General Dynamics Reports Fourth-Quarter, Full-Year 2014 Results

- Fourth-quarter revenues up 3.9 percent

- Fourth-quarter operating earnings up 15.5 percent

- Fourth-quarter earnings from continuing operations up 18.1 percent

- Backlog up 58 percent from year-end 2013 to $72.4 billion

FALLS CHURCH, Va., Jan. 28, 2015 /PRNewswire/ -- General Dynamics GD today reported 2014 fourth-quarter and full-year results. On revenues of $8.4 billion, 2014 fourth-quarter earnings from continuing operations were $737 million, an 18.1 percent increase over fourth-quarter 2013. Diluted earnings per share for the quarter was $2.19 compared to diluted earnings per share of $1.76 in fourth-quarter 2013.

Full-year earnings from continuing operations rose to $2.7 billion from $2.5 billion in 2013. Diluted earnings per share for the year was $7.83, compared to diluted earnings per share of $7.03 in 2013. Revenues for 2014 were $30.9 billion.

Margins

Company-wide operating margins were 12.8 percent for the fourth quarter, 130 basis points higher than fourth-quarter 2013 margins.  For the full year of 2014, operating margins were 12.6 percent, 70 basis points higher than full-year 2013 margins.

Cash

Net cash provided by operating activities was $3.7 billion for the full year. Free cash flow from operations, defined as net cash provided by operating activities less capital expenditures, was $3.2 billion for the year.

Backlog

The company's total backlog was $72.4 billion at the end of 2014, up 58 percent from the end of 2013. The estimated potential contract value, representing management's estimate of value in unfunded indefinite delivery, indefinite quantity (IDIQ) contracts and unexercised options, was $26.7 billion. Total potential contract value, the sum of all backlog components, was $99.1 billion at the end of the year.

The Aerospace group experienced increased demand, booking more aircraft orders than any quarter in more than three years. Significant awards received in the quarter from the company's defense groups include $435 million for the U.S. Navy's Mobile Landing Platform (MLP) Afloat Forward Staging Base (AFSB), $325 million from the Centers for Medicare & Medicaid Services for contact-center services, $90 million from the Navy for design work on the next-generation ballistic missile submarine and $80 million from the U.S. Army under a foreign military sales contract to upgrade Abrams tanks.

"General Dynamics' performance in 2014 was very strong," said Phebe N. Novakovic, General Dynamics chairman and chief executive officer. "We did what we said we would: increase operating earnings, margins and EPS through a relentless focus on operations and prudent capital deployment.

"In 2014, our earnings from continuing operations rose 7.5 percent, margins increased 70 basis points and EPS increased 11.4 percent compared to last year. We also had excellent free cash from operations of $3.2 billion and grew our backlog to more than $72.4 billion by year-end, a 58 percent increase over the end of 2013."

General Dynamics, headquartered in Falls Church, Virginia, is a market leader in business aviation; combat vehicles, weapons systems and munitions; shipbuilding; and communications and information technology systems. 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 fourth-quarter securities analyst conference call at 9 a.m. EST on Wednesday, January 28, 2015. 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 January 28 and will continue for 12 months. To hear a recording of the conference call by telephone, please call 888-286-8010 (international: 617-801-6888); passcode 31283960. The phone replay will be available from 1 p.m. January 28 through February 4, 2015.

 

 


EXHIBIT A

 

CONSOLIDATED STATEMENTS OF EARNINGS - (UNAUDITED)

DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS



















Fourth Quarter


Variance



2014


2013


$


%

Revenues


$

8,362



$

8,047



$

315



3.9

%

Operating costs and expenses


7,295



7,123



(172)




Operating earnings


1,067



924



143



15.5

%

Interest, net


(19)



(23)



4




Other, net


(3)



4



(7)




Earnings before income tax


1,045



905



140



15.5

%

Provision for income tax, net


308



281



(27)




Earnings from continuing operations


$

737



$

624



$

113



18.1

%

Discontinued operations, net of tax


(36)



(129)



93




Net earnings


$

701



$

495



$

206



41.6

%

Earnings per share—basic









Continuing operations


$

2.23



$

1.78



$

0.45



25.3

%

Discontinued operations


$

(0.11)



$

(0.37)



$

0.26




Net earnings


$

2.12



$

1.41



$

0.71



50.4

%

Basic weighted average shares outstanding


330.0



350.5






Earnings per share—diluted









Continuing operations


$

2.19



$

1.76



$

0.43



24.4

%

Discontinued operations


$

(0.10)



$

(0.36)



$

0.26




Net earnings


$

2.09



$

1.40



$

0.69



49.3

%

Diluted weighted average shares outstanding


335.8



354.6

















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



















Twelve Months


Variance



2014


2013


$


%

Revenues


$

30,852



$

30,930



$

(78)



(0.3)

%

Operating costs and expenses


26,963



27,241



278




Operating earnings


3,889



3,689



200



5.4

%

Interest, net


(86)



(86)






Other, net


(1)



8



(9)




Earnings before income tax


3,802



3,611



191



5.3

%

Provision for income tax, net


1,129



1,125



(4)




Earnings from continuing operations


$

2,673



$

2,486



$

187



7.5

%

Discontinued operations, net of tax


(140)



(129)



(11)




Net earnings


$

2,533



$

2,357



$

176



7.5

%

Earnings per share—basic









Continuing operations


$

7.97



$

7.09



$

0.88



12.4

%

Discontinued operations


$

(0.41)



$

(0.37)



$

(0.04)




Net earnings


$

7.56



$

6.72



$

0.84



12.5

%

Basic weighted average shares outstanding


335.2



350.7






Earnings per share—diluted









Continuing operations


$

7.83



$

7.03



$

0.80



11.4

%

Discontinued operations


$

(0.41)



$

(0.36)



$

(0.05)




Net earnings


$

7.42



$

6.67



$

0.75



11.2

%

Diluted weighted average shares outstanding


341.3



353.5

















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



















Fourth Quarter


Variance



2014


2013


$


%

Revenues:









Aerospace


$

2,240



$

2,135



$

105



4.9

%

Combat Systems


1,614



1,591



23



1.4

%

Information Systems and Technology


2,468



2,691



(223)



(8.3)

%

Marine Systems


2,040



1,630



410



25.2

%

Total


$

8,362



$

8,047



$

315



3.9

%

Operating earnings:









Aerospace


$

412



$

348



$

64



18.4

%

Combat Systems


271



250



21



8.4

%

Information Systems and Technology


212



196



16



8.2

%

Marine Systems


193



159



34



21.4

%

Corporate


(21)



(29)



8



27.6

%

Total


$

1,067



$

924



$

143



15.5

%

Operating margins:









Aerospace


18.4

%


16.3

%





Combat Systems


16.8

%


15.7

%





Information Systems and Technology


8.6

%


7.3

%





Marine Systems


9.5

%


9.8

%





Total


12.8

%


11.5

%
















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



















Twelve Months


Variance



2014


2013


$


%

Revenues:









Aerospace


$

8,649



$

8,118



$

531



6.5

%

Combat Systems


5,732



5,832



(100)



(1.7)

%

Information Systems and Technology


9,159



10,268



(1,109)



(10.8)

%

Marine Systems


7,312



6,712



600



8.9

%

Total


$

30,852



$

30,930



$

(78)



(0.3)

%

Operating earnings:









Aerospace


$

1,611



$

1,416



$

195



13.8

%

Combat Systems


862



908



(46)



(5.1)

%

Information Systems and Technology


785



795



(10)



(1.3)

%

Marine Systems


703



666



37



5.6

%

Corporate


(72)



(96)



24



25.0

%

Total


$

3,889



$

3,689



$

200



5.4

%

Operating margins:









Aerospace


18.6

%


17.4

%





Combat Systems


15.0

%


15.6

%





Information Systems and Technology


8.6

%


7.7

%





Marine Systems


9.6

%


9.9

%





Total


12.6

%


11.9

%
















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, 2014


December 31, 2013

ASSETS





Current assets:





Cash and equivalents


$

4,388



$

5,301


Accounts receivable


4,050



4,370


Contracts in process


4,591



4,780


Inventories


3,221



2,890


Other current assets


1,157



821


Total current assets


17,407



18,162


Noncurrent assets:





Property, plant and equipment, net


3,329



3,359


Intangible assets, net


912



1,044


Goodwill


11,731



11,932


Other assets


1,976



997


Total noncurrent assets


17,948



17,332


Total assets


$

35,355



$

35,494


LIABILITIES AND SHAREHOLDERS' EQUITY





Current liabilities:





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


$

501



$

1


Accounts payable


2,057



2,216


Customer advances and deposits


7,335



6,584


Other current liabilities


3,858



3,458


Total current liabilities


13,751



12,259


Noncurrent liabilities:





Long-term debt


3,410



3,908


Other liabilities


6,365



4,826


Total noncurrent liabilities


9,775



8,734


Shareholders' equity:





Common stock


482



482


Surplus


2,548



2,226


Retained earnings


21,127



19,428


Treasury stock


(9,396)



(6,450)


Accumulated other comprehensive loss


(2,932)



(1,185)


Total shareholders' equity


11,829



14,501


Total liabilities and shareholders' equity


$

35,355



$

35,494











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












Twelve Months Ended



December 31, 2014


December 31, 2013

Cash flows from operating activities—continuing operations:





Net earnings


$

2,533



$

2,357


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





Depreciation of property, plant and equipment


375



382


Amortization of intangible assets


121



143


Stock-based compensation expense


128



120


Excess tax benefit from stock-based compensation


(83)



(23)


Deferred income tax provision


136



117


Discontinued operations, net of tax


140



129


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





Accounts receivable


330



(223)


Contracts in process


281



177


Inventories


(303)



(200)


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





Accounts payable


(161)



(204)


Customer advances and deposits


691



330


Other current liabilities


(246)



(118)


Other, net


(214)



124


Net cash provided by operating activities


3,728



3,111


Cash flows from investing activities—continuing operations:





Capital expenditures


(521)



(436)


Purchases of held-to-maturity securities


(500)




Purchases of available-for-sale securities


(136)



(135)


Sales of available-for-sale securities


135



99


Maturities of available-for-sale securities


4



14


Other, net


(84)



95


Net cash used by investing activities


(1,102)



(363)


Cash flows from financing activities—continuing operations:





Purchases of common stock


(3,382)



(740)


Dividends paid


(822)



(591)


Proceeds from option exercises


547



583


Other


82



23


Net cash used by financing activities


(3,575)



(725)


Net cash provided (used) by discontinued operations


36



(18)


Net (decrease) increase in cash and equivalents


(913)



2,005


Cash and equivalents at beginning of period


5,301



3,296


Cash and equivalents at end of period


$

4,388



$

5,301











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




















Fourth Quarter 2014




Fourth Quarter 2013



Other Financial Information (a):









Return on equity (b)


20.2

%




20.1

%



Debt-to-equity (c)


33.1

%




27.0

%



Debt-to-capital (d)


24.8

%




21.2

%



Book value per share (e)


$

35.61





$

41.03




Total taxes paid


$

446





$

175




Company-sponsored research and development (f)


$

101





$

68




Shares outstanding


332,164,097





353,402,794













Non-GAAP Financial Measures (a):











2014


2013



Quarter


Year-to-date


Quarter


Year-to-date

Free cash flow from operations:









Net cash provided by operating activities


$

(70)



$

3,728



$

1,558



$

3,111


Capital expenditures


(184)



(521)



(169)



(436)


Free cash flow from operations (g)


$

(254)



$

3,207



$

1,389



$

2,675











Return on invested capital:


















Earnings from continuing operations




$

2,673





$

2,486


After-tax interest expense




67





67


After-tax amortization expense




79





93


Net operating profit after taxes




2,819





2,646


Average invested capital




18,692





18,764


Return on invested capital (h)




15.1

%




14.1

%










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

 

 


EXHIBIT G (cont.)

 

PRELIMINARY FINANCIAL INFORMATION - (UNAUDITED)

DOLLARS IN MILLIONS EXCEPT PER SHARE AND EMPLOYEE AMOUNTS



(a)

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



(b)

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



(c)

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



(d)

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.



(e)

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



(f)

Includes independent research and development and Gulfstream product-development costs.



(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 excluding AOCL 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. After-tax interest and amortization expense is calculated using the statutory tax rate of 35 percent.

 

 

EXHIBIT H

 

BACKLOG - (UNAUDITED)

DOLLARS IN MILLIONS
























Funded


Unfunded


Total
Backlog


Estimated
Potential
Contract Value*


Total Potential
Contract
Value

Fourth Quarter 2014











Aerospace


$

13,115



$

117



$

13,232



$

2,734



$

15,966


Combat Systems


19,292



506



19,798



5,522



25,320


Information Systems and Technology


7,070



1,539



8,609



16,115



24,724


Marine Systems


13,452



17,319



30,771



2,311



33,082


Total


$

52,929



$

19,481



$

72,410



$

26,682



$

99,092


Third Quarter 2014











Aerospace


$

11,924



$

143



$

12,067



$

1,857



$

13,924


Combat Systems


20,879



732



21,611



5,760



27,371


Information Systems and Technology


7,421



1,452



8,873



16,520



25,393


Marine Systems


14,308



17,574



31,882



2,524



34,406


Total


$

54,532



$

19,901



$

74,433



$

26,661



$

101,094


Fourth Quarter 2013











Aerospace


$

13,785



$

158



$

13,943



$

1,679



$

15,622


Combat Systems


5,451



1,113



6,564



3,664



10,228


Information Systems and Technology


7,253



1,267



8,520



19,127



27,647


Marine Systems


11,795



5,063



16,858



3,098



19,956


Total


$

38,284



$

7,601



$

45,885



$

27,568



$

73,453




*

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.

 

 

EXHIBIT H-1


BACKLOG AND ESTIMATED CONTRACT VALUE - (UNAUDITED)
DOLLARS IN MILLIONS

EXHIBIT H-1: BACKLOG AND ESTIMATED CONTRACT VALUE - (UNAUDITED), DOLLARS IN MILLIONS

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

 

 

EXHIBIT I


FOURTH QUARTER 2014 SIGNIFICANT ORDERS (UNAUDITED)
DOLLARS IN MILLIONS

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

Combat Systems

  • $80 from the U.S. Army under a foreign military sales contract to convert Abrams tanks to the Saudi M1A2S configuration for the Kingdom of Saudi Arabia.
  • $75 from the Army under the Stryker wheeled armored vehicle program for upgrade kits.
  • $70 from the Army for production of Hydra-70 rockets.
  • $55 from the Army for technical support on the Abrams main battle tank program.

Information Systems and Technology

  • $325 from the Centers for Medicare & Medicaid Services for contact-center services. 
  • $135 for four related awards to design and develop next-generation space payloads.
  • $85 from the U.S. Department of State to provide supply chain management services.
  • $70 from the U.S. Navy for production and support of the U.S. and U.K. Trident II submarine weapons systems.
  • $55 from the Commonwealth of Massachusetts to develop, implement and operate the Massachusetts Next Generation (NG9-1-1) emergency communication system.
  • $55 from the Government of Canada to design and build a network of antennas and provide in-service support. 
  • $50 from the Army for ruggedized computing equipment under the Common Hardware Systems-4 (CHS-4) program.

Marine Systems

  • $435 from the Navy for detailed design and construction of the Mobile Landing Platform (MLP) Afloat Forward Staging Base (AFSB).
  • $90 from the Navy for design work on the next-generation ballistic missile submarine.
  • $80 from the Navy for planning yard services for the DDG-51 destroyer and the FFG-7 Oliver Hazard Perry-class frigate programs.

 

 


EXHIBIT J

 

AEROSPACE SUPPLEMENTAL DATA - (UNAUDITED)
















Fourth Quarter


Twelve Months



2014


2013


2014


2013

Gulfstream Green Deliveries (units):









Large-cabin aircraft


28



27



115



110


Mid-cabin aircraft


10



13



29



29


Total


38



40



144



139


Gulfstream Outfitted Deliveries (units):









Large-cabin aircraft


33



34



117



121


Mid-cabin aircraft


9



7



33



23


Total


42



41



150



144


Pre-owned Deliveries (units):




2



3



11


 

General Dynamics

Photo - http://photos.prnewswire.com/prnh/20150127/171673-INFO 
Logo - http://photos.prnewswire.com/prnh/20140428/81320

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/general-dynamics-reports-fourth-quarter-full-year-2014-results-300026708.html

SOURCE General Dynamics

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