Exhibit 99
L
For Immediate Release
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LOCKHEED MARTIN SUBSTANTIALLY REDUCES EARNINGS OUTLOOK FOR 1999 AND 2000;
STRATEGIC, OPERATIONAL AND ORGANIZATIONAL REVIEW CONTINUES
Bethesda, Maryland, June 9, 1999--Lockheed Martin Corporation (NYSE:LMT) today
announced that it has completed a detailed financial review as part of an
ongoing assessment of the company's strategy, operations and organization. The
review is part of a continuing top to bottom assessment of Lockheed Martin
activities aimed at improving quality, reducing costs and improving returns to
shareholders. The ongoing assessment already has resulted in several actions
including management changes in key business units.
The completion of the financial review has resulted in a substantial reduction
of the current earnings outlook for 1999 and 2000. The Corporation now expects,
excluding the effects of nonrecurring and unusual items (see note 1), earnings
per diluted share of at least $1.50 for 1999, and at least $2.15 in 2000. For
the second quarter 1999, a loss per diluted share between $0.10 and $0.15 is
expected. Free cash flow estimates are also being reduced to $0.5 billion in
1999 and $0.9 billion in 2000.
The principal reasons for the revised financial outlook are increased cost
growth, reduced production rates and delivery delays on the C-130J program;
recent launch vehicle failures; and delays of launches and commercial satellite
deliveries. The earnings outlook also excludes most of the previously
anticipated portfolio shaping gains.
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1 Nonrecurring and unusual items include the cumulative effect adjustment
related to the adoption of Statement of Position No. 98-5 and the effects of
significant portfolio shaping actions, such as the gain related to the sale of a
portion of the Corporation's investment in L-3 Communications Corporation. The
combined effect of the above two items was a reduction to diluted earnings per
share from the first quarter, 1999 of $0.74.
"Clearly our forecasts about some key programs have not been realized, and we
have not executed consistently across the Corporation to our expectations," said
Vance Coffman, Lockheed Martin chairman and chief executive officer. "We will
continue to examine operational, organizational and strategic alternatives, and
we are prepared to make further changes necessary to achieve outstanding
performance and increase shareholder value. We will communicate these changes as
they occur. We are examining each of our markets and positions in those
markets. We are working to fix processes and procedures that affects our
performance and customer confidence," Coffman said.
"Our shareholders, customers and employees should not lose sight of Lockheed
Martin's strengths and opportunities. We are privileged to be the nation's
leading defense contractor. We intend to remain so despite recent setbacks. By
focusing on quality, cost performance and overall execution for our customers,
we will deliver on our commitments," Coffman stated.
In addition to management changes and the previously announced review of the
space sector by an independent panel of experts -- whose recommendations are due
September 1 -- corporatewide workforce reductions of more than 8,000 have been
announced or have taken place since January 1, 1999.
Key Factors - 1999:
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Based on the review completed to date, the Corporation has identified the
following factors which are expected to negatively impact earnings:
. C-130J: The annual production rate will be between 16 and 19 aircraft, and
will not increase to 24 as previously projected. Cost growth has continued due
to existing and incremental customer requirements on the 83 aircraft under
contract. Thirty aircraft are now expected to be delivered in 1999, which is at
the low end of the 30-35 range established earlier this year. Revised C-130J
assumptions regarding cost performance, production rate and delivery timing
account for approximately $275 million in reduced net earnings expectations, or
$0.70 per diluted share.
. Launch Vehicles: Launches of 8 Atlas launch vehicles are expected for 1999,
rather than the earlier projected range of 10-12. The delays are caused by the
review of recent launch vehicle upper stage failures. Launches of 8 Proton
launch vehicles are expected for 1999, rather than 8-10 as previously expected
because of the potential delay of those launches planned for year-end. Reduced
award and incentive fees on the Titan IV launch program and costs of corrective
actions are anticipated due to the April 30 launch failure as well as a more
conservative assessment of future program performance. We anticipate launching
2 Titan IV's and 2 Titan II's during the remainder of 1999.
. Commercial Satellites: Higher than anticipated costs and fewer orders are
expected to reduce
the profitability of the commercial satellite manufacturing business. Backlog
currently stands at $750 million with 13 geosynchronous satellites in various
stages of production. There will be a delay in recognition of orbital incentives
from Space Imaging since the CRSS-1 satellite failed to reach proper orbit on
the Athena II launch April 27, 1999. A second satellite currently is in the
later stages of production and is expected to be launched during the second half
of 1999.
. Portfolio shaping initiatives: Most portfolio shaping gains are not included
in our outlook to reflect the uncertainty of timing of these gains. Only those
items with a high probability of occurrence are included. Pre-tax gains in 1999
are expected to be about $10 million.
. Summary for 1999: Anticipated timing delays have reduced net earnings
expectations by $125 million, or $0.31 per diluted share; performance issues
have reduced earnings expectations by $205 million, or $0.54 per diluted share;
and portfolio shaping gains by $125 million, or $0.31 per diluted share; and the
previously mentioned $0.70 per diluted share reduction attributable to the C-
130J program.
Key Factors 2000:
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Based on the review completed to date, the Corporation has identified the
following factors which are expected to negatively impact earnings:
. C-130J: The production rate is expected to remain in the mid-teens, and will
not increase to the mid-20s as previously anticipated. Cost increases are
expected to continue to reduce profit recognition until backlog aircraft are
delivered. Deliveries are anticipated to be in the low 20's range rather than
the mid-20's as previously anticipated. Revised C-130J assumptions on cost
performance, production rate and delivery timing account for approximately $110
million in reduced earnings expectations, or $0.26 per diluted share.
. Launch Vehicles: Launches of 7-9 Atlas launch vehicles are expected in 2000,
rather than 10-12 previously expected. Launches of 8 Proton launch vehicles are
expected, rather than the 9-11 previously expected. This outlook assumes that
the Proton launch quota issue will be favorably resolved and therefore will not
negatively impact launches in 2000. The impact of a more conservative
assessment of program performance on the Titan IV program is also reflected in
this outlook.
. Expectations for sales growth and margin expansion in all sectors are
generally being reduced across the board.
. Most portfolio shaping gains are being removed from the Corporation's outlook
for 2000.
. Consistent with our prior outlook, we have included the effect of dilution
from the proposed Comsat transaction.
. Summary for 2000: Anticipated timing delays are projected to reduce earnings
expectations by $140 million, or $0.33 per diluted share; performance issues by
$345 million, or $0.84 per diluted share; portfolio shaping gains by $35
million, or $0.07per diluted share; and the previously mentioned $0.26 per
diluted share reduction attributable to the C-130J program.
Coffman, in looking to the future, noted that, "Demand for our products and
services is very strong and our technology is second to none at a time when
defense outlays are likely to increase. In fact, we have more than $20 billion
in contract opportunities during the next 12 months. Moreover, our recent MEADS
win and our PAC 3 anti-ballistic missile test success, fighter orders from
Greece and Egypt and our capture of the Nike and Gateway IT contracts underscore
the bright prospects we have on the horizon."
Headquartered in Bethesda, Maryland, Lockheed Martin is a highly diversified
global enterprise principally engaged in the research, design, development,
manufacture and integration of advanced-technology systems, products and
services. The Corporation's core businesses span space, electronics,
aeronautics, information and services, telecommunications, energy and systems
integration. Employing more than 161,000 people worldwide, Lockheed Martin had
1998 sales surpassing $26 billion.
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NEWS MEDIA CONTACT: James Fetig 301/897-6352
INVESTOR RELATIONS CONTACT: James Ryan, 301/897-6584 or
Randa Middleton, 301/8976455
Web site: www.lmco.com
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NOTE: Statements in this press release are considered forward-looking
statements under the federal securities laws, including the Private
Securities Litigation Reform Act of 1995, including the statements
relating to projected future financial performance. Sometimes these
statements will contain words such as "believes," "expects,"
"intends," "plans" and other similar words. These statements are not
guarantees of our future performance and are subject to risks,
uncertainties and other important factors that could cause our actual
performance or achievements to be materially different from those we
may project.
As for the forward-looking statements that relate to future financial
results and other projections, actual results will be different due to
the inherent nature of projections and may be better or worse than
projected. Given these uncertainties, you should not place any
reliance on these forward-looking statements. These forward-looking
statements also represent our estimates and assumptions only as of the
date that they were made. We expressly disclaim a duty to provide
updates to these forward-looking statements, and the estimates and
assumptions associated with them, after the date of this press release
to reflect events or circumstances or changes in expectations or the
occurrence of anticipated events.
In addition to the factors set forth in our filings with the
Securities and Exchange Commission (www.sec.gov), the following
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factors could affect the forward-looking statements: continued
difficulties during space launches or adverse actions resulting from
space industry reviews by the U.S. military or the Clinton
Administration; the timely resolution of the quota restriction on
Proton launches depends on factors outside our control; continued
difficulties with cost growth and performance issues relating to the
C-130J program; the ability for Space Imaging to timely or
successfully launch its second satellite; the ability to achieve or
quantify savings for our customers or ourselves in our global cost-
cutting program; the ability to obtain or the timing of obtaining
future government awards, the availability of government funding and
customer requirements, economic conditions, competitive environment,
timing of awards and contracts; timing of product delivery and
launches, customer acceptance and the outcome of contingencies
including completion of acquisitions and divestitures, litigation and
environmental remediation, Year 2000 remediation, program performance,
the ability to consummate the COMSAT transaction. These are only some
of the numerous factors which will affect the forward-looking
statements in this press release, many of which are difficult to
predict.