General Dynamics Reports Strong Fourth-Quarter Results

• Revenue up 13 percent

• Earnings increase 23 percent

FALLS CHURCH, Va. – General Dynamics (NYSE: GD) today reported 2005 fourth-quarter earnings from continuing operations of $406 million, or $2.00 per share on a fully diluted basis; comparable 2004 fourth-quarter earnings were $330 million, or $1.63 per share fully diluted.  Revenue for the fourth quarter of 2005 was $5.8 billion, compared to fourth-quarter 2004 revenue of $5.2 billion.

Revenue for the full year of 2005 was $21.2 billion, compared with $19.1 billion for 2004, an increase of 11 percent.  Earnings from continuing operations for 2005 grew by 22 percent to $1.47 billion, or $7.25 per share on a fully diluted basis, compared with earnings of $1.21 billion, or $5.98 fully diluted, in 2004.

Net cash provided by operating activities totaled $900 million in the quarter and $2.06 billion for the year.  Free cash flow from operations, defined as net cash provided by operating activities less capital expenditures, was $788 million in the quarter and $1.78 billion for the year.

“General Dynamics generated solid returns in the fourth quarter of 2005, capping another very strong year,” said General Dynamics Chairman and Chief Executive Officer Nicholas D. Chabraja.  “Revenue and earnings grew substantially over the fourth quarter of 2004, and full-year earnings per share from continuing operations grew by 21 percent over 2004, on a revenue increase of 11 percent,” Chabraja said.

“Free cash flow from operations in the year of approximately $1.8 billion once again represents a very efficient conversion of net earnings into cash, a ratio of 122 percent,” said Chabraja.  “Backlog year-over-year remained strong, growing by approximately $400 million; especially notable is the $1.2 billion increase in the Aerospace backlog from year-end 2004 to year-end 2005.”

“Highlights of the fourth quarter include revenue increases in each of the company’s four major business groups.  Combat Systems sales grew by 23 percent over the fourth quarter of 2004, on strong demand for ground vehicles and associated systems around the world.  Revenue in Information Systems and Technology was up 12 percent, largely attributable to the strength of the tactical communications and computing markets, and production and support for intelligence systems.  In Aerospace, Gulfstream increased revenue by 13 percent over fourth quarter 2004, and received net orders for 44 aircraft,” said Chabraja.

“Looking forward in 2006, we anticipate continued solid performance from Combat Systems, Information Systems and Technology and the Aerospace group, as well as margin improvement in Marine Systems,” Chabraja said.  “We expect 2006 earnings per share from continuing operations to be between $7.80 and $7.85 per share including the effect of expensing options.  We also expect free cash flow from operations to approximate net earnings.”

General Dynamics, headquartered in Falls Church, Virginia, employs approximately 72,200 people worldwide.  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 fourth-quarter securities analyst conference call, scheduled for 11 a.m. Eastern Time on Wednesday, January 25, 2006.  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.

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 January 25 and will continue for 12 months.

To hear a recording of the conference call by telephone, please call 719-457-0820; passcode 5151654.  It will be available from 2 p.m. on January 25 until midnight February 8, 2006.

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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Exhibit H

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