EX-99.1 2 d246314dex991.htm EXHIBIT 99.1 Exhibit 99.1

Exhibit 99.1

LOGO

2941 Fairview Park Drive

Suite 100

Falls Church, VA 22042-4513

www.generaldynamics.com

News

 


October 26, 2011

Contact: Rob Doolittle

Tel: 703 876 3199

rdoolittle@generaldynamics.com

General Dynamics Reports Strong Performance

in Third Quarter 2011

 

 

EPS from continuing operations increases 7.6%

 

 

Funded backlog increases on continuing demand for key products

FALLS CHURCH, Va. – General Dynamics (NYSE: GD) today reported third-quarter 2011 earnings from continuing operations of $665 million, or $1.83 per share on a fully diluted basis, compared to 2010 third-quarter earnings from continuing operations of $649 million, or $1.70 per share fully diluted. Revenues in the quarter were $7.9 billion. Operating earnings were $998 million, an increase of 3.3 percent over third-quarter 2010.

Net earnings for the third quarter of 2011 were $652 million, compared to $650 million in the year-ago period. Net earnings on a per-share, fully diluted basis were $1.80 in the current quarter, an increase of 5.9 percent over the year-ago period.

Margins

Company-wide operating margins in the quarter grew to 12.7 percent, an increase of 60 basis points over third-quarter 2010. The growth in operating margins was driven by improvement in the Information Systems and Technology and Marine Systems groups.

Backlog

Funded backlog grew in three of the company’s four business groups, increasing by 3.7 percent in third-quarter 2011 to $45.9 billion. Total backlog, which includes both funded and unfunded orders, grew by 2.5 percent in the quarter, to $58.5 billion.

 

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The Aerospace group’s funded backlog increased $358 million in the third quarter on the strength of continued international demand for Gulfstream’s portfolio of aircraft. The $1.3 billion increase in funded defense-related backlog was supported by several significant orders in the quarter, including a $1.8 billion award to Marine Systems for two DDG-1000 Zumwalt-class destroyers, as well as a $565 million contract for construction of a DDG-51 Arleigh Burke-class destroyer which includes an option for an additional ship. Similarly, Combat Systems was awarded a $250 million order to produce 115 Stryker vehicles with the new double-V-hull configuration, and a $205 million order from the U.S. Marine Corps for upgrade kits for mine-resistant, ambush-protected vehicles.

In addition to the total backlog, the company’s estimated potential contract value grew by 28.7 percent over the end of the second quarter, largely on the strength of a $5.7 billion increase in the Information Systems and Technology group. Estimated potential contract value is management’s estimate of the ultimate value of unfunded indefinite delivery, indefinite quantity (IDIQ) contracts and unexercised options.

Cash

Net cash provided by operating activities in the third quarter totaled $136 million, and $1.2 billion year-to-date. Third-quarter free cash flow from operations, defined as net cash provided by operating activities less capital expenditures, was $15 million. Cash performance in the quarter was impacted by inventory growth in the Aerospace group in preparation for ultra-large-cabin G650 green aircraft deliveries in the fourth quarter.

“General Dynamics continued to execute effectively in the third quarter,” said Jay L. Johnson, chairman and chief executive officer. “This solid operating performance reflects our ongoing focus on increasing efficiency, improving productivity and driving cost out of our businesses. Importantly, order activity in the quarter underscored the enduring nature of customer demand for our products and services.”

General Dynamics, headquartered in Falls Church, Virginia, employs approximately 93,800 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.

 

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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 third-quarter securities-analyst conference call at 9 a.m. Eastern Time on Wednesday, October 26, 2011. 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 noon October 26 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 75906545. The phone replay will be available from noon October 26 until midnight November 2, 2011.

 

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EXHIBIT A

 

CONSOLIDATED STATEMENT OF EARNINGS (UNAUDITED)

DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS

 

 
     Third Quarter

    Variance

 
     2010

    2011

    $

    %

 

Revenues

   $ 8,011      $ 7,853      $ (158     (2.0 )% 

Operating costs and expenses

     7,045        6,855        190           
    


 


 


       

Operating earnings

     966        998        32        3.3

Interest, net

     (38     (38     —             

Other, net

     —          (8     (8        
    


 


 


       

Earnings from continuing operations before income taxes

     928        952        24        2.6

Provision for income taxes

     279        287        (8        
    


 


 


       

Earnings from continuing operations

   $ 649      $ 665      $ 16        2.5
    


 


 


       

Discontinued operations, net of tax

     1        (13     (14        
    


 


 


       

Net earnings

   $ 650      $ 652      $ 2        0.3
    


 


 


       

Earnings per share - basic

                                

Continuing operations

   $ 1.71      $ 1.84      $ 0.13        7.6

Discontinued operations

   $ —        $ (0.03   $ (0.03        
    


 


 


       

Net earnings

   $ 1.71      $ 1.81      $ 0.10        5.8
    


 


 


       

Basic weighted average shares outstanding (in millions)

     379.1        359.7                   
    


 


               

Earnings per share - diluted

                                

Continuing operations

   $ 1.70      $ 1.83      $ 0.13        7.6

Discontinued operations

   $ —        $ (0.03   $ (0.03        
    


 


 


       

Net earnings

   $ 1.70      $ 1.80      $ 0.10        5.9
    


 


 


       

Diluted weighted average shares outstanding (in millions)

     382.5        362.9                   
    


 


               

 

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EXHIBIT B

CONSOLIDATED STATEMENT OF EARNINGS (UNAUDITED)

DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS

 

     Nine Months

    Variance

 
     2010

    2011

    $

    %

 

Revenues

   $ 23,865      $ 23,530      $ (335     (1.4 )% 

Operating costs and expenses

     20,996        20,654        342           
    


 


 


       

Operating earnings

     2,869        2,876        7        0.2

Interest, net

     (124     (103     21           

Other, net

     2        34        32           
    


 


 


       

Earnings from continuing operations before income taxes

     2,747        2,807        60        2.2

Provision for income taxes

     848        858        (10        
    


 


 


       

Earnings from continuing operations

   $ 1,899      $ 1,949      $ 50        2.6
    


 


 


       

Discontinued operations, net of tax

     (4     (26     (22        
    


 


 


       

Net earnings

   $ 1,895      $ 1,923      $ 28        1.5
    


 


 


       

Earnings per share - basic

                                

Continuing operations

   $ 4.96      $ 5.31      $ 0.35        7.1

Discontinued operations

   $ (0.01   $ (0.07   $ (0.06        
    


 


 


       

Net earnings

   $ 4.95      $ 5.24      $ 0.29        5.9
    


 


 


       

Basic weighted average shares outstanding (in millions)

     382.7        366.8                   
    


 


               

Earnings per share - diluted

                                

Continuing operations

   $ 4.91      $ 5.26      $ 0.35        7.1

Discontinued operations

   $ (0.01   $ (0.07   $ (0.06        
    


 


 


       

Net earnings

   $ 4.90      $ 5.19      $ 0.29        5.9
    


 


 


       

Diluted weighted average shares outstanding (in millions)

     386.7        370.2                   
    


 


               

 

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EXHIBIT C

REVENUES AND OPERATING EARNINGS BY SEGMENT (UNAUDITED)

DOLLARS IN MILLIONS

 

          Third Quarter

    Variance

 
          2010

    2011

    $

    %

 

Revenues:


                             

Aerospace

        $ 1,291      $ 1,412      $ 121        9.4

Combat Systems

          2,069        2,140        71        3.4

Marine Systems

          1,700        1,621        (79     (4.6 )% 

Information Systems and Technology

          2,951        2,680        (271     (9.2 )% 
         


 


 


 


Total

        $ 8,011      $ 7,853      $ (158     (2.0 )% 
         


 


 


       

Operating earnings:


                             

Aerospace

        $ 199      $ 217      $ 18        9.0

Combat Systems

          311        319        8        2.6

Marine Systems

          169        173        4        2.4

Information Systems and Technology

          306        310        4        1.3

Corporate

          (19     (21     (2     (10.5 )% 
         


 


 


       

Total

        $ 966      $ 998      $ 32        3.3
         


 


 


       

Operating margins:


                             

Aerospace

          15.4     15.4                

Combat Systems

          15.0     14.9                

Marine Systems

          9.9     10.7                

Information Systems and Technology

          10.4     11.6                

Total

          12.1     12.7                

 

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EXHIBIT D

REVENUES AND OPERATING EARNINGS BY SEGMENT (UNAUDITED)

DOLLARS IN MILLIONS

 

          Nine Months

    Variance

 
          2010

    2011

    $

    %

 

Revenues:


                             

Aerospace

        $ 4,031      $ 4,141      $ 110        2.7

Combat Systems

          6,182        6,216        34        0.5

Marine Systems

          4,976        4,873        (103     (2.1 )% 

Information Systems and Technology

          8,676        8,300        (376     (4.3 )% 
         


 


 


       

Total

        $ 23,865      $ 23,530      $ (335     (1.4 )% 
         


 


 


       

Operating earnings:


                                     

Aerospace

        $ 650      $ 656      $ 6        0.9

Combat Systems

          875        895        20        2.3

Marine Systems

          497        501        4        0.8

Information Systems and Technology

          908        885        (23     (2.5 )% 

Corporate

          (61     (61     —          0.0
         


 


 


       
Total         $ 2,869      $ 2,876      $ 7        0.2
         


 


 


       

Operating margins:


                                     

Aerospace

          16.1     15.8                

Combat Systems

          14.2     14.4                

Marine Systems

          10.0     10.3                

Information Systems and Technology

          10.5     10.7                

Total

          12.0     12.2                

 

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EXHIBIT E

PRELIMINARY CONSOLIDATED BALANCE SHEET (UNAUDITED)

DOLLARS IN MILLIONS

 

     December 31, 2010

    October 2, 2011

 

ASSETS

                

Current assets:

                

Cash and equivalents

   $ 2,613      $ 1,540   

Accounts receivable

     3,848        4,119   

Contracts in process

     4,873        5,137   

Inventories

     2,158        2,506   

Other current assets

     694        738   
    


 


Total current assets

     14,186        14,040   
    


 


Noncurrent assets:

                

Property, plant and equipment, net

     2,971        3,063   

Intangible assets, net

     1,992        2,044   

Goodwill

     12,649        13,454   

Other assets

     747        807   
    


 


Total noncurrent assets

     18,359        19,368   
    


 


Total assets

   $ 32,545      $ 33,408   
    


 


LIABILITIES AND SHAREHOLDERS’ EQUITY

                

Current liabilities:

                

Short-term debt and current portion of long-term debt

   $ 773      $ 222   

Accounts payable

     2,736        2,584   

Customer advances and deposits

     4,465        4,690   

Other current liabilities

     3,203        2,986   
    


 


Total current liabilities

     11,177        10,482   
    


 


Noncurrent liabilities:

                

Long-term debt

     2,430        3,907   

Other liabilities

     5,622        5,400   
    


 


Total noncurrent liabilities

     8,052        9,307   
    


 


Shareholders’ equity:

                

Common stock

     482        482   

Surplus

     1,729        1,853   

Retained earnings

     17,076        18,483   

Treasury stock

     (4,535     (5,758

Accumulated other comprehensive loss

     (1,436     (1,441
    


 


Total shareholders’ equity

     13,316        13,619   
    


 


Total liabilities and shareholders’ equity

   $ 32,545      $ 33,408   
    


 


 

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EXHIBIT F

PRELIMINARY CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)

DOLLARS IN MILLIONS

 

     Nine Months Ended

 

Cash flows from operating activities:

    

October 3, 2010

  

   

October 2, 2011

  

Net earnings

   $ 1,895      $ 1,923   

Adjustments to reconcile net earnings to net cash provided by operating activities:

                

Depreciation of property, plant and equipment

     257        259   

Amortization of intangible assets

     167        176   

Stock-based compensation expense

     88        96   

Excess tax benefit from stock-based compensation

     (19     (22

Deferred income tax provision

     65        63   

Discontinued operations, net of tax

     4        26   

(Increase) decrease in assets, net of effects of business acquisitions:

                

Accounts receivable

     (178     (143

Contracts in process

     (478     (252

Inventories

     149        (346

Increase (decrease) in liabilities, net of effects of business acquisitions:

                

Accounts payable

     201        (171

Customer advances and deposits

     (331     (7

Other current and noncurrent liabilities

     (244     (261

Other, net

     (9)        (129)   
    


 


Net cash provided by operating activities

     1,567        1,212   
    


 


Cash flows from investing activities:

                

Business acquisitions, net of cash acquired

     (233     (1,143

Purchases of held-to-maturity securities

     (452     (428

Maturities of held-to-maturity securities

     599        322   

Purchases of available-for-sale securities

     (199     (350

Maturities of available-for-sale securities

     120        227   

Capital expenditures

     (219)        (273)   

Other, net

     123        188   
    


 


Net cash used by investing activities

     (261     (1,457
    


 


Cash flows from financing activities:

                

Proceeds from fixed-rate notes

     —          1,497   

Purchases of common stock

     (726     (1,449

Repayment of fixed-rate notes

     (700     (750

Dividends paid

     (471     (504

Net proceeds from commercial paper

     —          200   

Proceeds from option exercises

     159        186   

Other, net

     16        (6
    


 


Net cash used by financing activities

     (1,722     (826
    


 


Net cash used by discontinued operations

     (4     (2
    


 


Net decrease in cash and equivalents

     (420     (1,073

Cash and equivalents at beginning of period

     2,263        2,613   
    


 


Cash and equivalents at end of period

   $ 1,843      $ 1,540   
    


 


 

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EXHIBIT G

PRELIMINARY FINANCIAL INFORMATION (UNAUDITED)

DOLLARS IN MILLIONS EXCEPT PER SHARE AND EMPLOYEE AMOUNTS

 

     Third Quarter
2010


          Third Quarter
2011


       

Non-GAAP Financial Measures:


                        
Free cash flow from operations:    Quarter

    Year-to-date

    Quarter

    Year-to-date

 

Net cash provided by operating activities

   $ 880      $ 1,567      $ 136      $ 1,212   

Capital expenditures

     (96     (219     (121     (273
    


 


 


 


Free cash flow from operations (A)

   $ 784      $ 1,348      $ 15      $ 939   
    


 


 


 


Return on invested capital:

                                

Earnings from continuing operations

   $ 2,517              $ 2,678           

After-tax interest expense

     121                105           

After-tax amortization expense

     154                162           
    


         


       

Net operating profit after taxes

     2,792                2,945           

Average debt and equity

     16,400                17,048           
    


         


       

Return on invested capital (B)

     17.0             17.3        
    


         


       

Other Financial Information:


                        

Return on equity (C)

     19.9             19.6        

Debt-to-equity (D)

     23.6             30.3        

Debt-to-capital (E)

     19.1             23.3        

Book value per share (F)

   $ 35.96              $ 38.24           

Total taxes paid

   $ 227              $ 270           

Company-sponsored research and development (G)

   $ 115              $ 127           

Employment

     89,800                93,800           

Sales per employee (H)

   $ 348,400              $ 357,000           

Shares outstanding

     377,743,896                356,112,755           

 

(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.

 

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EXHIBIT H

BACKLOG (UNAUDITED)

DOLLARS IN MILLIONS

 

Third Quarter 2011


   Funded

     Unfunded

     Total
Backlog


     Estimated Potential
Contract Value*


     Total Potential
Contract Value


 

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   
    


  


  


  


  


Second Quarter 2011


                                            

Aerospace

   $ 17,948       $ 340       $ 18,288       $ —         $ 18,288   

Combat Systems

     9,657         1,135         10,792         4,370         15,162   

Marine Systems

     9,191         9,209         18,400         1,097         19,497   

Information Systems and Technology

     7,468         2,168         9,636         15,697         25,333   
    


  


  


  


  


Total

   $ 44,264       $ 12,852       $ 57,116       $ 21,164       $ 78,280   
    


  


  


  


  


Third Quarter 2010


                                            

Aerospace

   $ 17,184       $ 393       $ 17,577       $ 1,361       $ 18,938   

Combat Systems

     11,771         1,006         12,777         4,702         17,479   

Marine Systems

     7,972         12,620         20,592         768         21,360   

Information Systems and Technology

     8,666         2,219         10,885         13,978         24,863   
    


  


  


  


  


Total

   $ 45,593       $ 16,238       $ 61,831       $ 20,809       $ 82,640   
    


  


  


  


  


 

*   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.

 

 

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EXHIBIT I

THIRD QUARTER 2011 SIGNIFICANT ORDERS (UNAUDITED)

DOLLARS IN MILLIONS

We received the following significant contract orders during the third quarter of 2011:

Aerospace

 

   

$810 from Minsheng Financial Leasing, a Chinese aviation leasing company, for the purchase of 20 Gulfstream aircraft across the product portfolio.

Combat Systems

 

   

$440 from the U.S. Army for the Technology Development (TD) phase of the Army’s Ground Combat Vehicle (GCV) Infantry Fighting Vehicle (IFV) program.

 

   

$250 from the Army to produce 115 Stryker double-V-hulled vehicles.

 

   

$205 from the U.S. Marine Corps under the mine-resistant, ambush-protected (MRAP) vehicle program for upgrade kits for previously delivered RG-31 vehicles.

 

   

$135 from the Canadian government to supply various calibers of ammunition.

 

   

$60 from the Army to produce medium-caliber ammunition.

Marine Systems

 

   

$1.8 billion from the U.S. Navy for engineering, design and construction of two DDG-1000 destroyers. The destroyers are scheduled for delivery in 2015 and 2018.

 

   

$565 from the Navy for construction of a DDG-51 destroyer under the destroyer construction continuation program. The award also includes a $665 option to build an additional ship.

Information Systems and Technology

 

   

$85 from the Army for ruggedized computing equipment under the Common Hardware/Software III (CHS-3) program.

 

   

$85 from the Army under the Warfighter Information Network-Tactical (WIN-T) program for Increment 1 equipment.

 

   

$55 under the Defense Intelligence Agency’s (DIA) Solutions for the Information Technology Enterprise (SITE) contract for enterprise communication services.

 

   

An indefinite delivery, indefinite quantity (IDIQ) contract from the Army for ruggedized computing equipment under the Common Hardware Systems-4 (CHS-4) program. The program has a maximum potential value of approximately $3.7 billion over ten years.

 

   

An IDIQ contract from the U.S. Air Force under the Global Broadcast Service program (GBS) for the production of Transportable Ground Receive Suites (TGRS) and delivery of retrofit kits for previously delivered systems. The program has a maximum potential value of $900 over five years.

 

   

An IDIQ contract from the Army to provide information systems engineering and IT support services to the Army’s Information Systems Engineering Command (ISEC). The program has a maximum potential value among the three awardees of close to $900 over five years.

 

– more –


EXHIBIT J

AEROSPACE SUPPLEMENTAL DATA (UNAUDITED)

 

     Third Quarter

     Nine Months

 
     2010

     2011

     2010

     2011

 

Gulfstream Green Deliveries (units):                        


                                   

Large aircraft

     17         20         57         60   

Mid-size aircraft

     6         5         22         12   
    


  


  


  


Total

     23         25         79         72   
    


  


  


  


Gulfstream Outfitted Deliveries (units):                        


                                   

Large aircraft

     19         20         54         58   

Mid-size aircraft

     5         6         11         14   
    


  


  


  


Total

     24         26         65         72   
    


  


  


  


Pre-owned Deliveries (units):                        


     2         2         6         4   
    


  


  


  


 

###