General Dynamics today announced 2012 fourth-quarter and full-year financial results, which include significant, primarily non-cash charges recorded in the fourth quarter. Adjusting for the impact of those charges, non-GAAP fourth-quarter 2012 earnings from continuing operations were $491 million or $1.39 per share, fully diluted. On an unadjusted GAAP basis, the company reported a loss from continuing operations of $2.1 billion, or $6.07 per share fully diluted, for the quarter.
Adjusted 2012 full-year earnings from continuing operations were $2.3 billion, or $6.48 per share fully diluted. On a GAAP basis the company reported a loss from continuing operations of $332 million for 2012, or $0.94 per share fully diluted.
During the fourth quarter the company recorded a $2 billion goodwill impairment related to its Information Systems and Technology (IS&T) group. This charge recognizes the impact of slowed defense spending in the company's IS&T businesses. The company also recorded $867 million in other charges in the quarter, including intangible asset impairments of $301 million in its Aerospace and IS&T groups, which are detailed in Exhibit C of this press release.
Phebe N. Novakovic, chairman and chief executive officer of General Dynamics, said, "General Dynamics' operating results in 2012 and the charges that we have recorded in the fourth quarter reflect the fact that some of our markets are contracting as government budgets shrink at home and abroad. They also suggest opportunities for improvement in some areas of our performance, which we are addressing.
"General Dynamics is a strong corporation with relevant product and service offerings that are critical to our customers' missions. We will continue to manage our business aggressively as we approach the opportunities and the challenges of the future," Novakovic said.
Revenues were $8.1 billion in the fourth quarter of 2012 and $31.5 billion for the full year.
Company-wide operating margins on a non-GAAP basis were 10.1 percent for the fourth quarter and 11.4 percent for the year. On a GAAP basis, company-wide operating margins were -23.5 percent for the fourth quarter and 2.6 percent for the year.
Net cash provided by operating activities, which was largely unaffected by the charges described above, totaled $780 million in the fourth quarter of 2012 and $2.7 billion for the full year. Free cash flow from operations, defined as net cash provided by operating activities less capital expenditures, was $616 million in the quarter and $2.2 billion for the year.
The company's total backlog was $51.3 billion at the end of 2012. In the fourth quarter, orders were particularly strong for the Marine Systems group, including $2.4 billion in awards to continue the development of the U.S. Navy's next-generation strategic deterrent submarine, to purchase long-lead materials for three Virginia-class attack submarines, and to construct two commercial containerships. Other notable orders received in the quarter include awards for additional Stryker infantry combat vehicles, for Abrams tanks for a foreign customer, and for the production of tactical networking equipment and radios for the U.S. Army.
Estimated potential contract value was $26.9 billion at year-end 2012, representing management's estimate of the value of unfunded indefinite delivery, indefinite quantity (IDIQ) contracts and unexercised contract options. Total potential contract value, the sum of all backlog components, was $78.1 billion at the end of the year.
"Looking ahead to 2013, we anticipate earnings per share from continuing operations to be in the range of $6.60 to $6.70," Novakovic said.
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