EX-99.A.5.A
Exhibit (a)(5)(A)
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General Dynamics, Inc.
Announcement
Monday, February 12, 2018, 8:30 AM Eastern
CORPORATE PARTICIPANTS
Howard Rubel - Vice President, Investor Relations
Phebe Novakovic - Chair and Chief Executive Officer
Jason Aiken - Chief Financial Officer
Dan Johnson - Executive Vice President, IS&T
Larry Prior - President and Chief Executive Officer, CSRA |
PRESENTATION
Howard Rubel
Good morning, and welcome to the General
Dynamics conference call and presentation regarding the acquisition of CSRA, Inc. All participants on the phone will be in listen only mode. Please note, this event is being recorded.
I am Howard Rubel, Vice President of Investor Relations for General Dynamics.
At the conclusion of our presentation, we’ll take questions from those in the audience. Those listening online may send questions to
tshaw@generaldynamics.com [sp].
Any forward looking statements made today represent our estimates regarding the company’s outlook. These estimates
are subject to some risks and uncertainties. Additional information regarding these factors is contained in the company’s 10-K and 10-Q filings.
In addition, as contemplated by our merger agreement with CSRA, our wholly owned subsidiary will commence a tender offer for CSRA common stock, but the tender
offer has not yet commenced. CSRA will also provide a proxy statement and a recommendation on the tender offered to its shareholders. More information regarding the tender offer, CSRA’s recommendation on the tender offer, CSRA’s proxy
statement and the participants in the solicitation of CSRA’s stockholders is provided in the presentation material that are available for download on our website.
With that concluded, I would like to turn the presentation over to our Chairman and Chief Executive Officer Phebe Novakovic, who will also introduce the
General Dynamics executives who are here with us in New York today.
Phebe Novakovic
Thank you, Howard, and good morning.
As you know, earlier
today, we announced the acquisition of CSRA, an IT services business, in a $9.6 billion all cash transaction to create a combined $9.9 billion full service government IT business. This morning, I’ll share with you our rationale for
the acquisition, some information on the transaction itself, selected financial highlights and a description of what the combined entity does for GD’s shareholders as well as for our customers and employees.
In recognition of the fact that many of our sale side analysts do not cover CSRA, we will spend some time describing their business and why we find it
compelling.
Let me first, however, introduce the team I have with me today in New York. Larry Prior, CSRA’s President and Chief Executive, and
I’m pleased he could join me for the meeting. Jason Aiken, our CFO, is also here as is Dan Johnson, Executive Vice President for our IS&T segment, and our former GDIT President for nine years. Dan came to GD with Anteon where he was the
Chief Operating Officer of that public company. Amy Gilliland is our GDIT President, and with her is GDIT’s Chief Operating Officer Bernie Guerry.
Let’s turn our attention to chart three. For those of you on the phone, these charts are available on our website.
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CSRA is an excellent fit with GDIT, as you will learn. We have many of the same customers and offer similar
solution sets, both of which will benefit from our combined capabilities. We share the same values and culture.
CSRA is a strong IT service performer.
For us, they represent low risk and provide a significant increase to our earnings and free cash flow. The transaction creates significant near and long term value for our shareholders. We will enjoy cost, revenue and capability synergies. It will
be nicely accretive, both GAAP EPS and free cash flow per share in 2019. Obviously, we believe the combination of CRSA and GDIT is compelling.
Following
the transaction’s close, we intend to separate for reporting purposes our IT services and mission systems business. This increased transparency will reveal a very fine a electronics products business in the C4ISR space and give you better
insight into the scale, breadth and ability to compete provided by the new combination. We expect to close in the first half of ‘18.
I would like
Jason to address chart four’s financial highlights.
Jason Aiken
Thanks, Phebe.
I think as you’ll see, this transaction
presents a compelling story from every key financial metric. From a multiple perspective, the enterprise value is 1.8 times estimated 2018 sales and 11.6 times estimated EBITDA. Those are sales and EBITDA on a calendar year basis. As many of you
know, CSRA reports on a March 31 fiscal year basis.
In terms of the synergies we’ve identified, we expect to generate cost synergies slightly
more than 2% of the combined revenue. That’s CSRA and GDIT revenues, to be clear. We anticipate realizing the majority of those savings, as Phoebe said, in the first 18 to 24 months following the close of the transaction. To be clear, this
represents exclusively cost synergies, and while we believe there are outstanding prospects for revenue synergies, capability synergies and so on, we haven’t modeled any of those benefits into our outlook.
The deal is nicely accretive on both a GAAP EPS and free cash basis in 2019, the first full year after the acquisition. And frankly, it would be accretive in
the first year absent the one-time transaction expenses that are recorded as period costs in 2018.
Importantly,
we maintain a very strong balance sheet following the transaction. Our net debt is expected to be around $10.5 billion, and our net debt to EBITDA will be just under 2 times. We’ll finance the transaction with a combination of existing
cash on our balance sheet and new debt issuance. We remain firmly committed to our mid A top tier credit rating and will retain the financial flexibility to decide how quickly and to what extent to pay down the incremental debt while maintaining our
capital deployment priorities. That is, first and foremost, internal investment in the growth of our business, continuing our predictable, sustainable dividend policy with sufficient capacity for tactical share repurchases.
So, by all key measures, we are very excited about this transaction and the value it creates for our shareholders.
With that, I’ll turn it over to Dan Johnson, our Executive Vice President for the IS&T Group to discuss what we see in CSRA, the IT services market
and the power of this combined entity.
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Dan Johnson
Thanks, Jason, and good morning.
If you turn to chart five,
CSRA became an independent publicly traded company in late 2015 with the merger of the North American public sector business, a computer sciences corporation NSRA International, both of which were public companies with long histories of success.
CSRA is a top tier company in the government services marketplace, which is roughly a $250 billion industry. They employ over 19,000 people across the US and internationally and provide high end information technology services to the Department
of Defense, the intelligence community and federal civilian agencies.
Their revenues are in excess of $5 billion, and they generate market leading
double digit margins. They are a high transaction volume business, managing over 2,000 projects annually. Their business is relatively low risk, requires minimum investment and generates significant free cash flow.
The CSRA business model focuses on outcome based fixed price solutions, which tie in leading commercial technology companies as alliance partners to win and
deliver work. They are aggressive business developers with 12 consecutive quarters of book to bill greater than 1 and generate high customer loyalty and repeat business success.
Integrated with the strength of our General Dynamics Information Technology business, we feel we will be a major player in a large and growing marketplace.
For clarity, on chart six, here is a comparable description of General Dynamics Information Technology. As some of you know, GDIT reports up through our
information systems and technology reporting group within General Dynamics.
GDIT also has over 19,000 people, generates in excess of $4.5 billion in
annual revenue, has high single digit margins and customer lanes [sp] and divisional organization comparable to CSRA - defense, intelligence and civil agencies. We have a similar business model, we’re customer focused, have a high transaction
volume business, are relatively low risk, requiring minimum investment and also generate significant free cash flow.
CSRA has a strong portfolio balanced
across its three divisions, as you can see on chart seven. Intelligence community customers include the national three letter agencies, defense intelligence as well as the Department of Homeland Security. Defense customers include all of the
military services, their headquarters, field sites and combat and commands as well as defense agencies and the White House. Health and civil agency customers include the Department of Health and Human Services, Federal Aviation Administration,
National Aeronautics and Space Administration and the Veteran’s Administration, among others.
On chart eight, you see that the new entity will total
just under $10 billion in annual revenues evenly balanced between the three customer facing divisions. As you’ve seen, the CSRA organizational alignment of intelligence, defense and civil exactly mirrors the current go to market profile of
our General Dynamics Information Technology business unit. This will contribute to rapid integration, definition of market lanes, reach back and rapid realization of cost and capability synergies, plus our market portfolio within the divisions is
complementary and not overlapping. For example, GDIT is arguably the leading information technology provider in four of the five national intelligence agencies. CSRA is a portfolio leader in the fifth.
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CSRA is a strong player in budget priority civil agencies such as Department of Homeland Security, the
Veteran’s Administration and the FAA where GDIT has less of a role. Between CSRA and GDIT, there are over 25 large scale opportunities in our collective pipeline which we feel, when combined, will enhance our chances of success. Our total
contract mix will have almost 60% fixed price and time and materials type contracts, which is a key to higher margins. Our strategy will be to focus the CSRA outcome based solution model on our GDIT portfolio to further improve our industry leading
margins.
Chart nine depicts lines of business that represent buckets that we use to sort the various services we provide for purposes of describing what
we do. They do not have fine lines. They occasionally overlap and are subject to interpretation. The message here is that a GDIT strength is the design, development, implementation, test, operation and support of large scale IT infrastructure
programs. These are multi year, multi hundreds of millions of dollars outcome based programs. Examples include large scale projects at the Pentagon, intelligence agency build-outs and recent international program modernizations.
Both GDIT and CSRA are major players in the information services market. CSRA is leading the way in next generation IT - cloud, software development, data
analytics and managed services. Both companies are deep in mission applications, data center management, modernization and mobility technology. CSRA examples include large scale managed services programs with national intelligence agencies and
defense-wide cloud migration initiatives. GDIT examples include citizen facing web tool development, contact center applications and all tier help desk programs.
Both CSRA and GDIT have strong cyber protection services credentials and a number of pure play cyber programs. CSRA and GDIT have flagship training programs
with the Department of the Army, spanning live, virtual and constructive applications.
Professional services is a
catch-all for everything that doesn’t fit in the above categories. Both CSRA and GDIT through acquisitions and in meet customer demands have developed and applied engineering, logistics and supply chain
expertise to major programs.
Chart 10 depicts the major competitors in the government services marketplace before the GDIT CSRA combination. You probably
recognize many of these public companies and know something of their histories, and you can see where CSRA and GDIT line up.
Although the government
services market is fragmented, has many providers and is not dominated by any one company, the last few years have seen consolidation and a focus on scaling to be more competitive when pursuing large agency-wide opportunities.
Chart 11 shows how our services unit will stack up after combination. We feel that with recent events such as the newly approved increasing budget, the
realization that awarding to the lowest bidder has not worked and quality matters all align at this point to make the combination of General Dynamics and CSRA a market changing event, and we are very excited about it.
Thank you, and I’ll turn it back over to Phebe.
Phebe
Novakovic
If we turn to chart 12, just to give you some perspective on the reporting structure of General Dynamics post-close, in addition to
accelerating our growth, the transaction provides additional balance to our portfolio with aerospace, IT services and marine about comparable size and
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combat systems and mission systems somewhat smaller. The combination creates one of the top two companies in the government IT market. I should also tell you that the more we looked at CSRA
during due diligence, the more we liked it and its people, and more importantly, we like what it does for us, our shareholders and our customers.
If
you’ve got any questions, we’ll do our best to address them.
QUESTION AND ANSWER
Howard Rubel
Thanks, Phebe.
As a reminder, we ask participants here to wait for the mic and to identify themselves, and I think there’ll probably be room for at least one question
and one follow-up. I will be in the office later today to answer remaining questions. Again, those wishing to ask questions via email should submit them to tshaw@generaldynamics.com.
With that, Mr. McConnell has his hand up first, so go ahead.
Matt McConnell
Great, thank you very much. Matt
McConnell, RBC. Part of the barricades around CSRA was always around margin sustainability. The EBITDA margins are quite a bit above peer averages. How do you get comfortable that you can sustain that? And is a 14% to 15% EBITDA
margin—that’s what CSRA had been targeting, do you think that’s sustainable long term, and how do you get comfortable with that?
Phebe
Novakovic
Dan, you want to address that?
Dan
Johnson
Yeah, that was a concern that we had, as well, during due diligence. So, we looked very closely at what proof points were there that would
show that they would be able to in fact sustain that. And if you look at their portfolio of firm fixed price jobs, which—expirations dates which run past 2020 into the next five or six years, that’s a significant percentage of their
portfolio driving those higher margins. So, we were able to get confidence in that fact by looking at that.
Howard Rubel
Sheila?
Sheila Kahyaoglu
Thank you. Sheila Kahyaoglu from Jefferies. I guess, Phoebe, if you look at your longer term targets, the top line and [unintelligible] are the lowest for the
IS&T segment. What made you decide on going further into the service business rather than a product line acquisition?
Phebe Novakovic
Let’s talk about what General Dynamics is at its core. We are a platform and products business with a core IT services business, and we’ve discussed
with many of you over time what is it we like about our IT service business. First, we’re good at it. Second, it’s low risk, it’s got terrific return on invested capital and great cash flow.
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So, what we’re doing with this transaction is taking our good GDIT business and making it better, stronger,
a more viable competitor over time, and immediately, frankly, we believe, in that IT service space. We’re good at it. We know how to do it. We’re adding to our core - makes a lot of sense to me.
Howard Rubel
Doug? Wendy, Doug’s right there?
Doug Harned
Thank. Doug Harned, Bernstein. Dan, you
mentioned that there’s been a belief now that you can’t just go for the lowest bidder, that I assume LPTA type contracts, those are being seen as less effective. Can you talk about that a little bit? I mean, this has been something that, I
think if it had been two years ago, there was a big overhang of this type of work. I mean, how do you see the environment changing today? How do you get confidence that that type of issue won’t come back again?
Dan Johnson
Well, I think what changed was, five years
ago when the Budget Control Act was implemented and sequestration was initiated, there was a significant downward pressure on the entire services market. And that was driven because the government could realize budget savings faster in the services
market than they could in products where if you cut budgets in products, unit prices go up.
So, what that meant was it appeared that the acquisition
community within the government focused on low price in the government services marketplace, and that started driving behavior. I wouldn’t want to cite any specific examples, but there are several out there where that decision has resulted in
unsuccessful program delivery. So, you couple the fact that the Budget Control Act is no longer with us and we have an increasing budget going forward, that gives us cause for optimism that the services market is going to come back to pre-2011 characteristics.
Howard Rubel
Ron?
Ron Epstein
Hey, Ron Epstein, Bank of America Merrill Lynch. So, Phebe, in your prepared remarks, you mentioned that there’s potential synergy here. So, maybe kind of
two parts - one, can you talk about that some more, and are there any specific programs coming down the pipe that together GDIT and CSRA as a team could win that individually it would have been a harder thing to do?
Phebe Novakovic
So, as is our typical pattern, we
don’t intend to talk about upcoming competitions. I mean, those are company-sensitive, competitive-sensitive. But, when we looked at CSRA and did our very thorough due diligence, what became clear to us is that there are considerable revenue
synergies, both driven by our shared customer set and the combined capabilities of both businesses. But, let me have Jason address a little bit about the cost synergies.
Jason Aiken
Yeah, so I gave you the statistics on the
cost synergies we modeled. We feel very comfortable with those, that they’re readily achievable. Those are identified synergies that we picked up through due diligence, so they’re not speculative. And I think between the experience
we’ve had with the recent combination of the GD mission systems organization and what we were able to do there and again through these identified cost synergies, we feel like that’s an imminently achievable target.
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Howard Rubel
David?
David Strauss
Hi, David Strauss, Barclays. Jason, you talked about transaction costs. Could you maybe size those and then what roughly you’re assuming for intangible
amortization and the rate at which you would expect to delever?
Jason Aiken
So, the transaction cost ballparked, just somewhere in excess of $100 million, if that’s close enough for you. And in terms of the intangible asset
amortization, obviously, that’ll be subject to the detailed underlying analysis of intangibles that’ll take place following the close of the transaction. But, in terms of modeling, we looked at it in terms of sort of a stress test. So, if
you think between 15% to 30% of the purchase price going to intangibles, we—knowing that the ultimate outcome would be the result of a bottom-up analysis, we wanted to make sure that our valuation could
withstand something in that range. So, if you think of it that terms of range of purchase price going to intangibles, you’d be in the right ballpark.
Phebe Novakovic
And by the way, in both instances,
across our modeling scenarios, it has continued to be a very nicely accretive business.
Jason Aiken
Absolutely. And you mentioned deleveraging, I think. So, we modeled deleveraging only using incremental free cash flow from this transaction. So, clearly, as I
mentioned in my earlier remarks, we have a continuing very strong balance sheet in the incremental free cash flow of the combined entity gives us frankly complete flexibility to accelerate that deleveraging based on what we see as appropriate once
we get through the transaction.
Howard Rubel
John?
John Raviv
Morning, John Raviv from Citi. Dan, you
just mentioned some of the idea that the services market is going to return to pre-2011 characteristics. How would you think about that in terms of the competitive dynamic?
Pre-2011 was perhaps even more fragmented than it is today. And then also, going forward, do you see yourselves as a market share gainer? I would assume that’s the case, given what you’ve said about
synergy, revenue synergies, but just some sort of context on how you see this market growing at this point now that we’ve been through a bit of a trough.
Dan Johnson
Well, one of the things that we have
observed is it would appear that the market is starting to be populated with larger opportunities which require great reach back and a significant breadth of skill sets. That’s a little bit different than the
pre-2011 market as we recognized it at that time. So, we think that this is sort of a marriage made in heaven to go after that marketplace.
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John Raviv
And on the growth?
Dan Johnson
Well, certainly, we’re anticipating growth going forward, yes. I mean, just looking at the budget, which is about to be approved later this morning, would
give one pause for optimism.
Howard Rubel
Lucy, go
ahead.
Lucy Guo
Asking a question for
[unintelligible] with Cowen. So, a question for Dan, and hopefully, Larry can address it a little bit, as well, just follows on Ron’s question and maybe also John’s question as to why does the deal make sense when, considering, Larry, when
you spun out of CSC, that was one of the case was that you can compete more effectively as a standalone business. But, what has changed since then, and why does the combination with GD make sense today when you—the conversation has been that
scale may not necessarily be an issue for you to compete more effectively?
Dan Johnson
Let me take a crack, and then I’ll turn it over to Larry. In the services business, when we’re looking at acquisitions, typically, you look for one
of two things - either an entity which will bring you skill sets or solution sets that you don’t have and/or customers that you don’t have because they’re difficult to penetrate. Well, one of the examples I gave you is GDIT is a
market leader in four of the five leading intelligence agencies, and CSRA is a market leader in the fifth one.
Secondly, General Dynamics is a leader in
large scale IT infrastructure programs. CSRA is a leader in next generation cloud applications as well as data analytics and managed services, which we think is attractive to our skill sets, as well.
Larry Prior
Yeah, so when we first spun out of CSC, it
was purposeful to create a pure play commercial entity on their side when you saw them merge with HPE to create the company DXC. They’re now spinning out their government business yet again. So, we were really attracted to GDIT because
they’re the best in big enterprise IT programs. When you’re looking at doing 25 mega-deals all north of $.5 billion, skill does matter.
Howard Rubel
Let me do a couple from the web, and then
we’ll come back and wrap it up with a few more in the room. So, one of the first questions that we have is why are you deciding to further develop your fed IT business when many of the other primes seem to have left this market?
Phebe Novakovic
Well, I can’t speak for what others
do, but let me remind you, GDIT is core to us. It has been for a long time. I told you earlier that the characteristics of a well known services business that I like. And think about it this way - in a consolidating market, it makes an awful lot of
sense to combine to better address, as Dan has articulated, the larger packaging opportunities from a contracting point of view that are now afforded to us. So, others may have their own motivation, but GDIT has been core to us. And we’re
taking a really good business in our service business and we’re making it better. What’s not to like about that.
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Howard Rubel
And on that note, Phebe, the other question, similar but a little different, is when you first became General Dynamics’ CEO, you said the M&A process
was broken. What’s changed?
Phebe Novakovic
Our M&A process was broken in that we bought some businesses that were somewhat problematic. We’re past that. Let’s remember, GD, and
particularly on the IS&T side, but GD, the modern GD was built on a series of successful integrations of big and medium size companies. We’re good at that. This team knows how to do that. We were there in the birth of big GD, and we’re
very, very comfortable that we have an effective, disciplined and shareholder focused acquisition and M&A.
I’ve been telling you all for a while
that we invest in our business, our business is growing on the top line across our portfolio, and we’re making the appropriate investments. Here’s a perfect example where we can make an accretive investment in one of our core lines of
business - makes a lot of sense to me.
Howard Rubel
Two more from the web, and then we’ll go back and wrap up with a few more in the room. So, there’s—any questions on potential conflicts of
interest?
Phebe Novakovic
We have identified one
extremely small potential, which we dispatch with very expeditiously.
Howard Rubel
And then one sort of technical question - can CSRA continue to pay its dividend?
Phebe Novakovic
Let’s talk about this. We have
always told you that we have a predictable, sustainable and repeatable dividend policy. I don’t see any of that changing.
Howard Rubel
Well, I think it’s more for—there’s probably a timing with regard to when their next dividend date is. Larry, I don’t know whether you can
address that or whether we just have to be patient and see what the documents are later.
Larry Prior
Yes, we’re going to proceed with normal course.
Howard
Rubel
Thank you.
And I know there’s a couple more
questions in the room. Go ahead.
Joe Caiado
Thank
you. Joe Caiado, Credit Suisse. Phoebe, Jason, can you just help us maybe deconstruct the old IS&T guidance for 2018 into the new segments, GDIT and MS both on the top line and the margins?
Phebe Novakovic
So, post the transaction close, we will
do precisely that - premature.
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Howard Rubel
John?
John Raviv
Thanks for taking the follow-up here. Thinking about visibility in these markets, I mean, I think I would say that
IS&T has been perhaps a little bit softer than implied by some guidance that you’ve given or some multi year targets. I’d say the same thing—I don’t cover CSRA, but I know there’s been some questions around growth and
what it actually turns. I recognize that book to bill has been attracting [unintelligible] times, but how do you know—like what gives you the confidence you have the visibility now, that now is the time to do this because both those businesses
have been perhaps a little more lumpy than we would have liked to have seen?
Phebe Novakovic
Let me tell you something. From a GDIT perspective, post—in the aftermath of the hot wars when our Army facing businesses saw a significant revenue
decline, GDIT has been remarkably constant and really has for us over time. The quick transaction businesses, particularly GDIT and to some extent mission systems, get ripsawed by sequestration extended long term CRs. We’ve got a budget. I
think we have a consensus in our country that the world is getting more dangerous. We’ve got to fund defense, and we have to do it predictably and reliably.
So, I think some of the perceived volatility will evaporate. But, by the way, for the most part, once we said we were going to start growing—last year I
explained to you all it was simply a question of timing. Those revenues are coming in ‘18.
Howard Rubel
Doug?
Doug Harned
Doug Harned, Bernstein. Larry and Dan, when you go back and you look at what Leidos did taking a $5 billion business and adding a $5 billion business
from Lockheed Martin, many of the arguments they talked about are the kinds of things that you’ve referred to here in terms of revenue synergies. When you look at how that’s proceeded, have you seen Leidos become a much stronger competitor
than either of the pieces have been in the past?
Larry Prior
Yeah, I would argue, in the last two quarters, we’ve seen Leidos step up, bidding larger opportunities with greater success. So, we do believe, while it
was a little bumpy out of the gate, they’ve done a pretty good job in the last half. The good news is both of our companies are known for execution, and hopefully, we’ll do better out of the gate.
Phebe Novakovic
And I have every expectation that we do.
We know how to integrate companies. We’ve been doing it for a very, very long time. We’re good at it. We understand CSRA’s business. We like its people. We like its culture. I’m very optimistic that we’re going to hit the
ground running.
Think about a consolidating market, which this is, by the way. It still has a number of players, but it has been a consolidating market.
[Unintelligible.]
Howard Rubel
And I think
we’ll wrap up with Sheila.
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Sheila Kahyaoglu
Thank you. Larry, this one’s for you, actually. Maybe could you talk about—you’ve partnered with Amazon and Azure—how the GDIT portfolio
adds to your cloud services business moving forward.
Larry Prior
Yeah, so I’d point out the first congratulatory text I got this morning was from Teresa Carlson of Amazon. So, we’re deeply committed to our
partnership with Amazon Web Services, Microsoft Azure, Google and others.
It just gives us great competitive advantage to have the depth of enterprise IT
skills that GDIT brings to the marketplace. We I think bring a unique perspective as we focus on those technology partners and bring commercial IT to the government.
When I worked with Amy and her team, I am excited to see how we do both managed services as well as move a lot more work to the cloud, move to automation and
apply AI in a lot of fun, exciting ways. So, it’s a bigger playing field.
Phebe Novakovic
One of the things we found very compelling about CSRA are their strategic alliances. We bring additional customer intimacy, and we have the same customer base,
but within that base some particularly differentiated customers. So, we see this as a nice synergy from a GDIT perspective, and we love their go to market business model - really good.
CONCLUSION
Howard Rubel
With that, thank you, Phebe. Thank you, everybody else. Thank you, everybody here in the room and on the lines. Thanks for joining us today. If you have
additional questions, can be reached at 703-876-3117. Thank you all.
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Notice to Investors
In accordance with the Agreement and Plan of Merger, dated as of February 9, 2018 (the “Merger Agreement”), among General Dynamics Corporation,
a Delaware corporation (“General Dynamics”), Red Hawk Enterprises Corp., a Nevada corporation and a wholly owned subsidiary of General Dynamics (“Merger Sub”) and CSRA Inc., a Nevada corporation (“CSRA”), Merger Sub
will commence a tender offer, but the tender offer has not yet commenced. This transcript is for informational purposes only and is not a recommendation, an offer to purchase or a solicitation of an offer to sell shares of CSRA stock. At the time
the tender offer is commenced, Merger Sub will file a tender offer statement and related exhibits with the SEC and CSRA will file a solicitation/recommendation statement with respect to the tender offer. Investors and stockholders of CSRA are
strongly advised to read the tender offer statement (including the related exhibits) and the solicitation/recommendation statement, as they may be amended from time to time, when they become available, because they will contain important information
that stockholders should consider before making any decision regarding tendering their shares. The tender offer statement (including the related exhibits) and the solicitation/recommendation statement will be available at no charge on the SEC’s
website at www.sec.gov. In addition, the tender offer statement and other documents that Merger Sub files with the SEC will be made available to all stockholders of CSRA free of charge at www.generaldynamics.com. The solicitation/recommendation
statement and the other documents filed by CSRA with the SEC will be made available to all stockholders of CSRA free of charge at www.CSRA.com.
Additional Information about the Merger and Where to Find It
In connection with the potential one-step merger of Merger Sub with and into CSRA without the prior consummation of the tender offer (the “One Step
Merger”), CSRA will file a proxy statement with the SEC. Additionally, CSRA will file other relevant materials with the SEC in connection with the proposed acquisition of CSRA by General Dynamics and Merger Sub pursuant to the terms of the
Merger Agreement. Investors and stockholders of CSRA are strongly advised to read the proxy statement and the other relevant materials, as they may be amended from time to time, when they become available, because they will contain important
information about the One Step Merger and the parties to the One Step Merger, before making any voting or investment decision with respect to the One Step Merger. The proxy statement will be available at no charge on the SEC’s web site at
www.sec.gov. The proxy statement and other documents filed by CSRA with the SEC will be made available to all stockholders of CSRA free of charge at www.CSRA.com.
CSRA and its directors and officers may be deemed to be participants in the solicitation of proxies from CSRA’s stockholders with respect to the One Step
Merger. Information about CSRA’s directors and executive officers and their ownership of CSRA’s common stock is set forth in the proxy statement for CSRA’s 2017 Annual Meeting of Stockholders, which was filed with the SEC on June 27,
2017, and CSRA’s Annual Report on Form 10-K for the fiscal year ended March 31, 2017. CSRA stockholders may obtain additional information regarding the interests of CSRA and its directors and executive officers in the Merger, which may be
different than those of CSRA stockholders generally, by reading the proxy statement and other relevant documents regarding the One Step Merger, when filed with the SEC.
Forward-Looking Statements
Certain statements made in
this transcript, 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 include, among other things, statements about the potential benefits of the proposed transaction; the prospective performance and outlook of the combined company’s business, performance and opportunities, including
the ability to deliver more innovative, leading-edge solutions; the ability of the parties to complete the proposed transaction and the expected timing of completion of the proposed transaction; as well as any assumptions underlying any of the
foregoing. 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. The following are some of the factors that could cause actual future results to differ
materially from those expressed in any forward-looking statements: (i) uncertainties as to the timing of the tender offer and the merger; (ii)
the risk that the proposed transaction may not be completed in a timely manner or at all; (iii) uncertainties as to the percentage of CSRA’s stockholders tendering their shares in the tender
offer; (iv) the possibility that competing offers or acquisition proposals for CSRA will be made; (v) the possibility that any or all of the various conditions to the consummation of the tender offer or the merger may not be satisfied or waived,
including the failure to receive any required regulatory approvals from any applicable governmental entities (or any conditions, limitations or restrictions placed on such approvals); (vi) the occurrence of any event, change or other circumstance
that could give rise to the termination of the Merger Agreement; (vii) the risk that stockholder litigation in connection with the proposed transaction may result in significant costs of defense, indemnification and liability; and (viii) other
factors as set forth from time to time in General Dynamics and CSRA’s filings with the SEC, including their respective Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q, as well as the tender offer statement,
solicitation/recommendation statement and other tender offer documents that will be filed by General Dynamics, Merger Sub and CSRA. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date
hereof.
All forward-looking statements speak only as of the date they were made. General Dynamics 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 transcript.
