The ongoing coronavirus pandemic delayed General Dynamics’ [GD] deliveries of business jets in the first quarter, sending sales and net income lower.

The company’s defense businesses overall reported slightly higher sales and profit.

Net income fell 5 percent to $706 million, $2.43 earnings per share (EPS), from $745 million ($2.56 EPS), lagging consensus estimates by 15 cents per share. Total operating margin was down 10 basis points to 10.8 percent.

Sales dipped 6 percent to $8.8 billion from $9.3 billion a year ago.

GD’s Aerospace segment, which includes the Gulfstream business jet unit, drove the top and bottom line declines as the COVID-19 pandemic delayed aircraft deliveries. Revenue in the segment was down $549 million and operating income slid $88 million.

Customers still want their aircraft and they will be delivered once COVID travel restrictions are lifted, Phebe Novakovic, GD’s chairman and CEO, said on the company’s earnings call. Several aircraft were delivered in April and several more are scheduled for delivery in May, with the remaining aircraft depending on the travel restrictions, she said.

The pandemic has led to some inefficiencies at two of the company’s facilities due to employee absenteeism, Novakovic said. Costs related to keeping work facilities clean and providing employees with personal protective equipment are “rather significant,” she said.

There have also been supply chain weaknesses, particularly for Gulfstream, with some suppliers also impacted by challenges facing commercial aircraft manufacturers, Novakovic said.

At the defense businesses, higher sales were driven by the Marine Systems segment followed Combat Systems, which benefited from double-digit percentage increases to the U.S. government. Gains at these two segments more than offset a steep decline at the Information Technology segment, which was down due to the divestiture of non-core businesses, the completion of some intelligence and homeland security programs, and the closure of some customer sites late in the quarter, Novakovic said.

Operating income was up at Combat and Marine Systems driven by the higher sales, margin improvement at Combat despite the company’s land forces operations in Spain being largely shutdown and employee absenteeism at the Bath Iron Works shipbuilding facility in Maine, she said.

GD reduced its sales and earnings outlook for 2020 to account for the COVID impacts at Aerospace, which now expects sales of about $8.5 billion, down from the previous estimate of around $10 billion. Operating income at the segment is expected to be around $1.15 billion versus the prior outlook of close to $1.6 billion.

The outlook at Aerospace “lacks crystal ball precision” and is “related to our ability to produce and deliver aircraft, given supply chain issues and workforce productivity,” Novakovic said.

The guidance for the defense business overall is unchanged but Novakovic warned that there has been “modest pressure on defense revenue” the past few weeks but “at current levels we have a path to make that up on the earnings side.” The guidance for the defense businesses will be refined when the company reports second quarter results, she said.

The estimate for earnings this year is now between $11.30 and $11.40 EPS, a decline from the prior forecast of between $12.55 to $12.60 EPS.

Free cash flow in the quarter was $851 million. In 2020, free cash flow is expected to be between 80 and 85 percent of net income versus prior guidance of between 85 and 90 percent due to lower Gulfstream production and aircraft delivery rates, Jason Aiken, GD’s chief financial officer, said on the call.

Total backlog at the end of the quarter stood at $85.7 billion, well above the $69.2 billion reported a year ago due to a large Navy contract. Funded backlog stood at $63.8 billion versus $57.2 billion a year ago.