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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
Net Operating Profit after Taxes (NOPAT)
Cash Operating Taxes
Invested Capital
Cost of Capital
Economic Spread Ratio
Economic Profit Margin

Raytheon Co., economic profit calculation

US$ in millions

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	3,427)	3,010)	2,393)	2,456)	2,171)
Cost of capital²	12.39%	12.20%	12.27%	11.89%	11.70%
Invested capital³	26,688)	26,081)	23,548)	23,509)	22,413)

Economic profit⁴	119)	(173)	(497)	(339)	(453)

Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).

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
= 3,427 – 12.39% × 26,688 = 119

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Raytheon Co., NOPAT calculation

US$ in millions

12 months ended:	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015
Net income attributable to Raytheon Company	3,343)	2,909)	2,024)	2,211)	2,074)
Deferred income tax expense (benefit)¹	(28)	(24)	252)	109)	(56)
Increase (decrease) in allowance for doubtful accounts²	(5)	4)	—)	3)	1)
Increase (decrease) in equity equivalents³	(33)	(20)	252)	112)	(55)
Interest expense	180)	184)	205)	232)	233)
Interest expense, operating lease liability⁴	28)	33)	35)	47)	42)
Adjusted interest expense	208)	217)	240)	279)	275)
Tax benefit of interest expense⁵	(44)	(46)	(84)	(98)	(96)
Adjusted interest expense, after taxes⁶	165)	172)	156)	181)	179)
Interest income	(42)	(31)	(21)	(16)	(11)
Investment income, before taxes	(42)	(31)	(21)	(16)	(11)
Tax expense (benefit) of investment income⁷	9)	7)	7)	6)	4)
Investment income, after taxes⁸	(33)	(24)	(14)	(10)	(7)
(Income) loss from discontinued operations, net of tax⁹	(1)	1)	(2)	(1)	(13)
Net income (loss) attributable to noncontrolling interest	(14)	(27)	(23)	(37)	(7)
Net operating profit after taxes (NOPAT)	3,427)	3,010)	2,393)	2,456)	2,171)

Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).

¹ Elimination of deferred tax expense. See details »

² Addition of increase (decrease) in allowance for doubtful accounts.

³ Addition of increase (decrease) in equity equivalents to net income attributable to Raytheon Company.

⁴ 2019 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 919 × 3.10% = 28

⁵ 2019 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 208 × 21.00% = 44

⁶ Addition of after taxes interest expense to net income attributable to Raytheon Company.

⁷ 2019 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 42 × 21.00% = 9

⁸ Elimination of after taxes investment income.

⁹ Elimination of discontinued operations.

Net income attributable to Raytheon Company: The net income shows a generally positive trend over the five-year period. Starting at 2,074 million US dollars in 2015, there was a modest increase in 2016 to 2,211 million. However, the net income slightly declined in 2017 to 2,024 million. From 2017 onwards, the net income rose significantly, reaching 2,909 million in 2018 and further increasing to 3,343 million by the end of 2019. This pattern indicates recovery and robust growth in profitability in the latter years.
Net operating profit after taxes (NOPAT): NOPAT also demonstrates an upward trajectory across the reported years. The value grew steadily from 2,171 million US dollars in 2015 to 2,456 million in 2016. A slight decline occurred in 2017, with NOPAT at 2,393 million, mirroring the dip seen in net income for that year. In 2018, NOPAT increased sharply to 3,010 million and continued its upward movement to 3,427 million in 2019. This trend underscores improving operational efficiency and effective tax management contributing to profit growth over the period.
Overall Trend Analysis: The data reveals a consistent improvement in both net income and NOPAT from 2015 to 2019, notwithstanding the minor setbacks in 2017. The stronger gains after 2017 suggest enhanced operational performance and possibly favorable market or internal conditions. The parallel movement between net income and NOPAT implies that the operating profits, after accounting for taxes, significantly drive the net profitability of the company.

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Raytheon Co., cash operating taxes calculation

US$ in millions

12 months ended:	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015
Provision for federal and foreign income taxes	658)	264)	1,114)	857)	733)
Less: Deferred income tax expense (benefit)	(28)	(24)	252)	109)	(56)
Add: Tax savings from interest expense	44)	46)	84)	98)	96)
Less: Tax imposed on investment income	9)	7)	7)	6)	4)
Cash operating taxes	721)	327)	939)	840)	881)

Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).

The financial data indicates a fluctuating pattern in the provisions for federal and foreign income taxes over the five-year period. Starting at 733 million US dollars in 2015, the provision increased steadily to reach a peak of 1,114 million in 2017. However, in 2018, the provision experienced a significant decline to 264 million, followed by a recovery to 658 million in 2019. This trend suggests variability in the company's taxable income or changes in tax rates or policies during these years.

Regarding cash operating taxes, the figures show a less consistent trend. The amount decreased slightly from 881 million in 2015 to 840 million in 2016, then rose to 939 million in 2017. Similar to the provision for income taxes, cash operating taxes dropped considerably in 2018 to 327 million before increasing again to 721 million in 2019. The parallel movements in both provision and cash taxes in 2018 and 2019 indicate an underlying correlation in tax strategies or tax liabilities paid.

Provision for Federal and Foreign Income Taxes: General upward trend from 2015 to 2017, followed by a sharp decline in 2018 and partial rebound in 2019; Reflects volatility possibly due to changes in earnings before tax, tax regulations, or deferred tax assets/liabilities adjustments
Cash Operating Taxes: Slight fluctuations with a significant drop in 2018 and a recovery in 2019; Movements suggest impact from operational cash flows and timing differences in tax payments
Comparison and Insights: Both tax-related figures exhibit synchronized declines in 2018, indicating potential operational or fiscal events affecting tax computations or payments during that year; The rebound in 2019 points to normalization or adjustments after an anomalous fiscal period

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Raytheon Co., invested capital calculation (financing approach)

US$ in millions

	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015
Commercial paper and current portion of long-term debt	1,499)	300)	300)	—)	—)
Long-term debt, excluding current portion	3,261)	4,755)	4,750)	5,335)	5,330)
Operating lease liability¹	919)	842)	909)	1,086)	976)
Total reported debt & leases	5,679)	5,897)	5,959)	6,421)	6,306)
Total Raytheon Company stockholders’ equity	12,223)	11,472)	9,963)	10,066)	10,128)
Net deferred tax (assets) liabilities²	(513)	(329)	(532)	(746)	(887)
Allowance for doubtful accounts³	7)	12)	8)	8)	5)
Equity equivalents⁴	(506)	(317)	(524)	(738)	(882)
Accumulated other comprehensive (income) loss, net of tax⁵	9,260)	8,618)	7,935)	7,411)	7,176)
Redeemable noncontrolling interests	32)	411)	512)	449)	355)
Noncontrolling interests in subsidiaries	—)	—)	—)	—)	202)
Adjusted total Raytheon Company stockholders’ equity	21,009)	20,184)	17,886)	17,188)	16,979)
Short-term investments⁶	—)	—)	(297)	(100)	(872)
Invested capital	26,688)	26,081)	23,548)	23,509)	22,413)

Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).

¹ Addition of capitalized operating leases.

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

³ Addition of allowance for doubtful accounts receivable.

⁴ Addition of equity equivalents to total Raytheon Company stockholders’ equity.

⁵ Removal of accumulated other comprehensive income.

⁶ Subtraction of short-term investments.

Total reported debt & leases: The total reported debt and leases demonstrate a gradual declining trend over the analyzed period. Starting from 6,306 million US dollars in 2015, the figure increased slightly in 2016 to 6,421 million but began to decrease thereafter. By 2019, the total reported debt and leases had reduced to 5,679 million, reflecting a consistent effort to manage and reduce debt levels over time.
Total Raytheon Company stockholders’ equity: The stockholders’ equity shows a generally positive upward trend from 2015 to 2019. It started at 10,128 million US dollars in 2015 and experienced a minor decline through 2017, reaching 9,963 million. However, a significant recovery occurred in 2018 and 2019, with equity increasing to 11,472 million and then to 12,223 million respectively. This growth suggests an improvement in the company’s net asset base and potential retention of earnings or capital injection during these latter years.
Invested capital: Invested capital shows a steady increase over the period examined. Beginning at 22,413 million US dollars in 2015, it rose each year, attaining 23,509 million in 2016 and edging slightly upward to 23,548 million in 2017. Subsequently, there was a more pronounced increase in 2018 to 26,081 million, continuing to grow in 2019 to 26,688 million. This upward trend indicates ongoing capital investment or asset expansion, potentially supporting future growth initiatives.

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Raytheon Co., cost of capital calculations

Dec 31, 2019

	Capital (fair value)¹	Weights					Cost of capital
Equity²	63,975)	63,975)	÷	70,231)	=	0.91	0.91	×	13.31%	=	12.12%
Commercial paper and long-term debt³	5,337)	5,337)	÷	70,231)	=	0.08	0.08	×	4.01% × (1 – 21.00%)	=	0.24%
Operating lease liability⁴	919)	919)	÷	70,231)	=	0.01	0.01	×	3.10% × (1 – 21.00%)	=	0.03%
Total:	70,231)					1.00					12.39%

Based on: 10-K (reporting date: 2019-12-31).

¹ US$ in millions

² Equity. See details »

³ Commercial paper and long-term debt. See details »

⁴ Operating lease liability. See details »

Dec 31, 2018

	Capital (fair value)¹	Weights					Cost of capital
Equity²	51,068)	51,068)	÷	57,273)	=	0.89	0.89	×	13.31%	=	11.87%
Commercial paper and long-term debt³	5,363)	5,363)	÷	57,273)	=	0.09	0.09	×	3.95% × (1 – 21.00%)	=	0.29%
Operating lease liability⁴	842)	842)	÷	57,273)	=	0.01	0.01	×	3.95% × (1 – 21.00%)	=	0.05%
Total:	57,273)					1.00					12.20%

Based on: 10-K (reporting date: 2018-12-31).

¹ US$ in millions

² Equity. See details »

³ Commercial paper and long-term debt. See details »

⁴ Operating lease liability. See details »

Dec 31, 2017

	Capital (fair value)¹	Weights					Cost of capital
Equity²	61,331)	61,331)	÷	67,833)	=	0.90	0.90	×	13.31%	=	12.03%
Commercial paper and long-term debt³	5,593)	5,593)	÷	67,833)	=	0.08	0.08	×	3.87% × (1 – 35.00%)	=	0.21%
Operating lease liability⁴	909)	909)	÷	67,833)	=	0.01	0.01	×	3.87% × (1 – 35.00%)	=	0.03%
Total:	67,833)					1.00					12.27%

Based on: 10-K (reporting date: 2017-12-31).

¹ US$ in millions

² Equity. See details »

³ Commercial paper and long-term debt. See details »

⁴ Operating lease liability. See details »

Dec 31, 2016

	Capital (fair value)¹	Weights					Cost of capital
Equity²	44,506)	44,506)	÷	51,440)	=	0.87	0.87	×	13.31%	=	11.51%
Commercial paper and long-term debt³	5,848)	5,848)	÷	51,440)	=	0.11	0.11	×	4.29% × (1 – 35.00%)	=	0.32%
Operating lease liability⁴	1,086)	1,086)	÷	51,440)	=	0.02	0.02	×	4.29% × (1 – 35.00%)	=	0.06%
Total:	51,440)					1.00					11.89%

Based on: 10-K (reporting date: 2016-12-31).

¹ US$ in millions

² Equity. See details »

³ Commercial paper and long-term debt. See details »

⁴ Operating lease liability. See details »

Dec 31, 2015

	Capital (fair value)¹	Weights					Cost of capital
Equity²	37,844)	37,844)	÷	44,646)	=	0.85	0.85	×	13.31%	=	11.28%
Commercial paper and long-term debt³	5,826)	5,826)	÷	44,646)	=	0.13	0.13	×	4.29% × (1 – 35.00%)	=	0.36%
Operating lease liability⁴	976)	976)	÷	44,646)	=	0.02	0.02	×	4.29% × (1 – 35.00%)	=	0.06%
Total:	44,646)					1.00					11.70%

Based on: 10-K (reporting date: 2015-12-31).

¹ US$ in millions

² Equity. See details »

³ Commercial paper and long-term debt. See details »

⁴ Operating lease liability. See details »

Raytheon Co., economic spread ratio calculation, comparison to benchmarks

	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015
Selected Financial Data (US$ in millions)
Economic profit¹	119)	(173)	(497)	(339)	(453)
Invested capital²	26,688)	26,081)	23,548)	23,509)	22,413)
Performance Ratio
Economic spread ratio³	0.44%	-0.66%	-2.11%	-1.44%	-2.02%
Benchmarks
Economic Spread Ratio, Competitors⁴
Boeing Co.	—	—	—	—	—
Caterpillar Inc.	—	—	—	—	—
Eaton Corp. plc	—	—	—	—	—
GE Aerospace	—	—	—	—	—
Honeywell International Inc.	—	—	—	—	—
Lockheed Martin Corp.	—	—	—	—	—
RTX Corp.	—	—	—	—	—

Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).

¹ Economic profit. See details »

² Invested capital. See details »

³ 2019 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × 119 ÷ 26,688 = 0.44%

⁴ Click competitor name to see calculations.

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Raytheon Co., economic profit margin calculation, comparison to benchmarks

	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015
Selected Financial Data (US$ in millions)
Economic profit¹	119)	(173)	(497)	(339)	(453)
Net sales	29,176)	27,058)	25,348)	24,069)	23,247)
Performance Ratio
Economic profit margin²	0.41%	-0.64%	-1.96%	-1.41%	-1.95%
Benchmarks
Economic Profit Margin, Competitors³
Boeing Co.	—	—	—	—	—
Caterpillar Inc.	—	—	—	—	—
Eaton Corp. plc	—	—	—	—	—
GE Aerospace	—	—	—	—	—
Honeywell International Inc.	—	—	—	—	—
Lockheed Martin Corp.	—	—	—	—	—
RTX Corp.	—	—	—	—	—

Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).

¹ Economic profit. See details »

² 2019 Calculation
Economic profit margin = 100 × Economic profit ÷ Net sales
= 100 × 119 ÷ 29,176 = 0.41%

³ Click competitor name to see calculations.

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Raytheon Co. (NYSE:RTN)

Economic Value Added (EVA)

Economic Profit

Net Operating Profit after Taxes (NOPAT)

Cash Operating Taxes

Invested Capital

Cost of Capital

Economic Spread Ratio

Economic Profit Margin