News

July 23rd 2008 - General Dynamics Reports Strong Earnings, Backlog Growth in Second Quarter 2008

• To read the full press release, including statements, please click here.
• EPS from continuing operations increases 26 percent
• Sales, earnings and operating margins increase company-wide
• Full-year EPS guidance increased

FALLS CHURCH, Va. – General Dynamics (NYSE: GD) today reported second-quarter 2008 earnings

Cash

Net cash provided by operating activities in the quarter totaled $1 billion. Free cash flow from operations, defined as net cash provided by operating activities from continuing operations less capital expenditures, was $910 million for the period, or 142 percent of net earnings.

For the first half of 2008, net cash provided by operating activities was $1.5 billion, while free cash flow from operations was $1.3 billion.

Margins

Company-wide operating margins for the second quarter of 2008 increased 110 basis points over the second quarter of 2007, to 12.6 percent.

Backlog

The company’s funded backlog grew by approximately $5.2 billion or 12.9 percent in the second quarter of 2008, on strong orders for new aircraft in the Aerospace group, as well as demand for tanks, combat vehicles, tactical communications systems and information technology services. Compared to first-quarter 2008, company-wide total backlog grew by 11.2 percent.

Taxes

The company’s 2008 second-quarter financial results include a $35 million benefit from the favorable settlement of a tax-refund suit; this factor increased earnings by approximately 9 cents per share in the quarter.

Operational Highlights

Sales, earnings and operating margins increased in all four General Dynamics business groups in the second quarter. The Combat Systems group experienced increased sales in its armored vehicle and tank programs compared to the year-ago period and significant margin growth. New-aircraft volume in the Aerospace group, increased shipbuilding activity in Marine Systems and continued strong demand for tactical communications and computing systems in the Information Systems and Technology sector also contributed to the overall strong performance.

“General Dynamics’ performance continued to be strong in the second quarter of 2008,” said Nicholas D.Chabraja, chairman and chief executive officer. “Sales, earnings and operating margins increased in all four business segments compared to the year-ago period, cash generation was exceptionally strong and the robust backlog suggests continued healthy demand for the products and services of each business area. “Growth in the Aerospace backlog is a reflection of continued demand for the entire existing product line and extremely strong demand for the new Gulfstream G650. We are very pleased to see this interest in the new plane and view that as an indicator of Gulfstream’s ability to anticipate and exceed its customers’ product expectations.

“On the basis of these results and a clearer sense of what the remainder of 2008 will bring, we expect fullyear 2008 earnings from continuing operations to be in the range of $6.00 to $6.05 per share, fully diluted,” Chabraja said. from continuing operations of $641 million, or $1.60 per share on a fully diluted basis, compared with 2007 second-quarter earnings from continuing operations of $518 million, or $1.27 per share fully diluted. Revenues grew to $7.3 billion in the quarter, a 10.8 percent increase over second-quarter 2007 revenues of $6.6 billion. Net earnings were equal to earnings from continuing operations of $641 million.

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General Dynamics, headquartered in Falls Church, Virginia, employs approximately 84,600 people worldwide and reported $27.2 billion in revenue in 2007. The company is a market leader in business aviation; land and expeditionary combat systems, armaments and munitions; shipbuilding and marine systems; and mission-critical 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.

WEBCAST INFORMATION: General Dynamics will webcast its second-quarter securities analyst conference call, scheduled for 11:30 a.m. Eastern Time on Wednesday, July 23, 2008. 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 3 p.m. July 23 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 16780091. The phone replay will be available from 3 p.m. July 23 until midnight July 30, 2008.