EX-99.1 2 gd20170402exhibit991.htm EXHIBIT 99.1 Exhibit



Exhibit 99.1 
 
 gdlogo-2017.gif
2941 Fairview Park Drive, Suite 100
 
 
Falls Church, VA 22042-4513
 
News
www.generaldynamics.com
 

Contact: Lucy Ryan
Tel: 703 876 3631
lryan@generaldynamics.com

April 26, 2017

General Dynamics Reports First-Quarter 2017 Results

•
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

FALLS CHURCH, Va. – 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.




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gdlogo-2017.gif


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.

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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.




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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.


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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.

 

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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.

 

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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.

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EXHIBIT F
BACKLOG - (UNAUDITED)
DOLLARS IN MILLIONS
 
 
 
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.



 



 






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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.

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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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