Lockheed Martin 2015 Annual Report Download - page 113

$50 million and $180 million at our IS&GS, MST and Space Systems business segments through the completion of the plan
in 2016. As of December 31, 2015, we have incurred total accelerated and incremental costs of approximately $225 million,
of which approximately $115 million, $90 million and $20 million was recorded in 2015, 2014 and 2013, respectively. The
accelerated and incremental costs are recorded as incurred in cost of sales on our Statements of Earnings and included in the
respective business segment’s results of operations.
We expect to recover a substantial amount of the restructuring charges through the pricing of our products and services
to the U.S. Government and other customers in future periods, with the impact included in the respective business segment’s
results of operations. Of the total severance, accelerated and incremental costs mentioned above, we recovered approximately
$65 million in 2015 and $50 million in 2014 and expect to recover approximately $60 million in 2016.
Note 16 – Fair Value Measurements
Assets and liabilities measured and recorded at fair value on a recurring basis consisted of the following (in millions):
December 31, 2015 December 31, 2014
Total Level 1 Level 2 Total Level 1 Level 2
Assets
Equity securities $89 $89 $— $92 $92 $—
Mutual funds 745 745 — 696 696 —
U.S. Government securities 119 — 119 136 — 136
Other securities 147 — 147 153 — 153
Derivatives 15 — 15 27—27
Liabilities
Derivatives 35 — 35 18—18
Substantially all assets measured at fair value, other than derivatives, represent investments classified as trading
securities held in a separate trust to fund certain of our non-qualified deferred compensation plans and are recorded in other
noncurrent assets on our Balance Sheets. The fair values of equity securities and mutual funds are determined by reference to
the quoted market price per unit in active markets multiplied by the number of units held without consideration of transaction
costs. The fair values of U.S. Government and other securities are determined using pricing models that use observable
inputs (e.g., interest rates and yield curves observable at commonly quoted intervals), bids provided by brokers or dealers or
quoted prices of securities with similar characteristics. The fair values of derivative instruments, which consist of foreign
currency exchange forward and interest rate swap contracts, primarily are determined based on the present value of future
cash flows using model-derived valuations that use observable inputs such as interest rates, credit spreads and foreign
currency exchange rates. We did not have any transfers of assets or liabilities between levels of the fair value hierarchy
during 2015.
In addition to the financial instruments listed in the table above, we hold other financial instruments, including cash and
cash equivalents, receivables, accounts payable and debt. The carrying amounts for cash and cash equivalents, receivables
and accounts payable approximated their fair values. The estimated fair value of our outstanding debt was $16.5 billion and
$7.9 billion at December 31, 2015 and 2014 and the outstanding principal amount was $16.2 billion and $7.0 billion at
December 31, 2015 and 2014, excluding unamortized discounts of $941 million and $872 million. The estimated fair values
of our outstanding debt were determined based on quoted prices for similar instruments in active markets (Level 2).
In connection with the Sikorsky acquisition, we recorded the assets acquired and liabilities assumed at fair value. The
amounts recorded for certain assets and liabilities are preliminary in nature and are subject to adjustment as additional
information is obtained about the facts and circumstances that existed as of the November 6, 2015 acquisition date. See
Note 3 for further information about the fair values assigned and amounts subject to adjustment.
In the fourth quarter of 2014, we recorded non-cash goodwill impairment charge of $119 million in connection with our
annual goodwill impairment test. The fair value determination of goodwill was determined using a combination of a DCF
analysis and market-based valuation methodologies and was classified as a Level 3 fair value measurement due to the
significance of the unobservable inputs used. See Note 1 for further information on this non-cash goodwill impairment
charge and our valuation methodologies.
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