 |
January 23, 2008 |
| P.O. Box 2074 | Contact: Rob Doolittle |
| Warren, MI 48090-2074 | Tel: 703 876 3199 |
| www.gdls.com | Fax: 703 876 3555 |
| rdoolitt@generaldynamics.com |
General Dynamics Reports Strong Earnings, Revenue Growth in Fourth Quarter 2007
• Earnings from Continuing Operations Grow 24.8 percent
• Revenues Increase 15.4 Percent
FALLS CHURCH, Va. – General Dynamics (NYSE: GD) today reported financial results for the fourth quarter and full year of 2007, which ended December 31.
Fourth-Quarter Results
General Dynamics’ earnings from continuing operations in the fourth quarter 2007 were $578 million, or
$1.42 per share on a fully diluted basis, compared to 2006 fourth-quarter earnings from continuing
operations of $463 million, or $1.13 per share fully diluted. Revenue for the fourth quarter 2007 was $7.5
billion, compared to fourth-quarter 2006 revenue of $6.5 billion.
Full-year 2007 Results
Earnings from continuing operations for 2007 were $2.1 billion, or $5.10 per share on a fully diluted basis,
compared with $1.7 billion, or $4.20 fully diluted, in 2006. This is an increase of 21.6 percent. Revenue
for the full year 2007 was $27.2 billion, compared with $24.1 billion for 2006, an increase of 13.2 percent.
Cash
Net cash provided by operating activities from continuing operations totaled $1.07 billion in the quarter and
$2.95 billion for the year. Free cash flow from operations, defined as net cash provided by operating
activities from continuing operations less capital expenditures, was $891 million in the quarter and $2.48
billion for the year.
Backlog
The company’s funded backlog grew by $292 million in the fourth quarter of 2007, to $37.2 billion.
Compared to year-end 2006, funded backlog increased $3.2 billion. Total backlog at year-end 2007 was
$46.8 billion.
Margins
Operating margins for the fourth quarter 2007 increased to 11.6 percent from 10.8 percent for fourth
quarter 2006. For the full year, company-wide operating margins increased by 50 basis points over 2006,
to 11.4 percent.
Net Earnings
General Dynamics’ net earnings for the fourth quarter of 2007 were $579 million, compared to fourthquarter
2006 net earnings of $408 million, which included charges in discontinued operations related to the
anticipated sale of the company’s coal mining operations. Net earnings for the full year were $2.07 billion
in 2007, compared to $1.86 billion in 2006 which included a gain in discontinued operations from the sale
of the company’s aggregates business.
“General Dynamics generated solid returns in the fourth quarter of 2007,” said General Dynamics
Chairman and Chief Executive Officer Nicholas D. Chabraja. “Revenues and earnings grew substantially
over the fourth quarter of 2006, and operating margins increased 80 basis points, to 11.6 percent, when
compared to the fourth quarter 2006. Free cash flow from operations in the quarter was $891 million, or
more than 150 percent of net earnings.
“Highlights of the quarter included significant revenue and earnings growth in the Combat Systems group
on strong combat-vehicle sales, including Abrams tank modernization and Stryker production, as well as
significant sales and earnings increases in the Aerospace group,” Chabraja said. “Marine Systems once
again improved margin rates, on a modest increase in sales volume, contributing to another year of strong
performance across the corporation. Notably, total backlog in the Information Systems and Technology
segment grew $300 million on the strength of $3 billion in orders, reflecting a book-to-bill ratio of 1.2.
“Given our strong performance in 2007, the record backlog and strong support for our programs, we expect
2008 earnings to be in the range of $5.55 to $5.65 per share, fully diluted,” Chabraja said.
General Dynamics, headquartered in Falls Church, Virginia, employs approximately 83,500 people worldwide. The company is a market leader in business aviation; land and expeditionary combat systems, armaments and munitions; shipbuilding and marine systems; and information systems and technologies. More information about the company is available on the Internet at www.generaldynamics.com.
Certain statements made in this press release, including any statements as to future results of operations and
financial projections, may constitute “forward-looking statements” within the meaning of the Private Securities
Litigation Reform Act of 1995, as amended. Forward-looking statements are based on management’s
expectations, estimates, projections and assumptions. These statements are not guarantees of future
performance and involve certain risks and uncertainties, which are difficult to predict. Therefore, actual future
results and trends may differ materially from what is forecast in forward-looking statements due to a variety of
factors. Additional information regarding these factors is contained in the company’s filings with the Securities
and Exchange Commission, including, without limitation, our Annual Report on Form 10-K and our Quarterly
Reports on Form 10-Q.
All forward-looking statements speak only as of the date of this press release. The company does not undertake any obligation to update or publicly release any revisions to any forward-looking statements to reflect events, circumstances or changes in expectations after the date of this press release.
WEBCAST INFORMATION: General Dynamics will webcast its fourth-quarter securities analyst conference
call, scheduled for 11:30 a.m. Eastern Time on Wednesday, January 23, 2008. Those accessing the webcast will
be able to listen to management’s discussion of the fourth-quarter and full-year results, as well as the question-and-answer session with securities analysts.
The webcast will be available at www.generaldynamics.com. An on-demand replay of the webcast will be available by 3 p.m. on January 23 and will continue for 12 months.
To hear a recording of the conference call by telephone, please call 888-286-8010 (international: 617-801-6888); passcode 97541627. It will be available from 3 p.m. on January 23 until midnight January 30, 2008.
CONSOLIDATED STATEMENT OF EARNINGS (UNAUDITED)
DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS
Exhibit A
CONSOLIDATED STATEMENT OF EARNINGS (UNAUDITED)
DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS
Exhibit B
NET SALES AND OPERATING EARNINGS BY SEGMENT (UNAUDITED)
DOLLARS IN MILLIONS
Exhibit C
NET SALES AND OPERATING EARNINGS BY SEGMENT (UNAUDITED)
DOLLARS IN MILLIONS
Exhibit D
PRELIMINARY CONSOLIDATED BALANCE SHEET (UNAUDITED)
DOLLARS IN MILLIONS
Exhibit E
PRELIMINARY CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
DOLLARS IN MILLIONS
Exhibit F
PRELIMINARY FINANCIAL INFORMATION (UNAUDITED)
DOLLARS IN MILLIONS EXCEPT PER SHARE AND EMPLOYEE AMOUNTS
(A) The company's management believes free cash flow from operations is a measurement that is useful to investors, because it portrays the company's ability to generate cash from its core businesses for such purposes as repaying maturing debt, funding business acquisitions and paying dividends. The company uses free cash flow from operations to assess the quality of its earnings and as a performance measure in evaluating management. The most directly comparable GAAP measure to free cash flow from operations is net cash provided by operating activities from continuing operations.
(B) The company's management believes return on invested capital is a measurement that is useful to investors, because it reflects the company's ability to generate returns from the capital it has deployed in its operations. The company uses ROIC to evaluate investment decisions and as a performance measure in evaluating management. The company defines ROIC as net operating profit after taxes for the latest 12-month period divided by the sum of the average debt and shareholders' equity for the same period. Net operating profit after taxes is defined as earnings from continuing operations plus after-tax interest and amortization expense. The most directly comparable GAAP measure to net operating profit after taxes is earnings from continuing operations.
(C) Debt-to-equity ratio is calculated as total debt divided by total equity as of the end of the period.
(D) Debt-to-capital ratio is calculated as total debt divided by the sum of total debt plus total equity as of the end of the period.
(E) Book value per share is calculated as total equity divided by total outstanding shares as of the end of the period.
(F) Includes independent research and development and bid and proposal costs and Gulfstream product development costs.
(G) Sales per employee is calculated by dividing net sales for the latest 12-month period by the company's average
number of employees during that period.
Exhibit G
BACKLOG (UNAUDITED)
DOLLARS IN MILLIONS
* The estimated potential contract value represents management's estimate of the company's future contract value under indefinite delivery, indefinite quantity (IDIQ) contracts and unexercised options associated with existing firm contracts. Because the value in the IDIQ arrangements is subject to the customer's future exercise of an indeterminate quantity of delivery orders, the company recognizes these contracts in backlog only when they are funded. Unexercised options are recognized in backlog when the customer exercises the options and establishes a firm order.
Exhibit H
FOURTH QUARTER 2007 SIGNIFICANT ORDERS (UNAUDITED)
DOLLARS IN MILLIONS
General Dynamics received the following significant contract orders during the fourth quarter of 2007:
Combat Systems
• Combined orders worth $347 from the U.S. Army under the Abrams M1A2 System Enhancement Package
(SEP) program to reset and upgrade approximately 420 vehicles.
• $308 from the Army under the Egyptian M1A1 Abrams Tank Co-production program to supply 125 tank
kits for assembly.
• Combined orders worth $236 for 401 armored Cougar vehicles and related spares under the Mine Resistant
Ambush Protected (MRAP) vehicle program. The company is providing these vehicles to the U.S. Marine
Corps through a joint venture with Force Protection, Inc.
• Combined orders worth $84 from the Army for Abrams Tank System Technical Support, bringing the total
contract value to over $400.
• $88 from the Spanish government for 21 Piranha II wheeled armored vehicles.
Marine Systems
• $270 from the U.S. Navy to purchase long-lead materials for the FY 09 Virginia-class submarine.
• $189 from the Navy for procurement of long-lead materials and pre-production planning for the DDG 1000
Zumwalt-class destroyers.
Information Systems and Technology
• Contract modifications from the Army worth $633 to continue design and development of the Warfighter
Information Network-Tactical (WIN-T) system.
• Combined orders totaling $113 under the Common Hardware/Software III program, bringing the total
contract value to approximately $1.1 billion.
• $91 from the Navy to provide modifications and support for fire control systems aboard U.S. and U.K.
ballistic missile submarines and for the attack weapons control system aboard U.S. guided missile
submarines. The contract has a total potential value of approximately $160.
• $86 from the U.K. Royal Air Force for the tactical data link system of the Tactical Information Exchange
Capability (TIEC) program. TIEC provides aircrew with enhanced situational awareness.
Exhibit I
AIRCRAFT DELIVERIES (UNAUDITED)
AIRCRAFT ORDERS (UNAUDITED)
Exhibit J
