Microsoft Excel LibreOffice Calc

General Dynamics Corp. (GD)


Analysis of Income Taxes

Advanced level


Income Tax Expense (Benefit)

General Dynamics Corp., income tax expense (benefit), continuing operations

US$ in millions

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12 months ended Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
U.S. federal 587  656  698  841  856 
State 48  31  24  31  31 
International 95  77  71  98  106 
Current 730  764  793  970  993 
U.S. federal (37) 215  316  116  110 
State 14  (3)
International 26  60  46  46  29 
Adjustment for enacted change in U.S. tax law —  119  —  —  — 
Deferred (3) 401  376  167  136 
Provision for income taxes, net 727  1,165  1,169  1,137  1,129 

Based on: 10-K (filing date: 2019-02-13), 10-K (filing date: 2018-02-12), 10-K (filing date: 2017-02-06), 10-K (filing date: 2016-02-08), 10-K (filing date: 2015-02-09).

Item Description The company
Current Amount of current income tax expense (benefit) pertaining to taxable income (loss) from continuing operations. General Dynamics Corp.’s current decreased from 2016 to 2017 and from 2017 to 2018.
Deferred Amount of deferred income tax expense (benefit) pertaining to income (loss) from continuing operations. General Dynamics Corp.’s deferred increased from 2016 to 2017 but then decreased significantly from 2017 to 2018.
Provision for income taxes, net Amount of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations. General Dynamics Corp.’s provision for income taxes, net decreased from 2016 to 2017 and from 2017 to 2018.

Effective Income Tax Rate (EITR)

General Dynamics Corp., effective income tax rate (EITR) reconciliation

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Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Statutory federal income tax rate 21.00% 35.00% 35.00% 35.00% 35.00%
State tax on commercial operations, net of federal benefits 1.10% 0.60% 0.60% 0.60% 0.50%
Impact of international operations 0.60% -4.50% -3.80% -1.40% -2.60%
Domestic production deduction 0.00% -1.50% -1.30% -1.60% -1.90%
Foreign derived intangible income -1.20% 0.00% 0.00% 0.00% 0.00%
Equity-based compensation -1.10% -2.60% -2.00% 0.00% 0.00%
Domestic tax credits -1.10% -0.80% -0.80% -1.10% -0.70%
Contract close-outs -0.50% 0.00% 0.00% -2.90% 0.00%
Other, net -1.00% -0.50% -0.10% -0.90% -0.60%
Effective income tax rate, before adoption impact of enacted change in U.S. tax law 17.80% 25.70% 27.60% 27.70% 29.70%
Adoption impact of enacted change in U.S. tax law 0.00% 2.90% 0.00% 0.00% 0.00%
Effective income tax rate 17.80% 28.60% 27.60% 27.70% 29.70%

Based on: 10-K (filing date: 2019-02-13), 10-K (filing date: 2018-02-12), 10-K (filing date: 2017-02-06), 10-K (filing date: 2016-02-08), 10-K (filing date: 2015-02-09).

Item Description The company
Effective income tax rate, before adoption impact of enacted change in U.S. tax law Percentage of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations. General Dynamics Corp.’s effective income tax rate, before adoption impact of enacted change in U.S. tax law decreased from 2016 to 2017 and from 2017 to 2018.

Components of Deferred Tax Assets and Liabilities

General Dynamics Corp., components of deferred tax assets and liabilities

US$ in millions

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Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Retirement benefits 1,055  935  1,461  1,347  1,403 
Tax loss and credit carryforwards 393  437  480  522  701 
Salaries and wages 160  137  257  275  301 
Workers’ compensation 138  139  235  248  257 
Other 351  335  396  406  363 
Deferred assets 2,097  1,983  2,829  2,798  3,025 
Valuation allowances (336) (402) (406) (425) (494)
Net deferred assets 1,761  1,581  2,423  2,373  2,531 
Intangible assets (1,061) (688) (1,049) (1,013) (973)
Contract accounting methods (530) (500) (532) (261) (227)
Property, plant and equipment (265) (182) (320) (285) (280)
Capital Construction Fund qualified ships (160) (159) (240) (240) (240)
Other (284) (221) (245) (203) (167)
Deferred liabilities (2,300) (1,750) (2,386) (2,002) (1,887)
Net deferred tax asset (liability) (539) (169) 37  371  644 

Based on: 10-K (filing date: 2019-02-13), 10-K (filing date: 2018-02-12), 10-K (filing date: 2017-02-06), 10-K (filing date: 2016-02-08), 10-K (filing date: 2015-02-09).

Item Description The company
Deferred assets Amount before allocation of valuation allowances of deferred tax asset attributable to deductible temporary differences and carryforwards. General Dynamics Corp.’s deferred assets decreased from 2016 to 2017 but then slightly increased from 2017 to 2018.
Net deferred assets Amount after allocation of valuation allowances of deferred tax asset attributable to deductible temporary differences and carryforwards. General Dynamics Corp.’s net deferred assets decreased from 2016 to 2017 but then slightly increased from 2017 to 2018.
Net deferred tax asset (liability) Amount, after allocation of valuation allowances and deferred tax liability, of deferred tax asset attributable to deductible differences and carryforwards, without jurisdictional netting. General Dynamics Corp.’s net deferred tax asset (liability) decreased from 2016 to 2017 and from 2017 to 2018.

Deferred Tax Assets and Liabilities, Classification

General Dynamics Corp., deferred tax assets and liabilities, classification

US$ in millions

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Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Current deferred tax asset (included in other current assets) —  —  16 
Current deferred tax liability —  —  1,258  829  729 
Noncurrent deferred tax asset (included in other assets) 38  75  1,362  1,272  1,439 
Noncurrent deferred tax liability 577  244  72  75  82 

Based on: 10-K (filing date: 2019-02-13), 10-K (filing date: 2018-02-12), 10-K (filing date: 2017-02-06), 10-K (filing date: 2016-02-08), 10-K (filing date: 2015-02-09).

Item Description The company
Noncurrent deferred tax asset (included in other assets) Amount, after allocation of valuation allowances and deferred tax liability, of deferred tax asset attributable to deductible differences and carryforwards, with jurisdictional netting and classified as noncurrent. General Dynamics Corp.’s noncurrent deferred tax asset (included in other assets) decreased from 2016 to 2017 and from 2017 to 2018.
Noncurrent deferred tax liability Amount, after deferred tax asset, of deferred tax liability attributable to taxable differences, with jurisdictional netting and classified as noncurrent. General Dynamics Corp.’s noncurrent deferred tax liability increased from 2016 to 2017 and from 2017 to 2018.

Adjustments to Financial Statements: Removal of Deferred Taxes

General Dynamics Corp., adjustments to financial statements

US$ in millions

Microsoft Excel LibreOffice Calc
Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Adjustment to Current Assets
Current assets (as reported) 18,189  18,328  15,447  14,571  17,407 
Less: Current deferred tax assets, net —  —  16 
Current assets (adjusted) 18,189  18,328  15,442  14,568  17,391 
Adjustment to Total Assets
Total assets (as reported) 45,408  35,046  32,872  31,997  35,355 
Less: Current deferred tax assets, net —  —  16 
Less: Noncurrent deferred tax assets, net 38  75  1,362  1,272  1,439 
Total assets (adjusted) 45,370  34,971  31,505  30,722  33,900 
Adjustment to Current Liabilities
Current liabilities (as reported) 14,739  13,099  12,846  12,445  13,751 
Less: Current deferred tax liabilities, net —  —  1,258  829  729 
Current liabilities (adjusted) 14,739  13,099  11,588  11,616  13,022 
Adjustment to Total Liabilities
Total liabilities (as reported) 33,676  23,611  21,896  21,259  23,526 
Less: Current deferred tax liabilities, net —  —  1,258  829  729 
Less: Noncurrent deferred tax liabilities, net 577  244  72  75  82 
Total liabilities (adjusted) 33,099  23,367  20,566  20,355  22,715 
Adjustment to Shareholders’ Equity
Shareholders’ equity (as reported) 11,732  11,435  10,976  10,738  11,829 
Less: Net deferred tax assets (liabilities) (539) (169) 37  371  644 
Shareholders’ equity (adjusted) 12,271  11,604  10,939  10,367  11,185 
Adjustment to Net Earnings
Net earnings (as reported) 3,345  2,912  2,955  2,965  2,533 
Add: Deferred income tax expense (benefit) (3) 401  376  167  136 
Net earnings (adjusted) 3,342  3,313  3,331  3,132  2,669 

Based on: 10-K (filing date: 2019-02-13), 10-K (filing date: 2018-02-12), 10-K (filing date: 2017-02-06), 10-K (filing date: 2016-02-08), 10-K (filing date: 2015-02-09).


General Dynamics Corp., Financial Data: Reported vs. Adjusted


Adjusted Financial Ratios: Removal of Deferred Taxes (Summary)

General Dynamics Corp., adjusted financial ratios

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Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Current Ratio
Reported current ratio 1.23 1.40 1.20 1.17 1.27
Adjusted current ratio 1.23 1.40 1.33 1.25 1.34
Net Profit Margin
Reported net profit margin 9.24% 9.40% 9.42% 9.42% 8.21%
Adjusted net profit margin 9.23% 10.70% 10.62% 9.95% 8.65%
Total Asset Turnover
Reported total asset turnover 0.80 0.88 0.95 0.98 0.87
Adjusted total asset turnover 0.80 0.89 1.00 1.02 0.91
Financial Leverage
Reported financial leverage 3.87 3.06 2.99 2.98 2.99
Adjusted financial leverage 3.70 3.01 2.88 2.96 3.03
Return on Equity (ROE)
Reported ROE 28.51% 25.47% 26.92% 27.61% 21.41%
Adjusted ROE 27.23% 28.55% 30.45% 30.21% 23.86%
Return on Assets (ROA)
Reported ROA 7.37% 8.31% 8.99% 9.27% 7.16%
Adjusted ROA 7.37% 9.47% 10.57% 10.19% 7.87%

Based on: 10-K (filing date: 2019-02-13), 10-K (filing date: 2018-02-12), 10-K (filing date: 2017-02-06), 10-K (filing date: 2016-02-08), 10-K (filing date: 2015-02-09).

Financial ratio Description The company
Adjusted current ratio A liquidity ratio calculated as adjusted current assets divided by adjusted current liabilities. General Dynamics Corp.’s adjusted current ratio improved from 2016 to 2017 but then deteriorated significantly from 2017 to 2018.
Adjusted net profit margin An indicator of profitability, calculated as adjusted net income divided by total revenue. General Dynamics Corp.’s adjusted net profit margin ratio improved from 2016 to 2017 but then deteriorated significantly from 2017 to 2018.
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. General Dynamics Corp.’s adjusted total asset turnover ratio deteriorated from 2016 to 2017 and from 2017 to 2018.
Adjusted financial leverage A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity.
Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.
General Dynamics Corp.’s adjusted financial leverage ratio increased from 2016 to 2017 and from 2017 to 2018.
Adjusted ROE A profitability ratio calculated as adjusted net income divided by adjusted shareholders’ equity. General Dynamics Corp.’s adjusted ROE deteriorated from 2016 to 2017 and from 2017 to 2018.
Adjusted ROA A profitability ratio calculated as adjusted net income divided by adjusted total assets. General Dynamics Corp.’s adjusted ROA deteriorated from 2016 to 2017 and from 2017 to 2018.

General Dynamics Corp., Financial Ratios: Reported vs. Adjusted


Adjusted Current Ratio

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Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
As Reported
Selected Financial Data (US$ in millions)
Current assets 18,189  18,328  15,447  14,571  17,407 
Current liabilities 14,739  13,099  12,846  12,445  13,751 
Liquidity Ratio
Current ratio1 1.23 1.40 1.20 1.17 1.27
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted current assets 18,189  18,328  15,442  14,568  17,391 
Adjusted current liabilities 14,739  13,099  11,588  11,616  13,022 
Liquidity Ratio
Adjusted current ratio2 1.23 1.40 1.33 1.25 1.34

Based on: 10-K (filing date: 2019-02-13), 10-K (filing date: 2018-02-12), 10-K (filing date: 2017-02-06), 10-K (filing date: 2016-02-08), 10-K (filing date: 2015-02-09).

2018 Calculations

1 Current ratio = Current assets ÷ Current liabilities
= 18,189 ÷ 14,739 = 1.23

2 Adjusted current ratio = Adjusted current assets ÷ Adjusted current liabilities
= 18,189 ÷ 14,739 = 1.23

Liquidity ratio Description The company
Adjusted current ratio A liquidity ratio calculated as adjusted current assets divided by adjusted current liabilities. General Dynamics Corp.’s adjusted current ratio improved from 2016 to 2017 but then deteriorated significantly from 2017 to 2018.

Adjusted Net Profit Margin

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Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
As Reported
Selected Financial Data (US$ in millions)
Net earnings 3,345  2,912  2,955  2,965  2,533 
Revenue 36,193  30,973  31,353  31,469  30,852 
Profitability Ratio
Net profit margin1 9.24% 9.40% 9.42% 9.42% 8.21%
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted net earnings 3,342  3,313  3,331  3,132  2,669 
Revenue 36,193  30,973  31,353  31,469  30,852 
Profitability Ratio
Adjusted net profit margin2 9.23% 10.70% 10.62% 9.95% 8.65%

Based on: 10-K (filing date: 2019-02-13), 10-K (filing date: 2018-02-12), 10-K (filing date: 2017-02-06), 10-K (filing date: 2016-02-08), 10-K (filing date: 2015-02-09).

2018 Calculations

1 Net profit margin = 100 × Net earnings ÷ Revenue
= 100 × 3,345 ÷ 36,193 = 9.24%

2 Adjusted net profit margin = 100 × Adjusted net earnings ÷ Revenue
= 100 × 3,342 ÷ 36,193 = 9.23%

Profitability ratio Description The company
Adjusted net profit margin An indicator of profitability, calculated as adjusted net income divided by total revenue. General Dynamics Corp.’s adjusted net profit margin ratio improved from 2016 to 2017 but then deteriorated significantly from 2017 to 2018.

Adjusted Total Asset Turnover

Microsoft Excel LibreOffice Calc
Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
As Reported
Selected Financial Data (US$ in millions)
Revenue 36,193  30,973  31,353  31,469  30,852 
Total assets 45,408  35,046  32,872  31,997  35,355 
Activity Ratio
Total asset turnover1 0.80 0.88 0.95 0.98 0.87
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Revenue 36,193  30,973  31,353  31,469  30,852 
Adjusted total assets 45,370  34,971  31,505  30,722  33,900 
Activity Ratio
Adjusted total asset turnover2 0.80 0.89 1.00 1.02 0.91

Based on: 10-K (filing date: 2019-02-13), 10-K (filing date: 2018-02-12), 10-K (filing date: 2017-02-06), 10-K (filing date: 2016-02-08), 10-K (filing date: 2015-02-09).

2018 Calculations

1 Total asset turnover = Revenue ÷ Total assets
= 36,193 ÷ 45,408 = 0.80

2 Adjusted total asset turnover = Revenue ÷ Adjusted total assets
= 36,193 ÷ 45,370 = 0.80

Activity ratio Description The company
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. General Dynamics Corp.’s adjusted total asset turnover ratio deteriorated from 2016 to 2017 and from 2017 to 2018.

Adjusted Financial Leverage

Microsoft Excel LibreOffice Calc
Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
As Reported
Selected Financial Data (US$ in millions)
Total assets 45,408  35,046  32,872  31,997  35,355 
Shareholders’ equity 11,732  11,435  10,976  10,738  11,829 
Solvency Ratio
Financial leverage1 3.87 3.06 2.99 2.98 2.99
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted total assets 45,370  34,971  31,505  30,722  33,900 
Adjusted shareholders’ equity 12,271  11,604  10,939  10,367  11,185 
Solvency Ratio
Adjusted financial leverage2 3.70 3.01 2.88 2.96 3.03

Based on: 10-K (filing date: 2019-02-13), 10-K (filing date: 2018-02-12), 10-K (filing date: 2017-02-06), 10-K (filing date: 2016-02-08), 10-K (filing date: 2015-02-09).

2018 Calculations

1 Financial leverage = Total assets ÷ Shareholders’ equity
= 45,408 ÷ 11,732 = 3.87

2 Adjusted financial leverage = Adjusted total assets ÷ Adjusted shareholders’ equity
= 45,370 ÷ 12,271 = 3.70

Solvency ratio Description The company
Adjusted financial leverage A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity.
Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.
General Dynamics Corp.’s adjusted financial leverage ratio increased from 2016 to 2017 and from 2017 to 2018.

Adjusted Return on Equity (ROE)

Microsoft Excel LibreOffice Calc
Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
As Reported
Selected Financial Data (US$ in millions)
Net earnings 3,345  2,912  2,955  2,965  2,533 
Shareholders’ equity 11,732  11,435  10,976  10,738  11,829 
Profitability Ratio
ROE1 28.51% 25.47% 26.92% 27.61% 21.41%
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted net earnings 3,342  3,313  3,331  3,132  2,669 
Adjusted shareholders’ equity 12,271  11,604  10,939  10,367  11,185 
Profitability Ratio
Adjusted ROE2 27.23% 28.55% 30.45% 30.21% 23.86%

Based on: 10-K (filing date: 2019-02-13), 10-K (filing date: 2018-02-12), 10-K (filing date: 2017-02-06), 10-K (filing date: 2016-02-08), 10-K (filing date: 2015-02-09).

2018 Calculations

1 ROE = 100 × Net earnings ÷ Shareholders’ equity
= 100 × 3,345 ÷ 11,732 = 28.51%

2 Adjusted ROE = 100 × Adjusted net earnings ÷ Adjusted shareholders’ equity
= 100 × 3,342 ÷ 12,271 = 27.23%

Profitability ratio Description The company
Adjusted ROE A profitability ratio calculated as adjusted net income divided by adjusted shareholders’ equity. General Dynamics Corp.’s adjusted ROE deteriorated from 2016 to 2017 and from 2017 to 2018.

Adjusted Return on Assets (ROA)

Microsoft Excel LibreOffice Calc
Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
As Reported
Selected Financial Data (US$ in millions)
Net earnings 3,345  2,912  2,955  2,965  2,533 
Total assets 45,408  35,046  32,872  31,997  35,355 
Profitability Ratio
ROA1 7.37% 8.31% 8.99% 9.27% 7.16%
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted net earnings 3,342  3,313  3,331  3,132  2,669 
Adjusted total assets 45,370  34,971  31,505  30,722  33,900 
Profitability Ratio
Adjusted ROA2 7.37% 9.47% 10.57% 10.19% 7.87%

Based on: 10-K (filing date: 2019-02-13), 10-K (filing date: 2018-02-12), 10-K (filing date: 2017-02-06), 10-K (filing date: 2016-02-08), 10-K (filing date: 2015-02-09).

2018 Calculations

1 ROA = 100 × Net earnings ÷ Total assets
= 100 × 3,345 ÷ 45,408 = 7.37%

2 Adjusted ROA = 100 × Adjusted net earnings ÷ Adjusted total assets
= 100 × 3,342 ÷ 45,370 = 7.37%

Profitability ratio Description The company
Adjusted ROA A profitability ratio calculated as adjusted net income divided by adjusted total assets. General Dynamics Corp.’s adjusted ROA deteriorated from 2016 to 2017 and from 2017 to 2018.