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GENERAL DYNAMICS CORPORATION

(GD)
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General Dynamics Reports Third-Quarter 2021 Financial Results

10/27/2021 | 07:01am EST

RESTON, Va., Oct. 27, 2021 /PRNewswire/ -- General Dynamics (NYSE: GD) today reported third-quarter 2021 net earnings of $860 million on revenue of $9.6 billion. Diluted earnings per share (EPS) were $3.07.

EPS grew 5.9% from the year-ago quarter and 17.6% sequentially as company-wide operating margin expanded to 11.3%, up 90 basis points from the previous quarter. Margins were up sequentially in all four segments.

"The company delivered solid third-quarter results, generating very strong cash flow and attractive margins," said Phebe N. Novakovic, chairman and chief executive officer. "We continue to focus on delivering solid program performance and ensuring the well-being of our people, who are rising above the challenges of the pandemic to support our customers."

Cash
Net cash provided by operating activities in the quarter totaled $1.5 billion. Free cash flow from operations was $1.3 billion.

Backlog
Backlog at the end of the quarter was $88.1 billion, up 8.1% 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 $41.5 billion. Total estimated contract value, the sum of all backlog components, was $129.6 billion at the end of the quarter.

Orders in the Aerospace segment were strong, with backlog up 22.8% over the year-ago quarter to $14.7 billion.

Significant awards in the quarter for the Defense segments included $475 million from the U.S. Navy to provide ongoing lead yard services for the Columbia-class submarine program; $195 million from the Navy to provide engineering, technical, design and planning yard support services for operational strategic and attack submarines; a contract to provide cloud support services to the U.S. Patent and Trademark Office with a maximum potential value of $190 million; $165 million to produce various munitions, ordnance and missile subcomponents for the U.S. Army; $160 million from the Navy to provide maintenance and repair services for the Arleigh Burke-class destroyer, Nimitz-class aircraft carrier, San Antonio-class amphibious transport dock and Whidbey Island-class dock landing ship programs; $150 million from the Navy for Advanced Nuclear Plant Studies in support of the Columbia-class submarine program and options totaling $570 million of additional potential value; and $540 million for several key contracts for classified customers and additional classified IDIQ awards with a maximum potential value of $4.2 billion among multiple awardees.

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; 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 $37.9 billion in revenue in 2020. 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 2021 financial results conference call at 9 a.m. EDT on Wednesday, October 27, 2021. 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 3, 2021. To hear a recording of the conference call by telephone, please call 866-813-9403 (international: +44 204-525-0658); passcode 439422. 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


October 3, 2021


September 27, 2020


$


%

Revenue

$

9,568



$

9,431



$

137



1.5

%

Operating costs and expenses

(8,488)



(8,359)



(129)




Operating earnings

1,080



1,072



8



0.7

%

Other, net

34



24



10




Interest, net

(99)



(118)



19




Earnings before income tax

1,015



978



37



3.8

%

Provision for income tax, net

(155)



(144)



(11)




Net earnings

$

860



$

834



$

26



3.1

%

Earnings per share—basic

$

3.09



$

2.91



$

0.18



6.2

%

Basic weighted average shares outstanding

278.6



286.5






Earnings per share—diluted

$

3.07



$

2.90



$

0.17



5.9

%

Diluted weighted average shares outstanding

280.4



287.2










 

EXHIBIT B

 

CONSOLIDATED STATEMENT OF EARNINGS - (UNAUDITED)
DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS



Nine Months Ended


Variance


October 3, 2021


September 27, 2020


$


%

Revenue

$

28,177



$

27,444



$

733



2.7

%

Operating costs and expenses

(25,200)



(24,604)



(596)




Operating earnings

2,977



2,840



137



4.8

%

Other, net

95



70



25




Interest, net

(331)



(357)



26




Earnings before income tax

2,741



2,553



188



7.4

%

Provision for income tax, net

(436)



(388)



(48)




Net earnings

$

2,305



$

2,165



$

140



6.5

%

Earnings per share—basic

$

8.20



$

7.54



$

0.66



8.8

%

Basic weighted average shares outstanding

281.1



287.1






Earnings per share—diluted

$

8.16



$

7.52



$

0.64



8.5

%

Diluted weighted average shares outstanding

282.4



288.1










 

EXHIBIT C


REVENUE AND OPERATING EARNINGS BY SEGMENT - (UNAUDITED)
DOLLARS IN MILLIONS



Three Months Ended


Variance


October 3, 2021


September 27, 2020


$


%

Revenue:








Aerospace

$

2,066



$

1,975



$

91



4.6

%

Marine Systems

2,637



2,405



232



9.6

%

Combat Systems

1,745



1,801



(56)



(3.1)

%

Technologies

3,120



3,250



(130)



(4.0)

%

Total

$

9,568



$

9,431



$

137



1.5

%

Operating earnings:








Aerospace

$

262



$

283



$

(21)



(7.4)

%

Marine Systems

229



223



6



2.7

%

Combat Systems

276



270



6



2.2

%

Technologies

327



314



13



4.1

%

Corporate

(14)



(18)



4



22.2

%

Total

$

1,080



$

1,072



$

8



0.7

%

Operating margin:








Aerospace

12.7

%


14.3

%





Marine Systems

8.7

%


9.3

%





Combat Systems

15.8

%


15.0

%





Technologies

10.5

%


9.7

%





Total

11.3

%


11.4

%





 

EXHIBIT D


REVENUE AND OPERATING EARNINGS BY SEGMENT - (UNAUDITED)
DOLLARS IN MILLIONS



Nine Months Ended

Variance


October 3, 2021


September 27, 2020


$


%

Revenue:








Aerospace

$

5,575



$

5,640



$

(65)



(1.2)

%

Marine Systems

7,656



7,122



534



7.5

%

Combat Systems

5,464



5,263



201



3.8

%

Technologies

9,482



9,419



63



0.7

%

Total

$

28,177



$

27,444



$

733



2.7

%

Operating earnings:








Aerospace

$

677



$

682



$

(5)



(0.7)

%

Marine Systems

639



607



32



5.3

%

Combat Systems

786



732



54



7.4

%

Technologies

941



859



82



9.5

%

Corporate

(66)



(40)



(26)



(65.0)

%

Total

$

2,977



$

2,840



$

137



4.8

%

Operating margin:








Aerospace

12.1

%


12.1

%





Marine Systems

8.3

%


8.5

%





Combat Systems

14.4

%


13.9

%





Technologies

9.9

%


9.1

%





Total

10.6

%


10.3

%





 

EXHIBIT E


CONSOLIDATED BALANCE SHEET
DOLLARS IN MILLIONS



(Unaudited)




October 3, 2021


December 31, 2020

ASSETS




Current assets:




Cash and equivalents

$

3,139



$

2,824


Accounts receivable

3,046



3,161


Unbilled receivables

8,334



8,024


Inventories

5,651



5,745


Other current assets

1,516



1,789


Total current assets

21,686



21,543


Noncurrent assets:




Property, plant and equipment, net

5,195



5,100


Intangible assets, net

2,022



2,117


Goodwill

20,092



20,053


Other assets

2,375



2,495


Total noncurrent assets

29,684



29,765


Total assets

$

51,370



$

51,308


LIABILITIES AND SHAREHOLDERS' EQUITY




Current liabilities:




Short-term debt and current portion of long-term debt

$

2,183



$

3,003


Accounts payable

2,682



2,952


Customer advances and deposits

6,167



6,276


Other current liabilities

3,572



3,733


Total current liabilities

14,604



15,964


Noncurrent liabilities:




Long-term debt

11,485



9,995


Other liabilities

9,560



9,688


Total noncurrent liabilities

21,045



19,683


Shareholders' equity:




Common stock

482



482


Surplus

3,236



3,124


Retained earnings

34,800



33,498


Treasury stock

(19,276)



(17,893)


Accumulated other comprehensive loss

(3,521)



(3,550)


Total shareholders' equity

15,721



15,661


Total liabilities and shareholders' equity

$

51,370



$

51,308


 

EXHIBIT F


CONSOLIDATED STATEMENT OF CASH FLOWS - (UNAUDITED)
DOLLARS IN MILLIONS



Nine Months Ended


October 3, 2021


September 27, 2020

Cash flows from operating activities—continuing operations:




Net earnings

$

2,305



$

2,165


Adjustments to reconcile net earnings to net cash from operating activities:




Depreciation of property, plant and equipment

408



376


Amortization of intangible and finance lease right-of-use assets

242



267


Equity-based compensation expense

96



91


Deferred income tax benefit

(38)



(112)


(Increase) decrease in assets, net of effects of business acquisitions:




Accounts receivable

133



(336)


Unbilled receivables

(252)



(239)


Inventories

94



(134)


Increase (decrease) in liabilities, net of effects of business acquisitions:




Accounts payable

(291)



(558)


Customer advances and deposits

228



(906)


Other current liabilities

(202)



360


Other liabilities

(455)



3


Other, net

321



319


Net cash provided by operating activities

2,589



1,296


Cash flows from investing activities:




Capital expenditures

(502)



(622)


Other, net

1



33


Net cash used by investing activities

(501)



(589)


Cash flows from financing activities:




Repayment of fixed-rate notes

(2,500)



(2,000)


Proceeds from commercial paper, gross (maturities greater than 3 months)

1,997



420


Proceeds from fixed-rate notes

1,497



3,960


Purchases of common stock

(1,491)



(501)


Dividends paid

(983)



(925)


Repayment of floating-rate notes

(500)



(500)


Repayment of commercial paper (maturities greater than 3 months)



(420)


Other, net

223



(134)


Net cash used by financing activities

(1,757)



(100)


Net cash used by discontinued operations

(16)



(40)


Net increase in cash and equivalents

315



567


Cash and equivalents at beginning of period

2,824



902


Cash and equivalents at end of period

$

3,139



$

1,469


 

EXHIBIT G


ADDITIONAL FINANCIAL INFORMATION - (UNAUDITED)
DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS


Other Financial Information:









October 3, 2021


December 31, 2020





Debt-to-equity (a)

86.9

%


83.0

%





Debt-to-capital (b)

46.5

%


45.4

%





Book value per share (c)

$

56.30



$

54.67






Shares outstanding

279,222,830



286,477,836















Third Quarter


Nine Months


2021


2020


2021


2020

Income tax payments, net

$

257



$

289



$

502



$

345


Company-sponsored research and development (d)

$

112



$

97



$

295



$

291


Return on sales (e)

9.0

%


8.8

%


8.2

%


7.9

%









Non-GAAP Financial Measures:









Third Quarter


Nine Months


2021


2020


2021


2020

Free cash flow from operations:








Net cash provided by operating activities

$

1,471



$

1,119



$

2,589



$

1,296


Capital expenditures

(196)



(216)



(502)



(622)


Free cash flow from operations (f)

$

1,275



$

903



$

2,087



$

674











October 3, 2021


December 31, 2020





Net debt:








Total debt

$

13,668



$

12,998






Less cash and equivalents

3,139



2,824






   Net debt (g)

$

10,529



$

10,174





(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 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.


(g)     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


Total
Backlog


Estimated

Potential

Contract Value*


Total
Estimated
Contract Value

Third Quarter 2021:











Aerospace


$

14,312



$

378



$

14,690



$

1,974



$

16,664


Marine Systems


24,639



21,684



46,323



5,127



51,450


Combat Systems


13,040



308



13,348



7,594



20,942


Technologies


9,619



4,118



13,737



26,784



40,521


Total


$

61,610



$

26,488



$

88,098



$

41,479



$

129,577


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


Third Quarter 2020:











Aerospace


$

11,640



$

324



$

11,964



$

2,888



$

14,852


Marine Systems


23,958



17,124



41,082



14,666



55,748


Combat Systems


14,511



200



14,711



6,593



21,304


Technologies


10,112



3,651



13,763



26,242



40,005


Total


$

60,221



$

21,299



$

81,520



$

50,389



$

131,909



*     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/1670503/Exhibit_H_1.jpg 

 

EXHIBIT H-2

BACKLOG BY SEGMENT - (UNAUDITED)
DOLLARS IN MILLIONS

 

https://mma.prnewswire.com/media/1670504/Aerospace_Backlog.jpg

https://mma.prnewswire.com/media/1670505/Marine_Backlog.jpg

https://mma.prnewswire.com/media/1670506/Combat_Backlog.jpg

https://mma.prnewswire.com/media/1670507/Technologies_Backlog.jpg

https://mma.prnewswire.com/media/1670508/Backlog_Key.jpg

 

EXHIBIT I


THIRD QUARTER 2021 SIGNIFICANT ORDERS - (UNAUDITED)
DOLLARS IN MILLIONS

We received the following significant contract awards during the third quarter of 2021:

Marine Systems:

  • $475 from the U.S. Navy to provide ongoing lead yard services for the Columbia-class submarine program.
  • $195 from the Navy to provide engineering, technical, design and planning yard support services for operational strategic and attack submarines.
  • $160 from the Navy to provide maintenance and repair services for the Arleigh Burke-class destroyer, Nimitz-class aircraft carrier, San Antonio-class amphibious transport dock and Whidbey Island-class dock landing ship programs.
  • $150 from the Navy for Advanced Nuclear Plant Studies (ANPS) in support of the Columbia-class submarine program and options totaling $570 of additional potential value.

Combat Systems:

  • $165 to produce various munitions, ordnance and missile subcomponents for the U.S. Army.
  • $125 for Abrams main battle tank upgrades, mission control units and systems technical support.
  • $60 from the Army for the concept design phase of the Optionally Manned Fighting Vehicle (OMFV) acquisition program.
  • $30 from the Army for the production of Hydra-70 rockets.

Technologies:

  • $540 for several key contracts for classified customers and additional classified IDIQ awards with a maximum potential value of $4.2 billion among multiple awardees.
  • A contract to provide cloud support services to the U.S. Patent and Trademark Office (USPTO). The contract has a maximum potential value of $190.
  • A contract to modernize and consolidate existing information technology (IT) help desks for the Navy. The contract has a maximum potential value of $135.
  • $85 from the Army for computing and communications equipment under the Common Hardware Systems-5 (CHS-5) program.
  • $75 to provide logistics, sustainment and maintenance support services for the Army.
  • $70 to provide command, control and communications capabilities for the U.S. Department of Defense (DoD).
  • $65 from the U.S. Department of State (DoS) to provide overseas consular services to support visa application and issuance at U.S. embassies and consulates throughout the world under the Global Support Strategy (GSS) program.
  • $50 to provide simulation and training support for the Army.
  • $45 from the Centers for Medicare and Medicaid Services (CMS) to provide cloud services and software tools.
  • $45 to provide service desk; endpoint support and maintenance; and account, asset and security management services to the DoS.
  • $45 from the U.S. Department of Veterans Affairs under the Veterans Intake, Conversion and Communications Services (VICCS) program to modernize benefits and claim processing.
  • $40 to provide communications technical support for the U.S. Air Force.
  • $35 to provide design, development, testing, installation, maintenance, logistics support and modernization for Navy airborne and shipboard platforms.

 

EXHIBIT J

AEROSPACE SUPPLEMENTAL DATA - (UNAUDITED)




Third Quarter


Nine Months



2021


2020


2021


2020

Gulfstream Aircraft Deliveries (units):









Large-cabin aircraft


25



25



68



71


Mid-cabin aircraft


6



7



12



16


Total


31



32



80



87











Aerospace Book-to-Bill:









Orders*


$

3,247



$

1,816



$

8,996



$

4,744


Revenue


2,066



1,975



5,575



5,640


Book-to-Bill Ratio


1.57x



0.92x



1.61x



0.84x



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

 

General Dynamics (PRNewsFoto/General Dynamics) (PRNewsFoto/General Dynamics)

 

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SOURCE General Dynamics


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