Lockheed Martin 2013 Annual Report Download - page 87

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Valuation techniques – Cash equivalents are mostly comprised of short-term money-market instruments and are valued
at cost, which approximates fair value.
U.S. equity securities and international equity securities categorized as Level 1 are traded on active national and
international exchanges and are valued at their closing prices on the last trading day of the year. For U.S. equity securities
and international equity securities not traded on an active exchange, or if the closing price is not available, the trustee obtains
indicative quotes from a pricing vendor, broker, or investment manager. These securities are categorized as Level 2 if the
custodian obtains corroborated quotes from a pricing vendor or categorized as Level 3 if the custodian obtains
uncorroborated quotes from a broker or investment manager.
Commingled equity funds are investment vehicles valued using the Net Asset Value (NAV) provided by the fund
managers. The NAV is the total value of the fund divided by the number of shares outstanding. Commingled equity funds are
categorized as Level 1 if traded at their NAV on a nationally recognized securities exchange or categorized as Level 2 if the
NAV is corroborated by observable market data (e.g., purchases or sales activity) and we are able to redeem our investment
in the near-term.
Fixed income investments categorized as Level 2 are valued by the trustee using pricing models that use verifiable
observable market data (e.g., interest rates and yield curves observable at commonly quoted intervals and credit spreads),
bids provided by brokers or dealers, or quoted prices of securities with similar characteristics. Fixed income investments are
categorized at Level 3 when valuations using observable inputs are unavailable. The trustee obtains pricing based on
indicative quotes or bid evaluations from vendors, brokers, or the investment manager.
Private equity funds, real estate funds, and hedge funds are valued using the NAV based on valuation models of
underlying securities which generally include significant unobservable inputs that cannot be corroborated using verifiable
observable market data. Valuations for private equity funds and real estate funds are determined by the general partners.
Depending on the nature of the assets, the general partners may use various valuation methodologies, including the income
and market approaches in their models. The market approach consists of analyzing market transactions for comparable assets
while the income approach uses earnings or the net present value of estimated future cash flows adjusted for liquidity and
other risk factors. Hedge funds are valued by independent administrators using various pricing sources and models based on
the nature of the securities. Private equity funds, real estate funds, and hedge funds are generally categorized as Level 3 as
we cannot fully redeem our investment in the near-term.
Commodities are traded on an active commodity exchange and are valued at their closing prices on the last trading day
of the year.
Contributions and Expected Benefit Payments
We generally determine funding requirements for our defined benefit pension plans in a manner consistent with CAS
and Internal Revenue Code rules. In 2013, we made contributions of $2.25 billion related to our qualified defined benefit
pension plans. We currently plan to make contributions of approximately $1.0 billion related to the qualified defined benefit
pension plans in 2014. In 2013, we made contributions of $98 million to our retiree medical and life insurance plans. We do
not expect to make contributions related to the retiree medical and life insurance plans in 2014 as a result of our 2013
contributions.
The following table presents estimated future benefit payments, which reflect expected future employee service, as of
December 31, 2013 (in millions):
2014 2015 2016 2017 2018 2019 - 2023
Qualified defined benefit pension plans $1,960 $2,030 $2,110 $2,200 $2,300 $13,240
Retiree medical and life insurance plans 200 210 210 220 220 1,070
Defined Contribution Plans
We maintain a number of defined contribution plans, most with 401(k) features, that cover substantially all of our
employees. Under the provisions of our 401(k) plans, we match most employees’ eligible contributions at rates specified in
the plan documents. Our contributions were $383 million in 2013, $380 million in 2012, and $378 million in 2011, the
majority of which were funded in our common stock. Our defined contribution plans held approximately 44.7 million and
48.6 million shares of our common stock as of December 31, 2013 and 2012.
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