GENERAL DYNAMICS CORP

Previous wording

As a global aerospace and defense company, we compete in domestic and international markets, serving both government and commercial customers. Our financial performance is significantly influenced by U.S. government spending levels, administration priorities and the overall economy. In the federal market, defense spending has been at increased levels, and the administration has publicly stated support for further increases.

Current wording

As a global aerospace and defense company, we compete in domestic and international markets, serving both government and commercial customers. Our financial performance is significantly influenced by U.S. government spending levels, administration priorities and the overall economy. The U.S. Congress has not yet passed defense appropriations bills for the government’s fiscal year 2027, which began on October 1, 2026. It is uncertain when the government will pass fiscal year 2027 appropriations and what levels of funding those appropriations will provide. On September 2, 2026, a continuing resolution (CR) was signed into law, providing funding for federal agencies through December 11, 2026. When the government operates under a CR, all programs of record are funded at the prior year’s appropriated levels and the DoW is prohibited from starting new programs or increasing funding on existing programs unless there is an exception for a program included in the CR. We do not anticipate the current CR having a material impact on our results of operations, financial condition or cash flows.

Previous wording

There is significant demand in U.S. Navy shipbuilding, particularly submarines. We have invested significantly in our facilities and workforce to increase production capacity to meet this demand, and expect to continue to do so. The increased demand has placed pressure on the shipbuilding industrial base, which was already impacted by significant demographic issues coming out of the global pandemic. Together with the Navy customer, we have been working to stabilize and grow the supply chain to meet this heightened demand.

Current wording

Defense spending has been at increased historic levels, and the administration has publicly stated support for further increases. There is significant demand in U.S. Navy shipbuilding, particularly submarines. We have invested significantly in our facilities and workforce to increase production capacity to meet this demand, and expect to continue to do so. The increased demand has placed pressure on the shipbuilding industrial base, which was already impacted by significant demographic issues coming out of the global pandemic. Together with our Navy customer, we have been working to stabilize and grow the supply chain to meet this heightened demand.

Previous wording

Internationally, as a result of ongoing regional conflicts and the overall threat environment, we have seen increased demand, particularly in Europe, for our Combat Systems military products and services. This provides opportunities for our European businesses established in local markets as well as exports from our North American businesses. To meet this expected demand, there will be increased pressure on the supply chain and our hiring of skilled workers.

Current wording

Internationally, as a result of ongoing regional conflicts and the overall threat environment, we have seen increased demand, particularly in Europe, for our Combat Systems military products and services. This provides opportunities for our European businesses established in local markets as well as exports from our North American businesses. To meet this demand, we expect increased pressure on the supply chain and our hiring of skilled workers.

Previous wording

In our principal commercial market, our Aerospace group is experiencing strong demand for business jets. We believe our investments in a new family of Gulfstream aircraft will continue to fuel demand. The most recent addition is the G800, which entered into service last year. In addition, we expect the growing installed base of aircraft will continue to lead to increased demand for global aircraft services. The ongoing sanctions on Russia have restricted access to a segment of the market.

Current wording

In our principal commercial market, our Aerospace group is experiencing strong demand for business jets. We believe our investments in a new family of Gulfstream aircraft will continue to fuel demand. The most recent addition is the G800, which entered into service last year. In addition, we expect the growing installed base of aircraft will continue to lead to increased demand for global aircraft services. The ongoing sanctions on Russia have restricted access to that segment of the market.

Previous wording

Our consolidated revenue increased in the second quarter and first six months of 2026 driven by growth across all four operating segments, primarily in our Aerospace and Marine Systems segments. Operating margin increased 40 basis points in the second quarter and 20 basis points in the first six months of 2026 due to improved operating performance in our Aerospace and Marine Systems segments.

Current wording

Our consolidated revenue increased in the third quarter and first nine months of 2026 driven by growth across all four operating segments, primarily in our Marine Systems and Aerospace segments. Operating margin increased 20 basis points in the third quarter and 30 basis points in the first nine months of 2026 due to improved operating performance in these segments.

Previous wording

Aircraft manufacturing revenue increased in the second quarter and first six months of 2026 due primarily to the number and mix of aircraft deliveries. Aircraft services revenue was up in the second quarter and first six months of 2026 due primarily to higher fixed-base operator (FBO) activity and increased customer demand for aircraft maintenance.

Current wording

Aircraft manufacturing revenue increased in the third quarter and first nine months of 2026 due primarily to the number and mix of aircraft deliveries. Aircraft services revenue was up in the third quarter and first nine months of 2026 due primarily to higher fixed-base operator (FBO) activity and increased customer demand for aircraft maintenance.

Previous wording

The increase in the segment’s operating earnings in the second quarter and first six months of 2026 consisted of the following:

Current wording

The increase in the segment’s operating earnings in the third quarter and first nine months of 2026 consisted of the following:

Previous wording

Aircraft manufacturing operating earnings increased in the second quarter and first six months of 2026 due primarily to increased deliveries and aircraft mix. Aircraft services operating earnings increased in the second quarter and first six months of 2026 due to higher volume and a favorable services mix. In total, the Aerospace segment’s operating margin increased 130 basis points in the second quarter and 100 basis points in the first six months of 2026 compared with the prior-year periods due to improved operating performance.

Current wording

Aircraft manufacturing operating earnings increased in the third quarter and first nine months of 2026 due primarily to increased deliveries and aircraft mix. Aircraft services operating earnings increased in the third quarter and first nine months of 2026 due to higher volume and a favorable services mix. G&A/other expenses increased in the third quarter and first nine months of 2026 due primarily to higher selling expenses associated with strong orders for new aircraft. In total, the Aerospace segment’s operating margin increased 120 basis points in the third quarter and 110 basis points in the first nine months of 2026 compared with the prior-year periods due to improved operating performance.

Previous wording

The increase in the Marine Systems segment’s revenue in the second quarter and first six months of 2026 consisted of the following:

Current wording

The increase in the Marine Systems segment’s revenue in the third quarter and first nine months of 2026 consisted of the following:

Previous wording

Revenue from U.S. Navy ship construction was up in the second quarter and first six months of 2026 due primarily to increased material and labor volume on Columbia-class submarine construction and higher throughput on the John Lewis-class (T-AO-205) fleet replenishment oiler. The Marine Systems segment’s operating margin increased 40 basis points in the second quarter and first six months of 2026 on improved performance at each of our shipyards.

Current wording

Revenue from U.S. Navy ship construction was up in the third quarter and first nine months of 2026 due primarily to increased material and labor volume on Columbia-class and Virginia-class submarines. The Marine Systems segment’s operating margin increased 80 basis points in the third quarter and 50 basis points in the first nine months of 2026 due to improved performance and a favorable adjustment on the Virginia-class Block IV program as it nears completion.

Previous wording

The increase in the Combat Systems segment’s revenue in the second quarter and first six months of 2026 consisted of the following:

Current wording

The increase in the Combat Systems segment’s revenue in the third quarter and first nine months of 2026 consisted of the following:

Previous wording

Weapon systems and munitions revenue increased in the second quarter and first six months of 2026 due primarily to increased artillery production. International military vehicles increased in the second quarter and first six months of 2026 due primarily to higher volume on several wheeled and tracked vehicle programs in Europe. Revenue from U.S. military vehicles decreased in the second quarter and first six months of 2026 due to lower U.S. Army demand as part of its recapitalization efforts and the termination of the M10 Booker program. Overall, the Combat Systems segment’s operating margin decreased in the second quarter and first six months of 2026 due to program mix.

Current wording

Weapon systems and munitions revenue increased in the third quarter and first nine months of 2026 due primarily to increased artillery production. Revenue from international military vehicles increased in the first nine months of 2026 due primarily to higher volume on several wheeled and tracked vehicle programs in Europe. Revenue from U.S. military vehicles decreased in the first nine months of 2026 due to lower U.S. Army demand as part of its recapitalization efforts and the termination of the M10 Booker program. Overall, the Combat Systems segment’s operating margin decreased in the third quarter and first nine months of 2026 due to program mix.

Previous wording

The increase in the Technologies segment’s revenue in the second quarter and first six months of 2026 consisted of the following:

Current wording

The increase in the Technologies segment’s revenue in the third quarter and first nine months of 2026 consisted of the following:

Previous wording

The Technologies segment’s revenue increased in the second quarter and first six months of 2026 due primarily to higher volume across several C5ISR programs, particularly systems supporting a variety of land and air platforms and international programs. Overall, the Technologies segment’s operating margin decreased 20 basis points in the second quarter and first six months of 2026 due to program mix.

Current wording

The Technologies segment’s revenue increased in the third quarter and first nine months of 2026 due primarily to higher volume across C5ISR and IT services programs spanning the group's portfolio. Overall, the Technologies segment’s operating margin decreased 40 basis points in the third quarter and 20 basis points in the first nine months of 2026 due to program mix.

Previous wording

Corporate operating costs totaled $49 in the second quarter and $87 in the first six months of 2026 compared with $45 in the second quarter and $78 in the first six months of 2025 and consisted of equity-based compensation expense and other miscellaneous expenses. Corporate operating costs are expected to be approximately $180 in 2026.

Current wording

Corporate operating costs totaled $53 in the third quarter and $140 in the first nine months of 2026 compared with $52 in the third quarter and $130 in the first nine months of 2025 and consisted of equity-based compensation expense and other miscellaneous expenses.

Previous wording

The increase in product revenue in the second quarter and first six months of 2026 consisted of the following:

Current wording

The increase in product revenue in the third quarter and first nine months of 2026 consisted of the following:

Previous wording

Aircraft manufacturing revenue increased in the second quarter and first six months of 2026 due to additional aircraft deliveries. Ship construction revenue increased due primarily to higher volume on the Columbia-class submarine program. Weapon systems and munitions revenue increased in the second quarter and first six months of 2026 due primarily to increased artillery production. The primary drivers of the increase in product operating costs were the changes in volume on the programs described above.

Current wording

Ship construction revenue increased in the third quarter and first nine months of 2026 due to higher volume on the Columbia-class and Virginia-class submarine programs. Aircraft manufacturing revenue increased due primarily to additional aircraft deliveries and a favorable delivery mix. Weapon systems and munitions revenue increased in the third quarter and first nine months of 2026 due primarily to increased artillery production. The primary drivers of the increase in product operating costs were the changes in volume on the programs described above.

Previous wording

The increase in service revenue in the second quarter and first six months of 2026 consisted of the following:

Current wording

The increase in service revenue in the third quarter and first nine months of 2026 consisted of the following:

Previous wording

Ship services revenue was up in the second quarter and first six months of 2026 due to higher volume of engineering and repair work. The increase in C5ISR solutions and IT services revenue was driven by higher volume across the Technologies segment. Aircraft services revenue was up in the second quarter and first six months of 2026 due primarily to FBO activity and additional customer demand for aircraft maintenance. Military vehicle services revenue was down in the second quarter and first six months of 2026 due primarily to lower vehicle support volume. The primary drivers of the increase in service operating costs were the changes in volume on the programs described above.

Current wording

C5ISR solutions and IT services revenue increased in the third quarter and first nine months of 2026 due to higher volume across the Technologies segment. Ship services revenue was up in the third quarter and first nine months of 2026 due to higher volume of engineering and repair work. Aircraft services revenue was up in the third quarter and first nine months of 2026 due primarily to higher FBO activity and additional customer demand for aircraft maintenance. The primary drivers of the increase in service operating costs were the changes in volume on the programs described above.

Previous wording

As a percentage of revenue, G&A expenses were 5.2% in the first six months of 2026 compared with 5.0% in the first six months of 2025. We expect G&A expenses as a percentage of revenue in 2026 to be generally consistent with 2025.

Current wording

As a percentage of revenue, G&A expenses were 5.1% in the first nine months of 2026 compared with 5.0% in the first nine months of 2025.

Previous wording

Net other income was $14 in the first six months of 2026 compared with $36 in the first six months of 2025, and represents primarily the non-service components of pension and other post-retirement benefits. In 2026, we expect net other income to be approximately $15.

Current wording

Net other income was $18 in the first nine months of 2026 compared with $51 in the first nine months of 2025, and represents primarily the non-service components of pension and other post-retirement benefits. The decrease in the first nine months of 2026 was due to contributions to our qualified pension plans that have improved their funded status.

Previous wording

Net interest expense decreased to $118 in the first six months of 2026 from $177 in the prior-year period, reflecting lower interest expense associated with commercial paper issuances. See Note H to the unaudited Consolidated Financial Statements in Part I, Item 1, for additional information regarding our debt obligations, including interest rates. In 2026, we expect net interest expense to be approximately $270.

Current wording

Net interest expense decreased to $163 in the first nine months of 2026 from $251 in the prior-year period, reflecting lower interest expense associated with commercial paper issuances and additional interest income associated with higher cash balances. See Note H to the unaudited Consolidated Financial Statements in Part I, Item 1, for additional information regarding our debt obligations, including interest rates.

Previous wording

Our effective tax rate was 17.7% in the first six months of 2026 compared with 17.4% in the prior-year period. For 2026, we anticipate a full-year effective tax rate of approximately 17.5%.

Current wording

Our effective tax rate was 17.6% in the first nine months of 2026 compared with 17.2% in the prior-year period.

Previous wording

Our total backlog, including funded and unfunded portions, was $136.5 billion at the end of the second quarter of 2026 compared with $130.8 billion at the end of the first quarter. Our total backlog is equal to our remaining performance obligations under contracts with customers as discussed in Note B to the unaudited Consolidated Financial Statements in Part I, Item 1. Our total estimated contract value, which combines total backlog with estimated potential contract value, was $186.9 billion on July 5, 2026.

Current wording

Our total backlog, including funded and unfunded portions, was $220.3 billion at the end of the third quarter of 2026 compared with $136.5 billion at the end of the second quarter. Our total backlog is equal to our remaining performance obligations under contracts with customers as discussed in Note B to the unaudited Consolidated Financial Statements in Part I, Item 1. Our total estimated contract value, which combines total backlog with estimated potential contract value, was $270.7 billion on October 4, 2026.

Previous wording

The following table details the backlog and estimated potential contract value of each segment at the end of the second and first quarters of 2026:

Current wording

The following table details the backlog and estimated potential contract value of each segment at the end of the third and second quarters of 2026:

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 the second quarter of 2026 with backlog of $24 billion.

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 the third quarter of 2026 with backlog of $25.4 billion.

Previous wording

Orders for new Gulfstream aircraft reflected very strong demand across our portfolio of products and services. The segment achieved a book-to-bill ratio (orders divided by revenue) of 1.5-to-1 in the second quarter of 2026 and 1.3-to-1 in the first six months, even as revenue grew more than 10% in each period.

Current wording

Orders for new Gulfstream aircraft reflected very strong demand across our portfolio of products and services. The segment achieved a book-to-bill ratio (orders divided by revenue) of 1.4-to-1 in the third quarter and the first nine months of 2026, even as revenue grew more than 9% in each period.

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 July 5, 2026, estimated potential contract value in the Aerospace segment was $1.2 billion.

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 October 4, 2026, estimated potential contract value in the Aerospace segment was $1.4 billion.

Previous wording

Total backlog in our defense segments was $112.5 billion on July 5, 2026. The defense segments achieved a book-to-bill ratio of 1.4-to-1 in the second quarter of 2026 and 1.8-to-1 in the first six months. The increase in backlog was primarily driven by awards in the Marine Systems segment for continued construction of Virginia-class submarines and to produce armored combat support vehicles in the Combat Systems segment. Estimated potential contract value in our defense segments was $49.2 billion on July 5, 2026.

Current wording

Total backlog in our defense segments was $195 billion on October 4, 2026, up 73% compared with $112.5 billion at the end of the second quarter. The increase in backlog was primarily driven by large awards in the Marine Systems segment for construction of Virginia-class and Columbia-class submarines. The defense segments achieved a book-to-bill ratio of 8.5-to-1 in the third quarter of 2026 and 4.1-to-1 in the first nine months. Estimated potential contract value in our defense segments was $49 billion on October 4, 2026.

Previous wording

We ended the second quarter of 2026 with a cash and equivalents balance of $4.3 billion compared with $2.3 billion at the end of 2025. Following is a discussion of our major operating, investing and financing activities in the first six months of 2026 and 2025, as classified on the Consolidated Statement of Cash Flows in Part I, Item 1:

Current wording

We ended the third quarter of 2026 with a cash and equivalents balance of $4.4 billion compared with $2.3 billion at the end of 2025. Following is a discussion of our major operating, investing and financing activities in the first nine months of 2026 and 2025, as classified on the Consolidated Statement of Cash Flows in Part I, Item 1:

Previous wording

Cash provided by operating activities was $4 billion in the first six months of 2026 compared with $1.5 billion in the same period in 2025. The primary driver of cash flows in both periods was net earnings. Cash flows in the first six months of 2026 were affected positively by reductions in operating working capital led by our Combat Systems and Aerospace segments.

Current wording

Cash provided by operating activities was $5.7 billion in the first nine months of 2026 compared with $3.6 billion in the same period in 2025. The primary driver of cash flows in both periods was net earnings. Cash flows in the first nine months of 2026 were affected positively by reductions in operating working capital, particularly in our Combat Systems and Aerospace segments. Additionally, cash outflows in the first nine months of 2026 included a contribution of $500 to our qualified pension plans.

Previous wording

Cash used by investing activities was $424 in the first six months of 2026 compared with $216 in the same period in 2025. Our investing activities include cash paid for capital expenditures; business acquisitions; purchases, sales and maturities of marketable securities; and proceeds from asset sales. The primary use of cash for investing activities in both periods was capital expenditures. Capital expenditures were $437 in the first six months of 2026, up 29% compared with $340 in the same period of 2025, and are expected to continue to increase in the second half of 2026.

Current wording

Cash used by investing activities was $900 in the first nine months of 2026 compared with $422 in the same period in 2025. Our investing activities include cash paid for capital expenditures; business acquisitions; purchases, sales and maturities of marketable securities; and proceeds from asset sales. The primary use of cash for investing activities in both periods was capital expenditures. Capital expenditures were $918 in the first nine months of 2026, up 66% compared with $552 in the same period of 2025, and are expected to remain elevated in the fourth quarter of 2026.

Previous wording

Cash used by financing activities was $1.6 billion in the first six months of 2026 compared with $1.4 billion in the same period in 2025. Financing activities include the use of cash for payment of dividends, debt and commercial paper repayments and repurchases of common stock to cover dilution. Our financing activities also include proceeds received from debt and commercial paper issuances and employee stock option exercises.

Current wording

Cash used by financing activities was $2.8 billion in the first nine months of 2026 compared with $2.3 billion in the same period in 2025. Financing activities include the use of cash for payment of dividends, debt and commercial paper repayments and repurchases of common stock to cover dilution. Our financing activities also include proceeds received from debt and commercial paper issuances and employee stock option exercises.

Previous wording

On March 9, 2026, our board of directors (Board) declared a quarterly dividend of $1.59 per share, the 29th consecutive annual increase. Previously, the Board had increased the quarterly dividend to $1.50 per share in March 2025. Cash dividends paid were $834 in the first six months of 2026 compared with $785 in the same period in 2025.

Current wording

On March 9, 2026, our board of directors (Board) declared a quarterly dividend of $1.59 per share, the 29th consecutive annual increase. Previously, the Board had increased the quarterly dividend to

Previous wording

We paid $319 and $600 in the first six months of 2026 and 2025, respectively, to repurchase our outstanding shares to cover dilution. On July 5, 2026, 5.8 million shares remained authorized by our Board for repurchase, representing 2.2% of our total shares outstanding.

Current wording

We paid approximately $600 in the first nine months of 2026 and 2025 to repurchase our outstanding shares to cover dilution. On October 4, 2026, 5.1 million shares remained authorized by our Board for repurchase, representing 1.9% of our total shares outstanding.

Previous wording

In June 2026, we repaid fixed-rate notes of $500 at the scheduled maturity using cash on hand. Fixed-rate notes of $500 mature in August 2026. We currently plan to repay these notes using cash on hand but will continue to monitor market conditions as well as the need for future borrowings. For additional information regarding our debt obligations, including scheduled debt maturities and interest rates, see Note H to the unaudited Consolidated Financial Statements in Part I, Item 1.

Current wording

We repaid fixed-rate notes of $500 in August 2026 and $500 in June 2026 at their respective maturities using cash on hand. For additional information regarding our debt obligations, including scheduled debt maturities and interest rates, see Note H to the unaudited Consolidated Financial Statements in Part I, Item 1.

Previous wording

On July 5, 2026, we had no commercial paper outstanding, but we maintain the ability to access the commercial paper market in the future. Separately, we have $4 billion in a committed bank credit facility for general corporate purposes and working capital needs and to support our commercial paper issuances. We also have an effective shelf registration on file with the Securities and Exchange Commission (SEC) that allows us to access the debt markets.

Current wording

On October 4, 2026, we had no commercial paper outstanding, but we maintain the ability to access the commercial paper market in the future. Separately, we have $4 billion in a committed bank credit facility for general corporate purposes and working capital needs and to support our commercial paper issuances. We may renew or replace this credit facility in whole or in part at or prior to the March 2027 expiration date. We also have an effective shelf registration on file with the Securities and Exchange Commission (SEC) that allows us to access the debt markets.

Previous wording

Accounting for long-term contracts and programs involves the use of various techniques to estimate total contract revenue and costs. Contract estimates are based on various assumptions to project the outcome of future events that often span several years. We review and update our contract-related estimates regularly. We recognize adjustments in estimated profit on contracts under the cumulative catch-up method. Under this method, the impact of the adjustment on profit recorded to date on a contract is recognized in the period the adjustment is identified. The aggregate impact of adjustments in contract estimates changed our operating earnings (and diluted earnings per share) by $29 ($0.08) and $83 ($0.24) for the three- and six-month periods ended July 5, 2026, and $31 ($0.09) and $62 ($0.18)

Current wording

Accounting for long-term contracts and programs involves the use of various techniques to estimate total contract revenue and costs. Contract estimates are based on various assumptions to project the outcome of future events that often span several years. For large programs, many of these estimates are material. We review and update our contract-related estimates regularly. We recognize adjustments in estimated profit on contracts under the cumulative catch-up method. Under this method, the impact of the adjustment on profit recorded to date on a contract is recognized in the period the adjustment is identified. The aggregate impact of adjustments in contract estimates changed our operating earnings (and diluted earnings per share) by $44 ($0.13) and $137 ($0.40) for the three- and nine-month periods ended October 4, 2026, and $57 ($0.17) and $119 ($0.35) for the three- and nine-month periods ended September 28, 2025, respectively. No adjustment on any one contract was material to the unaudited Consolidated Financial Statements for the three- and nine-month periods ended October 4, 2026, or September 28, 2025.