General Dynamics sees flat sales, despite sequestration and shutdown

January 22

After a rocky year of automatic spending cuts and a government shutdown, Falls Church-based contracting giant General Dynamics reported Wednesday that 2013 sales were essentially flat.

Revenue hit $31.2 billion, a decline of less than 1 percent from the previous year. Profit for the year surged to $2.4 billion, or $6.67 a share, compared with a loss of $332 million, or 94 cents a share, in 2012 — mostly related to the company’s decision that year to devalue its information technology business by $2 billion amid falling government demand.

The contractor was buoyed by its aerospace unit, which includes a line of business jets. Sales rose to $8.1 billion from $6.9 billion in 2012.

Phebe N. Novakovic, General Dynamics’ chief executive, said in a call with analysts Wednesday that only the combat systems unit — which specializes in military vehicles — was materially affected by sequestration and the shutdown. She said those events cut about $500 million in sales.

“Army spending slowed during the year, which hit us hard during the fourth quarter as they worried about the potential shortage of funds,” Novakovic said.

William Loomis, managing director at financial services firm Stifel Nicolaus, said several major defense contractors appeared to have weathered the cutbacks better than some had feared.

“It appears the government took most of those reductions themselves,” he said.

General Dynamics also reported that its IT unit had higher sales than forecast in 2013, but Novakovic said she expects a nearly 20 percent revenue drop for the group this year.

Novakovic vowed when she took over leadership of the contractor about a year ago to back away from mergers and acquisitions, calling the company’s process for buying “somewhat broken.”

She reaffirmed that stance Wednesday. “I don’t have anything on my horizon at present, and so I don’t anticipate our behavior with respect to [mergers and acquisitions] to be any different this year,” she said.

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