General Dynamics Reports Fourth-quarter, Full-year 2011 Performance
FALLS CHURCH, Va., Jan. 25, 2012 /PRNewswire/ -- General Dynamics (NYSE: GD) today reported 2011 fourth-quarter earnings from continuing operations of $603 million, or $1.68 per share on a fully diluted basis, compared to 2010 fourth-quarter earnings from continuing operations of $729 million, or $1.91 per share fully diluted.
Fourth-quarter earnings were impacted by charges taken at the company's Switzerland-based aircraft-completions business totaling $189 million. The charges comprise a $111 million non-cash impairment of an intangible asset related to the business and $78 million in contract losses.
"Jet Aviation's aircraft-completions business continued to face lower OEM business-jet volume and delays in several narrow-body and wide-body aircraft which are nearing delivery," said Jay L. Johnson, chairman and chief executive officer. "We have taken appropriate steps to address these issues.
"The charges taken in our completions business mask an otherwise solid fourth-quarter performance by General Dynamics, marked by excellent cash generation, delivery of the first 12 Gulfstream G650 production aircraft to the final phase of manufacturing, and strong margins in our defense businesses," Johnson continued.
Revenue and Full-year Earnings
Fourth-quarter 2011 revenue was $9.1 billion, and revenue was $32.7 billion for the full year. Full-year 2011 earnings from continuing operations were $2.55 billion, or $6.94 per share on a fully diluted basis, compared to $2.63 billion and $6.82 per share, respectively, for 2010.
Margins
Company-wide operating margins, which include the impact of the charges in Aerospace, were 10.4 percent for the fourth quarter and 11.7 percent for the full year. These margins reflect the continued strong performance in the company's defense groups, each of which increased their operating margins in the quarter and for the year.
Cash
Net cash provided by operating activities totaled $2 billion in the fourth quarter and $3.2 billion for the full year. Free cash flow from operations, defined as net cash provided by operating activities less capital expenditures, was $1.8 billion in the quarter and $2.8 billion for the year. Free cash flow exceeded earnings from continuing operations in the fourth quarter and for the full year, benefitting from progress payments received by the Aerospace group as the new Gulfstream G650 business-jet aircraft received provisional type certification and the first 12 production aircraft were delivered into final-phase manufacturing.
Backlog
The company's total backlog was $57.4 billion at the end of the year. In the fourth quarter, orders were particularly strong for combat vehicle production and improvements, both domestically and internationally. Gulfstream also enjoyed healthy demand across its product portfolio in the quarter, and for the full year recorded the highest number of orders for new aircraft since the introduction of the G650 in 2008.
Estimated potential contract value, representing management's estimate of the value of unfunded indefinite delivery, indefinite quantity (IDIQ) contracts and unexercised contract options, increased to $28 billion at year-end 2011. Total potential contract value, the sum of all backlog components, was $85.4 billion at the end of the year.
General Dynamics, headquartered in Falls Church, Virginia, employs approximately 95,100 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.
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 fourth-quarter securities-analyst conference call at 11:30 a.m. Eastern Standard Time on Wednesday, January 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 2 p.m. January 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 99298277. The phone replay will be available from 2 p.m. January 25 until midnight February 1, 2012.
EXHIBIT A
CONSOLIDATED STATEMENT OF EARNINGS (UNAUDITED)
DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS
Fourth Quarter Variance
2010 2011 $ %
---- ---- --- ---
Revenues $8,601 $9,147 $546 6.3 %
Operating
costs
and
expenses 7,525 8,197 (672)
----- ----- ----
Operating
earnings 1,076 950 (126) (11.7)%
Interest,
net (33) (38) (5)
Other,
net - (1) (1)
--- --- ---
Earnings
from
continuing
operations
before
income
taxes 1,043 911 (132) (12.7)%
Provision
for
income
taxes 314 308 6
--- --- ---
Earnings
from
continuing
operations $729 $603 $(126) (17.3)%
==== ==== =====
Discontinued
operations,
net
of
tax - - -
--- --- ---
Net
earnings $729 $603 $(126) (17.3)%
==== ==== =====
Earnings
per
share
-
basic
Continuing
operations $1.94 $1.69 $(0.25) (12.9)%
Discontinued
operations $- $- $-
--- --- ---
Net
earnings $1.94 $1.69 $(0.25) (12.9)%
===== ===== ======
Basic
weighted
average
shares
outstanding
(in
millions) 376.7 356.2
===== =====
Earnings
per
share
-
diluted
Continuing
operations $1.91 $1.68 $(0.23) (12.0)%
Discontinued
operations $- $- $-
--- ---
Net
earnings $1.91 $1.68 $(0.23) (12.0)%
===== ===== ======
Diluted
weighted
average
shares
outstanding
(in
millions) 380.9 359.4
===== =====
EXHIBIT B
CONSOLIDATED STATEMENT OF EARNINGS (UNAUDITED)
DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS
Twelve Months Variance
2010 2011 $ %
---- ---- --- ---
Revenues $32,466 $32,677 $211 0.6 %
Operating
costs
and
expenses 28,521 28,851 (330)
------ ------ ----
Operating
earnings 3,945 3,826 (119) (3.0)%
Interest,
net (157) (141) 16
Other,
net 2 33 31
--- --- ---
Earnings
from
continuing
operations
before
income
taxes 3,790 3,718 (72) (1.9)%
Provision
for
income
taxes 1,162 1,166 (4)
----- ----- ---
Earnings
from
continuing
operations $2,628 $2,552 $(76) (2.9)%
====== ====== ====
Discontinued
operations,
net of
tax (4) (26) (22)
--- --- ---
Net
earnings $2,624 $2,526 $(98) (3.7)%
====== ====== ====
Earnings
per
share
-
basic
Continuing
operations $6.89 $7.01 $0.12 1.7 %
Discontinued
operations $(0.01) $(0.07) $(0.06)
------ ------ ------
Net
earnings $6.88 $6.94 $0.06 0.9 %
===== ===== =====
Basic
weighted
average
shares
outstanding
(in
millions) 381.2 364.1
===== =====
Earnings
per
share
-
diluted
Continuing
operations $6.82 $6.94 $0.12 1.8 %
Discontinued
operations $(0.01) $(0.07) $(0.06)
------ ------
Net
earnings $6.81 $6.87 $0.06 0.9 %
===== ===== =====
Diluted
weighted
average
shares
outstanding
(in
millions) 385.2 367.5
===== =====
EXHIBIT C
REVENUES AND OPERATING EARNINGS BY SEGMENT (UNAUDITED)
DOLLARS IN MILLIONS
Fourth Quarter Variance
2010 2011 $ %
---- ---- --- ---
Revenues:
---------
Aerospace $1,268 $1,857 $589 46.5 %
Combat Systems 2,696 2,611 (85) (3.2)%
Marine Systems 1,701 1,758 57 3.4 %
Information
Systems and
Technology 2,936 2,921 (15) (0.5)%
----- ----- ---
Total $8,601 $9,147 $546 6.3 %
====== ====== ====
Operating
earnings:
----------
Aerospace $210 $73 $(137) (65.2)%
Combat Systems 400 388 (12) (3.0)%
Marine Systems 177 190 13 7.3 %
Information
Systems and
Technology 311 315 4 1.3 %
Corporate (22) (16) 6 27.3 %
Total $1,076 $950 $(126) (11.7)%
====== ==== =====
Operating
margins:
---------
Aerospace 16.6 % 3.9 %
Combat Systems 14.8 % 14.9 %
Marine Systems 10.4 % 10.8 %
Information
Systems and
Technology 10.6 % 10.8 %
Total 12.5 % 10.4 %
EXHIBIT D
REVENUES AND OPERATING EARNINGS BY SEGMENT (UNAUDITED)
DOLLARS IN MILLIONS
Twelve Months Variance
2010 2011 $ %
---- ---- --- ---
Revenues:
---------
Aerospace $5,299 $5,998 $699 13.2 %
Combat Systems 8,878 8,827 (51) (0.6)%
Marine Systems 6,677 6,631 (46) (0.7)%
Information
Systems and
Technology 11,612 11,221 (391) (3.4)%
------ ------ ----
Total $32,466 $32,677 $211 0.6 %
======= ======= ====
Operating
earnings:
----------
Aerospace $860 $729 $(131) (15.2)%
Combat Systems 1,275 1,283 8 0.6 %
Marine Systems 674 691 17 2.5 %
Information
Systems and
Technology 1,219 1,200 (19) (1.6)%
Corporate (83) (77) 6 7.2 %
Total $3,945 $3,826 $(119) (3.0)%
====== ====== =====
Operating
margins:
---------
Aerospace 16.2 % 12.2 %
Combat Systems 14.4 % 14.5 %
Marine Systems 10.1 % 10.4 %
Information
Systems and
Technology 10.5 % 10.7 %
Total 12.2 % 11.7 %
EXHIBIT E
PRELIMINARY CONSOLIDATED BALANCE SHEET (UNAUDITED)
DOLLARS IN MILLIONS
December 31, December 31,
2010 2011
------------- -------------
ASSETS
Current assets:
Cash and equivalents $2,613 $2,649
Accounts receivable 3,848 4,452
Contracts in process 4,873 5,168
Inventories 2,158 2,310
Other current assets 694 789
--------------------
Total current assets 14,186 15,368
-------------------- ------ ------
Noncurrent assets:
Property, plant and equipment,
net 2,971 3,284
Intangible assets, net 1,992 1,813
Goodwill 12,649 13,576
Other assets 747 842
------------
Total noncurrent assets 18,359 19,515
----------------------- ------ ------
Total assets $32,545 $34,883
------- -------
LIABILITIES AND SHAREHOLDERS'
EQUITY
Current liabilities:
Short-term debt and current
portion of long-term debt $773 $23
Accounts payable 2,736 2,895
Customer advances and deposits 4,465 5,011
Other current liabilities 3,203 3,216
-------------------------
Total current liabilities 11,177 11,145
------------------------- ------ ------
Noncurrent liabilities:
Long-term debt 2,430 3,907
Other liabilities 5,622 6,599
----------------- ----- -----
Total noncurrent liabilities 8,052 10,506
---------------------------- ----- ------
Shareholders' equity:
Common stock 482 482
Surplus 1,729 1,888
Retained earnings 17,076 18,917
Treasury stock (4,535) (5,743)
Accumulated other comprehensive
loss (1,436) (2,312)
-------------------------------
Total shareholders' equity 13,316 13,232
-------------------------- ------ ------
Total liabilities and
shareholders' equity $32,545 $34,883
--------------------- ------- -------
EXHIBIT F
PRELIMINARY CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
DOLLARS IN MILLIONS
Twelve Months Ended
-------------------
Cash flows from operating December 31, December 31,
activities: 2010 2011
------------- -------------
Net earnings $2,624 $2,526
Adjustments to reconcile
net earnings to net cash
provided by
operating activities:
Depreciation of property,
plant and equipment 345 354
Amortization of intangible
assets 224 238
Intangible asset
impairment - 111
Stock-based compensation
expense 118 128
Excess tax benefit from
stock-based compensation (18) (24)
Deferred income tax
provision 56 14
Discontinued operations,
net of tax 4 26
(Increase) decrease in
assets, net of effects of
business acquisitions:
Accounts receivable (152) (420)
Contracts in process (334) (62)
Inventories (23) (186)
Increase (decrease) in
liabilities, net of
effects of business
acquisitions:
Accounts payable 366 17
Customer advances and
deposits 30 629
Other current liabilities (285) 86
Other, net 31 (199)
Net cash provided by
operating activities 2,986 3,238
--------------------- ----- -----
Cash flows from investing
activities:
Business acquisitions, net
of cash acquired (233) (1,560)
Purchases of held-to-
maturity securities (468) (459)
Maturities of held-to-
maturity securities 605 441
Capital expenditures (370) (458)
Purchases of available-
for-sale securities (226) (373)
Maturities of available-
for-sale securities 126 235
Other, net 158 200
Net cash used by investing
activities (408) (1,974)
-------------------------- ---- ------
Cash flows from financing
activities:
Proceeds from fixed-rate
notes - 1,497
Purchases of common stock (1,185) (1,468)
Repayment of fixed-rate
notes (700) (750)
Dividends paid (631) (673)
Proceeds from option
exercises 277 198
Other, net 13 (5)
Net cash used by financing
activities (2,226) (1,201)
-------------------------- ------ ------
Net cash used by
discontinued operations (2) (27)
------------------------ --- ---
Net increase in cash and
equivalents 350 36
Cash and equivalents at
beginning of period 2,263 2,613
-----------------------
Cash and equivalents at
end of period $2,613 $2,649
----------------------- ------ ------
EXHIBIT G
PRELIMINARY FINANCIAL INFORMATION (UNAUDITED)
DOLLARS IN MILLIONS EXCEPT PER SHARE AND EMPLOYEE AMOUNTS
Fourth Quarter Fourth Quarter
2010 2011
---- ----
Non-GAAP
Financial
Measures:
----------
Free cash flow
from operations: Quarter Year-to-date Quarter Year-to-date
------- ------------ ------- ------------
Net cash provided
by operating
activities $1,419 $2,986 $2,026 $3,238
Capital
expenditures (151) (370) (185) (458)
---- ---- ---- ----
Free cash flow
from operations
(A) $1,268 $2,616 $1,841 $2,780
====== ====== ====== ======
Return on invested
capital:
Earnings from
continuing
operations $2,628 $2,552
After-tax
interest expense 116 106
After-tax
amortization
expense 155 163
Net operating
profit after
taxes 2,899 2,821
Average debt and
equity 16,587 17,123
------ ------
Return on invested
capital (B) 17.5% 16.5%
==== ====
Other Financial
Information:
---------------
Return on equity
(C) 20.2% 18.8%
Debt-to-equity (D) 24.1% 29.7%
Debt-to-capital
(E) 19.4% 22.9%
Book value per
share (F) $35.79 $37.12
Total taxes paid $310 $279
Company-sponsored
research and
development (G) $124 $154
Employment 90,000 95,100
Sales per employee
(H) $358,100 $358,600
Shares outstanding 372,052,313 356,437,880
(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 H
BACKLOG (UNAUDITED)
DOLLARS IN MILLIONS
Estimated
Total
Total Potential Potential
Contract Contract
Fourth Quarter 2011 Funded Unfunded Backlog Value* Value
------------------- ------ -------- ------- --------- ---------
Aerospace $17,618 $289 $17,907 $- $17,907
Combat Systems 10,283 1,137 11,420 3,453 14,873
Marine Systems 9,364 9,140 18,504 2,163 20,667
Information Systems
and Technology 7,434 2,145 9,579 22,384 31,963
----- ----- ----- ------ ------
Total $44,699 $12,711 $57,410 $28,000 $85,410
======= ======= ======= ======= =======
Third Quarter 2011
------------------
Aerospace $18,306 $318 $18,624 $- $18,624
Combat Systems 9,078 1,304 10,382 3,763 14,145
Marine Systems 10,269 8,611 18,880 2,044 20,924
Information Systems
and Technology 8,248 2,389 10,637 21,429 32,066
----- ----- ------ ------ ------
Total $45,901 $12,622 $58,523 $27,236 $85,759
======= ======= ======= ======= =======
Fourth Quarter 2010
-------------------
Aerospace $17,443 $378 $17,821 $1,361 $19,182
Combat Systems 10,908 892 11,800 4,645 16,445
Marine Systems 7,050 13,069 20,119 584 20,703
Information Systems
and Technology 7,978 1,843 9,821 15,196 25,017
----- ----- ----- ------ ------
Total $43,379 $16,182 $59,561 $21,786 $81,347
======= ======= ======= ======= =======
* 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. Because the value in the unfunded IDIQ
arrangements is subject to the customer's future exercise
of an indeterminate quantity of delivery 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 I
FOURTH QUARTER 2011 SIGNIFICANT ORDERS (UNAUDITED)
DOLLARS IN MILLIONS
We received the following significant defense contract orders during the fourth quarter of 2011:
Combat Systems
-- $950 from the Canadian government to modernize 550 LAV III combat
vehicles.
-- $800 from the U.S. Army under the Stryker program for the production of
277 Stryker vehicles and contractor logistics support.
-- $315 from the Army for the production of 125 M1A1 Abrams tank kits for
the Egyptian co-production program.
-- $125 from the Army to produce 73 Light Armored Vehicles (LAVs) for an
international military customer.
-- $100 from the U.S. Marine Corps under the mine-resistant,
ambush-protected (MRAP) vehicle program for RG-31 upgrade kits.
-- $75 from the Swiss Army for the production of 70 Duro Armoured Personnel
Carriers.
Marine Systems
-- $280 from the U.S. Navy for the conversion of nuclear submarines to
moored training ship platforms and associated support yard services.
-- $60 from the Navy to operate and maintain large, medium-speed,
roll-on/roll-off (LMSR) vessels.
-- $35 from the Navy for the fitting-out of the San Antonio-class
amphibious assault dock ship (LPD) USS San Diego. The award also
includes an option for work on two additional ships.
Information Systems and Technology
-- $95 from the Navy for production and support of U.S. and U.K. Trident II
submarine weapons systems. The contract has a maximum value of $225 if
all options are exercised.
-- $60 from the Army for information technology support and modernization
at the Alexandria, Virginia, Mark Center.
-- $60 from the Army to provide information technology and help desk
support to the Army's intelligence and security branch.
-- $40 from the U.S. Air Force for networking and computing products and
support under the Network-Centric Solutions (NETCENTS) program.
EXHIBIT J
AEROSPACE SUPPLEMENTAL DATA (UNAUDITED)
Fourth Quarter Twelve Months
2010 2011 2010 2011
---- ---- ---- ----
Gulfstream Green
Deliveries
(units):
----------------
Large aircraft 18 30 75 90
Mid-size aircraft 2 5 24 17
--- --- --- ---
Total 20 35 99 107
=== === === ===
Gulfstream
Outfitted
Deliveries
(units):
-----------
Large aircraft 20 20 74 78
Mid-size aircraft 4 7 15 21
--- --- --- ---
Total 24 27 89 99
=== === === ===
Pre-owned
Deliveries
(units): 1 1 7 5
----------- === === === ===
SOURCE General Dynamics