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)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). | |
Emerging growth company ¨ | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨ | |
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 July 26, 2017, with respect to the company’s financial results for the quarter ended July 2, 2017. |
GENERAL DYNAMICS CORPORATION | |||
by | /s/ William A. Moss | ||
William A. Moss Vice President and Controller (Authorized Officer and Chief Accounting Officer) | |||
Dated: July 26, 2017 |
2941 Fairview Park Drive, Suite 100 | ||
Falls Church, VA 22042-4513 | News | |
www.generaldynamics.com |
• | Operating earnings up 2.8% to $1.1 billion |
• | Operating margin of 13.8%, a 60 basis-point improvement |
• | Earnings from continuing operations up 4.9% to $749 million |
• | Diluted earnings per share up 6.5% to $2.45 |
Three Months Ended | Variance | |||||||||||||
July 2, 2017 | July 3, 2016* | $ | % | |||||||||||
Revenue | $ | 7,675 | $ | 7,774 | $ | (99 | ) | (1.3 | )% | |||||
Operating costs and expenses | 6,619 | 6,747 | (128 | ) | ||||||||||
Operating earnings | 1,056 | 1,027 | 29 | 2.8 | % | |||||||||
Interest, net | (24 | ) | (23 | ) | (1 | ) | ||||||||
Other, net | — | 1 | (1 | ) | ||||||||||
Earnings before income tax | 1,032 | 1,005 | 27 | 2.7 | % | |||||||||
Provision for income tax, net | 283 | 291 | (8 | ) | ||||||||||
Net earnings | $ | 749 | $ | 714 | $ | 35 | 4.9 | % | ||||||
Earnings per share—basic | $ | 2.50 | $ | 2.35 | $ | 0.15 | 6.4 | % | ||||||
Basic weighted average shares outstanding | 299.8 | 304.5 | ||||||||||||
Earnings per share—diluted | $ | 2.45 | $ | 2.30 | $ | 0.15 | 6.5 | % | ||||||
Diluted weighted average shares outstanding | 305.3 | 310.2 |
Six Months Ended | Variance | |||||||||||||
July 2, 2017 | July 3, 2016* | $ | % | |||||||||||
Revenue | $ | 15,116 | $ | 15,250 | $ | (134 | ) | (0.9 | )% | |||||
Operating costs and expenses | 13,025 | 13,299 | (274 | ) | ||||||||||
Operating earnings | 2,091 | 1,951 | 140 | 7.2 | % | |||||||||
Interest, net | (49 | ) | (45 | ) | (4 | ) | ||||||||
Other, net | — | 11 | (11 | ) | ||||||||||
Earnings from continuing operations before income tax | 2,042 | 1,917 | 125 | 6.5 | % | |||||||||
Provision for income tax, net | 530 | 549 | (19 | ) | ||||||||||
Earnings from continuing operations | 1,512 | 1,368 | 144 | 10.5 | % | |||||||||
Discontinued operations | — | (13 | ) | 13 | ||||||||||
Net earnings | $ | 1,512 | $ | 1,355 | $ | 157 | 11.6 | % | ||||||
Earnings per share—basic | ||||||||||||||
Continuing operations | $ | 5.03 | $ | 4.47 | $ | 0.56 | 12.5 | % | ||||||
Discontinued operations | — | (0.04 | ) | 0.04 | ||||||||||
Net earnings | $ | 5.03 | $ | 4.43 | $ | 0.60 | 13.5 | % | ||||||
Basic weighted average shares outstanding | 300.8 | 306.2 | ||||||||||||
Earnings per share—diluted | ||||||||||||||
Continuing operations | $ | 4.94 | $ | 4.39 | $ | 0.55 | 12.5 | % | ||||||
Discontinued operations | — | (0.04 | ) | 0.04 | ||||||||||
Net earnings | $ | 4.94 | $ | 4.35 | $ | 0.59 | 13.6 | % | ||||||
Diluted weighted average shares outstanding | 306.3 | 311.8 |
Three Months Ended | Variance | |||||||||||||
July 2, 2017 | July 3, 2016* | $ | % | |||||||||||
Revenue: | ||||||||||||||
Aerospace | $ | 2,078 | $ | 2,284 | $ | (206 | ) | (9.0 | )% | |||||
Combat Systems | 1,414 | 1,297 | 117 | 9.0 | % | |||||||||
Information Systems and Technology | 2,104 | 2,215 | (111 | ) | (5.0 | )% | ||||||||
Marine Systems | 2,079 | 1,978 | 101 | 5.1 | % | |||||||||
Total | $ | 7,675 | $ | 7,774 | $ | (99 | ) | (1.3 | )% | |||||
Operating earnings: | ||||||||||||||
Aerospace | $ | 425 | $ | 424 | $ | 1 | 0.2 | % | ||||||
Combat Systems | 225 | 205 | 20 | 9.8 | % | |||||||||
Information Systems and Technology | 240 | 234 | 6 | 2.6 | % | |||||||||
Marine Systems | 178 | 172 | 6 | 3.5 | % | |||||||||
Corporate | (12 | ) | (8 | ) | (4 | ) | (50.0 | )% | ||||||
Total | $ | 1,056 | $ | 1,027 | $ | 29 | 2.8 | % | ||||||
Operating margin: | ||||||||||||||
Aerospace | 20.5 | % | 18.6 | % | ||||||||||
Combat Systems | 15.9 | % | 15.8 | % | ||||||||||
Information Systems and Technology | 11.4 | % | 10.6 | % | ||||||||||
Marine Systems | 8.6 | % | 8.7 | % | ||||||||||
Total | 13.8 | % | 13.2 | % |
Six Months Ended | Variance | |||||||||||||
July 2, 2017 | July 3, 2016* | $ | % | |||||||||||
Revenue: | ||||||||||||||
Aerospace | $ | 4,152 | $ | 4,065 | $ | 87 | 2.1 | % | ||||||
Combat Systems | 2,701 | 2,542 | 159 | 6.3 | % | |||||||||
Information Systems and Technology | 4,250 | 4,543 | (293 | ) | (6.4 | )% | ||||||||
Marine Systems | 4,013 | 4,100 | (87 | ) | (2.1 | )% | ||||||||
Total | $ | 15,116 | $ | 15,250 | $ | (134 | ) | (0.9 | )% | |||||
Operating earnings: | ||||||||||||||
Aerospace | $ | 868 | $ | 756 | $ | 112 | 14.8 | % | ||||||
Combat Systems | 430 | 392 | 38 | 9.7 | % | |||||||||
Information Systems and Technology | 476 | 471 | 5 | 1.1 | % | |||||||||
Marine Systems | 339 | 356 | (17 | ) | (4.8 | )% | ||||||||
Corporate | (22 | ) | (24 | ) | 2 | 8.3 | % | |||||||
Total | $ | 2,091 | $ | 1,951 | $ | 140 | 7.2 | % | ||||||
Operating margin: | ||||||||||||||
Aerospace | 20.9 | % | 18.6 | % | ||||||||||
Combat Systems | 15.9 | % | 15.4 | % | ||||||||||
Information Systems and Technology | 11.2 | % | 10.4 | % | ||||||||||
Marine Systems | 8.4 | % | 8.7 | % | ||||||||||
Total | 13.8 | % | 12.8 | % |
July 2, 2017 | December 31, 2016* | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and equivalents | $ | 1,856 | $ | 2,334 | |||
Accounts receivable | 3,690 | 3,399 | |||||
Unbilled receivables | 5,045 | 4,212 | |||||
Inventories | 5,839 | 5,817 | |||||
Other current assets | 696 | 772 | |||||
Total current assets | 17,126 | 16,534 | |||||
Noncurrent assets: | |||||||
Property, plant and equipment, net | 3,424 | 3,477 | |||||
Intangible assets, net | 685 | 678 | |||||
Goodwill | 11,679 | 11,445 | |||||
Other assets | 879 | 1,038 | |||||
Total noncurrent assets | 16,667 | 16,638 | |||||
Total assets | $ | 33,793 | $ | 33,172 | |||
LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Short-term debt and current portion of long-term debt | $ | 989 | $ | 900 | |||
Accounts payable | 2,620 | 2,538 | |||||
Customer advances and deposits | 6,822 | 6,827 | |||||
Other current liabilities | 3,072 | 3,185 | |||||
Total current liabilities | 13,503 | 13,450 | |||||
Noncurrent liabilities: | |||||||
Long-term debt | 2,989 | 2,988 | |||||
Other liabilities | 6,349 | 6,433 | |||||
Total noncurrent liabilities | 9,338 | 9,421 | |||||
Shareholders’ equity: | |||||||
Common stock | 482 | 482 | |||||
Surplus | 2,796 | 2,819 | |||||
Retained earnings | 25,546 | 24,543 | |||||
Treasury stock | (14,950 | ) | (14,156 | ) | |||
Accumulated other comprehensive loss | (2,922 | ) | (3,387 | ) | |||
Total shareholders’ equity | 10,952 | 10,301 | |||||
Total liabilities and shareholders’ equity | $ | 33,793 | $ | 33,172 |
Six Months Ended | |||||||
July 2, 2017 | July 3, 2016* | ||||||
Cash flows from operating activities—continuing operations: | |||||||
Net earnings | $ | 1,512 | $ | 1,355 | |||
Adjustments to reconcile net earnings to net cash provided by operating activities: | |||||||
Depreciation of property, plant and equipment | 182 | 181 | |||||
Amortization of intangible assets | 38 | 50 | |||||
Equity-based compensation expense | 49 | 51 | |||||
Deferred income tax provision | 93 | 10 | |||||
Discontinued operations | — | 13 | |||||
(Increase) decrease in assets, net of effects of business acquisitions: | |||||||
Accounts receivable | (291 | ) | (38 | ) | |||
Unbilled receivables | (815 | ) | (523 | ) | |||
Inventories | (14 | ) | (84 | ) | |||
Increase (decrease) in liabilities, net of effects of business acquisitions: | |||||||
Accounts payable | 82 | 157 | |||||
Customer advances and deposits | (29 | ) | (455 | ) | |||
Other, net | 203 | 156 | |||||
Net cash provided by operating activities | 1,010 | 873 | |||||
Cash flows from investing activities: | |||||||
Capital expenditures | (153 | ) | (134 | ) | |||
Other, net | (42 | ) | (51 | ) | |||
Net cash used by investing activities | (195 | ) | (185 | ) | |||
Cash flows from financing activities: | |||||||
Purchases of common stock | (901 | ) | (1,189 | ) | |||
Dividends paid | (483 | ) | (447 | ) | |||
Other, net | 108 | 96 | |||||
Net cash used by financing activities | (1,276 | ) | (1,540 | ) | |||
Net cash used by discontinued operations | (17 | ) | (34 | ) | |||
Net decrease in cash and equivalents | (478 | ) | (886 | ) | |||
Cash and equivalents at beginning of period | 2,334 | 2,785 | |||||
Cash and equivalents at end of period | $ | 1,856 | $ | 1,899 |
2017 | 2016 (a) | ||||||||||||||
Second Quarter | Second Quarter | ||||||||||||||
Other Financial Information: | |||||||||||||||
Debt-to-equity (b) | 36.3 | % | 32.5 | % | |||||||||||
Debt-to-capital (c) | 26.6 | % | 24.5 | % | |||||||||||
Book value per share (d) | $ | 36.57 | $ | 34.65 | |||||||||||
Total income tax payments | $ | 332 | $ | 439 | |||||||||||
Company-sponsored research and development (e) | $ | 134 | $ | 121 | |||||||||||
Shares outstanding | 299,461,802 | 305,278,868 | |||||||||||||
Non-GAAP Financial Measures: | |||||||||||||||
2017 | 2016 | ||||||||||||||
Second Quarter | Six Months | Second Quarter | Six Months | ||||||||||||
Free cash flow from operations: | |||||||||||||||
Net cash provided by operating activities | $ | 477 | $ | 1,010 | $ | 393 | $ | 873 | |||||||
Capital expenditures | (91 | ) | (153 | ) | (69 | ) | (134 | ) | |||||||
Free cash flow from operations (f) | $ | 386 | $ | 857 | $ | 324 | $ | 739 |
(a) | Prior-period information has been restated for the adoption of ASC Topic 606, which we adopted on January 1, 2017. |
(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 (a) | Total Potential Contract Value | ||||||||||||||||
Second Quarter 2017: | ||||||||||||||||||||
Aerospace | $ | 12,116 | $ | 120 | $ | 12,236 | $ | 1,911 | $ | 14,147 | ||||||||||
Combat Systems | 16,749 | 281 | 17,030 | 4,845 | 21,875 | |||||||||||||||
Information Systems and Technology | 6,809 | 2,085 | 8,894 | 14,389 | 23,283 | |||||||||||||||
Marine Systems | 16,033 | 4,374 | 20,407 | 3,282 | 23,689 | |||||||||||||||
Total | $ | 51,707 | $ | 6,860 | $ | 58,567 | $ | 24,427 | $ | 82,994 | ||||||||||
First Quarter 2017: | ||||||||||||||||||||
Aerospace | $ | 12,446 | $ | 133 | $ | 12,579 | $ | 1,929 | $ | 14,508 | ||||||||||
Combat Systems | 17,058 | 523 | 17,581 | 4,970 | 22,551 | |||||||||||||||
Information Systems and Technology | 6,682 | 2,038 | 8,720 | 13,994 | 22,714 | |||||||||||||||
Marine Systems | 17,071 | 4,413 | 21,484 | 3,756 | 25,240 | |||||||||||||||
Total | $ | 53,257 | $ | 7,107 | $ | 60,364 | $ | 24,649 | $ | 85,013 | ||||||||||
Second Quarter 2016 (b): | ||||||||||||||||||||
Aerospace | $ | 13,418 | $ | 126 | $ | 13,544 | $ | 2,221 | $ | 15,765 | ||||||||||
Combat Systems | 18,094 | 478 | 18,572 | 4,812 | 23,384 | |||||||||||||||
Information Systems and Technology | 7,509 | 2,292 | 9,801 | 14,560 | 24,361 | |||||||||||||||
Marine Systems | 15,868 | 7,260 | 23,128 | 4,237 | 27,365 | |||||||||||||||
Total | $ | 54,889 | $ | 10,156 | $ | 65,045 | $ | 25,830 | $ | 90,875 |
(a) | The estimated potential contract value includes work awarded on 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. The actual amount of funding received in the future may be higher or lower than our estimate of potential contract value. We recognize options in backlog when the customer exercises the option and establishes a firm order. |
(b) | Prior-period information has been restated for the adoption of ASC Topic 606, which we adopted on January 1, 2017. |
• | $110 to provide munitions to a customer in the Middle East. |
• | $75 to provide munitions to the U.S. Air Force and U.S. Army. |
• | $45 from the Army in support of the Stryker wheeled combat vehicle program, including the production of vehicles with a 30-millimeter cannon. |
• | $40 to produce gun systems for the F-35 Joint Strike Fighter. |
• | $30 to continue the conversion of M1A2 tanks to the M1A2S configuration for the Kingdom of Saudi Arabia and for engineering and logistics support services for the U.S. Army's Abrams family of vehicles. |
• | $165 from the Centers for Medicare & Medicaid Services for contact center services. |
• | $125 from the Army for ruggedized computing equipment under the Common Hardware Systems-4 (CHS-4) program. |
• | $105 from the U.S. Navy for combat and seaframe control systems on an Independence-variant Littoral Combat Ship (LCS). Options for the systems on three additional ships added $270 to the group's estimated potential contract value. |
• | $60 to provide support for live and virtual operations under the Warfighter Field Operations Customer Support (FOCUS) program. |
• | $50 to provide engineering, manufacturing and development in support of the Navy's Air and Missile Defense Radar (AMDR) program. |
• | $40 from the Navy to provide training and training-related program support services for the Center for Surface Combat Systems (CSCS). This contract has a potential value of approximately $245 over five years. |
• | $40 from the U.S. Coast Guard to provide system sustainment support for the Rescue 21 program. |
• | $35 from the Army to provide continued software support and engineering for the Warfighter Information Network-Tactical(WIN-T) Increment 2 program. |
• | $35 from the U.S. Geological Survey to perform hardware and software upgrades for the Landsat 8 satellite program. |
• | $565 from the Navy for design work on the Columbia-class submarine program and Advanced Nuclear Plant Studies (ANPS) in support of the program. |
• | $110 from the Navy to procure long-lead materials for two Virginia-class submarines under Block V of the program. |
• | $105 from the Navy for maintenance, modernization and repair work on the USS Makin Island, an LHD-class amphibious assault ship. |
• | $55 for initial design and construction work for the second ship in the TAO-205 next-generation fleet oiler program. |
• | $45 from the Navy to provide maintenance, modernization and repair services for submarines located at Naval Submarine Base New London in Connecticut. |
• | $35 from the Navy for on-board repair parts for two Virginia-class submarines under Block IV of the program. |
Second Quarter | Six Months | |||||||||||
2017 | 2016* | 2017 | 2016* | |||||||||
Gulfstream Aircraft Deliveries (units): | ||||||||||||
Large-cabin aircraft | 23 | 29 | 46 | 49 | ||||||||
Mid-cabin aircraft | 7 | 7 | 14 | 15 | ||||||||
Total | 30 | 36 | 60 | 64 | ||||||||
Pre-owned Deliveries (units): | 2 | 4 | 3 | 5 |