
AeroTech Corporation - Illustrative Financial Statements
For the Years Ended December 31, 2019, 2018, and 2017
Consolidated Statements of Earnings
(In millions, except per share data)
Description | 2019 | 2018 | 2017 |
Net Sales | $62,500 | $56,800 | $52,300 |
Cost of Sales | 53,750 | 49,200 | 45,900 |
Gross Profit | 8,750 | 7,600 | 6,400 |
Operating Expenses: | |||
Selling, General, and Administrative | 1,200 | 1,100 | 1,050 |
Research and Development | 1,300 | 1,200 | 1,100 |
Total Operating Expenses | 2,500 | 2,300 | 2,150 |
Operating Profit | 6,250 | 5,300 | 4,250 |
Other Income (Expense), net | 150 | 120 | 100 |
Earnings Before Income Taxes | 6,400 | 5,420 | 4,350 |
Income Tax Expense | 1,280 | 1,084 | 1,305 |
Net Earnings | $5,120 | $4,336 | $3,045 |
Earnings Per Common Share: | |||
Basic | $18.29 | $15.37 | $10.73 |
Diluted | $18.15 | $15.25 | $10.62 |
Weighted Average Shares Outstanding: | |||
Basic | 280 | 282 | 284 |
Diluted | 282 | 284 | 286 |
Consolidated Statements of Comprehensive Income
(In millions)
Description | 2019 | 2018 | 2017 |
Net Earnings | $5,120 | $4,336 | $3,045 |
Other Comprehensive Income (Loss), net of tax: | |||
Pension Adjustments | (300) | (250) | (200) |
Unrealized Gains (Losses) on Securities | 50 | (30) | 20 |
Other Comprehensive Income (Loss) | (250) | (280) | (180) |
Comprehensive Income | $4,870 | $4,056 | $2,865 |
Consolidated Balance Sheets
(In millions)
Description | December 31, 2019 | December 31, 2018 |
Assets | ||
Cash and Cash Equivalents | $1,800 | $900 |
Receivables, net | 2,500 | 2,200 |
Inventories, net | 3,200 | 2,900 |
Other Current Assets | 600 | 550 |
Total Current Assets | 8,100 | 6,550 |
Property, Plant, and Equipment, net | 6,500 | 6,200 |
Goodwill | 10,200 | 10,200 |
Intangible Assets, net | 3,000 | 3,200 |
Other Noncurrent Assets | 20,700 | 19,800 |
Total Assets | $48,500 | $45,950 |
Liabilities and Equity | ||
Accounts Payable | 1,900 | 1,700 |
Customer Advances and Billings | 6,800 | 6,500 |
Other Current Liabilities | 2,300 | 2,100 |
Total Current Liabilities | 11,000 | 10,300 |
Long-Term Debt, net | 12,000 | 13,000 |
Accrued Pension Liabilities | 13,500 | 13,200 |
Other Noncurrent Liabilities | 7,300 | 7,000 |
Total Liabilities | 43,800 | 43,500 |
Stockholders’ Equity: | ||
Common Stock, $1 par value | 280 | 282 |
Additional Paid-In Capital | 0 | 0 |
Retained Earnings | 18,420 | 15,168 |
Accumulated Other Comprehensive Loss | (14,000) | (13,000) |
Total Equity | 4,700 | 2,450 |
Total Liabilities and Equity | $48,500 | $45,950 |
Consolidated Statements of Cash Flows
(In millions)
Description | 2019 | 2018 | 2017 |
Operating Activities: | |||
Net Earnings | $5,120 | $4,336 | $3,045 |
Adjustments: | |||
Depreciation and Amortization | 1,100 | 1,050 | 1,000 |
Changes in Working Capital | (400) | (1,200) | 500 |
Other, net | 580 | 514 | 455 |
Net Cash Provided by Operating Activities | 6,400 | 4,700 | 5,000 |
Investing Activities: | |||
Capital Expenditures | (1,600) | (1,500) | (1,400) |
Other, net | (100) | (50) | (75) |
Net Cash Used in Investing Activities | (1,700) | (1,550) | (1,475) |
Financing Activities: | |||
Dividends Paid | (2,800) | (2,500) | (2,200) |
Repurchases of Common Stock | (1,000) | (1,200) | (1,500) |
Repayment of Long-Term Debt | (1,000) | (500) | (300) |
Other, net | 0 | (50) | (25) |
Net Cash Used in Financing Activities | (4,800) | (4,250) | (4,025) |
Net Change in Cash and Cash Equivalents | 900 | (1,100) | (500) |
Cash and Cash Equivalents, Beginning | 900 | 2,000 | 2,500 |
Cash and Cash Equivalents, Ending | $1,800 | $900 | $2,000 |
Consolidated Statements of Equity
(In millions)
Description | Common Stock | Additional Paid-In Capital | Retained Earnings | Accumulated Other Comprehensive Loss | Total Equity |
Balance at December 31, 2016 | 286 | 0 | 13,287 | (12,520) | 1,053 |
Net Earnings | - | - | 3,045 | - | 3,045 |
Other Comprehensive Loss | - | - | - | (180) | (180) |
Dividends Declared | - | - | (2,200) | - | (2,200) |
Stock Repurchases | (2) | - | (1,498) | - | (1,500) |
Balance at December 31, 2017 | 284 | 0 | 12,634 | (12,700) | 118 |
Net Earnings | - | - | 4,336 | - | 4,336 |
Other Comprehensive Loss | - | - | - | (280) | (280) |
Dividends Declared | - | - | (2,500) | - | (2,500) |
Stock Repurchases | (2) | - | (1,198) | - | (1,200) |
Balance at December 31, 2018 | 282 | 0 | 15,168 | (13,000) | 2,450 |
Net Earnings | - | - | 5,120 | - | 5,120 |
Other Comprehensive Loss | - | - | - | (250) | (250) |
Dividends Declared | - | - | (2,800) | - | (2,800) |
Stock Repurchases | (2) | - | (998) | - | (1,000) |
Balance at December 31, 2019 | 280 | 0 | 18,420 | (14,000) | 4,700 |
Walkthrough of What’s Happening
1. Consolidated Statements of Earnings
Purpose: This statement shows AeroTech’s profitability over three years.
Net Sales: Grew from $52,300M in 2017 to $62,500M in 2019, indicating strong revenue growth (similar to Lockheed Martin’s trend).
Cost of Sales: Represents the direct costs of producing goods/services (e.g., labor, materials). It’s a large portion of sales, leaving a gross profit of $8,750M in 2019.
Operating Expenses: Includes SG&A (overhead) and R&D (innovation investment), totaling $2,500M in 2019. These are subtracted from gross profit to get operating profit ($6,250M).
Other Income: Small positive amounts (e.g., $150M in 2019) from non-core activities boost earnings before taxes.
Income Tax Expense: At 20% of pre-tax earnings (simplified), it reduces net earnings to $5,120M in 2019.
Earnings Per Share (EPS): Calculated as Net Earnings ÷ Shares Outstanding. Diluted EPS ($18.15 in 2019) is slightly lower than Basic ($18.29) due to potential share dilution (e.g., stock options).
2. Consolidated Statements of Comprehensive Income
Purpose: Adds non-earnings items (like pension adjustments) to show total “comprehensive” income.
Net Earnings: Carried over from the earnings statement.
Other Comprehensive Income (Loss): Includes unrealized gains/losses and pension adjustments (negative due to rising liabilities). In 2019, a $250M loss reduces comprehensive income to $4,870M, less than net earnings.
3. Consolidated Balance Sheets
Purpose: A snapshot of assets, liabilities, and equity at year-end.
Assets: Total $48,500M in 2019, up from $45,950M in 2018. Cash increased ($1,800M vs. $900M) due to strong cash flow. Noncurrent assets (e.g., goodwill, pension assets) dominate due to AeroTech’s long-term contracts.
Liabilities: Total $43,800M in 2019, with significant long-term debt ($12,000M) and pension liabilities ($13,500M). Customer advances ($6,800M) reflect prepayments for contracts.
Equity: Grew to $4,700M in 2019 from $2,450M in 2018, driven by net earnings ($5,120M) minus dividends ($2,800M) and stock repurchases ($1,000M).
4. Consolidated Statements of Cash Flows
Purpose: Tracks cash inflows/outflows across operating, investing, and financing activities.
Operating Activities: $6,400M in 2019 reflects strong earnings adjusted for non-cash items (e.g., depreciation) and working capital changes.
Investing Activities: Negative ($1,700M in 2019) due to capital expenditures ($1,600M) for equipment/facilities.
Financing Activities: Negative ($4,800M in 2019) as AeroTech paid dividends ($2,800M), repurchased stock ($1,000M), and reduced debt ($1,000M).
Net Change: Cash increased by $900M in 2019, aligning with the balance sheet.
5. Consolidated Statements of Equity
Purpose: Shows changes in equity components over time.
Common Stock: Declines slightly (286M to 280M shares) due to repurchases.
Retained Earnings: Grows with net earnings but is reduced by dividends and repurchases.
Accumulated Other Comprehensive Loss: Increases (worsens) due to pension and security losses, offsetting some equity growth.
Key Observations
Growth Trend: AeroTech mirrors Lockheed Martin’s growth in sales and earnings, driven by defense contracts.
Cash Management: Strong operating cash flow funds dividends, stock repurchases, and debt reduction, similar to Lockheed Martin’s strategy.
Equity Dynamics: Retained earnings grow, but pension liabilities (reflected in comprehensive loss) keep total equity modest.
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