8-KEarnings & ResultsRegulation FDOther Events+1

LOCKHEED MARTIN CORP 8-K Report, Financial Results (Jun 27, 2022)

Filed June 27, 2022For Securities:LMT

Summary

Lockheed Martin Corporation (LMT) has announced a significant transaction to de-risk its defined benefit pension obligations. The company purchased group annuity contracts from Athene Holding Ltd. to transfer approximately $4.3 billion of its pension obligations and related assets for about 13,600 U.S. retirees. This move is intended to reduce the financial volatility associated with managing these pension liabilities. While the transaction itself requires no additional funding from Lockheed Martin, it will result in an estimated non-cash, non-operating settlement charge of approximately $1.5 billion ($1.2 billion after tax, or $4.50 per share) in the second quarter of 2022. This charge stems from the accelerated recognition of actuarial losses. Investors should note that this estimated charge was not previously factored into the company's 2022 financial outlook. The core retirement benefits for the affected retirees will remain unchanged.

Key Highlights

  • 1Lockheed Martin is transferring approximately $4.3 billion in U.S. defined benefit pension obligations and assets to Athene Holding Ltd.
  • 2The transaction covers roughly 13,600 U.S. retirees and beneficiaries.
  • 3No additional funding contribution was required for this transaction.
  • 4Lockheed Martin expects to recognize a non-cash, non-operating settlement charge of approximately $1.5 billion ($1.2 billion after-tax, or $4.50 per share) in Q2 2022.
  • 5This settlement charge is due to the accelerated recognition of actuarial losses.
  • 6The estimated charge was not included in the company's prior 2022 financial outlook.
  • 7Retiree benefits will not change as a result of this transaction.

Frequently Asked Questions

The primary purpose is to reduce Lockheed Martin's financial exposure and volatility related to its defined benefit pension obligations by transferring these liabilities and assets to a third-party insurer, Athene Holding Ltd.

No, the retirement benefits received by the affected retirees and beneficiaries will not change as a result of this transaction. Athene will take over the payment and administration of these benefits starting January 1, 2023.

The charge is a non-cash, non-operating expense recognized in the second quarter of 2022 due to the accelerated recognition of actuarial losses that were previously reflected in stockholders' equity. This is an accounting consequence of settling the pension obligations.

The estimated $1.5 billion settlement charge was not included in Lockheed Martin's prior 2022 financial outlook that was released on April 19, 2022. Investors should adjust their expectations for the second quarter results to account for this charge.