Summary
Lockheed Martin Corporation (LMT) has announced a significant transaction to transfer approximately $4.9 billion of its U.S. defined benefit pension obligations and related assets to Athene Holding Ltd. This move affects about 18,000 retirees and beneficiaries and is being executed through the purchase of group annuity contracts. The transaction is expected to be completed by January 1, 2022, at which point Athene will take over the administration and payment of benefits. Importantly, the benefits provided to retirees and beneficiaries will remain unchanged. While this transaction is designed to de-risk the company's balance sheet by removing a substantial pension liability, it will result in a notable non-cash charge. Lockheed Martin anticipates recognizing a non-operating settlement charge of approximately $1.7 billion ($1.3 billion, or $4.75 per share, after tax) in the third quarter of 2021. This charge is primarily due to the accelerated recognition of actuarial losses. The company has reaffirmed its full-year 2021 financial outlook for net sales, segment operating profit, and cash from operations, but has updated its earnings per share guidance to reflect the impact of this pension settlement.
Key Highlights
- 1Lockheed Martin is transferring approximately $4.9 billion in U.S. defined benefit pension obligations and assets to Athene Holding Ltd.
- 2The transaction covers approximately 18,000 U.S. retirees and beneficiaries.
- 3Retiree benefits will not be affected by this transfer.
- 4A non-cash, non-operating settlement charge of approximately $1.7 billion (or $4.75 per share after tax) is expected in Q3 2021.
- 5The charge is primarily due to accelerated recognition of actuarial losses.
- 6Full-year 2021 financial outlook for net sales, segment operating profit, and cash from operations is reaffirmed.
- 7Full-year 2021 earnings per share outlook has been updated to reflect the transaction's impact.