EX-99.1 2 d383548dex991.htm EXHIBIT 99.1 -- PRESS RELEASE Exhibit 99.1 -- Press Release

Exhibit 99.1

 

LOGO

2941 Fairview Park Drive

Suite 100

Falls Church, VA 22042-4513

www.generaldynamics.com

News


July 25, 2012

Contact: Rob Doolittle

Tel: 703 876 3199

rdoolittle@generaldynamics.com

General Dynamics Reports Second-Quarter 2012 Results

 

   

Operating earnings increase to $970 million

   

Company-wide operating margins expand to 12.2 percent

FALLS CHURCH, Va. – General Dynamics (NYSE: GD) today reported second-quarter 2012 earnings from continuing operations of $634 million, or $1.77 per share on a fully diluted basis, compared with 2011 second-quarter earnings from continuing operations of $666 million, or $1.79 per share fully diluted. Revenues in the quarter were $7.9 billion. Net earnings for the second quarter of 2012 were $634 million, compared to $653 million in the second quarter of 2011.

Margins

Company-wide operating margins for the second quarter of 2012 were 12.2 percent, which reflected 90-basis-point increases in each of the Aerospace, Combat Systems and Marine Systems groups over the year-ago period. Operating margins in the Information Systems and Technology group were 8.9 percent.

Cash

Net cash provided by operating activities in the quarter totaled $789 million. Free cash flow from operations, defined as net cash provided by operating activities less capital expenditures, was $703 million in second-quarter 2012, or approximately 111 percent of earnings from continuing operations.

Backlog

Funded backlog declined slightly in the second quarter, compared to first-quarter 2012. However, demand for information technology (IT) services was strong in the quarter, and other significant awards received included an indefinite delivery, indefinite quantity (IDIQ) contract from the Federal Aviation Administration for air traffic control radios which has a maximum potential value of $365 million over 10 years; a $270 million order for Hydra-70 rockets in support of Army requirements; $115 million for conversion of additional Stryker vehicles to the new double-V-hulled configuration and contractor logistics support; and a $125 million contract for continued development of the U.S. Navy’s next-generation ballistic-missile submarine (SSBN(X)).

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LOGO

 

The company’s total backlog at the end of second-quarter 2012 was $52.4 billion, and the estimated potential contract value was an additional $26.2 billion, representing management’s estimate of value under unfunded IDIQ contracts and unexercised options. The sum of all backlog components exceeded $78 billion at the end of the quarter.

“General Dynamics’ operating results in the second quarter reflect our continued focus on disciplined execution and effective cash conversion across the corporation,” said Jay L. Johnson, chairman and chief executive officer.

“Heading into the second half of 2012, I remain very confident in our continued ability to execute. However, given the impact of first-half award delays in IS&T’s tactical communications business, as well as the likelihood of further delays in the second half, I believe it is prudent to revise the full-year earnings guidance range downward to $7.00 to $7.10 per share, fully diluted.”

General Dynamics, headquartered in Falls Church, Virginia, employs approximately 93,500 people worldwide. The company is a market leader in business aviation; land and expeditionary combat systems, armaments and munitions; shipbuilding and marine systems; and information systems and technologies. More information about the company is available on the Internet at www.generaldynamics.com.

 

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LOGO

 

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 second-quarter securities analyst conference call at 9 a.m. Eastern Daylight Time on Wednesday, July 25, 2012. 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 noon on July 25 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 12521089. The phone replay will be available from noon July 25 until midnight August 1, 2012.

 

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EXHIBIT A

CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)

DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS

 

     Second Quarter     Variance  
     2011     2012     $     %  

Revenues

   $ 7,879      $ 7,922      $ 43        0.5

Operating costs and expenses

     6,930        6,952        (22  
  

 

 

   

 

 

   

 

 

   

Operating earnings

     949        970        21        2.2

Interest, net

     (31     (37     (6  

Other, net

     41        (5     (46  
  

 

 

   

 

 

   

 

 

   

Earnings from continuing operations before income taxes

     959        928        (31     (3.2 )% 

Provision for income taxes

     293        294        (1  
  

 

 

   

 

 

   

 

 

   

Earnings from continuing operations

   $ 666      $ 634      $ (32     (4.8 )% 
  

 

 

   

 

 

   

 

 

   

Discontinued operations, net of tax

     (13     —          13     
  

 

 

   

 

 

   

 

 

   

Net earnings

   $ 653      $ 634      $ (19     (2.9 )% 
  

 

 

   

 

 

   

 

 

   

Earnings per share—basic

        

Continuing operations

   $ 1.81      $ 1.79      $ (0.02     (1.1 )% 

Discontinued operations

   $ (0.04   $ —        $ 0.04     
  

 

 

   

 

 

   

 

 

   

Net earnings

   $ 1.77      $ 1.79      $ 0.02        1.1
  

 

 

   

 

 

   

 

 

   

Basic weighted average shares outstanding (in millions)

     368.0        355.0       
  

 

 

   

 

 

     

Earnings per share—diluted

        

Continuing operations

   $ 1.79      $ 1.77      $ (0.02     (1.1 )% 

Discontinued operations

   $ (0.03   $ —        $ 0.03     
  

 

 

   

 

 

   

 

 

   

Net earnings

   $ 1.76      $ 1.77      $ 0.01        0.6
  

 

 

   

 

 

   

 

 

   

Diluted weighted average shares outstanding (in millions)

     371.4        357.4       
  

 

 

   

 

 

     

 

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EXHIBIT B

CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)

DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS

 

     Six Months     Variance  
     2011     2012     $     %  

Revenues

   $ 15,677      $ 15,501      $ (176     (1.1 )% 

Operating costs and expenses

     13,799        13,671        128     
  

 

 

   

 

 

   

 

 

   

Operating earnings

     1,878        1,830        (48     (2.6 )% 

Interest, net

     (65     (76     (11  

Other, net

     42        (5     (47  
  

 

 

   

 

 

   

 

 

   

Earnings from continuing operations before income taxes

     1,855        1,749        (106     (5.7 )% 

Provision for income taxes

     571        551        20     
  

 

 

   

 

 

   

 

 

   

Earnings from continuing operations

   $ 1,284      $ 1,198      $ (86     (6.7 )% 
  

 

 

   

 

 

   

 

 

   

Discontinued operations, net of tax

     (13     —          13     
  

 

 

   

 

 

   

 

 

   

Net earnings

   $ 1,271      $ 1,198      $ (73     (5.7 )% 
  

 

 

   

 

 

   

 

 

   

Earnings per share—basic

        

Continuing operations

   $ 3.47      $ 3.37      $ (0.10     (2.9 )% 

Discontinued operations

   $ (0.04   $ —        $ 0.04     
  

 

 

   

 

 

   

 

 

   

Net earnings

   $ 3.43      $ 3.37      $ (0.06     (1.7 )% 
  

 

 

   

 

 

   

 

 

   

Basic weighted average shares outstanding (in millions)

     370.3        356.0       
  

 

 

   

 

 

     

Earnings per share—diluted

        

Continuing operations

   $ 3.43      $ 3.34      $ (0.09     (2.6 )% 

Discontinued operations

   $ (0.03   $ —        $ 0.03     
  

 

 

   

 

 

   

 

 

   

Net earnings

   $ 3.40      $ 3.34      $ (0.06     (1.8 )% 
  

 

 

   

 

 

   

 

 

   

Diluted weighted average shares outstanding (in millions)

     373.9        358.4       
  

 

 

   

 

 

     

 

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EXHIBIT C

REVENUES AND OPERATING EARNINGS BY SEGMENT (UNAUDITED)

DOLLARS IN MILLIONS

 

     Second Quarter     Variance  
     2011     2012     $     %  

Revenues:

        

Aerospace

   $ 1,376      $ 1,592      $ 216        15.7

Combat Systems

     2,121        2,149        28        1.3

Marine Systems

     1,576        1,653        77        4.9

Information Systems and Technology

     2,806        2,528        (278     (9.9 )% 
  

 

 

   

 

 

   

 

 

   

Total

   $ 7,879      $ 7,922      $ 43        0.5
  

 

 

   

 

 

   

 

 

   

Operating earnings:

        

Aerospace

   $ 209      $ 257      $ 48        23.0

Combat Systems

     299        322        23        7.7

Marine Systems

     161        183        22        13.7

Information Systems and Technology

     299        226        (73     (24.4 )% 

Corporate

     (19     (18     1        5.3
  

 

 

   

 

 

   

 

 

   

Total

   $ 949      $ 970      $ 21        2.2
  

 

 

   

 

 

   

 

 

   

Operating margins:

        

Aerospace

     15.2     16.1    

Combat Systems

     14.1     15.0    

Marine Systems

     10.2     11.1    

Information Systems and Technology

     10.7     8.9    

Total

     12.0     12.2    

 

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EXHIBIT D

REVENUES AND OPERATING EARNINGS BY SEGMENT (UNAUDITED)

DOLLARS IN MILLIONS

 

     Six Months     Variance  
     2011     2012     $     %  

Revenues:

        

Aerospace

   $ 2,729      $ 3,215      $ 486        17.8

Combat Systems

     4,076        4,060        (16     (0.4 )% 

Marine Systems

     3,252        3,258        6        0.2

Information Systems and Technology

     5,620        4,968        (652     (11.6 )% 
  

 

 

   

 

 

   

 

 

   

Total

   $ 15,677      $ 15,501      $ (176     (1.1 )% 
  

 

 

   

 

 

   

 

 

   

Operating earnings:

        

Aerospace

   $ 439      $ 528      $ 89        20.3

Combat Systems

     576        525        (51     (8.9 )% 

Marine Systems

     328        368        40        12.2

Information Systems and Technology

     575        444        (131     (22.8 )% 

Corporate

     (40     (35     5        12.5
  

 

 

   

 

 

   

 

 

   

Total

   $ 1,878      $ 1,830      $ (48     (2.6 )% 
  

 

 

   

 

 

   

 

 

   

Operating margins:

        

Aerospace

     16.1     16.4    

Combat Systems

     14.1     12.9    

Marine Systems

     10.1     11.3    

Information Systems and Technology

     10.2     8.9    

Total

     12.0     11.8    

 

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EXHIBIT E

PRELIMINARY CONSOLIDATED BALANCE SHEETS

DOLLARS IN MILLIONS

 

           (Unaudited)  
     December 31, 2011     July 1, 2012  

ASSETS

    

Current assets:

    

Cash and equivalents

   $ 2,649      $ 2,540   

Accounts receivable

     4,452        4,571   

Contracts in process

     5,168        4,916   

Inventories

     2,310        2,648   

Other current assets

     789        852   
  

 

 

   

 

 

 

Total current assets

     15,368        15,527   
  

 

 

   

 

 

 

Noncurrent assets:

    

Property, plant and equipment, net

     3,284        3,248   

Intangible assets, net

     1,813        1,738   

Goodwill

     13,576        13,762   

Other assets

     842        928   
  

 

 

   

 

 

 

Total noncurrent assets

     19,515        19,676   
  

 

 

   

 

 

 

Total assets

   $ 34,883      $ 35,203   
  

 

 

   

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

    

Current liabilities:

    

Short-term debt and current portion of long-term debt

   $ 23      $ 1,028   

Accounts payable

     2,895        2,559   

Customer advances and deposits

     5,011        5,398   

Other current liabilities

     3,216        3,194   
  

 

 

   

 

 

 

Total current liabilities

     11,145        12,179   
  

 

 

   

 

 

 

Noncurrent liabilities:

    

Long-term debt

     3,907        2,905   

Other liabilities

     6,599        6,457   
  

 

 

   

 

 

 

Total noncurrent liabilities

     10,506        9,362   
  

 

 

   

 

 

 

Shareholders’ equity:

    

Common stock

     482        482   

Surplus

     1,888        1,939   

Retained earnings

     18,917        19,751   

Treasury stock

     (5,743     (6,208

Accumulated other comprehensive loss

     (2,312     (2,302
  

 

 

   

 

 

 

Total shareholders’ equity

     13,232        13,662   
  

 

 

   

 

 

 

Total liabilities and shareholders’ equity

   $ 34,883      $ 35,203   
  

 

 

   

 

 

 

 

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EXHIBIT F

PRELIMINARY CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

DOLLARS IN MILLIONS

 

     Six Months Ended  
      July 3, 2011     July 1, 2012  

Cash flows from operating activities:

    

Net earnings

   $ 1,271      $ 1,198   

Adjustments to reconcile net earnings to net cash provided by operating activities:

    

Depreciation of property, plant and equipment

     172        189   

Amortization of intangible assets

     116        115   

Stock-based compensation expense

     64        69   

Excess tax benefit from stock-based compensation

     (21     (22

Deferred income tax provision

     34        3   

Discontinued operations, net of tax

     13        —     

(Increase) decrease in assets, net of effects of business acquisitions:

    

Accounts receivable

     (385     (110

Contracts in process

     (132     194   

Inventories

     (224     (316

Increase (decrease) in liabilities, net of effects of business acquisitions:

    

Accounts payable

     (103     (342

Customer advances and deposits

     283        226   

Other, net

     (9     (1
  

 

 

   

 

 

 

Net cash provided by operating activities

     1,079        1,203   
  

 

 

   

 

 

 

Cash flows from investing activities:

    

Capital expenditures

     (152     (176

Business acquisitions, net of cash acquired

     —          (165

Purchases of held-to-maturity securities

     (278     (160

Maturities of held-to-maturity securities

     221        19   

Purchases of available-for-sale securities

     (257     (100

Other, net

     215        76   
  

 

 

   

 

 

 

Net cash used by investing activities

     (251     (506
  

 

 

   

 

 

 

Cash flows from financing activities:

    

Purchases of common stock

     (1,121     (592

Dividends paid

     (333     (353

Proceeds from option exercises

     175        111   

Other, net

     (2     28   

Net cash used by financing activities

     (1,281     (806 ) 
  

 

 

   

 

 

 

Net cash used by discontinued operations

     (3     —     
  

 

 

   

 

 

 

Net decrease in cash and equivalents

     (456     (109 ) 

Cash and equivalents at beginning of period

     2,613        2,649   
  

 

 

   

 

 

 

Cash and equivalents at end of period

   $ 2,157      $ 2,540   
  

 

 

   

 

 

 

 

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EXHIBIT G

PRELIMINARY FINANCIAL INFORMATION (UNAUDITED)

DOLLARS IN MILLIONS EXCEPT PER SHARE AND EMPLOYEE AMOUNTS

 

     Second Quarter
2011
          Second Quarter
2012
       
     Quarter     Year-to-date     Quarter     Year-to-date  

Non-GAAP Financial Measures:

        

Free cash flow from operations:

        

Net cash provided by operating activities

   $ 751      $ 1,079      $ 789      $ 1,203   

Capital expenditures

     (91     (152     (86     (176
  

 

 

   

 

 

   

 

 

   

 

 

 

Free cash flow from operations (A)

   $ 660      $ 927      $ 703      $ 1,027   
  

 

 

   

 

 

   

 

 

   

 

 

 

Return on invested capital:

        

Earnings from continuing operations

   $ 2,662        $ 2,466     

After-tax interest expense

     104          113     

After-tax amortization expense

     159          162     
  

 

 

     

 

 

   

Net operating profit after taxes

     2,925          2,741     

Average debt and equity

     16,838          17,475     
  

 

 

     

 

 

   

Return on invested capital (B)

     17.4       15.7  
  

 

 

     

 

 

   

Other Financial Information:

        

Return on equity (C)

     19.7       18.1  

Debt-to-equity (D)

     22.8       28.8  

Debt-to-capital (E)

     18.6       22.4  

Book value per share (F)

   $ 38.49        $ 38.73     

Total taxes paid

   $ 479        $ 424     

Company-sponsored research and development (G)

   $ 149        $ 130     

Employment

     88,400          93,500     

Sales per employee (H)

   $ 359,600        $ 348,800     

Shares outstanding

     361,764,830          352,778,253     

 

(A) 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.
(B) We believe return on invested capital (ROIC) is a measurement that is useful to investors because it reflects our ability to generate returns from the capital we have deployed in our operations. We use ROIC to evaluate investment decisions and as a performance measure in evaluating management. We define ROIC as net operating profit after taxes for the latest 12-month period divided by the sum of the average debt and shareholders’ equity for the same period. Net operating profit after taxes is defined as earnings from continuing operations plus after-tax interest and amortization expense. The most directly comparable GAAP measure to net operating profit after taxes is earnings from continuing operations.
(C) Return on equity is calculated by dividing earnings from continuing operations for the latest 12-month period by our average equity during that period.
(D) Debt-to-equity ratio is calculated as total debt divided by total equity as of the end of the period.
(E) 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.
(F) Book value per share is calculated as total equity divided by total outstanding shares as of the end of the period.
(G) Includes independent research and development and bid and proposal costs and Gulfstream product-development costs.
(H) Sales per employee is calculated by dividing revenues for the latest 12-month period by our average number of employees during that period.

 

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EXHIBIT H

BACKLOG (UNAUDITED)

DOLLARS IN MILLIONS

 

     Funded      Unfunded      Total
Backlog
     Estimated Potential
Contract Value*
     Total Potential
Contract
Value
 

Second Quarter 2012

              

Aerospace

   $ 16,058       $ 241       $ 16,299       $ —         $ 16,299   

Combat Systems

     8,854         905         9,759         3,090         12,849   

Marine Systems

     11,666         5,339         17,005         1,377         18,382   

Information Systems and Technology

     7,348         1,951         9,299         21,774         31,073   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 43,926       $ 8,436       $ 52,362       $ 26,241       $ 78,603   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

First Quarter 2012

              

Aerospace

   $ 16,718       $ 266       $ 16,984       $ —         $ 16,984   

Combat Systems

     9,623         1,042         10,665         3,473         14,138   

Marine Systems

     12,261         5,754         18,015         1,199         19,214   

Information Systems and Technology

     7,649         1,913         9,562         22,256         31,818   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 46,251       $ 8,975       $ 55,226       $ 26,928       $ 82,154   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Second Quarter 2011

              

Aerospace

   $ 17,948       $ 340       $ 18,288       $ —         $ 18,288   

Combat Systems

     9,657         1,135         10,792         4,370         15,162   

Marine Systems

     9,191         9,209         18,400         1,097         19,497   

Information Systems and Technology

     7,468         2,168         9,636         15,697         25,333   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 44,264       $ 12,852       $ 57,116       $ 21,164       $ 78,280   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

* 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.

 

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EXHIBIT I

SECOND QUARTER 2012 SIGNIFICANT ORDERS (UNAUDITED)

DOLLARS IN MILLIONS

We received the following significant contract orders during the second quarter of 2012:

Combat Systems

 

   

$270 from the U.S. Army for the production of Hydra-70 rockets.

 

   

$170 from the Army to upgrade Abrams main battle tanks to the M1A2 System Enhancement Package (SEP) configuration and for continued technical support on the program.

 

   

$115 from the Army for the double-V-hull conversion of 49 previously-delivered Stryker vehicles and contractor logistics support.

Marine Systems

 

   

$125 from the U.S. Navy for Advanced Nuclear Plant Studies (ANPS) in support of development of the next-generation ballistic-missile submarine (SSBN(X)).

 

   

$80 from the Navy for long-lead funding for the construction of the first Virginia-class submarine under Block IV of the program.

 

   

$65 from the Navy for planning yard services for the DDG-51 guided missile destroyer and FFG-7 Oliver Hazard Perry-class frigate programs.

Information Systems and Technology

 

   

$80 for support of the Trident missile D5 life-extension program, which extends the life of existing missiles by replacing and upgrading obsolete components.

 

   

$30 from the Army under the Range Radar Replacement Program (RRRP) to develop modernized instrumentation radars at U.S Army test ranges.

 

   

An award from the Centers for Medicare & Medicaid Services (CMS) to combine the Coordination of Benefits and the Medicare Secondary Payer systems. The program has a maximum potential value of $100 over 5 years.

 

   

An indefinite delivery, indefinite quantity (IDIQ) contract from the Federal Aviation Administration to deliver radios that allow air traffic control personnel to communicate with aircraft. The program has a maximum potential value of $365 over 10 years.

 

– more –


EXHIBIT J

AEROSPACE SUPPLEMENTAL DATA (UNAUDITED)

 

     Second Quarter      Six Months  
     2011      2012      2011      2012  

Gulfstream Green Deliveries (units):

           

Large aircraft

     20         24         40         50   

Mid-size aircraft

     3         2         7         4   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     23         26         47         54   
  

 

 

    

 

 

    

 

 

    

 

 

 

Gulfstream Outfitted Deliveries (units):

           

Large aircraft

     19         18         38         35   

Mid-size aircraft

     3         3         8         5   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     22         21         46         40   
  

 

 

    

 

 

    

 

 

    

 

 

 

Pre-owned Deliveries (units):

     2         —           2         —     
  

 

 

    

 

 

    

 

 

    

 

 

 

 

###