10-QPeriod: Q3 FY2013

GENERAL DYNAMICS CORP Quarterly Report for Q3 Ended Sep 29, 2013

Filed October 23, 2013For Securities:GD

Summary

General Dynamics Corporation (GD) reported solid financial results for the nine months ended September 29, 2013. Net earnings increased to $1.86 billion, a 3.5% rise from $1.79 billion in the prior year period, leading to a diluted EPS of $5.27, up from $5.04. The company demonstrated revenue resilience despite a slight overall decline, with increases in its Aerospace and Marine Systems segments offsetting decreases in Combat Systems and Information Systems and Technology. This was driven by strong performance in Gulfstream aircraft deliveries and increased activity in shipbuilding and repair. The company maintained a strong liquidity position, with cash and equivalents increasing to $4.1 billion. Operating cash flow remained robust, although slightly lower than the prior year, due to growth in operating working capital. General Dynamics continues to return value to shareholders through dividends and share repurchases, reflecting confidence in its financial health and future prospects. The company also highlighted its ongoing cost-control initiatives within its defense segments to navigate a challenging defense spending environment.

Financial Highlights

52 data points
Beta

Revenue

$7.74B

18.8% Gross Margin

Net Income

$651.00M

8.4% Net Margin

EPS (Diluted)

$1.84

Total Assets

$35.47B

Cash & Equivalents

$4.07B

Free Cash Flow

$364.00M

Financial Statements
Beta
Revenue$7.74B
Cost of Revenue$6.28B
Gross Profit$1.46B
Operating Expenses$6.77B
Operating Income$961.00M
Net Income$651.00M
EPS (Basic)$1.86
EPS (Diluted)$1.84
Shares Outstanding (Basic)349.34M
Shares Outstanding (Diluted)352.92M

Key Highlights

  • 1Net earnings increased to $1.86 billion for the first nine months of 2013, up from $1.79 billion in the same period of 2012.
  • 2Diluted Earnings Per Share (EPS) rose to $5.27 for the nine-month period, compared to $5.04 in the prior year.
  • 3Aerospace segment revenue saw a significant increase of 18.5% year-over-year, driven by higher Gulfstream aircraft deliveries.
  • 4Combat Systems segment revenue decreased by 25.7%, reflecting reduced U.S. Army spending on key programs.
  • 5Cash and cash equivalents increased to $4.1 billion as of September 29, 2013, up from $3.3 billion at the end of 2012.
  • 6The company declared an increased quarterly dividend of $0.56 per share in March 2013, marking its 16th consecutive annual increase.
  • 7Free cash flow from operations for the first nine months of 2013 was $1.28 billion, down from $1.62 billion in the prior year, primarily due to growth in operating working capital.

Frequently Asked Questions

General Dynamics demonstrated a positive trend in net earnings and diluted EPS for the first nine months of 2013 compared to the same period in 2012. Net earnings grew to $1.86 billion from $1.79 billion, and diluted EPS increased to $5.27 from $5.04, indicating improved profitability.

The Aerospace segment showed strong revenue growth of 18.5%, primarily driven by increased Gulfstream aircraft deliveries. Marine Systems also saw a modest revenue increase. However, the Combat Systems segment experienced a significant revenue decline of 25.7% due to reduced U.S. Army spending, and the Information Systems and Technology segment had a slight revenue decrease. Overall consolidated revenues saw a slight decline.

General Dynamics maintained a strong liquidity position, with cash and cash equivalents increasing to $4.1 billion by the end of the third quarter of 2013. While operating cash flow was slightly lower than the previous year, the company generated $1.28 billion in free cash flow from operations. They are actively returning capital to shareholders through dividends and share repurchases, and have substantial credit facilities available.

The company operates in a challenging defense spending environment due to U.S. government budget controls and sequestration. Revenue declines in the Combat Systems segment reflect this. Additionally, the long-standing A-12 litigation poses a potential significant financial risk, although the company believes it has sufficient resources to address it if necessary. The company also faces risks related to program performance, government contract terminations, and fluctuations in the business aviation market.