General Dynamics Reports First-Quarter 2020 Results
RESTON, Va., April 29, 2020 /PRNewswire/ -- 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.
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.
EXHIBIT A
CONSOLIDATED STATEMENT OF EARNINGS - (UNAUDITED)
DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS
Three Months Ended
Variance
March 29, 2020 March 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
EXHIBIT B
REVENUE AND OPERATING EARNINGS BY SEGMENT - (UNAUDITED)
DOLLARS IN MILLIONS
Three Months Ended Variance
March 29, 2020 March 31, 2019
$ %
Revenue:
---
Aerospace $
1,691 $
2,240 $
(549) (24.5)
%
Combat Systems 1,708 1,636 72 4.4
%
Information Technology 1,988 2,169 (181) (8.3)
%
Mission Systems 1,116 1,158 (42) (3.6)
%
Marine Systems 2,246 2,058 188 9.1
%
Total $
8,749 $
9,261 $
(512) (5.5)
%
Operating earnings:
---
Aerospace $
240 $
328 $
(88) (26.8)
%
Combat Systems 223 206 17 8.3
%
Information Technology 150 156 (6) (3.8)
%
Mission Systems 148 148 %
Marine Systems 184 180 4 2.2
%
Corporate (4) (4) %
Total $
941 $
1,014 $
(73) (7.2)
%
Operating margin:
---
Aerospace 14.2
%
% 14.6
Combat Systems 13.1
%
% 12.6
Information Technology 7.5 7.2
% %
Mission Systems 13.3
%
% 12.8
Marine Systems 8.2 8.7
% %
Total 10.8
%
% 10.9
EXHIBIT C
CONSOLIDATED BALANCE SHEET
DOLLARS IN MILLIONS
(Unaudited)
March 29, 2020 December 31, 2019
ASSETS
Current assets:
Cash and equivalents $
5,330 $
902
Accounts receivable 3,547 3,544
Unbilled receivables 7,938 7,857
Inventories 6,852 6,306
Other current assets 1,074 1,171
Total current assets 24,741 19,780
Noncurrent assets:
Property, plant and equipment, net 4,537 4,475
Intangible assets, net 2,259 2,315
Goodwill 19,653 19,677
Other assets 2,520 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 payable 2,788 3,162
Customer advances and deposits 6,825 7,148
Other current liabilities 3,780 3,571
Total current liabilities 18,440 16,801
Noncurrent liabilities:
Long-term debt 12,951 9,010
Other liabilities 9,119 9,453
Total noncurrent liabilities 22,070 18,463
Shareholders' equity:
Common stock 482 482
Surplus 3,015 3,039
Retained earnings 31,983 31,633
Treasury stock (17,809) (17,358)
Accumulated other comprehensive loss (4,471) (4,219)
Total shareholders' equity 13,200 13,577
Total liabilities and shareholders' equity $
53,710 $
48,841
EXHIBIT D
CONSOLIDATED STATEMENT OF CASH FLOWS - (UNAUDITED)
DOLLARS IN MILLIONS
Three Months Ended
March 29, 2020 March 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 equipment 122 114
Amortization of intangible and finance lease right-of-use assets 90 91
Equity-based compensation expense 30 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, net 8 (6)
Net cash used by investing activities (177) (187)
Cash flows from financing activities:
Proceeds from fixed-rate notes 3,960
Proceeds from commercial paper, net 2,271 1,010
Purchases of common stock (449) (133)
Dividends paid (295) (268)
Other, net (202) 88
Net cash provided by financing activities 5,285 697
Net cash used by discontinued operations (14) (5)
Net increase (decrease) in cash and equivalents 4,428 (290)
Cash and equivalents at beginning of period 902 963
Cash and equivalents at end of period $
5,330 $
673
EXHIBIT E
ADDITIONAL FINANCIAL INFORMATION - (UNAUDITED)
DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS
Other Financial Information:
---
March 29, 2020 December 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 outstanding 286,864,540 289,610,336
First Quarter
2020 2019
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
2020 2019
Earnings before interest, taxes, depreciation and amortization:
Net earnings $
706 $
745
Interest, net 107 117
Provision for income tax, net 142 170
Depreciation of property, plant and equipment 122 114
Amortization of intangible and finance lease right-of-use assets 90 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.
EXHIBIT F
BACKLOG - (UNAUDITED)
DOLLARS IN MILLIONS
Funded Unfunded Total Estimated Total
Backlog Estimated
Potential Contract Value
Contract Value*
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
Fourth Quarter 2019:
---
Aerospace $
13,168 $
181 $
13,349 $
2,989 $
16,338
Combat Systems 14,474 439 14,913 4,322 19,235
Information Technology 4,839 4,294 9,133 19,003 28,136
Mission Systems 5,037 326 5,363 7,482 12,845
Marine Systems 20,012 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 Systems 15,475 515 15,990 4,185 20,175
Information Technology 4,770 3,584 8,354 16,666 25,020
Mission Systems 5,081 234 5,315 7,186 12,501
Marine Systems 19,935 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.
EXHIBIT F-1
BACKLOG - (UNAUDITED)
DOLLARS IN MILLIONS
https://mma.prnewswire.com/media/1161206/EXHIBIT_F_1.jpg
EXHIBIT F-2
BACKLOG BY SEGMENT -(UNAUDITED)
DOLLARS IN MILLIONS
https://mma.prnewswire.com/media/1161204/EXHIBIT_F_2_Aerospace.jpg
https://mma.prnewswire.com/media/1161205/EXHIBIT_F_2_Combat_Systems.jpg
https://mma.prnewswire.com/media/1161207/EXHIBIT_F_2_Information_Technology.jpg
https://mma.prnewswire.com/media/1161209/EXHIBIT_F_2_Mission_Systems.jpg
https://mma.prnewswire.com/media/1161208/EXHIBIT_F_2_Marine_Systems.jpg
https://mma.prnewswire.com/media/1161210/EXHIBIT_F_2_Key.jpg
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.
EXHIBIT H
AEROSPACE SUPPLEMENTAL DATA - (UNAUDITED)
First Quarter
2020 2019
Gulfstream Aircraft Deliveries (units):
---
Large-cabin aircraft 20 27
Mid-cabin aircraft 3 7
Total 23 34
Aerospace Book-to-Bill:
---
Orders* $
1,856 $
3,131
Revenue (excluding pre-owned aircraft sales) 1,691 2,198
Book-to-Bill Ratio 1.10x 1.42x
Does not include customer
defaults, liquidated damages,
cancellations, foreign exchange
fluctuations and other backlog
* adjustments.
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SOURCE General Dynamics
