General Dynamics Corporation

Innovation and product development · Product development and randd investment risks

Our success depends in part on our ability to develop new products and technologies and maintain a qualified workforce to meet the needs of our customers. Our customers' requirements change and evolve regularly. Accordingly, our performance depends in part on our ability to continue to develop, manufacture and provide innovative products and services and bring those offerings to market quickly at cost-effective prices.

Strategic execution · Merger acquisition and divestiture risks

We have made and expect to continue to make investments, including acquisitions and joint ventures, that involve risks and uncertainties. Whether we realize the anticipated benefits from these transactions depends on multiple factors, including our integration of the businesses involved; the performance of the underlying products, capabilities, or technologies; market conditions following the acquisition; and acquired liabilities.

Customer and revenue · Changing customer preferences and behavior

Our Aerospace segment is subject to changing customer demand for business aircraft. The business jet market is driven by the demand for business-aviation products and services by corporate, individual and government customers in the United States and around the world. Customer demand can be affected by a number of factors, including changes in general economic conditions, the availability and cost of credit, pricing pressures and trends in capital goods markets.

Customer and revenue · Customer concentration and key customer dependence

Approximately 70% of our consolidated revenue was from the U.S. government. If customers default on existing contracts and the contracts are not replaced, the segment's anticipated revenue and profitability could be reduced materially.

Natural and catastrophic events · Pandemic and public health crises

The COVID-19 pandemic has had, and could continue to have, a negative effect on our business, results of operations and financial condition. Other outbreaks of contagious diseases, including new variants of COVID-19, or other adverse public health developments in countries where we operate or our customers are located, could similarly adversely affect our business.

Natural and catastrophic events · Climate change and environmental impact

Increased public awareness and concern regarding global climate change may result in state, federal or international requirements to reduce or mitigate global warming, such as the imposition of carbon pricing mechanisms, stricter limits on greenhouse gas emissions, or other business restrictions or compliance requirements regarding reducing or mitigating global climate change.

Geopolitical and trade · Government funding and budget changes

Approximately 70% of our consolidated revenue was from the U.S. government. Levels of U.S. defense spending may be impacted by numerous factors, such as the domestic political environment, changes in national and international priorities, and threats to national security. Decreases in U.S. government defense and other spending or changes in spending allocation or priorities could result in one or more of our programs being reduced, delayed or terminated, which could impact our financial performance.

Geopolitical and trade · Political instability and government changes

Our non-U.S. operations may be sensitive to and impacted by changes in a foreign government's national policies and priorities, political leadership and budgets, which may be influenced by changes in threat environments, geopolitical uncertainties, volatility in economic conditions and other economic and political factors including inflationary pressures.

International and currency · International operations and emerging markets

Operations outside the United States are subject to various risks that may be associated with doing business in foreign countries. In some countries there is increased chance for economic, legal or political instability, and procurement procedures may be less robust or mature, which may complicate the contracting process.

Market and investment · Asset valuation and impairment

Goodwill represents the purchase price paid in excess of the fair value of net tangible and intangible assets acquired in a business combination. We review goodwill for impairment annually. We may experience unforeseen circumstances that adversely affect the value of our goodwill or intangible assets. Future write-offs of goodwill or other intangible assets as a result of an impairment in the business could materially adversely affect our results of operations and financial condition.

International and currency · Foreign exchange and currency exposure

Non-U.S. transactions can involve increased risks arising from foreign exchange rate variability, which could, among other things, negatively impact sales and the translation of our international revenue from local currencies into U.S. dollars.

Core operations · Operational disruption and business continuity

The COVID-19 pandemic could result in disruptions or restrictions on our employees' ability to work effectively, temporary closures of our facilities and the facilities of our customers, and the imposition of quarantine and travel restrictions that have and may in the future negatively affect demand for our products and services and result in supply-chain disruptions.

Human capital and workforce · Talent acquisition and retention

Due to the highly specialized nature of our business, we must hire and retain the skilled and qualified personnel necessary to perform the services required by our customers and to develop and manufacture our products. To the extent that the demand for skilled personnel exceeds supply, we could experience higher labor, recruiting or training costs in order to attract and retain such employees.

Supply chain and procurement · Raw material availability and cost volatility

Some of our operating segments rely on the supply of semiconductors for the manufacture of our products, and any inability of or delay by our suppliers to meet our order demands (including due to the suppliers' competing commercial priorities, any military conflict resulting in a disruption of manufacturing or trade relations, or any other business disruption) could delay or disrupt our ability to procure semiconductors.

Supply chain and procurement · Supplier operation and dependance

We rely on other companies and our government customers to provide materials, components and subsystems for our products. We sometimes rely on only one or two sources of supply, and any disruption in our supply chain could have an adverse effect on our ability to meet our customer commitments and could adversely affect our business, results of operations and financial condition.

Project and contract management · Government contract dependency

U.S. government contracts generally permit the government to terminate a contract, in whole or in part, for convenience. If a contract is terminated for convenience, a contractor usually is entitled to receive payments for its allowable costs incurred and the proportionate share of fees or earnings for the work performed. The termination of multiple or large programs could have a material adverse effect on our future revenue and earnings.

Project and contract management · Project execution and delivery risks

Earnings and margin depend on our ability to perform on our contracts. When agreeing to contractual terms, our management team makes assumptions and projections about future conditions and events. If there is a significant change in one or more of these circumstances, estimates or assumptions, or if the risks under our contracts are not managed adequately, the profitability of contracts could be adversely affected.

Cybersecurity and data protection · Third party data security and vendors

We face cybersecurity threats from entities and persons that may seek to target us through our customers, suppliers and other third parties with whom we do business. There can be no assurance that the safeguards put in place by our customers, suppliers and other parties on which we rely, will be sufficient to detect, prevent and mitigate cybersecurity breaches or disruptions.

Cybersecurity and data protection · Data breaches and cyber attacks

We face various cybersecurity threats, including threats to our IT infrastructure and attempts to gain unauthorized access to our proprietary or classified information, denial-of-service attacks, as well as threats to the physical security of our facilities and employees. We have experienced cybersecurity events and disruptions such as viruses and attacks targeting our IT systems.

Industry regulation · Regulatory compliance and changes

Government contractors operate in a highly regulated environment and are subject to audit by the U.S. government. Numerous U.S. government agencies routinely audit and review government contractors. These agencies review a contractor's performance under its contracts and compliance with applicable laws, regulations and standards.