GENERAL DYNAMICS CORP (Form: 10-Q, Received: 05/03/2011 16:57:47)

LOGO

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended April 3, 2011

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 1-3671


		GENERAL DYNAMICS CORPORATION
		*(Exact name of registrant as specified in its charter)*

Delaware

13-1673581

State or other jurisdiction of

incorporation or organization

I.R.S. employer

identification no.

2941 Fairview Park Drive, Suite 100

Falls Church, Virginia

22042-4513

Address of principal executive offices

Zip code

(703) 876-3000

Registrant’s telephone number,

including area code

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer þ Accelerated Filer ¨ Non-Accelerated Filer ¨ Smaller Reporting Company ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No þ

372,000,435 shares of the registrant’s common stock, $1 par value per share, were outstanding on April 3, 2011.

INDEX


		PAGE
PART I - FINANCIAL INFORMATION

Item 1 -	Consolidated Financial Statements

	Consolidated Balance Sheet		3

	Consolidated Statement of Earnings		4

	Consolidated Statement of Cash Flows		5

	Notes to Unaudited Consolidated Financial Statements		6

Item 2 -	Management’s Discussion and Analysis of Financial Condition and Results of Operations		24

Item 3 -	Quantitative and Qualitative Disclosures About Market Risk		36

Item 4 -	Controls and Procedures		36

FORWARD-LOOKING STATEMENTS			36

PART II - OTHER INFORMATION

Item 1 -	Legal Proceedings		37

Item 1A -	Risk Factors		37

Item 2 -	Unregistered Sales of Equity Securities and Use of Proceeds		37

Item 6 -	Exhibits		38

SIGNATURES			39

PART I – FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED BALANCE SHEET


(Dollars in millions)	December 31 2010			(Unaudited) April 3 2011
ASSETS
Current assets:
Cash and equivalents	$	2,613		$	2,484
Accounts receivable		3,848			4,237
Contracts in process		4,873			4,896
Inventories		2,158			2,273
Other current assets		694			905
Total current assets		14,186			14,795
Noncurrent assets:
Property, plant and equipment, net		2,971			2,993
Intangible assets, net		1,992			1,943
Goodwill		12,649			12,723
Other assets		747			650
Total noncurrent assets		18,359			18,309
Total assets	$	32,545		$	33,104
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Short-term debt and current portion of long-term debt	$	773		$	792
Accounts payable		2,736			2,510
Customer advances and deposits		4,465			4,731
Other current liabilities		3,203			3,219
Total current liabilities		11,177			11,252
Noncurrent liabilities:
Long-term debt		2,430			2,411
Other liabilities		5,622			5,564
Commitments and contingencies (See Note K)
Total noncurrent liabilities		8,052			7,975
Shareholders’ equity:
Common stock		482			482
Surplus		1,729			1,781
Retained earnings		17,076			17,518
Treasury stock		(4,535	)		(4,647	)
Accumulated other comprehensive loss		(1,436	)		(1,257	)
Total shareholders’ equity		13,316			13,877
Total liabilities and shareholders’ equity	$	32,545		$	33,104

The accompanying Notes to Unaudited Consolidated Financial Statements are an integral part of this statement.

CONSOLIDATED STATEMENT OF EARNINGS

(UNAUDITED)


	Three Months Ended
(Dollars in millions, except per share amounts)	April 4 2010			April 3 2011
Revenues:
Products	$	5,162		$	5,061
Services		2,588			2,737
		7,750			7,798
Operating costs and expenses:
Products		4,144			4,009
Services		2,202			2,351
General and administrative		486			509
		6,832			6,869
Operating earnings		918			929
Interest, net		(44	)		(34	)
Other, net		—			1
Earnings from continuing operations before income taxes		874			896

Provision for income taxes, net		275			278
Earnings from continuing operations		599			618

Discontinued operations, net of tax		(2	)		—

Net earnings	$	597		$	618

Earnings per share
Basic:
Continuing operations	$	1.56		$	1.66
Discontinued operations		(0.01	)		—
Net earnings	$	1.55		$	1.66
Diluted:
Continuing operations	$	1.54		$	1.64
Discontinued operations		(0.01	)		—
Net earnings	$	1.53		$	1.64

The accompanying Notes to Unaudited Consolidated Financial Statements are an integral part of this statement.

CONSOLIDATED STATEMENT OF CASH FLOWS

(UNAUDITED)


	Three Months Ended
(Dollars in millions)	April 4 2010			April 3 2011
Cash flows from operating activities:
Net earnings	$	597		$	618
Adjustments to reconcile net earnings to net cash provided by operating activities –
Depreciation of property, plant and equipment		86			85
Amortization of intangible assets		57			58
Stock-based compensation expense		29			32
Excess tax benefit from stock-based compensation		(17	)		(15	)
Deferred income tax provision		10			19
Discontinued operations, net of tax		2			—
(Increase) decrease in assets, net of effects of business acquisitions –
Accounts receivable		(51	)		(389	)
Contracts in process		(241	)		(14	)
Inventories		143			(154	)
Increase (decrease) in liabilities, net of effects of business acquisitions –
Accounts payable		(114	)		(226	)
Customer advances and deposits		(230	)		198
Income taxes payable		234			215
Other current liabilities		(374	)		(121	)
Other, net		79			21
Net cash provided by operating activities		210			327
Cash flows from investing activities:
Purchases of available-for-sale securities		(31	)		(174	)
Maturities of held-to-maturity securities		2			116
Purchases of held-to-maturity securities		(247	)		(78	)
Capital expenditures		(60	)		(61	)
Other, net		54			59
Net cash used by investing activities		(282	)		(138	)
Cash flows from financing activities:
Purchases of common stock		(200	)		(314	)
Dividends paid		(147	)		(157	)
Proceeds from option exercises		168			138
Other, net		16			15
Net cash used by financing activities		(163	)		(318	)
Net cash used by discontinued operations		(3	)		—
Net decrease in cash and equivalents		(238	)		(129	)
Cash and equivalents at beginning of period		2,263			2,613
Cash and equivalents at end of period	$	2,025		$	2,484
Supplemental cash flow information:
Cash payments for:
Income taxes	$	35		$	55
Interest	$	62		$	44

The accompanying Notes to Unaudited Consolidated Financial Statements are an integral part of this statement.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in millions, except per-share amounts or unless otherwise noted)

A.	BASIS OF PREPARATION

Basis of Consolidation and Classification

The unaudited Consolidated Financial Statements included in this Form 10-Q include the accounts of General Dynamics Corporation and our wholly owned and majority-owned subsidiaries. We eliminate all inter-company balances and transactions in the Consolidated Financial Statements.

Consistent with defense industry practice, we classify assets and liabilities related to long-term production contracts as current, even though some of these amounts are not expected to be realized within one year. In addition, some prior-year amounts have been reclassified among financial statement accounts to conform to the current-year presentation.

Interim Financial Statements

The unaudited Consolidated Financial Statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. These rules and regulations permit some of the information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (GAAP) to be condensed or omitted.

Our fiscal quarters are 13 weeks in length. Because our fiscal year ends on December 31, the number of days in our first and fourth quarters varies slightly from year to year. Operating results for the three-month period ended April 3, 2011, are not necessarily indicative of the results that may be expected for the year ending December 31, 2011.

In our opinion, the unaudited Consolidated Financial Statements contain all adjustments, that are of a normal recurring nature, necessary for a fair presentation of our results of operations and financial condition for the three-month periods ended April 4, 2010, and April 3, 2011.

We have evaluated material events and transactions that have occurred after the balance sheet date and concluded that no subsequent events have occurred that require adjustment to or disclosure in this Form 10-Q.

These unaudited Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2010.

B.	ACQUISITIONS, INTANGIBLE ASSETS AND GOODWILL

We did not acquire any businesses in the first three months of 2011. In 2010, we acquired three businesses for an aggregate of $233 in cash:

Combat Systems

•

A business that demilitarizes, incinerates and disposes of munitions, explosives and explosive wastes in an environmentally safe and efficient manner (on May 12).

Information Systems and Technology

•

A provider of software for military mission planning and execution (on January 8).

•

A U.K. based-company that designs and manufactures sensor and optical surveillance systems for military and security applications (on June 22).

We funded these acquisitions using cash on hand. The operating results of these businesses have been included with our reported results since the respective closing dates of the acquisitions. The purchase prices of these businesses have been allocated to the estimated fair value of net tangible and intangible assets acquired, with any excess purchase price recorded as goodwill.

Intangible assets consisted of the following:


	December 31 2010							April 3 2011
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Contract and program intangible assets*	$	2,421	$	(949	)	$	1,472	$	2,426	$	(1,000	)	$	1,426
Trade names and trademarks		483		(58	)		425		488		(62	)		426
Technology and software		176		(94	)		82		176		(97	)		79
Other intangible assets		207		(194	)		13		207		(195	)		12
Total intangible assets	$	3,287	$	(1,295	)	$	1,992	$	3,297	$	(1,354	)	$	1,943

Consists of acquired backlog and probable follow-on work and related customer relationships.

The amortization lives (in years) of our intangible assets on April 3, 2011, were as follows:


	Range of Amortization Life		Weighted Average Amortization Life
Contract and program intangible assets		7-30		17
Trade names and trademarks		30		30
Technology and software		7-13		10
Other intangible assets		7-15		11
Total intangible assets				19

We amortize intangible assets on a straight-line basis unless the pattern of usage of the benefits indicates an alternate method is more representative of the usage of the asset. Amortization expense was $57 for the three-month period ended April 4, 2010, and $58 for the three-month period ended April 3, 2011. We expect to record 2011 full-year amortization expense of $226 and annual amortization expense over the next five years as follows:


2012	$	219
2013		181
2014		155
2015		150
2016		125

The changes in the carrying amount of goodwill by reporting unit for the three months ended April 3, 2011, were as follows:


	Aerospace		Combat Systems		Marine Systems		Information Systems and Technology		Total Goodwill
December 31, 2010	$	2,650	$	2,828	$	198	$	6,973	$	12,649
Acquisitions		—		—		—		—		—
Other*		17		45		—		12		74
April 3, 2011	$	2,667	$	2,873	$	198	$	6,985	$	12,723

Consists primarily of adjustments for foreign currency translation.

C.	EARNINGS PER SHARE, DIVIDENDS AND COMPREHENSIVE INCOME

Earnings per Share

We compute basic earnings per share using net earnings for the period and the weighted average number of common shares outstanding during the period. Diluted earnings per share incorporates the additional shares issuable upon the assumed exercise of stock options and the release of restricted shares. Basic and diluted weighted average shares outstanding were as follows (in thousands):


*Three Months Ended*	April 4 2010		April 3 2011
Basic weighted average shares outstanding		384,823		372,680
Dilutive effect of stock options and restricted stock		4,161		3,683
Diluted weighted average shares outstanding		388,984		376,363

Dividends

Dividends declared per share were $0.42 and $0.47 for the three-month periods ended April 4, 2010, and April 3, 2011, respectively.

Comprehensive Income

Our comprehensive income was $535 and $797 for the three-month periods ended April 4, 2010, and April 3, 2011, respectively. The primary components of our comprehensive income are net earnings and foreign currency translation adjustments of ($57) and $128 for the three-month periods ended April 4, 2010, and April 3, 2011, respectively.

D.	FAIR VALUE OF FINANCIAL INSTRUMENTS

Our financial instruments include cash and equivalents, marketable securities and other investments; accounts receivable and accounts payable; short- and long-term debt; and derivative financial instruments. We did not have any significant non-financial assets or liabilities measured at fair value on December 31, 2010, or April 3, 2011.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market in an orderly transaction between marketplace participants. Various valuation approaches can be used to determine fair value, each requiring different valuation inputs. The following hierarchy classifies the inputs used to determine fair value into three levels:

•

Level 1 – quoted prices in active markets for identical assets or liabilities;

•

Level 2 – inputs, other than quoted prices, observable by a marketplace participant either directly or indirectly and

•

Level 3 – unobservable inputs significant to the fair value measurement.

The carrying values of cash and equivalents, accounts receivable and payable, and short-term debt (commercial paper) on the Consolidated Balance Sheet approximate their fair value. The following tables present the fair values of our other financial assets and liabilities on December 31, 2010, and April 3, 2011, and the basis for determining their fair values:


	Carrying Value			Fair Value			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2) ^(a)
Financial assets (liabilities) ^(b)		December 31, 2010
Marketable securities:
Available-for-sale	$	47		$	47		$	47	$	—
Held-to-maturity		165			165			—		165
Other investments		113			113			55		58
Derivatives		130			130			—		130
Long-term debt, including current portion		(3,203	)		(3,436	)		—		(3,436	)
		April 3, 2011
Marketable securities:
Available-for-sale	$	159		$	159		$	159	$	—
Held-to-maturity		128			128			—		128
Other investments		118			118			60		58
Derivatives		189			189			—		189
Long-term debt, including current portion		(3,203	)		(3,418	)		—		(3,418	)

(a)

Determined under a market approach using valuation models that incorporate observable inputs such as interest rates, bond yields and quoted prices for similar assets and liabilities.

(b)

We had no Level 3 financial instruments on December 31, 2010, or April 3, 2011.

The increase from year-end 2010 in marketable securities and derivative instruments represents the majority of the increase in other current assets on the Consolidated Balance Sheet.

E.	CONTRACTS IN PROCESS

Contracts in process represent recoverable costs and, where applicable, accrued profit related to long-term contracts that have been inventoried until the customer is billed, and consisted of the following:


	December 31 2010			April 3 2011
Contract costs and estimated profits	$	15,675		$	16,870
Other contract costs		909			932
		16,584			17,802
Advances and progress payments		(11,711	)		(12,906	)
Total contracts in process	$	4,873		$	4,896

Contract costs consist primarily of labor and material costs and related overhead and general and administrative (G&A) expenses. Contract costs also include estimated contract recoveries for matters such as contract changes, negotiated settlements and claims for unanticipated contract costs. We record revenue associated with these matters only when the amount of recovery can be estimated reliably and realization is probable. Assumed recoveries for these items were not material on December 31, 2010, or April 3, 2011.

Other contract costs represent amounts that are not currently allocable to government contracts, such as a portion of our estimated workers’ compensation obligations, other insurance-related assessments, pension and other post-retirement benefits, and environmental expenses. These costs will become allocable to contracts generally after they are paid. We expect to recover these costs through ongoing business, including existing backlog and probable follow-on contracts. This business base includes numerous contracts for which we are the sole source or are one of two suppliers on long-term U.S. defense programs. However, if the backlog in the future does not support the continued deferral of these costs, the profitability of our remaining contracts could be adversely affected. We expect to bill substantially all of our April 3, 2011, contracts-in-process balance during the next 12 months, with the exception of these other contract costs.

F.	INVENTORIES

Our inventories represent primarily business-jet components and are stated at the lower of cost or net realizable value. Work-in-process represents largely labor, material and overhead costs associated with aircraft in the manufacturing process and is based primarily on the estimated average unit cost of the units in a production lot. Raw materials are based primarily on the first-in, first-out method. We record pre-owned aircraft acquired in connection with the sale of new aircraft at the lower of the trade-in value or the estimated net realizable value. Inventories consisted of the following:


	December 31 2010		April 3 2011
Work in process	$	1,124	$	1,204
Raw materials		965		961
Finished goods		69		67
Pre-owned aircraft		—		41
Total inventories	$	2,158	$	2,273

DEBT

Debt consisted of the following:


	Interest Rate		December 31 2010		April 3 2011
Fixed-rate notes due:
July 2011		1.800%	$	749	$	750
May 2013		4.250%		1,000		1,000
February 2014		5.250%		997		997
August 2015		5.375%		400		400
Other		Various		57		56
Total debt				3,203		3,203
Less current portion				773		792
Long-term debt			$	2,430	$	2,411

Fixed-rate Notes

On April 3, 2011, we had outstanding $3.1 billion aggregate principal amount of fixed-rate notes. The fixed-rate notes are fully and unconditionally guaranteed by several of our 100-percent-owned subsidiaries. We have the option to redeem the notes prior to their maturity in whole or in part at 100 percent of the principal plus any accrued but unpaid interest and applicable make-whole amounts. The next material repayment of long-term debt is $750 of fixed-rate notes scheduled to mature in July of 2011. As we approach the maturity date, we will determine whether to repay these notes with cash on hand or refinance the obligation. See Note N for condensed consolidating financial statements.

Commercial Paper

On April 3, 2011, we had no commercial paper outstanding, but we maintain the ability to access the market. We have approximately $2 billion in bank credit facilities that provide backup liquidity to our commercial paper program. These credit facilities include a $975 multi-year facility expiring in December 2011 and a $1 billion multi-year facility expiring in July 2013. These facilities are required by rating agencies to support our commercial paper issuances. We may renew or replace, in whole or in part, these credit facilities prior to their expiration. Our commercial paper issuances and the bank credit facilities are guaranteed by several of our 100-percent-owned subsidiaries.

Our financing arrangements contain a number of customary covenants and restrictions. We were in compliance with all material covenants on April 3, 2011.

H.	OTHER LIABILITIES

A summary of significant other liabilities by balance sheet caption follows:


	December 31 2010		April 3 2011
Salaries and wages	$	773	$	681
Workers’ compensation		537		541
Deferred income taxes		383		388
Retirement benefits		254		274
Other ^(a)		1,256		1,335
Total other current liabilities	$	3,203	$	3,219
Retirement benefits	$	3,596	$	3,631
Customer deposits on commercial contracts		1,039		971
Deferred income taxes		220		219
Other ^(b)		767		743
Total other liabilities	$	5,622	$	5,564

(a)

Consists primarily of dividends payable, environmental remediation reserves, warranty reserves, liabilities of discontinued operations and insurance-related costs.

(b)

Consists primarily of liabilities for warranty reserves and workers’ compensation.

I.	INCOME TAXES

Deferred Tax Assets/(Liabilities)

Our net deferred tax liability was included in the Consolidated Balance Sheet as follows:


	December 31 2010			April 3 2011
Current deferred tax asset	$	30		$	29
Current deferred tax liability		(383	)		(388	)
Noncurrent deferred tax asset		359			292
Noncurrent deferred tax liability		(220	)		(219	)
Net deferred tax liability	$	(214	)	$	(286	)

Tax Uncertainties

We periodically assess our liabilities and contingencies for all periods open to examination by tax authorities based on the latest available information. Where we believe there is more than a 50 percent chance that our tax position will not be sustained, we record our best estimate of the resulting tax liability, including interest, in the Consolidated Financial Statements. We include any interest or penalties incurred in connection with income taxes as part of income tax expense for financial reporting purposes.

The IRS began its examination of our 2007 to 2009 tax returns in the fourth quarter of 2009, and we expect this examination to conclude in 2011. The IRS selected General Dynamics to participate in its Compliance Assurance Process, a real-time audit, for 2010 and future years. We have recorded liabilities for tax uncertainties for all years that remain open to review. We do not expect the resolution of tax matters for these years to have a material impact on our results of operations, financial condition, cash flows or effective tax rate.

Based on all known facts and circumstances and current tax law, we believe the total amount of unrecognized tax benefits on April 3, 2011, is not material to our results of operations, financial condition or cash flows. We also believe that the total amount of unrecognized tax benefits on April 3, 2011, if recognized, would not have a material impact on our effective tax rate. We further believe that there are no tax positions for which it is reasonably possible that the unrecognized tax benefits will significantly increase or decrease over the next 12 months producing, individually or in the aggregate, a material effect on our results of operations, financial condition or cash flows.

J.	DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

We are exposed to market risk, primarily from foreign currency exchange rates, interest rates, commodity prices and investments. We may use derivative financial instruments to hedge some of these risks as described below. We do not use derivatives for trading or speculative purposes.

Foreign Currency Risk

Our foreign currency exchange rate risk relates to receipts from customers, payments to suppliers and inter-company transactions denominated in foreign currencies. To the extent possible, we include terms in our contracts that are designed to protect us from this risk. We periodically enter into derivative financial instruments, principally foreign currency forward purchase and sale contracts with terms of less than three years. These instruments are designed to minimize our risk by fixing, or limiting the adverse impact on, the amount of firmly committed and forecasted foreign currency-denominated payments, receipts and inter-company transactions related to our business and operational financing activities.

Interest Rate Risk

Our financial instruments subject to interest rate risk include fixed-rate long-term debt obligations and variable-rate commercial paper. However, the risk associated with these instruments is not material.

Commodity Price Risk

We are subject to risk of rising labor and commodity prices, primarily on long-term fixed-price contracts. To the extent possible, we include terms in our contracts that are designed to protect us from this risk. Some of the protective terms included in our contracts are considered derivatives but are not accounted for separately because they are clearly and closely related to the host contract. We have not entered into any material commodity hedging contracts but may do so as circumstances warrant. We do not believe that changes in labor or commodity prices will have a material impact on our results of operations or cash flows.

Investment Risk

Our investment policy allows for purchases of fixed-income securities with an investment-grade rating and a maximum maturity of two years. On April 3, 2011, we held $2.8 billion in cash and equivalents and marketable securities. Our marketable securities have an average duration of three months and an average credit rating of AA. Historically, we have not experienced material gains or losses on these instruments due to changes in interest rates or market values.

Hedging Activities

We had $4.2 billion in notional forward foreign exchange contracts outstanding on December 31, 2010, and $4.6 billion on April 3, 2011. We recognize derivative financial instruments on the Consolidated Balance Sheet at fair value (see Note D). The fair value of these derivative contracts consisted of the following:


	December 31 2010			April 3 2011
Other current assets:
Designated as cash flow hedges	$	128		$	188
Not designated as cash flow hedges		35			37
Other current liabilities:
Designated as cash flow hedges		(16	)		(19	)
Not designated as cash flow hedges		(17	)		(17	)
Total	$	130		$	189

We had no material derivative financial instruments designated as fair value or net investment hedges on December 31, 2010, or April 3, 2011.

We record changes in the fair value of derivative financial instruments in operating costs and expenses in the Consolidated Statement of Earnings or in accumulated other comprehensive income (AOCI) within shareholders’ equity on the Consolidated Balance Sheet depending on whether the derivative is designated and qualifies for hedge accounting. Gains and losses related to derivatives that qualify as cash flow hedges are deferred in AOCI until the underlying transaction is reflected in earnings. We adjust derivative financial instruments not designated as cash flow hedges to market value each period and record the gain or loss in the Consolidated Statement of Earnings. The gains and losses on these instruments generally offset losses and gains on the assets, liabilities and other transactions

being hedged. Gains and losses resulting from hedge ineffectiveness are recognized in the Consolidated Statement of Earnings for all derivative financial instruments, regardless of designation.

Net gains and losses recognized in earnings and AOCI, including gains and losses related to hedge ineffectiveness, were not material for the three-month periods ended April 4, 2010, and April 3, 2011. We do not expect the amount of gains and losses in AOCI that will be reclassified to earnings during the next 12 months to be material.

Foreign Currency Financial Statement Translation

We translate foreign-currency balance sheets from our international business units’ functional currency (generally the respective local currency) to U.S. dollars at the end-of-period exchange rates, and earnings statements at the average exchange rates for each period. The resulting foreign currency translation adjustments are a component of AOCI.

We do not hedge the fluctuation in reported revenues and earnings resulting from the translation of these international operations’ income statements into U.S. dollars. The impact of translating our international operations’ revenues and earnings into U.S. dollars was not material to our results of operations for the three-month periods ended April 4, 2010, or April 3, 2011. In addition, the effect of changes in foreign exchange rates on non-U.S. cash balances was not material in the first three months of either 2010 or 2011.

K.	COMMITMENTS AND CONTINGENCIES

Litigation

Termination of A-12 Program. In January 1991, the U.S. Navy terminated the A-12 aircraft contract for default. The A-12 contract was a fixed-price incentive contract for the full-scale development and initial production of the Navy’s carrier-based Advanced Tactical Aircraft. We and McDonnell Douglas, the contractors, were parties to the contract with the Navy. (McDonnell Douglas is now owned by The Boeing Company.) Both contractors had full responsibility to the Navy for performance under the contract, and both are jointly and severally liable for potential liabilities arising from the termination. As a consequence of the termination for default, the Navy demanded the contractors repay $1.4 billion in unliquidated progress payments. The Navy agreed to defer collection of that amount pending a resolution by the court or a negotiated settlement.

Over 20 years of litigation, the trial court (the U.S. Court of Federal Claims) and appeals court (the Court of Appeals for the Federal Circuit) have issued multiple rulings, some in favor of the government and others in favor of the contractors. On May 3, 2007, the trial court issued a decision upholding the default termination. The court did not, however, award any money judgment to the government. On June 2, 2009, a three-judge panel of the appeals court affirmed the trial court’s decision, and on November 24, 2009, the appeals court denied the contractors’ petitions for rehearing. On September 28, 2010, the U.S. Supreme Court granted the contractors’ petition for review as to one issue – whether the government can maintain its default claim against the contractors while invoking the state-secrets privilege to deny the contractors a defense to that claim. Oral arguments were presented on January 18, 2011. The contractors contend that the government should not be permitted to pursue its default claim after stripping the contractors of their superior knowledge defense to that claim by invoking the state-secrets privilege. Additionally, apart from the state-secrets issue, and even if the Supreme Court ultimately were to rule in the government’s favor on that issue, we continue to believe

that there are significant legal obstacles to the government’s ability to collect any amount from the contractors given that no court has ever entered a money judgment in favor of the government. Based on the reasons stated above, we have not recorded an accrual for this matter.

If, contrary to our expectations, the default termination is ultimately sustained and the government prevails on its recovery theories, the contractors could collectively be required to repay the government as much as $1.4 billion for progress payments received for the A-12 contract, plus interest, which was approximately $1.5 billion on April 3, 2011. This would result in a liability to us of half of the total, or approximately $1.4 billion pretax. Our after-tax charge would be approximately $820, or $2.18 per share, to be recorded in discontinued operations. Our after-tax cash cost would be approximately $730. We believe we have sufficient resources to satisfy our obligation if required.

Other. Various claims and other legal proceedings incidental to the normal course of business are pending or threatened against us. These matters relate to such issues as U.S. government investigations and claims, the protection of the environment, asbestos-related claims and employee-related matters. The nature of litigation is such that we cannot predict the outcome of these matters. However, based on information currently available, we believe any potential liabilities in these proceedings, individually or in the aggregate, will not have a material impact on our results of operations, financial condition or cash flows.

Environmental

We are subject to and affected by a variety of federal, state, local and foreign environmental laws and regulations. We are directly or indirectly involved in environmental investigations or remediation at some of our current and former facilities, and at third-party sites that we do not own but where we have been designated a Potentially Responsible Party (PRP) by the U.S. Environmental Protection Agency or a state environmental agency. Based on historical experience, we expect that a significant percentage of the total remediation and compliance costs associated with these facilities will continue to be allowable contract costs and, therefore, reimbursed by the U.S. government.

As required, we provide financial assurance for certain sites undergoing or subject to investigation or remediation. We accrue environmental costs when it is probable that a liability has been incurred and the amount can be reasonably estimated. Where applicable, we seek insurance recovery for costs related to environmental liability. We do not record insurance recoveries before collection is considered probable. Based on all known facts and analyses, as well as current U.S. government policies relating to allowable contract costs, we do not believe that our liability at any individual site, or in the aggregate, arising from such environmental conditions, will be material to our results of operations, financial condition or cash flows. We also do not believe that the range of reasonably possible additional loss beyond what has been recorded would be material to our results of operations, financial condition or cash flows.

Other

Letters of Credit. In the ordinary course of business, we have entered into letters of credit and other similar arrangements with financial institutions and insurance carriers totaling approximately $1.7 billion on April 3, 2011. These include letters of credit for our international subsidiaries, which are backed by available local bank credit facilities aggregating approximately $1 billion. From time to time in the ordinary course of business, we guarantee the payment or performance obligations of our

subsidiaries arising under certain contracts. We are aware of no event of default that would require us to satisfy these guarantees.

Government Contracts. As a government contractor, we are subject to U.S. government audits and investigations relating to our operations, including claims for fines, penalties, and compensatory and treble damages. Based on currently available information, we believe the outcome of such ongoing government disputes and investigations will not have a material impact on our results of operations, financial condition or cash flows.

Aircraft Trade-ins. In connection with orders for new aircraft in funded contract backlog, our Aerospace group has outstanding options with some customers to trade in aircraft as partial consideration in their new-aircraft transaction. These trade-in commitments are structured to establish the fair market value of the trade-in aircraft at a date generally 120 or fewer days preceding delivery of the new aircraft to the customer. At that time, the customer is required to either exercise the option or allow its expiration. Any excess of the pre-established trade-in price above the fair market value at the time the new aircraft is delivered is treated as a reduction of revenue in the new-aircraft sales transaction.

Product Warranties. We provide product warranties to our customers associated with certain product sales. We record estimated warranty costs in the period in which the related products are delivered. The warranty liability recorded at each balance sheet date is generally based on the number of months of warranty coverage remaining for products delivered and the average historical monthly warranty payments. Warranty obligations incurred in connection with long-term production contracts are accounted for within the contract estimates at completion (EACs). Our other warranty obligations, primarily for business-jet aircraft, are included in other current liabilities and other liabilities on the Consolidated Balance Sheet.

The changes in the carrying amount of warranty liabilities for the three-month periods ended April 4, 2010, and April 3, 2011, were as follows:


*Three Months Ended*	April 4 2010			April 3 2011
Beginning balance	$	239		$	260
Warranty expense		18			12
Payments		(13	)		(13	)
Adjustments*		(2	)		(1	)
Ending balance	$	242		$	258

Includes warranty liabilities assumed in connection with acquisitions, foreign exchange translation adjustments and reclassifications.

L.	RETIREMENT PLANS

We provide defined-benefit pension and other post-retirement benefits, as well as defined-contribution benefits, to eligible employees.

Net periodic cost associated with our defined-benefit pension and other post-retirement benefit plans for the three-month periods ended April 4, 2010, and April 3, 2011, consisted of the following:


	*Pension Benefits*						*Other* *Post-retirement Benefits*
*Three Months Ended*	April 4 2010			April 3 2011			April 4 2010			April 3 2011
Service cost	$	54		$	64		$	3		$	4
Interest cost		127			129			15			15
Expected return on plan assets		(150	)		(150	)		(8	)		(8	)
Recognized net actuarial loss (gain)		17			40			(1	)		1
Amortization of prior service credit		(11	)		(11	)		—			1
Net periodic cost	$	37		$	72		$	9		$	13

Our contractual arrangements with the U.S. government provide for the recovery of contributions to our pension and other post-retirement benefit plans covering employees working in our government contracting businesses. For non-funded plans, our government contracts allow us to recover claims paid. Following payment, these recoverable amounts are allocated to contracts and billed to the customer in accordance with the Cost Accounting Standards and specific contractual terms. For some of these plans, the cumulative pension and post-retirement benefit cost exceeds the amount currently allocable to contracts. To the extent recovery of the cost is considered probable based on our backlog, we defer the excess in contracts in process on the Consolidated Balance Sheet until the cost is allocable to contracts. For other plans, the amount allocated to contracts and included in revenues has exceeded the plans’ cumulative benefit cost. We have deferred recognition of these excess earnings to provide a better matching of revenues and expenses. These deferrals have been classified against the plan assets on the Consolidated Balance Sheet. (See Note E for discussion of our deferred contract costs.)

M.	BUSINESS GROUP INFORMATION

We operate in four business groups: Aerospace, Combat Systems, Marine Systems and Information Systems and Technology. We organize and measure our business groups in accordance with the nature of products and services offered. These business groups derive their revenues from business aviation; combat vehicles, weapons systems and munitions; military and commercial shipbuilding; and communications and information technology, respectively. We measure each group’s profit based on operating earnings. As a result, we do not allocate net interest, other income and expense items, and income taxes to our business groups.

Summary financial information for each of our business groups follows:



	*Revenues*				*Operating Earnings*
*Three Months Ended*	April 4 2010		April 3 2011		April 4 2010			April 3 2011
Aerospace	$	1,357	$	1,353	$	218		$	230
Combat Systems		2,002		1,955		269			277
Marine Systems		1,639		1,676		161			167
Information Systems and Technology		2,752		2,814		290			276
Corporate*		—		—		(20	)		(21	)
	$	7,750	$	7,798	$	918		$	929

Corporate operating results include our stock option expense and a portion of the operating results of our commercial pension plans.

N.	CONDENSED CONSOLIDATING FINANCIAL STATEMENTS

The fixed-rate notes described in Note G are fully and unconditionally guaranteed on an unsecured, joint and several basis by certain of our 100-percent-owned subsidiaries (the guarantors). The following condensed consolidating financial statements illustrate the composition of the parent, the guarantors on a combined basis (each guarantor together with its majority-owned subsidiaries) and all other subsidiaries on a combined basis.

Condensed Consolidating Statement of Earnings


*Three Months Ended April 4, 2010*	Parent			Guarantors on a Combined Basis			Other Subsidiaries on a Combined Basis			Consolidating Adjustments			Total Consolidated
Revenues	$	—		$	6,432		$	1,318		$	—		$	7,750
Cost of sales		(3	)		5,252			1,097			—			6,346
General and administrative expenses		20			372			94			—			486
Operating earnings		(17	)		808			127			—			918
Interest expense		(47	)		—			—			—			(47	)
Interest income		2			—			1			—			3
Other, net		—			(1	)		1			—			—
Earnings from continuing operations before income taxes		(62	)		807			129			—			874
Provision for income taxes		(21	)		270			26			—			275
Discontinued operations, net of tax		—			—			(2	)		—			(2	)
Equity in net earnings of subsidiaries		638			—			—			(638	)		—
Net earnings	$	597		$	537		$	101		$	(638	)	$	597

*Three Months Ended April 3, 2011*
Revenues	$	—		$	6,383		$	1,415		$	—		$	7,798
Cost of sales		(3	)		5,192			1,171			—			6,360
General and administrative expenses		22			375			112			—			509
Operating earnings		(19	)		816			132			—			929
Interest expense		(36	)		—			—			—			(36	)
Interest income		2			—			—			—			2
Other, net		1			(1	)		1			—			1
Earnings from continuing operations before income taxes		(52	)		815			133			—			896
Provision for income taxes		(15	)		259			34			—			278
Equity in net earnings of subsidiaries		655			—			—			(655	)		—
Net earnings	$	618		$	556		$	99		$	(655	)	$	618

Condensed Consolidating Balance Sheet


*December 31, 2010*	Parent			Guarantors on a Combined Basis			Other Subsidiaries on a Combined Basis			Consolidating Adjustments			Total Consolidated
ASSETS
Current assets:
Cash and equivalents	$	1,608		$	—		$	1,005		$	—		$	2,613
Accounts receivable		—			1,538			2,310			—			3,848
Contracts in process		263			3,205			1,405			—			4,873
Inventories
Work in process		—			1,090			34			—			1,124
Raw materials		—			808			157			—			965
Finished goods		—			36			33			—			69
Other current assets		143			147			404			—			694
Total current assets		2,014			6,824			5,348			—			14,186
Noncurrent assets:
Property, plant and equipment		147			4,687			1,125			—			5,959
Accumulated depreciation of PP&E		(42	)		(2,448	)		(498	)		—			(2,988	)
Intangible assets		—			1,664			1,623			—			3,287
Accumulated amortization of intangible assets		—			(920	)		(375	)		—			(1,295	)
Goodwill		—			8,322			4,327			—			12,649
Other assets		183			172			392			—			747
Investment in subsidiaries		30,580			—			—			(30,580	)		—
Total noncurrent assets		30,868			11,477			6,594			(30,580	)		18,359
Total assets	$	32,882		$	18,301		$	11,942		$	(30,580	)	$	32,545
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Short-term debt	$	749		$	21		$	3		$	—		$	773
Customer advances and deposits		—			2,182			2,283			—			4,465
Other current liabilities		596			3,397			1,946			—			5,939
Total current liabilities		1,345			5,600			4,232			—			11,177
Noncurrent liabilities:
Long-term debt		2,396			29			5			—			2,430
Other liabilities		2,774			2,242			606			—			5,622
Total noncurrent liabilities		5,170			2,271			611			—			8,052
Intercompany		13,051			(13,626	)		575			—			—
Shareholders’ equity:
Common stock, including surplus		2,211			6,786			2,360			(9,146	)		2,211
Retained earnings		17,076			18,175			3,097			(21,272	)		17,076
Treasury stock		(4,535	)		—			—			—			(4,535	)
Accumulated other comprehensive loss		(1,436	)		(905	)		1,067			(162	)		(1,436	)
Total shareholders’ equity		13,316			24,056			6,524			(30,580	)		13,316
Total liabilities and shareholders’ equity	$	32,882		$	18,301		$	11,942		$	(30,580	)	$	32,545

Condensed Consolidating Balance Sheet


*April 3, 2011*	Parent			Guarantors on a Combined Basis			Other Subsidiaries on a Combined Basis			Consolidating Adjustments			Total Consolidated
ASSETS
Current assets:
Cash and equivalents	$	1,513		$	—		$	971		$	—		$	2,484
Accounts receivable		—			1,536			2,701			—			4,237
Contracts in process		272			3,056			1,568			—			4,896
Inventories
Work in process		—			1,163			41			—			1,204
Raw materials		—			804			157			—			961
Finished goods		—			25			42			—			67
Pre-owned aircraft		—			41			—			—			41
Other current assets		338			198			369			—			905
Total current assets		2,123			6,823			5,849			—			14,795
Noncurrent assets:
Property, plant and equipment		148			4,743			1,169			—			6,060
Accumulated depreciation of PP&E		(43	)		(2,490	)		(534	)		—			(3,067	)
Intangible assets		—			1,664			1,633			—			3,297
Accumulated amortization of intangible assets		—			(951	)		(403	)		—			(1,354	)
Goodwill		—			8,323			4,400			—			12,723
Other assets		117			164			369			—			650
Investment in subsidiaries		31,687			—			—			(31,687	)		—
Total noncurrent assets		31,909			11,453			6,634			(31,687	)		18,309
Total assets	$	34,032		$	18,276		$	12,483		$	(31,687	)	$	33,104
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Short-term debt	$	750		$	39		$	3		$	—		$	792
Customer advances and deposits		—			2,076			2,655			—			4,731
Other current liabilities		759			3,232			1,738			—			5,729
Total current liabilities		1,509			5,347			4,396			—			11,252
Noncurrent liabilities:
Long-term debt		2,397			9			5			—			2,411
Other liabilities		2,779			2,157			628			—			5,564
Total noncurrent liabilities		5,176			2,166			633			—			7,975
Intercompany		13,470			(14,141	)		671			—			—
Shareholders’ equity:
Common stock, including surplus		2,263			6,853			1,869			(8,722	)		2,263
Retained earnings		17,518			18,918			3,680			(22,598	)		17,518
Treasury stock		(4,647	)		—			—			—			(4,647	)
Accumulated other comprehensive income		(1,257	)		(867	)		1,234			(367	)		(1,257	)
Total shareholders’ equity		13,877			24,904			6,783			(31,687	)		13,877
Total liabilities and shareholders’ equity	$	34,032		$	18,276		$	12,483		$	(31,687	)	$	33,104

Condensed Consolidating Statement of Cash Flows


*Three Months Ended April 4, 2010*	Parent			Guarantors on a Combined Basis			Other Subsidiaries on a Combined Basis			Consolidating Adjustments		Total Consolidated
Net cash provided by operating activities	$	(54	)	$	273		$	(9	)	$	—	$	210
Cash flows from investing activities:
Purchases of held-to-maturity securities		(125	)		—			(122	)		—		(247	)
Business acquisitions, net of cash acquired		—			(48	)		—			—		(48	)
Other, net		22			8			(17	)		—		13
Net cash used by investing activities		(103	)		(40	)		(139	)		—		(282	)
Cash flows from financing activities:
Purchases of common stock		(200	)		—			—			—		(200	)
Proceeds from option exercises		168			—			—			—		168
Dividends paid		(147	)		—			—			—		(147	)
Other, net		17			—			(1	)		—		16
Net cash used by financing activities		(162	)		—			(1	)		—		(163	)
Net cash used by discontinued operations		—			—			(3	)		—		(3	)
Cash sweep/funding by parent		385			(233	)		(152	)		—		—
Net decrease in cash and equivalents		66			—			(304	)		—		(238	)
Cash and equivalents at beginning of period		1,406			—			857			—		2,263
Cash and equivalents at end of period	$	1,472		$	—		$	553		$	—	$	2,025

*Three Months Ended April 3, 2011*
Net cash provided by operating activities	$	(72	)	$	636		$	(237	)	$	—	$	327
Cash flows from investing activities:
Purchases of available-for-sale securities		(142	)		(32	)		—			—		(174	)
Maturities of held-to-maturity securities		9			—			107			—		116
Other, net		(50	)		(17	)		(13	)		—		(80	)
Net cash used by investing activities		(183	)		(49	)		94			—		(138	)
Cash flows from financing activities:
Purchases of common stock		(314	)		—			—			—		(314	)
Dividends paid		(157	)		—			—			—		(157	)
Proceeds from option exercises		138			—			—			—		138
Other, net		15			—			—			—		15
Net cash used by financing activities		(318	)		—			—			—		(318	)
Cash sweep/funding by parent		478			(587	)		109			—		—
Net decrease in cash and equivalents		(95	)		—			(34	)		—		(129	)
Cash and equivalents at beginning of period		1,608			—			1,005			—		2,613
Cash and equivalents at end of period	$	1,513		$	—		$	971		$	—	$	2,484

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Dollars in millions, except per share amounts or unless otherwise noted)

BUSINESS OVERVIEW

General Dynamics offers a broad portfolio of products and services in business aviation; combat vehicles, weapons systems and munitions; military and commercial shipbuilding; and communications and information technology. We operate through four business groups: Aerospace, Combat Systems, Marine Systems and Information Systems and Technology. Our primary customers are the U.S. military, other U.S. government organizations, the armed forces of other nations, and a diverse base of corporate and individual buyers of business aircraft. We operate in two primary markets: defense and national security, and business aviation. The majority of our revenues derive from contracts with the U.S. government. The following discussion should be read in conjunction with our 2010 Annual Report on Form 10-K, filed with the Securities and Exchange Commission, and with the unaudited Consolidated Financial Statements included in this Form 10-Q.

RESULTS OF OPERATIONS

Consolidated Overview


*Three Months Ended*	April 4 2010			April 3 2011			Variance
Revenues	$	7,750		$	7,798		$	48	0.6	%
Operating earnings		918			929			11	1.2	%
Operating margin		11.8	%		11.9	%
Net cash provided by operating activities		210			327			117	55.7	%

General Dynamics’ revenues increased in the first quarter of 2011 compared with 2010. Our defense revenues were up slightly while aerospace revenues remained steady year over year. The increase in defense revenues was driven by growth in several U.S. Navy programs in the Marine Systems group and information technology (IT) services in the Information Systems and Technology group. Combat Systems revenues were down from 2010 due to reduced volume on U.S. military vehicle programs. In the Aerospace group, higher aircraft manufacturing and services revenues offset reductions in other original equipment manufacturer (OEM) aircraft outfitting work and pre-owned aircraft activity.

Higher operating earnings in the first quarter of 2011 compared with the same period in 2010 resulted in a 10 basis-point increase in overall operating margins in the first quarter. Margins expanded in the Aerospace, Combat Systems and Marine Systems groups. Our Aerospace group continued to benefit from excellent operational performance in the quarter. Our defense businesses retained their focus on program execution, particularly in light of an increasingly challenging defense environment caused by the prolonged resolution of the 2011 U.S. defense budget.

Net cash provided by operating activities was $327 in the first three months of 2011, over 50 percent of net earnings, compared with $210, approximately 35 percent of net earnings, in the same period in 2010. We deployed this cash to fund capital expenditures, repurchase our common stock and pay dividends.

Our net debt – debt less cash and equivalents and marketable securities – was $432 at the end of the first quarter of 2011, down from $1.3 billion at the end of the first quarter of 2010. This decrease in net debt came after the following capital deployments in the past 12 months: $1.3 billion of share repurchases, $641 of dividends paid, $476 of company-sponsored research and development, $371 of capital expenditures, more than $300 of contributions to our retirement plans and $185 spent on acquisitions.

Net interest expense in the first three months of 2011 was $34 compared with $44 in the same period in 2010. The decrease was due largely to the repayment of $700 of fixed-rate notes in the third quarter of 2010. We expect full-year 2011 net interest expense to be approximately $130, subject to capital deployment activities during the year.

Our effective tax rate for the first three months of 2011 was 31 percent compared with 31.5 percent in the same period in 2010. We anticipate a full-year 2011 effective tax rate of approximately 31 percent, compared with 30.7 percent in 2010. For additional discussion of tax matters, see Note I to the unaudited Consolidated Financial Statements.

Aerospace


*Three Months Ended*	April 4 2010			April 3 2011			Variance
Revenues	$	1,357		$	1,353		$	(4	)	(0.3	)%
Operating earnings		218			230			12		5.5	%
Operating margin		16.1	%		17.0	%
Gulfstream aircraft deliveries (in units):
Green		28			24			(4	)	(14.3	)%
Outfitted		17			24			7		41.2	%

The Aerospace group’s revenues were steady year over year. Higher volume in aircraft manufacturing operations and continued growth in aircraft services activity were offset by a reduction in aircraft outfitting work for other OEMs and pre-owned aircraft sales.

The group delivered fewer green Gulfstream aircraft in the first quarter of 2011 compared with the first three months of 2010. Manufacturing revenues were stable despite the reduced deliveries as a result of a more favorable mix of aircraft deliveries, which included fewer mid-cabin aircraft. The group’s five-week aircraft manufacturing furlough in mid-2009 resulted in a temporary decline in outfitted deliveries in the first quarter of 2010. Outfitted deliveries have since increased, resulting in higher revenues in the first quarter of 2011. Decreased OEM production across the broader business-jet market and production delays on narrow- and wide-body commercial aircraft resulted in a decline in completions work at Jet Aviation.

Growth in aircraft services activity throughout 2010 continued into the first quarter of 2011, with both Gulfstream and Jet Aviation maintenance and repair work, fixed-base operations and aircraft management services increasing in the first quarter of 2011. This increase reflects the growing installed base of business-jet aircraft and increased aircraft utilization.

Additionally, the group sold no pre-owned aircraft in the first quarter of 2011 compared with three in 2010. We took in two trade-in aircraft in the quarter, one of which was available for sale and one under contract at quarter end.

The group’s operating earnings were up compared with the first quarter of 2010. The increase in the group’s earnings consisted of the following:


Aircraft manufacturing and outfitting	$	15
Aircraft services		9
Pre-owned aircraft		—
SG&A/other		(12	)
Total increase in operating earnings	$	12

The group’s aircraft manufacturing and outfitting earnings increased compared with 2010 due to the growth in aircraft manufacturing volume and improved pricing on large-cabin units delivered in 2011. First quarter 2011 earnings included revenue from liquidated damages associated with a fleet customer’s determination not to purchase aircraft under a multi-year delivery contract. The liquidated damages recognized in connection with this single transaction contributed favorably to the group’s margins in the quarter but were slightly less than the damages received in the year-ago quarter when the group experienced a number of customer defaults. Jet Aviation continues to take steps to improve its performance, although earnings from its completions business were down compared with the first quarter of 2010.

Consistent with the increased volume, aircraft services earnings continued to improve from the comparative 2010 period. Margins were up slightly compared with the first quarter of 2010 due to a favorable mix of service work.

The group’s operating earnings in the first quarter of 2011 were also impacted by higher SG&A activities associated with selling and marketing expenses.

As a result of the factors discussed above, the group’s overall operating margins increased 90 basis points in the quarter compared with the same prior-year period.

We expect full-year 2011 Aerospace revenues to increase approximately 15 to 16 percent over 2010 and full-year operating margins to be approximately 15.5 to 16 percent. This outlook assumes initial green deliveries of the group’s new G650 aircraft later this year and sustained growth in aircraft services. On April 2, 2011, one of the five test aircraft used in flight testing for the ultra-large-cabin, ultra-high-speed G650 program crashed. We are cooperating fully with the National Transportation Safety Board (NTSB) in its investigation of the accident and working closely with the Federal Aviation Administration (FAA) on progressing toward G650 type certification. While we have temporarily suspended flight activity for the remaining four test aircraft, other certification activities and production work on the G650 program continue. The impact on the aircraft’s certification and initial green delivery schedule is currently unknown.

Combat Systems


*Three Months Ended*	April 4 2010			April 3 2011			Variance
Revenues	$	2,002		$	1,955		$	(47	)	(2.3	)%
Operating earnings		269			277			8		3.0	%
Operating margin		13.4	%		14.2	%

The Combat Systems group’s revenues were down in the first quarter of 2011 compared with the same period in 2010 due to reduced activity in the group’s U.S. military vehicle business. The decrease in the group’s revenues consisted of the following:


U.S. military vehicles	$	(101	)
Weapon systems and munitions		12
European military vehicles		42
Total decrease in revenues	$	(47	)

In the group’s U.S. military vehicle business, volume was down on the Abrams main battle tank and Expeditionary Fighting Vehicle (EFV) programs. The reductions related primarily to less refurbishment and upgrade work for the Abrams tank, consistent with our expectations, and a decline in EFV activity as the system design and development contract concludes. Increased volume on the group’s foreign military sales (FMS) contract to provide light armored vehicles to an international military customer partially offset the decline in revenues.

In the group’s weapon systems and munitions businesses, revenues were up modestly in the first quarter compared with the same prior-year period. The growth resulted from increased sales of heavy-payload axles in both the military and commercial markets.

Revenues in the group’s European military vehicle business increased in the first quarter of 2011 due largely to a higher volume of sales of Duro and EAGLE wheeled military vehicles to a variety of European customers and the start-up of the Specialist Vehicle (SV) program for the United Kingdom. The group is designing and co-producing seven prototype vehicles under the SV program in coordination with our U.K. business in the Information Systems and Technology group.

Despite the decrease in revenues, the Combat Systems group’s operating earnings increased in the first quarter of 2011, resulting in an 80 basis-point margin improvement compared with the first quarter of 2010. Margins were up as a result of productivity improvements across the group and a favorable contract mix, including reduced engineering and development work.

We expect full-year 2011 Combat Systems revenues to be approximately $9 billion, consistent with 2010, as growth in international vehicle contracts, particularly in the second half of the year, offsets a reduction in volume on some of the group’s U.S. vehicle programs. We expect full-year operating margins for the group to be approximately 14 percent.

Marine Systems


*Three Months Ended*	April 4 2010			April 3 2011			Variance
Revenues	$	1,639		$	1,676		$	37	2.3	%
Operating earnings		161			167			6	3.7	%
Operating margin		9.8	%		10.0	%

The Marine Systems group’s revenues increased in the first quarter of 2011 over the same prior-year period as growth in several U.S. Navy programs was partially offset by a decline in commercial ship construction. The increase in the group’s revenues consisted of the following:


Multi-year Navy ship construction	$	5
Other Navy ship design, construction, engineering and repair		64
Commercial ship construction		(32	)
Total increase in revenues	$	37

The group’s multi-year Navy ship-construction programs include Virginia-class submarines, DDG-51 and DDG-1000 destroyers, and T-AKE combat-logistics ships. The group has been accelerating construction of Virginia-class submarines over the past several years to achieve a build rate of two boats per year in 2011. This resulted in moderately higher volume on the program in the first quarter of 2011. The group is completing the last three boats under the Block II contract and has begun the first three boats under the Block III contract. Deliveries of the remaining 11 boats under contract are scheduled through 2018. Subsequent to the end of the quarter, in connection with the passage of the 2011 U.S. defense budget we received funding for the second 2011 boat.

Destroyer program revenues decreased in the first quarter of 2011 due largely to the timing of contract awards and construction activities. Volume was down on the DDG-51 program as the current multi-ship contract nears completion. The remaining two DDG-51 destroyers under contract are scheduled for delivery in 2011 and 2012. Based on the Navy’s plans to continue the DDG-51 program, the group expects to receive an award for an additional DDG-51 in 2011, following funding for long-lead material for this ship in 2010. Revenues were also down slightly on the DDG-1000 destroyer program. Delivery of the first DDG-1000 is scheduled for 2014. The group was awarded long-lead construction for the second ship and long-lead material for the third ship in 2010, with construction contracts for these ships expected in 2011. The group expects to complete contract negotiations with the U.S. Navy for the second and third ships in this class in the second quarter of 2011.

Activity on the group’s T-AKE program was up in the first quarter of 2011 as the group continued construction on the remaining ships under contract. Deliveries of the remaining three ships are scheduled through 2012. Volume is also up on the Mobile Landing Platform program. Advanced design efforts continue in anticipation of a construction award this year following funding in the 2011 U.S. defense budget.

While the net impact of these ship-construction programs resulted in essentially steady revenues compared with 2010, volume was up on engineering and repair programs for the Navy. Revenues were

up in the first quarter of 2011 on the group’s engineering work associated with the next-generation ballistic-missile submarine under development for the Navy. Additionally, the group’s repair work continued to increase in the first quarter of 2011 following significant growth in 2009 and 2010, particularly at our West Coast operation.

In 2010, the group completed construction of a five-ship commercial product-carrier program, resulting in a decrease in commercial shipbuilding revenues in 2011. Given the success of the program, the age of the fleet of Jones Act ships and environmental regulations that require double-hull tankers and impose emission control limits, we anticipate additional commercial program opportunities as the economy continues to recover.

The group’s 2011 operating earnings increased at a slightly higher rate than revenues, resulting in an increase in margins compared with the first quarter of 2010 despite a continuing shift in contract mix from the fixed-price DDG-51 program to the cost-reimbursable DDG-1000 contract and from the mature Block II Virginia-class contract to the Block III contract. Strong performance on the T-AKE contract contributed significantly to the margin increase.

We expect Marine Systems 2011 revenues to remain near 2010 revenues of approximately $6.7 billion as increased Virginia-class production and submarine engineering activity are offset by lower DDG-51, T-AKE and commercial volume. For the year, we expect the group to achieve operating margins in the low-9 percent range, down from 2010. Margins are expected to decrease throughout the year due to the continued mix shift in ship-construction programs and the start-up of new production contracts.

Information Systems and Technology


*Three Months Ended*	April 4 2010			April 3 2011			Variance
Revenues	$	2,752		$	2,814		$	62		2.3	%
Operating earnings		290			276			(14	)	(4.8	)%
Operating margin		10.5	%		9.8	%

The Information Systems and Technology group’s revenues increased in the first quarter of 2011 over the same period in 2010. Increased revenues in the group’s information technology (IT) services business were offset in part by a decline in revenue in the group’s tactical communications and intelligence, surveillance and reconnaissance (ISR) businesses. The increase in the group’s revenues consisted of the following:


Tactical communication systems	$	(33	)
IT services		124
ISR systems		(29	)
Total increase in revenues	$	62

Revenues in the tactical communication systems business decreased in the first quarter of 2011 compared with 2010 due to lower volume on the Warfighter Information Network – Tactical (WIN-T) battlefield communications system and several programs at the group’s Canadian operation, including

the Canadian Maritime Helicopter Project (MHP). The group received an award in the first quarter of 2011 for low-rate initial production of equipment under the second increment of the WIN-T program, and we expect activity under this contract to increase starting in the second quarter. Revenues in the group’s United Kingdom-based operation were steady, as lower volume on the BOWMAN contract, which is now in the maintenance and long-term support and enhancement phase of the program, was offset by higher volume on the demonstration phase of the U.K. Ministry of Defence Specialist Vehicle program.

In the group’s IT services business, volume increased on IT support and modernization programs for the intelligence community, including the New Campus East (NCE) contract, as well as several programs associated with the Base Realignment and Closure (BRAC) facility changes, including the Walter Reed National Military Medical Center and Mark Center facilities. Revenue was also up on the group’s Network-Centric Solutions (NETCENTS) program, which provides network support for federal agencies.

Revenue was down in the first quarter in the group’s ISR business due largely to the sale of a satellite facility in the first quarter of 2010 and the completion of several signals intelligence programs in early 2011.

The Information Systems and Technology group’s operating earnings and operating margins decreased in the first quarter of 2011 as a result of a shift in contract mix and an increasingly competitive and price-sensitive market for IT services. The significant sales growth in our IT services business in the quarter reduced the group’s overall margin.

We expect full-year revenues in the Information Systems and Technology group to grow approximately 3 to 5 percent. We expect this growth to be spread among each of the group’s businesses, particularly in the areas of tactical communication systems and IT services for intelligence and federal civilian customers. We expect the group’s margins to remain above 10 percent for the year, with margins increasing throughout the year as higher-margin product sales increase.

Corporate

Corporate results consist primarily of compensation expense for stock options and a portion of the results from our commercial pension plans. Corporate operating expenses totaled approximately $20 in the first quarter of both 2010 and 2011. We expect 2011 full-year Corporate operating expense of approximately $90.

BACKLOG

Our total backlog was $57.6 billion on April 3, 2011, down 3 percent from the fourth quarter of 2010. Our backlog does not include work awarded under unfunded indefinite delivery, indefinite quantity (IDIQ) contracts, unexercised options associated with existing firm contracts or options to purchase new aircraft, which we refer to collectively as estimated potential contract value. At the end of the first quarter of 2011, our estimate of this potential contract value was $20.6 billion compared with $21.8 billion at the end of 2010.

The following table details the backlog and the total estimated contract value of each business group at the end of the fourth quarter of 2010 and the first quarter of 2011:


*April 3, 2011*	Funded		Unfunded		Total Backlog		Estimated Potential Contract Value		Total Estimated Contract Value
Aerospace	$	17,499	$	361	$	17,860	$	—	$	17,860
Combat Systems		10,289		1,092		11,381		4,925		16,306
Marine Systems		8,113		10,540		18,653		549		19,202
Information Systems and Technology		7,958		1,724		9,682		15,119		24,801
Total	$	43,859	$	13,717	$	57,576	$	20,593	$	78,169

*December 31, 2010*
Aerospace	$	17,443	$	378	$	17,821	$	1,361	$	19,182
Combat Systems		10,908		892		11,800		4,645		16,445
Marine Systems		7,050		13,069		20,119		584		20,703
Information Systems and Technology		7,978		1,843		9,821		15,196		25,017
Total	$	43,379	$	16,182	$	59,561	$	21,786	$	81,347

Aerospace

Aerospace funded backlog represents orders for which we have definitive purchase contracts and deposits from the customer. Aerospace unfunded backlog consists of agreements to provide future aircraft maintenance and support services. Aerospace estimated potential contract value represents options to purchase new aircraft and long-term agreements with fleet customers. The group ended the first quarter of 2011 with $17.9 billion of backlog, following its second consecutive quarterly increase. In the first quarter of 2011, a fleet customer informed us of its intent not to purchase 40 large-cabin aircraft, which were scheduled to be delivered over the next five years. We have, therefore, removed these aircraft from the group’s estimated potential contract value. The impact to annual scheduled deliveries is not material.

Order activity in 2011 remains strong, with continued order interest from emerging markets, particularly the Asia-Pacific region. Additionally, we experienced the lowest amount of customer defaults in the backlog since the third quarter of 2008, an indication of the sustained improvement in the business-jet market. Backlog in the group’s large-cabin segment remains well-positioned, with an 18- to 24-month period between customer order and delivery of in-service aircraft.

Defense Businesses

The total backlog for our defense businesses represents the estimated remaining sales value of work to be performed under firm contracts. The funded portion of this backlog includes items that have been authorized and appropriated by the Congress and funded by the customer, as well as commitments by international customers that are similarly approved and funded by their governments. While there is no guarantee that future budgets and appropriations will provide funding for a given program, we have included in the backlog only firm contracts we believe are likely to receive funding. Our backlog does not include work awarded under unfunded IDIQ contract awards or unexercised options. The estimated potential contract value represents our estimate of the potential value we will receive under these arrangements.

Customers use IDIQ contracts for several reasons, including expanding the field of available contractors to maximize competition under a given program or when they have not defined the exact timing and quantity of deliveries that will be required at the time the contract is executed. These agreements, which set forth the majority of the contractual terms, including prices, are funded as delivery orders are placed. A significant portion of our estimated potential contract value is composed of multiple-award IDIQ contracts in which we are one of several companies competing for task orders. We include only our estimate of the value we will receive under these arrangements. The estimated contract value also includes IDIQ contracts for which we have been designated as the sole-source supplier to design, develop, produce and integrate complex products and systems over several years for the military or other government agencies. We believe the customers intend to fully implement these products and systems. Because the value of these arrangements is subject to the customer’s future exercise of an indeterminate quantity of delivery orders, we recognize these contracts in backlog only when they are funded.

Contract options in our defense businesses represent agreements to perform additional work beyond the products and services associated with firm contracts, if the customer exercises the option. These options are negotiated in conjunction with a firm contract and provide the terms under which the customer may elect to procure additional units or services at a future date. We recognize contract options in backlog when the customer exercises the option and establishes a firm order.

Almost 75 percent of the decline in our defense business backlog from the fourth quarter of 2010 was in the Marine Systems group, which traditionally receives large, multi-year awards and works that backlog down in subsequent periods. Backlog was impacted in part by a delay in orders associated with the government’s continuing resolution (CR), which funded the Pentagon at fiscal year 2010 funding levels throughout the first quarter of 2011. Despite the difficult business environment associated with budget pressures and delays, our defense businesses each experienced continued demand for their products and services during the first quarter of 2011, with several notable contract awards.

Combat Systems awards included the following:

•

$325 from the Israeli Ministry of Defense for Merkava Armored Personnel Carrier (APC) hulls and material kit sets.

•

$155 from the U.S. Marine Corps for ammunition for the Expeditionary Fire Support System. The contract has a maximum potential value of $195 if all options are exercised.

•

$45 from the U.S. Army for training ammunition.

•

$35 from the Army for munitions demilitarization. The contract has a maximum potential value of $165 over five years if all options are exercised.

Marine Systems awards included the following:

•

$55 from the U.S. Navy for engineering, design and technical services for the DDG-1000 destroyer program, bringing the total value in backlog to approximately $815.

Information Systems and Technology awards included the following:

•

$295 from the Army under the WIN-T program for low-rate initial production of equipment under the second increment of the program. The second increment adds on-the-move command-and-control capabilities to the tactical communication network.

•

$100 from the Army for ruggedized computing equipment under the Common Hardware/Software III (CHS-3) program, bringing the total value in backlog to $230.

•

$90 from Austal USA for combat and seaframe control systems for the next Littoral Combat Ship (LCS). Options to provide these systems for eight additional ships will be recognized as orders as they are exercised over the next five years.

•

$65 under the Mobile User Objective System (MUOS) program for development of the Navy’s next-generation tactical satellite communication system.

•

$55 for networking and computing products and support under the Network-Centric Solutions (NETCENTS) program, bringing the total value in backlog to $215.

•

$30 from the Army to operate its Supply Support Activity (SSA) in Kuwait. The contract has a maximum potential value of $175 over five years if all options are exercised.

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

We ended the first quarter of 2011 with a cash balance of $2.5 billion, compared with $2.6 billion at the end of 2010. Our net debt was $432, essentially unchanged from the end of 2010. Following is a discussion of the major components of our operating, investing and financing activities, as classified on the Consolidated Statement of Cash Flows, in the first three months of 2010 and 2011.

Operating Activities

We generated cash from operating activities of $327 in the first three months of 2011 compared with $210 in the same period in 2010. The primary driver of cash flows in both periods was net earnings, offset by growth in operating working capital (OWC). The increase in OWC in the first three months of 2011 is due primarily to timing of contract payments, and we expect this growth to reverse over the remainder of the year.

As discussed further in Note K to the unaudited Consolidated Financial Statements, litigation on the A-12 contract termination has been ongoing since 1991. If, contrary to our expectations, the default termination ultimately is sustained and the government prevails on its recovery theories, we, along with The Boeing Company, could collectively be required to repay the U.S. government as much as $1.4 billion for progress payments received for the A-12 contract, plus interest, which was approximately $1.5 billion at April 3, 2011. If this were the outcome, we would owe half of the total, or approximately $1.4 billion pretax. Our after-tax cash obligation would be approximately $730. We believe we have sufficient resources, including access to capital markets, to pay such an obligation, if required.

Investing Activities

We used $138 for investing activities in the first three months of 2011 compared with $282 in the same period in 2010. The primary uses of cash in investing activities were capital expenditures and purchases of marketable securities. Investing activities also include proceeds received from the sale of assets and marketable securities. We expect full-year capital expenditures to be less than 2 percent of revenues, up slightly from 2010 due largely to the seven-year facilities expansion project at the Aerospace group’s Savannah campus announced in 2010. As a result of lower market interest rates, we have expanded our investments in available-for-sale and held-to-maturity securities in recent years to generate additional return. We had net purchases of $77 in the first three months of 2011 and net purchases of $229 in the first three months of 2010. We did not complete any acquisitions in the first quarter of 2011. We completed one acquisition for $48 in the first three months of 2010. We used cash on hand to fund this acquisition. See Note B to the unaudited Consolidated Financial Statements for further discussion of acquisition activity.

Financing Activities

Net cash used for financing activities was $318 in the three-month period ended April 3, 2011, compared with $163 in the same period in 2010. Our financing activities include issuances and repayments of debt, payment of dividends and repurchases of common stock. Net cash from financing activities also includes proceeds received from stock option exercises.

We had no commercial paper outstanding at the end of the first quarter. We have approximately $2 billion in bank credit facilities that have not been drawn upon. These facilities provide backup liquidity to our commercial paper program. We also have an effective shelf registration on file with the Securities and Exchange Commission. The next material repayment of long-term debt is $750 of fixed-rate notes scheduled to mature in July of 2011. As we approach the maturity date, we will determine whether to repay these notes with cash on hand or refinance the obligation.

On March 2, 2011, our board of directors declared an increased quarterly dividend of $0.47 per share – the 14th consecutive annual increase. The board had previously increased the quarterly dividend to $0.42 per share in March 2010.

In the first three months of 2011, we repurchased 3.1 million of our outstanding shares on the open market at an average price of $75 per share. In the first three months of 2010, we repurchased 2.9 million shares at an average price of $68 per share. On April 3, 2011, approximately 6.9 million shares remained authorized by our board of directors for repurchase – about 2 percent of our total shares outstanding. We expect to continue to repurchase shares as part of our capital deployment activities in the future.

Non-GAAP Management Metrics – Free Cash Flow

Our free cash flow from operations for the first three months of 2011 was $266 compared with $150 for the same period in 2010. We define free cash flow from operations as net cash provided by operating activities less capital expenditures. We believe free cash flow from operations is a useful measure for investors, because it portrays our ability to generate cash from our core businesses for purposes such as repaying maturing debt, funding business acquisitions, repurchasing our common stock 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 following table reconciles free cash flow from

operations with net cash provided by operating activities, as classified on the unaudited Consolidated Statement of Cash Flows:


*Three Months Ended*	April 4 2010			April 3 2011
Net cash provided by operating activities	$	210		$	327
Capital expenditures		(60	)		(61	)
Free cash flow from operations	$	150		$	266
Cash flows as a percentage of earnings from continuing operations:
Net cash provided by operating activities		35	%		53	%
Free cash flow from operations		25	%		43	%

Cash generation was strong across all areas of the business. We expect to continue to generate funds from operations in excess of our short- and long-term liquidity needs and believe we have adequate funds on hand and sufficient borrowing capacity to execute our financial and operating strategy.

ADDITIONAL FINANCIAL INFORMATION

Environmental Matters and Other Contingencies

For a discussion of environmental matters and other contingencies, see Note K to the unaudited Consolidated Financial Statements. We do not expect our aggregate liability with respect to these matters to have a material impact on our results of operations, financial condition or cash flows.

Application of Critical Accounting Policies

Management’s Discussion and Analysis of our Financial Condition and Results of Operations is based on our unaudited Consolidated Financial Statements, which have been prepared in accordance with U.S. generally accepted accounting principles (GAAP). The preparation of financial statements in accordance with GAAP requires that we make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, we evaluate our estimates, including those related to long-term contracts and programs, goodwill and other intangible assets, income taxes, pensions and other post-retirement benefits, workers’ compensation, warranty obligations, pre-owned aircraft inventory, and contingencies and litigation. We base our estimates on historical experience and on various assumptions that we believe to be reasonable under the circumstances. The results of these estimates form the basis for making judgments about the carrying values of assets and liabilities that are not readily available from other sources. Actual results may differ from these estimates under different assumptions or conditions. For a full discussion of our critical accounting policies, see our Annual Report on Form 10-K for the year ended December 31, 2010.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes with respect to this item from the disclosure included in our Annual Report on Form 10-K for the year ended December 31, 2010.

ITEM 4. CONTROLS AND PROCEDURES

Our management, under the supervision and with the participation of the Chief Executive Officer and the Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Securities Exchange Act of 1934, as amended) on April 3, 2011. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, on April 3, 2011, our disclosure controls and procedures were effective.

There were no changes in our internal control over financial reporting that occurred during the quarter ended April 3, 2011, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

FORWARD-LOOKING STATEMENTS

This quarterly report on Form 10-Q contains forward-looking statements that are based on management’s expectations, estimates, projections and assumptions. Words such as “expects,” “anticipates,” “plans,” “believes,” “scheduled,” “estimates,” “should” and variations of these words and similar expressions are intended to identify forward-looking statements. These include but are not limited to projections of revenues, earnings, segment performance, cash flows, contract awards, aircraft production, deliveries and backlog stability. Forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, as amended. These statements are not guarantees of future performance and involve certain risks and uncertainties that 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, including the risk factors discussed in Item 1A of our Annual Report on Form 10-K. These factors include, without limitation:

•

general U.S. and international political and economic conditions;

•

changing priorities in the U.S. government’s defense budget;

•

termination or restructuring of government contracts due to unilateral government action;

•

differences in anticipated and actual program performance, including the ability to perform under long-term fixed-price contracts within estimated costs, and performance issues with key suppliers and subcontractors;

•

expected recovery on contract claims and requests for equitable adjustment;

•

changing customer demand or preferences for business aircraft, including the effects of economic conditions on the business-aircraft market;

•

potential for changing prices for energy and raw materials and

•

the status or outcome of legal and/or regulatory proceedings.

All forward-looking statements speak only as of the date of this report or, in the case of any document incorporated by reference, the date of that document. All subsequent written and oral forward-looking statements attributable to the company or any person acting on the company’s behalf are qualified by the cautionary statements in this section. We do not undertake any obligation to update or publicly release any revisions to forward-looking statements to reflect events, circumstances or changes in expectations after the date of this report except as expressly required to do so by law.

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

For information relating to legal proceedings, see Note K to the unaudited Consolidated Financial Statements contained in Part I, Item 1 of this quarterly report on Form 10-Q.

ITEM 1A. RISK FACTORS

There have been no material changes with respect to this item from the disclosure included in our Annual Report on Form 10-K for the year ended December 31, 2010.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The following table provides information about our first quarter repurchases of equity securities that are registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended:


Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Program ^(a)		Maximum Number of Shares that May Yet Be Purchased Under the Program ^(a)
Pursuant to Share Buyback Program
1/1/11 - 1/30/11		—	$	—		—		—
1/31/11 - 2/27/11		330,646	$	75.80		330,646		9,669,354
2/28/11 - 4/3/11		2,800,941	$	74.88		2,800,941		6,868,413

Shares Delivered or Withheld Pursuant to Restricted Stock Vesting ^(b)
1/1/11 - 1/30/11		140,933	$	70.22
1/31/11 - 2/27/11		—	$	—
2/28/11 - 4/3/11		—	$	—

Total		3,272,520	$	74.77

(a)

On February 2, 2011, with no shares remaining under a prior authorization, the board of directors authorized management to repurchase up to 10 million of common stock on the open market. Unless terminated or extended earlier by resolution of the board of directors, the program will expire when the number of authorized shares has been repurchased.

(b)

Represents shares withheld by, or delivered to, us pursuant to provisions in agreements with recipients of restricted stock granted under our equity compensation plans that allow us to withhold, or the recipient to deliver to us, the number of shares with a fair value equal to the minimum statutory tax withholding due upon vesting of the restricted shares.

We did not make any unregistered sales of equity securities in the first quarter.

ITEM 6. EXHIBITS



10.1		General Dynamics Corporation Supplemental Savings and Stock Investment Plan, amended and restated as of January 1, 2009 (incorporating amendments through March 31, 2011)*

10.2		General Dynamics Corporation Supplemental Retirement Plan, restated effective January 1, 2010 (incorporating amendments through March 31, 2011)*

31.1		Certification by CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*

31.2		Certification by CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*

32.1		Certification by CEO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*

32.2		Certification by CFO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*

101		Interactive Data File*

*	Filed herewith.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.


GENERAL DYNAMICS CORPORATION

by		/s/ Jason W. Aiken
		Jason W. Aiken
		Vice President and Controller
		(Authorized Officer and Chief Accounting Officer)

Dated: May 3, 2011

Exhibit 10.1

GENERAL DYNAMICS CORPORATION

SUPPLEMENTAL SAVINGS AND

STOCK INVESTMENT PLAN

Amended and restated

Effective as of January 1, 2009 (incorporating amendments through March 31, 2011)

GENERAL DYNAMICS CORPORATION

SUPPLEMENTAL SAVINGS AND

STOCK INVESTMENT PLAN

Table of Contents



SECTION 1	INTRODUCTION AND PLAN HISTORY	1

SECTION 2	DEFINITIONS	1

SECTION 3	SUPPLEMENTAL BENEFITS DUE TO LIMITATIONS UNDER THE QUALIFIED SSIP	4

SECTION 4	CREDITED EARNINGS	5

SECTION 5	PAYMENT, NONFORFEITABILITY OF BENEFITS AND MAINTENANCE OF ACCOUNTS	6

SECTION 6	SPECIAL SUPPLEMENTAL BENEFITS	8

SECTION 7	MISCELLANEOUS PROVISIONS	8

SECTION 8	AMENDMENT AND TERMINATION OF THE PLAN	10

SECTION 9	SECTION 409A COMPLIANCE	11

INTRODUCTION AND PLAN HISTORY

Introduction . This Plan is maintained so as to strengthen the ability of the Company and its Subsidiaries to attract and retain persons of outstanding competence upon which, in large measure, continued growth and profitability depend. The Plan is intended to supplement Qualified Salary Deferrals and Qualified Matching Contributions. The Plan is intended to be an unfunded deferred compensation plan for a select group of management or highly compensated employees within the meanings of Sections 201(2), 301(a)(3) and 401(a)(4) of ERISA and shall be construed and interpreted accordingly.

Effective Date . This Plan was established effective January 1, 1983, and previously amended and restated as of January 1, 1987, January 1, 1998, and August 1, 2003. The Plan was further amended as of March 1, 2005. The Plan was last amended and restated effective as of December 24, 2005, and conformed to include amendments through January 1, 2007. The Plan is hereby amended and restated effective as of January 1, 2009, and conformed to include amendments through March 31, 2011.

Plan Appendices . From time to time, the Company may adopt Appendices to the Plan for the purpose of setting forth specific provisions or providing documentation necessary to determine benefits under the Plan for certain Employee groups. Each such Appendix shall be attached to and form a part of the Plan. Each such Appendix shall specify the population to which it applies and shall supersede the provisions of the Plan document to the extent necessary to eliminate any inconsistencies between the Plan document and such Appendix.

Applicability of Plan Provisions . The provisions of this Plan shall apply to any person who is a Participant on or after January 1, 2005, and to any Account in existence on or after January 1, 2005. Pre-2005 Accounts are considered to be “grandfathered” under Section 409A and, except as otherwise specifically provided under this Plan by reference to Pre-2005 Accounts, the benefits and rights existing as of October 3, 2004, under the prior version of the Plan applicable to any Pre-2005 Account shall continue to apply. For purposes of clarity, except as otherwise specifically provided by this Plan by reference to Pre-2005 Accounts, to the extent that benefits or rights of Pre-2005 Accounts are governed by reference to corresponding Qualified SSIP provisions, the Qualified SSIP provisions in effect as of October 3, 2004, shall apply.

DEFINITIONS

Where the following words and phrases appear in the Plan, they shall have the respective meanings set forth below, unless the context clearly indicates to the contrary. Some of the words and phrases used in the Plan are not defined in this Section 2, but, for convenience, are defined as they are introduced into the text.

Account shall mean the recordkeeping account to which Salary Deferrals, Matching Contributions and Credited Earnings are credited (or debited for Credited Earnings reflecting an investment loss) under the Plan. An Account may be divided into two or more subaccounts to the extent necessary or desirable, as determined by the Company, for Plan recordkeeping and accounting purposes. Such subaccounts are referred to herein collectively as the “Account” or “Accounts,” and sometimes individually as the “Account.”

Accounting Date shall mean each day on which the U.S. financial markets are open for business.

Beneficiary shall mean the Participant’s beneficiary, who shall be determined by the following order: (1) the Participant’s designated beneficiary under the Qualified SSIP, (2) the Participant’s spouse, and (3) the Participant’s estate.

Change of Control shall mean a “Change of Control” as that term is defined in the Company’s Equity Compensation Plan, as amended from time to time.

Code shall mean the Internal Revenue Code of 1986, as amended from time to time and the rules and regulations promulgated thereunder.

Company shall mean General Dynamics Corporation, a Delaware corporation, and any successor thereof.

Credited Earnings shall have the meaning set forth in Section 4.1.

Eligible Employee shall mean an Employee who satisfies the eligibility criteria described at Section 3.1.

Employee shall mean any person who is regularly employed as a full-time, salaried employee by the Company or its Subsidiaries, and who is not covered by a collective bargaining agreement (except where such collective bargaining agreement specifically provides for participation). Individuals not initially treated and classified by the Company as common-law employees, including, but not limited to, leased employees, independent contractors or any other contract employees, shall be excluded from participation irrespective of whether a court, administrative agency or other entity determines that such individuals are common-law employees.

ERISA shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time.

Key Employee shall mean a “specified employee” as that term is used under Section 409A.

Matching Contributions shall mean amounts credited to a Participant’s Account with reference to the Participant’s Salary Deferrals pursuant to Section 3.4.

Participant shall mean any current or former Employee who has an Account that has not been fully paid or otherwise discharged.

Plan shall mean the General Dynamics Corporation Supplemental Savings and Stock Investment Plan, established January 1, 1983, as amended and restated as set forth herein, as it may be amended from time to time, and its Appendices.

Plan Year shall mean the 12 month period beginning on January 1st and ending on the following December 31st.

Post-2004 Account shall mean a Participant’s subaccount to which Salary Deferrals and Matching Contributions are credited if not earned and vested by December 31, 2004, and any Credited Earnings with respect to such amounts.

Pre-2005 Account shall mean a Participant’s subaccount to which Salary Deferrals and Matching Contributions are credited to the extent they were earned and vested on or before December 31, 2004, and any Credited Earnings with respect to such amounts.

Qualified Matching Contributions shall mean amounts contributed to the Qualified SSIP by the Company or its Subsidiaries which are determined with reference to amounts of Qualified Salary Deferrals.

Qualified Plan Limitations shall mean limitations imposed (i) pursuant to Code Sections 401(a)(17), 402(g), 415 or any other section of the Code or (ii) by the Company in order to assure compliance with the actual deferral percentage or actual contribution percentage requirements of the Qualified SSIP.

Qualified Salary Deferrals shall mean pre-tax salary deferrals made by an Employee pursuant to the Qualified SSIP.

Qualified SSIP shall mean the General Dynamics Corporation Savings and Stock Investment Plan (Plan 3.0), the General Dynamics Corporation Savings and Stock Investment Plan (Plan 4.5) and the General Dynamics Corporation Savings and Stock Investment Plan (Plan 5.0).

Salary shall mean an Employee’s “Deferral Pay,” as that term is used in the Qualified SSIP, without taking into account the limitation on annual compensation under Code Section 401(a)(17) or any successor provision thereto, or any incentive plan payments, bonuses or commissions.

Salary Deferrals shall mean amounts credited to a Participant’s Account corresponding to Salary reductions elected pursuant to Section 3.2.

Section 409A shall mean Code Section 409A, including, without limitation, applicable transition guidance provided by the Internal Revenue Service.

Separation from Service shall mean a “separation from service” as that term is defined in Section 409A.

Subsidiary shall mean any corporation of which the Company owns, directly or indirectly, fifty percent (50%) or more of the outstanding voting stock.

SUPPLEMENTAL BENEFITS DUE TO LIMITATIONS

UNDER THE QUALIFIED SSIP

Eligibility .

Unless otherwise directed by the Chief Executive Officer of the Company (the “Chief Executive Officer”), eligibility for participation in any benefits provided under this Section 3 for a given Plan Year shall be extended to selected Employees (i) who are eligible to participate in the Qualified SSIP, (ii) whose Qualified Salary Deferrals to the Qualified SSIP are restricted due to any of the Qualified Plan Limitations, and (iii) whose Salary in effect on November 1 of the year immediately preceding the given Plan Year (or such other date prescribed by the Company from time to time) equals or exceeds the annual compensation limitation of Code Section 401(a)(17) for the Plan Year.

The selection of eligible Employees who may participate in the Plan shall be in the sole discretion of the Company, and participation may be limited to such otherwise eligible Employees as the Company shall determine by the application of minimum compensation levels or otherwise. All determinations shall be made prior to the given Plan Year and may be made as of a given date at the sole discretion of the Company.

Notwithstanding anything to the contrary, to the extent that an Employee meets the requirements of this Section 3.1 during a Plan Year, such Employee shall not become an Eligible Employee during that Plan Year except as directed by the Chief Executive Officer.

Salary Deferral Elections . Salary Deferrals shall be credited to an Eligible Employee’s Post-2004 Account in accordance with such Eligible Employee’s election and subject to the following rules:

An Eligible Employee may elect to defer up to the maximum amount described in Section 3.3.

An Eligible Employee’s Salary Deferral election under this Plan shall be irrevocable for the 2005 Plan Year after March 15, 2005.

For Plan Years commencing after 2005, an Eligible Employee may make an irrevocable Salary Deferral election at the time and in the form prescribed by the Company, but in no event later than December 31 of the year preceding a given Plan Year.

For purposes of clarity, and without limitation, the Company may prescribe a “negative” election for Salary Deferrals, meaning that it may impose an automatic or default Salary Deferral election, provided the Eligible Employee has an opportunity during the election period to affirmatively change such election.

Notwithstanding the preceding requirements, in the event an Employee becomes eligible to participate during the Plan Year in accordance with Section 3.1(c) above, such Eligible Employee may make an irrevocable Salary Deferral election within 30 days from the date of eligibility with respect to any Salary earned after such election. For purposes of clarity, and without limitation, the Company may prescribe a “negative” election for Salary Deferrals,

meaning that it may impose an automatic Salary Deferral election, provided the Eligible Employee has an opportunity during the election period to affirmatively change such election.

Maximum Amount of Salary Deferrals . The maximum amount of Salary Deferrals that an Eligible Employee may elect for a given Plan Year is equal to (X times Y) minus Z, where:

X is the Eligible Employee’s annual Salary in effect as of the November 1st of the year immediately preceding the Plan Year (or such other date prescribed by the Company from time to time).

Y is the Eligible Employee’s percentage deferral limit under the Qualified SSIP (using the limit applicable to the business unit at which the Eligible Employee is assigned as of the December 15th of the year immediately preceding the Plan Year, or such other date prescribed by the Company from time to time).

Z is the Code Section 402(g) limit for such Plan Year.

Matching Contributions . An Eligible Employee may be eligible for a Matching Contribution under this Plan, which shall be credited to an Eligible Employee’s Post-2004 Account, based on his or her Salary Deferrals under this Plan. Eligibility for, and the amount of any Matching Contribution under this Plan, shall be determined by the Qualified Matching Contribution provisions in the Qualified SSIP that are applicable to the business unit to which the Eligible Employee is assigned as of the end of the Salary Deferral election period prescribed by the Company for a given Plan Year.

Transfer . For purposes of clarity, should an Eligible Employee transfer business units during a Plan Year, such Eligible Employee’s Salary Deferrals and Matching Contributions, if any, shall not change during that Plan Year to account for different deferral or matching provisions under the Qualified SSIP applicable to the Eligible Employee’s new business unit.

CREDITED EARNINGS

Initial Credited Earnings . Effective for the Plan Years commencing on and after January 1, 2006, Salary Deferrals and Matching Contributions credited to the Participant’s Post-2004 Account shall be deemed invested in the same investment funds that the Participant’s Qualified Salary Deferrals are invested in as of the December 15th of the preceding Plan Year (or such other date as determined from time to time by the Company) under the Qualified SSIP. For 2005, Credited Earnings shall be determined under the prior provisions of the Plan. Effective April 22, 2011, Salary Deferrals and Matching Contributions credited to the Participant’s Post-2004 Account shall be deemed invested in the same investment funds as Qualified Salary Deferrals and Qualified Matching Contributions would be invested under the Qualified SSIP as of the crediting date.

Account Adjustments . Each Account shall be adjusted to reflect investment gain or loss on any balance in the Account as of the close of the immediately preceding Accounting Date. The adjustment shall be the same as what would actually have been recognized if the Account had been invested in the Qualified SSIP under the investment options actually selected by the Participant thereunder (or, with respect to initial Salary Deferrals, as determined by Section 4.1).

Investment Fund Transfers . If a Participant makes an investment fund transfer pursuant to the provisions of the Qualified SSIP, the identical investment fund transfer shall be performed in this Plan, but no such transfer shall be permitted in this Plan unless made in the Qualified SSIP. Notwithstanding the foregoing, the Company may, in its discretion, approve transfers in this Plan where no transfer is possible in the Qualified SSIP due to loans and withdrawals.

Coordination with Qualified SSIP . The Company may adopt such rules, in its sole discretion, to coordinate the crediting of earnings under the Plan with the investment of funds under the Qualified SSIP.

PAYMENT, NONFORFEITABILITY OF BENEFITS

AND MAINTENANCE OF ACCOUNTS

Pre-2005 Accounts: Payment and Nonforfeitability of Benefits and Maintenance of Accounts . This Section 5.1 shall be effective as of January 1, 2005, and shall only apply to Pre-2005 Accounts. Except as otherwise provided in this Plan, a Participant’s Pre-2005 Account, if any, shall be paid under the same conditions, rules and restrictions as would apply to the benefits as if they were provided under the Qualified SSIP. The following rules shall apply to such Pre-2005 Accounts, notwithstanding the conditions, rules and restrictions of the Qualified SSIP:

Participants shall not be entitled to receive distributions or loans or to make withdrawals of any portion of their Pre-2005 Account balances while employed by the Company or any of its Subsidiaries.

Upon termination of employment with the Company and its Subsidiaries, the entire balance of a Participant’s Pre-2005 Account (valued as of the Accounting Date coincident with or immediately preceding the date of payment) shall be paid to the Participant as soon as administratively practicable. However, any Participant may, by a written statement (including internet and telephone methods approved by the Company for this purpose) filed with the Company or its delegated agent on or before one year prior to the termination of employment, irrevocably elect to defer commencement of such payments until a specific date which may be as late as the Participant attaining age 70 ¹ / 2 . If a deferral is elected, the Participant may choose to have his or her Pre-2005 Account balance subsequently paid in a lump sum or in such number of equal annual installments (not to exceed 15) as he or she may request (which will commence as soon as practicable, but no later than 60 days following the payment date(s) selected, after the conclusion of the deferral period and will be payable annually thereafter). To the extent consistent with the above requirements, deferrals and installment payments of distributions shall be governed by the applicable provisions of the Qualified SSIP.

All Pre-2005 Account balances shall be paid in cash. No Participant shall have any right to receive payment in any other form.

Upon the death of a Participant prior to the entire balance of the Participant’s Pre-2005 Account having been paid, the remaining unpaid balance shall be payable to the Beneficiary. Amounts shall be paid as soon as practicable, but no later than 60 days following the Participant’s death.

In the event that a Subsidiary ceases to meet the definition of Subsidiary (e.g., on account of a sale of its stock to an unrelated third party), or an unincorporated business unit ceases to be owned by the Company or a Subsidiary, such cessation shall not, by itself, be treated as a termination of employment by the Participants employed by such Subsidiary or business unit unless the Company shall so determine. In those circumstances, the Company may also determine whether the Pre-2005 Accounts of the Participants employed by such Subsidiary or business unit will be vested or distributed.

The Company shall promulgate such other additional rules and procedures governing the operation of this Plan in relation to such Pre-2005 Accounts as it may, from time to time and in its sole discretion, determine are necessary or desirable.

Pursuant to transition guidance under Section 409A, Participants in the Plan (i) who are former Employees (as of November 30, 2005) and (ii) whose Pre-2005 Account is worth less than $100,000 (as of November 30, 2005), shall be terminated from participation in the Plan and such Participants shall be paid their respective Accounts in a single lump sum payment on or before December 31, 2005.

Post-2004 Accounts: Payment and Nonforfeitability of Benefits and Maintenance of Accounts . This Section 5.2 shall be effective as of January 1, 2005, and shall apply to Post-2004 Accounts.

Six months following a Separation from Service from the Company and its Subsidiaries, the entire balance of a Participant’s Post-2004 Account (valued as of the Accounting Date coincident with or immediately preceding the date of payment) shall be paid to the Participant as soon as administratively practicable, but no later than 60 days following the six-month anniversary of the Participant’s Separation from Service. Notwithstanding the foregoing, in the event that a Participant’s Post-2004 Account is less than the applicable dollar amount under Section 402(g) of the Code, the Company shall have the discretion to distribute such amount in a single lump sum payment.

All Post-2004 Account balances shall be paid in cash. No Participant shall have any right to receive payment in any other form.

In the event that a Subsidiary ceases to meet the definition of Subsidiary (e.g., on account of a sale of its stock to an unrelated third party), or an unincorporated business unit ceases to be owned by the Company or a Subsidiary, the Company, in its sole discretion, may fully vest the Post-2004 Account balances of Participants employed by such Subsidiary or business unit and the Post-2004 Account shall be paid in accordance with Section 5.2(a).

The Company shall promulgate such other additional rules and procedures governing the operation of this Plan in relation to such Post-2004 Accounts as it may, from time to time and in its sole discretion, determine are necessary or desirable.

Notwithstanding, Section 5.2(a) above, upon the death of a Participant prior to the entire balance of the Participant’s Post-2004 Account having been paid, the remaining unpaid balance shall be payable to the Beneficiary as soon as practicable but no later than 60 days following the Participant’s death.

Notwithstanding anything to the contrary contained in this Section 5.2, payment to a Participant shall be delayed should the Company reasonably anticipate that the making of such payment would violate federal securities laws or other applicable law. In such an event, payment shall be made at the earliest date at which the Company reasonably anticipates that the making of the payment would not cause such violation.

SPECIAL SUPPLEMENTAL BENEFITS

Participation . Recognizing the need to make special retirement and other compensation or employee benefit provisions for certain Employees, the Company may, from time to time and in its best judgment, designate such other individual Employees or groups of select management or highly compensated Employees as being eligible to receive benefits under this Plan. Any such Employees or groups of Employees, and the benefits applicable to them, will be described in the Appendices attached to this Plan.

Benefits . Such supplemental benefits may be provided in such amounts as the Company determines are appropriate. Such benefits need not be uniform among such Employees.

MISCELLANEOUS PROVISIONS

Construction . In the construction of the Plan, the masculine shall include the feminine and the singular the plural in all cases where such meanings would be appropriate. Except as may be governed by ERISA or other applicable federal law, this Plan shall be construed, governed, regulated and administered according to the laws of the Commonwealth of Virginia.

Employment . Participation in the Plan shall not give any Employee the right to be retained in the employ of the Company or its Subsidiaries, or upon dismissal or upon his or her voluntary termination of employment, to have any right, legal or equitable, under the Plan or any portion thereof, except as expressly granted by the Plan.

Nonalienability of Benefits . No benefit under the Plan shall be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or charge, and any attempt to do so shall be void, and no such benefit shall in any manner be liable for or subject to the debts, liabilities, engagements or torts of the person entitled to such benefit, except as specifically provided in the Plan.

Facility of Payment . If the Company judges any recipient of benefits, in its sole discretion, to be legally incapable of personally receiving and giving a valid receipt for any payment due him or her under the Plan, the Company may, unless and until claims shall have been made by a duly appointed guardian or committee of such person, make such payment or any part thereof to such person’s spouse, children or other legal entity deemed by the Company to have incurred expenses or assumed responsibility for the expenses of such person. Any payment so made shall be a complete discharge of any liability under the Plan for such payment.

Obligation to Pay Amounts Hereunder .

No trust fund, escrow account or other segregation of assets need be established or made by the Company to guarantee, secure or assure the payment of any amount payable hereunder.

The Company’s obligation to make payments pursuant to this Plan shall constitute only a general contractual liability of the Company to individuals entitled to benefits hereunder and other actual or possible payees hereunder in accordance with the terms hereof. Payments hereunder shall be made only from such funds of the Company as it shall determine, and no individual entitled to benefits hereunder shall have any interest in any particular asset of the Company by reason of the existence of this Plan. No provision of the Plan shall be interpreted so as to give any individual any right in any assets of the Company greater than the rights of a general unsecured creditor of the Company. It is expressly understood as a condition for receipt of any benefits under this Plan that the Company is not obligated to create a trust fund or escrow account or to segregate any asset of the Company in any fashion.

The Company may, in its sole discretion, establish segregated funds, escrow accounts or trust funds whose primary purpose would be for the provision of benefits under this Plan. If such funds or accounts are established, however, individuals entitled to benefits hereunder shall not have any identifiable interest in any such funds or accounts nor shall such individuals be entitled to any preference or priority with respect to the assets of such funds or accounts. These funds and accounts would still be available to judgment creditors of the Company and to all creditors in the event of the Company’s insolvency or bankruptcy.

Administration . The Plan shall be administered by the Company. The Company shall have the discretionary authority to construe and interpret the provisions of the Plan and make factual determinations thereunder, including the power to determine the rights or eligibility of Employees or Participants and any other persons, and the amounts of their benefits under the Plan, and to remedy ambiguities, inconsistencies or omissions, and any such determinations shall be binding on all parties. Benefits will only be paid if the Company, in its sole discretion, determines that the Participant or Beneficiary is entitled to them.

The Company has the authority to delegate any of its powers under this Plan (including, without limitation, Section 7.7) to any other person, persons, or committee. This person, persons, or committee may further delegate its reserved powers to another person, persons, or committee as they see fit. Any delegation or subsequent delegation shall include the same full, final and discretionary authority that the Company has listed herein and any decisions, actions or interpretations made by any delegate shall have the same ultimate binding effect as if made by the Company.

Claims Appeal Procedure . Upon receipt of a claim for benefits under the Plan, the Company shall notify the Participant, Beneficiary or authorized representative of any action taken within 90 days of receiving the claim. If the claim is denied, the denial shall be set forth in writing and shall include the specific reasons for the denial, with reference to pertinent Plan provisions on which the denial is based, and shall describe the procedure for perfecting the claim, or for requesting a review of the denial. Within 60 days after receiving a notification of denial of a claim, a Participant, Beneficiary or authorized representative may request that the Company make a full and fair review of the denial. In connection with this request, the Participant may review pertinent documents and submit issues or comments in writing. The Company will make a final decision on the claim within 120 days of the request for review. Any decision made by the Company in good faith shall be final and binding on all parties.

Change of Control . Notwithstanding any provision herein to the contrary, immediately prior to the occurrence of a Change of Control, all allocations made to Accounts of Participants who are then active Employees shall become fully vested and nonforfeitable.

Action by the Company . Any action or authorization by the Company hereunder shall be made by the Chief Executive Officer or its Board of Directors, or any delegate of either.

AMENDMENT AND TERMINATION OF THE PLAN

Amendment . The Company has the right to modify or amend this Plan in whole or in part, effective as of any specified date; provided, however, that the Company shall have no authority to modify or amend the Plan to:

Reduce any benefit accrued hereunder based on service and compensation to the date of amendment unless such action is necessary to prevent this Plan from being subject to any provision of Title 1, Subtitle B, Parts 2, 3 or 4 of ERISA;

Permit the accrual, holding or payment of actual shares of common stock of the Company under the Plan (such right to amend being reserved to the Board of Directors of the Company or its delegate); or

Adversely affect any accrued benefits hereunder (and any benefits that will accrue upon a Change of Control) and any rights attaching thereto after or in anticipation of the occurrence of a Change of Control.

No benefit hereunder shall be deemed to be adversely affected or otherwise reduced to the extent that any amendment or action affects the tax treatment of Plan benefits or an interest in future investment returns.

Termination .

The Company reserves the right to terminate this Plan, in whole or in part. This Plan shall be automatically terminated upon (i) a dissolution of the Company (but not upon a merger, consolidation, reorganization, recapitalization or acquisition of a controlling interest in the voting stock of the Company by another person or entity); (ii) the Company being legally adjudicated bankrupt; (iii) the appointment of a receiver or trustee in bankruptcy with respect to the Company’s assets and business if such appointment is not set aside within ninety (90) days thereafter; or (iv) the making by the Company of an assignment for the benefit of creditors.

Upon a termination of this Plan, (i) no additional Employees shall become entitled to benefits hereunder; (ii) all benefits accrued through the date of termination will become immediately nonforfeitable as to each Participant; and (iii) no additional benefits (except that the Company, in its sole discretion, may provide for an allocation of “income” or “earnings” on the Participant’s contributions) shall be accrued hereunder for subsequent payment.

Pre-2005 Accounts accrued to the date of termination of the Plan shall be paid to the Participants as soon as practicable.

Post-2004 Accounts accrued to the date of termination of the Plan shall be paid to the Participants as soon as practicable to the extent permitted under Section 409A and otherwise shall remain payable in accordance with Section 5.2.

SECTION 409A COMPLIANCE

It is intended that the Plan (and any payments) will comply with or be exempt from Section 409A, if applicable, and the Plan (and any payments) shall be interpreted and construed on a basis consistent with such intent. The Plan (and any payments) may be amended (in accordance with Section 8.1 of the Plan) in any respect deemed necessary or desirable (including retroactively) by the Company with the intent to preserve compliance with or exemption from Section 409A. The preceding shall not be construed as a guarantee of any particular tax effect for Plan benefits. A Participant (or Beneficiary) is solely responsible and liable for the satisfaction of all taxes and penalties that may be imposed on such person in connection with the Plan (including any taxes and penalties under Section 409A), and the Company shall have no obligation to indemnify or otherwise hold a Participant (or Beneficiary) harmless from any or all of such taxes or penalties.

Following a Change of Control or a “change in control” as defined under Section 409A, no action shall be taken under the Plan that will cause a Participant’s benefit that has previously been determined to be (or is determined to be) subject to Section 409A, to fail to comply in any respect with Section 409A without the written consent of such Participant.

Exhibit 10.2

GENERAL DYNAMICS CORPORATION

SUPPLEMENTAL RETIREMENT PLAN

Effective January 1, 1983

and restated effective January 1, 2010 (incorporating amendments through March 31, 2011)

TABLE OF CONTENTS


			Page
SECTION 1 INTRODUCTION AND PLAN HISTORY			1

	1.01	Introduction	1
	1.02	Effective Date	1
	1.03	Plan Appendices and Exhibits	1

SECTION 2 DEFINITIONS			1

	2.01	Actuarial Equivalent Value	2
	2.02	Actuary	2
	2.03	Code	2
	2.04	Corporation	2
	2.05	Defined Benefit Plan	2
	2.06	Defined Contribution Plan	2
	2.07	Determination Date	2
	2.08	Employee	2
	2.09	Employing Unit	2
	2.10	ERISA	3
	2.11	Grandfathered Amounts	3
	2.12	Participant	3
	2.13	Plan	3
	2.14	Retirement Plan	3
	2.15	Separation from Service	3
	2.16	Subsidiary	3

SECTION 3 SUPPLEMENTAL BENEFITS DUE TO LIMITATIONS UNDER DEFINED BENEFIT PLANS			3

	3.01	Participation	3
	3.02	Transition Rules	4
	3.03	Supplemental Benefit Due to Limitations Under Defined Benefit Plans	4
	3.04	Forms of Distribution for Grandfathered Amounts	5
	3.05	Forms of Distribution for Benefits Without Lump-Sum Option	5
	3.06	Forms of Distribution for Benefits With Lump-Sum Option	6
	3.07	Election of Alternative Annuity Forms	6
	3.08	Distribution Date of non-Grandfathered Amount	6
	3.09	Small-Sum Cashout	6
	3.10	Reemployment	7
	3.11	Distribution of Benefit	7

SECTION 4 SPECIAL SUPPLEMENTAL BENEFITS			7



	4.01	Participation	7
	4.02	Benefits	7

SECTION 5 MISCELLANEOUS PROVISIONS			8

	5.01	Construction	8
	5.02	Employment	8
	5.03	Non-alienability of Benefits	8
	5.04	Facility of Payment	8
	5.05	Discretionary Payment of Benefits	8
	5.06	Obligation to Pay Amounts Hereunder.	8
	5.07	Administration	9

SECTION 6 AMENDMENT AND TERMINATION OF PLAN			11

	6.01	Amendment	11
	6.02	Termination	12
	6.03	Delegation	12
	6.04	Section 409A	12

Appendix A			A-1

Appendix B			B-1

Appendix C			C-1

Appendix D			D-1

Appendix E			E-1

SECTION 1

INTRODUCTION AND PLAN HISTORY

1.01 Introduction .

(a)

This Plan is maintained so as to strengthen the ability of the Corporation to attract and retain persons of outstanding competence upon which, in large measure, continued growth and profitability depend.

(b)

The Plan is intended to supplement any benefits that may be provided under any plans of the Corporation and its Subsidiaries, as they may be in effect from time to time, that are qualified under Code Section 401. The Corporation shall not be required to fund, in any way, any of the benefits provided under this Plan prior to the time payments become due to persons hereunder.

(c)

The Plan is intended to be an excess benefit plan within the meanings of Sections 3(36) and 201(7) of ERISA and an unfunded deferred compensation plan for a select group of management or highly compensated employees within the meanings of Sections 201(2), 301(a)(3) and 401(a)(4) of ERISA and Labor Regulation Section 2520.104-23, and shall be construed and interpreted accordingly.

1.02 Effective Date . The Plan was established January 1, 1983, was amended and restated as of January 1, 1989, as of January 1, 2002, and as of January 1, 2009, and has also been amended from time to time. The Effective Date of the amendment and restatement of the Plan as set forth herein is January 1, 2010, except as otherwise provided in the Plan or an Appendix, and it incorporates amendments through March 31, 2011.

1.03 Plan Appendices and Exhibits . From time to time, the Corporation may adopt Exhibits to the Plan for the purpose of setting forth specific provisions of this Plan. In addition, the Corporation may from time to time adopt Appendices to this Plan for the purpose of providing documentation necessary to determine benefits under the Plan for certain employee groups. Each such Exhibit or Appendix shall be attached to and form a part of the Plan. Each such Exhibit or Appendix shall specify the Employing Unit to which it applies and shall supersede the provisions of the Plan document to the extent necessary to eliminate any inconsistencies between the Plan document and such Exhibit or Appendix.

SECTION 2

DEFINITIONS

2.01 Actuarial Equivalent Value . “Actuarial Equivalent Value” shall mean an amount determined by an Actuary that is of the equivalent value to the aggregate amounts expected to be received under different forms of payment under the Plan and based on actuarial assumptions adopted under the Defined Benefit Plan in which the Plan Participant benefits. For purposes of determining a lump sum value where no lump sum payment option, other than the small benefit cashouts described in Section S5.5 of the Master Retirement Plan Supplement (or any successor provision thereto), is available under the Defined Benefit Plan, the lump sum value shall be based on the actuarial assumptions that would be used for determining a small benefit cashout.

2.02 Actuary . “Actuary” shall mean one or more actuaries chosen by the Corporation, who shall be independent of the Corporation, and qualified through Fellowship in the Society of Actuaries or a firm with such actuaries on its staff.

2.03 Code . “Code” shall mean the Internal Revenue Code of 1986, as amended from time to time, and the applicable regulations and other guidance issued thereunder.

2.04 Corporation . “Corporation” shall mean General Dynamics Corporation, a Delaware corporation, and any successor thereof.

2.05 Defined Benefit Plan . “Defined Benefit Plan” shall mean any Retirement Plan maintained by the Corporation or its Subsidiaries other than a Defined Contribution Plan as its specific benefit structure is defined with respect to a group of covered employees. Defined Benefit Plans covered by this Plan are listed in Appendix A.

2.06 Defined Contribution Plan . “Defined Contribution Plan” shall mean a Retirement Plan which provides for an individual account for each covered Employee and for benefits based solely upon the amount contributed to the Employee’s account, and any income, expenses, gains and losses, and any other amounts which may be allocated to such account.

2.07 Determination Date . “Determination Date” shall mean, in the case of payment resulting from disability, the Participant’s attainment of age 65, or, for all other payments, the first day of the month following the later of the Participant’s attainment of age 55 or the Participant’s Separation from Service, including Separation from Service on account of death.

2.08 Employee . “Employee” shall mean any person regularly employed as a full-time salaried or hourly employee by the Corporation or its Subsidiaries in any capacity including officers (and also including directors who regularly render services to the Corporation or its Subsidiaries as regular full-time employees), and who is not covered by a collective bargaining agreement unless coverage under this Plan has been extended by negotiated agreement to Employees covered by the terms of such agreements. Individuals not initially treated and classified by the Corporation as common-law employees, including, but not limited to, leased employees, independent contractors or any other contract employees, shall be excluded from participation irrespective of whether a court, administrative agency or other entity determines that such individuals are common-law employees.

2.09 Employing Unit . “Employing Unit” shall mean any Subsidiary or affiliate of the Corporation or any economic or organizational or locational division or unit thereof which is set forth in the Appendices to the Plan.

2.10 ERISA . “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended.

2.11 Grandfathered Amounts . “Grandfathered Amounts” shall mean any amounts under this Plan which were deferred and vested before January 1, 2005 (as determined in accordance with Code Section 409A).

2.12 Participant . “Participant” shall mean an Employee who satisfied the eligibility criteria described in Section 3.01, 4.01 or an Appendix.

2.13 Plan . “Plan” shall mean the Supplemental Retirement Plan effective January 1, 1983, and restated as set forth herein effective January 1, 2010 (and incorporating amendments through March 31, 2011), as it shall be amended from time to time and its Appendices and Exhibits.

2.14 Retirement Plan . “Retirement Plan” shall mean any plan, fund, or program which was heretofore or is hereafter established or maintained by the Corporation and/or its Subsidiaries and which is qualified under Code Section 401 to the extent that by its express terms or as a result of surrounding circumstances such plan, fund or program:

(a)

provides retirement income to Employees; or

(b)

results in a deferral of income by Employees for periods extending to the termination of covered employment or beyond,

regardless of the method of calculating the contributions made to the plan, the method of calculating the benefits under the plan or the method of distributing benefits from the plan.

2.15 Separation from Service . “Separation from Service” shall have the meaning set forth in Code Section 409A.

2.16 Subsidiary . “Subsidiary” shall mean any subsidiary of the Corporation authorized by the Corporation to participate in this Plan with respect to its Employees and of which the Corporation owns, directly or indirectly, fifty percent (50%) or more of the outstanding voting stock.

SECTION 3

SUPPLEMENTAL BENEFITS DUE TO LIMITATIONS

UNDER DEFINED BENEFIT PLANS

3.01 Participation . Eligibility for participation for any benefits provided under Section 3.03 shall be extended to Employees covered under a benefit structure identified in Appendix A either who are members of a select group of management or highly compensated employees with benefits payable under such benefit structure restricted due to the limitations of Code Section 401(a)(17) or whose benefits payable thereunder are restricted due to Code Section 415 limitations.

Notwithstanding the preceding paragraph, an Employee shall not be eligible for a benefit under Section 3.03 if such Employee is eligible for benefits under an Appendix (other than Appendix A) or an agreement with the Corporation or its Subsidiaries where such Appendix or agreement provides benefits in lieu of benefits described in Section 3.03 unless such Appendix or agreement provides otherwise.

3.02 Transition Rules .

(a)

Except as otherwise specifically provided herein with respect to Grandfathered Amounts, any benefit pursuant to this Plan distribution of which commenced prior to January 1, 2009, shall continue to be paid in the same amount and in the same time and form of payment as elected by the Participant prior to January 1, 2009.

(b)

A Participant with a Plan benefit that is solely a Grandfathered Amount the distribution of which has not commenced prior to January 1, 2009, shall be eligible for a Plan benefit in accordance with the terms of the Plan as in effect as of the date of such Participant’s termination of employment, without regard to any forms of benefit that are no longer available under the Defined Benefit Plan of which the Participant is a member as of the date distribution of such Participant’s benefit commences.

3.03 Supplemental Benefit Due to Limitations Under Defined Benefit Plans .

The benefit payable to or on behalf of a Participant eligible under Section 3.01 with a Determination Date on or after January 1, 2009, other than a Participant described in Section 3.02 above, shall be an amount equal to the excess, if any, of (X) over (Y) as follows:

(X) The total benefit that would have been provided to the Participant under the various Defined Benefit Plans of which the Participant is a member without regard to the limitations of Code Sections 415 or 401(a)(17), where such benefit is calculated in the form of a single life annuity payable as of the Determination Date.

(Y) The benefit that would have been payable to the Participant under the various Defined Benefit Plans of which the Participant is a member, after giving effect to the limitations of Code Section 415 and 401(a)(17) where such benefit is calculated in the form of a single life annuity payable as of the Determination Date.

However, calculation of the benefit pursuant to this Section shall reflect any restrictions and/or modifications described in Appendix A that may be applicable to the Participant. In the event that the Determination Date of a Participant is earlier than when the Participant would first be eligible for early commencement of benefits from the underlying Defined Benefit Plan, the monthly amount payable upon such earlier commencement shall be reduced in accordance with the actuarial equivalent early commencement basis that would be applicable under the General Dynamics Salaried Retirement Plan for a Participant terminating prior to the attainment of age 55 but with ten years of service.

3.04 Forms of Distribution for Grandfathered Amounts . Any Grandfathered Amounts shall be subject to the distribution forms and elections under this Plan as in effect on December 31, 2004, to the extent that such forms continue to be available under the Defined Benefit Plan of which the Participant is a member as of the date distribution of such Participant’s benefit commences. Such benefit shall be determined and payable as of such Defined Benefit Plan benefit commencement date; provided, however, that effective April 1, 2011, in the event the Defined Benefit Plan is subject to benefit restrictions as required under Section 436 of the Code:

(a)

If as a result of a lump sum election, the Participant’s benefit under the Defined Benefit Plan is bifurcated into a restricted benefit and an unrestricted benefit, then:

(i)

The optional form actually selected by the Participant for purposes of this Section 3.04 shall be the optional form elected for the bifurcated benefits under the Defined Benefit Plan;

(ii)

If any portion of the restricted benefit under the Defined Benefit Plan would have otherwise been payable as a lump sum in the absence of such benefit restrictions, the Corporation shall use its discretion authorized under Section 5.05 to pay such corresponding portion of Grandfathered Amounts as a lump sum, thereby preserving the form and timing of payment of Grandfathered Amounts that would have been payable in the absence of such benefit restrictions, and

(iii)

All lump sum amounts attributable to Grandfathered Amounts described in this Section 3.04(a) shall be calculated using the Actuarial Equivalent Value basis and methodology that would have applied in the absence of any benefit restrictions in the Defined Benefit Plan;

(b)

If a Participant elects a “level income option” in the Defined Benefit Plan, then the optional form actually selected by the Participant for purposes of this Section 3.04 shall be deemed to be a “single life annuity” for purposes of paying any portion of the Grandfathered Amount that is associated with such “level income option”, as if such benefit restrictions were not in effect.

3.05 Forms of Distribution for Benefits Without Lump-Sum Option . Payment of benefits under the Plan (other than with respect to Grandfathered Amounts), with respect to Defined Benefit Plans that as of January 1, 2005, did not provide for a lump sum payment option, shall be as follows:

(a)

The normal form of distribution of benefits subject to this Section 3.05 if the Participant is legally married at the Determination Date shall be in the form of a 100% Contingent Annuitant Option, which is a reduced retirement benefit payable to the Participant during his or her lifetime, with 100% of such retirement benefit continuing to and for the lifetime of the participant’s spouse, if such spouse survives the Participant.

(b)

The normal form of distribution of benefits subject to this Section 3.05 if the Participant is not legally married at the Determination Date shall be in the form of a

single life annuitant option, which is a retirement benefit payable to the Participant for the remainder of his or her lifetime.

3.06 Forms of Distribution for Benefits With Lump-Sum Option . Payment of benefits under the Plan (other than with respect to Grandfathered Amounts), with respect to Defined Benefit Plans that as of January 1, 2005, provided for a lump sum distribution option, shall be as follows:

(a)

The normal form of distribution of benefits subject to this Section 3.06 with respect to benefits for which a lump sum option under the underlying Defined Benefit Plan was available as of January 1, 2005, shall be in a lump sum payment.

(b)

The normal form of distribution of benefits subject to this Section 3.06 but not subject to Section 3.06(a) shall be (1) if the Participant was legally married at the Determination Date, in the form of a 100% Contingent Annuitant Option (as described in Section 3.05) and (2) if the Participant is not legally married at the Determination Date, in the form of a single life annuitant option (as described in Section 3.05).

3.07 Election of Alternative Annuity Forms . With respect to non-Grandfathered Amounts that are payable under Sections 3.05 or 3.06(b), a Participant may elect, at any time prior to the Determination Date, to change from the normal form of distribution to another optional form of distribution with an Actuarial Equivalent Value that is provided for in the underlying Defined Benefit Plan.

3.08 Distribution Date of non-Grandfathered Amounts .

(a)

Later of Age 55 or 6 Months Following Separation From Service . Except as provided in paragraph (b), below, distribution of a Participant’s benefits under the Plan (other than with respect to Grandfathered Amounts) shall commence on the Participant’s Determination Date; provided however that distribution of such benefits shall commence no earlier than the first day of the first month that is more than 6 months following the Participant’s Separation from Service. Payments that are delayed pursuant to the proviso in the preceding sentence shall be accumulated with interest during such deferral period based on the third segment rate in effect in November of the year prior to the year in which the Determination Date occurs and with application of the §417(e)(3)(D) adjustment for plan years beginning prior to 2012.

(b)

Disability . If the Participant incurs a “disability” (as defined in Code Section 409A), distribution of the Participant’s benefits under the Plan (other than with respect to Grandfathered Amounts) shall commence upon the Participant’s attainment of age 65.

3.09 Small-Sum Cashout . In the event that the single lump sum Actuarial Equivalent Value of any benefit subject to Section 3.05 or Section 3.06(b), determined as of the Determination Date (or the date specified in Section 3.08(b), if applicable) is less than $100,000, such benefit shall be distributed in a single lump sum payment. In addition, in the event that the single lump sum Actuarial Equivalent Value of any benefit subject to Section 3.05 or Section 3.06, aggregated with

benefits (other than Grandfathered Amounts) under other plans of the Corporation that are of a “single type” with this Plan pursuant to Treas. Reg. § 1.409A-1(c)(2), is less than the applicable dollar amount under § 402(g)(1)(B) of the Code, the Corporation shall have the discretion to distribute such amount in a single lump sum payment.

3.10 Reemployment . Except as otherwise provided in this Section 3.10, there will be no suspension of benefits under this Plan in the event of reemployment of the Participant by the Corporation or any Subsidiary following the Participant’s Determination Date. Re-employment of a Participant following such Participant’s Determination Date shall not affect the Participant’s rights to continued receipt of benefits previously earned by such Employee. Notwithstanding the foregoing, if a Participant who is receiving Grandfathered Amounts is reemployed with the Corporation or an affiliate of the Corporation and, in connection with such reemployment, his Defined Benefit Plan benefit payment is suspended, payment of his Grandfathered Amounts will be suspended for the same period. Payment of such Grandfathered Amounts will recommence at the same time as his or her benefit under the Defined Benefit Plan and recommencement of the Grandfathered Amounts will be adjusted in accordance with the provisions of the Plan to reflect the period of suspension and benefits previously paid. However, any additional benefits earned attributable to service associated with the Grandfathered Amounts shall be treated as non-Grandfathered Amounts.

3.11 Distribution of Benefit . In accordance with the provisions of Section 409A, distributions of a Participant’s benefits (other than Grandfathered Amounts) shall be paid or commence no later than the fifteenth (15 ^th ) day of the third (3 ^rd ) month following the date on which payment of benefits is scheduled to commence pursuant to Section 3.08.

SECTION 4

SPECIAL SUPPLEMENTAL BENEFITS

4.01 Participation . Recognizing the need to make special retirement and other compensation or employee benefit provisions for certain Employees of Employing Units, the Corporation may, from time to time and in its best judgment, designate groups of select management or highly compensated employees as being eligible to receive additional benefits, substitute benefits, or more restrictive benefits than are found in Section 3.03 of the Plan. Any such Employees or groups of Employees shall be described in Appendices attached to this Plan or in other agreements with the Corporation or its Subsidiaries.

Such Employees shall not be eligible for a benefit under Section 3.03 to the extent such appendices or agreements provide for benefits in lieu of benefits described in Section 3.03 unless such Appendix or agreement provides otherwise. For those Employees with individual agreements, unless expressly provided in the agreement, the provisions of this Plan shall not apply to the benefit attributable to such agreement.

4.02 Benefits . Such benefits may be provided only to select management or highly compensated employees in such amounts as the Corporation determines are appropriate.

SECTION 5

MISCELLANEOUS PROVISIONS

5.01 Construction . In the construction of the Plan the masculine shall include the feminine and the singular shall include the plural in all cases where such meanings would be appropriate. This Plan shall be construed, governed, regulated, and administered according to the laws of the State of Virginia.

5.02 Employment . The Plan is not an employment contract. Participation in the Plan shall not give any Employee the right to be retained in the employ of the Corporation or its Subsidiaries, or upon dismissal or upon his voluntary termination of employment, to have any right, legal or equitable, under the Plan or any portion thereof, except as expressly granted by the Plan.

5.03 Non-alienability of Benefits . No benefit under the Plan shall be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, or charge; and any attempt to anticipate, alienate, sell, transfer, assign, pledge, encumber, or charge the same shall be void; and no such benefit shall in any manner be liable for or subject to the debts, liabilities, engagements, or torts of the person entitled to such benefit, except as specifically provided in the Plan.

5.04 Facility of Payment . If any recipient of benefits is, in the judgment of the Corporation, legally incapable of personally receiving and giving a valid receipt for any payment due him under the Plan, the Corporation may, unless and until claims shall have been made by a duly appointed guardian or committee of such person, make such payment or any part thereof to such person’s spouse, children, or other legal entity deemed by the Corporation to have incurred expenses or assumed responsibility for the expenses of such person. Any payment so made shall be a complete discharge of any liability under the Plan for such payment.

5.05 Discretionary Payment of Benefits . In any instance in which the Corporation in its sole and uncontrolled discretion believes such action to be in the best interest of the party entitled to receive any payment provided by this Plan, or to be in the best interests of the Corporation, Grandfathered Amounts payable in installments pursuant to the provisions of this Plan may be paid in a single lump sum, the amount of which shall be of Actuarial Equivalent Value to the benefits for which the lump sum is to be substituted. It is intended by this Section 5.05 to vest the Corporation with full discretion to administer this Plan with respect to Grandfathered Amounts and to determine when and under what circumstances deviations which accelerate payments of Grandfathered Amounts are necessary, desirable, or appropriate; and the Corporation shall have full power to authorize such deviations as regards each payee separately.

5.06 Obligation to Pay Amounts Hereunder .

(a)

No trust fund, escrow account, or other segregation of assets need be established or made by the Corporation to guarantee, secure, or assure the payment of any amount payable hereunder. The Corporation’s obligation to make payments pursuant to this Plan shall constitute only a general contractual liability of the Corporation to individuals entitled to benefits hereunder and other actual or possible payees hereunder in accordance with the terms hereof. Payments hereunder shall be made

only from such funds of the Corporation as it shall determine, and no individual entitled to benefits hereunder shall have any interest in any particular asset of the Corporation by reason of the existence of this Plan. It is expressly understood as a condition for receipt of any benefits under this Plan that the Corporation is not obligated to create a trust fund or escrow account, or to segregate any asset of the Corporation in any fashion.

(b)

The Corporation may, in its sole discretion, establish segregated funds, escrow accounts, or trust funds whose primary purpose would be for the provision of benefits under this Plan. If such funds or accounts are established, however, individuals entitled to benefits hereunder shall not have any identifiable interest in any such funds or accounts nor shall such individuals be entitled to any preference or priority with respect to the assets of such funds or accounts. These funds and accounts would still be available to judgment creditors of the Corporation and to all creditors in the event of the Corporation’s insolvency or bankruptcy.

(c)

A former Employee is not entitled to a benefit under this Plan to the extent that the liability for such benefit has been transferred to or assumed by a successor to all or any portion of the business of the Corporation.

5.07 Administration .

(a)

Administrative Provisions of Defined Benefit Plans . To the extent consistent with the purposes and provisions of this Plan and as may be deemed necessary or advisable in the best judgment of the Corporation, the Plan shall be operated under the Administrative and General Provisions of the Defined Benefit Plans.

(b)

Claims Procedures . Any application for benefits, inquiries about the Plan or inquiries about present or future rights under the Plan must be submitted in writing to the person or persons (the “Claims Administrator”) selected by the Corporation or, at the election of the Corporation, by the Corporation’s Employee Benefit Appeals Committee (the Company or such Employee Benefit Appeals Committee being hereinafter referred to as the “Committee”), as follows:

(i)

In the event that any application for benefits is denied in whole or in part, the Claims Administrator must notify the applicant, in written or electronic format, of the denial of the application, and of the applicant’s right to review the denial. The notice of denial will be set forth in a manner designed to be understood by the applicant, and will include specific reasons for the denial, specific references to the Plan provision upon which the denial is based, a description of any information or material that the Claims Administrator needs to complete the review, and an explanation of the Plan’s review procedure.

(ii)

This notice will be given to the applicant within ninety (90) days after the Claims Administrator receives the application, unless special circumstances require an extension of time, in which case, the Claims Administrator has

up to an additional ninety (90) days for processing the application. If an extension of time for processing is required, written or electronic notice of the extension will be furnished to the applicant before the end of the initial ninety (90)-day period.

(iii)

This notice of extension will describe the special circumstances necessitating the additional time and the date by which the Claims Administrator is to render his or her decision on the application. The applicant will then be permitted to appeal the denial in accordance with the Review Procedure described below.

(iv)

Any person (or that person’s authorized representative) for whom an application for benefits is denied, in whole or in part, may appeal the denial by submitting a request for a review to the Claims Administrator within 60 days after the application is denied. The Claims Administrator will give the applicant (or his or her representative) a reasonable opportunity for a full and fair review of a claim and adverse benefit determination, including: (A) the opportunity to submit written comments, documents, records and other information relating to the claim for benefits; (B) the provision, upon request and free of charge, of reasonable access to and copies of, all documents, records and other information relevant to the claimant’s claim for benefits, and (C) a review that takes into account all comments, documents, records, and other information submitted by the claimant relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination. A request for a review shall be in writing and shall be addressed to:

General Dynamics Corporation

2941 Fairview Park Drive

Falls Church, Virginia 22042

(v)

A request for review must set forth all of the grounds on which it is based, all facts in support of the request and any other matters that the applicant feels are pertinent. The Claims Administrator may require the applicant to submit additional facts, documents or other material as he or she may find necessary or appropriate in making his or her review.

(vi)

The Claims Administrator will act on each request for review within sixty (60) days after receipt of the request, unless special circumstances require an extension of time (not to exceed an additional sixty (60) days), for processing the request for a review. If an extension for review is required, written or electronic notice of the extension will be furnished to the applicant within the initial sixty (60)-day period. The Claims Administrator will give prompt, written or electronic notice of his or her decision to the applicant. In the event that the Claims Administrator confirms the denial of the application for benefits in whole or in part, the notice will outline, in a manner calculated to be understood by the applicant: (A) the specific reason

or reasons for the adverse determination, (B) the specific Plan provisions upon which the decision is based, (C) a description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary, (D) a description of the Plan’s review procedures and the time limits applicable to such procedures, including a statement of the claimant’s right to bring a civil action under Section 502(a) of ERISA following an adverse benefit determination on review.

(vii)

The Claims Administrator may establish rules and procedures, consistent with the Plan and with ERISA, as necessary and appropriate in carrying out his or her responsibilities in reviewing benefit claims. The Claims Administrator may require an applicant who wishes to submit additional information in connection with an appeal from the denial of benefits to do so at the applicant’s own expense.

(viii)

No legal action for benefits under the Plan may be brought until the applicant (A) has submitted a written application for benefits in accordance with the procedures described by paragraph (i) above, (B) has been notified by the Claims Administrator that the application is denied, (C) has filed a written request for a review of the application in accordance with the appeal procedure described in paragraph (iv) above and (D) has been notified in writing or electronically that the Claims Administrator has denied the appeal.

(c)

Committee . Unless otherwise provided by the Corporation, the Committee shall rule in place of the Corporation and the Committee’s ruling shall be the final decision of the Corporation. Benefits shall be paid under the Plan only if the Corporation or the Committee in its sole discretion, determines that a Participant is entitled to them. There shall be no duplication of benefits between this Plan and its Appendices and any other plan or agreement with the Corporation or its Subsidiaries for the same period of service unless otherwise specifically stated in the Plan, Appendices or such other plan or agreement.

SECTION 6

AMENDMENT AND TERMINATION OF PLAN

6.01 Amendment . The Chief Executive Officer of the Corporation reserves the right to modify or amend this Plan in whole or in part, effective as of any specified date; provided, however, that the Chief Executive Officer shall have no authority to modify or amend the Plan with respect to the benefit provided by Section 3.03 to:

(a)

reduce any benefit accrued hereunder based on service and compensation to the date of amendment unless such action is necessary to prevent this Plan from being subject to any provision of Title I, Subtitle B, Parts 2, 3 or 4 of ERISA;

(b)

permit the accrual, holding or payment of actual shares of General Dynamics Corporation common stock under the Plan.

6.02 Termination .

(a)

The Chief Executive Officer of the Corporation reserves the right to terminate this Plan, in whole or in part. This Plan shall be automatically terminated upon a dissolution of the Corporation (but not upon a merger, consolidation, reorganization, recapitalization, or acquisition of a controlling interest in the voting stock of the Corporation by another); upon the Corporation being legally adjudicated as bankrupt; upon the appointment of a receiver or trustee in bankruptcy with respect to the Corporation’s assets and business if such appointment is not set aside within ninety (90) days thereafter; or upon the making by the Corporation of an assignment for the benefit of creditors.

(b)

Upon termination of this Plan, no additional Employees shall become entitled to receive all benefits hereunder; and all benefits accrued through the date of termination (calculated as if the date of such termination were the date on which the Employee’s employment ceased) will become non-forfeitable.

6.03 Delegation . The Chief Executive Officer of the Corporation may delegate his powers under this Section 6 by written delegation.

6.04 Section 409A . It is intended that any income or payments provided pursuant to the Plan will not be subject to the additional tax and interest under Code Section 409A, and all regulations issued thereunder and applicable guidance thereto (“Section 409A”), and the Plan shall be interpreted and construed on a basis consistent with such intent. The preceding shall not be construed as a guarantee of any particular tax treatment of any amounts paid or payable hereunder.

Appendix A

(Defined Benefit Plans Subject to the Provisions of Section 3.03)

The following Defined Benefit Plans are subject to the provisions of Section 3.03. Where noted, the benefits related to the inclusion of these Defined Benefit Plans under this Plan provide supplemental benefits related to corporate acquisitions or, as applicable, supersede the applicability of the provisions of the indicated prior plan providing similar coverage and as such represent an amendment and restatement of such plan. Likewise, where noted, the provisions of Section 3.03 are modified to the extent specified in this Appendix.


Defined Benefit Plan		Modifications and Effective Date

General Dynamics Salaried Retirement Plan—Corporate Legacy Provisions (known prior to January 1, 2007 as General Dynamics Corporation Retirement Plan for Salaried Employees)		Effective Date: January 1, 1983.

Retirement Plan for the Resources Group Salaried Employees		Effective Date: January 1, 1983.

General Dynamics Salaried Retirement Plan—ATS Legacy Provisions (known prior to January 1, 2007 as Retirement Plan for Management/Technical Employees of General Dynamics Advanced Technology Systems, Inc., the Plan hereby supersedes the Lucent Technologies Inc. Non-Qualified Pension Plan)		Effective Date: October 1, 1997.

General Dynamics Salaried Retirement Plan—Armament Systems and Defense Systems Legacy Provisions (known prior to January 1, 2007 as Retirement Plan for Salaried Employees, AS/DS Legacy Provisions, which superseded the Retirement Plan for Non-Represented Employees of General Dynamics Armament/Defense Systems, the Plan hereby supersedes the Martin Marietta Corporation Supplemental Excess Retirement Plan)		Effective Date: January 1, 1997.

General Dynamics Salaried Retirement Plan—BIW Legacy Provisions (known prior to January 1, 2007 as Bath Iron Works Corporation Pension Plan for Salaried Employees)		The benefit under Section 3.03 is determined taking into account post December 31, 1996 benefit service only. Effective Date: January 1, 1997.

A-1


Defined Benefit Plan		Modifications and Effective Date

General Dynamics Salaried Retirement Plan—Decision Systems Traditional Legacy Provisions (known prior to January 1, 2007 as Retirement Plan for General Dynamics Decision Systems, Inc. Traditional Legacy Provisions, which superseded a part of the Retirement Plan for General Dynamics Decision Systems, Inc., the Plan hereby supersedes the Motorola Supplemental Pension Plan)		For Employees that participated and were vested in a benefit under the Motorola Elected Officers Supplementary Retirement Plan as of September 27, 2001 the benefit under Section 3.03 is determined taking into account post September 27, 2001 benefit service only. Effective Date: September 28, 2001.

General Dynamics Salaried Retirement Plan—Decision Systems Portable Legacy Provisions (known prior to January 1, 2007 as General Dynamics Salaried Retirement Plan for Legacy Decision Systems Portable Plan Employees, which superseded a part of the Retirement Plan for General Dynamics Decision Systems, Inc., the Plan hereby supersedes the Motorola Supplemental Pension Plan)		For Employees that participated and were vested in a benefit under the Motorola Elected Officers Supplementary Retirement Plan as of September 27, 2001 the benefit under Section 3.03 is determined taking into account post September 27, 2001 benefit service only. Effective Date: September 28, 2001.

General Dynamics Salaried Retirement Plan—GDIS Legacy Provisions (known prior to January 1, 2007 as Retirement Plan for General Dynamics Information Systems, Inc., the Plan hereby supersedes the Ceridian Corporation Benefit Equalization Plan)		The benefit under Section 3.03 is determined taking into account compensation described in Section 3.03 and, in addition, any amount that would have otherwise been paid as base salary or bonus but for the Participant’s election pursuant to the Ceridian Corporation Deferred Compensation Plan. Effective Date: January 1, 1998.

General Dynamics Salaried Retirement Plan—GSC Legacy Provisions (known prior to January 1, 2007 as Retirement Plan for Salaried Employees, GSC Legacy Provisions, which superseded the Retirement Plan for General Dynamics Government Systems Corporation, the Plan hereby supersedes the GTE Excess Pension Plan)		The benefit under Section 3.03 is determined based on the normal form of payment. The benefit under Section 3.03 is determined taking into account compensation described in Section 3.03 and, in addition, certain forms of compensation not covered under the Defined Benefit Plan prior to 1995. Optional forms of payment for Grandfathered Amounts are calculated independently of the Defined Benefit Plan but using the same adjustments as provided under that plan, but otherwise based on Section 3 of the Plan. Effective Date: September 1, 1999.

General Dynamics Salaried Retirement Plan—Muskegon Legacy Provisions (known prior to January 1, 2007 as Retirement Plan for Salaried Employees of GDLS Muskegon Operations)		The benefit under Section 3.03 is determined taking into account post March 31, 1996 benefit service only. Effective Date: April 1, 1996.

A-2


Defined Benefit Plan		Modifications and Effective Date

General Dynamics Salaried Retirement Plan—NASSCO Legacy Provisions (known prior to January 1, 2007 as NASSCO Retirement Plan, the Plan hereby supersedes the NASSCO Supplemental Retirement Plan)		Only Employees designated by National Steel and Shipbuilding Corporation shall be eligible for the benefit under Section 3.03. Effective Date: November 10, 1998.

General Dynamics Salaried Retirement Plan—Saco Legacy Provisions (known prior to January 1, 2007 as Retirement Plan for Salaried Employees of General Dynamics Armament Systems—Saco Operations)		The benefit under Section 3.03 is determined taking into account post December 31, 2000 benefit service only. Effective Date: January 1, 2001.

General Dynamics Salaried Retirement Plan—OTS Garland Legacy Provisions (known prior to January 1, 2007 as Retirement Plan for Salaried Employees of General Dynamics Ordnance and Tactical Systems, Inc. (Garland))		The benefit under Section 3.03 is determined taking into account post September 3, 2003 benefit service only. Effective Date: September 4, 2003.

General Dynamics Salaried Retirement Plan		Effective Date: January 1, 2007.

A-3

Appendix B

(Bath Iron Works Corporation)

B-1. Purpose, Superseding Provision . The purpose of this Appendix B is to describe certain benefits that were previously described in the Bath Iron Works Corporation Supplemental Executive Retirement Program (Principal Officers, Tier I, and Tier II Employees) (the “Bath SERP”) as of December 31, 1996, that are being provided for those Employees of Bath Iron Works Corporation (“Bath”) who continue in employment with the Corporation on or after January 1, 2005. The provisions applicable to employees who have terminated or retired prior to January 1, 2005, continue to be described by the provisions of the plan as it existed prior to January 1, 2005.

This Appendix forms a part of the Plan to which it is attached and its terms shall supersede other provisions of the Plan to the extent such other provisions are inconsistent with this Appendix.

B-2. Definitions . Capitalized terms in this Appendix not defined elsewhere in the Plan shall have the meaning assigned to them below.

(1)

Annuity Value of the Non-Program Benefits . The “Annuity Value” of any Non-Program Benefit is twelve times the initial monthly amount expressed as a straight life annuity commencing at the time that Bath SERP benefits under this Appendix B commence.

(2)

Annuity Value of the Social Security Benefit . The Annuity Value of the Social Security Benefit is twelve times the initial monthly amount shown on the Notice of Award from the Social Security Administration commencing at the time such Social Security Benefit becomes Receivable. The Tier II Employee shall provide the Corporation with a copy of such Notice of Award prior to the time such Social Security Benefit becomes Receivable.

(3)

Average Earnings . “Average Earnings” for purposes of determining the Bath SERP benefit for a Tier II Employee means the average of the highest thirty-six (36) consecutive months of Earnings within the sixty-month (60) period immediately preceding retirement, death, or disability, multiplied by twelve (12).

(4)

Earnings . “Earnings” for each month includes base salary for such month plus one-twelfth (1/12) of the amount earned under the General Dynamics Corporation Second Amended and Restated 1997 Incentive Compensation Plan for the calendar year in which such month occurs.

(5)

Base Plans . “Base Plans” are the General Dynamics Salaried Retirement Plan, the General Dynamics Salaried Retirement Plan—BIW Legacy Provisions (known prior to January 1, 2007, as the Bath Iron Works Corporation Pension Plan for Salaried Employees), and the Bath Iron Works Corporation Pension Plan for Hourly Employees.

B-1

(6)

Company . “Company” means Bath Iron Works Corporation and its predecessor, Congoleum Corporation and CC Liquidating Corp.

(7)

Credited Service . “Credited Service” means the period of an employee’s continuous service from his most recent date of employment, in any capacity, with the Corporation. Credited service will include any period prior to the earliest of the Tier II Employee’s attaining age sixty-five (65), voluntary retirement, or voluntary termination of employment.

(8)

Early Retirement Date . “Early Retirement Date” means any date prior to Normal Retirement Date on which the Tier II Employee’s employment with the Corporation terminates after having attained age fifty-five (55) and completed ten (10) years of Credited Service.

(9)

Executive Service . “Executive Service” means that period of an executive’s Credited Service accrued as a Tier II Employee. For any computation under this Appendix, “Years of Executive Service” and “Years of Projected Executive Service” shall be expressed as a whole number representing the number of full years of Executive Service or Projected Executive Service, as the case may be, and a fraction representing any partial years treating each calendar month during which the Tier II Employee is employed as a Tier II Employee for at least one-half (1/2) of the month as a full month.

(10)

Non-Program Benefit . “Non-Program Benefit” means any of the following:

Except to the extent attributable to voluntary contributions by the Tier II Employee, a retirement benefit from any Base Plans, defined benefit or defined contribution retirement plan maintained by the Corporation or any of its operating units;

A benefit from any individual contract between the Tier II Employee and the Corporation or any of its operating units or any predecessor of any of them providing for periodic payments from commencement thereof until death (with or without survivor benefits of optional modes of settlement) in the event of retirement or other termination of employment, other than a contract which offsets benefits under Section B-5 against the benefits provided under the contract.

(11)

Normal Retirement Date . “Normal Retirement Date” means the first day of the month following the day a Tier II Employee attains age sixty-five (65).

(12)

Projected Executive Service . “Projected Executive Service” means that period of Executive Service which a Tier II Employee would accrue if he should remain a Tier II Employee covered by this Appendix B until his Normal Retirement Date.

(13)

Receivable . A Social Security Benefit is considered “Receivable” from and after the later of (i) commencement of benefits under this Appendix B, or (ii) the earliest

B-2

date on which such Social Security Benefit is, or upon application, would have been payable to the Tier II Employee.

(14)

Retirement . “Retirement” means any termination of employment with the Corporation on an Early Retirement Date or on or after Normal Retirement Date. Retirement or other termination of employment shall be “Voluntary” if initiated by the Tier II Employee, or “Involuntary” if initiated by the Corporation notwithstanding that the Tier II Employee shall have consented thereto or shall have resigned in response to a Corporate initiative.

(15)

Social Security Benefit. “Social Security Benefit” means the Tier II Employee’s Primary Insurance Amount, reduced for commencement prior to Social Security Normal Retirement Age, under the Social Security Act as in effect on the date such benefit becomes Receivable.

(16)

Tier II Employee . “Tier II Employee” means any Company executive whom the Company had designated as a Tier II Employee and remained in such designation as of September 13, 1995, the date General Dynamics Corporation acquired Bath Iron Works Corporation.

B-3. Covered Employees . A Covered Employee is any Employee who has been designated as a Tier II Employee.

B-4. Amount of Benefit . The amount of benefits payable to a Tier II Employee shall equal the excess, if any, of (a) the Tier II Benefit payable to such Employee under the provisions described in Section B-5, or in the case of death, the benefit payable on behalf of such Employee under the provisions described in Section B-7, over (b) the benefit determined in accordance with the provisions of Section 3.03 and Appendix A.

Benefits payable under this Section B-4 shall be in addition to any benefit payable under the provisions of Section 3.03 and Appendix A.

B-5. Tier II Benefit . The amount of a Covered Employee’s Tier II Benefit shall be determined as follows:

(1)

Normal Retirement Benefit . A Tier II Employee retiring under this Appendix B on or after Normal Retirement Date shall receive a monthly Normal Retirement Benefit equal to one-twelfth (1/12) of the amount determined by:

Taking the amount which is fifty percent (50%) of Average Earnings at Normal Retirement Date and reducing such amount by the Annuity Value of the Non-Program Benefits and by the Annuity Value of the Social Security Benefit; and

Multiplying the amount determined by application of the preceding clause (a) by a fraction, the numerator of which is Years of Executive Service at Normal Retirement Date to a maximum of fifteen (15), and the denominator of which is fifteen (15).

B-3

(2)

Early Retirement Benefit . A Tier II Employee retiring under this Appendix B on an Early Retirement Date shall receive a monthly Early Retirement Benefit equal to one-twelfth (1/12) of the amount determined by:

Taking the amount which is fifty percent (50%) of Average Earnings at Early Retirement Date and subtracting from such amount the product of (i) such amount times (ii) 0.004 times (iii) the number of full months by which the commencement of benefits under this B-5 precedes age sixty-two (62);

Reducing the amount in the preceding clause (a) by the Annuity Value of the Non-Program Benefits, and further reducing the amount by the Annuity Value of the Social Security Benefit commencing at the time such Social Security Benefit becomes Receivable; and

Multiplying the amount determined by application of the preceding clauses (a) and (b) by the product of (i) a fraction, the numerator of which is Years of Executive Service at Early Retirement Date to a maximum of twenty-five (25), and the denominator of which is Years for Projected Executive Service to a maximum of twenty-five (25), times (ii) a fraction, the numerator of which is Years of Projected Executive Service to a maximum of twenty (20), and the denominator of which is twenty (20).

(3)

Vested Benefit . After completion of five (5) years of Credited Service, a Tier II Employee’s rights to benefits under this Appendix B will, subject to the provisions of this Plan, become fully vested. The benefit payable under this Appendix B to a Tier II Employee who terminates employment prior to his Early Retirement Date will be the same as the Early Retirement Benefit otherwise payable, based on Years of Executive Service and Average Earnings computed as of the date of termination, except that the multiplicand in clause B-5(2)(a)(iii) shall be the number of full months by which the commencement of benefits under this B-5 precedes age sixty-five (65).

B-6. Form and Timing of Benefit .

(1)

The commencement of B-4 benefits payable to a Tier II Employee retiring under this Appendix B shall be determined in accordance with Section 3 of the Plan.

(2)

A Tier II Employee will receive B-4 benefits in the forms provided for under Sections 3.04, 3.05, and 3.07 of the Plan, as applicable.

B-7. Death Benefit . If an active Tier II Employee dies before Retirement and while still employed by the Corporation, his Tier II Benefit used to determine the benefit payable to his surviving spouse will be a monthly benefit equal to seventy-five percent (75%) of the amount of the Normal Retirement Benefit determined in accordance with B-5 based on the Executive Service and Average Earnings as of the date of death, and

B-4

(1)

Assuming that the Tier II Employee is living and that such benefit is payable to him in a straight life annuity commencing on the first day of the month following the date of death;

(2)

In determining any reduction for the Annuity Value of the Non-Program Benefits and for the Annuity Value of the Social Security Benefit, considering only the Tier II Employee’s Social Security Benefit and those Non-Program Benefits to which the Tier II Employee would then or thereafter become entitled had he been living and terminated his employment on the date of death;

(3)

Assuming that the Social Security Benefit becomes Receivable from and after the date of death, irrespective of whether or not such benefit has actually commenced; and,

(4)

Calculating the Annuity Value of the Non-Program Benefits as if the Tier II Employee were living and had terminated his employment on the date of death, basing such calculation upon the Tier II Employee’s employment and earnings history and other circumstances existing at the date of death, but assuming that the Tier II Employee’s age is the later of his age at the date of death, the earliest age at which such Non-Program Benefit would upon application be payable, or age sixty-two (62).

The benefit payable to a surviving spouse shall be paid monthly commencing on the first day of the month following the month in which the Tier II Employee dies. The last payment to a surviving spouse shall be on the first day of the month in which the surviving spouse dies or remarries, whichever occurs first.

Upon the Tier II Employee’s death if the Tier II Employee’s spouse predeceases him, or upon the earlier of the death or remarriage of such spouse if the Tier II Employee’s spouse survives him, if one or more children of the Tier II Employee shall then be living and under twenty-one (21) years of age, an equal share of the Death Benefit shall be apportioned to each such child who is then living and under age twenty-one (21). The share so apportioned to each child shall be paid to him as a monthly benefit commencing on the first day of the month following the month in which the Tier II Employee dies or, if his spouse survives him, following the earlier of the month in which such spouse dies or the month in which such spouse remarries. The last payment of a child’s monthly benefit under this Appendix shall be on the first day of the month in which he dies or attains age twenty-one (21), whichever occurs first.

B-8. Competition . Notwithstanding anything elsewhere herein contained, if, while employed by the Corporation, a Tier II Employee engages in competitive activities without prior authorization of the Corporation, such Tier II Employee, his surviving spouse, his children, and any contingent annuitant designated by him shall be entitled to no further benefits hereunder. For such purpose, to “engage in competitive activities” shall mean, directly or indirectly, to own, manage, operate, control, or participate in the ownership, management, operation, or control of, or be connected as an officer, employee, partner, director, or otherwise with, or have any financial interest in, or aid or assist anyone else in the conduct of, any business which competes with, or which contemplates competition with, any business conducted by the Corporation, or be any group,

B-5

division or subsidiary of the Corporation, in any area where such business is being conducted by the Corporation at the time of such termination. For the purposes of the foregoing provisions, ownership of not more than two percent (2%) of the voting stock of any publicly held corporation shall not be considered engaging in competitive activities.

B-6

Appendix C

(General Dynamics Information Systems, Inc.)

C-1. Purpose, Superseding Provision . The purpose of this Appendix C is to provide for certain provisions for those Employees of General Dynamics Information Systems, Inc. (“GDIS”) described below. This Appendix forms a part of the Plan to which it is attached and its terms shall supersede other provisions of the Plan to the extent such other provisions are inconsistent with this Appendix.

Notwithstanding anything contained herein to the contrary, pursuant to the Personnel Agreement dated December 31, 1997, between Ceridian Corporation and General Dynamics Corporation (the “Personnel Agreement”), and the March 17, 1998 letter agreement between Ceridian Corporation and General Dynamics Corporation, participants in the Ceridian Corporation Deferred Compensation Plan (the “Deferred Compensation Plan”) listed on Schedule 4.2(c) of the Personnel Agreement who went to work for General Dynamics Corporation shall have their benefits under the Deferred Compensation Plan paid in accordance with the provisions of the Deferred Compensation Plan as it existed as of December 31, 1997. The benefits for Employees covered by these provisions are in addition to any benefits that may be provided under Section 3.03 of the Plan.

C-1

Appendix D

(General Dynamics Government Systems Corporation)

D-1. Purpose, Superseding Provision . Effective September 1, 1999, the purpose of this Appendix D is to provide for certain provisions for those Employees of General Dynamics Government Systems Corporation (“GSC”) described below (the “Appendix D Employees”). This Appendix forms a part of the Plan to which it is attached and its terms shall supersede other provisions of the Plan to the extent such other provisions are inconsistent with this Appendix. This Appendix consists of two parts: (i) an ISEP Executive Minimum and (ii) an Executive Retired Life Insurance Plan (each a “Part” and collectively “Parts”). Both such Parts provide benefits for Employees covered by these provisions, benefits that are in addition to any benefits that may be provided under Section 3.03 of the Plan. An Appendix D Employee will participate under a Part or Parts based on the eligibility provisions of that Part.

D-2. Definitions . Capitalized terms in this Appendix not defined elsewhere in the Plan shall have the meaning assigned to them below.

(1)

“Administrator” shall mean the Corporation, or the person (including but not limited to GSC) to whom administrative duties are delegated to by the Corporation.

(2)

“Base Salary” shall mean the Appendix D Employee’s annual basic remuneration (exclusive of overtime, differentials, premiums and other similar types of payment, but inclusive of commissions and bonuses on account of sales when received by an Appendix D Employee pursuant to a written commitment of his or her employer).

(3)

“GSC Legacy Plan” means the General Dynamics Salaried Retirement Plan—GSC Legacy Provisions (known from January 1, 2005 to January 1, 2007 as the Retirement Plan for Salaried Employees, GSC Legacy Provisions and prior to January 1, 2005 as the Retirement Plan for General Dynamics Government Systems Corporation).

(4)

“GSC Qualified Plan” means the Retirement Plan for General Dynamics Government Systems Corporation effective September 1, 1999.

(5)

“GTE Executive Life Insurance Plan” means the GTE Executive Life Insurance Plan effective January 1, 1979.

(6)

“Predecessor Company” shall mean, for periods prior to September 1, 1999, the GTE Government Systems Corporation and any Affiliate as defined by the GTE Government Systems Corporation Pension Plan for Salaried Employees at August 31, 1999.

D-1

ISEP Executive Minimum

D-3. Covered Employees . For purposes of this part, an Appendix D Employee is an Employee who is a member of a select group of management or highly compensated employees of GSC and who Separates as a Special Separatee under Section 9 of the GSC Qualified Plan prior to December 31, 2002, regardless of whether he is eligible to receive a Retirement Benefit under the GSC Qualified Plan.

D-4. Benefit . The benefit payable to an eligible Appendix D Employee under this Part shall be a single life annuity equal to the Actuarial Equivalent Value (as described in (3)(a) below) of the excess, if any, of (1) over (2) as follows:

(1)

The product of (a) times (b) as follows:

(a)

The Appendix D Employee’s annual rate of compensation as of the day immediately preceding the Appendix D Employee’s Separation Date, as defined in the GSC Qualified Plan, whereby the annual rate of compensation shall be determined by including only the types of remuneration included in determining Modified Average Annual Compensation under the GSC Qualified Plan, but for periods prior to September 1, 1999, without regard to awards from the Predecessor Company under the Management Incentive Plan, the International Team Incentive Program, and the GTE Investment Management Corporation Incentive Plan, times

(b)

The Payment Ratio (as described in (3)(b) below) for the Appendix D Employee; over

(2)

The ISEP Lump Sum as defined by Section 9 of the GSC Qualified Plan (plus the portion of such ISEP Lump Sum attributable to Appendix A), determined without regard to any reduction in the ISEP Lump Sum attributable to a failure to execute a Separation Agreement and General Release there under.

(3)

For purposes of this D-4, the following shall apply:

(a)

The Actuarial Equivalent Value shall be determined in the same manner as it is determined for purposes of calculating the ISEP Annuity under Section 9 of the GSC Qualified Plan.

(b)

The Payment Ratio shall be determined as follows based on the Appendix D Employee’s career band and Base Salary at termination:


Career Band	Base Salary Breakpoints	Payment Ratio

Tan	$80,000 or higher	50%

Orange	Less than $100,000	50%

D-2



Orange	$100,000 or higher	75%

Yellow	Less than $155,000	75%

Yellow	$155,000 or higher	100%

(4)

The amounts determined under D-4 shall be reduced to 50% of the amounts determined unless the Appendix D Employee (or, if applicable, the Appendix D Employee’s personal representative) executes a Separation Agreement and General Release pursuant to the requirements of Section 9 of the GSC Qualified Plan.

D-5. Timing of Benefit . An Appendix D Employee, surviving spouse or designated beneficiary who is entitled to an ISEP Executive Minimum benefit under this Part shall be paid such ISEP Executive Minimum benefit under this Part when benefits become due and payable to such person under the GSC Qualified Plan.

D-6. Form of Benefit . Any benefits payable pursuant to this Part shall be paid under the same conditions and restrictions as would apply to the benefits if they were provided by the GSC Qualified Plan at the time of retirement, subject to the following:

(1)

An Appendix D Employee shall have the right to elect to receive benefits under this Part in any one of the forms provided under the GSC Qualified Plan provided that an annuity option shall be available under this Part only if the Appendix D Employee elects the annuity payment option prior to such Appendix D Employee’s termination of employment.

(2)

Notwithstanding D-6 (1), if the Appendix D Employee is also entitled to a benefit pursuant to the provisions of Appendix A, then both the benefit attributable to Appendix A and the benefit attributable to this Part of Appendix D must be paid at the same time and under the same optional form.

(3)

If an Appendix D Employee elects to receive benefits under this Part in a form other than a single life annuity, the benefits shall be computed so as to be the Actuarial Equivalent of such benefits in the form of a single life annuity using the actuarial tables and interest rates then in effect under the GSC Qualified Plan.

Executive Retired Life Insurance Plan

D-7. Covered Employees . For purposes of this Part, an Appendix D Employee is an Employee of GSC who as of June 21, 1999, participated in the GTE Executive Retired Life Insurance Plan (the “ERLIP”) and whose combined age and years of service as of June 21, 1999, was at least 66 or who was otherwise within five years of eligibility for the ERLIP as of that date.

In order to be eligible to obtain benefits under this Part, an Appendix D Employee must retire pursuant to the terms of the GSC Legacy Plan, provided however that retirement with a deferred vested benefit shall not be deemed to satisfy this provision except in the case of a participant who terminates employment with GSC having attained age 60 with at least 10 years of service.

D-3

D-8. Benefit . A participant eligible to receive benefits under this Part shall receive non-contributory life insurance benefits under the following schedule:


Grandfathered Salary Grade at Termination		Insurance

15 16 17 18 19 and above		1.0 x base salary 1.5 x base salary 2.0 x base salary 2.5 x base salary 3.0 x base salary

The Administrator, in its sole discretion, may amend the above schedule.

Any Appendix D Employee who is demoted, downgraded, transferred or assigned to a position, whether or not such position is eligible to participate in this Part, may under extraordinary circumstances as determined by the Administrator, remain eligible to receive benefits based upon his highest salary grade and Base Salary while participating in this Part.

D-9. Timing of Benefit . An Appendix D Employee who satisfies the criteria in D-7 of this Part shall receive benefits only upon retirement pursuant to the terms of the GSC Legacy Plan. The benefits under this Part shall be in lieu of any other life insurance coverage provided for retired employees by GSC.

D-10. Form of Benefit . The benefit provided by this Part is in the form of non-contributory life insurance. However, an Appendix D Employee eligible to receive benefits under this Part may elect with respect to Grandfathered Amounts to convert all or part of this life insurance benefit to a supplementary retirement benefit as follows:

(1)

An Appendix D Employee may with respect to Grandfathered Amounts elect to receive a supplementary retirement benefit in any form provided under the GSC Legacy Plan as of December 31, 2004, or in two to thirty annual installments, or as otherwise may be approved by the Administrator. The supplementary retirement benefit shall be based upon the present value of the life insurance benefit defined in this Part, using the actuarial tables and interest rates then in effect for the GSC Legacy Plan.

(2)

In the event that an Appendix D Employee elects to receive a supplementary retirement benefit with respect to Grandfathered Amounts other than in the single life annuity form and/or other than at age 65, the amount of such benefits shall be actuarially adjusted using the actuarial table and interest rates then in effect for the GSC Legacy Plan.

(3)

If an Appendix D Employee elects to receive with respect to Grandfathered Amounts a supplementary retirement benefit in an installment form and dies prior

D-4

to the payment of all installments, any unpaid installments shall be paid to the Appendix D Employee’s beneficiary or, in the absence of a designated beneficiary, to the Appendix D Employee’s estate. The designated beneficiary shall have the option, in accordance with Section 3.03 of the Plan, to continue to receive annual payments for the period elected by the Appendix D Employee or to receive the unpaid installments in a lump sum. In the event that a lump sum is elected, the lump sum will be adjusted using the actuarial tables and interest rates then in effect for the GSC Legacy Plan.

D-5

Appendix E

(General Dynamics Armament Systems and General Dynamics Defense Systems)

E-1. Purpose, Superseding Provision . The purpose of this Appendix E is to describe certain benefits that were previously described in the Martin Marietta Supplementary Pension Plan for Employees of Transferred GE Operations as of December 31, 1996, that are being provided to certain employees who continue in employment with the Corporation on or after January 1, 2005. The provisions applicable to employees who have terminated or retired prior to January 1, 2005, continue to be described by the provisions of the plan as it existed prior to January 1, 2005.

This Appendix forms a part of the Plan to which it is attached and its terms shall supersede other provisions of the Plan to the extent such other provisions are inconsistent with this Appendix.

E-2. Definitions . Capitalized terms in this Appendix not defined elsewhere in the Plan shall have the meaning assigned to them below.

(1)

Annual Estimated Social Security Benefit . “Annual Estimated Social Security Benefit” shall mean the annual equivalent of the maximum possible Primary Insurance Amount payable, after reduction for early retirement, as an old-age benefit to an employee who retired at age sixty-two (62) on January 1 ^st of the calendar year in which occurred the Employee’s actual date of retirement or death, whichever is earlier. Such Annual Estimated Social Security Benefit shall be determined by the Corporation in accordance with the Federal Social Security Act in effect at the end of the calendar year immediately preceding such January 1 ^st .

If an Employee has less than thirty-five (35) years of Credited Service, the Annual Estimated Social Security Benefit shall be the amount determined under the first paragraph hereof multiplied by a fraction, the numerator of which shall be the number of years of the Employee’s Credited Service to his date of retirement or death, whichever is earlier, and the denominator of which shall be thirty-five (35).

The Annual Estimated Social Security Benefit as so determined shall be adjusted to include any social security, severance or similar benefit provided under foreign law or regulation as the Corporation may prescribe by rules and regulations issued with respect to this Plan.

(2)

Annual Retirement Income . “Annual Retirement Income” shall mean the amount determined by multiplying 1.75% of the Employee’s Average Annual Compensation by the number of years of Credited Service completed by the Employee at the date of his retirement or death, whichever is earlier.

(3)

Average Annual Compensation . “Average Annual Compensation” means one-third of the Employee’s Compensation for the highest thirty-six (36) consecutive months during the last one-hundred twenty (120) months before his date of retirement or death, whichever is earlier. In computing the Average Annual

E-1

Compensation, normal straight-time earnings shall be substituted for actual Compensation for any month in which such normal straight-time earnings are greater.

(4)

Benefit Eligibility Service . “Benefit Eligibility Service” shall have the same meaning herein as Benefit Eligibility Service in the Legacy Plan.

(5)

Compensation . “Compensation” for the purposes of the Supplementary Pension defined in this Appendix E shall mean salary, including any deferred salary approved by the Corporation as compensation for purposes of the Supplementary Pension benefit, plus

For Employees then eligible for Incentive Compensation, the total amount of any Incentive Compensation earned except to the extent such Incentive Compensation is excluded by the Corporation;

For Employees who would then have been eligible for Incentive Compensation if they had not been participants in a Sales Commission Plan or other variable compensation plan, the total amount of sales commissions (or other variable compensation) earned;

For all other Employees, the sales commissions and other variable compensation earned by them but only to the extent such earnings were then included under the Martin Marietta Corporation Retirement Income Plan II, plus any amounts (other than salary and those mentioned in clauses (a) and (b) above) which were then included as compensation under the Martin Marietta Corporation Retirement Income Plan II except any amounts which the Corporation may exclude from the computation of “Compensation” and subject to the powers of the Corporation.

(6)

Credited Service . “Credited Service” shall have the same meaning herein as in the Legacy Plan. Credited Service shall include periods of Plan Membership as defined under the Legacy Plan.

(7)

Legacy Plan . “Legacy Plan” shall mean the General Dynamics Salaried Retirement Plan—Armament Systems and Defense Systems Legacy Provisions (known from January 1, 2005 to January 1, 2007 as the Retirement Plan for Salaried Employees, AS/DS Legacy Provisions and prior to January 1, 2005, as the Retirement Plan for Non-Represented Employees of General Dynamics Armament/Defense Systems).

(8)

Salaried Plan . “Salaried Plan” shall mean the General Dynamics Salaried Retirement Plan effective January 1, 2007.

(9)

Vesting Service . “Vesting Service” shall have the same meaning herein as Continuous Service in the Legacy Plan.

E-3. Covered Employees . An Appendix E Employee is an Employee who was covered by the Martin Marietta Supplementary Pension Plan for Employees of Transferred GE Operations prior

E-2

to January 1, 1997, and who is a Transferred Lockheed Martin Employee as defined in the Retirement Plan for Non-Represented Employees of General Dynamics Armament/Defense Systems, as amended and restated effective January 1, 2001.

E-4. Amount of Benefit . Subject to the limitation described in (5) below, the amount of the Supplementary Pension shall be as follows.

(1)

Normal Retirement Benefit . The annual Supplementary Pension payable to an Appendix E Employee retiring on or after his Normal Retirement Date as defined under the Legacy Plan shall be equal to the excess, if any, of the Employee’s Annual Retirement Income over the sum of:

The annual pension payable under the Legacy Plan (as a single life annuity);

The annual pension payable under the Salaried Plan (as a single life annuity);

One-half (1/2) of the Employee’s Annual Estimated Social Security Benefit;

The Employee’s Personal Pension Account annuity as defined in the Legacy Plan (as a single life annuity); and

The Employee’s annual benefit, if any, determined in accordance with the provisions of Section 3.03 and Appendix A (as a single life annuity).

(2)

Early Retirement Benefit After Age Sixty (60) . The annual Supplementary Pension payable to an Appendix E Employee who, following the attainment of age sixty (60), retires on an optional retirement date under the Legacy Plan, shall be computed in the manner provided by (1) above (for an Employee retiring on or after his Normal Retirement Date) but taking into account only Credited Service and Average Annual Compensation to the actual date of optional retirement and, for purposes of the Legacy Plan offset in (1)(a), excluding the early retirement supplement described in sections 2.3(a)(ii) and 2.3(b)(ii) of the Legacy Plan.

(3)

Early Retirement Benefit Before Age Sixty (60) . The annual Supplementary Pension payable to an Appendix E Employee who retires following the attainment of age fifty-five (55), but before attainment of age sixty (60), shall be equal to the excess, if any, of the Employee’s Annual Retirement Income multiplied by an early retirement reduction factor described in (a), over the sum of (b) through (f), where (a) through (f) are as follows:

The earlier retirement reduction factor shall equal the product of (i) one-twelfth (1/12) of the number of complete months by which commencement of the Supplementary Benefit precedes the attainment of age sixty (60) and (ii) seven percent (7%) minus the smaller of three and

E-3

one-half percent (3.5%) or fourteen hundredths percent (0.14%) times complete years of Benefit Eligibility Service in excess of five (5).

The annual pension payable under the Legacy Plan (as a single life annuity and excluding the early retirement supplement described in sections 2.3(a)(ii) and 2.3(b)(ii) of the Legacy Plan);

The annual pension payable under the Salaried Plan (as a single life annuity);

One-half (1/2) of the Employee’s Annual Estimated Social Security Benefit;

The Employee’s Personal Pension Account annuity as defined in the Legacy Plan (as a single life annuity); and

The Employee’s annual benefit, if any, determined in accordance with the provisions of Section 3.03 and Appendix A (as a single life annuity).

Except as provided by the Special Retirement provisions in (4) below, an Appendix E Employee who retires before the first day of the month following attainment of age fifty-five (55) or who terminates employment before attainment of age fifty-five (55) shall not be eligible for the Supplementary Pension under this Appendix E.

(4)

Special Retirement . An Appendix E Employee who is laid off due to a reduction in force, a plant closing or lack of work after reaching age fifty (50) and having completed at least twenty-five (25) years of Vesting Service is eligible for a Supplementary Pension commencing as early as age fifty-five (55). The Supplementary Pension shall be determined by (3) above except taking into account the following:

The Average Annual Compensation shall be based on the last one hundred twenty (120) completed months before his termination date;

The Annual Estimated Social Security Benefit shall be determined as though the Employee’s retirement date was the date of termination; and

The early retirement reduction factor shall be based on the age at which the Supplementary Pension benefit actually commences.

(5)

Limitation on Benefit . Notwithstanding any provision of this Plan to the contrary, if the sum of (a) through (g) defined as follows exceeds sixty percent (60%) of the Employee’s Average Annual Compensation, then the Employee’s Supplementary Pension shall be reduced by the amount of such excess, but not less than zero (0). In cases of retirement before age sixty (60), then for purposes of this limitation the sixty-percent (60%) of Average Annual Compensation shall be reduced by the same early retirement reduction factor described in (3)(a).

E-4

The Supplementary Pension (calculated after application of any reduction factor for early retirement) otherwise payable hereunder;

The annual pension payable under the Legacy Plan (as a single life annuity and excluding the early retirement supplement described in sections 2.3(a)(ii) and 2.3(b)(ii) of the Legacy Plan)

The annual pension payable under the Salaried Plan (as a single life annuity);

The Employee’s Annual Estimated Social Security Benefit, but before any adjustment for less than 35 years of service;

The Employee’s Personal Pension Account annuity as defined in the Legacy Plan (as a single life annuity);

The Employee’s annual benefit, if any, determined in accordance with the provisions of Section 3.03 and Appendix A (as a single life annuity); and

The Employee’s annual benefit (as a single life annuity), if any, payable under any other annual pension (or the annual pension equivalent of other forms of payment) payable under any other pension plan, policy, contract, or government program sponsored by the Corporation.

E-5. Form and Timing of Benefit .

(1)

An Appendix E Employee may elect to receive the Supplementary Pension benefit with respect to Grandfathered Amounts as a life annuity (the normal form) or in any one of the optional forms permitted under the provisions of Section 5.4 of the Legacy Plan (optional forms for the TOPS Benefit). Non-Grandfathered Amounts shall be distributed in a form determined in accordance with Sections 3.04, 3.05, and 3.07 of the Plan.

(2)

The timing of the Supplementary Pension benefit payable to an Appendix E Employee shall be determined in accordance with the provisions of Section 3 of the Plan.

E-6. Death Benefit .

(1)

If an Appendix E Employee dies prior to commencing his Supplementary Pension benefit and leaves a surviving spouse, a lifetime benefit shall be payable to his surviving spouse. Such benefit shall commence on the first of the month following the later of the date the Employee would have attained age fifty-five (55) or his date of death, and shall be equal to the excess, if any, of the Employee’s Annual Retirement Income multiplied by an early retirement reduction factor described in (a), over the sum of (b) through (f), where (a) through (f) are as follows:

E-5

The earlier retirement reduction factor shall equal the product of (i) one-twelfth (1/12) of the number of complete months by which commencement of the death benefit precedes the attainment of age sixty (60) and (ii) seven percent (7%) minus the smaller of three and one-half percent (3.5%) or fourteen hundredths percent (0.14%) times complete years of Benefit Eligibility Service in excess of five (5). If commencement of the death benefit is on or after the date the Employee attained or would have attained age sixty (60), then this early retirement reduction factor shall not apply.

The annual pre-retirement surviving spouse benefit payable under the Legacy Plan (as a single life annuity and excluding the early retirement supplement described in sections 2.3(a)(ii) and 2.3(b)(ii) of the Legacy Plan);

The annual pre-retirement surviving spouse benefit payable under the Legacy Plan (as a single life annuity);

Twenty-five percent (25%) of the Employee’s Annual Estimated Social Security Benefit;

The Employee’s Personal Pension Account joint and survivor benefit as defined in the Legacy Plan (as a single life annuity); and

The annual pre-retirement surviving spouse benefit, if any, determined in accordance with the provisions of Section 3.03 and Appendix A (as a single life annuity).

(2)

If an Appendix E Employee dies while employed by the Corporation and without leaving a surviving spouse, the death benefit payable to his Beneficiary shall be a single sum equal to five (5) times his annual Supplementary Pension benefit that would have otherwise been payable had he survived until the first of the month following the later of his age fifty-five (55) or his date of death and then commenced his Supplementary Pension. Such single sum shall be paid on the first of the month following the later of the date the Employee would have attained age fifty-five (55) or his date of death. For purposes of this paragraph, an Appendix E Employee may only designate his estate, former spouse, or member of his immediate family as his Beneficiary.

E-6

Exhibit 31.1

CERTIFICATION BY CEO PURSUANT TO SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

I, Jay L. Johnson, certify that:

1)	I have reviewed this quarterly report on Form 10-Q of General Dynamics Corporation;

2)	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3)	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:

designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5)	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ Jay L. Johnson

Jay L. Johnson

Chairman and Chief Executive Officer

May 3, 2011

Exhibit 31.2

CERTIFICATION BY CFO PURSUANT TO SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

I, L. Hugh Redd, certify that:

1)	I have reviewed this quarterly report on Form 10-Q of General Dynamics Corporation;

2)	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3)	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

5)	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ L. Hugh Redd

L. Hugh Redd

Senior Vice President and Chief Financial Officer

May 3, 2011

Exhibit 32.1

CERTIFICATION BY CEO PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of General Dynamics Corporation (the Company) on Form 10-Q for the quarter ended April 3, 2011, as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Jay L. Johnson, Chairman and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Jay L. Johnson

Jay L. Johnson

Chairman and Chief Executive Officer

May 3, 2011

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

Exhibit 32.2

CERTIFICATION BY CFO PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of General Dynamics Corporation (the Company) on Form 10-Q for the quarter ended April 3, 2011, as filed with the Securities and Exchange Commission on the date hereof (the Report), I, L. Hugh Redd, Senior Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ L. Hugh Redd

L. Hugh Redd

Senior Vice President and Chief Financial Officer

May 3, 2011