General Dynamics Reports First-Quarter 2016 Results

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- Diluted earnings per share from continuing operations up 9.3% to $2.34

- Operating margin of 13.6%, a 40 basis-point improvement

- Operating earnings up 2.5% to $1.05 billion

- Earnings from continuing operations up 2% to $730 million

FALLS CHURCH, Va., April 27, 2016 /PRNewswire/ --General Dynamics GD today reported first-quarter 2016 earnings from continuing operations of $730 million, a 2 percent increase over first-quarter 2015, on revenue of $7.7 billion. Diluted earnings per share from continuing operations were $2.34 compared to $2.14 in the year-ago quarter, a 9.3 percent increase.

"General Dynamics delivered a strong first quarter, with all four groups contributing to our outstanding operating performance," said Phebe N. Novakovic, chairman and chief executive officer of General Dynamics. "We generated positive operating leverage and achieved the sixth straight quarter with operating earnings of more than one billion dollars."

Margin

Company-wide operating margin for the first quarter of 2016 was 13.6 percent, a 40 basis-point increase when compared to 13.2 percent in first-quarter 2015. Three of the company's four business groups expanded margins over the year-ago period.

Cash

Net cash provided by operating activities in the quarter totaled $439 million. Free cash flow from operations, defined as net cash provided by operating activities less capital expenditures, was $374 million.

Capital Deployment

The company repurchased 7.8 million of its outstanding shares in the first quarter. In addition, in March, the board of directors increased the company's quarterly dividend by 10.1 percent to $0.76 per share, representing the company's 19th consecutive annual dividend increase.

Backlog

General Dynamics' total backlog at the end of first-quarter 2016 was $64.7 billion. There was order activity across the Gulfstream product portfolio and strong demand for defense products, which resulted in a book-to-bill ratio (orders divided by revenue) of one-to-one in the Combat Systems group and greater than one-to-one in the Information Systems and Technology group. The estimated potential contract value, representing management's estimate of value in unfunded indefinite delivery, indefinite quantity (IDIQ) contracts and unexercised options, was $24.5 billion. Total potential contract value, the sum of all backlog components, was $89.2 billion at the end of the quarter.

About General Dynamics

Headquartered in Falls Church, Virginia, General Dynamics is a global aerospace and defense company that offers a broad portfolio of products and services in business aviation; combat vehicles, weapons systems and munitions; C4ISR and IT solutions; and shipbuilding. The company's revenues in 2015 were $31.5 billion. More information 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 first-quarter securities analyst conference call at 9 a.m. EDT on Wednesday, April 27, 2016. 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 April 27 and will continue for 12 months. To hear a recording of the conference call by telephone, please call 855-859-2056 (international: 404-537-3406); passcode 89290991. The phone replay will be available from 3 p.m. April 27 through May 3, 2016.

 

 


EXHIBIT A

 

CONSOLIDATED STATEMENTS OF EARNINGS - (UNAUDITED)

DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS


















First Quarter


Variance


2016



2015


$


%

Revenue

$

7,724



$

7,784


$

(60)


(0.8)

%

Operating costs and expenses

6,671



6,757


86



Operating earnings

1,053



1,027


26


2.5

%

Interest, net

(22)



(21)


(1)



Other, net

10



3


7



Earnings from continuing operations before income tax

1,041



1,009


$

32


3.2

%

Provision for income tax, net

311



293


(18)



Earnings from continuing operations

$

730



$

716


$

14


2.0

%

Discontinued operations

(13)

*



(13)



Net earnings

$

717



$

716


$

1


0.1

%

Earnings per share—basic









Continuing operations

$

2.37



$

2.18


$

0.19


8.7

%

Discontinued operations

$

(0.04)

*


$


$

(0.04)



Net earnings

$

2.33



$

2.18


$

0.15


6.9

%

Basic weighted average shares outstanding

307.9



329.2





Earnings per share—diluted









Continuing operations

$

2.34



$

2.14


$

0.20


9.3

%

Discontinued operations

$

(0.04)

*


$


$

(0.04)



Net earnings

$

2.30



$

2.14


$

0.16


7.5

%

Diluted weighted average shares outstanding

312.3



334.7







*

In the first quarter of 2016, we recognized a final adjustment to the loss on the sale of our axle business in the Combat Systems group. The business was sold in 2015.

 

 

EXHIBIT B

 

REVENUE AND OPERATING EARNINGS BY SEGMENT - (UNAUDITED)

DOLLARS IN MILLIONS

















First Quarter


Variance


2016


2015


$


%

Revenue:








Aerospace

$

1,987



$

2,108



$

(121)



(5.7)

%

Combat Systems

1,273



1,363



(90)



(6.6)

%

Information Systems and Technology

2,333



2,370



(37)



(1.6)

%

Marine Systems

2,131



1,943



188



9.7

%

Total

$

7,724



$

7,784



$

(60)



(0.8)

%

Operating earnings:








Aerospace

$

411



$

431



$

(20)



(4.6)

%

Combat Systems

217



204



13



6.4

%

Information Systems and Technology

248



217



31



14.3

%

Marine Systems

192



188



4



2.1

%

Corporate

(15)



(13)



(2)



(15.4)

%

Total

$

1,053



$

1,027



$

26



2.5

%

Operating margin:








Aerospace

20.7

%


20.4

%





Combat Systems

17.0

%


15.0

%





Information Systems and Technology

10.6

%


9.2

%





Marine Systems

9.0

%


9.7

%





Total

13.6

%


13.2

%





 

 

EXHIBIT C

 

CONSOLIDATED BALANCE SHEETS

DOLLARS IN MILLIONS










(Unaudited)




April 3, 2016


December 31, 2015

ASSETS




Current assets:




Cash and equivalents

$

1,907



$

2,785


Accounts receivable

3,654



3,446


Contracts in process

4,705



4,357


Inventories

3,504



3,366


Other current assets

418



617


Total current assets

14,188



14,571


Noncurrent assets:




Property, plant and equipment, net

3,477



3,466


Intangible assets, net

759



763


Goodwill

11,595



11,443


Other assets

1,683



1,754


Total noncurrent assets

17,514



17,426


Total assets

$

31,702



$

31,997


LIABILITIES AND SHAREHOLDERS' EQUITY




Current liabilities:




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

$

501



$

501


Accounts payable

2,150



1,964


Customer advances and deposits

5,560



5,674


Other current liabilities

4,212



4,306


Total current liabilities

12,423



12,445


Noncurrent liabilities:




Long-term debt

2,899



2,898


Other liabilities

5,798



5,916


Total noncurrent liabilities

8,697



8,814


Shareholders' equity:




Common stock

482



482


Surplus

2,740



2,730


Retained earnings

23,687



23,204


Treasury stock

(13,386)



(12,392)


Accumulated other comprehensive loss

(2,941)



(3,286)


Total shareholders' equity

10,582



10,738


Total liabilities and shareholders' equity

$

31,702



$

31,997


 

 

EXHIBIT D

 

CONSOLIDATED STATEMENTS OF CASH FLOWS - (UNAUDITED)

DOLLARS IN MILLIONS












Three Months Ended



April 3, 2016


April 5, 2015

Cash flows from operating activities—continuing operations:





Net earnings


$

717



$

716


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





Depreciation of property, plant and equipment


90



94


Amortization of intangible assets


27



30


Equity-based compensation expense


27



40


Excess tax benefit from equity-based compensation


(15)



(30)


Deferred income tax provision


20



(8)


Discontinued operations


13




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





Accounts receivable


(195)



388


Contracts in process


(337)



152


Inventories


(133)



(183)


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





Accounts payable


179



210


Customer advances and deposits


(209)



(871)


Income taxes payable


268



251


Other current liabilities


(70)



(38)


Other, net


57



(6)


Net cash provided by operating activities


439



745


Cash flows from investing activities:





Capital expenditures


(65)



(98)


Maturities of held-to-maturity securities




500


Other, net


(53)



94


Net cash (used) provided by investing activities


(118)



496


Cash flows from financing activities:





Purchases of common stock


(1,026)



(620)


Dividends paid


(215)



(206)


Proceeds from stock options exercises


33



87


Repayment of fixed-rate notes




(500)


Other, net


15



30


Net cash used by financing activities


(1,193)



(1,209)


Net cash used by discontinued operations


(6)



(8)


Net (decrease) increase in cash and equivalents


(878)



24


Cash and equivalents at beginning of period


2,785



4,388


Cash and equivalents at end of period


$

1,907



$

4,412


 

 

EXHIBIT E

 

PRELIMINARY FINANCIAL INFORMATION - (UNAUDITED)

DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS












First Quarter 2016


First Quarter 2015

Other Financial Information (a):





Debt-to-equity (b)


32.1

%


29.5

%

Debt-to-capital (c)


24.3

%


22.8

%

Book value per share (d)


$

34.62



$

35.04


Total taxes paid


$

21



$

53


Company-sponsored research and development (e)


$

104



$

96


Shares outstanding


305,646,967



328,732,777







Non-GAAP Financial Measures:









Free cash flow from operations:





Net cash provided by operating activities


$

439



$

745


Capital expenditures


(65)



(98)


Free cash flow from operations (f)


$

374



$

647






(a)

Prior period information has been restated to reflect the reclassification of debt issuance costs from other assets to debt in accordance with ASU 2015-03, Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs, which we adopted in the fourth quarter of 2015.

(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 Aerospace product-development costs.

(f)

We believe free cash flow from operations is a useful measure for investors because it portrays our ability to generate cash from our businesses for purposes such as repaying maturing debt, funding business acquisitions, repurchasing our common stock 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 F

 

BACKLOG - (UNAUDITED)

DOLLARS IN MILLIONS
























Funded


Unfunded


Total

Backlog


Estimated

Potential

Contract Value*


Total Potential

Contract

Value

First Quarter 2016











Aerospace


$

12,465



$

147



$

12,612



$

2,368



$

14,980


Combat Systems


18,260



565



18,825



4,959



23,784


Information Systems and Technology


7,442



1,991



9,433



15,146



24,579


Marine Systems


16,547



7,317



23,864



1,999



25,863


Total


$

54,714



$

10,020



$

64,734



$

24,472



$

89,206


Fourth Quarter 2015











Aerospace


$

13,292



$

106



$

13,398



$

2,437



$

15,835


Combat Systems


18,398



597



18,995



5,059



24,054


Information Systems and Technology


6,827



1,755



8,582



14,702



23,284


Marine Systems


13,266



11,879



25,145



2,263



27,408


Total


$

51,783



$

14,337



$

66,120



$

24,461



$

90,581


First Quarter 2015











Aerospace


$

12,947



$

147



$

13,094



$

2,699



$

15,793


Combat Systems


18,942



462



19,404



5,459



24,863


Information Systems and Technology


6,842



1,815



8,657



15,296



23,953


Marine Systems


17,248



12,138



29,386



2,143



31,529


Total


$

55,979



$

14,562



$

70,541



$

25,597



$

96,138




*

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 G

 

FIRST QUARTER 2016 SIGNIFICANT ORDERS (UNAUDITED)

DOLLARS IN MILLIONS

We received the following significant orders during the first quarter of 2016:

Combat Systems

  • $405 from the Swiss government to upgrade Duro tactical vehicles through 2022.
  • $180 from the U.S. Army for spare parts and inventory management and support services for the Stryker family of vehicles.
  • $60 from the Army to design, develop and produce eight prototype Stryker vehicles with an integrated 30-millimeter gun system.

Information Systems and Technology

  • $310 for several space payloads.
  • $170 for new hardware, software and equipment to upgrade the United Kingdom Ministry of Defence's Bowman tactical communication system.
  • $160 from the Army for additional equipment for the Warfighter Information Network-Tactical (WIN-T) Increment 2 program.
  • $155 from the National Geospatial-Intelligence Agency (NGA) to consolidate NGA's operations from six locations to one stand-alone location at New Campus East (NCE).
  • $140 from the Army for ruggedized computing equipment under the CHS-4 program.
  • $95 for combat and seaframe control systems on an Independence-variant Littoral Combat Ship (LCS) for the U.S. Navy.

Marine Systems

  • $155 from the Navy for the planning and execution of depot-level maintenance, alterations and modifications to the USS Essex (LHD-2).
  • $140 from the Navy for lead yard and design services for the Virginia-class submarine program.
  • $80 from the Navy for Advanced Nuclear Plant Studies (ANPS) in support of the Ohio-class submarine replacement program.

 

 

EXHIBIT H

 

AEROSPACE SUPPLEMENTAL DATA - (UNAUDITED)










First Quarter



2016


2015

Gulfstream Green Deliveries (units):





Large-cabin aircraft


25



27


Mid-cabin aircraft


6



7


Total


31



34


Gulfstream Outfitted Deliveries (units):





Large-cabin aircraft


19



25


Mid-cabin aircraft


8



7


Total


27



32


Pre-owned Deliveries (units):


1



1


 

 

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-first-quarter-2016-results-300257975.html

SOURCE General Dynamics

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