01—Abstract
Summary
Summary of the 10-K filed February 10, 2020. Cited figures are marked; the original filing is the authoritative source.
General Dynamics Corporation (GD) reported strong revenue growth in 2019, reaching $39.4 billiona, an increase of 8.7% over the previous year.
This growth was driven by higher deliveries in the Aerospace segment, particularly the new Gulfstream G500 and G600 aircraft, and significant contract wins in the defense segments, including the record-setting Virginia-class submarine Block V contract. The company's operating earnings increased by 4.3% to $4.6 billionb, and diluted earnings per share grew by 6.8% to $11.98. Despite a slight decrease in operating margin from 12.3% to 11.8%, largely due to the transition to newer, lower-margin programs, the company ended the year with a record backlog of $86.9 billion, signaling robust future demand across its diverse portfolio.
Key financial highlights include a substantial increase in the Marine Systems segment's backlog due to the Virginia-class submarine contract and strong order activity for Gulfstream aircraft, particularly the new G700. The company continued to return value to shareholders through dividend increases and share repurchases. While facing some headwinds such as the initial lower margins on new programs and increased interest expenses related to the CSRA acquisition, GD demonstrated operational resilience and strategic positioning for continued growth in both its defense and aerospace businesses.
02—Key points
Key Highlights
- Revenue increased by 8.7% to $39.4 billion in 2019, driven by Aerospace segment growth and strong defense contract awards.
- Operating earnings rose by 4.3% to $4.6 billion, with diluted EPS reaching $11.98, up 6.8%.
- Total backlog reached a record $86.9 billion, a 28.1% increase from 2018, reflecting strong future demand, particularly from the Virginia-class submarine program (Block V) and Gulfstream aircraft orders.
- Aerospace segment revenue grew 15.9% to $9.8 billion, aided by new aircraft deliveries (G500/G600) and a 57% increase in net orders for Gulfstream aircraft.
- Marine Systems segment revenue increased by 8.0% to $9.2 billion, largely due to higher volume on submarine and destroyer programs.
- Operating margin slightly decreased to 11.8% from 12.3% in 2018, primarily attributed to the lower initial margins on new product programs.
- The company repurchased 1.1 million shares in 2019 and increased its quarterly dividend for the 22nd consecutive year, demonstrating a commitment to shareholder returns.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2019, General Dynamics kept $0.09.
- Revenue$39.35B100.0%
- Cost of revenue−$32.29B82.1%
- Gross profit$7.06B17.9%
- Operating costs−$2.49B6.3%
- Operating income$4.57B11.6%
- Interest, other & tax−$1.09B2.8%
- Net income$3.48B8.9%
Where FY2019 revenue went
$39.35B- Cost of revenue: $32.29B, 82% of revenue
- Net income: $3.48B, 8.9% of revenue
- Operating costs: $2.49B, 6.3% of revenue
- Interest, other & tax: $1.09B, 2.8% of revenue
Kept 8.9% as net incomeNet income $3.48B · 8.9%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2019filed February 10, 2020Financial Statements
FY2019 against FY2018
| Line item | FY2019FY2018 | Change |
|---|---|---|
| Revenue | $39.35B$36.19B | +8.7% |
| Cost of Revenue | $32.29B$29.48B | +9.5% |
| Gross Profit | $7.06B$6.71B | +5.1% |
| Operating Expenses | $34.78B$31.80B | +9.4% |
| Operating Income | $4.57B$4.39B | +4.0% |
| Interest Expense | $472.00M$374.00M | +26.2% |
| Net Income | $3.48B$3.35B | +4.2% |
| EPS (Basic) | $12.09$11.33 | +6.7% |
| EPS (Diluted) | $11.98$11.18 | +7.2% |
| Shares Outstanding (Basic) | 288.29M295.26M | −2.4% |
| Shares Outstanding (Diluted) | 290.84M299.16M | −2.8% |
05—Questions
Frequently Asked Questions
What were the main drivers of General Dynamics' revenue growth in 2019?
General Dynamics' revenue grew by 8.7% to $39.4 billion in 2019, primarily driven by increased deliveries of new Gulfstream aircraft (G500 and G600) in the Aerospace segment, and significant contract awards in the defense segments, most notably the large Virginia-class submarine Block V contract. The Combat Systems segment also saw revenue increases due to higher volumes in military vehicle production and weapons systems.
How did the acquisition of CSRA impact the company's financial performance?
The acquisition of CSRA in April 2018 significantly boosted the Information Technology segment's revenue, contributing an additional quarter of volume in 2019. However, it also led to increased interest expenses due to the financing used for the acquisition. While the acquisition strengthened the IT segment, the overall operating margin saw a slight decrease, partly due to the integration and the transition to new, lower-margin programs across the company.
What is the significance of the record backlog of $86.9 billion?
The record backlog of $86.9 billion at the end of 2019, representing a 28.1% increase from the prior year, indicates strong future demand for General Dynamics' products and services. This backlog, particularly the substantial amount from the Marine Systems segment's Virginia-class submarine program and robust orders for Gulfstream aircraft, provides visibility into sustained revenue generation and supports the company's long-term growth expectations.
What factors contributed to the slight decline in the company's operating margin in 2019?
The operating margin decreased slightly from 12.3% in 2018 to 11.8% in 2019. This was primarily attributed to the company's strategic transition from mature programs and products to newer ones, such as the Gulfstream G500 and G600 aircraft and certain defense programs, which typically have lower initial operating margins. These margins are expected to improve as production volumes increase and manufacturing efficiencies are realized.
06—Continue