10-KPeriod: FY2014

GENERAL DYNAMICS CORP Annual Report, Year Ended Dec 31, 2014

Filed February 9, 2015For Securities:GD

Summary

General Dynamics Corporation (GD) reported relatively stable revenues in 2014, approximately $30.85 billion, showing slight fluctuations compared to the previous year. The company operates across four key segments: Aerospace, Combat Systems, Information Systems and Technology, and Marine Systems. Aerospace, driven by Gulfstream business jets, saw increased revenues and operating earnings, bolstered by strong demand and new aircraft deliveries. Defense segments, including Combat Systems and Marine Systems, experienced mixed results, with Marine Systems showing revenue growth driven by naval shipbuilding contracts, while Combat Systems saw a slight revenue dip due to reduced U.S. Army spending, offset by significant international orders. The company maintains a substantial backlog, exceeding $72 billion by the end of 2014, providing visibility into future revenue streams, particularly in the Marine Systems and Combat Systems segments. Financially, GD demonstrated strong cash flow generation, with net cash provided by operating activities at $3.7 billion, enabling significant share repurchases and dividend payments, reflecting a commitment to shareholder returns. Despite pressures on U.S. defense spending, the company's diversified portfolio and strategic focus on operational efficiency and innovation position it for continued performance.

Financial Highlights

54 data points
Beta

Revenue

$30.85B

50.3% Gross Margin

Net Income

$2.53B

8.2% Net Margin

EPS (Diluted)

$7.42

Total Assets

$35.34B

Cash & Equivalents

$4.39B

Free Cash Flow

$3.31B

Financial Statements
Beta
Revenue$30.85B
Cost of Revenue$15.34B
Gross Profit$15.52B
Operating Expenses$26.96B
Operating Income$3.89B
Interest Expense$103.00M
Net Income$2.53B
EPS (Basic)$7.56
EPS (Diluted)$7.42
Shares Outstanding (Basic)335.19M
Shares Outstanding (Diluted)341.33M

Key Highlights

  • 1Total revenues remained stable at approximately $30.85 billion in 2014, with Aerospace and Marine Systems revenues showing growth, partially offset by declines in Information Systems and Technology and Combat Systems.
  • 2Aerospace segment demonstrated robust performance with increased revenues and operating earnings, driven by strong demand for Gulfstream business jets and the introduction of new models.
  • 3The company's total backlog significantly increased to $72.4 billion by year-end 2014, up from $45.9 billion, primarily due to major contract awards in Combat Systems and Marine Systems, providing strong revenue visibility.
  • 4Net cash provided by operating activities was strong at $3.7 billion, allowing for substantial capital deployment including $3.4 billion in share repurchases and $822 million in dividends paid.
  • 5The U.S. government remains the largest customer, accounting for 58% of revenues, though this also exposes the company to risks related to U.S. defense budget fluctuations and contract terminations.
  • 6The company repurchased approximately 29 million shares in 2014, reducing outstanding shares and demonstrating a commitment to returning capital to shareholders.

Frequently Asked Questions

General Dynamics' primary revenue drivers in 2014 were its four business groups: Aerospace (Gulfstream business jets and services), Combat Systems (military vehicles, weapons, munitions), Information Systems and Technology (IT solutions, communication systems), and Marine Systems (shipbuilding and repair). The Aerospace segment saw strong performance driven by new aircraft deliveries and services. Marine Systems benefited from significant naval shipbuilding contracts, while Combat Systems experienced growth from international orders despite some U.S. defense spending reductions. Information Systems and Technology revenue decreased but maintained solid operating margins.

General Dynamics demonstrated strong financial management in 2014, generating $3.7 billion in net cash from operating activities. This robust cash flow supported significant capital deployment, including $3.4 billion in share repurchases and $822 million in dividends paid to shareholders. The company also highlighted its commitment to shareholder returns through a 17th consecutive annual dividend increase.

The company's total backlog, representing the estimated remaining value of work under firm contracts, significantly increased to $72.4 billion by the end of 2014, up from $45.9 billion the previous year. This substantial backlog provides considerable visibility into future revenues. The largest portions of the backlog were in Marine Systems ($30.8 billion) and Combat Systems ($19.8 billion), reflecting significant long-term defense contracts. The Aerospace backlog was $13.2 billion, and Information Systems and Technology backlog was $8.6 billion.

A significant risk for General Dynamics is its heavy reliance on the U.S. government as a customer, which accounted for 58% of its revenues in 2014. This concentration exposes the company to potential reductions or changes in U.S. defense spending, budget uncertainties, and the risk of contract terminations. Sales to non-U.S. customers also introduced financial and legal risks associated with foreign operations and varying government procurement practices.