GENERAL DYNAMICS CORP

Previous wording

The coronavirus (COVID-19) pandemic caused significant disruptions to national and global economies and government activities, including supply chain and staffing challenges. Additionally, in response to the Russian invasion of Ukraine, the United States and several other countries imposed economic and trade sanctions, export controls and other restrictions (collectively, global sanctions) targeting Russia and Belarus. The conflict and these sanctions have caused some disruptions to global economies and some global businesses, including heightened cybersecurity risks, increased energy costs and foreign currency exchange rate fluctuations, as well as exacerbated existing supply chain challenges and inflationary pressures. Lastly, the impact of the war between Israel and Hamas continues to evolve.

Current wording

The coronavirus (COVID-19) pandemic caused significant disruptions to national and global economies and government activities, including supply chain and staffing challenges. Additionally, in response to the Russian invasion of Ukraine, the United States and several other countries imposed economic and trade sanctions, export controls and other restrictions targeting Russia and Belarus. Lastly, the impact of the conflict in the Middle East continues to evolve. The disruptions caused by these events continue to impact global economies and businesses, including ours. The primary impact to our business is supply chain challenges, including availability of parts, quality escapes and inflationary pressures.

Previous wording

The disruptions caused by these events continue to impact global economies and businesses. The primary impact to our business is supply chain challenges, including inflationary pressures. In our Aerospace segment, supply chain challenges have paced our ability to ramp up production in response to strong customer demand for our aircraft and have caused out-of-sequence manufacturing, which increases costs and decreases operational efficiency. This includes the Israel-Hamas war’s impact on our Israel-based supplier of mid-cabin aircraft. Within our defense segments, the COVID-19 pandemic resulted in supply chain challenges and impacted the regional availability of skilled labor, which we continue to experience, particularly in our Marine Systems segment. The Russia-Ukraine conflict and increased threat environment has created additional demand for our products and services, particularly in our Combat Systems segment.

Current wording

In our Aerospace segment, supply chain challenges paced our ability to ramp up production at the rate we like in response to strong customer demand for our aircraft, causing out-of-sequence manufacturing that increased costs and decreased operational efficiency. In addition, the conflict in the Middle East impacted the delivery schedule for our Israel-based supplier of mid-cabin aircraft. Within our defense segments, the COVID-19 pandemic resulted in supply chain challenges that continue to impact our Marine Systems segment. The Russia-Ukraine conflict and increased threat environment have created additional demand for certain of our products and services, particularly in our Combat Systems segment.

Previous wording

With approximately 70% of our revenue from the U.S. government, government spending levels— particularly defense spending— influence our financial performance. The Congress has not yet passed a defense appropriations bill for the government’s current fiscal year. However, the government has been operating under a continuing resolution (CR) that provides funding for some federal agencies through March 1, 2024, and other federal agencies through March 8, 2024. When the government operates under a CR, all programs of record are funded at the prior year’s appropriated levels until the current year appropriations bill is signed into law. Therefore, the U.S. Department of Defense (DoD) is prohibited from starting new programs or increasing funding on existing programs unless there is an exception for the program included in the CR. The current CR included an exception allowing the DoD to obligate funds for the construction of the second submarine under the existing Columbia-class submarine program. We do not anticipate the current CR having a material impact on our results of operations, financial condition or cash flows. However, the impact to our business from an extended CR or government shutdown that may result from any continuing delay by Congress to pass a new defense appropriations bill would depend on the duration and government implementation of the CR or shutdown.

Current wording

With approximately 70% of our revenue from the U.S. government, government spending levels— particularly defense spending— influence our financial performance. The Congress has not yet passed a defense appropriations bill for the government’s current fiscal year. However, the government has been operating under a continuing resolution (CR) that provides funding for some federal agencies through March 14, 2025. When the government operates under a CR, all programs of record are funded at the prior year’s appropriated levels until the current year appropriations bill is signed into law. Therefore, the U.S. Department of Defense (DoD) is prohibited from starting new programs or increasing funding on existing programs unless there is an exception for the program included in the CR. The current CR included exceptions allowing the DoD to obligate additional funds for two fiscal year 2024 and one fiscal year 2025 Virginia-class submarines, and for non-executive pay improvements and infrastructure investments to support the submarine industrial base. In addition, the CR included an exception allowing the DoD to obligate funds for the construction of the second submarine under the existing Columbia-class submarine contract. We do not anticipate the current CR having a material impact on our results of operations, financial condition or cash flows. However, the impact to our business from an extended CR or government shutdown that may result from any continuing delay by Congress to pass a new defense appropriations bill would depend on the duration and government implementation of the CR or shutdown.

Previous wording

For new aircraft, operating earnings and margin are a function of the prices of our aircraft, our operational efficiency in manufacturing and outfitting the aircraft, and the mix of ultra-large-cabin, large-cabin and mid-cabin aircraft deliveries. Aircraft mix can also refer to the stage of program maturity for our aircraft models. A new aircraft model typically has lower margins in its initial production lots, and then margins generally increase as we realize efficiencies in the production process.

Current wording

For new aircraft, operating earnings and margin are a function of the prices of our aircraft, our operational efficiency in manufacturing and outfitting the aircraft, and the mix of ultra-large-cabin, large-cabin and mid-cabin aircraft deliveries. Aircraft mix can also refer to the stage of program maturity for our aircraft models. A new aircraft model typically has lower margins in its initial production lots, and then margins generally increase as we realize efficiencies in the production process. Additional factors affecting the segment’s earnings and margin include the volume, mix and profitability of services work performed, the market for pre-owned aircraft, and the level of general and administrative (G&A) and net research and development (R&D) costs incurred by the segment.

Previous wording

◦Record-high revenue of $42.3 billion, an increase of 7.3% from 2022

Current wording

◦Revenue of $47.7 billion, an increase of 12.9% from 2023

Previous wording

◦Operating earnings of $4.2 billion with sequential growth throughout the year

Current wording

◦Operating earnings of $4.8 billion, an increase of 13% from 2023, with sequential growth throughout the year

Previous wording

◦Record-high cash provided by operating activities of $4.7 billion, or 142% of net earnings

Current wording

◦Cash provided by operating activities of $4.1 billion, or 109% of net earnings

Previous wording

◦Several significant contract awards received in our defense segments, including $3 billion of combined awards from the U.S. Navy for advance procurement and other work for the Virginia-class submarine program

Current wording

◦Several significant contract awards received in our defense segments, including $3.7 billion of combined awards from the U.S. Navy for advance procurement and other work for the Virginia-class submarine program

Previous wording

Revenue from U.S. Navy ship construction and engineering was up in 2023 due primarily to increased volume on the Columbia-class submarine program. The Marine Systems segment’s operating margin decreased 110 basis points in 2023 due to supply chain impacts to the Virginia-class submarine schedule and cost growth on the Arleigh Burke-class (DDG-51) guided-missile destroyer program.

Current wording

Revenue from U.S. Navy ship construction and engineering was up in 2024 due primarily to increased volume on the Columbia-class and Virginia-class submarine programs. The Marine Systems segment’s operating margin decreased 50 basis points in 2024 due to a $123 unfavorable profit adjustment in the fourth quarter of 2024 on the Virginia-class Block IV contract as it approaches completion in 2026. The Virginia-class program has been impacted by supplier quality issues and late supply chain deliveries causing cost growth and schedule delays.

Previous wording

We expect the Marine Systems segment’s 2024 revenue to increase to approximately $12.8-12.9 billion with operating margin of approximately 7.6%.

Current wording

We expect the Marine Systems segment’s 2025 revenue to increase to approximately $15 billion with operating margin of approximately 6.8%.

Previous wording

Revenue from international military vehicles increased in 2023 due to higher volume on several wheeled and tracked vehicle contracts, including the sale of the Abrams main battle tank to U.S. allies and partners. Weapons systems and munitions revenue was up due to increased demand and facility expansion efforts associated with increased artillery production. Revenue from U.S. military vehicles increased due primarily to higher volume on the U.S. Army’s M10 Booker combat vehicle program (formerly known as Mobile Protected Firepower). The Combat Systems segment’s operating margin decreased 80 basis points compared with 2022 driven primarily by lower-margin artillery facilities expansion work.

Current wording

Weapons systems and munitions revenue increased in 2024 due to heightened demand for artillery products. Revenue from U.S. military vehicles was up in 2024 due primarily to higher volume on the U.S. Army’s M10 Booker combat vehicle program. The Combat Systems segment’s operating margin increased 30 basis points compared with 2023 driven by favorable contract mix.

Previous wording

We expect the Combat Systems segment’s 2024 revenue to increase to approximately $8.5 billion with operating margin of approximately 14.4%.

Current wording

We expect the Combat Systems segment’s 2025 revenue to increase to approximately $9.1 billion with operating margin of approximately 14.5%.

Previous wording

The Technologies segment’s revenue was up due primarily to strong demand for IT services and the acquisition of a C5ISR solutions business in 2022. Overall, the segment’s margin decreased 50 basis points compared with 2022 due to program mix.

Current wording

The Technologies segment’s revenue increased in 2024 due primarily to strong demand for IT services, including the ramp-up of new programs, offset partially by C5ISR solutions program timing and the ramp-down of legacy programs. Overall, the segment’s margin increased 30 basis points compared with 2023 due to strong operating performance.

Previous wording

We expect the Technologies segment’s 2024 revenue to increase to $13 billion with operating margin of around 9.5%.

Current wording

We expect the Technologies segment’s 2025 revenue to increase to approximately $13.5 billion with operating margin of approximately 9.2%.

Previous wording

Corporate operating costs totaled $160 in 2023 and $118 in 2022 and consisted primarily of equity-based compensation expense. Corporate operating costs are expected to be approximately $125 in 2024.

Current wording

Corporate operating costs totaled $139 in 2024 and $160 in 2023 and consisted primarily of equity-based compensation expense. Corporate operating costs are expected to be approximately $150 in 2025.

Previous wording

Ship construction revenue increased due primarily to higher volume on the Columbia-class submarine program. Military vehicle production revenue was up due primarily to higher volume on several international wheeled and tracked vehicle contracts. Weapons systems and munitions revenue was up due to increased demand and facility expansion efforts associated with increased artillery production. In 2023, product operating costs increased at a higher rate than revenue due to supply chain impacts and cost growth within our Marine Systems segment.

Current wording

Aircraft manufacturing revenue increased due to additional aircraft deliveries. Ship construction revenue was up due primarily to higher volume on the Columbia-class and Virginia-class submarine programs. Weapons systems and munitions revenue increased due to heightened demand for artillery products. In 2024, product operating costs increased at a higher rate than revenue due to supplier quality issues and late supply chain deliveries on the Virginia-class Block IV contract within our Marine Systems segment and additional costs associated with initial deliveries of G700 aircraft due to out of station work caused by supplier quality escapes and late delivery of components in our Aerospace segment.

Previous wording

As a percentage of revenue, G&A expenses decreased to 5.7% in 2023 compared with 6.1% in 2022 due to growth in revenue. We expect G&A expenses as a percentage of revenue in 2024 to be generally consistent with 2023.

Current wording

As a percentage of revenue, G&A expenses decreased to 5.4% in 2024 compared with 5.7% in 2023 due to growth in revenue. We expect G&A expenses as a percentage of revenue in 2025 to be generally consistent with 2024.

Previous wording

Net other income was $82 in 2023 and $189 in 2022 and represents primarily the non-service components of pension and other post-retirement benefits. The decrease in pension income was driven primarily by higher interest rates and a change in investment mix in one of our plans due to its improved funded status. In 2024, we expect net other income to be approximately $50.

Current wording

Net other income was $68 in 2024 and $82 in 2023 and represents primarily the non-service components of pension and other post-retirement benefits. In 2025, we expect net other income to be approximately $50.

Previous wording

Net interest expense was $343 in 2023 and $364 in 2022, reflecting the repayment of our scheduled debt maturities in 2023 and 2022. See Note K to the Consolidated Financial Statements in Item 8 for additional information regarding our debt obligations, including interest rates. We expect 2024 net interest expense to be approximately $320.

Current wording

Net interest expense was $324 in 2024 and $343 in 2023. See Note K to the Consolidated Financial Statements in Item 8 for additional information regarding our debt obligations, including interest rates. We expect 2025 net interest expense to be consistent with 2024.

Previous wording

Our effective tax rate increased to 16.8% in 2023 from 16% in 2022. For further discussion, including a reconciliation of our effective tax rate from the statutory federal rate, see Note D to the Consolidated Financial Statements in Item 8. For 2024, we anticipate a slightly higher full-year effective tax rate of approximately 17.5%. The increase in our effective tax rate in 2023 and the expected increase in 2024 are due principally to higher taxes on foreign earnings.

Current wording

Our effective tax rate was 16.7% in 2024 and 16.8% in 2023. For further discussion, including a reconciliation of our effective tax rate from the statutory federal rate, see Note D to the Consolidated Financial Statements in Item 8. For 2025, we expect a full-year effective tax rate of approximately 17.5%, generally consistent with our original expectations for 2024 before declining due to certain U.S. and foreign tax credits and benefits and other timing items.

Previous wording

Our total backlog, including funded and unfunded portions, was $93.6 billion on December 31, 2023, compared to $91.1 billion at the end of 2022. Our total backlog is equal to our remaining performance obligations under contracts with customers as discussed in Note B to the Consolidated Financial

Current wording

Our total backlog, including funded and unfunded portions, was $90.6 billion on December 31, 2024, compared to $93.6 billion at the end of 2023. Our total backlog is equal to our remaining performance obligations under contracts with customers as discussed in Note B to the Consolidated Financial Statements in Item 8. Our total estimated contract value, which combines total backlog with estimated potential contract value, was $144 billion on December 31, 2024.

Previous wording

Aerospace funded backlog represents primarily new aircraft orders for which we have definitive purchase contracts and deposits from customers. Unfunded backlog consists of agreements to provide future aircraft maintenance and support services. The Aerospace segment ended 2023 with backlog of $20.5 billion, up 4.8% from $19.5 billion at year-end 2022.

Current wording

Aerospace funded backlog represents primarily new aircraft orders for which we have definitive purchase contracts and deposits from customers. Unfunded backlog consists of agreements to provide future aircraft maintenance and support services. The Aerospace segment ended 2024 with backlog of $19.7 billion.

Previous wording

Orders in 2023 reflected strong demand across our portfolio of products and services, including orders for all models of Gulfstream aircraft. The segment’s book-to-bill ratio (orders divided by revenue) was 1.2-to-1 in 2023.

Current wording

Orders in 2024 reflected strong demand across our portfolio of products and services, including orders for all models of Gulfstream aircraft. The segment’s book-to-bill ratio (orders divided by revenue) was 1-to-1 in 2024, even as revenue grew by more than 30% year over year.

Previous wording

Beyond total backlog, estimated potential contract value represents primarily options and other agreements with existing customers to purchase new aircraft and long-term aircraft services agreements. On December 31, 2023, estimated potential contract value in the Aerospace segment was $451.

Current wording

Beyond total backlog, estimated potential contract value represents primarily options and other agreements with existing customers to purchase new aircraft and long-term aircraft services agreements. On December 31, 2024, estimated potential contract value in the Aerospace segment was $1.1 billion.

Previous wording

Demand for Gulfstream aircraft remains strong across customer types and geographic regions, generating orders from public and privately held companies, individuals, and governments around the world. Geographically, U.S. customers represented 68% of the segment’s orders in 2023 and 59% of the segment’s backlog on December 31, 2023, demonstrating continued strong domestic demand.

Current wording

Demand for Gulfstream aircraft remains strong across customer types and geographic regions, generating orders from public and privately held companies, individuals, and governments around the world. Geographically, U.S. customers represented 54% of the segment’s orders in 2024 and 56% of the segment’s backlog on December 31, 2024, demonstrating continued strong domestic demand.

Previous wording

Total backlog in our defense segments was $73.2 billion on December 31, 2023, compared with $71.6 billion at year-end 2022. In 2023, the total book-to-bill ratio in our defense segments was slightly above 1-to-1. Estimated potential contract value in our defense segments was $37.9 billion on December 31, 2023, compared with $35.9 billion at year-end 2022.

Current wording

Total backlog in our defense segments was $70.9 billion on December 31, 2024, compared with $73.2 billion at year-end 2023. In 2024, the total book-to-bill ratio in our defense segments was 1-to-1. Estimated potential contract value in our defense segments was $52.2 billion on December 31, 2024, up 37.8% compared with $37.9 billion at year-end 2023.

Previous wording

The Marine Systems segment’s backlog consists of very long-term submarine and surface ship construction programs, as well as numerous engineering and repair contracts. The segment’s backlog and estimated potential contract value remained steady compared with year-end 2022.

Current wording

The Marine Systems segment’s backlog consists of very long-term submarine and surface ship construction programs, as well as numerous engineering and repair contracts. The segment’s total estimated contract value remained steady compared with year-end 2023.

Previous wording

•$735 from the Navy for construction of an additional John Lewis-class (T-AO-205) fleet replenishment oiler.

Current wording

•$780 from the U.S. Navy for the construction of an additional John Lewis-class (T-AO-205) fleet replenishment oiler. The contract including options for an additional seven T-AO-205 oilers has a maximum potential value of more than $6.7 billion.

Previous wording

•$1.3 billion from the Navy for long-lead materials and advance construction for Block V and long-lead materials for Block VI Virginia-class submarines.

Current wording

•$2.9 billion from the Navy for long-lead materials for Block V and Block VI Virginia-class submarines.

Previous wording

•A contract from the Navy to provide ongoing lead yard services for the DDG-51 program. The contract including options has a maximum potential value of $420.

Current wording

•$205 from the Navy for planning yard services for the Arleigh Burke-class (DDG-51) guided-missile destroyer program. The contract including options has a maximum potential value of $1.1 billion.

Previous wording

•$1.7 billion from the U.S. Navy for lead yard services, development studies and design efforts, procurement and delivery of initial spare parts to support maintenance availabilities for Virginia-class submarines.

Current wording

•$770 from the Navy for lead yard services, development studies, design and engineering efforts, procurement and delivery of initial spare parts to support maintenance availabilities for Virginia-class submarines.

Previous wording

•$720 from the Navy to provide maintenance and modernization services for the DDG-51 destroyer, San Antonio-class amphibious transport dock and Wasp-class amphibious assault ship programs. The awards including options have a maximum potential value of $1.2 billion.

Current wording

•$530 from the Navy to provide maintenance, modernization and repair services for the DDG-51 destroyer, USS Hartford Los Angeles-class submarine and Wasp-class amphibious assault ship programs.

Previous wording

•$300 for advanced nuclear plant studies (ANPS) in support of the Columbia-class submarine program. The contracts, including options, have a maximum potential value of $1.5 billion.

Current wording

•$115 for advanced nuclear plant studies (ANPS) in support of the Columbia-class submarine program.

Previous wording

•$95 from the Navy to provide maintenance and support non-nuclear maintenance on submarines based at the New London Naval Submarine Support Facility in Connecticut. The awards have a maximum potential value of $460.

Current wording

•$55 from the Navy to support non-nuclear maintenance on submarines based at the New England Naval Submarine Support Facility.

Previous wording

The Combat Systems segment’s backlog consists of a mix of U.S. and international combat vehicles, weapons systems and munitions programs. The vehicle programs are generally long-term franchise programs, while the weapons systems and munitions programs tend to be shorter-term in nature. The segment’s backlog was up 9.7% from year-end 2022 to $14.5 billion. The segment’s estimated potential contract value was $6.2 billion on December 31, 2023, compared with $5.4 billion at year-end 2022.

Current wording

The Combat Systems segment’s backlog consists of a mix of U.S. and international combat vehicles, weapons systems and munitions programs. The vehicle programs are generally long-term franchise programs, while the weapons systems and munitions programs tend to be shorter-term in nature. The segment’s backlog was up 16.8% from year-end 2023 to $17 billion. The segment’s estimated potential contract value was $8.6 billion on December 31, 2024, compared with $6.2 billion at year-end 2023.

Previous wording

•$1.7 billion for various munitions and ordnance. The awards have a maximum potential value of $3.2 billion.

Current wording

•$2 billion for various munitions and ordnance. These contracts have a maximum potential value of $3.2 billion.

Previous wording

•$1 billion from the U.S. Army to establish additional capacity for 155mm projectile metal parts and M795 load, assemble and pack (LAP) production and artillery propellant. The contracts, including follow-on production, have a maximum potential value of $2.4 billion.

Current wording

•$1.6 billion from the Army to produce 155mm artillery projectile metal parts and propelling bag charges and establish additional capacity for artillery propellant. The contracts have a maximum potential value of $2.5 billion.

Previous wording

•$260 from the Army for the second phase of low-rate initial production (LRIP) of the M10 Booker Combat Vehicle.

Current wording

•$325 from the Army for the third phase of the low-rate initial production (LRIP) of the M10 Booker Combat Vehicle.

Previous wording

•$755 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.

Current wording

•$285 to produce Abrams main battle tanks in the system enhancement package version 3 (SEPv3) configuration for Romania.

Previous wording

The Technologies segment’s backlog consists of thousands of contracts and task orders across a mix of U.S. and non-U.S. government and commercial customers. These contracts can be shorter-cycle or span multiple years, but commonly include a small, initially funded order. Therefore, our estimated potential contract value of $28 billion is an important indicator of future orders and revenue. In 2023, approximately 80% of the segment’s orders were from additional work on IDIQ contracts or the exercise of options. The segment’s total estimated contract value was $40.8 billion on December 31, 2023, compared with $39.6 billion at year-end 2022.

Current wording

The Technologies segment’s backlog consists of thousands of contracts and task orders across a mix of U.S. and non-U.S. government and commercial customers. These contracts can be shorter-cycle or span multiple years, but commonly include a smaller, initially funded order. Therefore, our estimated potential contract value of $34 billion is an important indicator of future orders and revenue. In 2024, approximately 75% of the segment’s orders were from additional work on IDIQ contracts or the exercise of options. The segment’s total estimated contract value was $48.1 billion on December 31, 2024, up 18.1% compared with $40.8 billion at year-end 2023.