GENERAL DYNAMICS CORPORATION FALLS CHURCH, Va., July 29, 2015 /PRNewswire/ --
-- Compared to second-quarter 2014:
-- Revenue up 5.5% to $7.9 billion
-- Operating earnings up 13.9% to $1.08 billion; margins increased to
13.7%
-- Earnings from continuing operations up 16.4% to $752 million
-- Earnings per fully diluted share up 20.7% to $2.27
-- Company increases full-year guidance
General Dynamics (NYSE: GD) today reported second-quarter 2015 earnings from continuing operations of $752 million, a 16.4 percent increase over second-quarter 2014, on revenue of $7.9 billion. Diluted earnings per share (EPS) were $2.27 per share compared to $1.88 in second-quarter 2014, a 20.7 percent increase.
"General Dynamics' performance was rock solid this quarter, rounding out a strong first half. We continue to have impressive operating leverage with operating earnings at more than $1 billion, up 13.9 percent over the prior year's quarter," said Phebe N. Novakovic, chairman and chief executive officer. "Year to date, our revenue is up 6.3 percent across the business with organic growth in all four segments, including the defense segments."
Margins
Company-wide operating margins for the second quarter of 2015 were 13.7 percent, with margin expansion in three of the company's four business groups compared to the second quarter of 2014.
Cash
Net cash provided by operating activities in the quarter totaled $603 million. Free cash flow from operations, defined as net cash provided by operating activities less capital expenditures, was $511 million.
Capital Deployment
The company repurchased 7.5 million of its outstanding shares in the second quarter. Year-to-date, the company has repurchased 12.1 million outstanding shares.
Backlog
General Dynamics' backlog remained steady at the end of second-quarter 2015, with funded backlog at $55.4 billion and total backlog of $70 billion. Aerospace backlog increased by seven percent in the quarter, with strong order activity across the product line. Information Systems and Technology also had several notable orders in the quarter leading to higher backlog. Estimated potential contract value, representing management's estimate of value in unfunded indefinite delivery, indefinite quantity (IDIQ) contracts and unexercised options, was $25.6 billion. Total potential contract value, the sum of all backlog components, was $95.6 billion at the end of the quarter.
Guidance
The company is increasing full-year EPS guidance for continuing operations from $8.05 - $8.10 to $8.70 - $8.80.
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 second-quarter securities analyst conference call at 9 a.m. EDT on Wednesday, July 29, 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 1 p.m. on July 29 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 66737646. The phone replay will be available from 1 p.m. July 29 through August 5, 2015.
EXHIBIT A
CONSOLIDATED STATEMENTS OF EARNINGS - (UNAUDITED)
DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS
Second Quarter Variance
2015 2014 $ %
---- ---- --- ---
Revenues $7,882 $7,474 $408 5.5%
Operating costs and expenses 6,801 6,525 (276)
----- ----- ----
Operating earnings 1,081 949 132 13.9%
Interest, net (20) (24) 4
Earnings before income tax 1,061 925 $136 14.7%
Provision for income tax, net 309 279 (30)
--- --- ---
Earnings from continuing operations $752 $646 $106 16.4%
==== ==== ====
Discontinued operations, net of tax - (105) 105
--- ---- ---
Net earnings $752 $541 211 39.0%
==== ==== ===
Earnings per share-basic
Continuing operations $2.31 $1.92 $0.39 20.3%
Discontinued operations $ - $(0.31) $0.31
--- --- ------ -----
Net earnings $2.31 $1.61 $0.70 43.5%
===== ===== =====
Basic weighted average shares outstanding 326.2 336.7
===== =====
Earnings per share-diluted
Continuing operations $2.27 $1.88 $0.39 20.7%
Discontinued operations $ - $(0.30) $0.30
--- --- ------ -----
Net earnings $2.27 $1.58 $0.69 43.7%
===== ===== =====
Diluted weighted average shares outstanding 331.4 342.8
===== =====
EXHIBIT B
CONSOLIDATED STATEMENTS OF EARNINGS - (UNAUDITED)
DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS
Six Months Variance
2015 2014 $ %
---- ---- --- ---
Revenues $15,666 $14,739 $927 6.3%
Operating costs and expenses 13,558 12,916 (642)
------ ------ ----
Operating earnings 2,108 1,823 285 15.6%
Interest, net (41) (46) 5
Other, net 3 1 2
--- --- ---
Earnings before income tax 2,070 1,778 292 16.4%
Provision for income tax, net 602 536 (66)
--- --- ---
Earnings from continuing operations $1,468 $1,242 $226 18.2%
====== ====== ====
Discontinued operations, net of tax - (106) 106
--- ---- ---
Net earnings $1,468 $1,136 $332 29.2%
====== ====== ====
Earnings per share-basic
Continuing operations $4.48 $3.66 $0.82 22.4%
Discontinued operations $ - $(0.31) $0.31
--- --- ------ -----
Net earnings $4.48 $3.35 $1.13 33.7%
===== ===== =====
Basic weighted average shares outstanding 327.7 339.5
===== =====
Earnings per share-diluted
Continuing operations $4.41 $3.60 $0.81 22.5%
Discontinued operations $ - $(0.31) $0.31
--- --- ------ -----
Net earnings $4.41 $3.29 $1.12 34.0%
===== ===== =====
Diluted weighted average shares outstanding 333.0 345.4
===== =====
EXHIBIT C
REVENUES AND OPERATING EARNINGS BY SEGMENT - (UNAUDITED)
DOLLARS IN MILLIONS
Second Quarter Variance
2015 2014 $ %
---- ---- --- ---
Revenues:
---------
Aerospace $2,258 $1,995 $263 13.2%
Combat Systems 1,408 1,465 (57) (3.9)%
Information Systems and Technology 2,215 2,163 52 2.4%
Marine Systems 2,001 1,851 150 8.1%
----- ----- ---
Total $7,882 $7,474 $408 5.5%
====== ====== ====
Operating earnings:
-------------------
Aerospace $439 $384 $55 14.3%
Combat Systems 226 220 6 2.7%
Information Systems and Technology 237 188 49 26.1%
Marine Systems 187 174 13 7.5%
Corporate (8) (17) 9 52.9%
--- --- ---
Total $1,081 $949 $132 13.9%
====== ==== ====
Operating margins:
------------------
Aerospace 19.4% 19.2%
Combat Systems 16.1% 15.0%
Information Systems and Technology 10.7% 8.7%
Marine Systems 9.3% 9.4%
Total 13.7% 12.7%
EXHIBIT D
REVENUES AND OPERATING EARNINGS BY SEGMENT - (UNAUDITED)
DOLLARS IN MILLIONS
Six Months Variance
2015 2014 $ %
---- ---- --- ---
Revenues:
---------
Aerospace $4,366 $4,120 $246 6.0%
Combat Systems 2,771 2,723 48 1.8%
Information Systems and Technology 4,585 4,444 141 3.2%
Marine Systems 3,944 3,452 492 14.3%
----- ----- ---
Total $15,666 $14,739 $927 6.3%
======= ======= ====
Operating earnings:
-------------------
Aerospace $870 $788 $82 10.4%
Combat Systems 430 359 71 19.8%
Information Systems and Technology 454 371 83 22.4%
Marine Systems 375 340 35 10.3%
Corporate (21) (35) 14 40.0%
--- --- ---
Total $2,108 $1,823 $285 15.6%
====== ====== ====
Operating margins:
------------------
Aerospace 19.9% 19.1%
Combat Systems 15.5% 13.2%
Information Systems and Technology 9.9% 8.3%
Marine Systems 9.5% 9.8%
Total 13.5% 12.4%
EXHIBIT E
CONSOLIDATED BALANCE SHEETS
DOLLARS IN MILLIONS
(Unaudited)
July 5, 2015 December 31,
2014
------------ -------------
ASSETS
Current assets:
Cash and equivalents $4,032 $4,388
Accounts receivable 3,595 4,050
Contracts in process 4,273 4,591
Inventories 3,359 3,221
Other current assets 514 1,157
--- -----
Total current assets 15,773 17,407
------ ------
Noncurrent assets:
Property, plant and equipment, net 3,329 3,329
Intangible assets, net 841 912
Goodwill 11,644 11,731
Other assets 2,067 1,976
----- -----
Total noncurrent assets 17,881 17,948
------ ------
Total assets $33,654 $35,355
------- -------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term debt and current portion of long-term debt $2 $501
Accounts payable 2,275 2,057
Customer advances and deposits 6,104 7,335
Other current liabilities 4,327 3,858
----- -----
Total current liabilities 12,708 13,751
------ ------
Noncurrent liabilities:
Long-term debt 3,411 3,410
Other liabilities 6,259 6,365
----- -----
Total noncurrent liabilities 9,670 9,775
----- -----
Shareholders' equity:
Common stock 482 482
Surplus 2,657 2,548
Retained earnings 22,143 21,127
Treasury stock (10,914) (9,396)
Accumulated other comprehensive loss (3,092) (2,932)
------ ------
Total shareholders' equity 11,276 11,829
------ ------
Total liabilities and shareholders' equity $33,654 $35,355
------- -------
EXHIBIT F
CONSOLIDATED STATEMENTS OF CASH FLOWS - (UNAUDITED)
DOLLARS IN MILLIONS
Six Months Ended
----------------
July 5, 2015 June 29, 2014
------------ -------------
Cash flows from operating activities-continuing operations:
Net earnings $1,468 $1,136
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation of property, plant and equipment 184 191
Amortization of intangible assets 59 61
Equity-based compensation expense 71 64
Excess tax benefit from stock-based compensation (57) (54)
Deferred income tax provision 21 64
Discontinued operations, net of tax - 106
(Increase) decrease in assets, net of effects of business acquisitions:
Accounts receivable 455 (104)
Contracts in process 330 (130)
Inventories (149) (278)
Increase (decrease) in liabilities, net of effects of business acquisitions:
Accounts payable 222 270
Customer advances and deposits (1,252) 25
Other, net (4) (57)
--- ---
Net cash provided by operating activities 1,348 1,294
----- -----
Cash flows from investing activities-continuing operations:
Maturities of held-to-maturity securities 500 -
Proceeds from sales of assets 259 3
Capital expenditures (190) (162)
Other, net (18) 14
--- ---
Net cash provided (used) by investing activities 551 (145)
--- ----
Cash flows from financing activities-continuing operations:
Purchases of common stock (1,565) (2,691)
Repayment of fixed-rate notes (500) -
Dividends paid (432) (411)
Proceeds from stock options exercises 198 415
Other, net 60 54
--- ---
Net cash used by financing activities (2,239) (2,633)
------ ------
Net cash (used) provided by discontinued operations (16) 24
--- ---
Net decrease in cash and equivalents (356) (1,460)
Cash and equivalents at beginning of period 4,388 5,301
----- -----
Cash and equivalents at end of period $4,032 $3,841
====== ======
EXHIBIT G
PRELIMINARY FINANCIAL INFORMATION - (UNAUDITED)
DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS
Second Quarter Second Quarter
2015 2014
---- ----
Other Financial Information:
----------------------------
Debt-to-equity (a) 30.3% 29.8%
Debt-to-capital (b) 23.2% 23.0%
Book value per share (c) $34.94 $39.24
Total taxes paid $530 $214
Company-sponsored research and development (d) $101 $98
Shares outstanding 322,727,167 334,315,950
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 $603 $1,348 $866 $1,294
Capital expenditures (92) (190) (75) (162)
--- ---- --- ----
Free cash flow from operations (e) $511 $1,158 $791 $1,132
==== ====== ==== ======
(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.
EXHIBIT H
BACKLOG - (UNAUDITED)
DOLLARS IN MILLIONS
Funded Unfunded Total Estimated Total Potential
Backlog Potential Contract
Contract Value* Value
-------------- -----
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
======= ======= ======= ======= =======
First Quarter 2015
------------------
Aerospace $12,947 $147 $13,094 $2,699 $15,793
Combat Systems 18,942 462 19,404 5,459 24,863
Information Systems and Technology 6,842 1,815 8,657 15,296 23,953
Marine Systems 17,248 12,138 29,386 2,143 31,529
------ ------ ------ ----- ------
Total $55,979 $14,562 $70,541 $25,597 $96,138
======= ======= ======= ======= =======
Second Quarter 2014
-------------------
Aerospace $12,556 $172 $12,728 $1,920 $14,648
Combat Systems 15,363 852 16,215 8,074 24,289
Information Systems and Technology 7,343 1,602 8,945 16,477 25,422
Marine Systems 15,458 17,747 33,205 1,938 35,143
------ ------ ----- ------
Total $50,720 $20,373 $71,093 $28,409 $99,502
======= ======= ======= ======= =======
* 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 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
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EXHIBIT I
SECOND QUARTER 2015 SIGNIFICANT
ORDERS (UNAUDITED)
DOLLARS IN MILLIONS
We received the following significant orders during the second quarter of 2015:
Combat Systems
-- $125 from the U.S. Army for production of Hydra-70 rockets.
-- $50 from the Army for contractor logistics support on the Abrams main
battle tank program.
-- An IDIQ contract from the Army to demilitarize munitions. The program
has a maximum potential value of $225 over five years among two
awardees.
Information Systems and Technology
-- $350 from the Army to build Warfighter Information Network - Tactical
(WIN-T) Increment 2 systems and for engineering and development work
under Increment 3 of the program.
-- $290 from the Centers for Medicare & Medicaid Services for
contact-center services.
-- $225 from the U.S. Department of State to provide supply chain
management services.
-- $190 from the Army for ruggedized computing equipment under the CHS-4
program.
-- $105 from the U.S. Navy for the procurement of material to support
production of guidance and missile hardware for the D5 Life Extension
Program.
Marine Systems
-- $155 from the U.S. Navy for design work on the next-generation ballistic
missile submarine.
-- $85 from the Navy to provide support, materials and facilities to
maintain and modernize twelve Littoral Combat Ships (LCS).
-- $45 from the Navy for planning efforts in support of maintenance and
modernization work on USS Montpelier, a Los Angeles-class attack
submarine. The contract has a potential value of $260 if all options are
exercised.
EXHIBIT J
AEROSPACE SUPPLEMENTAL DATA - (UNAUDITED)
Second Quarter Six Months
2015 2014 2015 2014
---- ---- ---- ----
Gulfstream Green Deliveries (units):
------------------------------------
Large-cabin aircraft 29 26 56 55
Mid-cabin aircraft 7 7 14 13
--- --- --- ---
Total 36 33 70 68
=== === === ===
Gulfstream Outfitted Deliveries (units):
----------------------------------------
Large-cabin aircraft 33 26 58 59
Mid-cabin aircraft 8 12 15 18
--- --- --- ---
Total 41 38 73 77
=== === === ===
Pre-owned Deliveries (units): 4 - 5 -
----------------------------- === === === ===
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SOURCE General Dynamics
