U.S. Markets closed

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 (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 - http://globalfinance.zenfs.com/en_us/Finance/US_AFTP_PRNEWSWIRE_LIVE/General_Dynamics_Reports_FirstQuarter_2019-5e38ebda31bf71edbfa46c0893a2fcb4

 

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 - http://globalfinance.zenfs.com/en_us/Finance/US_AFTP_PRNEWSWIRE_LIVE/General_Dynamics_Reports_FirstQuarter_2019-15c0523029cc9b246be14ca2434b0042
Photo - http://globalfinance.zenfs.com/en_us/Finance/US_AFTP_PRNEWSWIRE_LIVE/General_Dynamics_Reports_FirstQuarter_2019-98323d1aa68710a26c8009aefe2f6595
Photo - http://globalfinance.zenfs.com/en_us/Finance/US_AFTP_PRNEWSWIRE_LIVE/General_Dynamics_Reports_FirstQuarter_2019-2c9a830c814cab0d51ef0d3982fc6dd5
Photo - http://globalfinance.zenfs.com/en_us/Finance/US_AFTP_PRNEWSWIRE_LIVE/General_Dynamics_Reports_FirstQuarter_2019-a1eb84cecb3ef865f7280235de7ccfb2
Photo - http://globalfinance.zenfs.com/en_us/Finance/US_AFTP_PRNEWSWIRE_LIVE/General_Dynamics_Reports_FirstQuarter_2019-32af26b49502bd6fe4f76fe3b77b6535
Photo - http://globalfinance.zenfs.com/en_us/Finance/US_AFTP_PRNEWSWIRE_LIVE/General_Dynamics_Reports_FirstQuarter_2019-7e20160e7afd7eca24eaa669d717f132

 

 

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:



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



$160 from the Army for various munitions.



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



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



Information Technology:


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.



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



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.



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.



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.



•  

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



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



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



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



Mission Systems:


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



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



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



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



$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:


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



$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.



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



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



•    

$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)

 

Cision

View original content to download multimedia:http://www.prnewswire.com/news-releases/general-dynamics-reports-first-quarter-2019-results-300837019.html