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) |
GENERAL DYNAMICS CORPORATION | |||
by | /s/ William A. Moss | ||
William A. Moss Vice President and Controller (Authorized Officer and Chief Accounting Officer) | |||
Dated: April 25, 2018 |
2941 Fairview Park Drive, Suite 100 | ||
Falls Church, VA 22042-4513 | News | |
www.generaldynamics.com |
• | Diluted earnings per share from continuing operations of $2.65, up 6.9% |
• | Net earnings of $799 million, up 4.7% |
• | Return on sales of 10.6% |
• | 1.3% revenue growth with particular strength in our defense businesses |
Three Months Ended | Variance | |||||||||||||
April 1, 2018 | April 2, 2017* | $ | % | |||||||||||
Revenue | $ | 7,535 | $ | 7,441 | $ | 94 | 1.3 | % | ||||||
Operating costs and expenses | 6,527 | 6,395 | 132 | |||||||||||
Operating earnings | 1,008 | 1,046 | (38 | ) | (3.6 | )% | ||||||||
Interest, net | (27 | ) | (25 | ) | (2 | ) | ||||||||
Other, net | (21 | ) | (11 | ) | (10 | ) | ||||||||
Earnings before income tax | 960 | 1,010 | (50 | ) | (5.0 | )% | ||||||||
Provision for income tax, net | 161 | 247 | (86 | ) | ||||||||||
Net earnings | $ | 799 | $ | 763 | $ | 36 | 4.7 | % | ||||||
Earnings per share—basic | $ | 2.70 | $ | 2.53 | $ | 0.17 | 6.7 | % | ||||||
Basic weighted average shares outstanding | 296.4 | 301.8 | ||||||||||||
Earnings per share—diluted | $ | 2.65 | $ | 2.48 | $ | 0.17 | 6.9 | % | ||||||
Diluted weighted average shares outstanding | 301.1 | 307.3 |
Three Months Ended | Variance | |||||||||||||
April 1, 2018 | April 2, 2017* | $ | % | |||||||||||
Revenue: | ||||||||||||||
Aerospace | $ | 1,825 | $ | 2,074 | $ | (249 | ) | (12.0 | )% | |||||
Combat Systems | 1,440 | 1,287 | 153 | 11.9 | % | |||||||||
Information Systems and Technology | 2,236 | 2,146 | 90 | 4.2 | % | |||||||||
Marine Systems | 2,034 | 1,934 | 100 | 5.2 | % | |||||||||
Total | $ | 7,535 | $ | 7,441 | $ | 94 | 1.3 | % | ||||||
Operating earnings: | ||||||||||||||
Aerospace | $ | 346 | $ | 439 | $ | (93 | ) | (21.2 | )% | |||||
Combat Systems | 224 | 205 | 19 | 9.3 | % | |||||||||
Information Systems and Technology | 247 | 236 | 11 | 4.7 | % | |||||||||
Marine Systems | 184 | 161 | 23 | 14.3 | % | |||||||||
Corporate | 7 | 5 | 2 | 40.0 | % | |||||||||
Total | $ | 1,008 | $ | 1,046 | $ | (38 | ) | (3.6 | )% | |||||
Operating margin: | ||||||||||||||
Aerospace | 19.0 | % | 21.2 | % | ||||||||||
Combat Systems | 15.6 | % | 15.9 | % | ||||||||||
Information Systems and Technology | 11.0 | % | 11.0 | % | ||||||||||
Marine Systems | 9.0 | % | 8.3 | % | ||||||||||
Total | 13.4 | % | 14.1 | % |
(Unaudited) | |||||||
April 1, 2018 | December 31, 2017 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and equivalents | $ | 4,332 | $ | 2,983 | |||
Accounts receivable | 3,769 | 3,617 | |||||
Unbilled receivables | 5,865 | 5,240 | |||||
Inventories | 5,543 | 5,303 | |||||
Other current assets | 955 | 1,185 | |||||
Total current assets | 20,464 | 18,328 | |||||
Noncurrent assets: | |||||||
Property, plant and equipment, net | 3,533 | 3,517 | |||||
Intangible assets, net | 702 | 702 | |||||
Goodwill | 11,955 | 11,914 | |||||
Other assets | 565 | 585 | |||||
Total noncurrent assets | 16,755 | 16,718 | |||||
Total assets | $ | 37,219 | $ | 35,046 | |||
LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Short-term debt and current portion of long-term debt | $ | 2,498 | $ | 2 | |||
Accounts payable | 2,851 | 3,207 | |||||
Customer advances and deposits | 7,095 | 6,992 | |||||
Other current liabilities | 2,798 | 2,898 | |||||
Total current liabilities | 15,242 | 13,099 | |||||
Noncurrent liabilities: | |||||||
Long-term debt | 3,981 | 3,980 | |||||
Other liabilities | 6,222 | 6,532 | |||||
Total noncurrent liabilities | 10,203 | 10,512 | |||||
Shareholders’ equity: | |||||||
Common stock | 482 | 482 | |||||
Surplus | 2,820 | 2,872 | |||||
Retained earnings | 27,605 | 26,444 | |||||
Treasury stock | (15,742 | ) | (15,543 | ) | |||
Accumulated other comprehensive loss | (3,391 | ) | (2,820 | ) | |||
Total shareholders’ equity | 11,774 | 11,435 | |||||
Total liabilities and shareholders’ equity | $ | 37,219 | $ | 35,046 |
Three Months Ended | |||||||
April 1, 2018 | April 2, 2017 | ||||||
Cash flows from operating activities—continuing operations: | |||||||
Net earnings | $ | 799 | $ | 763 | |||
Adjustments to reconcile net earnings to net cash provided by operating activities: | |||||||
Depreciation of property, plant and equipment | 89 | 92 | |||||
Amortization of intangible assets | 20 | 19 | |||||
Equity-based compensation expense | 29 | 23 | |||||
Deferred income tax provision | 4 | 45 | |||||
(Increase) decrease in assets, net of effects of business acquisitions: | |||||||
Accounts receivable | (150 | ) | (84 | ) | |||
Unbilled receivables | (608 | ) | (338 | ) | |||
Inventories | (236 | ) | 2 | ||||
Increase (decrease) in liabilities, net of effects of business acquisitions: | |||||||
Accounts payable | (358 | ) | (72 | ) | |||
Customer advances and deposits | (149 | ) | (95 | ) | |||
Income taxes payable | 167 | 202 | |||||
Other current liabilities | (128 | ) | (76 | ) | |||
Other, net | 25 | 52 | |||||
Net cash (used) provided by operating activities | (496 | ) | 533 | ||||
Cash flows from investing activities: | |||||||
Capital expenditures | (104 | ) | (62 | ) | |||
Other, net | (1 | ) | (23 | ) | |||
Net cash used by investing activities | (105 | ) | (85 | ) | |||
Cash flows from financing activities: | |||||||
Proceeds from commercial paper, net | 2,494 | — | |||||
Purchases of common stock | (267 | ) | (354 | ) | |||
Dividends paid | (250 | ) | (230 | ) | |||
Other, net | (25 | ) | (22 | ) | |||
Net cash provided (used) by financing activities | 1,952 | (606 | ) | ||||
Net cash used by discontinued operations | (2 | ) | (8 | ) | |||
Net increase (decrease) in cash and equivalents | 1,349 | (166 | ) | ||||
Cash and equivalents at beginning of period | 2,983 | 2,334 | |||||
Cash and equivalents at end of period | $ | 4,332 | $ | 2,168 |
2018 | 2017 | |||||||
First Quarter | First Quarter | |||||||
Other Financial Information: | ||||||||
Debt-to-equity (a) | 55.0 | % | 36.7 | % | ||||
Debt-to-capital (b) | 35.5 | % | 26.9 | % | ||||
Book value per share (c) | $ | 39.64 | $ | 35.08 | ||||
Income tax refunds, net | $ | 4 | $ | 4 | ||||
Company-sponsored research and development (d) | $ | 140 | $ | 113 | ||||
Shares outstanding | 297,033,427 | 301,685,448 | ||||||
Non-GAAP Financial Measure: | ||||||||
Free cash flow from operations: | ||||||||
Net cash (used) provided by operating activities | $ | (496 | ) | $ | 533 | |||
Capital expenditures | (104 | ) | (62 | ) | ||||
Free cash flow from operations (e) | $ | (600 | ) | $ | 471 |
(a) | Debt-to-equity ratio is calculated as total debt divided by total equity as of the end of the period. |
(b) | 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. |
(c) | Book value per share is calculated as total equity divided by total outstanding shares as of the end of the period. |
(d) | Includes independent research and development and Aerospace product-development costs. |
(e) | 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 key 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 | ||||||||||||||||
First Quarter 2018: | ||||||||||||||||||||
Aerospace | $ | 11,898 | $ | 158 | $ | 12,056 | $ | 1,868 | $ | 13,924 | ||||||||||
Combat Systems | 17,126 | 378 | 17,504 | 3,549 | 21,053 | |||||||||||||||
Information Systems and Technology | 6,739 | 2,075 | 8,814 | 15,787 | 24,601 | |||||||||||||||
Marine Systems | 18,310 | 5,458 | 23,768 | 4,271 | 28,039 | |||||||||||||||
Total | $ | 54,073 | $ | 8,069 | $ | 62,142 | $ | 25,475 | $ | 87,617 | ||||||||||
Fourth Quarter 2017: | ||||||||||||||||||||
Aerospace | $ | 12,319 | $ | 147 | $ | 12,466 | $ | 1,955 | $ | 14,421 | ||||||||||
Combat Systems | 17,158 | 458 | 17,616 | 3,154 | 20,770 | |||||||||||||||
Information Systems and Technology | 6,682 | 2,192 | 8,874 | 14,875 | 23,749 | |||||||||||||||
Marine Systems | 15,872 | 8,347 | 24,219 | 4,809 | 29,028 | |||||||||||||||
Total | $ | 52,031 | $ | 11,144 | $ | 63,175 | $ | 24,793 | $ | 87,968 | ||||||||||
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 |
(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 aircraft services agreements. We recognize options in backlog when the customer exercises the option and establishes a firm order. For IDIQ contracts, we evaluate the amount of funding we expect to receive and include this amount in our estimated potential contract value. The actual amount of funding received in the future may be higher or lower than our estimate of potential contract value. |
• | $445 to produce Piranha 5 wheeled armored vehicles and provide associated support services to the Romanian Armed Forces, part of a larger contract with a total potential value exceeding $1 billion. |
• | $285 from the U.S. Army for inventory management and engineering and support services for the Stryker wheeled combat-vehicle fleet. |
• | $155 from the Army for various calibers of ammunition. |
• | $80 from the Army for technical support and engineering and logistics services for the Abrams main battle tank program. |
• | $70 from the Army for the production of Stryker double-V-hull vehicles in the A1 configuration. |
• | $65 to produce AGM-114R Hellfire munitions. |
• | $215 from the National Aeronautics and Space Administration (NASA) for the Space Network Ground Segment Sustainment (SGSS) program to modernize NASA’s ground infrastructure systems for its satellite network. |
• | $120 from the U.S. Army for computing and communications equipment under the Common Hardware Systems-4 (CHS-4) program. |
• | $95 from the U.S. Air Force for the Battlefield Information Collection and Exploitation System (BICES) program to provide information sharing support to coalition operations. |
• | $60 to provide IT network and technical support services for the U.S. Army Intelligence and Security Command. |
• | $55 from the U.S. Air Force Central Command for communications equipment and associated technical support services in Asia. |
• | $50 from the National Geospatial-Intelligence Agency (NGA) for IT lifecycle management and virtual desktop services. |
• | $45 to provide vehicle electronic systems and components for Prophet, the Army’s ground-based tactical signals intelligence and electronic warfare system. |
• | $45 from the Army for the lightweight mobile tactical network. |
• | $40 to continue managing the Army’s live training systems. |
• | $30 to provide engineering and integration support for the Canadian Army’s tactical communications network, the Land Command Support System (LCSS). |
• | $695 from the U.S. Navy to procure long-lead materials for four Virginia-class submarines under Block V of the program. |
• | $420 from the Navy for construction of the second ship in the John Lewis-class (TAO-205) fleet oiler program. |
• | $100 from the Navy for Advanced Nuclear Plant Studies in support of the Columbia-class submarine program. |
• | $85 from the Navy for maintenance and modernization work on the USS Montpelier, a Los Angeles-class attack submarine. |
• | $40 from the Navy to provide design and development and lead yard services for Virginia-class submarines. |
First Quarter | ||||||
2018 | 2017 | |||||
Gulfstream Aircraft Deliveries (units): | ||||||
Large-cabin aircraft | 19 | 23 | ||||
Mid-cabin aircraft | 7 | 7 | ||||
Total | 26 | 30 | ||||
Pre-owned Deliveries (units): | 1 | 1 |