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AeroTech Corporation - Illustrative Financial Statements

Writer: Rabeel QureshiRabeel Qureshi




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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