin Management & Data Systems and
Lockheed Martin Western Development Laboratories that are engaged in programs
such as ASIA Cellular Satellite ("ACeS"), Ellipso, and Astrolink /TM/;
. our investment in Lockheed Martin Intersputnik, Ltd., a strategic venture
principally owned by us and, and to a lesser extent, owned by Moscow-based
Intersputnik International Organization of Space Communications, that is
scheduled to deploy its first satellite in 1999;
. our 50% investment in Americom Asia-Pacific, LLC, a joint venture with GE
American Communications, Inc. that is scheduled to launch a satellite in 1999
that will serve broadcasters in the Asia-Pacific region; and
. our 30% equity investment in ACeS, recently reincorporated as ACeS
International Limited, which is to deliver mobile voice and data
communications
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services beginning in late 1999 in the Asia-Pacific region.
If the COMSAT tender offer and the merger are consummated, we intend to
combine COMSAT's operations with LMGT's operations.
We also run research laboratories, own real estate and conduct other
miscellaneous activities. We have approximately a diluted 14% interest (in the
form of convertible preferred stock) in Loral Space & Communications, Ltd. We
are considering monetizing or divesting this interest in 1999, if market
conditions permit and we obtain any necessary Loral agreement. In February 1999,
we reduced our ownership interest in L-3 Communications Corporation from
approximately 25% to 7%.
Patents
We own numerous patents and patent applications, some of which, together with
licenses under patents owned by others, are utilized in our operations.
Although these patents and licenses are, in the aggregate, important to the
operation of our business, no existing patent, license or other similar
intellectual property right is of such importance that its loss or termination
would, in the opinion of management, materially affect our business.
Raw Materials and Seasonality
Although certain aspects of our business require relatively scarce raw
materials, we have not experienced difficulty in our ability to obtain raw
materials and other supplies needed in our manufacturing processes, nor do we
expect this to be an issue in the future. No material portion of our business is
considered to be seasonal.
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Competition and Risk
We compete with numerous other contractors on the basis of price, as well as
technical and managerial capability. Our ability to successfully compete for
and retain such business is highly dependent on technical excellence, management
proficiency, strategic alliances, cost-effective performance and the ability to
recruit and retain key personnel.
On-going consolidation of the U.S. and global defense and space industries
continues to intensify competition. Consolidation among U.S. defense, space and
aerospace companies has resulted in a reduction of the number of principal prime
contractors for the DOD and NASA. As a result of this consolidation, we
frequently partner on various programs with our major suppliers, some of whom
are, from time to time, our competitors on other programs. We are required to
generate working capital and invest in fixed assets to maintain and expand our
government business. Winning the competition for a contract is often the
determinant of whether a competitor is able to remain in that line of business.
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U.S. Government programs are also subject to uncertain future funding
levels, which can result in the extension or termination of programs. Our
business is also highly sensitive to changes in national and international
priorities and U.S. Government budgets. For most of this decade, we have been
adversely impacted by U.S. Government budgetary and policy constraints which led
to fewer available contracts. Recently, the Clinton administration announced
plans to obtain increased budgets for the U.S. military. There can be no
assurance, however, that these announced plans will result in increased hardware
or services procurements; increased research and development spending; or that
we would win any contracts funded by any budgetary increases.
In 1998, 70% of our net sales were made to the U.S. Government, either as a
prime contractor or as a subcontractor. Accordingly, a substantial portion of
our sales are subject to inherent risks, including uncertainty of economic
conditions, changes in government policies and requirements that may reflect
rapidly changing military and political developments and the availability of
funds. Other characteristics of the industry are complexity of designs, the
difficulty of forecasting costs and schedules when bidding on developmental and
highly sophisticated technical work, and the rapidity with which product lines
become obsolete due to technological advances and other factors characteristic
of the industry. Certain risks inherent in the current aerospace and defense
business environment are discussed in "Management's Discussion and Analysis of
Financial Condition and Results of Operations" on page 15 through page 25 of our
1998 Annual Report to Shareholders.
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During the past few years, a growing percentage of our business has been in
developmental programs under cost-reimbursement-type contracts, which generally
have lower profit margins than fixed-price-type contracts. Earnings may vary
materially depending on the types of long-term government contracts undertaken,
the costs incurred in their performance, the achievement of other performance
objectives and the stage of performance at which the right to receive fees,
particularly under incentive and award fee contracts, is finally determined.
Our international business, which has been growing, tends to have more risk
than our domestic business due to the greater potential for changes in foreign
economic and political environments. Our business is also highly sensitive to
changes in foreign national priorities and government budgets. International
transactions frequently involve increased financial and legal risks arising from
stringent contractual terms and conditions and the widely differing legal
systems and customs in foreign countries.
Government Contracts and Regulations
Our businesses are heavily regulated in most of our markets. We deal with
numerous U.S. Government agencies and entities, including all of the branches of
the U.S. military and NASA. Similar government authorities exist in our
international markets.
21
The U.S. Government, and other governments, may terminate any of our
government contracts and, in general, subcontracts at their convenience as well
as for default on performance. If any of our government contracts were to be
terminated for convenience, we generally would be entitled to receive payment
for work completed and allowable termination or cancellation costs.
Upon termination for convenience of a fixed-price type contract, we normally
are entitled, to the extent of available funding, to receive the purchase price
for delivered items, reimbursement for allowable costs for work-in-process and
an allowance for profit on the contract or adjustment for loss if completion of
performance would have resulted in a loss. Upon termination for convenience of
a cost-reimbursement type contract, we normally are entitled, to the extent of
available funding, to reimbursement of allowable costs plus a portion of the
fee. The amount of the fee recovered, if any, is related to the portion of the
work accomplished prior to termination and is determined by negotiation.
U.S. Government contracts also are conditioned upon the continuing
availability of Congressional appropriations. Long-term government contracts and
related orders are subject to cancellation if appropriations for subsequent
performance periods become unavailable. Congress usually appropriates funds on a
fiscal-year basis even though contract performance may extend over many years.
Consequently, at the outset of a program, the contract is usually partially
funded and Congress annually determines if additional funds are appropriated to
the contract.
A portion of our business is classified by the government and cannot be
specifically described. The operating results of these classified programs are
included in our consolidated financial statements. The business risks
22
associated with classified programs do not differ materially from those of our
other government programs and products.
Backlog
At December 31, 1998, our total negotiated backlog was $45.3 billion
compared with $47.1 billion at the end of 1997. The total negotiated backlog of
the sectors at December 31, 1998, was as follows: Space & Strategic Missiles --
$16.1 billion, Electronics -- $10.6 billion, Aeronautics -- $10.6 billion and
Information & Services -- $7.8 billion. At December 31, 1998, the Energy &
Environment sector contributed almost all of the total negotiated backlog of
$226 million for the reportable business segment of which it is a part, Energy
and Other. Of our total 1998 year-end backlog, approximately $26.8 billion, or
59.2%, is not expected to be filled within one year.
These amounts are all approximate and include both unfilled firm orders for
our products for which funding has been both authorized and appropriated by the
customer (Congress in the case of U.S. Government agencies) and firm orders for
which funding has not been appropriated.
Environmental Regulation
Our operations are subject to and affected by a variety of federal, state and
local environmental protection laws and regulations. We are involved in
environmental responses at our facilities, former facilities and at third-party
sites not owned by us where we have been designated a "Potentially Responsible
Party" ("PRP") by the U.S. Environmental Protection Agency ("EPA") or by a state
agency.
At these third-party sites, the EPA or a state agency has identified the site
as requiring remedial action under the federal "Superfund" and other related
federal or state laws governing the remediation of hazardous materials.
Generally, PRPs that are ultimately determined to be "responsible parties" are
strictly liable for site clean-ups and usually agree among themselves to share,
on an allocated basis, in the costs and expenses for investigation and
remediation of the hazardous materials. Under existing environmental laws,
however, responsible parties are jointly and severally liable and, therefore, we
are potentially liable to government environmental agencies for the full cost of
funding such remediation. In the unlikely event that we were required to fund
the entire cost of such remediation, the statutory framework provides that we
may pursue rights of contribution from the other PRPs.
At third-party sites, we continue to pursue a course of action designed to
minimize and mitigate our potential liability through assessing the legal basis
for our involvement, including an analysis of such factors as (i) the amount and
nature of materials disposed of by us, (ii) the allocation process, if any, used
to assign costs to all involved parties, and (iii) the scope of the response
action that is or may reasonably be required. We also continue to pursue active
participation in steering committees, consent orders and other appropriate and
available avenues.
23
Management believes that this approach should minimize our proportionate share
of liability at third-party sites where other PRPs share liability.
In addition, we manage various government-owned facilities on behalf of the
government. At such facilities, environmental compliance and remediation costs
have historically been the responsibility of the government and we relied (and
continue to rely with respect to past practices) upon government funding to pay
such costs. While the government remains responsible for capital and operating
costs associated with environmental compliance, responsibility for fines and
penalties associated with environmental noncompliance, in certain instances, is
being shifted from the government to the contractor with fines and penalties no
longer constituting allowable costs under the contracts pursuant to which such
facilities are managed.
Description of Certain Environmental Matters
--------------------------------------------
In 1991, we entered into a consent decree with the EPA relating to our
former Lockheed Aeronautical Systems Company facilities in Burbank, California,
which obligated us to design and construct facilities to monitor, extract and
treat groundwater contaminated with chlorinated solvents released from regional
industry, and to operate and maintain such facilities for approximately eight
years. In 1998, we entered into a follow-on consent decree which obligates us
to fund the continued operation and maintenance of these facilities through the
year 2018. We have also been operating under a cleanup and abatement order from
the California Regional Water Quality Control Board ("Regional Board") relating
to our former Burbank facilities. This order requires site assessment and action
to abate groundwater contamination by a combination of groundwater and soil
cleanup and treatment. We estimate that total expenditures required over
24
the remaining terms of the consent decrees and the Regional Board order will be
approximately $110 million.
We are responding to various administrative orders issued by the Regional
Board in connection with our former Lockheed Propulsion Company facilities in
Redlands, California. Under the orders, we are investigating the impact and
potential remediation of regional groundwater contamination by perchlorates and
chlorinated solvents. The Regional Board has approved our plan to maintain
public water supplies with respect to chlorinated solvents during this work, and
we are negotiating with local water purveyors to implement this plan, as well as
to address water supply concerns relative to perchlorate contamination. We
estimate that expenditures required to implement work currently approved will be
approximately $110 million. We also are coordinating with the U.S. Air Force,
which is conducting preliminary studies of the potential health effects of
exposure to perchlorates in connection with several sites across the country,
including the Redlands site. The results of these preliminary studies indicate
that our current efforts with water purveyors regarding perchlorate issues are
appropriate, but it is not yet possible to project the extent of our ultimate
perchlorates clean-up obligation, if any.
Under an agreement with the U.S. Government, the Burbank groundwater
treatment and soil remediation expenditures referenced above are being allocated
to our operations as general and administrative costs and, under existing
government regulations, these and other environmental expenditures related to
U.S. Government business, after deducting any recoveries from insurance or other
PRPs, are allowable in establishing the prices of our products and services. As
a result, a substantial portion of the expenditures are being reflected in our
sales and cost of sales pursuant to U.S. Government agreement or regulation.
Although the Defense
25
Contract Audit Agency has questioned certain elements of our practices with
respect to the agreement with the U.S. Government, no formal action has been
initiated, and it is management's opinion that the treatment of these
environmental costs is appropriate and consistent with the terms of such
agreement. We have recorded an asset for the portion of environmental costs that
are probable of future recovery in the pricing of our products and services for
U.S. Government business. The portion that is expected to be allocated to
commercial business has been reflected in the cost of sales. The recorded
amounts do not reflect the possible future recovery of portions of the
environmental costs through insurance policy coverage or from other PRPs, which
we are pursuing as required by agreement and U.S. Government regulation. Any
such recoveries, when received, would reduce our liability as well as the
allocated amounts to be included in our U.S. Government sales and cost of sales.
The extent of the our financial exposure relating to environmental matters
cannot in all cases be reasonably estimated at this time. A liability of
approximately $460 million, including the aggregate $220 million estimate for
matters related to our former Redlands and Burbank facilities noted above, for
those cases in which an estimate of financial exposure can be determined has
been recorded. Because of the regulatory complexities and risk of unidentified
contaminated sites and circumstances, the potential exists for environmental
remediation costs to be materially different from the estimated costs accrued
for identified contaminated sites. In addition, our involvement and extent of
responsibility varies at each site. After an assessment of each site and
consultation with environmental experts and counsel, management has concluded
that the probability is remote that our actual or potential liability as a PRP
in each or all of these sites, in combination with our actual or potential
liability for environmental responses at our own facilities or in our contract
management capacity at government-owned facilities, will have a material
26
adverse effect on our consolidated results of operations or financial position.
For additional details, see "Note 16 -- Commitments and Contingencies" of the
"Notes to Consolidated Financial Statements" on page 42 through page 43 and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations, Environmental Matters" on page 24 through page 25 of the 1998 Annual
Report to Shareholders.
Research and Development
We conduct research and development activities under customer contract funding
and with Independent Research and Development ("IR&D") funds. IR&D efforts
consist of projects involving basic research, applied research, development, and
systems and other concept formulation studies. In 1998, we spent approximately
$1.1 billion of IR&D and bid and proposal funds, a substantial portion of which
was included in general and administrative costs allocable to U.S. Government
contracts.
During 1998, we did not undertake the development of a new product or line of
business requiring the investment of a material amount of our total assets.
Effective January 1999, we transferred certain businesses to LMGT. Our launch
services business, however, is requiring increasing investments in the
development or improvement of launch vehicles.
See "Research and development and similar costs" in "Note 1-- Summary of
Significant Accounting Policies" of the "Notes to Consolidated Financial
Statements" on page 33 of the 1998 Annual Report to Shareholders.
Employees
At December 31, 1998, we had approximately 165,000 employees, the majority of
whom
27
were located in the United States. We have a continuing need for numerous
skilled and professional personnel to meet contract schedules and obtain new and
ongoing orders for our products. Approximately one-fifth of our employees are
covered by over a hundred separate collective bargaining agreements with various
international and local unions. Management considers employee relations
generally to be good.
Forward-looking Statements - Safe Harbor Provisions
This report contains, is based on or incorporates by reference statements
which constitute "forward-looking statements" within the meaning of the
Securities Act of 1933 and the Securities Exchange Act of 1934. The words
"believe," "estimate," "anticipate," "project," "intend," "expect" and similar
expressions are intended to identify forward-looking statements.
All forward-looking statements involve risks and uncertainties, including
statements and assumptions with respect to future revenues, program performance
and cash flows, the outcome of contingencies including litigation and
environmental remediation, and anticipated costs of capital investments and
planned dispositions. Our operations are necessarily subject to various risks
and uncertainties; actual outcomes are dependent upon many factors, including,
without limitation, our successful performance of internal plans; the successful
resolution of our Year 2000 issues; government customers' budgetary restraints;
customer changes in short-range and long-range plans; domestic and international
competition in the defense, space and commercial areas; product performance;
continued development and acceptance of new products; performance issues with
key suppliers and subcontractors; government import and export policies;
termination of government contracts; the outcome of political and legal
processes; legal, financial, and governmental risks related to international
transactions and global needs for
28
military and commercial aircraft and electronic systems and support; as well as
other economic, political and technological risks and uncertainties.
Readers are cautioned not to place undue reliance on these forward-looking
statements which speak only as of the date of this Annual Report on Form 10-K.
We do not undertake any obligation to publicly release any revisions to forward-
looking statements to reflect events or circumstances or changes in expectations
after the date of this Annual Report on Form 10-K or to reflect the occurrence
of unanticipated events. The forward-looking statements in (or incorporated by
reference in) this document are intended to be subject to the safe harbor
protection provided by the federal securities laws.
For a discussion identifying some important factors that could cause actual
results to vary materially from those anticipated in the forward-looking
statements, see our SEC filings, including but not limited to, the discussion of
"Competition and Risk" and "Government Contracts and Regulations" on page 19
through page 21 and page 21 through page 23 of this Annual Report on Form 10-K,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" on page 15 through page 25 of the 1998 Annual Report to
Shareholders, "Note 1 - Summary of Significant Accounting Policies", "Note 2 -
Transaction Agreement with COMSAT Corporation," and "Note 16 - Commitments and
Contingencies" of the Notes to Consolidated Financial Statements on page 32
through page 34, page 34 and page 42 through page 43, respectively, of the
Audited Financial Statements included in the 1998 Annual Report to Shareholders.
ITEM 2. PROPERTIES
At December 31, 1998, we operated in 445 offices, facilities, manufacturing
plants,
29
warehouses, service centers and laboratories throughout the United States and
internationally. Of these, we owned floor space at 64 locations aggregating
approximately 41.4 million square feet and we leased space at 381 locations
aggregating approximately 24.9 million square feet. At December 31, 1998, we
managed and/or occupied various major government-owned facilities The U.S.
Government also furnishes certain equipment used by us.
At December 31, 1998, our sectors had major operations at the following
locations:
. Space and Strategic Missiles -- Sunnyvale/Palo Alto, California;
Waterton/Littleton, Colorado; and Newtown and King of Prussia,
Pennsylvania;
. Electronics -- Camden, Arkansas; Orlando, Florida; Lexington,
Massachusetts; Eagan, Minnesota; Nashua, New Hampshire; Moorestown/Mt.
Laurel, New Jersey; Johnson City, Owego, Yonkers, Syosset and Syracuse,
New York; Akron, Ohio; Grand Prairie, Texas; Manassas, Virginia and
Ontario, Canada;
. Aeronautics -- Palmdale, California; Marietta, Georgia; Greenville, South
Carolina; and Fort Worth, Texas;
. Information & Services -- Goodyear, Arizona; San Jose, California;
Colorado Springs, Colorado; Orlando, Florida; Gaithersburg, Maryland;
King of Prussia, Pennsylvania; Houston, Texas; and Reston/Fairfax,
Virginia;
. Energy & Environment -- Livermore, California; Idaho Falls, Idaho; Las
Vegas, Nevada; Albuquerque, New Mexico; Oak Ridge, Tennessee; and
Richland, Washington; and
. Corporate -- Bethesda, Maryland; Westlake Village, California and
Arlington (Crystal City), Virginia.
30
At December 31, 1998, a summary of our floor space by sector consisted of:
(square feet in millions)
Leased Owned Gov't Owned Total
------ ------ ----------- -----
Space & Strategic Missiles 2.2 12.0 5.1 19.3
Electronics 10.1 16.0 0.2 26.3
Aeronautics 2.2 4.5 15.0 21.7
Information & Services 8.2 4.2 0.0 12.4
Energy & Environment 0.8 0.1 34.8 35.7
Corporate & Other* 1.4 4.6 0.0 6.0
---- ---- ---- -----
Total 24.9 41.4 55.1 121.4
---- ---- ---- -----
(* includes owned/leased discontinued operations square footage of 2.7 million
square feet located primarily in Burbank, California)
At December 31, 1998, we owned various large tracts of land which are
available for sale or development. The location and approximate size of these
large tracts include:
LOCATION ACREAGE
------------------------- -------
1. Potrero Creek, California 9,100
2. Beaumont, California 2,800
3. Palmdale, California 650
4. Austin, Texas 250
A portion of our activity is related to engineering and research and
development, which is not susceptible to productive capacity analysis. In the
area of manufacturing, most of the operations are of a job-order nature, rather
than an assembly line process, and productive equipment has multiple uses for
multiple products. Management believes that all of our major physical
facilities are in good condition and are adequate for their intended use.
ITEM 3. LEGAL PROCEEDINGS
We are parties or have property subject to litigation and other proceedings,
including matters arising under provisions relating to the protection of the
environment, both as specifically
31
described below or arising in the ordinary course of our business. In the
opinion of management, the probability is remote that the outcome of any such
litigation or other proceedings, will have a material adverse effect on our
results of operations or financial position.
We are primarily engaged in providing products and services under contracts
with the U.S. Government and, to a lesser degree, under direct foreign sales
contracts, some of which are funded by the U.S. Government. These contracts are
subject to extensive legal and regulatory requirements and, from time to time,
agencies of the U.S. Government investigate whether our operations are being
conducted in accordance with these requirements. U.S. Government investigations
of us, whether relating to these contracts or conducted for other reasons, could
result in administrative, civil or criminal liabilities, including repayments,
fines or penalties being imposed upon us, or could lead to suspension or
debarment from future U.S. Government contracting. U.S. Government
investigations often take years to complete and many result in no adverse action
against us. For the U.S. government investigations noted below, it is too early
for us to determine whether adverse decisions relating to these investigations
could ultimately have a material adverse effect on our results of operations or
financial condition.
New Matters
-----------
On January 14, 1999, Mohammad Yousefi and David Kane filed a lawsuit against
us and six of our officers and directors (Vance D. Coffman, Marcus C. Bennett,
James A. Blackwell, Jr., Thomas A. Corcoran, Vincent N. Marafino and Norman R.
Augustine)("Yousefi complaint"). The complaint contains class action
allegations and states that it is filed on behalf of the named plaintiffs as
well as on behalf of purchasers of our common stock between August 13, 1998
and December 23, 1998. The complaint alleges that the defendants violated
Sections 10(b) and 20(a)
32
of the Securities Exchange Act of 1934 in that they or persons they controlled
allegedly (a) employed devices, schemes and artifices to defraud; (b) made
untrue statements of material facts or omitted to state material facts necessary
in order to make statements made, in light of the circumstances under which they
were made, not misleading; or (c) engaged in acts, practices and a course of
business that operated as a fraud or deceit upon class members in connection
with their purchases of our common stock. The complaint further alleges that the
statutory safe harbor provided for forward-looking statements does not apply to
any of the allegedly false forward-looking statements. According to the
complaint, class members were damaged as, in reliance on the integrity of the
market, they paid artificially inflated prices for our stock. Plaintiffs seek a
judgment awarding (a) damages and costs; (b) equitable or injunctive relief,
including the imposition of a constructive trust upon defendants' alleged
insider-trading proceeds; and (c) other just and proper relief. We believe that
the allegations are without merit and will defend this and any related actions.
As is common with private securities class action litigation, we and the same
persons in the Yousefi complaint, have been named as defendants in additional,
multiple actions purportedly brought on behalf of our shareholders, which were
filed subsequent to the Yousefi complaint. These additional actions assert
substantially the same claims made in the Yousefi complaint. We anticipate that
additional related actions could be filed. We also expect that the multiple
actions will be consolidated and that the court will appoint as lead plaintiff
the member or members of the purported plaintiff class that the court determines
to be most capable of adequately representing the interests of class members.
33
Previously Reported Matters
----------------------------
In 1994, the DOE awarded our subsidiary, Lockheed Martin Advanced
Environmental Systems, Inc. ("LMAES"), a $180 million fixed price contract at
the Idaho National Engineering and Environmental Laboratory ("INEEL") for the
Phase II design, construction and limited test of remediation facilities and the
Phase III full remediation of waste found in Pit 9, located on the INEEL
reservation. At the time the contract was definitized, Lockheed Martin Idaho
Technologies Company ("LMITCO"), another of our subsidiaries, was the INEEL
management contractor.
As we performed under the contract, we incurred unanticipated costs and
scheduling issues due to complex technical and contractual matters which
threatened the viability of the overall Pit 9 program. On March 31, 1997, based
on an investigation by management to identify and quantify the overall effect of
these matters, we submitted a request for equitable adjustment ("REA") to the
DOE that sought, among other things, the recovery of a portion of unanticipated
costs incurred by us. We also sought to restructure the contract to provide for
a more equitable sharing of the risks associated with the Pit 9 project. We were
unsuccessful in reaching any agreements with the DOE on cost recovery or other
contract restructuring matters. Starting in May 1997, we reduced work activities
at the Pit 9 site while awaiting technical direction from the DOE.
On June 1, 1998, the DOE directed LMITCO to terminate the Pit 9 contract for
default. On that same date, we filed a lawsuit against the DOE in the U.S. Court
of Federal Claims in Washington, D.C., challenging and seeking to overturn the
default termination. In addition, on July 21, 1998, we withdrew the REA
previously submitted to the DOE in March 1997 and
34
replaced it with a certified REA. The certified REA is similar in substance to
the REA previously submitted, but its certification, based upon more detailed
factual and contractual analysis, raises its status to that of a formal claim.
On August 11, 1998, LMITCO, at the DOE's direction, filed suit against us in
U.S. District Court in Idaho, seeking recovery of approximately $54 million
previously paid by LMITCO to us under the Pit 9 contract. We intend to defend
this action while continuing to pursue our certified REA. On January 26, 1999,
the U.S. District Court in Idaho granted our motion and stayed the Idaho
proceeding until resolution of the motion to dismiss our lawsuit in the Court of
Federal Claims, or until August 2, 1999. We continue to assert our position in
the litigation while continuing our efforts to resolve the dispute through non-
litigation means.
Since July 1995, we have been served with grand jury subpoenas issued by the
U.S. District Court for the Eastern District of New York seeking documents
related to the performance of various government contracts by the former Unisys
Corporation Defense Systems facility at Great Neck, New York. We acquired the
facility when we acquired Loral Corporation in April 1996. Loral Corporation
acquired the facility from Unisys Corporation. We are cooperating with the U.S.
Government's continuing investigation of this matter.
We have been served, along with various of our current and former employees,
with grand jury subpoenas issued by the U.S. District Court for the Middle
District of Florida and subpoenas issued by the Department of Defense Inspector
General relating to the LANTIRN program. The U.S. Attorney's Office for the
Middle District of Florida has advised us that the grand jury is investigating
allegations of fraud in connection with certain LANTIRN program contracts.
These allegations, in part, were first made in qui tam complaints filed against
us and
35
unsealed on July 16, 1996. We are cooperating with the U.S. Government's
continuing investigation of this matter.
Lockheed Martin Technical Operations Company, our wholly-owned subsidiary, and
certain of its current and former employees were served with grand jury
subpoenas issued by the United States District Court for the District of
Colorado seeking documents relating to efforts to obtain and to perform a
contract with the U.S. Air Force for space operations, maintenance and support
services. We are cooperating with the U.S. Government's continuing
investigation of this matter.
We understand that the U.S. Government's investigations have been closed
relating to (i) former employees of our Armament Systems business in Milan,
Tennessee and (ii) procurement of parking meter and other services by the
District of Columbia from Lockheed Martin IMS Corporation.
We are a party to or have our property subject to various other litigation and
proceedings involving matters arising under provisions relating to the
protection of the environment. We are subject to federal and state requirements
for protection of the environment, including those for discharge of hazardous
materials and remediation of contaminated sites. Due in part to their
complexity and pervasiveness, such requirements have resulted in us being
involved with related legal proceedings, claims and remediation obligations.
For a discussion of these matters, see "Item 1. Business Environmental
Regulation."
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of 1998.
36
ITEM 4(a). EXECUTIVE OFFICERS OF THE REGISTRANT
Our executive officers are listed below. There were no family relationships
among any of our executive officers and directors. All officers serve at the
pleasure of the Board of Directors.
Principal Occupation and
Name Positions and Business Experience
(Age at 12/31/98) Offices Held (Past Five Years)
- ------------------ --------------------------- --------------------------------------------------------
Vance D. Coffman Chairman of the Board and Chairman of the Board since April 1998 and Chief Executive
(54) Chief Executive Officer Officer since August 1997; Vice Chairman of the Board from
August 1997 to April 1998; Board member since 1996; President
from June 1996 to July 1997 and Chief Operating Officer from
January 1996 to July 1997; Executive Vice President from
January to June 1996; President and Chief Operating Officer,
Space & Strategic Missiles Sector from March 1995 to December
1995; previously served as Executive Vice President of
Lockheed from 1992 to 1995; and President of Lockheed Space
Systems Division from 1988 to 1992.
James A. Blackwell, Vice President; President and President and Chief Operating Officer, Aeronautics Sector
Jr. (58) Chief Operating Officer since March 1995; previously served at Lockheed Corporation
Aeronautics Sector as Corporate Vice President and President from 1993 to 1995
of Lockheed Aeronautical Systems Company; served as an
executive employee of Lockheed Aeronautical Systems Company
from 1986 until 1995.
Thomas A. Corcoran Vice President; President and President and Chief Operating Officer, Space & Strategic
(54) Chief Operating Officer Missiles Sector since October 1998; President and Chief
Space & Strategic Missiles Operating Officer, Electronics Sector from March 1995 to
Sector September 1998; previously served in Martin Marietta
Corporation as President, Electronics Group, from 1993 to
1995; previously served at General Electric Corporation as
Vice President and General Manager, from 1990 to 1993.
37
Robert B. Coutts Vice President; President and President and Chief Operating Officer, Electronics Sector
(48) Chief Operating Officer since October 1998; President, Lockheed Martin Government
Electronics Sector Electronics Systems from January 1997 until September 1998;
President Lockheed Martin Aero and Naval Systems from
September 1994 to December 1996; previously served as Vice
President, Sourcing for the Martin Marietta Corporation.
Philip J. Duke (53) Vice President and Chief Vice President and Chief Financial Officer since February
Financial Officer 1999; Vice President Finance from July 1996 to January 1999;
Vice President Finance, Space & Strategic Missiles Sector
from March 1995 to July 1996; previously served as Vice
President Finance, Martin Marietta from 1994 to 1995; Vice
President Finance, Electronics Sector of Martin Marietta from
1993 to 1994; and Vice President Business Management of
Martin Marietta Corporation from 1987 to 1993.
Arthur E. Johnson Vice President; President and President and Chief Operating Officer, Information &
(51) Chief Operating Officer - Services Sector since August 1997; President, Lockheed Martin
Information & Services Sector Systems Integration Group from January 1997 to August 1997;
President, Lockheed Martin Federal Systems Group from January
1996 to January 1997; and President, Loral Federal Systems
Group from January 1994 to January 1996.
Todd J. Kallman (42) Vice President and Controller Vice President and Controller since August 1997; Vice
President Finance, Aeronautics Sector from July 1995 to
August 1997; Vice President Business Management, Lockheed
Martin Aeronautical Systems Company from June 1994 to July
1995; Vice President Finance, Lockheed Aeronautical Systems
Company from 1992 to 1994.
Frank H. Menaker, Senior Vice President and Senior Vice President since July 1996; Vice President and
Jr. (58) General Counsel General Counsel for Lockheed Martin Corporation from March
1995 to July 1996, having served in the same capacity for
Martin Marietta Corporation since 1981.
Walter E. Vice President and Treasurer Vice President and Treasurer since March 1995; previously
Skowronski (50) served in Lockheed Corporation as Vice President and
Treasurer from 1992 to 1995; served as staff Vice President,
Investor Relations from 1990 to 1992.
38
Robert J. Stevens Vice President; President and President and Chief Operating Officer, Energy & Environment
(47) Chief Operating Officer - Sector since January 1998; Vice President of Strategic
Energy & Environment Sector; Development since November 1998; President, Air Traffic
Vice President of Strategic Management Division from June 1996 through January 1998;
Development Executive Vice President and Senior Vice President and Chief
Financial Officer of Air Traffic Management from December
1993; previously served as an executive employee of Loral
Corporation from
August 1987.
Peter B.Teets (56) President and Chief Operating President and Chief Operating Officer since August 1997;
Officer; Director Board member since July 1997; President and Chief Operating
Officer, Lockheed Martin Information & Services Sector from
March 1995 to July 1997; previously served as Corporate Vice
President of Martin Marietta from 1985 to 1995, President of
Martin Marietta Space Group from 1993 to 1995, and President
of Martin Marietta Astronautics Group from 1987 to 1993.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
At December 31, 1998, we had approximately 39,533 holders of record of our
Common Stock, $1 par value. In October 1998, our Board of Directors approved a
two-for-one split of our Common Stock in the form of a stock dividend for
holders of record on December 1, 1998. The new shares were issued on December
31, 1998. Unless otherwise indicated, all references to shares of Common Stock
and per share amounts reflect the stock split. Our Common Stock is traded on
39
the New York Stock Exchange, Inc. Information concerning stock prices and
dividends paid during the past two years is as follows:
Common Stock -- Dividends Paid and Market Prices
------------------------------------------------
Quarter Dividends Paid Market Prices (HighLow)
- -------- -------------- ------------- ---------
1998 1997 1998 1997
---- ---- ---- ----
First $0.20 $0.20 $58.938 - $48.750 $46.438 - $41.000
Second 0.20 0.20 58.500 - 49.969 52.625 - 39.125
Third 0.20 0.20 54.250 - 43.625 56.719 - 49.188
Fourth 0.22 0.20 56.750 - 41.000 54.219 - 44.063
----- -----
Year $0.82 $0.80 58.938- 41.000 56.719- 39.125
ITEM 6. SELECTED FINANCIAL DATA
The information required by this Item 6 is included under the caption
"Consolidated Financial Data -- Nine-Year Summary" on page 46 through page 47 of
the 1998 Annual Report to Shareholders, and that information is incorporated by
reference in this Form 10-K.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information required by this Item 7 is included under the caption
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" on page 15 through page 25 of the 1998 Annual Report to
Shareholders, and that information is incorporated by reference in this
Form 10-K.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We do not hold or issue derivative financial instruments for trading purposes.
We may use derivative financial instruments to manage our exposure to
fluctuations in foreign exchange rates. The aggregate value of derivative
financial instruments held or issued by us is not material to us nor
40
is the market risk posed. For additional discussion of our use of such
instruments, see "Management's Discussion and Analysis of Financial Condition
and Results of Operations, Other Matters" on page 25 of the 1998 Annual Report
to Shareholders, and "Derivative financial instruments" and "New accounting
pronouncements to be adopted" in "Note 1 - Summary of Significant Accounting
Policies" of the "Notes to Consolidated Financial Statements" on page 33 and
page 33 through page 34, respectively, of the Audited Financial Statements
included in the 1998 Annual Report to Shareholders, and that information is
incorporated by reference in this Form 10-K.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this Item 8 is included under the captions
"Consolidated Statement of Earnings," "Consolidated Statement of Cash Flows,"
"Consolidated Balance Sheet," "Consolidated Statement of Stockholders' Equity"
and "Notes to Consolidated Financial Statements" in the Audited Consolidated
Financial Statements included on page 27 through page 45 of the 1998 Annual
Report to Shareholders and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" on page 15 through page 25 of the 1998
Annual Report to Shareholders. This information is incorporated by reference in
this Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
41
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information concerning directors required by this Item 10 is included
under the caption "Election of Directors" in our definitive Proxy Statement to
be filed pursuant to Regulation 14A no later than March 1999 (the "1999 Proxy
Statement"), and that information is incorporated by reference in this Form 10-
K. Information concerning executive officers required by this Item 10 is
located under Part I, Item 4(a) on page 39 through page 41 of this Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item 11 is included in the text and tables
under the caption "Compensation of Executive Officers" in the 1999 Proxy
Statement and that information, except for the information required by Item
402(k) and 402(l) of Regulation S-K, is incorporated by reference in this Form
10-K.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item 12 is included under the headings
"Security Ownership of Certain Beneficial Owners," "Securities Owned by
Directors, Nominees and Named Executive Officers" and "Voting Securities and
Record Date" in the 1999 Proxy Statement, and that information is incorporated
by reference in this Form 10-K.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
42
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)(1) List of Financial Statements filed as part of the Form 10-K.
Page
----
The following financial statements of Lockheed
Martin Corporation and consolidated subsidiaries,
included in the 1998 Annual Report to Shareholders,
are incorporated by reference into Item 8 on page 43
of this Annual Report on Form 10-K. Page numbers
refer to the 1998 Annual Report to Shareholders:
Consolidated Statement of Earnings--
Years ended December 31, 1998, 1997, and 1996................ 28
Consolidated Statement of Cash Flows--
Years ended December 31, 1998, 1997 and 1996............... 29
Consolidated Balance Sheet--
December 31, 1998 and 1997................................. 30
Consolidated Statement of Stockholders' Equity--
Years ended December 31, 1998, 1997 and 1996............... 31
Notes to Consolidated Financial Statements--
December 31, 1998.......................................... 32-45
(2) List of Financial Statement Schedules filed as part of this Form
10-K.
All schedules have been omitted because they are not applicable, not
required, or the information has been otherwise supplied in the
financial statements or notes to the financial statements.
(3) Ernst & Young LLP
The report of Lockheed Martin's independent auditors with respect to the
above-referenced financial statements appears on page 27 of the 1998
Annual Report to Shareholders and that report is incorporated by
reference in this Form 10-K. The consent of Lockheed Martin's
independent auditors appears as Exhibit 23 of this Annual Report on Form
10-K.
(b) The following reports on Form 8-K were filed during the last quarter
of the period covered by this report:
(1) Lockheed Martin Corporation Current Report on Form 8-K filed with the
Securities and Exchange Commission on October 22, 1998.
(2) Lockheed Martin Corporation Current Report on Form 8-K filed with the
Securities and Exchange Commission on November 17, 1998.
43
(3) Lockheed Martin Corporation Current Report on Form 8-K filed with the
Securities and Exchange Commission on December 31, 1998.
During the first quarter of 1999 (up until this report was filed), Lockheed
Martin Corporation made the following filings on Form 8-K:
(1) Lockheed Martin Corporation Current Report on Form 8-K filed with the
Securities and Exchange Commission on January 19, 1999.
(2) Lockheed Martin Corporation Current Report on Form 8-K filed with the
Securities and Exchange Commission on January 28, 1999.
(3) Lockheed Martin Corporation Current Report on Form 8-K filed with the
Securities and Exchange Commission on February 10, 1999.
(4) Lockheed Martin Corporation Current Report on Form 8-K filed with the
Securities and Exchange Commission on February 16, 1999.
(c) Exhibits
(3)(i) Articles of Incorporation.
(a) Articles of Amendment and Restatement of Lockheed
Martin Corporation (formerly Parent Corporation) filed
with the State Department of Assessments and Taxation
of the State of Maryland on February 7, 1995
(incorporated by reference to Exhibit 3.1 to Lockheed
Martin Corporation's Registration Statement on Form S-4
(No. 33-57645) filed with the Commission on February 9,
1995).
(ii) Bylaws
(a) Copy of the Bylaws of Lockheed Martin Corporation as
amended on April 25, 1996 (incorporated by reference to
Exhibit 1 to the Corporation's Annual Report on Form
10-Q for the quarter ended September 30, 1998).
(4) (a) Indenture dated May 16, 1996, between the
Corporation, Lockheed Martin Tactical Systems, Inc.,
and First Trust of Illinois, National Association as
Trustee (incorporated by reference to Exhibit 4 of the
Corporation's filing on Form 8-K on May 16, 1996).
(b) Form of Indenture between the Corporation and U.S. Bank
Trust National Association as Trustee (incorporated by
44
reference to Exhibit 4(a) of the Corporation's filing
on Form S-3 (No. 333-71409) on January 29, 1999).
No other instruments defining the rights of holders of
long-term debt are filed since the total amount of
securities authorized under any such instrument does
not exceed 10% of the total assets of the Corporation
on a consolidated basis. The Corporation agrees to
furnish a copy of such instruments to the Securities
and Exchange Commission upon request.
(b) See Exhibits 3(i) and 3(ii).
(10)* (a) Lockheed Martin Corporation 1995 Omnibus
Performance Award Plan (incorporated by reference to
Exhibit 10.36 to Lockheed Martin Corporation's
Registration Statement on Form S-4 (No. 33-57645) filed
with the Commission on February 9, 1995).
(b) Lockheed Martin Corporation Directors Deferred Stock
Plan, as amended.
(c) Agreement Containing Consent Order, dated December 22,
1994, among the Corporation, Lockheed Corporation,
Martin Marietta Corporation and the Federal Trade
Commission (incorporated by reference to Exhibit 10.4
to Lockheed Martin Corporation's Registration Statement
on Form S-4 (No. 33-57645) filed with the Commission on
February 9, 1995).
(d) Lockheed Martin Corporation Directors Deferred
Compensation Plan, as amended.
(e) Resolutions relating to Lockheed Martin Corporation
Financial Counseling Program for directors, officers,
company presidents, and other key employees, as amended
(incorporated by reference to Exhibit 10(e) to Lockheed
Martin Corporation's Annual Report on Form 10-K for the
year ended December 31, 1997).
(f) Martin Marietta Corporation Post-Retirement Death
Benefit Plan for Senior Executives, as amended
(incorporated by reference to Exhibit 10.9 to Lockheed
Martin Corporation's Registration Statement on Form S-4
(No. 33-57645) filed with Commission on February 9,
1995).
45
(g) Martin Marietta Corporation 1984 Stock Option Plan for
Key Employees, as amended (incorporated by reference to
Exhibit 10.12 to Lockheed Martin Corporation's
Registration Statement on Form S-4 (No. 33-57645) filed
with Commission on February 9, 1995).
(h) Martin Marietta Corporation Amended Omnibus Securities
Award Plan, as amended March 25, 1993 (incorporated by
reference to Exhibit 10.13 to Lockheed Martin
Corporation's Registration Statement on Form S-4 (No.
33-57645) filed with Commission on February 9, 1995).
(i) Martin Marietta Corporation Supplemental Excess
Retirement Plan, as amended (incorporated by reference
to Exhibit 10.15 to Lockheed Martin Corporation's
Registration Statement on Form S-4 (No. 33-57645) filed
with Commission on February 9, 1995).
(j) Martin Marietta Corporation Supplemental Excess
Retirement Plan, as amended (incorporated by reference
to Exhibit 10.15 to Lockheed Martin Corporation's
Registration Statement on Form S-4 (No. 33-51645) filed
with the Commission on February 19, 1995).
(k) Martin Marietta Corporation Directors' Life Insurance
Program (incorporated by reference to Exhibit 10.17 to
Lockheed Martin Corporation's Registration Statement on
Form S-4 (No. 33-57645) filed with Commission on
February 9, 1995).
(l) Martin Marietta Corporation Executive Special Early
Retirement Option and Plant Closing Retirement Option
Plan (incorporated by reference to Exhibit 10.18 to
Lockheed Martin Corporation's Registration Statement on
Form S-4 (No. 33-57645) filed with Commission on
February 9, 1995).
(m) Martin Marietta Supplementary Pension Plan for
Employees of Transferred GE Operations (incorporated by
reference to Exhibit 10.19 to Lockheed Martin
Corporation's Registration Statement on Form S-4 (No.
33-57645) filed with Commission on February 9, 1995).
(n) Martin Marietta Corporation Deferred Compensation Plan
for Selected Officers, as amended (incorporated by
reference to Exhibit 10(v) to Lockheed Martin
46
Corporation's Annual Report on Form 10-K for the year
ended December 31, 1997).
(o) Lockheed Corporation 1992 Employee Stock Option Program
(incorporated by reference to the Registration
Statement on Form S-8 (No. 33-49003) of Lockheed
Corporation filed with the Commission on September 11,
1992).
(p) Amendment to Lockheed Corporation 1992 Employee Stock
Option Plan (incorporated by reference to Exhibit 10.22
to Lockheed Martin Corporation's Registration Statement
on Form S-4 (No. 33-57645) filed with the Commission on
February 9, 1995).
(q) Lockheed Corporation 1986 Employee Stock Purchase
Program, as amended (incorporated by reference to
Exhibit 10.23 to Lockheed Martin Corporation's
Registration Statement on Form S-4 (No. 33-57645) filed
with the Commission on February 9, 1995).
(r) Incentive Retirement Benefit Plan for Certain
Executives of Lockheed Corporation, as amended
(incorporated by reference to Exhibit 10.25 to Lockheed
Martin Corporation's Registration Statement on Form S-4
(No. 33-57645) filed with the Commission on February 9,
1995).
(s) Supplemental Retirement Benefit Plan for Certain
Transferred Employees of Lockheed Corporation, as
amended (incorporated by reference to Exhibit 10.26 to
Lockheed Martin Corporation's Registration Statement on
Form S-4 (No. 33-57645) filed with the Commission on
February 9, 1995).
(t) Supplemental Benefit Plan of Lockheed Corporation, as
amended (incorporated by reference to Exhibit 10.27 to
Lockheed Martin Corporation's Registration Statement on
Form S-4 (No. 33-57645) filed with the Commission on
February 9, 1995).
(u) Lockheed Martin Corporation Supplemental Savings Plan,
as amended and restated (incorporated by reference to
Exhibit 10(ee) to Lockheed Martin Corporation's Annual
Report on Form 10-K for the year ended December 31,
1997).
47
(v) Deferred Compensation Plan for Directors of Lockheed
Corporation, as amended (incorporated by reference to
Exhibit 10.30 to Lockheed Martin Corporation's
Registration Statement on Form S-4 (No. 33-57645) filed
with the Commission on February 9, 1995).
(w) Lockheed Corporation Retirement Plan for Directors, as
amended (incorporated by reference to Exhibit 10.31 to
Lockheed Martin Corporation's Registration Statement on
Form S-4 (No. 33-57645) filed with the Commission on
February 9, 1995).
(x) Trust Agreement, as amended February 3, 1995, between
Lockheed Corporation and First Interstate Bank of
California (incorporated by reference to Exhibit 10.33
to Lockheed Martin Corporation's Registration Statement
on Form S-4 (No. 33-57645) filed with the Commission on
February 9, 1995).
(y) Lockheed Corporation Directors' Deferred Compensation
Plan Trust Agreement, as amended (incorporated by
reference to Exhibit 10.34 to Lockheed Martin
Corporation's Registration Statement on Form S-4 (No.
33-57645) filed with the Commission on February 9,
1995).
(z) Trust Agreement, dated December 22, 1994, between
Lockheed Corporation and J.P. Morgan California with
respect to certain employee benefit plans of Lockheed
Corporation (incorporated by reference to Exhibit 10.35
to Lockheed Martin Corporation's Registration Statement
on Form S-4 (No. 33-57645) filed with the Commission on
February 9, 1995).
(aa) Lockheed Martin Corporation Directors Charitable Award
Plan (incorporated by reference to Exhibit 10(oo) to
Lockheed Martin Corporation's Annual Report on Form 10-
K for the year ended December 31, 1996).
(bb) Loral Supplemental Executive Retirement Plan
(incorporated by reference to Exhibit 99.2 of the
Schedule 14D-9 filed by Loral Corporation with the
Commission on January 16, 1996).
(cc) Amendment to Lockheed Martin Corporation
Supplemental Excess Retirement Plan(incorporated by
reference to Exhibit 10(nnn) to Lockheed Martin
Corporation's Annual Report on Form 10-K for the year
ended December 31, 1996).
48
(dd) Amendment to Terms of Outstanding Stock Option
Relating to Exercise Period for Employees of Divested
Business(incorporated by reference to Exhibit 10(ooo)
to Lockheed Martin Corporation's Annual Report on Form
10-K for the year ended December 31, 1996).
(ee) Lockheed Martin Corporation Post-Retirement Death
Benefit Plan for Elected Officers, as
amended(incorporated by reference to Exhibit 10(ppp) to
Lockheed Martin Corporation's Annual Report on Form 10-
K for the year ended December 31, 1996).
(ff) Lockheed Martin Corporation Directors Retirement
Plan, as amended.
(gg) Deferred Performance Payment Plan of Lockheed
Martin Corporation Space & Strategic Missiles
Sector(incorporated by reference to Exhibit 10(ooo) to
Lockheed Martin Corporation's Annual Report on Form 10-
K for the year ended December 31, 1997).
(hh) Resolutions of Board of Directors of Lockheed
Martin Corporation dated June 27, 1997 amending
Lockheed Martin Non-Qualified Pension Plans
(incorporated by reference to Exhibit 10(ppp) to
Lockheed Martin Corporation's Annual Report on Form 10-
K for the year ended December 31, 1997).
(ii) Form of Retention Agreement, including Addendum
(incorporated by reference to Exhibit 10(u) to Lockheed
Martin Corporation's Annual Report on Form 10-K for the
year ended December 31, 1997).
(jj) Lockheed Martin Corporation Directors Equity Plan.
(kk) Lockheed Martin Corporation Management Incentive
Compensation Plan
(ll) Lockheed Martin Corporation Deferred Management
Incentive Compensation Plan
* Exhibits (10)(a) through (10)(ll) constitute management contracts or
compensatory plans or arrangements required to be filed as an Exhibit
to this Form pursuant to Item 14(c) of this Report.
49
(12) Computation of ratio of earnings to fixed charges for the year
ended December 31, 1998.
(13) Portions of Lockheed Martin Corporation's 1998 Annual Report to
Shareholders incorporated by reference in this Annual Report on
Form 10-K.
(23) Consent of Ernst & Young LLP, Independent Auditors for
Lockheed Martin Corporation.
(24) Powers of Attorney.
(27) Financial Data Schedule.
Other material incorporated by reference:
None.
50
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
LOCKHEED MARTIN CORPORATION
Date: March 22, 1999 By: /s/ FRANK H. MENAKER, JR.
---------------------
Frank H. Menaker, Jr.
Senior Vice President
and General Counsel
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
SIGNATURES TITLE DATE
---------- ----- ----
/s/Vance D. Coffman* Chairman and Chief March 22, 1999
- ------------------- Executive Officer
VANCE D. COFFMAN
/s/Philip J. Duke* Vice President and March 22, 1999
- ----------------- Chief Financial Officer
PHILIP J. DUKE
/s/Todd J. Kallman* Vice President and March 22, 1999
- ------------------- Chief Accounting Officer
TODD J. KALLMAN
/s/Norman R. Augustine* Director March 22, 1999
- -----------------------
NORMAN R. AUGUSTINE
/s/Marcus C. Bennett* Director March 22, 1999
- ---------------------
MARCUS C. BENNETT
/s/Lynne V. Cheney* Director March 22, 1999
- -------------------
LYNNE V. CHENEY
51
SIGNATURES TITLE DATE
- ---------- ----- ----
/s/Houston I. Flournoy* Director March 22, 1999
- -----------------------
HOUSTON I. FLOURNOY
/s/James F. Gibbons* Director March 22, 1999
- --------------------
JAMES F. GIBBONS
/s/Edward E. Hood, Jr.* Director March 22, 1999
- -----------------------
EDWARD E. HOOD, JR.
/s/Caleb B. Hurtt* Director March 22, 1999
- ------------------
CALEB B. HURTT
/s/Gwendolyn S. King* Director March 22, 1999
- ---------------------
GWENDOLYN S. KING
/s/Vincent N. Marafino* Director March 22, 1999
- -----------------------
VINCENT N. MARAFINO
/s/Eugene F. Murphy* Director March 22, 1999
- --------------------
EUGENE F. MURPHY
/s/Allen E. Murray* Director March 22, 1999
- -------------------
Allen E. Murray
/s/Frank Savage* Director March 22, 1999
- ----------------
FRANK SAVAGE
/s/Peter B. Teets* Director March 22, 1999
- ------------------
PETER B. TEETS
/s/Carlisle A.H. Trost* Director March 22, 1999
- -----------------------
CARLISLE A.H. TROST
/s/James R. Ukropina* Director March 22, 1999
- ---------------------
JAMES R. UKROPINA
/s/Douglas C. Yearley* Director March 22, 1999
- ---------------------
DOUGLAS C. YEARLEY
*By: /s/MARIAN S. BLOCK March 22, 1999
---------------
(Marian S. Block, Attorney-in-fact**)
___________________________
**By authority of Powers of Attorney filed with this Annual
Report on Form 10-K.
52