Summary
Lockheed Martin Corporation (LMT) filed an 8-K on March 31, 2010, to disclose the financial impact of the Patient Protection and Affordable Care Act (PPACA) and its subsequent amendment. While the core legislation, enacted on March 23, 2010, originally planned to eliminate the tax deduction for retiree prescription drug expenses reimbursed by Medicare Part D starting January 1, 2011, a subsequent amendment signed on March 30, 2010, deferred this effective date to January 1, 2013. Despite the delayed cash impact, Lockheed Martin is required by GAAP to recognize the accounting effect in its 2010 financial statements. This will result in a one-time, after-tax charge to net earnings of approximately $96 million, or $0.25 per diluted share, in the first quarter of 2010. The company noted that its previously issued 2010 earnings per share outlook did not account for this legislation, and it plans to provide an updated financial outlook alongside its first quarter 2010 earnings release on April 21, 2010.
Key Highlights
- 1The Patient Protection and Affordable Care Act (PPACA) impacts the tax deductibility of retiree prescription drug expenses reimbursed by Medicare Part D.
- 2An amendment deferred the effective date of this tax change from January 1, 2011, to January 1, 2013.
- 3Lockheed Martin will recognize a one-time, pre-tax GAAP charge of approximately $96 million ($0.25 per diluted share) in Q1 2010.
- 4The cash impact of this change will be realized over several years, beginning in 2013.
- 5The company's prior 2010 earnings outlook did not include this tax law change.
- 6Lockheed Martin will provide an updated 2010 financial outlook on April 21, 2010, with its Q1 earnings release.
- 7The company is continuing to evaluate the full potential effects of the new legislation.