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GENERAL DYNAMICS REPORTS FALL IN EARNINGS

GENERAL DYNAMICS REPORTS FALL IN EARNINGS BUT INCREASED SALES

15 Oct 03. General Dynamics Corp.’s third-quarter earnings fell 2 percent due to weak performance in its aerospace division and a significant charge in its marine systems unit.

The U.S. defense contractor said Wednesday it earned $262m, or $1.32 a share, in the quarter ended Sept. 28, (2002: $268m, or $1.32 a share). Details on the size of the charge were not immediately available. Sales rose 35 percent to $4.4bn (2002: $3.3bn). Analysts surveyed had forecast earnings of $1.24 a share excluding charges on sales of $3.8bn.

“We experienced significant organic sales growth, respectable earnings performance, very strong cash generation and strong order intake resulting in a significant backlog increase,” Nicholas D. Chabraja, chairman and chief executive of General Dynamics, said in a statement. General Dynamics’ marine systems group received the U.S. Navy’s largest single order for submarines, increasing the unit’s backlog to $18.6bn. “This gives the group additional opportunities to enhance performance into the next decade,” he said. The unit’s operating earnings fell nearly 54 percent in the quarter to $36m. The aerospace segment, which makes corporate jets, experienced a 50 percent decline in the three-month period. But the combat systems and information systems groups both saw gains in operating income for the quarter. The company’s new G450 jet was recently selected by Northrop Grumman’s the platform for its ACS solution (See ACS TEAMS ANNOUNCE DEVELOPMENTS AT AUSA BATTLESPACE UPDATE Vol.5 ISSUE 40, October 10th 2003).

For the first nine months of the year, General Dynamics earned $725m, or $3.64 a share, (2002: $760m, or $3.74 a share). Nine-month sales rose to $11.8bn, (2002: $9.9bn).

In another announcement, General Dynamics United Kingdom Ltd, Rockwell Collins and Innovative Concepts (ICI) have teamed to develop the Tactical Information Exchange Capability (TIEC) for the United Kingdom Ministry of Defence’s close air support, interdiction and reconnaissance force of Tornado GR4 and Harrier GR9 aircraft. General Dynamics United Kingdom Ltd. Is a wholly owned subsidiary of General Dynamics (NYSE:GD).

General Dynamics is the team leader and system integrator and will provide network connectivity and airborne qualification, Rockwell Collins will provide Link 16 capability and ICI will provide the Improved Data Modem (IDM)

“We believe this team has the essential capabilities to implement this challenging programme”, said Larry Johnson, President and Managing Director of GDUK, “We offer a complete solution based on fielded products and detailed knowledge of the platform to be equipped.”

Comment: Rumours to the effect that GD is running its slide rule over BAE Systems and conducting due diligence, will not go away. Suggestions that the company is poised to take over some of BAE’s operations could stem from GD’s strong presence at the BAE Barrow plant where it has 250 engineers involved on the Astute programme. Watch this space!

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