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 4, 2004

OR

[  ] 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 Falls Church, Virginia	22042-4153
Address of principal executive offices	Zip code

(703) 876-3000

Registrant’s telephone number, including area code

3190 Fairview Park Drive
Falls Church, Virginia 22042

Former address

     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 [X]  No [  ].

     Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes [X]  No [  ].

     199,053,358 shares of the registrant’s common stock, $1 par value per share, were outstanding at May 2, 2004.

TABLE OF CONTENTS

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
	CONSOLIDATED BALANCE SHEET
	CONSOLIDATED STATEMENT OF EARNINGS
	CONSOLIDATED STATEMENT OF CASH FLOWS
	NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ITEM 4. - CONTROLS AND PROCEDURES
FORWARD-LOOKING STATEMENTS
ITEM 1. LEGAL PROCEEDINGS
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
SIGNATURE
CEO Section 302 Certification
CFO Section 302 Certification
CEO Section 906 Certification
CFO Section 906 Certification

GENERAL DYNAMICS CORPORATION

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		22
Item 3 -  Quantitative and Qualitative Disclosures About Market Risk		30
Item 4 -  Controls and Procedures		30
FORWARD-LOOKING STATEMENTS		31
PART II — OTHER INFORMATION
Item 1 -  Legal Proceedings		32
Item 6 -  Exhibits and Reports on Form 8-K		32
SIGNATURE		33

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GENERAL DYNAMICS CORPORATION

PART I – FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED BALANCE SHEET

(Dollars in millions)

	April 4
	2004			December 31
ASSETS	(Unaudited)			2003
Current Assets:
Cash and equivalents	$	869		$	860
Accounts receivable		1,525			1,378
Contracts in process		2,628			2,548
Inventories		1,268			1,160
Other current assets		482			448
Total Current Assets		6,772			6,394
Noncurrent Assets:
Property, plant and equipment, net		2,080			2,085
Intangible assets, net		1,006			1,030
Goodwill, net		6,157			6,083
Other assets		653			591
Total Noncurrent Assets		9,896			9,789
	$	16,668		$	16,183
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Short-term debt and current portion of long-term debt	$	561		$	747
Accounts payable		1,370			1,317
Other current liabilities		3,792			3,552
Total Current Liabilities		5,723			5,616
Noncurrent Liabilities:
Long-term debt		3,297			3,296
Other liabilities		1,431			1,350
Commitments and contingencies (See Note K)
Total Noncurrent Liabilities		4,728			4,646
Shareholders’ Equity:
Common stock, including surplus		891			838
Retained earnings		6,404			6,206
Treasury stock		(1,265	)		(1,279	)
Accumulated other comprehensive income		187			156
Total Shareholders’ Equity		6,217			5,921
	$	16,668		$	16,183

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

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GENERAL DYNAMICS CORPORATION

CONSOLIDATED STATEMENT OF EARNINGS

(UNAUDITED)

(Dollars in millions, except per share amounts)

	Three Months Ended
	April 4			March 30
	2004			2003
Net Sales	$	4,760		$	3,421
Operating costs and expenses		4,318			3,103
Operating Earnings		442			318
Interest expense, net		(39	)		(11	)
Other income, net		—			4
Earnings Before Income Taxes		403			311
Provision for income taxes		134			90
Net Earnings	$	269		$	221
Net Earnings Per Share:
Basic	$	1.36		$	1.11
Diluted	$	1.34		$	1.11
Dividends Per Share	$	0.36		$	0.32
Supplemental Information:
General and adminstrative expenses included in operating costs and expenses	$	298		$	236

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

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GENERAL DYNAMICS CORPORATION

CONSOLIDATED STATEMENT OF CASH FLOWS

(UNAUDITED)

(Dollars in millions)

	Three Months Ended
	April 4			March 30
	2004			2003
Cash Flows from Operating Activities:
Net earnings	$	269		$	221
Adjustments to reconcile net earnings to net cash provided by operating activities –
Depreciation, depletion and amortization of property, plant and equipment		54			47
Amortization of intangible assets		23			10
Deferred income tax provision		111			33
(Increase) decrease in assets, net of effects of business acquisitions –
Accounts receivable		(147	)		(41	)
Contracts in process		(8	)		(124	)
Inventories		(108	)		(80	)
Increase (decrease) in liabilities, net of effects of business acquisitions –
Customer deposits on commercial contracts		105			(53	)
Billings in excess of costs and estimated profits		55			137
Income taxes payable		(2	)		83
Other, net		(15	)		(20	)
Net cash provided by operating activities from continuing operations		337			213
Net cash used by discontinued operations		(8	)		(12	)
Net cash provided by operating activities		329			201
Cash Flows from Investing Activities:
Business acquisitions, net of cash acquired		(31	)		(1,075	)
Capital expenditures		(53	)		(31	)
Other, net		16			(6	)
Net cash used by investing activities		(68	)		(1,112	)
Cash Flows from Financing Activities:
Net (repayments of) proceeds from commercial paper		(183	)		1,654
Net repayments of other debt		(3	)		(10	)
Dividends paid		(63	)		(60	)
Purchases of common stock		—			(274	)
Other, net		(3	)		21
Net cash (used) provided by financing activities		(252	)		1,331
Net Increase in Cash and Equivalents		9			420
Cash and Equivalents at Beginning of Period		860			328
Cash and Equivalents at End of Period	$	869		$	748
Supplemental Cash Flow Information:
Cash payments for:
Income taxes	$	11		$	3
Interest	$	38		$	12

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

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GENERAL DYNAMICS CORPORATION

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in millions, except per share amounts)

(A) Basis of Preparation

     The term “company” refers to General Dynamics Corporation and all of its wholly-owned and majority-owned subsidiaries. The unaudited Consolidated Financial Statements included herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) have been condensed or omitted pursuant to such rules and regulations. Operating results for the three-month period ended April 4, 2004, are not necessarily indicative of the results that may be expected for the year ending December 31, 2004. These unaudited Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and notes thereto included in the company’s Annual Report on Form 10-K for the year ended December 31, 2003.

     In management’s opinion, the unaudited Consolidated Financial Statements contain all adjustments, that are of a normal recurring nature, necessary for a fair statement of the results for the three-month periods ended April 4, 2004, and March 30, 2003. Certain prior-year amounts have been reclassified to conform to the current-year presentation.

(B) Acquisitions, Intangible Assets and Goodwill, Net

     During 2003, the company completed the following acquisitions for a total cost of approximately $3 billion, which was paid in cash:

• General Motors Defense (GM Defense) of London, Ontario, a business unit of General Motors Corporation, on March 1. GM Defense manufactures wheeled armored vehicles and turrets.

• Creative Technology Incorporated (CTI) of Herndon, Virginia, on March 31. CTI supports the intelligence community and Department of Defense by delivering systems and network engineering, integration, software development and operations and technical consulting.

• Veridian Corporation (Veridian) of Arlington, Virginia, on August 11. Veridian provides the Department of Defense, the Department of Homeland Security and the intelligence community with network security and enterprise protection; intelligence, surveillance and reconnaissance systems development and integration; decision support; information systems development and integration; chemical, biological and nuclear detection capabilities; network and enterprise management services; and large-scale systems engineering.

• Intercontinental Manufacturing Company (IMCO) of Garland, Texas, a division of Datron, Inc., on September 4. IMCO develops and manufactures aircraft bomb bodies for the U.S. armed services.

• Digital System Resources, Inc., (DSR) of Fairfax, Virginia, on September 10. DSR is a provider of surveillance and combat systems for submarines and surface ships.

• Steyr Daimler Puch Spezialfahrzeug Aktiengesellschaft & Company KG (Steyr) of Vienna, Austria, on October 2. Steyr develops and manufactures armored combat vehicles, including the Pandur family of wheeled combat vehicles and the Ulan tracked infantry fighting vehicle.

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     The operating results of these businesses have been included with those of the company from their respective closing dates. The purchase prices of these businesses have been allocated to the estimated fair value of net tangible and intangible assets acquired, with any excess recorded as goodwill. Certain of the estimates related to the Steyr acquisition are still preliminary at April 4, 2004. The company is awaiting the completion of the appraisals of assets acquired, and the identification and valuation of intangible assets acquired. The company expects these analyses to be completed during the second quarter of 2004.

     In March 2004, the company agreed on terms of a cash offer to acquire Alvis plc. The offer is valued at approximately $550. The boards of directors of both companies have approved the transaction, which is subject to regulatory approval and the tender of a majority of the outstanding shares. The company expects the transaction to be completed in the second half of 2004. Alvis manufactures main battle tanks, armored infantry vehicles, armored personnel carriers and light armored vehicles in the United Kingdom, Scandinavia and South Africa.

     In March 2004, the company entered into a definitive agreement to acquire Spectrum Astro, Inc., of Gilbert, Arizona, a privately held space systems integrator for the U.S. government. Spectrum Astro’s capabilities include manufacturing and integration of spacecraft subsystem hardware, software and ground-support equipment. The acquisition is subject to regulatory approval and is expected to close in the second quarter of 2004.

     Intangible assets consisted of the following:

	April 4							December 31
	2004							2003
	Gross					Net		Gross					Net
	Carrying		Accumulated			Carrying		Carrying		Accumulated			Carrying
	Amount		Amortization			Amount		Amount		Amortization			Amount
Amortized intangible assets:
Contract and program intangible assets	$	990	$	(170	)	$	820	$	991	$	(157	)	$	834
Other intangible assets		282		(115	)		167		282		(105	)		177
	$	1,272	$	(285	)	$	987	$	1,273	$	(262	)	$	1,011
Unamortized intangible assets:
Trademarks	$	19	$	—		$	19	$	19	$	—		$	19

     The company amortizes contract and program intangible assets on a straight-line basis over periods ranging from 8 to 40 years. Other intangible assets consist primarily of aircraft product design, customer lists, software and licenses, which are amortized over periods ranging from 5 to 21 years.

     Amortization expense was $23 for the three-month period ended April 4, 2004, and $10 for the three-month period ended March 30, 2003. The company expects to record annual amortization expense over the next five years as follows:

2005	$	90
2006	$	89
2007	$	88
2008	$	84
2009	$	80

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     The changes in the carrying amount of goodwill by business group for the three months ended April 4, 2004, were as follows:

	December 31						April 4
	2003		Acquisitions (a)		Other (b)		2004
Information Systems and Technology	$	3,581	$	56	$	4	$	3,641
Combat Systems		1,960		8		6		1,974
Marine Systems		193		—		—		193
Aerospace		348		—		—		348
Resources		1		—		—		1
	$	6,083	$	64	$	10	$	6,157

(a)	Includes adjustments to preliminary assignment of fair value to net assets acquired.
(b)	Consists of adjustments for currency translation.

(C) Equity Compensation Plans

     The company accounts for its incentive compensation plans under the recognition and measurement principles of Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees,” and related Interpretations. The company measures compensation expense for stock options as the excess, if any, of the quoted market price of the company’s stock at the measurement date over the exercise price. The company records stock awards at fair value at the date of the award.

     Had compensation expense for stock options been determined based on the fair value at the grant dates for awards under the company’s incentive compensation plans, the company’s net earnings and net earnings per share would have been reduced to the pro forma amounts indicated as follows:

	April 4		March 30
Three Months Ended	2004		2003
Net earnings, as reported	$	269	$	221
Add: Stock-based compensation expense included in reported net earnings, net of tax (a)		8		3
Deduct: Total fair value-based compensation expense, net of tax		14		10
Pro forma	$	263	$	214
Net earnings Per share — basic:    As reported	$	1.36	$	1.11
Pro forma	$	1.33	$	1.08
Net earnings Per share — diluted: As reported	$	1.34	$	1.11
Pro forma	$	1.31	$	1.07

(a) Represents restricted stock grants under the company’s 1997 Incentive Compensation Plan.

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     The weighted average fair value of each stock option included in the preceding pro forma amounts was estimated using the Black-Scholes option pricing model and is amortized over the vesting period of the underlying options.

(D) Comprehensive Income

     Comprehensive income consisted of the following:

	April 4		March 30
Three Months Ended	2004		2003
Net earnings	$	269	$	221
Foreign currency translation adjustments		20		3
Fair value adjustments on cash flow hedge		10		(3	)
Other		1		1
Comprehensive income	$	300	$	222

(E) Earnings Per Share

     Basic earnings per share for all periods presented is computed using net earnings for the respective periods and the weighted average number of common shares outstanding during the period. Diluted earnings per share incorporates the incremental shares issuable upon the assumed exercise of stock options and the issuance of contingently issuable shares.

     Basic and diluted weighted average shares outstanding were as follows (in thousands):

	April 4		March 30
Three Months Ended	2004		2003
Basic weighted average shares outstanding		198,439		198,878
Assumed exercise of stock options (a)		1,723		840
Contingently issuable shares		141		—
Diluted weighted average shares outstanding		200,303		199,718

(a) Excludes the following outstanding options to purchase shares of common stock because the options’ exercise price was greater than the average market price for the shares: three months ended April 4, 2004: 2,108; three months ended March 30, 2003: 4,495.

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     (F) Contracts in Process

          Contracts in process represent costs and accrued profit related to defense contracts and programs and consisted of the following:

	April 4		December 31
	2004		2003
Contract costs and estimated profits	$	22,739	$	17,700
Other contract costs		764		749
		23,503		18,449
Less advances and progress payments		20,875		15,901
	$	2,628	$	2,548

     Contract costs include production costs and related overhead, such as general and administrative expenses, as well as contract recoveries for such matters as contract changes, negotiated settlements and claims for unanticipated contract costs, which totaled $20 as of April 4, 2004, and $21 as of December 31, 2003. The company records revenue associated with these matters as either income or as an offset against a potential loss only when recovery can be reliably estimated and realization is probable. Other contract costs represent amounts required to be recorded under GAAP that are not currently allocable to contracts, such as a portion of the company’s estimated workers’ compensation, other insurance-related assessments, retirement benefits and environmental expenses. These costs will become allocable to contracts when they are paid. The company expects to recover these costs through ongoing business, including both existing backlog and probable follow-on contracts. This business base includes numerous contracts for which the company is the sole source or one of two suppliers on long-term defense programs. If the level of backlog in the future does not support the continued deferral of these costs, the profitability of the company’s remaining contracts could be adversely affected.

(G) Inventories

        Inventories primarily represent commercial aircraft components and consisted of the following:

	April 4		December 31
	2004		2003
Work in process	$	674	$	614
Raw materials		393		389
Pre-owned aircraft		150		103
Other (a)		51		54
	$	1,268	$	1,160

(a) Consists primarily of coal and aggregates.

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(H) Debt

     Debt consisted of the following:

	Maturity		Range of			April 4		December 31
	Dates		Interest Rates			2004		2003
Fixed-rate notes		2006-2015		2.125%-5.375	%	$	3,094	$	3,094
Floating-rate notes		2004		1.37	%		500		500
Commercial paper, net of unamortized discount		2004		1.02	%		—		183
Senior notes		2008		6.32	%		150		150
Term debt		2008		7.50	%		40		40
Other	Various		Various				74		76
							3,858		4,043
Less current portion							561		747
						$	3,297	$	3,296

     As of April 4, 2004, the company had outstanding $3.1 billion aggregate principal amount of fixed-rate notes, which are registered with the Securities and Exchange Commission under the Securities Act of 1933, as amended (the Securities Act). The fixed-rate notes consist of the following:

• $500 aggregate principal amount of 2.125 percent notes maturing in 2006;

• $500 aggregate principal amount of 3.000 percent notes maturing in 2008;

• $700 aggregate principal amount of 4.500 percent notes maturing in 2010;

• $1 billion aggregate principal amount of 4.250 percent notes maturing in 2013; and

• $400 aggregate principal amount of 5.375 percent notes maturing in 2015.

     As of April 4, 2004, the company had outstanding $500 aggregate principal amount of three-year floating-rate notes due September 1, 2004, which are registered under the Securities Act. Interest on the notes resets quarterly at three-month LIBOR plus 0.22 percent, and is payable each March, June, September and December. The notes had an average interest rate of 1.37 percent for the three months ended April 4, 2004.

     The fixed-rate notes and the floating-rate notes are fully and unconditionally guaranteed by certain of the company’s 100-percent-owned subsidiaries. The notes are redeemable at the company’s option in whole or in part at any time prior to their maturity at 100 percent of the principal amount of the notes to be redeemed plus any accrued but unpaid interest on the date the notes are redeemed and any applicable make-whole amounts. See Note N for condensed consolidating financial statements.

     As of April 4, 2004, the company had no commercial paper outstanding. The company has $2 billion in bank credit facilities that serve as back-up liquidity facilities for its commercial paper issuances. These credit facilities consist of a $1 billion 364-day facility expiring in July 2004, which can be extended for one year at the company’s option when drawn, and a $1 billion multiyear facility expiring in July 2006. The company’s commercial paper issuances and the bank credit facilities are guaranteed by certain of the company’s 100-percent-owned subsidiaries. Additionally, certain international subsidiaries have available local bank credit facilities of approximately $200.

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     The senior notes are privately placed U.S.-dollar-denominated notes issued by one of the company’s Canadian subsidiaries. Interest is payable semi-annually at an annual rate of 6.32 percent, until maturity in September 2008. The subsidiary has a currency swap, that locked in the U.S.-dollar equivalent interest payments and principal repayment of these notes. As of April 4, 2004, the fair value of this currency swap was a $16 liability. The senior notes are backed by a parent company guarantee.

     The company assumed the term debt in connection with its acquisition of Primex Technologies, Inc., in 2001. Sinking fund payments of $5 are required in December of each of the years 2004 through 2007, with the remaining $20 payable in December 2008. Interest is payable in June and December at the rate of 7.5 percent annually.

     As of April 4, 2004, other debt consisted primarily of $39 related to various debt facilities assumed in the acquisition of Steyr and a $15 note payable to a Spanish insurance company. Annual principal payments on the note payable are $13 in 2004 and $1 in 2005 and 2006. Interest is payable each December at a rate of 3.85 percent annually. The debt assumed with the acquisition of Steyr is scheduled to be extinguished during the second quarter of 2004.

     Certain of the company’s financing arrangements contain a number of customary covenants and restrictions, including a minimum net worth threshold. The company was in compliance with all material covenants as of April 4, 2004.

(I) Liabilities

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

	April 4		December 31
	2004		2003
Billings in excess of costs and estimated profits	$	847	$	792
Customer deposits on commercial contracts		662		465
Workers’ compensation		539		548
Salaries and wages		359		371
Retirement benefits		322		306
Liabilities of discontinued operations		65		70
Other		998		1,000
Other Current Liabilities	$	3,792	$	3,552
Deferred U.S. federal income taxes	$	518	$	351
Retirement benefits		348		340
Customer deposits on commercial contracts		33		77
Accrued costs on disposed businesses		52		63
Other		480		519
Other Liabilities	$	1,431	$	1,350

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(J) Income Taxes

     The company had a net deferred tax liability of $174 at April 4, 2004, and $0 at December 31, 2003. The current portion of the net deferred tax asset was $314 at April 4, 2004, and $333 at December 31, 2003, and is included in other current assets on the Consolidated Balance Sheet.

     In the first quarter of 2003, the company settled various outstanding state tax disputes, resulting in a net non-cash benefit of $15, or $.08 per share. The Internal Revenue Service (IRS) has commenced its examination of the company’s 1999 through 2002 income tax returns. The company has recorded liabilities for tax contingencies for open years. The company does not expect the resolution of tax matters for these years to have a material impact on its results of operations, financial condition or cash flows.

     On November 27, 2001, the company filed a refund suit in the U.S. Court of Federal Claims, titled General Dynamics v. United States, for the years 1991 to 1993. The company anticipates that the years 1994 to 1998 will be added to this suit. The suit seeks recovery of refund claims that were disallowed by the IRS at the administrative level. If the court awards a full recovery to the company, the refund could exceed $100 (including after-tax interest). The company expects the litigation to take several years to resolve. The company has recognized no income from this matter.

(K) Commitments and Contingencies

     Litigation

     Termination of A-12 Program. In January 1991, the Navy terminated the company’s 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. Both the company and McDonnell Douglas, now owned by the Boeing Company, (the contractors), were parties to the contract with the Navy; each 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 that the contractors repay $1.4 billion in unliquidated progress payments, but agreed to defer collection of the amount pending a decision by the U.S. Court of Federal Claims on the contractors’ challenge to the termination for default, or a negotiated settlement.

     On December 19, 1995, the U.S. Court of Federal Claims issued an order converting the termination for default to a termination for convenience. On March 31, 1998, a final judgment was entered in favor of the contractors for $1.2 billion plus interest.

     On July 1, 1999, the U.S. Court of Appeals for the Federal Circuit remanded the case for determination of whether the government’s default termination was justified. On August 31, 2001, following the trial on remand, the Trial Court issued an opinion upholding the default termination of the A-12 contract. In its opinion, the Trial Court rejected all of the government’s arguments to sustain the default termination except for the government’s schedule arguments, as to which the Trial Court held that the schedule the government unilaterally imposed was reasonable and enforceable, and that the government had not waived that schedule. On the sole ground that the contractors were not going to deliver the first aircraft on the date provided in the unilateral schedule, the Trial Court upheld the default termination and entered judgment for the government.

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     On November 30, 2001, the company filed its notice of appeal, and on January 9, 2003, the appeal was argued before a three-judge panel of the Court of Appeals. On March 17, 2003, the Court of Appeals vacated the Trial Court’s judgment and remanded the case to the Trial Court for further proceedings. The Court of Appeals found that the Trial Court misapplied the controlling legal standard in concluding that the termination for default could be sustained solely on the basis of the contractors’ inability to complete the first flight of the first test aircraft by December 1991. Rather, the Court of Appeals held that in order to uphold a termination for default the Trial Court would have to determine that there was no reasonable likelihood that the contractors could perform the entire contract effort within the time remaining for performance. This is a determination the company does not believe is supported by the evidence. A government petition for rehearing in the Court of Appeals was denied on August 27, 2003, and the case was again remanded to the Trial Court for further proceedings.

     If, contrary to the company’s expectations, the default termination is ultimately sustained, 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 $1.1 billion at April 4, 2004. This would result in a liability for the company of approximately $1.2 billion pretax, $707 after-tax, to be taken as a charge against discontinued operations. The company believes it has sufficient resources to pay such an obligation if required.

     Final Analysis. On May 28, 2003, Final Analysis Communication Services, Inc. (FACS), a Maryland corporation, served the company with a complaint it filed on January 30, 2003, in the United States District Court for the District of Maryland. On November 18, 2003, FACS filed an amended complaint alleging that the company breached contracts among the company, FACS and FACS’ then-corporate parent, Final Analysis, Inc., a Maryland corporation currently a debtor in the Bankruptcy Court for the District of Maryland. It also alleges tort claims for fraud, defamation and tortious interference with contractual and business relations. The amended complaint alleges monetary damages in excess of $500, plus punitive damages. On December 3, 2003 and March 22, 2004, the company filed its responses to the amended complaint. The company denies liability to FACS and asserts counterclaims. A trial date is set for October 26, 2004. The company believes the outcome of this matter will not have a material impact on its results of operations, financial condition or cash flows.

     Glen Cove. On August 8, 2003, a subsidiary of the company received a grand jury subpoena issued by the United States Attorney’s Office for the Eastern District of New York relating to its Glen Cove, New York operations for the period from January 1, 2000, to August 8, 2003. Such operations were acquired by the company in June, 2002. The company conducted an internal investigation of the Glen Cove operations through outside counsel and intends to fully cooperate with the government. As a result of its investigation, management made changes to the Glen Cove operations, and subsequently announced the facility’s closure effective year-end 2004. While the government investigation will continue for some additional period of time, the company believes the outcome of this matter will not have a material impact on its results of operations, financial condition or cash flows.

     Other. Various claims and other legal proceedings incidental to the normal course of business are pending or threatened against the company. While the company cannot predict the outcome of these matters, the company believes any potential liabilities in these proceedings, individually or in the aggregate, will not have a material impact on its results of operations, financial condition or cash flows.

-14-

     Environmental

     The company is subject to and affected by a variety of federal, state, local and foreign environmental laws and regulations. The company is directly or indirectly involved in environmental responses at some of its current and former facilities, and at third-party sites not owned by the company but where it has been designated a Potentially Responsible Party (PRP) by the Environmental Protection Agency or a state environmental agency. The company is also involved in the investigation, cleanup and remediation of various conditions at current and former company sites where the release of hazardous materials may have occurred. Based on historical experience, the company expects that a significant percentage of the total remediation and compliance costs associated with these facilities will continue to be allowable costs and, therefore, reimbursed by the U.S. government. Based on a site-by-site review and analyses by outside counsel and environmental consultants, the company believes that its liability at any individual site, or in the aggregate, arising from such sites at which there is a known environmental condition, or Superfund or other multi-party sites at which the company is a PRP, is not material to its results of operations, financial condition or cash flows. Moreover, based on all known facts and analyses, the company does not believe that the range of reasonably possible additional loss beyond what has been recorded would be material to its results of operations, financial condition or cash flows.

     Other

     In the ordinary course of business, the company has entered into letters of credit and other similar arrangements with financial institutions and insurance carriers totaling $983 at April 4, 2004. The company, from time to time in the ordinary course of business, guarantees the payment or performance obligations of its subsidiaries arising under certain of their contracts. The company is aware of no event of default that would require it to satisfy these guarantees.

     As a government contractor, the company is from time to time subject to U.S. government investigations relating to its operations, including claims for fines, penalties and compensatory and treble damages. The company believes, based on currently available information, that the outcome of such ongoing government disputes and investigations will not have a material effect on its results of operations, financial condition or cash flows.

     On June 5, 2001, the company acquired substantially all of the assets of Galaxy Aerospace Company LP. The selling parties may receive additional payments, up to a maximum of approximately $300 through 2006, contingent on the achievement of specific revenue targets.

     As of April 4, 2004, in connection with orders for seven Gulfstream G550 and two Gulfstream G200 aircraft in firm contract backlog, the company had offered customers trade-in options, which may or may not be exercised by the customers. If these options are exercised, the company will accept trade-in aircraft (principally Gulfstream aircraft) at a predetermined minimum trade-in price as partial consideration in the new aircraft transaction. Any excess of the trade-in price above the fair market value is treated as a reduction of revenue upon recording of the new aircraft sales transaction. These option commitments last through 2005 and totaled $201 as of April 4, 2004, down from $229 at December 31, 2003. Beyond these commitments, additional aircraft trade-ins are likely to be accepted throughout the year in connection with future orders for new aircraft.

     The company provides product warranties to its customers associated with certain product sales, particularly business aircraft. The company has also offered, on a limited basis, a five-year maintenance program that supplements the standard product warranties on Gulfstream G200, Gulfstream G400 and Gulfstream G550 aircraft models. The company records estimated warranty costs in the period in which

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the related products are delivered. The warranty liability recorded at each balance sheet date is based on the estimated number of months of warranty coverage remaining for products delivered and the average historical monthly warranty payments, and is 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 period ended April 4, 2004, were as follows:

	December 31		Warranty					April 4
	2003		Expense		Payments			2004
Warranty liabilities	$	214	$	16	$	(11	)	$	219

(L) Retirement Plans

     The company provides defined benefit pension and other postretirement benefits to certain eligible employees.

     Net periodic pension and other postretirement benefit costs for the three-month periods ended April 4, 2004, and March 30, 2003, consisted of the following:

	Pension Benefits						Other Postretirement Benefits
	April 4			March 30			April 4			March 30
	2004			2003			2004			2003
Service cost	$	57		$	44		$	3		$	4
Interest cost		100			96			18			18
Expected return on plan assets		(133	)		(130	)		(6	)		(6	)
Recognized net actuarial loss (gain)		1			(1	)		3			1
Amortization of unrecognized transition obligation		—			—			2			3
Amortization of prior service cost		8			9			(1	)		1
Net periodic cost	$	33		$	18		$	19		$	21

     Pension Benefits. The company’s contractual arrangements with the U.S. government provide for the recovery of contributions to the company’s government plans. The amount contributed to certain plans, charged to contracts and included in net sales has exceeded the net periodic pension cost as determined under Statement of Financial Accounting Standards No. 87, "Employers' Accounting for Pensions." The company has deferred recognition of earnings resulting from this difference to provide a better matching of revenues and expenses. Similarly, pension settlements and curtailments under the government plans have also been deferred. These deferrals have been classified against the prepaid pension cost related to these plans.

     Other Postretirement Benefits. The company’s contractual arrangements with the U.S. government provide for the recovery of contributions to a VEBA and, for non-funded plans, recovery of claims paid. The net periodic postretirement benefit cost exceeds the company’s cost currently allocable to contracts. To the extent recovery of the cost is considered probable based on the company’s backlog, the company defers the excess in contracts in process until such time that the cost is allocable to contracts.

     On December 8, 2003, the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the Act) was signed into law. The Act introduced a Medicare prescription-drug benefit and a

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federal subsidy to sponsors of retiree health care plans. The FASB issued Staff Position (FSP) No. FAS 106-1, “Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003,” in January 2004. FSP 106-1 permits a sponsor of a postretirement health care plan to make a one-time election to defer accounting for the effects of the Act until final authoritative guidance on the accounting for the federal subsidy is issued. The company has made the election to defer recognition of the effects of the Act.

(M) Business Group Information

     The company operates in four primary business groups: Information Systems and Technology, Combat Systems, Marine Systems and Aerospace. The company organizes and measures its business groups in accordance with the nature of products and services offered. These business groups derive their revenues from mission-critical information systems and technologies; land and expeditionary combat systems, armaments and munitions; shipbuilding and marine systems; and business aviation, respectively. The company also owns certain commercial operations that are identified for reporting purposes as Resources. The company measures each group’s profit based on operating earnings. As a result, net interest, other income and expense items and income taxes have not been allocated to the company’s business groups.

     Summary financial information for each of the company’s business groups follows:

	Net Sales				Operating Earnings
	April 4		March 30		April 4			March 30
For the Three Months Ended	2004		2003		2004			2003
Information Systems and Technology	$	1,716	$	995	$	170		$	111
Combat Systems		1,111		815		117			92
Marine Systems		1,280		976		98			65
Aerospace		606		594		66			40
Resources (a)		47		41		(9	)		10
	$	4,760	$	3,421	$	442		$	318

	Identifiable Assets
	April 4		December 31
	2004		2003
Information Systems and Technology	$	5,878	$	5,800
Combat Systems		4,821		4,682
Marine Systems		2,265		2,171
Aerospace		2,706		2,592
Resources (a)		196		165
Corporate (b)		802		773
	$	16,668	$	16,183

(a)	Resources includes the results of the company’s coal and aggregates operations, as well as a portion of the operating results of the company’s commercial pension plans.
(b)	Corporate identifiable assets include cash and equivalents from domestic operations, deferred taxes, real estate held for development and a portion of the net prepaid pension cost related to the company’s commercial pension plans.

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(N) Condensed Consolidating Financial Statements

     The fixed-rate notes and the floating-rate notes described in Note H are fully and unconditionally guaranteed on an unsecured, joint and several basis by certain 100-percent-owned subsidiaries of General Dynamics Corporation (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 as of April 4, 2004, and December 31, 2003, for the balance sheet, as well as the statements of earnings and cash flows for the three-month periods ended April 4, 2004, and March 30, 2003.

Condensed Consolidating Statement of Earnings

							Other
				Guarantors			Subsidiaries
				on a			on a
				Combined			Combined			Consolidating			Total
Three Months Ended April 4, 2004	Parent			Basis			Basis			Adjustments			Consolidated
Net Sales	$	—		$	3,941		$	819		$	—		$	4,760
Cost of sales		3			3,335			682			—			4,020
General and administrative expenses		—			241			57			—			298
Operating Earnings		(3	)		365			80			—			442
Interest expense		(35	)		(1	)		(4	)		—			(40	)
Interest income		—			—			1			—			1
Other income, net		(13	)		2			11			—			—
Earnings before Income Taxes		(51	)		366			88			—			403
Provision for income taxes		(30	)		135			29			—			134
Equity in net earnings of subsidiaries		290			—			—			(290	)		—
Net Earnings	$	269		$	231		$	59		$	(290	)	$	269

							Other
				Guarantors			Subsidiaries
				on a			on a
				Combined			Combined			Consolidating			Total
Three Months Ended March 30, 2003	Parent			Basis			Basis			Adjustments			Consolidated
Net Sales	$	—		$	2,908		$	513		$	—		$	3,421
Cost of sales		(9	)		2,453			423			—			2,867
General and administrative expenses		—			199			37			—			236
Operating Earnings		9			256			53			—			318
Interest expense		(8	)		(1	)		(4	)		—			(13	)
Interest income		—			—			2			—			2
Other income, net		(1	)		3			2			—			4
Earnings before Income Taxes		—			258			53			—			311
Provision for income taxes		(10	)		82			18			—			90
Equity in net earnings of subsidiaries		211			—			—			(211	)		—
Net Earnings	$	221		$	176		$	35		$	(211	)	$	221

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Condensed Consolidating Balance Sheet

							Other
				Guarantors			Subsidiaries
				on a			on a
				Combined			Combined			Consolidating			Total
April 4, 2004	Parent			Basis			Basis			Adjustments			Consolidated
ASSETS
Current Assets:
Cash and equivalents	$	147		$	—		$	722		$	—		$	869
Accounts receivable		—			1,242			283			—			1,525
Contracts in process		77			2,079			472			—			2,628
Inventories
Work in process		—			643			31			—			674
Raw materials		—			348			45			—			393
Pre-owned aircraft		—			150			—			—			150
Other		—			41			10			—			51
Assets of discontinued operations		—			33			—			—			33
Other current assets		124			160			165			—			449
Total Current Assets		348			4,696			1,728			—			6,772
Noncurrent Assets:
Property, plant and equipment		153			3,216			583			—			3,952
Accumulated depreciation, depletion & amortization of PP&E		(31	)		(1,628	)		(213	)		—			(1,872	)
Intangible assets and goodwill		—			5,605			2,058			—			7,663
Accumulated amortization of intangible assets		—			(448	)		(52	)		—			(500	)
Other assets		49			504			100			—			653
Investment in subsidiaries		13,849			—			—			(13,849	)		—
Total Noncurrent Assets		14,020			7,249			2,476			(13,849	)		9,896
	$	14,368		$	11,945		$	4,204		$	(13,849	)	$	16,668
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Short-term debt	$	500		$	6		$	55		$	—		$	561
Liabilities of discontinued operations		—			65			—			—			65
Other current liabilities		207			3,520			1,370			—			5,097
Total Current Liabilities		707			3,591			1,425			—			5,723
Noncurrent Liabilities:
Long-term debt		3,094			44			159			—			3,297
Other liabilities		309			1,008			114			—			1,431
Total Noncurrent Liabilities		3,403			1,052			273			—			4,728
Shareholders’ Equity:
Common stock, including surplus		891			5,315			2,215			(7,530	)		891
Other shareholders’ equity		9,367			1,987			291			(6,319	)		5,326
Total Shareholders’ Equity		10,258			7,302			2,506			(13,849	)		6,217
	$	14,368		$	11,945		$	4,204		$	(13,849	)	$	16,668

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Condensed Consolidating Balance Sheet

							Other
				Guarantors			Subsidiaries
				on a			on a
				Combined			Combined			Consolidating			Total
December 31, 2003	Parent			Basis			Basis			Adjustments			Consolidated
ASSETS
Current Assets:
Cash and equivalents	$	179		$	—		$	681		$	—		$	860
Accounts receivable		3			1,013			362			—			1,378
Contracts in process		46			2,069			433			—			2,548
Inventories
Work in process		—			606			8			—			614
Raw materials		—			365			24			—			389
Pre-owned aircraft		—			103			—			—			103
Other		—			43			11			—			54
Assets of discontinued operations		—			29			—			—			29
Other current assets		124			161			134			—			419
Total Current Assets		352			4,389			1,653			—			6,394
Noncurrent Assets:
Property, plant and equipment		150			3,188			565			—			3,903
Accumulated depreciation, depletion & amortization of PP&E		(30	)		(1,593	)		(195	)		—			(1,818	)
Intangible assets and goodwill		—			5,527			2,063			—			7,590
Accumulated amortization of intangible assets		—			(430	)		(47	)		—			(477	)
Other assets		(28	)		517			102			—			591
Investment in subsidiaries		13,672			—			—			(13,672	)		—
Total Noncurrent Assets		13,764			7,209			2,488			(13,672	)		9,789
	$	14,116		$	11,598		$	4,141		$	(13,672	)	$	16,183
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Short-term debt	$	683		$	6		$	58		$	—		$	747
Liabilities of discontinued operations		—			70			—			—			70
Other current liabilities		203			3,301			1,295			—			4,799
Total Current Liabilities		886			3,377			1,353			—			5,616
Noncurrent Liabilities:
Long-term debt		3,094			44			158			—			3,296
Other liabilities		364			846			140			—			1,350
Total Noncurrent Liabilities		3,458			890			298			—			4,646
Shareholders’ Equity:
Common stock, including surplus		838			5,315			2,268			(7,583	)		838
Other shareholders’ equity		8,934			2,016			222			(6,089	)		5,083
Total Shareholders’ Equity		9,772			7,331			2,490			(13,672	)		5,921
	$	14,116		$	11,598		$	4,141		$	(13,672	)	$	16,183

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Condensed Consolidating Statement of Cash Flows

							Other
				Guarantors			Subsidiaries
				on a			on a
				Combined			Combined			Consolidating		Total
Three Months Ended April 4, 2004	Parent			Basis			Basis			Adjustments		Consolidated
Net Cash Provided by Operating
Activities From Continuing Operations	$	319		$	11		$	7		$	—	$	337
Net Cash Used by Discontinued Operations		—			(8	)		—			—		(8	)
Net Cash Provided by Operating Activities		319			3			7			—		329
Cash Flows From Investing Activities:
Business acquisitions, net of cash acquired		(1	)		(29	)		(1	)		—		(31	)
Capital expenditures		(9	)		(32	)		(12	)		—		(53	)
Other, net		—			2			14			—		16
Net Cash Used by Investing Activities		(10	)		(59	)		1			—		(68	)
Cash Flows From Financing Activities:
Net repayments of commercial paper		(183	)		—			—			—		(183	)
Net repayments of other debt		—			—			(3	)		—		(3	)
Dividends paid		(63	)		—			—			—		(63	)
Other, net		(52	)		—			49			—		(3	)
Net Cash Used by Financing Activities		(298	)		—			46			—		(252	)
Cash sweep by parent		(43	)		56			(13	)		—		—
Net Increase in Cash and Equivalents		(32	)		—			41			—		9
Cash and Equivalents at Beginning of Period		179			—			681			—		860
Cash and Equivalents at End of Period	$	147		$	—		$	722		$	—	$	869

							Other
				Guarantors			Subsidiaries
				on a			on a
				Combined			Combined			Consolidating		Total
Three Months Ended March 30, 2003	Parent			Basis			Basis			Adjustments		Consolidated
Net Cash Provided by Operating
Activities From Continuing Operations	$	66		$	80		$	67		$	—	$	213
Net Cash Used by Discontinued Operations		—			(12	)		—			—		(12	)
Net Cash Provided by Operating Activities		66			68			67			—		201
Cash Flows From Investing Activities:
Business acquisitions, net of cash acquired		—			(1,075	)		—			—		(1,075	)
Capital expenditures		(1	)		(22	)		(8	)		—		(31	)
Other, net		(1	)		(5	)		—			—		(6	)
Net Cash Used by Investing Activities		(2	)		(1,102	)		(8	)		—		(1,112	)
Cash Flows From Financing Activities:
Net proceeds from commercial paper		1,654			—			—			—		1,654
Purchases of common stock		(274	)		—			—			—		(274	)
Dividends paid		(60	)		—			—			—		(60	)
Other, net		17			—			(6	)		—		11
Net Cash Provided by Financing Activities		1,337			—			(6	)		—		1,331
Cash sweep by parent		(1,313	)		1,034			279			—		—
Net Increase in Cash and Equivalents		88			—			332			—		420
Cash and Equivalents at Beginning of Period		55			—			273			—		328
Cash and Equivalents at End of Period	$	143		$	—		$	605		$	—	$	748

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GENERAL DYNAMICS CORPORATION

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

April 4, 2004

(Dollars in millions, except per share amounts)

Business Overview

     General Dynamics designs, develops, manufactures and supports leading-edge technology products and services for mission-critical information systems and technologies; land and expeditionary combat systems, armaments and munitions; shipbuilding and marine systems; and business aviation. The company’s primary customers are the U.S. military, other government organizations, the armed forces of allied nations and a diverse base of corporate and industrial buyers. It operates through four primary business groups – Information Systems and Technology, Combat Systems, Marine Systems and Aerospace – and a smaller Resources group. The following discussion should be read in conjunction with the company’s 2003 Annual Report on Form 10-K filed with the Securities and Exchange Commission and with the unaudited Consolidated Financial Statements included herein.

Results of Operations

Consolidated Overview

     The company’s net sales were $4.8 billion for the three-month period ended April 4, 2004, an increase of 39 percent from the first quarter of 2003. The increase in net sales resulted from significant growth in each of the company’s defense businesses, reflecting the continued investment in military and homeland defense initiatives by both the United States and its allies. In particular, the Information Systems and Technology group continues to benefit from the emphasis its defense and intelligence customers place on network-centric communications and intelligence systems. Business acquisitions in the Information Systems and Technology and Combat Systems groups in 2003 also increased the company’s net sales in the quarter.

     Operating earnings grew 39 percent to $442 for the first quarter of 2004 compared with the same period in 2003. The earnings growth resulted from the substantial increase in volume and was augmented by improved performance in the Marine Systems and Aerospace groups, reflecting the company’s continued emphasis on program performance and the improving business-jet market. General and administrative expenses as a percent of net sales decreased to 6.3 percent in the first quarter of 2004 from 6.9 percent in the first quarter of 2003. Operating margins were 9.3 percent for both periods.

     The company’s total backlog rose to $41.6 billion at April 4, 2004, up from $41.1 billion at the end of 2003. Considerable new-order activity in all business groups fueled the growth in backlog. The company received $5.1 billion in new orders during the quarter. The funded backlog increased 7 percent from year-end 2003, reaching $27 billion at April 4, 2004. The total backlog does not include work awarded under numerous indefinite delivery, indefinite quantity (IDIQ) contracts. The total potential value of these contracts, which may be realized over the next 10 years, was approximately $6.1 billion as of April 4, 2004.

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Information Systems and Technology

	April 4			March 30
Three Months Ended	2004			2003			Variance
Net sales	$	1,716		$	995		$	721	72	%
Operating earnings		170			111			59	53	%
Operating margin		9.9	%		11.2	%

     Net sales and operating earnings in the Information Systems and Technology group increased substantially in the first quarter of 2004 as compared with the same period in 2003. Growing demand for the company’s communications and information technology products and services, both in the United States and abroad, fueled solid growth in sales and earnings in all of the group’s lines of business. In particular, volume was up in the company’s command-and-control and communications systems programs including:

• The Land Warrior soldier modernization system;

• The Rescue 21 search-and-rescue system for the U.S. Coast Guard;

• The BOWMAN secure digital voice and data system for the United Kingdom’s armed forces; and

• The U.S. Army’s Warfighter Information Network – Tactical (WIN-T).

Sales of high-speed encryption devices, secure network products, and surveillance and reconnaissance systems also increased in the quarter. The increased volume across the group was supplemented by the addition of newly-acquired businesses in the second half of 2003, most notably Veridian Corporation (Veridian) in August 2003.

     The group’s operating margins were down for the first three months of 2004 versus the same period in 2003 due to the addition of the lower-margin contract mix from acquired businesses. However, margins have improved from the fourth quarter of 2003, reflecting the continued successful integration of these businesses into the group’s portfolio. The company expects the Information Systems and Technology group’s operating margins for the full year to be consistent with the first quarter results.

     In March 2004, the company entered into a definitive agreement to acquire Spectrum Astro, Inc., of Gilbert, Arizona, a privately held space systems integrator for the U.S. government. Spectrum Astro’s capabilities include manufacturing and integration of spacecraft subsystem hardware, software and ground-support equipment. The acquisition is subject to regulatory approval and is expected to close in the second quarter of 2004.

Combat Systems

	April 4			March 30
Three Months Ended	2004			2003			Variance
Net sales	$	1,111		$	815		$	296	36	%
Operating earnings		117			92			25	27	%
Operating margin		10.5	%		11.3	%

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     The Combat Systems group’s net sales and operating earnings for the first quarter of 2004 grew significantly over the same three-month period in 2003. The rise in net sales was due largely to the 2003 acquisitions of GM Defense in March, IMCO in September and Steyr in October. Net sales and operating earnings for the first quarter of 2004 were also favorably impacted by increased activity in the group’s armaments and munitions programs, the Army’s Future Combat Systems program, and the Piranha and Leopard tank production programs in Europe. Operating margins were down slightly in the first quarter of 2004 versus 2003 due to the addition of the contract base associated with new businesses and some shift in the group’s contract mix. Management believes there is opportunity for margin improvement in the Combat Systems group in 2004 and expects full-year operating margins to be consistent with 2003 results.

     In March 2004, the company agreed on terms of a cash offer to acquire Alvis plc. The offer is valued at approximately $550. The boards of directors of both companies have approved the transaction, which is subject to regulatory approval and the tender of a majority of the outstanding shares. The company expects the transaction to be completed in the second half of 2004. Alvis manufactures main battle tanks, armored infantry vehicles, armored personnel carriers and light armored vehicles in the United Kingdom, Scandinavia and South Africa.

Marine Systems

	April 4			March 30
Three Months Ended	2004			2003			Variance
Net sales	$	1,280		$	976		$	304	31	%
Operating earnings		98			65			33	51	%
Operating margin		7.7	%		6.7	%

     The Marine Systems group’s net sales experienced strong growth in the first quarter of 2004 as compared with the same period in 2003. Increased activity on engineering and repair contracts, as well as early-stage production and development contracts, such as the Virginia-class submarine, the T-AKE combat logistics ships and the conversion of Trident submarines to a conventional-strike configuration (SSGN), led the group’s sales increase. The group’s operating earnings for the first quarter of 2004 increased markedly, reflecting the growth in sales volume as well as improved performance on the group’s commercial shipbuilding contracts. The group’s 2003 operating earnings were depressed by losses recorded on its contracts to build two roll-on/roll-off cargo ships and four double-hull oil tankers. No charges were taken on these programs in the first quarter of 2004. The final cargo ship under contract was delivered in the third quarter of 2003. There was no further deterioration in the first quarter of 2004 in the estimate to complete the four oil tankers. As of the end of the quarter, the first and second ships were approximately 93 percent and 67 percent complete, respectively. The company will continue to monitor the program’s performance but does not expect to record any additional losses on this contract going forward. The first two ships are scheduled to be delivered this year, the third in 2005 and the fourth in 2006.

     Operating margins improved significantly in the first three months of 2004 compared with the first quarter of 2003 and full-year 2003 due to the absence of commercial shipbuilding charges and the increased volume on higher-margin repair and engineering contracts. The company expects the group’s full-year operating margins to remain steady with the first quarter results.

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Aerospace

	April 4			March 30
Three Months Ended	2004			2003			Variance
Net sales	$	606		$	594		$	12	2	%
Operating earnings		66			40			26	65	%
Operating margin		10.9	%		6.7	%
Aircraft deliveries (in units):
Green		17			15
Completion		12			17

     Net sales in the Aerospace group were up slightly in the first quarter of 2004 compared with the same period in 2003. Higher deliveries of green aircraft and increased activity in aircraft services were offset partially by decreased sales of pre-owned aircraft and fewer aircraft completions.

     Operating earnings increased significantly for the three-month period ended April 4, 2004, up 65 percent from the first quarter of 2003. The growth in earnings resulted primarily from the absence of losses on pre-owned aircraft sales. The number of pre-owned units available for sale in the market has declined dramatically from the levels seen in 2003, resulting in a more stable market and improved pricing. In the first quarter of 2003, losses on pre-owned sales were $24. Operating earnings for the first quarter of 2004 also reflected the initial favorable effects of cost-reduction initiatives undertaken by the company in 2003. The company remains cautiously optimistic about the outlook for the Aerospace group and believes the business-jet market continues to show signs of improvement based on recent price stabilization and decreased levels of new and pre-owned aircraft inventory. The group’s operating margins have continued to grow quarter-over-quarter, reaching double-digit levels for the second straight quarter. The company expects full-year operating margins to remain at or above the first quarter 2004 results assuming continued firming of prices, the absence of pre-owned aircraft losses and favorable results from cost-reduction initiatives. (See Notes G and K to the unaudited Consolidated Financial Statements for additional information regarding the Aerospace group’s aircraft inventories and trade-in commitments.)

Resources

	April 4			March 30
Three Months Ended	2004			2003		Variance
Net sales	$	47		$	41	$	6		15	%
Operating earnings		(9	)		10		(19	)	-190	%

     The Resources group’s net sales increased 15 percent for the three-month period ended April 4, 2004, due to increased volume in the company’s aggregates business. Operating earnings decreased in the first quarter of 2004 compared to the same period in 2003 as a result of unfavorable seasonal conditions and slightly reduced pension earnings in the company’s commercial pension plans. In addition, operating earnings in the company’s coal mining operations in the first quarter of 2003 were favorably impacted by the reduction of surface reclamation obligations upon adoption of Statement of Financial Accounting Standards No. 143, “Accounting for Asset Retirement Obligations.”

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Backlog

     The following table details the backlog and the total estimated contract value of each business group at April 4, 2004, and December 31, 2003:

April 4, 2004
									Total
							IDIQ		Estimated
					Total		Contract		Contract
	Funded		Unfunded		Backlog		Value		Value
Information Systems and Technology	$	6,480	$	1,445	$	7,925	$	5,934	$	13,859
Combat Systems		6,320		2,370		8,690		183		8,873
Marine Systems		9,968		8,357		18,325		—		18,325
Aerospace		4,094		2,386		6,480		—		6,480
Resources		145		57		202		—		202
Total	$	27,007	$	14,615	$	41,622	$	6,117	$	47,739

December 31, 2003
									Total
							IDIQ		Estimated
					Total		Contract		Contract
	Funded		Unfunded		Backlog		Value		Value
Information Systems and Technology	$	6,164	$	1,529	$	7,693	$	6,517	$	14,210
Combat Systems		6,029		2,447		8,476		162		8,638
Marine Systems		8,775		9,388		18,163		—		18,163
Aerospace		4,127		2,397		6,524		—		6,524
Resources		163		57		220		—		220
Total	$	25,258	$	15,818	$	41,076	$	6,679	$	47,755

Defense Businesses

     The total backlog for the company’s 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 Congress and funded by the customer. The unfunded backlog represents firm orders for which funding has not been appropriated. The backlog does not include work awarded under IDIQ contracts. Because the value in these arrangements is subject to the customer’s future exercise of an indeterminate quantity of delivery orders, these contracts are recognized in the backlog only when funded.

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     The company received several notable contract awards during the first quarter of 2004, including the following:

     The Combat Systems group received an order from the Army valued at over $280 for the fourth brigade of Stryker wheeled combat vehicles. The order is for 212 out of 300 vehicles that are scheduled to be delivered between February 2005 and January 2006.

     The Combat Systems group received orders worth approximately $125 from the U.S. Army Aviation and Missile Command for the production of unguided Advanced Precision Kill Weapon System (APKWS, formerly known as Hydra-70) 70mm rockets, motors and warheads. These orders extend deliveries through 2006 and bring the total contract value to date to $960.

     The U.S. Army Joint Munitions Command awarded the Combat Systems group a $104 modification to a contract for the production of MK80 Series bomb bodies. The contract consists of a base award and two options and has a total potential value of $240. Deliveries are scheduled through 2005.

     In the Marine Systems group, the Navy exercised two options worth approximately $580 for the fifth and sixth ships in the T-AKE program, a new class of combat logistics force ships. The contract has options for six more ships for a total potential contract value of $3.7 billion.

     The Marine Systems group received $165 in modifications to its contract to convert four Trident ballistic-missile submarines to an SSGN configuration, a multi-mission submarine optimized for tactical strike and special-operations support. These awards modify a $443 contract that the Navy awarded to the Marine Systems group in 2002 for the design and related support of the conversion program. If all options are exercised, the total potential contract value is approximately $1 billion.

     The Navy awarded the Marine Systems group a contract modification worth $111 to perform depot modernization services on the USS Springfield submarine. Under the modification, the Marine Systems group will perform repairs, alterations, maintenance, testing and routine work onboard the submarine through June 2005.

Aerospace

     The Aerospace funded backlog includes orders for which the company has definitive purchase contracts and deposits from the customer. The Aerospace unfunded backlog consists of options to purchase new aircraft and agreements to provide future aircraft maintenance and support services.

     A significant portion of the Aerospace backlog is with an unaffiliated customer, NetJets Inc. (NetJets), a unit of Berkshire Hathaway and the leader in the fractional aircraft market. NetJets purchases the aircraft for use in its fractional ownership program. As of April 4, 2004, backlog with NetJets for all aircraft types represented 51 percent of the Aerospace funded backlog and 83 percent of the Aerospace unfunded backlog.

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Financial Condition, Liquidity and Capital Resources

Operating Activities

     The company continued to generate strong cash flow in the first quarter of 2004, with net cash provided by operating activities totaling $329 versus $201 in the same period in 2003. The primary drivers of the solid cash flow in the first quarter of 2004 were net earnings and customer deposits received in the quarter. Free cash flow from operations for the quarter was $276 compared to $170 for the first quarter of 2003. Management defines free cash flow from operations as net cash provided by operating activities less capital expenditures. Management believes free cash flow from operations is a useful measure for investors, because it portrays the company’s ability to generate cash from its core businesses for such purposes as repaying maturing debt, funding business acquisitions and paying dividends. The following table reconciles the free cash flow from operations with net cash provided by operating activities, as classified on the unaudited Consolidated Statement of Cash Flows:

	April 4			March 30
Three Months Ended	2004			2003
Cash provided by operating activities	$	329		$	201
Capital expenditures		(53	)		(31	)
Free cash flow from operations	$	276		$	170

     The company expects to continue to generate funds from operations in excess of its short- and long-term liquidity needs and believes it has adequate funds on hand and sufficient borrowing capacity to execute its financial and operating strategy.

     As discussed further in Note K to the unaudited Consolidated Financial Statements, litigation on the A-12 program termination has been ongoing since 1991. If, contrary to the company’s expectations, the default termination is ultimately sustained, the company and 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 $1.1 billion at April 4, 2004. In this outcome, the government contends the company’s liability would be approximately $1.2 billion pretax, or $707 after-tax. The company believes it has sufficient resources to pay such an obligation, if required, while still retaining ample liquidity.

Investing Activities

     Net cash used by investing activities was $68 for the three-month period ended April 4, 2004, compared to $1.1 billion for the first quarter of 2003. Cash used for investing activities was higher in the first quarter of 2003 due to the acquisition on March 1, 2003, of GM Defense of London, Ontario, a business unit of General Motors Corporation, for $1.1 billion in cash. The company issued commercial paper to finance the acquisition.

Financing Activities

     Financing activities used cash of $252 in the first quarter of 2004 and provided cash of $1.3 billion in the same period in 2003. The cash was used primarily to repay outstanding debt in the first quarter of 2004. In the first quarter of 2003, the company received net proceeds of $1.7 billion from the issuance of commercial paper to fund the GM Defense acquisition and to repurchase the company’s outstanding shares.

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     On March 3, 2004, the company’s board of directors declared an increased regular quarterly dividend of $.36 per share – the seventh consecutive annual increase. The company had previously increased the regular quarterly dividend to $.32 per share in March 2003.

     The company’s stock repurchases are also included in financing activities. In the first quarter of 2003, the company repurchased 4.2 million shares at an average price of $64.55 per share, or a total value of approximately $274. The company did not repurchase any shares during the first three months of 2004. The company has approximately 4.5 million remaining shares authorized for repurchase as of April 4, 2004.

Additional Financial Information

Provision for Income Taxes

     The company’s effective tax rate for the three-month period ended April 4, 2004, was 33.3 percent compared with 28.9 percent for same period in 2003. The 2003 rate was favorably impacted by the resolution of certain outstanding state tax disputes during the first quarter, resulting in a $15, or $.08 per share, non-cash benefit. In the absence of further adjustments resulting from resolution of outstanding tax disputes, the company currently expects the effective tax rate for 2004 to be consistent with the first quarter rate. For further discussion of tax matters, as well as a discussion of the net deferred tax liability, see Note J to the unaudited Consolidated Financial Statements.

Environmental Matters and Other Contingencies

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

Application of Critical Accounting Policies

     Management’s Discussion and Analysis of the company’s Financial Condition and Results of Operations is based on the company’s unaudited Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). The preparation of financial statements in accordance with GAAP requires management to 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. 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. There have been no significant changes in the company’s critical accounting policies during the first quarter of 2004.

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GENERAL DYNAMICS CORPORATION

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES

ABOUT MARKET RISK

April 4, 2004

     There were no material changes with respect to this item from the disclosure included in the company’s Annual Report on Form 10-K for the year ended December 31, 2003.

ITEM 4. CONTROLS AND PROCEDURES

     The company’s management, under the supervision and with the participation of the Chief Executive Officer and the Chief Financial Officer, evaluated the effectiveness of the company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended) as of April 4, 2004. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of April 4, 2004, the company’s disclosure controls and procedures were effective.

     There were no changes in the company’s internal controls over financial reporting that occurred during the quarter ended April 4, 2004, that have materially affected, or are reasonably likely to materially affect, the company’s internal controls over financial reporting.

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GENERAL DYNAMICS CORPORATION

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” and variations of these words and similar expressions are intended to identify forward-looking statements, which 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, which are difficult to predict. Therefore, actual future results and trends may differ materially from what is forecast in forward-looking statements due to a variety of factors, including, without limitation:

• General U.S. and international political and economic conditions;

• Changing priorities in the U.S. government’s defense budget (including changes in priorities in response to terrorist threats or to improved homeland security);

• Termination 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;

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

• Reliance on a large fleet customer for a majority of the firm aircraft contracts backlog and most of the options backlog; 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. The company does 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.

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GENERAL DYNAMICS CORPORATION

PART II - OTHER INFORMATION

April 4, 2004

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 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

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

(b)	Reports on Form 8-K
	On January 21, 2004, the company furnished a Form 8-K under Item 12, Results of Operations and Financial Condition, announcing the company’s results for the quarter and year ended December 31, 2003.
	On January 21, 2004, the company furnished a Form 8-K under Item 12, Results of Operations and Financial Condition, announcing that there was a typographical error in its fourth quarter earnings announcement.

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SIGNATURE

     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/ John W. Schwartz
	John W. Schwartz
	Vice President and Controller
	(Authorized Officer and Chief Accounting Officer)

Dated: May 6, 2004

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