EX-99.1 2 gd-20190929exhibit991.htm EX-99.1 Document


Exhibit 99.1 
 
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11011 Sunset Hills Road 
Reston, VA 20190News
www.gd.com 

Contact: Jeff A. Davis
Tel: 703 876 3483
press@generaldynamics.com

October 23, 2019

General Dynamics Reports Third-Quarter 2019 Results

•Revenue of $9.8 billion, up 7.3% year-over-year
•Operating earnings of $1.2 billion, up 7.1% year-over-year
•Diluted earnings per share from continuing operations of $3.14, up 8.7% year-over-year
•First Gulfstream G600 deliveries


RESTON, Va. – General Dynamics (NYSE: GD) today reported third-quarter 2019 revenue of $9.8 billion, operating earnings of $1.2 billion, net earnings from continuing operations of $913 million and diluted earnings per share from continuing operations of $3.14, up 25 cents from the year-ago quarter.

“Margins advanced nicely in the quarter due to Gulfstream’s continuing ability to efficiently transition its production to new models, coupled with solid operating performance at the defense businesses,” said Phebe N. Novakovic, chairman and chief executive officer. “Our continued focus on operating excellence and driving cost efficiencies, coupled with new business opportunities, should enable us to build on these results.”

Operating performance
Operating margin was 12.5 percent in the quarter, up 110 basis points sequentially. Customer deliveries of the Gulfstream G600 began in August, less than two months after receiving FAA type and production certificates.

Cash
Net cash provided by operating activities in the quarter totaled $1.1 billion. Free cash flow from operations, defined as net cash provided by operating activities less capital expenditures, was $847 million.

Capital deployment
The company paid $295 million in dividends and repaid approximately $450 million of its outstanding commercial paper in the third quarter. Capital expenditures totaled $244 million, up $76 million from the year-ago quarter, driven by continued strategic investments in Marine Systems.

Backlog
Total backlog at the end of third-quarter 2019 was $67.4 billion. Estimated potential contract value, representing management’s estimate of value in unfunded indefinite delivery, indefinite quantity (IDIQ) contracts and unexercised options, was $35.6 billion. Total estimated contract value, the sum of all backlog components, was $103 billion.
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Orders
Order activity remained strong across the aerospace and defense portfolios, with a book-to-bill of 1-to-1 on 7.3 percent year-over-year revenue growth. Significant awards in the defense portfolios in the quarter included $1.3 billion from the Canadian government for production of armored combat support vehicles; $1.1 billion from the U.S. Navy for design and construction of two Expeditionary Sea Base auxiliary support ships and a $550 million option for an additional ship; $390 million from the Navy for Advanced Nuclear Plant Studies in support of the Columbia-class submarine program; $155 million from the U.S. Army for various munitions and ordnance; $325 million to provide program management and engineering services to the Cybersecurity and Infrastructure Security Agency’s emergency communications infrastructure; and $265 million from the Army for computing and communications equipment under the Common Hardware Systems-5 (CHS-5) program.

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 $36.2 billion in revenue in 2018. 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 and its Quarterly Reports on Form 10-Q. 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 2019 financial results conference call at 9 a.m. EDT on Wednesday, October 23, 2019. 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 October 30. To hear a recording of the conference call by telephone, please call 1-877-344-7529 (international: 1-412-317-0088) passcode 10135319. Charts furnished to investors and securities analysts in connection with General Dynamics’ announcement of its financial results for third-quarter 2019 are available at www.gd.com.
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EXHIBIT A
CONSOLIDATED STATEMENT OF EARNINGS - (UNAUDITED)
DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS
 
   Three Months Ended  Variance  
   September 29, 2019September 30, 2018$  %  
Revenue  $9,761  $9,094  $667  7.3 %
Operating costs and expenses  (8,545) (7,959) (586) 
Operating earnings  1,216  1,135  81  7.1 %
Interest, net  (114) (114) —  
Other, net  (12) 2  (14) 
Earnings from continuing operations before income tax  1,090  1,023  67  6.5 %
Provision for income tax, net  (177) (159) (18) 
Earnings from continuing operations  913  864  49  5.7 %
Discontinued operations, net of tax  —  (13) 13  
Net earnings  $913  $851  $62  7.3 %
Earnings per share—basic  
Continuing operations   $3.17  $2.92  $0.25  8.6 %
Discontinued operations  —  (0.04) 0.04  
Net earnings  $3.17  $2.88  $0.29  10.1 %
Basic weighted average shares outstanding  288.4  295.3  
Earnings per share—diluted  
Continuing operations   $3.14  $2.89  $0.25  8.7 %
Discontinued operations  —  (0.04) 0.04  
Net earnings  $3.14  $2.85  $0.29  10.2 %
Diluted weighted average shares outstanding  290.9  299.1  





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EXHIBIT B
CONSOLIDATED STATEMENT OF EARNINGS - (UNAUDITED)
DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS
 
 Nine Months EndedVariance
 September 29, 2019September 30, 2018*
$%
Revenue$28,577  $25,815  $2,762  10.7 %
Operating costs and expenses(25,257) (22,584) (2,673) 
Operating earnings3,320  3,231  89  2.8 %
Interest, net(350) (244) (106) 
Other, net18  (34) 52  
Earnings from continuing operations before income tax2,988  2,953  35  1.2 %
Provision for income tax, net(524) (504) (20) 
Earnings from continuing operations2,464  2,449  15  0.6 %
Discontinued operations, net of tax—  (13) 13  
Net earnings $2,464  $2,436  $28  1.1 %
Earnings per share—basic
Continuing operations $8.55  $8.27  $0.28  3.4 %
Discontinued operations—  (0.04) 0.04  
Net earnings$8.55  $8.23  $0.32  3.9 %
Basic weighted average shares outstanding288.1  296.0  
Earnings per share—diluted
Continuing operations$8.47  $8.16  $0.31  3.8 %
Discontinued operations—  (0.04) 0.04  
Net earnings$8.47  $8.12  $0.35  4.3 %
Diluted weighted average shares outstanding290.8  300.1  

*2018 results include the unfavorable impact of one-time charges of approximately $75 associated with costs to complete the acquisition of CSRA Inc. In the table above, approximately $45 of compensation-related costs was reported in operating costs and expenses, and approximately $30 of transaction costs was reported in other, net.



 



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EXHIBIT C
REVENUE AND OPERATING EARNINGS BY SEGMENT - (UNAUDITED)
DOLLARS IN MILLIONS
 
 Three Months EndedVariance
 September 29, 2019September 30, 2018$%
Revenue:
Aerospace$2,495  $2,031  $464  22.8 %
Combat Systems1,740  1,523  217  14.2 %
Information Technology2,071  2,307  (236) (10.2)%
Mission Systems1,220  1,230  (10) (0.8)%
Marine Systems2,235  2,003  232  11.6 %
Total$9,761  $9,094  $667  7.3 %
Operating earnings:
Aerospace$393  $376  $17  4.5 %
Combat Systems264  241  23  9.5 %
Information Technology146  157  (11) (7.0)%
Mission Systems185  179  6  3.4 %
Marine Systems209  169  40  23.7 %
Corporate19  13  6  46.2 %
Total$1,216  $1,135  $81  7.1 %
Operating margin:
Aerospace15.8 %18.5 %
Combat Systems15.2 %15.8 %
Information Technology7.0 %6.8 %
Mission Systems15.2 %14.6 %
Marine Systems9.4 %8.4 %
Total12.5 %12.5 %



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EXHIBIT D
REVENUE AND OPERATING EARNINGS BY SEGMENT - (UNAUDITED)
DOLLARS IN MILLIONS
 
 Nine Months EndedVariance
 September 29, 2019September 30, 2018*
$%
Revenue:
Aerospace$6,871  $5,751  $1,120  19.5 %
Combat Systems5,035  4,497  538  12.0 %
Information Technology6,398  5,887  511  8.7 %
Mission Systems3,655  3,475  180  5.2 %
Marine Systems6,618  6,205  413  6.7 %
Total$28,577  $25,815  $2,762  10.7 %
Operating earnings:
Aerospace$1,052  $1,108  $(56) (5.1)%
Combat Systems712  701  11  1.6 %
Information Technology456  414  42  10.1 %
Mission Systems495  478  17  3.6 %
Marine Systems586  548  38  6.9 %
Corporate19  (18) 37  205.6 %
Total$3,320  $3,231  $89  2.8 %
Operating margin:
Aerospace15.3 %19.3 %
Combat Systems14.1 %15.6 %
Information Technology7.1 %7.0 %
Mission Systems13.5 %13.8 %
Marine Systems8.9 %8.8 %
Total11.6 %12.5 %

*2018 results include the unfavorable impact of approximately $45 of compensation-related one-time charges associated with costs to complete the acquisition of CSRA Inc. This amount was reported as a reduction of Corporate operating earnings in the table above.


 

 

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EXHIBIT E
CONSOLIDATED BALANCE SHEET
DOLLARS IN MILLIONS
 
(Unaudited)
September 29, 2019December 31, 2018
ASSETS
Current assets:
Cash and equivalents$974  $963  
Accounts receivable3,489  3,759  
Unbilled receivables8,077  6,576  
Inventories6,573  5,977  
Other current assets1,038  914  
Total current assets20,151  18,189  
Noncurrent assets:
Property, plant and equipment, net4,217  3,978  
Intangible assets, net2,376  2,585  
Goodwill19,617  19,594  
Other assets2,427  1,062  
Total noncurrent assets 28,637  27,219  
Total assets$48,788  $45,408  
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Short-term debt and current portion of long-term debt$4,661  $973  
Accounts payable2,999  3,179  
Customer advances and deposits6,854  7,270  
Other current liabilities3,713  3,317  
Total current liabilities18,227  14,739  
Noncurrent liabilities:
Long-term debt8,989  11,444  
Other liabilities8,059  7,493  
Total noncurrent liabilities17,048  18,937  
Shareholders’ equity:
Common stock482  482  
Surplus2,999  2,946  
Retained earnings30,909  29,326  
Treasury stock(17,346) (17,244) 
Accumulated other comprehensive loss(3,531) (3,778) 
Total shareholders’ equity13,513  11,732  
Total liabilities and shareholders’ equity$48,788  $45,408  



 
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EXHIBIT F
CONSOLIDATED STATEMENT OF CASH FLOWS - (UNAUDITED)
DOLLARS IN MILLIONS
 
  
Nine Months Ended
 September 29, 2019September 30, 2018
Cash flows from operating activities—continuing operations:
Net earnings$2,464  $2,436  
Adjustments to reconcile net earnings to net cash from operating activities:
Depreciation of property, plant and equipment352  315  
Amortization of intangible and finance lease right-of-use assets273  227  
Equity-based compensation expense103  110  
Deferred income tax benefit(72) (66) 
Discontinued operations, net of tax—  13  
(Increase) decrease in assets, net of effects of business acquisitions:
Accounts receivable253  472  
Unbilled receivables(1,603) (1,625) 
Inventories(646) (854) 
Increase (decrease) in liabilities, net of effects of business acquisitions:
Accounts payable(164) (324) 
Customer advances and deposits(565) 112  
Other, net192  265  
Net cash provided by operating activities587  1,081  
Cash flows from investing activities:
Capital expenditures(606) (447) 
Business acquisitions, net of cash acquired(19) (10,039) 
Other, net21  169  
Net cash used by investing activities(604) (10,317) 
Cash flows from financing activities:
Proceeds from commercial paper, net947  1,668  
Dividends paid(858) (801) 
Purchases of common stock(231) (533) 
Proceeds from fixed-rate notes—  6,461  
Proceeds from floating-rate notes—  1,000  
Repayment of CSRA accounts receivable purchase agreement—  (450) 
Other, net207  (68) 
Net cash provided by financing activities65  7,277  
Net cash used by discontinued operations(37) (14) 
Net increase (decrease) in cash and equivalents11  (1,973) 
Cash and equivalents at beginning of period963  2,983  
Cash and equivalents at end of period$974  $1,010  


 

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EXHIBIT G
PRELIMINARY FINANCIAL INFORMATION - (UNAUDITED)
DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS
 
Other Financial Information:
 September 29, 2019December 31, 2018 
Debt-to-equity (a)101.0 %105.8 %
Debt-to-capital (b)50.3 %51.4 %
Book value per share (c)$46.71  $40.64  
Shares outstanding289,306,108  288,698,149  
Third QuarterNine Months
2019201820192018
Income tax payments, net$90  $150  $487  $305  
Company-sponsored research and development (d)$110  $126  $352  $356  
Non-GAAP Financial Measures:
Third QuarterNine Months
 2019201820192018
Earnings before interest, taxes, depreciation and amortization:
Earnings from continuing operations$913  $864  $2,464  $2,449  
Interest, net114  114  350  244  
Provision for income tax, net177  159  524  504  
Depreciation of property, plant and equipment120  109  352  315  
Amortization of intangible and finance lease right-of-use assets90  106  273  227  
Earnings before interest, taxes, depreciation and amortization (e)
$1,414  $1,352  $3,963  $3,739  
Free cash flow from operations:
Net cash provided by operating activities$1,091  $790  $587  $1,081  
Capital expenditures(244) (168) (606) (447) 
Free cash flow from operations (f)$847  $622  $(19) $634  
(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)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 earnings from continuing operations. The most directly comparable GAAP measure to EBITDA is earnings from continuing operations.

(f)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.
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EXHIBIT H
BACKLOG - (UNAUDITED)
DOLLARS IN MILLIONS
 
FundedUnfundedTotal
Backlog
Estimated
Potential
Contract Value*
Total
Estimated
Contract Value
Third Quarter 2019:
Aerospace$11,195  $188  $11,383  $2,065  $13,448  
Combat Systems15,069  449  15,518  4,255  19,773  
Information Technology4,782  4,381  9,163  18,063  27,226  
Mission Systems5,152  307  5,459  6,764  12,223  
Marine Systems17,801  8,072  25,873  4,497  30,370  
Total$53,999  $13,397  $67,396  $35,644  $103,040  
Second Quarter 2019:
Aerospace$11,932  $213  $12,145  $2,079  $14,224  
Combat Systems14,794  438  15,232  4,113  19,345  
Information Technology4,446  4,405  8,851  17,983  26,834  
Mission Systems4,925  258  5,183  6,847  12,030  
Marine Systems18,344  7,899  26,243  3,223  29,466  
Total$54,441  $13,213  $67,654  $34,245  $101,899  
Third Quarter 2018:
Aerospace$11,696  $173  $11,869  $2,239  $14,108  
Combat Systems15,865  395  16,260  3,857  20,117  
Information Technology5,222  4,731  9,953  17,365  27,318  
Mission Systems5,024  587  5,611  7,453  13,064  
Marine Systems16,615  9,221  25,836  3,797  29,633  
Total$54,422  $15,107  $69,529  $34,711  $104,240  

* 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.





 



 





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EXHIBIT H-1
BACKLOG - (UNAUDITED)
DOLLARS IN MILLIONS




chart-990c0480e8b84e70.jpg
Funded BacklogUnfunded Backlog











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EXHIBIT H-2
BACKLOG BY SEGMENT - (UNAUDITED)
DOLLARS IN MILLIONS

chart-f33b896de4524349.jpgchart-ac8989256a7a45b0.jpg
chart-ddbba209085e4e38.jpgchart-ab33e95d64804770.jpg
chart-59d1d41110e842af.jpg
Funded BacklogUnfunded Backlog
* Reflects the divestiture of a public-facing contact-center business.

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EXHIBIT I
THIRD QUARTER 2019 SIGNIFICANT ORDERS - (UNAUDITED)
DOLLARS IN MILLIONS


We received the following significant contract awards during the third quarter of 2019:
Combat Systems:
•$1.3 billion from the Canadian government to produce armored combat support vehicles (ACSVs) and provide associated support services.
•$155 from the U.S. Army for various munitions and ordnance.
•$70 to produce gun systems for the F-35 Joint Strike Fighter.
•$55 from the Army for various maintenance and enhancements at the Lima Army Tank Plant in Lima, Ohio.

Information Technology:
•An IDIQ contract to provide command, control, communications, computers, intelligence, surveillance and reconnaissance (C4ISR) installation services for the U.S. Navy. The program has a maximum potential value of $2.5 billion among 6 awardees.
•A contract to provide program management and engineering services to the Cybersecurity and Infrastructure Security Agency’s (CISA) emergency communications infrastructure. The contract has a maximum potential value of $325.
•A contract from the U.S. Department of Veterans Affairs under the Veterans Intake, Conversion and Communications Services (VICCS) program to provide support and communication services to U.S. veterans. The contract has a maximum potential value of $280.
•$155 from the U.S. Department of State to provide business process support services for the Bureau of Consular Affairs’ Global Support Strategy (GSS) program for visa services.
•$125 to provide design, development, testing, installation, maintenance, logistics support and modernization services for Navy airborne and shipboard platforms.
•$95 from the Centers for Medicare and Medicaid Services for several key contracts, including support of the Medicare Secondary Payer (MSP) program. These contracts have a maximum potential value of $220.

Mission Systems:
•$265 from the Army for computing and communications equipment under the Common Hardware Systems-5 program.
•$95 from the Army to provide continued software support and engineering for the Warfighter Information Network-Tactical (WIN-T) Increment 2 program.
•$65 from the Navy to provide fire control system modifications for ballistic-missile and guided-missile submarines.
•$45 from the Navy to produce five Knifefish surface mine countermeasure systems and associated support equipment.
•$25 from the Army for the production of Prophet enhanced ground-based signals intelligence and electronic warfare systems. The contract has a maximum potential value of $295.

Marine Systems:
•$1.1 billion from the Navy for design and construction of two Expeditionary Sea Base (ESB) auxiliary support ships and an option totaling approximately $550 for an additional ship.
•$175 from the Navy to provide engineering, technical, design and planning yard support services for operational strategic and attack submarines. The program has a maximum potential value of $1 billion.
•$390 from the Navy for Advanced Nuclear Plant Studies (ANPS) in support of the Columbia-class submarine program.
•$110 from the Navy to provide maintenance and repair services for the USS Kearsarge, an amphibious assault ship.
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EXHIBIT J
AEROSPACE SUPPLEMENTAL DATA - (UNAUDITED)

 Third QuarterNine Months
 2019201820192018
Gulfstream Aircraft Deliveries (units):
Large-cabin aircraft29  21  79  58  
Mid-cabin aircraft9  6  24  21  
Total38  27  103  79  
Pre-owned Aircraft Deliveries (units):4  2  9  4  
Aerospace Book-to-Bill:
Orders*$1,693  $1,743  $7,022  $5,479  
Revenue (excluding pre-owned aircraft sales)2,404  1,962  6,735  5,672  
Book-to-Bill Ratio0.70x  0.89x  1.04x  0.97x  

*Does not include customer defaults, liquidated damages, cancellations, foreign exchange fluctuations and other backlog adjustments.






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