-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, E1wiT5h949yQqJ34Z2BX+XpDpYECHSChUMQ/RQLcGdNZsN73jNITGT1cf2N9zl4r 1Ou/rL4uZNRo2NKqDYuBqA== /in/edgar/work/20000814/0000928385-00-002249/0000928385-00-002249.txt : 20000921 0000928385-00-002249.hdr.sgml : 20000921 ACCESSION NUMBER: 0000928385-00-002249 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20000814 FILER: COMPANY DATA: COMPANY CONFORMED NAME: COMSAT CORP CENTRAL INDEX KEY: 0000022698 STANDARD INDUSTRIAL CLASSIFICATION: [4899 ] IRS NUMBER: 520781863 STATE OF INCORPORATION: DC FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-04929 FILM NUMBER: 700195 BUSINESS ADDRESS: STREET 1: 6560 ROCK SPRING DR CITY: BETHESDA STATE: MD ZIP: 20817 BUSINESS PHONE: 3012133000 MAIL ADDRESS: STREET 1: 6560 ROCK SPRING DRIVE CITY: BETHESDA STATE: MD ZIP: 20817 FORMER COMPANY: FORMER CONFORMED NAME: COMMUNICATIONS SATELLITE CORP /DE/ DATE OF NAME CHANGE: 19930719 10-Q 1 0001.txt FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 For Quarter Ended June 30, 2000 Commission File Number 1-4929 COMSAT CORPORATION 6560 Rock Spring Drive Bethesda, MD 20817 (301) 214-3000 District of Columbia 52-0781863 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 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 twelve (12) months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past ninety (90) days. Yes [X] No [_] 53,364,848 shares of the Registrant's common stock were outstanding as of June 30, 2000. The registrant meets the conditions set forth in general instruction H(1)(a) and (b) of Form 10-Q and is therefore filing this form with the reduced disclosure format. PART I. Financial Information Item 1. Interim Financial Statements for the Corporation (Unaudited) COMSAT CORPORATION AND SUBSIDIARIES Condensed Consolidated Income Statements
Three Months Ended June 30, Six Months Ended June 30, --------------------------- ----------------------------- In thousands, except per share amounts 2000 1999 2000 1999 - ------------------------------------------------------------------------------------------------------------------- REVENUES $ 168,728 $ 155,925 $ 340,164 $ 300,466 --------- --------- --------- --------- Operating expenses: Cost of services 96,728 83,071 187,768 163,573 Depreciation and amortization 39,104 43,938 77,853 86,444 Research and development 1,456 2,183 3,772 3,903 General and administrative 8,356 6,727 14,373 11,928 Merger costs 1,640 2,057 2,931 3,893 --------- --------- --------- --------- Total operating expenses 147,284 137,976 286,697 269,741 --------- --------- --------- --------- OPERATING INCOME 21,444 17,949 53,467 30,725 Other income (expense), net (905) 14,056 9,415 31,153 Interest expense, net of amounts capitalized (8,810) (9,605) (17,416) (19,382) --------- --------- --------- --------- INCOME BEFORE INCOME TAXES 11,729 22,400 45,466 42,496 Income tax expense (5,134) (10,431) (17,879) (18,501) --------- --------- --------- --------- NET INCOME $ 6,595 $ 11,969 $ 27,587 $ 23,995 ========= ========= ========= ========= EARNINGS PER COMMON SHARE: Basic $ 0.12 $ 0.23 $ 0.52 $ 0.46 Assuming dilution 0.12 0.22 0.52 0.45
The accompanying notes are an integral part of these financial statements. 2 COMSAT CORPORATION AND SUBSIDIARIES Condensed Consolidated Balance Sheets
June 30, December 31, In thousands 2000 1999 - ------------------------------------------------------------------------------------------------------------------------------------ ASSETS - ------ CURRENT ASSETS: Cash and cash equivalents $ 57,555 $ 78,632 Receivables 145,801 149,973 Other 19,224 62,017 ---------- ---------- Total current assets 222,580 290,622 ---------- ---------- Property and equipment (net of accumulated depreciation of $1,298,733 in 2000 and $1,209,924 in 1999) 939,101 912,475 Investments 362,258 327,684 Other assets 126,916 120,943 ---------- ---------- TOTAL ASSETS $1,650,855 $1,651,724 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY - ------------------------------------ CURRENT LIABILITIES: Current maturities of long-term debt $ 75,806 $ 786 Accounts payable and accrued liabilities 95,616 114,081 Due to related parties 30,137 27,893 Other 3,265 6,928 ---------- ---------- Total current liabilities 204,824 149,688 ---------- ---------- Long-term debt 339,549 408,979 Deferred income taxes and investment tax credits 108,446 110,214 Accrued post-retirement benefit costs 48,902 49,075 Other long-term liabilities 126,266 136,063 Preferred securities issued by subsidiary 200,000 200,000 STOCKHOLDERS' EQUITY: Common stock 452,841 448,072 Retained earnings 251,944 229,681 Treasury stock (9,211) (8,991) Unearned compensation (3,892) (2,804) Accumulated other comprehensive loss (68,814) (68,253) ---------- ---------- Total stockholders' equity 622,868 597,705 ---------- ---------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,650,855 $1,651,724 ========== ==========
The accompanying notes are an integral part of these financial statements. 3 COMSAT CORPORATION AND SUBSIDIARIES Condensed Consolidated Cash Flow Statements
Six Months Ended June 30, ----------------------------------- In thousands 2000 1999 - ------------------------------------------------------------------------------------------------------------------------------------ Cash flows from operating activities: Net income $ 27,587 $ 23,995 Adjustments to reconcile net income to net cash provided by continuing operations: Depreciation and amortization 77,853 86,444 Equity in earnings of affiliates (12,212) (9,159) Gain on sale of investments (6,166) (25,671) Changes in operating assets and liabilities 15,573 1,886 Other (2,525) 846 ---------- ---------- Net cash provided by continuing operations 100,110 78,341 Net cash used by discontinued operations (3,308) (6,208) ---------- ---------- Net cash provided by operating activities 96,802 72,133 ---------- ---------- Cash flows from investing activities: Purchase of property and equipment (82,894) (55,194) Investments in unconsolidated businesses (1,041) - Proceeds from sale of investments 8,672 29,541 Increase in INTELSAT ownership (37,121) (38,064) Distribution from Inmarsat - 31,248 Other 360 (676) ---------- ---------- Net cash used in investing activities (112,024) (33,145) ---------- ---------- Cash flows from financing activities: Common stock issued 2,032 3,124 Cash dividends paid (5,324) (5,268) Repayment of long-term debt (392) (7,238) Payment of satellite performance incentives (2,171) - ---------- ---------- Net cash used in financing activities (5,855) (9,382) ---------- ---------- Net increase (decrease) in cash and cash equivalents (21,077) 29,606 Cash and cash equivalents, beginning of period 78,632 30,795 ---------- ---------- Cash and cash equivalents, end of period $ 57,555 $ 60,401 ========== ==========
The accompanying notes are an integral part of these financial statements. 4 COMSAT CORPORATION AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) 1. Financial Statement Presentation COMSAT prepared the accompanying unaudited condensed consolidated financial statements pursuant to the rules and regulations of the SEC. These financial statements should be read together with the financial statements and notes in COMSAT's 1999 Annual Report on Form 10-K filed with the SEC. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. The accompanying condensed consolidated financial statements reflect all adjustments and disclosures which, in our opinion, are necessary for a fair presentation. All such adjustments are of a normal recurring nature. The results of operations for the interim periods are not necessarily indicative of the results of the entire year. Electromechanical Systems, Inc. was excluded from the COMSAT RSI, Inc. sale in 1998 and retained by COMSAT in discontinued operations pending its possible sale. Effective January 1, 2000, Electromechanical Systems is now reported in continuing operations. The assets, revenues and income of Electromechanical Systems were not material to COMSAT's consolidated financial position or operating results prior to 2000. 2. Agreement and Plan of Merger with Lockheed Martin Corporation On August 3, 2000, Lockheed Martin Corporation ("Lockheed Martin") acquired the remaining outstanding common stock of COMSAT Corporation ("COMSAT") in connection with the merger (the "Merger") of COMSAT with and into a wholly-owned subsidiary of Lockheed Martin. The Merger was effected pursuant to the Agreement and Plan of Merger, among Lockheed Martin, COMSAT and a subsidiary of Lockheed Martin, dated as of September 18, 1998 (the "Merger Agreement"). Lockheed Martin owned approximately 49% of COMSAT's outstanding common stock prior to completion of the Merger. Pursuant to the terms of the Merger Agreement, each issued and outstanding share of COMSAT common stock, not held by Lockheed Martin, was converted into the right to receive one share of Lockheed Martin common stock. 3. INTELSAT Share Change During the first quarter of 2000, we paid $37.1 million to increase our total ownership share of INTELSAT to 22.5% from 20.4% at December 31, 1999. 4. Regulatory Environment and Litigation Regulatory Environment. COMSAT is subject to regulation by the FCC, under the Communications Satellite Act and the Communications Act, with respect to various aspects of its COMSAT World Systems (CWS) and COMSAT Mobile Communications (CMC) businesses. FCC decisions and policies have had and will continue to have a significant impact on the corporation. In addition, the telecommunications companies which the corporation operates in various developing countries are subject to regulation by the local regulatory bodies in those 5 countries. Because the regulatory environment in those countries is rapidly evolving as the local economies are developing, these companies face increasing business uncertainties that could have an adverse effect on their operations. In March 2000, Congress passed and the President signed the ORBIT Act. The ORBIT Act amends the Satellite Act and repeals upon enactment the special restrictions on the ownership of COMSAT common stock and FCC regulation of COMSAT's capital structure. A detailed description of the ORBIT Act is included in COMSAT's Form 10-K for the year ended December 31, 1999. Litigation. The corporation and its subsidiaries are a party to various lawsuits and arbitration proceedings and are subject to various claims and inquiries, which generally are incidental to the ordinary course of their business. On August 3, 2000, Electromechanical Systems, Inc. (EMS), a subsidiary of the corporation, entered a plea of guilty in the United States District Court for the Middle District of Florida in Tampa to a one-count information charging obstruction of federal audits in violation of 18 U.S.C. (S) 1516. The information charged that from 1988 through February 1999, EMS employees concealed or altered documents or other information in order to avoid detection by government auditors that EMS employees were engaged in fraudulent activity, including falsification of actual costs associated with work performed for the United States Navy on radar pedestals. As part of a plea agreement, EMS agreed to pay the government $7.5 million in restitution and the United States Attorney's Office for the Middle District of Florida agreed that it will not charge COMSAT, any COMSAT successor corporation, or any current or former COMSAT affiliate and will not further charge EMS, with any criminal offense relating to the conduct giving rise to the plea. As previously reported, in January 1999, the United States Department of Justice announced that it intended to join a lawsuit filed by former employees of EMS under the qui tam provisions of the Civil False Claims Act. The lawsuit, which alleges conduct similar to that charged in the criminal information, names EMS, the corporation and several current or former employees of EMS and seeks potential damages estimated at up to $40 million. The lawsuit has been stayed pending completion of the criminal investigation by the United States Attorney's Office. The corporation intends vigorously to defend the allegations against COMSAT and EMS in the lawsuit but cannot predict the ultimate outcome or estimate the amount of liability, if any, that could result from the lawsuit. In addition, Note 7 describes an arbitration proceeding related to the Green Bank contract to which the corporation is a party. The outcome of legal proceedings cannot be predicted with certainty. Based on currently available information, however, management does not believe that the outcome of any matter which is pending or threatened, either individually or in the aggregate, will have a material adverse effect on the long-term consolidated financial condition of the corporation. Nevertheless, the outcome of such matters could materially affect consolidated results of operations in a given year or quarter. 6 5. Earnings Per Share The following reconciliation illustrates the calculation of our basic and diluted earnings per share amounts for the three and six month periods ended June 30, 2000 and 1999:
Three Months Ended June 30, Six Months Ended June 30, ------------------------------------------------------------------------- In millions, except per share amounts 2000 1999 2000 1999 - -------------------------------------------------------------------------------------------------------------------------- Net income $ 6.6 $ 12.0 $ 27.6 $ 24.0 =========== =========== ========== ========== Basic: Weighted average shares outstanding 53.2 52.6 53.1 52.5 =========== =========== ========== ========== Per share $ 0.12 $ 0.23 $ 0.52 $ 0.46 =========== =========== ========== ========== Assuming dilution: Weighted average shares outstanding 53.2 52.6 53.1 52.5 Stock options 0.5 1.1 0.3 1.1 Restricted stock awards and units - 0.1 0.1 0.1 ----------- ----------- ---------- ---------- Total 53.7 53.8 53.5 53.7 =========== =========== ========== ========== Per share $ 0.12 $ 0.22 $ 0.52 $ 0.45 =========== =========== ========== ==========
6. Comprehensive Income Comprehensive income consists of net income and other gains and losses affecting our stockholders' equity that, under generally accepted accounting principles, are excluded from net income. For COMSAT, such items consist primarily of foreign currency translation gains and losses and unrealized gains and losses on marketable equity securities. The components of total comprehensive income (loss) are presented in the following table:
Three Months Ended June 30, Six Months Ended June 30, --------------------------------------------------------------------------------- In millions 2000 1999 2000 1999 - ----------------------------------------------------------------------------------------------------------------------------------- Net income $ 6.6 $ 12.0 $ 27.6 $ 24.0 Other comprehensive income (loss): Unrealized gain (loss) on securities - (14.4) (2.2) (24.9) Foreign currency translation (4.5) (0.1) 1.7 (50.5) ---------- ---------- --------- ---------- Total comprehensive income (loss): $ 2.1 $ (2.5) $ 27.1 $ (51.4) ========== ========== ========= ==========
The unrealized loss on securities in 2000 represents an adjustment to reclassify $2.2 million of unrealized gains to net income in the first quarter of 2000. The unrealized loss on securities in 1999 includes a reduction in the market value of COMSAT's investment in ICO Global Communication (Holdings) Limited and reclassification adjustments related to the sale of stock in Viatel, Inc. Foreign currency translation principally relates to the appreciation (devaluation) of the Brazilian currency (the Real). 7 7. Discontinued Operations On June 25, 1998, we sold substantially all of COMSAT RSI, Inc. In connection with the sale, COMSAT and the purchaser agreed to indemnify each other against certain losses. Our indemnification obligations generally are limited to losses incurred in excess of an agreed threshold amount ($6.7 million) and are capped at a maximum agreed amount ($28.0 million) in respect of claims made within an agreed survival period (generally, approximately two years). In certain instances, however, our indemnification obligations are not subject to those limitations. COMSAT retained a long-term construction contract for a radio astronomy telescope in Green Bank, West Virginia. We also retained a claim against the prime contractor to recover $29.0 million in costs incurred in performing the Green Bank contract, which are in excess of the original contract value. The prime contractor has filed a counterclaim seeking $13.1 million in damages for delay. The claim and counterclaim are currently in arbitration. There can be no assurance that we will be successful in collecting all or any portion of this claim, or that we will prevail in defense of the counterclaim. The loss upon disposition of discontinued operations is based upon our best estimates of the estimated costs to complete the Green Bank contract, the amount to be realized from the $29.0 million Green Bank contract arbitration claim, potential indemnification claims and other costs related to the discontinued operations. These estimates could change as additional costs are incurred to complete the Green Bank contract, upon resolution of the arbitration and upon resolution of other matters related to the COMSAT RSI discontinued operations. The net assets of COMSAT RSI remaining were $13.8 million at June 30, 2000 and $10.5 million at December 31, 1999. The net assets consist primarily of receivables on long-term contracts, fixed assets, current liabilities and the remaining reserve for the estimated loss on disposal. 8. New Accounting Pronouncements In June 1998, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities." The statement requires companies to recognize all derivatives as either assets or liabilities, with the instruments measured at fair value. The accounting for changes in fair value and gains or losses depends on the intended use of the derivative and its resulting designation. The statement was originally effective for fiscal years beginning after June 15, 1999. In June 1999, FASB delayed implementation of this statement by one year, to June 15, 2000. The corporation will adopt SFAS No. 133 in the first quarter of 2001 and is evaluating the impact that implementation of this statement will have on its consolidated financial statements. In December 1999, the United States Securities Exchange Commission (SEC) issued Staff Accounting Bulletin (SAB) No. 101 - Revenue Recognition. In June 2000, the SEC issued SAB No. 101B - Second Amendment: Revenue Recognition in Financial Statements, which delayed the implementation of SAB No. 101 until no later than the fourth quarter of fiscal years beginning after December 15, 1999. The corporation is evaluating the impact that implementation of this SAB will have on its consolidated financial statements. In March 2000, FASB issued FASB Interpretation No. 44, "Accounting for Certain Transactions involving Stock Compensation, an interpretation of APB Opinion No. 25." This Interpretation clarifies the application of Opinion No. 25 for certain issues. The Interpretation is effective July 1, 2000. The corporation is evaluating the impact that implementation of this Interpretation will have on its consolidated financial statements. 8 9. Segment Information Selected information regarding our operating segments, World Systems (CWS), Mobile Communications (CMC), International (CI) and Laboratories (Labs), follows:
Three Months Ended (in millions) CWS CMC CI Labs Other Total - --------------------------------------------------------------------------------------------------------------------------- June 30, 2000: Revenues: External customers $ 96.6 $ 26.9 $ 29.8 $ 10.9 $ 4.6 $ 168.8 Intersegment 0.8 0.1 - 0.8 (1.7) - --------- ---------- ---------- ----------- ------------- ----------- Total $ 97.4 $ 27.0 $ 29.8 $ 11.7 $ 2.9 $ 168.8 ========= ========== ========== =========== ============= =========== Segment income (loss) $ 45.6 $ 5.7 $ (6.8) $ (1.7) $ (31.0) $ 11.8 ========= ========== ========== =========== ============= =========== June 30, 1999: Revenues: External customers $ 85.9 $ 30.7 $ 27.7 $ 11.6 $ - $ 155.9 Intersegment 0.4 0.2 - 1.7 (2.3) - --------- ---------- ---------- ----------- ------------- ----------- Total $ 86.3 $ 30.9 $ 27.7 $ 13.3 $ (2.3) $ 155.9 ========= ========== ========== =========== ============= =========== Segment income (loss) $ 32.0 $ 4.1 $ 9.5 $ (0.2) $ (23.0) $ 22.4 ========= ========== ========== =========== ============= =========== Six Months Ended (in millions) CWS CMC CI Labs Other Total - --------------------------------------------------------------------------------------------------------------------------- June 30, 2000: Revenues: External customers $ 195.2 $ 55.8 $ 58.1 $ 21.9 $ 9.2 $ 340.2 Intersegment 1.3 1.0 - 1.7 (4.0) - ---------- ---------- ----------- ----------- ------------ ----------- Total $ 196.5 $ 56.8 $ 58.1 $ 23.6 $ 5.2 $ 340.2 ========== ========== =========== =========== ============ =========== Segment income (loss) $ 96.0 $ 12.6 $ (13.5) $ (2.7) $ (46.9) $ 45.5 ========== ========== =========== =========== ============ =========== June 30, 1999: Revenues: External customers $ 164.3 $ 60.4 $ 55.4 $ 20.3 $ - $ 300.4 Intersegment 0.9 0.2 - 2.9 (4.0) - ---------- ---------- ----------- ----------- ------------ ----------- Total $ 165.2 $ 60.6 $ 55.4 $ 23.2 $ (4.0) $ 300.4 ========== ========== =========== =========== ============ =========== Segment income (loss) $ 61.3 $ 8.9 $ 18.3 $ (1.7) $ (44.3) $ 42.5 ========== ========== =========== =========== ============ ===========
We evaluate the performance of our operating segments based on income (loss) before income taxes and interest costs. The "Other" column includes Electromechanical Systems, the elimination of intersegment revenues, corporate related items and interest costs, net of amounts capitalized. 9 Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations for the Quarter Ended June 30, 2000 ANALYSIS OF OPERATIONS On August 3, 2000, COMSAT Corporation completed its merger with a wholly owned subsidiary of Lockheed Martin Corporation and became a business unit of Lockheed Martin Global Telecommunications. COMSAT entered into an Agreement and Plan of Merger with Lockheed Martin on September 18, 1998. Under that agreement, Lockheed Martin agreed to acquire all of COMSAT's outstanding common stock in a two-step transaction. The first step, a cash tender offer to purchase 49% of COMSAT's common stock at a price of $45.50 per share, was completed on September 18, 1999. The second step, the merger of COMSAT with a Lockheed Martin subsidiary, was completed on August 3, 2000. In the merger, COMSAT shareholders, other than Lockheed Martin, received one share of Lockheed Martin common stock for each share of COMSAT common stock that they owned. As a result, Lockheed Martin now owns 100% of COMSAT's common stock. The merger qualified as a tax-free reorganization. Consolidated Operations Revenues Consolidated revenues for the second quarter of 2000 were $168.8 million, or $12.9 million better than the second quarter of 1999. For the six months ended June 30, 2000, consolidated revenues were $340.2 million, or $39.8 million higher than the comparative period of 1999. The improvement in revenues for both periods was primarily due to increased revenues in World Systems. Operating Income Operating income for the second quarter of 2000 was $21.4 million, or $3.5 million above the second quarter of last year. For the six-months period ended June 30, 2000, operating income was $53.5 million, which was $22.8 million higher than the comparative period of 1999. The improvement was principally due to increased operating income in World Systems, which was partially offset by increased operating losses in both International and the Laboratories. In addition, the second quarter and year-to-date 2000 results included a $3.0 million loss from the settlement of a Supplemental Executive Retirement Plan obligation. The merger costs in the second quarter of 2000 were $1.6 million, compared to $2.1 million in the same period of last year. For the year-to-date period, merger costs were $2.9 million, which was $1.0 million lower than the same period in 1999. 10 Other Income (Expense), Net Other income (expense), net for the second quarter of 2000 was expense of $900,000, which compares to income of $14.1 million for the same period of 1999. For the six months ended June 30, 2000, other income was $9.4 million, versus income of $31.2 million for the comparative period of 1999. During the first half of 1999 COMSAT sold its remaining stock in Viatel, Inc. The pre-tax gains recorded for the sale of Viatel were $12.6 million for the second quarter of 1999 and $25.7 million for the first six months of 1999. The results for the second quarter and first six months of 2000 included the establishment of a $7.5 million reserve related to an investigation by the U.S. Attorney's Office in Tampa of Electromechanical Systems, Inc., a subsidiary located in Largo, Florida. The financial results for the first six months of 2000 included $6.2 million from the sale of investments. Interest Costs, Net of Amounts Capitalized Interest costs, net of amounts capitalized, for the second quarter of 2000 were $8.8 million, or $800,000 better than the second quarter of 1999. For the first half of 2000, interest costs, net were $17.4 million, which was $2.0 million below the same period of 1999. This improvement was primarily due to an increase in the amount of interest we capitalized related to the construction of INTELSAT satellites. Income Before Income Taxes Income before income taxes for the second quarter of 2000 was $11.8 million, which was $10.6 million below the comparative period of 1999. For the first six months of 2000, income before income taxes was $45.5 million, or $3.0 million better than the first half of 1999. The second quarter and year-to-date 2000 results include the reserve established for Electromechanical Systems, Inc. and the loss from the settlement of a Supplemental Executive Retirement Plan obligation. The 1999 results included the gains associated with the sale of Viatel. Exclusive of these items, income before income taxes for the second quarter of 2000 was $12.5 million higher than the same quarter in 1999 and for the first half of 2000 was $39.2 million better than the same period in 1999. The increases in income before income taxes over 1999 were primarily the result of improved results in World Systems and Mobile Communications, offset in part by increased losses in International and Laboratories. Income Tax Expense For the second quarter of 2000, income tax expense was $5.1 million, compared to expense of $10.4 million in the same period of l999. The effective tax rate for the second quarter of 2000 was 44%, compared to 47% for the same period of 1999. For the six months ended June 30, 2000, income tax expense was $17.9 million, which was $600,000 lower than the comparative period of 1999. For the year-to-date period, the effective tax rate in 2000 was 39%, versus 44% in 1999. 11 Net Income Net income for the three months ended June 30, 2000 was $6.6 million, or $5.4 million below the same period of 1999. For the first half of 2000 net income was $27.6 million, or $3.6 million better than the first six months of 1999. The earnings per share on a fully diluted basis were $0.12 for the second quarter and $0.52 for the first six months of 2000. This compares to $0.22 for the second quarter of 1999 and $0.45 for the first half of 1999. Segment Operating Results We report our operating results in four segments: World Systems, Mobile Communications, International and the Laboratories. We evaluate the performance of our operating segments based on segment income (loss) before taxes and interest costs. Electromechanical Systems, Inc. previously was included in discontinued operations. Since January 1, 2000, Electromechanical Systems has been reported in continuing operations in the "other" categories listed below. Results by Segment:
Three Months Ended Six Months Ended June 30, June 30, ------------------------------- --------------------------------- In millions 2000 1999 2000 1999 - -------------------------------------------------------------------------------------------------------------------------- REVENUES - -------- World Systems $ 97.4 $ 86.3 $ 196.5 $ 165.2 Mobile Communications 27.0 30.9 56.8 60.6 International 29.8 27.7 58.1 55.4 Laboratories 11.7 13.3 23.6 23.2 Eliminations and other 2.9 (2.3) 5.2 (4.0) -------- -------- ------ ----- Total $ 168.8 $ 155.9 $ 340.2 $ 300.4 ======== ======== ====== ===== SEGMENT INCOME (LOSS) - -------------------- World Systems $ 45.6 $ 32.0 $ 96.0 $ 61.3 Mobile Communications 5.7 4.1 12.6 8.9 International (6.8) 9.5 (13.5) 18.3 Laboratories (1.7) (0.2) (2.7) (1.7) -------- -------- ------- ------ Total Segment income 42.8 45.4 92.4 86.8 General and administrative expenses (8.4) (6.7) (14.4) (11.9) Merger costs (1.6) (2.1) (2.9) (3.9) Interest costs, net of amounts capitalized (8.8) (9.6) (17.4) (19.4) Other income (expense), net (12.2) (4.6) (12.2) (9.1) ------- -------- ------- ------ Total $ 11.8 $ 22.4 $ 45.5 $ 42.5 ======= ======== ======= ======
12 World Systems World Systems' revenues in the second quarter of 2000 were $97.4 million, an increase of $11.1 million over the same period of last year. For the first six months of 2000, revenues in World Systems were $196.5 million, or $31.3 million higher than the comparative period of 1999. The improved revenues were primarily the result of increased demand for Internet and other high-speed data services, the reversal of a reserve related to space segment usage charges and increased ownership in INTELSAT. In addition, the year-to-date 2000 improvement in revenues includes $5.7 million from the settlement of a commercial lawsuit. Segment income in World Systems in the second quarter was $45.6 million, or $13.6 million above the second quarter of 1999. For the first half of 2000, World Systems segment income was $96.0 million, or $34.7 million better than the same period of 1999. The improvement in segment income principally was due to increased revenues and the extension of the depreciable lives of INTELSAT satellites in the third quarter of 1999. In addition, the results for the first half of 2000 included $9.2 million in segment income realized from the settlement of a commercial lawsuit. In March 2000, we paid $37.1 million to increase our total ownership share of INTELSAT from 20.4% to 22.5%. Mobile Communications Revenues in Mobile Communications for the second quarter were $27.0 million, a decline of $3.9 million from the second quarter of 1999. Mobile Communications revenues for the first half of 2000 were $56.8 million, or $3.8 million lower than the first six months of 1999. The revenue decreases were primarily the result of lower analog telephone traffic, which was partially offset by increased revenue from the U.S. Navy lease contract. Mobile Communications' segment income in the second quarter was $5.7 million, or $1.6 million above the second quarter of 1999. The improvement over the second quarter of 1999 was due to increased equity income attributable to Mobile Communications' investment in Inmarsat. For the first half of 2000, Mobile Communications segment income was $12.6 million, which was $3.7 million higher than the comparative period of 1999. The year-to-date improvement in segment income was due primarily to a $2.8 million gain from the sale of a portion of Mobile Communications' stock in ICO Global Communications (Holdings) Limited. We wrote off our investment in ICO after ICO filed for bankruptcy in the third quarter of 1999 International International's second quarter 2000 revenues were $29.8 million, or $2.1 million above the comparative period of last year. For the first half of 2000, International's revenues were $58.1 million, which was $2.7 million better than the same period last year. This improvement was due to revenue increases in Argentina and Turkey, offset in part by declines in Mexico and Colombia. International's segment loss for the second quarter of 2000 was $6.8 million, compared to segment income in the second quarter of 1999 of $9.5 million. For the six months ended 13 June 30, 2000, International's segment loss was $13.5 million, compared to segment income of $18.3 million in the six months ended June 30, 1999. International's segment results for 1999 included pre-tax gains from the sale of stock in Viatel, Inc. of $12.6 million in the second quarter and $25.7 million in the first half of 1999. Exclusive of the Viatel gains, International's segment losses for the second quarter and first half of 2000 were $3.7 million and $6.1 million higher than the comparative periods of 1999, respectively. The increase in International's segment losses were primarily due to higher operating losses in both Brazil and Colombia. Laboratories The revenues for the Laboratories in the second quarter of 2000 were $11.7 million, which was $1.6 million below the second quarter of 1999. This decrease was due to lower sales in both the systems and technology consulting and the communications products businesses. The revenues for the six months ended June 30, 2000 for the Laboratories were $23.6 million, or $400,000 better than the same period of 1999. The segment loss for the Laboratories for the second quarter was $1.7 million, which was $1.5 million higher than the second quarter of 1999. For the year-to-date period ended June 30, 2000, the segment loss was $2.7 million, compared to $1.7 million for the same period last year. The increased segment losses for the Laboratories primarily were due to higher losses in the products business. 14 PART II. Other Information Item 1. Legal Proceedings ----------------- See note 4 of this Form 10-Q, note 11 to the financial statements contained in our 1999 Form 10-K and Item 3 of our 1999 Form 10-K, which are incorporated herein by reference. Item 5. Other Events. ------------- Lockheed Martin Corporation acquired control of the remaining outstanding common stock of COMSAT Corporation as a result of the merger of COMSAT with and into a wholly-owned subsidiary of Lockheed Martin, formerly known as "Deneb (D.C.) Corporation" (the "Registrant"), on August 3, 2000. The merger was effected pursuant to the Agreement and Plan of Merger, among Lockheed Martin, COMSAT and Deneb Corporation, dated as of September 18, 1998 (the "Merger Agreement"). Prior to the merger, Deneb assigned its rights under the Merger Agreement to Registrant. Lockheed Martin owned approximately 49% of COMSAT's outstanding common stock prior to completion of the merger. Pursuant to the terms of the Merger Agreement, each issued and outstanding share of COMSAT common stock, not held by Lockheed Martin, was converted into the right to receive one share of Lockheed Martin common stock. Lockheed Martin will issue approximately 27,460,604 shares of Lockheed Martin common stock in exchange for the shares of COMSAT common stock. Lockheed Martin's common stock is listed on the New York Stock Exchange ("NYSE") and trades under the symbol LMT. In addition, each option to acquire COMSAT common stock under COMSAT's stock option plans was converted into an option to acquire an equal number of shares of Lockheed Martin common stock. As a result of the merger, Registrant was renamed "COMSAT Corporation" and assumed COMSAT's obligations under the following debt instruments: 8.125% Notes due April 1, 2004 8.95% Notes due May 15, 2001 8.66% Medium Term Notes, Series A, due November 30, 2006 8.55% Medium Term Notes, Series A, due December 13, 2006 8.50% Medium Term Notes, Series A, due February 2, 2007 7.92% Medium Term Notes, Series A, due March 20, 2007 7.77% Medium Term Notes, Series A, due May 8, 2007 7.70% Medium Term Notes, Series A, due May 10, 2007 Trading on the NYSE of the 8.125% Notes due April 1, 2004 and the 8.95% Notes due May 15, 2001 (previously traded on the NYSE under the symbol CQ8D04 and CQ8E01, respectively) has been halted pending de-listing. On August 3, 2000, COMSAT filed a notice on Form 15 of termination of registration or suspension of duty to file reports under the Securities Exchange Act of 1934 with respect to the above- referenced notes. In addition, in connection with the merger, Registrant guaranteed the obligation of COMSAT Capital I, L.P. under the 8 1/8% Cumulative Monthly Income Preferred Securities ("MIPs") issued by COMSAT Capital I, L.P. The MIPs are listed on the New York Stock Exchange and trade under the symbol CQ pa. Registrant will continue to file reports under the Exchange Act as the successor registrant to COMSAT in respect of the MIPs. 15 Upon consummation of the merger, Registrant acquired all of the assets and liabilities of COMSAT by operation of law. The merger and the Merger Agreement are described in greater detail in the Proxy Statement/Prospectus included as part of Lockheed Martin's Registration Statement on Form S-4 (Registration No. 333-78279), which description is incorporated herein by reference. To the extent required, Registrant will file the required proforma financial information required by Item 7 of Form 8-K within the required 60 days of the date of this report. On July 31, 2000, the Federal Communications Commission ("FCC") approved the transfer of control of COMSAT's licenses and authorizations as contemplated by the Merger Agreement. A copy of the joint press release of Lockheed Martin and COMSAT announcing FCC approval is attached as Exhibit 99.1. Following receipt of FCC approval, the merger became effective on August 3, 2000. A copy of the joint press release of Lockheed Martin and COMSAT announcing consummation of the merger is attached as Exhibit 99.2. Item 6. Exhibits and Reports on Form 8-K -------------------------------- (a) Exhibits -------- 2 Agreement and Plan of Merger, dated as of September 18, 1998, among COMSAT Corporation, Lockheed Martin Corporation and Deneb Corporation (incorporated by reference to Exhibit 2 to Registrant's Solicitation/Recommendation Statement on Schedule 14D-9 filed on September 25, 1998) 3.1 First Supplemental Indenture, dated as of August 3, 2000, between COMSAT Corporation, formerly Deneb (D.C.) Corporation as successor by merger to COMSAT Corporation, and Bank One Trust Company, N.A. (as successor in interest to The First National Bank of Chicago), as Trustee 3.2 Second Supplemental Indenture, dated as of August 3, 2000, between COMSAT Corporation, formerly Deneb (D.C.) Corporation as successor by merger to COMSAT Corporation, and The Chase Manhattan Bank, as successor by merger to The Chase Manhattan Bank (National Association), as Trustee 27 Financial Data Schedule 99.1 Joint Press Release issued by Lockheed Martin and COMSAT on July 31, 2000 announcing FCC approval 99.2 Joint Press Release issued by Lockheed Martin and COMSAT on August 3, 2000 announcing completion of the merger (b) Reports on Form 8-K ------------------- None 16 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. COMSAT Corporation ------------------ By: /s/ Alan Korobov ---------------- Alan Korobov Controller Date: August 14, 2000 17 EXHIBIT INDEX Exhibit No. - ----------- 2 Agreement and Plan of Merger, dated as of September 18, 1998, among COMSAT Corporation, Lockheed Martin Corporation and Deneb Corporation (incorporated by reference to Exhibit 2 to Registrant's Solicitation/Recommendation Statement on Schedule 14D-9 filed on September 25, 1998) 3.1 First Supplemental Indenture, dated as of August 3, 2000, between COMSAT Corporation, formerly Deneb (D.C.) Corporation as successor by merger to COMSAT Corporation, and Bank One Trust Company, N.A. (as successor in interest to The First National Bank of Chicago), as Trustee 3.2 Second Supplemental Indenture, dated as of August 3, 2000, between COMSAT Corporation, formerly Deneb (D.C.) Corporation as successor by merger to COMSAT Corporation, and The Chase Manhattan Bank, as successor by merger to The Chase Manhattan Bank (National Association), as Trustee 27 Financial Data Schedule 99.1 Joint Press Release issued by Lockheed Martin and COMSAT on July 31, 2000 announcing FCC approval. 99.2 Joint Press Release issued by Lockheed Martin and COMSAT on August 3, 2000 announcing completion of the merger. EX-3.1 2 0002.txt EXHIBIT 3.1 Exhibit 3.1 COMSAT CORPORATION, Issuer FIRST SUPPLEMENTAL INDENTURE Dated as of August 3, 2000 Supplement to Indenture Dated as of July 18, 1995 BANK ONE TRUST COMPANY, N.A., Trustee THIS FIRST SUPPLEMENTAL INDENTURE, dated as of August 3, 2000, between COMSAT CORPORATION (formerly known as Deneb (D.C.) Corporation), a District of Columbia corporation (the "Corporation"), and BANK ONE TRUST COMPANY, N.A. ( as successor in interest to The First National Bank of Chicago), a national banking association duly organized and existing under the laws of the United States of America, as Trustee (the "Trustee"). R E C I T A L S WHEREAS, COMSAT CORPORATION, a District of Columbia corporation ("COMSAT") and the Trustee entered into an Indenture dated as of July 18, 1995 (the "Indenture"), providing for the issuance by COMSAT of its securities (the "Securities"); WHEREAS, pursuant to the terms of the Indenture, COMSAT guaranteed to each Holder of a Security and to the Trustee, the due and punctual payment of the principal of and interest, if any, on such Security, when and as the same shall become due and payable, whether by declaration thereof or otherwise in accordance with the terms of such Security and of the Indenture; WHEREAS, pursuant to an Agreement and Plan of Merger dated as of September 18, 1998, among Lockheed Martin Corporation, the Corporation and COMSAT, on August 3, 2000, COMSAT merged with and into the Corporation whereby the existence of COMSAT ceased and the Corporation continued as the surviving corporation under the name of the Corporation; WHEREAS, Section 901 of the Indenture provides that the Corporation and the Trustee may enter into a supplemental indenture without the consent of any Holders to evidence the succession of the Corporation to COMSAT and the assumption by the Corporation of the covenants of COMSAT contained in the Indenture and the Securities; WHEREAS, the execution and delivery of this First Supplemental Indenture have been duly authorized by a Board Resolution, and the Corporation has requested the Trustee to join with it in the execution of this First Supplemental Indenture; and WHEREAS, the Corporation and the Trustee have done all things necessary under the Indenture to enter into this First Supplemental Indenture; NOW, THEREFORE, in consideration of these premises, it is mutually covenanted and agreed for the equal and proportionate benefit of all Holders of Securities as follows: ARTICLE I --------- Assumption ---------- Section 1.01. The Corporation hereby expressly assumes the due and punctual payment of the principal of and interest on the Securities, according to their tenor, and the due and punctual performance and observance of all the covenants and conditions of this Indenture with respect to the Securities to be kept or performed by the Corporation. Section 1.02. Upon the assumption of obligations set forth in Section 1.01, the Corporation succeeds to, and is substituted for, and may exercise every right and power of, COMSAT under this Indenture with the same effect as if the Corporation had been named therein. ARTICLE II ---------- Endorsement and Change of Form of Securities -------------------------------------------- Section 2.01. Securities authenticated and delivered after the execution of this First Supplemental Indenture may bear a notation in form approved by the Corporation, provided such form meets the requirements of any exchange upon which the Securities may be listed, as to any matter provided for in this First Supplemental Indenture. Section 2.02. If the Corporation shall so determine, new Securities so modified as to conform, in the opinion of the Board of Directors of the Corporation, to the modification of the Indenture contained in this First Supplemental Indenture may be prepared and executed by the Corporation and authenticated and delivered by the Trustee in exchange for the Outstanding Securities. Section 2.03. Anything herein to the contrary notwithstanding, the Trustee shall not at any time be under any responsibility either to require or cause any Security now or hereafter outstanding to be either presented to or delivered to it for any purpose provided for in this Article II or for the legal consequences of the failure of any Holder so to present or deliver the same. ARTICLE III ----------- Miscellaneous ------------- Section 3.01. Except as hereby expressly modified, the Indenture and the Securities issued thereunder are in all respects ratified and confirmed and all the terms, conditions and provisions thereof shall remain in full force and effect. Section 3.02. The Trustee shall have no responsibility for the recitals in this First Supplemental Indenture or for the validity or the sufficiency of this First Supplemental Indenture. The Trustee accepts the trust created by this First Supplemental Indenture upon the terms and subject to the conditions of the Indenture. Section 3.03. Any notices or demands hereafter required or permitted by the Indenture to be given to or served upon the Corporation shall be given to or served upon the Corporation at 6801 Rockledge Drive, Bethesda, Maryland 20817, Attention: Treasurer, with a required copy to Lockheed Martin Corporation, 6801 Rockledge Drive, Bethesda, Maryland 20817, Attention: Treasurer. Section 3.04. Capitalized terms used herein which are not defined herein shall have the meanings specified in the Indenture. Section 3.05. The parties may sign any number of copies of this First Supplemental Indenture. Each signed copy shall be an original, but all of them together represent the same instrument. Section 3.06. This First Supplemental Indenture shall be governed by and construed in accordance with the laws of the State of Maryland. [this space intentionally left blank] IN WITNESS WHEREOF, the parties have caused this First Supplemental Indenture to be duly executed, and the Corporation and the Trustee have caused their respective corporate seals to be thereunto affixed and attested, all as of the day and year first above written. ATTEST: COMSAT CORPORATION, a District of Columbia corporation /s/ Lillian M. Trippett By: /s/ John E. Montague - ----------------------- ------------------------------- Lillian M. Trippett John E. Montague Secretary Vice President and Chief Financial Officer ATTEST: BANK ONE TRUST COMPANY, N.A., as Trustee /s/ Faye Wright By: /s/ Barbara G. Grosse - ----------------------- ------------------------------- Faye Wright Barbara G. Grosse Vice President and Vice President Assistant Secretary EX-3.2 3 0003.txt EXHIBIT 3.2 Exhibit 3.2 COMSAT CORPORATION ((formerly Deneb (D.C.) Corporation), as successor by merger to COMSAT Corporation), Issuer TO THE CHASE MANHATTAN BANK (as successor by merger to The Chase Manhattan Bank (National Association)), Trustee SECOND SUPPLEMENTAL INDENTURE Dated as of August 3, 2000 Supplemental to Indenture dated as of March 15, 1991 THIS SECOND SUPPLEMENTAL INDENTURE, dated as of August 3, 2000, is entered into by and between COMSAT CORPORATION (formerly Deneb (D.C.) Corporation), a District of Columbia corporation (the "Corporation"), and THE CHASE MANHATTAN BANK, a New York banking corporation (successor by merger to The Chase Manhattan Bank (National Association), as Trustee (the "Trustee"). R E C I T A L S WHEREAS, COMSAT CORPORATION, a District of Columbia corporation ("COMSAT") and The Chase Manhattan Bank (National Association) (as predecessor to The Chase Manhattan Bank, a New York banking corporation) as the Trustee entered into an Indenture dated as of March 15, 1991, supplemented and amended by the Supplemental Indenture dated as of June 29, 1994 (as so supplemented and amended, the "Indenture"), providing for the issuance by COMSAT of its debentures, notes or other evidences of indebtedness to be issued in one or more series (the "Securities"); WHEREAS, pursuant to the terms of the Indenture, COMSAT has created and issued its Securities of various series; WHEREAS, on August 3, 2000, COMSAT merged with and into the Corporation, whereby and whereupon the existence of COMSAT ceased and the Corporation continued as the surviving corporation under the name "COMSAT Corporation" (the "Merger"); WHEREAS, Section 11.01(a) of the Indenture provides that, without the consent of any Holders, the Corporation, when authorized by a Board Resolution, and the Trustee may enter into a supplemental indenture in form satisfactory to the Trustee to evidence the succession of the Corporation to COMSAT and the assumption by the Corporation of the covenants of COMSAT contained in the Indenture and the Securities; WHEREAS, the Trustee has received from the Corporation an Officers' Certificate and an Opinion of Counsel, each stating that the Merger and this Second Supplemental Indenture comply with Article Ten of the Indenture and that all conditions precedent therein provided for relating to such Merger have been complied with; and WHEREAS, the execution and delivery of this Second Supplemental Indenture have been duly authorized by a Board Resolution and the Corporation has requested the Trustee to join with it in the execution of this Second Supplemental Indenture; NOW, THEREFORE, in consideration of these premises, it is mutually covenanted and agreed for the equal and proportionate benefit of all Holders of Securities as follows: ARTICLE I --------- Assumption ---------- Section 1.01. The Corporation hereby expressly assumes the due and punctual payment of the principal of (and premium, if any) and interest, if any, on all the Securities of all series and the performance and observance of every covenant of the Indenture on the part of COMSAT to be performed or observed with the same effect as if the Corporation had been named as the Company therein. Section 1.02. Upon the assumption of obligations set forth in Section 1.01, the Corporation succeeds to, and is substituted for, and may exercise every right and power of, COMSAT under the Indenture with the same effect as if the Corporation had been named as the Company therein. ARTICLE II ---------- Endorsement and Change of Form of Securities -------------------------------------------- Section 2.01. Securities of any series authenticated and delivered after the execution of this Second Supplemental Indenture may, and shall if required by the Trustee, bear a notation in form approved by the Trustee as to any matter provided for in this Second Supplemental Indenture. Section 2.02. If the Corporation shall so determine, new Securities so modified as to conform, in the opinion of the Corporation and the Trustee, to the modification of the Indenture contained in this Second Supplemental Indenture may be prepared and executed by the Corporation and authenticated and delivered by the Trustee and delivered in exchange for Outstanding Securities of the same series. Section 2.03. Anything herein to the contrary notwithstanding, the Trustee shall not at any time be under any responsibility either to require or cause any Security now or hereafter Outstanding to be either presented to or delivered to it for any purpose provided for in this Article II or for the legal consequences of the failure of any Holder so to present or deliver the same. ARTICLE III ----------- Miscellaneous ------------- Section 3.01. Except as hereby expressly modified, the Indenture and the Securities issued thereunder are in all respects ratified and confirmed and all the terms, conditions and provisions thereof shall remain in full force and effect. Section 3.02. The Trustee shall have no responsibility for the recitals in this Second Supplemental Indenture or for the validity or the sufficiency of this Second Supplemental Indenture. The Trustee accepts the trust created by this Second Supplemental Indenture upon the terms and subject to the conditions of the Indenture. Section 3.03. Any notices or demands hereafter required or permitted by the Indenture to be given to or served upon the Corporation shall be given to or served upon the Corporation at 6801 Rockledge Drive, Bethesda, Maryland 20817, Attention: Treasurer, with a required copy to Lockheed Martin Corporation, 6801 Rockledge Drive, Bethesda, Maryland 20817, Attention: Treasurer. Section 3.04. Capitalized terms used herein which are not defined herein shall have the meanings specified in the Indenture. Section 3.05. The parties may sign any number of counterparts of this Second Supplemental Indenture. Each signed counterpart shall be an original, but all of them together represent the same instrument. Section 3.06. This Second Supplemental Indenture shall be governed by and construed in accordance with the laws of the State of New York. [this space intentionally left blank] IN WITNESS WHEREOF, the parties have caused this Second Supplemental Indenture to be duly executed, and the Corporation and the Trustee have caused their respective corporate seals to be hereunto affixed and attested, all as of the day and year first above written. ATTEST: COMSAT CORPORATION /s/ Lillian M. Trippett By: /s/ John E. Montague - ----------------------- ------------------------------- Lillian M. Trippett John E. Montague Secretary Vice President and Chief Financial Officer ATTEST: THE CHASE MANHATTAN BANK, as Trustee /s/ Giovanni Simeone By: /s/ John T. Needham - ----------------------- ------------------------------- Giovanni Simeone John T. Needham, Jr. Trust Officer Vice President EX-27 4 0004.txt EXHIBIT 27
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS FOR SIX MONTHS ENDED JUNE 30, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000022698 COMSAT Corporation 1,000 6-MOS DEC-31-2000 JAN-01-2000 JUN-30-2000 57,555 0 145,801 0 0 222,580 2,237,834 1,298,733 1,650,855 204,824 339,549 0 0 452,841 170,027 1,650,855 0 340,164 0 187,768 98,929 0 17,416 27,587 17,879 27,587 0 0 0 27,587 0.52 0.52
EX-99.1 5 0005.txt EXHIBIT 99.1 Exhibit 99.1 For Immediate Release FEDERAL COMMUNICATIONS COMMISSION GRANTS TRANSFER OF COMSAT LICENSES TO LOCKHEED MARTIN Action Clears Way for Completion of Lockheed Martin/COMSAT Combination BETHESDA, Maryland, July 31, 2000 - A Federal Communications Commission (FCC) order released today granting COMSAT Corporation authority to assign its space and earth stations licenses to a subsidiary of Lockheed Martin will permit completion of a strategic combination between the two companies. In issuing the order, the FCC noted that after the merger the resulting competition "will promote wider service offerings and lower prices for consumers in the United States and abroad." Lockheed Martin and COMSAT indicated they would finalize their combination later this week. # # # CONTACT: Charles Manor, Lockheed Martin Global Telecommunications, 301/897-6258 EX-99.2 6 0006.txt EXHIBIT 99.2 Exhibit 99.2 LOCKHEED MARTIN, COMSAT COMBINATION COMPLETED New Global Telecommunications Business To Provide Network Services, Advanced Technology Solutions To Enterprise Customers BETHESDA, Maryland, August 3, 2000 -- Lockheed Martin Corporation (NYSE: LMT) and COMSAT Corporation today announced the completion of their strategic combination following final approval from the Federal Communications Commission (FCC). The transaction was accomplished via a one-for-one tax-free exchange of Lockheed Martin common stock for COMSAT common stock for the remaining 51% of COMSAT stock Lockheed Martin did not own. The value of the exchange of common stock is approximately $790 million. COMSAT will become an integral element of Lockheed Martin Global Telecommunications, a wholly owned subsidiary of the Corporation comprising Lockheed Martin's telecommunications services business. The resultant new business, with projected revenues approaching $1 billion, plans to offer services in the U.S. as Lockheed Martin Global Telecommunications (LMGT), while offshore COMSAT International operations will retain their current designations. Vance Coffman, chairman and chief executive officer of Lockheed Martin Corporation, said, "We are glad the LMGT/COMSAT combination has concluded successfully. The strategic underpinning for the transaction is as strong today as when first proposed, and we're anxious to move ahead and expand LMGT's role in this dynamic marketplace. Strategic partnerships are being considered to unlock the value of the LMGT assets." John V. Sponyoe, chief executive officer of LMGT, noted, "The worldwide demand for telecommunications services is growing rapidly, and we've created a new force in the marketplace to unlock the value of our telecommunications assets for the benefit of shareholders. Both Lockheed Martin and COMSAT have played unique roles in the history of telecommunications and together we offer an impressive array of advanced telecommunications services and products. We appreciate the timely fashion in which the FCC acted, enabling us to proceed with this combination." Sponyoe also praised COMSAT President and Chief Executive Officer Betty C. Alewine, who is retiring after 14 years with the company. "Under Betty Alewine's stewardship, COMSAT reached new levels of performance, and her contributions to the integration of these two businesses have been invaluable." Combination of Assets Offers Full Range of Growth Opportunities The new enterprise is organized along the following business lines: Network Services - delivering tailored, integrated solutions built on a foundation of quality, customer service, technology and network security. Network Services currently conducts business in 11 countries for over 1400 customers connecting more than 9000 international sites in the retail, banking, manufacturing, technology and other industries. It offers a full suite of end-to-end services for businesses, carriers and Internet service providers via the GlobalWay/SM/ regional network in Latin America, with a direct connection to the U.S. Internet backbone, and expanded applications, including the newly announced Securedge/SM network/ security solutions portfolio. Satellite Services - providing satellite capacity, network management and systems engineering services that extend voice, high-speed data and multimedia networks virtually anywhere worldwide. Telecommunications, broadcast and digital networking services between the U.S. and other countries are provided via the global, 19-satellite INTELSAT system. Satellite Services also includes COMSAT Mobile Communications, which services for mobile users at sea, in the air, and at remote land locations via the nine-satellite Inmarsat system and a worldwide network of earth stations. Personal satellite communications, offering voice, fax and data capabilities also are offered. Teleport services are provided on the east and west coasts of the United States. Strategic ventures, including Lockheed Martin Intersputnik, and minority ownership in New Skies, ACeS, Astrolink and Americom Asia-Pacific ventures also are valuable assets in this market segment. Systems & Technology - offering network design, wireless communications and network security, along with technical consulting services to provide customized, value-added solutions to enterprise customers. The line of business combines Lockheed Martin's network systems development capability with COMSAT Laboratories, a preeminent developer of advanced communications technologies. Additionally, LMGT Products will focus on increasing market potential for select technologies, including the LINKWAY/TM /family of broadband satellite networking products, and unlocking their value through strategic partners and licensing. LMGT becomes the U.S. owner, and the largest shareholder, in both the INTELSAT and Inmarsat systems. Inmarsat fully privatized on April 15, 1999, and INTELSAT has targeted privatization for 2001. LMGT also is the largest owner in New Skies Satellites, N.V., the global, six-satellite system spun-off from INTELSAT into a private commercial company in 1998. Background The COMSAT transaction, which was accomplished through two phases, was first announced in September 1998. The first phase, a cash tender offer for 49 percent of the outstanding shares of COMSAT common stock valued at approximately $1.2 billion, was completed in September 1999 following COMSAT shareholder approval and initial regulatory approvals. Then, earlier this year, the ORBIT Act (Open-Market Reorganization for the Betterment of International Telecommunications) was enacted by Congress and signed by President Clinton, allowing the merger to proceed while also overhauling the Communications Satellite Act of 1962. With the final FCC approval, the second phase, the one-for-one stock exchange, of the transaction was completed. COMSAT Corporation was created by the Communications Satellite Act of 1962 and incorporated as a publicly traded company in 1963. COMSAT was the driving force in the creation of INTELSAT, an international satellite organization that today has 143 member countries and signatories. COMSAT, over its 38-year history served as a global provider of satellite services and digital networking services, products, and technology. COMSAT stock will cease to be traded today and all COMSAT stockholders will receive one share of Lockheed Martin Corporation stock for each share of COMSAT stock they currently hold. Headquartered in Bethesda, Maryland, Lockheed Martin is a global enterprise principally engaged in the research, design, development, manufacture and integration of advanced-technology systems, products and services. The Corporation's core businesses are systems integration, space, aeronautics, and technology services. Lockheed Martin had 1999 sales surpassing $25 billion. LMGT was formed in 1998 to focus and extend the Corporation's role in the global networking and applications services marketplace. With a legacy of designing and managing the world's most sophisticated secure high-speed data networks and global services for the U.S. government, and an innovative technology heritage, LMGT capably and rapidly delivers seamless and secure networking and applications solutions to corporate and government customers worldwide. # # # CONTACT: Charles Manor, 301/897-6258; Morgan Broman, 301/214-3436 ----------------------------------------------------------------------- SAFE HARBOR STATEMENT: Some of the statements in this news release are forward- looking and relate to anticipated future operating results. Forward-looking statements are based on Lockheed Martin Corporation management's current expectations and assumptions, which may be affected by the timing and outcome of pending or prospective regulatory actions, by developments concerning the privatization of INTELSAT, by international business conditions (e.g., foreign currency devaluation and economic instability in foreign markets), by business conditions affecting the value of LMGT's various equity investments and by other subsequent developments and business conditions, and necessarily involve risks and uncertainties. Therefore, there can be no assurance that actual future results will not differ materially from anticipated results. Readers should refer to Lockheed Martin's and COMSAT's disclosure documents filed with the Securities and Exchange Commission, including the recent Forms 10-k for the year ending December 31, 1998, for specific details on some of the factors that may affect operating results. Lockheed Martin expressly disclaims any obligation to update forward- looking statements. -----END PRIVACY-ENHANCED MESSAGE-----