FALLS CHURCH, Va., Jan. 25, 2012 /PRNewswire/ -- General Dynamics (NYSE: GD) today reported 2011 fourth-quarter earnings from continuing operations of $603 million, or $1.68 per share on a fully diluted basis, compared to 2010 fourth-quarter earnings from continuing operations of $729 million, or $1.91 per share fully diluted.
Fourth-quarter earnings were impacted by charges taken at the company's Switzerland-based aircraft-completions business totaling $189 million. The charges comprise a $111 million non-cash impairment of an intangible asset related to the business and $78 million in contract losses.
"Jet Aviation's aircraft-completions business continued to face lower OEM business-jet volume and delays in several narrow-body and wide-body aircraft which are nearing delivery," said Jay L. Johnson, chairman and chief executive officer. "We have taken appropriate steps to address these issues.
"The charges taken in our completions business mask an otherwise solid fourth-quarter performance by General Dynamics, marked by excellent cash generation, delivery of the first 12 Gulfstream G650 production aircraft to the final phase of manufacturing, and strong margins in our defense businesses," Johnson continued.
Revenue and Full-year Earnings
Fourth-quarter 2011 revenue was $9.1 billion, and revenue was $32.7 billion for the full year. Full-year 2011 earnings from continuing operations were $2.55 billion, or $6.94 per share on a fully diluted basis, compared to $2.63 billion and $6.82 per share, respectively, for 2010.
Margins
Company-wide operating margins, which include the impact of the charges in Aerospace, were 10.4 percent for the fourth quarter and 11.7 percent for the full year. These margins reflect the continued strong performance in the company's defense groups, each of which increased their operating margins in the quarter and for the year.
Cash
Net cash provided by operating activities totaled $2 billion in the fourth quarter and $3.2 billion for the full year. Free cash flow from operations, defined as net cash provided by operating activities less capital expenditures, was $1.8 billion in the quarter and $2.8 billion for the year. Free cash flow exceeded earnings from continuing operations in the fourth quarter and for the full year, benefitting from progress payments received by the Aerospace group as the new Gulfstream G650 business-jet aircraft received provisional type certification and the first 12 production aircraft were delivered into final-phase manufacturing.
Backlog
The company's total backlog was $57.4 billion at the end of the year. In the fourth quarter, orders were particularly strong for combat vehicle production and improvements, both domestically and internationally. Gulfstream also enjoyed healthy demand across its product portfolio in the quarter, and for the full year recorded the highest number of orders for new aircraft since the introduction of the G650 in 2008.
Estimated potential contract value, representing management's estimate of the value of unfunded indefinite delivery, indefinite quantity (IDIQ) contracts and unexercised contract options, increased to $28 billion at year-end 2011. Total potential contract value, the sum of all backlog components, was $85.4 billion at the end of the year.
General Dynamics, headquartered in Falls Church, Virginia, employs approximately 95,100 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 fourth-quarter securities-analyst conference call at 11:30 a.m. Eastern Standard Time on Wednesday, January 25, 2012. 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 2 p.m. January 25 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 99298277. The phone replay will be available from 2 p.m. January 25 until midnight February 1, 2012.
EXHIBIT A CONSOLIDATED STATEMENT OF EARNINGS (UNAUDITED) DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS Fourth Quarter Variance 2010 2011 $ % ---- ---- --- --- Revenues $8,601 $9,147 $546 6.3 % Operating costs and expenses 7,525 8,197 (672) ----- ----- ---- Operating earnings 1,076 950 (126) (11.7)% Interest, net (33) (38) (5) Other, net - (1) (1) --- --- --- Earnings from continuing operations before income taxes 1,043 911 (132) (12.7)% Provision for income taxes 314 308 6 --- --- --- Earnings from continuing operations $729 $603 $(126) (17.3)% ==== ==== ===== Discontinued operations, net of tax - - - --- --- --- Net earnings $729 $603 $(126) (17.3)% ==== ==== ===== Earnings per share - basic Continuing operations $1.94 $1.69 $(0.25) (12.9)% Discontinued operations $- $- $- --- --- --- Net earnings $1.94 $1.69 $(0.25) (12.9)% ===== ===== ====== Basic weighted average shares outstanding (in millions) 376.7 356.2 ===== ===== Earnings per share - diluted Continuing operations $1.91 $1.68 $(0.23) (12.0)% Discontinued operations $- $- $- --- --- Net earnings $1.91 $1.68 $(0.23) (12.0)% ===== ===== ====== Diluted weighted average shares outstanding (in millions) 380.9 359.4 ===== =====
EXHIBIT B CONSOLIDATED STATEMENT OF EARNINGS (UNAUDITED) DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS Twelve Months Variance 2010 2011 $ % ---- ---- --- --- Revenues $32,466 $32,677 $211 0.6 % Operating costs and expenses 28,521 28,851 (330) ------ ------ ---- Operating earnings 3,945 3,826 (119) (3.0)% Interest, net (157) (141) 16 Other, net 2 33 31 --- --- --- Earnings from continuing operations before income taxes 3,790 3,718 (72) (1.9)% Provision for income taxes 1,162 1,166 (4) ----- ----- --- Earnings from continuing operations $2,628 $2,552 $(76) (2.9)% ====== ====== ==== Discontinued operations, net of tax (4) (26) (22) --- --- --- Net earnings $2,624 $2,526 $(98) (3.7)% ====== ====== ==== Earnings per share - basic Continuing operations $6.89 $7.01 $0.12 1.7 % Discontinued operations $(0.01) $(0.07) $(0.06) ------ ------ ------ Net earnings $6.88 $6.94 $0.06 0.9 % ===== ===== ===== Basic weighted average shares outstanding (in millions) 381.2 364.1 ===== ===== Earnings per share - diluted Continuing operations $6.82 $6.94 $0.12 1.8 % Discontinued operations $(0.01) $(0.07) $(0.06) ------ ------ Net earnings $6.81 $6.87 $0.06 0.9 % ===== ===== ===== Diluted weighted average shares outstanding (in millions) 385.2 367.5 ===== =====
EXHIBIT C REVENUES AND OPERATING EARNINGS BY SEGMENT (UNAUDITED) DOLLARS IN MILLIONS Fourth Quarter Variance 2010 2011 $ % ---- ---- --- --- Revenues: --------- Aerospace $1,268 $1,857 $589 46.5 % Combat Systems 2,696 2,611 (85) (3.2)% Marine Systems 1,701 1,758 57 3.4 % Information Systems and Technology 2,936 2,921 (15) (0.5)% ----- ----- --- Total $8,601 $9,147 $546 6.3 % ====== ====== ==== Operating earnings: ---------- Aerospace $210 $73 $(137) (65.2)% Combat Systems 400 388 (12) (3.0)% Marine Systems 177 190 13 7.3 % Information Systems and Technology 311 315 4 1.3 % Corporate (22) (16) 6 27.3 % Total $1,076 $950 $(126) (11.7)% ====== ==== ===== Operating margins: --------- Aerospace 16.6 % 3.9 % Combat Systems 14.8 % 14.9 % Marine Systems 10.4 % 10.8 % Information Systems and Technology 10.6 % 10.8 % Total 12.5 % 10.4 %
EXHIBIT D REVENUES AND OPERATING EARNINGS BY SEGMENT (UNAUDITED) DOLLARS IN MILLIONS Twelve Months Variance 2010 2011 $ % ---- ---- --- --- Revenues: --------- Aerospace $5,299 $5,998 $699 13.2 % Combat Systems 8,878 8,827 (51) (0.6)% Marine Systems 6,677 6,631 (46) (0.7)% Information Systems and Technology 11,612 11,221 (391) (3.4)% ------ ------ ---- Total $32,466 $32,677 $211 0.6 % ======= ======= ==== Operating earnings: ---------- Aerospace $860 $729 $(131) (15.2)% Combat Systems 1,275 1,283 8 0.6 % Marine Systems 674 691 17 2.5 % Information Systems and Technology 1,219 1,200 (19) (1.6)% Corporate (83) (77) 6 7.2 % Total $3,945 $3,826 $(119) (3.0)% ====== ====== ===== Operating margins: --------- Aerospace 16.2 % 12.2 % Combat Systems 14.4 % 14.5 % Marine Systems 10.1 % 10.4 % Information Systems and Technology 10.5 % 10.7 % Total 12.2 % 11.7 %
EXHIBIT E PRELIMINARY CONSOLIDATED BALANCE SHEET (UNAUDITED) DOLLARS IN MILLIONS December 31, December 31, 2010 2011 ------------- ------------- ASSETS Current assets: Cash and equivalents $2,613 $2,649 Accounts receivable 3,848 4,452 Contracts in process 4,873 5,168 Inventories 2,158 2,310 Other current assets 694 789 -------------------- Total current assets 14,186 15,368 -------------------- ------ ------ Noncurrent assets: Property, plant and equipment, net 2,971 3,284 Intangible assets, net 1,992 1,813 Goodwill 12,649 13,576 Other assets 747 842 ------------ Total noncurrent assets 18,359 19,515 ----------------------- ------ ------ Total assets $32,545 $34,883 ------- ------- LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Short-term debt and current portion of long-term debt $773 $23 Accounts payable 2,736 2,895 Customer advances and deposits 4,465 5,011 Other current liabilities 3,203 3,216 ------------------------- Total current liabilities 11,177 11,145 ------------------------- ------ ------ Noncurrent liabilities: Long-term debt 2,430 3,907 Other liabilities 5,622 6,599 ----------------- ----- ----- Total noncurrent liabilities 8,052 10,506 ---------------------------- ----- ------ Shareholders' equity: Common stock 482 482 Surplus 1,729 1,888 Retained earnings 17,076 18,917 Treasury stock (4,535) (5,743) Accumulated other comprehensive loss (1,436) (2,312) ------------------------------- Total shareholders' equity 13,316 13,232 -------------------------- ------ ------ Total liabilities and shareholders' equity $32,545 $34,883 --------------------- ------- -------
EXHIBIT F PRELIMINARY CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED) DOLLARS IN MILLIONS Twelve Months Ended ------------------- Cash flows from operating December 31, December 31, activities: 2010 2011 ------------- ------------- Net earnings $2,624 $2,526 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation of property, plant and equipment 345 354 Amortization of intangible assets 224 238 Intangible asset impairment - 111 Stock-based compensation expense 118 128 Excess tax benefit from stock-based compensation (18) (24) Deferred income tax provision 56 14 Discontinued operations, net of tax 4 26 (Increase) decrease in assets, net of effects of business acquisitions: Accounts receivable (152) (420) Contracts in process (334) (62) Inventories (23) (186) Increase (decrease) in liabilities, net of effects of business acquisitions: Accounts payable 366 17 Customer advances and deposits 30 629 Other current liabilities (285) 86 Other, net 31 (199) Net cash provided by operating activities 2,986 3,238 --------------------- ----- ----- Cash flows from investing activities: Business acquisitions, net of cash acquired (233) (1,560) Purchases of held-to- maturity securities (468) (459) Maturities of held-to- maturity securities 605 441 Capital expenditures (370) (458) Purchases of available- for-sale securities (226) (373) Maturities of available- for-sale securities 126 235 Other, net 158 200 Net cash used by investing activities (408) (1,974) -------------------------- ---- ------ Cash flows from financing activities: Proceeds from fixed-rate notes - 1,497 Purchases of common stock (1,185) (1,468) Repayment of fixed-rate notes (700) (750) Dividends paid (631) (673) Proceeds from option exercises 277 198 Other, net 13 (5) Net cash used by financing activities (2,226) (1,201) -------------------------- ------ ------ Net cash used by discontinued operations (2) (27) ------------------------ --- --- Net increase in cash and equivalents 350 36 Cash and equivalents at beginning of period 2,263 2,613 ----------------------- Cash and equivalents at end of period $2,613 $2,649 ----------------------- ------ ------
EXHIBIT G PRELIMINARY FINANCIAL INFORMATION (UNAUDITED) DOLLARS IN MILLIONS EXCEPT PER SHARE AND EMPLOYEE AMOUNTS Fourth Quarter Fourth Quarter 2010 2011 ---- ---- Non-GAAP Financial Measures: ---------- Free cash flow from operations: Quarter Year-to-date Quarter Year-to-date ------- ------------ ------- ------------ Net cash provided by operating activities $1,419 $2,986 $2,026 $3,238 Capital expenditures (151) (370) (185) (458) ---- ---- ---- ---- Free cash flow from operations (A) $1,268 $2,616 $1,841 $2,780 ====== ====== ====== ====== Return on invested capital: Earnings from continuing operations $2,628 $2,552 After-tax interest expense 116 106 After-tax amortization expense 155 163 Net operating profit after taxes 2,899 2,821 Average debt and equity 16,587 17,123 ------ ------ Return on invested capital (B) 17.5% 16.5% ==== ==== Other Financial Information: --------------- Return on equity (C) 20.2% 18.8% Debt-to-equity (D) 24.1% 29.7% Debt-to-capital (E) 19.4% 22.9% Book value per share (F) $35.79 $37.12 Total taxes paid $310 $279 Company-sponsored research and development (G) $124 $154 Employment 90,000 95,100 Sales per employee (H) $358,100 $358,600 Shares outstanding 372,052,313 356,437,880 (A) 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. (B) 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. (C) Return on equity is calculated by dividing earnings from continuing operations for the latest 12-month period by our average equity during that period. (D) Debt-to-equity ratio is calculated as total debt divided by total equity as of the end of the period. (E) 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. (F) Book value per share is calculated as total equity divided by total outstanding shares as of the end of the period. (G) Includes independent research and development and bid and proposal costs and Gulfstream product-development costs. (H) Sales per employee is calculated by dividing revenues for the latest 12-month period by our average number of employees during that period.
EXHIBIT H BACKLOG (UNAUDITED) DOLLARS IN MILLIONS Estimated Total Total Potential Potential Contract Contract Fourth Quarter 2011 Funded Unfunded Backlog Value* Value ------------------- ------ -------- ------- --------- --------- Aerospace $17,618 $289 $17,907 $- $17,907 Combat Systems 10,283 1,137 11,420 3,453 14,873 Marine Systems 9,364 9,140 18,504 2,163 20,667 Information Systems and Technology 7,434 2,145 9,579 22,384 31,963 ----- ----- ----- ------ ------ Total $44,699 $12,711 $57,410 $28,000 $85,410 ======= ======= ======= ======= ======= Third Quarter 2011 ------------------ Aerospace $18,306 $318 $18,624 $- $18,624 Combat Systems 9,078 1,304 10,382 3,763 14,145 Marine Systems 10,269 8,611 18,880 2,044 20,924 Information Systems and Technology 8,248 2,389 10,637 21,429 32,066 ----- ----- ------ ------ ------ Total $45,901 $12,622 $58,523 $27,236 $85,759 ======= ======= ======= ======= ======= Fourth Quarter 2010 ------------------- Aerospace $17,443 $378 $17,821 $1,361 $19,182 Combat Systems 10,908 892 11,800 4,645 16,445 Marine Systems 7,050 13,069 20,119 584 20,703 Information Systems and Technology 7,978 1,843 9,821 15,196 25,017 ----- ----- ----- ------ ------ Total $43,379 $16,182 $59,561 $21,786 $81,347 ======= ======= ======= ======= ======= * 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. Because the value in the unfunded IDIQ arrangements is subject to the customer's future exercise of an indeterminate quantity of delivery 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 FOURTH QUARTER 2011 SIGNIFICANT ORDERS (UNAUDITED) DOLLARS IN MILLIONS
We received the following significant defense contract orders during the fourth quarter of 2011:
Combat Systems
-- $950 from the Canadian government to modernize 550 LAV III combat vehicles. -- $800 from the U.S. Army under the Stryker program for the production of 277 Stryker vehicles and contractor logistics support. -- $315 from the Army for the production of 125 M1A1 Abrams tank kits for the Egyptian co-production program. -- $125 from the Army to produce 73 Light Armored Vehicles (LAVs) for an international military customer. -- $100 from the U.S. Marine Corps under the mine-resistant, ambush-protected (MRAP) vehicle program for RG-31 upgrade kits. -- $75 from the Swiss Army for the production of 70 Duro Armoured Personnel Carriers.
Marine Systems
-- $280 from the U.S. Navy for the conversion of nuclear submarines to moored training ship platforms and associated support yard services. -- $60 from the Navy to operate and maintain large, medium-speed, roll-on/roll-off (LMSR) vessels. -- $35 from the Navy for the fitting-out of the San Antonio-class amphibious assault dock ship (LPD) USS San Diego. The award also includes an option for work on two additional ships.
Information Systems and Technology
-- $95 from the Navy for production and support of U.S. and U.K. Trident II submarine weapons systems. The contract has a maximum value of $225 if all options are exercised. -- $60 from the Army for information technology support and modernization at the Alexandria, Virginia, Mark Center. -- $60 from the Army to provide information technology and help desk support to the Army's intelligence and security branch. -- $40 from the U.S. Air Force for networking and computing products and support under the Network-Centric Solutions (NETCENTS) program.
EXHIBIT J AEROSPACE SUPPLEMENTAL DATA (UNAUDITED) Fourth Quarter Twelve Months 2010 2011 2010 2011 ---- ---- ---- ---- Gulfstream Green Deliveries (units): ---------------- Large aircraft 18 30 75 90 Mid-size aircraft 2 5 24 17 --- --- --- --- Total 20 35 99 107 === === === === Gulfstream Outfitted Deliveries (units): ----------- Large aircraft 20 20 74 78 Mid-size aircraft 4 7 15 21 --- --- --- --- Total 24 27 89 99 === === === === Pre-owned Deliveries (units): 1 1 7 5 ----------- === === === ===
SOURCE General Dynamics