General Dynamics Corp. (NYSE:GD)

The data reveals significant changes in the composition and carrying amounts of intangible assets and goodwill over the five-year period.

Contract and Program Intangible Assets

These assets remained relatively stable from 2015 to 2017, with values around 1.6 billion USD. However, a sharp increase is observed in 2018, nearly doubling to approximately 3.77 billion USD by 2019, indicating substantial additions or revaluations during this period.

Trade Names and Trademarks

This category showed minor fluctuations across the five years, with values hovering in the mid-400 million USD range. The trend appears stable, with a slight upward movement toward 474 million USD in 2019.

Technology and Software

Values increased gradually from 119 million USD in 2015 to a peak of 165 million USD in 2018, before a marginal decline to 164 million USD in 2019. This suggests moderate investment in technology-related intangible assets over time.

Other Intangible Assets

These assets remained almost constant, around 154-159 million USD, indicating little change in this category throughout the period.

Intangible Assets, Gross Carrying Amount

A steady position was maintained from 2015 to 2017 around 2.35 billion USD. In 2018, this amount nearly doubled to about 4.56 billion USD, remaining stable in 2019. This rise aligns with the increase in contract and program intangible assets, suggesting a considerable capitalization event.

Accumulated Amortization

The accumulated amortization showed a progressive increase in absolute value, moving from -1.59 billion USD in 2015 to -2.26 billion USD in 2019. This reflects consistent amortization expenses being recorded against intangible assets.

Intangible Assets, Net Carrying Amount

A decline occurred from 763 million USD in 2015 down to 678 million USD in 2016, followed by a slight increase to 702 million USD in 2017. A dramatic jump is noted in 2018 to 2.59 billion USD, remaining elevated at 2.32 billion USD in 2019. This pattern corresponds with the gross carrying amount changes but also suggests an adjustment in amortization practices or asset valuation.

Goodwill

Goodwill remained mostly stable between 11.4 billion and 11.9 billion USD from 2015 to 2017 before experiencing a substantial increase in 2018 to almost 19.6 billion USD, continuing marginally higher to 19.7 billion USD in 2019. This marks a significant acquisition or reassessment of goodwill during that period.

Intangible Assets and Goodwill Combined

The combined total mirrors the previous trends, holding steady around 12.2 billion USD until 2017, then dramatically jumping to approximately 22.2 billion USD in 2018, followed by a slight decline to 22 billion USD in 2019. The magnitude of this increase underscores a major investment or revaluation event primarily impacting goodwill and contract-game intangible assets.

Total Assets

The reported total assets show a consistent upward trend from 31,997 million US dollars in 2015 to 48,841 million US dollars in 2019, indicating overall growth in asset base. The adjusted total assets, which appear to exclude goodwill, also increase steadily from 20,554 million to 29,164 million US dollars over the same period. The gap between reported and adjusted total assets notably widens each year, suggesting an increasing proportion of goodwill or intangible assets on the balance sheet.

Shareholders’ Equity

The reported shareholders' equity rises gradually from 10,738 million in 2015 to 13,577 million US dollars in 2019, reflecting growth in the company’s net worth based on the reported figures. Conversely, the adjusted shareholders' equity figures present a starkly different trend, remaining negative throughout the period and worsening significantly from -705 million in 2015 to a low of -7,862 million in 2018 before improving slightly to -6,100 million in 2019. This large negative adjusted equity suggests substantial write-downs or adjustments related to goodwill or intangible assets, severely impacting the underlying equity from a goodwill-adjusted perspective.

Insights

The divergence between reported and adjusted figures highlights the considerable impact goodwill has on the company's financial structure. While the reported figures indicate stable asset growth and increasing equity, the adjusted figures reveal that once goodwill is removed, the company has a diminished asset base and negative equity position, suggesting potential concerns about the quality or recoverability of goodwill. This pattern calls for careful consideration of the goodwill valuation and its implications for financial health and risk assessment.

The analysis of the financial ratios over the period from 2015 to 2019 reveals several key trends regarding asset efficiency, leverage, and profitability.

Total Asset Turnover

The reported total asset turnover ratio consistently declined from 0.98 in 2015 to 0.81 in 2019, indicating a gradual reduction in the efficiency with which the company used its assets to generate revenue. In contrast, the adjusted total asset turnover, which likely accounts for goodwill adjustments, also showed a downward trend but remained significantly higher than the reported figures. It decreased from 1.53 in 2015 to 1.35 in 2019. This suggests that excluding goodwill, asset utilization was more robust, though still experiencing a gradual decline.

Financial Leverage

The reported financial leverage ratio increased moderately from 2.98 in 2015 to a peak of 3.87 in 2018, followed by a decrease to 3.6 in 2019. This indicates a period of rising reliance on debt or other liabilities relative to equity until 2018, after which leverage was slightly reduced. There is no data available for adjusted financial leverage ratios to compare the impact of goodwill on leverage metrics.

Return on Equity (ROE)

The reported ROE showed some variability but generally remained robust, fluctuating between 25.47% and 28.51% during the period. It peaked in 2018 at 28.51%, despite the high financial leverage seen that year, then declined to 25.66% in 2019. Absence of adjusted ROE data limits direct insight into the effect of goodwill adjustments on equity returns.

Return on Assets (ROA)

The reported ROA decreased steadily from 9.27% in 2015 to 7.13% in 2019, signaling declining asset profitability. Adjusted ROA followed a similar downward trajectory but remained substantially higher, starting at 14.43% in 2015 and ending at 11.95% in 2019. The adjusted figures emphasize the positive impact on asset returns when goodwill is excluded, yet also reflect a persistent decline in asset efficiency and profitability over time.

Overall, the company experienced a gradual decline in asset utilization and profitability metrics, both on a reported and adjusted basis. Financial leverage increased notably through 2018 before a slight reduction in the final year. The persistence of higher adjusted total asset turnover and ROA compared to reported figures highlights the material effect goodwill has on financial ratio analysis. These patterns suggest operational pressures impacting asset efficiency and returns amidst varying leverage levels.

Total Assets

Reported total assets increased steadily from 31,997 million US dollars in 2015 to 48,841 million US dollars in 2019, indicating significant growth over the five-year period. Adjusted total assets, which exclude goodwill, also rose consistently from 20,554 million US dollars to 29,164 million US dollars, reflecting asset growth independent of goodwill adjustments.

Total Asset Turnover

The reported total asset turnover ratio experienced a declining trend, dropping from 0.98 in 2015 to 0.81 in 2019. This suggests a decreasing efficiency in generating sales from reported assets over the timeframe. In contrast, the adjusted total asset turnover, which considers assets excluding goodwill, showed a slight decline from 1.53 in 2015 to 1.35 in 2019 with minor fluctuations, indicating a reduction in turnover efficiency but at a higher and more stable level compared to the reported ratio.

Overall Insights

The data reveal a continuous expansion in asset base both reported and adjusted for goodwill. Despite this growth, the ability to generate revenue from these assets has decreased when considering the reported figures. However, when adjusted for goodwill, the turnover remains higher and shows less severe decline, implying that the underlying operational assets retain relatively better efficiency. This divergence between reported and adjusted figures highlights the impact of goodwill on total asset measures and efficiency calculations.

The financial data over the five-year period exhibits pronounced trends in both reported and adjusted figures, highlighting significant changes in asset values, shareholders’ equity, and leverage ratios.

Total Assets

Reported total assets show a consistent upward trajectory, increasing from US$31,997 million in 2015 to US$48,841 million by the end of 2019. This represents a growth pace accelerating notably between 2017 and 2018, where assets rose substantially by approximately US$10.4 billion. Adjusted total assets, which presumably exclude goodwill or other adjustments, also demonstrate steady growth but at a lower scale, rising from US$20,554 million to US$29,164 million over the same period. The divergence between reported and adjusted asset values suggests significant goodwill or other intangible assets are included in the reported figures and have grown considerably.

Shareholders' Equity

Reported shareholders’ equity increases moderately over the period, from US$10,738 million in 2015 to US$13,577 million in 2019. The growth is steady but less pronounced compared to total assets, indicating that equity expansion did not keep pace with asset growth. In stark contrast, adjusted shareholders’ equity is negative throughout the available years, starting at -US$705 million in 2015 and deteriorating sharply to -US$7,862 million in 2018 before slightly improving to -US$6,100 million in 2019. The negative adjusted equity could point to substantial write-downs or eliminations of intangible assets and goodwill, indicating potential impairment or accounting adjustments that heavily impact the net asset value from an adjusted perspective.

Financial Leverage

The reported financial leverage ratio remains relatively stable from 2015 through 2017, hovering around 3.0. However, it rises markedly in 2018 to 3.87, reflecting an increase in asset relative to equity, before decreasing somewhat to 3.6 in 2019. This trend suggests the company increased its use of debt or other liabilities relative to equity during 2018, possibly linked to greater asset acquisitions or changes in capital structure. There are no provided adjusted financial leverage ratios, preventing further analysis from the adjusted perspective.

Overall, the company’s reported data depict growth in asset base and a moderate increase in equity, accompanied by an increase in leverage in the later years. Meanwhile, the adjusted data reveal challenges, such as negative equity values, likely due to significant intangible asset adjustments. This discrepancy between reported and adjusted figures highlights the importance of considering asset quality and accounting adjustments in assessing the company’s financial health.

The data presents a progression of both reported and goodwill-adjusted financial metrics over a five-year period ending December 31, 2019. Several trends are notable from the figures provided.

Reported Shareholders’ Equity

The reported shareholders’ equity shows a consistent upward trajectory from 10,738 million US dollars in 2015 to 13,577 million US dollars in 2019. This represents an overall increase of approximately 26.4% over the five-year span. The growth appears steady without any abrupt changes, indicating a stable accumulation of equity during this period.

Adjusted Shareholders’ Equity

The adjusted shareholders’ equity figures, which likely reflect the removal or revaluation of goodwill or other intangible assets, present a markedly different and more volatile picture. These values are negative throughout the period, starting at -705 million US dollars in 2015, declining to -469 million in 2016 and -479 million in 2017, but then sharply deteriorating to -7,862 million in 2018 before improving slightly to -6,100 million in 2019. This substantial negative adjustment in 2018 suggests significant goodwill impairment or other adjustments that severely reduced the net equity when goodwill is excluded.

Reported Return on Equity (ROE)

The reported ROE shows a generally high and relatively stable level, fluctuating within a narrow range between 25.47% and 28.51%. It starts at 27.61% in 2015, dips slightly to 25.47% in 2017, peaks at 28.51% in 2018, and then decreases to 25.66% in 2019. This indicates that the company maintained a strong ability to generate profits from its reported shareholders’ equity throughout the period.

Adjusted Return on Equity (ROE)

No data is available for the adjusted ROE, precluding any analysis of profitability when adjusted shareholders’ equity is considered.

Overall, the reported figures suggest solid growth in equity and consistent profitability. However, the presence of significant negative adjustments to equity after goodwill adjustments indicates underlying risks or impairments that are not reflected in the reported metrics. This disparity highlights the importance of examining adjusted financial measures to gain a comprehensive understanding of the company’s financial health.

Total Assets

The reported total assets displayed a consistent upward trajectory from 31,997 million US dollars in 2015 to 48,841 million US dollars in 2019, representing a substantial increase over the five-year period. Adjusted total assets, which exclude goodwill, also exhibited a steady growth from 20,554 million US dollars in 2015 to 29,164 million US dollars in 2019, reflecting an increment albeit at a somewhat lower level compared to the reported figures.

Return on Assets (ROA)

The reported return on assets showed a declining trend, decreasing from 9.27% in 2015 to 7.13% in 2019. This indicates a gradual reduction in the company's efficiency in generating profit from its total assets over the years. In contrast, the adjusted ROA, which removes the impact of goodwill, also declined but remained significantly higher than the reported ROA, starting at 14.43% in 2015 and ending at 11.95% in 2019. This suggests that the core assets excluding goodwill were more productive, though their profitability also contracted during the period.

Comparative Insights

The difference between reported and adjusted total assets indicates a substantial portion of assets attributable to goodwill, which increased over time. Additionally, the gap between reported and adjusted ROA suggests that goodwill negatively impacted overall asset profitability metrics. Despite asset growth, the declining trend in both reported and adjusted ROA points to diminishing returns on asset investment, potentially signaling operational challenges or increased asset bases not fully matched by profit growth.