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Microsoft Excel LibreOffice Calc

Lockheed Martin Corp. (LMT)


Economic Value Added (EVA)

Difficulty: Advanced

EVA is registered trademark of Stern Stewart.

Economic value added or economic profit is the difference between revenues and costs,where costs include not only expenses, but also cost of capital.


Economic Profit

Lockheed Martin Corp., economic profit calculation

USD $ in millions

Microsoft Excel LibreOffice Calc
12 months ended Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Net operating profit after taxes (NOPAT)1 hidden hidden hidden hidden hidden
Cost of capital2 hidden hidden hidden hidden hidden
Invested capital3 hidden hidden hidden hidden hidden
Economic profit4 hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2019-02-08), 10-K (filing date: 2018-02-06), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-24), 10-K (filing date: 2015-02-09).

2018 Calculations

1 NOPAT. See Details »

2 Cost of capital. See Details »

3 Invested capital. See Details »

4 Economic profit = NOPAT – Cost of capital × Invested capital
= hiddenhidden × hidden = hidden

Item Description The company
Economic profit Economic profit is a measure of corporate performance computed by taking the spread between the return on invested capital and the cost of capital, and multiplying by the invested capital. Lockheed Martin Corp.’s economic profit increased from 2016 to 2017 but then slightly declined from 2017 to 2018.

Net Operating Profit after Taxes (NOPAT)

Lockheed Martin Corp., NOPAT calculation

USD $ in millions

Microsoft Excel LibreOffice Calc
12 months ended Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Net earnings hidden hidden hidden hidden hidden
Deferred income tax expense (benefit)1 hidden hidden hidden hidden hidden
Increase (decrease) in equity equivalents2 hidden hidden hidden hidden hidden
Interest expense hidden hidden hidden hidden hidden
Interest expense, operating lease obligations3 hidden hidden hidden hidden hidden
Adjusted interest expense hidden hidden hidden hidden hidden
Tax benefit of interest expense4 hidden hidden hidden hidden hidden
Adjusted interest expense, after taxes5 hidden hidden hidden hidden hidden
(Gain) loss on marketable securities hidden hidden hidden hidden hidden
Investment income, before taxes hidden hidden hidden hidden hidden
Tax expense (benefit) of investment income6 hidden hidden hidden hidden hidden
Investment income, after taxes7 hidden hidden hidden hidden hidden
(Income) loss from discontinued operations, net of tax8 hidden hidden hidden hidden hidden
Net operating profit after taxes (NOPAT) hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2019-02-08), 10-K (filing date: 2018-02-06), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-24), 10-K (filing date: 2015-02-09).

2018 Calculations

1 Elimination of deferred tax expense. See Details »

2 Addition of increase (decrease) in equity equivalents to net earnings.

3 Addition of interest expense on capitalized operating leases. See Details »

4 Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= hidden × 21.00% = hidden

5 Addition of after taxes interest expense to net earnings.

6 Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= hidden × 21.00% = hidden

7 Elimination of after taxes investment income.

8 Elimination of discontinued operations.

Item Description The company
NOPAT Net operating profit after taxes is income from operations, but after removement of taxes calculated on cash basis that are relevant to operating income. Lockheed Martin Corp.’s NOPAT increased from 2016 to 2017 but then slightly declined from 2017 to 2018.

Cash Operating Taxes

Lockheed Martin Corp., cash operating taxes calculation

USD $ in millions

Microsoft Excel LibreOffice Calc
12 months ended Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Income tax expense hidden hidden hidden hidden hidden
Less: Deferred income tax expense (benefit) hidden hidden hidden hidden hidden
Add: Tax savings from interest expense hidden hidden hidden hidden hidden
Less: Tax imposed on investment income hidden hidden hidden hidden hidden
Cash operating taxes hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2019-02-08), 10-K (filing date: 2018-02-06), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-24), 10-K (filing date: 2015-02-09).

Item Description The company
Cash operating taxes Cash operating taxes are estimated by adjusting income tax expense for changes in deferred taxes and tax benefit from the interest deduction. Lockheed Martin Corp.’s cash operating taxes declined from 2016 to 2017 but then increased from 2017 to 2018 not reaching 2016 level.

Invested Capital

Lockheed Martin Corp., invested capital calculation (financing approach)

USD $ in millions

Microsoft Excel LibreOffice Calc
Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Current maturities of long-term debt and commercial paper hidden hidden hidden hidden hidden
Long-term debt, net, excluding current maturities hidden hidden hidden hidden hidden
PV of operating lease payments1 hidden hidden hidden hidden hidden
Total reported debt & leases hidden hidden hidden hidden hidden
Stockholders’ equity (deficit) hidden hidden hidden hidden hidden
Net deferred tax (assets) liabilities2 hidden hidden hidden hidden hidden
Equity equivalents3 hidden hidden hidden hidden hidden
Accumulated other comprehensive (income) loss, net of tax4 hidden hidden hidden hidden hidden
Noncontrolling interests in subsidiary hidden hidden hidden hidden hidden
Adjusted stockholders’ equity (deficit) hidden hidden hidden hidden hidden
Construction in progress5 hidden hidden hidden hidden hidden
Marketable securities6 hidden hidden hidden hidden hidden
Invested capital hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2019-02-08), 10-K (filing date: 2018-02-06), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-24), 10-K (filing date: 2015-02-09).

1 Addition of capitalized operating leases. See Details »

2 Elimination of deferred taxes from assets and liabilities. See Details »

3 Addition of equity equivalents to stockholders’ equity (deficit).

4 Removal of accumulated other comprehensive income.

5 Subtraction of construction in progress.

6 Subtraction of marketable securities.

Item Description The company
Invested capital Capital is an approximation of the economic book value of all cash invested in going-concern business activities. Lockheed Martin Corp.’s invested capital increased from 2016 to 2017 and from 2017 to 2018.

Cost of Capital

Lockheed Martin Corp., cost of capital calculations

Fair Value1 Weights Cost of Capital
Equity2 hidden hidden ÷ hidden = hidden hidden × hidden = hidden
Outstanding debt and commercial paper3 hidden hidden ÷ hidden = hidden hidden × hidden × (1 – 21.00%) = hidden
PV of operating lease payments4 hidden hidden ÷ hidden = hidden hidden × hidden × (1 – 21.00%) = hidden
Total: hidden hidden hidden

Based on: 10-K (filing date: 2019-02-08).

1 USD $ in millions

2 Equity. See Details »

3 Outstanding debt and commercial paper. See Details »

4 PV of operating lease payments. See Details »

Fair Value1 Weights Cost of Capital
Equity2 hidden hidden ÷ hidden = hidden hidden × hidden = hidden
Outstanding debt and commercial paper3 hidden hidden ÷ hidden = hidden hidden × hidden × (1 – 35.00%) = hidden
PV of operating lease payments4 hidden hidden ÷ hidden = hidden hidden × hidden × (1 – 35.00%) = hidden
Total: hidden hidden hidden

Based on: 10-K (filing date: 2018-02-06).

1 USD $ in millions

2 Equity. See Details »

3 Outstanding debt and commercial paper. See Details »

4 PV of operating lease payments. See Details »

Fair Value1 Weights Cost of Capital
Equity2 hidden hidden ÷ hidden = hidden hidden × hidden = hidden
Outstanding debt and commercial paper3 hidden hidden ÷ hidden = hidden hidden × hidden × (1 – 35.00%) = hidden
PV of operating lease payments4 hidden hidden ÷ hidden = hidden hidden × hidden × (1 – 35.00%) = hidden
Total: hidden hidden hidden

Based on: 10-K (filing date: 2017-02-09).

1 USD $ in millions

2 Equity. See Details »

3 Outstanding debt and commercial paper. See Details »

4 PV of operating lease payments. See Details »

Fair Value1 Weights Cost of Capital
Equity2 hidden hidden ÷ hidden = hidden hidden × hidden = hidden
Outstanding debt and commercial paper3 hidden hidden ÷ hidden = hidden hidden × hidden × (1 – 35.00%) = hidden
PV of operating lease payments4 hidden hidden ÷ hidden = hidden hidden × hidden × (1 – 35.00%) = hidden
Total: hidden hidden hidden

Based on: 10-K (filing date: 2016-02-24).

1 USD $ in millions

2 Equity. See Details »

3 Outstanding debt and commercial paper. See Details »

4 PV of operating lease payments. See Details »

Fair Value1 Weights Cost of Capital
Equity2 hidden hidden ÷ hidden = hidden hidden × hidden = hidden
Outstanding debt and commercial paper3 hidden hidden ÷ hidden = hidden hidden × hidden × (1 – 35.00%) = hidden
PV of operating lease payments4 hidden hidden ÷ hidden = hidden hidden × hidden × (1 – 35.00%) = hidden
Total: hidden hidden hidden

Based on: 10-K (filing date: 2015-02-09).

1 USD $ in millions

2 Equity. See Details »

3 Outstanding debt and commercial paper. See Details »

4 PV of operating lease payments. See Details »


Economic Spread

Lockheed Martin Corp., economic spread calculation

Microsoft Excel LibreOffice Calc
Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Selected Financial Data (USD $ in millions)
Economic profit1 hidden hidden hidden hidden hidden
Invested capital2 hidden hidden hidden hidden hidden
Ratio
Economic spread3 hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2019-02-08), 10-K (filing date: 2018-02-06), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-24), 10-K (filing date: 2015-02-09).

2018 Calculations

1 Economic profit. See Details »

2 Invested capital. See Details »

3 Economic spread = 100 × Economic profit ÷ Invested capital
= 100 × hidden ÷ hidden = hidden

Ratio Description The company
Economic spread The ratio of economic profit to invested capital, also equal to the difference between return on invested capital (ROIC) and cost of capital. Lockheed Martin Corp.’s economic spread improved from 2016 to 2017 but then slightly deteriorated from 2017 to 2018 not reaching 2016 level.

Economic Profit Margin

Lockheed Martin Corp., economic profit margin calculation

Microsoft Excel LibreOffice Calc
Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Selected Financial Data (USD $ in millions)
Economic profit1 hidden hidden hidden hidden hidden
Net sales hidden hidden hidden hidden hidden
Ratio
Economic profit margin2 hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2019-02-08), 10-K (filing date: 2018-02-06), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-24), 10-K (filing date: 2015-02-09).

2018 Calculations

1 Economic profit. See Details »

2 Economic profit margin = 100 × Economic profit ÷ Net sales
= 100 × hidden ÷ hidden = hidden

Ratio Description The company
Economic profit margin The ratio of economic profit to sales. It is the company’s profit margin covering income efficiency and asset management. Economic profit margin is not biased in favor of capital-intensive business models, because any added capital is a cost to the economic profit margin. Lockheed Martin Corp.’s economic profit margin improved from 2016 to 2017 but then slightly deteriorated from 2017 to 2018 not reaching 2016 level.