Market Overview

General Dynamics Reports Second-Quarter 2019 Results

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FALLS CHURCH, Va., July 24, 2019 /PRNewswire/ --

  • Revenue of $9.6 billion, up 4% year-over-year
  • Diluted earnings per share of $2.77, up 5.7% year-over-year
  • Gulfstream G600 achieves FAA certification

General Dynamics (NYSE:GD) today reported second-quarter 2019 revenue of $9.6 billion, up 4 percent year-over-year, with net earnings of $806 million. Diluted earnings per share were $2.77, an increase of 5.7 percent year-over-year.

Operating margins increased sequentially by 50 basis points over the previous quarter to 11.4 percent. In June, the all-new Gulfstream G600 earned both its type and production certificates from the U.S. Federal Aviation Administration.

"Our second-quarter results reflect our relentless focus on driving down costs and improving performance," said Phebe Novakovic, chairman and chief executive officer. "That focus on performance remains unwavering as we ramp up production of new aircraft, begin construction of both a new block and new class of submarines, and solidify our market-leading position in Information Technology."

Backlog
General Dynamics' total backlog at the end of second-quarter 2019 was $67.7 billion. Estimated potential contract value, representing management's estimate of value in unfunded indefinite delivery, indefinite quantity (IDIQ) contracts and unexercised options, was $34.2 billion. Total estimated contract value, the sum of all backlog components, was $101.9 billion, up 3 percent year-over-year.

Order activity remained strong across the aerospace and defense portfolios. Aerospace booked $2.2 billion in orders in the quarter, a 1-to-1 book-to-bill on 12.7 percent year-over-year revenue growth. Significant awards in defense portfolios in the quarter included $495 million from the U.S. Navy for industrial base development and expansion in support of the Columbia-class ballistic missile submarine program, $360 million in contracts to provide intelligence services to classified customers, $270 million from the Navy to support the joint U.S. and U.K. development of the submarine Common Missile Compartment and $260 million from the U.S. Army for production of munitions. Information Technology posted a strong book-to-bill of 1.2-to-1, driven by a $1 billion U.S. Department of State contract to provide global engineering and supply chain services.

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; IT services; C4ISR solutions; and shipbuilding and ship repair. General Dynamics employs more than 100,000 people worldwide and generated $36.2 billion in revenue in 2018. 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 risks and uncertainties that 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 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 second-quarter 2019 financial results conference call at 9 a.m. EDT on Wednesday, July 24, 2019. 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 July 24 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 10132448. The phone replay will be available through August 1, 2019.

Charts furnished to investors and securities analysts in connection with General Dynamics' announcement of its financial results for second-quarter 2019 are available at www.generaldynamics.com.

 

 

EXHIBIT A

CONSOLIDATED STATEMENT OF EARNINGS - (UNAUDITED)

DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS

















Three Months Ended


Variance


June 30, 2019


July 1, 2018*


$


%

Revenue

$

9,555



$

9,186



$

369



4.0

%

Operating costs and expenses

(8,465)



(8,098)



(367)




Operating earnings

1,090



1,088



2



0.2

%

Interest, net

(119)



(103)



(16)




Other, net

12



(15)



27




Earnings before income tax

983



970



13



1.3

%

Provision for income tax, net

(177)



(184)



7




Net earnings

$

806



$

786



$

20



2.5

%

Earnings per share—basic

$

2.80



$

2.65



$

0.15



5.7

%

Basic weighted average shares outstanding

288.1



296.2








Earnings per share—diluted

$

2.77



$

2.62



$

0.15



5.7

%

Diluted weighted average shares outstanding

290.8



300.1








*

2018 results include the unfavorable impact of one-time charges of approximately $70 associated with costs to complete the acquisition of CSRA Inc. In the table above, approximately $45 of compensation-related costs was reported in operating costs and expenses, and approximately $25 of transaction costs was reported in other, net.

 

 

 

EXHIBIT B

CONSOLIDATED STATEMENT OF EARNINGS - (UNAUDITED)

DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS

















Six Months Ended


Variance


June 30, 2019


July 1, 2018*


$


%

Revenue

$

18,816



$

16,721



$

2,095



12.5

%

Operating costs and expenses

(16,712)



(14,625)



(2,087)




Operating earnings

2,104



2,096



8



0.4

%

Interest, net

(236)



(130)



(106)




Other, net

30



(36)



66




Earnings before income tax

1,898



1,930



(32)



(1.7)

%

Provision for income tax, net

(347)



(345)



(2)




Net earnings

$

1,551



$

1,585



$

(34)



(2.1)

%

Earnings per share—basic

$

5.39



$

5.35



$

0.04



0.7

%

Basic weighted average shares outstanding

288.0



296.3







Earnings per share—diluted

$

5.33



$

5.27



$

0.06



1.1

%

Diluted weighted average shares outstanding

290.8



300.6








*

2018 results include the unfavorable impact of one-time charges of approximately $75 associated with costs to complete the acquisition of CSRA Inc. In the table above, approximately $45 of compensation-related costs was reported in operating costs and expenses, and approximately $30 of transaction costs was reported in other, net.

 

 

 

EXHIBIT C

REVENUE AND OPERATING EARNINGS BY SEGMENT - (UNAUDITED)

DOLLARS IN MILLIONS

















Three Months Ended


Variance


June 30, 2019


July 1, 2018*


$


%

Revenue:








Aerospace

$

2,136



$

1,895



$

241



12.7

%

Combat Systems

1,659



1,534



125



8.1

%

Information Technology

2,158



2,442



(284)



(11.6)

%

Mission Systems

1,277



1,147



130



11.3

%

Marine Systems

2,325



2,168



157



7.2

%

Total

$

9,555



$

9,186



$

369



4.0

%

Operating earnings:








Aerospace

$

331



$

386



$

(55)



(14.2)

%

Combat Systems

242



236



6



2.5

%

Information Technology

154



156



(2)



(1.3)

%

Mission Systems

162



153



9



5.9

%

Marine Systems

197



195



2



1.0

%

Corporate

4



(38)



42



110.5

%

Total

$

1,090



$

1,088



$

2



0.2

%

Operating margin:








Aerospace

15.5

%


20.4

%





Combat Systems

14.6

%


15.4

%





Information Technology

7.1

%


6.4

%





Mission Systems

12.7

%


13.3

%





Marine Systems

8.5

%


9.0

%





Total

11.4

%


11.8

%







*

2018 results include the unfavorable impact of approximately $45 of compensation-related one-time charges associated with costs to complete the acquisition of CSRA Inc. This amount was reported as a reduction of Corporate operating earnings in the table above.

 

 

 

EXHIBIT D

REVENUE AND OPERATING EARNINGS BY SEGMENT - (UNAUDITED)

DOLLARS IN MILLIONS

















Six Months Ended


Variance


June 30, 2019


July 1, 2018*


$


%

Revenue:








Aerospace

$

4,376



$

3,720



$

656



17.6

%

Combat Systems

3,295



2,974



321



10.8

%

Information Technology

4,327



3,580



747



20.9

%

Mission Systems

2,435



2,245



190



8.5

%

Marine Systems

4,383



4,202



181



4.3

%

Total

$

18,816



$

16,721



$

2,095



12.5

%

Operating earnings:








Aerospace

$

659



$

732



$

(73)



(10.0)

%

Combat Systems

448



460



(12)



(2.6)

%

Information Technology

310



257



53



20.6

%

Mission Systems

310



299



11



3.7

%

Marine Systems

377



379



(2)



(0.5)

%

Corporate



(31)



31



100.0

%

Total

$

2,104



$

2,096



$

8



0.4

%

Operating margin:








Aerospace

15.1

%


19.7

%





Combat Systems

13.6

%


15.5

%





Information Technology

7.2

%


7.2

%





Mission Systems

12.7

%


13.3

%





Marine Systems

8.6

%


9.0

%





Total

11.2

%


12.5

%







*

2018 results include the unfavorable impact of approximately $45 of compensation-related one-time charges associated with costs to complete the acquisition of CSRA Inc. This amount was reported as a reduction of Corporate operating earnings in the table above.

 

 

 

EXHIBIT E

CONSOLIDATED BALANCE SHEET

DOLLARS IN MILLIONS










(Unaudited)




June 30, 2019


December 31, 2018

ASSETS




Current assets:




Cash and equivalents

$

702



$

963


Accounts receivable

3,673



3,759


Unbilled receivables

7,554



6,576


Inventories

6,480



5,977


Other current assets

1,148



914


Total current assets

19,557



18,189


Noncurrent assets:




Property, plant and equipment, net

4,091



3,978


Intangible assets, net

2,457



2,585


Goodwill

19,662



19,594


Other assets

2,307



1,062


Total noncurrent assets

28,517



27,219


Total assets

$

48,074



$

45,408


LIABILITIES AND SHAREHOLDERS' EQUITY




Current liabilities:




Short-term debt and current portion of long-term debt

$

4,960



$

973


Accounts payable

2,860



3,179


Customer advances and deposits

6,714



7,270


Other current liabilities

3,480



3,317


Total current liabilities

18,014



14,739


Noncurrent liabilities:




Long-term debt

8,975



11,444


Other liabilities

8,208



7,493


Total noncurrent liabilities

17,183



18,937


Shareholders' equity:




Common stock

482



482


Surplus

2,959



2,946


Retained earnings

30,291



29,326


Treasury stock

(17,379)



(17,244)


Accumulated other comprehensive loss

(3,476)



(3,778)


Total shareholders' equity

12,877



11,732


Total liabilities and shareholders' equity

$

48,074



$

45,408


 

 

 

EXHIBIT F

CONSOLIDATED STATEMENT OF CASH FLOWS - (UNAUDITED)

DOLLARS IN MILLIONS










Six Months Ended


June 30, 2019


July 1, 2018

Cash flows from operating activities—continuing operations:




Net earnings

$

1,551



$

1,585


Adjustments to reconcile net earnings to net cash from operating activities:




Depreciation of property, plant and equipment

232



206


Amortization of intangible and finance lease right-of-use assets

183



121


Equity-based compensation expense

72



71


Deferred income tax benefit

(17)



(6)


(Increase) decrease in assets, net of effects of business acquisitions:




Accounts receivable

64



344


Unbilled receivables

(1,074)



(1,030)


Inventories

(556)



(542)


Increase (decrease) in liabilities, net of effects of business acquisitions:




Accounts payable

(301)



(324)


Customer advances and deposits

(607)



(159)


Other, net

(51)



25


Net cash (used) provided by operating activities

(504)



291


Cash flows from investing activities:




Capital expenditures

(362)



(279)


Business acquisitions, net of cash acquired

(17)



(10,039)


Other, net

16



74


Net cash used by investing activities

(363)



(10,244)


Cash flows from financing activities:




Proceeds from commercial paper, net

1,394



2,786


Dividends paid

(563)



(526)


Purchases of common stock

(231)



(436)


Proceeds from fixed-rate notes



6,461


Proceeds from floating-rate notes



1,000


Repayment of CSRA accounts receivable purchase agreement



(450)


Other, net

30



3


Net cash provided by financing activities

630



8,838


Net cash used by discontinued operations

(24)



(6)


Net decrease in cash and equivalents

(261)



(1,121)


Cash and equivalents at beginning of period

963



2,983


Cash and equivalents at end of period

$

702



$

1,862


 

 

 

EXHIBIT G

PRELIMINARY FINANCIAL INFORMATION - (UNAUDITED)

DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS




















2019




2018





Second Quarter




Second Quarter



Other Financial Information:









Debt-to-equity (a)


108.2

%




119.0

%



Debt-to-capital (b)


52.0

%




54.3

%



Book value per share (c)


$

44.58





$

40.48




Income tax payments, net


$

360





$

159




Company-sponsored research and development (d)


$

120





$

90




Shares outstanding


288,844,120





296,281,432













Non-GAAP Financial Measures:











2019


2018



Second Quarter


Six Months


Second Quarter


Six Months

Earnings before interest, taxes, depreciation

and amortization:









Net earnings


$

806



$

1,551



$

786



$

1,585


Interest, net


119



236



103



130


Provision for income tax, net


177



347



184



345


Depreciation of property, plant and equipment


118



232



117



206


Amortization of intangible and finance lease right-of-use assets


92



183



101



121


Earnings before interest, taxes, depreciation

and amortization (e)


$

1,312



$

2,549



$

1,291



$

2,387











Free cash flow from operations:









Net cash provided (used) by operating activities


$

291



$

(504)



$

787



$

291


Capital expenditures


(181)



(362)



(175)



(279)


Free cash flow from operations (f)


$

110



$

(866)



$

612



$

12











(a)

Debt-to-equity ratio is calculated as total debt divided by total equity as of the end of the period.



(b)

Debt-to-capital ratio is calculated as total debt divided by the sum of total debt plus total equity as of the end of the period.



(c)

Book value per share is calculated as total equity divided by total outstanding shares as of the end of the period. 



(d)

Includes independent research and development and Aerospace product-development costs.



(e)

We believe earnings before interest, taxes, depreciation and amortization (EBITDA) is a useful measure for investors because it provides another measure of our profitability and our ability to service our debt. We calculate EBITDA by adding back interest, taxes, depreciation and amortization to net earnings. The most directly comparable GAAP measure to EBITDA is net earnings. 



(f)

We believe free cash flow from operations is a useful measure for investors because it portrays our ability to generate cash from our businesses for purposes such as repaying maturing debt, funding business acquisitions, repurchasing our common stock and paying dividends. We use free cash flow from operations to assess the quality of our earnings and as a key performance measure in evaluating management. The most directly comparable GAAP measure to free cash flow from operations is net cash provided by operating activities.

 

 

 

EXHIBIT H

BACKLOG - (UNAUDITED)

DOLLARS IN MILLIONS
























Funded


Unfunded


Total

Backlog


Estimated

Potential

Contract Value*


Total Estimated

Contract

Value

Second Quarter 2019:











Aerospace


$

11,932



$

213



$

12,145



$

2,079



$

14,224


Combat Systems


14,794



438



15,232



4,113



19,345


Information Technology


4,446



4,405



8,851



17,983



26,834


Mission Systems


4,925



258



5,183



6,847



12,030


Marine Systems


18,344



7,899



26,243



3,223



29,466


Total


$

54,441



$

13,213



$

67,654



$

34,245



$

101,899


First Quarter 2019:











Aerospace


$

11,924



$

244



$

12,168



$

2,080



$

14,248


Combat Systems


15,475



515



15,990



4,185



20,175


Information Technology


4,770



3,584



8,354



16,666



25,020


Mission Systems


5,081



234



5,315



7,186



12,501


Marine Systems


19,935



7,446



27,381



3,831



31,212


Total


$

57,185



$

12,023



$

69,208



$

33,948



$

103,156


Second Quarter 2018:











Aerospace


$

12,187



$

157



$

12,344



$

2,282



$

14,626


Combat Systems


16,646



376



17,022



2,840



19,862


Information Technology


4,633



4,576



9,209



18,931



28,140


Mission Systems


4,636



645



5,281



4,287



9,568


Marine Systems


17,310



5,124



22,434



4,333



26,767


Total


$

55,412



$

10,878



$

66,290



$

32,673



$

98,963




*

The estimated potential contract value includes work awarded on unfunded indefinite delivery, indefinite quantity (IDIQ) contracts and unexercised options associated with existing firm contracts, including options and other agreements with existing customers to purchase new aircraft and aircraft services. We recognize options in backlog when the customer exercises the option and establishes a firm order. For IDIQ contracts, we evaluate the amount of funding we expect to receive and include this amount in our estimated potential contract value. The actual amount of funding received in the future may be higher or lower than our estimate of potential contract value.

 

 

EXHIBIT H-1
BACKLOG - (UNAUDITED)
DOLLARS IN MILLIONS

EXHIBIT H-1

Photo - https://mma.prnewswire.com/media/951121/EXHIBIT_H_1.jpg

 

EXHIBIT H-2
BACKLOG BY SEGMENT - (UNAUDITED)
DOLLARS IN MILLIONS

EXHIBIT H-2 Aerospace

Photo - https://mma.prnewswire.com/media/951122/EXHIBIT_H_2_Aerospace.jpg

EXHIBIT H-2 Combat Systems

Photo - https://mma.prnewswire.com/media/951123/EXHIBIT_H_2_Combat_Systems.jpg

EXHIBIT H-2 Information Technology

Photo - https://mma.prnewswire.com/media/951126/EXHIBIT_H_2_Information_Technology.jpg  

EXHIBIT H-2 Mission Systems

Photo - https://mma.prnewswire.com/media/951125/EXHIBIT_H_2_Mission_Systems.jpg

EXHIBIT H-2 Marine Systems

Photo - https://mma.prnewswire.com/media/951127/EXHIBIT_H_2_Marine_Systems.jpg  

Photo - https://mma.prnewswire.com/media/951128/EXHIBIT_H_2_Key.jpg  


 

EXHIBIT I

SECOND QUARTER 2019 SIGNIFICANT ORDERS - (UNAUDITED)

DOLLARS IN MILLIONS


We received the following significant contract awards during the second quarter of 2019:


Combat Systems:



$260 from the U.S. Army for munitions production. The program has a maximum potential contract value of $1.6 billion. 



$100 for the production of various high-performance warheads. 



$60 for the production of control actuator systems for the Excalibur artillery system. 



$35 from the Army for various rounds of medium-caliber ammunition. 



$25 from the Army to provide systems technical support for Abrams main battle tanks. 


Information Technology:



$1 billion from the U.S. Department of State to provide global security engineering and supply chain management services. The program has a maximum potential contract value of over $2 billion. 



$360 for several key contracts to provide intelligence services to classified customers. 



A contract to provide network monitoring, network engineering and system administration services for the U.S. Air Force. The program has a maximum potential value of approximately $215.



$85 from the Centers for Medicare and Medicaid Services (CMS) for cloud hosting support services. 



$70 from the CMS to provide hosting, operations and maintenance services for the agency's Healthcare Integrated General Ledger Accounting System (HIGLAS) application.



$50 from the U.S. Navy to provide training and training-related program support.



$45 from the CMS for benefits recovery services. The program has a maximum potential contract value of $275.


Mission Systems:



$90 to provide maintenance and support services for the United Kingdom's Bowman tactical communications system. 



$80 from the Army for computing and communications equipment under the Common Hardware Systems-5 (CHS-5) program.



$80 to provide engineering and support services for the Army's mobile communications network. 



$45 to support the engineering and manufacturing of the Navy's Air and Missile Defense Radar (AMDR) program. 



$35 to build space encryption units for the Air Force.



$25 from the Air Force for continued modernization of the global positioning system. 


Marine Systems:



$495 from the Navy for submarine industrial base development and expansion in support of the Columbia-class ballistic missile submarine program and the nuclear shipbuilding enterprise. 



$270 from the Navy to support the Common Missile Compartment work under joint development for the Navy and the U.K. Royal Navy. 



$85 from the Navy for planning yard, engineering and technical support services for in-service nuclear submarines.



$55 from the Navy to provide ongoing lead yard services for the Arleigh Burke-class (DDG-51) guided-missile destroyer program.

 

 

EXHIBIT J

AEROSPACE SUPPLEMENTAL DATA - (UNAUDITED)




















Second Quarter


Six Months



2019


2018


2019


2018

Gulfstream Aircraft Deliveries (units):









Large-cabin aircraft


23



18



50



37


Mid-cabin aircraft


8



8



15



15


Total


31



26



65



52


Pre-owned Aircraft Deliveries (units):


1



1



5



2











Aerospace Book-to-Bill:









Orders*


$

2,198



$

2,291



$

5,329



$

3,736


Revenue (excluding pre-owned aircraft sales)


2,134



1,894



4,332



3,710


Book-to-Bill Ratio


1.03x



1.21x



1.23x



1.01x




*

Does not include customer defaults, liquidated damages, cancellations, foreign exchange fluctuations and other backlog adjustments.

 

 

General Dynamics (PRNewsFoto/General Dynamics) (PRNewsFoto/General Dynamics)

Cision View original content to download multimedia:http://www.prnewswire.com/news-releases/general-dynamics-reports-second-quarter-2019-results-300889956.html

SOURCE General Dynamics

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