General Dynamics Reports Third-Quarter 2020 Results
RESTON, Va., Oct. 28, 2020 /PRNewswire/ -- General Dynamics (NYSE: GD) today reported third-quarter 2020 net earnings of $834 million on revenue of $9.4 billion. Diluted earnings per share (EPS) were $2.90. Revenue was up 1.8% over the previous quarter, while net earnings and diluted EPS grew 33%.
"As we manage through this challenging time, we remain focused on the basics of operating performance, especially cash conversion and the early and aggressive management of costs, as evidenced this quarter by our strong operating margin and return on sales," said Phebe N. Novakovic, chairman and chief executive officer. "Moreover, we continue to reduce debt and invest in the company for future growth."
Margin
Company-wide operating margin for the quarter was 11.5%, a 240 basis-point increase from the previous quarter, with a notable increase of 620 basis points in the Aerospace segment's margin. Return on sales was 8.8%, a 210 basis-point increase over the previous quarter.
Cash
Net cash provided by operating activities in the quarter totaled $1.1 billion, or 134% of net earnings. Free cash flow from operations, defined as net cash provided by operating activities less capital expenditures, was $903 million, a 108% conversion of net earnings.
Capital Deployment
In the third quarter, the company reduced its net debt by $388 million to $11.9 billion, a decrease of 3.2% from the previous quarter. Capital expenditures were $216 million, or 2.3% of revenue.
Backlog
General Dynamics' total backlog at the end of third-quarter 2020 was $81.5 billion, up 21% from 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 $50.4 billion. Total estimated contract value, the sum of all backlog components, was $131.9 billion at the end of the quarter.
Significant awards in the quarter included $870 million to deliver 8x8 combat vehicles and provide maintenance and life cycle support to the Spanish Ministry of Defense; a contract with a maximum potential value of $760 million from the U.S. Department of Defense (DoD) for enterprise information technology and cybersecurity services and solutions; a contract with a maximum potential value of $365 million to provide command, control and communications capabilities for the DoD; an IDIQ contract with a maximum potential value of $250 million from the U.S. Army to produce Small Multipurpose Equipment Transport (SMET) vehicles; $240 million from the U.S. Navy for ship maintenance and repair services; a contract with a maximum potential value of $240 million from the U.S. Department of Health and Human Services Centers for Medicare and Medicaid Services for cloud services and software tools; $155 million from the Navy for Advanced Nuclear Plant Studies (ANPS) in support of various submarine programs; $145 million for several key Information Technology contracts to provide intelligence services to classified customers; and $140 million for several key Mission Systems contracts for 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 third-quarter 2020 financial results conference call at 9 a.m. EDT on Wednesday, October 28, 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 November 4, 2020. To hear a recording of the conference call by telephone, please call 1-877-344-7529 (international: 1-412-317-0088) passcode 10148284. 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
September 27, 2020 September 29, 2019
$ %
Revenue $
9,431 $
9,761 $
(330) (3.4)
%
Operating costs and expenses (8,347) (8,545) 198
Operating earnings 1,084 1,216 (132) (10.9)
%
Other, net 12 (12) 24
Interest, net (118) (114) (4)
Earnings before income tax 978 1,090 (112) (10.3)
%
Provision for income tax, net (144) (177) 33
Net earnings $
834 $
913 $
(79) (8.7)
%
Earnings per share-basic $
2.91 $
3.17 $
(0.26) (8.2)
%
Basic weighted average shares outstanding 286.5 288.4
Earnings per share-diluted $
2.90 $
3.14 $
(0.24) (7.6)
%
Diluted weighted average shares outstanding 287.2 290.9
EXHIBIT B
CONSOLIDATED STATEMENT OF EARNINGS - (UNAUDITED)
DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS
Nine Months Ended
Variance
September 27, 2020 September 29, 2019
$ %
Revenue $
27,444 $
28,577 $
(1,133) (4.0)
%
Operating costs and expenses (24,578) (25,257) 679
Operating earnings 2,866 3,320 (454) (13.7)
%
Other, net 44 18 26
Interest, net (357) (350) (7)
Earnings before income tax 2,553 2,988 (435) (14.6)
%
Provision for income tax, net (388) (524) 136
Net earnings $
2,165 $
2,464 $
(299) (12.1)
%
Earnings per share-basic $
7.54 $
8.55 $
(1.01) (11.8)
%
Basic weighted average shares outstanding 287.1 288.1
Earnings per share-diluted $
7.52 $
8.47 $
(0.95) (11.2)
%
Diluted weighted average shares outstanding 288.1 290.8
EXHIBIT C
REVENUE AND OPERATING EARNINGS BY SEGMENT - (UNAUDITED)
DOLLARS IN MILLIONS
Three Months Ended
Variance
September 27, 2020 September 29, 2019
$ %
Revenue:
---
Aerospace $
1,975 $
2,495 $
(520) (20.8)
%
Combat Systems 1,801 1,740 61 3.5
%
Information Technology 2,029 2,071 (42) (2.0)
%
Mission Systems 1,221 1,220 1 0.1
%
Marine Systems 2,405 2,235 170 7.6
%
Total $
9,431 $
9,761 $
(330) (3.4)
%
Operating earnings:
---
Aerospace $
283 $
393 $
(110) (28.0)
%
Combat Systems 270 264 6 2.3
%
Information Technology 146 146 %
Mission Systems 168 185 (17) (9.2)
%
Marine Systems 223 209 14 6.7
%
Corporate (6) 19 (25) (131.6)
%
Total $
1,084 $
1,216 $
(132) (10.9)
%
Operating margin:
---
Aerospace 14.3
% 15.8
%
Combat Systems 15.0
% 15.2
%
Information Technology 7.2
% 7.0
%
Mission Systems 13.8
% 15.2
%
Marine Systems 9.3
% 9.4
%
Total 11.5
% 12.5
%
EXHIBIT D
REVENUE AND OPERATING EARNINGS BY SEGMENT - (UNAUDITED)
DOLLARS IN MILLIONS
Nine Months Ended
Variance
September 27, 2020 September 29, 2019
$ %
Revenue:
---
Aerospace $
5,640 $
6,871 $
(1,231) (17.9)
%
Combat Systems 5,263 5,035 228 4.5
%
Information Technology 5,901 6,398 (497) (7.8)
%
Mission Systems 3,518 3,655 (137) (3.7)
%
Marine Systems 7,122 6,618 504 7.6
%
Total $
27,444 $
28,577 $
(1,133) (4.0)
%
Operating earnings:
---
Aerospace $
682 $
1,052 $
(370) (35.2)
%
Combat Systems 732 712 20 2.8
%
Information Technology 379 456 (77) (16.9)
%
Mission Systems 480 495 (15) (3.0)
%
Marine Systems 607 586 21 3.6
%
Corporate (14) 19 (33) (173.7)
%
Total $
2,866 $
3,320 $
(454) (13.7)
%
Operating margin:
---
Aerospace 12.1
% 15.3
%
Combat Systems 13.9
% 14.1
%
Information Technology 6.4
% 7.1
%
Mission Systems 13.6
% 13.5
%
Marine Systems 8.5
% 8.9
%
Total 10.4
% 11.6
%
EXHIBIT E
CONSOLIDATED BALANCE SHEET
DOLLARS IN MILLIONS
(Unaudited)
September 27, December 31,
2020 2019
ASSETS
Current assets:
Cash and equivalents $
1,469 $
902
Accounts receivable 3,863 3,544
Unbilled receivables 8,143 7,857
Inventories 6,402 6,306
Other current assets 988 1,171
Total current assets 20,865 19,780
Noncurrent assets:
Property, plant and equipment,
net 4,863 4,475
Intangible assets, net 2,162 2,315
Goodwill 19,889 19,677
Other assets 2,479 2,594
Total noncurrent assets 29,393 29,061
Total assets $
50,258 $
48,841
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term debt and current
portion of long-term debt $
3,394 $
2,920
Accounts payable 2,613 3,162
Customer advances and deposits 6,086 7,148
Other current liabilities 4,027 3,571
Total current liabilities 16,120 16,801
Noncurrent liabilities:
Long-term debt 9,978 9,010
Other liabilities 9,444 9,453
Total noncurrent liabilities 19,422 18,463
Shareholders' equity:
Common stock 482 482
Surplus 3,082 3,039
Retained earnings 32,812 31,633
Treasury stock (17,805) (17,358)
Accumulated other comprehensive
loss (3,855) (4,219)
Total shareholders' equity 14,716 13,577
Total liabilities and
shareholders' equity $
50,258 $
48,841
EXHIBIT F
CONSOLIDATED STATEMENT OF CASH FLOWS - (UNAUDITED)
DOLLARS IN MILLIONS
Nine Months Ended
September 27, 2020 September 29, 2019
Cash flows from operating activities-continuing operations:
Net earnings $
2,165 $
2,464
Adjustments to reconcile net earnings to net cash from operating activities:
Depreciation of property, plant and equipment 376 352
Amortization of intangible and finance lease right-of-use assets 267 273
Equity-based compensation expense 91 103
Deferred income tax benefit (112) (72)
(Increase) decrease in assets, net of effects of business acquisitions:
Accounts receivable (336) 253
Unbilled receivables (239) (1,603)
Inventories (134) (646)
Increase (decrease) in liabilities, net of effects of business acquisitions:
Accounts payable (558) (164)
Customer advances and deposits (906) (565)
Other current liabilities 360 191
Other, net 322 1
Net cash provided by operating activities 1,296 587
Cash flows from investing activities:
Capital expenditures (622) (606)
Other, net 33 2
Net cash used by investing activities (589) (604)
Cash flows from financing activities:
Proceeds from fixed-rate notes 3,960
Repayment of fixed-rate notes (2,000)
Dividends paid (925) (858)
Purchases of common stock (501) (231)
Repayment of floating-rate notes (500)
Proceeds from commercial paper, gross (maturities greater than 3 months) 420
Repayment of commercial paper, gross (maturities greater than 3 months) (420)
Proceeds from commercial paper, net - 947
Other, net (134) 207
Net cash (used) provided by financing activities (100) 65
Net cash used by discontinued operations (40) (37)
Net increase in cash and equivalents 567 11
Cash and equivalents at beginning of period 902 963
Cash and equivalents at end of period $
1,469 $
974
EXHIBIT G
ADDITIONAL FINANCIAL INFORMATION - (UNAUDITED)
DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS
Other Financial Information:
---
September 27, 2020 December 31, 2019
Debt-to-equity (a) 90.9 87.9
% %
Debt-to-capital (b) 47.6 46.8
% %
Book value per share (c) $
51.28 $
46.88
Shares outstanding 286,972,150 289,610,336
Third Quarter
Nine Months
2020 2019 2020 2019
---
Income tax payments, net $
289 $
90 $
345 $
487
Company-sponsored research and $
97 $
110 $
291 $
352
development (d)
Return on sales (e) 8.8 9.4
% 7.9 8.6
%
% %
Non-GAAP Financial Measures:
---
Third Quarter
Nine Months
2020 2019 2020 2019
---
Earnings before interest, taxes,
depreciation and amortization:
Net earnings $
834 $
913 $
2,165 $
2,464
Interest, net 118 114 357 350
Provision for income tax, net 144 177 388 524
Depreciation of property, plant and 122 120 376 352
equipment
Amortization of intangible and finance 90 90 267 273
lease right-of-use assets
Earnings before interest, taxes, $
1,308 $
1,414 $
3,553 $
3,963
depreciation and amortization (f)
Free cash flow from operations:
Net cash provided by operating $
1,119 $
1,091 $
1,296 $
587
activities
Capital expenditures (216) (244) (622) (606)
Free cash flow from operations (g) $
903 $
847 $
674 $
(19)
(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 by operating
activities.
EXHIBIT H
BACKLOG - (UNAUDITED)
DOLLARS IN MILLIONS
Funded Unfunded Total Estimated Total
Backlog Estimated
Potential Contract Value
Contract Value*
Third Quarter 2020:
---
Aerospace $
11,640 $
324 $
11,964 $
2,888 $
14,852
Combat Systems 14,511 200 14,711 6,593 21,304
Information Technology 5,558 3,411 8,969 18,925 27,894
Mission Systems 4,554 240 4,794 7,317 12,111
Marine Systems 23,958 17,124 41,082 14,666 55,748
Total $
60,221 $
21,299 $
81,520 $
50,389 $
131,909
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
Third Quarter 2019:
---
Aerospace $
11,195 $
188 $
11,383 $
2,065 $
13,448
Combat Systems 15,069 449 15,518 4,255 19,773
Information Technology 4,782 4,381 9,163 18,063 27,226
Mission Systems 5,152 307 5,459 6,764 12,223
Marine Systems 17,801 8,072 25,873 4,497 30,370
Total $
53,999 $
13,397 $
67,396 $
35,644 $
103,040
* 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/1321089/Exhibit_H_1.jpg
EXHIBIT H-2
BACKLOG BY SEGMENT -(UNAUDITED)
DOLLARS IN MILLIONS
https://mma.prnewswire.com/media/1321090/EXHIBIT_H_2_Aerospace.jpg
https://mma.prnewswire.com/media/1321091/EXHIBIT_H_2_Combat_Systems.jpg
https://mma.prnewswire.com/media/1321092/EXHIBIT_H_2_Information_Technology.jpg
https://mma.prnewswire.com/media/1321093/EXHIBIT_H_2_Mission_Systems.jpg
https://mma.prnewswire.com/media/1321094/EXHIBIT_H_2_Marine_Systems.jpg
https://mma.prnewswire.com/media/1321095/EXHIBIT_H_2_Segment_Key.jpg
EXHIBIT I
THIRD QUARTER 2020 SIGNIFICANT
ORDERS -(UNAUDITED)
DOLLARS IN MILLIONS
We received the following significant contract awards during the third quarter of 2020:
Combat Systems:
-- $870 to deliver 8x8 wheeled combat vehicles, maintenance and life cycle
support to the Spanish Ministry of Defense.
-- An IDIQ contract to produce Small Multipurpose Equipment Transport
(SMET) vehicles for the U.S. Army. The contract has a maximum potential
value of $250.
-- $125 from the Army for various munitions and ordnance.
-- $55 from the U.S. Navy to produce gun systems for the F-35 Joint Strike
Fighter.
-- $35 from the Army for the production of Improved Fire Control
Electronics Units (IFCEUs) and Improved Commanders Display Units (ICDUs)
for the Abrams tank program.
Information Technology:
-- $65 to provide enterprise information technology and cybersecurity
services and solutions for the U.S. Department of Defense (DoD). The
contract has a maximum potential value of $760.
-- $70 to provide command, control and communications capabilities for the
DoD. The contract has a maximum potential value of $365.
-- $50 from the U.S. Department of Health and Human Services Centers for
Medicare and Medicaid Services (CMS) to provide cloud services and
software tools. The contract has a maximum potential value of $240.
-- $145 for several key contracts to provide intelligence services to
classified customers.
-- $110 to provide design, development, testing, installation, maintenance,
logistics support and modernization services for Navy airborne and
shipboard platforms.
-- $95 to provide logistics, sustainment and maintenance support services
for the Army.
-- $50 from the U.S. Department of Veterans Affairs under the Veterans
Intake, Conversion and Communications Services (VICCS) program to
modernize benefits claims processing.
Mission Systems:
-- $140 for several key contracts for classified customers.
-- $95 from the Army for computing and communications equipment under the
Common Hardware Systems-5 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:
-- $240 from the Navy to provide maintenance and repair services for the
Arleigh Burke-class guided-missile destroyer, Independence-class
Littoral Combat Ship (LCS), Ticonderoga-class guided-missile cruiser and
Wasp-class amphibious assault ship programs.
-- $155 from the Navy for Advanced Nuclear Plant Studies (ANPS) in support
of various submarine programs.
-- $115 from the Navy for maintenance and modernization work on the USS
Hartford, a Los Angeles-class attack submarine.
-- $35 from the Navy for the Expeditionary Sea Base (ESB) auxiliary support
ship program.
EXHIBIT J
AEROSPACE SUPPLEMENTAL DATA - (UNAUDITED)
Third Quarter
Nine Months
2020 2019 2020 2019
Gulfstream Aircraft Deliveries (units):
---
Large-cabin aircraft 25 29 71 79
Mid-cabin aircraft 7 9 16 24
Total 32 38 87 103
Aerospace Book-to-Bill:
---
Orders* $
1,816 $
1,693 $
4,744 $
7,022
Revenue (excluding pre-owned aircraft sales) 1,975 2,404 5,640 6,735
Book-to-Bill Ratio 0.92x 0.70x 0.84x 1.04x
* Does not include customer
defaults, liquidated damages,
cancellations, foreign exchange
fluctuations and other backlog
adjustments.
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SOURCE General Dynamics
