Lockheed Martin 2008 Annual Report Download - page 62

net of the unamortized discount under the caption “Long-term Debt, Net.” The expenses associated with the exchange, net of
state income tax benefits, totaled $16 million and were recorded in other non-operating income (expense), net. They reduced
net earnings in 2006 by $11 million ($0.03 per share).
Our stockholders’ equity amounted to $2.9 billion at December 31, 2008, a decrease of $6.9 billion from December 31,
2007. The decrease primarily was due to the annual remeasurement of the funded status of our postretirement benefit plans at
December 31 under FAS 158 (see Note 10), which increased the accumulated other comprehensive loss by $7.25 billion, the
repurchase of 29 million common shares for $2.9 billion, and payment of $737 million of dividends during the year. These
decreases partially were offset by net earnings of $3.2 billion and employee stock activity of $746 million. 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 $2.1 billion recorded as a reduction of retained earnings.
Through our debt repayment activities, our long-term debt balance has declined $2.4 billion over the last five years from
$6.2 billion at December 31, 2003. Our debt-to-total capital ratio was 57% at December 31, 2008, up from 31% at
December 31, 2007. The increase from 2007 to 2008 primarily was attributable to the decrease in stockholders’ equity
associated with postretirement benefit plans discussed above.
Debt-to-Total Capital Ratio
0%
10%
20%
30%
40%
60%
50%
20072008 2006
Return on invested capital (ROIC) improved by 30 basis points during 2008 to 21.7%. 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. We believe that reporting ROIC
provides investors with greater visibility into how effectively we use the capital invested in our operations. We use ROIC as
one of the inputs in our evaluation of 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 31
of this Form 10-K for additional information concerning how we calculate ROIC.
Return on Invested Capital Ratio
0%
5%
15%
10%
20%
25%
20072008 2006
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