General Dynamics Reports First-Quarter 2015 Results
FALLS CHURCH, Va., April 29, 2015 /PRNewswire/ -- General Dynamics (NYSE: GD) today reported first-quarter 2015 earnings from continuing operations of $716 million, a 20.1 percent increase over first-quarter 2014, on revenues of $7.8 billion. Diluted earnings per share were $2.14 per share compared to $1.71 in first-quarter 2014, a 25.1 percent increase.
"General Dynamics delivered a powerful first quarter," said Phebe N. Novakovic, chairman and chief executive officer. "As a result of impressive revenue growth and strong operating performance, we expanded operating earnings to more than $1 billion, a 17.5 percent increase."
Margins
Company-wide operating margins for the first quarter of 2015 were 13.2 percent, a 120 basis points improvement when compared to 12 percent in first-quarter 2014. Margins grew in three of the company's four business groups.
Cash
Net cash provided by operating activities in the quarter totaled $745 million. Free cash flow from operations, defined as net cash provided by operating activities less capital expenditures, was $647 million.
Capital Deployment
The company repurchased 4.65 million of its outstanding shares in the first quarter. In addition, in March, the board of directors increased the company's quarterly dividend by 11.3 percent to $0.69 per share, representing the company's 18th consecutive annual dividend increase.
Backlog
Funded backlog at the end of first-quarter 2015 grew to $56 billion, and total backlog was $70.5 billion. 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 $25.6 billion. Total potential contract value, the sum of all backlog components, was $96.1 billion at the end of the quarter.
"Looking ahead, we remain confident that General Dynamics is well-positioned for growth as we maximize the value of our strong backlog and continue to focus on program execution, operations and increasing return on invested capital," Novakovic said.
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 first-quarter securities analyst conference call at 9 a.m. EDT on Wednesday, April 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 12 p.m. on April 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 93780294. The phone replay will be available from 1 p.m. April 29 through May 5, 2015.
|
EXHIBIT A
CONSOLIDATED STATEMENTS OF EARNINGS - (UNAUDITED) DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS | ||||||||||||||
|
First Quarter |
Variance | |||||||||||||
|
2015 |
2014 |
$ |
% | |||||||||||
|
Revenues |
$ |
7,784 |
$ |
7,265 |
$ |
519 |
7.1 |
% | ||||||
|
Operating costs and expenses |
6,757 |
6,391 |
(366) |
|||||||||||
|
Operating earnings |
1,027 |
874 |
153 |
17.5 |
% | |||||||||
|
Interest, net |
(21) |
(22) |
1 |
|||||||||||
|
Other, net |
3 |
1 |
2 |
|||||||||||
|
Earnings before income tax |
1,009 |
853 |
$ |
156 |
18.3 |
% | ||||||||
|
Provision for income tax, net |
293 |
257 |
(36) |
|||||||||||
|
Earnings from continuing operations |
$ |
716 |
$ |
596 |
$ |
120 |
20.1 |
% | ||||||
|
Discontinued operations, net of tax |
— |
(1) |
1 |
|||||||||||
|
Net earnings |
$ |
716 |
$ |
595 |
121 |
20.3 |
% | |||||||
|
Earnings per share—basic |
||||||||||||||
|
Continuing operations |
$ |
2.18 |
$ |
1.74 |
$ |
0.44 |
25.3 |
% | ||||||
|
Discontinued operations |
$ |
— |
$ |
— |
$ |
— |
||||||||
|
Net earnings |
$ |
2.18 |
$ |
1.74 |
$ |
0.44 |
25.3 |
% | ||||||
|
Basic weighted average shares outstanding |
329.2 |
342.2 |
||||||||||||
|
Earnings per share—diluted |
||||||||||||||
|
Continuing operations |
$ |
2.14 |
$ |
1.71 |
$ |
0.43 |
25.1 |
% | ||||||
|
Discontinued operations |
$ |
— |
$ |
— |
$ |
— |
||||||||
|
Net earnings |
$ |
2.14 |
$ |
1.71 |
$ |
0.43 |
25.1 |
% | ||||||
|
Diluted weighted average shares outstanding |
334.7 |
347.2 |
||||||||||||
|
Note: Prior period information has been restated to reflect our axle business in discontinued operations. | ||||||||||||||
|
EXHIBIT B
REVENUES AND OPERATING EARNINGS BY SEGMENT - (UNAUDITED) DOLLARS IN MILLIONS | ||||||||||||||
|
First Quarter |
Variance | |||||||||||||
|
2015 |
2014 |
$ |
% | |||||||||||
|
Revenues: |
||||||||||||||
|
Aerospace |
$ |
2,108 |
$ |
2,125 |
$ |
(17) |
(0.8) |
% | ||||||
|
Combat Systems |
1,363 |
1,258 |
105 |
8.3 |
% | |||||||||
|
Information Systems and Technology |
2,370 |
2,281 |
89 |
3.9 |
% | |||||||||
|
Marine Systems |
1,943 |
1,601 |
342 |
21.4 |
% | |||||||||
|
Total |
$ |
7,784 |
$ |
7,265 |
$ |
519 |
7.1 |
% | ||||||
|
Operating earnings: |
||||||||||||||
|
Aerospace |
$ |
431 |
$ |
404 |
$ |
27 |
6.7 |
% | ||||||
|
Combat Systems |
204 |
139 |
65 |
46.8 |
% | |||||||||
|
Information Systems and Technology |
217 |
183 |
34 |
18.6 |
% | |||||||||
|
Marine Systems |
188 |
166 |
22 |
13.3 |
% | |||||||||
|
Corporate |
(13) |
(18) |
5 |
27.8 |
% | |||||||||
|
Total |
$ |
1,027 |
$ |
874 |
$ |
153 |
17.5 |
% | ||||||
|
Operating margins: |
||||||||||||||
|
Aerospace |
20.4 |
% |
19.0 |
% |
||||||||||
|
Combat Systems |
15.0 |
% |
11.0 |
% |
||||||||||
|
Information Systems and Technology |
9.2 |
% |
8.0 |
% |
||||||||||
|
Marine Systems |
9.7 |
% |
10.4 |
% |
||||||||||
|
Total |
13.2 |
% |
12.0 |
% |
||||||||||
|
Note: Prior period information has been restated to reflect our axle business in discontinued operations. | ||||||||||||||
|
EXHIBIT B-1
FIRST QUARTER 2015 COMPARISON TO PRIOR YEARS DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS | ||||||||||||||
|
First Quarter |
Compound Annual Growth Rate | |||||||||||||
|
2013 |
2014 |
2015 |
||||||||||||
|
Revenues |
$ |
7,314 |
$ |
7,265 |
$ |
7,784 |
3.2 |
% | ||||||
|
Operating earnings |
843 |
874 |
1,027 |
10.4 |
% | |||||||||
|
Operating margins |
11.5 |
% |
12.0 |
% |
13.2 |
% |
+170 bps | |||||||
|
Diluted earnings per share - continuing operations |
$ |
1.62 |
$ |
1.71 |
$ |
2.14 |
14.9 |
% | ||||||
|
Note: Prior period information has been restated to reflect our axle business in discontinued operations. | ||||||||||||||
|
EXHIBIT C
CONSOLIDATED BALANCE SHEETS DOLLARS IN MILLIONS | |||||||
|
(Unaudited) |
|||||||
|
April 5, 2015 |
December 31, 2014 | ||||||
|
ASSETS |
|||||||
|
Current assets: |
|||||||
|
Cash and equivalents |
$ |
4,412 |
$ |
4,388 |
|||
|
Accounts receivable |
3,661 |
4,050 |
|||||
|
Contracts in process |
4,444 |
4,591 |
|||||
|
Inventories |
3,397 |
3,221 |
|||||
|
Other current assets |
438 |
1,157 |
|||||
|
Total current assets |
16,352 |
17,407 |
|||||
|
Noncurrent assets: |
|||||||
|
Property, plant and equipment, net |
3,323 |
3,329 |
|||||
|
Intangible assets, net |
893 |
912 |
|||||
|
Goodwill |
11,699 |
11,731 |
|||||
|
Other assets |
2,118 |
1,976 |
|||||
|
Total noncurrent assets |
18,033 |
17,948 |
|||||
|
Total assets |
$ |
34,385 |
$ |
35,355 |
|||
|
LIABILITIES AND SHAREHOLDERS' EQUITY |
|||||||
|
Current liabilities: |
|||||||
|
Short-term debt and current portion of long-term debt |
$ |
1 |
$ |
501 |
|||
|
Accounts payable |
2,266 |
2,057 |
|||||
|
Customer advances and deposits |
6,487 |
7,335 |
|||||
|
Other current liabilities |
4,358 |
3,858 |
|||||
|
Total current liabilities |
13,112 |
13,751 |
|||||
|
Noncurrent liabilities: |
|||||||
|
Long-term debt |
3,410 |
3,410 |
|||||
|
Other liabilities |
6,343 |
6,365 |
|||||
|
Total noncurrent liabilities |
9,753 |
9,775 |
|||||
|
Shareholders' equity: |
|||||||
|
Common stock |
482 |
482 |
|||||
|
Surplus |
2,588 |
2,548 |
|||||
|
Retained earnings |
21,615 |
21,127 |
|||||
|
Treasury stock |
(9,949) |
(9,396) |
|||||
|
Accumulated other comprehensive loss |
(3,216) |
(2,932) |
|||||
|
Total shareholders' equity |
11,520 |
11,829 |
|||||
|
Total liabilities and shareholders' equity |
$ |
34,385 |
$ |
35,355 |
|||
|
EXHIBIT D
CONSOLIDATED STATEMENTS OF CASH FLOWS - (UNAUDITED) DOLLARS IN MILLIONS | ||||||||
|
Three Months Ended | ||||||||
|
April 5, 2015 |
March 30, 2014 | |||||||
|
Cash flows from operating activities—continuing operations: |
||||||||
|
Net earnings |
$ |
716 |
$ |
595 |
||||
|
Adjustments to reconcile net earnings to net cash provided by operating activities: |
||||||||
|
Depreciation of property, plant and equipment |
94 |
95 |
||||||
|
Amortization of intangible assets |
30 |
30 |
||||||
|
Stock-based compensation expense |
40 |
27 |
||||||
|
Excess tax benefit from stock-based compensation |
(30) |
(32) |
||||||
|
Deferred income tax provision |
(8) |
36 |
||||||
|
Discontinued operations, net of tax |
— |
1 |
||||||
|
(Increase) decrease in assets, net of effects of business acquisitions: |
||||||||
|
Accounts receivable |
388 |
119 |
||||||
|
Contracts in process |
152 |
(94) |
||||||
|
Inventories |
(183) |
(21) |
||||||
|
Increase (decrease) in liabilities, net of effects of business acquisitions: |
||||||||
|
Accounts payable |
210 |
(29) |
||||||
|
Customer advances and deposits |
(871) |
(165) |
||||||
|
Income taxes payable |
251 |
150 |
||||||
|
Other current liabilities |
(38) |
(173) |
||||||
|
Other, net |
(6) |
(117) |
||||||
|
Net cash provided by operating activities |
745 |
422 |
||||||
|
Cash flows from investing activities—continuing operations: |
||||||||
|
Maturities of held-to-maturity securities |
500 |
— |
||||||
|
Capital expenditures |
(98) |
(87) |
||||||
|
Other, net |
94 |
10 |
||||||
|
Net cash provided (used) by investing activities |
496 |
(77) |
||||||
|
Cash flows from financing activities—continuing operations: |
||||||||
|
Purchases of common stock |
(620) |
(1,430) |
||||||
|
Repayment of fixed-rate notes |
(500) |
— |
||||||
|
Dividends paid |
(206) |
(198) |
||||||
|
Proceeds from option exercises |
87 |
249 |
||||||
|
Other, net |
30 |
32 |
||||||
|
Net cash used by financing activities |
(1,209) |
(1,347) |
||||||
|
Net cash used by discontinued operations |
(8) |
(3) |
||||||
|
Net increase (decrease) in cash and equivalents |
24 |
(1,005) |
||||||
|
Cash and equivalents at beginning of period |
4,388 |
5,301 |
||||||
|
Cash and equivalents at end of period |
$ |
4,412 |
$ |
4,296 |
||||
|
Note: Prior period information has been restated to reflect our axle business in discontinued operations. | ||||||||
|
EXHIBIT E
PRELIMINARY FINANCIAL INFORMATION - (UNAUDITED) DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS | ||||||||
|
First Quarter 2015 |
First Quarter 2014 | |||||||
|
Other Financial Information(a): |
||||||||
|
Debt-to-equity (b) |
29.6 |
% |
28.6 |
% | ||||
|
Debt-to-capital (c) |
22.8 |
% |
22.2 |
% | ||||
|
Book value per share (d) |
$ |
35.04 |
$ |
39.93 |
||||
|
Total taxes paid |
$ |
53 |
$ |
67 |
||||
|
Company-sponsored research and development (e) |
$ |
96 |
$ |
86 |
||||
|
Shares outstanding |
328,732,777 |
342,860,725 |
||||||
|
Non-GAAP Financial Measures(a): |
||||||||
|
Free cash flow from operations: |
||||||||
|
Net cash provided by operating activities |
$ |
745 |
$ |
422 |
||||
|
Capital expenditures |
(98) |
(87) |
||||||
|
Free cash flow from operations (f) |
$ |
647 |
$ |
335 |
||||
|
(a) |
Prior period information has been restated to reflect our axle business in discontinued operations. |
|
(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 Gulfstream product-development costs. |
|
(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 | ||||||||||||||||||||
|
Funded |
Unfunded |
TotalBacklog |
EstimatedPotentialContract Value* |
Total PotentialContractValue | ||||||||||||||||
|
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 |
||||||||||
|
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 |
||||||||||
|
First Quarter 2014 |
||||||||||||||||||||
|
Aerospace |
$ |
12,747 |
$ |
199 |
$ |
12,946 |
$ |
2,000 |
$ |
14,946 |
||||||||||
|
Combat Systems |
15,870 |
885 |
16,755 |
8,143 |
24,898 |
|||||||||||||||
|
Information Systems and Technology |
7,134 |
1,343 |
8,477 |
16,494 |
24,971 |
|||||||||||||||
|
Marine Systems |
12,447 |
5,248 |
17,695 |
2,046 |
19,741 |
|||||||||||||||
|
Total |
$ |
48,198 |
$ |
7,675 |
$ |
55,873 |
$ |
28,683 |
$ |
84,556 |
||||||||||
|
* |
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 G FIRST QUARTER 2015 SIGNIFICANT ORDERS (UNAUDITED)DOLLARS IN MILLIONS |
We received the following significant orders during the first quarter of 2015:
Combat Systems
- $410 from the U.S. Army under the Stryker wheeled armored vehicle program for production of 107 double-V-hulled vehicles and contractor logistics support.
- $220 from the Government of Canada for the integration of an enhanced surveillance suite onto Canadian LAV III vehicles.
- An IDIQ contract from the Army to supply 155mm ammunition. The program has a maximum potential value of $300 over five years.
Information Systems and Technology
- $175 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).
- $155 for combat and seaframe control systems on two U.S. Navy Littoral Combat Ships (LCS).
- $70 from the Army for ruggedized computing equipment under the Common Hardware Systems-4 (CHS-4) program.
- $70 from the U.S. Department of State to provide supply chain management services.
- An IDIQ contract to manage the Army's Live Training Transformation (LT2) live training systems, including nearly 300 training ranges worldwide. The program has a maximum potential value of $415 over five years.
Marine Systems
- $180 from the U.S. Navy to provide engineering and technical support for nuclear submarines.
- $55 from the Navy for the design and development of moored training ship components.
|
EXHIBIT H
AEROSPACE SUPPLEMENTAL DATA - (UNAUDITED) | |||||
|
First Quarter | |||||
|
2015 |
2014 | ||||
|
Gulfstream Green Deliveries (units): |
|||||
|
Large-cabin aircraft |
27 |
29 | |||
|
Mid-cabin aircraft |
7 |
6 | |||
|
Total |
34 |
35 | |||
|
Gulfstream Outfitted Deliveries (units): |
|||||
|
Large-cabin aircraft |
25 |
33 | |||
|
Mid-cabin aircraft |
7 |
6 | |||
|
Total |
32 |
39 | |||
|
Pre-owned Deliveries (units): |
1 |
— | |||
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SOURCE General Dynamics