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GENERAL DYNAMICS 3RD QUARTER BACKLOG JUMPS $4BN

16 Oct 02. General Dynamics (NYSE: GD) today reported 2002 third quarter net earnings of $268m, or $1.32 per share on a fully diluted basis, on sales of $3.3bn. Before the impact of FAS 142, which changes the way companies account for goodwill in business combinations, earnings per share increased 13 percent, (2001: $230m, or $1.13 per share, on sales of $3bn). (Including the effects of FAS 142, earnings per share in the third quarter of 2002 increased 17 percent.) Net cash provided by operating activities totaled $254m for the 2002 third quarter. The quarter ended on September 29, 2002.

For the first nine months of 2002, sales were $9.9bn, (2001: $8.7bn). Net earnings for this nine month period were $760m, or $3.74 per share fully diluted, (2001: $669m, or $3.30 per share), excluding a non-recurring tax gain recorded in the first quarter of 2001. Net cash provided by operating activities for the first three quarters now totals approximately $592 million.

A top aide to U.S. Defense Secretary Donald Rumsfeld is proposing cuts in major weapons program, including the Stryker combat vehicle, which is being built by a joint venture of General Dynamics and General Motors Corp. (NYSE:GM – News). The Army is fighting a proposal to cut the Stryker program by half. But Stryker is still expected to be a winner for General Dynamics in 2003.

Chairman and Chief Executive Nicholas Chabraja said on a conference call with analysts. Congress has shown strong support for funding the program, and any cuts in the production schedule would not be implemented for a few years, he said.

“Next year we’re going to have great results on Stryker,” Chabraja said.
“I don’t think there’s any debate about that that I’ve heard of. “And our results next year will be unimpaired no matter how that comes out, and I think we’re comfortable all the way out to 2004.”

“This was a very good quarter, with a $4.02billion increase in our backlog on the strength of major shipbuilding increases and Gulfstream orders. We ended the quarter with a total backlog of $29.5 billion, $21.5 fully funded,” said Nicholas D. Chabraja, chairman and CEO of General Dynamics.

Comment: These are good results with combat vehicles and shipbuilding leading the way. In 2003-4 results from the UK BOWMAN programme should increase electronic segment results with WIN-T and OFW flowing in after that. Geoff Hoon MP for BOWMAN is due to officially open the UK facility in Wales on November 7th.

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