General Dynamics Corporation (NYSE:GD) Q2 2020 Earnings Conference Call - Final Transcript
Jul 29, 2020 • 09:00 am ET
Good morning, and welcome to the General Dynamics Second Quarter 2020 Earnings Conference Call. [Operator Instructions] Please also note that today's event is being recorded.
I would now like to turn the conference over to Howard Rubel, Vice President of Investor Relations. Please go ahead, sir.
Howard Alan Rubel
Good morning. Thank you, Rocco. Welcome to the General Dynamics Second Quarter 2020 Conference Call.
Any forward-looking statements made today represent our estimates regarding the company's outlook. These estimates are subject to some risks and uncertainties. Additional information regarding these factors is contained in the company's 10-K, 10-Q and 8-K filings.
With that complete, I would like to turn the call over to our Chairman and Chief Executive Officer, Phebe Novakovic.
Phebe N. Novakovic
Thank you, Howard, and good morning all. Before I address the company's performance in the quarter, let me briefly discuss how COVID-19 is continuing to impact us. We continue on a professional and proactive way to create a safe work environment for our people, adhering to CDC guidelines, encouraging social distancing and instituting a company-wide mandatory mask policy. We temperature-screen our employees and send those homes who fail. These procedures have ensured that we have lower infection rates than the locales in which we operate. Of our over 100,000 employees globally, we have had 515 cases to date, less than 1/2 of 1%. As you would expect, we continue to incur significant COVID-related direct costs across the company. In addition, several of the business units are experiencing considerable program impact, which we estimate to be around $127 million by the end of the second quarter. The most significant impact appears to be at GDIT, which I will discuss later in my remarks. On the good news front, with respect to Congress, all of our major programs are well supported in the Congressional markups of the defense funding bills.
As we turn to our results in the quarter, I will spend less time on quarterly and year-to-date comparisons that are well stated in the exhibits to the press release and focus my remarks on the operations and the significant nonrecurring items in the quarter. Regarding the company's second quarter performance, as you can discern from our press release, we reported earnings of $2.18 per fully diluted share on revenue of $9.26 billion, operating earnings $841 million and net income of $625 million. As one would expect, revenue was down $291 million or 3% against the second quarter last year. Operating earnings were down $249 million or 22.8%, and net earnings were down $181 million.
The defense side of the business was down very modestly against the year ago quarter and even less year-to-date. For the defense business in the first half, revenue was down only 0.6%, and operating earnings were down 3.7% on a 30 basis point lower operating margin. Most of the revenue and earnings challenges in shortfall occurred at GDIT and in our Aerospace segment, which was particularly impacted by Jet Aviation. I'll comment on this in considerable detail later in my remarks.