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RESTON, Va., July 27, 2022 /PRNewswire/ -- General Dynamics (NYSE: GD) today reported second-quarter 2022 net earnings of $766 million on revenue of $9.2 billion. Diluted earnings per share (EPS) were $2.75, a 5.4% increase from the year-ago quarter.
"Demand in the quarter was very strong in Aerospace, with margins showing steady improvement year over year," said Phebe N. Novakovic, chairman and chief executive officer. "Our defense segments demonstrated solid operating performance and had several important wins."
CashNet cash provided by operating activities in the quarter totaled $659 million. During the quarter, the company invested $224 million in capital expenditures, paid $349 million in dividends, and used $800 million to repurchase shares, ending the quarter with $2.2 billion in cash and equivalents on hand. For the first half of the year, net cash provided by operating activities totaled $2.6 billion, or 176% of net earnings.
BacklogOrders remained strong across the company with a consolidated book-to-bill ratio, defined as orders divided by revenue, of 1.1-to-1 for the quarter, with particular strength in the Aerospace segment driven by strong order activity for Gulfstream aircraft. In addition to company-wide backlog of $87.6 billion, estimated potential contract value, representing management's estimate of additional value in unfunded indefinite delivery, indefinite quantity (IDIQ) contracts and unexercised options, was $38.7 billion. Total estimated contract value, the sum of all backlog components, was $126.4 billion at the end of the quarter.
Significant awards in the quarter for the three defense segments included $410 million with a maximum potential value of $1.1 billion from the U.S. Army to begin low-rate initial production (LRIP) of the Mobile Protected Firepower vehicle; $295 million for various munitions and ordnance with additional option value of $465 million; $525 million from the Army to upgrade Stryker vehicles; $500 million from the U.S. Navy for long-lead materials to support construction of two additional John Lewis-class (T-AO-205) fleet replenishment oilers; $355 million to produce Abrams main battle tanks in the system enhancement package version 3 (SEPv3) configuration for Australia; $160 million with a maximum potential value of $325 million from the U.S. Space Development Agency to build and operate ground systems for the new low earth orbit (LEO) satellite network; $315 million from the Navy for submarine industrial base development and expansion for the Columbia-class submarine program; a contract with a maximum potential value of $300 million for development and sustainment of applications and websites for the Administrative Office of the United States Courts; and $545 million for several key classified contracts.
About General DynamicsHeadquartered in Reston, Virginia, General Dynamics is a global aerospace and defense company that offers a broad portfolio of products and services in business aviation; ship construction and repair; land combat vehicles, weapons systems and munitions; and technology products and services. General Dynamics employs more than 100,000 people worldwide and generated $38.5 billion in revenue in 2021. More information is available at www.gd.com.
Certain statements in this press release, including any statements about the company's future operational and financial performance, may constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. Words such as "expects," "anticipates," "plans," "believes," "forecasts," "scheduled," "outlook," "estimates," "should" and variations of these words and similar expressions are intended to identify forward-looking statements. 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 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 revisions to any 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 second-quarter 2022 financial results conference call at 9 a.m. EDT on Wednesday, July 27, 2022. 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 telephone one hour after the end of the call and end on August 3, 2022, at 866-813-9403 (international: +44 204-525-0658); passcode 671446. 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 | ||||||||||||||||||||||
July 3, 2022 | July 4, 2021 | $ | % | ||||||||||||||||||||
Revenue | $ | 9,189 | $ | 9,220 | $ | (31) | (0.3) | % | |||||||||||||||
Operating costs and expenses | (8,211) | (8,261) | 50 | ||||||||||||||||||||
Operating earnings | 978 | 959 | 19 | 2.0 | % | ||||||||||||||||||
Other, net | 40 | 31 | 9 | ||||||||||||||||||||
Interest, net | (95) | (109) | 14 | ||||||||||||||||||||
Earnings before income tax | 923 | 881 | 42 | 4.8 | % | ||||||||||||||||||
Provision for income tax, net | (157) | (144) | (13) | ||||||||||||||||||||
Net earnings | $ | 766 | $ | 737 | $ | 29 | 3.9 | % | |||||||||||||||
Earnings per share—basic | $ | 2.77 | $ | 2.63 | $ | 0.14 | 5.3 | % | |||||||||||||||
Basic weighted average shares outstanding | 276.3 | 280.7 | |||||||||||||||||||||
Earnings per share—diluted | $ | 2.75 | $ | 2.61 | $ | 0.14 | 5.4 | % | |||||||||||||||
Diluted weighted average shares outstanding | 278.9 | 282.2 | |||||||||||||||||||||
EXHIBIT B CONSOLIDATED STATEMENT OF EARNINGS - (UNAUDITED) DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS
| |||||||||||||||||||||||
Six Months Ended | Variance | ||||||||||||||||||||||
July 3, 2022 | July 4, 2021 | $ | % | ||||||||||||||||||||
Revenue | $ | 18,581 | $ | 18,609 | $ | (28) | (0.2) | % | |||||||||||||||
Operating costs and expenses | (16,695) | (16,712) | 17 | ||||||||||||||||||||
Operating earnings | 1,886 | 1,897 | (11) | (0.6) | % | ||||||||||||||||||
Other, net | 79 | 61 | 18 | ||||||||||||||||||||
Interest, net | (193) | (232) | 39 | ||||||||||||||||||||
Earnings before income tax | 1,772 | 1,726 | 46 | 2.7 | % | ||||||||||||||||||
Provision for income tax, net | (276) | (281) | 5 | ||||||||||||||||||||
Net earnings | $ | 1,496 | $ | 1,445 | $ | 51 | 3.5 | % | |||||||||||||||
Earnings per share—basic | $ | 5.41 | $ | 5.12 | $ | 0.29 | 5.7 | % | |||||||||||||||
Basic weighted average shares outstanding | 276.7 | 282.4 | |||||||||||||||||||||
Earnings per share—diluted | $ | 5.35 | $ | 5.10 | $ | 0.25 | 4.9 | % | |||||||||||||||
Diluted weighted average shares outstanding | 279.4 | 283.6 | |||||||||||||||||||||
EXHIBIT C REVENUE AND OPERATING EARNINGS BY SEGMENT - (UNAUDITED) DOLLARS IN MILLIONS
| |||||||||||||||||||||||
Three Months Ended | Variance | ||||||||||||||||||||||
July 3, 2022 | July 4, 2021 | $ | % | ||||||||||||||||||||
Revenue: | |||||||||||||||||||||||
Aerospace | $ | 1,867 | $ | 1,622 | $ | 245 | 15.1 | % | |||||||||||||||
Marine Systems | 2,651 | 2,536 | 115 | 4.5 | % | ||||||||||||||||||
Combat Systems | 1,666 | 1,899 | (233) | (12.3) | % | ||||||||||||||||||
Technologies | 3,005 | 3,163 | (158) | (5.0) | % | ||||||||||||||||||
Total | $ | 9,189 | $ | 9,220 | $ | (31) | (0.3) | % | |||||||||||||||
Operating earnings: | |||||||||||||||||||||||
Aerospace | $ | 238 | $ | 195 | $ | 43 | 22.1 | % | |||||||||||||||
Marine Systems | 211 | 210 | 1 | 0.5 | % | ||||||||||||||||||
Combat Systems | 245 | 266 | (21) | (7.9) | % | ||||||||||||||||||
Technologies | 304 | 308 | (4) | (1.3) | % | ||||||||||||||||||
Corporate | (20) | (20) | — | — | % | ||||||||||||||||||
Total | $ | 978 | $ | 959 | $ | 19 | 2.0 | % | |||||||||||||||
Operating margin: | |||||||||||||||||||||||
Aerospace | 12.7 | % | 12.0 | % | |||||||||||||||||||
Marine Systems | 8.0 | % | 8.3 | % | |||||||||||||||||||
Combat Systems | 14.7 | % | 14.0 | % | |||||||||||||||||||
Technologies | 10.1 | % | 9.7 | % | |||||||||||||||||||
Total | 10.6 | % | 10.4 | % | |||||||||||||||||||
EXHIBIT D REVENUE AND OPERATING EARNINGS BY SEGMENT - (UNAUDITED) DOLLARS IN MILLIONS | |||||||||||||||||||||||
Six Months Ended | Variance | ||||||||||||||||||||||
July 3, 2022 | July 4, 2021 | $ | % | ||||||||||||||||||||
Revenue: | |||||||||||||||||||||||
Aerospace | $ | 3,770 | $ | 3,509 | $ | 261 | 7.4 | % | |||||||||||||||
Marine Systems | 5,302 | 5,019 | 283 | 5.6 | % | ||||||||||||||||||
Combat Systems | 3,341 | 3,719 | (378) | (10.2) | % | ||||||||||||||||||
Technologies | 6,168 | 6,362 | (194) | (3.0) | % | ||||||||||||||||||
Total | $ | 18,581 | $ | 18,609 | $ | (28) | (0.2) | % | |||||||||||||||
Operating earnings: | |||||||||||||||||||||||
Aerospace | $ | 481 | $ | 415 | $ | 66 | 15.9 | % | |||||||||||||||
Marine Systems | 422 | 410 | 12 | 2.9 | % | ||||||||||||||||||
Combat Systems | 472 | 510 | (38) | (7.5) | % | ||||||||||||||||||
Technologies | 602 | 614 | (12) | (2.0) | % | ||||||||||||||||||
Corporate | (91) | (52) | (39) | (75.0) | % | ||||||||||||||||||
Total | $ | 1,886 | $ | 1,897 | $ | (11) | (0.6) | % | |||||||||||||||
Operating margin: | |||||||||||||||||||||||
Aerospace | 12.8 | % | 11.8 | % | |||||||||||||||||||
Marine Systems | 8.0 | % | 8.2 | % | |||||||||||||||||||
Combat Systems | 14.1 | % | 13.7 | % | |||||||||||||||||||
Technologies | 9.8 | % | 9.7 | % | |||||||||||||||||||
Total | 10.2 | % | 10.2 | % | |||||||||||||||||||
EXHIBIT E CONSOLIDATED BALANCE SHEET DOLLARS IN MILLIONS | |||||||||||
(Unaudited) | |||||||||||
July 3, 2022 | December 31, 2021 | ||||||||||
ASSETS | |||||||||||
Current assets: | |||||||||||
Cash and equivalents | $ | 2,223 | $ | 1,603 | |||||||
Accounts receivable | 3,213 | 3,041 | |||||||||
Unbilled receivables | 7,819 | 8,498 | |||||||||
Inventories | 6,158 | 5,340 | |||||||||
Other current assets | 1,166 | 1,505 | |||||||||
Total current assets | 20,579 | 19,987 | |||||||||
Noncurrent assets: | |||||||||||
Property, plant and equipment, net | 5,479 | 5,417 | |||||||||
Intangible assets, net | 1,867 | 1,978 | |||||||||
Goodwill | 20,002 | 20,098 | |||||||||
Other assets | 2,554 | 2,593 | |||||||||
Total noncurrent assets | 29,902 | 30,086 | |||||||||
Total assets | $ | 50,481 | $ | 50,073 | |||||||
LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||||||
Current liabilities: | |||||||||||
Short-term debt and current portion of long-term debt | $ | 1,754 | $ | 1,005 | |||||||
Accounts payable | 3,138 | 3,167 | |||||||||
Customer advances and deposits | 6,531 | 6,266 | |||||||||
Other current liabilities | 3,313 | 3,540 | |||||||||
Total current liabilities | 14,736 | 13,978 | |||||||||
Noncurrent liabilities: | |||||||||||
Long-term debt | 9,741 | 10,490 | |||||||||
Other liabilities | 8,623 | 7,964 | |||||||||
Total noncurrent liabilities | 18,364 | 18,454 | |||||||||
Shareholders' equity: | |||||||||||
Common stock | 482 | 482 | |||||||||
Surplus | 3,466 | 3,278 | |||||||||
Retained earnings | 36,218 | 35,420 | |||||||||
Treasury stock | (20,632) | (19,619) | |||||||||
Accumulated other comprehensive loss | (2,153) | (1,920) | |||||||||
Total shareholders' equity | 17,381 | 17,641 | |||||||||
Total liabilities and shareholders' equity | $ | 50,481 | $ | 50,073 | |||||||
EXHIBIT F CONSOLIDATED STATEMENT OF CASH FLOWS - (UNAUDITED) DOLLARS IN MILLIONS | |||||||||||
Six Months Ended | |||||||||||
July 3, 2022 | July 4, 2021 | ||||||||||
Cash flows from operating activities—continuing operations: | |||||||||||
Net earnings | $ | 1,496 | $ | 1,445 | |||||||
Adjustments to reconcile net earnings to net cash from operating activities: | |||||||||||
Depreciation of property, plant and equipment | 278 | 280 | |||||||||
Amortization of intangible and finance lease right-of-use assets | 147 | 159 | |||||||||
Equity-based compensation expense | 120 | 72 | |||||||||
Deferred income tax benefit | (218) | (37) | |||||||||
(Increase) decrease in assets, net of effects of business acquisitions: | |||||||||||
Accounts receivable | (172) | (94) | |||||||||
Unbilled receivables | 695 | 134 | |||||||||
Inventories | (816) | (58) | |||||||||
Increase (decrease) in liabilities, net of effects of business acquisitions: | |||||||||||
Accounts payable | (29) | (364) | |||||||||
Customer advances and deposits | 1,402 | (226) | |||||||||
Other, net | (276) | (193) | |||||||||
Net cash provided by operating activities | 2,627 | 1,118 | |||||||||
Cash flows from investing activities: | |||||||||||
Capital expenditures | (365) | (306) | |||||||||
Other, net | — | (2) | |||||||||
Net cash used by investing activities | (365) | (308) | |||||||||
Cash flows from financing activities: | |||||||||||
Purchases of common stock | (1,094) | (1,352) | |||||||||
Dividends paid | (679) | (651) | |||||||||
Repayment of fixed-rate notes | — | (2,000) | |||||||||
Proceeds from commercial paper, gross (maturities greater than 3 months) | — | 1,997 | |||||||||
Proceeds from fixed-rate notes | — | 1,497 | |||||||||
Repayment of floating-rate notes | — | (500) | |||||||||
Other, net | 110 | 338 | |||||||||
Net cash used by financing activities | (1,663) | (671) | |||||||||
Net cash provided (used) by discontinued operations | 21 | (13) | |||||||||
Net increase in cash and equivalents | 620 | 126 | |||||||||
Cash and equivalents at beginning of period | 1,603 | 2,824 | |||||||||
Cash and equivalents at end of period | $ | 2,223 | $ | 2,950 | |||||||
EXHIBIT G ADDITIONAL FINANCIAL INFORMATION - (UNAUDITED) DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS | |||||||||||||||||||||||
Other Financial Information: | |||||||||||||||||||||||
July 3, 2022 | December 31, 2021 | ||||||||||||||||||||||
Debt-to-equity (a) | 66.1 | % | 65.2 | % | |||||||||||||||||||
Book value per share (b) | $ | 63.38 | $ | 63.54 | |||||||||||||||||||
Shares outstanding | 274,246,220 | 277,620,943 | |||||||||||||||||||||
Second Quarter | Six Months | ||||||||||||||||||||||
2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
Income tax payments, net | $ | 550 | $ | 212 | $ | 565 | $ | 245 | |||||||||||||||
Company-sponsored research and development (c) | $ | 130 | $ | 93 | $ | 237 | $ | 183 | |||||||||||||||
Return on sales (d) | 8.3 | % | 8.0 | % | 8.1 | % | 7.8 | % | |||||||||||||||
Non-GAAP Financial Measures: | |||||||||||||||||||||||
Second Quarter | Six Months | ||||||||||||||||||||||
2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
Free cash flow: | |||||||||||||||||||||||
Net cash provided by operating activities | $ | 659 | $ | 1,115 | $ | 2,627 | $ | 1,118 | |||||||||||||||
Capital expenditures | (224) | (172) | (365) | (306) | |||||||||||||||||||
Free cash flow (e) | $ | 435 | $ | 943 | $ | 2,262 | $ | 812 | |||||||||||||||
July 3, 2022 | December 31, 2021 | ||||||||||||||||||||||
Net debt: | |||||||||||||||||||||||
Total debt | $ | 11,495 | $ | 11,495 | |||||||||||||||||||
Less cash and equivalents | 2,223 | 1,603 | |||||||||||||||||||||
Net debt (f) | $ | 9,272 | $ | 9,892 | |||||||||||||||||||
(a) | Debt-to-equity ratio is calculated as total debt divided by total equity as of the end of the period. |
(b) | Book value per share is calculated as total equity divided by total outstanding shares as of the end of the period. |
(c) | Includes independent research and development and Aerospace product-development costs. |
(d) | Return on sales is calculated as net earnings divided by revenue. |
(e) | We define free cash flow as net cash provided by operating activities less capital expenditures. We believe free cash flow is a useful measure for investors because it portrays our ability to generate cash from our businesses for purposes such as repaying debt, funding business acquisitions, repurchasing our common stock and paying dividends. We use free cash flow to assess the quality of our earnings and as a key performance measure in evaluating management. |
(f) | We define net debt as short- and long-term debt (total debt) less cash and equivalents. We believe net debt is a useful measure for investors because it reflects the borrowings that support our operations and capital deployment strategy. We use net debt as an important indicator of liquidity and financial position. |
EXHIBIT H BACKLOG - (UNAUDITED) DOLLARS IN MILLIONS | ||||||||||||||||||||||||||||||||
Funded | Unfunded | TotalBacklog | Estimated Potential Contract Value* | TotalEstimatedContract Value | ||||||||||||||||||||||||||||
Second Quarter 2022: | ||||||||||||||||||||||||||||||||
Aerospace | $ | 18,237 | $ | 549 | $ | 18,786 | $ | 877 | $ | 19,663 | ||||||||||||||||||||||
Marine Systems | 26,965 | 14,873 | 41,838 | 3,904 | 45,742 | |||||||||||||||||||||||||||
Combat Systems | 13,236 | 202 | 13,438 | 6,939 | 20,377 | |||||||||||||||||||||||||||
Technologies | 9,448 | 4,120 | 13,568 | 27,028 | 40,596 | |||||||||||||||||||||||||||
Total | $ | 67,886 | $ | 19,744 | $ | 87,630 | $ | 38,748 | $ | 126,378 | ||||||||||||||||||||||
First Quarter 2022: | ||||||||||||||||||||||||||||||||
Aerospace | $ | 17,114 | $ | 501 | $ | 17,615 | $ | 1,829 | $ | 19,444 | ||||||||||||||||||||||
Marine Systems | 27,656 | 15,258 | 42,914 | 4,316 | 47,230 | |||||||||||||||||||||||||||
Combat Systems | 12,760 | 299 | 13,059 | 6,298 | 19,357 | |||||||||||||||||||||||||||
Technologies | 9,067 | 4,579 | 13,646 | 29,347 | 42,993 | |||||||||||||||||||||||||||
Total | $ | 66,597 | $ | 20,637 | $ | 87,234 | $ | 41,790 | $ | 129,024 | ||||||||||||||||||||||
Second Quarter 2021: | ||||||||||||||||||||||||||||||||
Aerospace | $ | 13,155 | $ | 366 | $ | 13,521 | $ | 2,099 | $ | 15,620 | ||||||||||||||||||||||
Marine Systems | 26,435 | 21,095 | 47,530 | 4,689 | 52,219 | |||||||||||||||||||||||||||
Combat Systems | 14,157 | 271 | 14,428 | 7,711 | 22,139 | |||||||||||||||||||||||||||
Technologies | 9,769 | 3,999 | 13,768 | 26,594 | 40,362 | |||||||||||||||||||||||||||
Total | $ | 63,516 | $ | 25,731 | $ | 89,247 | $ | 41,093 | $ | 130,340 | ||||||||||||||||||||||
* | 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-1BACKLOG - (UNAUDITED) DOLLARS IN MILLIONS |
EXHIBIT H-2BACKLOG BY SEGMENT - (UNAUDITED) DOLLARS IN MILLIONS |
EXHIBIT ISECOND QUARTER 2022 SIGNIFICANT ORDERS - (UNAUDITED)DOLLARS IN MILLIONS |
We received the following significant contract awards during the second quarter of 2022:
Marine Systems:
Combat Systems:
Technologies:
EXHIBIT JAEROSPACE SUPPLEMENTAL DATA - (UNAUDITED) | ||||||||||||||||||||||||||
Second Quarter | Six Months | |||||||||||||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||||||||||||
Gulfstream Aircraft Deliveries (units): | ||||||||||||||||||||||||||
Large-cabin aircraft | 17 | 18 | 38 | 43 | ||||||||||||||||||||||
Mid-cabin aircraft | 5 | 3 | 9 | 6 | ||||||||||||||||||||||
Total | 22 | 21 | 47 | 49 | ||||||||||||||||||||||
Aerospace Book-to-Bill: | ||||||||||||||||||||||||||
Orders* | $ | 3,652 | $ | 3,292 | $ | 6,895 | $ | 5,749 | ||||||||||||||||||
Revenue | 1,867 | 1,622 | 3,770 | 3,509 | ||||||||||||||||||||||
Book-to-Bill Ratio | 1.96x | 2.03x | 1.83x | 1.64x | ||||||||||||||||||||||
* Does not include customer defaults, liquidated damages, cancellations, foreign exchange fluctuations and other backlog adjustments. | ||||||||||||||||||||||||||
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SOURCE General Dynamics
