EX-99 2 gd-20200628exhibit991.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


General Dynamics Reports Second-Quarter 2020 Results

July 29, 2020

•Diluted EPS of $2.18
•Net earnings of $625 million on revenue of $9.3 billion
•Free cash flow conversion 100%
•32 aircraft delivered despite pandemic-caused delivery challenges


RESTON, Va. – 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
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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.

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EXHIBIT A
CONSOLIDATED STATEMENT OF EARNINGS - (UNAUDITED)
DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS
 
 Three Months EndedVariance
 June 28, 2020June 30, 2019$%
Revenue$9,264  $9,555  $(291) (3.0)%
Operating costs and expenses(8,423) (8,465) 42  
Operating earnings841  1,090  (249) (22.8)%
Interest, net(132) (119) (13) 
Other, net18  12  6  
Earnings before income tax727  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 outstanding286.4  288.1  
Earnings per share—diluted$2.18  $2.77  $(0.59) (21.3)%
Diluted weighted average shares outstanding286.9  290.8  





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EXHIBIT B
CONSOLIDATED STATEMENT OF EARNINGS - (UNAUDITED)
DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS
 
 Six Months EndedVariance
 June 28, 2020June 30, 2019$%
Revenue$18,013  $18,816  $(803) (4.3)%
Operating costs and expenses(16,231) (16,712) 481  
Operating earnings1,782  2,104  (322) (15.3)%
Interest, net(239) (236) (3) 
Other, net32  30  2  
Earnings before income tax1,575  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 outstanding287.5  288.0  
Earnings per share—diluted$4.61  $5.33  $(0.72) (13.5)%
Diluted weighted average shares outstanding288.5  290.8  





 



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EXHIBIT C
REVENUE AND OPERATING EARNINGS BY SEGMENT - (UNAUDITED)
DOLLARS IN MILLIONS
 
 Three Months EndedVariance
 June 28, 2020June 30, 2019$%
Revenue:
Aerospace$1,974  $2,136  $(162) (7.6)%
Combat Systems1,754  1,659  95  5.7 %
Information Technology1,884  2,158  (274) (12.7)%
Mission Systems1,181  1,277  (96) (7.5)%
Marine Systems2,471  2,325  146  6.3 %
Total$9,264  $9,555  $(291) (3.0)%
Operating earnings:
Aerospace$159  $331  $(172) (52.0)%
Combat Systems239  242  (3) (1.2)%
Information Technology83  154  (71) (46.1)%
Mission Systems164  162  2  1.2 %
Marine Systems200  197  3  1.5 %
Corporate(4) 4  (8) (200.0)%
Total$841  $1,090  $(249) (22.8)%
Operating margin:
Aerospace8.1 %15.5 %
Combat Systems13.6 %14.6 %
Information Technology4.4 %7.1 %
Mission Systems13.9 %12.7 %
Marine Systems8.1 %8.5 %
Total9.1 %11.4 %



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EXHIBIT D
REVENUE AND OPERATING EARNINGS BY SEGMENT - (UNAUDITED)
DOLLARS IN MILLIONS
 
 Six Months EndedVariance
 June 28, 2020June 30, 2019$%
Revenue:
Aerospace$3,665  $4,376  $(711) (16.2)%
Combat Systems3,462  3,295  167  5.1 %
Information Technology3,872  4,327  (455) (10.5)%
Mission Systems2,297  2,435  (138) (5.7)%
Marine Systems4,717  4,383  334  7.6 %
Total$18,013  $18,816  $(803) (4.3)%
Operating earnings:
Aerospace$399  $659  $(260) (39.5)%
Combat Systems462  448  14  3.1 %
Information Technology233  310  (77) (24.8)%
Mission Systems312  310  2  0.6 %
Marine Systems384  377  7  1.9 %
Corporate(8) —  (8) — %
Total$1,782  $2,104  $(322) (15.3)%
Operating margin:
Aerospace10.9 %15.1 %
Combat Systems13.3 %13.6 %
Information Technology6.0 %7.2 %
Mission Systems13.6 %12.7 %
Marine Systems8.1 %8.6 %
Total9.9 %11.2 %



 

 

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EXHIBIT E
CONSOLIDATED BALANCE SHEET
DOLLARS IN MILLIONS
 
(Unaudited)
June 28, 2020December 31, 2019
ASSETS
Current assets:
Cash and equivalents$2,300  $902  
Accounts receivable3,515  3,544  
Unbilled receivables7,715  7,857  
Inventories6,666  6,306  
Other current assets939  1,171  
Total current assets21,135  19,780  
Noncurrent assets:
Property, plant and equipment, net4,721  4,475  
Intangible assets, net2,197  2,315  
Goodwill19,718  19,677  
Other assets2,451  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 payable2,383  3,162  
Customer advances and deposits6,212  7,148  
Other current liabilities3,890  3,571  
Total current liabilities16,606  16,801  
Noncurrent liabilities:
Long-term debt10,470  9,010  
Other liabilities9,256  9,453  
Total noncurrent liabilities19,726  18,463  
Shareholders’ equity:
Common stock482  482  
Surplus3,050  3,039  
Retained earnings32,294  31,633  
Treasury stock(17,809) (17,358) 
Accumulated other comprehensive loss(4,127) (4,219) 
Total shareholders’ equity13,890  13,577  
Total liabilities and shareholders’ equity$50,222  $48,841  



 
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EXHIBIT F
CONSOLIDATED STATEMENT OF CASH FLOWS - (UNAUDITED)
DOLLARS IN MILLIONS
 
  
Six Months Ended
 June 28, 2020June 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 equipment254  232  
Amortization of intangible and finance lease right-of-use assets177  183  
Equity-based compensation expense61  72  
Deferred income tax benefit(83) (17) 
(Increase) decrease in assets, net of effects of business acquisitions:
Accounts receivable(1) 64  
Unbilled receivables160  (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, net356  (51) 
Net cash provided (used) by operating activities177  (504) 
Cash flows from investing activities:
Capital expenditures(406) (362) 
Other, net184  (1) 
Net cash used by investing activities(222) (363) 
Cash flows from financing activities:
Proceeds from fixed-rate notes3,960  —  
Repayment of fixed-rate notes(2,000) —  
Proceeds from commercial paper, net816  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 activities1,467  630  
Net cash used by discontinued operations(24) (24) 
Net increase (decrease) in cash and equivalents1,398  (261) 
Cash and equivalents at beginning of period902  963  
Cash and equivalents at end of period$2,300  $702  


 

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EXHIBIT G
ADDITIONAL FINANCIAL INFORMATION - (UNAUDITED)
DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS
 
Other Financial Information:
 June 28, 2020December 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 outstanding286,932,436  289,610,336  
Second QuarterSix Months
2020201920202019
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 QuarterSix Months
 2020201920202019
Earnings before interest, taxes, depreciation and amortization:
Net earnings$625  $806  $1,331  $1,551  
Interest, net132  119  239  236  
Provision for income tax, net102  177  244  347  
Depreciation of property, plant and equipment132  118  254  232  
Amortization of intangible and finance lease right-of-use assets87  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.
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EXHIBIT H
BACKLOG - (UNAUDITED)
DOLLARS IN MILLIONS
 
FundedUnfundedTotal
Backlog
Estimated
Potential
Contract Value*
Total
Estimated
Contract Value
Second Quarter 2020:
Aerospace$11,874  $239  $12,113  $2,834  $14,947  
Combat Systems13,863  242  14,105  6,399  20,504  
Information Technology5,464  3,463  8,927  18,392  27,319  
Mission Systems4,856  185  5,041  7,510  12,551  
Marine Systems25,118  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 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  
Second Quarter 2019:
Aerospace$11,932  $213  $12,145  $2,079  $14,224  
Combat Systems14,794  438  15,232  4,113  19,345  
Information Technology4,446  4,405  8,851  17,983  26,834  
Mission Systems4,925  258  5,183  6,847  12,030  
Marine Systems18,344  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.





 



 





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




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Funded BacklogUnfunded Backlog











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

chart-e8299893cab844bf1.jpgchart-c8bb82356c1042641.jpg
chart-bedaac45b6ac4c3a1.jpgchart-143ac273cb6b4b271.jpg
chart-763d7e92e9a9471e1.jpg
Funded BacklogUnfunded Backlog


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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.
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EXHIBIT J
AEROSPACE SUPPLEMENTAL DATA - (UNAUDITED)

 Second QuarterSix Months
 2020201920202019
Gulfstream Aircraft Deliveries (units):
Large-cabin aircraft26  23  46  50  
Mid-cabin aircraft6  8  9  15  
Total32  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 Ratio0.54x1.03x0.80x1.23x

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







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