GENERAL DYNAMICS CORPORATION FALLS CHURCH, Va., Oct. 26, 2016 /PRNewswire/ --
-- Operating earnings up 3.4% to $1.07 billion
-- Operating margin of 13.8%, a 90 basis-point improvement
-- Earnings from continuing operations up 4.6% to $767 million; return on
sales reaches new high of 9.9%
-- Diluted earnings per share from continuing operations of $2.48, up 8.8%
General Dynamics (NYSE: GD) today reported third-quarter 2016 earnings from continuing operations of $767 million, a 4.6 percent increase over the year-ago quarter, on revenue of $7.7 billion. Diluted earnings per share from continuing operations were $2.48 compared to $2.28 in third-quarter 2015, an 8.8 percent increase.
Net earnings for third-quarter 2016 were $683 million, with fully diluted earnings per share of $2.21. Net earnings included an $84 million charge in discontinued operations related to the A-12 settlement reached with the U.S. Navy in 2013.
"General Dynamics had a very strong quarter, clearly demonstrated by our operating earnings, margin and return on sales," said Phebe N. Novakovic, chairman and chief executive officer. "Our businesses are performing exceptionally well as we remain focused on operating excellence and continuous improvement."
Margin
Company-wide operating margin for the third quarter of 2016 was 13.8 percent, a 90 basis-point increase when compared to 12.9 percent in third-quarter 2015. Three of the company's four business groups expanded margins over the year-ago period, with the Aerospace group achieving record-setting margins in the third quarter.
Cash
Net cash provided by operating activities in the quarter totaled $499 million. Free cash flow from operations, defined as net cash provided by operating activities less capital expenditures, was $389 million.
Capital Deployment
The company repurchased 2.3 million of its outstanding shares in the third quarter. Year-to-date, the company has repurchased 11.2 million outstanding shares.
Backlog
General Dynamics' total backlog at the end of third-quarter 2016 was $62 billion. There was solid demand in the quarter across the company's portfolio. The estimated potential contract value, representing management's estimate of value in unfunded indefinite delivery, indefinite quantity (IDIQ) contracts and unexercised options, was $25.2 billion. Total potential contract value, the sum of all backlog components, was $87.2 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 2015 revenue was $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 third-quarter securities analyst conference call at 9 a.m. EDT on Wednesday, October 26, 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 October 26 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 94369568. The phone replay will be available from 3 p.m. October 26 through November 2, 2016.
EXHIBIT A
CONSOLIDATED STATEMENTS OF EARNINGS - (UNAUDITED)
DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS
Three Months Ended Variance
October 2, 2016 October 4, 2015 $ %
--------------- --------------- --- ---
Revenue $7,731 $7,994 $(263) (3.3)%
Operating costs and expenses 6,662 6,960 (298)
----- ----- ----
Operating earnings 1,069 1,034 35 3.4%
Interest, net (23) (23) -
Other, net 2 2 -
--- --- ---
Earnings from continuing operations before income tax 1,048 1,013 35 3.5%
Provision for income tax, net 281 280 1
Earnings from continuing operations 767 733 34 4.6%
Discontinued operations, net of tax (84) * - (84)
----- --- ---
Net earnings $683 $733 $(50) (6.8)%
Earnings per share-basic
Continuing operations $2.52 $2.31 $0.21 9.1%
Discontinued operations (0.27) * - (0.27)
------- --- -----
Net earnings $2.25 $2.31 $(0.06) (2.6)%
===== ===== ======
Basic weighted average shares outstanding 303.9 316.7
===== =====
Earnings per share-diluted
Continuing operations $2.48 $2.28 $0.20 8.8%
Discontinued operations (0.27) * - (0.27)
------- --- -----
Net earnings $2.21 $2.28 $(0.07) (3.1)%
===== ===== ======
Diluted weighted average shares outstanding 309.7 321.9
===== =====
* In the
third
quarter of
2016, we
recognized
a loss due
to an
adjustment
of the
value of a
previously-
recognized
settlement
related to
litigation
associated
with a
former
business
of the
company.
EXHIBIT B
CONSOLIDATED STATEMENTS OF EARNINGS - (UNAUDITED)
DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS
Nine Months Ended Variance
October 2, 2016 October 4, 2015 $ %
--------------- --------------- --- ---
Revenue $23,120 $23,660 $(540) (2.3)%
Operating costs and expenses 19,928 20,518 (590)
------ ------ ----
Operating earnings 3,192 3,142 50 1.6%
Interest, net (68) (64) (4)
Other, net 13 5 8
--- --- ---
Earnings from continuing operations before income tax 3,137 3,083 54 1.8%
Provision for income tax, net 882 882 -
--- --- ---
Earnings from continuing operations 2,255 2,201 54 2.5%
Discontinued operations, net of tax (97) - (97)
--- --- ---
Net earnings $2,158 $2,201 $(43) (2.0)%
====== ====== ====
Earnings per share-basic
Continuing operations $7.38 $6.79 $0.59 8.7%
Discontinued operations (0.31) - (0.31)
----- --- -----
Net earnings $7.07 $6.79 $0.28 4.1%
===== ===== =====
Basic weighted average shares outstanding 305.4 324.0
===== =====
Earnings per share-diluted
Continuing operations $7.25 $6.68 $0.57 8.5%
Discontinued operations (0.31) - (0.31)
----- --- -----
Net earnings $6.94 $6.68 $0.26 3.9%
===== ===== =====
Diluted weighted average shares outstanding 311.1 329.4
===== =====
EXHIBIT C
REVENUE AND OPERATING EARNINGS BY SEGMENT - (UNAUDITED)
DOLLARS IN MILLIONS
Three Months Ended Variance
October 2, 2016 October 4, 2015 $ %
--------------- --------------- --- ---
Revenue:
--------
Aerospace $2,017 $2,343 $(326) (13.9)%
Combat Systems 1,330 1,345 (15) (1.1)%
Information Systems and Technology 2,341 2,219 122 5.5%
Marine Systems 2,043 2,087 (44) (2.1)%
----- ----- ---
Total $7,731 $7,994 $(263) (3.3)%
====== ====== =====
Operating earnings:
-------------------
Aerospace $437 $426 $11 2.6%
Combat Systems 219 218 1 0.5%
Information Systems and Technology 256 219 37 16.9%
Marine Systems 166 181 (15) (8.3)%
Corporate (9) (10) 1 10.0%
--- --- ---
Total $1,069 $1,034 $35 3.4%
====== ====== ===
Operating margin:
-----------------
Aerospace 21.7% 18.2%
Combat Systems 16.5% 16.2%
Information Systems and Technology 10.9% 9.9%
Marine Systems 8.1% 8.7%
Total 13.8% 12.9%
EXHIBIT D
REVENUE AND OPERATING EARNINGS BY SEGMENT - (UNAUDITED)
DOLLARS IN MILLIONS
Nine Months Ended Variance
October 2, 2016 October 4, 2015 $ %
--------------- --------------- --- ---
Revenue:
--------
Aerospace $6,138 $6,709 $(571) (8.5)%
Combat Systems 3,918 4,116 (198) (4.8)%
Information Systems and Technology 6,903 6,804 99 1.5%
Marine Systems 6,161 6,031 130 2.2%
----- ----- ---
Total $23,120 $23,660 $(540) (2.3)%
======= ======= =====
Operating earnings:
-------------------
Aerospace $1,282 $1,296 $(14) (1.1)%
Combat Systems 655 648 7 1.1%
Information Systems and Technology 748 673 75 11.1%
Marine Systems 539 556 (17) (3.1)%
Corporate (32) (31) (1) (3.2)%
--- --- ---
Total $3,192 $3,142 $50 1.6%
====== ====== ===
Operating margin:
-----------------
Aerospace 20.9% 19.3%
Combat Systems 16.7% 15.7%
Information Systems and Technology 10.8% 9.9%
Marine Systems 8.7% 9.2%
Total 13.8% 13.3%
EXHIBIT E
CONSOLIDATED BALANCE SHEETS
DOLLARS IN MILLIONS
(Unaudited)
October 2, 2016 December 31, 2015
--------------- -----------------
ASSETS
Current assets:
Cash and equivalents $2,303 $2,785
Accounts receivable 3,502 3,446
Contracts in process 5,213 4,357
Inventories 3,657 3,366
Other current assets 622 617
--- ---
Total current assets 15,297 14,571
------ ------
Noncurrent assets:
Property, plant and equipment, net 3,445 3,466
Intangible assets, net 715 763
Goodwill 11,581 11,443
Other assets 1,630 1,754
----- -----
Total noncurrent assets 17,371 17,426
Total assets $32,668 $31,997
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term debt and current portion of long-term debt $1 $501
Accounts payable 2,276 1,964
Customer advances and deposits 5,249 5,674
Other current liabilities 4,367 4,306
----- -----
Total current liabilities 11,893 12,445
------ ------
Noncurrent liabilities:
Long-term debt 3,885 2,898
Other liabilities 5,573 5,916
----- -----
Total noncurrent liabilities 9,458 8,814
----- -----
Shareholders' equity:
Common stock 482 482
Surplus 2,789 2,730
Retained earnings 24,661 23,204
Treasury stock (13,724) (12,392)
Accumulated other comprehensive loss (2,891) (3,286)
------ ------
Total shareholders' equity 11,317 10,738
Total liabilities and shareholders' equity $32,668 $31,997
======= =======
EXHIBIT F
CONSOLIDATED STATEMENTS OF CASH FLOWS - (UNAUDITED)
DOLLARS IN MILLIONS
Nine Months Ended
October 2, 2016 October 4, 2015*
--------------- ----------------
Cash flows from operating activities-continuing operations:
Net earnings $2,158 $2,201
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation of property, plant and equipment 272 272
Amortization of intangible assets 70 88
Equity-based compensation expense 76 84
Deferred income tax provision 218 88
Discontinued operations, net of tax 97 -
(Increase) decrease in assets, net of effects of business acquisitions:
Accounts receivable (52) 254
Contracts in process (957) 391
Inventories (288) (29)
Increase (decrease) in liabilities, net of effects of business acquisitions:
Accounts payable 305 334
Customer advances and deposits (574) (1,508)
Other, net 47 95
--- ---
Net cash provided by operating activities 1,372 2,270
----- -----
Cash flows from investing activities:
Capital expenditures (244) (360)
Maturities of held-to-maturity securities - 500
Proceeds from sales of assets 4 290
Other, net (42) (12)
--- ---
Net cash (used) provided by investing activities (282) 418
---- ---
Cash flows from financing activities:
Purchases of common stock (1,514) (2,729)
Proceeds from fixed-rate notes 992 -
Dividends paid (678) (655)
Repayment of fixed-rate notes (500) (500)
Proceeds from stock option exercises 211 240
Other, net (39) (29)
--- ---
Net cash used by financing activities (1,528) (3,673)
------ ------
Net cash used by discontinued operations (44) (31)
--- ---
Net decrease in cash and equivalents (482) (1,016)
Cash and equivalents at beginning of period 2,785 4,388
----- -----
Cash and equivalents at end of period $2,303 $3,372
====== ======
* Prior period information has been
restated to reflect the
reclassification of certain items in
accordance with 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.
EXHIBIT G
PRELIMINARY FINANCIAL INFORMATION - (UNAUDITED)
DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS
2016 2015
Third Quarter Third Quarter (a)
------------- -----------------
Other Financial Information:
----------------------------
Debt-to-equity (b) 34.3% 31.7%
Debt-to-capital (c) 25.6% 24.0%
Book value per share (d) $37.16 $33.95
Total taxes paid $217 $246
Company-sponsored research and $99 $104
development (e)
Shares outstanding 304,519,550 316,128,160
Non-GAAP Financial Measures:
----------------------------
2016 2015 (f)
---- -------
Third Quarter Nine Months Third Quarter Nine Months
------------- ----------- ------------- -----------
Free cash flow from operations:
Net cash provided by operating activities $499 $1,372 $837 $2,270
Capital expenditures (110) (244) (170) (360)
---- ---- ---- ----
Free cash flow from operations (g) $389 $1,128 $667 $1,910
==== ====== ==== ======
(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) Prior period information has been
restated to reflect the
reclassification of certain items in
accordance with ASU 2016-09, which
we adopted in the second quarter of
2016.
(g) 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* Value
-------------- -----
Third Quarter 2016
------------------
Aerospace $11,415 $108 $11,523 $2,158 $13,681
Combat Systems 17,659 436 18,095 4,469 22,564
Information Systems and Technology 7,143 2,057 9,200 14,444 23,644
Marine Systems 15,152 8,001 23,153 4,172 27,325
------ ----- ------ ----- ------
Total $51,369 $10,602 $61,971 $25,243 $87,214
======= ======= ======= ======= =======
Second Quarter 2016
-------------------
Aerospace $11,629 $126 $11,755 $2,221 $13,976
Combat Systems 18,032 478 18,510 4,812 23,322
Information Systems and Technology 7,508 2,292 9,800 14,560 24,360
Marine Systems 15,908 7,260 23,168 4,237 27,405
------ ----- ------ ----- ------
Total $53,077 $10,156 $63,233 $25,830 $89,063
======= ======= ======= ======= =======
Third Quarter 2015
------------------
Aerospace $13,459 $100 $13,559 $2,479 $16,038
Combat Systems 18,591 658 $19,249 5,261 24,510
Information Systems and Technology 7,294 2,122 $9,416 15,074 24,490
Marine Systems 14,391 12,127 $26,518 2,734 29,252
------ ------ ----- ------
Total $53,735 $15,007 $68,742 $25,548 $94,290
======= ======= ======= ======= =======
* 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 I
THIRD QUARTER 2016 SIGNIFICANT ORDERS (UNAUDITED)
DOLLARS IN MILLIONS
We received the following significant orders during the third quarter of 2016:
Combat Systems
-- $170 from the U.S. Army for the production of Hydra-70 rockets.
-- $165 from the Army to produce various calibers of ammunition and
ordnance.
-- $145 from the Swiss government to produce Piranha armored vehicles
equipped with mortar systems.
-- $100 from the Army for Abrams M1A2 System Enhancement Program (SEP)
components and associated program management.
-- $75 to provide munitions to the government of Israel.
-- $55 from the Army for Abrams technical support and engineering services.
-- $40 for technical assistance with Abrams tank kits for Egypt.
-- $35 from the U.S. Marine Corps for the reset of Cougar vehicles.
Information Systems and Technology
-- $105 from the U.S. Air Force for the Battlefield Information Collection
and Exploitation System (BICES) program to provide intelligence
information sharing and support to coalition operations.
-- $90 from the Army for ruggedized computing equipment under the Common
Hardware Systems-4 (CHS-4) program.
-- $75 from the U.S. Navy for missile guidance systems.
-- $65 from the Army for system engineering and program management for the
Warfighter Information Network-Tactical (WIN-T) program.
-- $35 from the National Geospatial-Intelligence Agency for full motion
video processing, dissemination and exploitation.
-- A contract from the U.S. Census Bureau to provide contact-center systems
and operations support for the 2020 Census Questionnaire Assistance
program, a key component of the 2020 Decennial Census. The contract has
a value of $430 over five years.
Marine Systems
-- $300 from the Navy for lead-yard services, development studies and
design efforts for Virginia-class submarines.
-- $235 from the Navy to provide design, engineering, material and
logistics support and research and development activities for active U.S
submarines.
-- $215 from the Navy to provide in-service support of systems and
components on the USS Jimmy Carter (SSN23).
-- $205 from the Navy to perform non-nuclear planning and maintenance work
on five aircraft carriers.
-- $40 from the Navy for the repair and alteration of the USS Oak Hill
(LSD-51).
-- $25 from the Navy for ship-repair services for the USS Harry S. Truman
(CVN-75).
-- The design and construction of two liquefied natural gas (LNG)-capable
containerships for Matson Navigation Company, Inc. Construction of the
first containership will begin in early 2018, with deliveries in 2019
and 2020, respectively.
EXHIBIT J
AEROSPACE SUPPLEMENTAL DATA - (UNAUDITED)
Third Quarter Nine Months
2016 2015 2016 2015
---- ---- ---- ----
Gulfstream
Green
Deliveries
(units):
----------
Large-
cabin
aircraft 24 31 74 87
Mid-
cabin
aircraft 6 9 18 23
--- --- --- ---
Total 30 40 92 110
=== === === ===
Gulfstream
Outfitted
Deliveries
(units):
----------
Large-
cabin
aircraft 21 31 67 89
Mid-
cabin
aircraft 6 12 21 27
--- --- --- ---
Total 27 43 88 116
=== === === ===
Pre-
owned
Deliveries
(units): 1 - 6 5
----------- === === === ===
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SOURCE General Dynamics
