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 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.
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