10-QPeriod: Q2 FY2011

GENERAL DYNAMICS CORP Quarterly Report for Q2 Ended Apr 3, 2011

Filed May 3, 2011For Securities:GD

Summary

General Dynamics Corporation (GD) reported solid results for the first quarter of 2011, with revenues slightly increasing to $7.80 billion from $7.75 billion in the prior year period. Operating earnings also saw a modest improvement, rising by 1.2% to $929 million, leading to a slight expansion in operating margin to 11.9%. The company demonstrated strong operating cash flow generation, with net cash provided by operating activities increasing significantly by 55.7% to $327 million. The company's diverse business segments showed mixed performance. Aerospace revenues were stable, while Marine Systems and Information Systems and Technology saw revenue growth. Combat Systems experienced a revenue decline, primarily due to reduced activity in U.S. military vehicle programs. Despite revenue pressures in some areas, overall operational execution and cost management contributed to the improved profitability.

Financial Highlights

53 data points
Beta

Revenue

$7.80B

18.4% Gross Margin

Net Income

$618.00M

7.9% Net Margin

EPS (Diluted)

$1.64

Total Assets

$33.10B

Cash & Equivalents

$2.48B

Free Cash Flow

$267.00M

Financial Statements
Beta
Revenue$7.80B
Cost of Revenue$6.36B
Gross Profit$1.44B
Operating Expenses$6.87B
Operating Income$929.00M
Interest Expense$36.00M
Net Income$618.00M
EPS (Basic)$1.66
EPS (Diluted)$1.64
Shares Outstanding (Basic)372.68M
Shares Outstanding (Diluted)376.36M

Key Highlights

  • 1Revenues for the first quarter of 2011 increased slightly to $7.80 billion, up from $7.75 billion in the same period of 2010.
  • 2Operating earnings grew by 1.2% to $929 million, with operating margins improving by 10 basis points to 11.9%.
  • 3Net cash provided by operating activities saw a substantial increase of 55.7%, reaching $327 million.
  • 4The Aerospace segment maintained stable revenues, driven by growth in aircraft manufacturing and services, offsetting declines in other areas.
  • 5Marine Systems and Information Systems & Technology segments reported revenue increases, supported by U.S. Navy programs and IT services, respectively.
  • 6Combat Systems experienced a revenue decrease due to lower U.S. military vehicle program volumes, though operating earnings improved.
  • 7The company's net debt decreased significantly to $432 million from $1.3 billion in the prior year period, reflecting strong cash generation and capital deployment strategies.

Frequently Asked Questions

General Dynamics reported revenues of $7.80 billion for the first quarter of 2011, a slight increase from $7.75 billion in the same period of 2010. This growth was driven by higher revenues in the Marine Systems and Information Systems and Technology segments, while Aerospace revenues remained stable and Combat Systems experienced a slight decline.

The company's operating earnings increased by 1.2% to $929 million in the first quarter of 2011. This led to an improvement in the operating margin to 11.9%, up from 11.8% in the prior year period, indicating effective cost management and operational execution across its business segments.

General Dynamics demonstrated strong cash flow generation, with net cash provided by operating activities increasing by 55.7% to $327 million in the first quarter of 2011. This robust cash flow contributed to a significant reduction in net debt, which stood at $432 million at the end of the quarter, down from $1.3 billion in the prior year period. The company also highlighted its commitment to returning capital to shareholders through dividends and share repurchases.

The most significant contingent liability is related to the A-12 contract termination, which has been ongoing since 1991. If the government ultimately prevails in its recovery theories, General Dynamics could be liable for approximately $1.4 billion pre-tax, resulting in an after-tax cash obligation of about $730 million. The company believes it has sufficient resources to meet this potential obligation if required.