10-QPeriod: Q2 FY2010

GENERAL DYNAMICS CORP Quarterly Report for Q2 Ended Apr 4, 2010

Filed May 4, 2010For Securities:GD

Summary

General Dynamics Corporation (GD) reported revenues of $7.75 billion for the first quarter of 2010, a decrease of 6.2% compared to the same period in 2009. This decline was primarily driven by lower volume in the Combat Systems group and reduced aircraft deliveries in the Aerospace group. Despite the revenue dip, operating earnings rose slightly to $918 million, an increase of 1.4%, resulting in an improved operating margin of 11.8% from 11.0% in the prior year. The company highlighted strong performance in its Aerospace and Combat Systems segments, which contributed to the margin improvement. Funded backlog increased by 3% to $47.4 billion, indicating a healthy pipeline of future business, although total backlog saw a slight 3% decrease. Net cash provided by operating activities was $210 million, a significant improvement from $154 million in the prior year, and the company successfully reduced its net debt. The company also announced an increased quarterly dividend, demonstrating confidence in its financial position and commitment to shareholder returns.

Financial Highlights

52 data points
Beta

Revenue

$7.75B

18.1% Gross Margin

Net Income

$597.00M

7.7% Net Margin

EPS (Diluted)

$1.53

Total Assets

$31.06B

Cash & Equivalents

$2.02B

Free Cash Flow

$150.00M

Financial Statements
Beta
Revenue$7.75B
Cost of Revenue$6.35B
Gross Profit$1.40B
Operating Expenses$6.83B
Operating Income$918.00M
Interest Expense$47.00M
Net Income$597.00M
EPS (Basic)$1.55
EPS (Diluted)$1.53
Shares Outstanding (Basic)384.82M
Shares Outstanding (Diluted)388.98M

Key Highlights

  • 1Revenues for the quarter ended April 4, 2010, were $7.75 billion, down 6.2% year-over-year, primarily due to lower volumes in Combat Systems and Aerospace.
  • 2Operating earnings increased by 1.4% to $918 million, with operating margins improving to 11.8% from 11.0% in the prior year, driven by better performance in Aerospace and Combat Systems.
  • 3Net cash provided by operating activities was $210 million, a substantial increase from $154 million in the prior year's quarter.
  • 4Funded backlog increased by 3% to $47.4 billion, while total backlog decreased slightly by 3% to $63.9 billion.
  • 5The company completed one acquisition for $48 million in the quarter and reduced its net debt to $1.3 billion.
  • 6An increased quarterly dividend of $0.42 per share was declared, marking the 13th consecutive annual increase.

Frequently Asked Questions

The revenue decrease of 6.2% to $7.75 billion was primarily driven by lower volume in the Combat Systems group, particularly due to the completion of MRAP vehicle production and the cancellation of the Future Combat Systems program. Reduced aircraft deliveries in the Aerospace group, also related to market conditions and production rate adjustments, contributed to the decline.

The company improved operating earnings by 1.4% to $918 million and operating margins to 11.8% through better performance in the Aerospace and Combat Systems groups. This was achieved by a favorable mix of deliveries and improved pricing in Aerospace, alongside improved performance on specific vehicle programs and a favorable mix in munitions in Combat Systems. Efficiencies and cost reduction efforts also played a role.

General Dynamics expects full-year revenue growth in Aerospace in the low- to mid-single-digit percent range, with stable or improving operating margins around 14%. The Combat Systems group anticipates 4-5% revenue growth, weighted towards the second half of the year, with operating margins in the high 12% range. Marine Systems is projected to see 7-8% revenue growth with mid-9% operating margins. The Information Systems and Technology group expects 8-9% revenue growth with operating margins in the mid-10% range.

The company generated $210 million in operating cash flow in the first quarter of 2010, up from $154 million in the prior year. Net debt was reduced to $1.3 billion. The company has significant liquidity through undrawn bank credit facilities totaling $1.8 billion and a cash balance of $2 billion. The next major debt repayment is $700 million in notes maturing in the third quarter of 2010.