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26.04.2023 13:00:00
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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."
Cash
Net 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.
Backlog
The 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 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 $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 https://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 | |||||||
(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 |
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 | ||||||||||
EXHIBIT F-1
BACKLOG - (UNAUDITED) |
https://mma.prnewswire.com/media/2062506/Exhibit_F_1.jpg
EXHIBIT F-2
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EXHIBIT G FIRST QUARTER 2023 SIGNIFICANT ORDERS - (UNAUDITED) |
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 | |||||||
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SOURCE General Dynamics
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