General Dynamics Reports First-Quarter 2013 Results - Diluted EPS increases 3.2 percent - Cash generation, margin performance underscore commitment to execution PR Newswire FALLS CHURCH, Va., April 24, 2013 FALLS CHURCH, Va., April 24, 2013 /PRNewswire/ --General Dynamics (NYSE: GD) today reported first-quarter 2013 net earnings of $571 million, or $1.62 per share on a diluted basis, compared to 2012 first-quarter net earnings of $564 million, or $1.57 per diluted share. First-quarter 2013 revenues were $7.4 billion. Margins Company-wide operating margins for the first quarter of 2013 were 11.4 percent, compared to 11.3 percent in first-quarter 2012. Cash Net cash provided by operating activities in the quarter totaled $504 million. Free cash flow from operations, defined as net cash provided by operating activities less capital expenditures, was $429 million in first-quarter 2013. In comparison, for the first quarter of 2012, net cash provided by operating activities was $414 million, and free cash flow from operations was $324 million. Capital Deployment The company repurchased 1 million outstanding shares on the open market in the first quarter, at an average price per share of $70. In addition, in March, the board of directors increased the company's quarterly dividend by 10 percent to $0.56 per share. This represents the 16th consecutive annual dividend increase by the company. Backlog Funded backlog at the end of first-quarter 2013 was $42.4 billion, and total backlog was $48.5 billion. Significant awards received in the quarter include a $55 million order for production of Hydra-70 rockets, a $160 million contract for two additional combat and seaframe control systems for U.S. Navy Littoral Combat Ships and an award valued at more than $100 million for infrastructure support and modernization of a new government complex in northern Virginia. In addition to total backlog, estimated potential contract value was $25.2 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 $73.6 billion at the end of the quarter. "General Dynamics' first-quarter performance reflects our continued focus on operations, cost improvement and cash generation, as well as our commitment to meeting our customers' requirements," said Phebe N. Novakovic, chairman and chief executive officer. "This is a strong start toward achieving our objectives for the year." General Dynamics, headquartered in Falls Church, Virginia, employs approximately 89,900 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 first-quarter securities analyst conference call, scheduled for 9 a.m. EDT on Wednesday, April 24, 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. EDT on April 24 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 76133512. The phone replay will be available from 12 p.m. April 24 through May 1, 2013. EXHIBIT A CONSOLIDATED STATEMENTS OF EARNINGS - (UNAUDITED) DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS First Quarter Variance 2012 2013 $ % Revenues $ $ $ (2.3)% 7,579 7,404 (175) Operating costs and expenses 6,719 6,557 162 Operating earnings 860 847 (13) (1.5)% Interest, net (39) (23) 16 Earnings before income taxes 821 824 3 0.4 % Provision for income taxes 257 253 4 Net earnings $ $ $ 1.2 % 564 571 7 Earnings per share - basic $ $ $ 2.5 % 1.58 1.62 0.04 Basic weighted average shares 357.0 351.9 outstanding Earnings per share - diluted $ $ $ 3.2 % 1.57 1.62 0.05 Diluted weighted average 359.4 353.5 shares outstanding EXHIBIT B REVENUES AND OPERATING EARNINGS BY SEGMENT - (UNAUDITED) DOLLARS IN MILLIONS First Quarter Variance 2012 2013 $ % Revenues: Aerospace $ $ $ 9.6 % 1,623 1,778 155 Combat Systems 1,911 1,553 (358) (18.7)% Marine Systems 1,605 1,626 21 1.3 % Information Systems and 2,440 2,447 7 0.3 % Technology Total $ $ $ (2.3)% 7,579 7,404 (175) Operating earnings: Aerospace $ $ $ 14.4 % 271 310 39 Combat Systems 203 215 12 5.9 % Marine Systems 185 159 (26) (14.1)% Information Systems and 218 185 (33) (15.1)% Technology Corporate (17) (22) (5) (29.4)% Total $ $ $ (1.5)% 860 847 (13) Operating margins: Aerospace 16.7 % 17.4 % Combat Systems 10.6 % 13.8 % Marine Systems 11.5 % 9.8 % Information Systems and 8.9 % 7.6 % Technology Total 11.3 % 11.4 % EXHIBIT C PRELIMINARY CONSOLIDATED BALANCE SHEETS DOLLARS IN MILLIONS (Unaudited) December 31, 2012 March 31, 2013 ASSETS Current assets: Cash and equivalents $ $ 3,296 3,745 Accounts receivable 4,204 4,261 Contracts in process 4,964 5,073 Inventories 2,776 2,863 Other current assets 504 408 Total current assets 15,744 16,350 Noncurrent assets: Property, plant and equipment, 3,403 3,374 net Intangible assets, net 1,383 1,310 Goodwill 12,048 11,934 Other assets 1,731 1,641 Total noncurrent assets 18,565 18,259 Total assets $ $ 34,309 34,609 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ $ 2,469 2,503 Customer advances and deposits 6,042 5,958 Other current liabilities 3,109 3,308 Total current liabilities 11,620 11,769 Noncurrent liabilities: Long-term debt 3,908 3,909 Other liabilities 7,391 7,349 Total noncurrent liabilities 11,299 11,258 Shareholders' equity: Common stock 482 482 Surplus 1,988 1,961 Retained earnings 17,860 18,234 Treasury stock (6,165) (6,201) Accumulated other (2,775) (2,894) comprehensive loss Total shareholders' equity 11,390 11,582 Total liabilities and $ $ shareholders' equity 34,309 34,609 EXHIBIT D PRELIMINARY CONSOLIDATED STATEMENTS OF CASH FLOWS - (UNAUDITED) DOLLARS IN MILLIONS Three Months Ended April 1, 2012 March 31, 2013 Cash flows from operating activities: Net earnings $ $ 564 571 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation of property, plant and 97 95 equipment Amortization of intangible assets 57 47 Stock-based compensation expense 35 31 Excess tax benefit from stock-based (21) (12) compensation Deferred income tax provision 3 11 (Increase) decrease in assets, net of effects of business acquisitions: Accounts receivable (233) (57) Contracts in process 162 (98) Inventories (114) (95) Increase (decrease) in liabilities, net of effects of business acquisitions: Accounts payable (387) 34 Customer advances and deposits 205 (94) Income taxes payable 188 217 Other current liabilities (269) (176) Other, net 127 30 Net cash provided by operating activities 414 504 Cash flows from investing activities: Capital expenditures (90) (75) Purchases of available-for-sale securities (65) (29) Purchases of held-to-maturity securities (126) - Other, net 17 28 Net cash used by investing activities (264) (76) Cash flows from financing activities: Proceeds from option exercises 78 12 Dividends paid (169) - Purchases of common stock (76) - Other, net 1 12 Net cash (used) provided by financing (166) 24 activities Net cash used by discontinued operations (1) (3) Net (decrease) increase in cash and (17) 449 equivalents Cash and equivalents at beginning of 2,649 3,296 period Cash and equivalents at end of period $ $ 2,632 3,745 EXHIBIT E PRELIMINARY FINANCIAL INFORMATION - (UNAUDITED) DOLLARS IN MILLIONS EXCEPT PER SHARE AND EMPLOYEE AMOUNTS First Quarter First Quarter 2012 2013 Other Financial Information: Debt-to-equity (a) 28.2% 33.8% Debt-to-capital (b) 22.0% 25.2% Book value per share (c) $ $ 38.44 32.79 Total taxes paid $ $ 82 26 Company-sponsored research and $ $ development (d) 152 126 Employment 92,900 89,900 Sales per employee (e) $ $ 351,400 338,000 Shares outstanding 360,399,149 353,186,716 Non-GAAP Financial Measures: Free cash flow from operations: Net cash provided by operating $ $ activities 414 504 Capital expenditures (90) (75) Free cash flow from operations (f) $ $ 324 429 (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 F BACKLOG - (UNAUDITED) DOLLARS IN MILLIONS Estimated Total Total Potential Potential First Quarter 2013 Funded Unfunded Backlog Contract Contract Value* Value Aerospace $ $ $ $ $ 15,029 197 15,226 - 15,226 Combat Systems 6,677 1,180 7,857 3,038 10,895 Marine Systems 12,551 3,108 15,659 2,324 17,983 Information Systems and 8,158 1,551 9,709 19,811 29,520 Technology Total $ $ $ 48,451 $ $ 42,415 6,036 25,173 73,624 Fourth Quarter 2012 Aerospace $ $ $ $ $ 15,458 209 15,667 - 15,667 Combat Systems 7,442 1,298 8,740 2,794 11,534 Marine Systems 13,495 3,606 17,101 3,047 20,148 Information Systems and 8,130 1,643 9,773 21,009 30,782 Technology Total $ $ $ 51,281 $ $ 44,525 6,756 26,850 78,131 First Quarter 2012 Aerospace $ $ $ $ $ 16,718 266 16,984 - 16,984 Combat Systems 9,623 1,042 10,665 3,473 14,138 Marine Systems 12,261 5,754 18,015 1,199 19,214 Information Systems and 1,913 9,562 22,256 31,818 7,649 Technology Total $ $ $ 55,226 $ $ 46,251 8,975 26,928 82,154 * 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 2013 SIGNIFICANT ORDERS - (UNAUDITED) DOLLARS IN MILLIONS We received the following significant contract orders during the first quarter of 2013: Combat Systems o$55 from the U.S. Army for the production of Hydra-70 rockets. Marine Systems oAn indefinite delivery, indefinite quantity (IDIQ) contract from the U.S. Navy to perform submarine safety and maintenance work. The program has a maximum potential value of $215 over five years. Information Systems and Technology o$160 for commercial wireless network systems and support. o$160 for combat and seaframe control systems on two Navy Littoral Combat Ships (LCS). o$105 for the National Geospatial-Intelligence Agency's New Campus East (NCE) infrastructure support and modernization program. o$85 from the U.S. Department of Education to assist in the implementation and operation of the Federal Student Aid Information Center. o$75 to provide advanced communication services to the Canadian Army. o$75 from the Army under the Warfighter Information Network-Tactical (WIN-T) program for Increment 2 equipment production and training. o$70 from the Army for ruggedized computing equipment under the Common Hardware Systems-4 (CHS-4) program. o$60 from the U.S. Air Force for networking and computing products and support under the Network-Centric Solutions (NETCENTS) program. o$60 for the United Kingdom's Bowman communications system for long-term support and enhancement activities for the program. EXHIBIT H AEROSPACE SUPPLEMENTAL DATA - (UNAUDITED) First Quarter 2012 2013 Gulfstream Green Deliveries (units): Large aircraft 26 25 Mid-size aircraft 2 5 Total 28 30 Gulfstream Outfitted Deliveries (units): Large aircraft 17 25 Mid-size aircraft 2 4 Total 19 29 Pre-owned Deliveries (units): - 2 SOURCE General Dynamics Website: http://www.generaldynamics.com Contact: Media: Rob Doolittle, General Dynamics, (703) 876-3199, or Investors: Erin Linnihan, General Dynamics, (703) 876-3583
General Dynamics Reports First-Quarter 2013 Results
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