EX-99.1 2 gd-20191231exhibit991.htm EX-99.1 Document


Exhibit 99.1 
 
image11.gif
11011 Sunset Hills Road 
Reston, VA 20190News
www.gd.com 

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

January 29, 2020

General Dynamics Reports Fourth-Quarter and Full-Year 2019 Financial Results

Fourth-quarter net earnings of $1 billion, up 12.2%
Fourth-quarter diluted EPS of $3.51, up 14.3%
Fourth-quarter operating margin of 12.3%, up 50 basis points
Full-year diluted EPS from continuing operations of $11.98, up 6.8%
Backlog grew 28.1% to record-high $86.9 billion, for book-to-bill of 1.5-to-1 for the year


RESTON, Va. General Dynamics (NYSE: GD) today reported quarterly net earnings of $1 billion on $10.8 billion in revenue. Full-year earnings from continuing operations were $3.5 billion on revenue of $39.4 billion. Full-year revenue and operating earnings grew in all five segments.

Fourth-quarter’s net earnings grew 12.2% over fourth-quarter 2018. On a per share basis, diluted earnings per share (EPS) were $3.51, a 14.3% increase over the year-ago quarter. For the year, diluted EPS from continuing operations were $11.98, a 6.8% increase from 2018.

“We continue to improve performance and focus on lines of business that will deliver value for our customers and sustained superior results for our shareholders,” said Phebe N. Novakovic, chairman and chief executive officer. “Our fourth-quarter and full-year performance, coupled with strong order intake, leaves us well positioned to create enduring value.”

SEGMENT HIGHLIGHTS
Aerospace
Aerospace revenue was $2.9 billion for the quarter, up 8.4% over the year-ago quarter, for full-year revenue of $9.8 billion. Operating earnings were $480 million for the quarter, up 25.7% over the year-ago quarter, and $1.5 billion for the year. Operating margin was 16.4% for the quarter, up 230 basis points over the year-ago quarter, and 15.6% for the year. Backlog grew during the fourth quarter to $13.3 billion, up 17.4% from the end of 2018. Book-to-bill was 1.7-to-1 for the quarter and 1.2-to-1 for the year. Gulfstream received FAA type and production certification of its G600 in the second quarter and deliveries began in the third quarter. In the fourth quarter, Gulfstream unveiled the G700 and announced the first orders for the new aircraft, scheduled to begin customer deliveries in 2022.


– more –




image22.gif

Combat Systems
Combat Systems reported fourth-quarter revenue of $2 billion, up 13.1% over the year-ago quarter, for full-year revenue of $7 billion. Operating earnings were $284 million, up 8.8% over the year-ago quarter, for full-year operating earnings of $996 million. Operating margin was 14.4% for the quarter and 14.2% for the year. The segment was selected in 2019 to produce light armored vehicles for the Canadian Army. It continues to develop new platforms to meet future customer needs, including Mobile Protected Firepower and new variants of the Stryker.

Information Technology
Information Technology reported fourth-quarter revenue of $2 billion and $8.4 billion for the year. Operating earnings were $172 million for the fourth quarter and $628 million for the year. Operating margin was 8.5% for the quarter, up 40 basis points over the year-ago quarter, and 7.5% for the year. Total backlog was $9.1 billion, up 14.7% from the end of 2018. Total estimated contract value, which includes management’s estimate of value in unfunded indefinite delivery, indefinite quantity (IDIQ) contracts and unexercised options, was $28.1 billion, up 12.4% from the end of 2018. Book-to-bill was 1-to-1 for the quarter and 1.1-to-1 for the year.

Mission Systems
Mission Systems reported fourth-quarter revenue of $1.3 billion, up 2.5% from the year-ago quarter, for full-year revenue of $4.9 billion. Operating earnings were $188 million for the quarter, up 3.9% from the year-ago quarter, and $683 million for the year. Operating margin was 14.7% for the quarter, up 20 basis points from the year-ago quarter, and 13.8% for the year. Backlog was $5.4 billion. Book-to-bill was 1-to-1 for the year. Significant awards included a contract from the U.S. Navy to modernize ground stations for satellite communications systems with a maximum potential value of $730 million.

Marine Systems
Marine Systems reported quarterly revenue of $2.6 billion, up 11.7% from the year-ago quarter, for full-year revenue of $9.2 billion. Operating earnings were $199 million for the quarter and $785 million for the year. Operating margin was 7.8% for the quarter and 8.5% for the year. The award in the fourth quarter of a $22.2 billion contract for Virginia-class submarines expanded the segment’s backlog to $44.2 billion, up 66.1% from the end of 2018. Book-to-bill was 8.1-to-1 for the quarter and 2.9-to-1 for the year.

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
– more –




image21.gif

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 fourth-quarter and full-year 2019 financial results conference call at 9 a.m. EST on Wednesday, January 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 by 12 noon on January 29 and will continue for 12 months. To hear a recording of the conference call by telephone, please call 877-344-7529 (international: 412-317-0088); passcode 10137702. The phone replay will be available through January 29, 2020. Charts furnished to investors and securities analysts in connection with General Dynamics’ announcement of its financial results for the quarter and year ended December 31, 2019, are available on its website at www.gd.com. General Dynamics intends to supplement those charts on its website after its earnings call today to include information about 2020 guidance presented on its earnings call.
– more –




EXHIBIT A
CONSOLIDATED STATEMENT OF EARNINGS - (UNAUDITED)
DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS
 
   Three Months Ended December 31  Variance  
   20192018  
Revenue  $10,773  $10,378  $395  3.8 %
Operating costs and expenses  (9,445) (9,152) (293) 
Operating earnings  1,328  1,226  102  8.3 %
Interest, net  (110) (112)  
Other, net  (4) 18  (22) 
Earnings before income tax  1,214  1,132  82  7.2 %
Provision for income tax, net  (194) (223) 29  
Net earnings  $1,020  $909  $111  12.2 %
Earnings per share—basic  $3.53  $3.10  $0.43  13.9 %
Basic weighted average shares outstanding  288.8  293.2  
Earnings per share—diluted  $3.51  $3.07  $0.44  14.3 %
Diluted weighted average shares outstanding  290.9  296.4  





– more –




EXHIBIT B
CONSOLIDATED STATEMENT OF EARNINGS - (UNAUDITED)
DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS
 
 Year Ended December 31Variance
 20192018*$%
Revenue$39,350  $36,193  $3,157  8.7 %
Operating costs and expenses(34,702) (31,736) (2,966) 
Operating earnings4,648  4,457  191  4.3 %
Interest, net(460) (356) (104) 
Other, net14  (16) 30  
Earnings from continuing operations before income tax4,202  4,085  117  2.9 %
Provision for income tax, net(718) (727)  
Earnings from continuing operations3,484  3,358  126  3.8 %
Discontinued operations, net of tax—  (13) 13  
Net earnings $3,484  $3,345  $139  4.2 %
Earnings per share—basic
Continuing operations $12.09  $11.37  $0.72  6.3 %
Discontinued operations—  (0.04) 0.04  
Net earnings$12.09  $11.33  $0.76  6.7 %
Basic weighted average shares outstanding288.3  295.3  
Earnings per share—diluted
Continuing operations$11.98  $11.22  $0.76  6.8 %
Discontinued operations—  (0.04) 0.04  
Net earnings$11.98  $11.18  $0.80  7.2 %
Diluted weighted average shares outstanding290.8  299.2  

*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.



 



– more –




EXHIBIT C
REVENUE AND OPERATING EARNINGS BY SEGMENT - (UNAUDITED)
DOLLARS IN MILLIONS
 
 Three Months Ended December 31Variance
 20192018$%
Revenue:
Aerospace$2,930  $2,704  $226  8.4 %
Combat Systems1,972  1,744  228  13.1 %
Information Technology2,024  2,382  (358) (15.0)%
Mission Systems1,282  1,251  31  2.5 %
Marine Systems2,565  2,297  268  11.7 %
Total$10,773  $10,378  $395  3.8 %
Operating earnings:
Aerospace$480  $382  $98  25.7 %
Combat Systems284  261  23  8.8 %
Information Technology172  194  (22) (11.3)%
Mission Systems188  181   3.9 %
Marine Systems199  213  (14) (6.6)%
Corporate (5) 10  (200.0)%
Total$1,328  $1,226  $102  8.3 %
Operating margin:
Aerospace16.4 %14.1 %
Combat Systems14.4 %15.0 %
Information Technology8.5 %8.1 %
Mission Systems14.7 %14.5 %
Marine Systems7.8 %9.3 %
Total12.3 %11.8 %



– more –




EXHIBIT D
REVENUE AND OPERATING EARNINGS BY SEGMENT - (UNAUDITED)
DOLLARS IN MILLIONS
 
 Year Ended December 31Variance
 20192018*
$%
Revenue:
Aerospace$9,801  $8,455  $1,346  15.9 %
Combat Systems7,007  6,241  766  12.3 %
Information Technology8,422  8,269  153  1.9 %
Mission Systems4,937  4,726  211  4.5 %
Marine Systems9,183  8,502  681  8.0 %
Total$39,350  $36,193  $3,157  8.7 %
Operating earnings:
Aerospace$1,532  $1,490  $42  2.8 %
Combat Systems996  962  34  3.5 %
Information Technology628  608  20  3.3 %
Mission Systems683  659  24  3.6 %
Marine Systems785  761  24  3.2 %
Corporate24  (23) 47  204.3 %
Total$4,648  $4,457  $191  4.3 %
Operating margin:
Aerospace15.6 %17.6 %
Combat Systems14.2 %15.4 %
Information Technology7.5 %7.4 %
Mission Systems13.8 %13.9 %
Marine Systems8.5 %9.0 %
Total11.8 %12.3 %

*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.


 

 

– more –




EXHIBIT E
CONSOLIDATED BALANCE SHEET
DOLLARS IN MILLIONS
 
(Unaudited)
December 31, 2019December 31, 2018
ASSETS
Current assets:
Cash and equivalents$902  $963  
Accounts receivable3,544  3,759  
Unbilled receivables7,857  6,576  
Inventories6,306  5,977  
Other current assets1,171  914  
Total current assets19,780  18,189  
Noncurrent assets:
Property, plant and equipment, net4,475  3,978  
Intangible assets, net2,315  2,585  
Goodwill19,677  19,594  
Other assets2,594  1,062  
Total noncurrent assets 29,061  27,219  
Total assets$48,841  $45,408  
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Short-term debt and current portion of long-term debt$2,920  $973  
Accounts payable3,162  3,179  
Customer advances and deposits7,148  7,270  
Other current liabilities3,571  3,317  
Total current liabilities16,801  14,739  
Noncurrent liabilities:
Long-term debt9,010  11,444  
Other liabilities9,453  7,493  
Total noncurrent liabilities18,463  18,937  
Shareholders’ equity:
Common stock482  482  
Surplus3,039  2,946  
Retained earnings31,633  29,326  
Treasury stock(17,358) (17,244) 
Accumulated other comprehensive loss(4,219) (3,778) 
Total shareholders’ equity13,577  11,732  
Total liabilities and shareholders’ equity$48,841  $45,408  



 
– more –




EXHIBIT F
CONSOLIDATED STATEMENT OF CASH FLOWS - (UNAUDITED)
DOLLARS IN MILLIONS
 
  
Year Ended December 31
 20192018
Cash flows from operating activities—continuing operations:
Net earnings$3,484  $3,345  
Adjustments to reconcile net earnings to net cash from operating activities:
Depreciation of property, plant and equipment466  436  
Amortization of intangible and finance lease right-of-use assets363  327  
Equity-based compensation expense133  140  
Deferred income tax provision (benefit)92  (3) 
Discontinued operations, net of tax—  13  
(Increase) decrease in assets, net of effects of business acquisitions:
Accounts receivable176  417  
Unbilled receivables(1,303) (800) 
Inventories(376) (591) 
Other current assets 310  
Increase (decrease) in liabilities, net of effects of business acquisitions:
Accounts payable (197) 
Customer advances and deposits(105) 36  
Other, net37  (285) 
Net cash provided by operating activities2,981  3,148  
Cash flows from investing activities:
Capital expenditures(987) (690) 
Business acquisitions, net of cash acquired(19) (10,099) 
Proceeds from sales of assets14  562  
Other, net(2) (7) 
Net cash used by investing activities(994) (10,234) 
Cash flows from financing activities:
Dividends paid(1,152) (1,075) 
(Repayments of) proceeds from commercial paper, net(850) 850  
Purchases of common stock(231) (1,769) 
Proceeds from fixed-rate notes—  6,461  
Proceeds from floating-rate notes—  1,000  
Repayment of CSRA accounts receivable purchase agreement—  (450) 
Other, net236  69  
Net cash (used) provided by financing activities(1,997) 5,086  
Net cash used by discontinued operations(51) (20) 
Net decrease in cash and equivalents(61) (2,020) 
Cash and equivalents at beginning of year963  2,983  
Cash and equivalents at end of year$902  $963  


 

– more –




EXHIBIT G
PRELIMINARY FINANCIAL INFORMATION - (UNAUDITED)
DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS
 
Other Financial Information:
 December 31, 2019December 31, 2018 
Debt-to-equity (a)87.9 %105.8 %
Debt-to-capital (b)46.8 %51.4 %
Book value per share (c)$46.88  $40.64  
Shares outstanding289,610,336  288,698,149  
Fourth QuarterTwelve Months
2019201820192018
Income tax payments, net$85  $227  $572  $532  
Company-sponsored research and development (d)$114  $146  $466  $502  
Return on sales (e)9.5 %8.8 %8.9 %9.3 %
Return on equity (f)27.2 %28.1 %
Non-GAAP Financial Measures:
Fourth QuarterTwelve Months
 2019201820192018
Earnings before interest, taxes, depreciation and amortization:
Earnings from continuing operations$1,020  $909  $3,484  $3,358  
Interest, net110  112  460  356  
Provision for income tax, net194  223  718  727  
Depreciation of property, plant and equipment114  121  466  436  
Amortization of intangible and finance lease right-of-use assets90  100  363  327  
Earnings before interest, taxes, depreciation and amortization (g)
$1,528  $1,465  $5,491  $5,204  
Free cash flow from operations:
Net cash provided by operating activities$2,394  $2,067  $2,981  $3,148  
Capital expenditures(381) (243) (987) (690) 
Free cash flow from operations (h)$2,013  $1,824  $1,994  $2,458  
Return on invested capital:
Earnings from continuing operations$3,484  $3,358  
After-tax interest expense373  295  
After-tax amortization expense287  258  
Net operating profit after taxes4,144  3,911  
Average invested capital29,620  25,367  
Return on invested capital (i)14.0 %15.4 %
Notes describing the calculation of the other financial information and a reconciliation of non-GAAP financial measures are on the following page.




– more –




EXHIBIT G (Cont.)
PRELIMINARY FINANCIAL INFORMATION - (UNAUDITED)
DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS


(a)Debt-to-equity ratio is calculated as total debt divided by total equity as of year end.

(b)Debt-to-capital ratio is calculated as total debt divided by the sum of total debt plus total equity as of year end.

(c)Book value per share is calculated as total equity divided by total outstanding shares as of year end.

(d)Includes independent research and development and Aerospace product-development costs.

(e)Return on sales is calculated as earnings from continuing operations divided by revenue.
(f)Return on equity is calculated by dividing earnings from continuing operations by our average equity during the year.

(g)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.
(h)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.

(i)We believe return on invested capital (ROIC) is a useful measure for investors because it reflects our ability to generate returns from the capital we have deployed in our operations. We use ROIC to evaluate investment decisions and as a performance measure in evaluating management. We define ROIC as net operating profit after taxes divided by average invested capital. Net operating profit after taxes is defined as earnings from continuing operations plus after-tax interest and amortization expense, calculated using the statutory federal income tax rate. Average invested capital is defined as the sum of the average debt and shareholders’ equity excluding accumulated other comprehensive loss. ROIC excludes goodwill impairments and non-economic accounting changes as they are not reflective of company performance. The most directly comparable GAAP measure to net operating profit after taxes is earnings from continuing operations.





– more –




EXHIBIT H
BACKLOG - (UNAUDITED)
DOLLARS IN MILLIONS
 
FundedUnfundedTotal
Backlog
Estimated
Potential
Contract Value*
Total
Estimated
Contract Value
Fourth Quarter 2019:
Aerospace$13,168  $181  $13,349  $2,989  $16,338  
Combat Systems14,474  439  14,913  4,322  19,235  
Information Technology4,839  4,294  9,133  19,003  28,136  
Mission Systems5,037  326  5,363  7,482  12,845  
Marine Systems20,012  24,175  44,187  5,453  49,640  
Total$57,530  $29,415  $86,945  $39,249  $126,194  
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  
Fourth Quarter 2018:
Aerospace$11,208  $167  $11,375  $3,130  $14,505  
Combat Systems16,174  424  16,598  4,187  20,785
Information Technology4,717  3,248  7,965  17,066  25,031
Mission Systems4,890  445  5,335  7,409  12,744
Marine Systems18,837  7,761  26,598  3,703  30,301
Total$55,826  $12,045  $67,871  $35,495  $103,366  

* 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.





 



 





– more –




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




chart-f0eb52455b234897.jpg
Funded BacklogUnfunded Backlog











– more –




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

chart-939fd5a70948431f.jpgchart-46a0d4066e2e4550.jpg
chart-e8799a0fc5894770.jpgchart-fd21ae4b7982433d.jpg
chart-a81f931e0b3e442b.jpg
Funded BacklogUnfunded Backlog

– more –




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


We received the following significant contract awards during the fourth quarter of 2019:
Combat Systems:
$465 from the U.S. Army to upgrade Abrams tanks to the M1A2 System Enhancement Package Version 3 configuration.
$160 from the Army for various munitions and ordnance.
$150 for the production of Eagle vehicles and related spares for Switzerland.
$35 from the Army to provide systems technical support for Abrams main battle tanks.

Information Technology:
$800 to support the operations and enhancement of several state health insurance programs.
$355 for several key contracts to provide intelligence services to classified customers.
$150 to provide operations and maintenance support services for a Department of Homeland Security (DHS) data center.
$105 from the National Geospatial-Intelligence Agency (NGA) for network storage and data center services.
A contract from the U.S. Department of Education for development, operation and maintenance of the Federal Student Aid Application and Eligibility Determination System (AEDS). The contract has a maximum potential value of $90.
$75 to provide Military Information Support Operations (MISO) to the U.S. Department of Defense.

Mission Systems:
A sole-source contract from the U.S. Navy to provide sustainment services for the Navy’s next-generation Mobile User Objective System (MUOS) satellite communications system. The contract has a maximum potential value of $730.
$90 from the Navy to provide sustainment services for Littoral Combat Ships (LCS), including maintenance of in-service ships’ Integrated Combat Management System (ICMS). The contract has a maximum potential value of $395.
$60 from the Navy to modernize and maintain fire-control systems for ballistic-missile submarines. The contract has a maximum potential value of $300.
$80 from the Army for computing and communications equipment under the Common Hardware Systems-5 program.
$60 to perform Strategic Systems Program Alteration (SPALT) activities to rebuild and repair MK6 missile guidance systems for the Navy.

Marine Systems:
$22.2 billion contract from the Navy for the construction of nine submarines in Block V of the Virginia-class submarine program and spare materials. The contract includes $3.2 billion of previously-awarded orders for advance materials. The contract includes an option for a tenth submarine that if exercised would bring the total contract value to $24.1 billion.
$435 from the Navy to provide design and development activities for Virginia-class submarines.
$300 from the Navy to provide maintenance and repair services for the Arleigh Burke-class (DDG-51) guided-missile destroyer, Independence-variant LCS and Harpers Ferry-class dock landing ship (LSD) programs.
$80 from the Navy to provide planning yard services for the DDG-51 destroyer program.
$45 from the Navy to provide non-nuclear maintenance and repair services for submarines located at the Naval Submarine Support Facility in New London, Connecticut.
– more –




EXHIBIT J
AEROSPACE SUPPLEMENTAL DATA - (UNAUDITED)

 Fourth QuarterTwelve Months
 2019201820192018
Gulfstream Aircraft Deliveries (units):
Large-cabin aircraft35  34  114  92  
Mid-cabin aircraft  33  29  
Total44  42  147  121  
Pre-owned Aircraft Deliveries (units):  15   
Aerospace Book-to-Bill:
Orders (a)$4,652  $2,117  $11,674  $7,596  
Revenue (excluding pre-owned aircraft sales)2,774  2,650  9,509  8,322  
Book-to-Bill Ratio (b)1.68x  0.80x  1.23x  0.91x  

(a)Does not include customer defaults, liquidated damages, cancellations, foreign exchange fluctuations and other backlog adjustments.
(b)Gulfstream new aircraft book-to-bill (value of new aircraft orders versus new aircraft deliveries) was 2.0x in the fourth quarter and 1.4x for the full year 2019.









# # #