General Dynamics Reports Third-Quarter 2013 Results - Diluted EPS increases 8.2 percent over third-quarter 2012

- Operating margins grow to 12.3 percent

FALLS CHURCH, Va., Oct. 23, 2013 /PRNewswire/ -- General Dynamics (NYSE: GD) today reported third-quarter 2013 net earnings of $651 million, or $1.84 per share on a diluted basis, on revenues of $7.8 billion. This compares to 2012 third-quarter net earnings of $600 million, or $1.70 per diluted share, on revenues of $7.9 billion. Third-quarter 2013 operating earnings rose $52 million to $957 million, a 5.7 percent increase over the year-ago quarter.

Margins

Company-wide operating margins for the third quarter of 2013 were 12.3 percent, 90 basis points higher than third-quarter 2012 margins, reflecting operating-performance improvement in the company's Aerospace, Combat Systems and Information Systems and Technology groups over the year-ago period. Marine Systems' margins remained steady from second quarter to third quarter 2013 on the strength of current program performance, although they declined as expected from the year-ago period due to the completion of the long-running T-AKE program.

Cash

Net cash provided by operating activities in third-quarter 2013 totaled $467 million. Free cash flow from operations, defined as net cash provided by operating activities less capital expenditures, was $364 million in the quarter.

Capital Deployment

The company repurchased 1.6 million shares of outstanding common stock in the third quarter. Year-to-date, the company has repurchased 9.2 million shares. At its October meeting the company's board of directors authorized management to repurchase up to 10 million additional shares.

Backlog

Total backlog at the end of third-quarter 2013 was $47.9 billion, and the estimated potential contract value was an additional $27.4 billion, representing management's estimate of value in unfunded indefinite delivery, indefinite quantity (IDIQ) contracts and unexercised options. Total potential contract value, the sum of all backlog components, was $75.4 billion at the end of the quarter.

Significant awards received in the quarter include $200 million to continue production and support of double-V-hulled Stryker combat vehicles for the U.S. Army, $150 million for continued production of Abrams tanks for a foreign customer and $140 million for equipment and services in support of the Army's Warfighter Information Network-Tactical (WIN-T). Marine Systems was contracted to design and manufacture two commercial product carriers, and received a $280 million award for repair and maintenance of U.S. Navy LHA- and LHD-class ships.

"General Dynamics performed well in the third quarter, reflecting our focus on the basics of operational excellence," said Phebe N. Novakovic, chairman and chief executive officer. "We remain committed to creating value by meeting our obligations to our customers while continuously improving the way we do business."

General Dynamics, headquartered in Falls Church, Virginia, employs approximately 95,700 people worldwide. The company is a market leader in business aviation; land and expeditionary combat systems, armaments and munitions; shipbuilding and marine systems; and information systems and technologies. More information about the company is available on the Internet at www.generaldynamics.com.

Certain statements made in this press release, including any statements as to future results of operations and financial projections, may constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. Forward-looking statements are based on management's expectations, estimates, projections and assumptions. These statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. Therefore, actual future results and trends may differ materially from what is forecast in forward-looking statements due to a variety of factors. Additional information regarding these factors is contained in the company's filings with the Securities and Exchange Commission, including, without limitation, its Annual Report on Form 10-K and its Quarterly Reports on Form 10-Q.

All forward-looking statements speak only as of the date they were made. The company does not undertake any obligation to update or publicly release any revisions to any forward-looking statements to reflect events, circumstances or changes in expectations after the date of this press release.

WEBCAST INFORMATION:  General Dynamics will webcast its third-quarter securities analyst conference call at 9 a.m. EDT on Wednesday, October 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 by 12 p.m. on October 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 69201108. The phone replay will be available from 1 p.m. October 23 through October 30, 2013.

 

EXHIBIT A










CONSOLIDATED STATEMENTS OF EARNINGS - (UNAUDITED)

DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS












Third Quarter


Variance



2012


2013


$


%










Revenues


$          7,934


$        7,796


$         (138)


(1.7)%

Operating costs and expenses


7,029


6,839


190












Operating earnings


905


957


52


5.7 %










Interest, net


(39)


(22)


17



Other, net


(3)


5


8












Earnings before income taxes


863


940


77


8.9 %










Provision for income taxes


263


289


(26)












Net earnings


$             600


$            651


$             51


8.5 %










Earnings per share - basic


$            1.71


$           1.86


$          0.15


8.8 %










Basic weighted average shares outstanding


350.5


349.3














Earnings per share - diluted


$            1.70


$           1.84


$          0.14


8.2 %










Diluted weighted average shares outstanding


352.8


352.9














 

EXHIBIT B










CONSOLIDATED STATEMENTS OF EARNINGS - (UNAUDITED)

DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS












Nine Months


Variance



2012


2013


$


%










Revenues


$        23,435


$      23,111


$         (324)


(1.4)%

Operating costs and expenses


20,700


20,347


353












Operating earnings


2,735


2,764


29


1.1 %










Interest, net


(115)


(63)


52



Other, net


(8)


6


14












Earnings before income taxes


2,612


2,707


95


3.6 %










Provision for income taxes


814


845


(31)












Net earnings


$          1,798


$        1,862


$             64


3.6 %










Earnings per share - basic


$            5.08


$           5.31


$          0.23


4.5 %










Basic weighted average shares outstanding


354.2


350.8














Earnings per share - diluted


$            5.04


$           5.27


$          0.23


4.6 %










Diluted weighted average shares outstanding


356.5


353.1














 

EXHIBIT C











REVENUES AND OPERATING EARNINGS BY SEGMENT - (UNAUDITED)

DOLLARS IN MILLIONS














Third Quarter


Variance




2012


2013


$


%

Revenues:



















Aerospace


$          1,836


$        2,152


$           316


17.2 %











Combat Systems


1,956


1,367


(589)


(30.1)%











Marine Systems


1,670


1,697


27


1.6 %











Information Systems and Technology


2,472


2,580


108


4.4 %











Total


$          7,934


$        7,796


$         (138)


(1.7)%











Operating earnings:



















Aerospace


$             261


$            369


$           108


41.4 %











Combat Systems


274


224


(50)


(18.2)%











Marine Systems


186


170


(16)


(8.6)%











Information Systems and Technology


201


216


15


7.5 %











Corporate


(17)


(22)


(5)


(29.4)%











Total


$             905


$            957


$             52


5.7 %











Operating margins:



















Aerospace


14.2 %


17.1 %















Combat Systems


14.0 %


16.4 %















Marine Systems


11.1 %


10.0 %















Information Systems and Technology


8.1 %


8.4 %















Total


11.4 %


12.3 %















 

EXHIBIT D











REVENUES AND OPERATING EARNINGS BY SEGMENT - (UNAUDITED)

DOLLARS IN MILLIONS














Nine Months


Variance




2012


2013


$


%

Revenues:



















Aerospace


$          5,051


$        5,983


$           932


18.5 %











Combat Systems


6,016


4,469


(1,547)


(25.7)%











Marine Systems


4,928


5,082


154


3.1 %











Information Systems and Technology


7,440


7,577


137


1.8 %











Total


$        23,435


$      23,111


$         (324)


(1.4)%











Operating earnings:



















Aerospace


$             789


$        1,068


$           279


35.4 %











Combat Systems


799


657


(142)


(17.8)%











Marine Systems


554


507


(47)


(8.5)%











Information Systems and Technology


645


599


(46)


(7.1)%











Corporate


(52)


(67)


(15)


(28.8)%











Total


$          2,735


$        2,764


$             29


1.1 %











Operating margins:



















Aerospace


15.6 %


17.9 %















Combat Systems


13.3 %


14.7 %















Marine Systems


11.2 %


10.0 %















Information Systems and Technology


8.7 %


7.9 %















Total


11.7 %


12.0 %















 

EXHIBIT E








PRELIMINARY CONSOLIDATED BALANCE SHEETS


DOLLARS IN MILLIONS






(Unaudited)




December 31, 2012


September 29, 2013


ASSETS






Current assets:






Cash and equivalents


$                         3,296


$                       4,065


Accounts receivable


4,204


4,365


Contracts in process


4,964


5,113


Inventories


2,776


2,986


Other current assets


504


589


Total current assets


15,744


17,118








Noncurrent assets:






Property, plant and equipment, net


3,403


3,365


Intangible assets, net


1,383


1,248


Goodwill


12,048


12,008


Other assets


1,731


1,732


Total noncurrent assets


18,565


18,353


Total assets


$                       34,309


$                     35,471


LIABILITIES AND SHAREHOLDERS' EQUITY






Current liabilities:






Accounts payable


$                         2,469


$                       2,443


Customer advances and deposits


6,042


6,266


Other current liabilities


3,109


3,356


Total current liabilities


11,620


12,065








Noncurrent liabilities:






Long-term debt


3,908


3,908


Other liabilities


7,391


6,893


Total noncurrent liabilities


11,299


10,801








Shareholders' equity:






Common stock


482


482


Surplus


1,988


2,161


Retained earnings


17,860


19,131


Treasury stock


(6,165)


(6,500)


Accumulated other comprehensive loss


(2,775)


(2,669)


Total shareholders' equity


11,390


12,605


Total liabilities and shareholders' equity


$                       34,309


$                     35,471








 

EXHIBIT F






PRELIMINARY CONSOLIDATED STATEMENTS OF CASH FLOWS - (UNAUDITED)

DOLLARS IN MILLIONS








Nine Months Ended



September 30, 2012


September 29, 2013

Cash flows from operating activities:





Net earnings


$                      1,798


$                     1,862

Adjustments to reconcile net earnings to net cash provided by 





  operating activities -





  Depreciation of property, plant and equipment


286


288

  Amortization of intangible assets


172


127

  Stock-based compensation expense


104


90

  Excess tax benefit from stock-based compensation


(24)


(19)

  Deferred income tax provision


53


47

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




  Accounts receivable


139


(166)

  Contracts in process


91


(119)

  Inventories


(340)


(218)

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




  Accounts payable


(368)


(26)

  Customer advances and deposits


257


16

  Other current liabilities


(105)


(167)

Other, net


(156)


(165)

Net cash provided by operating activities


1,907


1,550






Cash flows from investing activities:





Capital expenditures


(286)


(271)

Business acquisitions, net of cash acquired


(426)


(1)

Other, net


44


56

Net cash used by investing activities


(668)


(216)






Cash flows from financing activities:





Purchases of common stock


(602)


(696)

Proceeds from option exercises


121


484

Dividends paid


(533)


(394)

Other, net


2


46

Net cash used by financing activities


(1,012)


(560)






Net cash used by discontinued operations


(2)


(5)






Net increase in cash and equivalents


225


769

Cash and equivalents at beginning of period


2,649


3,296

Cash and equivalents at end of period


$                      2,874


$                     4,065






 


EXHIBIT G













PRELIMINARY FINANCIAL INFORMATION - (UNAUDITED)

DOLLARS IN MILLIONS EXCEPT PER SHARE AND EMPLOYEE AMOUNTS

















Third Quarter




Third Quarter








2012




2013




Other Financial Information:










Debt-to-equity (a)


27.5%




31.2%
















Debt-to-capital (b)


21.6%




23.8%
















Book value per share (c)


$               40.42




$             35.79
















Total taxes paid


$                  299




$                245
















Company-sponsored research and development (d)


$                  149




$                116
















Employment 


93,700




95,700
















Sales per employee (e)


$           346,900




$        340,000
















Shares outstanding


353,069,806




352,198,231
















Non-GAAP Financial Measures:






















Free cash flow from operations:


 Quarter 


 Year-to-date 


 Quarter 


 Year-to-date 


Net cash provided by operating activities


$                  704


$               1,907


$                467


$             1,550


Capital expenditures 


(110)


(286)


(103)


(271)


Free cash flow from operations (f)


$                  594


$               1,621


$                364


$             1,279














(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 bid and proposal costs 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.













 

EXHIBIT H













BACKLOG - (UNAUDITED)

DOLLARS IN MILLIONS





















Estimated 










Total


Potential


Total Potential


Third Quarter 2013


Funded 


Unfunded 


Backlog 


Contract Value*


Contract Value


Aerospace


$      13,653


$               170


$   13,823


$                    -


$             13,823














Combat Systems


6,164


954


7,118


3,622


10,740














Marine Systems


12,228


5,337


17,565


3,389


20,954














Information Systems and Technology


7,950


1,485


9,435


20,433


29,868














Total


$    39,995


$          7,946


$ 47,941


$           27,444


$           75,385


























Second Quarter 2013












Aerospace


$      14,480


$               183


$   14,663


$                      -


$             14,663














Combat Systems


5,915


1,129


7,044


3,025


10,069














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


$    41,109


$          8,317


$ 49,426


$           27,713


$           77,139


























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


























*  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 I


THIRD QUARTER 2013 SIGNIFICANT ORDERS (UNAUDITED)

DOLLARS IN MILLIONS

 

We received the following significant orders during the third quarter of 2013:

Combat Systems

  • $200 from the U.S. Army under the Stryker wheeled armored vehicle program for the production of 66 double-V-hulled vehicles and for contractor logistics support.
  • $185 from the Army for the production of Hydra-70 rockets and M2A1 machine gun barrel kits.
  • $150 from the Army under a foreign military sales contract to convert Abrams tanks to the Saudi M1A2S configuration for the Kingdom of Saudi Arabia.
  • $35 from the U.K. Ministry of Defence for the production of 24 Foxhound light tactical vehicles.

Marine Systems

  • $280 from the U.S. Navy for repair and maintenance services on LHA- and LHD-class ships.
  • $210 from the Navy for the design and construction of a steel deckhouse and hangar and construction of aft Peripheral Vertical Launching System (PVLS) modules on the third DDG-1000 destroyer.
  • $55 from the Navy for moored training ship platforms.
  • The design and construction of two product carriers from Seabulk Tankers, Inc.

Information Systems and Technology

  • $140 from the Army under the Warfighter Information Network-Tactical (WIN-T) program for equipment and support services.
  • $90 from the Army for ruggedized computing equipment under the Common Hardware Systems-4 (CHS-4) program.
  • $75 from the U.S. Department of State to provide supply chain management services.
  • $65 for the Army's Warfighter Field Operations Customer Support (FOCUS) program to provide support for live, virtual and constructive training operations.
  • One of 17 awards to provide cyber security services to the U.S. Department of Homeland Security and other government agencies through a General Services Administration blanket purchase agreement. The agreement has a maximum potential value of $6 billion over five years among all awardees.

 

EXHIBIT J










AEROSPACE SUPPLEMENTAL DATA - (UNAUDITED)












Third Quarter


Nine Months



2012


2013


2012


2013

Gulfstream Green Deliveries (units):


















Large aircraft


28


28


78


83










Mid-size aircraft


6


6


10


16










Total


34


34


88


99










Gulfstream Outfitted Deliveries (units):


















Large aircraft


17


32


52


87










Mid-size aircraft


-


6


5


16










Total


17


38


57


103










Pre-owned Deliveries (units):


1


4


1


9










 

SOURCE General Dynamics



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