Lockheed Martin 2013 Annual Report Download - page 86

Fair value measurements – The rules related to accounting for postretirement benefit plans under GAAP require
certain fair value disclosures related to postretirement benefit plan assets, even though those assets are not included on our
Balance Sheets. The following table presents the fair value of the assets (in millions) of our qualified defined benefit pension
plans and retiree medical and life insurance plans by asset category and their level within the fair value hierarchy, which has
three levels based on the reliability of the inputs used to determine fair value. Level 1 refers to fair values determined based
on quoted prices in active markets for identical assets, Level 2 refers to fair values estimated using significant other
observable inputs, and Level 3 includes fair values estimated using significant unobservable inputs.
December 31, 2013 December 31, 2012
Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
Cash and cash equivalents (a) $ 2,176 $ — $ — $ 2,176 $ 2,465 $ — $ — $ 2,465
Equity (a):
U.S. equity securities 5,274 94 — 5,368 3,871 50 10 3,931
International equity securities 4,912 89 7 5,008 3,363 15 11 3,389
Commingled equity funds 1,212 4,825 — 6,037 980 2,963 — 3,943
Fixed income (a):
Corporate debt securities — 2,943 43 2,986 — 1,045 61 1,106
U.S. Government securities — 6,553 — 6,553 — 12,013 — 12,013
U.S. Government-sponsored
enterprise securities — 1,451 — 1,451 — 239 — 239
Other fixed income investments — 1,293 95 1,388 — 1,176 49 1,225
Alternative investments:
Private equity funds — — 2,601 2,601 — — 2,461 2,461
Real estate funds — 29 572 601 — 25 504 529
Hedge funds — 46 505 551 — — 806 806
Commodities (a) 156 — — 156 735 1 — 736
Total $13,730 $17,323 $3,823 $34,876 $11,414 $17,527 $3,902 $32,843
Receivables, net 55 45
Total $34,931 $32,888
(a) Cash and cash equivalents, equity securities, fixed income securities, and commodities included derivative assets and liabilities whose
fair values were not material as of December 31, 2013 and 2012. LMIMCo’s investment policies restrict the use of derivatives to
either establish long exposures for purposes of expediency or capital efficiency, or to hedge risks to the extent of a plan’s current
exposure to such risks. Most derivative transactions are settled on a daily basis. In addition, we corrected the classification of
$980 million of other fixed income investments and $118 million of commingled equity funds as of December 31, 2012, which were
reclassified from cash and cash equivalents into their respective asset category. These reclassifications are not material as the changes
do not impact the 2012 financial statements nor the total plan assets previously reported, rather just the presentation of the components
of total plan assets in the table above.
As of December 31, 2013 and 2012, the assets associated with our foreign defined benefit pension plans were not
material and have not been included in the table above.
The following table presents the changes during 2013 and 2012 in the fair value of plan assets categorized as Level 3 in
the preceding table (in millions):
Private
Equity
Funds
Real
Estate
Funds
Hedge
Funds Other Total
Balance at January 1, 2012 $2,286 $278 $ 825 $165 $3,554
Actual return on plan assets:
Realized gains, net 142 11 16 1 170
Unrealized gains, net 22 20 31 2 75
Purchases, sales, and settlements, net 92 113 (65) (9) 131
Transfers into (out of) Level 3, net (81) 82 (1) (28) (28)
Balance at December 31, 2012 $2,461 $504 $ 806 $131 $3,902
Actual return on plan assets:
Realized gains, net 144 43 21 4 212
Unrealized gains, net 42 19 104 1 166
Purchases, sales, and settlements, net (46) (3) (394) 2 (441)
Transfers into (out of) Level 3, net — 9 (32) 7 (16)
Balance at December 31, 2013 $2,601 $572 $ 505 $145 $3,823
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