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GENERAL DYNAMICS

26 Jan 11. General Dynamics(NYSE: GD) reported 2010 fourth-quarter earnings from continuing operations of $729m, or $1.91 per share on a fully diluted basis, compared to 2009 fourth-quarter earnings from continuing operations of $618m, or $1.58 per share fully diluted. Full-year 2010 earnings from continuing operations were $2.63bn, or $6.82 per share on a fully diluted basis, compared to $2.41bn and $6.20 per share, respectively, for 2009. Revenue was $8.6bn in the fourth quarter and $32.5bn for the full year.

Margins

Company-wide operating margins increased to 12.5 percent for the fourth quarter, led by a 250-basis-point improvement in the company’s Aerospace sector. Margins also increased in the Marine Systems and Information Systems and Technology businesses and remained steady in Combat Systems.

Cash

Net cash provided by operating activities totalled $1.42bn in the fourth quarter and $2.99bn for the full year. Free cash flow from operations, defined as net cash provided by operating activities less capital expenditures, was $1.27bn in the quarter and $2.62bn for the year. Free cash flow significantly exceeded earnings from continuing operations in the fourth quarter and was equal to earnings from continuing operations for the year.

Backlog

The company’s total backlog was $59.6bn at the end of the year. The
Aerospace group booked its largest order intake of the year, resulting in a $244m increase in backlog over the third quarter. Significant domestic and international orders for vehicle production and improvements, ongoing ship design and development efforts, and combat mission-systemintegration work underscored the ongoing demand for many of the company’s key product and service offerings.

Estimated potential contract value, representing management’s estimate of the value of unfunded indefinite delivery, indefinite quantity (IDIQ) contracts and unexercised contract options, increased to $21.8bn at year-end 2010. Total potential contract value, the sum of all backlog components, was $81.3bn at the end of the year.

“2010 was a good year for General Dynamics, marked by outstanding earnings growth, efficient cash conversion and focused execution across the company, “said Jay L. Johnson, chairman and chief executive officer. “Our businesses are well-positioned as we continue to provide mission-essential capabilities to our defense customers and capitalize on accelerating global business-jet demand.”

“Looking ahead, we expect 2011 earnings to be in the range of $7.00 to $7.10per share, fully diluted,” Johnson said.

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