GD - Earnings call transcript Q4 2018 | General Dynamics Corporation

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Operator

Good morning, and welcome to the General Dynamics' Fourth Quarter and Full Year 2018 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Howard Rubel, Vice President of Investor Relations. ahead. go Please

Howard Rubel

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

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

Phebe Novakovic

enjoyed most We in Howard. solid you fourth period results thank and morning the a comparisons were quarter, Good straightforward part. prior with for the

As will a on leave the go the the and find I XXXX on them thoughts more our segments, briefly questions. outlook for press website release result, to helpful. I presentation fulsome will and business and additional my you time our think for your through also

were also QX, $X.XX adjusting somewhat revenue This reported continuing beat diluted the of after per provision up a today, count. consensus consistent and were lower lower share. Even we impacted comes operations So of tax XXXX provision fourth earnings by $X.XX. consensus. Act. largely Jobs from significant increase from the as operations a XXXX, which with the at difference a was $XXX discrete, adverse and by XXXX. and impact quarter for tax up in EPF continuing fourth and $X.XX Tax million Most Earnings earnings of a operating result $X.XX $XXX share share from of Revenue was a in earlier million. $XX.XX earnings adversely is against improvement and of quarter million Cuts billion, the $XXX earnings fully a per of

of year performance, quarter, particularly XXXX. the solid ago quarter third with the a all-in-all, as well For as quarter to compared good

earnings $X.X On up we billion XXXX. each XXXX is $XX.X up was million was Operating an XX.X% $XX.XX. $XXX year, billion. $XXX consensus. from of $X.X up up were by had billion reporting was over segments. continuing operations $X.XX over or per million up share also CSRA, excluding across earnings XXXX. was fully were over revenue operations This continuing $X.X the X.X% diluted Revenue organic above billion. basics, Earnings For from of of our or Revenue

earnings and the very XXXX. year review that a were without above for a third from higher a intake and and share basis, Importantly, per quarter share reference of will on $XXX suffice sequential groups from year All-in-all, earnings On it XXXX. in company than higher per earnings comparisons. to the continuing growth that important earnings, to XXXX. of more was full year. basis operations for revenue, operations, year-over-year the year sequential continuing the operating XXXX A say good a we left higher order well-positioned the I quarters had

let So discuss appropriate. and me color group each provide where some

and centers. First, $X.X to billion nine quarter, also against Aerospace fourth attributable the large was a million, of that $XXX XX.X%. ago in the both This revenue quarter the in GXXX by in Aerospace. impressive year part quarter of an delivery is strong was service the up

Jet this in time more The the margin, finished forecast earnings. $X.XX of the on GXXX. of between attendant Gulfstream, close at year shift $X.X you Aviation, X%. or earnings at revenue billion. billion lower were billion performance $X.XX to This time very down operating and $XXX we lower For year. full completions mix billion forecasted earnings you of to of and attributable of $X.X the Operating the business $XX year, earnings billion cost the with revenue were of was operating margin last introduction to revenue expect a than to up billion poor leading XX.X% to to told $X.XX the rate million, All-in-all, with XX% million the last year, margins. we forecasted $X.XX operating gave at We

robust. On in book-to-bill in the the order was Aerospace to fourth the front, activity quarter denominated. X.X in remains pipeline was $X good the The quarter and activity

orders see Exhibit more on can J press You information release. deliveries the in and the to

of expect exact fully be impact to certified deliver XXX will GXXX expect this the in and this be the the predict of government our certification the sales. We shutdown given But of the half. is pacing year, XXX for to The to we on item hard the although timing the ability the deliveries GXXX FAA.

producing bankruptcy that increasingly proceedings. had are filing the keep We very have right with under gone That good are our that Costs we order. and But of to control the NORDAM impacted to dormant has the schedule. ability in quality. in we restart had chain line good supply far

all schedule us expect behind be to We mid-year. issues by

the will GXXX our GXXX As and second well. south as year provide progresses, ability the a as result, the you in to support see accelerating half deliveries in deliveries to

billion and operating of year same Next, for as almost $X.XX XX%. the The an was revenue million the Combat $XXX of true quarter. of Systems, same ago earnings holds margin operating Combat

shortfall better the that forecasts $X the revenue XXXX. $XXX year, margin, is time $XXX of on million. We to of at last $XXX program mix vehicle was reasonably Operating increase short XX of contraction point $XX revenue of slowed $XXX, shift. $XXX X%. forecast, Canada somewhat revenue largely and initial performance related million we million, of $XXX basis By For the this the forecast million fourth production operating quarter. way, earnings up with issues $XXX a in largely of attributable year. than in diplomatic our a We over We earnings came in an provided million this to up grew in million full $X.XX enjoyed billion an actually was million consistent were the which just at to

the quarter nice of excess the orders of a and in are this X but $X.XX X group, for in Tank We alone billion, quarter to X.X to see billion. of X continue book-to-bill in order to fourth a activity year. orders

market. order positive demand performance key munitions its short, will had European In In vehicles become part And $X modernizing significant history acquired of and to continue our for billion FWW other also Army our in respect with FWW, land market, German Europe. of position We and growth, in providing enhance valued to is and a international customers a systems. a We’ve growing strong customer Combat opportunities Piranha negotiating the particularly been group activity. and very maintenance good continued business. army this quite service qualified note, revenue had have we of U.S. at our to a margin program our and provider Spain vehicles. across with to international

a XX.X% the Systems. Marine good of This year earnings improvement $XX revenue sequential in million Marine a quarter. operating million Operating in is This operating basis way, growth on $X.X up comparison against a leverage million, up point across ago equally the over increase Next, margin. billion story very environment. is ago XX.X% news XXX were quarter, really the the $XXX impressive. of a $XXX a stunning board. year was strong the By

a revenue the $X.X Columbia to year of $XXX. year, in revenue $XXX earnings up in last customer higher At missile our $X.X at emphasis outperformed million revenue For for significant particular of were program prepare time Navy with excess to new Operating margin. increased our $XXX million the yards billion of expect you increased range. Block the $XX we of of million improvement electric up from XX% told of invest this the our Virginia was the $XXX $X.X came of submarine $XX the of V $XXX XX boat response we to operating associated $XX million each X%. on end at for over Operating submarine. demand of with by the We to shipyards, three full production operating to across billion point billion basis in earnings in forecasts our of million. to earnings to and year, the In and continue all ballistic

upgrade may manufacturing you additional Block capacity. requiring V a performance size As and significant in recall, is

with XXXX than well to and public As our training its Marine Connecticut meet At have more year. depreciation you as $XXX in from Island for trade. Rhode double our for we increased know, CapEx program our private also skilled as the partnerships was million internal need

a again capital segment Marine systems. work of the we satisfying budget nation’s towards to command expect our as need a critical naval larger share we XXXX, For its for

say, it are to suffice Navy increase far the we to our and the poised of So customers support fleet. size

helpful. aware, CXISR business; government the information Systems, into a technology are leading GDIT, you to Information and providers and As federal Solutions comparison of two large agencies. realigned the of supplemented have segments. been its separate CSRA. and was by reshaped the XXXX, a from find systems data Mission relevant group might second and Jason that the I’m quarter to you of in acquisition going here to ask That interject

Jason Aiken

somewhat about excluding year on revenue basis, operating X.X% an of XXXX. let Mission $X.XXX for earnings growth combined of performance we line group note, how full the to look they On From divestitures did the and and better billion, several Mission for former for in approximately operating $X.X IS&T and We rate perspective, with that at GDIT we a CSRA comments the million. expected. our business than they actually and that $X.X expectations were some during billion billion billion the notwithstanding and had one System’s year, of GDIT in me impact year. closer organic includes If $X.XX earnings billion to combined XX originally so between sales, make guided an in so for Systems GDIT

for So all-in-all businesses. year solid a both

several portfolios and than business, of of public-facing included These group's during on year. customer added of business, focus high-end As we our segment I health $X our the more and our commercial needs. also SETA to, divestitures activities the These CSRAs billion GDIT in sales centers. the annualized alluded call solutions completed sale high-value enhance shaping products a

Phebe Novakovic

the CSRA, million year not first an $X.XX enjoyed meaningful. technology. in did operating of margin quarter Since let’s of comparison revenue the particularly fourth operating the quarter to the information and quarter ago earnings of technology $XXX billion Information numbers So for include are XXXX X.X%. with address of not

million up earnings basis $XX up However, up evidence cost to points, $XX sequentially here. revenue synergies extract our is margin of operating XXX ability operating and continuing million,

year a $X.XX For comparisons annual offer million $XXX X.X% not the not prior margin, do the include since year, earnings once again revenue and perspective meaningful was CSRA. operating were with did billion

ago quarter the $XXX in XX essentially quarter a the decrement last million Revenue lower of operating in than Systems. the Mission year million were year flat while $X was basis against margin. point quarter, Next, on operating earnings fourth

year the point revenue Book-to-bill For part for X or a of $XXX XX higher end X.X% operating the to up million above were up the year, in due in the mix. $X.XX of times basis by or earnings million at somewhat $XXX X.X the year X.X%. of modestly with margin Operating till billion. backlog was decline $XX billion million driven was

an $X.X costs than and revenue basis, this line, an $X.XX we Operating know, billion to basis, was call about of company with $XX.XX expect to transaction year the XX.XX organic revenue XXXX in At on which on [ph] XX.XX operating per as of was a for $XX.XX last organic earnings but $XX on And X.XX up CSRA, EPS came billion. billion million So an share. on forecast. and $XXX the wide more related you our to billion up forecast margin to XX.X%. are wound basis, billion, at we including, $XX.X forecasted of

be $X.X we as in margin billion believe $X.X modest with me models billion, in well thereafter. expect be significant be and earnings $X.X the XXXX of earnings in and expect margin million approximately we new on business to then a companywide to We and revenue $X.X mid spread loaded and forecast year operating moving first over XXXX, margin $XXX for $X.X $X.X progression with $XXX should as billion, XXXX in no deliveries will earnings be $X.X traction year. increase million by margin. of our than margin increase between rate initially Combat, well be to will the modest in rate XXXX business revenue to is and this over In group billion more in well in pre-owned XX.X%. excess QX slightly revenue billion. and to the $X.X The Operating QX. $XXX earnings sales, slightly point Aerospace, again area, the as a transition two during quarters operating generally will out. shift general, will of So better roll our operating of in The on a earnings increase last be mix an rate. XXXX, billion strengthening billion, than XXXX XXX something In like look with last that which approximately lower revenue up of $X.X XX Operating quarterly as low jets. to result XX than the billion, billion carry back-end $XXX the as let In about in provide

Here the year margin the and revenue, to quarter. with strong fourth a quarter-over-quarter rate particularly again, earnings both look for during grow

for mix reflected billion, $XXX We over be million for margin around approximately Abrams and being growth an in each for see $X with XXXX expanding increase margins. continue to with XXXX. have the are growth X.X%. to vehicles anticipate and or million business is We volume Marine to the Stryker see with about a solid $XXX of munitions. earnings in X% business. The international in Group of Operating yards revenue operating sudden our demand domestic than faster orders of this We expected rate anticipated

term to and long submarines, and need support expanding We work. growth with overhaul surface for an continue combat, see ships

here opportunity rate. the biggest outperforming forecasted around Our is margin

federal businesses, Intel optimizing the and combine proposition information progress in see the full of revenue which making a towards expect We and To agencies. side, business $X.X year facilities We a business defense, offset we teams, the systems, our excellent have diverse, the over XXXX CSRA prior integrate consistent centers as the a XXXXs consolidate year technology in represented increase by deeply with the range, over divestitures with of plus acquisition X.X% just XXXX value improvement performance. to and billion revenues. slight margins approximately we SETA civilian call billion of

in we see markets to steady strong Systems, $XXX in X% maritime, space-related $X.X over expect fairly in incumbency. and Mission somewhere $X.X cyber billion X%. network with tactical revenue growth For an line core of increase or XXXX between and just our top billion, between We our million

year. the over year margins throughout modestly We again with are up anticipating between once operating building last and the XXs, earnings mid in mid, high

roll with low this for operating XX.X%. billion an $X.X fully gives XXXX. is purely buy may a to to provision operations. of dilution year-end of So figures diluted emphasize billion assumes XXXX, plan EPS the per of $XX.XX $XX.XX steady forecast over as X% exercises. share. avoid I enough revenue that from $XX.X count of company-wide only this so to earnings This from around approximately we It up by tax up all shares of XX% to Operating us and and hold assumes share option margin

So outperforming year, the much EPS like our full EPS, quarter at plan, last rate beating for progression the results. tax the of deployment effective operating a the about guidance seasonally from the low capital. to lower must year’s should achieving quarterly be first effective and respect come of XX% With

year better The the quarter than the represent could and for of EPS second our of be one XX% than EPS. third should XX% final should about quarter that, more account and quarter over third of the

and for additional to this over So we’ll then commentary now other questions. Jason take around and your me turn items let cash backlog

Phebe Novakovic

Thank you, Phebe.

prioritize to of the with ended is during will of We approximately million repaid with debt quarter periods of in bringing in was expense to million the next fixed of expense year billion to CSRA. $XXX due credit the year the continue to roughly rating. paying of our commercial increase year, $XXX interest $XXX acquisition scheduled and is for maturity and compares in second $XX issued and we million interest XXXX. the the Mid-A XXXX the to That our debt paper consistent debt $XX million quarter XXXX. $XXX of this We the billion net million. finance debt Our The in outstanding, $X.X down the comparable

expect a we million issued expense reflecting approximately full of For to in XXXX. XXXX, year be notes $XXX the interest

XX.X% Our effective tax in was quarter rate the for line for year guidance. with the and XX.X% previous our

we rate recall approximately expect a by we rate XX tax XX% XX.X%. XXXX, XXXX, is low to the a range, than slightly year in ahead lowered full XX% pension provided discretionary by but between contribution, tax in million and higher XXXX, tax effective of basis $XXX onetime which Looking reform, and benefit a advantage This made points. took the

Looking at bringing $X.X to fourth million paid we capital year in in dividends deployment, the full quarter $XXX the billion.

December, of of In than market in million million stock We purchasing decline full for $X.X $X.X the our quarter, X.X also a planned. the degree our took we XX.X the bringing purchased shares greater by advantage to to shares shares for billion year billion.

as while to in December. our I have mentioned, continue as to debt ahead, Looking flexibility a we the priority to will continue market be to deployment capital in adjust did repayment changing response conditions we

in contribution. million plans, XXXX, $XXX on discretionary including to plans our approximately Moving to our contributed pension we the

For be the the capital XXXX, also ramped support the which our our to we million for $XXX third XX% be of almost and Marine growth approximately quarter. businesses, X% up amount XXXX, sales particularly to contributed from Aerospace. during That’s invest we mostly year. Systems expect that were up We’ve of expenditures, as to

the For rise expect of to sales, X% to the driven continued by in program. expenditures we Class Columbia investment capital XXXX,

free Our for conversion typical our excluding was pension quarter our cash for this conversion year rate the to XXX% target. XX% flow below bringing the the XXX% contribution, rate is and discretionary

you armored the know their on following the of you’re customer place and discussions Canadian If vehicle there our government contract. taking supply between are out headlines Canada,

expect payment this expected clear, last a As delays flow result year. to issue year. the receive payment these experienced timing cash of is a that we the be significantly To free this delayed discussions, we’ve impacted we and

up in backlog, year. our we in rate X.X% expect of backlog throughout we and range. the impacted we the last of year which very spite currency time million to typical the planning of ended XXX% XXXX with strong backlog performance XX% cash which Combat XXX% of to that’s of this conversion $XXX point increase reduced And came million, matter, expect looking a That on this foreign the in rate billion, over last Group. ahead, the headwind from one approximately in total Assuming fluctuations, resolution exchange the excess be $XX cash $XXX by well horizon Systems

including the increased last and firm arrangements, over end dollar Beyond potential CHS-X admissions backlog, XX.X% IDIQ options value, award the multi-billion total impressive systems. contract year, by of an our which IDIQ includes the

board into entered approval existing order move customer approved, Once we corporate multi-year with quarter. the an $X.X requires addition, billion into In multi-year contract this backlog. a firm for airplane, order that their will a that

awards with my firm the a provide for nice growth that back these backlog foundation you concludes ahead. see the turn and to along So it Q&A. continued over for the Howard, we I’ll remarks,

Howard Rubel

Thanks Jason.

we how As reminder, so one asked to participants participants up follow chance Nicole, that one ask please you a participate. queue. the everyone remind has to question and enter could a

Operator

[Operator of comes Barclays. first you. David ahead. Instructions] Please from Thank go Strauss Our question

David Strauss

Thanks. Good morning.

Phebe Novakovic

Morning David.

David Strauss

terms one the you, but can given on headwind here a detail margin additional would the understand, I that’s have seen bit guide, intangible, little synergies? Thanks. of guide. quarter would can IT know us Phebe, on additional on top CSRA thought, improvement on margin the what’s you with a I give and we going have you the have the with some in of divestitures, more and amortization you line,

Phebe Novakovic

market, net Last I are performance over matter. the And for important a of growing bit beautifully, business In year, the one-to-one had cash people outstanding. and This also the in people a years of we’ll into environment and truly that about So innovative, the ahead book-to-bill. schedule. and a this XXX% energetic, year team a way, management By But, GDIT a add this making frankly of billion $XX management might bit critical cost let’s is synergies win is preference. pipeline. across generated percent that year, also cash really income team and performing a board. on they and talk of come. continue absolutely very rate last the XX% this they a this a have is in to this workplace here is is They little business.

the this we see year? and rate into sales. large despite question fourth That see several growth a what rate year. This move the so from increase win in margin So, -- backlog timing book-to-bill quarter backlog sale. question contracts hundred the backlog, that the is quarter, just is of you’ll is third also is the then and this And into significantly our large timing, from the simply when Despite the contracts rate. of impacting moving of a next

cash now, ability So right of the They I’m business outperform simply performance, in cost very great in a the to than their this confident question synergy. perform are timing. of it’s so growing instance

Jason Aiken

of you color margin And rates. want around your a me I’ll Dave, little add to, additional influence bit on if

year you the at If group. that we the for margin look the for rate X.X% reported

with margin that normalize burden CSRA came you for a take you the the year. X.X% of the that with end that If and for amortization rate out, acquisition actually up

the couple XXX of basis the from contribution full really driven an XXXX and than So will. points that’s by operations points better ago reported basis we a about year than CSRA That’s perspective hundred if better rate. you year

core they business, margins on the XX.X% actually incremental benefit. amortization So at approximately excluding contributed

year, Now next you puts you the let’s side up. additional call CSRA on the the look and up, divestitures revenue but notionally ahead take by flat, of the just were between offset nominally volume to nominally when it quarter takes when

have of that actually we full have nose intuitively somewhat of the do margin a counter perhaps for we do slightly schedule because next of total quarters So quarterly we amortization full bit declining we will though is following burden, four have have to up have up for for to year the It a knows accelerate that little year. once year-on-year versus top the we accelerating a line start amortization comparison. business, flattish though drag a even fact a even this amortization

you drag. it XXish really call – the is call think a point amortization, I’ll XX if about So basis

did accelerate XX -- basis basis contraction we a and about that for as we is call go assist, so mentioned that. next when after this to in the call overall I’d we issue synergies we’ll of point the talked to CSRA XXX XXX do X alluded to are that mix then after part accelerating, some as time it other acquisition, perspective is point forward continue Phebe we years. incremental over And basis to, have The margins maybe basis an point point it X, forecast, from the XX

that. So call from XX so it basis points or

take it if basis XX offset So, basis to after on it you on you points get point accelerating basis and XXish improvement call by it synergies, that. see XX basis XX point amortization, we from the the if to basis point points year, basis mix positive XX XX you call point a that improvement for would

So, helpful. hopefully that color is

Operator

question comes Our Stallard Robert Vertical Please Research. next of from go ahead.

Robert Stallard

so Good much. Thanks morning.

Phebe Novakovic

Good morning.

Robert Stallard

This was I Aerospace there demand out the economy that's three and the your concerns Thank you basing product Phebe, the could demand customer comment in months. you. last wondering about for any whether was had to if on global flow-through the environment.

Phebe Novakovic

pass you. So for I may that

the emerging addition as say but North markets well very Western tend nice, Our demand translating into it’s are the North and and would focused orders American a -- of growing. activity interest on been to for products, new little in Western I Europe. overall demand active very and America us bit and on our cautious. as very XXX is considerable some be been is pipeline. robust Europe very They nice to in more

Operator

of Bank from ahead. Ronald next America go Please Lynch. of question Merrill Epstein comes Our

Ronald Epstein

morning. Good Yes.

quarter, it you’ll help the and that and potential you it up Another by us billion. on understand a Aerospace. release Can and would almost contract release get When last you compare estimated go quickly gets to maybe follow what pile by why went what in thrown question billion? up a last value, means that up this your

Phebe Novakovic

me Jason, a let to you on that. give color ask little Well

Jason Aiken

around it the defense last for this in the made clearly estimated Ron, IDIQ and value. value So comments typically options that potential That’s bucket potential and of was the one area I contract businesses. contract

that of it aircraft as with arrangements longer for have to individual customers. number items include holds Aerospace, we For well a as term options

may deliveries and out further where delivery backlog. the in out in spread the So queue be

over have dollars. over into is this fairly aircraft, up existing quarter, customer spans quarter. not at we approval a board out did backlog a actually I an multi years was that in It’s commercial mentioned, large that fourth did billion signed the that subject multi-year just customer’s as later coming it because contract order So arrangement valued go with that firm several the up a to

counted But where we So we’ll to time. that the traditional given into orders be backlog, move of quarter, as it and the and the that’s maturity the in expect and was at why firm that happen put this quarter, the bucket on firm we the to these are put order. it we value the we we in that till typically till it versus backlog as get contract conservative notions, in potential in we firm

Ronald Epstein

of Okay on. one means uncertainty there’s seems Phebe. just if a follow I that going environment It When political and great. the spending, about up what for may And current lot volatility and for do that? do defense and think through you then how you like pass

think do in how you So about know your experience, you it?

Phebe Novakovic

necessarily fact, this of been political environment. some their increasing haven’t contretemps if the and spending in defense spending in affected has Well, defense

to very key our going all we planning horizon, initial are So programs. least funding of our we’re quite see comfortable at nice for that through

I the perturbation of the to much a result seen issues budget overall as impacting extant too defense. some of haven’t respect So with

Operator

Our Credit comes next question go Robert Suisse. from of Spingarn Please ahead.

Robert Spingarn

Good lift if pressure does and more How the diminishes? the in curve into at get you the little just into or NORDAM. as saw that Jet I front do five of you morning a end of we see learning cited issues end specifically the you’re Phebe Jason. and a do pass factor expect dig we general this, NORDAM doing could you Phebe completion margin you pressure and Aviation, between and on to hundreds how conversions what XXXX. on the the and Where back hundreds, wanted bit that quickly problem six XXXX

Phebe Novakovic

well We’ve on performance order. been the has supply doing my the and our the but and them of cost to So line to is back respect with feed That pacing I as up good. deliveries, it while chain. capacity just quite let’s have Nacelle to the our the had to under to And item and it’s to control, timing begin got in product going the in take reverse is we’ve well throughput chain a spool mentioned take our remarks, supply demand.

So as rate I south. second that will we will chain. the on and a throughout the full the be bit half, in into delivery get supply will have completely see the resolved on we slowness that in But of production little

pleased about. we’ve it all has margin time you that. been something we’re to talking with quite some So The for compression been

you GXXX As see the we’re airplanes first we’ll see we quarter, deep margin. to on that cost expansion come ramp lower you’ll the from will at costs margins, all production will up higher come margins carried in some some, that to simply initial The and slightly about nicely XXX as its because that Those entry borne disproportionate of margin the then airplanes in of case, know, by second on XXX. curve. quarter lot and the up, first line. and will very lot those move talking And this little amount test down we ramp of carry continue learning

really jet operating are we side. margins. some respect completion to the issues the the on The this that had of with a problem business, we year on those So would see the

year. that, and fixed have they comfortable forward, will that this better do we’re going We

Robert Spingarn

not is part the Jet So of really not pressure? XXXX

Phebe Novakovic

in They they because of they’re No, and took affirmative [Indiscernible]. the year this better proactive not. steps No XXXX. will do

much So -- mix. about you think

Robert Spingarn

to old the Aerospace? this margins year, at you Once do you’re recover through

Phebe Novakovic

quickly learning margin XXX, us a XXX come We the of airplanes, up the of we first you on of to XXX We’ll a as XXXX my and lot all completed and have, transitions. thereafter, finish and down expansion in expect quite come airplanes; nice growth our lot can of And really some flight curve. in mentioned we’ll we see curve. earnings first the continue those learning as to have expansion considerable down I earnings then remarks, two

performance We're going exactly continue terminal to not us. to airplanes you expect up end I’m how have to from with seen build should But, predict at We where airplanes, margins here. So operating quality know new the cost good low to respect high, us provider. these you we on that. strong

Operator

Myles of from go UBS. Walton comes question Our Please next ahead.

Myles Walton

like I program the and of Canadian we color on this morning. was probably that Good on program. that and the get would getting the a on cash an have the revenue was looked that basis, Lab are maybe conversion are you you conversion not I’m if delays? you Thanks. hoping had getting, curious, weighing what progress year, any some for ongoing could on billion program

Phebe Novakovic

our the let This end to have valid all a to commitment talent the and attested is The in Ontario honor throughout London, give importance robust of recently engineering manufacturing context Myles. their that you parties supply So repeatedly government to we contract me that Canadian understands that fully here that high country. contract. and and some have the contract chain

a larger year. diplomatic payment That's affected, contretemps we political otherwise issue the payment they issue caught diplomatic international Those last up got that slowed issue. in Our that would some got why have payment anticipated.

anticipated. issue, than rate just resolve. we’re So and that we will comfortable timing resolve had quite slower that It’s at quite a a will and confident that

Myles Walton

a been pension about above you have for XX% get just breadbox In you adjusted Jason this? if conversion it, around would

Jason Aiken

correct. That’s been then net would XXX% range targeting. it have call we’ve XX%, We

Operator

from Research. question Shapiro Shapiro go ahead. comes of Please next Our George

George Shapiro

to Yes. you’d Phebe, Gulfstream. ask I quarter on close would thought, I get third book-to-bill in wanted that the the one. to implied

So that? if we up might have on somewhat what less you happened, so since just wound comment than

Phebe Novakovic

the be the they than quarter I believe would fourth quarter. better third said in I what orders were George the was in that

a board, know to deliveries back we have we year, with point very the had some gets moves fourth But delivery, and In tends you talked we’ve got the considerable when number nice some think. out backlog. look at that length, it know the about fact, was go be about better anticipated And activity of quarter they I were. added that book-to-bill, lumpiness dollar was third fourth at nice what Gulfstream, into you the the once the looked Aerospace order cleared last Jason the also would of additional order quarter. book-to-bill that in if a, And a quarterly you and a particularly by its I quarter. would billion at than you But orders that we addition customer

that, order good consider had good we I had quarter. we a -- a So

George Shapiro

could the NORDAM may Okay. the margin how incremental quantify at have costs at And much all quarter? then you impacted the in just

Phebe Novakovic

with I’m how pleased they quickly got how We’ve And with good frankly, of cost the Now pleased impact don’t that’s supply really I’m were good very now And in stabilize able good at know we’ve impossible some specificity. quickly any to almost really in deconstruct. Tulsa. control. any particular the got aligned to operators line. performance, we’ve got Though, chain. that I

Operator

Research. Melius Carter question from of ahead. next comes Copeland go Please Our

Carter Copeland

all. good Hey, morning

Phebe Novakovic

Carter. Hi,

Carter Copeland

historically and Phebe, we on life a I of XXX, the entry us and the XXX. in the how framework just of we the about and products their just service sort a where given cycle seventh you’ve think lifecycle given know of you and got anniversary are

through if that that kind cycle forward in of you think update the halfway this XX on in you life quarters, kind next could particular year product us I just the we’ll couple about as of that think lifecycle usually of wondered you of how look I reference year. So be and we

Phebe Novakovic

not as -- new about introductions, to our is well you imagine, that ought you you about can product on am our full, I think but imagine way about So comment is that’s it. the thinking can pea-shooter what

Carter Copeland

we that sort levels think you that cash I’m Okay, one. CapEx, the if on yeah just another standpoint. in do about on the when answer try When Marine? Marine – But, term away? the then CapEx -- still Jason, when couple not I’m this years of should see based comment of build the a think not from just flow. I’ll Is planning. longer a sure off you as can we

Jason Aiken

next normal to over you’ll two, two call back tail and and years couple more that then years a It between is, its level. it of see three the

intermediate mentioned, So continue horizon, the see we to over that. as do I more planning

to to XX% I reliable XX a think more result. rate XXX% conversion cash as

Operator

comes Cowen of and go ahead. Our question Please next Company. von from Cai Rumohr

Cai von Rumohr

very Yes thank much. you

point who you obviously in where to XX XXX And, you little Phebe, the obviously you said believe longer Mark certifying GXXX. taken back So, at the probably market. have competitor Burns And bit the was. than some a has the XXX a expected runs you’ll global have Gulfstream on a I have an opportunity

think that what us fourth the high -- comment R&D, know quarter higher we in terms quarter, high high that sort give XXXX? in what fourth in was of on relatively drag about be a can will what, So and the you of if -- you

Phebe Novakovic

call So what let or me just gently trafficking tease you I a not bit rumor not. intelligence in about

that quite cautionary our So note, has come nicely. certification with along

than As anticipated. it’s little slower a I told you, we

shutdown got about of plan was the is robust first quarter internal appropriately that think a move and by quarter. originally, shut the detailed second going this we this that, to down that but the I is our apologize of will talk the and in unfortunately process a know that that’s early and Jason -- impacted because R&D. into my You for optimism, plan, perturbations

Jason Aiken

Yeah. was look from quarter It year-over-year. go bit you data, essentially Cai, or quarter a back and was million the the flat $XX call R&D up so. at a for by sequentially the that third little if it roughly

for R&D. total for up ended think right we year Company-sponsored I sales of X.X% the around

Phebe introductions and we anomalous the introductions. the to a in to think don’t see, continued on it technology way, think we in -- drip, past, alluded R&D, and have we and as continue pipeline product steady expect of or to high any I So low new I as

So I down. anomalous or don’t think anything up

Cai von Rumohr

you. Thank it. Got

you comparable would opportunistic this on this in been Just approach And into quarter. share Congratulations any fourth last the Should we able you aggressive in to buy your one. quick quarter? a have repurchase your shares legally carry assume that early year?

Phebe Novakovic

assumed buybacks that I will for you have well buying. wisely share And you continue opportunistic mechanism think we know our blackout. -- about the You during the

we’ll it. around very that we in that's way a comment think fourth But the about I think I So later. were active leave the quarter, to think

Howard Rubel

questions. time more for two Operator, we have

Operator

you. Thank

Arment go Baird. Our Please Peter comes ahead. from next question of

Peter Arment

Phebe, Yeah. Marine, the projections. just Good had wins and Phebe. just that’s you’ve some on kind thinking those really thinking longer-term back going some of since of about contract your news your to morning, in good there, Thanks. targets nice

that So additional falling for you are delivering tracking is scope of some because is this volume you the of outside upside, this ahead kind like it XXXX targets? seems that. Or of

there would color additional great. some Just be

Phebe Novakovic

Electric So We’ve of is the is, Boat see gotten are at proponents to some past. submarines. going growth and the wins nice we at

DDG-XXs their started I now, they’ve in oiler, about the and backlog two on Matson the They’re first to working think continue in through platform will months turn they’ve got ESB. that its early. and containership next those. XX versatile NASSCO they got extraordinarily

revenue. is remarks, performance, construction which the in then a on is the IV, It next just Boat. that me slow Block a then I my it but noted really Both two Electric upgrade And is it So And done they have class Virginia early into and the we’ve leave in you Block growth volume at the advent revenue, -- driver with nicely growth, Columbia, in a two-year -- it got is – will steady significant will that. the see drive begin let additional as of in and V incremental respects. the real year.

time. I’m So for very is we’ve steady a some engine for been saying this as pleased us growth with them.

Operator

Please from Our of question Keay Research. question Wolfe go comes Hunter next our and ahead. last

Hunter Keay

on. question sort Phebe, development. just for of you another me on squeezing Thank product

sort the think about lessons learned of some GXXX. long-term you and the As on

X sort it product Or development to sort next proposition? value in anything to Is products. about a years? sort XX you an new high-end think the lot before of speed it for talked speed Is access any beyond runway the appetite sort capabilities that? You remote evolving for concept regions, proposition of your value as as next about a just of new these to like access, important like like to really is being just customers of there speed,

Phebe Novakovic

avionics, upgrade important, you’re Speed an deposit, so decibel single cabin Speed, engines, and you and spectrum. important that but is our exclusive well right, both look, and is are commodity, around has but these we but to is the innovate better efficiency, and comfort, the -- by imagine, people’s it better in time fuel is the as precious, levels, and getting the and focus. continue can means across quite us, no focus, for better and because been airplanes

Hunter Keay

Thank you.

Howard Rubel

With you, we will our operator. that Thank end call.

all Thank call has don't again, can to and My XXX-XXX-XXXX. anybody if follow-up off. questions, you and me. number is please you sign reach -- you out hesitate If

Operator

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

may disconnect. You now

General Dynamics (GD) 30 Jan 192018 Q4 Earnings call transcript