General Dynamics (NYSE: GD) today reported second-quarter 2018 net earnings of $786 million, a 4.9 percent increase over second-quarter 2017. Revenue increased by 19.7 percent to $9.2 billion due to strong defense volumes and the acquisition of CSRA. On an organic basis, the defense businesses generated a 7.1 percent revenue increase.
Diluted earnings per share (EPS) was $2.62 compared to $2.45 in the year-ago quarter, a 6.9 percent increase. In the quarter, the company incurred one-time charges totaling $0.20 per share related to the acquisition of CSRA. Absent the charge, EPS would have been 15.1 percent higher than second-quarter 2017.
"General Dynamics delivered solid operating results and accomplished a number of key strategic objectives across the portfolio," said Phebe N. Novakovic, chairman and chief executive officer. "We closed on the CSRA acquisition, building on our core GDIT business to create a leading government IT services provider, and integration of the business is well underway. Our Combat and Marine segments continue to have reliable growth with strong operating performance. And the FAA certified the G500 and we look forward to delivering this newest Gulfstream aircraft to our customers in fourth-quarter 2018."
MarginCompany-wide operating margin for the second quarter of 2018 was 11.8 percent, including one-time transaction costs and incremental intangible asset amortization associated with the CSRA acquisition. This is compared to 13.9 percent in second-quarter 2017.
CashNet cash provided by operating activities in the quarter totaled $787 million, compared to $477 millionfrom the year-ago quarter. Free cash flow from operations, defined as net cash provided by operating activities less capital expenditures, was $612 million.
Capital DeploymentThe company repurchased 0.9 million of its outstanding shares for $179 million in the second quarter. Year-to-date, the company has repurchased 2.1 million outstanding shares for $436 million.
BacklogGeneral Dynamics' total backlog at the end of second-quarter 2018 was $66.3 billion. The estimated potential contract value, representing management's estimate of value in unfunded indefinite delivery, indefinite quantity (IDIQ) contracts and unexercised options, was $32.7 billion. Total potential contract value, the sum of all backlog components, was $99 billion at the end of the quarter.
Gulfstream unit orders were 21 percent higher than the year-ago quarter, with large-cabin orders accounting for approximately 75 percent of the demand.
Total backlog for the defense businesses was up 7.7 percent from the end of first-quarter 2018, due to the CSRA acquisition and strong order activity across the segments. On an organic basis, Information Technology achieved a book-to-bill ratio greater than one-to-one, and the book-to-bill ratio in Mission Systems was one-to-one. Significant awards in the quarter include $615 million from the Centers for Medicare & Medicaid Services for contact-center services, $440 million from the U.S. Army to upgrade Abrams main battle tanks, $260 million from the Army to upgrade Stryker vehicles, $225 million from the U.S. Navy for Block V Virginia-class submarines, $150 million from the Army for the production of Hydra-70 rockets and $125 million from the Navy for Common Missile Compartment work.
About General Dynamics Headquartered in Falls Church, Virginia, General Dynamics is a global aerospace and defense company that offers a broad portfolio of products and services in business aviation; combat vehicles, weapons systems and munitions; IT services; C4ISR solutions; and shipbuilding and ship repair. The company's 2017 revenue was $31 billion. More information is available at www.generaldynamics.com.
