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Microsoft Excel LibreOffice Calc

Lockheed Martin Corp. (NYSE:LMT)


Economic Value Added (EVA)

Advanced level

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

US$ in millions

Microsoft Excel LibreOffice Calc
12 months ended Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Net operating profit after taxes (NOPAT)1
Cost of capital2
Invested capital3
 
Economic profit4

Based on: 10-K (filing date: 2020-02-07), 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).

1 NOPAT. See details »

2 Cost of capital. See details »

3 Invested capital. See details »

4 2019 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= × =

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 decreased from 2017 to 2018 but then increased from 2018 to 2019 exceeding 2017 level.

Net Operating Profit after Taxes (NOPAT)

Lockheed Martin Corp., NOPAT calculation

US$ in millions

Microsoft Excel LibreOffice Calc
12 months ended Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Net earnings
Deferred income tax expense (benefit)1
Increase (decrease) in equity equivalents2
Interest expense
Interest expense, operating lease liability3
Adjusted interest expense
Tax benefit of interest expense4
Adjusted interest expense, after taxes5
(Gain) loss on marketable securities
Investment income, before taxes
Tax expense (benefit) of investment income6
Investment income, after taxes7
(Income) loss from discontinued operations, net of tax8
Net operating profit after taxes (NOPAT)

Based on: 10-K (filing date: 2020-02-07), 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).

1 Elimination of deferred tax expense. See details »

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

3 2019 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =

4 2019 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= × 21.00% =

5 Addition of after taxes interest expense to net earnings.

6 2019 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= × 21.00% =

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 decreased from 2017 to 2018 but then increased from 2018 to 2019 exceeding 2017 level.

Cash Operating Taxes

Lockheed Martin Corp., cash operating taxes calculation

US$ in millions

Microsoft Excel LibreOffice Calc
12 months ended Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Income tax expense
Less: Deferred income tax expense (benefit)
Add: Tax savings from interest expense
Less: Tax imposed on investment income
Cash operating taxes

Based on: 10-K (filing date: 2020-02-07), 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).

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 increased from 2017 to 2018 but then slightly decreased from 2018 to 2019.

Invested Capital

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

US$ in millions

Microsoft Excel LibreOffice Calc
Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Current maturities of long-term debt and commercial paper
Long-term debt, net, excluding current maturities
Operating lease liability1
Total reported debt & leases
Stockholders’ equity (deficit)
Net deferred tax (assets) liabilities2
Equity equivalents3
Accumulated other comprehensive (income) loss, net of tax4
Noncontrolling interests in subsidiary
Adjusted stockholders’ equity (deficit)
Construction in progress5
Marketable securities6
Invested capital

Based on: 10-K (filing date: 2020-02-07), 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).

1 Addition of capitalized operating leases.

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 2017 to 2018 and from 2018 to 2019.

Cost of Capital

Lockheed Martin Corp., cost of capital calculations

Capital (fair value)1 Weights Cost of capital
Equity2 ÷ = × =
Outstanding debt and commercial paper3 ÷ = × × (1 – 21.00%) =
Operating lease liability4 ÷ = × × (1 – 21.00%) =
Total:

Based on: 10-K (filing date: 2020-02-07).

1 US$ in millions

2 Equity. See details »

3 Outstanding debt and commercial paper. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 ÷ = × =
Outstanding debt and commercial paper3 ÷ = × × (1 – 21.00%) =
Operating lease liability4 ÷ = × × (1 – 21.00%) =
Total:

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

1 US$ in millions

2 Equity. See details »

3 Outstanding debt and commercial paper. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 ÷ = × =
Outstanding debt and commercial paper3 ÷ = × × (1 – 35.00%) =
Operating lease liability4 ÷ = × × (1 – 35.00%) =
Total:

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

1 US$ in millions

2 Equity. See details »

3 Outstanding debt and commercial paper. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 ÷ = × =
Outstanding debt and commercial paper3 ÷ = × × (1 – 35.00%) =
Operating lease liability4 ÷ = × × (1 – 35.00%) =
Total:

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

1 US$ in millions

2 Equity. See details »

3 Outstanding debt and commercial paper. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 ÷ = × =
Outstanding debt and commercial paper3 ÷ = × × (1 – 35.00%) =
Operating lease liability4 ÷ = × × (1 – 35.00%) =
Total:

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

1 US$ in millions

2 Equity. See details »

3 Outstanding debt and commercial paper. See details »

4 Operating lease liability. See details »


Economic Spread Ratio

Lockheed Martin Corp., economic spread ratio calculation

Microsoft Excel LibreOffice Calc
Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Selected Financial Data (US$ in millions)
Economic profit1
Invested capital2
Performance Ratio
Economic spread ratio3

Based on: 10-K (filing date: 2020-02-07), 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).

1 Economic profit. See details »

2 Invested capital. See details »

3 2019 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × ÷ =

Performance ratio Description The company
Economic spread ratio 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 ratio deteriorated from 2017 to 2018 but then improved from 2018 to 2019 not reaching 2017 level.

Economic Profit Margin

Lockheed Martin Corp., economic profit margin calculation

Microsoft Excel LibreOffice Calc
Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Selected Financial Data (US$ in millions)
Economic profit1
Net sales
Performance Ratio
Economic profit margin2

Based on: 10-K (filing date: 2020-02-07), 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).

1 Economic profit. See details »

2 2019 Calculation
Economic profit margin = 100 × Economic profit ÷ Net sales
= 100 × ÷ =

Performance 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 deteriorated from 2017 to 2018 but then improved from 2018 to 2019 not reaching 2017 level.