General Dynamics [GD] on Wednesday reported slightly lower net income and sales in its fourth quarter compared with the same period in 2019—when COVID-19 had barely been identified—due mainly to continued softness in its business jet segment.

Still, the company’s financial results showed steady improvement sequentially, that is versus the third quarter of 2020, when the coronavirus had already mushroomed into a full-fledged pandemic.

Net income in the fourth quarter dipped nearly 2 percent to $1 billion, $3.49 earnings per share (EPS), from $1 billion ($3.51 EPS) a year ago, missing analysts’ expectations by five cents. The miss on consensus estimates was due to delays in delivering three business jets into 2021, Phebe Novakovic, GD’s chairman and CEO, said on the company’s earnings call.

Sales in the quarter fell 3 percent to $10.5 billion from $10.8 billion from a year ago.

Compared with the third quarter of 2020, fourth quarter net income was up 20 percent and sales 11 percent as three of the company’s operating segments registered revenue gains and all four posted better operating income.

“Our defense segments continued to capture significant awards, leading to a record high backlog, while our Aerospace segment not only remained very profitable, but actually improved its margins throughout the year, even as the broader business aviation industry contracted severely due to the pandemic,” Novakovic said in a statement.

Free cash flow in the quarter was impressive, $2.2 billion, and for the year was $2.9 billion, ahead of the company’s projections and representing 91 percent of net income for 2020. In 2021, GD expects free cash flow to be around $3.1 billion, about 95 to 100 percent of net income.

For all of 2020, net income slid 9 percent to $3.2 billion ($11.00 EPS) from $3.5 billion ($11.98 EPS) and sales fell 4 percent to $37.9 billion from $39.4 billion a year ago.

Novakovic introduced guidance for 2021, with per share earnings between $11 and $11.05, operating margin of 10.5 percent, and sales around $39 billion. Growth will be driven by about $580 million in higher sales in the Technologies segment, which for reporting purposes combines the Information Technology and Mission Systems business areas, more than $300 million in increases at Marine Systems, and about a $100 million increase in work at Combat Systems. Aerospace is expected to be relatively flat.

GD’s backlog at the end of 2020 stood at a record $89.5 billion, up 3 percent from a year ago. The backlog mostly excludes $8.3 billion in fourth quarter awards to the Technologies segment for cloud, enterprise IT and global support services. This work will be recognized as task orders and options are exercised.

Improved free cash flow conversion in 2021 offers an opportunity to repurchase shares to “enhance” the outcome for per share earnings, Novakovic said.

In the fourth quarter, in addition to Aerospace sales being down versus a year ago, revenue also declined at Technologies and Combat Systems, partially offset by growth at Marine Systems. Higher operating income at Marine and Combat Systems was more than offset by declines at Aerospace and Technologies.

Novakovic said the new Technologies segment reflects the evolution of government demand for services and technology, adding that the company is increasingly providing integrated solutions and bidding on contracting opportunities with proposals jointly fashioned by GDIT and Mission Systems. GD in 2018 broke out IT and Mission Systems from the previous Information Systems and Technology segment.

Asked by one analyst on the earnings call where she thinks the defense budget might come under pressure in the Biden administration if spending flattens, Novakovic said in her experience that the best “antidote for budget reductions are well performing, well supported programs of record. We have all of those.” On top of that, she added, “almost every single one of our programs are on schedule, at or below cost. That is when the budgeteers get their knives out, those are almost always the last to fall.”

GD is well positioned with respect to the Navy’s priorities for submarines, destroyers and supporting oilers and the Army’s modernization priorities, Novakovic said. She also said that while in the “old days” government IT budgets were always the place to start for cutting spending, now IT is critical to all agencies’ missions.