GENERAL DYNAMICS CORPORATION 
FALLS CHURCH, Va., April 26, 2017 /PRNewswire/ --
-- Diluted earnings per share from continuing operations up 19.2% to $2.48
-- Operating earnings up 12% to $1.04 billion
-- Earnings from continuing operations up 16.7% to $763 million
-- Operating margin of 13.9%, a 150 basis-point improvement
General Dynamics (NYSE: GD) today reported first-quarter 2017 earnings from continuing operations of $763 million, a 16.7 percent increase over first-quarter 2016, on revenue of $7.4 billion. Diluted earnings per share from continuing operations were $2.48 compared to $2.08 in the year-ago quarter, a 19.2 percent increase.
"General Dynamics delivered very strong first-quarter operating performance, demonstrated by 13.9 percent operating margins and 10.3 percent return on sales," said Phebe N. Novakovic, chairman and chief executive officer. "We are on track for a productive 2017 as we continue our focus on operational improvement and successful execution on our robust backlog."
Margin
Company-wide operating margin for the first quarter of 2017 was 13.9 percent, a 150 basis-point increase when compared to 12.4 percent in first-quarter 2016.
Cash
Net cash provided by operating activities in the quarter totaled $533 million, up 11 percent from the year-ago quarter. Free cash flow from operations, defined as net cash provided by operating activities less capital expenditures, was $471 million.
Capital Deployment
The company repurchased 1.9 million of its outstanding shares in the first quarter. In addition, in March, the board of directors increased the company's quarterly dividend by 10.5 percent to $0.84 per share, representing the company's 20th consecutive annual dividend increase.
Backlog
General Dynamics' total backlog at the end of first-quarter 2017 was $60.4 billion. There was order activity across the Gulfstream product portfolio and strong demand for defense products. The estimated potential contract value, representing management's estimate of value in unfunded indefinite delivery, indefinite quantity (IDIQ) contracts and unexercised options, was $24.6 billion. Total potential contract value, the sum of all backlog components, was $85 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 2016 revenue was $30.6 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 2017 financial results conference call at 9 a.m. EDT on Wednesday, April 26, 2017. 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 26 and will continue for 12 months. To hear a recording of the conference call by telephone, please call 877-344-7529 (international: 412-317-0088); passcode 10105194. The phone replay will be available from April 26 through May 3, 2017.
EXHIBIT A
CONSOLIDATED STATEMENTS OF EARNINGS - (UNAUDITED)
IN MILLIONS, EXCEPT PER SHARE AMOUNTS
Three Months Ended Variance
April 2, 2017 April 3, 2016* $ %
------------- ------------- --- ---
Revenue $7,441 $7,476 $(35) (0.5)%
Operating costs and expenses 6,406 6,552 (146)
----- ----- ----
Operating earnings 1,035 924 111 12.0%
Interest, net (25) (22) (3)
Other, net - 10 (10)
--- --- ---
Earnings from continuing operations before income tax 1,010 912 98 10.7%
Provision for income tax, net 247 258 (11)
Earnings from continuing operations 763 654 109 16.7%
Discontinued operations - (13) 13
--- --- ---
Net earnings $763 $641 $122 19.0%
Earnings per share-basic
Continuing operations $2.53 $2.12 $0.41 19.3%
Discontinued operations - (0.04) 0.04
--- ----- ----
Net earnings $2.53 $2.08 $0.45 21.6%
===== ===== =====
Basic weighted average shares outstanding 301.8 307.9
===== =====
Earnings per share-diluted
Continuing operations $2.48 $2.08 $0.40 19.2%
Discontinued operations - (0.04) 0.04
--- ----- ----
Net earnings $2.48 $2.04 $0.44 21.6%
===== ===== =====
Diluted weighted average shares outstanding 307.3 313.5
===== =====
* Prior-period information has
been restated for the adoption of
Accounting Standards Update (ASU)
2016-09, Compensation - Stock
Compensation (Topic 718):
Improvements to Employee Share-
Based Payment Accounting, which we
adopted in the second quarter of
2016, and Accounting Standards
Codification (ASC) Topic 606,
Revenue from Contracts with
Customers, which we adopted on
January 1, 2017.
EXHIBIT B
REVENUE AND OPERATING EARNINGS BY SEGMENT - (UNAUDITED)
DOLLARS IN MILLIONS
Three Months Ended Variance
April 2, 2017 April 3, 2016* $ %
------------- ------------- --- ---
Revenue:
--------
Aerospace $2,074 $1,781 $293 16.5%
Combat Systems 1,287 1,245 42 3.4%
Information Systems and Technology 2,146 2,328 (182) (7.8)%
Marine Systems 1,934 2,122 (188) (8.9)%
----- ----- ----
Total $7,441 $7,476 $(35) (0.5)%
====== ====== ====
Operating earnings:
-------------------
Aerospace $443 $332 $111 33.4%
Combat Systems 205 187 18 9.6%
Information Systems and Technology 236 237 (1) (0.4)%
Marine Systems 161 184 (23) (12.5)%
Corporate (10) (16) 6 37.5%
--- --- ---
Total $1,035 $924 $111 12.0%
====== ==== ====
Operating margin:
-----------------
Aerospace 21.4% 18.6%
Combat Systems 15.9% 15.0%
Information Systems and Technology 11.0% 10.2%
Marine Systems 8.3% 8.7%
Total 13.9% 12.4%
* Prior-period information
has been restated for the
adoption of ASC Topic 606,
which we adopted on January
1, 2017.
EXHIBIT C
CONSOLIDATED BALANCE SHEETS - (UNAUDITED)
DOLLARS IN MILLIONS
April 2, 2017 December 31,
2016*
------------- ------------
ASSETS
Current assets:
Cash and equivalents $2,168 $2,334
Accounts receivable 3,483 3,399
Unbilled receivables 4,557 4,212
Inventories 5,822 5,817
Other current assets 584 772
--- ---
Total current assets 16,614 16,534
------ ------
Noncurrent assets:
Property, plant and equipment, net 3,412 3,477
Intangible assets, net 679 678
Goodwill 11,532 11,445
Other assets 974 1,038
--- -----
Total noncurrent assets 16,597 16,638
Total assets $33,211 $33,172
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term debt and current portion of long-term debt $901 $900
Accounts payable 2,466 2,538
Customer advances and deposits 6,686 6,827
Other current liabilities 3,112 3,185
----- -----
Total current liabilities 13,165 13,450
------ ------
Noncurrent liabilities:
Long-term debt 2,988 2,988
Other liabilities 6,475 6,433
----- -----
Total noncurrent liabilities 9,463 9,421
----- -----
Shareholders' equity:
Common stock 482 482
Surplus 2,762 2,819
Retained earnings 25,049 24,543
Treasury stock (14,448) (14,156)
Accumulated other comprehensive loss (3,262) (3,387)
------ ------
Total shareholders' equity 10,583 10,301
Total liabilities and shareholders' equity $33,211 $33,172
======= =======
* Prior-period information has
been restated for the adoption
of ASU 2015-17, Income Taxes
(Topic 740): Balance Sheet
Classification of Deferred
Taxes, and ASC Topic 606, both
of which we adopted on January
1, 2017.
EXHIBIT D
CONSOLIDATED STATEMENTS OF CASH FLOWS - (UNAUDITED)
DOLLARS IN MILLIONS
Three Months Ended
April 2, 2017 April 3, 2016*
------------- -------------
Cash flows from operating activities-continuing operations:
Net earnings $763 $641
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation of property, plant and equipment 92 89
Amortization of intangible assets 19 27
Equity-based compensation expense 22 27
Deferred income tax provision (benefit) 45 (18)
Discontinued operations - 13
(Increase) decrease in assets, net of effects of business acquisitions:
Accounts receivable (84) (210)
Unbilled receivables (338) (276)
Inventories 2 (221)
Increase (decrease) in liabilities, net of effects of business acquisitions:
Accounts payable (72) 179
Customer advances and deposits (95) (18)
Income taxes payable 202 253
Other current liabilities (76) (52)
Other, net 53 46
--- ---
Net cash provided by operating activities 533 480
--- ---
Cash flows from investing activities:
Capital expenditures (62) (65)
Other, net (23) (53)
--- ---
Net cash used by investing activities (85) (118)
--- ----
Cash flows from financing activities:
Purchases of common stock (354) (1,026)
Dividends paid (230) (215)
Other, net (22) 7
--- ---
Net cash used by financing activities (606) (1,234)
---- ------
Net cash used by discontinued operations (8) (6)
--- ---
Net decrease in cash and equivalents (166) (878)
Cash and equivalents at beginning of period 2,334 2,785
----- -----
Cash and equivalents at end of period $2,168 $1,907
====== ======
* Prior-period information
has been restated for the
adoption of ASU 2016-09,
which we adopted in the
second quarter of 2016, and
ASC Topic 606, which we
adopted on January 1, 2017.
EXHIBIT E
PRELIMINARY FINANCIAL INFORMATION - (UNAUDITED)
DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS
2017 2016
First Quarter First Quarter (a)
------------- -----------------
Other Financial Information:
----------------------------
Debt-to-equity (b) 36.7% 33.4%
Debt-to-capital (c) 26.9% 25.0%
Book value per share (d) $35.08 $33.35
Total income tax (refunds) payments $(4) $21
Company-sponsored research and development (e) $113 $104
Shares outstanding 301,685,448 305,646,967
Non-GAAP Financial Measures:
----------------------------
Free cash flow from operations:
Net cash provided by operating activities $533 $480
Capital expenditures (62) (65)
--- ---
Free cash flow from operations (f) $471 $415
==== ====
(a) Prior-period information has
been restated for the adoption
of ASU 2016-09, which we
adopted in the second quarter of
2016, and ASC Topic 606, which
we adopted on January 1, 2017.
(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 Estimated Total Potential
Backlog Potential Contract
Contract Value (a) Value
----------------- -----
First Quarter 2017:
-------------------
Aerospace $12,446 $133 $12,579 $1,929 $14,508
Combat Systems 17,058 523 17,581 4,970 22,551
Information Systems and Technology 6,682 2,038 8,720 13,994 22,714
Marine Systems 17,071 4,413 21,484 3,756 25,240
------ ----- ------ ----- ------
Total $53,257 $7,107 $60,364 $24,649 $85,013
======= ====== ======= ======= =======
Fourth Quarter 2016 (b):
------------------------
Aerospace $13,119 $96 $13,215 $2,127 $15,342
Combat Systems 17,206 597 17,803 4,698 22,501
Information Systems and Technology 6,458 2,007 8,465 14,327 22,792
Marine Systems 15,000 7,723 22,723 3,873 26,596
------ ----- ------ ----- ------
Total $51,783 $10,423 $62,206 $25,025 $87,231
======= ======= ======= ======= =======
First Quarter 2016 (b):
-----------------------
Aerospace $14,406 $147 $14,553 $2,368 $16,921
Combat Systems 18,304 565 18,869 4,959 23,828
Information Systems and Technology 7,431 1,989 9,420 15,146 24,566
Marine Systems 16,497 7,317 23,814 1,999 25,813
------ ----- ----- ------
Total $56,638 $10,018 $66,656 $24,472 $91,128
======= ======= ======= ======= =======
(a) The estimated potential
contract value includes work
awarded on 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. The actual amount
of funding received in the
future may be higher or lower
than our estimate of potential
contract value. We recognize
options in backlog when the
customer exercises the option
and establishes a firm order.
(b) Prior-period information has
been restated for the adoption
of ASC Topic 606, which we
adopted on January 1, 2017.
EXHIBIT G
FIRST QUARTER 2017 SIGNIFICANT ORDERS - (UNAUDITED)
DOLLARS IN MILLIONS
We received the following significant orders during the first quarter of 2017:
Combat Systems:
-- $175 from the U.S. Army for inventory management and support services
for the Stryker fleet.
-- $75 from the Army for engineering and logistics support services for the
Abrams family of vehicles.
-- $65 from the Army for training ammunition.
-- $50 from the U.S. Special Operations Command for the production of
Ground Mobility Vehicles (GMVs).
-- $35 to produce gun systems for the F-35 Joint Strike Fighter.
-- $30 from the Army for the production of Stryker vehicles with an
integrated 30-millimeter gun system.
Information Systems and Technology:
-- $415 from the U.K. Ministry of Defence to design and develop the
next-generation tactical communication and information system in the
initial phase of the U.K.'s MORPHEUS program.
-- $160 from the National Geospatial-Intelligence Agency (NGA) to continue
the consolidation of NGA's operations from six locations to one
stand-alone location at New Campus East (NCE).
-- $85 from the NATO Communications and Information Agency to upgrade
existing technical infrastructure with a comprehensive cloud-based
infrastructure.
-- $85 from the U.S. Air Force for the Battlefield Information Collection
and Exploitation System (BICES) program to provide intelligence
information sharing and support to coalition operations.
-- $50 from the Air Forces Central Command for communications technical
support services in Asia.
-- $45 from the U.S. Naval Air Warfare Center for design, development and
support services of shipboard and airborne systems.
-- $45 from the Army for additional equipment for the Warfighter
Information Network-Tactical (WIN-T) Increment 2 program.
-- $40 to provide enterprise IT support services for U.S. Army Europe.
-- $35 from the Army for ruggedized computing equipment under the Common
Hardware Systems-4 (CHS-4) program.
Marine Systems:
-- $310 from the U.S. Navy for design work on the Columbia-class submarine
program and Advanced Nuclear Plant Studies (ANPS) in support of the
program.
-- $125 from the Navy to procure long-lead materials for two Virginia-class
submarines under Block V of the program.
-- $40 from the Navy for modernization work on the USS Cowpens, a
Ticonderoga-class guided-missile cruiser.
-- $35 from the Navy for Post Shakedown Availability (PSA) work on a
Virginia-class submarine.
-- $25 from the Navy for maintenance and modernization work on the USS
Gonzalez, an Arleigh Burke-class guided-missile destroyer.
EXHIBIT H
AEROSPACE SUPPLEMENTAL DATA - (UNAUDITED)
First Quarter
2017 2016*
---- ----
Gulfstream Aircraft
Deliveries (units):
--------------------
Large-cabin aircraft 23 20
Mid-cabin aircraft 7 8
--- ---
Total 30 28
=== ===
Pre-owned Deliveries
(units): 1 1
-------------------- === ===
* Prior-period information
has been restated for the
adoption of ASC Topic 606,
which we adopted on January
1, 2017.
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SOURCE General Dynamics
