01—Abstract
Summary
Summary of the 10-K filed February 12, 2018. Cited figures are marked; the original filing is the authoritative source.
General Dynamics Corporation (GD) reported a solid financial performance for the fiscal year ended December 31, 2017.
The company experienced revenue growth primarily driven by its Aerospace and Combat Systems segments, with overall revenue reaching $30.97 billiona. Operating earnings saw a significant increase of 11.9% to $4.18 billion, accompanied by an improved operating margin of 13.5%, up from 12.2% in the prior year. This profitability expansion was consistent across all business groups.
The company maintained a robust backlog of $63.2 billionb, indicating strong future revenue potential. GD also demonstrated strong cash flow generation, with free cash flow from operations of $3.45 billion, and continued to return value to shareholders through dividends and share repurchases.
Management highlighted strategic investments in product development, particularly in the Aerospace segment with new aircraft models poised for 2018 entry into service, and favorable contract awards in defense segments. The company also announced its intent to acquire CSRA for $9.6 billionc, expected to close in the first half of 2018, which signals a strategic expansion in its Information Systems and Technology capabilities.
02—Key points
Key Highlights
- Revenue increased by 1.3% to $30.97 billion in 2017, driven by growth in Aerospace and Combat Systems.
- Operating earnings grew by 11.9% to $4.18 billion, with operating margin improving to 13.5% from 12.2% in 2016.
- Free cash flow from operations reached $3.45 billion, a significant increase from $1.81 billion in 2016.
- The company's total backlog stood strong at $63.2 billion, an increase of nearly $1 billion from the previous year.
- Aerospace segment revenue increased by 4.0% to $8.13 billion, with strong demand for Gulfstream aircraft and services, while preparing for new G500 and G600 aircraft deliveries.
- Combat Systems segment revenue increased by 7.6% to $5.95 billion, boosted by higher volumes in U.S. military vehicles and international programs like the AJAX program.
- The company returned $2.54 billion to shareholders in 2017 through share repurchases ($1.56 billion) and dividends ($0.99 billion).
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2017, General Dynamics kept $0.09.
- Revenue$30.97B100.0%
- Cost of revenue−$24.73B79.8%
- Gross profit$6.24B20.2%
- Operating costs−$2.01B6.5%
- Operating income$4.24B13.7%
- Interest, other & tax−$1.32B4.3%
- Net income$2.91B9.4%
Where FY2017 revenue went
$30.97B- Cost of revenue: $24.73B, 80% of revenue
- Net income: $2.91B, 9.4% of revenue
- Operating costs: $2.01B, 6.5% of revenue
- Interest, other & tax: $1.32B, 4.3% of revenue
Kept 9.4% as net incomeNet income $2.91B · 9.4%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2017filed February 12, 2018Financial Statements
FY2017 against FY2016
| Line item | FY2017FY2016 | Change |
|---|---|---|
| Revenue | $30.97B$30.56B | +1.3% |
| Cost of Revenue | $24.73B$24.90B | −0.7% |
| Gross Profit | $6.24B$5.67B | +10.2% |
| Operating Expenses | $26.74B$26.82B | −0.3% |
| Operating Income | $4.24B$3.74B | +13.1% |
| Interest Expense | $117.00M$99.00M | +18.2% |
| Net Income | $2.91B$2.57B | +13.2% |
| EPS (Basic) | $9.73$8.44 | +15.3% |
| EPS (Diluted) | $9.56$8.29 | +15.3% |
| Shares Outstanding (Basic) | 299.17M304.71M | −1.8% |
| Shares Outstanding (Diluted) | 304.64M310.39M | −1.9% |
05—Questions
Frequently Asked Questions
What was General Dynamics' revenue and profitability performance in 2017?
General Dynamics reported consolidated revenue of $30.97 billion for 2017, a 1.3% increase from 2016. Operating earnings rose by 11.9% to $4.18 billion, and the operating margin improved by 130 basis points to 13.5%, reflecting strong performance across all business segments.
How is the company managing its backlog and future growth prospects?
General Dynamics maintained a robust total backlog of $63.2 billion at the end of 2017, up slightly from $62.2 billion in 2016. This strong backlog, combined with increasing net orders for Gulfstream aircraft and significant defense contract awards, positions the company well for continued growth.
What are the key drivers of growth in the different business segments?
The Aerospace segment saw revenue growth driven by increased deliveries of ultra-large-cabin and mid-cabin Gulfstream aircraft, alongside growth in aircraft services. The Combat Systems segment benefited from higher volumes in U.S. military vehicle programs like Abrams and Stryker, as well as international programs. The Information Systems and Technology segment experienced a slight revenue decrease but showed improved operating margin due to strong program performance. The Marine Systems segment's revenue was relatively stable, with growth in U.S. Navy ship engineering and repair services partially offsetting lower commercial ship construction.
How did General Dynamics return capital to shareholders in 2017?
In 2017, General Dynamics returned approximately $2.54 billion to shareholders. This included $1.56 billion in share repurchases and $0.99 billion in dividends. The company also highlighted its 20th consecutive annual dividend increase.
What is the significance of the announced acquisition of CSRA?
General Dynamics announced an agreement to acquire CSRA for $9.6 billion, including debt assumption. This acquisition, expected to close in the first half of 2018, signifies a strategic move to enhance its capabilities and market position within the Information Systems and Technology sector, particularly in IT modernization and digital transformation services for government customers.
06—Continue