GENERAL DYNAMICS CORPORATION FALLS CHURCH, Va., April 27, 2016 /PRNewswire/ --General Dynamics (NYSE: GD) today reported first-quarter 2016 earnings from continuing operations of $730 million, a 2 percent increase over first-quarter 2015, on revenue of $7.7 billion. Diluted earnings per share from continuing operations were $2.34 compared to $2.14 in the year-ago quarter, a 9.3 percent increase.
"General Dynamics delivered a strong first quarter, with all four groups contributing to our outstanding operating performance," said Phebe N. Novakovic, chairman and chief executive officer of General Dynamics. "We generated positive operating leverage and achieved the sixth straight quarter with operating earnings of more than one billion dollars."
Margin
Company-wide operating margin for the first quarter of 2016 was 13.6 percent, a 40 basis-point increase when compared to 13.2 percent in first-quarter 2015. Three of the company's four business groups expanded margins over the year-ago period.
Cash
Net cash provided by operating activities in the quarter totaled $439 million. Free cash flow from operations, defined as net cash provided by operating activities less capital expenditures, was $374 million.
Capital Deployment
The company repurchased 7.8 million of its outstanding shares in the first quarter. In addition, in March, the board of directors increased the company's quarterly dividend by 10.1 percent to $0.76 per share, representing the company's 19th consecutive annual dividend increase.
Backlog
General Dynamics' total backlog at the end of first-quarter 2016 was $64.7 billion. There was order activity across the Gulfstream product portfolio and strong demand for defense products, which resulted in a book-to-bill ratio (orders divided by revenue) of one-to-one in the Combat Systems group and 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 $24.5 billion. Total potential contract value, the sum of all backlog components, was $89.2 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 2015 were $31.5 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 first-quarter securities analyst conference call at 9 a.m. EDT on Wednesday, April 27, 2016. 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 April 27 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 89290991. The phone replay will be available from 3 p.m. April 27 through May 3, 2016.
EXHIBIT A
CONSOLIDATED STATEMENTS OF EARNINGS - (UNAUDITED)
DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS
First Quarter Variance
2016 2015 $ %
---- ---- --- ---
Revenue $7,724 $7,784 $(60) (0.8)%
Operating costs and expenses 6,671 6,757 86
----- ----- ---
Operating earnings 1,053 1,027 26 2.5%
Interest, net (22) (21) (1)
Other, net 10 3 7
--- --- ---
Earnings from continuing operations before income tax 1,041 1,009 $32 3.2%
Provision for income tax, net 311 293 (18)
--- --- ---
Earnings from continuing operations $730 $716 $14 2.0%
==== ==== ===
Discontinued operations (13) * - (13)
--- --- ---
Net earnings $717 $716 $1 0.1%
==== ==== ===
Earnings per share-basic
Continuing operations $2.37 $2.18 $0.19 8.7%
Discontinued operations $(0.04) * $ - $(0.04)
------ --- --- ------
Net earnings $2.33 $2.18 $0.15 6.9%
===== ===== =====
Basic weighted average shares outstanding 307.9 329.2
===== =====
Earnings per share-diluted
Continuing operations $2.34 $2.14 $0.20 9.3%
Discontinued operations $(0.04) * $ - $(0.04)
------ --- --- ------
Net earnings $2.30 $2.14 $0.16 7.5%
===== ===== =====
Diluted weighted average shares outstanding 312.3 334.7
===== =====
* In the
first
quarter of
2016, we
recognized
a final
adjustment
to the
loss on
the sale
of our
axle
business
in the
Combat
Systems
group. The
business
was sold
in 2015.
EXHIBIT B
REVENUE AND OPERATING EARNINGS BY SEGMENT - (UNAUDITED)
DOLLARS IN MILLIONS
First Quarter Variance
2016 2015 $ %
---- ---- --- ---
Revenue:
--------
Aerospace $1,987 $2,108 $(121) (5.7)%
Combat Systems 1,273 1,363 (90) (6.6)%
Information Systems and Technology 2,333 2,370 (37) (1.6)%
Marine Systems 2,131 1,943 188 9.7%
----- ----- ---
Total $7,724 $7,784 $(60) (0.8)%
====== ====== ====
Operating earnings:
-------------------
Aerospace $411 $431 $(20) (4.6)%
Combat Systems 217 204 13 6.4%
Information Systems and Technology 248 217 31 14.3%
Marine Systems 192 188 4 2.1%
Corporate (15) (13) (2) (15.4)%
--- --- ---
Total $1,053 $1,027 $26 2.5%
====== ====== ===
Operating margin:
-----------------
Aerospace 20.7% 20.4%
Combat Systems 17.0% 15.0%
Information Systems and Technology 10.6% 9.2%
Marine Systems 9.0% 9.7%
Total 13.6% 13.2%
EXHIBIT C
CONSOLIDATED BALANCE SHEETS
DOLLARS IN MILLIONS
(Unaudited)
April 3, 2016 December 31,
2015
------------- -------------
ASSETS
Current assets:
Cash and equivalents $1,907 $2,785
Accounts receivable 3,654 3,446
Contracts in process 4,705 4,357
Inventories 3,504 3,366
Other current assets 418 617
--- ---
Total current assets 14,188 14,571
------ ------
Noncurrent assets:
Property, plant and equipment, net 3,477 3,466
Intangible assets, net 759 763
Goodwill 11,595 11,443
Other assets 1,683 1,754
----- -----
Total noncurrent assets 17,514 17,426
Total assets $31,702 $31,997
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term debt and current portion of long-term debt $501 $501
Accounts payable 2,150 1,964
Customer advances and deposits 5,560 5,674
Other current liabilities 4,212 4,306
----- -----
Total current liabilities 12,423 12,445
------ ------
Noncurrent liabilities:
Long-term debt 2,899 2,898
Other liabilities 5,798 5,916
----- -----
Total noncurrent liabilities 8,697 8,814
----- -----
Shareholders' equity:
Common stock 482 482
Surplus 2,740 2,730
Retained earnings 23,687 23,204
Treasury stock (13,386) (12,392)
Accumulated other comprehensive loss (2,941) (3,286)
------ ------
Total shareholders' equity 10,582 10,738
Total liabilities and shareholders' equity $31,702 $31,997
======= =======
EXHIBIT D
CONSOLIDATED STATEMENTS OF CASH FLOWS - (UNAUDITED)
DOLLARS IN MILLIONS
Three Months Ended
------------------
April 3, 2016 April 5, 2015
------------- -------------
Cash flows from operating activities-continuing operations:
Net earnings $717 $716
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation of property, plant and equipment 90 94
Amortization of intangible assets 27 30
Equity-based compensation expense 27 40
Excess tax benefit from equity-based compensation (15) (30)
Deferred income tax provision 20 (8)
Discontinued operations 13 -
(Increase) decrease in assets, net of effects of business acquisitions:
Accounts receivable (195) 388
Contracts in process (337) 152
Inventories (133) (183)
Increase (decrease) in liabilities, net of effects of business acquisitions:
Accounts payable 179 210
Customer advances and deposits (209) (871)
Income taxes payable 268 251
Other current liabilities (70) (38)
Other, net 57 (6)
--- ---
Net cash provided by operating activities 439 745
--- ---
Cash flows from investing activities:
Capital expenditures (65) (98)
Maturities of held-to-maturity securities - 500
Other, net (53) 94
--- ---
Net cash (used) provided by investing activities (118) 496
---- ---
Cash flows from financing activities:
Purchases of common stock (1,026) (620)
Dividends paid (215) (206)
Proceeds from stock options exercises 33 87
Repayment of fixed-rate notes - (500)
Other, net 15 30
--- ---
Net cash used by financing activities (1,193) (1,209)
------ ------
Net cash used by discontinued operations (6) (8)
--- ---
Net (decrease) increase in cash and equivalents (878) 24
Cash and equivalents at beginning of period 2,785 4,388
----- -----
Cash and equivalents at end of period $1,907 $4,412
====== ======
EXHIBIT E
PRELIMINARY FINANCIAL INFORMATION - (UNAUDITED)
DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS
First Quarter 2016 First Quarter 2015
------------------ ------------------
Other Financial Information (a):
--------------------------------
Debt-to-equity (b) 32.1% 29.5%
Debt-to-capital (c) 24.3% 22.8%
Book value per share (d) $34.62 $35.04
Total taxes paid $21 $53
Company-sponsored research and development (e) $104 $96
Shares outstanding 305,646,967 328,732,777
Non-GAAP Financial Measures:
----------------------------
Free cash flow from operations:
Net cash provided by operating activities $439 $745
Capital expenditures (65) (98)
--- ---
Free cash flow from operations (f) $374 $647
==== ====
(a) Prior period information has been
restated to reflect the
reclassification of debt issuance
costs from other assets to debt in
accordance with ASU 2015-03,
Interest -Imputation of Interest
(Subtopic 835-30): Simplifying the
Presentation of Debt Issuance
Costs, which we adopted in the
fourth quarter of 2015.
(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 F
BACKLOG - (UNAUDITED)
DOLLARS IN MILLIONS
Funded Unfunded Total Estimated Total Potential
Backlog Potential Contract
Contract Value* Value
-------------- -----
First Quarter 2016
------------------
Aerospace $12,465 $147 $12,612 $2,368 $14,980
Combat Systems 18,260 565 18,825 4,959 23,784
Information Systems and Technology 7,442 1,991 9,433 15,146 24,579
Marine Systems 16,547 7,317 23,864 1,999 25,863
------ ----- ------ ----- ------
Total $54,714 $10,020 $64,734 $24,472 $89,206
======= ======= ======= ======= =======
Fourth Quarter 2015
-------------------
Aerospace $13,292 $106 $13,398 $2,437 $15,835
Combat Systems 18,398 597 18,995 5,059 24,054
Information Systems and Technology 6,827 1,755 8,582 14,702 23,284
Marine Systems 13,266 11,879 25,145 2,263 27,408
------ ------ ------ ----- ------
Total $51,783 $14,337 $66,120 $24,461 $90,581
======= ======= ======= ======= =======
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
======= ======= ======= ======= =======
* 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 2016 SIGNIFICANT
ORDERS (UNAUDITED)
DOLLARS IN MILLIONS
We received the following significant orders during the first quarter of 2016:
Combat Systems
-- $405 from the Swiss government to upgrade Duro tactical vehicles through
2022.
-- $180 from the U.S. Army for spare parts and inventory management and
support services for the Stryker family of vehicles.
-- $60 from the Army to design, develop and produce eight prototype Stryker
vehicles with an integrated 30-millimeter gun system.
Information Systems and Technology
-- $310 for several space payloads.
-- $170 for new hardware, software and equipment to upgrade the United
Kingdom Ministry of Defence's Bowman tactical communication system.
-- $160 from the Army for additional equipment for the Warfighter
Information Network-Tactical (WIN-T) Increment 2 program.
-- $155 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).
-- $140 from the Army for ruggedized computing equipment under the CHS-4
program.
-- $95 for combat and seaframe control systems on an Independence-variant
Littoral Combat Ship (LCS) for the U.S. Navy.
Marine Systems
-- $155 from the Navy for the planning and execution of depot-level
maintenance, alterations and modifications to the USS Essex (LHD-2).
-- $140 from the Navy for lead yard and design services for the
Virginia-class submarine program.
-- $80 from the Navy for Advanced Nuclear Plant Studies (ANPS) in support
of the Ohio-class submarine replacement program.
EXHIBIT H
AEROSPACE SUPPLEMENTAL DATA - (UNAUDITED)
First Quarter
2016 2015
---- ----
Gulfstream Green Deliveries (units):
------------------------------------
Large-cabin aircraft 25 27
Mid-cabin aircraft 6 7
--- ---
Total 31 34
=== ===
Gulfstream Outfitted Deliveries (units):
----------------------------------------
Large-cabin aircraft 19 25
Mid-cabin aircraft 8 7
--- ---
Total 27 32
=== ===
Pre-owned Deliveries (units): 1 1
----------------------------- === ===
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