An Update on Sequestration

Memorandum

DATE:              March 22, 2013

TO:                   All Lockheed Martin U.S. Employees

FROM:             Marillyn Hewson, Chief Executive Officer and President

SUBJECT:       An Update on Sequestration

I want to update you on where sequestration stands and how it is affecting our company.

While Congress has not yet taken action to reverse sequestration, we do have some encouraging news. Congress has approved an appropriations bill that will keep the government operating through Sept. 30, the end of its fiscal year. While this action does not reduce the impact of budget cuts from sequestration, it does provide funding stability for the government.

We continue to advocate aggressively against sequestration’s across-the-board federal spending cuts; however, it is unlikely that Congress will take any further action in the near term. House and Senate members are not scheduled to begin discussions on future budget legislation until later this spring.

As we anticipated, it is taking time for our customers to determine how they will implement sequestration’s required cuts. We’re working closely with them as they explore a host of potential scenarios, although we still do not know exactly how most of our programs or employees will be affected. To date, we have received five contract modifications as a result of sequestration and are evaluating the potential impact to the nearly 50 employees working on those contracts.

If sequestration is not reversed, we are facing the possibility of focused hiring freezes, furloughs or layoffs in the future. The extent and timing of any of these potential actions will depend on how our customers implement sequestration-related cuts.

I know that this uncertainty is unsettling for all of us. Please know that we are working hard on your behalf to advocate for a better alternative to address our nation’s fiscal challenges and to help our customers minimize the impact on our national security readiness. We’ll continue to share new details with you as soon as they are available.

In the meantime, I want to thank you for remaining focused on delivering world-class products, technologies and services to our customers.  The work you do is vitally important to our nation and to the world, and they are counting on us to continue to deliver.