GENERAL DYNAMICS REPORTS SECOND-QUARTER 2021 FINANCIAL RESULTS
- Net earnings of $737 million, up 17.9% from year-ago quarter
- DILUTED EPS OF $2.61, UP 19.7% FROM YEAR-AGO QUARTER - $1.1 BILLION IN CASH PROVIDED BY OPERATING ACTIVITIES - VERY STRONG GULFSTREAM ORDER ACTIVITY
RESTON, Va. , July 28, 2021 /PRNewswire/ -- General Dynamics (NYSE: GD) today reported second-quarter 2021 net earnings of $737 million on revenue of $9.2 billion . Diluted earnings per share (EPS) were $2.61 .
EPS grew 19.7% on a 17.9% increase in net earnings, as company-wide operating margin expanded to 10.4%, up 140 basis points from the year-ago quarter. Backlog of $89.2 billion was up 8% from the year-ago quarter.
"The company performed impressively this quarter, delivering very strong cash flow, improved margins and significant Aerospace order activity," said Phebe N. Novakovic , chairman and chief executive officer. "Emerging from the pandemic, we remain focused on operating discipline and wise deployment of capital."
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 $943 million .
Backlog Backlog at the end of second-quarter 2021 was $89.2 billion . Estimated potential contract value, representing management's estimate of value in unfunded indefinite delivery, indefinite quantity (IDIQ) contracts and unexercised options, was $41.1 billion . Total estimated contract value, the sum of all backlog components, was $130.3 billion at the end of the quarter.
Overall demand remained strong in the quarter, with a consolidated book-to-bill ratio of 1-to-1.
Significant awards in the quarter included $135 million from the U.S. Navy to provide ongoing lead yard services for the Virginia-class submarine program and options totaling $1.6 billion of additional potential value; $620 million from the U.S. Army to upgrade Stryker vehicles to the double-V-hull A1 configuration; $435 million from the Army to produce Stryker Initial Maneuver Short-Range Air Defense (IM-SHORAD) vehicles; $240 million from the Centers for Medicare and Medicaid Services (CMS) for several contracts, including work to provide cloud services and software tools; $145 million from the Army for the production of Hydra-70 rockets; and $865 million for several key 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; 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 http://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 second-quarter 2021 financial results conference call at 9 a.m. EDT on Wednesday, July 28, 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 August 4, 2021 . To hear a recording of the conference call by telephone, please call 877-344-7529 (international: 412-317-0088); passcode 10157891. 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 4, 2021 June 28, 2020 $ % Revenue $ 9,220
$ 9,264
$ (44)
(0.5) % Operating costs and expenses (8,261)
(8,430)
169
Operating earnings 959
834
125
15.0 % Other, net 31
25
6
Interest, net (109)
(132)
23
Earnings before income tax 881
727
154
21.2 % Provision for income tax, net (144)
(102)
(42)
Net earnings $ 737
$ 625
$ 112
17.9 % Earnings per share—basic $ 2.63
$ 2.18
$ 0.45
20.6 % Basic weighted average shares outstanding 280.7
286.4
Earnings per share—diluted $ 2.61
$ 2.18
$ 0.43
19.7 % Diluted weighted average shares outstanding 282.2
286.9
EXHIBIT B
CONSOLIDATED STATEMENT OF EARNINGS - (UNAUDITED) DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS
Six Months Ended Variance
July 4, 2021 June 28, 2020 $ % Revenue $ 18,609
$ 18,013
$ 596
3.3 % Operating costs and expenses (16,712)
(16,245)
(467)
Operating earnings 1,897
1,768
129
7.3 % Other, net 61
46
15
Interest, net (232)
(239)
7
Earnings before income tax 1,726
1,575
151
9.6 % Provision for income tax, net (281)
(244)
(37)
Net earnings $ 1,445
$ 1,331
$ 114
8.6 % Earnings per share—basic $ 5.12
$ 4.63
$ 0.49
10.6 % Basic weighted average shares outstanding 282.4
287.5
Earnings per share—diluted $ 5.10
$ 4.61
$ 0.49
10.6 % Diluted weighted average shares outstanding 283.6
288.5
EXHIBIT C
REVENUE AND OPERATING EARNINGS BY SEGMENT - (UNAUDITED) DOLLARS IN MILLIONS
Three Months Ended Variance
July 4, 2021 June 28, 2020 $ % Revenue:
Aerospace $ 1,622
$ 1,974
$ (352)
(17.8) % Marine Systems 2,536
2,471
65
2.6 % Combat Systems 1,899
1,754
145
8.3 % Technologies 3,163
3,065
98
3.2 % Total $ 9,220
$ 9,264
$ (44)
(0.5) % Operating earnings:
Aerospace $ 195
$ 159
$ 36
22.6 % Marine Systems 210
200
10
5.0 % Combat Systems 266
239
27
11.3 % Technologies 308
247
61
24.7 % Corporate (20)
(11)
(9)
(81.8) % Total $ 959
$ 834
$ 125
15.0 % Operating margin:
Aerospace 12.0 % 8.1 %
Marine Systems 8.3 % 8.1 %
Combat Systems 14.0 % 13.6 %
Technologies 9.7 % 8.1 %
Total 10.4 % 9.0 %
EXHIBIT D
REVENUE AND OPERATING EARNINGS BY SEGMENT - (UNAUDITED) DOLLARS IN MILLIONS
Six Months Ended Variance
July 4, 2021 June 28, 2020 $ % Revenue:
Aerospace $ 3,509
$ 3,665
$ (156)
(4.3) % Marine Systems 5,019
4,717
302
6.4 % Combat Systems 3,719
3,462
257
7.4 % Technologies 6,362
6,169
193
3.1 % Total $ 18,609
$ 18,013
$ 596
3.3 % Operating earnings:
Aerospace $ 415
$ 399
$ 16
4.0 % Marine Systems 410
384
26
6.8 % Combat Systems 510
462
48
10.4 % Technologies 614
545
69
12.7 % Corporate (52)
(22)
(30)
(136.4) % Total $ 1,897
$ 1,768
$ 129
7.3 % Operating margin:
Aerospace 11.8 % 10.9 %
Marine Systems 8.2 % 8.1 %
Combat Systems 13.7 % 13.3 %
Technologies 9.7 % 8.8 %
Total 10.2 % 9.8 %
EXHIBIT E
CONSOLIDATED BALANCE SHEET DOLLARS IN MILLIONS
(Unaudited)
July 4, 2021 December 31, 2020 ASSETS
Current assets:
Cash and equivalents $ 2,950
$ 2,824 Accounts receivable 3,255
3,161 Unbilled receivables 7,923
8,024 Inventories 5,803
5,745 Other current assets 1,649
1,789 Total current assets 21,580
21,543 Noncurrent assets:
Property, plant and equipment, net 5,135
5,100 Intangible assets, net 2,003
2,117 Goodwill 20,021
20,053 Other assets 2,444
2,495 Total noncurrent assets 29,603
29,765 Total assets $ 51,183
$ 51,308 LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term debt and current portion of long-term debt $ 2,821
$ 3,003 Accounts payable 2,595
2,952 Customer advances and deposits 5,956
6,276 Other current liabilities 3,609
3,733 Total current liabilities 14,981
15,964 Noncurrent liabilities:
Long-term debt 11,485
9,995 Other liabilities 9,396
9,688 Total noncurrent liabilities 20,881
19,683 Shareholders' equity:
Common stock 482
482 Surplus 3,194
3,124 Retained earnings 34,273
33,498 Treasury stock (19,181)
(17,893) Accumulated other comprehensive loss (3,447)
(3,550) Total shareholders' equity 15,321
15,661 Total liabilities and shareholders' equity $ 51,183
$ 51,308 EXHIBIT F
CONSOLIDATED STATEMENT OF CASH FLOWS - (UNAUDITED) DOLLARS IN MILLIONS
Six Months Ended
July 4, 2021 June 28, 2020 Cash flows from operating activities—continuing operations:
Net earnings $ 1,445
$ 1,331 Adjustments to reconcile net earnings to net cash from operating activities:
Depreciation of property, plant and equipment 280
254 Amortization of intangible and finance lease right-of-use assets 159
177 Equity-based compensation expense 72
61 Deferred income tax benefit (37)
(83) (Increase) decrease in assets, net of effects of business acquisitions:
Accounts receivable (94)
(1) Unbilled receivables 134
160 Inventories (58)
(433) Increase (decrease) in liabilities, net of effects of business acquisitions:
Accounts payable (364)
(782) Customer advances and deposits (226)
(863) Other, net (193)
356 Net cash provided by operating activities 1,118
177 Cash flows from investing activities:
Capital expenditures (306)
(406) Other, net (2)
184 Net cash used by investing activities (308)
(222) Cash flows from financing activities:
Repayment of fixed-rate notes (2,000)
(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 (1,352)
(501) Dividends paid (651)
(610) Repayment of floating-rate notes (500)
(500) Proceeds from commercial paper, net —
816 Other, net 338
(118) Net cash (used) provided by financing activities (671)
1,467 Net cash used by discontinued operations (13)
(24) Net increase in cash and equivalents 126
1,398 Cash and equivalents at beginning of period 2,824
902 Cash and equivalents at end of period $ 2,950
$ 2,300 EXHIBIT G
ADDITIONAL FINANCIAL INFORMATION - (UNAUDITED) DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS
Other Financial Information:
July 4, 2021 December 31, 2020
Debt-to-equity (a) 93.4 % 83.0 %
Debt-to-capital (b) 48.3 % 45.4 %
Book value per share (c) $ 54.81
$ 54.67
Shares outstanding 279,541,414
286,477,836
Second Quarter Six Months
2021 2020 2021 2020 Income tax payments, net $ 212
$ 13
$ 245
$ 56 Company-sponsored research and development (d) $ 93
$ 116
$ 183
$ 194 Return on sales (e) 8.0 % 6.7 % 7.8 % 7.4 %
Non-GAAP Financial Measures:
Second Quarter Six Months
2021 2020 2021 2020 Earnings before interest, taxes, depreciation and amortization:
Net earnings $ 737
$ 625
$ 1,445
$ 1,331 Interest, net 109
132
232
239 Provision for income tax, net 144
102
281
244 Depreciation of property, plant and equipment 144
132
280
254 Amortization of intangible and finance lease right-of-use assets 80
87
159
177 Earnings before interest, taxes, depreciation and amortization (f) $ 1,214
$ 1,078
$ 2,397
$ 2,245
Free cash flow from operations:
Net cash provided by operating activities $ 1,115
$ 843
$ 1,118
$ 177 Capital expenditures (172)
(221)
(306)
(406) Free cash flow from operations (g) $ 943
$ 622
$ 812
$ (229)
(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 Backlog Estimated Potential Contract Value* Total Estimated Contract Value 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 First Quarter 2021:
Aerospace $ 11,545
$ 384
$ 11,929
$ 2,312
$ 14,241 Marine Systems 27,676
22,075
49,751
2,815
52,566 Combat Systems 14,085
143
14,228
9,120
23,348 Technologies 10,003
3,670
13,673
27,530
41,203 Total $ 63,309
$ 26,272
$ 89,581
$ 41,777
$ 131,358 Second Quarter 2020:
Aerospace $ 11,874
$ 239
$ 12,113
$ 2,834
$ 14,947 Marine Systems 25,118
17,365
42,483
14,441
56,924 Combat Systems 13,863
242
14,105
6,399
20,504 Technologies 10,320
3,648
13,968
25,902
39,870 Total $ 61,175
$ 21,494
$ 82,669
$ 49,576
$ 132,245
* 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
SECOND QUARTER 2021 SIGNIFICANT ORDERS - (UNAUDITED) DOLLARS IN MILLIONS
We received the following significant contract awards during the second quarter of 2021:
Marine Systems:
$135 from the U.S. Navy to provide ongoing lead yard services for the Virginia-class submarine program and options totaling $1.6 billion of additional potential value. $100 from the Navy for maintenance and modernization work on the USS Pinckney, an Arleigh Burke -class (DDG-51) guided-missile destroyer. $65 from the Navy for maintenance and modernization work on the USS Hartford, a Los Angeles-class submarine. $55 from the Navy to provide ongoing lead yard services for the DDG-51 program. Combat Systems:
$620 from the U.S. Army to upgrade Stryker vehicles to the double-V-hull A1 configuration. $435 from the Army to produce Stryker Initial Maneuver Short-Range Air Defense (IM-SHORAD) vehicles. $145 from the Army for the production of Hydra-70 rockets. $100 for various munitions and ordnance. $45 to produce mission control units for Abrams main battle tanks. Technologies:
$865 for several key contracts for classified customers. $160 to provide ship modernization services for the Navy. The contract has a maximum potential value of $730 . $240 from the Centers for Medicare and Medicaid Services (CMS) for several contracts, including work to provide cloud services and software tools. $115 to provide enterprise information technology (IT) and cybersecurity services and solutions for the Department of Defense (DoD). $40 to provide IT support services and system engineering for the U.S. Department of Energy (DOE). The contract has a maximum potential value of $90 . $80 to provide military information support operations for the DoD. $80 from the Environmental Protection Agency (EPA) to provide infrastructure support and applications hosting services. $80 from the Army for computing and communications equipment under the Common Hardware Systems-5 (CHS-5) program. $65 to provide training support for the Navy. $40 from the Navy to retrofit five Knifefish surface mine countermeasure systems with improved operational capabilities. $40 from the Army to provide continued software support and engineering for the Warfighter Information Network-Tactical (WIN-T) Increment 2 program. EXHIBIT J
* Does not include customer defaults, liquidated damages, cancellations, foreign exchange fluctuations and other backlog adjustments. General Dynamics (PRNewsFoto/General Dynamics) (PRNewsFoto/General Dynamics)