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

23 Jan, 2013, 09:00 ET from General Dynamics

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