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Press release from PR Newswire

General Dynamics Reports Fourth-quarter, Full-year 2012 Results

Wednesday, January 23, 2013

General Dynamics Reports Fourth-quarter, Full-year 2012 Results09:00 EST Wednesday, January 23, 2013FALLS CHURCH, Va., Jan. 23, 2013 /PRNewswire/ -- General Dynamics (NYSE: GD) today announced 2012 fourth-quarter and full-year financial results, which include significant, primarily non-cash charges recorded in the fourth quarter.  Adjusting for the impact of those charges, non-GAAP fourth-quarter 2012 earnings from continuing operations were $491 million or $1.39 per share, fully diluted.  On an unadjusted GAAP basis, the company reported a loss from continuing operations of $2.1 billion, or $6.07 per share fully diluted, for the quarter.Adjusted 2012 full-year earnings from continuing operations were $2.3 billion, or $6.48 per share fully diluted.  On a GAAP basis the company reported a loss from continuing operations of $332 million for 2012, or $0.94 per share fully diluted.During the fourth quarter the company recorded a $2 billion goodwill impairment related to its Information Systems and Technology (IS&T) group.  This charge recognizes the impact of slowed defense spending in the company's IS&T businesses.  The company also recorded $867 million in other charges in the quarter, including intangible asset impairments of $301 million in its Aerospace and IS&T groups, which are detailed in Exhibit C of this press release.Phebe N. Novakovic, chairman and chief executive officer of General Dynamics, said, "General Dynamics' operating results in 2012 and the charges that we have recorded in the fourth quarter reflect the fact that some of our markets are contracting as government budgets shrink at home and abroad.  They also suggest opportunities for improvement in some areas of our performance, which we are addressing."General Dynamics is a strong corporation with relevant product and service offerings that are critical to our customers' missions.  We will continue to manage our business aggressively as we approach the opportunities and the challenges of the future," Novakovic said.RevenuesRevenues were $8.1 billion in the fourth quarter of 2012 and $31.5 billion for the full year.MarginsCompany-wide operating margins on a non-GAAP basis were 10.1 percent for the fourth quarter and 11.4 percent for the year.  On a GAAP basis, company-wide operating margins were -23.5 percent for the fourth quarter and 2.6 percent for the year.CashNet cash provided by operating activities, which was largely unaffected by the charges described above, totaled $780 million in the fourth quarter of 2012 and $2.7 billion for the full year. Free cash flow from operations, defined as net cash provided by operating activities less capital expenditures, was $616 million in the quarter and $2.2 billion for the year. BacklogThe company's total backlog was $51.3 billion at the end of 2012.  In the fourth quarter, orders were particularly strong for the Marine Systems group, including $2.4 billion in awards to continue the development of the U.S. Navy's next-generation strategic deterrent submarine, to purchase long-lead materials for three Virginia-class attack submarines, and to construct two commercial containerships.  Other notable orders received in the quarter include awards for additional Stryker infantry combat vehicles, for Abrams tanks for a foreign customer, and for the production of tactical networking equipment and radios for the U.S. Army.Estimated potential contract value was $26.9 billion at year-end 2012, representing management's estimate of the value of unfunded indefinite delivery, indefinite quantity (IDIQ) contracts and unexercised contract options.  Total potential contract value, the sum of all backlog components, was $78.1 billion at the end of the year."Looking ahead to 2013, we anticipate earnings per share from continuing operations to be in the range of $6.60 to $6.70," Novakovic said.General Dynamics, headquartered in Falls Church, Virginia, employs approximately 92,200 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.Use of Non-GAAP Financial InformationTo supplement the review of General Dynamics Corporation's consolidated financial statements presented on a GAAP basis, the company has provided non-GAAP calculations of certain financial measures along with explanations of the company's use of these measures on Exhibits C, E, G and J to this press release.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, its Annual Report on Form 10-K and its Quarterly Reports on Form 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 at 11:30 a.m. Eastern Standard Time on Wednesday, January 23, 2013.  The webcast will be a listen-only audio event, available at www.generaldynamics.com. An on-demand replay of the webcast will be available shortly after the conclusion of the call on January 23 and will continue for 12 months. To hear a recording of the conference call by telephone, please call 888-286-8010 (international: 617-801-6888); passcode 19265786.  The phone replay will be available shortly after the conclusion of the call January 23 until midnight January 30.  EXHIBIT ACONSOLIDATED STATEMENTS OF EARNINGS (LOSS) - (UNAUDITED)DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTSFourth QuarterVariance20112012$%Revenues$          9,147$        8,078$      (1,069)(11.7)%Operating costs and expenses8,1979,980(1,783)Operating earnings (loss)950(1,902)(2,852)(300.2)%Interest, net(38)(41)(3)Other, net(1)(128)(127)Earnings (loss) from continuing operations  before income taxes911(2,071)(2,982)(327.3)%Provision for income taxes30859249Earnings (loss) from continuing operations$             603$       (2,130)$      (2,733)(453.2)%Discontinued operations, net of tax---Net earnings (loss)$             603$       (2,130)$      (2,733)(453.2)%Earnings (loss) per share - basic    Continuing operations$            1.69$         (6.07)$        (7.76)(459.2)%    Discontinued operations$                  -$                 -$               -    Net earnings (loss)$            1.69$         (6.07)$        (7.76)(459.2)%Basic weighted average shares outstanding 356.2350.9Earnings (loss) per share - diluted    Continuing operations$            1.68$         (6.07)*$        (7.75)(461.3)%    Discontinued operations$                  -$                 -$               -    Net earnings (loss)$            1.68$         (6.07)*$        (7.75)(461.3)%Diluted weighted average shares outstanding359.4350.9** Fourth quarter 2012 amounts exclude dilutive effect of stock options and restricted stock as it would be antidilutive. EXHIBIT BCONSOLIDATED STATEMENTS OF EARNINGS (LOSS) - (UNAUDITED)DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTSTwelve MonthsVariance20112012$%Revenues$        32,677$      31,513$      (1,164)(3.6)%Operating costs and expenses28,85130,680(1,829)Operating earnings 3,826833(2,993)(78.2)%Interest, net(141)(156)(15)Other, net33(136)(169)Earnings from continuing operations  before income taxes3,718541(3,177)(85.4)%Provision for income taxes1,166873293Earnings (loss) from continuing operations$          2,552$          (332)$      (2,884)(113.0)%Discontinued operations, net of tax(26)-26Net earnings (loss)$          2,526$          (332)$      (2,858)(113.1)%Earnings (loss) per share - basic    Continuing operations$            7.01$         (0.94)$        (7.95)(113.4)%    Discontinued operations$          (0.07)$                -$          0.07    Net earnings (loss)$            6.94$         (0.94)$        (7.88)(113.5)%Basic weighted average shares outstanding364.1353.3Earnings (loss) per share - diluted    Continuing operations$            6.94$         (0.94) * $        (7.88)(113.5)%    Discontinued operations$          (0.07)$                 -$          0.07    Net earnings (loss)$            6.87$         (0.94) * $        (7.81)(113.7)%Diluted weighted average shares outstanding367.5353.3 * * 2012 amounts exclude dilutive effect of stock options and restricted stock as it would be antidilutive. EXHIBIT CCALCULATION OF ADJUSTED NON-GAAP EARNINGS FROM CONTINUING OPERATIONS ANDADJUSTED NON-GAAP DILUTED EARNINGS PER SHARE - (UNAUDITED)DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTSFourth QuarterTwelve Months20122012Calculation of adjusted non-GAAP earnings from continuing operations:Loss from continuing operations (from Exhibits A and B, respectively)$       (2,130)$        (332)Non-GAAP adjustments:Goodwill impairment (a)1,9941,994Intangible asset impairments (a)301301Contract disputes accruals (b)292292Restructuring-related charges (c)9898Inventory-related charges (d)5378Debt retirement charge (e)123123Tax effects (f)(240)(249)Adjusted non-GAAP earnings from continuing operations$            491$      2,305Calculation of diluted (loss) earnings per share from continuing operations:Loss from continuing operations$       (2,130)$        (332)Basic weighted average shares outstanding350.9353.3    Diluted loss per share from continuing operations $         (6.07) (g) $       (0.94) (g) Adjusted non-GAAP earnings from continuing operations$            491$      2,305Diluted weighted average shares outstanding353.2355.7    Adjusted non-GAAP diluted earnings per share from continuing operations $           1.39$        6.48This Exhibit includes the following financial measures which are not calculated in accordance with generally accepted accounting principles (GAAP) in the United States ? adjusted earnings from continuing operations and adjusted diluted earnings per share from continuing operations.  Each of these calculations excludes the impact of certain items and therefore, is considered a non-GAAP financial measure.  The items excluded were considered by management to be unusual and not reflective of the underlying performance of the company as explained in the notes for each item. The GAAP financial measure most directly comparable to adjusted earnings from continuing operations is loss from continuing operations and the GAAP financial measure most directly comparable to adjusted diluted earnings per share is diluted loss per share.  Reconciliations of each of these non-GAAP financial measures to the corresponding GAAP financial measure are included above. Management uses these measures to evaluate the operating performance of the company and analyze trends.  For this reason, management believes the measures are useful supplemental information for investors to understand the company's operating results.  Notes describing each non-GAAP adjustment are on the following page.EXHIBIT C (cont.)CALCULATION OF ADJUSTED NON-GAAP EARNINGS FROM CONTINUING OPERATIONS ANDADJUSTED NON-GAAP DILUTED EARNINGS PER SHARE - (UNAUDITED)DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS(a) Impairments - Represents goodwill impairment charge of $1,994 in the Information Systems and Technology group and intangible asset impairments of $191 in the Aerospace group and $110 in the Information Systems and Technology group.  Management believes that the exclusion of these items is useful because management does not consider impairment charges in evaluating the operating performance of its on-going operations.  The exclusions permit investors to evaluate the company's performance and analyze trends in a similar manner as management.(b) Contract disputes accruals - Represents accruals of $292 for contract disputes related to the Combat Systems group's European Land Systems business, primarily with the government of Portugal.  While the company has contract disputes from time to time, management believes this item is unique due to the nature of the disputes and not reflective of the operating performance of its underlying operations.  The exclusion permits investors to evaluate the company's performance in a similar manner as management and facilitates a comparison of its operating performance to the company's past operating performance.(c) Restructuring-related charges - Represents restructuring-related charges of $98, primarily severance costs, related to the Combat Systems group's European Land Systems business.  Management believes that the exclusion of this item is useful because management does not consider this item as reflective of its operating performance of its underlying operations.  The exclusion permits investors to evaluate the company's performance in a similar manner as management and facilitates a comparison of its operating performance to the company's past operating performance.(d) Inventory-related charges - Represents increases to inventory reserves for obsolete inventory in the Information Systems and Technology group of $38 and in the Combat Systems group of $15 for the quarter ended December 31, 2012.  Represents increases to inventory reserves for obsolete inventory in the Information Systems and Technology group of $63 and in the Combat Systems group of $15 for the twelve months ended December 31, 2012.  The Information Systems and Technology charge was primarily for ruggedized hardware products that ceased production in 2012.  Management has adjusted for this item because it does not believe that it is indicative of its on-going operations or the on-going operating costs of its products since it does not generally build products to inventory within its defense groups.  The exclusion permits investors to evaluate the company's performance in a similar manner as management and facilitates a comparison of its operating performance to the company's past operating performance.  (e) Debt retirement charges - Represents the premium associated with the early redemption of debt completed in December 2012.  Management has excluded this item for comparative purposes and views this charge as uniquely related to its debt refinancing completed in 2012.  By excluding this item, investors can evaluate the company's performance in a similar manner as management.(f) Tax effects - Represents the limited tax benefit on the charges in (a) - (e) due to the non-deductible nature of a substantial portion of the charges.  The tax effects of these changes have been reflected because management evaluates performance on an after-tax basis.  This permits investors to evaluate the company's performance in a similar manner as management and compare the operating performance of the company to prior periods.  (g) Calculated based on basic weighted average shares outstanding as the inclusion of dilutive securities (stock options and restricted stock) would have an antidilutive effect. EXHIBIT DREVENUES AND OPERATING EARNINGS BY SEGMENT - (UNAUDITED)DOLLARS IN MILLIONSFourth QuarterVariance20112012$%Revenues:Aerospace$          1,857$        1,861$               40.2 %Combat Systems2,6111,976(635)(24.3)%Marine Systems1,7581,664(94)(5.3)%Information Systems and Technology2,9212,577(344)(11.8)%Total$          9,147$        8,078$      (1,069)(11.7)%Operating earnings (loss):Aerospace$               73$              69$             (4)(5.5)%Combat Systems388(136)(524)(135.1)%Marine Systems19019663.2 %Information Systems and Technology315(2,014)(2,329)(739.4)%Corporate(16)(17)(1)(6.3)%Total$             950$       (1,902)$      (2,852)(300.2)%Operating margins:Aerospace3.9 %3.7 %Combat Systems14.9 %(6.9)%Marine Systems10.8 %11.8 %Information Systems and Technology10.8 %(78.2)%Total10.4 %(23.5)% EXHIBIT ECALCULATION OF ADJUSTED NON-GAAP REVENUES AND ADJUSTED NON-GAAP OPERATING EARNINGS BY SEGMENT - (UNAUDITED)DOLLARS IN MILLIONSGAAPAdjustedFourth QuarterNon-GAAP2012Non-GAAPFourth Quarter(from Exhibit D)Adjustments2012Revenues:Aerospace$                   1,861$                      -$                 1,861Combat Systems1,976169(a)2,145Marine Systems1,664-1,664Information Systems and Technology2,577-2,577Total$                   8,078$                  169$                 8,247Operating earnings (loss):Aerospace$                         69$                  191(b)$                     260Combat Systems(136)405(c)269Marine Systems196-196Information Systems and Technology(2,014)2,142(d)128Corporate(17)-(17)Total$                 (1,902)$               2,738$                     836Operating margins:Aerospace3.7 %14.0 %Combat Systems(6.9)%12.5 %Marine Systems11.8 %11.8 %Information Systems and Technology(78.2)%5.0 %Total(23.5)%10.1 %This Exhibit includes the following financial measures which are not calculated in accordance with generally accepted accounting principles (GAAP) in the United States ? adjusted revenues and operating earnings by segment.  Each of these calculations excludes the impact of certain items and therefore, is considered a non-GAAP financial measure.  The items excluded were considered by management to be unusual and not reflective of the underlying performance of the company.  The GAAP financial measure most directly comparable to adjusted revenues by segment is revenues by segment and the GAAP financial measure most directly comparable to adjusted operating earnings by segment is operating earnings by segment.  Reconciliations of each of these non-GAAP financial measures to the corresponding GAAP financial measure are included above.  Management uses these measures to evaluate the operating performance of the company and analyze trends.  For this reason, management believes the measures are useful supplemental information for investors to understand the company's operating results.  Notes describing each non-GAAP adjustment are on the following page. EXHIBIT E (cont.)CALCULATION OF ADJUSTED NON-GAAP REVENUES AND ADJUSTED NON-GAAP OPERATING EARNINGS BY SEGMENT - (UNAUDITED)DOLLARS IN MILLIONS(a) Represents the portion of the $292 of contract disputes accruals related to the contract with the government of Portugal in the Combat Systems group from Exhibit C that was recorded as a reduction of revenue. (b) Represents intangible asset impairment of $191 in the Aerospace group from Exhibit C.  (c) Represents contract disputes accruals of $292, restructuring-related charges of $98 and inventory-related charges of $15 in the Combat Systems group from Exhibit C. (d) Represents goodwill impairment of $1,994, intangible asset impairment of $110 and inventory-related charges of $38 in the Information Systems and Technology group from Exhibit C.   EXHIBIT FREVENUES AND OPERATING EARNINGS BY SEGMENT - (UNAUDITED)DOLLARS IN MILLIONSTwelve MonthsVariance20112012$%Revenues:Aerospace$          5,998$        6,912$           91415.2 %Combat Systems8,8277,992(835)(9.5)%Marine Systems6,6316,592(39)(0.6)%Information Systems and Technology11,22110,017(1,204)(10.7)%Total$        32,677$      31,513$      (1,164)(3.6)%Operating earnings (loss):Aerospace$             729$            858$           12917.7 %Combat Systems1,283663(620)(48.3)%Marine Systems691750598.5 %Information Systems and Technology1,200(1,369)(2,569)(214.1)%Corporate(77)(69)810.4 %Total$          3,826$            833$      (2,993)(78.2)%Operating margins:Aerospace12.2 %12.4 %Combat Systems14.5 %8.3 %Marine Systems10.4 %11.4 %Information Systems and Technology10.7 %(13.7)%Total11.7 %2.6 % EXHIBIT GCALCULATION OF ADJUSTED NON-GAAP REVENUES AND ADJUSTED NON-GAAP OPERATING EARNINGS BY SEGMENT - (UNAUDITED)DOLLARS IN MILLIONSGAAPAdjustedTwelve MonthsNon-GAAP2012Non-GAAPTwelve Months(from Exhibit F)Adjustments2012Revenues:Aerospace$                   6,912$                      -$                   6,912Combat Systems7,992169(a)8,161Marine Systems6,592-6,592Information Systems and Technology10,017-10,017Total$                 31,513$                  169$                 31,682Operating earnings (loss):Aerospace$                      858$                  191(b)$                   1,049Combat Systems663405(c)1,068Marine Systems750-750Information Systems and Technology(1,369)2,167(d)798Corporate(69)-(69)Total$                      833$               2,763$                   3,596Operating margins:Aerospace12.4 %15.2 %Combat Systems8.3 %13.1 %Marine Systems11.4 %11.4 %Information Systems and Technology(13.7)%8.0 %Total2.6 %11.4 %This Exhibit includes the following financial measures which are not calculated in accordance with generally accepted accounting principles (GAAP) in the United States ? adjusted revenues and operating earnings by segment.  Each of these calculations excludes the impact of certain items and therefore, is considered a non-GAAP financial measure.  The items excluded were considered by management to be unusual and not reflective of the underlying performance of the company.  The GAAP financial measure most directly comparable to adjusted revenues by segment is revenues by segment and the GAAP financial measure most directly comparable to adjusted operating earnings by segment is operating earnings by segment.  Reconciliations of each of these non-GAAP financial measures to the corresponding GAAP financial measure are included above.  Management uses these measures to evaluate the operating performance of the company and analyze trends.  For this reason, management believes the measures are useful supplemental information for investors to understand the company's operating results.  Notes describing each non-GAAP adjustment are on the following page.EXHIBIT G (cont.)CALCULATION OF ADJUSTED NON-GAAP REVENUES AND ADJUSTED NON-GAAP OPERATING EARNINGS BY SEGMENT - (UNAUDITED)DOLLARS IN MILLIONS(a) Represents the portion of the $292 of contract disputes accruals related to the contract with the government of Portugal in the Combat Systems group from Exhibit C that was recorded as a reduction of revenue.  (b) Represents intangible asset impairment of $191 in the Aerospace group from Exhibit C. (c) Represents contract disputes accruals of $292, restructuring-related charges of $98 and inventory-related charges of $15 in the Combat Systems group from Exhibit C.     (d) Represents goodwill impairment of $1,994, intangible asset impairment of $110 and inventory-related charges of $63 in the Information Systems and Technology group from Exhibit C.   EXHIBIT HPRELIMINARY CONSOLIDATED BALANCE SHEETSDOLLARS IN MILLIONS(Unaudited)December 31, 2011December 31, 2012ASSETSCurrent assets:Cash and equivalents$                         2,649$                       3,296Accounts receivable4,4294,204Contracts in process5,1684,964Inventories2,3102,776Other current assets812504Total current assets15,36815,744Noncurrent assets:Property, plant and equipment, net3,2843,403Intangible assets, net1,8131,383Goodwill13,57612,048Other assets8421,731Total noncurrent assets19,51518,565Total assets$                       34,883$                     34,309LIABILITIES AND SHAREHOLDERS' EQUITYCurrent liabilities:Short-term debt and current portion of long-term debt$                              23$                               1Accounts payable2,8952,469Customer advances and deposits5,0116,042Other current liabilities3,2163,108Total current liabilities11,14511,620Noncurrent liabilities:Long-term debt3,9073,908Other liabilities6,5997,391Total noncurrent liabilities10,50611,299Shareholders' equity:Common stock482482Surplus1,8881,988Retained earnings18,91717,860Treasury stock(5,743)(6,165) Accumulated other comprehensive loss(2,312)(2,775)Total shareholders' equity13,23211,390Total liabilities and shareholders' equity$                       34,883$                     34,309 EXHIBIT IPRELIMINARY CONSOLIDATED STATEMENTS OF CASH FLOWS - (UNAUDITED)DOLLARS IN MILLIONSTwelve Months EndedCash flows from operating activities:December 31, 2011December 31, 2012Net earnings (loss)$                 2,526$                         (332)Adjustments to reconcile net earnings to net cash provided by operating activities:Depreciation of property, plant and equipment354386Amortization of intangible assets238234Goodwill and intangible asset impairments1112,295Stock-based compensation expense128114Excess tax benefit from stock-based compensation(24)(29)Deferred income tax (benefit) provision14(148)Discontinued operations, net of tax26-(Increase) decrease in assets, net of effects of business acquisitions:Accounts receivable(397)240Contracts in process(62)149Inventories(186)(478)Increase (decrease) in liabilities, net of effects of business acquisitions:Accounts payable17(441)Customer advances and deposits629730Other current liabilities8622Other, net(222)(55)Net cash provided by operating activities3,2382,687Cash flows from investing activities:Capital expenditures(458)(450)Business acquisitions, net of cash acquired(1,560)(444)Purchases of held-to-maturity securities(459)(260)Maturities of held-to-maturity securities441224Sales of held-to-maturity securities-211Purchases of available-for-sale securities(373)(252)Sales of available-for-sale securities107186Maturities of available-for-sale securities235110Other, net9319Net cash used by investing activities(1,974)(656)Cash flows from financing activities:Repayment of fixed-rate notes(750)(2,400)Proceeds from fixed-rate notes 1,4972,382Dividends paid(673)(893)Purchases of common stock(1,468)(602)Proceeds from option exercises198146Other, net(5)(15)Net cash used by financing activities(1,201)(1,382)Net cash used by discontinued operations(27)(2)Net increase in cash and equivalents36647Cash and equivalents at beginning of period2,6132,649Cash and equivalents at end of period$                 2,649$                       3,296 EXHIBIT JPRELIMINARY FINANCIAL INFORMATION - (UNAUDITED)DOLLARS IN MILLIONS EXCEPT PER SHARE AND EMPLOYEE AMOUNTSFourth QuarterFourth Quarter20112012Other Financial Information:Return on equity (a)18.8%(2.5)%Debt-to-equity (b)29.7%34.3%Debt-to-capital (c)22.9%25.6%Book value per share (d)$                        37.12$                          32.20Total taxes paid$                           279$                              350Company-sponsored research and development (e)$                           154$                              113Employment 95,10092,200Sales per employee (f)$                    357,700$                      337,300Shares outstanding356,437,880353,674,248Non-GAAP Financial Measures:Free cash flow from operations: Quarter  Year-to-date  Quarter  Year-to-date Net cash provided by operating activities$                        2,022$                 3,238$                              780$             2,687Capital expenditures (185)(458)(164)(450)Free cash flow from operations (g)$                        1,837$                 2,780$                              616$             2,237Return on invested capital:Earnings from continuing operations$                 2,552$              (332) After-tax interest expense106109 After-tax amortization expense163152Net operating profit after taxes2,821(71)Average debt and equity17,12317,203Return on invested capital (h)16.5%(0.4)%Notes describing the calculation of other financial information and a reconciliation of non-GAAP financial measures are on the following page. EXHIBIT J (cont.)PRELIMINARY FINANCIAL INFORMATION - (UNAUDITED)DOLLARS IN MILLIONS EXCEPT PER SHARE AND EMPLOYEE AMOUNTS(a) Return on equity is calculated by dividing earnings from continuing operations for the latest 12-month period by our average equity during that period.(b) Debt-to-equity ratio is calculated as total debt divided by total equity as of the end of the period.(c) Debt-to-capital ratio is calculated as total debt divided by the sum of total debt plus total equity as of the end of the period.(d) Book value per share is calculated as total equity divided by total outstanding shares as of the end of the period.(e) Includes independent research and development and bid and proposal costs and Gulfstream product-development costs.(f) Sales per employee is calculated by dividing revenues for the latest 12-month period by our average number of employees during that period.(g) We believe free cash flow from operations is a measurement that is useful to investors because it portrays our ability to generate cash from our core businesses for such purposes as repaying maturing debt, funding business acquisitions and paying dividends.  We use free cash flow from operations to assess the quality of our earnings and as a performance measure in evaluating management.  The most directly comparable GAAP measure to free cash flow from operations is net cash provided by operating activities.(h) We believe return on invested capital (ROIC) is a measurement that is useful to investors because it reflects our ability to generate returns from the capital we have deployed in our operations.  We use ROIC to evaluate investment decisions and as a performance measure in evaluating management.  We define ROIC as net operating profit after taxes for the latest 12-month period divided by the sum of the average debt and shareholders' equity for the same period.  Net operating profit after taxes is defined as earnings from continuing operations plus after-tax interest and amortization expense.  The most directly comparable GAAP measure to net operating profit after taxes is earnings from continuing operations. Fourth quarter of 2012 after-tax interest expense and amortization expense is calculated using the statutory tax rate of 35 percent. EXHIBIT KBACKLOG - (UNAUDITED)DOLLARS IN MILLIONSEstimated TotalPotentialTotal PotentialFourth Quarter 2012Funded Unfunded Backlog Contract Value*Contract ValueAerospace$      15,458$               209$        15,667$                    -$             15,667Combat Systems7,4421,2988,7402,79411,534Marine Systems13,4953,60617,1013,04720,148Information Systems and Technology8,1301,6439,77321,00930,782Total$    44,525$          6,756$      51,281$           26,850$           78,131Third Quarter 2012Aerospace$      15,827$               215$        16,042$                      -$             16,042Combat Systems8,2591,1019,3602,62711,987Marine Systems10,9095,03615,9451,38217,327Information Systems and Technology8,2241,88710,11122,05232,163Total$    43,219$          8,239$      51,458$           26,061$           77,519Fourth Quarter 2011Aerospace$      17,618$               289$        17,907$                      -$             17,907Combat Systems10,2831,13711,4203,45314,873Marine Systems9,3649,14018,5042,16320,667Information Systems and Technology7,4342,1459,57922,38431,963Total$    44,699$        12,711$      57,410$           28,000$           85,410*  The estimated potential contract value represents management's estimate of our future contract value under unfunded indefinite delivery, indefinite quantity (IDIQ) contracts and unexercised options associated with existing firm contracts, including options to purchase new aircraft and long-term agreements with fleet customers, as applicable.  Because the value in the unfunded IDIQ arrangements is subject to the customer's future exercise of an indeterminate quantity of orders, we recognize these contracts in backlog only when they are funded.  Unexercised options are recognized in backlog when the customer exercises the option and establishes a firm order. EXHIBIT LFOURTH QUARTER 2012 SIGNIFICANT ORDERS - (UNAUDITED)DOLLARS IN MILLIONSWe received the following significant contract orders during the fourth quarter of 2012:Combat Systems$355 from the U.S. Army under the Stryker wheeled combat vehicle program for contractor logistics support and for the production of 62 Nuclear, Biological, Chemical Reconnaissance vehicles. $135 to upgrade 66 additional Light Armored Vehicles (LAVs) for the Canadian government. $135 from the Army for continued technical support on the Abrams main battle tank program. $135 for the production of Saudi M1A2 Abrams tanks for the Kingdom of Saudi Arabia. $85 from the U.K. Ministry of Defence for the production of 51 Foxhound vehicles. $65 from the Columbian government for the production of 24 LAVs.Marine Systems$1.8 billion from the U.S. Navy for research and development work for a new class of ballistic-missile submarines under the Ohio Replacement Program.  $335 from TOTE, Inc., for the construction of two liquefied natural gas (LNG)-powered containerships, with an option for three additional ships. $310 from the Navy to purchase long-lead materials for three Virginia-class submarines. $125 from the Navy to perform maintenance and modernization work on the USS Essex and the USS Toledo. $65 from the Navy to provide ongoing planning yard services for the DDG 51 Arleigh Burke-class destroyer and the FFG 7 Oliver Hazard Perry-class frigate programs.Information Systems and Technology$250 from the Army for production of 3,726 Handheld, Manpack and Small Form-Fit (HMS) radios and accessory kits. $130 from the Army under the Warfighter Information Network-Tactical (WIN-T) program for Increment 2 equipment production and training. $125 from the Navy for production and support of the U.S. and U.K. Trident II submarine weapons systems.  $70 from the U.S. Department of State to provide supply chain management services. $65 for commercial wireless network systems and support. EXHIBIT MAEROSPACE SUPPLEMENTAL DATA - (UNAUDITED)Fourth QuarterTwelve Months2011201220112012Gulfstream Green Deliveries (units):Large aircraft302690104Mid-size aircraft571717Total3533107121Gulfstream Outfitted Deliveries (units):Large aircraft20317883Mid-size aircraft762111Total27379994Pre-owned Deliveries (units):1354 SOURCE General DynamicsFor further information: Media: Rob Doolittle, General Dynamics, +1-703-876-3199, or Investors: Amy Gilliland, General Dynamics, +1-703-876-3748