GENERAL DYNAMICS CORPORATION 
By FALLS CHURCH, Va., April 23, 2014 /PRNewswire/ -- General Dynamics (NYSE: GD) today reported first-quarter 2014 net earnings of $595 million, or $1.71 per share on a diluted basis, compared to 2013 first-quarter net earnings of $571 million, or $1.62 per diluted share. First-quarter 2014 revenues were $7.3 billion.
Margins
Company-wide operating margins for the first quarter of 2014 were 11.9 percent, a 50 basis points improvement when compared to 11.4 percent in first-quarter 2013.
Cash
Net cash provided by operating activities in the quarter totaled $428 million. Free cash flow from operations, defined as net cash provided by operating activities less capital expenditures, was $341 million in first-quarter 2014. In comparison, for the first quarter of 2013, net cash provided by operating activities was $504 million, and free cash flow from operations was $429 million.
Capital Deployment
The company repurchased 14.4 million of its outstanding shares in the first quarter. In addition, in March, the board of directors increased the company's quarterly dividend by 10.7 percent to $0.62 per share, representing the company's 17th consecutive annual dividend increase.
Backlog
Funded backlog at the end of first-quarter 2014 was $48.3 billion, and total backlog was $56 billion, a more than 20 percent increase from year-end 2013. The company received a $10 billion 14-year contract from the Government of Canada's Canadian Commercial Corporation to provide military and commercial vehicles, training, and support services to an international customer, with $3 billion in options. Additional significant awards received in the quarter include $645 million for an additional Arleigh Burke-class destroyer, $520 million for long-lead material for Virginia-class Block IV submarines, $210 million for continued support of the U.K.'s Bowman tactical communication system, and $165 million for combat and seaframe control systems on the Navy's Independence-variant Littoral Combat Ship.
In addition to total backlog, estimated potential contract value, representing management's estimate of value in unfunded indefinite delivery, indefinite quantity (IDIQ) contracts and unexercised options, was $28.7 billion. Total potential contract value, the sum of all backlog components, was $84.7 billion at the end of the quarter.
"General Dynamics' first quarter operating performance was strong, demonstrated by 11.9 percent operating margins," said Phebe N. Novakovic, chairman and chief executive officer. "2014 is off to a solid start as we remain committed to robust operating performance, engaging in wise capital deployment and driving excellence throughout the company."
General Dynamics, headquartered in Falls Church, Virginia, employs approximately 94,400 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 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 first-quarter securities analyst conference call, scheduled for 9 a.m. EDT on Wednesday, April 23, 2014. 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 23 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 91025939. The phone replay will be available from 12 p.m. April 23 through April 30, 2014.
EXHIBIT A
CONSOLIDATED STATEMENTS OF EARNINGS - (UNAUDITED)
DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS
First Quarter Variance
2013 2014 $ %
---- ---- --- ---
Revenues $7,404 $7,324 $(80) (1.1)%
Operating costs and expenses 6,557 6,453 104
----- ----- ---
Operating earnings 847 871 24 2.8 %
Interest, net (23) (22) 1
Other, net - 2 2
--- --- ---
Earnings before income taxes 824 851 27 3.3 %
Provision for income taxes 253 256 (3)
--- --- ---
Net earnings $571 $595 $24 4.2 %
==== ==== ===
Earnings per share - basic $1.62 $1.74 $0.12 7.4 %
===== ===== =====
Basic weighted average shares outstanding 351.9 342.2
===== =====
Earnings per share - diluted $1.62 $1.71 $0.09 5.6 %
===== ===== =====
Diluted weighted average shares outstanding 353.5 347.2
===== =====
EXHIBIT B
REVENUES AND OPERATING EARNINGS BY SEGMENT - (UNAUDITED)
DOLLARS IN MILLIONS
First Quarter Variance
2013 2014 $ %
---- ---- --- ---
Revenues:
---------
Aerospace $1,778 $2,125 $347 19.5 %
Combat Systems 1,553 1,317 (236) (15.2)%
Marine Systems 1,626 1,601 (25) (1.5)%
Information Systems and Technology 2,447 2,281 (166) (6.8)%
----- ----- ----
Total $7,404 $7,324 $(80) (1.1)%
====== ====== ====
Operating earnings:
-------------------
Aerospace $310 $404 $94 30.3 %
Combat Systems 215 136 (79) (36.7)%
Marine Systems 159 166 7 4.4 %
Information Systems and Technology 185 183 (2) (1.1)%
Corporate (22) (18) 4 18.2 %
Total $847 $871 $24 2.8 %
==== ==== ===
Operating margins:
------------------
Aerospace 17.4 % 19.0 %
Combat Systems 13.8 % 10.3 %
Marine Systems 9.8 % 10.4 %
Information Systems and Technology 7.6 % 8.0 %
Total 11.4 % 11.9 %
EXHIBIT C
PRELIMINARY CONSOLIDATED BALANCE SHEETS
DOLLARS IN MILLIONS
(Unaudited)
December 31, 2013 March 30, 2014
----------------- --------------
ASSETS
Current assets:
Cash and equivalents $5,301 $4,296
Accounts receivable 4,402 4,286
Contracts in process 4,780 4,889
Inventories 2,968 2,977
Other current assets 435 516
--------------------
Total current assets 17,886 16,964
-------------------- ------ ------
Noncurrent assets:
Property, plant and equipment, net 3,415 3,408
Intangible assets, net 1,217 1,184
Goodwill 11,977 11,946
Other assets 953 880
------------
Total noncurrent assets 17,562 17,418
----------------------- ------ ------
Total assets $35,448 $34,382
------- -------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term debt and current portion of long-term debt $1 $502
Accounts payable 2,248 2,215
Customer advances and deposits 6,584 6,502
Other current liabilities 3,361 3,404
-------------------------
Total current liabilities 12,194 12,623
------------------------- ------ ------
Noncurrent liabilities:
Long-term debt 3,908 3,409
Other liabilities 4,845 4,660
----------------- ----- -----
Total noncurrent liabilities 8,753 8,069
---------------------------- ----- -----
Shareholders' equity:
Common stock 482 482
Surplus 2,226 2,325
Retained earnings 19,428 19,809
Treasury stock (6,450) (7,723)
Accumulated other comprehensive loss (1,185) (1,203)
------------------------------------
Total shareholders' equity 14,501 13,690
-------------------------- ------ ------
Total liabilities and shareholders' equity $35,448 $34,382
------------------------------------------ ------- -------
EXHIBIT D
PRELIMINARY CONSOLIDATED STATEMENTS OF CASH FLOWS - (UNAUDITED)
DOLLARS IN MILLIONS
Three Months Ended
------------------
March 31, 2013 March 30, 2014
-------------- --------------
Cash flows from operating activities:
Net earnings $571 $595
Adjustments to reconcile net earnings to net cash provided by
operating activities:
Depreciation of property, plant and equipment 95 97
Amortization of intangible assets 47 35
Stock-based compensation expense 31 27
Excess tax benefit from stock-based compensation (12) (32)
Deferred income tax provision 11 42
(Increase) decrease in assets, net of effects of business acquisitions:
Accounts receivable (57) 116
Contracts in process (98) (94)
Inventories (95) (19)
Increase (decrease) in liabilities, net of effects of business acquisitions:
Accounts payable 34 (33)
Customer advances and deposits (94) (165)
Income taxes payable 217 150
Other current liabilities (176) (171)
Other, net 30 (120)
---------- --- ----
Net cash provided by operating activities 504 428
----------------------------------------- --- ---
Cash flows from investing activities:
Capital expenditures (75) (87)
Sales of available-for-sale securities 26 66
Purchases of available-for-sale securities (29) (60)
Other, net 2 4
---------- --- ---
Net cash used by investing activities (76) (77)
------------------------------------- --- ---
Cash flows from financing activities:
Purchases of common stock - (1,430)
Proceeds from option exercises 12 249
Dividends paid - (198)
Excess tax benefit from stock-based compensation 12 32
------------------------------------------------ --- ---
Net cash provided (used) by financing activities 24 (1,347)
------------------------------------------------ --- ------
Net cash used by discontinued operations (3) (9)
---------------------------------------- --- ---
Net increase (decrease) in cash and equivalents 449 (1,005)
Cash and equivalents at beginning of period 3,296 5,301
------------------------------------------- ----- -----
Cash and equivalents at end of period $3,745 $4,296
------------------------------------- ------ ------
EXHIBIT E
PRELIMINARY FINANCIAL INFORMATION - (UNAUDITED)
DOLLARS IN MILLIONS EXCEPT PER SHARE AND EMPLOYEE AMOUNTS
First Quarter First Quarter
2013 2014
---- ----
Other Financial Information:
----------------------------
Debt-to-equity (a) 33.8% 28.6%
Debt-to-capital (b) 25.2% 22.2%
Book value per share (c) $32.79 $39.93
Total taxes paid $26 $67
Company-sponsored research and development (d) $86
$91
Employment 89,900 94,400
Sales per employee (e) $338,000 $333,100
Shares outstanding 353,186,716 342,860,725
Non-GAAP Financial Measures:
----------------------------
Free cash flow from operations:
Net cash provided by operating activities $504 $428
Capital expenditures (75) (87)
Free cash flow from operations (f) $429 $341
==== ====
(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) Sales per employee is
calculated by dividing
revenues for the latest
12-month period by our
average number of employees
during that period.
(f) 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.
EXHIBIT F
BACKLOG - (UNAUDITED)
DOLLARS IN MILLIONS
Estimated
Total Potential Total Potential
First Quarter 2014 Funded Unfunded Backlog Contract Value* Contract Value
------------------ ------ -------- ------- -------------- --------------
Aerospace $12,747 $199 $12,946 $2,000 $14,946
Combat Systems 16,001 885 16,886 8,143 25,029
Marine Systems 12,447 5,248 17,695 2,046 19,741
Information Systems and Technology
7,134 1,343 8,477 16,494 24,971
----- ----- ----- ------ ------
Total $48,329 $7,675 $56,004 $28,683 $84,687
======= ====== ======= ======= =======
Fourth Quarter 2013
-------------------
Aerospace $13,785 $158 $13,943 $1,679 $15,622
Combat Systems 5,571 1,113 6,684 3,664 10,348
Marine Systems 11,795 5,063 16,858 3,098 19,956
Information Systems and Technology
7,253 1,267 8,520 19,127 27,647
----- ----- ----- ------ ------
Total $38,404 $7,601 $46,005 $27,568 $73,573
======= ====== ======= ======= =======
First Quarter 2013
------------------
Aerospace $15,029 $197 $15,226 $ - $15,226
Combat Systems 6,677 1,180 7,857 3,038 10,895
Marine Systems 12,551 3,108 15,659 2,324 17,983
Information Systems and Technology
8,158 1,551 9,709 19,811 29,520
----- ----- ----- ------ ------
Total $42,415 $6,036 $48,451 $25,173 $73,624
======= ====== ======= ======= =======
* 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.
EXHIBIT G
FIRST QUARTER 2014 SIGNIFICANT
ORDERS (UNAUDITED)
DOLLARS IN MILLIONS
We received the following significant orders during the first quarter of 2014:
Combat Systems
-- $10 billion from the Government of Canada's Canadian Commercial
Corporation to provide military and commercial vehicles, training and
support services to an international customer over 14 years. The
contract provides for an estimated potential $3 billion of additional
vehicles and services.
-- $75 from the U.S. Marine Corps for egress upgrade kits for the Cougar
vehicle in support of the Mine Resistant, Ambush Protected (MRAP)
program.
-- $65 from the United Kingdom's Ministry of Defence to develop three
additional Specialist Vehicle (SV) variants, bringing the total number
of variants under development to seven.
-- $60 from the U.S. Army to upgrade 12 M1A1 Abrams tanks to the M1A2
Systems Enhancement Package (SEP) configuration.
Marine Systems
-- $645 from the Navy exercising an option to construct an additional
DDG-51 destroyer, bringing the total number of ships to be constructed
under a multi-year procurement to five.
-- $520 from the Navy for long-lead material for five Virginia-class
submarines under Block IV of the program.
-- $130 from the Navy for the detail design and construction of the Mobile
Landing Platform (MLP) 3 Afloat Forward Staging Base (AFSB).
-- $130 from the Navy for repair and maintenance services for
nuclear-powered aircraft carriers homeported in Puget Sound, Washington.
-- $55 from the Navy for design work, including advanced nuclear plant
studies, for the next-generation ballistic-missile submarine.
Information Systems and Technology
-- $210 for the U.K.'s Bowman tactical communication system for long-term
support and capability upgrades.
-- $165 for combat and seaframe control systems on two Navy Littoral Combat
Ships (LCS).
-- $110 from the Army under the Warfighter Information Network-Tactical
(WIN-T) program for Increment 2 spares and support services.
-- $80 from the U.S. Department of Education to design, build and operate
the federal student aid application processing system.
-- $60 from the National Geospatial-Intelligence Agency (NGA) to
consolidate NGA's operations from six locations to one stand-alone
location at New Campus East (NCE).
EXHIBIT H
AEROSPACE SUPPLEMENTAL DATA - (UNAUDITED)
First
Quarter
2013 2014
---- ----
Gulfstream Green
Deliveries (units):
--------------------
Large-cabin aircraft 25 29
Mid-cabin aircraft 5 6
--- ---
Total 30 35
=== ===
Gulfstream Outfitted
Deliveries (units):
--------------------
Large-cabin aircraft 25 33
Mid-cabin aircraft 4 6
--- ---
Total 29 39
=== ===
Pre-owned Deliveries
(units): 2 -
-------------------- === ===
SOURCE General Dynamics
