GENERAL DYNAMICS CORPORATION FALLS CHURCH, Va., July 26, 2017 /PRNewswire/ --
-- Operating earnings up 2.8% to $1.1 billion
-- Operating margin of 13.8%, a 60 basis-point improvement
-- Earnings from continuing operations up 4.9% to $749 million
-- Diluted earnings per share up 6.5% to $2.45
General Dynamics (NYSE: GD) today reported second-quarter 2017 diluted earnings per share (EPS) of $2.45 compared to $2.30 in the year-ago quarter, a 6.5 percent increase. Net earnings were $749 million, on revenue of $7.7 billion.
"General Dynamics' strong second quarter performance reflects our focus on operations and executing on our programs," said Phebe N. Novakovic, chairman and chief executive officer. "We are confident in our outlook for the future, built on a solid defense backlog and continued good order activity across the portfolio of Gulfstream business jets."
Margin
With three of the company's four business groups expanding margins over the year-ago period, company-wide operating margin for the second quarter of 2017 was 13.8 percent, a 60 basis-point increase when compared to 13.2 percent in second-quarter 2016.
Cash
Net cash provided by operating activities in the quarter totaled $477 million, up 21 percent from the year-ago quarter. Free cash flow from operations, defined as net cash provided by operating activities less capital expenditures, was $386 million.
Capital Deployment
The company repurchased 2.7 million of its outstanding shares in the second quarter. Year-to-date, the company has repurchased 4.6 million outstanding shares.
Backlog
General Dynamics' total backlog at the end of second-quarter 2017 was $58.6 billion. There was order activity across the Gulfstream product portfolio and strong demand for defense products, including another quarter of a book-to-bill ratio (orders divided by revenue) greater than one-to-one in the Information Systems and Technology group. The estimated potential contract value, representing management's estimate of value in unfunded indefinite delivery, indefinite quantity (IDIQ) contracts and unexercised options, was $24.4 billion. Total potential contract value, the sum of all backlog components, was $83 billion at the end of the quarter.
Guidance
The company is increasing its full-year EPS guidance from $9.50 - $9.55 to $9.70 - $9.75.
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 2016 revenue was $30.6 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 second-quarter 2017 financial results conference call at 9 a.m. EDT on Wednesday, July 26, 2017. 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 July 26 and will continue for 12 months. To hear a recording of the conference call by telephone, please call 877-344-7529 (international: 412-317-0088); passcode 10110468. The phone replay will be available from July 26 through August 3, 2017.
EXHIBIT A
CONSOLIDATED STATEMENTS OF EARNINGS - (UNAUDITED)
DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS
Three Months Ended Variance
July 2, 2017 July 3, 2016* $ %
------------ ------------ --- ---
Revenue $7,675 $7,774 $(99) (1.3)%
Operating costs and expenses 6,619 6,747 (128)
----- ----- ----
Operating earnings 1,056 1,027 29 2.8%
Interest, net (24) (23) (1)
Other, net - 1 (1)
--- --- ---
Earnings before income tax 1,032 1,005 27 2.7%
Provision for income tax, net 283 291 (8)
Net earnings $749 $714 $35 4.9%
Earnings per share-basic $2.50 $2.35 $0.15 6.4%
Basic weighted average shares outstanding 299.8 304.5
===== =====
Earnings per share-diluted $2.45 $2.30 $0.15 6.5%
Diluted weighted average shares outstanding 305.3 310.2
===== =====
* Prior-period information has
been restated for the adoption of
Accounting Standards Update (ASU)
2016-09, Compensation - Stock
Compensation (Topic 718):
Improvements to Employee Share-
Based Payment Accounting, which we
adopted in the second quarter of
2016, and Accounting Standards
Codification (ASC) Topic 606,
Revenue from Contracts with
Customers, which we adopted on
January 1, 2017.
EXHIBIT B
CONSOLIDATED STATEMENTS OF EARNINGS - (UNAUDITED)
DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS
Six Months Ended Variance
July 2, 2017 July 3, 2016* $ %
------------ ------------ --- ---
Revenue $15,116 $15,250 $(134) (0.9)%
Operating costs and expenses 13,025 13,299 (274)
------ ------ ----
Operating earnings 2,091 1,951 140 7.2%
Interest, net (49) (45) (4)
Other, net - 11 (11)
--- --- ---
Earnings from continuing operations before income tax 2,042 1,917 125 6.5%
Provision for income tax, net 530 549 (19)
--- --- ---
Earnings from continuing operations 1,512 1,368 144 10.5%
Discontinued operations - (13) 13
--- --- ---
Net earnings $1,512 $1,355 $157 11.6%
====== ====== ====
Earnings per share-basic
Continuing operations $5.03 $4.47 $0.56 12.5%
Discontinued operations - (0.04) 0.04
--- ----- ----
Net earnings $5.03 $4.43 $0.60 13.5%
===== ===== =====
Basic weighted average shares outstanding 300.8 306.2
===== =====
Earnings per share-diluted
Continuing operations $4.94 $4.39 $0.55 12.5%
Discontinued operations - (0.04) 0.04
--- ----- ----
Net earnings $4.94 $4.35 $0.59 13.6%
===== ===== =====
Diluted weighted average shares outstanding 306.3 311.8
===== =====
* Prior-period information
has been restated for the
adoption of ASC Topic 606,
which we adopted on January
1, 2017.
EXHIBIT C
REVENUE AND OPERATING EARNINGS BY SEGMENT - (UNAUDITED)
DOLLARS IN MILLIONS
Three Months Ended Variance
July 2, 2017 July 3, 2016* $ %
------------ ------------ --- ---
Revenue:
--------
Aerospace $2,078 $2,284 $(206) (9.0)%
Combat Systems 1,414 1,297 117 9.0%
Information Systems and Technology 2,104 2,215 (111) (5.0)%
Marine Systems 2,079 1,978 101 5.1%
----- ----- ---
Total $7,675 $7,774 $(99) (1.3)%
====== ====== ====
Operating earnings:
-------------------
Aerospace $425 $424 $1 0.2%
Combat Systems 225 205 20 9.8%
Information Systems and Technology 240 234 6 2.6%
Marine Systems 178 172 6 3.5%
Corporate (12) (8) (4) (50.0)%
--- --- ---
Total $1,056 $1,027 $29 2.8%
====== ====== ===
Operating margin:
-----------------
Aerospace 20.5% 18.6%
Combat Systems 15.9% 15.8%
Information Systems and Technology 11.4% 10.6%
Marine Systems 8.6% 8.7%
Total 13.8% 13.2%
* Prior-period information
has been restated for the
adoption of ASC Topic 606,
which we adopted on January
1, 2017.
EXHIBIT D
REVENUE AND OPERATING EARNINGS BY SEGMENT - (UNAUDITED)
DOLLARS IN MILLIONS
Six Months Ended Variance
July 2, 2017 July 3, 2016* $ %
------------ ------------ --- ---
Revenue:
--------
Aerospace $4,152 $4,065 $87 2.1%
Combat Systems 2,701 2,542 159 6.3%
Information Systems and Technology 4,250 4,543 (293) (6.4)%
Marine Systems 4,013 4,100 (87) (2.1)%
----- ----- ---
Total $15,116 $15,250 $(134) (0.9)%
======= ======= =====
Operating earnings:
-------------------
Aerospace $868 $756 $112 14.8%
Combat Systems 430 392 38 9.7%
Information Systems and Technology 476 471 5 1.1%
Marine Systems 339 356 (17) (4.8)%
Corporate (22) (24) 2 8.3%
--- --- ---
Total $2,091 $1,951 $140 7.2%
====== ====== ====
Operating margin:
-----------------
Aerospace 20.9% 18.6%
Combat Systems 15.9% 15.4%
Information Systems and Technology 11.2% 10.4%
Marine Systems 8.4% 8.7%
Total 13.8% 12.8%
* Prior-period information
has been restated for the
adoption of ASC Topic 606,
which we adopted on January
1, 2017.
EXHIBIT E
CONSOLIDATED BALANCE SHEETS - (UNAUDITED)
DOLLARS IN MILLIONS
July 2, 2017 December 31, 2016*
------------ -----------------
ASSETS
Current assets:
Cash and equivalents $1,856 $2,334
Accounts receivable 3,690 3,399
Unbilled receivables 5,045 4,212
Inventories 5,839 5,817
Other current assets 696 772
--- ---
Total current assets 17,126 16,534
------ ------
Noncurrent assets:
Property, plant and equipment, net 3,424 3,477
Intangible assets, net 685 678
Goodwill 11,679 11,445
Other assets 879 1,038
--- -----
Total noncurrent assets 16,667 16,638
Total assets $33,793 $33,172
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term debt and current portion of long-term debt $989 $900
Accounts payable 2,620 2,538
Customer advances and deposits 6,822 6,827
Other current liabilities 3,072 3,185
----- -----
Total current liabilities 13,503 13,450
------ ------
Noncurrent liabilities:
Long-term debt 2,989 2,988
Other liabilities 6,349 6,433
----- -----
Total noncurrent liabilities 9,338 9,421
----- -----
Shareholders' equity:
Common stock 482 482
Surplus 2,796 2,819
Retained earnings 25,546 24,543
Treasury stock (14,950) (14,156)
Accumulated other comprehensive loss (2,922) (3,387)
------ ------
Total shareholders' equity 10,952 10,301
Total liabilities and shareholders' equity $33,793 $33,172
======= =======
* Prior-period information has
been restated for the adoption
of ASU 2015-17, Income Taxes
(Topic 740): Balance Sheet
Classification of Deferred
Taxes, and ASC Topic 606, both
of which we adopted on January
1, 2017.
EXHIBIT F
CONSOLIDATED STATEMENTS OF CASH FLOWS - (UNAUDITED)
DOLLARS IN MILLIONS
Six Months Ended
July 2, 2017 July 3, 2016*
------------ ------------
Cash flows from operating activities-continuing operations:
Net earnings $1,512 $1,355
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation of property, plant and equipment 182 181
Amortization of intangible assets 38 50
Equity-based compensation expense 49 51
Deferred income tax provision 93 10
Discontinued operations - 13
(Increase) decrease in assets, net of effects of business acquisitions:
Accounts receivable (291) (38)
Unbilled receivables (815) (523)
Inventories (14) (84)
Increase (decrease) in liabilities, net of effects of business acquisitions:
Accounts payable 82 157
Customer advances and deposits (29) (455)
Other, net 203 156
--- ---
Net cash provided by operating activities 1,010 873
----- ---
Cash flows from investing activities:
Capital expenditures (153) (134)
Other, net (42) (51)
--- ---
Net cash used by investing activities (195) (185)
---- ----
Cash flows from financing activities:
Purchases of common stock (901) (1,189)
Dividends paid (483) (447)
Other, net 108 96
--- ---
Net cash used by financing activities (1,276) (1,540)
------ ------
Net cash used by discontinued operations (17) (34)
--- ---
Net decrease in cash and equivalents (478) (886)
Cash and equivalents at beginning of period 2,334 2,785
----- -----
Cash and equivalents at end of period $1,856 $1,899
====== ======
* Prior-period information
has been restated for the
adoption of ASC Topic 606,
which we adopted on January
1, 2017.
EXHIBIT G
PRELIMINARY FINANCIAL INFORMATION - (UNAUDITED)
DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS
2017 2016 (a)
Second Quarter Second Quarter
-------------- --------------
Other Financial Information:
----------------------------
Debt-to-equity (b) 36.3% 32.5%
Debt-to-capital (c) 26.6% 24.5%
Book value per share (d) $36.57 $34.65
Total income tax payments $332 $439
Company-sponsored research and development (e) $134 $121
Shares outstanding 299,461,802 305,278,868
Non-GAAP Financial Measures:
----------------------------
2017 2016
---- ----
Second Quarter Six Months Second Quarter Six Months
-------------- ---------- -------------- ----------
Free cash flow from operations:
Net cash provided by operating activities $477 $1,010 $393 $873
Capital expenditures (91) (153) (69) (134)
--- ---- --- ----
Free cash flow from operations (f) $386 $857 $324 $739
==== ==== ==== ====
(a) Prior-period information has
been restated for the adoption
of ASC Topic 606, which we
adopted on January 1, 2017.
(b) Debt-to-equity ratio is
calculated as total debt divided
by total equity as of the end of
the period.
(c) 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.
(d) Book value per share is
calculated as total equity
divided by total outstanding
shares as of the end of the
period.
(e) Includes independent research and
development and Aerospace
product-development costs.
(f) We believe free cash flow from
operations is a useful measure
for investors because it
portrays our ability to generate
cash from our businesses for
purposes such as repaying
maturing debt, funding business
acquisitions, repurchasing our
common stock 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.
EXHIBIT H
BACKLOG - (UNAUDITED)
DOLLARS IN MILLIONS
Funded Unfunded Total Estimated Total Potential
Backlog Potential Contract
Contract Value (a) Value
----------------- -----
Second Quarter 2017:
--------------------
Aerospace $12,116 $120 $12,236 $1,911 $14,147
Combat Systems 16,749 281 17,030 4,845 21,875
Information Systems and Technology 6,809 2,085 8,894 14,389 23,283
Marine Systems 16,033 4,374 20,407 3,282 23,689
------ ----- ------ ----- ------
Total $51,707 $6,860 $58,567 $24,427 $82,994
======= ====== ======= ======= =======
First Quarter 2017:
-------------------
Aerospace $12,446 $133 $12,579 $1,929 $14,508
Combat Systems 17,058 523 17,581 4,970 22,551
Information Systems and Technology 6,682 2,038 8,720 13,994 22,714
Marine Systems 17,071 4,413 21,484 3,756 25,240
------ ----- ------ ----- ------
Total $53,257 $7,107 $60,364 $24,649 $85,013
======= ====== ======= ======= =======
Second Quarter 2016 (b):
------------------------
Aerospace $13,418 $126 $13,544 $2,221 $15,765
Combat Systems 18,094 478 18,572 4,812 23,384
Information Systems and Technology 7,509 2,292 9,801 14,560 24,361
Marine Systems 15,868 7,260 23,128 4,237 27,365
------ ----- ----- ------
Total $54,889 $10,156 $65,045 $25,830 $90,875
======= ======= ======= ======= =======
(a) The estimated potential
contract value includes work
awarded on 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. The actual amount
of funding received in the
future may be higher or lower
than our estimate of potential
contract value. We recognize
options in backlog when the
customer exercises the option
and establishes a firm order.
(b) Prior-period information has
been restated for the adoption
of ASC Topic 606, which we
adopted on January 1, 2017.
EXHIBIT I
SECOND QUARTER 2017 SIGNIFICANT
ORDERS -(UNAUDITED)
DOLLARS IN MILLIONS
We received the following
significant orders during the
second quarter of 2017:
Combat Systems:
---------------
-- $110 to provide munitions to a customer in the Middle East.
-- $75 to provide munitions to the U.S. Air Force and U.S. Army.
-- $45 from the Army in support of the Stryker wheeled combat vehicle program, including the production of vehicles with a 30-millimeter cannon.
-- $40 to produce gun systems for the F-35 Joint Strike Fighter.
-- $30 to continue the conversion of M1A2 tanks to the M1A2S configuration for the Kingdom of Saudi Arabia and for engineering and logistics support services for the U.S. Army's Abrams family of vehicles.
Information Systems and
Technology:
-----------------------
-- $165 from the Centers for Medicare & Medicaid Services for contact center services.
-- $125 from the Army for ruggedized computing equipment under the Common Hardware Systems-4 (CHS-4) program.
-- $105 from the U.S. Navy for combat and seaframe control systems on an Independence-variant Littoral Combat Ship (LCS). Options for the systems on three additional ships added $270 to the group's estimated potential contract value.
-- $60 to provide support for live and virtual operations under the Warfighter Field Operations Customer Support (FOCUS) program.
-- $50 to provide engineering, manufacturing and development in support of the Navy's Air and Missile Defense Radar (AMDR) program.
-- $40 from the Navy to provide training and training-related program support services for the Center for Surface Combat Systems (CSCS). This contract has a potential value of approximately $245 over five years.
-- $40 from the U.S. Coast Guard to provide system sustainment support for the Rescue 21 program.
-- $35 from the Army to provide continued software support and engineering for the Warfighter Information Network-Tactical (WIN-T) Increment 2 program.
-- $35 from the U.S. Geological Survey to perform hardware and software upgrades for the Landsat 8 satellite program.
Marine Systems:
---------------
-- $565 from the Navy for design work on the Columbia-class submarine program and Advanced Nuclear Plant Studies (ANPS) in support of the program.
-- $110 from the Navy to procure long-lead materials for two Virginia-class submarines under Block V of the program.
-- $105 from the Navy for maintenance, modernization and repair work on the USS Makin Island, an LHD-class amphibious assault ship.
-- $55 for initial design and construction work for the second ship in the TAO-205 next-generation fleet oiler program.
-- $45 from the Navy to provide maintenance, modernization and repair services for submarines located at Naval Submarine Base New London in Connecticut.
-- $35 from the Navy for on-board repair parts for two Virginia-class submarines under Block IV of the program.
EXHIBIT J
AEROSPACE SUPPLEMENTAL DATA - (UNAUDITED)
Second Quarter Six Months
2017 2016* 2017 2016*
---- ---- ---- ----
Gulfstream Aircraft
Deliveries (units):
--------------------
Large-cabin aircraft 23 29 46 49
Mid-cabin aircraft 7 7 14 15
--- --- --- ---
Total 30 36 60 64
=== === === ===
Pre-owned Deliveries
(units): 2 4 3 5
-------------------- === === === ===
* Prior-period information
has been restated for the
adoption of ASC Topic 606,
which we adopted on January
1, 2017.
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SOURCE General Dynamics
