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FALLS CHURCH, Va. – General Dynamics (NYSE: GD) today reported 2011 fourth-quarter earnings from continuing operations of $603 million, or $1.68 per share on a fully diluted basis, compared to 2010 fourth-quarter earnings from continuing operations of $729 million, or $1.91 per share fully diluted.
Fourth-quarter earnings were impacted by charges taken at the company’s Switzerland-based aircraft-completions business totaling $189 million. The charges comprise a $111 million non-cash impairment of an intangible asset related to the business and $78 million in contract losses.
“Jet Aviation’s aircraft-completions business continued to face lower OEM business-jet volume and delays in several narrow-body and wide-body aircraft which are nearing delivery,” said Jay L. Johnson, chairman and chief executive officer. “We have taken appropriate steps to address these issues.
“The charges taken in our completions business mask an otherwise solid fourth-quarter performance by General Dynamics, marked by excellent cash generation, delivery of the first 12 Gulfstream G650 production aircraft to the final phase of manufacturing, and strong margins in our defense businesses,” Johnson continued.
Revenue and Full-year Earnings
Fourth-quarter 2011 revenue was $9.1 billion, and revenue was $32.7 billion for the full year. Full-year 2011 earnings from continuing operations were $2.55 billion, or $6.94 per share on a fully diluted basis, compared to $2.63 billion and $6.82 per share, respectively, for 2010.
Company-wide operating margins, which include the impact of the charges in Aerospace, were 10.4 percent for the fourth quarter and 11.7 percent for the full year. These margins reflect the continued strong performance in the company’s defense groups, each of which increased their operating margins in the quarter and for the year.
Net cash provided by operating activities totaled $2 billion in the fourth quarter and $3.2 billion for the full year. Free cash flow from operations, defined as net cash provided by operating activities less capital expenditures, was $1.8 billion in the quarter and $2.8 billion for the year. Free cash flow exceeded earnings from continuing operations in the fourth quarter and for the full year, benefitting from progress payments received by the Aerospace group as the new Gulfstream G650 business-jet aircraft received provisional type certification and the first 12 production aircraft were delivered into final-phase manufacturing.
The company’s total backlog was $57.4 billion at the end of the year. In the fourth quarter, orders were particularly strong for combat vehicle production and improvements, both domestically and internationally. Gulfstream also enjoyed healthy demand across its product portfolio in the quarter, and for the full year recorded the highest number of orders for new aircraft since the introduction of the G650 in 2008.
Estimated potential contract value, representing management’s estimate of the value of unfunded indefinite delivery, indefinite quantity (IDIQ) contracts and unexercised contract options, increased to $28 billion at year-end 2011. Total potential contract value, the sum of all backlog components, was $85.4 billion at the end of the year.
General Dynamics, headquartered in Falls Church, Virginia, employs approximately 95,100 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, its Annual Report on Form 10-K and its Quarterly Reports on Form 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 at 11:30 a.m. Eastern Standard Time on Wednesday, January 25, 2012.The webcast will be a listen-only audio event, available at www.generaldynamics.com. An on-demand replay of the webcast will be available by 2 p.m. January 25 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 99298277.The phone replay will be available from 2 p.m. January 25 until midnight February 1, 2012.