01—Abstract
Summary
Summary of the 10-K filed February 13, 2019. Cited figures are marked; the original filing is the authoritative source.
General Dynamics Corporation (GD) reported robust performance in its 2018 fiscal year, highlighted by record revenue of $36.2 billiona, a 16.9% increase over 2017, driven significantly by the acquisition of CSRA Inc. Operating earnings grew 5.2% to $4.5 billion, and diluted earnings per share from continuing operations reached a record $11.22.
The company's backlog also expanded by 7.4% to $67.9 billionb, indicating strong future revenue potential across its diversified segments. The company's five operating segments – Aerospace, Combat Systems, Information Technology, Mission Systems, and Marine Systems – all contributed to the revenue growth. The Aerospace segment saw increased revenue from services, while the IT segment's significant revenue jump was largely attributable to the CSRA acquisition.
The defense segments (Combat Systems, Information Technology, Mission Systems, and Marine Systems) demonstrated strong order intake and backlog growth, particularly in areas like naval shipbuilding and combat vehicles. GD continued its commitment to shareholder returns, repurchasing $1.8 billionc in stock and increasing dividends, returning over 115% of its free cash flow from operations to shareholders.
02—Key points
Key Highlights
- Record revenue of $36.2 billion in 2018, a 16.9% increase driven by the CSRA acquisition and growth across all segments.
- Operating earnings increased by 5.2% to $4.5 billion, with diluted earnings per share from continuing operations reaching a record $11.22.
- Backlog grew by 7.4% to $67.9 billion, providing a strong foundation for future revenue.
- Aerospace segment benefited from increased aircraft services and the acquisition of Hawker Pacific.
- Information Technology segment revenue more than doubled due to the significant CSRA acquisition.
- Defense segments (Combat Systems, Mission Systems, Marine Systems) showed strong order intake and backlog growth, particularly in key programs like naval construction and modernization.
- Strong commitment to shareholder returns, with $1.8 billion in share repurchases and a 21st consecutive annual dividend increase.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2018, General Dynamics kept $0.09.
- Revenue$36.19B100.0%
- Cost of revenue−$29.48B81.4%
- Gross profit$6.71B18.6%
- Operating costs−$2.32B6.4%
- Operating income$4.39B12.1%
- Interest, other & tax−$1.05B2.9%
- Net income$3.35B9.2%
Where FY2018 revenue went
$36.19B- Cost of revenue: $29.48B, 81% of revenue
- Net income: $3.35B, 9.2% of revenue
- Operating costs: $2.32B, 6.4% of revenue
- Interest, other & tax: $1.05B, 2.9% of revenue
Kept 9.2% as net incomeNet income $3.35B · 9.2%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2018filed February 13, 2019Financial Statements
FY2018 against FY2017
| Line item | FY2018FY2017 | Change |
|---|---|---|
| Revenue | $36.19B$30.97B | +16.9% |
| Cost of Revenue | $29.48B$24.73B | +19.2% |
| Gross Profit | $6.71B$6.24B | +7.6% |
| Operating Expenses | $31.80B$26.74B | +18.9% |
| Operating Income | $4.39B$4.24B | +3.7% |
| Interest Expense | $374.00M$117.00M | +219.7% |
| Net Income | $3.35B$2.91B | +14.9% |
| EPS (Basic) | $11.33$9.73 | +16.4% |
| EPS (Diluted) | $11.18$9.56 | +16.9% |
| Shares Outstanding (Basic) | 295.26M299.17M | −1.3% |
| Shares Outstanding (Diluted) | 299.16M304.64M | −1.8% |
05—Questions
Frequently Asked Questions
What was the primary driver of General Dynamics' revenue growth in 2018?
The primary driver of General Dynamics' revenue growth in 2018 was the acquisition of CSRA Inc. in April 2018, which significantly boosted the Information Technology segment's revenue. Excluding the impact of this acquisition, revenue still grew by 5%, indicating organic growth across other segments as well.
How did the company manage its cash flow and return capital to shareholders?
General Dynamics generated strong cash flow from operations, amounting to $3.1 billion in 2018. The company demonstrated a strong commitment to shareholder returns by repurchasing $1.8 billion of its common stock and paying $1.1 billion in cash dividends, collectively returning over 115% of its free cash flow from operations to shareholders.
What is the significance of the company's backlog, and how did it change?
The company's total backlog, representing the estimated remaining value of work to be performed under firm contracts, increased by 7.4% to $67.9 billion at the end of 2018. This growth signifies a strong pipeline of future business across all segments, particularly in defense contracts, which supports the company's long-term growth expectations.
What impact did the CSRA acquisition have on the company's financial structure?
The CSRA acquisition significantly increased General Dynamics' debt, leading to a higher debt-to-equity ratio of 105.8% in 2018 compared to 34.8% in 2017. This was primarily due to the issuance of $7.5 billion in notes to finance the acquisition.
06—Continue