GENERAL DYNAMICS CORP [GD] Filings

10-Q 1 gd-20240929.htm 10-Q gd-20240929

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

[☑] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 29, 2024

[☐] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______ to _______

Commission File Number 1-3671

GENERAL DYNAMICS CORPORATION

(Exact name of registrant as specified in its charter)

Delaware

13-1673581

State or other jurisdiction of incorporation or organization

I.R.S. Employer Identification No.

11011 Sunset Hills Road

Reston,

Virginia

20190

Address of principal executive offices

Zip code

(703) 876-3000

Registrant’s telephone number, including area code

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	GD	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ü No ___

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ü No ___

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ü Accelerated filer ___ Non-accelerated filer ___

Smaller reporting company___☐ Emerging growth company___☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ___

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes___☐ No ü

274,968,619 shares of the registrant’s common stock, $1 par value per share, were outstanding on September 29, 2024.

INDEX



PART I -	FINANCIAL INFORMATION	PAGE
Item 1 -	Unaudited Consolidated Financial Statements
	Consolidated Statement of Earnings (Three Months)	3
	Consolidated Statement of Earnings (Nine Months)	4
	Consolidated Statement of Comprehensive Income (Three and Nine Months)	5
	Consolidated Balance Sheet	6
	Consolidated Statement of Cash Flows	7
	Consolidated Statement of Shareholders ’ Equity (Three and Nine Months)	8
	Notes to Unaudited Consolidated Financial Statements	9
Item 2 -	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28
Item 3 -	Quantitative and Qualitative Disclosures About Market Risk	43
Item 4 -	Controls and Procedures	43
	FORWARD-LOOKING STATEMENTS	43
PART II -	OTHER INFORMATION	45
Item 1 -	Legal Proceedings	45
Item 1A -	Risk Factors	45
Item 2 -	Unregistered Sales of Equity Securities and Use of Proceeds	45
Item 5 -	Other Information	45
Item 6 -	Exhibits	46
	SIGNATURES	47

PART I – FINANCIAL INFORMATION

ITEM 1. UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED STATEMENT OF EARNINGS (UNAUDITED)


	Three Months Ended
(Dollars in millions, except per-share amounts)	September 29, 2024		October 1, 2023
Revenue:
Products	$	6,767	$	6,163
Services	4,904		4,408
	11,671		10,571
Operating costs and expenses:
Products	(5,760)		(5,148)
Services	(4,095)		(3,765)
General and administrative (G&A)	(635)		(601)
	(10,490)		(9,514)
Operating earnings	1,181		1,057
Other, net	15		19
Interest, net	(82)		(85)
Earnings before income tax	1,114		991
Provision for income tax, net	(184)		(155)
Net earnings	$	930	$	836

Earnings per share
Basic	$	3.39	$	3.07
Diluted	$	3.35	$	3.04

The accompanying Notes to Unaudited Consolidated Financial Statements are an integral part of these financial statements.

CONSOLIDATED STATEMENT OF EARNINGS (UNAUDITED)


	Nine Months Ended
(Dollars in millions, except per-share amounts)	September 29, 2024		October 1, 2023
Revenue:
Products	$	20,061	$	17,473
Services	14,317		13,131
	34,378		30,604
Operating costs and expenses:
Products	(17,074)		(14,704)
Services	(12,025)		(11,151)
G&A	(1,906)		(1,792)
	(31,005)		(27,647)
Operating earnings	3,373		2,957
Other, net	47		65
Interest, net	(248)		(265)
Earnings before income tax	3,172		2,757
Provision for income tax, net	(538)		(447)
Net earnings	$	2,634	$	2,310

Earnings per share
Basic	$	9.61	$	8.45
Diluted	$	9.49	$	8.39

The accompanying Notes to Unaudited Consolidated Financial Statements are an integral part of these financial statements.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)


	Three Months Ended				Nine Months Ended
(Dollars in millions)	September 29, 2024		October 1, 2023		September 29, 2024		October 1, 2023
Net earnings	$	930	$	836	$	2,634	$	2,310
Changes in unrealized cash flow hedges	31		(14)		(31)		(33)

Foreign currency translation adjustments	279		(128)		(16)		63
Changes in retirement plans’ funded status	44		169		125		526
Other comprehensive income, pretax	354		27		78		556
Provision for income tax, net	(19)		(30)		(18)		(102)
Other comprehensive income (loss), net of tax	335		(3)		60		454
Comprehensive income	$	1,265	$	833	$	2,694	$	2,764

The accompanying Notes to Unaudited Consolidated Financial Statements are an integral part of these financial statements.

CONSOLIDATED BALANCE SHEET


	(Unaudited)
(Dollars in millions)	September 29, 2024		December 31, 2023

ASSETS
Current assets:
Cash and equivalents	$	2,101	$	1,913
Accounts receivable	3,165		3,004
Unbilled receivables	8,852		7,997
Inventories	10,141		8,578
Other current assets	1,484		2,123
Total current assets	25,743		23,615
Noncurrent assets:
Property, plant and equipment, net	6,324		6,198
Intangible assets, net	1,583		1,656
Goodwill	20,757		20,586
Other assets	2,905		2,755
Total noncurrent assets	31,569		31,195
Total assets	$	57,312	$	54,810

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Short-term debt and current portion of long-term debt	$	2,005	$	507
Accounts payable	3,290		3,095
Customer advances and deposits	10,925		9,564
Other current liabilities	3,337		3,266
Total current liabilities	19,557		16,432
Noncurrent liabilities:
Long-term debt	7,262		8,754
Other liabilities	7,520		8,325
Commitments and contingencies (see Note J)
Total noncurrent liabilities	14,782		17,079
Shareholders’ equity:
Common stock	482		482
Surplus	3,997		3,760
Retained earnings	40,730		39,270
Treasury stock	(21,137)		(21,054)
Accumulated other comprehensive loss	(1,099)		(1,159)
Total shareholders’ equity	22,973		21,299
Total liabilities and shareholders’ equity	$	57,312	$	54,810

The accompanying Notes to Unaudited Consolidated Financial Statements are an integral part of these financial statements.

CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)


	Nine Months Ended
(Dollars in millions)	September 29, 2024		October 1, 2023
Cash flows from operating activities – continuing operations:
Net earnings	$	2,634	$	2,310
Adjustments to reconcile net earnings to net cash from operating activities:
Depreciation of property, plant and equipment	469		446
Amortization of intangible and finance lease right-of-use assets	177		195
Equity-based compensation expense	137		136
Deferred income tax benefit	(107)		(158)
(Increase) decrease in assets, net of effects of business acquisitions:
Accounts receivable	(172)		(89)
Unbilled receivables	(874)		448
Inventories	(1,612)		(1,904)
Increase (decrease) in liabilities, net of effects of business acquisitions:
Accounts payable	193		(83)
Customer advances and deposits	628		2,171



Other, net	479		42
Net cash provided by operating activities	1,952		3,514
Cash flows from investing activities:
Capital expenditures	(561)		(600)

Other, net	(27)		(8)
Net cash used by investing activities	(588)		(608)
Cash flows from financing activities:
Dividends paid	(1,140)		(1,068)
Purchases of common stock	(183)		(434)
Repayment of fixed-rate notes	—		(1,250)






Other, net	150		(40)
Net cash used by financing activities	(1,173)		(2,792)
Net cash used by discontinued operations	(3)		(4)
Net increase in cash and equivalents	188		110
Cash and equivalents at beginning of period	1,913		1,242
Cash and equivalents at end of period	$	2,101	$	1,352
Supplemental cash flow information:
Income tax payments, net	$	(125)	$	(493)
Interest payments	$	(213)	$	(224)

The accompanying Notes to Unaudited Consolidated Financial Statements are an integral part of these financial statements.

CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY (UNAUDITED)


	Three Months Ended
	Common Stock				Retained		Treasury		Accumulated Other Comprehensive		Total Shareholders’
(Dollars in millions)	Par		Surplus		Earnings		Stock		Loss		Equity
June 30, 2024	$	482	$	3,925	$	40,191	$	(21,128)	$	(1,434)	$	22,036

Net earnings	—		—		930		—		—		930
Cash dividends declared	—		—		(391)		—		—		(391)
Equity-based awards	—		72		—		35		—		107
Shares purchased	—		—		—		(44)		—		(44)
Other comprehensive income	—		—		—		—		335		335
September 29, 2024	$	482	$	3,997	$	40,730	$	(21,137)	$	(1,099)	$	22,973

July 2, 2023	$	482	$	3,614	$	38,154	$	(21,077)	$	(1,695)	$	19,478

Net earnings	—		—		836		—		—		836
Cash dividends declared	—		—		(364)		—		—		(364)
Equity-based awards	—		57		—		9		—		66
Shares purchased	—		—		—		(56)		—		(56)
Other comprehensive loss	—		—		—		—		(3)		(3)
October 1, 2023	$	482	$	3,671	$	38,626	$	(21,124)	$	(1,698)	$	19,957


	Nine Months Ended
	Common Stock				Retained		Treasury		Accumulated Other Comprehensive		Total Shareholders’
(Dollars in millions)	Par		Surplus		Earnings		Stock		Loss		Equity
December 31, 2023	$	482	$	3,760	$	39,270	$	(21,054)	$	(1,159)	$	21,299

Net earnings	—		—		2,634		—		—		2,634
Cash dividends declared	—		—		(1,174)		—		—		(1,174)
Equity-based awards	—		237		—		100		—		337
Shares purchased	—		—		—		(183)		—		(183)
Other comprehensive income	—		—		—		—		60		60
September 29, 2024	$	482	$	3,997	$	40,730	$	(21,137)	$	(1,099)	$	22,973

December 31, 2022	$	482	$	3,556	$	37,403	$	(20,721)	$	(2,152)	$	18,568
Net earnings	—		—		2,310		—		—		2,310
Cash dividends declared	—		—		(1,087)		—		—		(1,087)
Equity-based awards	—		115		—		31		—		146
Shares purchased	—		—		—		(434)		—		(434)
Other comprehensive income	—		—		—		—		454		454
October 1, 2023	$	482	$	3,671	$	38,626	$	(21,124)	$	(1,698)	$	19,957

The accompanying Notes to Unaudited Consolidated Financial Statements are an integral part of these financial statements.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in millions, except share and per-share amounts or unless otherwise noted)

A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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.

The following is a discussion of certain significant accounting policies, and further discussion is contained in other notes to these financial statements.

Basis of Consolidation and Classification. The unaudited Consolidated Financial Statements include the accounts of General Dynamics Corporation and our wholly owned and majority-owned subsidiaries. We eliminate all intercompany balances and transactions in the unaudited Consolidated Financial Statements.

Consistent with industry practice, we classify assets and liabilities related to long-term contracts as current, even though some of these amounts may not be realized within one year.

Interim Financial Statements. The unaudited Consolidated Financial Statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). These rules and regulations permit some of the information and footnote disclosures included in financial statements prepared in accordance with U.S. generally accepted accounting principles (GAAP) to be condensed or omitted.

Our fiscal quarters are typically 13 weeks in length. Because our fiscal year ends on December 31, the number of days in our first and fourth quarters varies slightly from year to year. Operating results for the three- and nine-month periods ended September 29, 2024, are not necessarily indicative of the results that may be expected for the year ending December 31, 2024.

The unaudited Consolidated Financial Statements contain all adjustments that are of a normal recurring nature necessary for a fair presentation of our results of operations and financial condition for the three- and nine-month periods ended September 29, 2024, and October 1, 2023.

These unaudited Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2023.

Property, Plant and Equipment, Net. Property, plant and equipment (PP&E) is carried at historical cost, net of accumulated depreciation. Net PP&E consisted of the following:


	September 29, 2024		December 31, 2023
PP&E	$	13,393	$	13,000
Accumulated depreciation	(7,069)		(6,802)
PP&E, net	$	6,324	$	6,198

Recent Accounting Pronouncements. For a discussion of accounting standards that have been issued by the Financial Accounting Standards Board (FASB) but are not yet effective, refer to the Recent Accounting Pronouncements section in our Annual Report on Form 10-K for the year ended

December 31, 2023. These standards are not expected to have a material impact on our results of operations, financial condition or cash flows.

B. REVENUE

Performance Obligations. A performance obligation is a promise in a contract to transfer a distinct good or service to the customer, and is the unit of account for revenue. A contract’s transaction price is allocated to each distinct performance obligation within that contract and recognized as revenue when, or as, the performance obligation is satisfied. The majority of our contracts have a single performance obligation as the promise to transfer the individual goods or services is not separately identifiable from other promises in the contracts and is, therefore, not distinct. Some of our contracts have multiple performance obligations, most commonly due to the contract covering multiple phases of the product life cycle (development, production, maintenance and support). For contracts with multiple performance obligations, we allocate the contract’s transaction price to each performance obligation using our best estimate of the standalone selling price of each distinct good or service in the contract. The primary method used to estimate standalone selling price is the expected cost plus a margin approach, under which we forecast our expected costs of satisfying a performance obligation and then add an appropriate margin for that distinct good or service.

Contract modifications are routine in the performance of our contracts. Contracts are often modified to account for changes in customer specifications or requirements. In most instances, contract modifications are for goods or services that are not distinct and, therefore, are accounted for as part of the existing contract.

Our performance obligations are satisfied over time as work progresses or at a point in time. Revenue from products and services transferred to customers over time accounted for 79% and 78% of our revenue for the three- and nine-month periods ended September 29, 2024, respectively, and 79% and 80% for the three- and nine-month periods ended October 1, 2023, respectively. Substantially all of our revenue in the defense segments is recognized over time because control is transferred continuously to our customers. Typically, revenue is recognized over time using costs incurred to date relative to total estimated costs at completion to measure progress toward satisfying our performance obligations. Incurred costs represent work performed, which corresponds with, and thereby best depicts, the transfer of control to the customer. Contract costs include labor, material, overhead and, when appropriate, G&A expenses.

Revenue from goods and services transferred to customers at a point in time accounted for 21% and 22% of our revenue for the three- and nine-month periods ended September 29, 2024, respectively, and 21% and 20% for the three- and nine-month periods ended October 1, 2023, respectively. Most of our revenue recognized at a point in time is for the manufacture of business jet aircraft in our Aerospace segment. Revenue on these contracts is recognized when the customer obtains control of the asset, which is generally upon delivery and acceptance by the customer of the fully outfitted aircraft.

On September 29, 2024, we had $92.6 billion of remaining performance obligations, which we refer to as total backlog. We expect to recognize approximately 55% of our remaining performance obligations as revenue by year-end 2025, an additional 30% by year-end 2027 and the balance thereafter.

Contract Estimates. The majority of our revenue is derived from long-term contracts and programs that can span several years. Accounting for long-term contracts and programs involves the use of various techniques to estimate total contract revenue and costs. We estimate the profit on a contract as the

difference between the total estimated revenue and expected costs to complete a contract and recognize that profit over the life of the contract.

Contract estimates are based on various assumptions to project the outcome of future events that often span several years. These assumptions include labor productivity and availability; the complexity of the work to be performed; the cost and availability of materials; the performance of subcontractors; and the availability and timing of funding from the customer.

The nature of our contracts gives rise to several types of variable consideration, including claims, award fees and incentive fees. We include in our contract estimates additional revenue for contract modifications or claims against the customer when we believe we have an enforceable right to the modification or claim, the amount can be estimated reliably and its realization is probable. In evaluating these criteria, we consider the contractual/legal basis for the claim, the cause of any additional costs incurred, the reasonableness of those costs and the objective evidence available to support the claim. We include award fees or incentive fees in the estimated transaction price when there is a basis to reasonably estimate the amount of the fee. These estimates are based on historical award experience, anticipated performance and our best informed judgment at the time.

As a significant change in one or more of these estimates could affect the profitability of our contracts, 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. Revenue and profit in future periods of contract performance are recognized using the adjusted estimate. If at any time the estimate of contract profitability indicates an anticipated loss on the contract, we recognize the total loss in the period it is identified.

The impact of adjustments in contract estimates on our operating earnings can be reflected in either operating costs and expenses or revenue. The aggregate impact of adjustments in contract estimates changed our revenue, operating earnings and diluted earnings per share as follows:


	Three Months Ended				Nine Months Ended
	September 29, 2024		October 1, 2023		September 29, 2024		October 1, 2023
Revenue	$	62	$	27	$	211	$	179
Operating earnings	(12)		11		101		98
Diluted earnings per share	$	(0.03)	$	0.03	$	0.29	$	0.28

No adjustment on any one contract was material to the unaudited Consolidated Financial Statements for the three- and nine-month periods ended September 29, 2024, or October 1, 2023.

We have large, long-term contracts with the U.S. Navy for Virginia-class submarines and an international customer for tracked vehicles in which our estimates for contract revenue include variable consideration from anticipated contract modifications. For both contracts, it is reasonably possible that the actual amount of variable consideration realized could be less than our estimate, which could have a material unfavorable impact on our results of operations.

In addition, during the quarter the Navy was informed of deficiencies in welding procedures conducted by our teammate and subcontractor on our Columbia-class and Virginia-class submarine programs. It is reasonably possible that addressing these deficiencies could potentially impose costs or

schedule delays not accounted for in our estimates related to our long-term contracts with the Navy for the construction of submarines.

Revenue by Category. Our portfolio of products and services consists of more than 9,000 active contracts. The following series of tables presents our revenue disaggregated by several categories.

Revenue by major products and services was as follows:


	Three Months Ended				Nine Months Ended
	September 29, 2024		October 1, 2023		September 29, 2024		October 1, 2023
Aircraft manufacturing	$	1,686	$	1,348	$	5,014	$	3,715
Aircraft services	796		684		2,492		2,162
Total Aerospace	2,482		2,032		7,506		5,877
Nuclear-powered submarines	2,630		2,027		7,496		6,186
Surface ships	658		697		2,023		2,016
Repair and other services	311		278		864		851
Total Marine Systems	3,599		3,002		10,383		9,053
Military vehicles	1,295		1,280		3,850		3,707
Weapons systems, armament and munitions	658		739		2,033		1,650
Engineering and other services	259		205		719		547
Total Combat Systems	2,212		2,224		6,602		5,904
Information technology (IT) services	2,220		2,149		6,556		6,445
C5ISR* solutions	1,158		1,164		3,331		3,325
Total Technologies	3,378		3,313		9,887		9,770
Total revenue	$	11,671	$	10,571	$	34,378	$	30,604

*Command, control, communications, computers, cyber, intelligence, surveillance and reconnaissance

Revenue by contract type was as follows:


Three Months Ended September 29, 2024	Aerospace		Marine Systems		Combat Systems		Technologies		Total Revenue
Fixed-price	$	2,250	$	1,666	$	1,957	$	1,359	$	7,232
Cost-reimbursement	—		1,933		238		1,503		3,674
Time-and-materials	232		—		17		516		765
Total revenue	$	2,482	$	3,599	$	2,212	$	3,378	$	11,671
Three Months Ended October 1, 2023
Fixed-price	$	1,816	$	1,513	$	1,992	$	1,428	$	6,749
Cost-reimbursement	—		1,489		220		1,408		3,117
Time-and-materials	216		—		12		477		705
Total revenue	$	2,032	$	3,002	$	2,224	$	3,313	$	10,571


Nine Months Ended September 29, 2024	Aerospace		Marine Systems		Combat Systems		Technologies		Total Revenue
Fixed-price	$	6,772	$	4,893	$	5,844	$	4,033	$	21,542
Cost-reimbursement	—		5,489		706		4,350		10,545
Time-and-materials	734		1		52		1,504		2,291
Total revenue	$	7,506	$	10,383	$	6,602	$	9,887	$	34,378
Nine Months Ended October 1, 2023
Fixed-price	$	5,145	$	4,687	$	5,204	$	4,255	$	19,291
Cost-reimbursement	—		4,365		651		4,118		9,134
Time-and-materials	732		1		49		1,397		2,179
Total revenue	$	5,877	$	9,053	$	5,904	$	9,770	$	30,604

Our segments operate under fixed-price, cost-reimbursement and time-and-materials contracts. Our production contracts are primarily fixed-price. Under these contracts, we agree to perform a specific scope of work for a fixed amount. Contracts for research, engineering, repair and maintenance, and other services are typically cost-reimbursement or time-and-materials. Under cost-reimbursement contracts, the customer reimburses contract costs incurred and pays a fixed, incentive or award-based fee. The amount for an incentive or award fee is determined by our ability to achieve targets set in the contract, such as cost, quality, schedule and performance. Under time-and-materials contracts, the customer pays a fixed hourly rate for direct labor and generally reimburses us for the cost of materials.

Each of these contract types presents advantages and disadvantages. Typically, we assume more risk with fixed-price contracts. However, these types of contracts offer additional profits when we complete the work for less than originally estimated. Cost-reimbursement contracts generally subject us to lower risk. Accordingly, the associated base fees are usually lower than fees earned on fixed-price contracts. Under time-and-materials contracts, our profit may vary if actual labor-hour rates vary significantly from the negotiated rates. Also, because these contracts may provide little or no fee for managing material costs, the content mix can impact profitability.

Revenue by customer was as follows:


Three Months Ended September 29, 2024	Aerospace		Marine Systems		Combat Systems		Technologies		Total Revenue
U.S. government:
Department of Defense (DoD)	$	83	$	3,571	$	1,274	$	1,981	$	6,909
Non-DoD	—		—		1		1,238		1,239
Foreign military sales (FMS)	9		28		211		7		255
Total U.S. government	92		3,599		1,486		3,226		8,403
U.S. commercial	1,586		—		61		48		1,695
Non-U.S. government	294		—		631		98		1,023
Non-U.S. commercial	510		—		34		6		550
Total revenue	$	2,482	$	3,599	$	2,212	$	3,378	$	11,671
Three Months Ended October 1, 2023
U.S. government:
DoD	$	46	$	2,970	$	1,309	$	1,914	$	6,239
Non-DoD	—		1		3		1,212		1,216
FMS	14		31		143		14		202
Total U.S. government	60		3,002		1,455		3,140		7,657
U.S. commercial	1,375		—		53		49		1,477
Non-U.S. government	67		—		692		105		864
Non-U.S. commercial	530		—		24		19		573
Total revenue	$	2,032	$	3,002	$	2,224	$	3,313	$	10,571


Nine Months Ended September 29, 2024	Aerospace		Marine Systems		Combat Systems		Technologies		Total Revenue
U.S. government:
DoD	$	187	$	10,280	$	3,742	$	5,767	$	19,976
Non-DoD	—		1		6		3,586		3,593
FMS	30		98		675		28		831
Total U.S. government	217		10,379		4,423		9,381		24,400
U.S. commercial	4,225		2		180		146		4,553
Non-U.S. government	989		2		1,890		326		3,207
Non-U.S. commercial	2,075		—		109		34		2,218
Total revenue	$	7,506	$	10,383	$	6,602	$	9,887	$	34,378
Nine Months Ended October 1, 2023
U.S. government:
DoD	$	241	$	8,948	$	3,184	$	5,654	$	18,027
Non-DoD	—		2		8		3,582		3,592
FMS	53		101		435		33		622
Total U.S. government	294		9,051		3,627		9,269		22,241
U.S. commercial	3,558		1		159		151		3,869
Non-U.S. government	317		1		2,044		297		2,659
Non-U.S. commercial	1,708		—		74		53		1,835
Total revenue	$	5,877	$	9,053	$	5,904	$	9,770	$	30,604

Contract Balances. The timing of revenue recognition, billings and cash collections results in billed accounts receivable, unbilled receivables (contract assets), and customer advances and deposits (contract liabilities) on the Consolidated Balance Sheet. In our defense segments, amounts are billed as work progresses in accordance with agreed-upon contractual terms, either at periodic intervals (e.g., biweekly or monthly) or upon achievement of contractual milestones. Generally, billing occurs subsequent to revenue recognition, resulting in contract assets. However, we sometimes receive advances or deposits from our customers, particularly on our international contracts, before revenue is recognized, resulting in contract liabilities. These assets and liabilities are reported on the Consolidated Balance Sheet on a contract-by-contract basis at the end of each reporting period. In our Aerospace segment, we generally receive deposits from customers upon contract execution and upon achievement of contractual milestones. These deposits are liquidated when revenue is recognized. Changes in the contract asset and liability balances during the nine-month period ended September 29, 2024, were not materially impacted by any other factors.

Revenue recognized for the three- and nine-month periods ended September 29, 2024, and October 1, 2023, that was included in the contract liability balance at the beginning of each year was $1.1 billion and $4.5 billion, and $869 and $3.5 billion, respectively. This revenue represented primarily the sale of business jet aircraft.

C. EARNINGS PER SHARE

We compute basic earnings per share (EPS) using net earnings for the period and the weighted average number of common shares outstanding during the period. Diluted EPS incorporates the additional shares issuable upon the assumed exercise of stock options and the release of restricted stock and restricted stock units (RSUs).

Basic and diluted weighted average shares outstanding were as follows (in thousands):


	Three Months Ended		Nine Months Ended
	September 29, 2024	October 1, 2023	September 29, 2024	October 1, 2023
Basic weighted average shares outstanding	274,393	272,585	274,004	273,242
Dilutive effect of stock options and restricted stock/RSUs*	3,495	2,160	3,514	2,204
Diluted weighted average shares outstanding	277,888	274,745	277,518	275,446

* Excludes unvested stock options, and vested stock options that had exercise prices in excess of the average market price of our common stock during the period and, therefore, the effect of including these options would be antidilutive. These options totaled 1,277 and 962 for the three- and nine-month periods ended September 29, 2024, and 4,464 and 4,101 for the three- and nine-month periods ended October 1, 2023, respectively.

D. INCOME TAXES

Net Deferred Tax Liability. Our deferred tax assets and liabilities are included in other noncurrent assets and liabilities on the Consolidated Balance Sheet. Our net deferred tax liability consisted of the following:


	September 29, 2024		December 31, 2023
Deferred tax asset	$	28	$	28
Deferred tax liability	(581)		(655)
Net deferred tax liability	$	(553)	$	(627)

Tax Uncertainties. We participate in the Internal Revenue Service (IRS) Compliance Assurance Process (CAP), a real-time audit of our consolidated federal corporate income tax return. The IRS has examined our consolidated federal income tax returns through 2022. For tax years ending December 31, 2023, and December 31, 2024, the IRS placed us in the phase of CAP reserved for taxpayers whose risk of noncompliance does not warrant the continual use of IRS examination resources.

For all periods open to examination by tax authorities, we periodically assess our liabilities and contingencies based on the latest available information. Where we believe there is more than a 50% chance that our tax position will not be sustained, we record our best estimate of the resulting tax liability, including interest, in the Consolidated Financial Statements. We include any interest or penalties incurred in connection with income taxes as part of income tax expense.

Based on all known facts and circumstances and applicable tax law, we believe the total amount of any unrecognized tax benefits on September 29, 2024, was not material to our results of operations, financial condition or cash flows. In addition, there are no tax positions for which it is reasonably possible that the unrecognized tax benefits will vary significantly over the next 12 months, producing, individually or in the aggregate, a material effect on our results of operations, financial condition or cash flows.

The Organization for Economic Co-operation and Development has issued “Pillar Two” model rules introducing a new global minimum tax of 15% on a country-by-country basis, with certain aspects intended to be effective on January 1, 2024, and other aspects on January 1, 2025. Although it is uncertain whether the U.S. will adopt any Pillar Two rules, some countries have enacted, introduced, or are considering implementing legislation. Because we generally do not have material operations in jurisdictions with tax rates lower than the proposed Pillar Two minimum, any legislation enacted consistent with the Pillar Two model rules is not expected to have a material effect on our results of operations, financial condition or cash flows.

E. UNBILLED RECEIVABLES

Unbilled receivables represent revenue recognized on long-term contracts (contract costs and estimated profits) less associated advances and progress billings. These amounts will be billed in accordance with the agreed-upon contractual terms. Unbilled receivables consisted of the following:


	September 29, 2024		December 31, 2023
Unbilled revenue	$	41,814	$	40,552
Advances and progress billings	(32,962)		(32,555)
Net unbilled receivables	$	8,852	$	7,997

On September 29, 2024, and December 31, 2023, net unbilled receivables included $1.4 billion and $1.2 billion, respectively, associated with a large international tracked vehicle contract in our Combat Systems segment. The contract, signed in 2010, experienced an unbilled receivable build-up in 2021 and 2022. The customer resumed payments on the contract in the first quarter of 2023.

F. INVENTORIES

The majority of our inventories are for business jet aircraft. Our inventories are stated at the lower of cost or net realizable value. Work in process represents largely labor, material and overhead costs associated with aircraft in the manufacturing process and is based primarily on the estimated average unit cost in a production lot. Substantially all of our raw materials are valued on either the average cost or the first-in, first-out method. We record pre-owned aircraft acquired in connection with the sale of new aircraft at the lower of the trade-in value or the estimated net realizable value.

Inventories consisted of the following:


	September 29, 2024		December 31, 2023
Work in process	$	6,767	$	5,655
Raw materials	3,283		2,886
Finished goods	29		22
Pre-owned aircraft	62		15
Total inventories	$	10,141	$	8,578

The increase in total inventories during the nine-month period ended September 29, 2024, was due primarily to the ramp-up in production of new Gulfstream aircraft models, including the G700 that began deliveries in the second quarter of 2024, as well as increased production of in-service aircraft reflecting strong customer demand. Customer deposits associated with firm orders for these aircraft, which are reported in customer advances and deposits and other noncurrent liabilities on the Consolidated Balance Sheet, also increased.

G. GOODWILL AND INTANGIBLE ASSETS

Goodwill. The changes in the carrying amount of goodwill by reporting unit were as follows:


	Aerospace		Marine Systems		Combat Systems		Technologies		Total Goodwill
December 31, 2023 (a)	$	3,199	$	297	$	2,812	$	14,278	$	20,586
Acquisitions (b)	7		—		39		156		202
Other (c)	(6)		—		(22)		(3)		(31)
September 29, 2024 (a)	$	3,200	$	297	$	2,829	$	14,431	$	20,757

(a)Goodwill in the Technologies reporting unit was net of $1.8 billion of accumulated impairment losses.

(b)Included adjustments during the purchase price allocation period.

(c)Consisted primarily of adjustments for foreign currency translation.

Intangible Assets. Intangible assets consisted of the following:


	Gross Carrying Amount (a)		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount (a)		Accumulated Amortization		Net Carrying Amount
	September 29, 2024						December 31, 2023
Contract and program intangible assets (b)	$	3,295	$	(1,960)	$	1,335	$	3,256	$	(1,868)	$	1,388
Trade names and trademarks	540		(302)		238		542		(288)		254
Technology and software	62		(52)		10		65		(51)		14
Other intangible assets	60		(60)		—		64		(64)		—
Total intangible assets	$	3,957	$	(2,374)	$	1,583	$	3,927	$	(2,271)	$	1,656

(a)Changes in gross carrying amounts consisted primarily of adjustments for acquired and divested intangible assets and foreign currency translation.

(b)Consisted of acquired backlog and probable follow-on work and associated customer relationships.

Amortization expense is included in operating costs and expenses in the Consolidated Statement of Earnings. Amortization expense for intangible assets was $45 and $134 for the three- and nine-month periods ended September 29, 2024, and $47 and $147 for the three- and nine-month periods ended October 1, 2023, respectively.

H. DEBT

Debt consisted of the following:


		September 29, 2024		December 31, 2023
Fixed-rate notes due:	Interest rate:
November 2024	2.375%	$	500	$	500
April 2025	3.250%	750		750
May 2025	3.500%	750		750
June 2026	1.150%	500		500
August 2026	2.125%	500		500
April 2027	3.500%	750		750
November 2027	2.625%	500		500
May 2028	3.750%	1,000		1,000
April 2030	3.625%	1,000		1,000
June 2031	2.250%	500		500
April 2040	4.250%	750		750
June 2041	2.850%	500		500
November 2042	3.600%	500		500
April 2050	4.250%	750		750



Other	Various	85		90
Total debt principal		9,335		9,340
Less unamortized debt issuance costs and discounts		68		79
Total debt		9,267		9,261
Less current portion		2,005		507
Long-term debt		$	7,262	$	8,754

On September 29, 2024, we had no commercial paper outstanding, but we maintain the ability to access the commercial paper market in the future. Separately, we have a $4 billion committed bank credit facility for general corporate purposes and working capital needs and to support our commercial paper issuances. This credit facility expires in March 2027. We may renew or replace this credit facility in whole or in part at or prior to its expiration date. We also have an effective shelf registration on file with the SEC that allows us to access the debt markets.

Our financing arrangements contain a number of customary covenants and restrictions. We were in compliance with all covenants and restrictions on September 29, 2024.

I. OTHER LIABILITIES

A summary of significant other liabilities by balance sheet caption follows:


	September 29, 2024		December 31, 2023

Salaries and wages	$	1,180	$	1,191
Dividends payable	391		362
Lease liabilities	324		325
Workers’ compensation	247		237

Other	1,195		1,151
Total other current liabilities	$	3,337	$	3,266

Retirement benefits	$	2,058	$	2,219
Customer deposits on commercial contracts	1,847		2,576
Lease liabilities	1,576		1,497
Other	2,039		2,033
Total other liabilities	$	7,520	$	8,325

J. COMMITMENTS AND CONTINGENCIES

Litigation

On October 6, 2023, a putative class action lawsuit was filed in the United States District Court for the Eastern District of Virginia against General Dynamics Corporation, certain of its subsidiaries and various other companies alleging that they conspired, in violation of the Sherman Act, not to solicit naval architects and marine engineers from each other. The named plaintiffs purport to represent a class of individuals consisting of all naval architects and marine engineers employed by the shipyard and consultancy defendants, their predecessors, their subsidiaries and/or their related entities in the United States at any time since January 1, 2000. The plaintiffs allege that the conspiracy suppressed compensation paid to the putative class members, and the plaintiffs seek trebled monetary damages, attorneys’ fees, injunctive and other equitable relief. We are defending the matter. On April 19, 2024, the District Court dismissed the plaintiffs’ complaint. Plaintiffs initiated an appeal of the dismissal of their complaint to the U.S. Court of Appeals for the Fourth Circuit on May 20, 2024. Given the current status of this matter, we are unable to express a view regarding the ultimate outcome or, if the outcome is adverse, to estimate an amount or range of reasonably possible loss. Depending on the outcome of this matter, there could be a material impact on our results of operations, financial condition and cash flows.

Additionally, various other claims and legal proceedings incidental to the normal course of business are pending or threatened against us. These other matters relate to such issues as government investigations and claims, the protection of the environment, asbestos-related claims and employee-related matters. The nature of litigation is such that we cannot predict the outcome of these other matters. However, based on information currently available, we believe any potential liabilities in these other proceedings, individually or in the aggregate, will not have a material impact on our results of operations, financial condition or cash flows.

Environmental

We are subject to and affected by a variety of federal, state, local and foreign environmental laws and regulations. We are directly or indirectly involved in environmental investigations or remediation at some of our current and former facilities and third-party sites that we do not own but where we have

been designated a potentially responsible party (PRP) by the U.S. Environmental Protection Agency or a state environmental agency. Based on historical experience, we expect that a significant percentage of the total remediation and compliance costs associated with these facilities will continue to be allowable contract costs and, therefore, recoverable under U.S. government contracts.

As required, we provide financial assurance for certain sites undergoing or subject to investigation or remediation. We accrue environmental costs when it is probable that a liability has been incurred and the amount can be reasonably estimated. Where applicable, we seek insurance recovery for costs related to environmental liabilities. We do not record insurance recoveries before collection is considered probable. Based on all known facts and analyses, we do not believe that our liability at any individual site, or in the aggregate, arising from such environmental conditions will be material to our results of operations, financial condition or cash flows. We also do not believe that the range of reasonably possible additional loss beyond what has been recorded would be material to our results of operations, financial condition or cash flows.

Other

Government Contracts. As a government contractor, we are subject to U.S. government audits and investigations relating to our operations, including claims for fines, penalties, and compensatory and treble damages. We believe the outcome of such ongoing government audits and investigations will not have a material impact on our results of operations, financial condition or cash flows.

In the performance of our contracts, we routinely request contract modifications that require additional funding from the customer. Most often, these requests are due to customer-directed changes in the scope of work. While we are entitled to recovery of these costs under our contracts, the administrative process with our customer may be protracted. Based on the circumstances, we periodically file requests for equitable adjustment (REAs) that are sometimes converted into claims. In some cases, these requests are disputed by our customer. We believe our outstanding modifications, REAs and other claims will be resolved without material impact to our results of operations, financial condition or cash flows.

Letters of Credit and Guarantees. In the ordinary course of business, we have entered into letters of credit, bank guarantees, surety bonds and other similar arrangements with financial institutions and insurance carriers totaling approximately $1.8 billion on September 29, 2024. In addition, from time to time and in the ordinary course of business, we contractually guarantee the payment or performance of our subsidiaries arising under certain contracts.

Aircraft Trade-ins. In connection with orders for new aircraft in contract backlog, some Gulfstream customers hold options to trade in aircraft as partial consideration in their new-aircraft transaction. These trade-in commitments are generally structured to establish the fair market value of the trade-in aircraft at a date generally 45 or fewer days preceding delivery of the new aircraft to the customer. At that time, the customer is required to either exercise the option or allow its expiration. Other trade-in commitments are structured to guarantee a predetermined trade-in value. These commitments present more risk in the event of an adverse change in market conditions. In either case, any excess of the preestablished trade-in price above the fair market value at the time the new aircraft is delivered is treated as a reduction of revenue in the new-aircraft sales transaction. As of September 29, 2024, the estimated change in fair market values from the date of the commitments was not material.

Product Warranties. We provide warranties to our customers associated with certain product sales. We record estimated warranty costs in the period in which the related products are delivered. The warranty liability recorded at each balance sheet date is based generally on the number of months of

warranty coverage remaining for the products delivered and the average historical monthly warranty payments. Warranty obligations incurred in connection with long-term production contracts are accounted for within the contract estimates at completion. Our other warranty obligations, primarily for business jet aircraft, are included in other current and noncurrent liabilities on the Consolidated Balance Sheet.

The changes in the carrying amount of warranty liabilities for the nine-month periods ended September 29, 2024, and October 1, 2023, were as follows:


Nine Months Ended	September 29, 2024		October 1, 2023
Beginning balance	$	597	$	603
Warranty expense	84		57
Payments	(76)		(74)
Adjustments	9		5
Ending balance	$	614	$	591

K. SHAREHOLDERS’ EQUITY

Share Repurchases. In the nine-month period ended September 29, 2024, we repurchased 0.7 million of our outstanding shares for $183. On September 29, 2024, 4 million shares remained authorized by our board of directors (Board) for repurchase, representing 1.5% of our total shares outstanding. We repurchased 2 million shares for $434 in the nine-month period ended October 1, 2023.

Dividends per Share. Our Board declared dividends per share of $1.42 and $4.26 for the three- and nine-month periods ended September 29, 2024, and $1.32 and $3.96 for the three- and nine-month periods ended October 1, 2023, respectively. We paid cash dividends of $390 and $1.1 billion for the three- and nine-month periods ended September 29, 2024, and $363 and $1.1 billion for the three- and nine-month periods ended October 1, 2023, respectively.

Accumulated Other Comprehensive Loss. The changes, pretax and net of tax, in each component of accumulated other comprehensive loss (AOCL) consisted of the following:


	Changes in Unrealized Cash Flow Hedges		Foreign Currency Translation Adjustments		Changes in Retirement Plans’ Funded Status		AOCL
December 31, 2023	$	11	$	673	$	(1,843)	$	(1,159)
Other comprehensive income, pretax	(31)		(16)		125		78
Provision for income tax, net	7		—		(25)		(18)
Other comprehensive income, net of tax	(24)		(16)		100		60
September 29, 2024	$	(13)	$	657	$	(1,743)	$	(1,099)


December 31, 2022	$	4	$	260	$	(2,416)	$	(2,152)
Other comprehensive income, pretax	(33)		63		526		556
Provision for income tax, net	8		—		(110)		(102)
Other comprehensive income, net of tax	(25)		63		416		454
October 1, 2023	$	(21)	$	323	$	(2,000)	$	(1,698)

Amounts reclassified out of AOCL related primarily to changes in our retirement plans’ funded status and included pretax recognized net actuarial losses and amortization of prior service credit. See Note O for these amounts, which are included in our net periodic pension and other post-retirement benefit cost (credit).