General Dynamics 2013 Annual Report Download - page 32

The group received a number of significant contract awards in
2013, including the following:
•$250 from the Army for ruggedized computing equipment under the
CHS-4 program. $990 of estimated potential contract value remains
under this IDIQ contract.
•$235 for commercial wireless network systems and support.
•$160 from Austal USA for combat and seaframe control systems for
two Littoral Combat Ships, bringing the value in backlog to $325.
Options to provide these naval control systems for four additional
ships will be reported in backlog when they are exercised.
•$145 from the U.S. Department of State to provide supply chain
management services. The program has a maximum potential value
of $1.2 billion over five years.
•$140 for production and support of U.S. and U.K. Trident II
submarine weapons systems.
•$135 for the Warfighter Field Operations Customer Support (FOCUS)
program to provide support for the Army’s live, virtual and
constructive training operations.
Backlog at year-end 2013 also included the following key programs:
•$490 of support and modernization work for the intelligence
community, the DoD and the Department of Homeland Security,
including the St. Elizabeths campus, New Campus East and
NETCENTS infrastructure programs.
•$450 for WIN-T and an additional $755 of estimated potential
contract value awarded as an IDIQ contract.
•$315 for contact-center services for the Centers for Medicare &
Medicaid Services, including the 1-800-MEDICARE program.
•$190 for the Rifleman and Manpack tactical radios. In 2013, the
group received orders from the Army for production of 1,500 radios
and 500 accessory kits.
FINANCIAL CONDITION, LIQUIDITY AND
CAPITAL RESOURCES
We place a strong emphasis on cash flow generation. This focus gives
us the flexibility for capital deployment while preserving a strong
balance sheet to position us for future opportunities. The $9 billion of
cash generated by operating activities over the past three years was
deployed to fund acquisitions and capital expenditures, repurchase our
common stock and pay dividends. Our net cash, defined as cash and
equivalents less debt, was $1.4 billion at year-end 2013, up $2 billion
from the end of 2012.
Our cash balances are invested primarily in time deposits from highly
rated banks and commercial paper rated A1/P1 or higher. On
December 31, 2013, $1.1 billion of our cash was held by international
operations. While we do not intend to do so, should this cash be
repatriated, it would be subject to U.S. federal income tax but would
generate offsetting foreign tax credits.
Year Ended December 31 2011 2012 2013
Net cash provided by operating activities $ 3,238 $ 2,687 $ 3,106
Net cash used by investing activities (1,974) (656) (367)
Net cash used by financing activities (1,201) (1,382) (725)
Net cash used by discontinued operations (27) (2) (9)
Net increase in cash and equivalents 36 647 2,005
Cash and equivalents at beginning of year 2,613 2,649 3,296
Cash and equivalents at end of year 2,649 3,296 5,301
Marketable securities 248 – –
Short- and long-term debt (3,930) (3,909) (3,909)
Net cash (debt) (a) $ (1,033) $ (613) $ 1,392
Debt-to-equity (b) 29.7% 34.3% 27.0%
Debt-to-capital (c) 22.9% 25.6% 21.2%
(a) Net cash is calculated as cash and equivalents and marketable securities less debt.
(b) Debt-to-equity ratio is calculated as total debt divided by total equity.
(c) Debt-to-capital ratio is calculated as total debt divided by the sum of total debt plus total
equity.
We expect to continue to generate funds in excess of our short- and
long-term liquidity needs. We believe we have adequate funds on hand
and sufficient borrowing capacity to execute our financial and operating
strategy. The following is a discussion of our major operating, investing
and financing activities for each of the past three years, as classified on
the Consolidated Statements of Cash Flows.
OPERATING ACTIVITIES
We generated cash from operating activities of $3.2 billion in 2011, $2.7
billion in 2012 and $3.1 billion in 2013. In all three years, the primary
driver of cash flows was net earnings (loss) after removing the impact of
non-cash charges. Operating cash flows in 2013 were favorably
impacted by reductions in operating working capital (OWC), primarily in
our Marine Systems business group from deposits associated with
orders received in 2013 for commercial ships. Cash from operating
activities includes contributions to our pension plans, which have grown
from $350 in 2011 to $600 in 2013, with contributions of approximately
$550 expected in 2014.
28 General Dynamics Annual Report 2013