How TPC Works

By Michael K. Lowry
Source: Aviation Week & Space Technology
May 27, 2013

Rankings of publicly traded aerospace and defense contractors are the result of a composite scoring of four equally weighted performance categories that place significant emphasis on operating excellence. Category weightings are based on results of two surveys conducted by Aviation Week with senior management of companies generating annual revenues greater than $1 billion.

The four categories are:

Return on Invested Capital (ROIC), measuring net profitability (Nopat) to average capital investment. It is a common asset utilization metric employed to evaluate a company's investment decisions. AW&ST's computation rewards companies with superior top-line profitability (referred to as “operating profit”). Non-operating income and/or expense, discontinued operations, extraordinary and special items are not considered. Goodwill is included in the capital base.

Earnings Momentum, offering a string of metrics measuring year-over-year earnings momentum, earnings quality and revenue expansion that evaluate company decisions to adjust plant capacity, lower unit costs and/or increase sales at rates ahead of the accompanying rise in direct production costs.

Asset Management, presenting the composite result of a series of industry turn-rates that measure how efficiently a company employs its resources, using comparisons of revenue to total assets, inventory, working capital and receivables.

Financial Health, representing the composite result of a string of metrics measuring a company's financial strength including an overall solvency assessment, liquidity available to fund current operating requirements and debt coverage.

Company Rankings

Companies are ranked by revenue in four groups this year: those with revenues greater than $20 billion, $5-20 billion, $1-5 billion and $250 million-1 billion.

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