What is the Voluntary Executive Separation Program (VESP)?

The VESP was a program offered by Lockheed Martin to its senior leaders (director or vice president level) who could voluntarily apply to leave the company between July 6 and September 7, 2010. Participants who were approved received a severance package including a lump-sum payment based on salary and years of service, a cash payment for future medical costs, and their 2011 vacation pay.

What is the financial impact of the VESP on Lockheed Martin?

Lockheed Martin estimates a pre-tax charge of $175 million to $200 million for the lump-sum severance payments associated with the VESP. This charge will be recognized in the company's third quarter 2010 financial results.

Will the costs of the VESP program be recovered?

Yes, Lockheed Martin expects that a substantial amount of the VESP program costs will be allowable and recoverable in future periods, suggesting these costs may be linked to contracts or other revenue-generating activities.

When will the VESP participants officially leave the company?

The effective date of termination for most VESP participants is scheduled for February 1, 2011, unless a different date is approved on an individual basis.

LMT 8-K SEC Disclosure — Sep 13, 2010

Summary

This 8-K filing from Lockheed Martin Corporation (LMT) on September 13, 2010, announces the results of its Voluntary Executive Separation Program (VESP). The program, which ran from July 6 to September 7, 2010, offered voluntary retirement incentives to qualifying senior leaders. More than 600 executives, representing approximately 25% of the total executive workforce, applied to participate in the VESP. The company anticipates a pre-tax charge of $175 million to $200 million for the lump-sum severance payouts, which will be recorded in the third quarter of 2010. A significant portion of these VESP program costs are expected to be allowable and recoverable in future periods. Effective termination dates for most participants are set for February 1, 2011.

Key Highlights

1Over 600 executives, or about 25% of LMT's total executive population, applied for the Voluntary Executive Separation Program (VESP).
2The VESP was a voluntary program for senior leaders (director or vice president level) to exit the company.
3LMT expects to incur a pre-tax charge of approximately $175 million to $200 million for VESP severance payouts.
4The VESP charge will be recorded in Lockheed Martin's third quarter 2010 financial results.
5A substantial amount of VESP program costs are expected to be allowable and recoverable in future periods.
6Termination dates for most VESP participants are planned for February 1, 2011.
7The company will provide details on its third quarter 2010 operating results via press release on October 21, 2010.

LOCKHEED MARTIN CORP 8-K Report, Corporate Update (Sep 13, 2010)

Summary

Key Highlights

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