General Dynamics announces $2.1B loss

General Dynamics announces $2.1B loss

Defense industry titan General Dymanics reported on Wednesday a $2.1 billion loss in the fourth quarter of 2012.

The announcement comes on the heels of three major submarine contract awards to General Dynamics’ Electric Boat Division that amounted to more than $4 billion.

In 2012, General Dynamics lost $332 million compared to the profit of $2.55 the company reported in 2011.


Defense analysts expect similar calls throughout the industry as the Pentagon braces for the coming defense budget cuts that could be more severe if sequestration is executed. Industry executives worry that sequestration combined with the extension of the Continuing Resolution will put contracts in jeopardy.

General Dynamics reported $31.5 billion total revenue for 2012 and $8.1 billion for the fourth quarter. The company’s operating margin was 2.6 percent through 2012 after taking a 23.5 percent hit in the fourth quarter. The defense firm credited additional Styrker orders and the contract to develop the next generation Ohio-class submarine for not creating a greater fourth quarter loss.

Company CEO Phebe Novakovic said on the earnings call that she expected future growth of international orders in combat systems. However, she did criticize the company’s acquisition process.

Much like other defense companies, General Dynamics hopes to stem portions of domestic losses with additional international business. Novakovic signaled that the company is placing focus on Europe where she said she’s worried about recent performance.

General Dynamics did recognize the impact of shrinking budgets on the company’s Information Systems and Technology group where it reported a $2 billion goodwill impairment in the fourth quarter. Novakovic said the company needs to improve in its IS&T accounts.

The CEO said that despite the reported loss at the end of 2012, General Dynamics will remain aggressive in 2013.

“General Dynamics is a strong corporation with relevant product and service offerings that are critical to our customers’ missions. We will continue to manage our business aggressively as we approach the opportunities and the challenges of the future,” Noakovic said in a statement.

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Easy solution have the Army drop GCV and buy more Strikers.

The article doesn’t really say why GD had such a big loss in 4Q/12. They haven’t lost any big contracts yet so their revenue stream should be more or less constant. They build a lot of stuff for the DoD. Any ideas?

Wonder if Alenia knew this was coming before teaming on T-X?

The explanation is on GD’s site http://​generaldynamics​.com/​n​e​w​s​/​p​r​e​s​s​-​r​e​l​e​a​s​e​s​/de… but it is a little too technical for me.

That’s quite a bit to decipher. It looks like they had losses in the value of a couple of their programs as well as less revenue in their ground combat systems division. I’m not a CPA so I really don’t know what a goodwill impairement is, but it makes up a lot of their loss that quarter.

.…..we need a cheap APC.….remove the turret from the Bradley.

Tada. Mount a ring and hatch on top and a 50 cal and you have a perfectly capable apc.

Singapore did as much with their Bionix IFV. Would be interesting to see how effective it was for them.

It’s weird. A value assigned to something intangible. A brand name, an R&D capability, etc. When it is “impaired”, its stated value is basically lowered. I always thought it was a balance sheet thing, so I’m not sure how it impacts an income statement or earnings report.

As far as I’m concerned they bought up too many civilian companies during the GWOT push years. They ruined a lot of business here, because it all dried up on the streets. I don’t feel a bit sorry for them myself.

Meanwhile Lockheed Martin announces:

Thanks to your dedication, focus on program execution and proactive cost-reduction efforts in this very challenging business environment, we achieved record performance in 2012 and are well positioned for continued success.

Our 2012 results, reported today, show that we grew sales to $47.2 billion, booked $48.7 billion in new orders, and achieved a year-end backlog of $82.3 billion. We also generated $1.6 billion in cash from operations, after contributing $3.6 billion to our pension funds. Earnings per share from continuing operations increased six percent to $8.36.

By the way, if you’re looking to get a job there, now’s not a good time. They’re laying off. A big f you to all the little people who got them where they are today.

If I’m reading it correctly, they are saying that the market value of their IT division and some other small subunits declined by about $2B total. That’s not an operating loss; it represents the market’s opinion about future earnings from those business areas.

I was confused about how you could know that at the subunit level, but it looks like all of that division comes from acquisitions, starting with Lucent, Computing Devices, and CSC in 1998. There have been other acquisitions since then. If you know what you paid for all of the pieces, and you got a recent offer for the unit, that would tell you whether the value of the unit has gone up or down…

The turretless Bradley isn’t an IFV anymore, it’s an APC. And it’s exactly what is proposed for the new AMPV program, to replace all of the useless M113s in the inventory.

Of course, they probably won’t be able to afford to do that if they go ahead with the proposed GCV…

All they have to do is initiate a pension freeze for there long time employees within its IT division to make up for the loss. Oh wait, they just did that.

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