Return on Invested Capital (ROIC)
(Dollars in millions) |
2013 |
2012 |
2011 |
2010 |
2009 |
||||||
ROIC Income |
|||||||||||
Income from continuing operations1 |
$ |
498 |
$ |
581 |
$ |
242 |
$ |
92 |
$ |
(73) |
|
Interest expense for Manufacturing group |
77 |
90 |
88 |
88 |
91 |
||||||
Operating income from acquisitions |
– |
– |
– |
2 |
– |
||||||
Special charges and gain on sale of businesses/product lines |
– |
– |
– |
153 |
230 |
||||||
Operating results of business units in discontinued operations, net of taxes2 |
– |
8 |
– |
– |
2 |
||||||
ROIC Income |
$ |
575 |
$ |
679 |
$ |
330 |
$ |
335 |
$ |
250 |
|
Invested Capital at End of Year |
|||||||||||
Total shareholders’ equity |
$ |
4,384 |
$ |
2,991 |
$ |
2,745 |
$ |
2,972 |
$ |
2,826 |
|
Total Manufacturing group debt |
1,931 |
2,301 |
2,459 |
2,302 |
3,584 |
||||||
Loan to Finance group |
– |
– |
(490) |
(315) |
(413) |
||||||
Cash and cash equivalents for Manufacturing group |
(1,163) |
(1,378) |
(871) |
(898) |
(1,748) |
||||||
Net cash used by Manufacturing group for acquisitions |
(196) |
(11) |
(14) |
(57) |
– |
||||||
Eliminate special charges, net of income taxes |
– |
– |
– |
153 |
230 |
||||||
Eliminate net cash proceeds from sale of business |
– |
– |
– |
– |
288 |
||||||
Eliminate impact of gain on sale of businesses/product lines |
– |
– |
– |
– |
(8) |
||||||
Invested Capital at End of Year, as Adjusted |
4,956 |
3,903 |
3,829 |
4,157 |
4,759 |
||||||
Invested Capital at Beginning of Year |
3,914 |
3,843 |
4,061 |
4,249 |
4,271 |
||||||
Average Invested Capital |
$ |
4,435 |
$ |
3,873 |
$ |
3,945 |
$ |
4,203 |
$ |
4,515 |
|
Return on Invested Capital |
13.0% |
17.5% |
8.4% |
8.0% |
5.5% |
||||||
|
1 In 2013, income from continuing operations includes the following pre-tax items: $28 million in severance costs in connection with a voluntary separation program at Cessna and $15 million of charges related our UAS fee-for service contracts at Textron Systems. 2012 includes the following pre-tax items: $37 million in charges related to our UAS fee-for-service contracts at Textron Systems and a $27 million charge from an unfavorable arbitration award at Cessna. 2011 includes the following pre-tax items: $41 million non-cash impairment charge to write down certain intangible assets and approximately $19 million in severance costs at Textron Systems, $186 million non-cash initial mark-to-market adjustment for remaining finance receivables in the Golf mortgage portfolio.
|
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Return on invested capital (ROIC) is a non-GAAP financial measure that our management believes is useful to investors as a measure of performance and of the effectiveness of the use of capital in our operations. We measure ROIC by dividing ROIC income by average invested capital. ROIC income includes income from continuing operations and adds back after-tax amounts for 1) interest expense for the Manufacturing group, 2) special charges, 3) gains or losses on the sales of businesses or product lines and 4) operating results related to discontinued operations.
At the beginning of the year, our invested capital represents total shareholders’ equity and Manufacturing group debt, less its cash and cash equivalents and any outstanding amounts loaned to the Finance group. At the end of the year, we typically adjust ending invested capital for significant events unrelated to our normal operations for the year such as acquisitions, dispositions and special charges.