General Dynamics Reports Fourth-quarter, Full-year 2012 Results

FALLS CHURCH, Va., Jan. 23, 2013 /PRNewswire/ -- General Dynamics (NYSE: GD) today announced 2012 fourth-quarter and full-year financial results, which include significant, primarily non-cash charges recorded in the fourth quarter.  Adjusting for the impact of those charges, non-GAAP fourth-quarter 2012 earnings from continuing operations were $491 million or $1.39 per share, fully diluted.  On an unadjusted GAAP basis, the company reported a loss from continuing operations of $2.1 billion, or $6.07 per share fully diluted, for the quarter.

Adjusted 2012 full-year earnings from continuing operations were $2.3 billion, or $6.48 per share fully diluted.  On a GAAP basis the company reported a loss from continuing operations of $332 million for 2012, or $0.94 per share fully diluted.

During the fourth quarter the company recorded a $2 billion goodwill impairment related to its Information Systems and Technology (IS&T) group.  This charge recognizes the impact of slowed defense spending in the company's IS&T businesses.  The company also recorded $867 million in other charges in the quarter, including intangible asset impairments of $301 million in its Aerospace and IS&T groups, which are detailed in Exhibit C of this press release.

Phebe N. Novakovic, chairman and chief executive officer of General Dynamics, said, "General Dynamics' operating results in 2012 and the charges that we have recorded in the fourth quarter reflect the fact that some of our markets are contracting as government budgets shrink at home and abroad.  They also suggest opportunities for improvement in some areas of our performance, which we are addressing.

"General Dynamics is a strong corporation with relevant product and service offerings that are critical to our customers' missions.  We will continue to manage our business aggressively as we approach the opportunities and the challenges of the future," Novakovic said.

Revenues

Revenues were $8.1 billion in the fourth quarter of 2012 and $31.5 billion for the full year.

Margins

Company-wide operating margins on a non-GAAP basis were 10.1 percent for the fourth quarter and 11.4 percent for the year.  On a GAAP basis, company-wide operating margins were -23.5 percent for the fourth quarter and 2.6 percent for the year.

Cash

Net cash provided by operating activities, which was largely unaffected by the charges described above, totaled $780 million in the fourth quarter of 2012 and $2.7 billion for the full year. Free cash flow from operations, defined as net cash provided by operating activities less capital expenditures, was $616 million in the quarter and $2.2 billion for the year.

Backlog

The company's total backlog was $51.3 billion at the end of 2012.  In the fourth quarter, orders were particularly strong for the Marine Systems group, including $2.4 billion in awards to continue the development of the U.S. Navy's next-generation strategic deterrent submarine, to purchase long-lead materials for three Virginia-class attack submarines, and to construct two commercial containerships.  Other notable orders received in the quarter include awards for additional Stryker infantry combat vehicles, for Abrams tanks for a foreign customer, and for the production of tactical networking equipment and radios for the U.S. Army.

Estimated potential contract value was $26.9 billion at year-end 2012, representing management's estimate of the value of unfunded indefinite delivery, indefinite quantity (IDIQ) contracts and unexercised contract options.  Total potential contract value, the sum of all backlog components, was $78.1 billion at the end of the year.

"Looking ahead to 2013, we anticipate earnings per share from continuing operations to be in the range of $6.60 to $6.70," Novakovic said.

General Dynamics, headquartered in Falls Church, Virginia, employs approximately 92,200 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 at www.generaldynamics.com.

Use of Non-GAAP Financial Information

To supplement the review of General Dynamics Corporation's consolidated financial statements presented on a GAAP basis, the company has provided non-GAAP calculations of certain financial measures along with explanations of the company's use of these measures on Exhibits C, E, G and J to this press release.

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 23, 2013.  The webcast will be a listen-only audio event, available at www.generaldynamics.com. An on-demand replay of the webcast will be available shortly after the conclusion of the call on January 23 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 19265786.  The phone replay will be available shortly after the conclusion of the call January 23 until midnight January 30. 

 

EXHIBIT A











CONSOLIDATED STATEMENTS OF EARNINGS (LOSS) - (UNAUDITED)

DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS













Fourth Quarter



Variance



2011


2012



$


%











Revenues


$          9,147


$        8,078



$      (1,069)


(11.7)%

Operating costs and expenses


8,197


9,980



(1,783)













Operating earnings (loss)


950


(1,902)



(2,852)


(300.2)%











Interest, net


(38)


(41)



(3)



Other, net


(1)


(128)



(127)













Earnings (loss) from continuing operations










  before income taxes


911


(2,071)



(2,982)


(327.3)%











Provision for income taxes


308


59



249













Earnings (loss) from continuing operations


$             603


$       (2,130)



$      (2,733)


(453.2)%











Discontinued operations, net of tax


-


-



-













Net earnings (loss)


$             603


$       (2,130)



$      (2,733)


(453.2)%











Earnings (loss) per share - basic










    Continuing operations


$            1.69


$         (6.07)



$        (7.76)


(459.2)%

    Discontinued operations


$                  -


$                 -



$               -



    Net earnings (loss)


$            1.69


$         (6.07)



$        (7.76)


(459.2)%











Basic weighted average shares outstanding 


356.2


350.9
















Earnings (loss) per share - diluted










    Continuing operations


$            1.68


$         (6.07)

*


$        (7.75)


(461.3)%

    Discontinued operations


$                  -


$                 -



$               -



    Net earnings (loss)


$            1.68


$         (6.07)

*


$        (7.75)


(461.3)%











Diluted weighted average shares outstanding


359.4


350.9

*















* Fourth quarter 2012 amounts exclude dilutive effect of stock options and restricted stock as it would be antidilutive.











 

EXHIBIT B











CONSOLIDATED STATEMENTS OF EARNINGS (LOSS) - (UNAUDITED)

DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS













Twelve Months



Variance



2011


2012



$


%











Revenues


$        32,677


$      31,513



$      (1,164)


(3.6)%

Operating costs and expenses


28,851


30,680



(1,829)













Operating earnings 


3,826


833



(2,993)


(78.2)%











Interest, net


(141)


(156)



(15)



Other, net


33


(136)



(169)













Earnings from continuing operations










  before income taxes


3,718


541



(3,177)


(85.4)%











Provision for income taxes


1,166


873



293













Earnings (loss) from continuing operations


$          2,552


$          (332)



$      (2,884)


(113.0)%











Discontinued operations, net of tax


(26)


-



26













Net earnings (loss)


$          2,526


$          (332)



$      (2,858)


(113.1)%











Earnings (loss) per share - basic










    Continuing operations


$            7.01


$         (0.94)



$        (7.95)


(113.4)%

    Discontinued operations


$          (0.07)


$                -



$          0.07



    Net earnings (loss)


$            6.94


$         (0.94)



$        (7.88)


(113.5)%











Basic weighted average shares outstanding


364.1


353.3
















Earnings (loss) per share - diluted










    Continuing operations


$            6.94


$         (0.94)

 * 


$        (7.88)


(113.5)%

    Discontinued operations


$          (0.07)


$                 -



$          0.07



    Net earnings (loss)


$            6.87


$         (0.94)

 * 


$        (7.81)


(113.7)%











Diluted weighted average shares outstanding


367.5


353.3

 * 















* 2012 amounts exclude dilutive effect of stock options and restricted stock as it would be antidilutive.











 

EXHIBIT C











CALCULATION OF ADJUSTED NON-GAAP EARNINGS FROM CONTINUING OPERATIONS AND


ADJUSTED NON-GAAP DILUTED EARNINGS PER SHARE - (UNAUDITED)


DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS















Fourth Quarter



Twelve Months






2012



2012











Calculation of adjusted non-GAAP earnings from continuing operations:
















Loss from continuing operations (from Exhibits A and B, respectively)


$       (2,130)



$        (332)


Non-GAAP adjustments:









Goodwill impairment (a)




1,994



1,994


Intangible asset impairments (a)


301



301


Contract disputes accruals (b)


292



292


Restructuring-related charges (c)


98



98


Inventory-related charges (d)


53



78


Debt retirement charge (e)


123



123


Tax effects (f)




(240)



(249)











Adjusted non-GAAP earnings from continuing operations


$            491



$      2,305











Calculation of diluted (loss) earnings per share from continuing operations:
















Loss from continuing operations


$       (2,130)



$        (332)


Basic weighted average shares outstanding


350.9



353.3


    Diluted loss per share from continuing operations 


$         (6.07)

 (g) 


$       (0.94)

 (g) 










Adjusted non-GAAP earnings from continuing operations


$            491



$      2,305


Diluted weighted average shares outstanding


353.2



355.7


    Adjusted non-GAAP diluted earnings per share from continuing operations 


$           1.39



$        6.48











This Exhibit includes the following financial measures which are not calculated in accordance with generally accepted accounting principles (GAAP) in the United States – adjusted earnings from continuing operations and adjusted diluted earnings per share from continuing operations.  Each of these calculations excludes the impact of certain items and therefore, is considered a non-GAAP financial measure.  The items excluded were considered by management to be unusual and not reflective of the underlying performance of the company as explained in the notes for each item. The GAAP financial measure most directly comparable to adjusted earnings from continuing operations is loss from continuing operations and the GAAP financial measure most directly comparable to adjusted diluted earnings per share is diluted loss per share.  Reconciliations of each of these non-GAAP financial measures to the corresponding GAAP financial measure are included above. Management uses these measures to evaluate the operating performance of the company and analyze trends.  For this reason, management believes the measures are useful supplemental information for investors to understand the company's operating results.  Notes describing each non-GAAP adjustment are on the following page.




EXHIBIT C (cont.)











CALCULATION OF ADJUSTED NON-GAAP EARNINGS FROM CONTINUING OPERATIONS AND

ADJUSTED NON-GAAP DILUTED EARNINGS PER SHARE - (UNAUDITED)

DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS











(a) Impairments - Represents goodwill impairment charge of $1,994 in the Information Systems and Technology group and intangible asset impairments of $191 in the Aerospace group and $110 in the Information Systems and Technology group.  Management believes that the exclusion of these items is useful because management does not consider impairment charges in evaluating the operating performance of its on-going operations.  The exclusions permit investors to evaluate the company's performance and analyze trends in a similar manner as management.











(b) Contract disputes accruals - Represents accruals of $292 for contract disputes related to the Combat Systems group's European Land Systems business, primarily with the government of Portugal.  While the company has contract disputes from time to time, management believes this item is unique due to the nature of the disputes and not reflective of the operating performance of its underlying operations.  The exclusion permits investors to evaluate the company's performance in a similar manner as management and facilitates a comparison of its operating performance to the company's past operating performance.











(c) Restructuring-related charges - Represents restructuring-related charges of $98, primarily severance costs, related to the Combat Systems group's European Land Systems business.  Management believes that the exclusion of this item is useful because management does not consider this item as reflective of its operating performance of its underlying operations.  The exclusion permits investors to evaluate the company's performance in a similar manner as management and facilitates a comparison of its operating performance to the company's past operating performance.











(d) Inventory-related charges - Represents increases to inventory reserves for obsolete inventory in the Information Systems and Technology group of $38 and in the Combat Systems group of $15 for the quarter ended December 31, 2012.  Represents increases to inventory reserves for obsolete inventory in the Information Systems and Technology group of $63 and in the Combat Systems group of $15 for the twelve months ended December 31, 2012.  The Information Systems and Technology charge was primarily for ruggedized hardware products that ceased production in 2012.  Management has adjusted for this item because it does not believe that it is indicative of its on-going operations or the on-going operating costs of its products since it does not generally build products to inventory within its defense groups.  The exclusion permits investors to evaluate the company's performance in a similar manner as management and facilitates a comparison of its operating performance to the company's past operating performance.  











(e) Debt retirement charges - Represents the premium associated with the early redemption of debt completed in December 2012.  Management has excluded this item for comparative purposes and views this charge as uniquely related to its debt refinancing completed in 2012.  By excluding this item, investors can evaluate the company's performance in a similar manner as management.











(f) Tax effects - Represents the limited tax benefit on the charges in (a) - (e) due to the non-deductible nature of a substantial portion of the charges.  The tax effects of these changes have been reflected because management evaluates performance on an after-tax basis.  This permits investors to evaluate the company's performance in a similar manner as management and compare the operating performance of the company to prior periods.  











(g) Calculated based on basic weighted average shares outstanding as the inclusion of dilutive securities (stock options and restricted stock) would have an antidilutive effect.











 

EXHIBIT D










REVENUES AND OPERATING EARNINGS BY SEGMENT - (UNAUDITED)

DOLLARS IN MILLIONS












Fourth Quarter


Variance



2011


2012


$


%

Revenues:


















Aerospace


$          1,857


$        1,861


$               4


0.2 %










Combat Systems


2,611


1,976


(635)


(24.3)%










Marine Systems


1,758


1,664


(94)


(5.3)%










Information Systems and Technology


2,921


2,577


(344)


(11.8)%










Total


$          9,147


$        8,078


$      (1,069)


(11.7)%










Operating earnings (loss):


















Aerospace


$               73


$              69


$             (4)


(5.5)%










Combat Systems


388


(136)


(524)


(135.1)%










Marine Systems


190


196


6


3.2 %










Information Systems and Technology


315


(2,014)


(2,329)


(739.4)%














Corporate


(16)


(17)


(1)


(6.3)%










Total


$             950


$       (1,902)


$      (2,852)


(300.2)%










Operating margins:


















Aerospace


3.9 %


3.7 %














Combat Systems


14.9 %


(6.9)%














Marine Systems


10.8 %


11.8 %














Information Systems and Technology


10.8 %


(78.2)%




















Total


10.4 %


(23.5)%














 

EXHIBIT E









CALCULATION OF ADJUSTED NON-GAAP REVENUES 

AND ADJUSTED NON-GAAP OPERATING EARNINGS BY SEGMENT - (UNAUDITED)

DOLLARS IN MILLIONS












GAAP




Adjusted




Fourth Quarter




Non-GAAP




2012


Non-GAAP


Fourth Quarter




(from Exhibit D)


Adjustments


2012

Revenues:
















Aerospace



$                   1,861


$                      -


$                 1,861









Combat Systems



1,976


169

(a)

2,145









Marine Systems



1,664


-


1,664









Information Systems and Technology



2,577


-


2,577









Total



$                   8,078


$                  169


$                 8,247









Operating earnings (loss):
















Aerospace



$                         69


$                  191

(b)

$                     260









Combat Systems



(136)


405

(c)

269









Marine Systems



196


-


196









Information Systems and Technology



(2,014)


2,142

(d)

128









Corporate



(17)


-


(17)









Total



$                 (1,902)


$               2,738


$                     836









Operating margins:
















Aerospace



3.7 %




14.0 %









Combat Systems



(6.9)%




12.5 %









Marine Systems



11.8 %




11.8 %









Information Systems and Technology



(78.2)%




5.0 %









Total



(23.5)%




10.1 %









This Exhibit includes the following financial measures which are not calculated in accordance with generally accepted accounting principles (GAAP) in the United States – adjusted revenues and operating earnings by segment.  Each of these calculations excludes the impact of certain items and therefore, is considered a non-GAAP financial measure.  The items excluded were considered by management to be unusual and not reflective of the underlying performance of the company.  The GAAP financial measure most directly comparable to adjusted revenues by segment is revenues by segment and the GAAP financial measure most directly comparable to adjusted operating earnings by segment is operating earnings by segment.  Reconciliations of each of these non-GAAP financial measures to the corresponding GAAP financial measure are included above.  Management uses these measures to evaluate the operating performance of the company and analyze trends.  For this reason, management believes the measures are useful supplemental information for investors to understand the company's operating results.  Notes describing each non-GAAP adjustment are on the following page.









 

EXHIBIT E (cont.)









CALCULATION OF ADJUSTED NON-GAAP REVENUES 

AND ADJUSTED NON-GAAP OPERATING EARNINGS BY SEGMENT - (UNAUDITED)

DOLLARS IN MILLIONS









(a) Represents the portion of the $292 of contract disputes accruals related to the contract with the government of Portugal in the Combat Systems group from Exhibit C that was recorded as a reduction of revenue. 









(b) Represents intangible asset impairment of $191 in the Aerospace group from Exhibit C.  









(c) Represents contract disputes accruals of $292, restructuring-related charges of $98 and inventory-related charges of $15 in the Combat Systems group from Exhibit C. 









(d) Represents goodwill impairment of $1,994, intangible asset impairment of $110 and inventory-related charges of $38 in the Information Systems and Technology group from Exhibit C.  









 

EXHIBIT F











REVENUES AND OPERATING EARNINGS BY SEGMENT - (UNAUDITED)

DOLLARS IN MILLIONS














Twelve Months


Variance




2011


2012


$


%

Revenues:




















Aerospace



$          5,998


$        6,912


$           914


15.2 %











Combat Systems



8,827


7,992


(835)


(9.5)%











Marine Systems



6,631


6,592


(39)


(0.6)%











Information Systems and Technology



11,221


10,017


(1,204)


(10.7)%











Total



$        32,677


$      31,513


$      (1,164)


(3.6)%











Operating earnings (loss):




















Aerospace



$             729


$            858


$           129


17.7 %











Combat Systems



1,283


663


(620)


(48.3)%











Marine Systems



691


750


59


8.5 %











Information Systems and Technology



1,200


(1,369)


(2,569)


(214.1)%
















Corporate



(77)


(69)


8


10.4 %











Total



$          3,826


$            833


$      (2,993)


(78.2)%











Operating margins:




















Aerospace



12.2 %


12.4 %















Combat Systems



14.5 %


8.3 %















Marine Systems



10.4 %


11.4 %















Information Systems and Technology



10.7 %


(13.7)%




















Total



11.7 %


2.6 %















 

EXHIBIT G









CALCULATION OF ADJUSTED NON-GAAP REVENUES 

AND ADJUSTED NON-GAAP OPERATING EARNINGS BY SEGMENT - (UNAUDITED)

DOLLARS IN MILLIONS












GAAP




Adjusted




Twelve Months




Non-GAAP




2012


Non-GAAP


Twelve Months




(from Exhibit F)


Adjustments


2012

Revenues:
















Aerospace



$                   6,912


$                      -


$                   6,912









Combat Systems



7,992


169

(a)

8,161









Marine Systems



6,592


-


6,592









Information Systems and Technology



10,017


-


10,017









Total



$                 31,513


$                  169


$                 31,682









Operating earnings (loss):
















Aerospace



$                      858


$                  191

(b)

$                   1,049









Combat Systems



663


405

(c)

1,068









Marine Systems



750


-


750









Information Systems and Technology



(1,369)


2,167

(d)

798









Corporate



(69)


-


(69)









Total



$                      833


$               2,763


$                   3,596









Operating margins:
















Aerospace



12.4 %




15.2 %









Combat Systems



8.3 %




13.1 %









Marine Systems



11.4 %




11.4 %









Information Systems and Technology



(13.7)%




8.0 %









Total



2.6 %




11.4 %









This Exhibit includes the following financial measures which are not calculated in accordance with generally accepted accounting principles (GAAP) in the United States – adjusted revenues and operating earnings by segment.  Each of these calculations excludes the impact of certain items and therefore, is considered a non-GAAP financial measure.  The items excluded were considered by management to be unusual and not reflective of the underlying performance of the company.  The GAAP financial measure most directly comparable to adjusted revenues by segment is revenues by segment and the GAAP financial measure most directly comparable to adjusted operating earnings by segment is operating earnings by segment.  Reconciliations of each of these non-GAAP financial measures to the corresponding GAAP financial measure are included above.  Management uses these measures to evaluate the operating performance of the company and analyze trends.  For this reason, management believes the measures are useful supplemental information for investors to understand the company's operating results.  Notes describing each non-GAAP adjustment are on the following page.

EXHIBIT G (cont.)









CALCULATION OF ADJUSTED NON-GAAP REVENUES 

AND ADJUSTED NON-GAAP OPERATING EARNINGS BY SEGMENT - (UNAUDITED)

DOLLARS IN MILLIONS









(a) Represents the portion of the $292 of contract disputes accruals related to the contract with the government of Portugal in the Combat Systems group from Exhibit C that was recorded as a reduction of revenue.  









(b) Represents intangible asset impairment of $191 in the Aerospace group from Exhibit C. 









(c) Represents contract disputes accruals of $292, restructuring-related charges of $98 and inventory-related charges of $15 in the Combat Systems group from Exhibit C.     









(d) Represents goodwill impairment of $1,994, intangible asset impairment of $110 and inventory-related charges of $63 in the Information Systems and Technology group from Exhibit C.  

 

EXHIBIT H







PRELIMINARY CONSOLIDATED BALANCE SHEETS

DOLLARS IN MILLIONS





(Unaudited)




December 31, 2011


December 31, 2012


ASSETS






Current assets:






Cash and equivalents


$                         2,649


$                       3,296


Accounts receivable


4,429


4,204


Contracts in process


5,168


4,964


Inventories


2,310


2,776


Other current assets


812


504


Total current assets


15,368


15,744








Noncurrent assets:






Property, plant and equipment, net


3,284


3,403


Intangible assets, net


1,813


1,383


Goodwill


13,576


12,048


Other assets


842


1,731


Total noncurrent assets


19,515


18,565


Total assets


$                       34,883


$                     34,309


LIABILITIES AND SHAREHOLDERS' EQUITY






Current liabilities:






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


$                              23


$                               1


Accounts payable


2,895


2,469


Customer advances and deposits


5,011


6,042


Other current liabilities


3,216


3,108


Total current liabilities


11,145


11,620








Noncurrent liabilities:






Long-term debt


3,907


3,908


Other liabilities


6,599


7,391


Total noncurrent liabilities


10,506


11,299








Shareholders' equity:






Common stock


482


482


Surplus


1,888


1,988


Retained earnings


18,917


17,860


Treasury stock


(5,743)


(6,165)


 Accumulated other comprehensive loss


(2,312)


(2,775)


Total shareholders' equity


13,232


11,390


Total liabilities and shareholders' equity


$                       34,883


$                     34,309








 

EXHIBIT I








PRELIMINARY CONSOLIDATED STATEMENTS OF CASH FLOWS - (UNAUDITED)


DOLLARS IN MILLIONS










Twelve Months Ended


Cash flows from operating activities:


December 31, 2011


December 31, 2012


Net earnings (loss)


$                 2,526


$                         (332)


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






Depreciation of property, plant and equipment


354


386


Amortization of intangible assets


238


234


Goodwill and intangible asset impairments


111


2,295


Stock-based compensation expense


128


114


Excess tax benefit from stock-based compensation


(24)


(29)


Deferred income tax (benefit) provision


14


(148)


Discontinued operations, net of tax


26


-


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






Accounts receivable


(397)


240


Contracts in process


(62)


149


Inventories


(186)


(478)


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






Accounts payable


17


(441)


Customer advances and deposits


629


730


Other current liabilities


86


22


Other, net


(222)


(55)


Net cash provided by operating activities


3,238


2,687








Cash flows from investing activities:






Capital expenditures


(458)


(450)


Business acquisitions, net of cash acquired


(1,560)


(444)


Purchases of held-to-maturity securities


(459)


(260)


Maturities of held-to-maturity securities


441


224


Sales of held-to-maturity securities


-


211


Purchases of available-for-sale securities


(373)


(252)


Sales of available-for-sale securities


107


186


Maturities of available-for-sale securities


235


110


Other, net


93


19


Net cash used by investing activities


(1,974)


(656)








Cash flows from financing activities:






Repayment of fixed-rate notes


(750)


(2,400)


Proceeds from fixed-rate notes 


1,497


2,382


Dividends paid


(673)


(893)


Purchases of common stock


(1,468)


(602)


Proceeds from option exercises


198


146


Other, net


(5)


(15)


Net cash used by financing activities


(1,201)


(1,382)








Net cash used by discontinued operations


(27)


(2)








Net increase in cash and equivalents


36


647


Cash and equivalents at beginning of period


2,613


2,649


Cash and equivalents at end of period


$                 2,649


$                       3,296








 

EXHIBIT J













PRELIMINARY FINANCIAL INFORMATION - (UNAUDITED)

DOLLARS IN MILLIONS EXCEPT PER SHARE AND EMPLOYEE AMOUNTS

















Fourth Quarter




Fourth Quarter








2011




2012




Other Financial Information:










Return on equity (a)


18.8%




(2.5)%
















Debt-to-equity (b)


29.7%




34.3%
















Debt-to-capital (c)


22.9%




25.6%
















Book value per share (d)


$                        37.12




$                          32.20
















Total taxes paid


$                           279




$                              350
















Company-sponsored research and development (e)


$                           154




$                              113
















Employment 


95,100




92,200
















Sales per employee (f)


$                    357,700




$                      337,300
















Shares outstanding


356,437,880




353,674,248
















Non-GAAP Financial Measures:






















Free cash flow from operations:


 Quarter 


 Year-to-date 


 Quarter 


 Year-to-date 


Net cash provided by operating activities


$                        2,022


$                 3,238


$                              780


$             2,687


Capital expenditures 


(185)


(458)


(164)


(450)


Free cash flow from operations (g)


$                        1,837


$                 2,780


$                              616


$             2,237














Return on invested capital:






















Earnings from continuing operations




$                 2,552




$              (332)


 After-tax interest expense




106




109


 After-tax amortization expense




163




152


Net operating profit after taxes




2,821




(71)


Average debt and equity




17,123




17,203


Return on invested capital (h)




16.5%




(0.4)%














Notes describing the calculation of other financial information and a reconciliation of non-GAAP financial measures are on the following page.


 

EXHIBIT J (cont.)











PRELIMINARY FINANCIAL INFORMATION - (UNAUDITED)

DOLLARS IN MILLIONS EXCEPT PER SHARE AND EMPLOYEE AMOUNTS











(a) Return on equity is calculated by dividing earnings from continuing operations for the latest 12-month period by our average equity during that period.











(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 bid and proposal costs and Gulfstream product-development costs.











(f) Sales per employee is calculated by dividing revenues for the latest 12-month period by our average number of employees during that period.











(g) 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.











(h) 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. Fourth quarter of 2012 after-tax interest expense and amortization expense is calculated using the statutory tax rate of 35 percent.

 

EXHIBIT K













BACKLOG - (UNAUDITED)

DOLLARS IN MILLIONS





















Estimated 










Total


Potential


Total Potential


Fourth Quarter 2012


Funded 


Unfunded 


Backlog 


Contract Value*


Contract Value


Aerospace


$      15,458


$               209


$        15,667


$                    -


$             15,667














Combat Systems


7,442


1,298


8,740


2,794


11,534














Marine Systems


13,495


3,606


17,101


3,047


20,148














Information Systems and Technology


8,130


1,643


9,773


21,009


30,782














Total


$    44,525


$          6,756


$      51,281


$           26,850


$           78,131


























Third Quarter 2012












Aerospace


$      15,827


$               215


$        16,042


$                      -


$             16,042














Combat Systems


8,259


1,101


9,360


2,627


11,987














Marine Systems


10,909


5,036


15,945


1,382


17,327














Information Systems and Technology


8,224


1,887


10,111


22,052


32,163




















Total


$    43,219


$          8,239


$      51,458


$           26,061


$           77,519


























Fourth Quarter 2011












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


























*  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 L


FOURTH QUARTER 2012 SIGNIFICANT ORDERS - (UNAUDITED)

DOLLARS IN MILLIONS

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

Combat Systems

  • $355 from the U.S. Army under the Stryker wheeled combat vehicle program for contractor logistics support and for the production of 62 Nuclear, Biological, Chemical Reconnaissance vehicles.
  • $135 to upgrade 66 additional Light Armored Vehicles (LAVs) for the Canadian government.
  • $135 from the Army for continued technical support on the Abrams main battle tank program.
  • $135 for the production of Saudi M1A2 Abrams tanks for the Kingdom of Saudi Arabia.
  • $85 from the U.K. Ministry of Defence for the production of 51 Foxhound vehicles.
  • $65 from the Columbian government for the production of 24 LAVs.

Marine Systems

  • $1.8 billion from the U.S. Navy for research and development work for a new class of ballistic-missile submarines under the Ohio Replacement Program. 
  • $335 from TOTE, Inc., for the construction of two liquefied natural gas (LNG)-powered containerships, with an option for three additional ships.
  • $310 from the Navy to purchase long-lead materials for three Virginia-class submarines.
  • $125 from the Navy to perform maintenance and modernization work on the USS Essex and the USS Toledo.
  • $65 from the Navy to provide ongoing planning yard services for the DDG 51 Arleigh Burke-class destroyer and the FFG 7 Oliver Hazard Perry-class frigate programs.

Information Systems and Technology

  • $250 from the Army for production of 3,726 Handheld, Manpack and Small Form-Fit (HMS) radios and accessory kits.
  • $130 from the Army under the Warfighter Information Network-Tactical (WIN-T) program for Increment 2 equipment production and training.
  • $125 from the Navy for production and support of the U.S. and U.K. Trident II submarine weapons systems. 
  • $70 from the U.S. Department of State to provide supply chain management services.
  • $65 for commercial wireless network systems and support.

 

EXHIBIT M










AEROSPACE SUPPLEMENTAL DATA - (UNAUDITED)












Fourth Quarter


Twelve Months



2011


2012


2011


2012

Gulfstream Green Deliveries (units):


















Large aircraft


30


26


90


104










Mid-size aircraft


5


7


17


17










Total


35


33


107


121










Gulfstream Outfitted Deliveries (units):


















Large aircraft


20


31


78


83










Mid-size aircraft


7


6


21


11










Total


27


37


99


94










Pre-owned Deliveries (units):


1


3


5


4










 

SOURCE General Dynamics



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