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FALLS CHURCH, Va. – General Dynamics (NYSE: GD) today reported fourth-quarter 2016 earnings from continuing operations of $807 million, a 5.6 percent increase over fourth-quarter 2015, on revenue of $8.2 billion. Diluted earnings per share from continuing operations were $2.62 compared to $2.40 in the year-ago quarter, a 9.2 percent increase.
Full-year earnings from continuing operations were $3.1 billion, a 3.3 percent increase from 2015 on revenue of $31.4 billion. Diluted earnings per share from continuing operations were up 8.7 percent at $9.87 compared to $9.08 in 2015.
“The quarter is solid showing strong growth over the year-ago quarter in both revenue and earnings and the same was true on a sequential basis. These themes played out throughout the business groups as well,” said Phebe Novakovic, chairman and chief executive officer. “The year was strong with growth in earnings, margins, return on sales and an 8.7 percent increase in EPS over the prior year.”
Company-wide operating margin was 13.6 percent for the fourth quarter, 30 basis points higher than the fourth-quarter 2015 margin, with expansion in Aerospace, Information Systems and Technology and Marine Systems. For the full year of 2016, operating margin was 13.7 percent, 40 basis points higher than the full-year 2015 margin.
The Aerospace group reported fourth-quarter 2016 revenue of $2.22 billion, operating earnings of $436 million and operating margin of 19.6 percent. Compared to fourth-quarter 2015, revenue was up 3.8 percent, earnings were up 6.3 percent and margin was up 50 basis points. The group had solid order activity in the quarter and Gulfstream’s two new large-cabin business jets continue to progress ahead of schedule, including the first flight of the G600 in December.
Combat Systems reported fourth-quarter 2016 revenue of $1.68 billion, operating earnings of $259 million and operating margin of 15.4 percent. Compared to fourth-quarter 2015, revenue was up 10.5 percent, earnings were up 10.7 percent and margin was steady as the group continued its strong program and operating performance. The group booked multiple significant contracts in the quarter, including a $320 million contract from the U.S. Army for double-V-hulled Stryker vehicles.
Information Systems and Technology
The Information Systems and Technology group reported fourth-quarter 2016 revenue of $2.28 billion, operating earnings of $244 million and operating margin of 10.7 percent. Compared to fourth-quarter 2015, revenue was up 5.7 percent, earnings were up 6.1 percent and margin was up 10 basis points. The group had a book-to-bill ratio (orders divided by revenue) of approximately one-to-one for the year, demonstrating continued demand for its products and services in a cost-competitive market.
Marine Systems reported fourth-quarter 2016 revenue of $2.04 billion, operating earnings of $186 million and operating margin of 9.1 percent. Compared to fourth-quarter 2015, revenue was up 3 percent, earnings were up 8.1 percent and margin was up 40 basis points. The group continues to execute on its extensive backlog and was awarded significant contracts in the quarter, including $375 million from the U.S. Navy for the design and construction of a fifth Expeditionary Sea Base auxiliary support ship.
Net cash provided by operating activities for the full year totaled $2.2 billion. Free cash flow from operations, defined as net cash provided by operating activities less capital expenditures, was $1.8 billion for the year.
General Dynamics’ total backlog at the end of 2016 was $59.8 billion. There was strong demand in the quarter across the company’s portfolio. The estimated potential contract value, representing management’s estimate of value in unfunded indefinite delivery, indefinite quantity (IDIQ) contracts and unexercised options, was $25 billion. Total potential contract value, the sum of all backlog components, was $84.8 billion at the end of the year.
The company will provide its 2017 financial outlook on the financial results conference call, held at 9 a.m. EST, on Friday, January 27, 2017. Additional exhibits (Exhibit K, K-1, K-2 and K-3) are included in this release with 2016 results reflecting the new revenue recognition standard, Accounting Standards Codification (ASC) Topic 606, which the company adopted on January 1, 2017. These exhibits provide comparable information to help investors understand the 2017 financial outlook.
About General Dynamics
Headquartered in Falls Church, Virginia, General Dynamics is a global aerospace and defense company that offers a broad portfolio of products and services in business aviation; combat vehicles, weapons systems and munitions; C4ISR and IT solutions; and shipbuilding. More information is available 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 and full-year 2016 financial results conference call at 9 a.m. EST on Friday, January 27, 2017. 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 12 p.m. on January 27 and will continue for 12 months. To hear a recording of the conference call by telephone, please call 877-344-7529 (international: 412-317-0088); passcode 10099610. The phone replay will be available from 3 p.m. January 27 through February 3, 2017.