General Dynamics Reports Strong Earnings, Revenue Growth in Fourth Quarter 2007

• Earnings from Continuing Operations Grow 24.8 percent
• Revenues Increase 15.4 Percent

FALLS CHURCH, Va. – General Dynamics (NYSE: GD) today reported financial results for the fourth quarter and full year of 2007, which ended December 31.

Fourth-Quarter Results

General Dynamics’ earnings from continuing operations in the fourth quarter 2007 were $578 million, or $1.42 per share on a fully diluted basis, compared to 2006 fourth-quarter earnings from continuing operations of $463 million, or $1.13 per share fully diluted. Revenue for the fourth quarter 2007 was $7.5 billion, compared to fourth-quarter 2006 revenue of $6.5 billion.

 Full-year 2007 Results

Earnings from continuing operations for 2007 were $2.1 billion, or $5.10 per share on a fully diluted basis, compared with $1.7 billion, or $4.20 fully diluted, in 2006. This is an increase of 21.6 percent. Revenue for the full year 2007 was $27.2 billion, compared with $24.1 billion for 2006, an increase of 13.2 percent.

Cash

Net cash provided by operating activities from continuing operations totaled $1.07 billion in the quarter and $2.95 billion for the year. Free cash flow from operations, defined as net cash provided by operating activities from continuing operations less capital expenditures, was $891 million in the quarter and $2.48 billion for the year.

Backlog

The company’s funded backlog grew by $292 million in the fourth quarter of 2007, to $37.2 billion. Compared to year-end 2006, funded backlog increased $3.2 billion. Total backlog at year-end 2007 was $46.8 billion.

 Margins

Operating margins for the fourth quarter 2007 increased to 11.6 percent from 10.8 percent for fourth quarter 2006. For the full year, company-wide operating margins increased by 50 basis points over 2006, to 11.4 percent.

Net Earnings

General Dynamics’ net earnings for the fourth quarter of 2007 were $579 million, compared to fourth-quarter 2006 net earnings of $408 million, which included charges in discontinued operations related to the anticipated sale of the company’s coal mining operations. Net earnings for the full year were $2.07 billion in 2007, compared to $1.86 billion in 2006 which included a gain in discontinued operations from the sale of the company’s aggregates business.

“General Dynamics generated solid returns in the fourth quarter of 2007,” said General Dynamics Chairman and Chief Executive Officer Nicholas D. Chabraja. “Revenues and earnings grew substantially over the fourth quarter of 2006, and operating margins increased 80 basis points, to 11.6 percent, when compared to the fourth quarter 2006. Free cash flow from operations in the quarter was $891 million, or more than 150 percent of net earnings.

“Highlights of the quarter included significant revenue and earnings growth in the Combat Systems group on strong combat-vehicle sales, including Abrams tank modernization and Stryker production, as well as significant sales and earnings increases in the Aerospace group,” Chabraja said. “Marine Systems once again improved margin rates, on a modest increase in sales volume, contributing to another year of strong performance across the corporation. Notably, total backlog in the Information Systems and Technology segment grew $300 million on the strength of $3 billion in orders, reflecting a book-to-bill ratio of 1.2.

“Given our strong performance in 2007, the record backlog and strong support for our programs, we expect 2008 earnings to be in the range of $5.55 to $5.65 per share, fully diluted,” Chabraja said.

General Dynamics, headquartered in Falls Church, Virginia, employs approximately 83,500 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, our Annual Report on Form 10-K and our Quarterly Reports on Form 10-Q.

All forward-looking statements speak only as of the date of this press release. 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 securities analyst conference call, scheduled for 11:30 a.m. Eastern Time on Wednesday, January 23, 2008. Those accessing the webcast will be able to listen to management’s discussion of the fourth-quarter and full-year results, as well as the question-and-answer session with securities analysts.