Lockheed Builds For Future By Getting Back To Basics

Lockheed Martin Corp., seeking to reduce its debt burden after a major acquisition and focus on its core operations, will divest an $840 million stake in the construction materials business.

The Bethesda, Maryland-based company, the world’s largest aerospace and defense contractor, incurred about $3.5 billion of debt to help finance its $9 billion acquisition of Loral Corp. in April. Lockheed Martin has promised lenders it’ll sell $1.5 billion of non-core assets by the end of next year and use the proceeds to pay down borrowings, analysts say.

The company now wants to cash in its largest non-core asset: an 81-percent stake in Martin Marietta Materials Inc., a Raleigh, North Carolina, supplier of sand, stone and gravel aggregates used to build roads and other projects, Lockheed Martin said in a filing Friday with the Securities and Exchange Commission. And it wants to do so through an unusual stock swap plan that analysts say could help Lockheed Martin get a better price and avoid a big tax bite.

The plan also will “allow Lockheed Martin to better focus on core technology businesses,” said Janice Henry, chief financial officer of Martin Marietta Materials, while also giving the materials company “increased ability to grow through the use of its common stock.”

Lockheed Martin said in the SEC filing that a clearer focus on its core technologies would impress investors, making it easier for the company to sell stock in the future. Management said it will continue to sell other non-core businesses after the exchange offer, without specifying which operations are peripheral.

The company has six major operations areas: space and strategic missiles, aeronautics, information and technology services, electronics, energy and environment, and tactical systems. Net income was $682 million last year on $22.85 billion in sales. Lockheed Martin in February, 1994, sold a 19 percent stake in the materials company through an initial public offering at a price of 23 a share. The stock rose 62-1/2 cents today to close at $23.12-1/2. Lockheed Martin’s rose $1.12-1/2 to $81.75.

Some of the stocks that moved substantially or traded heavily Friday.

NYSE

Kellogg, up 25 cents at $73.75-1/2.

The cereal maker posted a 42.5 percent drop in second quarter profits due to one-time charges and the impact of price reductions in the cereal aisles. The profit of $78.1 million, or 37 cents per share, was in line with expectations. Kellogg also boosted its quarterly dividend nearly 8 percent to 42 cents a share.

Texaco, down 50 cents at $84.

The oil company raised its quarterly dividend 6.25 percent to 85 cents a share. Texaco said the dividend increase reflects its confidence in attaining its goal of doubling earnings before the year 2000.

Wackenhut Corrections, up $3 at $28.

The company received a contract to build and manage a prison in Nottinghamshire, England. Wackenhut said late Thursday it estimates the project, which will have 500 beds, will cost $46.5 million. Wackenhut expects the 25-year deal to generate annual revenue of $10.5 million.

Miller Industries, up $1.62-1/2 at $31.

The maker of towing and recovery equipment agreed to acquire four towing equipment distribution companies with total annual revenues of about $40 million. Miller said the acquisitions will form the core of a new division. The transactions were structured as stock swaps.

NASDAQ

Gateway 2000, up $2.12-1/2 at $39.50.

The company earned $51.3 million in the second quarter, a 48 percent increase over a year ago as sales continued to grow at one of the fastest rates in the personal computer industry. The profit of 66 cents a share, announced after the markets closed Thursday, exceeded forecasts.