General Dynamics Reports Substantial Earnings Growth, Strong Revenue in First Quarter 2008

General Dynamics Reports Substantial Earnings Growth, Strong Revenue in First Quarter 2008

Earnings from continuing operations increase 30.2 percent
EPS from continuing operations increases 32.7 percent
FALLS CHURCH, Va. – General Dynamics (NYSE: GD) today reported first-quarter 2008 earnings from continuing operations of $573 million, or $1.42 per share on a fully diluted basis, compared with 2007 first-quarter earnings from continuing operations of $440 million, or $1.07 per share fully diluted. Revenues grew to $7 billion in the quarter, an 11.2 percent increase over first-quarter 2007 revenues of $6.3 billion. Net earnings for the first quarter of 2008 were $572 million, a 31.8 percent increase over first quarter 2007.

Margins

Company-wide operating margins for the first quarter of 2008 increased 150 basis points over the first quarter of 2007, to 12.3 percent.

Backlog

The company’s funded and total backlog each grew by approximately $2.9 billion in the first quarter of 2008, to $40 billion and $49.8 billion respectively at the end of the period. Compared to first-quarter 2007, funded backlog grew by 16 percent and total backlog grew by 14.1 percent.

Cash

Net cash provided by operating activities from continuing operations in the quarter totaled $431 million. Free cash flow from operations, defined as net cash provided by operating activities from continuing operations less capital expenditures, was $346 million for the period.

“General Dynamics’ performance in the first quarter of 2008 was excellent,” said Nicholas D. Chabraja, chairman and chief executive officer. “Earnings grew substantially over the first quarter of 2007, and significant sales-volume increases in Combat Systems, Marine Systems and the Aerospace segment reflect ongoing demand for each group’s products. While revenue in Information Systems and Technology was essentially unchanged year-over-year, the group’s operating earnings and margin rates increased for the period.

“Orders in the quarter were very strong, with $2.9 billion in future revenue being added to the company’s funded backlog. Notable contract awards include $1.2 billion for upgrades to Abrams tanks, $1.1 billion for a Virginia-class submarine and $1.4 billion for construction of the first DDG-1000 Zumwalt-class destroyer.

“Strong operating performance, lower interest expense and stock-repurchase activity in the quarter all contributed to a 34 percent increase in earnings per share on a fully diluted basis compared to the first quarter of 2007,” Chabraja said.

General Dynamics, headquartered in Falls Church, Virginia, employs approximately 84,000 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, 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.

FIRST QUARTER 2008 SIGNIFICANT ORDERS (UNAUDITED)

General Dynamics received the following significant contract orders during the first quarter of 2008:

Combat Systems

A multi-year contract from the U.S. Army worth $1.2 billion to upgrade 435 M1A1 Abrams main battle tanks to the M1A2 System Enhancement Package (SEP) Version Two (V2) configuration.
$359 from the Army to continue performing contractor logistics support for the Stryker program.
Combined orders worth $200 from the Army for Abrams Tank Systems Technical Support, bringing the total contract value to over $600.
$127 for 186 armored Cougar vehicles and related spares and support under the Mine Resistant Ambush Protected (MRAP) vehicle program.
$81 for RG-31 support, spares and training under the MRAP vehicle program.
$97 from the Marine Corps to continue the System Development and Demonstration phase of the Expeditionary Fighting Vehicle program.
$166 from the Army for the production of Hydra-70 (2.75-inch) rockets. This order brings the total contract value to date to almost $700. The contract has a potential value of over $900.
$110 from the Army for the production of small-caliber ammunition. This award brings the total contract value to date to approximately $630.
Marine Systems

$1.1 billion in funding from the U.S. Navy for the final Block II Virginia-class submarine.
$325 from the Navy to purchase long-lead materials for the first Block III Virginia-class submarine.
$1.4 billion from the Navy to build the first DDG-1000 Zumwalt-class destroyer.
$360 from the Navy for the construction of the 10th T-AKE combat-logistics ship and $100 to purchase long-lead materials for the 11th ship.
Information Systems and Technology

$263 for the system development and demonstration of the Integrated Computer System for the Future Combat Systems (FCS) program. This award brings the total contract value to over $800.
$133 from the Marine Corps to produce units of the next generation Tactical Data Network (TDN)-Data Distribution Systems-Modular. This indefinite delivery, indefinite quantity (IDIQ) contract has a potential value of $375.
$78 from the Army to provide specialized satellite communications earth terminals and support services for Increment One of the Warfighter Information Network-Tactical (WIN-T) program. This contract has a potential value of over $700.
$374 from the National Geospatial Intelligence Agency to plan, engineer, design, install, test and operate IT infrastructure. This contract has a potential value of $970.
$30 from the Navy to provide systems engineering and program management support to the Aegis Ballistic Missile Defense program. This contract has a potential value of over $190.