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General Dynamics earnings up 5% in second quarter, revenue flat

By Marjorie Censer
Capital Business Staff Writer
Thursday, July 29, 2010; A20

Falls Church-based General Dynamics said Wednesday that its second-quarter profit grew nearly 5 percent, propelled by increased earnings from its communications and information technology group.

The defense contractor reported earnings of $648 million ($1.67 per share) for the three-month period, up from $618 million ($1.60) in the same quarter in 2009. Revenue stayed essentially flat at $8.1 billion.

In a call with investors, chairman and chief executive Jay L. Johnson said the company's information systems and technology division posted its highest ever revenue and earnings. The group's profit grew to $312 million in the quarter, up nearly 10 percent from the same period last year.

Johnson forecast that the unit's business will continue to increase because its focus areas, which include intelligence and health care IT, are some of the stronger markets.

"Sales growth will also be driven by the rapidly expanding cyber market, where [the division] has a very strong position," he said.

Earnings also increased in the company's aerospace sector, and Johnson said the business jet market is improving.

"Second-quarter orders also reflected renewed interest in our North American markets, which were essentially dormant following last year's financial crisis and ensuing anti-business jet rhetoric," he said, adding that the company is looking to an emerging market in the Asia-Pacific region.

General Dynamics' combat systems and marine systems divisions posted small decreases in profit of 1.7 percent and 0.6 percent, respectively, from the same period in 2009. The combat systems unit, which supplies U.S. Army vehicles such as the Stryker and the Abrams tank, had a 12 percent revenue decline.

Predicting flat revenue in the combat systems business this year, Johnson said the European debt crisis and the decline of the euro have changed the market outlook.

Several defense contractors have taken steps to restructure their companies or cut costs as defense spending slows down. Johnson said General Dynamics is a lean company and has no immediate plans to spin off any of its businesses.

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