10-QPeriod: Q3 FY2015

GENERAL DYNAMICS CORP Quarterly Report for Q3 Ended Jul 5, 2015

Filed July 29, 2015For Securities:GD

Summary

General Dynamics Corporation (GD) reported a strong performance for the second quarter and first six months of fiscal year 2015, demonstrating robust revenue growth and significant improvements in operating earnings and margins across its business segments. The company saw a notable increase in revenue driven primarily by higher deliveries in the Aerospace segment, specifically large-cabin Gulfstream aircraft, and increased activity in its Marine Systems and Information Systems and Technology groups. This top-line growth, combined with effective cost management and efficiency improvements, particularly in Combat Systems and Information Systems and Technology, led to expanded operating margins. The company also highlighted its continued commitment to shareholder returns through increased dividends and substantial share repurchases, supported by strong free cash flow generation.

Financial Highlights

52 data points
Beta

Revenue

$7.88B

19.6% Gross Margin

Net Income

$752.00M

9.5% Net Margin

EPS (Diluted)

$2.27

Total Assets

$33.65B

Cash & Equivalents

$4.03B

Free Cash Flow

$596.00M

Financial Statements
Beta
Revenue$7.88B
Cost of Revenue$6.33B
Gross Profit$1.55B
Operating Expenses$6.80B
Operating Income$1.08B
Net Income$752.00M
EPS (Basic)$2.31
EPS (Diluted)$2.27
Shares Outstanding (Basic)326.15M
Shares Outstanding (Diluted)331.43M

Key Highlights

  • 1Total revenues increased by 5.5% to $7.88 billion for the three months ended July 5, 2015, compared to $7.47 billion in the prior year period.
  • 2Operating earnings grew by 13.9% to $1.08 billion for the three months ended July 5, 2015, with operating margins expanding to 13.7% from 12.7% in the prior year.
  • 3The Aerospace segment experienced revenue growth of 13.2% to $2.26 billion, driven by increased Gulfstream aircraft deliveries.
  • 4The Information Systems and Technology segment saw operating margins expand to 10.7% from 8.7% due to improved program performance and cost-cutting measures.
  • 5Free cash flow from operations was strong at $1.16 billion for the first six months of 2015, slightly up from $1.13 billion in the same period of 2014.
  • 6The company repurchased approximately 12.1 million shares for $1.7 billion in the first six months of 2015 and authorized additional share repurchases.
  • 7Dividends per share increased to $0.69 for the quarter, marking the 18th consecutive annual dividend increase.

Frequently Asked Questions

Revenue growth in the second quarter of 2015 was primarily driven by additional deliveries of large-cabin aircraft in the Aerospace segment and increased activity across the Marine Systems and Information Systems and Technology segments.

Operating costs and expenses increased at a slower rate than revenues, leading to improved operating margins. This was attributed to improved performance and cost-reduction efforts, particularly in the Combat Systems and Information Systems and Technology segments, including consolidation of businesses and restructuring activities.

For the full year 2015, General Dynamics expected revenue growth of approximately 6% in Aerospace, flat revenues in Information Systems and Technology, generally consistent revenues in Combat Systems with 2014, and a 7% revenue increase in Marine Systems. Operating margins were projected to be in the mid-18% range for Aerospace, mid-9% range for Information Systems and Technology, mid-15% range for Combat Systems, and mid-9% range for Marine Systems.

General Dynamics is returning capital to shareholders through increased dividends, with the quarterly dividend raised to $0.69 per share, marking the 18th consecutive annual increase. Additionally, the company engaged in significant share repurchases, buying back approximately 12.1 million shares for $1.7 billion in the first six months of 2015 and maintaining authorization for further repurchases.