General Dynamics Corp (GD)

FALLS CHURCH, Va., Jan. 27 /PRNewswire-FirstCall/ -- General Dynamics (NYSE: GD) today reported 2009 fourth-quarter earnings from continuing operations of $618 million, or $1.58 per share on a fully diluted basis, compared to 2008 fourth-quarter earnings from continuing operations of $630 million, or $1.62 per share fully diluted.  Full-year 2009 earnings from continuing operations were $2.41 billion, or $6.20 per share on a fully diluted basis, compared to $2.48 billion and $6.22 per share, respectively, for 2008.  Revenue was $7.9 billion in the fourth quarter and $32 billion for the full-year, an increase of 9.2 percent over full-year 2008.  

Margins

Company-wide operating margins increased to 12 percent for the fourth quarter of 2009, driven by improved performance at each of the company's defense businesses.  Notably, operating margins increased in Combat Systems by 160 basis points; Marine Systems and Information Systems and Technology also improved margin performance, by 50 and 80 basis points, respectively, in the quarter.

Cash

Net cash provided by operating activities totaled $1.5 billion in the fourth quarter and $2.86 billion for the full year.  Free cash flow from operations, defined as net cash provided by operating activities less capital expenditures, was $1.36 billion in the quarter and $2.47 billion for the year.  Free cash flow as a percentage of earnings from continuing operations was 103 percent for the year.

Backlog

The company's total backlog was $65.5 billion at the end of the fourth quarter, reflecting increases in both Aerospace and Combat Systems over the end of the third quarter.  In Aerospace, new-aircraft order activity continued to be strong in the fourth quarter.  Combat Systems received significant orders in the quarter as well, including a $2.2 billion contract for a foreign military sale of light armored vehicles, and $320 million for design, engineering, modernization and enhancements of Stryker vehicles for the U.S. Army.

Funded backlog at the end of fourth-quarter 2009 was $45.9 billion.  In addition, the estimated potential contract value, representing management's estimate of the value of unfunded indefinite delivery, indefinite quantity (IDIQ) contracts and unexercised options, was $17.6 billion at year-end 2009.  Total potential contract value, the sum of all backlog components, was $83.1 billion at the end of the year.

Net Earnings

General Dynamics' net earnings for the fourth quarter of 2009 were $614 million, compared to fourth-quarter 2008 net earnings of $612 million.  Net earnings for the full year were $2.39 billion in 2009, compared to $2.46 billion in 2008.

"General Dynamics performed well in 2009," said Jay L. Johnson, president and chief executive officer.  "The strength of our diverse portfolio was evident as continuing customer demand for our defense-related products balanced the impact of the global economic challenges on business aviation.  By marrying that strength with our commitment to financial performance and effective execution, the business generated strong margins and excellent cash flow in the fourth quarter and for the full year.

"Based on the company's performance in 2009 and our current understanding of the year ahead, we expect 2010 earnings to be in the range of $6.40 to $6.50 per share, fully diluted," Johnson said.

General Dynamics, headquartered in Falls Church, Virginia, employs approximately 91,700 people worldwide.  The company is a market leader in business aviation; land and expeditionary combat systems, armaments and munitions; shipbuilding and marine systems; and information systems and technologies. More information about the company is available on the Internet at www.generaldynamics.com.

Certain statements made in this press release, including any statements as to future results of operations and financial projections, may constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. Forward-looking statements are based on management's expectations, estimates, understandings, projections and assumptions. These statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. Therefore, actual future results and trends may differ materially from what is forecast in forward-looking statements due to a variety of factors. Additional information regarding these factors is contained in the company's filings with the Securities and Exchange Commission, including, without limitation, its Annual Report on Form 10-K and its Quarterly Reports on Form 10-Q.

All forward-looking statements speak only as of the date they were made. The company does not undertake any obligation to update or publicly release any revisions to any forward-looking statements to reflect events, circumstances or changes in expectations after the date of this press release.

WEBCAST INFORMATION:  General Dynamics will webcast its fourth-quarter 2009 securities analyst conference call, scheduled for 11:30 a.m. Eastern Time on Wednesday, January 27, 2010.  The webcast will be a listen-only audio event, available at www.generaldynamics.com.  An on-demand replay of the webcast will be available by 2:30 p.m.
January 27 and will continue for 12 months. To hear a recording of the conference call by telephone, please call 888-286-8010 (international: 617-801-6888); passcode 28124007.  The phone replay will be available from 2:30 p.m.
January 27 until midnight February 3, 2010.

EXHIBIT A



CONSOLIDATED STATEMENT OF EARNINGS (UNAUDITED)

DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS



                                     Fourth Quarter      Variance

                                     2009      2008      $         %



Revenues                             $ 7,898   $ 7,852   $ 46      0.6 %

Operating costs and expenses         6,947     6,914     (33)



Operating earnings                   951       938       13        1.4 %



Interest, net                        (43)      (24)      (19)

Other, net                           1         14        (13)



Earnings from continuing operations

before income taxes                  909       928       (19)      (2.0)%



Provision for income taxes           291       298       7



Earnings from continuing operations  $ 618     $ 630     $ (12)    (1.9)%



Discontinued operations, net of tax  (4)       (18)      14



Net earnings                         $ 614     $ 612     $ 2       0.3 %



Earnings per share - basic

Continuing operations                $ 1.60    $ 1.62    $ (0.02)  (1.2)%

Discontinued operations              $ (0.01)  $ (0.05)  $ 0.04

Net earnings                         $ 1.59    $ 1.57    $ 0.02    1.3 %



Basic weighted average

shares outstanding (in millions)     385.8     389.0



Earnings per share - diluted

Continuing operations                $ 1.58    $ 1.62    $ (0.04)  (2.5)%

Discontinued operations              $ (0.01)  $ (0.05)  $ 0.04

Net earnings                         $ 1.57    $ 1.57    $ -       0.0 %



Diluted weighted average

shares outstanding (in millions)     390.1     389.6

EXHIBIT B



CONSOLIDATED STATEMENT OF EARNINGS (UNAUDITED)

DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS



                                     Twelve Months       Variance

                                     2009      2008      $         %



Revenues                             $ 31,981  $ 29,300  $ 2,681   9.2 %

Operating costs and expenses         28,306    25,647    (2,659)



Operating earnings                   3,675     3,653     22        0.6 %



Interest, net                        (160)     (66)      (94)

Other, net                           (2)       17        (19)



Earnings from continuing operations

before income taxes                  3,513     3,604     (91)      (2.5)%



Provision for income taxes           1,106     1,126     20



Earnings from continuing operations  $ 2,407   $ 2,478   $ (71)    (2.9)%



Discontinued operations, net of tax  (13)      (19)      6



Net earnings                         $ 2,394   $ 2,459   $ (65)    (2.6)%



Earnings per share - basic

Continuing operations                $ 6.24    $ 6.26    $ (0.02)  (0.3)%

Discontinued operations              $ (0.03)  $ (0.05)  $ 0.02

Net earnings                         $ 6.21    $ 6.21    $ -       0.0 %



Basic weighted average

shares outstanding (in millions)     385.5     396.2



Earnings per share - diluted

Continuing operations                $ 6.20    $ 6.22    $ (0.02)  (0.3)%

Discontinued operations              $ (0.03)  $ (0.05)  $ 0.02

Net earnings                         $ 6.17    $ 6.17    $ -       0.0 %



Diluted weighted average

shares outstanding (in millions)     387.9     398.7

EXHIBIT C



REVENUES AND OPERATING EARNINGS BY SEGMENT (UNAUDITED)

DOLLARS IN MILLIONS



                          Fourth Quarter    Variance

                          2009     2008     $        %

Revenues:



Aerospace                 $ 1,181  $ 1,532  $ (351)  (22.9)%



Combat Systems            2,486    2,332    154      6.6 %



Marine Systems            1,551    1,380    171      12.4 %



Information Systems and

Technology                2,680    2,608    72       2.8 %



Total                     $ 7,898  $ 7,852  $ 46     0.6 %



Operating earnings:



Aerospace                 $ 167    $ 264    $ (97)   (36.7)%



Combat Systems            367      308      59       19.2 %



Marine Systems            156      132      24       18.2 %



Information Systems and

Technology                282      253      29       11.5 %



Corporate                 (21)     (19)     (2)      (10.5)%



Total                     $ 951    $ 938    $ 13     1.4 %



Operating margins:



Aerospace                 14.1 %   17.2 %



Combat Systems            14.8 %   13.2 %



Marine Systems            10.1 %   9.6 %



Information Systems and

Technology                10.5 %   9.7 %



Total                     12.0 %   11.9 %

EXHIBIT D



REVENUES AND OPERATING EARNINGS BY SEGMENT (UNAUDITED)

DOLLARS IN MILLIONS



                          Twelve Months       Variance

                          2009      2008      $        %

Revenues:



Aerospace                 $ 5,171   $ 5,512   $ (341)  (6.2)%



Combat Systems            9,645     8,194     1,451    17.7 %



Marine Systems            6,363     5,556     807      14.5 %



Information Systems and

Technology                10,802    10,038    764      7.6 %



Total                     $ 31,981  $ 29,300  $ 2,681  9.2 %



Operating earnings:



Aerospace                 $ 707     $ 1,021   $ (314)  (30.8)%



Combat Systems            1,262     1,111     151      13.6 %



Marine Systems            642       521       121      23.2 %



Information Systems and

Technology                1,151     1,075     76       7.1 %



Corporate                 (87)      (75)      (12)     (16.0)%



Total                     $ 3,675   $ 3,653   $ 22     0.6 %



Operating margins:



Aerospace                 13.7 %    18.5 %



Combat Systems            13.1 %    13.6 %



Marine Systems            10.1 %    9.4 %



Information Systems and

Technology                10.7 %    10.7 %



Total                     11.5 %    12.5 %

EXHIBIT E



PRELIMINARY CONSOLIDATED BALANCE SHEET (UNAUDITED)

DOLLARS IN MILLIONS



                                        December 31, 2009  December 31, 2008

ASSETS

Current assets:

Cash and equivalents                    $ 2,263            $ 1,621

Accounts receivable                     3,678              3,469

Contracts in process                    4,449              4,341

Inventories                             2,126              2,029

Other current assets                    733                490

Total current assets                    13,249             11,950



Noncurrent assets:

Property, plant and equipment, net      2,912              2,872

Intangible assets, net                  2,098              1,617

Goodwill                                12,269             11,413

Other assets                            549                521

Total noncurrent assets                 17,828             16,423

Total assets                            $ 31,077           $ 28,373

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

Short-term debt and current portion of
long-term debt                          $ 705              $ 911

Accounts payable                        2,365              2,443

Customer advances and deposits          4,313              4,154

Other current liabilities               2,988              2,852

Total current liabilities               10,371             10,360



Noncurrent liabilities:

Long-term debt                          3,159              3,113

Other liabilities                       5,124              4,847

Commitments and contingencies

Total noncurrent liabilities            8,283              7,960



Shareholders' equity:

Common stock                            482                482

Surplus                                 1,518              1,346

Retained earnings                       15,093             13,287

Treasury stock                          (3,463)            (3,349)

Accumulated other comprehensive loss    (1,207)            (1,713)

Total shareholders' equity              12,423             10,053

Total liabilities and shareholders'
equity                                  $ 31,077           $ 28,373

EXHIBIT F



PRELIMINARY CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)

DOLLARS IN MILLIONS



                                           Twelve Months Ended

Cash flows from operating activities:      December 31, 2009  December 31, 2008

Net earnings                               $ 2,394            $ 2,459

Adjustments to reconcile net earnings to
net cash provided by

operating activities:

Depreciation of property, plant and
equipment                                  344                301

Amortization of intangible assets          218                146

Stock-based compensation expense           117                105

Excess tax benefit from stock-based
compensation                               (5)                (31)

Deferred income tax provision              227                196

Discontinued operations, net of tax        13                 19

(Increase) decrease in assets, net of
effects of business acquisitions:

Accounts receivable                        (151)              (386)

Contracts in process                       (112)              73

Inventories                                (72)               (183)

Increase (decrease) in liabilities, net
of effects of business acquisitions:

Accounts payable                           (92)               (38)

Customer advances and deposits             145                849

Other current liabilities                  (306)              (203)

Other, net                                 135                (183)

Net cash provided by operating activities  2,855              3,124



Cash flows from investing activities:

Business acquisitions, net of cash
acquired                                   (811)              (3,224)

Capital expenditures                       (385)              (490)

Purchases of held-to-maturity securities   (337)              -

Sales/maturities of available-for-sale
securities                                 254                1,423

Purchases of available-for-sale
securities                                 (152)              (1,406)

Proceeds from sale of assets, net          43                 34

Other, net                                 (4)                -

Net cash used by investing activities      (1,392)            (3,663)



Cash flows from financing activities:

Net proceeds from (repayment of)
commercial paper                           (904)              904

Proceeds from fixed-rate notes             747                995

Dividends paid                             (577)              (533)

Purchases of common stock                  (209)              (1,522)

Proceeds from option exercises             142                144

Excess tax benefit from stock-based
compensation                               5                  31

Repayment of fixed-rate notes              -                  (500)

Repayment of senior notes                  -                  (150)

Other, net                                 (10)               (87)

Net cash used by financing activities      (806)              (718)



Net cash used by discontinued operations   (15)               (13)



Net increase (decrease) in cash and
equivalents                                642                (1,270)

Cash and equivalents at beginning of
period                                     1,621              2,891

Cash and equivalents at end of period      $ 2,263            $ 1,621

EXHIBIT G

PRELIMINARY FINANCIAL INFORMATION (UNAUDITED)

DOLLARS IN MILLIONS EXCEPT PER SHARE AND EMPLOYEE AMOUNTS



                       Fourth                     Fourth
                       Quarter                    Quarter

                       2009                       2008

Non-GAAP Financial
Measures:

Free cash flow from
operations:            Quarter      Year-to-date  Quarter      Year-to-date

Net cash provided by
operating activities   $ 1,498      $ 2,855       $ 805        $ 3,124

Capital
expenditures           (134)        (385)         (176)        (490)

Free cash flow from
operations (A)         $ 1,364      $ 2,470       $ 629        $ 2,634



Return on invested
capital:

Earnings from
continuing
operations             $ 2,407                    $ 2,478

After-tax interest
expense                117                        91

After-tax
amortization expense   149                        100

Net operating profit
after taxes            2,673                      2,669

Average debt
and equity             15,003                     14,390

Return on invested
capital (B)            17.8%                      18.5%



Other Financial
Information:

Return on
equity (C)             21.7%                      21.4%



Debt-to-equity
(D)                    31.1%                      40.0%



Debt-to-capital
(E)                    23.7%                      28.6%



Book value per
share (F)              $ 32.21                    $ 26.00



Total taxes
paid                   $ 246                      $ 113



Company-sponsored
research

and development
(G)                    $ 123                      $ 125



Employment             91,700                     92,300



Sales per
employee (H)           $ 346,500                  $ 342,600



Shares
outstanding            385,704,691                386,710,589



(A) We believe free cash flow from operations is a measurement that is
useful to investors, because it portrays our ability to generate cash from
our core businesses for such purposes as repaying maturing debt, funding
business acquisitions and paying dividends. We use free cash flow from
operations to assess the quality of our earnings and as a performance
measure in evaluating management. The most directly comparable GAAP measure
to free cash flow from operations is net cash provided by operating
activities.

(B) We believe return on invested capital is a measurement that is useful to
investors, because it reflects our ability to generate returns from the
capital we have deployed in our operations. We use ROIC to evaluate
investment decisions and as a performance measure in evaluating management.
We define ROIC as net operating profit after taxes for the latest 12-month
period divided by the sum of the average debt and shareholders' equity for
the same period. Net operating profit after taxes is defined as earnings
from continuing operations plus after-tax interest and amortization expense.
The most directly comparable GAAP measure to net operating profit after
taxes is earnings from continuing operations.

(C) Return on equity is calculated by dividing earnings from continuing
operations for the latest 12-month period by our average equity during that
period.

(D) Debt-to-equity ratio is calculated as total debt divided by total equity
as of the end of the period.

(E) Debt-to-capital ratio is calculated as total debt divided by the sum of
total debt plus total equity as of the end of the period.

(F) Book value per share is calculated as total equity divided by total
outstanding shares as of the end of the period.

(G) Includes independent research and development and bid and proposal costs
and Gulfstream product development costs.

(H) Sales per employee is calculated by dividing revenues for the latest
12-month period by our average number of employees during that period.

EXHIBIT H



BACKLOG (UNAUDITED)

DOLLARS IN MILLIONS



                                              Estimated

                                    Total     Potential        Total Potential

Fourth Quarter
2009            Funded    Unfunded  Backlog   Contract Value*  Contract Value

Aerospace       $ 18,891  $ 433     $ 19,324  $ 1,361          $ 20,685



Combat Systems  11,431    1,985     13,416    2,327            15,743



Marine Systems  7,111     15,362    22,473    1,072            23,545



Information
Systems and

Technology      8,423     1,909     10,332    12,815           23,147



Total           $ 45,856  $ 19,689  $ 65,545  $ 17,575         $ 83,120





Third Quarter
2009

Aerospace       $ 18,811  $ 444     $ 19,255  $ 1,361          $ 20,616



Combat Systems  11,508    1,355     12,863    2,645            15,508



Marine Systems  8,011     15,479    23,490    1,170            24,660



Information
Systems and

Technology      8,467     2,174     10,641    13,024           23,665



Total           $ 46,797  $ 19,452  $ 66,249  $ 18,200         $ 84,449





Fourth Quarter
2008

Aerospace       $ 21,861  $ 618     $ 22,479  $ 2,342          $ 24,821



Combat Systems  12,127    2,831     14,958    2,732            17,690



Marine Systems  10,482    15,963    26,445    1,510            27,955



Information
Systems and

Technology      7,242     3,003     10,245    10,263           20,508



Total           $ 51,712  $ 22,415  $ 74,127  $ 16,847         $ 90,974



* The estimated potential contract value represents management's estimate of
our future contract value under unfunded indefinite delivery, indefinite
quantity (IDIQ) contracts and unexercised options associated with existing
firm contracts, including aircraft fleet customers' options to purchase new
aircraft. Because the value in the unfunded IDIQ arrangements is subject to
the customer's future exercise of an indeterminate quantity of delivery
orders, we recognize these contracts in backlog only when they are funded.
Unexercised options are recognized in backlog when the customer exercises the
option and establishes a firm order.

EXHIBIT I

FOURTH QUARTER 2009 SIGNIFICANT ORDERS (UNAUDITED)

DOLLARS IN MILLIONS

We received the following significant contract orders during the fourth quarter of 2009:

Combat Systems

    --  Approximately $2.2 billion from the U.S. Army for Light Armored Vehicles
        for a Foreign Military Sale (FMS).
    --  Approximately $190 from the Army for the Stryker wheeled armored vehicle
        modernization program, bringing the total contract value to over $210.
    --  Approximately $160 from the Army to build M1A1 Situational Awareness
        (SA) tanks for Iraq. The contract has a potential value of approximately
        $200.
    --  Approximately $130 from the Army for design and engineering work and
        enhancements for Stryker vehicles in support of Operating Enduring
        Freedom.

Marine Systems

    --  Approximately $80 from the U.S. Navy for management and support of
        nuclear-maintenance work for submarines.
    --  Approximately $80 from the Navy for additional engineering services
        associated with the detail design and construction of the DDG-1000
        Zumwalt-class destroyer. The contract award has a potential value of
        approximately $190.

Information Systems and Technology

    --  Approximately $210 from the Army for initial outfitting and transition
        support of the newly renovated Walter Reed National Military Medical
        Center and the newly constructed Fort Belvoir Community Hospital. The
        contract has a potential value of over $320.
    --  A task order worth approximately $110 from the Army to modernize
        classroom training technology under the Information Technology
        Enterprise Technology Solutions-2 Services (ITES-2S) indefinite
        delivery, indefinite quantity (IDIQ) contract.
    --  An IDIQ contract from the Army with a potential value of $200 to develop
        the Consolidated Product-Line Management system, which will improve the
        Army's ability to manage its live combat training system product lines.
    --  An IDIQ contract from the Federal Aviation Administration with a
        potential value of approximately $220 to maintain its legacy telephony
        system.

EXHIBIT J



GULFSTREAM SUPPLEMENTAL DATA (UNAUDITED)



                               Fourth Quarter  Twelve Months

                               2009   2008     2009    2008

Green Deliveries (units):



Large aircraft                 19     20       75      87



Mid-size aircraft              1      21       19      69



Total                          20     41       94      156



Outfitted Deliveries (units):



Large aircraft                 18     21       78      87



Mid-size aircraft              3      17       32      65



Total                          21     38       110     152



Pre-owned Activity:



Units                          1      -        6       2



Revenues (millions)            $ 5    $ 1      $ 124   $ 18



Operating earnings (millions)  $ (5)  $ (22)   $ (37)  $ (19)

SOURCE General Dynamics