Operating cash flow in Q2 2023 was affected by multiple factors. Specifically, there was a **significant increase in inventories** which tied up more cash, along with a **decrease in unbilled receivables** due to progress payments on large international vehicle contracts. While **increased customer deposits** from Gulfstream aircraft orders provided a cash inflow, the net effect was a reduction in operating cash flow for the period.  **[0000040533-23-000058_gd-20230702exhibit991.htm:4]** **[0000040533-23-000058_gd-20230702exhibit991.htm:3]** **[0000040533-23-000060_gd-20230702.htm:30]** 

Why was Operating Cash Flow so low in Q2 2023?

The documents do not provide any specific explanation for a "sharp drop" in Free Cash Flow in Q2 2023 relative to the previous quarter. One document discusses factors for a **19.3% year-over-year increase** in Free Cash Flow in Q2 2023 (ranging from **$435 million in Q2 2022 to $519 million in Q2 2023**) by highlighting **higher net cash provided by operating activities** and **lower capital expenditures**.  **[GD_3329384_1]** **[0000040533-23-000058_gd-20230702exhibit991.htm:4]**  However, they do not address the change from Q1 2023’s **$1,301 million** to Q2 2023’s **$519 million**. Without additional details on the quarter-over-quarter shift, we cannot identify what drove the drop in Free Cash Flow in Q2 2023 relative to Q1 2023.

What drove the sharp drop in Free Cash Flow in Q2 2023?

The negative net change in cash in Q2 2023 was driven by several factors. **First**, there was a decrease in net cash provided by operating activities—from **$2,627 million** in 2022 down to **$2,193 million** in 2023. **Second**, cash flows from investing activities worsened, with net cash used increasing to **$404 million** in 2023 compared to **$365 million** in 2022. **Third**, financing activities also contributed with an increase in net cash used, reaching **$1,875 million** in 2023 compared to **$1,663 million** in 2022, which included the repayment of fixed-rate notes of **$750 million** and dividend payments of **$705 million**.  **[0000040533-23-000058_gd-20230702exhibit991.htm:3]** 

What contributed to the negative net change in cash in Q2 2023?

7116ba2a5b3f4f267aafc038ea92adbbf2218d86a80870afa78b8de763c04cfd

In Q1 2024, **cash and equivalents were notably low due to a cumulative net decline of $877 million** over the quarter. This decrease was driven by a combination of **operating, investing, and financing activities**. Specifically, there was a **net cash outflow of $278 million from operating activities**, largely due to increased operating working capital from ramping up production in the Aerospace segment, alongside changes in Marine Systems and Combat Systems. Additionally, **investing activities used $182 million mainly for capital expenditures**, and **financing activities resulted in a net outflow of $416 million**, which included significant dividend payments of $361 million and $105 million spent on repurchasing common stock.  **[0000040533-24-000013_gd-20240331exhibit991.htm:3]** **[0000040533-24-000014_gd-20240331.htm:2]** **[0000040533-24-000014_gd-20240331.htm:28]** 

Why was Cash and equivalents so low in Q1 2024?

The **documents** indicate that the **short-term debt and current portion of long-term debt** increased significantly from **$507 million** in Q1 2024 to **$2,004 million** in Q2 2024, but they do not provide specific reasons for this spike.  **[0000040533-24-000033_gd-20240630exhibit991.htm:3]** **[0000040533-24-000035_gd-20240630.htm:2]** 

What drove the spike in short-term debt in Q2 2024?

General Dynamics’ **inventories surged in Q1 2024** primarily because of a **ramp-up in production of new Gulfstream aircraft models**—notably following the **FAA certification of the G700 on March 29, 2024**, which enabled customer deliveries—and because of an **increase in production of in-service aircraft** driven by **strong customer demand** that led to higher work-in-process and raw materials inventories.  **[0000040533-24-000014_gd-20240331.htm:9]** **[0000040533-24-000013_gd-20240331exhibit991.htm:3]** 

Why did Inventories surge in Q1 2024?

The drop in **Total noncurrent liabilities** in Q2 2024 was driven primarily by a **reduction in long-term debt**, which declined from **$8,754 million** to **$7,257 million** (a reduction of **$1,497 million**), along with a decrease in **other noncurrent liabilities** from **$8,325 million** to **$7,892 million**. This combined reduction of **$1,930 million** reflects the company’s strategic use of cash to repay its debt, including plans to retire **$500 million of fixed-rate notes** later in 2024.  **[0000040533-24-000035_gd-20240630.htm:2]** **[0000040533-24-000033_gd-20240630exhibit991.htm:3]** **[GD_3394092_5]** 

What caused the drop in Total noncurrent liabilities in Q2 2024?

3cded9bdc7bc379d0922efb38a1320916665c126b66b54f49c6414b799ad0b0e

**Other, net** was so low in Q4 2023 because of a **substantial reduction in pension income**, which was mainly driven by **higher interest rates** and a **change in the investment mix** in one of GD’s pension plans as its funded status improved.  **[0000040533-24-000004_gd-20231231exhibit991.htm:2]** **[0000040533-24-000007_gd-20231231.htm:44]** 

Why was Other, net so low in Q4 2023?

The decline in net earnings for **FY 2023** was primarily due to **increased operating costs and expenses** that outweighed the benefits of rising revenue. Even though revenue grew by **7.3%**, reaching **$42,272 million**, the company saw operating costs and expenses rise by **8.0%** – driven largely by supply-chain cost pressures and the demands of lower-margin projects in their Combat Systems segment. Additionally, a slightly higher income tax provision, which increased from **$646 million** in FY 2022 to **$669 million** in FY 2023, further contributed to the lower net earnings, despite some offset from a minor decrease in net interest expense. These combined factors reduced the overall operating margin from **10.7%** to **10.0%** and led to the lower net earnings in FY 2023.  **[0000040533-24-000007_gd-20231231.htm:42]** **[0000040533-24-000007_gd-20231231.htm:57]** 

What factors led to lower net earnings in FY 2023 despite rising revenue?

General Dynamics experienced a **6.7% decline** in diluted EPS in Q3 2023 compared to Q3 2022 because of several factors. The company’s **net earnings fell** from **$902 million** to **$836 million** (a **7.3% decrease**), and there was also a **3.7% decline** in operating earnings, which dropped from **$1,098 million** to **$1,057 million**. Additionally, despite a **6% increase in revenue**, a **100 basis point contraction in operating margin** and a slight reduction in diluted weighted average shares outstanding contributed to the EPS decrease.  **[GD_3361821_1]** **[0000040533-23-000070_gd-20231001.htm:11]** **[0000040533-23-000068_gd-20231001exhibit991.htm:2]** 

Why did EPS - Diluted drop in Q3 2023?

59db21de27d1d39849a64aaeafbe598897359873959483178600c240fd0b7f5f

Cash and equivalents (USD, millions)

Accounts receivable (USD, millions)

Unbilled receivables (USD, millions)

Inventories (USD, millions)

Other current assets (USD, millions)

Total current assets (USD, millions)

Property, plant and equipment, net (USD, millions)

Intangible assets, net (USD, millions)

Goodwill (USD, millions)

Other assets (USD, millions)

Total noncurrent assets (USD, millions)

Total assets (USD, millions)

Short-term debt and current portion of long-term debt (USD, millions)

Accounts payable (USD, millions)

Customer advances and deposits (USD, millions)

Other current liabilities (USD, millions)

Total current liabilities (USD, millions)

Long-term debt (USD, millions)

Other liabilities (USD, millions)

Total noncurrent liabilities (USD, millions)

Common stock (USD, millions)

Surplus (USD, millions)

Retained earnings (USD, millions)

Treasury stock (USD, millions)

Accumulated other comprehensive loss (USD, millions)

Total shareholders’ equity (USD, millions)

Total liabilities and shareholders’ equity (USD, millions)

dc81395e63303a422bc5984fe2d355bc5e9f316ace4082d7e09ef43705d9e1e4

Net Earnings (USD, millions)

Depreciation of Property, Plant and Equipment (USD, millions)

Amortization of Intangible and Finance Lease Right-of-Use Assets (USD, millions)

Equity-Based Compensation Expense (USD, millions)

Deferred Income Tax Benefit (USD, millions)

Other, Net - Operating Activities (USD, millions)

Net Cash Provided by Operating Activities (USD, millions)

Capital Expenditures (USD, millions)

Other, Net - Investing Activities (USD, millions)

Net Cash Used by Investing Activities (USD, millions)

Repayment of Fixed-Rate Notes (USD, millions)

Dividends Paid (USD, millions)

Purchases of Common Stock (USD, millions)

Other, Net - Financing Activities (USD, millions)

Net Cash Used by Financing Activities (USD, millions)

Net Cash (Used) Provided by Discontinued Operations (USD, millions)

Net Increase (Decrease) Increase in Cash and Equivalents (USD, millions)

Cash and Equivalents at Beginning of Year (USD, millions)

Cash and Equivalents at End of Year (USD, millions)

90a736489d179352c9b9ae1bdda6523dcfece62efbb7c02f7a07790ad31f6728

Revenue (USD, millions)

Operating costs and expenses (USD, millions)

Operating earnings (USD, millions)

Other, net (USD, millions)

Interest, net (USD, millions)

Earnings before income tax (USD, millions)

Provision for income tax, net (USD, millions)

Net earnings (USD, millions)

Earnings per share - Basic (USD)

Earnings per share - Diluted (USD)

a1656c0cc546bbd22f908c7e94b20b1910fdbe79cae51e2b1f49e1e254b2a597

Adjustments for Non-Cash Items [USD, Millions]

Stock-Based Compensation [USD, Millions]

Changes in Working Capital [USD, Millions]

Capital Expenditures (CapEx) [USD, Millions]

Proceeds from / Repayments of Debt [USD, Millions]

Share Repurchases [USD, Millions]

Dividend Payments [USD, Millions]

Net Change in Cash [USD, Millions]

1550f123baefbeb6f62ec373aa2774569ba176893ca963f93b4addef460d3b95

Total Revenue [USD, Millions]

Cost of Goods Sold (COGS) [USD, Millions]

SG&A [USD, Millions]

R&D [USD, Millions]

D&A [USD, Millions]

Interest Expense [USD, Millions]

Operating Income (EBIT) [USD, Millions]

Net Income [USD, Millions]

EPS - Basic [USD, Per Share]

EPS - Diluted [USD, Per Share]

35155f2d42a0839aa96b757146a8a3b70599d7689c356d92cee20a075545ae8c

869e07f52553baf345db26caa7135af406b1f4b4210757d4ec36aef4c492ad00

Number of Gulfstream aircraft deliveries (units)

Segment book-to-bill ratio for new Gulfstream aircraft (ratio)

9625b69641839a499a536f4a402dbeb4b252f6a371375c0a76fea4e3ade5a329

North America

- United States

- Canada

- Other

Europe

- United Kingdom

- Switzerland

- Russia

- Spain

Asia/Pacific

- China

Africa/Middle East

South America

Revenues from International Operations

Total Revenue

c625b7eb416efb1efbc728403c6de9a5a6f28830e33f3996a790c44d63abdd9d

4e074664e50c7a0e7b461ac4b0b05cbde9bcf51aeec72458808ff8511fb5e6eb

GENERAL DYNAMICS (GD)

Financials