2019 ANNUAL REPORT WorldReginfo - 8147aacd-4217-4413-8db2-1e05971bfed4 Dear Fellow Shareholder General Dynamics’ strong financial results and compelling operating accomplishments in 2019 reflect the benefit of our commitment to invest over the long term to satisfy the needs of our customers and take advantage of the clear opportunities in our markets. Revenue across the company increased by 8.7% to $39.4 billion and diluted earnings per share (EPS) from continuing operations rose 6.8% to $11.98. Backlog reached a record $86.9 billion, a 28.1% increase from the prior year. Our performance was broad-based with each business segment generating higher revenue and profit. At our Aerospace segment, revenue increased 15.9% to $9.8 billion, driven by the delivery of new models, and operating earnings rose 2.8% to $1.53 billion. The total Gulfstream fleet grew by more than 4% to over 2,800 aircraft in service in 2019. Gulfstream delivered its 400th G650 toward the end of last year. In June 2019, the Federal Aviation Administration approved the G600 type and operating certifications. The G600 is a clean-sheet design aircraft with high-speed cruise of Mach 0.90. At its long-range cruise speed of Mach 0.85, the aircraft can fly 6,500 nautical miles. The G600 shares learning curve benefits with the advanced assembly line of the G500, which received its type and operating certifications in 2018. This will enable good margins on the G600 early in the program. In February 2020, Gulfstream flew its newest aircraft, the ultra-long-range G700, the most capable large-cabin jet in the industry. First deliveries are anticipated for 2022. We continued to invest in our Aerospace service network, which contributed $2.2 billion in revenue for the year. During the year, we added nearly one million square feet of service capability at 11 locations worldwide. We expanded the use of sustainable aviation fuel, making it available to customers and are continuing to use it internally for test flights and customer demonstrations. 2 | WorldReginfo - 8147aacd-4217-4413-8db2-1e05971bfed4 At Combat Systems, 2019 revenue rose 12.3% to Virginia-class Block V submarines. These boats are $7 billion, and operating earnings increased 3.5% to approximately 25% larger than earlier versions of $996 million. Combat Systems continues to deliver the class and offer the Navy increased capabilities systems that meet the top priorities of the U.S. and across a broad spectrum of missions. At our its allies across the globe, including the Abrams shipyard in Bath, Maine, we continue to perform on main battle tank, the Stryker combat vehicle, our 11-ship backlog of DDG-51 Aegis destroyers. numerous other wheeled and tracked combat At NASSCO, which engages in naval auxiliary vehicles, munitions and armament. We continue to ship construction, Jones Act commercial ship see growth in our European, Middle Eastern and construction and naval ship repair, we added over North American markets, particularly as the U.S. $1 billion to its backlog with the U.S. Navy’s order Army funds extensive upgrades to our existing U.S. of the 6th and 7th Expeditionary Sea Base ships. vehicle platforms. NASSCO also delivered the largest commercial container ship ever constructed in the United Last year, General Dynamics Information States. Importantly, the ship incorporates liquified Technology continued to integrate CSRA and to natural gas-capable engines that comply with Tier III reshape its portfolio. Revenue in 2019 was $8.4 emission requirements. billion even after divesting or exiting lines of business having revenue of $1.3 billion per annum. In March 2020, the board of directors raised the Operating earnings were $628 million with a 7.5% dividend by 7.8% to a quarterly rate of $1.10 per margin. EBITDA margin rose to 12.6% in 2019 share. This reflects the 23rd consecutive year of from 12% in 2018, industry leading in both years.1 dividend increases. GDIT’s backlog increased 14.7% in 2019, to $9.1 billion. Total estimated contract value reached $28.1 Our determination to be a leader in each of our billion. Cash flow at GDIT was extremely strong in markets is grounded in the view that this position 2019, following an equally impressive 2018. will lead to superior returns over time. Over the past five years, we have invested over $3 billion Our Mission Systems business generated strong in capital equipment to expand our operations, operating margins while staying at the leading edge expended more than $2.3 billion on independent of radio frequency and network communications, research and development to bring new products cyberwarfare and maritime subsystems. Revenue to market, and concluded several acquisitions to was up 4.5% to $4.94 billion and operating bolster and expand our market reach. We believe earnings were up 3.6% to $683 million on 13.8% that in the next few years, our customers and margins. Mission Systems’ pipeline remains strong shareholders will experience the considerable in the U.S., Canada and internationally as well. benefits of our long-term investment strategy. At our Marine Systems segment, revenue increased 8% to $9.2 billion and operating earnings were $785 million, up $24 million or 3.2%. Our three shipyards continue to grow as the U.S. Navy awards contracts for more ships to support the increases to its fleet. In December of last year, the Navy awarded its largest shipbuilding contract PHEBE N. NOVAKOVIC in history of $22.2 billion to Electric Boat for nine Chairman and CEO March 9, 2020 1 EBITDA is a financial measure not calculated in accordance with U.S. generally accepted accounting principles (GAAP). For a reconciliation of this measure to GAAP, see the presentation regarding the latest financial results in the investor relations section of our website. 3 ANNUAL | 2019 REPORT WorldReginfo - 8147aacd-4217-4413-8db2-1e05971bfed4 Gulfstream G700 AEROSPACE We design and manufacture the best business-jet aircraft in the world and provide a full range of services for business aircraft produced by Gulfstream and other manufacturers. Gulfstream and Jet Aviation have powerful brand recognition, are renowned for being at the forefront of the industry and relentlessly serve growing business aviation markets around the world. Our ongoing investment in research and development has created an expanded Gulfstream product lineup and has raised the bar on safety and performance. 4 | WorldReginfo - 8147aacd-4217-4413-8db2-1e05971bfed4 Gulfstream Symmetry Flight Deck The Aerospace segment delivered excellent performance and expanded backlog in 2019. Significant milestones in 2019 included: • FAA certification and first customer deliveries of the G600 • Unveiled the new ultra-long-range G700, offering superior performance and our most spacious cabin, with deliveries anticipated in 2022 • Record-setting flight with the G650ER from Singapore to Tucson, demonstrating superior speed and range capabilities • Acquisitions, expansions or significant renovations of support facilities in key business aviation markets including Teterboro, Van Nuys, Scottsdale, West Palm Beach and the Middle East • Gulfstream corporate aircraft surpassed the one-million mile mark flying on sustainable aviation fuel Gulfstream G650 5 ANNUAL | 2019 REPORT WorldReginfo - 8147aacd-4217-4413-8db2-1e05971bfed4 COMBAT SYSTEMS We design, manufacture and sustain the world’s most lethal, mobile and survivable land combat platforms and munitions for our U.S. and international partners through our three business units: Land Systems, European Land Systems, and Ordnance and Tactical Systems. Our products include the Abrams main battle tank, the Stryker and the Light Armored Vehicle (LAV) family of fighting vehicles. We also produce the armaments and munitions that support nearly all kinetic military systems in the U.S. arsenal today. We work closely with the U.S. Army through its cross-functional teams to design new solutions to fulfill its critical modernization objectives. Abrams M1A2 SEPv3 Munitions produced by GD Ordnance and Tactical Systems 6 | WorldReginfo - 8147aacd-4217-4413-8db2-1e05971bfed4 Piranha 5 In 2019, our products continued to demonstrate their versatility and broad market acceptance. Among the year’s highlights were: • $875 million in orders to deliver, upgrade and support Abrams Main Battle Tanks for the U.S. Army and its allies • A $1.3 billion contract from the Canadian government for 360 combat support LAVs in eight variants • $400 million in orders to deliver, upgrade and support Stryker vehicles for the U.S. Army and delivered initial Strykers to Thailand, marking the first time the vehicle has been sold outside the U.S. • Delivered AJAX armored fighting vehicles to the British Army as part of our program to produce 589 vehicles in six variants • New orders for munitions and precision systems totaling $1.7 billion 7 ANNUAL | 2019 REPORT WorldReginfo - 8147aacd-4217-4413-8db2-1e05971bfed4 Cybersecurity, cloud, artificial intelligence and enterprise IT capabilities Managing the U.S. State Department’s global supply chain INFORMATION TECHNOLOGY Our Information Technology segment employs 30,000 technologists and mission experts across the defense, intelligence and federal civilian markets. GDIT leverages deep partnerships with strategic and emerging technology companies to improve government services and modernize critical systems. The latest innovations in cloud, cyber, artificial intelligence, software development and data analytics are used to secure the nation’s most sensitive information to operate global supply chains and to support the nation’s most critical missions. 8 | WorldReginfo - 8147aacd-4217-4413-8db2-1e05971bfed4 Software development, systems engineering and data analytics In 2019, we drove significant organizational transformation. Among the year’s highlights were: • Awarded a $325 million contract to provide priority telecom- munications services to the Cybersecurity and Infrastructure Security Agency’s Emergency Communications Division • Selected by Department of Health and Human Services’ Program Support Center to provide efficiency-increasing artificial intelligence services • Received a $2 billion follow-on contract to continue managing the U.S.