10-KPeriod: FY2018

GENERAL DYNAMICS CORP Annual Report, Year Ended Dec 31, 2018

Filed February 13, 2019For Securities:GD

Summary

General Dynamics Corporation (GD) reported robust performance in its 2018 fiscal year, highlighted by record revenue of $36.2 billion, 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 billion, 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 billion in stock and increasing dividends, returning over 115% of its free cash flow from operations to shareholders.

Financial Highlights

55 data points
Beta

Revenue

$36.19B

18.6% Gross Margin

Net Income

$3.35B

9.2% Net Margin

EPS (Diluted)

$11.18

Total Assets

$45.89B

Cash & Equivalents

$963.00M

Free Cash Flow

$2.46B

Financial Statements
Beta
Revenue$36.19B
Cost of Revenue$29.48B
Gross Profit$6.71B
Operating Expenses$31.80B
Operating Income$4.39B
Interest Expense$374.00M
Net Income$3.35B
EPS (Basic)$11.33
EPS (Diluted)$11.18
Shares Outstanding (Basic)295.26M
Shares Outstanding (Diluted)299.16M

Key Highlights

  • 1Record revenue of $36.2 billion in 2018, a 16.9% increase driven by the CSRA acquisition and growth across all segments.
  • 2Operating earnings increased by 5.2% to $4.5 billion, with diluted earnings per share from continuing operations reaching a record $11.22.
  • 3Backlog grew by 7.4% to $67.9 billion, providing a strong foundation for future revenue.
  • 4Aerospace segment benefited from increased aircraft services and the acquisition of Hawker Pacific.
  • 5Information Technology segment revenue more than doubled due to the significant CSRA acquisition.
  • 6Defense segments (Combat Systems, Mission Systems, Marine Systems) showed strong order intake and backlog growth, particularly in key programs like naval construction and modernization.
  • 7Strong commitment to shareholder returns, with $1.8 billion in share repurchases and a 21st consecutive annual dividend increase.

Frequently Asked Questions

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.

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.

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.

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.