Attached files
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| 8-K - 8-K - GENERAL DYNAMICS CORP | gd-201510048k.htm |
Exhibit 99.1
2941 Fairview Park Drive | ||
Suite 100 | ||
Falls Church, VA 22042-4513 www.generaldynamics.com | News | |
October 28, 2015
Contact: Lucy Ryan
Tel: 703 876 3631
lryan@generaldynamics.com
General Dynamics Reports Third-Quarter 2015 Results
• | Revenue up 3.1% to $7.99 billion |
• | Operating earnings up 3.5% to $1.03 billion |
• | Earnings from continuing operations up 5.6% to $733 million |
• | Diluted earnings per share from continuing operations up 11.2% to $2.28 |
FALLS CHURCH, Va. - General Dynamics (NYSE: GD) today reported third-quarter 2015 earnings from continuing operations of $733 million, a 5.6 percent increase over third-quarter 2014, on revenue of $7.99 billion. Diluted earnings per share from continuing operations were $2.28 compared to $2.05 in the year-ago quarter, an 11.2 percent increase.
“General Dynamics had another solid quarter,” said Phebe Novakovic, chairman and chief executive officer. “This is our fourth consecutive quarter with more than $1 billion in operating earnings, and we expect to maintain this momentum as we see the results of our focus on operating discipline, lower cost structure and execution on our strong backlog.”
Margin
Company-wide operating margin for the third quarter of 2015 was 12.9 percent, with margin expansion in the Aerospace and Information Systems and Technology groups when compared to third-quarter 2014.
Cash
Net cash provided by operating activities in the quarter totaled $822 million. Free cash flow from operations, defined as net cash provided by operating activities less capital expenditures, was $652 million.
Capital Deployment
The company repurchased 7.15 million of its outstanding shares in the third quarter. Year-to-date, the company has repurchased 19.28 million outstanding shares.
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Backlog
General Dynamics’ total backlog at the end of third-quarter 2015 was $68.7 billion. The Aerospace group continued to experience steady demand in the quarter with order activity for each of the products in the Gulfstream portfolio. Also, each of the defense businesses had significant orders in the quarter. The estimated potential contract value, representing management’s estimate of value in unfunded indefinite delivery, indefinite quantity (IDIQ) contracts and unexercised options, was $25.5 billion. Total potential contract value, the sum of all backlog components, was $94.3 billion at the end of the quarter.
About General Dynamics
Headquartered in Falls Church, Virginia, General Dynamics is a global aerospace and defense company that offers a broad portfolio of products and services in business aviation; combat vehicles, weapons systems and munitions; C4ISR and IT solutions; and shipbuilding. The company’s revenues in 2014 were $30.9 billion. More information is available at www.generaldynamics.com.
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 third-quarter securities analyst conference call at 9 a.m. EDT on Wednesday, October 28, 2015. 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. on October 28 and will continue for 12 months. To hear a recording of the conference call by telephone, please call 855-859-2056 (international: 404-537-3406); passcode 59471842. The phone replay will be available from 1 p.m. October 28 through November 4, 2015.
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EXHIBIT A
CONSOLIDATED STATEMENTS OF EARNINGS - (UNAUDITED)
DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS
Third Quarter | Variance | |||||||||||||
2015 | 2014 | $ | % | |||||||||||
Revenue | $ | 7,994 | $ | 7,751 | $ | 243 | 3.1 | % | ||||||
Operating costs and expenses | 6,960 | 6,752 | (208 | ) | ||||||||||
Operating earnings | 1,034 | 999 | 35 | 3.5 | % | |||||||||
Interest, net | (23 | ) | (21 | ) | (2 | ) | ||||||||
Other, net | 2 | 1 | 1 | |||||||||||
Earnings from continuing operations before income tax | 1,013 | 979 | $ | 34 | 3.5 | % | ||||||||
Provision for income tax, net | 280 | 285 | 5 | |||||||||||
Earnings from continuing operations | $ | 733 | $ | 694 | $ | 39 | 5.6 | % | ||||||
Discontinued operations, net of tax | — | 2 | (2 | ) | ||||||||||
Net earnings | $ | 733 | $ | 696 | 37 | 5.3 | % | |||||||
Earnings per share—basic | ||||||||||||||
Continuing operations | $ | 2.31 | $ | 2.09 | $ | 0.22 | 10.5 | % | ||||||
Discontinued operations | $ | — | $ | 0.01 | $ | (0.01 | ) | |||||||
Net earnings | $ | 2.31 | $ | 2.10 | $ | 0.21 | 10.0 | % | ||||||
Basic weighted average shares outstanding | 316.7 | 331.8 | ||||||||||||
Earnings per share—diluted | ||||||||||||||
Continuing operations | $ | 2.28 | $ | 2.05 | $ | 0.23 | 11.2 | % | ||||||
Discontinued operations | $ | — | $ | 0.01 | $ | (0.01 | ) | |||||||
Net earnings | $ | 2.28 | $ | 2.06 | $ | 0.22 | 10.7 | % | ||||||
Diluted weighted average shares outstanding | 321.9 | 338.2 | ||||||||||||
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EXHIBIT B
CONSOLIDATED STATEMENTS OF EARNINGS - (UNAUDITED)
DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS
Nine Months | Variance | ||||||||||||||
2015 | 2014 | $ | % | ||||||||||||
Revenue | $ | 23,660 | $ | 22,490 | $ | 1,170 | 5.2 | % | |||||||
Operating costs and expenses | 20,518 | 19,668 | (850 | ) | |||||||||||
Operating earnings | 3,142 | 2,822 | 320 | 11.3 | % | ||||||||||
Interest, net | (64 | ) | (67 | ) | 3 | ||||||||||
Other, net | 5 | 2 | 3 | ||||||||||||
Earnings from continuing operations before income tax | 3,083 | 2,757 | 326 | 11.8 | % | ||||||||||
Provision for income tax, net | 882 | 821 | (61 | ) | |||||||||||
Earnings from continuing operations | $ | 2,201 | $ | 1,936 | $ | 265 | 13.7 | % | |||||||
Discontinued operations, net of tax | — | (104 | ) | 104 | |||||||||||
Net earnings | $ | 2,201 | $ | 1,832 | $ | 369 | 20.1 | % | |||||||
Earnings per share—basic | |||||||||||||||
Continuing operations | $ | 6.79 | $ | 5.75 | $ | 1.04 | 18.1 | % | |||||||
Discontinued operations | $ | — | $ | (0.31 | ) | $ | 0.31 | ||||||||
Net earnings | $ | 6.79 | $ | 5.44 | $ | 1.35 | 24.8 | % | |||||||
Basic weighted average shares outstanding | 324.0 | 336.9 | |||||||||||||
Earnings per share—diluted | |||||||||||||||
Continuing operations | $ | 6.68 | $ | 5.64 | $ | 1.04 | 18.4 | % | |||||||
Discontinued operations | $ | — | $ | (0.30 | ) | $ | 0.30 | ||||||||
Net earnings | $ | 6.68 | $ | 5.34 | $ | 1.34 | 25.1 | % | |||||||
Diluted weighted average shares outstanding | 329.4 | 343.1 | |||||||||||||
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EXHIBIT C
REVENUES AND OPERATING EARNINGS BY SEGMENT - (UNAUDITED)
DOLLARS IN MILLIONS
Third Quarter | Variance | |||||||||||||
2015 | 2014 | $ | % | |||||||||||
Revenue: | ||||||||||||||
Aerospace | $ | 2,343 | $ | 2,289 | $ | 54 | 2.4 | % | ||||||
Combat Systems | 1,345 | 1,395 | (50 | ) | (3.6 | )% | ||||||||
Information Systems and Technology | 2,219 | 2,247 | (28 | ) | (1.2 | )% | ||||||||
Marine Systems | 2,087 | 1,820 | 267 | 14.7 | % | |||||||||
Total | $ | 7,994 | $ | 7,751 | $ | 243 | 3.1 | % | ||||||
Operating earnings: | ||||||||||||||
Aerospace | $ | 426 | $ | 411 | $ | 15 | 3.6 | % | ||||||
Combat Systems | 218 | 232 | (14 | ) | (6.0 | )% | ||||||||
Information Systems and Technology | 219 | 202 | 17 | 8.4 | % | |||||||||
Marine Systems | 181 | 170 | 11 | 6.5 | % | |||||||||
Corporate | (10 | ) | (16 | ) | 6 | 37.5 | % | |||||||
Total | $ | 1,034 | $ | 999 | $ | 35 | 3.5 | % | ||||||
Operating margin: | ||||||||||||||
Aerospace | 18.2 | % | 18.0 | % | ||||||||||
Combat Systems | 16.2 | % | 16.6 | % | ||||||||||
Information Systems and Technology | 9.9 | % | 9.0 | % | ||||||||||
Marine Systems | 8.7 | % | 9.3 | % | ||||||||||
Total | 12.9 | % | 12.9 | % | ||||||||||
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EXHIBIT D
REVENUES AND OPERATING EARNINGS BY SEGMENT - (UNAUDITED)
DOLLARS IN MILLIONS
Nine Months | Variance | ||||||||||||||
2015 | 2014 | $ | % | ||||||||||||
Revenue: | |||||||||||||||
Aerospace | $ | 6,709 | $ | 6,409 | $ | 300 | 4.7 | % | |||||||
Combat Systems | 4,116 | 4,118 | (2 | ) | — | % | |||||||||
Information Systems and Technology | 6,804 | 6,691 | 113 | 1.7 | % | ||||||||||
Marine Systems | 6,031 | 5,272 | 759 | 14.4 | % | ||||||||||
Total | $ | 23,660 | $ | 22,490 | $ | 1,170 | 5.2 | % | |||||||
Operating earnings: | |||||||||||||||
Aerospace | $ | 1,296 | $ | 1,199 | $ | 97 | 8.1 | % | |||||||
Combat Systems | 648 | 591 | 57 | 9.6 | % | ||||||||||
Information Systems and Technology | 673 | 573 | 100 | 17.5 | % | ||||||||||
Marine Systems | 556 | 510 | 46 | 9.0 | % | ||||||||||
Corporate | (31 | ) | (51 | ) | 20 | 39.2 | % | ||||||||
Total | $ | 3,142 | $ | 2,822 | $ | 320 | 11.3 | % | |||||||
Operating margin: | |||||||||||||||
Aerospace | 19.3 | % | 18.7 | % | |||||||||||
Combat Systems | 15.7 | % | 14.4 | % | |||||||||||
Information Systems and Technology | 9.9 | % | 8.6 | % | |||||||||||
Marine Systems | 9.2 | % | 9.7 | % | |||||||||||
Total | 13.3 | % | 12.5 | % | |||||||||||
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EXHIBIT E
CONSOLIDATED BALANCE SHEETS
DOLLARS IN MILLIONS
(Unaudited) | |||||||
October 4, 2015 | December 31, 2014 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and equivalents | $ | 3,372 | $ | 4,388 | |||
Accounts receivable | 3,796 | 4,050 | |||||
Contracts in process | 4,215 | 4,591 | |||||
Inventories | 3,239 | 3,221 | |||||
Other current assets | 666 | 1,157 | |||||
Total current assets | 15,288 | 17,407 | |||||
Noncurrent assets: | |||||||
Property, plant and equipment, net | 3,370 | 3,329 | |||||
Intangible assets, net | 800 | 912 | |||||
Goodwill | 11,533 | 11,731 | |||||
Other assets | 1,989 | 1,976 | |||||
Total noncurrent assets | 17,692 | 17,948 | |||||
Total assets | $ | 32,980 | $ | 35,355 | |||
LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||
Current liabilities: | |||||||
Short-term debt and current portion of long-term debt | $ | 501 | $ | 501 | |||
Accounts payable | 2,387 | 2,057 | |||||
Customer advances and deposits | 5,871 | 7,335 | |||||
Other current liabilities | 4,419 | 3,858 | |||||
Total current liabilities | 13,178 | 13,751 | |||||
Noncurrent liabilities: | |||||||
Long-term debt | 2,912 | 3,410 | |||||
Other liabilities | 6,156 | 6,365 | |||||
Total noncurrent liabilities | 9,068 | 9,775 | |||||
Shareholders' equity: | |||||||
Common stock | 482 | 482 | |||||
Surplus | 2,697 | 2,548 | |||||
Retained earnings | 22,655 | 21,127 | |||||
Treasury stock | (11,915 | ) | (9,396 | ) | |||
Accumulated other comprehensive loss | (3,185 | ) | (2,932 | ) | |||
Total shareholders' equity | 10,734 | 11,829 | |||||
Total liabilities and shareholders' equity | $ | 32,980 | $ | 35,355 | |||
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EXHIBIT F
CONSOLIDATED STATEMENTS OF CASH FLOWS - (UNAUDITED)
DOLLARS IN MILLIONS
Nine Months Ended | ||||||||
October 4, 2015 | September 28, 2014 | |||||||
Cash flows from operating activities—continuing operations: | ||||||||
Net earnings | $ | 2,201 | $ | 1,832 | ||||
Adjustments to reconcile net earnings to net cash provided by operating activities: | ||||||||
Depreciation of property, plant and equipment | 272 | 285 | ||||||
Amortization of intangible assets | 88 | 91 | ||||||
Equity-based compensation expense | 84 | 94 | ||||||
Excess tax benefit from stock-based compensation | (69 | ) | (66 | ) | ||||
Deferred income tax provision | 88 | 94 | ||||||
Discontinued operations, net of tax | — | 104 | ||||||
(Increase) decrease in assets, net of effects of business acquisitions: | ||||||||
Accounts receivable | 254 | 189 | ||||||
Contracts in process | 391 | 380 | ||||||
Inventories | (29 | ) | (259 | ) | ||||
Increase (decrease) in liabilities, net of effects of business acquisitions: | ||||||||
Accounts payable | 334 | 174 | ||||||
Customer advances and deposits | (1,508 | ) | 1,231 | |||||
Income taxes payable | 13 | 148 | ||||||
Other current and noncurrent liabilities | 206 | (238 | ) | |||||
Other, net | (155 | ) | (261 | ) | ||||
Net cash provided by operating activities | 2,170 | 3,798 | ||||||
Cash flows from investing activities: | ||||||||
Maturities of held-to-maturity securities | 500 | — | ||||||
Purchases of held-to-maturity securities | — | (500 | ) | |||||
Capital expenditures | (360 | ) | (337 | ) | ||||
Proceeds from sales of assets | 290 | 7 | ||||||
Other, net | (12 | ) | 4 | |||||
Net cash provided (used) by investing activities | 418 | (826 | ) | |||||
Cash flows from financing activities: | ||||||||
Purchases of common stock | (2,729 | ) | (3,117 | ) | ||||
Dividends paid | (655 | ) | (618 | ) | ||||
Repayment of fixed-rate notes | (500 | ) | — | |||||
Proceeds from stock options exercises | 240 | 475 | ||||||
Other, net | 71 | 66 | ||||||
Net cash used by financing activities | (3,573 | ) | (3,194 | ) | ||||
Net cash (used) provided by discontinued operations | (31 | ) | 26 | |||||
Net decrease in cash and equivalents | (1,016 | ) | (196 | ) | ||||
Cash and equivalents at beginning of period | 4,388 | 5,301 | ||||||
Cash and equivalents at end of period | $ | 3,372 | $ | 5,105 | ||||
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EXHIBIT G
PRELIMINARY FINANCIAL INFORMATION - (UNAUDITED)
DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS
Third Quarter 2015 | Third Quarter 2014 | |||||||||||||||
Other Financial Information: | ||||||||||||||||
Debt-to-equity (a) | 31.8 | % | 30.1 | % | ||||||||||||
Debt-to-capital (b) | 24.1 | % | 23.1 | % | ||||||||||||
Book value per share (c) | $ | 33.95 | $ | 39.26 | ||||||||||||
Total taxes paid | $ | 246 | $ | 292 | ||||||||||||
Company-sponsored research and development (d) | $ | 104 | $ | 73 | ||||||||||||
Shares outstanding | 316,128,160 | 331,389,741 | ||||||||||||||
Non-GAAP Financial Measures: | ||||||||||||||||
2015 | 2014 | |||||||||||||||
Quarter | Year-to-date | Quarter | Year-to-date | |||||||||||||
Free cash flow from operations: | ||||||||||||||||
Net cash provided by operating activities | $ | 822 | $ | 2,170 | $ | 2,504 | $ | 3,798 | ||||||||
Capital expenditures | (170 | ) | (360 | ) | (175 | ) | (337 | ) | ||||||||
Free cash flow from operations (e) | $ | 652 | $ | 1,810 | $ | 2,329 | $ | 3,461 | ||||||||
(a) | Debt-to-equity ratio is calculated as total debt divided by total equity as of the end of the period. |
(b) | 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. |
(c) | Book value per share is calculated as total equity divided by total outstanding shares as of the end of the period. |
(d) | Includes independent research and development and Gulfstream product-development costs. |
(e) | 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. |
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EXHIBIT H
BACKLOG - (UNAUDITED)
DOLLARS IN MILLIONS
Funded | Unfunded | Total Backlog | Estimated Potential Contract Value* | Total Potential Contract Value | ||||||||||||||||
Third Quarter 2015 | ||||||||||||||||||||
Aerospace | $ | 13,459 | $ | 100 | $ | 13,559 | $ | 2,479 | $ | 16,038 | ||||||||||
Combat Systems | 18,591 | 658 | 19,249 | 5,261 | 24,510 | |||||||||||||||
Information Systems and Technology | 7,294 | 2,122 | 9,416 | 15,074 | 24,490 | |||||||||||||||
Marine Systems | 14,391 | 12,127 | 26,518 | 2,734 | 29,252 | |||||||||||||||
Total | $ | 53,735 | $ | 15,007 | $ | 68,742 | $ | 25,548 | $ | 94,290 | ||||||||||
Second Quarter 2015 | ||||||||||||||||||||
Aerospace | $ | 13,893 | $ | 125 | $ | 14,018 | $ | 2,474 | $ | 16,492 | ||||||||||
Combat Systems | 18,454 | 476 | 18,930 | 5,199 | 24,129 | |||||||||||||||
Information Systems and Technology | 7,096 | 2,037 | 9,133 | 15,562 | 24,695 | |||||||||||||||
Marine Systems | 15,993 | 11,952 | 27,945 | 2,345 | 30,290 | |||||||||||||||
Total | $ | 55,436 | $ | 14,590 | $ | 70,026 | $ | 25,580 | $ | 95,606 | ||||||||||
Third Quarter 2014 | ||||||||||||||||||||
Aerospace | $ | 11,924 | $ | 143 | $ | 12,067 | $ | 1,857 | $ | 13,924 | ||||||||||
Combat Systems | 20,879 | 732 | 21,611 | 5,760 | 27,371 | |||||||||||||||
Information Systems and Technology | 7,421 | 1,452 | 8,873 | 16,520 | 25,393 | |||||||||||||||
Marine Systems | 14,308 | 17,574 | 31,882 | 2,524 | 34,406 | |||||||||||||||
Total | $ | 54,532 | $ | 19,901 | $ | 74,433 | $ | 26,661 | $ | 101,094 | ||||||||||
* | 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 H-1
BACKLOG AND ESTIMATED CONTRACT VALUE - (UNAUDITED)
DOLLARS IN MILLIONS
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EXHIBIT H-2
BACKLOG AND ESTIMATED CONTRACT VALUE BY SEGMENT - (UNAUDITED)
DOLLARS IN MILLIONS
Funded Backlog | Unfunded Backlog | Estimated Potential Contract Value | ||||||||||
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EXHIBIT I
THIRD QUARTER 2015 SIGNIFICANT ORDERS (UNAUDITED)
DOLLARS IN MILLIONS
We received the following significant orders during the third quarter of 2015:
Combat Systems
• | $610 from the U.K. Ministry of Defence to provide in-service support for the AJAX armoured fighting vehicle fleet until 2024. |
• | $285 from the U.S. Army to refurbish and upgrade 150 Abrams main battle tanks to the situational awareness configuration for the Kingdom of Morocco under a Foreign Military Sales (FMS) contract. |
• | $60 from the Army under the Stryker wheeled armored vehicle program for production of double-V-hulled vehicles. |
• | $50 to produce various calibers of ammunition. |
Information Systems and Technology
• | $340 from the Centers for Medicare & Medicaid Services for contact-center services. |
• | $155 from the Army for ruggedized computing equipment under the CHS-4 program. |
• | $100 from the U.S. Air Force to deliver enterprise IT services. |
• | $90 from the Army under the Warfighter Field Operations Customer Support (FOCUS) program to provide support for live and virtual operations. |
• | $80 from the Army under Increment 2 of the Warfighter Information Network-Tactical (WIN-T) program for additional equipment, engineering and support services. |
Marine Systems
• | $265 from the U.S. Navy for design work on the Ohio-class submarine replacement program. |
• | $155 from the Navy to provide design, engineering, material and logistics support and research and development activities for active U.S. submarines. |
• | $50 from the Navy for the design and manufacture of two moored training ships. |
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EXHIBIT J
AEROSPACE SUPPLEMENTAL DATA - (UNAUDITED)
Third Quarter | Nine Months | |||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||
Gulfstream Green Deliveries (units): | ||||||||||||
Large-cabin aircraft | 31 | 32 | 87 | 87 | ||||||||
Mid-cabin aircraft | 9 | 6 | 23 | 19 | ||||||||
Total | 40 | 38 | 110 | 106 | ||||||||
Gulfstream Outfitted Deliveries (units): | ||||||||||||
Large-cabin aircraft | 31 | 25 | 89 | 84 | ||||||||
Mid-cabin aircraft | 12 | 6 | 27 | 24 | ||||||||
Total | 43 | 31 | 116 | 108 | ||||||||
Pre-owned Deliveries (units): | — | 3 | 5 | 3 | ||||||||
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