Delaware | 1-3671 | 13-1673581 | ||
(State or Other Jurisdiction of Incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
2941 Fairview Park Drive, Suite 100, Falls Church, Virginia | 22042-4513 | |
(Address of Principal Executive Offices) | (Zip Code) |
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d- 2(b)) |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02 | Results of Operations and Financial Condition |
Item 9.01 | Financial Statements and Exhibits |
(d) | Exhibits (furnished only) |
99.1 | General Dynamics press release dated April 26, 2017, with respect to the company’s financial results for the quarter ended April 2, 2017. |
GENERAL DYNAMICS CORPORATION | |||
by | /s/ William A. Moss | ||
William A. Moss Vice President and Controller (Authorized Officer and Chief Accounting Officer) | |||
Dated: April 26, 2017 |
2941 Fairview Park Drive, Suite 100 | ||
Falls Church, VA 22042-4513 | News | |
www.generaldynamics.com |
• | 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 |
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 |
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 | % |
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 |
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 |
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. |
Funded | Unfunded | Total Backlog | Estimated Potential Contract Value (a) | Total Potential Contract 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. |
• | $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. |
• | $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. |
• | $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. |
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 |