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 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) gains or losses on the sales of businesses or product lines, 3) special charges, 4) inventory charges and 5) operating results related to discontinued operations. In addition, ROIC income is adjusted to exclude the impact of one-time income tax items.

At the beginning of the year, our invested capital represents total shareholders’ equity and Manufacturing Group debt, less its cash and 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 Special charges, one-time income tax items and dispositions.

(Dollars in millions) 2020 2019 2018 2017 2016
ROIC Income1
Income from continuing operations 309  815 1,222  306 843 
Interest expense for Manufacturing Group 107  111 103  91 88 
Gain on business disposition, net of taxes —   —  (419)  — 
Special charges, net of taxes 119  55 56  86 78 
Inventory charges, net of taxes 55  —  — 
Tax benefit—TRU assets held for sale (8) —  — 
Special income tax items —   (14) 266 (206)
ROIC Income 582  981 948 749 803 
Invested Capital at end of year
Total shareholders’ equity2 5,845  5,518 5,192 5,647 5,574 
Total Manufacturing Group debt 3,707  3,124 3,066 3,088 2,777 
Cash and cash equivalents for
Manufacturing Group (2,146)  (1,181) (987) (1,079) (1,137) 
Eliminate gain on business disposition,
net of taxes —   (419) — 
Eliminate special charges, net of taxes 119  55 56 86 78 
Eliminate inventory charges, net of taxes 55  —  
Eliminate tax benefit—TRU assets held for sale (8) —  —  
Eliminate special income tax items —   (14) 266 (206) 
Invested Capital at end of year,
as adjusted 7,572  7,516 6,894 8,008 7,086 
Invested Capital at beginning of year 7,461  7,271 7,656 7,214 6,715 
Average Invested Capital 7,517  7,394 7,275 7,611 6,901 
Return on Invested Capital 7.7 % 13.3% 13.0% 9.8% 11.6%
1 In 2017, we revised our ROIC calculation to align with our adjusted income from continuing operations Non-GAAP financial measure. Prior periods have been restated to conform to this presentation.
2We adopted ASU No. 2014-09, Revenue from Contracts with Customers, at the beginning of 2018 and recorded a $90 million adjustment to increase Shareholders’ Equity to reflect the cumulative impact of adoption, primarily related to certain long-term contracts that converted to the cost-to-cost method for revenue recognition. Under the modified retrospective transition method that we elected upon adoption, prior periods were not restated.

Forward-looking statements

Certain statements in this Fact Book and other oral and written statements made by us from time to time are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements, which may describe strategies, goals, outlook or other non-historical matters, or project revenues, income, returns or other financial measures, often include words such as “believe,” “expect,” “anticipate,” “intend,” “plan,” “estimate,” “guidance,” “project,” “target,” “potential,” “will,” “should,” “could,” “likely” or “may” and similar expressions intended to identify forward-looking statements. These statements are only predictions and involve known and unknown risks, uncertainties, and other factors that may cause our actual results to differ materially from those expressed or implied by such forward-looking statements. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Forward-looking statements speak only as of the date on which they are made, and we undertake no obligation to update or revise any forward-looking statements. In addition to those factors described in our Annual Report on Form 10-K and our Quarterly Reports on Form 10-Q under “Risk Factors,” among the factors that could cause actual results to differ materially from past and projected future results are the following: interruptions in the U.S. Government’s ability to fund its activities and/or pay its obligations; changing priorities or reductions in the U.S. Government defense budget, including those related to military operations in foreign countries; our ability to perform as anticipated and to control costs under contracts with the U.S. Government; the U.S. Government’s ability to unilaterally modify or terminate its contracts with us for the U.S. Government’s convenience or for our failure to perform, to change applicable procurement and accounting policies, or, under certain circumstances, to withhold payment or suspend or debar us as a contractor eligible to receive future contract awards; changes in foreign military funding priorities or budget constraints and determinations, or changes in government regulations or policies on the export and import of military and commercial products; volatility in the global economy or changes in worldwide political conditions that adversely impact demand for our products; volatility in interest rates or foreign exchange rates; risks related to our international business, including establishing and maintaining facilities in locations around the world and relying on joint venture partners, subcontractors, suppliers, representatives, consultants and other business partners in connection with international business, including in emerging market countries; our Finance segment’s ability to maintain portfolio credit quality or to realize full value of receivables; performance issues with key suppliers or subcontractors; legislative or regulatory actions, both domestic and foreign, impacting our operations or demand for our products; our ability to control costs and successfully implement various cost-reduction activities; the efficacy of research and development investments to develop new products or unanticipated expenses in connection with the launching of significant new products or programs; the timing of our new product launches or certifications of our new aircraft products; our ability to keep pace with our competitors in the introduction of new products and upgrades with features and technologies desired by our customers; pension plan assumptions and future contributions; demand softness or volatility in the markets in which we do business; cybersecurity threats, including the potential misappropriation of assets or sensitive information, corruption of data or, operational disruption; difficulty or unanticipated expenses in connection with integrating acquired businesses; the risk that acquisitions do not perform as planned, including, for example, the risk that acquired businesses will not achieve revenue and profit projections; the impact of changes in tax legislation; and risks and uncertainties related to the impact of the COVID-19 pandemic on our business and operations.