Published April 24. 2013 12:00PM Updated April 24. 2013 1:17PM
The chairman of General Dynamics described a slight loss of revenue at the defense contractor in the first quarter of 2013 in light of cuts to defense spending.
Phebe N. Novakovic, chairman and chief executive officer of the Falls Church, Va.-based company, said that given the defense market environment, this quarter compares favorably to the first quarter of last year.
Revenue is down modestly, with a 2.3 percent loss, and operating earnings are essentially flat, Novakovic said.
The Budget Control Act, which includes the automatic spending cuts commonly referred to as sequestration, requires $85 billion in budget cuts this fiscal year, with half coming from the Department of Defense and the rest from domestic agencies, followed by $109 billion each year for a total $1.2 trillion in cuts over 10 years.
Novakovic said the Defense Department has not told the company specifically how each of its programs will be impacted. This year, she said, revenue in the Combat Systems group may be less than anticipated.
"But in general, we do not see sequester as a significant threat to 13. Most of our sales are in our backlog," she said Wednesday in a conference call with securities analysts.
The president's budget request for 2014 supports many of GD's programs, including all of the shipbuilding programs, Novakovic added. General Dynamics owns the Electric Boat shipyard in Groton and employs about 90,000 people worldwide.
GD reported that net earnings, or profits, for the first quarter rose 1.2 percent, to $571 million, or $1.62 on a per-share basis, compared to $564 million, or $1.58 on a per-share basis in the first quarter of last year. Revenues decreased from $7.58 billion in last year's comparable quarter to $7.4 billion this quarter.
The Marine Systems group, which includes the submarine business, said first-quarter revenues were up 1.3 percent to $1.63 billion, while operating earnings were down 14.1 percent to $159 million. The operating margins are down, as expected, because the program to build the T-AKE dry cargo/ammunition ship ended last year, Novakovic said.
"This group is expected to be highly consistent during the remainder of the year," she added.
Overall, Novakovic said, GD is well-positioned with solid-performing programs.
"That's frankly the best anecdote to the budgeteer's scalpel," she said.