Aerospace, IT spur rise in General Dynamics' quarterly earnings

General Dynamics Corp. reported third-quarter 2010 earnings of $649 million, compared to $575 million for the same quarter in 2009.

Revenues in the quarter were $8 billion. Operating earnings grew to $966 million for a 10.5 percent increase over third-quarter 2009, the company reported in an earnings statement released at market closing Wednesday.

Net earnings for the third quarter 2010 were $650 million, compared to $572 million in the year-ago period.

The company’s funded backlog at the end of the quarter was $45.6 billion and total backlog was $61.8 billion. Orders received reflected continuing demand for the company’s aerospace and defense products alike, General Dynamics reported.

In the Information Systems and Technology group, customer demand continued for tactical networking systems and rugged computing products, as well as IT infrastructure and support services.

“The federal government's preference for structuring contracts with its IT services vendors as fixed-price or cost-plus engagements has been readily embraced by General Dynamics IS&T, contributing to the company’s peer leading profitability,” said TBR, a market research and industry advisory firm, in a commentary on the General Dynamics report.

“With 88 percent of its deals structured as fixed-price or cost-plus engagements, General Dynamics IS&T is able to squeeze profit driving increased efficiencies and cost reductions,” TBR added.

General Dynamics said that in addition to the total backlog, its estimated potential contract value was $20.8 billion at the end of third-quarter 2010, reflecting management’s estimate of the value of unfunded indefinite-delivery, indefinite-quantity contracts and unexercised options.

Net cash provided by operating activities in the third quarter totaled $880 million. Free cash flow from operations, defined as net cash provided by operating activities less capital expenditures, was $784 million for the period.

“General Dynamics continues to demonstrate its ability to effectively execute on its programs,” said Jay Johnson, the company's chairman and CEO. “Margins remain strong across the corporation, and the quality of earnings was underscored by strong free cash flow. This solid operating performance reflects our continued focus on increasing efficiency, improving productivity and driving cost out of our businesses.

General Dynamics, of Falls Church, Va., ranks No. 6 on Washington Technology’s 2010 Top 100 list of the largest federal government contractors.