EX-99 2 gd-20200329exhibit991.htm EX-99 Document


Exhibit 99.1 
 
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11011 Sunset Hills Road 
Reston, Virginia 20190News
www.gd.com 

Contact: Jeff A. Davis
Tel: 703 876 3483
press@generaldynamics.com

April 29, 2020

General Dynamics Reports First-Quarter 2020 Results

•COVID-19 travel restrictions delay aircraft deliveries
•Defense segments combined show modest growth in revenue and margin
•Net earnings of $706 million
•Diluted EPS of $2.43
•Backlog of $85.7 billion, up 24% from year-ago quarter


RESTON, Va. – General Dynamics (NYSE: GD) today reported first-quarter 2020 net earnings of $706 million on $8.75 billion in revenue. On a per share basis, diluted earnings per share (EPS) were $2.43.

Travel restrictions due to the COVID-19 pandemic delayed deliveries of business-jet aircraft, which resulted in a $549 million decline in revenue for the Aerospace segment. Nevertheless, the segment’s backlog remains strong, up $1.1 billion, or 9.1%, over the year-ago quarter.

The defense businesses on a combined basis posted revenue of $7.1 billion, a slight increase over the year-ago quarter; operating earnings of $705 million, 2.2% above the year-ago quarter; and margin of 10%, an expansion of 20 basis points over the year-ago quarter. The defense businesses’ backlog of $72.5 billion was 27% higher than the year-ago quarter.

“Since the onset of the COVID-19 crisis, we have supported our government customers and implemented multiple safety measures to keep our people as safe as possible,” said Phebe N. Novakovic, chairman and chief executive officer. “We are responding to the COVID travel restrictions’ impact on Gulfstream and are managing our costs throughout our business.”

Capital Deployment
The company repurchased 3.4 million of its outstanding shares in the first quarter to cover dilution from the exercise of stock options. In March, the board of directors increased the company’s quarterly dividend 8 cents to $1.10 per share, which was the company’s 23rd consecutive annual dividend increase.

Backlog
Total backlog at the end of first-quarter 2020 was $85.7 billion, up 23.9% year-over-year. Estimated potential contract value, representing management’s estimate of value in unfunded indefinite delivery, indefinite quantity (IDIQ) contracts and unexercised options, was $38.1 billion. Total estimated contract value, the sum of all backlog components, was $123.9 billion, up 20.1% year-over-year.

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Orders
Significant awards in the quarter included an IDIQ contract with a maximum potential value of $885 million to modernize the U.S. Army’s training programs, $875 million for the construction of two additional U.S. Navy John Lewis-class (T-AO-205) oilers, an IDIQ contract with a maximum potential value of $505 million to provide supercomputing resources to the National Oceanic Atmospheric Administration’s (NOAA) Weather and Climate Operational Supercomputing System (WCOSS), $300 million from the Army to upgrade Abrams tanks to the M1A2 System Enhancement Package Version 3 (SEPv3) configuration and $225 million for parts and support for Stryker armored fighting vehicles.

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 more than 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 first-quarter 2020 financial results conference call at 9 a.m. EDT on Wednesday, April 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 May 6. To hear a recording of the conference call by telephone, please call 1-877-344-7529 (international: 1-412-317-0088) passcode 10141159. Charts furnished to investors and securities analysts in connection with General Dynamics’ announcement of its financial results are available at www.gd.com.
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EXHIBIT A
CONSOLIDATED STATEMENT OF EARNINGS - (UNAUDITED)
DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS
 
   Three Months EndedVariance
   March 29, 2020March 31, 2019$%
Revenue  $8,749  $9,261  $(512) (5.5)%
Operating costs and expenses  (7,808) (8,247) 439  
Operating earnings  941  1,014  (73) (7.2)%
Interest, net  (107) (117) 10  
Other, net  14  18  (4) 
Earnings before income tax  848  915  (67) (7.3)%
Provision for income tax, net  (142) (170) 28  
Net earnings  $706  $745  $(39) (5.2)%
Earnings per share—basic  $2.45  $2.59  $(0.14) (5.4)%
Basic weighted average shares outstanding  288.6  287.9  
Earnings per share—diluted  $2.43  $2.56  $(0.13) (5.1)%
Diluted weighted average shares outstanding  289.9  290.9  





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EXHIBIT B
REVENUE AND OPERATING EARNINGS BY SEGMENT - (UNAUDITED)
DOLLARS IN MILLIONS
 
 Three Months EndedVariance
 March 29, 2020March 31, 2019$%
Revenue:
Aerospace$1,691  $2,240  $(549) (24.5)%
Combat Systems1,708  1,636  72  4.4 %
Information Technology1,988  2,169  (181) (8.3)%
Mission Systems1,116  1,158  (42) (3.6)%
Marine Systems2,246  2,058  188  9.1 %
Total$8,749  $9,261  $(512) (5.5)%
Operating earnings:
Aerospace$240  $328  $(88) (26.8)%
Combat Systems223  206  17  8.3 %
Information Technology150  156  (6) (3.8)%
Mission Systems148  148  —  — %
Marine Systems184  180  4  2.2 %
Corporate(4) (4) —  — %
Total$941  $1,014  $(73) (7.2)%
Operating margin:
Aerospace14.2 %14.6 %
Combat Systems13.1 %12.6 %
Information Technology7.5 %7.2 %
Mission Systems13.3 %12.8 %
Marine Systems8.2 %8.7 %
Total10.8 %10.9 %



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EXHIBIT C
CONSOLIDATED BALANCE SHEET
DOLLARS IN MILLIONS
 
(Unaudited)
March 29, 2020December 31, 2019
ASSETS
Current assets:
Cash and equivalents$5,330  $902  
Accounts receivable3,547  3,544  
Unbilled receivables7,938  7,857  
Inventories6,852  6,306  
Other current assets1,074  1,171  
Total current assets24,741  19,780  
Noncurrent assets:
Property, plant and equipment, net4,537  4,475  
Intangible assets, net2,259  2,315  
Goodwill19,653  19,677  
Other assets2,520  2,594  
Total noncurrent assets 28,969  29,061  
Total assets$53,710  $48,841  
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Short-term debt and current portion of long-term debt$5,047  $2,920  
Accounts payable2,788  3,162  
Customer advances and deposits6,825  7,148  
Other current liabilities3,780  3,571  
Total current liabilities18,440  16,801  
Noncurrent liabilities:
Long-term debt12,951  9,010  
Other liabilities9,119  9,453  
Total noncurrent liabilities22,070  18,463  
Shareholders’ equity:
Common stock482  482  
Surplus3,015  3,039  
Retained earnings31,983  31,633  
Treasury stock(17,809) (17,358) 
Accumulated other comprehensive loss(4,471) (4,219) 
Total shareholders’ equity13,200  13,577  
Total liabilities and shareholders’ equity$53,710  $48,841  



 
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EXHIBIT D
CONSOLIDATED STATEMENT OF CASH FLOWS - (UNAUDITED)
DOLLARS IN MILLIONS
 
  
Three Months Ended
 March 29, 2020March 31, 2019
Cash flows from operating activities—continuing operations:
Net earnings$706  $745  
Adjustments to reconcile net earnings to net cash from operating activities:
Depreciation of property, plant and equipment122  114  
Amortization of intangible and finance lease right-of-use assets90  91  
Equity-based compensation expense30  40  
Deferred income tax benefit(28) (10) 
(Increase) decrease in assets, net of effects of business acquisitions:
Accounts receivable(33) 49  
Unbilled receivables(78) (873) 
Inventories(546) (210) 
Increase (decrease) in liabilities, net of effects of business acquisitions:
Accounts payable(375) (167) 
Customer advances and deposits(373) (623) 
Other, net(181) 49  
Net cash used by operating activities(666) (795) 
Cash flows from investing activities:
Capital expenditures(185) (181) 
Other, net8  (6) 
Net cash used by investing activities(177) (187) 
Cash flows from financing activities:
Proceeds from fixed-rate notes3,960  —  
Proceeds from commercial paper, net2,271  1,010  
Purchases of common stock(449) (133) 
Dividends paid(295) (268) 
Other, net(202) 88  
Net cash provided by financing activities5,285  697  
Net cash used by discontinued operations(14) (5) 
Net increase (decrease) in cash and equivalents4,428  (290) 
Cash and equivalents at beginning of period902  963  
Cash and equivalents at end of period$5,330  $673  


 

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EXHIBIT E
ADDITIONAL FINANCIAL INFORMATION - (UNAUDITED)
DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS
 
Other Financial Information:
 March 29, 2020December 31, 2019
Debt-to-equity (a)136.3 %87.9 %
Debt-to-capital (b)57.7 %46.8 %
Book value per share (c)$46.01  $46.88  
Shares outstanding286,864,540  289,610,336  
First Quarter
20202019
Income tax payments, net$43  $37  
Company-sponsored research and development (d)$78  $122  
Return on sales (e)8.1 %8.0 %
Non-GAAP Financial Measures:
First Quarter
 20202019
Earnings before interest, taxes, depreciation and amortization:
Net earnings$706  $745  
Interest, net107  117  
Provision for income tax, net142  170  
Depreciation of property, plant and equipment122  114  
Amortization of intangible and finance lease right-of-use assets90  91  
Earnings before interest, taxes, depreciation and amortization (f)
$1,167  $1,237  
Free cash flow from operations:
Net cash used by operating activities$(666) $(795) 
Capital expenditures(185) (181) 
Free cash flow from operations (g)$(851) $(976) 
(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.
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EXHIBIT F
BACKLOG - (UNAUDITED)
DOLLARS IN MILLIONS
 
FundedUnfundedTotal
Backlog
Estimated
Potential
Contract Value*
Total
Estimated
Contract Value
First Quarter 2020:
Aerospace$12,998  $274  $13,272  $2,837  $16,109  
Combat Systems14,373  244  14,617  4,253  18,870  
Information Technology5,375  4,127  9,502  18,638  28,140  
Mission Systems4,947  229  5,176  7,957  13,133  
Marine Systems26,112  17,053  43,165  4,460  47,625  
Total$63,805  $21,927  $85,732  $38,145  $123,877  
Fourth Quarter 2019:
Aerospace$13,168  $181  $13,349  $2,989  $16,338  
Combat Systems14,474  439  14,913  4,322  19,235  
Information Technology4,839  4,294  9,133  19,003  28,136  
Mission Systems5,037  326  5,363  7,482  12,845  
Marine Systems20,012  24,175  44,187  5,453  49,640  
Total$57,530  $29,415  $86,945  $39,249  $126,194  
First Quarter 2019:
Aerospace$11,924  $244  $12,168  $2,080  $14,248  
Combat Systems15,475  515  15,990  4,185  20,175  
Information Technology4,770  3,584  8,354  16,666  25,020  
Mission Systems5,081  234  5,315  7,186  12,501  
Marine Systems19,935  7,446  27,381  3,831  31,212  
Total$57,185  $12,023  $69,208  $33,948  $103,156  

* 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.





 



 





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




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Funded BacklogUnfunded Backlog











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

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Funded BacklogUnfunded Backlog


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EXHIBIT G
FIRST QUARTER 2020 SIGNIFICANT ORDERS - (UNAUDITED)
DOLLARS IN MILLIONS


We received the following significant contract awards during the first quarter of 2020:
Combat Systems:
•$300 from the U.S. Army to upgrade Abrams tanks to the M1A2 System Enhancement Package Version 3 (SEPv3) configuration.
•$225 from the Army to provide spare parts and inventory management services for the Stryker wheeled combat-vehicle program.
•$145 from the Army to provide systems technical support for Abrams main battle tanks.
•$135 to produce Eagle wheeled combat vehicles for Germany.
•$90 from the Army for various munitions and ordnance.

Information Technology:
•$240 to provide supercomputing resources through the National Oceanic Atmospheric Administration’s (NOAA) Weather and Climate Operational Supercomputing System (WCOSS) contract. The contract has a maximum potential value of $505.
•$80 to provide sustainment support, maintenance and logistics for the Army. The contract has a maximum potential value of $455.
•An IDIQ contract to provide development, program management and support services for enterprise-wide application development functions for a federal agency. The contract has a maximum potential value of $250.
•$150 for several key contracts to provide intelligence services to classified customers.
•A contract to provide IT infrastructure and engineering support for the U.S. Navy. The contract has a maximum potential value of $125.

Mission Systems:
•An IDIQ contract to modernize the Army’s training programs. The contract has a maximum potential value of $885.
•$65 from the Army for computing and communications equipment under the Common Hardware Systems-5 (CHS-5) program.
•$45 to support the engineering and manufacturing efforts on the Navy’s Air and Missile Defense Radar program.
•$40 from the Navy to provide nuclear weapons security maintenance and sustainment services.
•$40 from the Army to provide continued software support and engineering for the Warfighter Information Network-Tactical (WIN-T) Increment 2 program.

Marine Systems:
•$875 for the construction of two additional Navy John Lewis-class (T-AO-205) fleet replenishment oilers.
•$70 from the Navy to provide maintenance and repair services for the Ticonderoga-class guided-missile cruiser and Arleigh Burke-class (DDG-51) guided-missile destroyer programs.
•$60 from the Navy to produce a large vertical array fixture for Navy submarine acoustic detection efforts.
•$40 from the Navy to provide maintenance for submarines at the Naval Submarine Base New London in Connecticut.
•$40 from the Navy for on-board repair parts for two Virginia-class submarines under Block IV of the program.
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EXHIBIT H
AEROSPACE SUPPLEMENTAL DATA - (UNAUDITED)

 First Quarter
 20202019
Gulfstream Aircraft Deliveries (units):
Large-cabin aircraft20  27  
Mid-cabin aircraft3  7  
Total23  34  
Aerospace Book-to-Bill:
Orders*$1,856  $3,131  
Revenue (excluding pre-owned aircraft sales)1,691  2,198  
Book-to-Bill Ratio1.10x  1.42x  

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







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