General Dynamics Reports First-Quarter 2019 Results

FALLS CHURCH, Va., April 24, 2019 /PRNewswire/ —

  • Revenue of $9.3 billion, up 22.9 percent year-over-year
  • All segments produce year-over-year revenue growth
  • Orders exceed $10.7 billion, with consolidated book-to-bill of 1.2 to 1.0
  • Aerospace orders surpass $3.1 billion

General Dynamics (NYSE: GD) today reported first-quarter 2019 revenue of $9.3 billion, up 22.9 percent year-over-year, with net earnings of $745 million. Diluted earnings per share were $2.56.

“The solid sales gains and strong bookings reflect the market-leading performance we expect of our operating units,” said Phebe Novakovic, chairman and chief executive officer. “We are pleased with our robust backlog and remain relentlessly focused on improving operating performance.”

Backlog
General Dynamics’ total backlog at the end of first-quarter 2019 was $69.2 billion, up 11.4 percent year-over-year. Estimated potential contract value, representing management’s estimate of value in unfunded indefinite delivery, indefinite quantity (IDIQ) contracts and unexercised options, was $33.9 billion. Total potential contract value, the sum of all backlog components, was $103.2 billion, up 17.7 percent year-over-year.

Order activity remained strong across both the aerospace and defense portfolios. Aerospace booked more than $3.1 billion in orders in the quarter. Significant awards in defense portfolios in the quarter included $2 billion from the U.S. Navy for long-lead materials for Block V Virginia-class submarines, $580 million for services to classified customers, contracts totaling $510 million from the Navy for maintenance and repair of ships and a Virginia-class submarine, a blanket purchase agreement of $490 million from the Defense Information Systems Agency to operate Pentagon and government-furnished network infrastructures, contracts totaling $435 million to support the U.S. Army’s Stryker armored fighting vehicle and Abrams tank programs, contracts totaling $160 million to produce munitions for the U.S. Army, $125 million to provide helicopter training and simulation services to the Army and $115 million for computing and communications equipment under the Army’s Common Hardware Systems-5 program.

Capital Deployment
The company repurchased 525,000 of its outstanding shares in the first quarter. In March, the board of directors increased the company’s quarterly dividend to $1.02 per share. This 9.7 percent increase marked the company’s 22nd consecutive annual dividend increase.

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; IT services; C4ISR solutions; and shipbuilding and ship repair. The company’s 2018 revenue was $36.2 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 risks and uncertainties that 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 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 2019 financial results conference call at 9 a.m. EST on Wednesday, April 24, 2019. 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 24 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 10130304. The phone replay will be available through May 1, 2019.

Charts furnished to investors and securities analysts in connection with General Dynamics’ announcement of its financial results for first-quarter 2019 are available on its website at www.generaldynamics.com.

***

EXHIBIT A

CONSOLIDATED STATEMENT OF EARNINGS – (UNAUDITED)

DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS

Three Months Ended

Variance

March 31, 2019

April 1, 2018

$

%

Revenue

$

9,261

$

7,535

$

1,726

22.9

%

Operating costs and expenses

(8,247)

(6,527)

(1,720)

Operating earnings

1,014

1,008

6

0.6

%

Interest, net

(117)

(27)

(90)

Other, net

18

(21)

39

Earnings before income tax

915

960

(45)

(4.7)

%

Provision for income tax, net

(170)

(161)

(9)

Net earnings

$

745

$

799

$

(54)

(6.8)

%

Earnings per share–basic

$

2.59

$

2.70

$

(0.11)

(4.1)

%

Basic weighted average shares outstanding

287.9

296.4

Earnings per share–diluted

$

2.56

$

2.65

$

(0.09)

(3.4)

%

Diluted weighted average shares outstanding

290.9

301.1

EXHIBIT B

REVENUE AND OPERATING EARNINGS BY SEGMENT – (UNAUDITED)

DOLLARS IN MILLIONS

Three Months Ended

Variance

March 31, 2019

April 1, 2018

$

%


Revenue:

Aerospace

$

2,240

$

1,825

$

415

22.7

%

Combat Systems

1,636

1,440

196

13.6

%

Information Technology

2,169

1,138

1,031

90.6

%

Mission Systems

1,158

1,098

60

5.5

%

Marine Systems

2,058

2,034

24

1.2

%

Total

$

9,261

$

7,535

$

1,726

22.9

%


Operating earnings:

Aerospace

$

328

$

346

$

(18)

(5.2)

%

Combat Systems

206

224

(18)

(8.0)

%

Information Technology

156

101

55

54.5

%

Mission Systems

148

146

2

1.4

%

Marine Systems

180

184

(4)

(2.2)

%

Corporate

(4)

7

(11)

(157.1)

%

Total

$

1,014

$

1,008

$

6

0.6

%


Operating margin:

Aerospace

14.6

%

19.0

%

Combat Systems

12.6

%

15.6

%

Information Technology

7.2

%

8.9

%

Mission Systems

12.8

%

13.3

%

Marine Systems

8.7

%

9.0

%

Total

10.9

%

13.4

%

EXHIBIT C

CONSOLIDATED BALANCE SHEET

DOLLARS IN MILLIONS

(Unaudited)

March 31, 2019

December 31, 2018

ASSETS

Current assets:

Cash and equivalents

$

673

$

963

Accounts receivable

3,718

3,759

Unbilled receivables

7,367

6,576

Inventories

6,185

5,977

Other current assets

924

914

Total current assets

18,867

18,189

Noncurrent assets:

Property, plant and equipment, net

4,054

3,978

Intangible assets, net

2,518

2,585

Goodwill

19,668

19,594

Other assets

2,359

1,062

Total noncurrent assets

28,599

27,219

Total assets

$

47,466

$

45,408

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities:

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

$

2,097

$

973

Accounts payable

3,008

3,179

Customer advances and deposits

6,695

7,270

Other current liabilities

3,582

3,317

Total current liabilities

15,382

14,739

Noncurrent liabilities:

Long-term debt

11,451

11,444

Other liabilities

8,399

7,493

Total noncurrent liabilities

19,850

18,937

Shareholders’ equity:

Common stock

482

482

Surplus

2,937

2,946

Retained earnings

29,781

29,326

Treasury stock

(17,283)

(17,244)

Accumulated other comprehensive loss

(3,683)

(3,778)

Total shareholders’ equity

12,234

11,732

Total liabilities and shareholders’ equity

$

47,466

$

45,408

EXHIBIT D

CONSOLIDATED STATEMENT OF CASH FLOWS – (UNAUDITED)

DOLLARS IN MILLIONS

Three Months Ended

March 31, 2019

April 1, 2018

Cash flows from operating activities–continuing operations:

Net earnings

$

745

$

799

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

Depreciation of property, plant and equipment

114

89

Amortization of intangible and finance lease right-of-use assets

91

20

Equity-based compensation expense

40

29

Deferred income tax provision

(10)

4

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

Accounts receivable

49

(150)

Unbilled receivables

(873)

(608)

Inventories

(210)

(236)

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

Accounts payable

(167)

(358)

Customer advances and deposits

(623)

(149)

Other, net

49

64

Net cash used by operating activities

(795)

(496)

Cash flows from investing activities:

Capital expenditures

(181)

(104)

Other, net

(6)

(1)

Net cash used by investing activities

(187)

(105)

Cash flows from financing activities:

Proceeds from commercial paper, net

1,010

2,494

Dividends paid

(268)

(250)

Purchases of common stock

(133)

(267)

Other, net

88

(25)

Net cash provided by financing activities

697

1,952

Net cash used by discontinued operations

(5)

(2)

Net (decrease) increase in cash and equivalents

(290)

1,349

Cash and equivalents at beginning of period

963

2,983

Cash and equivalents at end of period

$

673

$

4,332

EXHIBIT E

PRELIMINARY FINANCIAL INFORMATION – (UNAUDITED)

DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS

2019

2018

First Quarter

First Quarter


Other Financial Information:

Debt-to-equity (a)

110.7

%

55.0

%

Debt-to-capital (b)

52.5

%

35.5

%

Book value per share (c)

$

42.35

$

39.64

Income tax (payments) refunds, net

$

(37)

$

4

Company-sponsored research and development (d)

$

122

$

140

Shares outstanding

288,871,990

297,033,427


Non-GAAP Financial Measures:

2019

2018

First Quarter

First Quarter

Earnings before interest, taxes, depreciation and amortization:

Net earnings

$

745

$

799

Interest, net

117

27

Provision for income tax, net

170

161

Depreciation of property, plant and equipment

114

89

Amortization of intangible and finance lease right-of-use assets

91

20

Earnings before interest, taxes, depreciation and amortization (e)

$

1,237

$

1,096

Free cash flow from operations:

Net cash used by operating activities

$

(795)

$

(496)

Capital expenditures

(181)

(104)

Free cash flow from operations (f)

$

(976)

$

(600)

(a)

Debt-to-equity ratio is calculated as total debt divided by total equity as of the end of the period.

(b)

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.

(c)

Book value per share is calculated as total equity divided by total outstanding shares as of the end of the period.

(d)

Includes independent research and development and Aerospace product-development costs.

(e)

We believe earnings before interest, taxes, depreciation and amortization (EBITDA) is a useful measure for investors because it provides another measure of our profitability and our ability to service our debt. We calculate EBITDA by adding back interest, taxes, depreciation and amortization to earnings from continuing operations. The most directly comparable GAAP measure to EBITDA is earnings from continuing operations.

(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 key performance measure in evaluating management. The most directly comparable GAAP measure to free cash flow from operations is net cash provided by operating activities.

EXHIBIT F

BACKLOG – (UNAUDITED)

DOLLARS IN MILLIONS

Funded

Unfunded

Total

Backlog

Estimated

Potential

Contract Value*

Total Potential

Contract

Value


First Quarter 2019:

Aerospace

$

11,924

$

244

$

12,168

$

2,080

$

14,248

Combat Systems

15,475

515

15,990

4,185

20,175

Information Technology

4,770

3,584

8,354

16,666

25,020

Mission Systems

5,081

234

5,315

7,186

12,501

Marine Systems

19,935

7,446

27,381

3,831

31,212

Total

$

57,185

$

12,023

$

69,208

$

33,948

$

103,156


Fourth Quarter 2018:

Aerospace

$

11,208

$

167

$

11,375

$

3,130

$

14,505

Combat Systems

16,174

424

16,598

4,187

20,785

Information Technology

4,717

3,248

7,965

17,066

25,031

Mission Systems

4,890

445

5,335

7,409

12,744

Marine Systems

18,837

7,761

26,598

3,703

30,301

Total

$

55,826

$

12,045

$

67,871

$

35,495

$

103,366


First Quarter 2018:

Aerospace

$

11,898

$

158

$

12,056

$

1,868

$

13,924

Combat Systems

17,126

378

17,504

3,549

21,053

Information Technology

2,190

1,275

3,465

11,367

14,832

Mission Systems

4,549

800

5,349

4,420

9,769

Marine Systems

18,310

5,458

23,768

4,271

28,039

Total

$

54,073

$

8,069

$

62,142

$

25,475

$

87,617

*

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 and other agreements with existing customers to purchase new aircraft and aircraft services. We recognize options in backlog when the customer exercises the option and establishes a firm order. For IDIQ contracts, we evaluate the amount of funding we expect to receive and include this amount in our estimated potential contract value. The actual amount of funding received in the future may be higher or lower than our estimate of potential contract value.

EXHIBIT F-1

BACKLOG – (UNAUDITED)

DOLLARS IN MILLIONS

EXHIBIT F-1

Photo – https://mma.prnewswire.com/media/876210/EXHIBIT_F_1.jpg

EXHIBIT F-2

BACKLOG BY SEGMENT – (UNAUDITED)

DOLLARS IN MILLIONS

EXHIBIT F-2 Aerospace

EXHIBIT F-2 Combat Systems

EXHIBIT F-2 Information Technology

EXHIBIT F-2 Mission Systems

EXHIBIT F-2 Marine Systems

Photo – https://mma.prnewswire.com/media/876221/EXHIBIT_F_2_Aerospace.jpg
Photo – https://mma.prnewswire.com/media/876222/EXHIBIT_F_2_Combat_Systems.jpg
Photo – https://mma.prnewswire.com/media/876223/EXHIBIT_F_2_Information_Technology.jpg
Photo – https://mma.prnewswire.com/media/876225/EXHIBIT_F_2_Mission_Systems.jpg
Photo – https://mma.prnewswire.com/media/876224/EXHIBIT_F_2_Marine_Systems.jpg
Photo – https://mma.prnewswire.com/media/876226/EXHIBIT_F_2_Mission_Systems_Segment_Backlog_Key.jpg

EXHIBIT G-1

FIRST QUARTER 2019 SIGNIFICANT ORDERS – (UNAUDITED)

DOLLARS IN MILLIONS

We received the following significant contract awards during the first quarter of 2019:


Combat Systems:

o

$225 from the U.S. Army for inventory management and support services for the Stryker fleet.

o

$160 from the Army for various munitions.

o

$145 from the Army for systems technical support on the Abrams and Stryker programs.

o

$65 from the Army for design and prototype development of the Abrams tank System Enhancement Package Version 4 (SEPv4).


Information Technology:

o

An IDIQ contract from the U.S. Navy to provide cyber mission engineering support services. The program has a maximum potential contract value of $900 among ten awardees.

o

$580 for several key contracts to provide services to classified customers.

o

An IDIQ contract from the Defense Threat Reduction Agency (DTRA) to provide IT support services and capabilities. The program has a maximum potential contract value of $535 among five awardees.

o

An IDIQ contract from the Department of Defense (DoD) to provide cybersecurity, planning, execution and analysis services to the Joint Chiefs of Staff’s J7 training activities. The program has a maximum potential contract value of $500 among six awardees.

o

A blanket purchase agreement of $490 from the Defense Information Systems Agency (DISA) to operate, maintain, deploy and manage Pentagon and regional government-furnished network infrastructures.

o

$125 to provide turnkey training and simulation services for the Army’s Aviation Center of Excellence in Fort Rucker, Alabama.

o

$60 from the U.S. Air Force Central Command for communications technical support services in Asia.

o

$55 from the National Geospatial-Intelligence Agency (NGA) for IT lifecycle management and virtual desktop services.

o

$50 from the U.S. Department of Veterans Affairs to provide managed services to improve service desk interactions with end users.


Mission Systems:

o

$115 from the Army for computing and communications equipment under the Common Hardware Systems-5 (CHS-5) program.

o

$55 to provide development and maintenance services for the Army’s Consolidated Project Management (CPM) Next program.

o

$55 from the Navy for the production of Digital Modular Radios (DMR).

o

$45 from the Army for the production of the Prophet Enhanced Tactical Signals Intelligence System.

o

$40 for additional equipment to support the Army’s mobile communications network.

EXHIBIT G-2

FIRST QUARTER 2019 SIGNIFICANT ORDERS – (UNAUDITED)

DOLLARS IN MILLIONS


Marine Systems:

o

$2 billion from the Navy for long-lead materials for Block V Virginia-class submarines.

o

$300 from the Navy to provide maintenance and repair services for the Arleigh Burke-class (DDG-51) guided-missile destroyer, Wasp-class amphibious assault ship and Nimitz-class aircraft carrier programs.

o

$210 from the Navy for planning, scheduling and technical support for maintenance activities on the USS South Dakota, a Virginia-class submarine.

o

$70 from the Navy for planning yard services for the DDG-51 destroyer program.

o

$40 from the Navy to provide non-nuclear maintenance and repair services for submarines located at the Naval Submarine Support Facility in New London, Connecticut.

EXHIBIT H

AEROSPACE SUPPLEMENTAL DATA – (UNAUDITED)

First Quarter

2019

2018


Gulfstream Aircraft Deliveries (units):

Large-cabin aircraft

27

19

Mid-cabin aircraft

7

7

Total

34

26


Pre-owned Aircraft Deliveries (units):

4

1


Aerospace Book-to-Bill:

Orders

$

3,131

$

1,445

Revenue (excluding pre-owned aircraft sales)

2,198

1,817

Book-to-Bill Ratio*

1.42x

0.80x

*

Does not include contract amendments, customer defaults, pricing adjustments, liquidated damages, cancellations, foreign exchange fluctuations and other backlog adjustments.

General Dynamics (PRNewsFoto/General Dynamics) (PRNewsFoto/General Dynamics)

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