General Dynamics Reports Second-Quarter 2020 Results

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

 

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

 

EXHIBIT H-2

BACKLOG BY SEGMENT – (UNAUDITED)

DOLLARS IN MILLIONS

 

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

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

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

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

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

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.

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

Spread the word

Discuss

This site uses Akismet to reduce spam. Learn how your comment data is processed.