10-QPeriod: Q3 FY2017

GENERAL DYNAMICS CORP Quarterly Report for Q3 Ended Jul 2, 2017

Filed July 26, 2017For Securities:GD

Summary

General Dynamics Corporation (GD) reported solid financial results for the six months ended July 2, 2017, with net earnings of $1.51 billion, an increase from $1.36 billion in the prior year period. Diluted earnings per share also saw a healthy rise to $4.94 from $4.35. Revenue for the six-month period was $15.12 billion, a slight decrease of 0.9% compared to the same period last year, primarily due to lower volume in the Information Systems and Technology segment. However, operating costs decreased at a faster rate than revenue, leading to a notable increase in operating earnings and margin. The company continues to execute its capital allocation strategy, repurchasing shares and increasing dividends, signaling confidence in its financial position and future prospects. The company's diverse business segments—Aerospace, Combat Systems, Information Systems and Technology, and Marine Systems—each contributed to the overall performance, with Aerospace and Combat Systems showing revenue growth in certain areas. Management highlighted improved operating performance and favorable program mix as key drivers for margin expansion across several segments, demonstrating effective cost management and operational efficiency. The company maintains a strong backlog, totaling $58.6 billion, providing visibility into future revenue streams.

Financial Highlights

52 data points
Beta

Revenue

$7.67B

53.1% Gross Margin

Net Income

$749.00M

9.8% Net Margin

EPS (Diluted)

$2.46

Total Assets

$33.79B

Cash & Equivalents

$1.86B

Free Cash Flow

$386.00M

Financial Statements
Beta
Revenue$7.67B
Cost of Revenue$3.60B
Gross Profit$4.08B
Operating Expenses$6.61B
Operating Income$1.07B
Net Income$749.00M
EPS (Basic)$2.50
EPS (Diluted)$2.46
Shares Outstanding (Basic)299.79M
Shares Outstanding (Diluted)305.35M

Key Highlights

  • 1Net earnings for the six months ended July 2, 2017, were $1.51 billion, up from $1.36 billion in the prior year.
  • 2Diluted earnings per share increased to $4.94 for the six months ended July 2, 2017, from $4.35 in the same period last year.
  • 3Consolidated revenue for the six months was $15.12 billion, a slight decrease of 0.9% year-over-year, mainly due to lower performance in the Information Systems and Technology segment.
  • 4Operating margin improved significantly, expanding by 100 basis points to 13.8% for the first six months of 2017 compared to the prior year.
  • 5The company generated $1 billion in cash from operating activities for the six months ended July 2, 2017, up from $873 million in the prior year.
  • 6Total backlog stood at $58.6 billion at the end of the second quarter of 2017, indicating a strong pipeline of future work.
  • 7General Dynamics continued its capital return strategy, repurchasing shares totaling $893 million and increasing its quarterly dividend.

Frequently Asked Questions

Consolidated revenue for the six months ended July 2, 2017, was $15.12 billion, a slight decrease of 0.9% from $15.25 billion in the same period of 2016. This decrease was primarily driven by lower volume in the Information Systems and Technology segment, partially offset by growth in the Combat Systems and Aerospace segments.

Profitability improved significantly. Net earnings increased to $1.51 billion for the six months ended July 2, 2017, from $1.36 billion in the prior year. This led to a rise in diluted earnings per share to $4.94 from $4.35. The operating margin expanded by 100 basis points to 13.8% for the first six months of 2017, reflecting operating costs decreasing at a faster rate than revenue.

General Dynamics demonstrated a strong commitment to capital allocation. For the first six months of 2017, the company repurchased approximately $893 million of its common stock and paid $483 million in dividends. The board of directors also authorized an additional repurchase of up to 10 million shares.

The company provided outlooks for its business segments. Aerospace revenue was expected to be around $8.1 billion for the full year with an operating margin of 19.5% to 19.6%. Combat Systems revenue was projected to increase approximately 7% with an operating margin of 15.6% to 15.7%. Information Systems and Technology revenue was expected to be flat, with an operating margin of 11.2% to 11.4%. Marine Systems revenue was projected to be about $8.1 billion with an operating margin of around 8.6%.