FALLS CHURCH, Va. - General Dynamics reported first-quarter 2014 revenues of $7.3 billion, down 1 percent from $7.4 billion in the first quarter of 2013. Net income was up 4 percent to $595 million compared to $571 million last year.
GD will produce more Arleigh Burke-class destroyers
Source: US Navy
"General Dynamics' first quarter operating performance was strong, demonstrated by 11.9 percent operating margins," said Phebe N. Novakovic, chairman and chief executive officer. "2014 is off to a solid start as we remain committed to robust operating performance, engaging in wise capital deployment and driving excellence throughout the company."
Funded backlog at the end of first-quarter 2014 was $48.3 billion, and total backlog was $56 billion, a more than 20 percent increase from year-end 2013. The company received a $10 billion 14-year contract from the Government of Canada's Canadian Commercial Corporation to provide military and commercial vehicles, training, and support services to an international customer, with $3 billion in options. Additional significant awards received in the quarter include $645 million for an additional Arleigh Burke-class destroyer, $520 million for long-lead material for Virginia-class Block IV submarines, $210 million for continued support of the U.K.'s Bowman tactical communication system, and $165 million for combat and seaframe control systems on the Navy's Independence-variant Littoral Combat Ship.
With the harshest sequester cuts now diminished; firms such as General Dynamics now have a measure of stability going forward. Several of the company's programs will maintain stable funding including M1A1 Abrams upgrades, Virginia-class submarines, and additional Stryker vehicles.
Despite the declines in defense, it remains a lucrative market. For General Dynamics, naval programs appear to be one of the most resilient sectors. Electric Boat's production of Virginia class submarines continues apace. A recent contract from the U.S. Navy secured production of several boats and protected them from the coming budget cuts. Bath Iron Works, meanwhile, is building Arleigh Burke and the new Zumwalt class destroyers, while NASSCO builds T-AKE supply ships.
Military vehicles becomes a bit more tenuous. While the company has strong short term prospects in terms of modernization and retrofit efforts, long term the outlook is less sanguine. Several competitions for future programs have fallen to budget cutting. Canada cancelled its $2 billion Canadian Close Combat Vehicle (CCV) program. Meanwhile, the US effectively canceled the Ground Combat Vehicle competition in early 2014.
In light of this trend, the company will continue its strategy of diversifying it markets. As defense manufacturing slows overall, the company has begun building mass in its other operations, most notably cybersecurity. In addition, emphasis will shift toward more civil-oriented operations in order to maintain a healthy revenue stream.
Aerospace had 2014 first quarter sales of $2.13 billion up 19 percent compared to 2013 period sales of $1.78 billion. Operating income rose to $404 million compared to $310 million in 2013.
Combat Systems posted 2014 first quarter sales of $1.32 billion down 15 percent compared to $1.55 billion in 2013. Operating income fell to $136 million compared to $215 million in 2013.
The Information Systems and Technology segment reported sales of $2.28 billion, down almost 7 percent compared to $2.45 billion in 2013. Operating income fell to $183 million for the quarter compared to $185 million in the same period in 2013.
In the Marine segment sales fell 1 percent to $1.60 billion in 2014 compared to $1.63 billion in 2013. Operating income for the quarter rose to $166 million compared to $159 million in 2013.