General Dynamics Earnings Call Insights: Aerospace Production, Portfolio & Businesses

General Dynamics (NYSE:GD) recently reported its first quarter earnings and discussed the following topics in its earnings conference call.

Aerospace Production

Joseph Nadol – JP Morgan Securities: On the aerospace side, I was wondering, Phebe, if you could give us an update on the market demand as you are seeing it and really honing in on the 550 and 450 where backlog is today and just color as you see demand go in the rest of the year. How are you thinking about production in that context?

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Phebe N. Novakovic – Chairman and CEO: As you all know our book-to-bill has been below 1 to 1, but I think this is important to understand with respect to Gulfstream that data can be misleading. It’s the mix of orders that are important and a significant, in fact the preponderance of the order — in this orders, in this quarter were for the G550 and G450 where we need them. So, we carefully watch that portion of the order book to determine production rate, we’re solid for the year and have not made a judgment about next year’s rate on these aircrafts. To the extent, the rate is down for next year on the 450, 550 and we have no reason to believe at the moment that it would be, but to the extent that it is, it will be overcome by increases in the 650 and 280. So in general, we are very comfortable with where we see our backlog and our new order activity.

Portfolio & Businesses

Carter Copeland – Barclays: Just I’m going to resist the urge to ask about the aerospace margins and instead ask a bigger picture question Phebe. You’ve now had another quarter under your belt here to do business reviews, think about what you want to do with the company from a strategic perspective. I wondered if you might share with us your perspectives on risks and opportunities you’ve identified over the last quarter or how things are shifting in your mind, and just your general sort of high level thoughts on what direction you want to take the Company in?

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Phebe N. Novakovic – Chairman and CEO: Let me answer that by giving you sort of an overview of how I see our portfolio and businesses developing through the long range planning process. Gulfstream will grow significantly in that timeframe and their margins will have improved. Marine Group will grow, increased revenue in submarine market throughout that period. IS&T has obviously significant margin opportunity, and for combat, we have sufficient international interest to bridge to a more robust army spending when the army needs to recapitalize. So in general I like the offsetting cyclicality that we have embedded into our businesses and in all respects we see a very clear way forward. Does that answer you?

Carter Copeland – Barclays: Yes it does.

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