General Dynamics (NYSE: GD) today reported 2005 fourth-quarter earnings from continuing operations of $406 million, or $2.00 per share on a fully diluted basis; comparable 2004 fourth-quarter earnings were $330 million, or $1.63 per share fully diluted. Revenue for the fourth quarter of 2005 was $5.8 billion, compared to fourth-quarter 2004 revenue of $5.2 billion.
Revenue for the full year of 2005 was $21.2 billion, compared with $19.1 billion for 2004, an increase of 11 percent. Earnings from continuing operations for 2005 grew by 22 percent to $1.47 billion, or $7.25 per share on a fully diluted basis, compared with earnings of $1.21 billion, or $5.98 fully diluted, in 2004.
Net cash provided by operating activities totaled $900 million in the quarter and $2.06 billion for the year. Free cash flow from operations, defined as net cash provided by operating activities less capital expenditures, was $788 million in the quarter and $1.78 billion for the year.
"General Dynamics generated solid returns in the fourth quarter of 2005, capping another very strong year," said General Dynamics Chairman and Chief Executive Officer Nicholas D. Chabraja. "Revenue and earnings grew substantially over the fourth quarter of 2004, and full-year earnings per share from continuing operations grew by 21 percent over 2004, on a revenue increase of 11 percent," Chabraja said.
"Free cash flow from operations in the year of approximately $1.8 billion once again represents a very efficient conversion of net earnings into cash, a ratio of 122 percent," said Chabraja. "Backlog year-over-year remained strong, growing by approximately $400 million; especially notable is the $1.2 billion increase in the Aerospace backlog from year-end 2004 to year-end 2005."
"Highlights of the fourth quarter include revenue increases in each of the company's four major business groups. Combat Systems sales grew by 23 percent over the fourth quarter of 2004, on strong demand for ground vehicles and associated systems around the world. Revenue in Information Systems and Technology was up 12 percent, largely attributable to the strength of the tactical communications and computing markets, and production and support for intelligence systems. In Aerospace, Gulfstream increased revenue by 13 percent over fourth quarter 2004, and received net orders for 44 aircraft," said Chabraja.
"Looking forward in 2006, we anticipate continued solid performance from Combat Systems, Information Systems and Technology and the Aerospace group, as well as margin improvement in Marine Systems," Chabraja said. "We expect 2006 earnings per share from continuing operations to be between $7.80 and $7.85 per share including the effect of expensing options. We also expect free cash flow from operations to approximate net earnings."
General Dynamics, headquartered in Falls Church, Virginia, employs approximately 72,200 people worldwide. The company is a market leader in mission-critical information systems and technologies; land and expeditionary combat systems, armaments and munitions; shipbuilding and marine systems; and business aviation. More information about the company is available on the Internet at http://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 Forms 10-Q.
All forward-looking statements speak only as of the date they were made. 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 a.m. Eastern Time on Wednesday, January 25, 2006. 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 a listen-only audio broadcast, available at http://www.generaldynamics.com. A Real Audio player or Windows Media(TM) player is required to access the webcast; information about downloading those players is available on the company's website. An on-demand replay of the webcast will be available by 2 p.m. on January 25 and will continue for 12 months.
To hear a recording of the conference call by telephone, please call 719- 457-0820; passcode 5151654. It will be available from 2 p.m. on January 25 until midnight February 8, 2006.
CONSOLIDATED STATEMENT OF EARNINGS (UNAUDITED)
DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS
Fourth Quarter Variance
2005 2004 $ %
NET SALES $5,831 $5,174 $657 12.7 %
OPERATING COSTS AND EXPENSES 5,219 4,644 (575)
OPERATING EARNINGS 612 530 82 15.5 %
Interest, Net (25) (37) 12
Other Income, Net 24 1 23
EARNINGS FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 611 494 117 23.7 %
Provision for Income Taxes 205 164 (41)
EARNINGS FROM CONTINUING OPERATIONS $406 $330 $76 23.0 %
Discontinued Operations, Net of Tax - 6 (6)
NET EARNINGS $406 $336 $70 20.8 %
EARNINGS PER SHARE - BASIC
Continuing Operations $2.02 $1.64 $0.38 23.2 %
Discontinued Operations $- $0.03 $(0.03)
Net Earnings $2.02 $1.67 $0.35 21.0 %
BASIC WEIGHTED AVERAGE SHARES
OUTSTANDING (IN MILLIONS) 200.9 200.6
EARNINGS PER SHARE - DILUTED
Continuing Operations $2.00 $1.63 $0.37 22.7 %
Discontinued Operations $- $0.03 $(0.03)
Net Earnings $2.00 $1.66 $0.34 20.5 %
DILUTED WEIGHTED AVERAGE SHARES
OUTSTANDING (IN MILLIONS) 202.7 202.6
CONSOLIDATED STATEMENT OF EARNINGS (UNAUDITED)
DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS
Twelve Months Variance
2005 2004 $ %
NET SALES $21,244 $19,119 $2,125 11.1 %
OPERATING COSTS AND EXPENSES 19,047 17,175 (1,872)
OPERATING EARNINGS 2,197 1,944 253 13.0 %
Interest, Net (118) (148) 30
Other Income/(Expense), Net 21 (8) 29
EARNINGS FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 2,100 1,788 312 17.4 %
Provision for Income Taxes 632 583 (49)
EARNINGS FROM CONTINUING OPERATIONS $1,468 $1,205 $263 21.8 %
Discontinued Operations, Net of Tax (7) 22 (29)
NET EARNINGS $1,461 $1,227 $234 19.1 %
EARNINGS PER SHARE - BASIC
Continuing Operations $7.31 $6.04 $1.27 21.0 %
Discontinued Operations $(0.03) $0.11 $(0.14)
Net Earnings $7.28 $6.15 $1.13 18.4 %
BASIC WEIGHTED AVERAGE SHARES
OUTSTANDING (IN MILLIONS) 200.8 199.6
EARNINGS PER SHARE - DILUTED
Continuing Operations $7.25 $5.98 $1.27 21.2 %
Discontinued Operations $(0.03) $0.11 $(0.14)
Net Earnings $7.22 $6.09 $1.13 18.6 %
DILUTED WEIGHTED AVERAGE SHARES
OUTSTANDING (IN MILLIONS) 202.4 201.5
NET SALES AND OPERATING EARNINGS BY SEGMENT (UNAUDITED)
DOLLARS IN MILLIONS
Fourth Quarter Variance
2005 2004 $ %
NET SALES:
INFORMATION SYSTEMS AND
TECHNOLOGY $2,076 $1,848 $228 12.3 %
COMBAT SYSTEMS 1,606 1,308 298 22.8 %
MARINE SYSTEMS 1,136 1,115 21 1.9 %
AEROSPACE 946 837 109 13.0 %
RESOURCES/ CORPORATE 67 66 1 1.5 %
TOTAL $5,831 $5,174 $657 12.7 %
OPERATING EARNINGS:
INFORMATION SYSTEMS AND
TECHNOLOGY $215 $181 $34 18.8 %
COMBAT SYSTEMS 190 171 19 11.1 %
MARINE SYSTEMS 83 51 32 62.7 %
AEROSPACE 123 116 7 6.0 %
RESOURCES/ CORPORATE 1 11 (10) (90.9)%
TOTAL $612 $530 $82 15.5 %
OPERATING MARGINS:
INFORMATION SYSTEMS AND
TECHNOLOGY 10.4 % 9.8 %
COMBAT SYSTEMS 11.8 % 13.1 %
MARINE SYSTEMS 7.3 % 4.6 %
AEROSPACE 13.0 % 13.9 %
RESOURCES/ CORPORATE 1.5 % 16.7 %
TOTAL 10.5 % 10.2 %
NET SALES AND OPERATING EARNINGS BY SEGMENT (UNAUDITED)
DOLLARS IN MILLIONS
Twelve Months Variance
2005 2004 $ %
NET SALES:
INFORMATION SYSTEMS AND
TECHNOLOGY $7,826 $6,722 $1,104 16.4 %
COMBAT SYSTEMS 5,021 4,407 614 13.9 %
MARINE SYSTEMS 4,695 4,726 (31) (0.7)%
AEROSPACE 3,433 3,012 421 14.0 %
RESOURCES/ CORPORATE 269 252 17 6.7 %
TOTAL $21,244 $19,119 $2,125 11.1 %
OPERATING EARNINGS:
INFORMATION SYSTEMS AND
TECHNOLOGY $865 $718 $147 20.5 %
COMBAT SYSTEMS 576 522 54 10.3 %
MARINE SYSTEMS 249 292 (43) (14.7)%
AEROSPACE 495 393 102 26.0 %
RESOURCES/ CORPORATE 12 19 (7) (36.8)%
TOTAL $2,197 $1,944 $253 13.0 %
OPERATING MARGINS:
INFORMATION SYSTEMS AND
TECHNOLOGY 11.1% 10.7%
COMBAT SYSTEMS 11.5% 11.8%
MARINE SYSTEMS 5.3% 6.2%
AEROSPACE 14.4% 13.0%
RESOURCES/ CORPORATE 4.5% 7.5%
TOTAL 10.3% 10.2%
PRELIMINARY FINANCIAL INFORMATION (UNAUDITED)
DOLLARS IN MILLIONS EXCEPT PER SHARE AND EMPLOYEE AMOUNTS
Fourth Quarter Fourth Quarter
2005 2004
Cash $2,331 $976
Short-term Debt $510 $6
Long-term Debt 2,781 3,291
Total Debt $3,291 $3,297
Net Debt $960 $2,321
Shareholders' Equity $8,145 $7,189
Debt-to-Equity 40.4% 45.9%
Debt-to-Capital 28.8% 31.4%
Book Value per Share $40.69 $35.76
Year- Year-
Net Cash Provided by Operating Quarter to-date Quarter to-date
Activities $900 $2,056 $804 $1,800
Capital Expenditures (112) (279) (89) (264)
Free Cash Flow from Operations (A) $788 $1,777 $715 $1,536
Total Taxes Paid $160 $166
Depreciation and Depletion $62 $58
Intangible Asset Amortization 25 26
Depreciation, Depletion and
Amortization $87 $84
Company Sponsored R&D (B) $91 $77
Employment 72,200 70,000
Sales Per Employee $299,367 $283,223
Shares Outstanding 200,181,527 201,033,153
Weighted Average Shares
Outstanding -
Basic 200,948,421 200,648,072
Diluted 202,651,211 202,577,701
(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 most directly comparable GAAP measure to free
cash flow from operations is net cash provided by operating
activities.
(B) Includes independent research and development and bid and proposal
costs and Gulfstream product development costs.
BACKLOG (UNAUDITED)
DOLLARS IN MILLIONS
Fourth Quarter 2005
IDIQ Total
Contract Estimated
Total Value Contract
Funded Unfunded Backlog (A) Value
INFORMATION SYSTEMS AND
TECHNOLOGY $6,960 $2,415 $9,375 $4,800 $14,175
COMBAT SYSTEMS 6,954 2,374 9,328 1,202 10,530
MARINE SYSTEMS 8,419 7,014 15,433 - 15,433
AEROSPACE 5,853 2,210 8,063 - 8,063
RESOURCES 165 65 230 - 230
TOTAL $28,351 $14,078 $42,429 $6,002 $48,431
Third Quarter 2005
IDIQ Total
Contract Estimated
Total Value Contract
Funded Unfunded Backlog (A) Value
INFORMATION SYSTEMS AND
TECHNOLOGY $7,310 $2,748 $10,058 $5,196 $15,254
COMBAT SYSTEMS 7,771 2,416 10,187 861 11,048
MARINE SYSTEMS 8,876 6,660 15,536 - 15,536
AEROSPACE 5,156 2,188 7,344 - 7,344
RESOURCES 181 58 239 - 239
TOTAL $29,294 $14,070 $43,364 $6,057 $49,421
Fourth Quarter 2004
IDIQ Total
Contract Estimated
Total Value Contract
Funded Unfunded Backlog (A) Value
INFORMATION SYSTEMS AND
TECHNOLOGY $7,071 $2,276 $9,347 $6,301 $15,648
COMBAT SYSTEMS 6,398 2,318 8,716 97 8,813
MARINE SYSTEMS 9,899 6,943 16,842 - 16,842
AEROSPACE 4,652 2,192 6,844 - 6,844
RESOURCES 200 58 258 - 258
TOTAL $28,220 $13,787 $42,007 $6,398 $48,405
(A) IDIQ contract value represents management's estimate of the future
contract value under existing indefinite delivery, indefinite quantity
contracts. Because the value in these 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.
AIRCRAFT DELIVERIES (UNAUDITED)
Fourth Quarter Twelve Months
2005 2004 2005 2004
GREEN:
LARGE AIRCRAFT 17 15 63 56
MID-SIZE AIRCRAFT 7 6 26 22
TOTAL 24 21 89 78
COMPLETIONS:
LARGE AIRCRAFT 17 16 60 52
MID-SIZE AIRCRAFT 8 10 24 25
TOTAL 25 26 84 77
PRE-OWNED:
UNITS 4 3 12 15
SALES $87 $65 $219 $278
OPERATING EARNINGS $3 $1 $13 $6
AIRCRAFT ORDERS (UNAUDITED)
UNITS
Large Mid-size
Aircraft Aircraft Total
FOURTH QUARTER 2005 2004 2005 2004 2005 2004
ORDERS (A) 32 33 12 10 44 43
DELIVERIES (B) 17 15 7 6 24 21
BOOK-TO-BILL 1.88 2.20 1.71 1.67 1.83 2.05
UNITS
Large Mid-size
Aircraft Aircraft Total
TWELVE MONTHS 2005 2004 2005 2004 2005 2004
ORDERS (A) 89 71 32 24 121 95
DELIVERIES (B) 63 56 26 22 89 78
BOOK-TO-BILL 1.41 1.27 1.23 1.09 1.36 1.22
(A) Net of cancellations.
(B) Represents green deliveries.
RECONCILIATION OF
YEAR-TO-DATE CASH FLOW TO
CHANGE IN NET DEBT (UNAUDITED)
2005 2004
NET CASH PROVIDED BY OPERATING ACTIVITIES $2,056 $1,800
CAPITAL EXPENDITURES (279) (264)
FREE CASH FLOW FROM OPERATIONS 1,777 1,536
BUSINESS ACQUISITIONS (277) (543)
ASSET SALES 361 24
SHARE REPURCHASES (348) -
DIVIDENDS (314) (278)
PROCEEDS FROM OPTION EXERCISES 148 169
OTHER 14 (47)
DECREASE IN NET DEBT $1,361 $861
NET DEBT, BEGINNING OF PERIOD (2,321) (3,182)
NET DEBT, END OF PERIOD $(960) $(2,321)