10-QPeriod: Q3 FY2011

GENERAL DYNAMICS CORP Quarterly Report for Q3 Ended Jul 3, 2011

Filed August 3, 2011For Securities:GD

Summary

General Dynamics Corporation's (GD) Q2 2011 filing shows a slight decrease in overall revenues for both the quarter and the first half of the year compared to 2010. This dip is primarily attributed to timing in the tactical communications business and certain Navy programs, partially offset by growth in aircraft services and international vehicle contracts. Despite the revenue moderation, the company demonstrated strong operational performance, with net earnings increasing to $653 million for the quarter and $1.27 billion for the first half, leading to solid earnings per share of $1.76 and $3.40, respectively. The company also saw a significant increase in operating cash flow, up 56.6% for the quarter, enabling robust free cash flow generation which supported increased share repurchases and dividend payouts.

Financial Highlights

53 data points
Beta

Revenue

$7.88B

18.5% Gross Margin

Net Income

$653.00M

8.3% Net Margin

EPS (Diluted)

$1.76

Total Assets

$33.36B

Cash & Equivalents

$2.16B

Free Cash Flow

$660.00M

Financial Statements
Beta
Revenue$7.88B
Cost of Revenue$6.42B
Gross Profit$1.45B
Operating Expenses$6.93B
Operating Income$949.00M
Interest Expense$38.00M
Net Income$653.00M
EPS (Basic)$1.77
EPS (Diluted)$1.76
Shares Outstanding (Basic)367.96M
Shares Outstanding (Diluted)371.42M

Key Highlights

  • 1Total revenues for the six months ended July 3, 2011, were $15.677 billion, a slight decrease of 1.1% from $15.854 billion in the prior year period.
  • 2Net earnings for the six months ended July 3, 2011, increased to $1.271 billion, up from $1.245 billion in the same period of 2010.
  • 3Diluted earnings per share for the six months ended July 3, 2011, were $3.40, compared to $3.20 for the same period in 2010.
  • 4Net cash provided by operating activities significantly increased to $1.076 billion for the six months ended July 3, 2011, from $687 million in the prior year period.
  • 5The company's funded backlog stood at $44.3 billion as of July 3, 2011, a slight increase from $43.86 billion at the end of the first quarter of 2011.
  • 6Total debt decreased slightly from $3.203 billion at December 31, 2010, to $3.181 billion at July 3, 2011.
  • 7The Aerospace segment experienced increased aircraft services volume and strong order activity for large-cabin aircraft, contributing positively to backlog.

Frequently Asked Questions

For the three months ended July 3, 2011, General Dynamics reported revenues of $7.879 billion, a decrease of 2.8% from $8.104 billion in the same period of 2010. However, net earnings saw a slight increase to $653 million, up from $648 million in the prior year, with diluted earnings per share at $1.76 compared to $1.67.

General Dynamics maintained a strong liquidity position with $2.157 billion in cash and equivalents as of July 3, 2011. Total debt decreased slightly to $3.181 billion from $3.203 billion at the end of 2010. The company also has significant unused credit facilities available.

The most significant contingent liability is related to the long-standing A-12 aircraft contract termination. While the company believes it will ultimately prevail and avoid material financial impact, a worst-case scenario could result in a significant financial obligation. The company has recognized legal costs associated with this ongoing litigation. Other legal proceedings are considered incidental to normal business and are not expected to have a material impact.

Revenues saw mixed performance across segments. Aerospace revenues were relatively flat, supported by strong aircraft services, while Combat Systems experienced slight growth. Marine Systems revenues decreased slightly in the quarter but remained stable year-to-date. Information Systems and Technology revenues declined, primarily due to a slowdown in tactical communications systems. Operating earnings generally followed revenue trends, with defense segments showing margin improvement while Aerospace margins declined due to R&D timing and other factors.