General Dynamics Reports Second-Quarter 2014 Results - Diluted EPS from continuing operations rises 3.9 percent over second-quarter 2013

- Company-wide operating margins increase to 12.7 percent

- Total backlog rises to $71.1 billion, 27 percent over first-quarter 2014

FALLS CHURCH, Va., July 23, 2014 /PRNewswire/ -- General Dynamics (NYSE: GD) today reported 2014 second-quarter earnings from continuing operations of $646 million, or $1.88 per share on a diluted basis, compared to second-quarter earnings from continuing operations in 2013 of $640 million, or $1.81 per diluted share. Second-quarter 2014 revenues were $7.5 billion.

There is a charge in the quarter of $105 million in discontinued operations for the sale of a business within Combat Systems, which results in net earnings for the second quarter of $541 million, or $1.58 fully diluted earnings per share.

Margins

Company-wide operating margins for the second quarter of 2014 were 12.7 percent, a 40 basis-point improvement when compared to 12.3 percent in second-quarter 2013.

Cash

Net cash provided by operating activities in the quarter totaled $866 million. Free cash flow from operations, defined as net cash provided by operating activities less capital expenditures, was $791 million in second-quarter 2014, or 122 percent of earnings from continuing operations.

Capital Deployment

The company repurchased 10.7 million outstanding shares in the second quarter, for $1.2 billion. Year-to-date, the company has repurchased 25 million outstanding shares, for $2.7 billion.

Backlog

Total backlog at the end of second-quarter 2014 was $71.1 billion. Estimated potential contract value, representing management's estimate of value in unfunded indefinite delivery, indefinite quantity (IDIQ) contracts and unexercised options, was $28.4 billion. At the end of the quarter, total potential contract value, the sum of all backlog components, was $99.5 billion.

Orders in the Aerospace group were strong in the quarter, including healthy activity across the group's portfolio. Additional significant awards received include a $17.8 billion multi-year contract from the U.S. Navy for the construction of 10 additional Virginia-class submarines, $645 million for support on the Canadian Maritime Helicopter Project, $425 million from the Centers for Medicare & Medicaid Services for contact-center services, $290 million from the U.S. Army for the production of 93 Stryker double-V-hulled vehicles and contractor logistics support, and $125 million for the construction of an additional product carrier from an affiliate of American Petroleum Tankers.

"General Dynamics' strong second quarter performance reflects our continued focus on program execution and operational improvements," said Phebe N. Novakovic, chairman and chief executive officer. "We have a solid building block for the future with an increased defense backlog and robust order activity across the portfolio of Gulfstream business jets."

General Dynamics, headquartered in Falls Church, Virginia, employs approximately 89,600 people worldwide.  The company is a market leader in business aviation; combat vehicles, weapons systems and munitions; shipbuilding; and communication and information technology systems and solutions.  More information about the company is available 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 second-quarter securities analyst conference call, scheduled for 9 a.m. EDT on Wednesday, July 23, 2014.  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 12 p.m. EDT on July 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 66081812.  The phone replay will be available from 12 p.m. July 23 through July 30, 2014.

 

EXHIBIT A











CONSOLIDATED STATEMENTS OF EARNINGS - (UNAUDITED)

DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS













Second Quarter


Variance



2013


2014


$


%











Revenues


$          7,834


$        7,474


$         (360)


(4.6)%

Operating costs and expenses


6,873


6,525


348













Operating earnings


961


949


(12)


(1.2)%











Interest, net


(18)


(24)


(6)













Earnings before income taxes


943


925


(18)


(1.9)%











Provision for income taxes


303


279


24













Earnings from continuing operations


$             640


$            646


$               6


0.9 %











Discontinued operations, net of tax


-


(105)


(105)













Net earnings


$             640


$            541


$           (99)


(15.5)%











Earnings per share - basic










    Continuing operations


$            1.82


$           1.92


$          0.10


5.5 %

    Discontinued operations


$                 -


$         (0.31)


$        (0.31)



Earnings per share - basic


$            1.82


$           1.61


$        (0.21)


(11.5)%











Basic weighted average shares outstanding


351.1


336.7














Earnings per share - diluted










    Continuing operations


$            1.81


$           1.88


$          0.07


3.9 %

    Discontinued operations


$                  -


$         (0.30)


$        (0.30)



Earnings per share - diluted


$            1.81


$           1.58


$        (0.23)


(12.7)%











Diluted weighted average shares outstanding


352.9


342.8
















Note: Prior period information has been restated to reflect our axle business in discontinued operations.

 

 

EXHIBIT B










CONSOLIDATED STATEMENTS OF EARNINGS - (UNAUDITED)

DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS












Six Months


Variance



2013


2014


$


%










Revenues


$        15,148


$      14,739


$         (409)


(2.7)%

Operating costs and expenses


13,344


12,916


428












Operating earnings


1,804


1,823


19


1.1 %










Interest, net


(41)


(46)


(5)



Other, net


-


1


1












Earnings before income taxes


1,763


1,778


15


0.9 %










Provision for income taxes


553


536


17












Earnings from continuing operations


$          1,210


$        1,242


$             32


2.6 %










Discontinued operations, net of tax


1


(106)


(107)












Net earnings


$          1,211


$        1,136


$           (75)


(6.2)%










Earnings per share - basic









    Continuing operations


$            3.45


$           3.66


$          0.21


6.1 %

    Discontinued operations


$                  -


$         (0.31)


$        (0.31)



    Net earnings


$            3.45


$           3.35


$        (0.10)


(2.9)%










Basic weighted average shares outstanding


351.5


339.5














Earnings per share - diluted









    Continuing operations


$            3.43


$           3.60


$          0.17


5.0 %

    Discontinued operations


$                  -


$         (0.31)


$        (0.31)



    Net earnings


$            3.43


$           3.29


$        (0.14)


(4.1)%










Diluted weighted average shares outstanding


353.2


345.4















Note: Prior period information has been restated to reflect our axle business in discontinued operations.

 

 

EXHIBIT C











REVENUES AND OPERATING EARNINGS BY SEGMENT - (UNAUDITED)

DOLLARS IN MILLIONS














Second Quarter


Variance




2013


2014


$


%

Revenues:




















Aerospace



$          2,053


$        1,995


$           (58)


(2.8)%











Combat Systems



1,472


1,465


(7)


(0.5)%











Marine Systems



1,759


1,851


92


5.2 %











Information Systems and Technology


2,550


2,163


(387)


(15.2)%











Total



$          7,834


$        7,474


$         (360)


(4.6)%











Operating earnings:




















Aerospace



$             389


$            384


$             (5)


(1.3)%











Combat Systems



219


220


1


0.5 %











Marine Systems



178


174


(4)


(2.2)%











Information Systems and Technology


198


188


(10)


(5.1)%











Corporate



(23)


(17)


6


26.1 %











Total



$             961


$            949


$           (12)


(1.2)%











Operating margins:




















Aerospace



18.9 %


19.2 %















Combat Systems



14.9 %


15.0 %















Marine Systems



10.1 %


9.4 %















Information Systems and Technology


7.8 %


8.7 %















Total



12.3 %


12.7 %

























Note:  Prior period information has been restated to reflect our axle business in discontinued operations.

 

 

EXHIBIT D











REVENUES AND OPERATING EARNINGS BY SEGMENT - (UNAUDITED)

DOLLARS IN MILLIONS














Six Months


Variance




2013


2014


$


%

Revenues:




















Aerospace



$          3,831


$        4,120


$           289


7.5 %











Combat Systems



2,935


2,723


(212)


(7.2)%











Marine Systems



3,385


3,452


67


2.0 %











Information Systems and Technology


4,997


4,444


(553)


(11.1)%











Total



$        15,148


$      14,739


$         (409)


(2.7)%











Operating earnings:




















Aerospace



$             699


$            788


$             89


12.7 %











Combat Systems



430


359


(71)


(16.5)%











Marine Systems



337


340


3


0.9 %











Information Systems and Technology


383


371


(12)


(3.1)%











Corporate



(45)


(35)


10


22.2 %











Total



$          1,804


$        1,823


$             19


1.1 %











Operating margins:




















Aerospace



18.2 %


19.1 %















Combat Systems



14.7 %


13.2 %















Marine Systems



10.0 %


9.8 %















Information Systems and Technology


7.7 %


8.3 %















Total



11.9 %


12.4 %

























Note:  Prior period information has been restated to reflect our axle business in discontinued operations.

 

 

EXHIBIT E






CONSOLIDATED BALANCE SHEETS - (UNAUDITED)

DOLLARS IN MILLIONS








December 31, 2013


June 29, 2014

ASSETS





Current assets:





Cash and equivalents


$                         5,301


$                       3,841

Accounts receivable


4,370


4,474

Contracts in process


4,780


4,934

Inventories


2,890


3,158

Other current assets


821


776

Total current assets


18,162


17,183






Noncurrent assets:





Property, plant and equipment, net


3,359


3,327

Intangible assets, net


1,044


983

Goodwill


11,932


11,927

Other assets


997


912

Total noncurrent assets


17,332


17,149

Total assets


$                       35,494


$                     34,332

LIABILITIES AND SHAREHOLDERS' EQUITY





Current liabilities:





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


$                                1


$                          501

Accounts payable


2,216


2,486

Customer advances and deposits


6,584


6,694

Other current liabilities


3,458


3,541

Total current liabilities


12,259


13,222






Noncurrent liabilities:





Long-term debt


3,908


3,409

Other liabilities


4,826


4,582

Total noncurrent liabilities


8,734


7,991






Shareholders' equity:





Common stock


482


482

Surplus


2,226


2,415

Retained earnings


19,428


20,142

Treasury stock


(6,450)


(8,816)

Accumulated other comprehensive loss


(1,185)


(1,104)

Total shareholders' equity


14,501


13,119

Total liabilities and shareholders' equity


$                       35,494


$                     34,332











Note:  Prior period information has been restated to reflect our axle business in discontinued operations.


 

 

EXHIBIT F






CONSOLIDATED STATEMENTS OF CASH FLOWS - (UNAUDITED)

DOLLARS IN MILLIONS








Six Months Ended



June 30, 2013


June 29, 2014

Cash flows from operating activities - continuing operations:





Net earnings


$                      1,211


$                     1,136

Adjustments to reconcile net earnings to net cash provided by 





operating activities:





Depreciation of property, plant and equipment


186


191

Amortization of intangible assets


79


61

Stock-based compensation expense


61


64

Excess tax benefit from stock-based compensation


(16)


(54)

Deferred income tax provision


47


64

Discontinued operations, net of tax


(1)


106

Increase in assets, net of effects of business acquisitions:





Accounts receivable


(102)


(104)

Contracts in process


(125)


(130)

Inventories


(161)


(278)

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





Accounts payable


(10)


270

Customer advances and deposits


(54)


25

Income taxes payable


50


188

Other current liabilities


(149)


(81)

Other, net


71


(164)

Net cash provided by operating activities


1,087


1,294






Cash flows from investing activities - continuing operations:





Capital expenditures


(165)


(162)

Other, net


4


17

Net cash used by investing activities


(161)


(145)






Cash flows from financing activities - continuing operations:





Purchases of common stock


(485)


(2,691)

Proceeds from option exercises


212


415

Dividends paid


(198)


(411)

Excess tax benefit from stock-based compensation


16


54

Net cash used by financing activities


(455)


(2,633)






Net cash (used) provided by discontinued operations


(10)


24






Net increase (decrease) in cash and equivalents


461


(1,460)

Cash and equivalents at beginning of period


3,296


5,301

Cash and equivalents at end of period


$                      3,757


$                     3,841






Note:  Prior period information has been restated to reflect our axle business in discontinued operations.






 

 

EXHIBIT G













PRELIMINARY FINANCIAL INFORMATION - (UNAUDITED)

DOLLARS IN MILLIONS EXCEPT PER SHARE AND EMPLOYEE AMOUNTS

















Second Quarter




Second Quarter








2013




2014




Other Financial Information (g): 










Debt-to-equity (a)


33.2%




29.8%
















Debt-to-capital (b)


24.9%




23.0%
















Book value per share (c)


$               33.60




$             39.24
















Total taxes paid


$                  442




$                214
















Company-sponsored research and development (d)


$                    77




$                   98
















Employment 


90,100




89,600
















Sales per employee (e)


$           339,500




$          327,100
















Shares outstanding


349,867,839




334,315,950
















Non-GAAP Financial Measures (g): 






















Free cash flow from operations:


 Quarter 


 Year-to-date 


 Quarter 


 Year-to-date 


Net cash provided by operating activities


$                  582


$               1,087


$                866


$             1,294


Capital expenditures 


(92)


(165)


(75)


(162)


Free cash flow from operations (f)


$                  490


$                  922


$                791


$             1,132














(a) Debt-to-equity ratio is calculated as total debt divided by total equity as of the end of the period.

(b) 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.

(c) Book value per share is calculated as total equity divided by total outstanding shares as of the end of the period.

(d) Includes independent research and development and Gulfstream product-development costs.

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

(f) 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.


(g) Prior period information has been restated to reflect our axle business in discontinued operations.













 

 

EXHIBIT H













BACKLOG - (UNAUDITED)

DOLLARS IN MILLIONS





















Estimated 










Total


Potential


Total Potential


Second Quarter 2014


Funded 


Unfunded 


Backlog 


Contract Value*


Contract Value


Aerospace


$      12,556


$               172


$   12,728


$               1,920


$             14,648














Combat Systems


15,363


852


16,215


8,074


24,289














Marine Systems


15,458


17,747


33,205


1,938


35,143














Information Systems and Technology


7,343


1,602


8,945


16,477


25,422














Total


$    50,720


$        20,373


$ 71,093


$           28,409


$           99,502


























First Quarter 2014












Aerospace


$      12,747


$               199


$   12,946


$               2,000


$             14,946














Combat Systems


15,870


885


16,755


8,143


24,898














Marine Systems


12,447


5,248


17,695


2,046


19,741














Information Systems and Technology


7,134


1,343


8,477


16,494


24,971














Total


$    48,198


$          7,675


$ 55,873


$           28,683


$           84,556


























Second Quarter 2013












Aerospace


$      14,480


$               183


$   14,663


$                      -


$             14,663














Combat Systems


5,790


1,129


6,919


3,025


9,944














Marine Systems


12,771


5,149


17,920


3,900


21,820














Information Systems and Technology


7,943


1,856


9,799


20,788


30,587














Total


$    40,984


$          8,317


$ 49,301


$           27,713


$           77,014


























*  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.














Note:  Prior period information has been restated to reflect our axle business in discontinued operations.


 

 

Photo -  http://photos.prnewswire.com/prnh/20140722/129536 

Note:  Prior period information has been restated to reflect our axle business in discontinued operations.

 

 

EXHIBIT I


SECOND QUARTER 2014 SIGNIFICANT ORDERS (UNAUDITED)

DOLLARS IN MILLIONS

We received the following significant orders during the second quarter of 2014:

Combat Systems

  • $290 from the U.S. Army under the Stryker wheeled armored vehicle program for the production of 93 double-V-hulled vehicles and for contractor logistics support.
  • $50 from the U.S. Marine Corps for production of seven light armored vehicle (LAV) upgrade kits, testing and customer support.

Marine Systems

  • $17.8 billion from the U.S. Navy for the construction of 10 Virginia-class submarines under the multi-year Block IV contract, including $1.2 billion that was previously recognized as orders for long-lead material.
  • $125 for the construction of a Jones Act product carrier from an affiliate of American Petroleum Tankers.
  • $85 from the Navy for design work, including advanced nuclear plant studies, for the next-generation ballistic-missile submarine.
  • $65 from the Navy for long-lead material for the fourth Mobile Landing Platform (MLP), configured as an Afloat Forward Staging Base (AFSB).

Information Systems and Technology

  • $645 to extend the period of performance for support on the Canadian Maritime Helicopter Project (MHP).
  • $425 from the Centers for Medicare & Medicaid Services (CMS) for contact-center services.
  • $105 from the Navy for the procurement of material to support production of guidance and missile hardware.
  • $80 from the Army under the Warfighter Information Network-Tactical (WIN-T) program for equipment and support services.
  • $75 to provide design and support services on the U.S. Air Force's Space Fence program.
  • $70 from the Army for ruggedized computing equipment under the Common Hardware Systems-4 (CHS-4) program.
  • $60 from the U.K. Ministry of Defence for tactical communication systems spares and services.
  • An indefinite delivery, indefinite quantity (IDIQ) contract from the Department of Homeland Security (DHS) to enhance mission effectiveness and create economies of scale through enhanced integration and consolidation. The program has a maximum potential value of $700 over seven years.

 

 

EXHIBIT J










AEROSPACE SUPPLEMENTAL DATA - (UNAUDITED)












Second  Quarter


Six Months



2013


2014


2013


2014

Gulfstream Green Deliveries (units):


















Large-cabin aircraft


30


26


55


55










Mid-cabin aircraft


5


7


10


13










Total


35


33


65


68










Gulfstream Outfitted Deliveries (units):


















Large-cabin aircraft


30


26


55


59










Mid-cabin aircraft


6


12


10


18










Total


36


38


65


77










Pre-owned Deliveries (units):


3


-


5


-










 

Logo - http://photos.prnewswire.com/prnh/20140428/81320

SOURCE General Dynamics



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