General Dynamics Reports Continued Strength in Third Quarter
General Dynamics Reports Continued Strength in Third QuarterWednesday October 20, 7:30 am ET
* EPS grows 21 percent
* Solid cash flow
* Stable backlog
FALLS CHURCH, Va., Oct. 20 /PRNewswire-FirstCall/ -- General Dynamics (NYSE: GD - News) today reported $4.8 billion in revenues for the third quarter of 2004, compared to 2003 third-quarter revenues of $4.4 billion. Net earnings were $322 million in the quarter, or $1.60 per share on a fully diluted basis, compared with 2003 third-quarter net earnings of $262 million, or $1.32 per share fully diluted. Net cash provided by operating activities was $309 million for the quarter. Free cash flow from operations, defined as net cash provided by operating activities less capital expenditures, was $249 million.
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Funded backlog at the end of the third quarter was $25.3 billion, and total backlog was $40.3 billion, compared with $26.4 billion and $41.1 billion, respectively, at the end of the second quarter of 2004.
"General Dynamics generated strong results for the quarter in both absolute and relative terms," said Nicholas D. Chabraja, General Dynamics chairman and chief executive officer. "Operating earnings increased over the year-ago period in all of our segments. Further, our operating earnings rate improved this quarter as it has in each of the last four quarters. In the Aerospace group, earnings more than doubled over the third quarter of 2003, based on improving market conditions, continuing cost improvement and tighter control of pre-owned activity. Combat Systems improved margins on a modest increase in revenue, and the Information Systems and Technology group continued to generate positive returns. Compared to the same period last year, Marine Systems also improved. However, the group's margin rate declined relative to earlier quarters this year as a result of cost growth in our commercial tanker program during the period," Chabraja said.
"Our backlog -- both funded and unfunded -- remained strong, and net cash continues to approximate net earnings," Chabraja said.
General Dynamics, headquartered in Falls Church, Virginia, employs approximately 71,600 people worldwide and anticipates 2004 revenue in excess of $19 billion. The company is a market leader in mission-critical information systems and technologies; land and expeditionary combat systems, armaments and munitions; shipbuilding and marine systems; and business aviation.
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 Forms 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 third-quarter security analyst conference call, scheduled for 11 a.m. Eastern Time on Wednesday, October 20, 2004. Those accessing the webcast will be able to listen to management's discussion of the third quarter, as well as the question-and-answer session with security analysts.
The webcast will be a listen-only audio broadcast, available at http://www.generaldynamics.com. A Real Audio player or Windows Media(TM) player is required to access the webcast; information about downloading those players is available on the company's website. An on-demand replay of the webcast will be available by 2 p.m. on October 20 and will continue for 12 months.
To hear a recording of the conference call by telephone, please call 719-457-0820; passcode 980791. It will be available from 2 p.m. on October 20 until midnight on November 2, 2004.
CONSOLIDATED STATEMENT OF EARNINGS (UNAUDITED)
DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS
Third Quarter Variance
2004 2003 $ %
NET SALES $4,754 $4,422 $332 7.5 %
OPERATING COSTS AND EXPENSES 4,255 4,064 (191)
OPERATING EARNINGS 499 358 141 39.4 %
Interest, Net (33) (29) (4)
Other Income (Expense), Net 3 (3) 6
EARNINGS FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 469 326 143 43.9 %
Provision for Income Taxes 146 71 (75)
EARNINGS FROM CONTINUING OPERATIONS $323 $255 $68 26.7 %
Discontinued Operations, Net of Tax (1) 7 (8)
NET EARNINGS $322 $262 $60 22.9 %
EARNINGS PER SHARE -- BASIC
Continuing Operations $1.62 $1.29 $0.33 25.6 %
Discontinued Operations $(0.01) $0.04 $(0.05)
Net Earnings $1.61 $1.33 $0.28 21.1 %
BASIC WEIGHTED AVERAGE
SHARES OUTSTANDING (IN MILLIONS) 200.0 197.3
EARNINGS PER SHARE -- DILUTED
Continuing Operations $1.60 $1.28 $0.32 25.0 %
Discontinued Operations $- $0.04 $(0.04)
Net Earnings $1.60 $1.32 $0.28 21.2 %
DILUTED WEIGHTED AVERAGE
SHARES OUTSTANDING (IN MILLIONS) 201.9 199.0
CONSOLIDATED STATEMENT OF EARNINGS (UNAUDITED)
DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS
Nine Months Variance
2004 2003 $ %
NET SALES $14,266 $11,768 $2,498 21.2 %
OPERATING COSTS AND EXPENSES 12,831 10,713 (2,118)
OPERATING EARNINGS 1,435 1,055 380 36.0 %
Interest, Net (111) (59) (52)
Other (Expense) Income, Net (9) 3 (12)
EARNINGS FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 1,315 999 316 31.6 %
Provision for Income Taxes 427 280 (147)
EARNINGS FROM CONTINUING OPERATIONS $888 $719 $169 23.5 %
Discontinued Operations, Net of Tax 3 6 (3)
NET EARNINGS $891 $725 $166 22.9 %
EARNINGS PER SHARE - BASIC
Continuing Operations $4.46 $3.64 $0.82 22.5 %
Discontinued Operations $0.01 $0.03 $(0.02)
Net Earnings $4.47 $3.67 $0.80 21.8 %
BASIC WEIGHTED AVERAGE
SHARES OUTSTANDING (IN MILLIONS) 199.2 197.8
EARNINGS PER SHARE - DILUTED
Continuing Operations $4.42 $3.61 $0.81 22.4 %
Discontinued Operations $0.01 $0.03 $(0.02)
Net Earnings $4.43 $3.64 $0.79 21.7 %
DILUTED WEIGHTED AVERAGE
SHARES OUTSTANDING (IN MILLIONS) 201.1 199.4
NET SALES AND OPERATING EARNINGS BY SEGMENT (UNAUDITED)
DOLLARS IN MILLIONS
Third Quarter Variance
2004 2003 $ %
NET SALES:
INFORMATION SYSTEMS AND
TECHNOLOGY $1,657 $1,301 $356 27.4 %
COMBAT SYSTEMS 1,071 1,045 26 2.5 %
MARINE SYSTEMS 1,154 1,190 (36) (3.0)%
AEROSPACE 798 808 (10) (1.2)%
RESOURCES 74 78 (4) (5.1)%
TOTAL $4,754 $4,422 $332 7.5 %
OPERATING EARNINGS:
INFORMATION SYSTEMS AND
TECHNOLOGY $176 $148 $28 18.9 %
COMBAT SYSTEMS 134 116 18 15.5 %
MARINE SYSTEMS 62 36 26 72.2 %
AEROSPACE 117 50 67 134.0 %
RESOURCES 10 8 2 25.0 %
TOTAL $499 $358 $141 39.4 %
OPERATING MARGINS:
INFORMATION SYSTEMS AND
TECHNOLOGY 10.6% 11.4%
COMBAT SYSTEMS 12.5% 11.1%
MARINE SYSTEMS 5.4% 3.0%
AEROSPACE 14.7% 6.2%
RESOURCES 13.5% 10.3%
TOTAL 10.5% 8.1%
NET SALES AND OPERATING EARNINGS BY SEGMENT (UNAUDITED)
DOLLARS IN MILLIONS
Nine Months Variance
2004 2003 $ %
NET SALES:
INFORMATION SYSTEMS AND
TECHNOLOGY $5,084 $3,444 $1,640 47.6 %
COMBAT SYSTEMS 3,210 2,870 340 11.8 %
MARINE SYSTEMS 3,611 3,149 462 14.7 %
AEROSPACE 2,175 2,117 58 2.7 %
RESOURCES 186 188 (2) (1.1)%
TOTAL $14,266 $11,768 $2,498 21.2 %
OPERATING EARNINGS:
INFORMATION SYSTEMS AND
TECHNOLOGY $542 $401 $141 35.2 %
COMBAT SYSTEMS 367 327 40 12.2 %
MARINE SYSTEMS 241 165 76 46.1 %
AEROSPACE 277 135 142 105.2 %
RESOURCES 8 27 (19) (70.4)%
TOTAL $1,435 $1,055 $380 36.0 %
OPERATING MARGINS:
INFORMATION SYSTEMS AND
TECHNOLOGY 10.7% 11.6%
COMBAT SYSTEMS 11.4% 11.4%
MARINE SYSTEMS 6.7% 5.2%
AEROSPACE 12.7% 6.4%
RESOURCES 4.3% 14.4%
TOTAL 10.1% 9.0%
PRELIMINARY FINANCIAL INFORMATION (UNAUDITED)
DOLLARS IN MILLIONS EXCEPT PER SHARE AND EMPLOYEE AMOUNTS
Third Quarter Third Quarter
2004 2003
Cash $686 $697
Short-term Debt $391 $1,234
Long-term Debt 3,296 3,310
Total Debt $3,687 $4,544
Net Debt $3,001 $3,847
Shareholders' Equity $6,777 $5,586
Debt-to-Equity 54.4% 81.3%
Debt-to-Capital 35.2% 44.9%
Book Value per Share $33.86 $28.27
Quarter Year-to- Quarter Year-to-
date date
Net Cash Provided by
Operating
Activities $309 $999 $368 $826
Capital Expenditures (60) (178) (48) (115)
Free Cash Flow From
Operations (A) $249 $821 $320 $711
Total Taxes Paid $58 $47
Depreciation and Depletion $61 $52
Intangible Asset Amortization 24 27
Depreciation, Depletion and
Amortization $85 $79
Company Sponsored R&D (B) $70 $74
Employment 71,600 66,800
Sales Per Employee $278,500 $275,700
Shares Outstanding 200,161,655 197,561,240
Weighted Average Shares
Outstanding -
Basic 199,964,232 197,310,727
Diluted 201,852,318 199,022,170
(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 most directly comparable GAAP measure to free cash flow
from operations is net cash provided by operating activities.
(B) Includes independent research and development and bid and proposal
costs and Gulfstream product development costs.
BACKLOG (UNAUDITED)
DOLLARS IN MILLIONS
Third Quarter 2004
Total
IDIQ Estimated
Total Contract Contract
Funded Unfunded Backlog Value(A) Value
INFORMATION SYSTEMS AND
TECHNOLOGY $6,257 $1,543 $7,800 $6,402 $14,202
COMBAT SYSTEMS 6,351 2,438 8,789 142 8,931
MARINE SYSTEMS 8,446 8,688 17,134 - 17,134
AEROSPACE 4,066 2,201 6,267 - 6,267
RESOURCES 216 57 273 - 273
TOTAL $25,336 $14,927 $40,263 $6,544 $46,807
Second Quarter 2004
Total
IDIQ Estimated
Total Contract Contract
Funded Unfunded Backlog Value(A) Value
INFORMATION SYSTEMS AND
TECHNOLOGY $6,172 $1,406 $7,578 $5,826 $13,404
COMBAT SYSTEMS 6,643 2,497 9,140 152 9,292
MARINE SYSTEMS 9,387 8,512 17,899 - 17,899
AEROSPACE 3,970 2,257 6,227 - 6,227
RESOURCES 235 57 292 - 292
TOTAL $26,407 $14,729 $41,136 $5,978 $47,114
(A) IDIQ contract value represents management's estimate of the future
contract value under existing indefinite delivery, indefinite quantity
contracts. Because the value in these 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.
AIRCRAFT DELIVERIES (UNAUDITED)
Third Quarter Nine Months
2004 2003 2004 2003
GREEN:
LARGE AIRCRAFT 14 14 41 37
MID-SIZE AIRCRAFT 6 5 16 16
TOTAL 20 19 57 53
COMPLETIONS:
LARGE AIRCRAFT 14 12 36 37
MID-SIZE AIRCRAFT 7 8 15 13
TOTAL 21 20 51 50
PRE-OWNED: 5 9 12 24
--------------------------------------------------------------------------------
Source: General Dynamics
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