GENERAL DYNAMICS CORPORATION FALLS CHURCH, Va., Jan. 27, 2016 /PRNewswire/ --
-- Full-year operating earnings growth in every group
-- Operating margin in the quarter and full-year of 13.3%
-- Earnings from continuing operations up 3.7% to $764 million for the
fourth quarter and 10.9% to $3 billion for 2015
-- Diluted EPS from continuing operations up 9.6% to $2.40 in the quarter
and up 16% at $9.08 for 2015
-- Return on sales of 9.8% in the quarter and 9.4% for the year
General Dynamics (NYSE: GD) today reported fourth-quarter 2015 earnings from continuing operations of $764 million, a 3.7 percent increase over fourth-quarter 2014, on revenue of $7.8 billion. Diluted earnings per share from continuing operations were $2.40 compared to $2.19 in the year-ago quarter, a 9.6 percent increase.
Full-year Results
Full-year earnings from continuing operations rose to $3 billion from $2.7 billion in 2014, a 10.9 percent increase. Diluted earnings per share from continuing operations were up 16 percent at $9.08 compared to $7.83 in 2014. Revenue for 2015 was up 2 percent, to $31.5 billion.
"General Dynamics had another record-setting year of financial performance, with operating earnings, margins, earnings from continuing operations, EPS and return on sales at the highest levels in the company's history," said Phebe Novakovic, chairman and chief executive officer. "We have a healthy and stable backlog with the defense businesses executing on recent program wins, and Aerospace's backlog is growing year-over-year reflecting strong order activity throughout 2015.
"Over the past 36 months, this management team has demonstrated the value of focusing on operations, managing the business for cash and earnings, and growing return on invested capital. The company's accomplishments in 2015 illustrate the strength of our approach and support our commitment to disciplined growth."
Revenue
Revenue for the fourth quarter of 2015 was $7.8 billion. For the full year of 2015, revenue was $31.5 billion, a 2 percent increase compared to 2014. The Aerospace and Marine Systems groups increased revenue in 2015, with Marine Systems growing by more than 9 percent.
Margin
Company-wide operating margin for fourth-quarter and full-year 2015 was 13.3 percent. Margins grew 50 basis points over the fourth quarter of 2014 and 70 basis points for the full year, with expansion in Aerospace, Combat Systems and Information Systems and Technology during the year.
Cash
Net cash provided by operating activities for the full year totaled $2.5 billion. Free cash flow from operations, defined as net cash provided by operating activities less capital expenditures, was $1.9 billion for the year.
Backlog
General Dynamics' total backlog at the end of 2015 was $66.1 billion. It was another strong quarter for the Aerospace group, with order activity in each of the Gulfstream products and across their global market. The estimated potential contract value, representing management's estimate of value in unfunded indefinite delivery, indefinite quantity (IDIQ) contracts and unexercised options, was $24.5 billion. Total potential contract value, the sum of all backlog components, was $90.6 billion at the end of the year.
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. 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 fourth-quarter securities analyst conference call at 11:30 a.m. EST on Wednesday, January 27, 2016. 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 3 p.m. on January 27 and will continue for 12 months. To hear a recording of the conference call by telephone, please call 855-859-2056 (international: 404-537-3406); passcode 22028571. The phone replay will be available from 3 p.m. January 27 through March 3, 2016.
EXHIBIT A
CONSOLIDATED STATEMENTS OF EARNINGS - (UNAUDITED)
DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS
Fourth Quarter Variance
2015 2014 $ %
---- --- ---
Revenue $7,809 $8,362 $(553) (6.6)%
Operating costs and expenses 6,773 7,295 522
----- ----- ---
Operating earnings 1,036 1,067 (31) (2.9)%
Interest, net (19) (19) -
Other, net 2 (3) 5
--- --- ---
Earnings from continuing operations before income tax 1,019 1,045 (26) (2.5)%
Provision for income tax, net 255 308 53
--- ---
Earnings from continuing operations $764 $737 $27 3.7%
==== ==== ===
Discontinued operations, net of tax - (36) 36
--- ---
Net earnings $764 $701 $63 9.0%
==== ==== ===
Earnings per share-basic
Continuing operations $2.44 $2.23 $0.21 9.4%
Discontinued operations $ - $(0.11) $0.11
--- --- ------
Net earnings $2.44 $2.12 $0.32 15.1%
===== ===== =====
Basic weighted average shares outstanding 313.3 330.0
===== =====
Earnings per share-diluted
Continuing operations $2.40 $2.19 $0.21 9.6%
Discontinued operations $ - $(0.10) $0.10
--- --- ------
Net earnings $2.40 $2.09 $0.31 14.8%
===== ===== =====
Diluted weighted average shares outstanding 318.3 335.8
===== =====
EXHIBIT B
CONSOLIDATED STATEMENTS OF EARNINGS - (UNAUDITED)
DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS
Twelve Months Variance
2015 2014 $ %
---- --- ---
Revenue $31,469 $30,852 $617 2.0%
Operating costs and expenses 27,291 26,963 (328)
------ ------ ----
Operating earnings 4,178 3,889 289 7.4%
Interest, net (83) (86) 3
Other, net 7 (1) 8
--- --- ---
Earnings from continuing operations before income tax 4,102 3,802 300 7.9%
Provision for income tax, net 1,137 1,129 (8)
----- ----- ---
Earnings from continuing operations $2,965 $2,673 $292 10.9%
====== ====== ====
Discontinued operations, net of tax - (140) 140
--- ---- ---
Net earnings $2,965 $2,533 $432 17.1%
====== ====== ====
Earnings per share-basic
Continuing operations $9.23 $7.97 $1.26 15.8%
Discontinued operations $ - $(0.41) $0.41
--- --- ------ -----
Net earnings $9.23 $7.56 $1.67 22.1%
===== ===== =====
Basic weighted average shares outstanding 321.3 335.2
===== =====
Earnings per share-diluted
Continuing operations $9.08 $7.83 $1.25 16.0%
Discontinued operations $ - $(0.41) $0.41
--- --- ------ -----
Net earnings $9.08 $7.42 $1.66 22.4%
===== ===== =====
Diluted weighted average shares outstanding 326.7 341.3
===== =====
EXHIBIT C
REVENUE AND OPERATING EARNINGS BY SEGMENT - (UNAUDITED)
DOLLARS IN MILLIONS
Fourth Quarter Variance
2015 2014 $ %
---- --- ---
Revenue:
--------
Aerospace $2,142 $2,240 $(98) (4.4)%
Combat Systems 1,524 1,614 (90) (5.6)%
Information Systems and Technology 2,161 2,468 (307) (12.4)%
Marine Systems 1,982 2,040 (58) (2.8)%
----- ----- ---
Total $7,809 $8,362 $(553) (6.6)%
====== ====== =====
Operating earnings:
-------------------
Aerospace $410 $412 $(2) (0.5)%
Combat Systems 234 271 (37) (13.7)%
Information Systems and Technology 230 212 18 8.5%
Marine Systems 172 193 (21) (10.9)%
Corporate (10) (21) 11 52.4%
--- --- ---
Total $1,036 $1,067 $(31) (2.9)%
====== ====== ====
Operating margin:
-----------------
Aerospace 19.1% 18.4%
Combat Systems 15.4% 16.8%
Information Systems and Technology 10.6% 8.6%
Marine Systems 8.7% 9.5%
Total 13.3% 12.8%
EXHIBIT D
REVENUE AND OPERATING EARNINGS BY SEGMENT - (UNAUDITED)
DOLLARS IN MILLIONS
Twelve Months Variance
2015 2014 $ %
---- ---- --- ---
Revenue:
--------
Aerospace $8,851 $8,649 $202 2.3%
Combat Systems 5,640 5,732 (92) (1.6)%
Information Systems and Technology 8,965 9,159 (194) (2.1)%
Marine Systems 8,013 7,312 701 9.6%
----- ----- ---
Total $31,469 $30,852 $617 2.0%
======= ======= ====
Operating earnings:
-------------------
Aerospace $1,706 $1,611 $95 5.9%
Combat Systems 882 862 20 2.3%
Information Systems and Technology 903 785 118 15.0%
Marine Systems 728 703 25 3.6%
Corporate (41) (72) 31 43.1%
--- ---
Total $4,178 $3,889 $289 7.4%
====== ====== ====
Operating margin:
-----------------
Aerospace 19.3% 18.6%
Combat Systems 15.6% 15.0%
Information Systems and Technology 10.1% 8.6%
Marine Systems 9.1% 9.6%
Total 13.3% 12.6%
EXHIBIT E
CONSOLIDATED BALANCE SHEETS - (UNAUDITED)
DOLLARS IN MILLIONS
December 31, 2015 December 31, 2014
----------------- -----------------
ASSETS
Current assets:
Cash and equivalents $2,785 $4,388
Accounts receivable 3,446 4,050
Contracts in process 4,357 4,591
Inventories 3,366 3,221
Other current assets 617 1,157
--- -----
Total current assets 14,571 17,407
------ ------
Noncurrent assets:
Property, plant and equipment, net 3,466 3,329
Intangible assets, net 763 912
Goodwill 11,443 11,731
Other assets 1,754 1,958
----- -----
Total noncurrent assets 17,426 17,930
------ ------
Total assets $31,997 $35,337
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term debt and current portion of long-term debt $501 $501
Accounts payable 1,964 2,057
Customer advances and deposits 5,674 7,335
Other current liabilities 4,306 3,858
----- -----
Total current liabilities 12,445 13,751
------ ------
Noncurrent liabilities:
Long-term debt 2,898 3,392
Other liabilities 5,916 6,365
-----
Total noncurrent liabilities 8,814 9,757
----- -----
Shareholders' equity:
Common stock 482 482
Surplus 2,730 2,548
Retained earnings 23,204 21,127
Treasury stock (12,392) (9,396)
Accumulated other comprehensive loss (3,286) (2,932)
------ ------
Total shareholders' equity 10,738 11,829
------ ------
Total liabilities and shareholders' equity $31,997 $35,337
======= =======
Note: Prior period information has
been restated to reflect the
reclassification of debt issuance
costs from other assets to debt in
accordance with Accounting Standards
Update (ASU) 2015-03, Interest -
Imputation of Interest (Subtopic
835-30): Simplifying the
Presentation of Debt Issuance Costs.
EXHIBIT F
CONSOLIDATED STATEMENTS OF CASH FLOWS - (UNAUDITED)
DOLLARS IN MILLIONS
Twelve Months Ended
-------------------
December 31, 2015 December 31, 2014
----------------- -----------------
Cash flows from operating activities-continuing operations:
Net earnings $2,965 $2,533
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation of property, plant and equipment 366 375
Amortization of intangible assets 116 121
Equity-based compensation expense 110 128
Excess tax benefit from equity-based compensation (77) (83)
Deferred income tax provision 167 136
Discontinued operations, net of tax - 140
(Increase) decrease in assets, net of effects of business acquisitions:
Accounts receivable 604 330
Contracts in process 231 281
Inventories (156) (303)
Increase (decrease) in liabilities, net of effects of business acquisitions:
Accounts payable (89) (161)
Customer advances and deposits (1,756) 691
Other current liabilities (83) (246)
Other, net 101 (214)
--- ----
Net cash provided by operating activities 2,499 3,728
----- -----
Cash flows from investing activities:
Capital expenditures (569) (521)
Maturities of held-to-maturity securities 500 -
Purchases of held-to-maturity securities - (500)
Proceeds from sales of assets 291 102
Purchases of available-for-sale securities (123) (136)
Sales of available-for-sale securities 122 135
Maturities of available-for-sale securities 6 4
Other, net (27) (186)
--- ----
Net cash provided (used) by investing activities 200 (1,102)
--- ------
Cash flows from financing activities:
Purchases of common stock (3,233) (3,382)
Dividends paid (873) (822)
Repayment of fixed-rate notes (500) -
Proceeds from stock option exercises 268 547
Other, net 79 82
--- ---
Net cash used by financing activities (4,259) (3,575)
------ ------
Net cash (used) provided by discontinued operations (43) 36
--- ---
Net decrease in cash and equivalents (1,603) (913)
Cash and equivalents at beginning of year 4,388 5,301
----- -----
Cash and equivalents at end of year $2,785 $4,388
====== ======
EXHIBIT G
PRELIMINARY FINANCIAL INFORMATION - (UNAUDITED)
DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS
Fourth Quarter 2015 Fourth Quarter 2014
------------------- -------------------
Other Financial Information (a):
--------------------------------
Return on equity (b) 26.4% 20.2%
Debt-to-equity (c) 31.7% 32.9%
Debt-to-capital (d) 24.0% 24.8%
Book value per share (e) $34.31 $35.61
Total taxes paid $95 $446
Company-sponsored research and development (f) $94 $101
Shares outstanding 312,987,277 332,164,097
Non-GAAP Financial Measures (a):
--------------------------------
2015 2014
---- ----
Fourth Quarter Twelve Months Fourth Quarter Twelve Months
-------------- ------------- -------------- -------------
Free cash flow from operations:
Net cash provided by operating activities $329 $2,499 $(70) $3,728
Capital expenditures (209) (569) (184) (521)
---- ---- ---- ----
Free cash flow from operations (g) $120 $1,930 $(254) $3,207
==== ====== ===== ======
Return on invested capital:
Earnings from continuing operations $2,965 $2,673
After-tax interest expense 64 67
After-tax amortization expense 75 79
--- ---
Net operating profit after taxes 3,104 2,819
Average invested capital 17,858 18,673
------ ------
Return on invested capital (h) 17.4% 15.1%
==== ====
Notes describing the calculation
of the other financial
information and a
reconciliation of non-GAAP
financial measures are on the
following page.
EXHIBIT G (cont.)
PRELIMINARY FINANCIAL INFORMATION - (UNAUDITED)
DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS
(a) Prior period information has been
restated to reflect the
reclassification of debt issuance
costs from other assets to debt in
accordance with ASU 2015-03,
Interest -Imputation of Interest
(Subtopic 835-30): Simplifying the
Presentation of Debt Issuance
Costs.
(b) Return on equity is calculated by
dividing earnings from continuing
operations for the latest 12-month
period by our average equity during
that period.
(c) Debt-to-equity ratio is calculated
as total debt divided by total
equity as of the end of the period.
(d) 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.
(e) Book value per share is calculated
as total equity divided by total
outstanding shares as of the end of
the period.
(f) Includes independent research and
development and Aerospace product-
development costs.
(g) 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.
(h) We believe return on invested
capital (ROIC) is a useful measure
for 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 divided by average invested
capital. Net operating profit after
taxes is defined as earnings from
continuing operations plus after-
tax interest and amortization
expense. Average invested capital
is defined as the sum of the
average debt and shareholders'
equity for the year. ROIC excludes
accumulated other comprehensive
loss, goodwill impairments and non-
economic accounting changes as they
are not reflective of our operating
performance. The most directly
comparable GAAP measure to net
operating profit after taxes is
earnings from continuing
operations. After-tax interest and
amortization expense is calculated
using the statutory tax rate of 35
percent.
EXHIBIT H
BACKLOG - (UNAUDITED)
DOLLARS IN MILLIONS
Funded Unfunded Total Estimated Total Potential
Backlog Potential Contract
Contract Value* Value
-------------- -----
Fourth Quarter 2015
-------------------
Aerospace $13,292 $106 $13,398 $2,437 $15,835
Combat Systems 18,398 597 18,995 5,059 24,054
Information Systems and Technology 6,827 1,755 8,582 14,702 23,284
Marine Systems 13,266 11,879 25,145 2,263 27,408
------ ------ ------ ----- ------
Total $51,783 $14,337 $66,120 $24,461 $90,581
======= ======= ======= ======= =======
Third Quarter 2015
------------------
Aerospace $13,459 $100 $13,559 $2,479 $16,038
Combat Systems 18,591 658 19,249 5,261 24,510
Information Systems and Technology 7,294 2,122 9,416 15,074 24,490
Marine Systems 14,391 12,127 26,518 2,734 29,252
------ ------ ------ ----- ------
Total $53,735 $15,007 $68,742 $25,548 $94,290
======= ======= ======= ======= =======
Fourth Quarter 2014
-------------------
Aerospace $13,115 $117 $13,232 $2,734 $15,966
Combat Systems 19,292 506 19,798 5,522 25,320
Information Systems and Technology 7,070 1,539 8,609 16,115 24,724
Marine Systems 13,452 17,319 30,771 2,311 33,082
------ ------ ------ ----- ------
Total $52,929 $19,481 $72,410 $26,682 $99,092
======= ======= ======= ======= =======
* 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, as
applicable.
Because the
value in the
unfunded IDIQ
arrangements
is subject to
the
customer's
future
exercise of
an
indeterminate
quantity of
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.
EXHIBIT H-1
BACKLOG AND ESTIMATED CONTRACT
VALUE -(UNAUDITED)
DOLLARS IN MILLIONS
https://photos.prnewswire.com/prnvar/20160126/326034
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EXHIBIT H-2
BACKLOG AND ESTIMATED CONTRACT
VALUE BY SEGMENT -(UNAUDITED)
DOLLARS IN MILLIONS
https://photos.prnewswire.com/prnvar/20160126/326035
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EXHIBIT I
FOURTH QUARTER 2015 SIGNIFICANT
ORDERS (UNAUDITED)
DOLLARS IN MILLIONS
We received the following significant orders during the fourth quarter of 2015:
Combat Systems
-- $595 to produce over 300 armored personnel carriers (APCs) for the
Danish Defence Acquisition and Logistics Organization.
-- $75 from the U.S. Army for contractor logistics support and training on
the Abrams main battle tank and Heavy Equipment Recovery Combat Utility
Lifting Extraction System (HERCULES) vehicle programs.
Information Systems and Technology
-- $270 from the U.S. Navy to provide fire control system modifications for
ballistic-missile (SSBN) and guided-missile (SSGN) submarines.
-- $180 from the Canadian Department of National Defence for the
procurement of components for a fleet of CP140 aircraft and the upgrade
of data management software for the aircraft.
-- $50 to upgrade the Canadian Forces' existing fleet of Combat Net Radios.
-- An IDIQ contract from the U.S. Air Forces Central Command to provide
communication systems technical support services in Asia. The contract
has a maximum potential value of approximately $450 over five years if
all options are exercised.
Marine Systems
-- $175 from the Navy for design work on the Ohio-class submarine
replacement program.
-- $95 from the Navy for development studies, design services and lead-yard
services in support of the Virginia-class submarine program.
-- $65 from the Navy for planning yard services for the DDG-51 destroyer
and the FFG-7 Oliver Hazard Perry-class frigate programs.
EXHIBIT J
AEROSPACE SUPPLEMENTAL DATA - (UNAUDITED)
Fourth Quarter Twelve Months
2015 2014 2015 2014
---- ---- ---- ----
Gulfstream Green Deliveries (units):
------------------------------------
Large-cabin aircraft 25 28 112 115
Mid-cabin aircraft 12 10 35 29
--- --- --- ---
Total 37 38 147 144
=== === === ===
Gulfstream Outfitted Deliveries (units):
----------------------------------------
Large-cabin aircraft 31 33 120 117
Mid-cabin aircraft 7 9 34 33
--- --- --- ---
Total 38 42 154 150
=== === === ===
Pre-owned Deliveries (units): 2 - 7 3
----------------------------- === === === ===
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SOURCE General Dynamics
