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General Dynamics Reports Strong Earnings, Revenue Growth in Fourth Quarter 2007- Earnings from Continuing Operations Grow 24.8 percent
FALLS CHURCH, Va., Jan. 23 /PRNewswire-FirstCall/ -- General Dynamics (NYSE: GD) today reported financial results for the fourth quarter and full year of 2007, which ended December 31. Fourth-Quarter Results General Dynamics' earnings from continuing operations in the fourth quarter 2007 were $578 million, or $1.42 per share on a fully diluted basis, compared to 2006 fourth-quarter earnings from continuing operations of $463 million, or $1.13 per share fully diluted. Revenue for the fourth quarter 2007 was $7.5 billion, compared to fourth-quarter 2006 revenue of $6.5 billion. Full-year 2007 Results Earnings from continuing operations for 2007 were $2.1 billion, or $5.10 per share on a fully diluted basis, compared with $1.7 billion, or $4.20 fully diluted, in 2006. This is an increase of 21.6 percent. Revenue for the full year 2007 was $27.2 billion, compared with $24.1 billion for 2006, an increase of 13.2 percent. Cash Net cash provided by operating activities from continuing operations totaled $1.07 billion in the quarter and $2.95 billion for the year. Free cash flow from operations, defined as net cash provided by operating activities from continuing operations less capital expenditures, was $891 million in the quarter and $2.48 billion for the year. Backlog The company's funded backlog grew by $292 million in the fourth quarter of 2007, to $37.2 billion. Compared to year-end 2006, funded backlog increased $3.2 billion. Total backlog at year-end 2007 was $46.8 billion. Margins Operating margins for the fourth quarter 2007 increased to 11.6 percent from 10.8 percent for fourth quarter 2006. For the full year, company-wide operating margins increased by 50 basis points over 2006, to 11.4 percent. Net Earnings General Dynamics' net earnings for the fourth quarter of 2007 were $579 million, compared to fourth-quarter 2006 net earnings of $408 million, which included charges in discontinued operations related to the anticipated sale of the company's coal mining operations. Net earnings for the full year were $2.07 billion in 2007, compared to $1.86 billion in 2006 which included a gain in discontinued operations from the sale of the company's aggregates business. "General Dynamics generated solid returns in the fourth quarter of 2007," said General Dynamics Chairman and Chief Executive Officer Nicholas D. Chabraja. "Revenues and earnings grew substantially over the fourth quarter of 2006, and operating margins increased 80 basis points, to 11.6 percent, when compared to the fourth quarter 2006. Free cash flow from operations in the quarter was $891 million, or more than 150 percent of net earnings. "Highlights of the quarter included significant revenue and earnings growth in the Combat Systems group on strong combat-vehicle sales, including Abrams tank modernization and Stryker production, as well as significant sales and earnings increases in the Aerospace group," Chabraja said. "Marine Systems once again improved margin rates, on a modest increase in sales volume, contributing to another year of strong performance across the corporation. Notably, total backlog in the Information Systems and Technology segment grew $300 million on the strength of $3 billion in orders, reflecting a book-to- bill ratio of 1.2. "Given our strong performance in 2007, the record backlog and strong support for our programs, we expect 2008 earnings to be in the range of $5.55 to $5.65 per share, fully diluted," Chabraja said. General Dynamics, headquartered in Falls Church, Virginia, employs approximately 83,500 people worldwide. The company is a market leader in business aviation; land and expeditionary combat systems, armaments and munitions; shipbuilding and marine systems; and information systems and technologies. More information about the company is available on the Internet at www.generaldynamics.com. 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, our Annual Report on Form 10-K and our Quarterly Reports on Form 10-Q. All forward-looking statements speak only as of the date of this press release. 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, scheduled for 11:30 a.m. Eastern Time on Wednesday, January 23, 2008. Those accessing the webcast will be able to listen to management's discussion of the fourth-quarter and full-year results, as well as the question-and-answer session with securities analysts. The webcast will be available at www.generaldynamics.com. An on-demand replay of the webcast will be available by 3 p.m. on January 23 and will continue for 12 months. To hear a recording of the conference call by telephone, please call 888- 286-8010 (international: 617-801-6888); passcode 97541627. It will be available from 3 p.m. on January 23 until midnight January 30, 2008.
CONSOLIDATED STATEMENT OF EARNINGS (UNAUDITED)
DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS
Fourth Quarter Variance
2007 2006 $ %
NET SALES $7,515 $6,514 $1,001 15.4%
OPERATING COSTS AND EXPENSES 6,644 5,811 (833)
OPERATING EARNINGS 871 703 168 23.9%
Interest, Net (11) (27) 16
Other, Net - - -
EARNINGS FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 860 676 184 27.2%
Provision for Income Taxes 282 213 (69)
EARNINGS FROM CONTINUING OPERATIONS $578 $463 $115 24.8%
Discontinued Operations, Net of Tax 1 (55) 56
NET EARNINGS $579 $408 $171 41.9%
EARNINGS PER SHARE - BASIC
Continuing Operations $1.43 $1.14 $0.29 25.4%
Discontinued Operations $- $(0.13) $0.13
Net Earnings $1.43 $1.01 $0.42 41.6%
BASIC WEIGHTED AVERAGE
SHARES OUTSTANDING (IN MILLIONS) 403.3 405.0
EARNINGS PER SHARE - DILUTED
Continuing Operations $1.42 $1.13 $0.29 25.7%
Discontinued Operations $- $(0.13) $0.13
Net Earnings $1.42 $1.00 $0.42 42.0%
DILUTED WEIGHTED AVERAGE
SHARES OUTSTANDING (IN MILLIONS) 406.9 408.7
CONSOLIDATED STATEMENT OF EARNINGS (UNAUDITED)
DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS
Twelve Months Variance
2007 2006 $ %
NET SALES $27,240 $24,063 $3,177 13.2%
OPERATING COSTS AND EXPENSES 24,127 21,438 (2,689)
OPERATING EARNINGS 3,113 2,625 488 18.6%
Interest, Net (70) (101) 31
Other, Net 4 3 1
EARNINGS FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 3,047 2,527 520 20.6%
Provision for Income Taxes 967 817 (150)
EARNINGS FROM CONTINUING OPERATIONS $2,080 $1,710 $370 21.6%
Discontinued Operations, Net of Tax (8) 146 (154)
NET EARNINGS $2,072 $1,856 $216 11.6%
EARNINGS PER SHARE - BASIC
Continuing Operations $5.14 $4.24 $0.90 21.2%
Discontinued Operations $(0.02) $0.36 $(0.38)
Net Earnings $5.12 $4.60 $0.52 11.3%
BASIC WEIGHTED AVERAGE
SHARES OUTSTANDING (IN MILLIONS) 404.4 403.4
EARNINGS PER SHARE - DILUTED
Continuing Operations $5.10 $4.20 $0.90 21.4%
Discontinued Operations $(0.02) $0.36 $(0.38)
Net Earnings $5.08 $4.56 $0.52 11.4%
DILUTED WEIGHTED AVERAGE
SHARES OUTSTANDING (IN MILLIONS) 408.1 406.8
NET SALES AND OPERATING EARNINGS BY SEGMENT (UNAUDITED)
DOLLARS IN MILLIONS
Fourth Quarter Variance
2007 2006 $ %
NET SALES:
AEROSPACE $1,211 $1,033 $178 17.2%
COMBAT SYSTEMS 2,645 1,805 840 46.5%
MARINE SYSTEMS 1,218 1,178 40 3.4%
INFORMATION SYSTEMS AND
TECHNOLOGY 2,441 2,498 (57) (2.3)%
TOTAL $7,515 $6,514 $1,001 15.4%
OPERATING EARNINGS:
AEROSPACE $212 $168 $44 26.2%
COMBAT SYSTEMS 323 194 129 66.5%
MARINE SYSTEMS 101 84 17 20.2%
INFORMATION SYSTEMS AND
TECHNOLOGY 254 266 (12) (4.5)%
CORPORATE (19) (9) (10) (111.1)%
TOTAL $871 $703 $168 23.9%
OPERATING MARGINS:
AEROSPACE 17.5% 16.3%
COMBAT SYSTEMS 12.2% 10.7%
MARINE SYSTEMS 8.3% 7.1%
INFORMATION SYSTEMS AND
TECHNOLOGY 10.4% 10.6%
TOTAL 11.6% 10.8%
NET SALES AND OPERATING EARNINGS BY SEGMENT (UNAUDITED)
DOLLARS IN MILLIONS
Twelve Months Variance
2007 2006 $ %
NET SALES:
AEROSPACE $4,828 $4,116 $712 17.3%
COMBAT SYSTEMS 7,797 5,983 1,814 30.3%
MARINE SYSTEMS 4,993 4,940 53 1.1%
INFORMATION SYSTEMS AND
TECHNOLOGY 9,622 9,024 598 6.6%
TOTAL $27,240 $24,063 $3,177 13.2%
OPERATING EARNINGS:
AEROSPACE $810 $644 $166 25.8%
COMBAT SYSTEMS 916 677 239 35.3%
MARINE SYSTEMS 421 375 46 12.3%
INFORMATION SYSTEMS AND
TECHNOLOGY 1,027 976 51 5.2%
CORPORATE (61) (47) (14) (29.8)%
TOTAL $3,113 $2,625 $488 18.6%
OPERATING MARGINS:
AEROSPACE 16.8% 15.6%
COMBAT SYSTEMS 11.7% 11.3%
MARINE SYSTEMS 8.4% 7.6%
INFORMATION SYSTEMS AND
TECHNOLOGY 10.7% 10.8%
TOTAL 11.4% 10.9%
PRELIMINARY CONSOLIDATED BALANCE SHEET (UNAUDITED)
DOLLARS IN MILLIONS
December 31, December 31,
2007 2006
Current Assets:
Cash and equivalents $2,891 $1,604
Accounts receivable 2,874 2,341
Contracts in process 4,337 3,988
Inventories 1,621 1,484
Other current assets 575 463
Total Current Assets 12,298 9,880
Noncurrent Assets:
Property, plant and equipment, net 2,472 2,168
Intangible assets, net 972 1,184
Goodwill 8,942 8,541
Other assets 1,049 603
Total Noncurrent Assets 13,435 12,496
$25,733 $22,376
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Short-term debt and current portion of
long-term debt $673 $7
Accounts payable 2,318 1,956
Customer advances and deposits 3,440 2,949
Other current liabilities 2,733 2,912
Total Current Liabilities 9,164 7,824
Noncurrent Liabilities:
Long-term debt 2,118 2,774
Other liabilities 2,683 1,951
Commitments and contingencies
Total Noncurrent Liabilities 4,801 4,725
Shareholders' Equity:
Common stock 482 482
Surplus 1,141 880
Retained earnings 11,379 9,769
Treasury stock (1,881) (1,455)
Accumulated other comprehensive income 647 151
Total Shareholders' Equity 11,768 9,827
$25,733 $22,376
PRELIMINARY CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
DOLLARS IN MILLIONS
Cash Flows from Operating Twelve Months Ended
Activities: December 31, December 31,
2007 2006
Net earnings $2,072 $1,856
Adjustments to reconcile net earnings
to net cash provided by
operating activities:
Depreciation 278 251
Amortization 145 133
Stock-based compensation expense 86 61
Excess tax benefit from stock-based
compensation (67) (47)
Deferred income tax provision 122 45
Discontinued operations, net of tax 8 (146)
(Increase) decrease in assets, net of
effects of business acquisitions:
Accounts receivable (519) (160)
Contracts in process (435) (390)
Inventories (135) (237)
Increase (decrease) in liabilities,
net of effects of business
acquisitions:
Accounts payable 340 180
Customer advances and deposits 993 399
Income taxes payable 66 39
Other, net (2) 172
Net Cash Provided by Operating
Activities from Continuing Operations 2,952 2,156
Net Cash Used by Discontinued
Operations - Operating Activities (27) (28)
Net Cash Provided by Operating
Activities 2,925 2,128
Cash Flows from Investing Activities:
Purchases of available-for-sale
securities (2,798) (82)
Sales/maturities of available-for-sale
securities 2,619 70
Capital expenditures (474) (334)
Business acquisitions, net of cash
acquired (330) (2,342)
Discontinued operations 23 300
Other, net 108 72
Net Cash Used by Investing Activities (852) (2,316)
Cash Flows from Financing Activities:
Purchases of common stock (505) (85)
Dividends paid (445) (359)
Proceeds from option exercises 207 253
Excess tax benefit from stock-based
compensation 67 47
Repayment of fixed-rate notes - (500)
Other, net (110) 105
Net Cash Used by Financing Activities (786) (539)
Net Increase (Decrease) in Cash and
Equivalents 1,287 (727)
Cash and Equivalents at Beginning of
Period 1,604 2,331
Cash and Equivalents at End of Period $2,891 $1,604
PRELIMINARY FINANCIAL INFORMATION (UNAUDITED)
DOLLARS IN MILLIONS EXCEPT PER SHARE AND EMPLOYEE AMOUNTS
Fourth Quarter Fourth Quarter
2007 2006
Non-GAAP Financial Measures:
Free Cash Flow from Operations:
Net Cash Provided by Operating Year-to- Year-to-
Activities from Continuing Quarter date Quarter date
Operations $1,071 $2,952 $824 $2,156
Capital Expenditures (180) (474) (137) (334)
Free Cash Flow from Operations(A) $891 $2,478 $687 $1,822
Return on Invested Capital:
Earnings from Continuing
Operations $2,080 $1,710
After-Tax Interest Expense 89 106
After-Tax Amortization Expense 99 90
Net Operating Profit after Taxes 2,268 1,906
Average Debt and Equity 13,430 12,220
Return on Invested Capital (B) 16.9% 15.6%
Other Financial Information:
Debt-to-Equity ( C ) 23.7% 28.3%
Debt-to-Capital (D) 19.2% 22.1%
Book Value per Share (E) $29.13 $24.22
Total Taxes Paid $156 $194
Company Sponsored R&D (F) $124 $101
Employment 83,500 81,000
Sales Per Employee (G) $329,400 $309,300
Shares Outstanding 403,979,572 405,792,438
(A) The company's management believes free cash flow from operations is
a measurement that is useful to investors, because it portrays the
company's ability to generate cash from its core businesses for such
purposes as repaying maturing debt, funding business acquisitions
and paying dividends. The company uses free cash flow from
operations to assess the quality of its 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 from continuing operations.
(B) The company's management believes return on invested capital is a
measurement that is useful to investors, because it reflects the
company's ability to generate returns from the capital it has
deployed in its operations. The company uses ROIC to evaluate
investment decisions and as a performance measure in evaluating
management. The company defines ROIC as net operating profit after
taxes for the latest 12-month period divided by the sum of the
average debt and shareholders' equity for the same period. Net
operating profit after taxes is defined as earnings from continuing
operations plus after-tax interest and amortization expense. The
most directly comparable GAAP measure to net operating profit after
taxes is earnings from continuing operations.
( C ) 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 bid and proposal
costs and Gulfstream product development costs.
(G) Sales per employee is calculated by dividing net sales for the
latest 12-month period by the company's average number of employees
during that period.
BACKLOG (UNAUDITED)
DOLLARS IN MILLIONS
Estimated Total
Potential Estimated
Total Contract Contract
Fourth Quarter 2007 Funded Unfunded Backlog Value* Value
AEROSPACE $11,591 $665 $12,256 $925 $13,181
COMBAT SYSTEMS 10,824 2,077 12,901 2,347 15,248
MARINE SYSTEMS 7,621 4,439 12,060 2,513 14,573
INFORMATION SYSTEMS AND
TECHNOLOGY 7,158 2,457 9,615 8,721 18,336
TOTAL $37,194 $9,638 $46,832 $14,506 $61,338
Third Quarter 2007
AEROSPACE $10,241 $687 $10,928 $964 $11,892
COMBAT SYSTEMS 11,371 2,195 13,566 2,083 15,649
MARINE SYSTEMS 8,106 4,641 12,747 2,601 15,348
INFORMATION SYSTEMS AND
TECHNOLOGY 7,184 2,123 9,307 9,496 18,803
TOTAL $36,902 $9,646 $46,548 $15,144 $61,692
Fourth Quarter 2006
AEROSPACE $6,941 $752 $7,693 $964 $8,657
COMBAT SYSTEMS 10,086 1,883 11,969 1,855 13,824
MARINE SYSTEMS 9,449 4,576 14,025 1,052 15,077
INFORMATION SYSTEMS AND
TECHNOLOGY 7,548 2,432 9,980 9,218 19,198
TOTAL $34,024 $9,643 $43,667 $13,089 $56,756
* The estimated potential contract value represents management's estimate
of the company's future contract value under indefinite delivery,
indefinite quantity (IDIQ) contracts and unexercised options associated
with existing firm contracts. Because the value in the IDIQ
arrangements is subject to the customer's future exercise of an
indeterminate quantity of delivery orders, the company recognizes these
contracts in backlog only when they are funded. Unexercised options are
recognized in backlog when the customer exercises the options and
establishes a firm order.
FOURTH QUARTER 2007 SIGNIFICANT ORDERS (UNAUDITED)
DOLLARS IN MILLIONS
General Dynamics received the following significant contract orders during the fourth quarter of 2007:
Combat Systems
-- Combined orders worth $347 from the U.S. Army under the Abrams M1A2
System Enhancement Package (SEP) program to reset and upgrade
approximately 420 vehicles.
-- $308 from the Army under the Egyptian M1A1 Abrams Tank Co-production
program to supply 125 tank kits for assembly.
-- Combined orders worth $236 for 401 armored Cougar vehicles and related
spares under the Mine Resistant Ambush Protected (MRAP) vehicle
program. The company is providing these vehicles to the U.S. Marine
Corps through a joint venture with Force Protection, Inc.
-- Combined orders worth $84 from the Army for Abrams Tank System
Technical Support, bringing the total contract value to over $400.
-- $88 from the Spanish government for 21 Piranha II wheeled armored
vehicles.
Marine Systems
-- $270 from the U.S. Navy to purchase long-lead materials for the FY 09
Virginia-class submarine.
-- $189 from the Navy for procurement of long-lead materials and pre-
production planning for the DDG 1000 Zumwalt-class destroyers.
Information Systems and Technology
-- Contract modifications from the Army worth $633 to continue design and
development of the Warfighter Information Network-Tactical (WIN-T)
system.
-- Combined orders totaling $113 under the Common Hardware/Software III
program, bringing the total contract value to approximately $1.1
billion.
-- $91 from the Navy to provide modifications and support for fire control
systems aboard U.S. and U.K. ballistic missile submarines and for the
attack weapons control system aboard U.S. guided missile submarines.
The contract has a total potential value of approximately $160.
-- $86 from the U.K. Royal Air Force for the tactical data link system of
the Tactical Information Exchange Capability (TIEC) program. TIEC
provides aircrew with enhanced situational awareness.
AIRCRAFT DELIVERIES (UNAUDITED)
Fourth Quarter Twelve Months
2007 2006 2007 2006
GREEN (UNITS):
LARGE AIRCRAFT 19 19 79 71
MID-SIZE AIRCRAFT 16 11 59 42
TOTAL 35 30 138 113
COMPLETIONS (UNITS):
LARGE AIRCRAFT 20 17 82 71
MID-SIZE AIRCRAFT 17 12 56 33
TOTAL 37 29 138 104
PRE-OWNED:
UNITS - 1 8 11
SALES (millions) $- $13 $78 $217
OPERATING EARNINGS (millions) $- $3 $6 $20
AEROSPACE MARGINS EXCLUDING
PRE-OWNED ACTIVITY 17.5% 16.2% 16.9% 16.0%
AIRCRAFT ORDERS (UNAUDITED)
UNITS
Large Mid-size
Aircraft Aircraft Total
2007 2006 2007 2006 2007 2006
ORDERS 179 114 78 45 257 159
DELIVERIES (A) 79 71 59 42 138 113
BOOK-TO-BILL 2.27 1.61 1.32 1.07 1.86 1.41
(A) Represents green deliveries.
Website: http://www.generaldynamics.com// |
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