Lockheed Martin 2007 Annual Report Download - page 61

Our Stockholders’ equity amounted to $9.8 billion at December 31, 2007, an increase of $2.9 billion from December 31,
2006. The increase was due primarily to Net earnings of $3.0 billion, the remeasurement and recognition of prior period
amounts related to our postretirement benefit plans under FAS 158 (see Note 12), which increased Other comprehensive
income by $1.7 billion, and employee stock activity of $889 million. These increases were partially offset by the repurchase
of 21.6 million common shares for $2.1 billion and payment of $615 million of dividends during the year. As we repurchase
our common shares, we reduce Common stock for the $1 of par value of the shares repurchased, with the remainder of the
purchase price over par value recorded as a reduction of Additional paid-in capital. Due to the volume of repurchases made
under our share repurchase program, Additional paid-in capital was reduced to zero, with the remainder of the excess of
purchase price over par value of $471 million recorded as a reduction of Retained earnings.
Through our debt repayment activities, our Long-term debt balance has declined $3.2 billion over the last five years
from $7.6 billion at December 31, 2002. Our debt-to-total capitalization ratio was 31% at December 31, 2007, down from
39% at December 31, 2006. The decrease from 2006 to 2007 was primarily attributable to the increase in Stockholders’
equity discussed above.
Debt-to-Total Capital Ratio
0%
10%
20%
30%
40%
50%
20062007 2005
Return on invested capital (ROIC) improved by 220 basis points during 2007 to 21.4%. We define ROIC as Net
earnings plus after-tax interest expense divided by average invested capital (Stockholders’ equity plus debt), after adjusting
Stockholders’ equity by adding back amounts related to postretirement benefit plans, including unrecognized prior service
costs, unrecognized actuarial gains and losses, the adjustment for the adoption of FAS 158 in 2006 and minimum pension
liability adjustments recorded in prior years. We believe that reporting ROIC provides investors with greater visibility into
how effectively we use the capital invested in our operations. We use ROIC to evaluate multi-year investment decisions and
as a long-term performance measure. We also use ROIC as a factor in evaluating management performance under certain of
our incentive compensation plans.
ROIC is not a measure of financial performance under U.S. generally accepted accounting principles, and may not be
defined and calculated by other companies in the same manner. ROIC should not be considered in isolation or as an
alternative to Net earnings as an indicator of performance. See Consolidated Financial Data – Five Year Summary on page
30 of this Form 10-K for additional information concerning how we calculate ROIC.
Return On Invested Capital Ratio
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
22%
20062007 2005
At December 31, 2007, we had in place a $1.5 billion revolving credit facility which expires in June 2012. There were
no borrowings outstanding under the facility at December 31, 2007. Borrowings under the credit facility would be unsecured
53