General Dynamics Posts Strong Second Quarter
EPS increases 22 percent
Strong cash flow

FALLS CHURCH, Va. – General Dynamics (NYSE: GD) today reported 2004 second quarter revenues of $4.8 billion, compared to 2003 second quarter revenues of $3.9 billion.  Net earnings in the 2004 second quarter were $300 million, or $1.49 per share on a fully diluted basis, compared with 2003 second quarter net earnings of $242 million, or $1.22 per share fully diluted.  Net cash provided by operating activities was $361 million for the quarter.  Free cash flow from operations, defined as net cash provided by operating activities less capital expenditures, was $296 million.

Funded backlog at the end of the second quarter was $26.4 billion, and total backlog was $41.1 billion, compared with $27 billion and $41.6 billion, respectively, at the end of the first quarter of 2004.

“General Dynamics’ continued focus on program performance generated excellent results in the quarter,” said Nicholas D. Chabraja, General Dynamics chairman and chief executive officer.  “The business aviation group more than doubled its earnings over the year-ago period as a result of our cost curtailment efforts and tightened control over pre-owned activity.  Information Systems and Technology and Combat Systems continued to provide strong revenue growth with healthy margins, and Marine Systems’ year-over-year performance was significantly improved,” Chabraja said.

“Our strong cash flow allowed us to further strengthen our balance sheet by reducing net debt almost $300 million in the quarter,” Chabraja said.  Net debt is defined as total debt minus cash on hand.

General Dynamics, headquartered in Falls Church, Virginia, employs approximately 69,400 people worldwide and anticipates 2004 revenue of $19 billion.  The company is a market leader in mission-critical information systems and technologies; land and expeditionary combat systems, armaments and munitions; shipbuilding and marine systems; and business aviation.

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, our Annual Report on Form 10-K and our Forms 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 security analyst conference call, scheduled for 11 a.m. Eastern Time on Wednesday, July 21, 2004.  Those accessing the webcast will be able to listen to management’s discussion of the second quarter, as well as the question and answer session with security analysts.

The webcast will be a listen-only audio broadcast, available at www.generaldynamics.com.  A Real Audio player or Windows Media™ player is required to access the webcast; information about downloading those players is available on the company’s website.  An on-demand replay of the webcast will be available by 2 p.m. on July 21 and will continue for 12 months.

To hear a recording of the conference call by telephone, please call 719-457-0820; passcode 582384.  It will be available from 2 p.m. on July 21 until midnight on August 5, 2004.

Exhibit A
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Exhibit B
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Exhibit C
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Exhibit D
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Exhibit E
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Exhibit F
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Exhibit G
 

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