General Dynamics Reports Second-Quarter 2022 Financial Results

  • Net earnings of $766 million on revenue of $9.2 billion
  • Operating margin 10.6%, up 20 bps year over year, 90 bps sequentially
  • Diluted EPS of $2.75, up 5.4% year over year
  • Continued strong Gulfstream demand

RESTON, Va., July 27, 2022 /PRNewswire/ -- General Dynamics GD today reported second-quarter 2022 net earnings of $766 million on revenue of $9.2 billion. Diluted earnings per share (EPS) were $2.75, a 5.4% increase from the year-ago quarter.

"Demand in the quarter was very strong in Aerospace, with margins showing steady improvement year over year," said Phebe N. Novakovic, chairman and chief executive officer. "Our defense segments demonstrated solid operating performance and had several important wins."

Cash
Net cash provided by operating activities in the quarter totaled $659 million. During the quarter, the company invested $224 million in capital expenditures, paid $349 million in dividends, and used $800 million to repurchase shares, ending the quarter with $2.2 billion in cash and equivalents on hand. For the first half of the year, net cash provided by operating activities totaled $2.6 billion, or 176% of net earnings.

Backlog
Orders remained strong across the company with a consolidated book-to-bill ratio, defined as orders divided by revenue, of 1.1-to-1 for the quarter, with particular strength in the Aerospace segment driven by strong order activity for Gulfstream aircraft. In addition to company-wide backlog of $87.6 billion, estimated potential contract value, representing management's estimate of additional value in unfunded indefinite delivery, indefinite quantity (IDIQ) contracts and unexercised options, was $38.7 billion. Total estimated contract value, the sum of all backlog components, was $126.4 billion at the end of the quarter.

Significant awards in the quarter for the three defense segments included $410 million with a maximum potential value of $1.1 billion from the U.S. Army to begin low-rate initial production (LRIP) of the Mobile Protected Firepower vehicle; $295 million for various munitions and ordnance with additional option value of $465 million; $525 million from the Army to upgrade Stryker vehicles; $500 million from the U.S. Navy for long-lead materials to support construction of two additional John Lewis-class (T-AO-205) fleet replenishment oilers; $355 million to produce Abrams main battle tanks in the system enhancement package version 3 (SEPv3) configuration for Australia; $160 million with a maximum potential value of $325 million from the U.S. Space Development Agency to build and operate ground systems for the new low earth orbit (LEO) satellite network; $315 million from the Navy for submarine industrial base development and expansion for the Columbia-class submarine program; a contract with a maximum potential value of $300 million for development and sustainment of applications and websites for the Administrative Office of the United States Courts; and $545 million for several key classified contracts.

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; ship construction and repair; land combat vehicles, weapons systems and munitions; and technology products and services. General Dynamics employs more than 100,000 people worldwide and generated $38.5 billion in revenue in 2021. More information is available at www.gd.com.

Certain statements in this press release, including any statements about the company's future operational and financial performance, may constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. Words such as "expects," "anticipates," "plans," "believes," "forecasts," "scheduled," "outlook," "estimates," "should" and variations of these words and similar expressions are intended to identify forward-looking statements. 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 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 revisions to any 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 2022 financial results conference call at 9 a.m. EDT on Wednesday, July 27, 2022. The webcast will be a listen-only audio event available at www.gd.com. An on-demand replay of the webcast will be available by telephone one hour after the end of the call and end on August 3, 2022, at 866-813-9403 (international: +44 204-525-0658); passcode 671446. 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


July 3, 2022


July 4, 2021


$


%

Revenue

$

9,189



$

9,220



$

(31)



(0.3)

%

Operating costs and expenses

(8,211)



(8,261)



50




Operating earnings

978



959



19



2.0

%

Other, net

40



31



9




Interest, net

(95)



(109)



14




Earnings before income tax

923



881



42



4.8

%

Provision for income tax, net

(157)



(144)



(13)




Net earnings

$

766



$

737



$

29



3.9

%

Earnings per share—basic

$

2.77



$

2.63



$

0.14



5.3

%

Basic weighted average shares outstanding

276.3



280.7






Earnings per share—diluted

$

2.75



$

2.61



$

0.14



5.4

%

Diluted weighted average shares outstanding     

278.9



282.2






 

EXHIBIT B

CONSOLIDATED STATEMENT OF EARNINGS - (UNAUDITED)

DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS

 




Six Months Ended


Variance


July 3, 2022


July 4, 2021


$


%

Revenue

$

18,581



$

18,609



$

(28)



(0.2)

%

Operating costs and expenses

(16,695)



(16,712)



17




Operating earnings

1,886



1,897



(11)



(0.6)

%

Other, net

79



61



18




Interest, net

(193)



(232)



39




Earnings before income tax

1,772



1,726



46



2.7

%

Provision for income tax, net

(276)



(281)



5




Net earnings

$

1,496



$

1,445



$

51



3.5

%

Earnings per share—basic

$

5.41



$

5.12



$

0.29



5.7

%

Basic weighted average shares outstanding

276.7



282.4






Earnings per share—diluted

$

5.35



$

5.10



$

0.25



4.9

%

Diluted weighted average shares outstanding     

279.4



283.6



 

EXHIBIT C

REVENUE AND OPERATING EARNINGS BY SEGMENT - (UNAUDITED)

DOLLARS IN MILLIONS

 



Three Months Ended


Variance


July 3, 2022


July 4, 2021


$


%

Revenue:








Aerospace

$

1,867



$

1,622



$

245



15.1

%

Marine Systems

2,651



2,536



115



4.5

%

Combat Systems

1,666



1,899



(233)



(12.3)

%

Technologies

3,005



3,163



(158)



(5.0)

%

Total

$

9,189



$

9,220



$

(31)



(0.3)

%

Operating earnings:     








Aerospace

$

238



$

195



$

43



22.1

%

Marine Systems

211



210



1



0.5

%

Combat Systems

245



266



(21)



(7.9)

%

Technologies

304



308



(4)



(1.3)

%

Corporate

(20)



(20)





%

Total

$

978



$

959



$

19



2.0

%

Operating margin:








Aerospace

12.7

%


12.0

%





Marine Systems

8.0

%


8.3

%





Combat Systems

14.7

%


14.0

%





Technologies

10.1

%


9.7

%





Total

10.6

%


10.4

%





 

EXHIBIT D

REVENUE AND OPERATING EARNINGS BY SEGMENT - (UNAUDITED)

DOLLARS IN MILLIONS



Six Months Ended


Variance


July 3, 2022


July 4, 2021


$


%

Revenue:








Aerospace

$

3,770



$

3,509



$

261



7.4

%

Marine Systems

5,302



5,019



283



5.6

%

Combat Systems

3,341



3,719



(378)



(10.2)

%

Technologies

6,168



6,362



(194)



(3.0)

%

Total

$

18,581



$

18,609



$

(28)



(0.2)

%

Operating earnings:     








Aerospace

$

481



$

415



$

66



15.9

%

Marine Systems

422



410



12



2.9

%

Combat Systems

472



510



(38)



(7.5)

%

Technologies

602



614



(12)



(2.0)

%

Corporate

(91)



(52)



(39)



(75.0)

%

Total

$

1,886



$

1,897



$

(11)



(0.6)

%

Operating margin:








Aerospace

12.8

%


11.8

%





Marine Systems

8.0

%


8.2

%





Combat Systems

14.1

%


13.7

%





Technologies

9.8

%


9.7

%





Total

10.2

%


10.2

%







 

EXHIBIT E

CONSOLIDATED BALANCE SHEET

DOLLARS IN MILLIONS












(Unaudited)




July 3, 2022


December 31, 2021

ASSETS




Current assets:




Cash and equivalents

$

2,223



$

1,603


Accounts receivable

3,213



3,041


Unbilled receivables

7,819



8,498


Inventories

6,158



5,340


Other current assets

1,166



1,505


Total current assets

20,579



19,987


Noncurrent assets:




Property, plant and equipment, net

5,479



5,417


Intangible assets, net

1,867



1,978


Goodwill

20,002



20,098


Other assets

2,554



2,593


Total noncurrent assets

29,902



30,086


Total assets

$

50,481



$

50,073


LIABILITIES AND SHAREHOLDERS' EQUITY




Current liabilities:




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

$

1,754



$

1,005


Accounts payable

3,138



3,167


Customer advances and deposits

6,531



6,266


Other current liabilities

3,313



3,540


Total current liabilities

14,736



13,978


Noncurrent liabilities:




Long-term debt

9,741



10,490


Other liabilities

8,623



7,964


Total noncurrent liabilities

18,364



18,454


Shareholders' equity:




Common stock

482



482


Surplus

3,466



3,278


Retained earnings

36,218



35,420


Treasury stock

(20,632)



(19,619)


Accumulated other comprehensive loss

(2,153)



(1,920)


Total shareholders' equity

17,381



17,641


Total liabilities and shareholders' equity

$

50,481



$

50,073


 

EXHIBIT F

CONSOLIDATED STATEMENT OF CASH FLOWS - (UNAUDITED)

DOLLARS IN MILLIONS














Six Months Ended


July 3, 2022


July 4, 2021

Cash flows from operating activities—continuing operations:




Net earnings

$

1,496



$

1,445


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




Depreciation of property, plant and equipment

278



280


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

147



159


Equity-based compensation expense

120



72


Deferred income tax benefit

(218)



(37)


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




Accounts receivable

(172)



(94)


Unbilled receivables

695



134


Inventories

(816)



(58)


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




Accounts payable

(29)



(364)


Customer advances and deposits

1,402



(226)


Other, net

(276)



(193)


Net cash provided by operating activities

2,627



1,118


Cash flows from investing activities:




Capital expenditures

(365)



(306)


Other, net



(2)


Net cash used by investing activities

(365)



(308)


Cash flows from financing activities:




Purchases of common stock

(1,094)



(1,352)


Dividends paid

(679)



(651)


Repayment of fixed-rate notes



(2,000)


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



1,997


Proceeds from fixed-rate notes



1,497


Repayment of floating-rate notes



(500)


Other, net

110



338


Net cash used by financing activities

(1,663)



(671)


Net cash provided (used) by discontinued operations

21



(13)


Net increase in cash and equivalents

620



126


Cash and equivalents at beginning of period

1,603



2,824


Cash and equivalents at end of period

$

2,223



$

2,950


 

EXHIBIT G

ADDITIONAL FINANCIAL INFORMATION - (UNAUDITED)

DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS


Other Financial Information:









July 3, 2022


December 31, 2021





Debt-to-equity (a)

66.1

%


65.2

%





Book value per share (b)

$

63.38



$

63.54






Shares outstanding

274,246,220



277,620,943















Second Quarter


Six Months


2022


2021


2022


2021

Income tax payments, net

$

550



$

212



$

565



$

245


Company-sponsored research and development (c)     

$

130



$

93



$

237



$

183


Return on sales (d)

8.3

%


8.0

%


8.1

%


7.8

%









Non-GAAP Financial Measures:









Second Quarter


Six Months


2022


2021


2022


2021

Free cash flow:








Net cash provided by operating activities

$

659



$

1,115



$

2,627



$

1,118


Capital expenditures

(224)



(172)



(365)



(306)


Free cash flow (e)

$

435



$

943



$

2,262



$

812











July 3, 2022


December 31, 2021





Net debt:








Total debt

$

11,495



$

11,495






Less cash and equivalents

2,223



1,603






     Net debt (f)

$

9,272



$

9,892
















(a)     

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



(b)     

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



(c)     

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



(d)     

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



(e)     

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



(f)     

We define net debt as short- and long-term debt (total debt) less cash and equivalents. We believe net debt is a useful
measure for investors because it reflects the borrowings that support our operations and capital deployment strategy.
We use net debt as an important indicator of liquidity and financial position.

 

EXHIBIT H

BACKLOG - (UNAUDITED)

DOLLARS IN MILLIONS




































Funded


Unfunded


Total
Backlog


Estimated

Potential

Contract Value*


Total
Estimated
Contract Value

Second Quarter 2022:











Aerospace


$

18,237



$

549



$

18,786



$

877



$

19,663


Marine Systems


26,965



14,873



41,838



3,904



45,742


Combat Systems


13,236



202



13,438



6,939



20,377


Technologies


9,448



4,120



13,568



27,028



40,596


Total


$

67,886



$

19,744



$

87,630



$

38,748



$

126,378


First Quarter 2022:











Aerospace


$

17,114



$

501



$

17,615



$

1,829



$

19,444


Marine Systems


27,656



15,258



42,914



4,316



47,230


Combat Systems


12,760



299



13,059



6,298



19,357


Technologies


9,067



4,579



13,646



29,347



42,993


Total


$

66,597



$

20,637



$

87,234



$

41,790



$

129,024


Second Quarter 2021:











Aerospace


$

13,155



$

366



$

13,521



$

2,099



$

15,620


Marine Systems


26,435



21,095



47,530



4,689



52,219


Combat Systems


14,157



271



14,428



7,711



22,139


Technologies


9,769



3,999



13,768



26,594



40,362


Total


$

63,516



$

25,731



$

89,247



$

41,093



$

130,340




*     

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-2

BACKLOG BY SEGMENT - (UNAUDITED)
DOLLARS IN MILLIONS

 

 

 

 

 
 

EXHIBIT I

SECOND QUARTER 2022 SIGNIFICANT ORDERS - (UNAUDITED)
DOLLARS IN MILLIONS

We received the following significant contract awards during the second quarter of 2022:

Marine Systems:

  • $500 from the U.S. Navy for long-lead materials to support construction of two additional John Lewis-class (T-AO-205) fleet replenishment oilers.
  • $315 from the Navy to provide submarine industrial base development and expansion for the Columbia-class program.
  • $100 from the Navy for long-lead materials to support construction of an additional Expeditionary Sea Base (ESB) auxiliary support ship.
  • $55 from the Navy to provide ongoing lead yard services for the Arleigh Burke-class (DDG-51) destroyer program.
  • $50 from the Navy to improve submarine acoustic performance.

Combat Systems:

  • $410 from the U.S. Army to begin low-rate initial production (LRIP) of the Mobile Protected Firepower (MPF) vehicle. The contract has a maximum potential value of $1.1 billion.
  • $295 for various munitions and ordnance with additional option value of $465.
  • $525 from the Army to upgrade Stryker vehicles to the double-V-hull (DVH) A1 configuration.
  • $355 to produce Abrams main battle tanks in the system enhancement package version 3 (SEPv3) configuration for Australia.
  • $60 to produce M3 amphibious bridge systems for an international customer. The contract has a maximum potential value of $210.
  • $90 from the Army for engineering and logistics support services for the Abrams family of vehicles.
  • $50 from the Army to upgrade domestic Abrams main battle tanks to the SEPv3 configuration.

Technologies:

  • $545 for several key classified contracts.
  • $160 from the U.S. Space Development Agency to build and operate ground systems for the new low earth orbit (LEO) satellite network. The contract has a maximum potential value of $325.
  • An indefinite delivery, indefinite quantity (IDIQ) contract for the development and sustainment of applications and websites for the Administrative Office of the United States Courts (AOUSC). The contract has a maximum potential value of $300.
  • $280 from the Centers for Medicare and Medicaid Services (CMS) for several contracts, including work to provide cloud services and software tools.
  • $155 to provide ship modernization services for the Navy.
  • $120 to provide global enterprise and digital modernization services under the Southern Command's (SOUTHCOM) Cyber Information Technology Enterprise Services (SCITES) contract.
  • $10 from the Department of Veteran Affairs (VA) to provide information technology (IT) support to more than 500,000 VA personnel and contractors nationwide. The contract has a maximum potential value of $110.
  • $105 from the Army for computing and communications equipment under the Common Hardware Systems-5 program.
  • $85 to provide military information support operations for the United States Special Operations Command.
  • $75 to provide command, control and communications capabilities for the U.S. Department of Defense (DoD).

 

EXHIBIT J
AEROSPACE SUPPLEMENTAL DATA - (UNAUDITED)




Second Quarter


Six Months



2022


2021


2022


2021

Gulfstream Aircraft Deliveries (units):









Large-cabin aircraft


17



18



38



43


Mid-cabin aircraft


5



3



9



6


Total


22



21



47



49











Aerospace Book-to-Bill:









Orders*


$

3,652



$

3,292



$

6,895



$

5,749


Revenue


1,867



1,622



3,770



3,509


Book-to-Bill Ratio


1.96x


2.03x


1.83x


1.64x


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

 

 

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SOURCE General Dynamics

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