Delaware | 1-3671 | 13-1673581 | ||
(State or Other Jurisdiction of Incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
2941 Fairview Park Drive, Suite 100, Falls Church, Virginia | 22042-4513 | |
(Address of Principal Executive Offices) | (Zip Code) |
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d- 2(b)) |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02 | Results of Operations and Financial Condition |
Item 9.01 | Financial Statements and Exhibits |
(d) | Exhibits (furnished only) |
99.1 | General Dynamics press release dated April 27, 2016, with respect to the company’s financial results for the quarter ended April 3, 2016. |
GENERAL DYNAMICS CORPORATION | |||
by | /s/ Kimberly A. Kuryea | ||
Kimberly A. Kuryea Vice President and Controller (Authorized Officer and Chief Accounting Officer) | |||
Dated: April 27, 2016 |
2941 Fairview Park Drive | ||
Suite 100 | ||
Falls Church, VA 22042-4513 www.generaldynamics.com | News |
• | Diluted earnings per share from continuing operations up 9.3% to $2.34 |
• | Operating margin of 13.6%, a 40 basis-point improvement |
• | Operating earnings up 2.5% to $1.05 billion |
• | Earnings from continuing operations up 2% to $730 million |
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. |
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 | % |
(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 |
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 option 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 |
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. |
Funded | Unfunded | Total Backlog | Estimated Potential Contract Value* | Total Potential Contract 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. |
• | $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. |
• | $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. |
• | $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. |
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 |