Attached files
| file | filename |
|---|---|
| 8-K - FORM 8-K - GENERAL DYNAMICS CORP | d339465d8k.htm |
Exhibit 99.1
| 2941 Fairview Park Drive Suite 100 Falls Church, VA 22042-4513 www.generaldynamics.com |
News |
April 25, 2012
Contact: Rob Doolittle
Tel: 703 876 3199
rdoolitt@generaldynamics.com
General Dynamics Reports First-Quarter 2012 Results
| • | Management affirms full-year earnings guidance |
| • | Aerospace group revenues grow 20 percent |
FALLS CHURCH, Va. – General Dynamics (NYSE: GD) today reported first-quarter 2012 net earnings of $564 million, or $1.57 per share on a fully diluted basis, compared with 2011 first-quarter net earnings of $618 million, or $1.64 per share fully diluted. First-quarter 2012 revenues were $7.6 billion.
Margins
Company-wide operating margins for the first quarter of 2012 were 11.3 percent, compared to 11.9 percent in first-quarter 2011. Marine Systems margins improved 150 basis points compared to first-quarter 2011 due to improved performance on auxiliary shipbuilding programs. Combat Systems’ operating earnings and margins were negatively impacted in the quarter by $67 million in non-cash out-of-period accounting adjustments in its European operations. These adjustments reduced the company’s fully diluted earnings per share by $0.13 in the quarter.
Cash
Net cash provided by operating activities in the quarter totaled $414 million. Free cash flow from operations, defined as net cash provided by operating activities less capital expenditures, was $324 million in first-quarter 2012. In comparison, for the first quarter of 2011, net cash provided by operating activities was $328 million, and free cash flow from operations was $267 million.
Backlog
Funded backlog at the end of first-quarter 2012 was $46.3 billion, and total backlog was $55.2 billion. Significant awards received in the quarter include construction contracts for two new surface ships, a DDG 51-class destroyer and a third Mobile Landing Platform (MLP) auxiliary ship. Healthy demand for Gulfstream aircraft continued in the quarter with particularly strong interest among North American customers.
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In addition to total backlog, estimated potential contract value was $26.9 billion, representing management’s estimate of value in unfunded indefinite delivery, indefinite quantity (IDIQ) contracts and unexercised options.
“General Dynamics’ first-quarter performance reflects continued growth in our Aerospace segment as well as the challenges presented by today’s dynamic U.S. federal procurement environment. We are continuing to see slower-than-anticipated award activity, particularly relating to our IS&T programs with validated requirements and approved funding,” said Jay L. Johnson, chairman and chief executive officer. “We remain focused on effectively executing existing programs, securing work associated with delayed awards and capturing new opportunities.
“Given our performance in the quarter and our current outlook for the remainder of the year, we expect full-year earnings per share to be in the $7.10 to $7.20 range,” Johnson said.
General Dynamics, headquartered in Falls Church, Virginia, employs approximately 93,000 people worldwide. The company is a market leader in business aviation; land and expeditionary combat systems, armaments and munitions; shipbuilding and marine systems; and information systems and technologies. More information about the company is available on the Internet at www.generaldynamics.com.
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Certain statements made in this press release, including any statements as to future results of operations and financial projections, may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. Forward-looking statements are based on management’s expectations, estimates, projections and assumptions. These statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. Therefore, actual future results and trends may differ materially from what is forecast in forward-looking statements due to a variety of factors. Additional information regarding these factors is contained in the company’s filings with the Securities and Exchange Commission, including, without limitation, its Annual Report on Form 10-K and its Quarterly Reports on Form 10-Q.
All forward-looking statements speak only as of the date they were made. The company does not undertake any obligation to update or publicly release any revisions to any forward-looking statements to reflect events, circumstances or changes in expectations after the date of this press release.
WEBCAST INFORMATION: General Dynamics will webcast its first-quarter securities analyst conference call, scheduled for 9 a.m. EDT on Wednesday, April 25, 2012. The webcast will be a listen-only audio event, available at www.generaldynamics.com. An on-demand replay of the webcast will be available by 12 p.m. EDT on April 25 and will continue for 12 months. To hear a recording of the conference call by telephone, please call 888-286-8010 (international: 617-801-6888); passcode 84872093. The phone replay will be available from 12 p.m. April 25 through May 2, 2012.
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EXHIBIT A
CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS
| First Quarter |
Variance |
|||||||||||||||
| 2011 |
2012 |
$ |
% |
|||||||||||||
| Revenues |
$ | 7,798 | $ | 7,579 | $ | (219 | ) | (2.8 | )% | |||||||
| Operating costs and expenses |
6,869 | 6,719 | 150 | |||||||||||||
| Operating earnings |
929 | 860 | (69 | ) | (7.4 | )% | ||||||||||
| Interest, net |
(34 | ) | (39 | ) | (5 | ) | ||||||||||
| Other, net |
1 | — | (1 | ) | ||||||||||||
| Earnings before income taxes |
896 | 821 | (75 | ) | (8.4 | )% | ||||||||||
| Provision for income taxes |
278 | 257 | 21 | |||||||||||||
| Net earnings |
$ | 618 | $ | 564 | $ | (54 | ) | (8.7 | )% | |||||||
| Earnings per share - basic |
$ | 1.66 | $ | 1.58 | $ | (0.08 | ) | (4.8 | )% | |||||||
| Basic weighted average shares outstanding (in millions) |
372.7 | 357.0 | ||||||||||||||
| Earnings per share - diluted |
$ | 1.64 | $ | 1.57 | $ | (0.07 | ) | (4.3 | )% | |||||||
| Diluted weighted average shares outstanding (in millions) |
376.4 | 359.4 | ||||||||||||||
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EXHIBIT B
REVENUES AND OPERATING EARNINGS BY SEGMENT (UNAUDITED)
DOLLARS IN MILLIONS
| First Quarter |
Variance |
|||||||||||||||||
| 2011 |
2012 |
$ |
% |
|||||||||||||||
| Revenues: |
||||||||||||||||||
| Aerospace |
$ | 1,353 | $ | 1,623 | $ | 270 | 20.0 | % | ||||||||||
| Combat Systems |
1,955 | 1,911 | (44 | ) | (2.3 | )% | ||||||||||||
| Marine Systems |
1,676 | 1,605 | (71 | ) | (4.2 | )% | ||||||||||||
| Information Systems and Technology |
2,814 | 2,440 | (374 | ) | (13.3 | )% | ||||||||||||
| Total |
$ | 7,798 | $ | 7,579 | $ | (219 | ) | (2.8 | )% | |||||||||
| Operating earnings: |
||||||||||||||||||
| Aerospace |
$ | 230 | $ | 271 | $ | 41 | 17.8 | % | ||||||||||
| Combat Systems |
277 | 203 | (74 | ) | (26.7 | )% | ||||||||||||
| Marine Systems |
167 | 185 | 18 | 10.8 | % | |||||||||||||
| Information Systems and Technology |
276 | 218 | (58 | ) | (21.0 | )% | ||||||||||||
| Corporate |
(21 | ) | (17 | ) | 4 | 19.0 | % | |||||||||||
| Total |
$ | 929 | $ | 860 | $ | (69 | ) | (7.4 | )% | |||||||||
| Operating margins: |
||||||||||||||||||
| Aerospace |
17.0 | % | 16.7 | % | ||||||||||||||
| Combat Systems |
14.2 | % | 10.6 | % | ||||||||||||||
| Marine Systems |
10.0 | % | 11.5 | % | ||||||||||||||
| Information Systems and Technology |
9.8 | % | 8.9 | % | ||||||||||||||
| Total |
11.9 | % | 11.3 | % | ||||||||||||||
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EXHIBIT C
PRELIMINARY CONSOLIDATED BALANCE SHEETS
DOLLARS IN MILLIONS
| (Unaudited) | ||||||||
| December 31, 2011 |
April 1, 2012 |
|||||||
| ASSETS |
||||||||
| Current assets: |
||||||||
| Cash and equivalents |
$ | 2,649 | $ | 2,632 | ||||
| Accounts receivable |
4,452 | 4,686 | ||||||
| Contracts in process |
5,168 | 4,929 | ||||||
| Inventories |
2,310 | 2,444 | ||||||
| Other current assets |
789 | 819 | ||||||
| Total current assets |
15,368 | 15,510 | ||||||
| Noncurrent assets: |
||||||||
| Property, plant and equipment, net |
3,284 | 3,290 | ||||||
| Intangible assets, net |
1,813 | 1,783 | ||||||
| Goodwill |
13,576 | 13,759 | ||||||
| Other assets |
842 | 967 | ||||||
| Total noncurrent assets |
19,515 | 19,799 | ||||||
| Total assets |
$ | 34,883 | $ | 35,309 | ||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY |
||||||||
| Current liabilities: |
||||||||
| Short-term debt and current portion of long-term debt |
$ | 23 | $ | 3 | ||||
| Accounts payable |
2,895 | 2,509 | ||||||
| Customer advances and deposits |
5,011 | 5,299 | ||||||
| Other current liabilities |
3,216 | 3,142 | ||||||
| Total current liabilities |
11,145 | 10,953 | ||||||
| Noncurrent liabilities: |
||||||||
| Long-term debt |
3,907 | 3,905 | ||||||
| Other liabilities |
6,599 | 6,597 | ||||||
| Total noncurrent liabilities |
10,506 | 10,502 | ||||||
| Shareholders’ equity: |
||||||||
| Common stock |
482 | 482 | ||||||
| Surplus |
1,888 | 1,897 | ||||||
| Retained earnings |
18,917 | 19,297 | ||||||
| Treasury stock |
(5,743 | ) | (5,710 | ) | ||||
| Accumulated other comprehensive loss |
(2,312 | ) | (2,112 | ) | ||||
| Total shareholders’ equity |
13,232 | 13,854 | ||||||
| Total liabilities and shareholders’ equity |
$ | 34,883 | $ | 35,309 | ||||
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EXHIBIT D
PRELIMINARY CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
DOLLARS IN MILLIONS
| Three Months Ended |
||||||||
| April 3, 2011 |
April 1, 2012 |
|||||||
| Cash flows from operating activities: | ||||||||
| Net earnings |
$ | 618 | $ | 564 | ||||
| Adjustments to reconcile net earnings to net cash provided by operating activities: |
||||||||
| Depreciation of property, plant and equipment |
85 | 97 | ||||||
| Amortization of intangible assets |
58 | 57 | ||||||
| Stock-based compensation expense |
32 | 35 | ||||||
| Excess tax benefit from stock-based compensation |
(15 | ) | (21 | ) | ||||
| Deferred income tax provision |
19 | 3 | ||||||
| (Increase) decrease in assets, net of effects of business acquisitions: |
||||||||
| Accounts receivable |
(389 | ) | (233 | ) | ||||
| Contracts in process |
(14 | ) | 162 | |||||
| Inventories |
(154 | ) | (114 | ) | ||||
| Increase (decrease) in liabilities, net of effects of business acquisitions: |
||||||||
| Accounts payable |
(226 | ) | (387 | ) | ||||
| Customer advances and deposits |
198 | 205 | ||||||
| Income taxes payable |
215 | 188 | ||||||
| Other current liabilities |
(120 | ) | (269 | ) | ||||
| Other, net |
21 | 127 | ||||||
| Net cash provided by operating activities |
328 | 414 | ||||||
| Cash flows from investing activities: |
||||||||
| Purchases of held-to-maturity securities |
(78 | ) | (126 | ) | ||||
| Capital expenditures |
(61 | ) | (90 | ) | ||||
| Purchases of available-for-sale securities |
(174 | ) | (65 | ) | ||||
| Business acquisitions, net of cash acquired |
— | (26 | ) | |||||
| Maturities of held-to-maturity securities |
116 | 3 | ||||||
| Other, net |
59 | 40 | ||||||
| Net cash used by investing activities |
(138 | ) | (264 | ) | ||||
| Cash flows from financing activities: |
||||||||
| Dividends paid |
(157 | ) | (169 | ) | ||||
| Proceeds from option exercises |
138 | 78 | ||||||
| Purchases of common stock |
(314 | ) | (76 | ) | ||||
| Other, net |
15 | 1 | ||||||
| Net cash used by financing activities |
(318 | ) | (166 | ) | ||||
| Net cash used by discontinued operations |
(1 | ) | (1 | ) | ||||
| Net decrease in cash and equivalents |
(129 | ) | (17 | ) | ||||
| Cash and equivalents at beginning of period |
2,613 | 2,649 | ||||||
| Cash and equivalents at end of period |
$ | 2,484 | $ | 2,632 | ||||
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EXHIBIT E
PRELIMINARY FINANCIAL INFORMATION (UNAUDITED)
DOLLARS IN MILLIONS EXCEPT PER SHARE AND EMPLOYEE AMOUNTS
| First Quarter 2011 |
First Quarter 2012 |
|||||||
| Non-GAAP Financial Measures: |
||||||||
| Free cash flow from operations: |
||||||||
| Net cash provided by operating activities |
$ | 328 | $ | 414 | ||||
| Capital expenditures |
(61 | ) | (90 | ) | ||||
| Free cash flow from operations (A) |
$ | 267 | $ | 324 | ||||
| Return on invested capital: |
||||||||
| Earnings from continuing operations |
$ | 2,647 | $ | 2,498 | ||||
| After-tax interest expense |
108 | 110 | ||||||
| After-tax amortization expense |
156 | 163 | ||||||
| Net operating profit after taxes |
2,911 | 2,771 | ||||||
| Average debt and equity |
16,746 | 17,372 | ||||||
| Return on invested capital (B) |
17.4 | % | 16.0 | % | ||||
| Other Financial Information: |
||||||||
| Return on equity (C) |
19.9 | % | 18.2 | % | ||||
| Debt-to-equity (D) |
23.1 | % | 28.2 | % | ||||
| Debt-to-capital (E) |
18.8 | % | 22.0 | % | ||||
| Book value per share (F) |
$ | 37.30 | $ | 38.44 | ||||
| Total taxes paid |
$ | 55 | $ | 82 | ||||
| Company-sponsored research and development (G) |
$ | 115 | $ | 152 | ||||
| Employment |
89,800 | 92,900 | ||||||
| Sales per employee (H) |
$ | 360,200 | $ | 352,200 | ||||
| Shares outstanding |
372,000,435 | 360,399,149 | ||||||
| (A) | We believe free cash flow from operations is a measurement that is useful to investors because it portrays our ability to generate cash from our core businesses for such purposes as repaying maturing debt, funding business acquisitions and paying dividends. We use free cash flow from operations to assess the quality of our earnings and as a performance measure in evaluating management. The most directly comparable GAAP measure to free cash flow from operations is net cash provided by operating activities. |
| (B) | We believe return on invested capital (ROIC) is a measurement that is useful to investors because it reflects our ability to generate returns from the capital we have deployed in our operations. We use ROIC to evaluate investment decisions and as a performance measure in evaluating management. We define ROIC as net operating profit after taxes for the latest 12-month period divided by the sum of the average debt and shareholders’ equity for the same period. Net operating profit after taxes is defined as earnings from continuing operations plus after-tax interest and amortization expense. The most directly comparable GAAP measure to net operating profit after taxes is earnings from continuing operations. |
| (C) | Return on equity is calculated by dividing earnings from continuing operations for the latest 12-month period by our average equity during that period. |
| (D) | Debt-to-equity ratio is calculated as total debt divided by total equity as of the end of the period. |
| (E) | Debt-to-capital ratio is calculated as total debt divided by the sum of total debt plus total equity as of the end of the period. |
| (F) | Book value per share is calculated as total equity divided by total outstanding shares as of the end of the period. |
| (G) | Includes independent research and development and bid and proposal costs and Gulfstream product-development costs. |
| (H) | Sales per employee is calculated by dividing revenues for the latest 12-month period by our average number of employees during that period. |
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EXHIBIT F
BACKLOG (UNAUDITED)
DOLLARS IN MILLIONS
| First Quarter 2012 |
Funded |
Unfunded |
Total Backlog |
Estimated Potential Contract Value* |
Total Potential Contract Value |
|||||||||||||||
| Aerospace |
$ | 16,718 | $ | 266 | $ | 16,984 | $ | — | $ | 16,984 | ||||||||||
| Combat Systems |
9,623 | 1,042 | 10,665 | 3,473 | 14,138 | |||||||||||||||
| Marine Systems |
12,261 | 5,754 | 18,015 | 1,199 | 19,214 | |||||||||||||||
| Information Systems and Technology |
7,649 | 1,913 | 9,562 | 22,256 | 31,818 | |||||||||||||||
| Total |
$ | 46,251 | $ | 8,975 | $ | 55,226 | $ | 26,928 | $ | 82,154 | ||||||||||
| Fourth Quarter 2011 |
||||||||||||||||||||
| Aerospace |
$ | 17,618 | $ | 289 | $ | 17,907 | $ | — | $ | 17,907 | ||||||||||
| Combat Systems |
10,283 | 1,137 | 11,420 | 3,453 | 14,873 | |||||||||||||||
| Marine Systems |
9,364 | 9,140 | 18,504 | 2,163 | 20,667 | |||||||||||||||
| Information Systems and Technology |
7,434 | 2,145 | 9,579 | 22,384 | 31,963 | |||||||||||||||
| Total |
$ | 44,699 | $ | 12,711 | $ | 57,410 | $ | 28,000 | $ | 85,410 | ||||||||||
| First Quarter 2011 |
||||||||||||||||||||
| Aerospace |
$ | 17,499 | $ | 361 | $ | 17,860 | $ | — | $ | 17,860 | ||||||||||
| Combat Systems |
10,289 | 1,092 | 11,381 | 4,925 | 16,306 | |||||||||||||||
| Marine Systems |
8,113 | 10,540 | 18,653 | 549 | 19,202 | |||||||||||||||
| Information Systems and Technology |
7,958 | 1,724 | 9,682 | 15,119 | 24,801 | |||||||||||||||
| Total |
$ | 43,859 | $ | 13,717 | $ | 57,576 | $ | 20,593 | $ | 78,169 | ||||||||||
| * | The estimated potential contract value represents management’s estimate of our future contract value under unfunded indefinite delivery, indefinite quantity (IDIQ) contracts and unexercised options associated with existing firm contracts, including options to purchase new aircraft and long-term agreements with fleet customers, as applicable. Because the value in the unfunded IDIQ arrangements is subject to the customer’s future exercise of an indeterminate quantity of orders, we recognize these contracts in backlog only when they are funded. Unexercised options are recognized in backlog when the customer exercises the option and establishes a firm order. |
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EXHIBIT G
FIRST QUARTER 2012 SIGNIFICANT ORDERS (UNAUDITED)
DOLLARS IN MILLIONS
We received the following significant contract orders during the first quarter of 2012:
Combat Systems
| • | $130 from the U.K. Ministry of Defence for the production of 100 Ocelot light patrol vehicles. |
| • | $40 from the U.S. Army for the production of 258 Stryker Mine Rollers. |
| • | $35 from the Army for munitions demilitarization. |
Marine Systems
| • | $665 from the U.S. Navy for construction of a second DDG-51 destroyer under the destroyer construction continuation program. |
| • | $360 from the Navy for construction of the third Mobile Landing Platform (MLP) auxiliary support ship. |
Information Systems and Technology
| • | $155 for combat and seaframe control systems on two Navy Littoral Combat Ships (LCS); options remain for six additional shipsets of equipment. |
| • | $80 from the U.S. Department of Education to assist in the implementation and operation of the Federal Student Aid Information Center. |
| • | $75 from the U.S. Air Force for networking and computing products and support under the Network-Centric Solutions (NETCENTS) program. |
| • | $70 from the Canadian government to provide engineering and support services. |
| • | An award from the U.S. Department of Energy to provide cybersecurity and cloud-computing support services. The program has a maximum potential value of $140 over four years. |
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EXHIBIT H
AEROSPACE SUPPLEMENTAL DATA (UNAUDITED)
| First Quarter |
||||||||
| 2011 |
2012 |
|||||||
| Gulfstream Green Deliveries (units): |
||||||||
| Large aircraft |
20 | 26 | ||||||
| Mid-size aircraft |
4 | 2 | ||||||
| Total |
24 | 28 | ||||||
| Gulfstream Outfitted Deliveries (units): |
||||||||
| Large aircraft |
19 | 17 | ||||||
| Mid-size aircraft |
5 | 2 | ||||||
| Total |
24 | 19 | ||||||
| Pre-owned Deliveries (units): |
— | — | ||||||
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