April 28, 2010 7:33 AM
- Earnings from continuing operations increase to $599 million - Company- wide operating margins increase to 11.8 percent
FALLS CHURCH, Va., --General Dynamics (NYSE: GD) today reported first-quarter 2010 earnings from continuing operations of $599 million, or $1.54 per share on a fully diluted basis, compared with 2009 first-quarter earnings from continuing operations of $593 million, or $1.54 per share fully diluted. Revenues in the quarter were $7.75 billion. Net earnings for the first quarter of 2010 were $597 million, compared to $590 million in the first quarter of 2009.
Margins
Company-wide operating margins for the first quarter of 2010 were 11.8 percent, compared to 11 percent in the year-ago period. Aerospace and Combat Systems margin growth was especially strong, increasing by 240 basis points and 180 basis points, respectively.
Backlog
Funded backlog at the end of first-quarter 2010 grew to $47.4 billion, a 3 percent increase over the end of the fourth quarter 2009. Significant orders received include contracts valued at $845 million for construction of two additional T-AKE combat-logistics ships and $115 million for construction materials for an additional DDG-51 destroyer for the U.S. Navy, and $515 million for Stryker vehicle production and support for the U.S. Army. The Information Systems and Technology group was awarded a contract valued at $340 million to initiate production of the second increment of Army's next-generation on-the-move tactical battlefield network, called WIN-T. The Aerospace group saw strong order activity in the quarter, particularly among large-cabin Gulfstream aircraft.
The company's total backlog at the end of the first quarter 2010 was $63.9 billion, and the estimated potential contract value was an additional $17 billion, which represents management's estimate of value under unfunded indefinite delivery, indefinite quantity (IDIQ) contracts and unexercised options.
Cash
Net cash provided by operating activities in the quarter totaled $210 million. Free cash flow from operations, defined as net cash provided by operating activities less capital expenditures, was $150 million for the period.
"General Dynamics delivered a strong operational performance in the first quarter of 2010," said Jay L. Johnson, president and chief executive officer. "Operating margins across the company were steady or improving, demonstrating the benefits of our commitment to continuous improvement, and we saw good order activity across the corporation. On balance, General Dynamics delivered solid results, giving us a good first step down the path toward meeting our overall performance objectives for the year," Johnson said.
General Dynamics, headquartered in Falls Church, Virginia, employs approximately 91,200 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.
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, scheduled for 11:30 a.m. Eastern Time on
Wednesday, April 28, 2010. 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 2:30 p.m. April 28 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 23755253. The phone replay
will be available from 1:30 p.m. April 28 until midnight May 5, 2010.
EXHIBIT A
CONSOLIDATED STATEMENT OF EARNINGS (UNAUDITED)
DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS
First Quarter Variance
2010 2009 $ %
---- ---- --- ---
Revenues $7,750 $8,264 $(514) (6.2)%
Operating costs and expenses 6,832 7,359 527
----- ----- ---
Operating earnings 918 905 13 1.4 %
Interest, net (44) (39) (5)
Other, net - 3 (3)
--- --- ---
Earnings from continuing
operations
before income taxes 874 869 5 0.6 %
Provision for income taxes 275 276 1
--- --- ---
Earnings from continuing
operations $599 $593 $6 1.0 %
==== ==== ===
Discontinued operations, net
of tax (2) (3) 1
--- --- ---
Net earnings $597 $590 $7 1.2 %
==== ==== ===
Earnings per share - basic
Continuing operations $1.56 $1.54 $0.02 1.3 %
Discontinued operations $(0.01) $(0.01) $-
------ ------ ---
Net earnings $1.55 $1.53 $0.02 1.3 %
===== ===== =====
Basic weighted average
shares outstanding (in
millions) 384.8 385.8
===== =====
Earnings per share - diluted
Continuing operations $1.54 $1.54 $- 0.0 %
Discontinued operations $(0.01) $(0.01) $-
------ ------
Net earnings $1.53 $1.53 $- 0.0 %
===== ===== ===
Diluted weighted average
shares outstanding (in
millions) 389.0 386.5
===== =====
EXHIBIT B
REVENUES AND OPERATING EARNINGS BY SEGMENT (UNAUDITED)
DOLLARS IN MILLIONS
First Quarter Variance
2010 2009 $ %
---- ---- --- ---
Revenues:
---------
Aerospace $1,357 $1,455 $(98)
(6.7)%
Combat Systems 2,002 2,407 (405)
(16.8)%
Marine Systems 1,639 1,669 (30)
(1.8)%
Information Systems
and
Technology 2,752 2,733 19 0.7
%
----- ----- ---
Total $7,750 $8,264 $(514)
(6.2)%
====== ====== =====
Operating earnings:
-------------------
Aerospace $218 $200 $18 9.0
%
Combat Systems 269 279 (10)
(3.6)%
Marine Systems 161 163 (2)
(1.2)%
Information Systems
and
Technology 290 289 1 0.3
%
Corporate (20) (26) 6 23.1
%
Total $918 $905 $13 1.4
%
==== ==== ===
Operating margins:
------------------
Aerospace 16.1 % 13.7 %
Combat Systems 13.4 % 11.6 %
Marine Systems 9.8 % 9.8 %
Information Systems
and
Technology 10.5 % 10.6 %
Total 11.8 % 11.0 %
EXHIBIT C
PRELIMINARY CONSOLIDATED BALANCE SHEET (UNAUDITED)
DOLLARS IN MILLIONS
April 4, December 31,
2010 2009
--------- -------------
ASSETS
Current assets:
Cash and equivalents $2,025 $2,263
Accounts receivable 3,738 3,678
Contracts in process 4,692 4,449
Inventories 1,985 2,126
Other current assets 913 733
--------------------
Total current assets 13,353 13,249
-------------------- ------ ------
Noncurrent assets:
Property, plant and equipment,
net 2,850 2,912
Intangible assets, net 2,032 2,098
Goodwill 12,288 12,269
Other assets 536 549
------------
Total noncurrent assets 17,706 17,828
----------------------- ------ ------
Total assets $31,059 $31,077
------- -------
LIABILITIES AND SHAREHOLDERS'
EQUITY
Current liabilities:
Short-term debt and current
portion of long-term debt $704 $705
Accounts payable 2,250 2,365
Customer advances and deposits 4,102 4,313
Other current liabilities 2,881 2,988
-------------------------
Total current liabilities 9,937 10,371
------------------------- ----- ------
Noncurrent liabilities:
Long-term debt 3,159 3,159
Other liabilities 5,184 5,124
Commitments and contingencies
-----------------------------
Total noncurrent liabilities 8,343 8,283
---------------------------- ----- -----
Shareholders' equity:
Common stock 482 482
Surplus 1,599 1,518
Retained earnings 15,527 15,093
Treasury stock (3,560) (3,463)
Accumulated other comprehensive
loss (1,269) (1,207)
-------------------------------
Total shareholders' equity 12,779 12,423
-------------------------- ------ ------
Total liabilities and
shareholders' equity $31,059 $31,077
--------------------- ------- -------
EXHIBIT D
PRELIMINARY CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
DOLLARS IN MILLIONS
Three Months Ended
------------------
April 4, April 5,
Cash flows from operating activities: 2010 2009
--------- ---------
Net earnings $597
$590
Adjustments to reconcile net earnings to net
cash provided by
operating activities:
Depreciation of property, plant and
equipment 86
85
Amortization of intangible assets 57
54
Stock-based compensation expense 29
28
Excess tax benefit from stock-based
compensation (17)
(1)
Deferred income tax provision 10
40
Discontinued operations, net of tax 2
3
(Increase) decrease in assets, net of
effects of business acquisitions:
Accounts receivable (51)
(292)
Contracts in process (241)
64
Inventories 143
(64)
Increase (decrease) in liabilities, net of
effects of business acquisitions:
Accounts payable (114)
151
Customer advances and deposits (230)
(512)
Income taxes payable 234
192
Other liabilities (312)
(131)
Other, net 17
(53)
Net cash provided by operating activities 210
154
----------------------------------------- --- ---
Cash flows from investing activities:
Purchases of held-to-maturity securities (247) -
Capital expenditures (60)
(81)
Business acquisitions, net of cash acquired (48)
(168)
Other, net 73
(36)
Net cash used by investing activities (282)
(285)
------------------------------------- ---- ----
Cash flows from financing activities:
Purchases of common stock (200)
(109)
Proceeds from option exercises 168
27
Dividends paid (147)
(136)
Repayments of commercial paper
- (139)
Other, net 16
(1)
Net cash used by financing activities (163)
(358)
------------------------------------- ---- ----
Net cash used by discontinued operations -
operating activities (3)
(6)
------------------------------------------ --- ---
Net decrease in cash and equivalents (238)
(495)
Cash and equivalents at beginning of period 2,263
1,621
-------------------------------------------
Cash and equivalents at end of period $2,025
$1,126
------------------------------------- ------ ------
EXHIBIT E
PRELIMINARY FINANCIAL INFORMATION (UNAUDITED)
DOLLARS IN MILLIONS EXCEPT PER SHARE AND EMPLOYEE AMOUNTS
First
Quarter First Quarter
2010 2009
---- ----
Non-GAAP Financial Measures:
----------------------------
Free cash flow from operations:
Net cash provided by operating
activities $210 $154
Capital expenditures (60) (81)
Free cash flow from operations (A) $150 $73
==== ===
Return on invested capital:
Earnings from continuing
operations $2,413 $2,498
After-tax interest expense 121 93
After-tax amortization expense 152 115
Net operating profit after taxes 2,686 2,706
Average debt and equity 15,516 14,308
Return on invested capital (B) 17.3% 18.9%
==== ====
Other Financial Information:
----------------------------
Return on equity (C) 20.7% 22.1%
Debt-to-equity (D) 30.2% 37.8%
Debt-to-capital (E) 23.2% 27.4%
Book value per share (F) $33.13 $26.68
Total taxes paid $35 $41
Company-sponsored research
and development (G) $147 $138
Employment 91,200 92,900
Sales per employee (H) $342,000 $348,400
Shares outstanding 385,728,673 385,018,155
(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 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 F
BACKLOG (UNAUDITED)
DOLLARS IN MILLIONS
Estimated
Total
Total Potential Potential
First Quarter Contract Contract
2010 Funded Unfunded Backlog Value* Value
------------- ------ -------- ------- -------- --------
Aerospace $18,123 $425 $18,548 $1,361 $19,909
Combat Systems 11,201 1,694 12,895 2,079 14,974
Marine Systems 9,634 12,457 22,091 340 22,431
Information
Systems and
Technology 8,452 1,880 10,332 13,207 23,539
----- ----- ------ ------ ------
Total $47,410 $16,456 $63,866 $16,987 $80,853
======= ======= ======= ======= =======
Fourth Quarter
2009
--------------
Aerospace $18,891 $433 $19,324 $1,361 $20,685
Combat Systems 11,431 1,985 13,416 2,327 15,743
Marine Systems 7,111 15,362 22,473 1,072 23,545
Information
Systems and
Technology 8,423 1,909 10,332 12,815 23,147
----- ----- ------ ------ ------
Total $45,856 $19,689 $65,545 $17,575 $83,120
======= ======= ======= ======= =======
First Quarter
2009
-------------
Aerospace $20,179 $590 $20,769 $2,071 $22,840
Combat Systems 11,746 2,724 14,470 2,112 16,582
Marine Systems 9,431 16,031 25,462 1,208 26,670
Information
Systems and
Technology 7,795 2,629 10,424 12,556 22,980
----- ----- ------ ------ ------
Total $49,151 $21,974 $71,125 $17,947 $89,072
======= ======= ======= ======= =======
* 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 G
FIRST QUARTER 2010 SIGNIFICANT ORDERS (UNAUDITED)
DOLLARS IN MILLIONS
We received the following significant contract orders during the first
quarter of 2010:
Combat Systems
Approximately $515 from the U.S. Army for vehicle production, contractor
logistics support and battle-damage assessment under the Stryker wheeled
armored vehicle program.
Approximately $300 from the U.S. Marine Corps under the mine-resistant,
ambush-protected (MRAP) vehicle program to provide 250 RG-31 vehicles,
suspension kits and spare parts.
Approximately $100 from the Army to provide improved ribbon bridge (IRB)
bays and accessories.
Marine Systems
Approximately $845 from the U.S. Navy for the construction of the 13th
and 14th T-AKE combat-logistics ships, scheduled for delivery in 2012.
Approximately $115 from the Navy for long-lead material for the
construction of an additional DDG-51 Arleigh Burke-class destroyer.
Approximately $65 from the Navy to continue to provide Advance Nuclear
Plant Studies (ANPS) in support of hull, mechanical, and electrical
(HM&E) systems. The award has a maximum potential value of $185.
Information Systems and Technology
Approximately $390 from the Army under the Warfighter Information
Network-Tactical (WIN-T) program for Increment 1 satellite communication
equipment and low rate initial production of Increment 2 equipment.
Approximately $165 of orders for ruggedized computing and networking
equipment under the Common Hardware/Software III (CHS-3) program, bringing
the total contract value to more than $2.1 billion.
Approximately $110 for the Joint Tactical Radio System (JTRS) Handheld,
Manpack and Small Form-Fit (HMS) radio program, bringing the total contract
value to approximately $685.
Approximately $25 from the Army for Constructive Training Systems
support. This five-year IDIQ contract has a maximum potential value of
approximately $390.
Approximately $30 from the Army to support the Medical Communications
for Combat Casualty Care (MC4) Product Management Office. The contract has a
maximum potential value of approximately $150 over five years.
EXHIBIT H
AEROSPACE SUPPLEMENTAL DATA (UNAUDITED)
First Quarter
2010 2009
---- ----
Gulfstream Green Deliveries
(units):
---------------------------
Large aircraft 20 22
Mid-size aircraft 8 9
--- ---
Total 28 31
=== ===
Gulfstream Outfitted Deliveries
(units):
-------------------------------
Large aircraft 16 18
Mid-size aircraft 1 16
--- ---
Total 17 34
=== ===
Pre-owned Deliveries (units): 3 -
----------------------------- === ===
SOURCE General Dynamics
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