General Dynamics Reports Second-Quarter 2020 Results
Friday, July 31st, 2020
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 billionat 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 millionfrom 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.
|
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 |
$ |
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, |
|||||||||||||||||||||||
|
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 |
132 |
118 |
254 |
232 |
|||||||||||||||||||
|
Amortization of intangible and |
87 |
92 |
177 |
183 |
|||||||||||||||||||
|
Earnings before interest, taxes, |
$ |
1,078 |
$ |
1,312 |
$ |
2,245 |
$ |
2,549 |
|||||||||||||||
|
Free cash flow from operations: |
|||||||||||||||||||||||
|
Net cash provided (used) by |
$ |
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 |
Estimated Potential Contract Value* |
Total |
||||||||||||||||||||||||||||
|
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 |
||||||||||||||||||||||
