General Dynamics 2010 Annual Report Download - page 5

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Dear Fellow Shareholders,
2010 was a very good year for General Dynamics. Our
company’s performance was marked by solid earnings
growth, strong cash generation and focused execution
across our four operating groups.
For the year, company revenues were $32.5 billion, a
modest increase from 2009, while operating earnings
grew 7 percent to $3.95 billion. Our Aerospace segment
led earnings growth with an impressive 22 percent
improvement reflecting a healthier business-jet market.
Each of our three defense segments also improved
earnings, with our Combat Systems and Information
Systems and Technology groups each exceeding
$1 billion again in 2010.
Free cash flow totaled $2.6 billion, after capital
expenditures and contributions to our pension funds.
This robust cash flow represents 100 percent of
earnings from continuing operations, maintaining our
trend of efficient cash conversion.
Report on Operations
These operating results reflect our commitment to
disciplined execution. General Dynamics’ leadership
remains focused on the same elemental principles that
have enabled our success over the years: driving growth
in our core businesses, enhancing margins through
continuous improvement initiatives, managing for
profitability and efficiently converting our earnings to
deployable cash.
Aerospace
Aerospace performed exceptionally well in 2010. The
group’s success was rooted in aggressive actions taken
in 2009 to reduce production, rightsize operations and
cut costs. These actions afforded the group significant
operating leverage as market conditions improved
following the severe downturn caused by the global
economic crisis.
Group revenues were $5.3 billion in 2010, up
modestly from 2009 due primarily to improving
demand for aircraft services across our global network.
Operating earnings grew over 20 percent to $860
million as margins expanded to 16.2 percent. Excellent
execution, improved pricing and the absence of aircraft
trade-in losses drove the increased profitability.
Backlog at year end was $17.8 billion. Order activity
and aircraft-services demand improved throughout the
year as financial markets stabilized and our customers
gained confidence in the global economic recovery.
Likewise, defaults slowed significantly as the year
progressed. We expect these trends to continue in 2011.
Aerospace’s backlog and opportunity pipeline remain
robust and diverse by both customer type and
geography. Our large-cabin G450 and G550 order book
is at about 18 to 24 months from new order to delivery,
while backlog for our new G650 aircraft reaches well
beyond 2015. Once again, 2010 customer orders were
primarily international, geographically diverse and
particularly strong in emerging markets. Orders continue
LETTER TO SHAREHOLDERS