Lockheed Martin exec gets a smooth landing…

February 1, 2012

It’s a time of transition for the folks at Lockheed Martin Corp. (LMT), given the proposed cuts to the defense budget and the resulting possible reduction to the number of F-35 Joint Strike Fighter stealth jets that the Defense Department may order from the company. Yet there’s another transition within the executive ranks, as disclosed by the 8-K filed January 31.

After spending 37 years with Lockheed Martin, Ralph D. Heath, Executive Vice President of the Lockheed Martin Aeronautics Company, is ready to retire. Heath has served in that role since January, 2005 and – based on the information in the 10-K filed in February, 2011 – is (or soon will be) 63 years old. Although his official date to step down as the Executive VP of Aeronautics is April 1, Heath agreed to keep working as an Executive Vice President until April 30, reporting to President and Chief Operating Officer Christopher E. Kubasik during that last month. Accordingly, his official retirement date is set for May 1.

Between now and then, Heath will continue to earn his salary (calculated at $63,333 a month, or $760,000 per year) and benefits. But after May 1 he is set to get a nice check from the company and a consulting agreement, described in the filing as follows:

“Following his retirement, Mr. Heath will be paid $950,000 as part of the transition arrangement contingent upon executing a written release of claims…

Heath also agreed to provide “transitional consulting services” pursuant to a year-long consulting agreement. He can’t work more than 52 days between May 1, 2012 and April 30, 2013, but he will be paid $5,000 per day for his troubles. Lockheed Martin hasn’t filed either the Transition Agreement or the Consulting Agreement yet; but those may be filed shortly, or they may be filed with the annual report, which will probably be filed near the end of this month. However, given the $950,000 initial payment, and assuming Heath works the maximum number of 52 days as a consultant, his new, post-retirement gig is worth $1.21 million.

Of course, Heath will actually be retiring with far more money than that, having labored for so many years for the world’s largest defense contractor. In the March, 2011 proxy, the company disclosed that Heath’s interests in a variety of executive benefit plans (including the retirement plan and a supplemental plan, a Deferred Compensation account, a supplemental pension, and his various equity interests at the time) had an aggregate value of more than $15.78 million, assuming a termination date of December 31, 2010. That number is most certainly higher now, both because Heath continued to get equity awards in 2011 and because the stock is trading about 3.4% higher than it did a year ago.

Within the past couple of weeks, Secretary of Defense Leon Panetta announced that he was rescinding probation of Lockheed Matin’s F-35B program because of the great progress made in 2011. Thus, even with the looming budget cuts, at least Heath is making his exit on a high note.

Image source: Lockheed Martin Corp.

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