GENERAL DYNAMICS CORPORATION 
FALLS CHURCH, Va., Jan. 28, 2015 /PRNewswire/ -- General Dynamics (NYSE: GD) today reported 2014 fourth-quarter and full-year results. On revenues of $8.4 billion, 2014 fourth-quarter earnings from continuing operations were $737 million, an 18.1 percent increase over fourth-quarter 2013. Diluted earnings per share for the quarter was $2.19 compared to diluted earnings per share of $1.76 in fourth-quarter 2013.
Full-year earnings from continuing operations rose to $2.7 billion from $2.5 billion in 2013. Diluted earnings per share for the year was $7.83, compared to diluted earnings per share of $7.03 in 2013. Revenues for 2014 were $30.9 billion.
Margins
Company-wide operating margins were 12.8 percent for the fourth quarter, 130 basis points higher than fourth-quarter 2013 margins. For the full year of 2014, operating margins were 12.6 percent, 70 basis points higher than full-year 2013 margins.
Cash
Net cash provided by operating activities was $3.7 billion for the full year. Free cash flow from operations, defined as net cash provided by operating activities less capital expenditures, was $3.2 billion for the year.
Backlog
The company's total backlog was $72.4 billion at the end of 2014, up 58 percent from the end of 2013. The estimated potential contract value, representing management's estimate of value in unfunded indefinite delivery, indefinite quantity (IDIQ) contracts and unexercised options, was $26.7 billion. Total potential contract value, the sum of all backlog components, was $99.1 billion at the end of the year.
The Aerospace group experienced increased demand, booking more aircraft orders than any quarter in more than three years. Significant awards received in the quarter from the company's defense groups include $435 million for the U.S. Navy's Mobile Landing Platform (MLP) Afloat Forward Staging Base (AFSB), $325 million from the Centers for Medicare & Medicaid Services for contact-center services, $90 million from the Navy for design work on the next-generation ballistic missile submarine and $80 million from the U.S. Army under a foreign military sales contract to upgrade Abrams tanks.
"General Dynamics' performance in 2014 was very strong," said Phebe N. Novakovic, General Dynamics chairman and chief executive officer. "We did what we said we would: increase operating earnings, margins and EPS through a relentless focus on operations and prudent capital deployment.
"In 2014, our earnings from continuing operations rose 7.5 percent, margins increased 70 basis points and EPS increased 11.4 percent compared to last year. We also had excellent free cash from operations of $3.2 billion and grew our backlog to more than $72.4 billion by year-end, a 58 percent increase over the end of 2013."
General Dynamics, headquartered in Falls Church, Virginia, is a market leader in business aviation; combat vehicles, weapons systems and munitions; shipbuilding; and communications and information technology systems. 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 fourth-quarter securities analyst conference call at 9 a.m. EST on Wednesday, January 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 January 28 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 31283960. The phone replay will be available from 1 p.m. January 28 through February 4, 2015.
EXHIBIT A
CONSOLIDATED STATEMENTS OF EARNINGS - (UNAUDITED)
DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS
Fourth Quarter Variance
2014 2013 $ %
---- ---- --- ---
Revenues $8,362 $8,047 $315 3.9%
Operating costs and expenses 7,295 7,123 (172)
----- ----- ----
Operating earnings 1,067 924 143 15.5%
Interest, net (19) (23) 4
Other, net (3) 4 (7)
--- --- ---
Earnings before income tax 1,045 905 140 15.5%
Provision for income tax, net 308 281 (27)
--- ---
Earnings from continuing operations $737 $624 $113 18.1%
==== ==== ====
Discontinued operations, net of tax (36) (129) 93
--- ----
Net earnings $701 $495 $206 41.6%
==== ==== ====
Earnings per share-basic
Continuing operations $2.23 $1.78 $0.45 25.3%
Discontinued operations $(0.11) $(0.37) $0.26
------ ------
Net earnings $2.12 $1.41 $0.71 50.4%
===== ===== =====
Basic weighted average shares outstanding 330.0 350.5
===== =====
Earnings per share-diluted
Continuing operations $2.19 $1.76 $0.43 24.4%
Discontinued operations $(0.10) $(0.36) $0.26
------ ------
Net earnings $2.09 $1.40 $0.69 49.3%
===== ===== =====
Diluted weighted average shares outstanding 335.8 354.6
===== =====
Note: Prior period information has been restated to reflect our axle business in discontinued operations.
EXHIBIT B
CONSOLIDATED STATEMENTS OF EARNINGS - (UNAUDITED)
DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS
Twelve Months Variance
2014 2013 $ %
---- ---- --- ---
Revenues $30,852 $30,930 $(78) (0.3)%
Operating costs and expenses 26,963 27,241 278
------ ------ ---
Operating earnings 3,889 3,689 200 5.4%
Interest, net (86) (86) -
Other, net (1) 8 (9)
--- --- ---
Earnings before income tax 3,802 3,611 191 5.3%
Provision for income tax, net 1,129 1,125 (4)
----- ----- ---
Earnings from continuing operations $2,673 $2,486 $187 7.5%
====== ====== ====
Discontinued operations, net of tax (140) (129) (11)
---- ---- ---
Net earnings $2,533 $2,357 $176 7.5%
====== ====== ====
Earnings per share-basic
Continuing operations $7.97 $7.09 $0.88 12.4%
Discontinued operations $(0.41) $(0.37) $(0.04)
------ ------ ------
Net earnings $7.56 $6.72 $0.84 12.5%
===== ===== =====
Basic weighted average shares outstanding 335.2 350.7
===== =====
Earnings per share-diluted
Continuing operations $7.83 $7.03 $0.80 11.4%
Discontinued operations $(0.41) $(0.36) $(0.05)
------ ------ ------
Net earnings $7.42 $6.67 $0.75 11.2%
===== ===== =====
Diluted weighted average shares outstanding 341.3 353.5
===== =====
Note: Prior period information has been restated to reflect our axle business in discontinued operations.
EXHIBIT C
REVENUES AND OPERATING EARNINGS BY SEGMENT - (UNAUDITED)
DOLLARS IN MILLIONS
Fourth Quarter Variance
2014 2013 $ %
---- ---- --- ---
Revenues:
---------
Aerospace $2,240 $2,135 $105 4.9%
Combat Systems 1,614 1,591 23 1.4%
Information Systems and Technology 2,468 2,691 (223) (8.3)%
Marine Systems 2,040 1,630 410 25.2%
----- ----- ---
Total $8,362 $8,047 $315 3.9%
====== ====== ====
Operating earnings:
-------------------
Aerospace $412 $348 $64 18.4%
Combat Systems 271 250 21 8.4%
Information Systems and Technology 212 196 16 8.2%
Marine Systems 193 159 34 21.4%
Corporate (21) (29) 8 27.6%
--- --- ---
Total $1,067 $924 $143 15.5%
====== ==== ====
Operating margins:
------------------
Aerospace 18.4% 16.3%
Combat Systems 16.8% 15.7%
Information Systems and Technology 8.6% 7.3%
Marine Systems 9.5% 9.8%
Total 12.8% 11.5%
Note: Prior period information has been restated to reflect our axle business in discontinued operations.
EXHIBIT D
REVENUES AND OPERATING EARNINGS BY SEGMENT - (UNAUDITED)
DOLLARS IN MILLIONS
Twelve Months Variance
2014 2013 $ %
---- ---- --- ---
Revenues:
---------
Aerospace $8,649 $8,118 $531 6.5%
Combat Systems 5,732 5,832 (100) (1.7)%
Information Systems and Technology 9,159 10,268 (1,109) (10.8)%
Marine Systems 7,312 6,712 600 8.9%
----- ----- ---
Total $30,852 $30,930 $(78) (0.3)%
======= ======= ====
Operating earnings:
-------------------
Aerospace $1,611 $1,416 $195 13.8%
Combat Systems 862 908 (46) (5.1)%
Information Systems and Technology 785 795 (10) (1.3)%
Marine Systems 703 666 37 5.6%
Corporate (72) (96) 24 25.0%
--- ---
Total $3,889 $3,689 $200 5.4%
====== ====== ====
Operating margins:
------------------
Aerospace 18.6% 17.4%
Combat Systems 15.0% 15.6%
Information Systems and Technology 8.6% 7.7%
Marine Systems 9.6% 9.9%
Total 12.6% 11.9%
Note: Prior period information has been restated to reflect our axle business in discontinued operations.
EXHIBIT E
CONSOLIDATED BALANCE SHEETS - (UNAUDITED)
DOLLARS IN MILLIONS
December 31, 2014 December 31,
2013
----------------- -------------
ASSETS
Current assets:
Cash and equivalents $4,388 $5,301
Accounts receivable 4,050 4,370
Contracts in process 4,591 4,780
Inventories 3,221 2,890
Other current assets 1,157 821
----- ---
Total current assets 17,407 18,162
------ ------
Noncurrent assets:
Property, plant and equipment, net 3,329 3,359
Intangible assets, net 912 1,044
Goodwill 11,731 11,932
Other assets 1,976 997
----- ---
Total noncurrent assets 17,948 17,332
------ ------
Total assets $35,355 $35,494
------- -------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term debt and current portion of long-term debt $501 $1
Accounts payable 2,057 2,216
Customer advances and deposits 7,335 6,584
Other current liabilities 3,858 3,458
----- -----
Total current liabilities 13,751 12,259
------ ------
Noncurrent liabilities:
Long-term debt 3,410 3,908
Other liabilities 6,365 4,826
-----
Total noncurrent liabilities 9,775 8,734
----- -----
Shareholders' equity:
Common stock 482 482
Surplus 2,548 2,226
Retained earnings 21,127 19,428
Treasury stock (9,396) (6,450)
Accumulated other comprehensive loss (2,932) (1,185)
------ ------
Total shareholders' equity 11,829 14,501
------ ------
Total liabilities and shareholders' equity $35,355 $35,494
------- -------
Note: Prior period information has been restated to reflect our axle business in discontinued operations.
EXHIBIT F
CONSOLIDATED STATEMENTS OF CASH FLOWS - (UNAUDITED)
DOLLARS IN MILLIONS
Twelve Months Ended
-------------------
December 31, 2014 December 31, 2013
----------------- -----------------
Cash flows from operating activities-continuing operations:
Net earnings $2,533 $2,357
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation of property, plant and equipment 375 382
Amortization of intangible assets 121 143
Stock-based compensation expense 128 120
Excess tax benefit from stock-based compensation (83) (23)
Deferred income tax provision 136 117
Discontinued operations, net of tax 140 129
(Increase) decrease in assets, net of effects of business acquisitions:
Accounts receivable 330 (223)
Contracts in process 281 177
Inventories (303) (200)
Increase (decrease) in liabilities, net of effects of business acquisitions:
Accounts payable (161) (204)
Customer advances and deposits 691 330
Other current liabilities (246) (118)
Other, net (214) 124
---- ---
Net cash provided by operating activities 3,728 3,111
----- -----
Cash flows from investing activities-continuing operations:
Capital expenditures (521) (436)
Purchases of held-to-maturity securities (500) -
Purchases of available-for-sale securities (136) (135)
Sales of available-for-sale securities 135 99
Maturities of available-for-sale securities 4 14
Other, net (84) 95
--- ---
Net cash used by investing activities (1,102) (363)
------ ----
Cash flows from financing activities-continuing operations:
Purchases of common stock (3,382) (740)
Dividends paid (822) (591)
Proceeds from option exercises 547 583
Other 82 23
--- ---
Net cash used by financing activities (3,575) (725)
------ ----
Net cash provided (used) by discontinued operations 36 (18)
--- ---
Net (decrease) increase in cash and equivalents (913) 2,005
Cash and equivalents at beginning of period 5,301 3,296
----- -----
Cash and equivalents at end of period $4,388 $5,301
====== ======
Note: Prior period information has been restated to reflect our axle business in discontinued operations.
EXHIBIT G
PRELIMINARY FINANCIAL INFORMATION - (UNAUDITED)
DOLLARS IN MILLIONS EXCEPT PER SHARE AND EMPLOYEE AMOUNTS
Fourth Quarter 2014 Fourth Quarter
2013
------------------- ---------------
Other Financial Information (a):
--------------------------------
Return on equity (b) 20.2% 20.1%
Debt-to-equity (c) 33.1% 27.0%
Debt-to-capital (d) 24.8% 21.2%
Book value per share (e) $35.61 $41.03
Total taxes paid $446 $175
Company-sponsored research and development (f) $101 $68
Shares outstanding 332,164,097 353,402,794
Non-GAAP Financial Measures (a):
--------------------------------
2014 2013
---- ----
Quarter Year-to-date Quarter Year-to-date
------- ------------ ------- ------------
Free cash flow from operations:
Net cash provided by operating activities $(70) $3,728 $1,558 $3,111
Capital expenditures (184) (521) (169) (436)
---- ---- ---- ----
Free cash flow from operations (g) $(254) $3,207 $1,389 $2,675
===== ====== ====== ======
Return on invested capital:
Earnings from continuing operations $2,673 $2,486
After-tax interest expense 67 67
After-tax amortization expense 79 93
--- ---
Net operating profit after taxes 2,819 2,646
Average invested capital 18,692 18,764
Return on invested capital (h) 15.1% 14.1%
==== ====
Notes describing the calculation of the other financial information and a reconciliation of non-GAAP financial measures are on the following page.
EXHIBIT G (cont.)
PRELIMINARY FINANCIAL INFORMATION -
(UNAUDITED)
DOLLARS IN MILLIONS EXCEPT PER SHARE AND
EMPLOYEE AMOUNTS
(a) Prior period information has been
restated to reflect our axle
business in discontinued
operations.
(b) Return on equity is calculated by
dividing earnings from continuing
operations for the latest
12-month period by our average
equity during that period.
(c) Debt-to-equity ratio is
calculated as total debt divided
by total equity as of the end of
the period.
(d) 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.
(e) Book value per share is calculated
as total equity divided by total
outstanding shares as of the end
of the period.
(f) Includes independent research and
development and Gulfstream
product-development costs.
(g) 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.
(h) 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 excluding
AOCL 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. After-tax interest
and amortization expense is
calculated using the statutory
tax rate of 35 percent.
EXHIBIT H
BACKLOG - (UNAUDITED)
DOLLARS IN MILLIONS
Funded Unfunded Total Estimated Total Potential
Backlog Potential Contract
Contract Value* Value
-------------- -----
Fourth Quarter 2014
-------------------
Aerospace $13,115 $117 $13,232 $2,734 $15,966
Combat Systems 19,292 506 19,798 5,522 25,320
Information Systems and Technology 7,070 1,539 8,609 16,115 24,724
Marine Systems 13,452 17,319 30,771 2,311 33,082
------ ------ ------ ----- ------
Total $52,929 $19,481 $72,410 $26,682 $99,092
======= ======= ======= ======= =======
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
======= ======= ======= ======= ========
Fourth Quarter 2013
-------------------
Aerospace $13,785 $158 $13,943 $1,679 $15,622
Combat Systems 5,451 1,113 6,564 3,664 10,228
Information Systems and Technology 7,253 1,267 8,520 19,127 27,647
Marine Systems 11,795 5,063 16,858 3,098 19,956
------ ----- ------ ----- ------
Total $38,284 $7,601 $45,885 $27,568 $73,453
======= ====== ======= ======= =======
* 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.
Note: Prior period information has been
restated to reflect our axle business in
discontinued operations.
EXHIBIT H-1
BACKLOG AND ESTIMATED CONTRACT
VALUE -(UNAUDITED)
DOLLARS IN MILLIONS
https://photos.prnewswire.com/prnvar/20150127/171673-INFO
Note: Prior period information
has been restated to reflect
our axle business in
discontinued operations.
EXHIBIT I
FOURTH QUARTER 2014 SIGNIFICANT
ORDERS (UNAUDITED)
DOLLARS IN MILLIONS
We received the following significant orders during the fourth quarter of 2014:
Combat Systems
-- $80 from the U.S. Army under a foreign military sales contract to
convert Abrams tanks to the Saudi M1A2S configuration for the Kingdom of
Saudi Arabia.
-- $75 from the Army under the Stryker wheeled armored vehicle program for
upgrade kits.
-- $70 from the Army for production of Hydra-70 rockets.
-- $55 from the Army for technical support on the Abrams main battle tank
program.
Information Systems and Technology
-- $325 from the Centers for Medicare & Medicaid Services for
contact-center services.
-- $135 for four related awards to design and develop next-generation space
payloads.
-- $85 from the U.S. Department of State to provide supply chain management
services.
-- $70 from the U.S. Navy for production and support of the U.S. and U.K.
Trident II submarine weapons systems.
-- $55 from the Commonwealth of Massachusetts to develop, implement and
operate the Massachusetts Next Generation (NG9-1-1) emergency
communication system.
-- $55 from the Government of Canada to design and build a network of
antennas and provide in-service support.
-- $50 from the Army for ruggedized computing equipment under the Common
Hardware Systems-4 (CHS-4) program.
Marine Systems
-- $435 from the Navy for detailed design and construction of the Mobile
Landing Platform (MLP) Afloat Forward Staging Base (AFSB).
-- $90 from the Navy for design work on the next-generation ballistic
missile submarine.
-- $80 from the Navy for planning yard services for the DDG-51 destroyer
and the FFG-7 Oliver Hazard Perry-class frigate programs.
EXHIBIT J
AEROSPACE SUPPLEMENTAL DATA - (UNAUDITED)
Fourth Quarter Twelve Months
2014 2013 2014 2013
---- ---- ---- ----
Gulfstream Green
Deliveries (units):
--------------------
Large-cabin aircraft 28 27 115 110
Mid-cabin aircraft 10 13 29 29
--- --- --- ---
Total 38 40 144 139
=== === === ===
Gulfstream Outfitted
Deliveries (units):
--------------------
Large-cabin aircraft 33 34 117 121
Mid-cabin aircraft 9 7 33 23
--- --- --- ---
Total 42 41 150 144
=== === === ===
Pre-owned Deliveries
(units): - 2 3 11
-------------------- === === === ===
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SOURCE General Dynamics
