Market Overview

General Dynamics Reports Second-Quarter 2020 Results

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RESTON, Va., July 29, 2020 /PRNewswire/ -- General Dynamics (NYSE:GD) today reported second-quarter 2020 net earnings of $625 million on revenue of $9.3 billion. Diluted earnings per share (EPS) were $2.18.

"We have continued to operate throughout the COVID-19 pandemic, meeting our customers' needs while keeping our people as safe as possible," said Phebe N. Novakovic, chairman and chief executive officer. "We are focused on the basics of early and aggressive cost management, performance and cash conversion as we manage through this period."

Aircraft deliveries
The company delivered 32 aircraft during the quarter, up from 23 last quarter, despite continued pandemic-related challenges to making international deliveries.

Cash
Net cash provided by operating activities in the quarter totaled $843 million, $552 million better than the year-ago quarter. Free cash flow from operations, defined as net cash provided by operating activities less capital expenditures, was $622 million, 100% of net earnings. The company ended the quarter with $2.3 billion of cash on hand, $1.6 billion more than at the end of second-quarter 2019.

Backlog
Total backlog at the end of second-quarter 2020 was $82.7 billion, 22% higher than the year-ago quarter. Estimated potential contract value, representing management's estimate of value in unfunded indefinite delivery, indefinite quantity (IDIQ) contracts and unexercised options, was $49.6 billion. Total estimated contract value, the sum of all backlog components, was $132.2 billion at the end of the quarter, approximately 30% more than the year-ago quarter.

Significant awards in the quarter included a contract to construct the first two Columbia-class submarines which will be worth $11.5 billion when funding is received from Congress; $320 million to upgrade Stryker vehicles to the double-V-hull A1 configuration; $215 million from the U.S. Army to produce Hydra-70 rockets; $175 million from the Army for computing and communications equipment under the Common Hardware Systems-5 program; $160 million in separate contracts from the U.S. Navy to provide missile components for the Aegis Ballistic Missile Defense program and gun systems for the F-35 Joint Strike Fighter; $130 million from the Centers for Medicare and Medicaid Services for several contracts, including support of the agency's Healthcare Integrated General Ledger Accounting System (HIGLAS) application; and $125 million for several key contracts to provide intelligence services to classified customers.

About General Dynamics
Headquartered in Reston, 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 approximately 100,000 people worldwide and generated $39.4 billion in revenue in 2019. More information is available at www.gd.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, its Quarterly Reports on Form 10-Q and its Current Reports on Form 8-K. 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 2020 financial results conference call at 9 a.m. EDT on Wednesday, July 29, 2020. The webcast will be a listen-only audio event available at www.gd.com. An on-demand replay of the webcast will be available one hour after the end of the call and end on August 5, 2020. To hear a recording of the conference call by telephone, please call 1-877-344-7529 (international: 1-412-317-0088) passcode 10144907. Charts furnished to investors and securities analysts in connection with General Dynamics' announcement of its financial results are available at www.gd.com.

EXHIBIT A

CONSOLIDATED STATEMENT OF EARNINGS - (UNAUDITED)

DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS



Three Months Ended


Variance


June 28, 2020


June 30, 2019


$


%

Revenue

$

9,264



$

9,555



$

(291)



(3.0)

%

Operating costs and expenses

(8,423)



(8,465)



42




Operating earnings

841



1,090



(249)



(22.8)

%

Interest, net

(132)



(119)



(13)




Other, net

18



12



6




Earnings before income tax

727



983



(256)



(26.0)

%

Provision for income tax, net

(102)



(177)



75




Net earnings

$

625



$

806



$

(181)



(22.5)

%

Earnings per share—basic

$

2.18



$

2.80



$

(0.62)



(22.1)

%

Basic weighted average shares outstanding

286.4



288.1






Earnings per share—diluted

$

2.18



$

2.77



$

(0.59)



(21.3)

%

Diluted weighted average shares outstanding

286.9



290.8






 

EXHIBIT B

CONSOLIDATED STATEMENT OF EARNINGS - (UNAUDITED)

DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS



Six Months Ended


Variance


June 28, 2020


June 30, 2019


$


%

Revenue

$

18,013



$

18,816



$

(803)



(4.3)

%

Operating costs and expenses

(16,231)



(16,712)



481




Operating earnings

1,782



2,104



(322)



(15.3)

%

Interest, net

(239)



(236)



(3)




Other, net

32



30



2




Earnings before income tax

1,575



1,898



(323)



(17.0)

%

Provision for income tax, net

(244)



(347)



103




Net earnings

$

1,331



$

1,551



$

(220)



(14.2)

%

Earnings per share—basic

$

4.63



$

5.39



$

(0.76)



(14.1)

%

Basic weighted average shares outstanding

287.5



288.0






Earnings per share—diluted

$

4.61



$

5.33



$

(0.72)



(13.5)

%

Diluted weighted average shares outstanding

288.5



290.8






 

EXHIBIT C

REVENUE AND OPERATING EARNINGS BY SEGMENT - (UNAUDITED)

DOLLARS IN MILLIONS



Three Months Ended


Variance


June 28, 2020


June 30, 2019


$


%

Revenue:








Aerospace

$

1,974



$

2,136



$

(162)



(7.6)

%

Combat Systems

1,754



1,659



95



5.7

%

Information Technology

1,884



2,158



(274)



(12.7)

%

Mission Systems

1,181



1,277



(96)



(7.5)

%

Marine Systems

2,471



2,325



146



6.3

%

Total

$

9,264



$

9,555



$

(291)



(3.0)

%

Operating earnings:








Aerospace

$

159



$

331



$

(172)



(52.0)

%

Combat Systems

239



242



(3)



(1.2)

%

Information Technology

83



154



(71)



(46.1)

%

Mission Systems

164



162



2



1.2

%

Marine Systems

200



197



3



1.5

%

Corporate

(4)



4



(8)



(200.0)

%

Total

$

841



$

1,090



$

(249)



(22.8)

%

Operating margin:








Aerospace

8.1

%


15.5

%





Combat Systems

13.6

%


14.6

%





Information Technology

4.4

%


7.1

%





Mission Systems

13.9

%


12.7

%





Marine Systems

8.1

%


8.5

%





Total

9.1

%


11.4

%





 

EXHIBIT D

REVENUE AND OPERATING EARNINGS BY SEGMENT - (UNAUDITED)

DOLLARS IN MILLIONS



Six Months Ended


Variance


June 28, 2020


June 30, 2019


$


%

Revenue:








Aerospace

$

3,665



$

4,376



$

(711)



(16.2)

%

Combat Systems

3,462



3,295



167



5.1

%

Information Technology

3,872



4,327



(455)



(10.5)

%

Mission Systems

2,297



2,435



(138)



(5.7)

%

Marine Systems

4,717



4,383



334



7.6

%

Total

$

18,013



$

18,816



$

(803)



(4.3)

%

Operating earnings:








Aerospace

$

399



$

659



$

(260)



(39.5)

%

Combat Systems

462



448



14



3.1

%

Information Technology

233



310



(77)



(24.8)

%

Mission Systems

312



310



2



0.6

%

Marine Systems

384



377



7



1.9

%

Corporate

(8)





(8)



%

Total

$

1,782



$

2,104



$

(322)



(15.3)

%

Operating margin:








Aerospace

10.9

%


15.1

%





Combat Systems

13.3

%


13.6

%





Information Technology

6.0

%


7.2

%





Mission Systems

13.6

%


12.7

%





Marine Systems

8.1

%


8.6

%





Total

9.9

%


11.2

%





 

EXHIBIT E

CONSOLIDATED BALANCE SHEET

DOLLARS IN MILLIONS



(Unaudited)




June 28, 2020


December 31, 2019

ASSETS




Current assets:




Cash and equivalents

$

2,300



$

902


Accounts receivable

3,515



3,544


Unbilled receivables

7,715



7,857


Inventories

6,666



6,306


Other current assets

939



1,171


Total current assets

21,135



19,780


Noncurrent assets:




Property, plant and equipment, net

4,721



4,475


Intangible assets, net

2,197



2,315


Goodwill

19,718



19,677


Other assets

2,451



2,594


Total noncurrent assets

29,087



29,061


Total assets

$

50,222



$

48,841


LIABILITIES AND SHAREHOLDERS' EQUITY




Current liabilities:




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

$

4,121



$

2,920


Accounts payable

2,383



3,162


Customer advances and deposits

6,212



7,148


Other current liabilities

3,890



3,571


Total current liabilities

16,606



16,801


Noncurrent liabilities:




Long-term debt

10,470



9,010


Other liabilities

9,256



9,453


Total noncurrent liabilities

19,726



18,463


Shareholders' equity:




Common stock

482



482


Surplus

3,050



3,039


Retained earnings

32,294



31,633


Treasury stock

(17,809)



(17,358)


Accumulated other comprehensive loss

(4,127)



(4,219)


Total shareholders' equity

13,890



13,577


Total liabilities and shareholders' equity

$

50,222



$

48,841


 

EXHIBIT F

CONSOLIDATED STATEMENT OF CASH FLOWS - (UNAUDITED)

DOLLARS IN MILLIONS



Six Months Ended


June 28, 2020


June 30, 2019

Cash flows from operating activities—continuing operations:




     Net earnings

$

1,331



$

1,551


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




          Depreciation of property, plant and equipment

254



232


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

177



183


          Equity-based compensation expense

61



72


          Deferred income tax benefit

(83)



(17)


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




          Accounts receivable

(1)



64


          Unbilled receivables

160



(1,074)


          Inventories

(433)



(556)


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




          Accounts payable

(782)



(301)


          Customer advances and deposits

(863)



(607)


     Other, net

356



(51)


     Net cash provided (used) by operating activities

177



(504)


Cash flows from investing activities:




     Capital expenditures

(406)



(362)


     Other, net

184



(1)


     Net cash used by investing activities

(222)



(363)


Cash flows from financing activities:




     Proceeds from fixed-rate notes

3,960




     Repayment of fixed-rate notes

(2,000)




     Proceeds from commercial paper, net

816



1,394


     Dividends paid

(610)



(563)


     Purchases of common stock

(501)



(231)


     Repayment of floating-rate notes

(500)




     Proceeds from commercial paper, gross (maturities greater than 3 months)

420




     Other, net

(118)



30


     Net cash provided by financing activities

1,467



630


Net cash used by discontinued operations

(24)



(24)


Net increase (decrease) in cash and equivalents

1,398



(261)


Cash and equivalents at beginning of period

902



963


Cash and equivalents at end of period

$

2,300



$

702


 

EXHIBIT G

ADDITIONAL FINANCIAL INFORMATION - (UNAUDITED)

DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS


Other Financial Information:









June 28, 2020


December 31, 2019





Debt-to-equity (a)

105.0

%


87.9

%





Debt-to-capital (b)

51.2

%


46.8

%





Book value per share (c)

48.41



$

46.88






Shares outstanding

286,932,436



289,610,336















Second Quarter


Six Months


2020


2019


2020


2019

Income tax payments, net

$

13



$

360



$

56



$

397


Company-sponsored research and
development (d)

$

116



$

120



$

194



$

242


Return on sales (e)

6.7

%


8.4

%


7.4

%


8.2

%









Non-GAAP Financial Measures:









Second Quarter


Six Months


2020


2019


2020


2019

Earnings before interest, taxes,
depreciation and amortization:








Net earnings

$

625



$

806



$

1,331



$

1,551


Interest, net

132



119



239



236


Provision for income tax, net

102



177



244



347


Depreciation of property, plant and
equipment

132



118



254



232


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

87



92



177



183


        Earnings before interest, taxes, 
        depreciation and amortization (f)

$

1,078



$

1,312



$

2,245



$

2,549










Free cash flow from operations:








Net cash provided (used) by
operating activities

$

843



$

291



$

177



$

(504)


Capital expenditures

(221)



(181)



(406)



(362)


     Free cash flow from operations (g)

$

622



$

110



$

(229)



$

(866)





(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)

Return on sales is calculated as net earnings divided by revenue.



(f)

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.



(g)

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 (used) by operating activities.

 

EXHIBIT H

BACKLOG - (UNAUDITED)

DOLLARS IN MILLIONS




Funded


Unfunded


Total
Backlog


Estimated

Potential

Contract Value*


Total
Estimated
Contract Value

Second Quarter 2020:











Aerospace


$

11,874



$

239



$

12,113



$

2,834



$

14,947


Combat Systems


13,863



242



14,105



6,399



20,504


Information Technology


5,464



3,463



8,927



18,392



27,319


Mission Systems


4,856



185



5,041



7,510



12,551


Marine Systems


25,118



17,365



42,483



14,441



56,924


Total


$

61,175



$

21,494



$

82,669



$

49,576



$

132,245


First Quarter 2020:











Aerospace


$

12,998



$

274



$

13,272



$

2,837



$

16,109


Combat Systems


14,373



244



14,617



4,253



18,870


Information Technology


5,375



4,127



9,502



18,638



28,140


Mission Systems


4,947



229



5,176



7,957



13,133


Marine Systems


26,112



17,053



43,165



4,460



47,625


Total


$

63,805



$

21,927



$

85,732



$

38,145



$

123,877


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





*

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

https://mma.prnewswire.com/media/1220566/Exhibit_H_1.jpg

 

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

 

EXHIBIT H-2 Aerospace

https://mma.prnewswire.com/media/1220564/EXHIBIT_H_2_Aerospace.jpg

EXHIBIT H-2 Combat Systems

https://mma.prnewswire.com/media/1220565/EXHIBIT_H_2_Combat_Systems.jpg 

EXHIBIT H-2 Information Technology

https://mma.prnewswire.com/media/1220567/EXHIBIT_H_2_Information_Technology.jpg

EXHIBIT H-2 Mission Systems

https://mma.prnewswire.com/media/1220569/EXHIBIT_H_2_Mission_Systems.jpg

EXHIBIT H-2 Marine Systems

https://mma.prnewswire.com/media/1220568/EXHIBIT_H_2_Marine_Systems.jpg

EXHIBIT H-2 Key

https://mma.prnewswire.com/media/1220570/EXHIBIT_H_2_Key.jpg

EXHIBIT I
SECOND QUARTER 2020 SIGNIFICANT ORDERS - (UNAUDITED)
DOLLARS IN MILLIONS

We received the following significant contract awards during the second quarter of 2020:

Combat Systems:

  • $320 from the U.S. Army to upgrade Stryker vehicles to the double-V-hull A1 configuration. The contract has a maximum potential value of $2.5 billion.
  • $215 from the Army for the production of Hydra-70 rockets. The contract has a maximum potential value of $3.4 billion.
  • $110 from the U.S. Navy to provide missile components for the Aegis Ballistic Missile Defense program.
  • $100 for various munitions and ordnance.
  • $50 from the Navy to produce gun systems for the F-35 Joint Strike Fighter.

Information Technology:

  • $120 from the U.S. Air Force for the Battlefield Information Collection and Exploitation System (BICES) program to provide intelligence information sharing capabilities for the Department of Defense (DoD). The contract has a maximum potential value of $620.
  • $130 from the Centers for Medicare and Medicaid Services (CMS) for several contracts, including support of the agency's Healthcare Integrated General Ledger Accounting System (HIGLAS) application.
  • $125 for several key contracts to provide intelligence services to classified customers.
  • $50 from the Navy to provide training and training-related program support.
  • $40 to provide IT, cloud support and network management services for a commercial customer.

Mission Systems:

  • $175 from the Army for computing and communications equipment under the Common Hardware Systems-5 program.
  • $105 from the Navy to support the design and development of fire-control systems for ballistic-missile submarines for the Navy and the U.K. Royal Navy.
  • $60 to provide sustainment services for the Navy's next-generation Mobile User Objective System (MUOS) satellite communications system.
  • $35 from the U.S. Coast Guard to provide system sustainment support for the Rescue 21 program.
  • $35 from the Army to provide continued software support and engineering for the Warfighter Information Network-Tactical (WIN-T) Increment 2 program.

Marine Systems:

  • A contract from the Navy to construct the first two Columbia-class submarines, which will be worth $11.5 billion when funding is received from Congress.
  • $130 from the Navy for capital expenditures and industrial base development in support of the Arleigh Burke-class (DDG-51) guided-missile destroyer program.
  • $80 from the Navy for Advanced Nuclear Plant Studies (ANPS) in support of the Columbia-class submarine program.
  • $55 from the Navy to support the Common Missile Compartment work under joint development for the Navy and the U.K. Royal Navy.
  • $45 from the Navy to provide ongoing lead yard services for the DDG-51 program.

 

EXHIBIT J

AEROSPACE SUPPLEMENTAL DATA - (UNAUDITED)




Second Quarter


Six Months



2020


2019


2020


2019

Gulfstream Aircraft Deliveries (units):









Large-cabin aircraft


26



23



46



50


Mid-cabin aircraft


6



8



9



15


Total


32



31



55



65











Aerospace Book-to-Bill:









Orders*


$

1,072



$

2,198



$

2,928



$

5,329


Revenue (excluding pre-owned aircraft sales)


1,974



2,134



3,665



4,332


Book-to-Bill Ratio


0.54x



1.03x



0.80x



1.23x





*

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-2020-results-301101728.html

SOURCE General Dynamics

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