GENERAL DYNAMICS CORP - FORM 8-K - EX-99.1 - EXHIBIT 99.1 - April 29, 2015

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8-K - 8-K - GENERAL DYNAMICS CORPgd-201504058k.htm


Exhibit 99.1 
 
2941 Fairview Park Drive
 
 
Suite 100
 
 
Falls Church, VA 22042-4513
www.generaldynamics.com
 
News
April 29, 2015
Contact: Lucy Ryan
Tel: 703 876 3631
lryan@generaldynamics.com
General Dynamics Reports First-Quarter 2015 Results
 
Compared to first-quarter 2014:
•
Revenues up 7.1% to $7.8 billion
•
Operating earnings up 17.5% to $1.03 billion
•
Earnings from continuing operations up 20.1% to $716 million
•
Earnings per fully diluted share up 25.1% to $2.14

FALLS CHURCH, Va. - 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,

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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.



 
 

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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.
 



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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.
 




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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.









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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


 

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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.
 

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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.

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EXHIBIT F
BACKLOG - (UNAUDITED)
DOLLARS IN MILLIONS
 
 
 
Funded
 
Unfunded
 
Total
Backlog
 
Estimated
Potential
Contract Value*
 
Total Potential
Contract
Value
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.
 



 

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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.


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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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