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General Dynamics says its shipyards are performing well

By Jennifer McDermott

Publication: theday.com

Published January 22. 2014 2:00PM   Updated January 23. 2014 12:03AM

The chief executive officer of General Dynamics said Wednesday that all of the company’s shipyards performed well in the fourth quarter and for the year.

 

In a conference call, Phebe N. Novakovic, chairman and chief executive officer of the Falls Church, Va.-based company, said revenues for the company’s Marine Systems group, which includes the submarine business, declined 2 percent to $1.63 billion and operating earnings declined 18.9 percent to $159 million in the fourth quarter of 2013. Revenues for the year increased 1.8 percent to $6.7 billion, while operating earnings dropped 11.2 percent to $666 million.

 

The declines were due entirely to the end of the profitable program to build the T-AKE dry cargo/ammunition ship, Novakovic said, and the group was “highly consistent” in its revenue and earnings throughout the year.

 

“All in all, a very good year for the marine group,” she said.

 

GD, which owns the Electric Boat shipyard in Groton, reported that net earnings, or profits, for the fourth quarter were $495 million, or $1.40 on a per-share basis. GD lost $2.1 billion in the fourth quarter of 2012, which Novakovic said then was the result of government budgets shrinking at home and abroad.

 

Net earnings for 2013 were $2.4 billion, or $6.67 on a per-share basis. For 2012, net earnings were reported as a loss of $332 million.

 

Revenues increased 0.4 percent during the fourth quarter, from $8.08 billion in 2012’s comparable quarter to $8.1 billion in 2013. For the year, revenues decreased 0.9 percent to $31.2 billion.

 

In the fourth quarter, orders were strong in the Aerospace group across the Gulfstream fleet, according to GD. Significant orders were also received for the Virginia-class submarine program and design work on the next-generation ballistic-missile submarine.

 

Revenues were “disappointing” for the Combat Systems group because the Army spent less as its leaders worried about how the potential shortage of funds due to the automatic budget cuts imposed under sequestration and the government’s 16-day shutdown in October would impact their ability to fund the war effort, Novakovic said. An international order of $1.2 billion was also delayed. Revenues for this group declined 16.4 percent to $1.65 billion in the fourth quarter and declined 23.4 percent to $6.1 billion for the year.

 

Novakovic said it is “quite a blessing” that Congress agreed to a fiscal 2014 budget this month, which will bring stability in program funding and reduce the uncertainty that is “very, very difficult to manage to.” Novakovic noted that all of the programs the marine group is working on were fully funded.

 

For 2014, revenues in the marine group are expected to grow by 2.5 percent while revenues for the combat group will continue to drop at a rate of 4 percent to 4.5 percent, even with the revenue from the international order that is expected in the first quarter, Novakovic said.

 

The operating plan assumes about $30 billion in revenue, Novakovic said, which translates to $6.80 to $6.85 per fully diluted share, compared to last year’s guidance of $6.60 to $6.70. About 96,000 people work for the contractor worldwide.

 

j.mcdermott@theday.com

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