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Press release from PR Newswire

General Dynamics Reports First-Quarter 2012 Results

Wednesday, April 25, 2012

General Dynamics Reports First-Quarter 2012 Results07:00 EDT Wednesday, April 25, 2012- Management affirms full-year earnings guidance - Aerospace group revenues grow 20 percentFALLS CHURCH, Va., April 25, 2012  /PRNewswire/ -- General Dynamics (NYSE: GD) today reported first-quarter 2012 net earnings of $564 million, or $1.57 per share on a fully diluted basis, compared with 2011 first-quarter net earnings of $618 million, or $1.64 per share fully diluted.  First-quarter 2012 revenues were $7.6 billion. Margins Company-wide operating margins for the first quarter of 2012 were 11.3 percent, compared to 11.9 percent in first-quarter 2011.  Marine Systems margins improved 150 basis points compared to first-quarter 2011 due to improved performance on auxiliary shipbuilding programs.  Combat Systems' operating earnings and margins were negatively impacted in the quarter by $67 million in non-cash out-of-period accounting adjustments in its European operations.  These adjustments reduced the company's fully diluted earnings per share by $0.13 in the quarter.  Cash Net cash provided by operating activities in the quarter totaled $414 million.  Free cash flow from operations, defined as net cash provided by operating activities less capital expenditures, was $324 million in first-quarter 2012.  In comparison, for the first quarter of 2011, net cash provided by operating activities was $328 million, and free cash flow from operations was $267 million. Backlog Funded backlog at the end of first-quarter 2012 was $46.3 billion, and total backlog was $55.2 billion.  Significant awards received in the quarter include construction contracts for two new surface ships, a DDG 51-class destroyer and a third Mobile Landing Platform (MLP) auxiliary ship.  Healthy demand for Gulfstream aircraft continued in the quarter with particularly strong interest among North American customers. In addition to total backlog, estimated potential contract value was $26.9 billion, representing management's estimate of value in unfunded indefinite delivery, indefinite quantity (IDIQ) contracts and unexercised options."General Dynamics' first-quarter performance reflects continued growth in our Aerospace segment as well as the challenges presented by today's dynamic U.S. federal procurement environment. We are continuing to see slower-than-anticipated award activity, particularly relating to our IS&T programs with validated requirements and approved funding," said Jay L. Johnson, chairman and chief executive officer.  "We remain focused on effectively executing existing programs, securing work associated with delayed awards and capturing new opportunities. "Given our performance in the quarter and our current outlook for the remainder of the year, we expect full-year earnings per share to be in the $7.10 to $7.20 range," Johnson said.   General Dynamics, headquartered in Falls Church, Virginia, employs approximately 93,000 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 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, scheduled for 9 a.m. EDT on Wednesday, April 25, 2012.  The webcast will be a listen-only audio event, available at  An on-demand replay of the webcast will be available by 12 p.m. EDT on April 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 84872093.  The phone replay will be available from 12 p.m. April 25 through May 2, 2012.  EXHIBIT ACONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTSFirst QuarterVariance20112012$%Revenues$          7,798$        7,579$         (219)(2.8)%Operating costs and expenses6,8696,719150Operating earnings929860(69)(7.4)%Interest, net(34)(39)(5)Other, net1-(1)Earnings before income taxes896821(75)(8.4)%Provision for income taxes27825721Net earnings$             618$            564$           (54)(8.7)%Earnings per share - basic$            1.66$           1.58$        (0.08)(4.8)%Basic weighted average shares outstanding (in millions)372.7357.0Earnings per share - diluted$            1.64$           1.57$        (0.07)(4.3)%Diluted weighted average shares outstanding (in millions)376.4359.4 EXHIBIT BREVENUES AND OPERATING EARNINGS BY SEGMENT (UNAUDITED)DOLLARS IN MILLIONSFirst QuarterVariance20112012$%Revenues:Aerospace$          1,353$        1,623$           27020.0 %Combat Systems1,9551,911(44)(2.3)%Marine Systems1,6761,605(71)(4.2)%Information Systems andTechnology2,814 2,440(374)(13.3)%Total$          7,798$        7,579$         (219)(2.8)%Operating earnings:Aerospace$             230$            271$             4117.8 %Combat Systems277203(74)(26.7)%Marine Systems1671851810.8 %Information Systems andTechnology276 218 (58) (21.0)%Corporate(21)(17)419.0 %Total$             929$            860$           (69)(7.4)%Operating margins:Aerospace17.0 %16.7 %Combat Systems14.2 %10.6 %Marine Systems10.0 %11.5 %Information Systems andTechnology9.8 % 8.9 %Total11.9 %11.3 % EXHIBIT CPRELIMINARY CONSOLIDATED BALANCE SHEETSDOLLARS IN MILLIONS(Unaudited)December 31, 2011April 1, 2012ASSETSCurrent assets:Cash and equivalents$                         2,649$                   2,632Accounts receivable4,4524,686Contracts in process5,1684,929Inventories2,3102,444Other current assets789819Total current assets15,36815,510Noncurrent assets:Property, plant and equipment, net3,2843,290Intangible assets, net1,8131,783Goodwill13,57613,759Other assets842967Total noncurrent assets19,51519,799Total assets$                       34,883$                  35,309LIABILITIES AND SHAREHOLDERS' EQUITYCurrent liabilities:Short-term debt and current portion of long-term debt$                              23$                           3Accounts payable2,8952,509Customer advances and deposits5,0115,299Other current liabilities3,2163,142Total current liabilities11,14510,953Noncurrent liabilities:Long-term debt3,9073,905Other liabilities6,5996,597Total noncurrent liabilities10,50610,502Shareholders' equity:Common stock482482Surplus1,8881,897Retained earnings18,91719,297Treasury stock(5,743)(5,710) Accumulated other comprehensive loss(2,312)(2,112)Total shareholders' equity13,23213,854Total liabilities and shareholders' equity$                       34,883$                35,309 EXHIBIT DPRELIMINARY CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)DOLLARS IN MILLIONSThree Months EndedCash flows from operating activities:April 3, 2011April 1, 2012Net earnings$                    618$                   564Adjustments to reconcile net earnings to net cash provided by operating activities:Depreciation of property, plant and equipment8597Amortization of intangible assets5857Stock-based compensation expense3235Excess tax benefit from stock-based compensation(15)(21)Deferred income tax provision193(Increase) decrease in assets, net of effects of business acquisitions:Accounts receivable(389)(233)Contracts in process(14)162Inventories(154)(114)Increase (decrease) in liabilities, net of effects of business acquisitions:Accounts payable(226)(387)Customer advances and deposits198205Income taxes payable215188Other current liabilities(120)(269)Other, net21127Net cash provided by operating activities328414Cash flows from investing activities:Purchases of held-to-maturity securities(78)(126)Capital expenditures(61)(90)Purchases of available-for-sale securities(174)(65)Business acquisitions, net of cash acquired-(26)Maturities of held-to-maturity securities1163Other, net5940Net cash used by investing activities(138)(264)Cash flows from financing activities:Dividends paid(157)(169)Proceeds from option exercises13878Purchases of common stock(314)(76)Other, net151Net cash used by financing activities(318)(166)Net cash used by discontinued operations(1)(1)Net decrease in cash and equivalents(129)(17)Cash and equivalents at beginning of period2,6132,649Cash and equivalents at end of period$                 2,484$                2,632  EXHIBIT EPRELIMINARY FINANCIAL INFORMATION (UNAUDITED)DOLLARS IN MILLIONS EXCEPT PER SHARE AND EMPLOYEE AMOUNTSFirst QuarterFirst Quarter20112012Non-GAAP Financial Measures:Free cash flow from operations:Net cash provided by operating activities$                           328$                  414Capital expenditures (61)(90)Free cash flow from operations (A)$                           267$                  324Return on invested capital:Earnings from continuing operations$                        2,647$               2,498After-tax interest expense108110After-tax amortization expense156163Net operating profit after taxes2,9112,771Average debt and equity16,74617,372Return on invested capital (B)17.4%16.0%Other Financial Information:Return on equity (C)19.9%18.2%Debt-to-equity (D)23.1%28.2%Debt-to-capital (E)18.8%22.0%Book value per share (F)$                        37.30$               38.44Total taxes paid$                             55$                    82Company-sponsored research and development (G)$                           115$                  152Employment 89,80092,900Sales per employee (H)$                    360,200$          352,200Shares outstanding372,000,435360,399,149(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. EXHIBIT FBACKLOG (UNAUDITED)DOLLARS IN MILLIONSEstimated TotalPotentialTotal PotentialFirst Quarter 2012Funded Unfunded Backlog Contract Value*Contract ValueAerospace$      16,718$               266$   16,984$                    -$             16,984Combat Systems9,6231,04210,6653,47314,138Marine Systems12,2615,75418,0151,19919,214Information Systems and Technology7,6491,9139,56222,25631,818Total$    46,251$          8,975$ 55,226$           26,928$           82,154Fourth Quarter 2011Aerospace$      17,618$               289$   17,907$                      -$             17,907Combat Systems10,2831,13711,4203,45314,873Marine Systems9,3649,14018,5042,16320,667Information Systems and Technology7,4342,1459,57922,38431,963Total$    44,699$        12,711$ 57,410$           28,000$           85,410First Quarter 2011Aerospace$      17,499$               361$   17,860$                      -$             17,860Combat Systems10,2891,09211,3814,92516,306Marine Systems8,11310,54018,65354919,202Information Systems and Technology7,9581,7249,68215,11924,801Total$    43,859$        13,717$ 57,576$           20,593$           78,169*  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.EXHIBIT G FIRST QUARTER 2012 SIGNIFICANT ORDERS (UNAUDITED) DOLLARS IN MILLIONS We received the following significant contract orders during the first quarter of 2012: Combat Systems$130 from the U.K. Ministry of Defence for the production of 100 Ocelot light patrol vehicles.  $40 from the U.S. Army for the production of 258 Stryker Mine Rollers.  $35 from the Army for munitions demilitarization.   Marine Systems$665 from the U.S. Navy for construction of a second DDG-51 destroyer under the destroyer construction continuation program. $360 from the Navy for construction of the third Mobile Landing Platform (MLP) auxiliary support ship.Information Systems and Technology$155 for combat and seaframe control systems on two Navy Littoral Combat Ships (LCS); options remain for six additional shipsets of equipment.   $80 from the U.S. Department of Education to assist in the implementation and operation of the Federal Student Aid Information Center. $75 from the U.S. Air Force for networking and computing products and support under the Network-Centric Solutions (NETCENTS) program. $70 from the Canadian government to provide engineering and support services.  An award from the U.S. Department of Energy to provide cybersecurity and cloud-computing support services.  The program has a maximum potential value of $140 over four years.  EXHIBIT HAEROSPACE SUPPLEMENTAL DATA (UNAUDITED)First Quarter20112012Gulfstream Green Deliveries (units):Large aircraft2026Mid-size aircraft42Total2428Gulfstream Outfitted Deliveries (units):Large aircraft1917Mid-size aircraft52Total2419Pre-owned Deliveries (units):--SOURCE General DynamicsFor further information: Media: Rob Doolittle, +1-703-876-3199,, or Investors: Amy Gilliland, General Dynamics, +1-703-876-3748