General Dynamics 2015 Annual Report Download - page 32

The Virginia-class submarine program was the company’s largest
program in 2015 and the largest contract in the company’s backlog. In
2014, we received a contract for the construction of 10 submarines in
Block IV of the program. The group’s backlog at year-end 2015
included $17.4 billion for 16 Virginia-class submarines scheduled for
delivery through 2023.
Navy destroyer programs represented $3.9 billion of the group’s
backlog at year-end 2015. We have construction contracts for seven
DDG-51 destroyers scheduled for delivery through 2022. Backlog at
year end 2015 also included three ships under the DDG-1000 program
scheduled for delivery through 2019.
The Marine Systems group’s backlog on December 31, 2015,
included $420 for construction of ESB auxiliary support ships. The
group has delivered the first three ships in the program, and
construction is underway on the fourth ship, scheduled for delivery in
2018.
The year-end backlog also included $350 for one liquefied natural
gas (LNG)-powered and seven LNG-conversion-ready Jones Act ships
for commercial customers scheduled for delivery through 2017.
Complementing these ship construction programs, engineering
services represented approximately $1.8 billion of the Marine Systems
group’s backlog on December 31, 2015, including $1.2 billion for
design and development efforts on the Ohio-class submarine
replacement program. Additionally, year-end backlog for maintenance,
repair and other services totaled $1.4 billion.
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. Cash generated
by operating activities over the past three years was deployed to
repurchase our common stock, pay dividends and fund capital
expenditures.
Our cash balances are invested primarily in time deposits from
highly rated banks and commercial paper rated A1/P1 or higher. On
December 31, 2015, $1.1 billion of our cash was held by non-U.S.
operations. Should this cash be repatriated, it generally would be
subject to U.S. federal income tax but would generate offsetting foreign
tax credits.
Year Ended December 31 2015 2014 2013
Net cash provided by operating activities $ 2,499 $ 3,728 $ 3,111
Net cash provided (used) by investing
activities 200 (1,102) (363)
Net cash used by financing activities (4,259) (3,575) (725)
Net cash (used) provided by discontinued
operations (43) 36 (18)
Net (decrease) increase in cash and
equivalents (1,603) (913) 2,005
Cash and equivalents at beginning of
year 4,388 5,301 3,296
Cash and equivalents at end of year 2,785 4,388 5,301
Marketable securities – 500 –
Short- and long-term debt (3,399) (3,893) (3,888)
Net (debt) cash $ (614) $ 995 $ 1,413
Debt-to-equity (a) 31.7% 32.9% 26.8%
Debt-to-capital (b) 24.0% 24.8% 21.1%
Note: Prior period information has been restated to reflect the reclassification of debt issuance
costs from other assets to debt as discussed in Note J to the Consolidated Financial Statements in
Item 8.
(a) Debt-to-equity ratio is calculated as total debt divided by total equity.
(b) 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 in Item 8.
OPERATING ACTIVITIES
We generated cash from operating activities of $2.5 billion in 2015, $3.7
billion in 2014 and $3.1 billion in 2013. In all three years, the primary
driver of cash flows was net earnings. Operating cash flows in 2013
benefited from deposits received in the Marine Systems group for
commercial ship orders. In 2014, operating cash flows included
significant customer deposits related to a large contract for a Middle
Eastern customer awarded in our Combat Systems group. In 2015,
operating cash flows were negatively affected by the utilization of these
deposits coupled with growth in operating working capital in our
Aerospace group consistent with building test aircraft for the G500 and
G600 programs.
28 General Dynamics Annual Report 2015