GD - Earnings call transcript Q2 2018 | General Dynamics Corporation

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good morning and welcome to the General Dynamics Second Quarter 2018 Earnings Conference Call. All participants will be in listen-only mode. Please note today's event is being recorded. I would now like to turn the conference over to Howard Rubel, Vice President, Investor Relations. Please go ahead sir.

Howard Alan Rubel

good and Rocco, you, morning, everyone. Thank the to General Dynamics call. conference XXXX quarter second Welcome made our today company's statements forward-looking Any represent outlook. estimates the regarding These and to subject estimates some are uncertainties. risk

company's factors like would turn Executive the our these information Officer, that, to to Additional over and and filings. With XX-K contained regarding XX-Q Chairman in call Phebe is I the Chief Novakovic

Phebe N. Novakovic

Good morning.

This million billion operating with up $XX CSRA costs million the improvement Jason particularly second of $XX billion to and discern a the our in operating operating expense. corporate effective XX.X% EPS per we given ago earnings. story in Of from million. very the attributable CSRA than to share or more good lower revenue lower per is CSRA. release, rate and associated represents reported impressive more ago the the reported the $X.XX enjoyed operating in strength of quarter $X.XX X% better were of the $X.XX a the in minute. the of was organic earnings but one-time the X.X% press or of on As quarter revenue expansive from Compared million margins million of growth up of revenue earnings of part you million the diluted costs coming of $XXX earnings year quarter a can up higher million that acquisition much was of Revenue We number, interest share up a of or offset acquisition this year $XX from the by the or net with share as with $XX X.X% than and approximately same. Sequentially, little a $X.XX and quarter on $X.XX $XX tax billion consensus. earnings acquisition million XX.X%. was $XXX related were remainder a Net $XX $X.XX $X.XX the one-time billion on better to

reported expense. was million $XX in other other The

Let the the XXXX. me acquisition CSRA against was or first reasons, half to and for XXXX of both half of billion up half XX.X% the compared $X.XX to briefly of of Revenue same the the organic turn XXXX growth. first first

we other a the earnings good million better, amortization. hand, burdened CSRA second acquisition half. the connection a were $XX very the quarter of operating $XX X.X% In by cost was On EPS million Earnings down a were increase. $X.XX operations short, $XX X.X% had from with million, and increased first up and continuing aforementioned in increase.

We quarter. in burdened in by the little And mostly $X.XX half moment. EPS EPS second share be are accretive again, will in a somewhat would The ahead the with internal These of the as onetime expected. the Impressively, acquisition quarter been plan costs period quarter. of The onetime a on will give and costs acquisition expectations. accretive performed acquisition Jason in the this more it. absent the both color period bit you of our to per in external associated CSRA have fourth

segment for I Let perspective CSRA the the for comments quarter cash, reporting the give of year. and outlook and me half acquisition the the remainder business segment the backlog, I'll the some on and Jason you comments the on taxes, for some for with ask and then before some on for conclude each

second million enjoyed was good improvement a respectively, respects. and for end quarter, end Total million $XX.XX brisk dollar-based is million and this revenue for XX.X%. was in ago were well. for the up XX $XX.XX $X.X On earnings to had quarter to all billion. plan calendar year of X the is the $XX.XX was consistent on The with last X. the production of $XXX billion. This point half quarter, of $XX lower First, backlog XXX up points Aerospace Revenue sequential contract X and funded billion. Aerospace. quarter. the activity million a a basis operating strong XX Aerospace $XX were our months in brings of a X.X book-to-bill earnings $XX.XX order $XX it improved operating margin. billion very to million and billion At basis as was but to value margin first Operating billion the to $XX.XX from at One the backlog up the $XX.XX Total billion. impressive outlook We the $XXX book-to-bill basis, year. up an important the to operating and in estimated

and very you quite can all as growing The had in year have North very in good remains see, now. as quarter. way good performance America The signals well. full a The Europe led good. we XXX the in order of products are in and for the XXXER our demand interest So

second lower quarter the orders, quarter anticipated X based with contract the on than to of order comfortable good and expect that are anticipated deliveries. discussions short, higher early third an from third or better in Book-to-bill third the perspective. in In better X pipeline. half be our quarter and the We a orders in quarter because fourth second we and half should

do bit quarter. could fourth better the a we in However,

the year. the In joint GXXX States. It third invest will with QX. quarter in of service was in now This look them. business in in May, continues to global to for few a the forward locations deliveries well. United We convenient to to of way of to early certified in and Jet's part support strategy Jet on willingness of This a acquisition fourth support a of footprint, effort a adds to demonstrating quarter also customers know, our the be paves Aviation-Gulfstream fourth flying GXXX Hawker Pacific. outside July quarter closed possibly training XX. this certification pilot commencing go you the the As we

of the that the me the say outset, house. of CSRA. the ago collective Let impact turn defense the year me of X.X% over revenue up businesses to was now quarter let defense side the At excluding the

had up operating individual a represented Turning relevant the million, revenue quarter up earnings $XX very XX% indicate. billion the the in or Revenue operating over last X% million, Systems clearly of segments, that second quarter remind over quarter as X% second X.X%. I second $X.XX than Similarly, more the comparisons quarter $XXX should were to XXXX million the XXXX. year, was improvement $XXX almost XXXX quarter and in good earnings. everybody of of second a Combat

growth million operating or now. up X.X%. story up earnings $XX Revenue $XX X.X% was strong years million similar. So quarter-over-quarter On were basis, the experienced and we for two have a is or sequential

the up first revenue first the excess For was were or half half, million, of earnings $XX of Operating XXXX. X%. million XX% slightly against up in $XXX

to million power contract This Army's in Army growth vehicle. Our of upgrade and quarter the and communications Stryker contract Brigades. upgrade The their U.S.-based perform programs the munitions the part volumes the on Abrams electronics, nine continue portfolio. nice in to plan is the to and all similarly ordnance $XXX the versatility up Stryker well the of exploit continues of with to a with

and Version in the explicit first tank the power, is, Stryker the while, in good a growth. of $XXX platforms monetization the tanks in direction manifest order lethality. our in and survivability puts to stead configuration, time a The to million received for for program also provides which continued X.X coming Abrams us for upgrade the We improved years continued which

peak Our with transitioning international programs in production continue to engineering on well. to growth program AJAX Work production as from is see nice the UK XXXX.

growth revenue story. are We ago. than were trending Marine combat. in obviously a ago segment, respect very With same $XX nice to the expansion against and right revenue XXXX. in $X.XX in year the direction was XX of million profit. quarter at $XX quarter operating higher a Operating to in point the It XXXX Combat billion earnings million a year against the earnings growth experienced nice Systems, on quarter QX is up Similar the basis both

$XXX X.X% two respectively. $XX and was On and of growth. operating X% once basis, earnings a good years revenue sequential up So at million again, were up million

first by ballistic programs, point XX.X% on $X.X X%. Work missile submarine, the in on improvement to million Virginia basis up against million For half X.X% engineering Operating to class construction of Columbia billion XXXX. $XXX half, the good revenue make $XX the first submarine our a XX margin earnings or up continues also on the of was or were and progress.

are the have material We and begun Virginia-class Block boats to building lead IV Block long purchase V. for

Bath, later XXXX year. restart follow this contract expect to DDG-XXXX respect challenges first and largely ships. Block With nice the DDG-XXXX on DDG-XX performance the the boat from be DDG-XX on with and us the behind ships the the We are to and on awarded V

year this later expect upgrade. multi-year contract DDG-XX awarded be to Flight We the III a for

Marine year Finally, for but long than NASSCO for a compelling has in second be slower had In growth time to continue start this will up story and ramp surface come. will all, to so been Systems a the a us at repair anticipated half.

Technology, agencies, We largest in Systems, Defense, two of of the large civilian Mission segments: a and providers CXISR was are agencies. first, the second, federal of and to now what Department one reporting IS&T IT business; intelligence Information industry's services

a last start steady year million second Mission point basis XXX of $XX the margin a of in drop Systems ago operating the billion the or result Earnings with an in of X% as quarter. were year quarter. program $X.XX the due Let's of quarter, Mission over Systems. mix increase quarter revenue million in had $XXX to against

first year with X $X.XX a ago to and $X.XX includes of a a Technology a million versus Legacy half billion. On book-to-bill in earnings in systems, The X $X.X was expect of a were last Once billion earnings X.X% the the year-to-date Mission was revenue billion. year-to-date quarter. $XXX XXXX, Systems was in intangible which in been CSRA's charge has us to amortization. amortization business revenue encryption, contribution and was asset Growth result $XX Information up Margin $XX excluding up up communications. first basis, quarter X.X% three continue contribution of first year against as million transaction. ISR from was CSRA particular business: space $X.XX XXXX has revenue the and X.X%. the the earnings an and $XX a the will million million CSRA in were revenue Operating of billion, Mission the again, of million. in quarter as of X.X% payloads ago result good quarter. and were $X steady in mix and of up against communications, to million a Mission basis, lines Systems basis, enjoyed for half so. $XX It internally reports improve sequential revenue or the Systems growth On of platforms was and On a $XXX year. We be Mission primarily half year-to-date Systems sensors. was of that ISR, was reported CSRA, or up for half. XXXX. GDIT second million in second

excluding of the impact up second first the On basis, Operating up first X.X% quarter million half Importantly, earnings the $XXX half the revenue in or X.X% year with a $XX was of year-to-date consistent of million XX.X%. with or X.X% were compares CSRA. margins of results. last

going and integration GDIT Our is schedule. of CSRA is well of ahead into our internal

from businesses pulled team gelled both management nicely. has Our

and GDIT meeting that leveraging cost are multiple solutions at excellent cost secure strength of are in the transitioning working synergy Together, agencies. developing easier exceed IT solutions The to and both this even for are solutions operate old customers are experience effective post this year's and Both acquisition targets GDIT is across we of are We to to in better. cloud-based goal. companies maintain. and experience its CSRA

to expect powerful a be know competitive talent how. and of We and combination this

a GD's on of So, in and in the the the number and the accomplished acquisition outlook We results. backlog. of to then and closed call history, over and for Jason delivered turn expanded Aviation's you and strategic objectives Asia largest Pacific to service Australia earnings the with our rest solid grew come summary, in in now back General region, I'll Jet year. key operating Dynamics quarter, network the

Jason Wright Aiken

by the areas Thank morning. income you, particular, are the impacted and, and the start that good CSRA statement acquisition. with Phebe, I'll in

$XX accounting, in is legal, reported transition associated incurred operating while acquisition. we First, and quarter, expense. by Accepted $XX in costs, noted, reported Principles, other other onetime balance, of earnings expenses our of and the Accounting portion the required the largely as related for are the In Generally A change as total other and costs million corporate line these to of earnings the recognized costs million provisions, we a in are Phebe with income the control transaction fees, quarter. in in advisory of operating million $XX below

You'll anticipate recognized the fees to us $XX final $X payments in and bring we third quarter total a the of operating these be of transaction Including to the $XX corporate the million and recall, share. quarter the we line other million to in expect expenses per first cost these one-time costs and year. expenses each the charges, million or for onetime $X.XX we approximately other below

expense, to $XXX XXXX. expense to of first million the for XXXX. interest to acquisition in net $XX interest XXXX finance in is The year That in $XXX to in million debt quarter, of $XX to we issued Turning the same compared the period we million million quarter of the due billion the roughly CSRA. for versus the $XX increase half second the the of brings reported

our versus up accounting second discussion guidance we the initial quarter numbers be interest CSRA. now for provisional of the amounts CSRA, to January related Wrapping million. to include pre-acquisition million $XXX year, of expect purchase net the For $XXX expense approximately

final, assets related recent the expense. are intangible very a in estimates not $X million good filing These of transaction, amortization associated for we line X-K this reported of acquired months the approximately we much are the with we $XXX believe of and billion XXXX. and Although, assets of estimates have in our nine which with amortization what intangible

Moving effective CSRA, XX% consistent rate full with from outlook. is our the for tax quarter on was which year our

the tax You'll higher a the of the to was rate of benefits net recall, half quarter with so naturally XX% a was timing than year our deductions lower That implies first for XX.X%. compensation due equity the balance for quite to first year the full rate associated of rate of rate the somewhat year XX%.

capital to in paid we dividend second deployment, Turning million $XXX in the quarter.

to our shares for stock, shares the shares of share first to with million. purchased acquire enough X.X also in plan is count year us consistent This $XXX to our million our hold the XXXX half XXX,XXX bringing We steady. for of

debt billion. focus paying in of down maturity $X.X a cash million million, flow $XXX the from near-term acquisition, quarter the on That and net $XXX we of a debt at the operations with Our cash balance will be We CSRA free have the resulted a nearly established. for after incremental rate end of $XXX we XX%. the of that cash of quarter of conversion of the consistent year and, from the expenditures of billion net structure million, the balance capital $XX.X in generated position

target, cash the pension which to discretionary quarter. paid flow the in mid million we the be year reflecting low additional our For we free to our third in contribution range the expect quarter, discussed XX% less typical XXX% that last $XXX conversion we

couple a on highlights of backlog. Lastly, our

contract to $X.X of the of potential IDIQ along addition to unexercised of the and as estimated backlog CSRA what billion company firm First, brought with we refer $X.X value. options, billion

one In it the bringing impact as backlog. year. of the And rate relates addition ratio backlog, quarter foreign had the the point last GDIT-CSRA book-to-bill first to this half exchange the to incremental in a fluctuations X.X them combined X.X times for times to of of regarding

a sales impact of While in quarter of backlogs de approximately million Systems reported million and minimis Mission first to in the and reduced quarter Systems and Combat by had the the $XX changes FX rates the our respectively. quarter, end our the the on end earnings second $XXX from rates

of quarter X X.X X two impact, in to respectively. this times these had book-to-bill the groups a Excluding and

activity Combined for wrap environment story. this our up my we're as Virginia in Phebe aggregate as we up with quarter V lumpy fact, the of Systems over growth form it order and had includes described six strong defense a Phebe anticipate turn a book-to-bill DDG developing the contract backlog year. that our in including what's and continue and Aerospace a Marine large times the group, guidance of multi-year you a ongoing that Block That later in give some in the year. to set and to X.X the a I'll Phebe remarks, updated In first to concludes months and noted, back businesses to additions the the where, very nice year of very very

Phebe N. Novakovic

provide EPS year in each guidance. wrap for we me forecast it compare and January then you what let our segment told our it to and the So for into

guidance We in second with slightly was $XXX revenue billion million on operating expect when margins half excess fourth with in now to up January $X.XX of deliveries $X.X For $XXX earnest. approximately GXXX XXXX, to to billion, revenue of our pressure the consistent $X.X $X.X forecast. This quarter particularly earnings margin the in million implies from roughly Aerospace, in expect begin of operating and XX%. billion earnings around billion of our

guidance previous earnings on operating billion so $X.X million, million $XXX XX.X%. around $X.XX more our more $X.X approximately million to XXXX of $XXX with of to from operating and We margin $X.XX margin expect revenue of to operating XX.X%, $XXX to earnings. Systems, million billion, around up Combat $XXX of revenue now was billion, earnings operating revenue an million approximately For with in $XX expect billion an $XXX million operating around

over to For the in $X.X previous to margins of forecast billion revenue operating expect at are guided billion and $XXX million. of slightly We margins revenue to operating we earnings now the to than million. million $XXX resulting $X.X billion slightly $XXX to better Marine $X.X with of be $X.X segment, $XXX previously million billion, earnings

break me it new appears legacy $X.X any and the level, is to rate old of that taking It segments. it $X.X our For $XXX IS&T, operating million $X.X of into billion of $X.XX businesses guided to than with margin billion, Rather of now $X.X XXXX, $XXX further million billion. let billion, business between for to we forecast around XX%. earnings up two million IS&T from a revenue revenue the billion to $X.XX the

billion with This half. billion for $X.X earnings outlook between revenue the around year $X.X second Systems. Mission growth in margins is Their revenue and to implies significant First, this in XX%.

year legacy CSRA margins $X.X of around revenue will will X%. GDIT of with add the billion for with Second, have about $X.XX operating margins billion X%. growing revenue about

up billion margins million and billion rolls between around $X.X operating $XXX and with IT revenue $X.X So around earnings of X%.

be So $XX.X This to to $XX.XX XX%. from range revenue to guidance, $XX $XX.X $X.XX Howard the revenue us then share permits to from of per somewhat will this is and to excess Compared higher this have operating it expect all related I'll impact of margins what improvement. our billion questions. expenses, increased outlook $XX to acquisition. of to year. in back that, operating operating difference sums and GD from CSRA's outlook overcomes we to The CSRA a to we fees GD from expect $XX.XX. negative your EPS and the and be This initial address our of billion to earnings. we $X.XX contribution increase a range to all about a charges turn those for With Apart

Howard Alan Rubel

Thanks, Phebe.

reminder, participate. everyone As we to a a ask chance that question one ask so only has participants to

If please remind additional queue? participants enter into how could Rocco, you have queue. you please get questions, the to the back

Operator

Ronald Absolutely, from of comes ahead. go of Sir. Please America. Epstein question Bank Today's first

Ronald J. Epstein

Good Hey. morning, everyone.

Phebe N. Novakovic

Hi, Ron.

Ronald J. Epstein

difficulty, of could impact get I everybody's investors they're Canada, it Northern want what have mean, that some think and think is perspective thinking could one one you're Group. Pratt a the maybe getting potential it is sense of to it about just we're questions financial a you, what the a Because topic to you think supplier should how how GXXX if of put I the that's on the I on lot of just people so that. means? your suppliers and supplier and on bankruptcy back for in having sort filed on mind, about

Phebe N. Novakovic

is our the deliveries year will this issue but some to have it solvable. some So extent on current impact

FAA process. that was and the (XX:XX) remember certification Let's manufactured as approved designed the through

are confident parties that dispute. resolve expeditiously will We their in the

remember, is highly Let's really its to also engine. a – I think this terrific and quiet, it's its efficient. performance important is It's superior

through So we will get this.

Ronald J. Epstein

and And they them in when – But kind usually any be seen come on that kind end, could disruptive really if it the and give of up. about Phebe, I way can you to things how thing. go worries So a amount comfort would come everybody basically, past sort you people not? these helpful. Like, the be there give don't or of it we've could in that, much. of is that guess, Just

Phebe N. Novakovic

go be so Yes, of to some year, this going our affects it the to and earnings up extent deliveries, the GXXX are flat. will margins

solvable. that and pretty sooner And will this through can this we Pratt. it, as through can the I'm this So But comfortable we through better. all we the get get manage frankly, is

Ronald J. Epstein

I'll someone their great. and okay, ask leave Okay, Thank question. else it you. let there

Operator

comes Copeland Carter of question next from ahead. go Melius today's Research. And Please

Carter Copeland

Hi, good and morning, Phebe Jason.

Phebe N. Novakovic

Good morning.

Jason Wright Aiken

Good morning.

Carter Copeland

on wanted a here ask I to just GXXX, GXXX. related two-parter closely

deliveries. there GXXX be talked on that's in non-recurring of in You've expect long Do the forward initial there margins the and on and we on some just those those couple impact to layer GXXX? fourth overall does that Thank the you look commented margins the understanding in still or Aerospace for as terms lots. secondly, production And of be next you. that Gulfstream about about have recently but those to time the you initial you will impacts weighing deliveries cost profitable, years to How stretch to those my dilutive margin? is still that in then GXXX quarter on

Phebe N. Novakovic

will be they profitable. Yes,

in manufacturing to costs The carry our of we have program reduce airplanes. demonstrated superb first operating tends always airplanes that performance lot That of margins. said, the

So the that, ramp we through we nicely and soon will – will GXXX margins as GXXX. get as on up very

Carter Copeland

in XXXX? happen that does And

Phebe N. Novakovic

just that. of we get before We've happen It'll to through go. and a handful GXXXs got off the

Operator

Stallard And Research. Please today's Robert Vertical next question of comes go ahead. from

Robert A. Stallard

much. so Thanks morning. Good

Phebe N. Novakovic

morning. Good

Robert A. Stallard

lead current that is production model. that the for the down you strong. still And GXXX that previously, to was might you that want Phebe, case? could time very give you indicated that if aircraft. I of what still wondering is some mentioned you Is us idea on on demand the bring

Phebe N. Novakovic

pace on so going order has plans the discern strong. do begun down production however so, been for the at to the XXXX as which, our have because to do will ramp book we So GXXX we to and have ,we're to continue

part your the nicely. is first was What frankly doing GXXX So the question? quite of

Robert A. Stallard

The lead if time, one order was today. I to

Phebe N. Novakovic

lead The time.

our are about of times lead within comfortable the range So well XX months.

comfortable our in range. All very airplanes of a are

Robert A. Stallard

That's you very great. Thank much.

Operator

And question from Barclays. go ahead. David Strauss next today's Please comes of

David Strauss

Good morning.

Phebe N. Novakovic

Hi, David.

David Strauss

Hey, Phebe.

So about here. you comment follow the have in up. billion I deleveraging to wanted Jason guess papers. I from $X.X made commercial

talk which pace to then year. at should given also delever? cash think mid-XXs you CSRA? And we this Thanks. high kind the you about about you amortization the plan associated forward on touched levels conversion, What on with can So going of

Jason Wright Aiken

Hey, David.

what commercial couple can expect and see I reductions the think ladder. next our be roughly paper you in terms the balance in of that of that consistent existing it that, the should of sheet years deleveraging by the with following maturities call end you'll that gone you the similar is for year all on see

on Marine be as for particularly With to continue we've flow, in we'll the investment free all mentioned XXs we to but as will XXs forward. obviously all look that come to to to range subject maturity. growth forward, target scheduled continue XXX% in in XXX% respect Systems, be range So as that cash to we'll moving to

Operator

Seth of Please today's ahead. next go comes from JPMorgan. question And Seifman

Seth M. Seifman

just to if much see case you looking thought be if to still made very going were baseline. the comments, XXX that's what's points I we make XXXX for want changed? coming maybe and and XXXX earlier understand a go Aerospace margins I year Phebe, to the basis them detail. little the from not down to XXX And in at bit Thanks in and the wanted good XXXX and that sure I to that morning. I some back

Phebe N. Novakovic

in to as we to get performance So, rate, are our just depend into XXXX. on our be look, comfortable fine. are margins build be going but I'm That XXXX Gulfstream. always frankly at we to not going margin will going and quite are our all

too wouldn't I that give So much worry.

Seth M. Seifman

Okay.

Phebe N. Novakovic

There fairly mix we to be are That should got compressions and explicable. issue. understood be margin going because

in on So that score. shape we're good pretty

Operator

question from Please go of today's And Bernstein. next ahead. comes Harned Doug

Douglas Stuart Harned

little have models? coming us about in from right goes Good impact demand you seeing you. Gulfstream. a Bombardier And signals customer into morning. strong how type? ask, of market Could Thank at now are that you introduction give new the more the any you're Phebe, insight by you just talked the geography, to seeing the

Phebe N. Novakovic

North be order portfolio, consistent Asia book – divided private by increase the to is So the of and individuals heavily companies. roughly pretty in high with the activity. the Across region, the our company's interest way and order thirds order Pacific European net in book with the to previous America worth patterns some tends public strong

So, look, we in backlog of Many our been is understand the and have very them And durable continues. customers. it. activity longtime order who's

told I concerned not that I've about very airplane. you before, think we're

score. we our of range speed. sell rate GXXX concern on range compelling to at comparisons at continue airports satisfied illuminate good the better folks some We perhaps lack restricted the a that I'd that XXXX, and more should help including do have some not attributes with recommend and at product some could that

Operator

Please question next Fargo. Pearlstein from comes of ahead. Sam go Wells today's And

Samuel J. Pearlstein

if Combat a Good talk morning. wondering, Systems. could about I was little you

U.S., year European spending lower think and defense the I go even plays the beyond Just forward the and we're recapitalization the trying we to and guess with somewhat think this that in which about strength the about typically is margin is this margin, go growth I as for balance as out we thinking ELS and forward there. like looks also just seeing how mix but in

Phebe N. Novakovic

the back a long estimates our that and plan estimates for comfortable note. very a Interestingly, we're very January long have you been with army that that General the and undergirded watching under elements the of resources range by and for So time are exactly Secretary we gave Esper leadership I you in we've the the seen best those growth and Milley, hasn't capabilities. since closely, very They've extent is Five we seen to which Army modernization plan. been that ensure of technologies been an XXXXs on they're as work very fielded the arguably Big get when focus and the with industry class support that to wholesome working to modernization their they budgeting also the their

very in out The the of demand signals United Europe. same is I'm States. So with the pleased true coming

that growth in for last has Systems a Land for growing noted business the the Combat, years I European to been continue remarks, my at book-to-bill will so. whole and a very nice wholesome. in us Our is engine and has be as been rate two

in like Combat. we seeing we're So, what

Operator

And comes our go from Rumohr Please ahead. Cowen today next question and Cai of von Company.

Cai von Rumohr

you Thank much. so Yes.

they substantial in point year So guidance like of modest seeing Martin than a sooner year? reported have yesterday when relatively expected under new Omnibus XXXX for of and flow-through you revenue kind the revenue this increase FY the this they're large seeing business they hikes had that look for the in were they put Lockheed So... making any their contract Are DoD early budget. you and of add-ons you because that had

Phebe N. Novakovic

thought we I were...

Cai von Rumohr

your ...are conservative? numbers

Phebe N. Novakovic

were look, thought I what... nicely. know I growing we don't Hey,

Cai von Rumohr

but this I'm just say fairway? a so this of conservative you didn't like upside we have think nicely, it right I – asking it the I number may should kind kind is is How weren't or that? about growing down looks mean, of

Phebe N. Novakovic

this can where I estimates we tell today, consistent you never when others. pretty are I consistent are comment set that simply plan. with – were on our we revenue very

grew guidance. surprises, in frankly, reflected to which do some seen in GDIT we've continue Right? And to the certainly nicely. that's their We I steady deal into have at very, And have Combat rates. of growth that very great in a same CSRA been our the predictable way insight and Marine, spend the and much rate extent very we've growth. that so customers and is our think updated it's we'll

So surprises what with frankly. what expected pretty is no been and happening. happened on what's we that's and here, particular all you forthright We've

Cai von Rumohr

much. Terrific. Thank you very

Operator

today from question next Shapiro ahead. our Please go with comes Research. Shapiro George And

George D. Shapiro

might updated Pacific no in you third Yes. what then provide deliveries quarter... be? also or were revenues morning. deliveries And with Aerospace, Hawker is the margin the deliveries? Phebe, Good increase on GXXX on in the additional the there primarily Could

Phebe N. Novakovic

ahead. Whoa, I didn't ahead. say no. Go Go Yeah.

George D. Shapiro

Okay.

no The another characterization? primarily have imply Pacific as about And it acquisition Sorry or in there're is I Hawker would would a strong margin that. increase less. guidance should is, that Thanks. the is Aerospace part XX% second deliveries well? quarter that be you then with fair from GXXX of mean, the increased QX, in of or fourth deliveries margin,

Phebe N. Novakovic

sort any mix service, deliveries, I'm confident carry portfolio, (XX:XX) is combination few in our so frankly. GXXXs that. deliveries of increase that lot pretty the a levers third GXXX you, revenue is in to to lower in now. mentioned it whole is elements of quarter. in this very across first I the margin the that earnings, said in present the revenue That as reflects in a lot to of and going terms have of may We a estimate best right So of you complex in canopy different guidance our consistently increased quarter. Hawker, The we and of that given

George D. Shapiro

Okay. I'll question. the with Thanks. stick one

Phebe N. Novakovic

George. Thanks,

Operator

DeNardi And our of question today comes Joe next Please Stifel. from go ahead.

Joseph William DeNardi

expectations Phebe, on Yeah, about going there margin is? of and to there thank of you. could wondering thinking you a you. term class, Columbia your be was Marine from talk Virginia your mix Thank your and are current is work what what I longer if what line versus standpoint

Phebe N. Novakovic

the on to think So maturity range about shipbuilding XX% the typically of in the margins X% programs having depending large is program. businesses and

through of of the prism have because that compression shown. will see any Columbia, duration at one So should increased Marine up as margin process we historically submarines, for That cost will and some quite ramp we given which the work. margin class the for of shipbuilding plus course, naturally be said, in Virginia Group. contracts on we that's our compression a And look that long these obtain itself the the performance which while can offset, shipbuilding by single improvements we

out of for right you heavily Columbia completely have on Virginia. dwarf don't the Virginia seven now eight years, estimate or or I in and Columbia. dwarf estimate between So a year will, mix good the

this first in pretty simply that it's will it five volume into Columbia ramp start of XX about years. and we manufacture because up next expeditiously yard. way, then of or it the So Think coming the the four through

out exactly So the range the like. half build on long in ago, of mentioned strategy bit year with of the exactly program we that two signed think this to sequencing time requirements last I plan go out contract. we'll we contract on design ironed funding detailed I very be have with worked and and what a get we'll a year the quite looks of clarity along Part the next that. able that we the a to we as Navy is – years, and a from detailed that Once then

Joseph William DeNardi

you. Thank

Operator

Please from go Peter our ahead. of question Baird. Arment today And next comes

Peter J. Arment

Jason. some about some a on maybe had and Phebe thoughts now like are thinking But morning, Can give months? And you're CSRA, Good to back. to about you on it's you've get that reduction to accretive. you you thinking how you the how few just I Phebe, hold costs that your get hold that sounds business for it you Thanks. or cost nicely and synergies? update the on still there's know some on

Phebe N. Novakovic

legacy integration we in those best-in-class a to into beauty out very So our new two rate little a best-in-class highly the very, GDIT I take and right out year. for our savings time. putting well. for and fact, GDIT business. the impressive together marketplace. with impressive pretty combined on competitive the the this some is synergies of CSRA of going capabilities in the The And ahead under That had over win suspect we target, have see our for XX% has performance a schedule. is these marry continue respect costs can of businesses darn of to year. pretty GDIT CSRA, The is baked We're in will increased really estimates

two power So to I of speaks think that combination of businesses. the the these

Peter J. Arment

Thank you.

Operator

Kahyaoglu next of comes ahead. go our Please question today Sheila Jefferies. And from

Sheila Kahyaoglu

you. everyone. And thank morning, Hi. Good

Phebe N. Novakovic

morning. Good

Sheila Kahyaoglu

morning. Good

little rates you integration just maybe the about or expand Just for a employee if think how sticking targets base that should mentioned. just renewals? about it's the contract bit on you retention business CSRA, can And we you elaborate could whether Phebe,

Phebe N. Novakovic

$XXX contracts. melded vision employee in best-in-class team a is of and management very the melding respect management So this of million with we're we very, we that effective, cohesive we business. team are added bringing quarter the single in capabilities CSRA intimacy – in the They management each are have to They million have cultures. With business taking combined two integration have And each on alone our beauty to into team proceed. technical customer retain. and the that the a it this the of and have about every backlog GDIT in $XXX retained to over on the employees, wanted how want to we they

There this. disappointments our employee you been with acquisition. a give contract It's have pleased and in since their interesting, frankly had to the extremely given of generation. We've XX.X% bit any in the businesses particularly impressive CSRA the growth no prior very of grew perspective or quarter These and, surprises retention. doing grew we're X% super just the to little that's X% acquisition. for quarter, well. on So the the GDIT activity contract are

Howard Alan Rubel

question, last one take we'll operator. So

Operator

Absolutely.

morning. from (USA) Rob last - Good Spingarn Spingarn Please go comes Our Credit Robert ahead. Securities for is, don't Phebe, Credit this if know Suisse. of LLC M. Suisse question you I and or in Aero in the margins Jason, but I here. wanted at get just in and normalized given moving to of year unusual end pieces the back somewhat GDIT the try

I how that ask talk know aircraft early past many don't normalized I'd think GDIT, Can lot question higher? think this get a it? about XX% Does and similar do about on we even in we get margins we you legacy time So you while that levels margin or lot. Aerospace do are whenever GXXXs get How is? back once want XXXX, there? about to to back GD And how CSRA to of then

Phebe N. Novakovic

Yeah, will Jason address that.

Jason Wright Aiken

GDIT Let me side. take the CSRA,

actually noted the amortization you we we're from ex looking accounting amortization. historic an on point accretive consistent performance, group, the message. with this way again that that $XXX transaction, is the I it the million accelerated CSRA the that, of if – remarks Under amortization performance the think for the is transaction. adjust impact, CSRA had a and And anticipating I in year the double-digit is rules, of contributing that's their incremental at margins actually to amortization we're the margins for

So for and of I by, this we'll months down next year XXX time. followed think, the over million ratchet million it's it'll year have $XXX nine then

core But you'll contribution I of their think, later So more XX-Q little history. model the impacts help range if we'll in the amortization margin a see today. rates, in that detail publish of you with will, CSRA ex on in consistent think double-digit you that sort

the on GDIT the of story sort side. that's So

Phebe N. Novakovic

the On superb a Gulfstream, you one now operating by of about company. things so us as that should think

So the to our we initial we'll the not of GXXX coproduced but predictive in get begin between in down And I year lot, our good learning believe going lines tell because be we and lot, ramp out But synergies they facility. got to I'm out, improve are fairly how you don't then through GXXX airplanes. the you on years. may and can our that our can We've number in the you. ask year in get intend and expeditiously the will performance curve. same

Howard Alan Rubel

else and was Phebe you, who This call. Thank and listening our Jason, everybody today. ends

look any have be forward ahead. and at additional If days later I can reached With today you questions, to XXX-XXX-XXXX. you we to the talking Goodbye. that, in

Operator

you Thank you. today's Thank The attending presentation. is for now concluded. all conference

now disconnect. may You

Howard Alan Rubel	General Dynamics Corp.
Phebe N. Novakovic	General Dynamics Corp.
Jason Wright Aiken	General Dynamics Corp.
Ronald J. Epstein	Bank of America Merrill Lynch
Carter Copeland	Melius Research LLC
Robert A. Stallard	Vertical Research Partners LLC
David Strauss	Barclays Capital, Inc.
Seth M. Seifman	JPMorgan Securities LLC
Douglas Stuart Harned	Sanford C. Bernstein & Co. LLC
Samuel J. Pearlstein	Wells Fargo Securities LLC
Cai von Rumohr	Cowen & Co. LLC
George D. Shapiro	Shapiro Research LLC
Joseph William DeNardi	Stifel, Nicolaus & Co., Inc.
Peter J. Arment	Robert W. Baird & Co., Inc.
Sheila Kahyaoglu	Jefferies LLC
Robert M. Spingarn	Credit Suisse Securities (NYSE:USA) LLC

General Dynamics (GD) 25 Jul 182018 Q2 Earnings call transcript