10-QPeriod: Q2 FY2009

GENERAL DYNAMICS CORP Quarterly Report for Q2 Ended Apr 5, 2009

Filed May 5, 2009For Securities:GD

Summary

General Dynamics Corporation (GD) reported increased revenues and operating earnings for the first quarter of 2009, driven by strong performance across its defense segments, particularly Marine Systems and Information Systems and Technology. The Aerospace segment, while impacted by the downturn in the business-jet market, saw revenue growth primarily due to the acquisition of Jet Aviation. The company's overall backlog remains substantial, although funded backlog saw a slight decrease. GD is managing inventory adjustments and production schedules in its Aerospace segment to navigate market challenges. Despite increased interest expenses and a slight decrease in operating margins due to program mix shifts and acquisition impacts, GD demonstrated solid financial footing, with a focus on cash generation to fund acquisitions, dividends, and stock repurchases.

Financial Highlights

28 data points
Beta

Revenue

$8.26B

43.2% Gross Margin

Net Income

$590.00M

7.1% Net Margin

EPS (Diluted)

$1.53

Cash & Equivalents

$1.13B

Free Cash Flow

$73.00M

Financial Statements
Beta
Revenue$8.26B
Cost of Revenue$4.69B
Gross Profit$3.57B
Operating Expenses$7.36B
Operating Income$905.00M
Net Income$590.00M
EPS (Basic)$1.53
EPS (Diluted)$1.53

Key Highlights

  • 1Total revenues increased by 18.0% to $8.26 billion for the three months ended April 5, 2009, compared to $7.01 billion for the same period in 2008.
  • 2Operating earnings grew by 5.1% to $905 million, although operating margins decreased slightly from 12.3% to 11.0%.
  • 3The Marine Systems segment showed significant revenue growth (21.1%) and a substantial increase in operating earnings (33.6%), indicating strong performance in shipbuilding.
  • 4The Aerospace segment's revenue grew 13.8% due to the Jet Aviation acquisition, but operating earnings decreased by 15.3% due to market challenges in business jets and adjustments to pre-owned aircraft inventory.
  • 5Total backlog at the end of the quarter was $71.1 billion, with funded backlog at $49.2 billion.
  • 6Net cash provided by operating activities from continuing operations decreased to $154 million from $431 million in the prior year, largely due to reduced customer deposits in the Aerospace segment.
  • 7The company declared an increased quarterly dividend of $0.38 per share, marking the 12th consecutive annual increase.

Frequently Asked Questions

The defense segments, including Combat Systems, Marine Systems, and Information Systems and Technology, all experienced significant revenue growth. Marine Systems, in particular, showed strong increases in both revenue and operating earnings. The Aerospace segment's revenue grew due to the Jet Aviation acquisition, but it faced challenges from the downturn in the business-jet market, leading to lower operating earnings and margins.

General Dynamics maintained a substantial total backlog of $71.1 billion, with $49.2 billion being funded. While the total backlog decreased slightly from the end of 2008, the defense businesses have strong order activity. The company also noted a significant estimated potential contract value, suggesting potential for future revenue realization.

The acquisition of Jet Aviation in the fourth quarter of 2008 contributed to revenue growth in the Aerospace segment for the first quarter of 2009. However, it also impacted operating margins, as Jet Aviation's services business generally has lower margins than other parts of the Aerospace segment, and there were associated amortization costs for intangible assets.

Net cash from operating activities was lower year-over-year, primarily due to a reduction in customer deposits in the Aerospace segment. However, the company ended the quarter with $1.1 billion in cash. It also has access to approximately $2 billion in undrawn bank credit facilities. Financing activities focused on dividends, stock repurchases, and debt repayment.