GENERAL DYNAMICS CORPORATION 
By FALLS CHURCH, Va., Jan. 23, 2013 /PRNewswire/ -- General Dynamics (NYSE: GD) today announced 2012 fourth-quarter and full-year financial results, which include significant, primarily non-cash charges recorded in the fourth quarter. Adjusting for the impact of those charges, non-GAAP fourth-quarter 2012 earnings from continuing operations were $491 million or $1.39 per share, fully diluted. On an unadjusted GAAP basis, the company reported a loss from continuing operations of $2.1 billion, or $6.07 per share fully diluted, for the quarter.
Adjusted 2012 full-year earnings from continuing operations were $2.3 billion, or $6.48 per share fully diluted. On a GAAP basis the company reported a loss from continuing operations of $332 million for 2012, or $0.94 per share fully diluted.
During the fourth quarter the company recorded a $2 billion goodwill impairment related to its Information Systems and Technology (IS&T) group. This charge recognizes the impact of slowed defense spending in the company's IS&T businesses. The company also recorded $867 million in other charges in the quarter, including intangible asset impairments of $301 million in its Aerospace and IS&T groups, which are detailed in Exhibit C of this press release.
Phebe N. Novakovic, chairman and chief executive officer of General Dynamics, said, "General Dynamics' operating results in 2012 and the charges that we have recorded in the fourth quarter reflect the fact that some of our markets are contracting as government budgets shrink at home and abroad. They also suggest opportunities for improvement in some areas of our performance, which we are addressing.
"General Dynamics is a strong corporation with relevant product and service offerings that are critical to our customers' missions. We will continue to manage our business aggressively as we approach the opportunities and the challenges of the future," Novakovic said.
Revenues
Revenues were $8.1 billion in the fourth quarter of 2012 and $31.5 billion for the full year.
Margins
Company-wide operating margins on a non-GAAP basis were 10.1 percent for the fourth quarter and 11.4 percent for the year. On a GAAP basis, company-wide operating margins were -23.5 percent for the fourth quarter and 2.6 percent for the year.
Cash
Net cash provided by operating activities, which was largely unaffected by the charges described above, totaled $780 million in the fourth quarter of 2012 and $2.7 billion for the full year. Free cash flow from operations, defined as net cash provided by operating activities less capital expenditures, was $616 million in the quarter and $2.2 billion for the year.
Backlog
The company's total backlog was $51.3 billion at the end of 2012. In the fourth quarter, orders were particularly strong for the Marine Systems group, including $2.4 billion in awards to continue the development of the U.S. Navy's next-generation strategic deterrent submarine, to purchase long-lead materials for three Virginia-class attack submarines, and to construct two commercial containerships. Other notable orders received in the quarter include awards for additional Stryker infantry combat vehicles, for Abrams tanks for a foreign customer, and for the production of tactical networking equipment and radios for the U.S. Army.
Estimated potential contract value was $26.9 billion at year-end 2012, representing management's estimate of the value of unfunded indefinite delivery, indefinite quantity (IDIQ) contracts and unexercised contract options. Total potential contract value, the sum of all backlog components, was $78.1 billion at the end of the year.
"Looking ahead to 2013, we anticipate earnings per share from continuing operations to be in the range of $6.60 to $6.70," Novakovic said.
General Dynamics, headquartered in Falls Church, Virginia, employs approximately 92,200 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.
Use of Non-GAAP Financial Information
To supplement the review of General Dynamics Corporation's consolidated financial statements presented on a GAAP basis, the company has provided non-GAAP calculations of certain financial measures along with explanations of the company's use of these measures on Exhibits C, E, G and J to this press release.
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. Eastern Standard Time on Wednesday, January 23, 2013. The webcast will be a listen-only audio event, available at www.generaldynamics.com. An on-demand replay of the webcast will be available shortly after the conclusion of the call 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 19265786. The phone replay will be available shortly after the conclusion of the call January 23 until midnight January 30.
EXHIBIT A
CONSOLIDATED STATEMENTS OF EARNINGS (LOSS) - (UNAUDITED)
DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS
Fourth Quarter Variance
2011 2012 $ %
---- ---- --- ---
Revenues $9,147 $8,078 $(1,069) (11.7)%
Operating costs and expenses 8,197 9,980 (1,783)
----- ----- ------
Operating earnings (loss) 950 (1,902) (2,852) (300.2)%
Interest, net (38) (41) (3)
Other, net (1) (128) (127)
--- ---- ----
Earnings (loss) from continuing operations
before income taxes 911 (2,071) (2,982) (327.3)%
Provision for income taxes 308 59 249
--- --- ---
Earnings (loss) from continuing operations $603 $(2,130) $(2,733) (453.2)%
==== ======= =======
Discontinued operations, net of tax - - -
--- --- ---
Net earnings (loss) $603 $(2,130) $(2,733) (453.2)%
==== ======= =======
Earnings (loss) per share - basic
Continuing operations $1.69 $(6.07) $(7.76) (459.2)%
Discontinued operations $ - $ - $ -
-------------------- ------------------- -----------------
Net earnings (loss) $1.69 $(6.07) $(7.76) (459.2)%
===== ====== ======
Basic weighted average shares outstanding 356.2 350.9
===== =====
Earnings (loss) per share - diluted
Continuing operations $1.68 $(6.07) * $(7.75) (461.3)%
Discontinued operations $ - $ - $ -
-------------------- -------------------
Net earnings (loss) $1.68 $(6.07) * $(7.75) (461.3)%
===== ====== ======
Diluted weighted average shares outstanding 359.4 350.9 *
===== =====
* Fourth quarter 2012 amounts exclude dilutive effect of stock options and restricted stock as it would be antidilutive.
EXHIBIT B
CONSOLIDATED STATEMENTS OF EARNINGS (LOSS) - (UNAUDITED)
DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS
Twelve Months Variance
2011 2012 $ %
---- ---- --- ---
Revenues $32,677 $31,513 $(1,164) (3.6)%
Operating costs and expenses 28,851 30,680 (1,829)
------ ------ ------
Operating earnings 3,826 833 (2,993) (78.2)%
Interest, net (141) (156) (15)
Other, net 33 (136) (169)
--- ---- ----
Earnings from continuing operations
before income taxes 3,718 541 (3,177) (85.4)%
Provision for income taxes 1,166 873 293
----- --- ---
Earnings (loss) from continuing operations $2,552 $(332) $(2,884) (113.0)%
====== ===== =======
Discontinued operations, net of tax (26) - 26
--- --- ---
Net earnings (loss) $2,526 $(332) $(2,858) (113.1)%
====== ===== =======
Earnings (loss) per share - basic
Continuing operations $7.01 $(0.94) $(7.95) (113.4)%
Discontinued operations $(0.07) $ - $0.07
------ ------------------ -----
Net earnings (loss) $6.94 $(0.94) $(7.88) (113.5)%
===== ====== ======
Basic weighted average shares outstanding 364.1 353.3
===== =====
Earnings (loss) per share - diluted
Continuing operations $6.94 $(0.94) * $(7.88) (113.5)%
Discontinued operations $(0.07) $ - $0.07
------ -------------------
Net earnings (loss) $6.87 $(0.94) * $(7.81) (113.7)%
===== ====== ======
Diluted weighted average shares outstanding 367.5 353.3 *
===== =====
* 2012 amounts exclude dilutive effect of stock options and restricted stock as it would be antidilutive.
EXHIBIT C
CALCULATION OF ADJUSTED NON-GAAP EARNINGS FROM CONTINUING OPERATIONS AND
ADJUSTED NON-GAAP DILUTED EARNINGS PER SHARE - (UNAUDITED)
DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS
Fourth Quarter Twelve Months
2012 2012
---- ----
Calculation of adjusted non-GAAP earnings from continuing operations:
---------------------------------------------------------------------
Loss from continuing operations (from Exhibits A and B, respectively) $(2,130) $(332)
======= =====
Non-GAAP adjustments:
Goodwill impairment (a) 1,994 1,994
Intangible asset impairments (a) 301 301
Contract disputes accruals (b) 292 292
Restructuring-related charges (c) 98 98
Inventory-related charges (d) 53 78
Debt retirement charge (e) 123 123
Tax effects (f) (240) (249)
---- ----
Adjusted non-GAAP earnings from continuing operations $491 $2,305
==== ======
Calculation of diluted (loss) earnings per share from continuing operations:
----------------------------------------------------------------------------
Loss from continuing operations $(2,130) $(332)
Basic weighted average shares outstanding 350.9 353.3
Diluted loss per share from continuing operations $(6.07) (g) $(0.94) (g)
====== ======
Adjusted non-GAAP earnings from continuing operations $491 $2,305
Diluted weighted average shares outstanding 353.2 355.7
Adjusted non-GAAP diluted earnings per share from continuing operations $1.39 $6.48
===== =====
This Exhibit includes the following financial measures which are not calculated in accordance with generally accepted accounting principles (GAAP) in the United States - adjusted earnings from continuing operations and adjusted diluted earnings per share from continuing
operations. Each of these calculations excludes the impact of certain items and therefore, is considered a non-GAAP financial measure. The items excluded were considered by management to be unusual and not reflective of the underlying performance of the company as
explained in the notes for each item. The GAAP financial measure most directly comparable to adjusted earnings from continuing operations is loss from continuing operations and the GAAP financial measure most directly comparable to adjusted diluted earnings per share is
diluted loss per share. Reconciliations of each of these non-GAAP financial measures to the corresponding GAAP financial measure are included above. Management uses these measures to evaluate the operating performance of the company and analyze trends. For this reason,
management believes the measures are useful supplemental information for investors to understand the company's operating results. Notes describing each non-GAAP adjustment are on the following page.
EXHIBIT C (cont.)
CALCULATION OF ADJUSTED NON-GAAP EARNINGS FROM CONTINUING
OPERATIONS AND
ADJUSTED NON-GAAP DILUTED EARNINGS PER SHARE - (UNAUDITED)
DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS
(a) Impairments - Represents goodwill impairment charge of $1,994
in the Information Systems and Technology group and intangible
asset impairments of $191 in the Aerospace group and $110 in the
Information Systems and Technology group. Management believes
that the exclusion of these items is useful because management
does not consider impairment charges in evaluating the operating
performance of its on-going operations. The exclusions permit
investors to evaluate the company's performance and analyze
trends in a similar manner as management.
(b) Contract disputes accruals -Represents accruals of $292 for
contract disputes related to the Combat Systems group's European
Land Systems business, primarily with the government of Portugal.
While the company has contract disputes from time to time,
management believes this item is unique due to the nature of the
disputes and not reflective of the operating performance of its
underlying operations. The exclusion permits investors to
evaluate the company's performance in a similar manner as
management and facilitates a comparison of its operating
performance to the company's past operating performance.
(c) Restructuring-related charges - Represents restructuring-
related charges of $98, primarily severance costs, related to the
Combat Systems group's European Land Systems business.
Management believes that the exclusion of this item is useful
because management does not consider this item as reflective of
its operating performance of its underlying operations. The
exclusion permits investors to evaluate the company's performance
in a similar manner as management and facilitates a comparison of
its operating performance to the company's past operating
performance.
(d) Inventory-related charges - Represents increases to
inventory reserves for obsolete inventory in the Information
Systems and Technology group of $38 and in the Combat Systems
group of $15 for the quarter ended December 31, 2012. Represents
increases to inventory reserves for obsolete inventory in the
Information Systems and Technology group of $63 and in the Combat
Systems group of $15 for the twelve months ended December 31,
2012. The Information Systems and Technology charge was
primarily for ruggedized hardware products that ceased production
in 2012. Management has adjusted for this item because it does
not believe that it is indicative of its on-going operations or
(e) Debt retirement charges -Represents the premium associated
with the early redemption of debt completed in December 2012.
Management has excluded this item for comparative purposes and
views this charge as uniquely related to its debt refinancing
completed in 2012. By excluding this item, investors can
evaluate the company's performance in a similar manner as
management.
(f) Tax effects - Represents the limited tax benefit on the
charges in (a) - (e) due to the non-deductible nature of a
substantial portion of the charges. The tax effects of these
changes have been reflected because management evaluates
performance on an after-tax basis. This permits investors to
evaluate the company's performance in a similar manner as
management and compare the operating performance of the company
to prior periods.
(g) Calculated based on basic weighted average shares outstanding
as the inclusion of dilutive securities (stock options and
restricted stock) would have an antidilutive effect.
EXHIBIT D
REVENUES AND OPERATING EARNINGS BY SEGMENT - (UNAUDITED)
DOLLARS IN MILLIONS
Fourth Quarter Variance
2011 2012 $ %
---- ---- --- ---
Revenues:
---------
Aerospace $1,857 $1,861 $4 0.2 %
Combat Systems 2,611 1,976 (635) (24.3)%
Marine Systems 1,758 1,664 (94) (5.3)%
Information Systems and Technology 2,577
2,921 (344) (11.8)%
----- ----
Total $9,147 $8,078 $(1,069) (11.7)%
====== ====== =======
Operating earnings (loss):
--------------------------
Aerospace $73 $69 $(4) (5.5)%
Combat Systems 388 (136) (524) (135.1)%
Marine Systems 190 196 6 3.2 %
Information Systems and Technology (2,014) (2,329) (739.4)%
315
Corporate (16) (17) (1) (6.3)%
Total $950 $(1,902) $(2,852) (300.2)%
==== ======= =======
Operating margins:
------------------
Aerospace 3.9 % 3.7 %
Combat Systems 14.9 % (6.9)%
Marine Systems 10.8 % 11.8 %
Information Systems and Technology (78.2)%
10.8 %
Total 10.4 % (23.5)%
EXHIBIT E
CALCULATION OF ADJUSTED NON-GAAP REVENUES
AND ADJUSTED NON-GAAP OPERATING EARNINGS BY SEGMENT - (UNAUDITED)
DOLLARS IN MILLIONS
GAAP Adjusted
Fourth Quarter Non-GAAP
2012 Non-GAAP Fourth Quarter
(from Exhibit D) Adjustments 2012
--------------- ----------- ----
Revenues:
---------
Aerospace $1,861 $ - $1,861
Combat Systems 1,976 169 (a) 2,145
Marine Systems 1,664 - 1,664
Information Systems and Technology 2,577 - 2,577
----- --- -----
Total $8,078 $169 $8,247
====== ==== ======
Operating earnings (loss):
--------------------------
Aerospace $69 $191 (b) $260
Combat Systems (136) 405 (c) 269
Marine Systems 196 - 196
Information Systems and Technology (2,014) 2,142 (d) 128
Corporate (17) - (17)
---
Total $(1,902) $2,738 $836
======= ====== ====
Operating margins:
------------------
Aerospace 3.7 % 14.0 %
Combat Systems (6.9)% 12.5 %
Marine Systems 11.8 % 11.8 %
Information Systems and Technology (78.2)% 5.0 %
Total (23.5)% 10.1 %
This Exhibit includes the following financial measures which are not calculated in accordance with generally accepted accounting principles (GAAP) in the United States - adjusted revenues and operating earnings by segment. Each of these
calculations excludes the impact of certain items and therefore, is considered a non-GAAP financial measure. The items excluded were considered by management to be unusual and not reflective of the underlying performance of the company. The
GAAP financial measure most directly comparable to adjusted revenues by segment is revenues by segment and the GAAP financial measure most directly comparable to adjusted operating earnings by segment is operating earnings by segment.
Reconciliations of each of these non-GAAP financial measures to the corresponding GAAP financial measure are included above. Management uses these measures to evaluate the operating performance of the company and analyze trends. For this
reason, management believes the measures are useful supplemental information for investors to understand the company's operating results. Notes describing each non-GAAP adjustment are on the following page.
EXHIBIT E (cont.)
CALCULATION OF ADJUSTED NON-GAAP REVENUES
AND ADJUSTED NON-GAAP OPERATING EARNINGS BY SEGMENT
- (UNAUDITED)
DOLLARS IN MILLIONS
(a) Represents the portion of the $292 of contract
disputes accruals related to the contract with the
government of Portugal in the Combat Systems group
from Exhibit C that was recorded as a reduction of
revenue.
(b) Represents intangible asset impairment of $191 in
the Aerospace group from Exhibit C.
(c) Represents contract disputes accruals of $292,
restructuring-related charges of $98 and inventory-
related charges of $15 in the Combat Systems group
from Exhibit C.
(d) Represents goodwill impairment of $1,994,
intangible asset impairment of $110 and inventory-
related charges of $38 in the Information Systems
and Technology group from Exhibit C.
EXHIBIT F
REVENUES AND OPERATING EARNINGS BY SEGMENT - (UNAUDITED)
DOLLARS IN MILLIONS
Twelve Months Variance
2011 2012 $ %
---- ---- --- ---
Revenues:
---------
Aerospace $5,998 $6,912 $914 15.2 %
Combat Systems 8,827 7,992 (835) (9.5)%
Marine Systems 6,631 6,592 (39) (0.6)%
Information Systems and Technology 10,017
11,221 (1,204) (10.7)%
------ ------
Total $32,677 $31,513 $(1,164) (3.6)%
======= ======= =======
Operating earnings (loss):
--------------------------
Aerospace $729 $858 $129 17.7 %
Combat Systems 1,283 663 (620) (48.3)%
Marine Systems 691 750 59 8.5 %
Information Systems and Technology (1,369) (2,569) (214.1)%
1,200
Corporate (77) (69) 8 10.4 %
Total $3,826 $833 $(2,993) (78.2)%
====== ==== =======
Operating margins:
------------------
Aerospace 12.2 % 12.4 %
Combat Systems 14.5 % 8.3 %
Marine Systems 10.4 % 11.4 %
Information Systems and Technology (13.7)%
10.7 %
Total 11.7 % 2.6 %
EXHIBIT G
CALCULATION OF ADJUSTED NON-GAAP REVENUES
AND ADJUSTED NON-GAAP OPERATING EARNINGS BY SEGMENT - (UNAUDITED)
DOLLARS IN MILLIONS
GAAP Adjusted
Twelve Months Non-GAAP
2012 Non-GAAP Twelve Months
(from Exhibit F) Adjustments 2012
--------------- ----------- ----
Revenues:
---------
Aerospace $6,912 $ - $6,912
Combat Systems 7,992 169 (a) 8,161
Marine Systems 6,592 - 6,592
Information Systems and Technology 10,017 - 10,017
------ --- ------
Total $31,513 $169 $31,682
======= ==== =======
Operating earnings (loss):
--------------------------
Aerospace $858 $191 (b) $1,049
Combat Systems 663 405 (c) 1,068
Marine Systems 750 - 750
Information Systems and Technology (1,369) 2,167 (d) 798
Corporate (69) - (69)
---
Total $833 $2,763 $3,596
==== ====== ======
Operating margins:
------------------
Aerospace 12.4 % 15.2 %
Combat Systems 8.3 % 13.1 %
Marine Systems 11.4 % 11.4 %
Information Systems and Technology (13.7)% 8.0 %
Total 2.6 % 11.4 %
This Exhibit includes the following financial measures which are not calculated in accordance with generally accepted accounting principles (GAAP) in the United States - adjusted revenues and operating earnings by segment. Each of these
calculations excludes the impact of certain items and therefore, is considered a non-GAAP financial measure. The items excluded were considered by management to be unusual and not reflective of the underlying performance of the company. The
GAAP financial measure most directly comparable to adjusted revenues by segment is revenues by segment and the GAAP financial measure most directly comparable to adjusted operating earnings by segment is operating earnings by segment.
Reconciliations of each of these non-GAAP financial measures to the corresponding GAAP financial measure are included above. Management uses these measures to evaluate the operating performance of the company and analyze trends. For this
reason, management believes the measures are useful supplemental information for investors to understand the company's operating results. Notes describing each non-GAAP adjustment are on the following page.
EXHIBIT G (cont.)
CALCULATION OF ADJUSTED NON-GAAP REVENUES
AND ADJUSTED NON-GAAP OPERATING EARNINGS BY SEGMENT
- (UNAUDITED)
DOLLARS IN MILLIONS
(a) Represents the portion of the $292 of contract
disputes accruals related to the contract with the
government of Portugal in the Combat Systems group
from Exhibit C that was recorded as a reduction of
revenue.
(b) Represents intangible asset impairment of $191 in
the Aerospace group from Exhibit C.
(c) Represents contract disputes accruals of $292,
restructuring-related charges of $98 and inventory-
related charges of $15 in the Combat Systems group
from Exhibit C.
(d) Represents goodwill impairment of $1,994,
intangible asset impairment of $110 and inventory-
related charges of $63 in the Information Systems
and Technology group from Exhibit C.
EXHIBIT H
PRELIMINARY CONSOLIDATED BALANCE SHEETS
DOLLARS IN MILLIONS
(Unaudited)
December 31, 2011 December 31, 2012
----------------- -----------------
ASSETS
Current assets:
Cash and equivalents $2,649 $3,296
Accounts receivable 4,429 4,204
Contracts in process 5,168 4,964
Inventories 2,310 2,776
Other current assets 812 504
--------------------
Total current assets 15,368 15,744
-------------------- ------ ------
Noncurrent assets:
Property, plant and equipment, net 3,284 3,403
Intangible assets, net 1,813 1,383
Goodwill 13,576 12,048
Other assets 842 1,731
------------
Total noncurrent assets 19,515 18,565
----------------------- ------ ------
Total assets $34,883 $34,309
------- -------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term debt and current portion of long-term debt $23 $1
Accounts payable 2,895 2,469
Customer advances and deposits 5,011 6,042
Other current liabilities 3,216 3,108
-------------------------
Total current liabilities 11,145 11,620
------------------------- ------ ------
Noncurrent liabilities:
Long-term debt 3,907 3,908
Other liabilities 6,599 7,391
----------------- ----- -----
Total noncurrent liabilities 10,506 11,299
---------------------------- ------ ------
Shareholders' equity:
Common stock 482 482
Surplus 1,888 1,988
Retained earnings 18,917 17,860
Treasury stock (5,743) (6,165)
Accumulated other comprehensive loss (2,312) (2,775)
------------------------------------
Total shareholders' equity 13,232 11,390
-------------------------- ------ ------
Total liabilities and shareholders' equity $34,883 $34,309
------------------------------------------ ------- -------
EXHIBIT I
PRELIMINARY CONSOLIDATED STATEMENTS OF CASH FLOWS - (UNAUDITED)
DOLLARS IN MILLIONS
Twelve Months Ended
-------------------
Cash flows from operating activities: December 31, 2011 December 31, 2012
----------------- -----------------
Net earnings (loss) $2,526 $(332)
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation of property, plant and equipment 354 386
Amortization of intangible assets 238 234
Goodwill and intangible asset impairments 111 2,295
Stock-based compensation expense 128 114
Excess tax benefit from stock-based compensation (24) (29)
Deferred income tax (benefit) provision 14 (148)
Discontinued operations, net of tax 26 -
(Increase) decrease in assets, net of effects of business acquisitions:
Accounts receivable (397) 240
Contracts in process (62) 149
Inventories (186) (478)
Increase (decrease) in liabilities, net of effects of business acquisitions:
Accounts payable 17 (441)
Customer advances and deposits 629 730
Other current liabilities 86 22
Other, net (222) (55)
Net cash provided by operating activities 3,238 2,687
----------------------------------------- ----- -----
Cash flows from investing activities:
Capital expenditures (458) (450)
Business acquisitions, net of cash acquired (1,560) (444)
Purchases of held-to-maturity securities (459) (260)
Maturities of held-to-maturity securities 441 224
Sales of held-to-maturity securities - 211
Purchases of available-for-sale securities (373) (252)
Sales of available-for-sale securities 107 186
Maturities of available-for-sale securities 235 110
Other, net 93 19
Net cash used by investing activities (1,974) (656)
------------------------------------- ------ ----
Cash flows from financing activities:
Repayment of fixed-rate notes (750) (2,400)
Proceeds from fixed-rate notes 1,497 2,382
Dividends paid (673) (893)
Purchases of common stock (1,468) (602)
Proceeds from option exercises 198 146
Other, net (5) (15)
Net cash used by financing activities (1,201) (1,382)
------------------------------------- ------ ------
Net cash used by discontinued operations (27) (2)
---------------------------------------- --- ---
Net increase in cash and equivalents 36 647
Cash and equivalents at beginning of period 2,613 2,649
-------------------------------------------
Cash and equivalents at end of period $2,649 $3,296
------------------------------------- ------ ------
EXHIBIT J
PRELIMINARY FINANCIAL INFORMATION - (UNAUDITED)
DOLLARS IN MILLIONS EXCEPT PER SHARE AND EMPLOYEE AMOUNTS
Fourth Quarter Fourth Quarter
2011 2012
---- ----
Other Financial Information:
----------------------------
Return on equity (a) 18.8% (2.5)%
Debt-to-equity (b) 29.7% 34.3%
Debt-to-capital (c) 22.9% 25.6%
Book value per share (d) $37.12 $32.20
Total taxes paid $279 $350
Company-sponsored research and development (e) $113
$154
Employment 95,100 92,200
Sales per employee (f) $357,700 $337,300
Shares outstanding 356,437,880 353,674,248
Non-GAAP Financial Measures:
----------------------------
Free cash flow from operations: Quarter Year-to-date Quarter Year-to-date
------- ------------ ------- ------------
Net cash provided by operating activities $2,022 $3,238 $780 $2,687
Capital expenditures (185) (458) (164) (450)
Free cash flow from operations (g) $1,837 $2,780 $616 $2,237
====== ====== ==== ======
Return on invested capital:
Earnings from continuing operations $2,552 $(332)
After-tax interest expense 106 109
After-tax amortization expense 163 152
Net operating profit after taxes 2,821 (71)
Average debt and equity 17,123 17,203
Return on invested capital (h) 16.5% (0.4)%
==== =====
Notes describing the calculation of other financial information and a reconciliation of non-GAAP financial measures are on the following page.
EXHIBIT J (cont.)
PRELIMINARY FINANCIAL INFORMATION - (UNAUDITED)
DOLLARS IN MILLIONS EXCEPT PER SHARE AND EMPLOYEE AMOUNTS
(a) Return on equity is calculated by dividing earnings from
continuing operations for the latest 12-month period by our
average equity during that period.
(b) Debt-to-equity ratio is calculated as total debt divided by
total equity as of the end of the period.
(c) 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.
(d) Book value per share is calculated as total equity divided by
total outstanding shares as of the end of the period.
(e) Includes independent research and development and bid and
proposal costs and Gulfstream product-development costs.
(f) Sales per employee is calculated by dividing revenues for the
latest 12-month period by our average number of employees during
that period.
(g) We believe free cash flow from operations is a measurement
that is useful to investors because it portrays our ability to
generate cash from our core businesses for such purposes as
repaying maturing debt, funding business acquisitions 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 measurement
that is useful to 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 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
EXHIBIT K
BACKLOG - (UNAUDITED)
DOLLARS IN MILLIONS
Estimated
Total Potential Total Potential
Fourth Quarter 2012 Funded Unfunded Backlog Contract Value* Contract Value
------------------- ------ -------- ------- -------------- --------------
Aerospace $15,458 $209 $15,667 $ - $15,667
Combat Systems 7,442 1,298 8,740 2,794 11,534
Marine Systems 13,495 3,606 17,101 3,047 20,148
Information Systems and Technology
8,130 1,643 9,773 21,009 30,782
----- ----- ----- ------ ------
Total $44,525 $6,756 $51,281 $26,850 $78,131
======= ====== ======= ======= =======
Third Quarter 2012
------------------
Aerospace $15,827 $215 $16,042 $ - $16,042
Combat Systems 8,259 1,101 9,360 2,627 11,987
Marine Systems 10,909 5,036 15,945 1,382 17,327
Information Systems and Technology
8,224 1,887 10,111 22,052 32,163
----- ----- ------ ------ ------
Total $43,219 $8,239 $51,458 $26,061 $77,519
======= ====== ======= ======= =======
Fourth Quarter 2011
-------------------
Aerospace $17,618 $289 $17,907 $ - $17,907
Combat Systems 10,283 1,137 11,420 3,453 14,873
Marine Systems 9,364 9,140 18,504 2,163 20,667
Information Systems and Technology
7,434 2,145 9,579 22,384 31,963
----- ----- ----- ------ ------
Total $44,699 $12,711 $57,410 $28,000 $85,410
======= ======= ======= ======= =======
* 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 L
FOURTH QUARTER 2012 SIGNIFICANT
ORDERS -(UNAUDITED)
DOLLARS IN MILLIONS
We received the following significant contract orders during the fourth quarter of 2012:
Combat Systems
-- $355 from the U.S. Army under the Stryker wheeled combat vehicle program
for contractor logistics support and for the production of 62 Nuclear,
Biological, Chemical Reconnaissance vehicles.
-- $135 to upgrade 66 additional Light Armored Vehicles (LAVs) for the
Canadian government.
-- $135 from the Army for continued technical support on the Abrams main
battle tank program.
-- $135 for the production of Saudi M1A2 Abrams tanks for the Kingdom of
Saudi Arabia.
-- $85 from the U.K. Ministry of Defence for the production of 51 Foxhound
vehicles.
-- $65 from the Columbian government for the production of 24 LAVs.
Marine Systems
-- $1.8 billion from the U.S. Navy for research and development work for a
new class of ballistic-missile submarines under the Ohio Replacement
Program.
-- $335 from TOTE, Inc., for the construction of two liquefied natural gas
(LNG)-powered containerships, with an option for three additional ships.
-- $310 from the Navy to purchase long-lead materials for three
Virginia-class submarines.
-- $125 from the Navy to perform maintenance and modernization work on the
USS Essex and the USS Toledo.
-- $65 from the Navy to provide ongoing planning yard services for the DDG
51 Arleigh Burke-class destroyer and the FFG 7 Oliver Hazard Perry-class
frigate programs.
Information Systems and Technology
-- $250 from the Army for production of 3,726 Handheld, Manpack and Small
Form-Fit (HMS) radios and accessory kits.
-- $130 from the Army under the Warfighter Information Network-Tactical
(WIN-T) program for Increment 2 equipment production and training.
-- $125 from the Navy for production and support of the U.S. and U.K.
Trident II submarine weapons systems.
-- $70 from the U.S. Department of State to provide supply chain management
services.
-- $65 for commercial wireless network systems and support.
EXHIBIT M
AEROSPACE SUPPLEMENTAL DATA - (UNAUDITED)
Fourth Quarter Twelve Months
2011 2012 2011 2012
---- ---- ---- ----
Gulfstream
Green
Deliveries
(units):
-----------
Large
aircraft 30 26 90 104
Mid-size
aircraft 5 7 17 17
--- --- --- ---
Total 35 33 107 121
=== === === ===
Gulfstream
Outfitted
Deliveries
(units):
-----------
Large
aircraft 20 31 78 83
Mid-size
aircraft 7 6 21 11
--- --- --- ---
Total 27 37 99 94
=== === === ===
Pre-owned
Deliveries
(units): 1 3 5 4
----------- === === === ===
SOURCE General Dynamics
