General Dynamics Reports First-Quarter 2023 Financial Results

Revenue of $9.9 billion, up 5.2% year over year
Net earnings of $730 million, diluted EPS of $2.64
$1.5 billion cash from operating activities

RESTON, Va., April 26, 2023 /PRNewswire/ — General Dynamics (NYSE: GD) today reported first-quarter 2023 net earnings of $730 million on revenue of $9.9 billion. Diluted earnings per share (EPS) were $2.64.

“Our businesses delivered solid operating results despite persistent supply chain headwinds, with earnings before taxes up 3.7% and EPS up modestly,” said Phebe N. Novakovic, chairman and chief executive officer. “Strong cash flow positions us to continue to invest in our business, retire debt and return value to shareholders.”

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EXHIBIT F-1
EXHIBIT F-1

EXHIBIT F-2
EXHIBIT F-2

CashNet cash provided by operating activities in the quarter totaled $1.5 billion, or 200% of net earnings. The company invested $161 million in capital expenditures and paid $345 million in dividends, ending the quarter with $2 billion in cash and equivalents.

BacklogThe consolidated book-to-bill ratio, defined as orders divided by revenue, was 0.9-to-1 for the quarter. Company-wide backlog of $89.8 billion was up 3% from the year-ago quarter. Estimated potential contract value, representing management’s estimate of additional value in unfunded indefinite delivery, indefinite quantity (IDIQ) contracts and unexercised options, was $38.5 billion. Total estimated contract value, the sum of all backlog components, was $128.4 billion.

Significant awards for the defense segments included more than $1.1 billion to produce and support Abrams tanks, Stryker combat vehicles and other armored vehicles for the U.S. Army and partner nations, including Poland and Colombia; $285 million, with a maximum potential value of $1.3 billion, to expand production of 155mm artillery projectile parts, plus $255 million for various other munitions and ordnance; an Air Force IDIQ service contract with maximum potential value of $4.5 billion between two awardees; $130 million, with a maximum potential value of $1.7 billion, to provide flight simulation and training services to the Army; $260 million from the U.S. Navy for maintenance and modernization of two amphibious ships and a destroyer; and $400 million for several key classified contracts. A detailed list of significant awards is provided in Exhibit G.

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 $39.4 billion in revenue in 2022. More information is available at www.gd.com.

WEBCAST INFORMATION: General Dynamics will webcast its first-quarter 2023 financial results conference call at 9 a.m. EDT on Wednesday, April 26, 2023. 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 two hours after the end of the call through May 3, 2023, at 800-770-2030 (international: +1 647-362-9199), conference ID 4299949. Charts furnished to investors and securities analysts in connection with General Dynamics’ announcement of its financial results are available at www.gd.com.

This press release contains forward-looking statements (FLS), including statements about the company’s future operational and financial performance, which are based on management’s expectations, estimates, projections and assumptions. Words such as “expects,” “anticipates,” “plans,” “believes,” “forecasts,” “scheduled,” “outlook,” “estimates,” “should” and variations of these words and similar expressions are intended to identify FLS. In making FLS, we rely on assumptions and analyses based on our experience and perception of historical trends; current conditions and expected future developments; and other factors, estimates and judgments we consider reasonable and appropriate based on information available to us at the time. FLS are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, as amended. FLS are not guarantees of future performance and involve factors, risks and uncertainties that are difficult to predict. Actual future results and trends may differ materially from what is forecast in the FLS. All FLS speak only as of the date they were made. We do not undertake any obligation to update or publicly release revisions to FLS to reflect events, circumstances or changes in expectations after the date of this press release. Additional information regarding these factors is contained in the company’s filings with the SEC, and these factors may be revised or supplemented in future SEC filings. In addition, this press release contains some financial measures not prepared in accordance with U.S. generally accepted accounting principles (GAAP). While we believe these non-GAAP metrics provide useful information for investors, there are limitations associated with their use, and our calculations of these metrics may not be comparable to similarly titled measures of other companies. Non-GAAP metrics should not be considered in isolation from, or as a substitute for, GAAP measures. Reconciliations to comparable GAAP measures and other information relating to our non-GAAP measures are included in other filings with the SEC, which are available at http://investorrelations.gd.com.

EXHIBIT A

CONSOLIDATED STATEMENT OF EARNINGS – (UNAUDITED)

DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS

Three Months Ended

Variance

April 2, 2023

April 3, 2022

$

%

Revenue

$                       9,881

$                       9,392

$        489

5.2 %

Operating costs and expenses

(8,943)

(8,484)

(459)

Operating earnings

938

908

30

3.3 %

Other, net

33

39

(6)

Interest, net

(91)

(98)

7

Earnings before income tax

880

849

31

3.7 %

Provision for income tax, net

(150)

(119)

(31)

Net earnings

$                          730

$                          730

$          —

— %

Earnings per share—basic

$                         2.66

$                         2.63

$       0.03

1.1 %

Basic weighted average shares outstanding

274.0

277.1

Earnings per share—diluted

$                         2.64

$                         2.61

$       0.03

1.1 %

Diluted weighted average shares outstanding

276.6

279.9

EXHIBIT B

REVENUE AND OPERATING EARNINGS BY SEGMENT – (UNAUDITED)

DOLLARS IN MILLIONS

Three Months Ended

Variance

April 2, 2023

April 3, 2022

$

%

Revenue:

Aerospace

$                  1,892

$                   1,903

$            (11)

(0.6) %

Marine Systems

2,992

2,651

341

12.9 %

Combat Systems

1,756

1,675

81

4.8 %

Technologies

3,241

3,163

78

2.5 %

Total

$                  9,881

$                   9,392

$            489

5.2 %

Operating earnings:

Aerospace

$                     229

$                      243

$            (14)

(5.8) %

Marine Systems

211

211

— %

Combat Systems

245

227

18

7.9 %

Technologies

299

298

1

0.3 %

Corporate

(46)

(71)

25

35.2 %

Total

$                     938

$                      908

$              30

3.3 %

Operating margin:

Aerospace

12.1 %

12.8 %

Marine Systems

7.1 %

8.0 %

Combat Systems

14.0 %

13.6 %

Technologies

9.2 %

9.4 %

Total

9.5 %

9.7 %

EXHIBIT C

CONSOLIDATED BALANCE SHEET

DOLLARS IN MILLIONS

(Unaudited)

April 2, 2023

December 31, 2022

ASSETS

Current assets:

Cash and equivalents

$                        2,038

$                        1,242

Accounts receivable

2,936

3,008

Unbilled receivables

8,148

8,795

Inventories

7,006

6,322

Other current assets

1,460

1,696

Total current assets

21,588

21,063

Noncurrent assets:

Property, plant and equipment, net

5,867

5,900

Intangible assets, net

1,776

1,824

Goodwill

20,386

20,334

Other assets

2,479

2,464

Total noncurrent assets

30,508

30,522

Total assets

$                      52,096

$                      51,585

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities:

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

$                        1,257

$                        1,253

Accounts payable

3,248

3,398

Customer advances and deposits

7,717

7,436

Other current liabilities

3,262

3,254

Total current liabilities

15,484

15,341

Noncurrent liabilities:

Long-term debt

9,245

9,243

Other liabilities

8,280

8,433

Total noncurrent liabilities

17,525

17,676

Shareholders’ equity:

Common stock

482

482

Surplus

3,562

3,556

Retained earnings

37,769

37,403

Treasury stock

(20,796)

(20,721)

Accumulated other comprehensive loss

(1,930)

(2,152)

Total shareholders’ equity

19,087

18,568

Total liabilities and shareholders’ equity

$                      52,096

$                      51,585

EXHIBIT D

CONSOLIDATED STATEMENT OF CASH FLOWS – (UNAUDITED)

DOLLARS IN MILLIONS

Three Months Ended

April 2, 2023

April 3, 2022

Cash flows from operating activities—continuing operations:

Net earnings

$                         730

$                         730

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

Depreciation of property, plant and equipment

149

139

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

77

74

Equity-based compensation expense

38

96

Deferred income tax benefit

(91)

(106)

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

Accounts receivable

72

26

Unbilled receivables

653

617

Inventories

(628)

(234)

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

Accounts payable

(150)

23

Customer advances and deposits

553

675

Other, net

59

(72)

Net cash provided by operating activities

1,462

1,968

Cash flows from investing activities:

Capital expenditures

(161)

(141)

Other, net

(29)

(6)

Net cash used by investing activities

(190)

(147)

Cash flows from financing activities:

Dividends paid

(345)

(330)

Purchases of common stock

(90)

(294)

Other, net

(40)

107

Net cash used by financing activities

(475)

(517)

Net cash used by discontinued operations

(1)

Net increase in cash and equivalents

796

1,304

Cash and equivalents at beginning of period

1,242

1,603

Cash and equivalents at end of period

$                      2,038

$                      2,907

EXHIBIT E

ADDITIONAL FINANCIAL INFORMATION – (UNAUDITED)

DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS

Other Financial Information:

April 2, 2023

December 31, 2022

Debt-to-equity (a)

55.0 %

56.5 %

Book value per share (b)

$                69.58

$                 67.66

Shares outstanding

274,335,601

274,411,106

First Quarter

2023

2022

Income tax payments, net

$                     58

$                      15

Company-sponsored research and development (c)

$                   110

$                    107

Return on sales (d)

7.4 %

7.8 %

Non-GAAP Financial Measures:

First Quarter

2023

2022

Free cash flow:

Net cash provided by operating activities

$                1,462

$                 1,968

Capital expenditures

(161)

(141)

Free cash flow (e)

$                1,301

$                 1,827

April 2, 2023

December 31, 2022

Net debt:

Total debt

$              10,502

$               10,496

Less cash and equivalents

2,038

1,242

Net debt (f)

$                8,464

$                 9,254

(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 F

BACKLOG – (UNAUDITED)

DOLLARS IN MILLIONS

Funded

Unfunded

Total

Backlog

Estimated

Potential

Contract Value*

Total

Estimated

Contract Value

First Quarter 2023:

Aerospace

$            18,853

$                 484

$            19,337

$                        804

$               20,141

Marine Systems

34,848

8,759

43,607

3,499

47,106

Combat Systems

13,953

143

14,096

5,599

19,695

Technologies

9,465

3,320

12,785

28,637

41,422

Total

$            77,119

$            12,706

$            89,825

$                   38,539

$             128,364

Fourth Quarter 2022:

Aerospace

$            19,077

$                 439

$            19,516

$                        685

$               20,201

Marine Systems

26,246

19,453

45,699

3,672

49,371

Combat Systems

12,726

525

13,251

5,364

18,615

Technologies

9,100

3,571

12,671

26,889

39,560

Total

$            67,149

$            23,988

$            91,137

$                   36,610

$             127,747

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

*     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 F-1

 

BACKLOG – (UNAUDITED)
DOLLARS IN MILLIONS

https://mma.prnewswire.com/media/2062506/Exhibit_F_1.jpg

EXHIBIT F-2

BACKLOG – (UNAUDITED)
DOLLARS IN MILLIONS

EXHIBIT G

FIRST QUARTER 2023 SIGNIFICANT ORDERS – (UNAUDITED)
DOLLARS IN MILLIONS

We received the following significant contract awards during the first quarter of 2023:

Marine Systems:

$215 from the U.S. Navy for maintenance and modernization work on the USS Anchorage and USS Arlington, San Antonio-class amphibious transport docks.

$45 from the Navy for maintenance and modernization work on the USS Sampson, an Arleigh Burke-class destroyer.

$25 from the Navy to provide Trident II Strategic Weapon System Trainer Facility kits and engineering support services.

Combat Systems:

$285 from the U.S. Army to establish additional capacity for 155mm artillery projectile metal parts production. The contract has a maximum potential value of $1.3 billion.

$350 from the Army to upgrade Abrams main battle tanks to the system enhancement package version 3 (SEPv3) configuration and provide system and sustainment technical support services for the Abrams program.

$305 to produce light armored vehicles and provide the associated spares and logistics support services for Colombia.

$255 for various munitions and ordnance.

$210 from the Army to provide spare parts and inventory management and support services for the Stryker wheeled combat vehicle program.

$205 to produce Abrams main battle tanks in the SEPv3 configuration for Poland, bringing the total firm backlog for the program to $1.1 billion.

$65 to produce Stryker infantry carrier vehicles for North Macedonia. The contract has a maximum potential value of $145.

Technologies:

An indefinite delivery, indefinite quantity (IDIQ) contract to provide full spectrum security support services to protect mission critical infrastructure for the U.S. Air Force. The contract has a maximum potential value of $4.5 billion between two awardees.

$130 to provide flight simulation and training services for the Army, with a maximum potential value of $1.7 billion.

An IDIQ contract to provide sustainment services, spare parts and obsolescence risk management services, and system readiness for the Army’s Prophet Enhanced sensor systems. The contract has a maximum potential value of $480.

$400 for several key classified contracts.

Two IDIQ contracts from the U.S. Environmental Protection Agency to provide technical, research and support services to enable the agency’s critical environmental and climate initiatives. These contracts have a maximum potential value of $380.

$135 from the Air Force for the Battlefield Information Collection and Exploitation System (BICES) program to provide intelligence information sharing capabilities.

$115 to provide global enterprise and digital modernization services under the Southern Command’s (SOUTHCOM) Cyber Information Technology Enterprise Services (SCITES) contract.

$105 to provide enterprise information technology (IT), communications and mission command support services to U.S. Army Europe.

$100 from the North Carolina Department of Health and Human Services in support of its Medicaid management information system.

$80 from the Army for computing and communications equipment under the Common Hardware Systems-5 program.

EXHIBIT H

AEROSPACE SUPPLEMENTAL DATA – (UNAUDITED)

DOLLARS IN MILLIONS

First Quarter

2023

2022

Gulfstream Aircraft Deliveries (units):

Large-cabin aircraft

17

21

Mid-cabin aircraft

4

4

Total

21

25

Aerospace Book-to-Bill:

Orders*

$              1,727

$              3,243

Revenue

1,892

1,903

Book-to-Bill Ratio

0.91x

1.70x

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

SOURCE General Dynamics


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