-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, F30RxAKbW8g5jf39Hp72X3I+hHJKObuTCf+X57pK1xxhOIl7T6IuT/mYscellEig hFntfNrm6GpOWtWgls5l6g== 0000950133-94-000045.txt : 19940330 0000950133-94-000045.hdr.sgml : 19940330 ACCESSION NUMBER: 0000950133-94-000045 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19931231 FILED AS OF DATE: 19940329 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GENERAL DYNAMICS CORP CENTRAL INDEX KEY: 0000040533 STANDARD INDUSTRIAL CLASSIFICATION: 3721 IRS NUMBER: 131673581 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 34 SEC FILE NUMBER: 001-03671 FILM NUMBER: 94518638 BUSINESS ADDRESS: STREET 1: 3190 FAIRVIEW PARK DRIVE CITY: FALLS CHURCH STATE: VA ZIP: 22042 BUSINESS PHONE: 7038763375 MAIL ADDRESS: STREET 1: 3190 FAIRVIEW PARK DR CITY: FALLS CHURCH STATE: VA ZIP: 22042 10-K 1 10-K 1 =============================================================================== UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K /X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED) FOR THE FISCAL YEAR ENDED 31 DECEMBER 1993 OR / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED) For the transition period from to 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 I.R.S. Employer Incorporation or Organization Identification No. 3190 Fairview Park Drive, Falls Church, Virginia 22042-4523 - ------------------------------------------------ ---------- Address of principal executive offices Zip Code
Registrant's telephone number, including area code (703) 876-3000 -------------- Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange Title of Each Class on Which Registered - ------------------- ------------------- Common Stock, $1.00 Par Value New York Stock Exchange Chicago Stock Exchange Pacific Stock Exchange 9.95% Debentures Due 2018 New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None 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 (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ---- ---- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment of this Form 10-K. ---- The aggregate market value of the voting stock held by nonaffiliates of the Registrant was $2,492,779,308 at 11 March 1994, calculated in accordance with the Securities and Exchange Commission rules as to beneficial ownership. 63,340,390 shares of the Registrant's Common Stock were outstanding at 11 March 1994 (adjusted for two-for-one stock split effected in the form of a 100% stock dividend declared 4 March 1994 and payable 11 April 1994 to shareholders of record 21 March 1994). DOCUMENTS INCORPORATED BY REFERENCE: Parts I, II and IV incorporate information from certain portions of the Registrant's 1993 Shareholder Report. Part III incorporates information from certain portions of the Registrant's definitive Proxy Statement to be filed with the Securities and Exchange Commission within 120 days after the close of the fiscal year. =============================================================================== 2 PART I ITEM 1. BUSINESS INTRODUCTION General Dynamics Corporation (the Company) is a Delaware corporation formed in 1952 as successor to the Electric Boat Company, now the Company's Nuclear Submarines business. Consolidated Vultee Aircraft Corporation was merged into the Company in 1954 and from it emerged the Company's former Tactical Military Aircraft and Missile Systems businesses and the Space Launch Systems business. The Material Service Resources Company is the successor to the Material Service Corporation which was merged into the Company in 1959. Chrysler Defense, Inc., now the Company's Armored Vehicles business, was acquired in 1982. The Cessna Aircraft Company, formerly the Company's General Aviation business, was acquired in 1985. In addition, the Company operates other smaller businesses. Prior to 1992, the businesses of the Company included the following: Tactical Military Aircraft, Nuclear Submarines, Armored Vehicles, Space Launch Systems, Missile Systems and General Aviation. Over the past two years, the Company has sold its Tactical Military Aircraft, Missile Systems and General Aviation businesses, as well as certain other smaller businesses, and the sale of its Space Launch Systems business is expected to close by April 1994. The Company's remaining continuing business segments are Nuclear Submarines, Armored Vehicles and Other. The Other business segment is composed of Freeman Energy Corporation (Freeman), American Overseas Marine Corporation (AMSEA) and Patriot I, II and IV Shipping Corporations (Patriots). A general description of these businesses including products, properties and other related information follows. For financial information and further discussion of the business segments, as well as an overall discussion of the Company's business environment, reference is made to Management's Discussion and Analysis of the Results of Operations and Financial Condition, appearing on pages 12 through 17 in the Company's 1993 Shareholder Report, included in this Form 10-K-Annual Report as Exhibit 13 and incorporated herein by reference. NUCLEAR SUBMARINES The Company's Electric Boat Division (Electric Boat) is a designer and builder of nuclear submarines for the U.S. Navy. Electric Boat also performs overhaul and repair work on submarines as well as a broad range of engineering work including advanced research and technology development, systems and component design evaluation, prototype development and logistics support to the operating fleet. Certain components and subassemblies of the submarines, such as electronic equipment, are produced by other firms. Electric Boat has contracts for SSN 688-class attack submarines (SSN 688), Trident ballistic missile submarines (Trident) and Seawolf class attack submarines, all of which are currently under construction at its 96 acre shipyard on the Thames River at Groton, Connecticut. The shipyard, which contains a covered area in excess of 2.6 million square feet, is owned by the Company. Electric Boat also produces modular submarine hull sections, components and subassemblies in leased facilities at Quonset Point, Rhode Island, and in Company-owned facilities at Avenel, New Jersey and Charleston, South Carolina. Due to the winding down of the SSN 688 and Trident programs, the Company has announced that it plans to close the Charleston facility in early 1994. Approximately 45% of Electric Boat's property, plant and equipment was fully depreciated at 31 December 1993. Electric Boat competed with Newport News Shipbuilding and Drydock Company (Newport News) for construction of the SSN 688 and Seawolf submarines. Electric Boat is currently the sole-source producer of Trident and Seawolf submarines. For most engineering work, Electric Boat competes in a highly competitive environment with several smaller specialized firms in addition to Newport News. ARMORED VEHICLES The Company's Land Systems Division (Land Systems) is the sole-source producer of main battle tanks for the U.S. Government. Land Systems designs and manufactures the M1 Series Abrams Main Battle Tank for the U.S. Army and the U.S. Marine Corps. Land Systems also performs engineering and upgrade work as well as provides support for existing armored vehicles. Production of the M1A1, a version of the M1 that incorporates increased firepower, additional crew protection features, and improved armor, was initiated in 1985. Production of the M1A2, the latest version of the M1 which incorporates battlefield management systems aimed at providing improved fightability, as well as improved survivability of the tank's four crew members, was initiated in 1992. In addition to domestic sales, M1 tanks are being sold through the U.S. Government to various foreign governments. Land Systems provides training in operation and maintenance and other logistical support on international sales. - 1 - 3 Certain components of the M1 series tank, such as the engine and the transmission and final drive, are produced by other firms. Land Systems has bid and is currently bidding on other armored vehicle and related programs for the U.S. Government in competition primarily with FMC Corporation. The current international market is characterized by intense competition for a limited number of business opportunities. The Company has been successful in competitive bids for production contracts and related logistic support with Egypt, Saudi Arabia and Kuwait, but was unsuccessful on similar bids with the United Arab Emirates and Sweden. Tank production is performed at the 1.6 million square foot plant on 370 acres in Lima, Ohio, and machining operations are performed at the 1.2 million square foot plant on 145 acres in Warren (Detroit), Michigan. Each is owned by the U.S. Government and operated by Land Systems under a facilities contract. In support of these plants, Land Systems leases property in Scranton, Pennsylvania, and owns or leases property in various locations in Michigan. The Company, teamed with Tadiran Ltd. of Israel, was selected during 1988 as the second-source producer of the Single Channel Ground and Airborne Radio System (SINCGARS). The Company is currently participating in its first competitive bid under the SINCGARS program with ITT Corporation. A decision on the competition is expected during the first half of 1994. The Company leases space in Tallahassee, Florida to support SINCGARS production. OTHER Freeman mines coal, the majority of which is sold in the spot market or under short-term contracts to a variety of customers. Freeman's remaining coal production (approximately 45%) is sold under long-term contracts to utilities and industrial users located principally in the Midwest. Several of these long-term contracts have price adjustment clauses to reflect changes in certain costs of production. Freeman operates three underground mines and one surface mine in Illinois, along with one surface mine in Kentucky. Coal preparation facilities and rail loading facilities are located at each mine sufficient for its output. Total production from Freeman's mines was approximately 5 million tons in 1993, 4.5 million tons in 1992 and 3.6 million tons in 1991. In addition, Freeman owns or leases rights to over 600 million tons of coal reserves in Illinois and Kentucky. Due to the commodity nature of the Company's coal operations, the primary factors affecting competition are price and geographic service area. Freeman's operations are not significantly affected by seasonal variations. The 1990 Clean Air Act requires, among other things, a phased reduction in sulfur dioxide emissions by coal burning facilities over the next few years. Virtually all of the coal in Freeman's Illinois basin mines has medium or high sulfur content. The impact of compliance with the Clean Air Act will be mitigated in the near-term by Freeman's long-term contracts and through installation of pollution control devices by certain of Freeman's major customers. The long-term impact of the Clean Air Act is not known. AMSEA provides ship management services for five of the U.S. Navy's Maritime Prepositioning Ships (MPS) and twelve of the U.S. Maritime Administration's Ready Reserve Force (RRF) ships. The MPS are under five year contracts which expire in 1995 and 1996 but are renewable through the year 2011. The RRF ships are in the first year of five year contracts for which the Company competed with various other ship management providers. The MPS vessels operate worldwide and the RRF vessels are located on the east, gulf and west coasts of the United States. AMSEA's home office is in Quincy, Massachusetts. Patriots are financing subsidiaries which lease liquefied natural gas tankers constructed by the Company to unrelated third parties. DISCONTINUED OPERATIONS The Company has sold or intends to sell certain businesses that are reported as discontinued operations in the Company's financial statements. The remaining businesses are as follows: The Company's Convair Division is the sole-source producer of fuselages for the McDonnell Douglas Corporation (McDonnell Douglas) MD-11 wide body tri-jet aircraft. Production work is performed in San Diego, California in facilities owned by the Company which are on land leased from the San Diego Port Authority. Material Service Corporation (Material Service) is engaged in the quarrying and direct sale of aggregates (e.g. stone, sand and gravel), and the production and direct sale of ready mix concrete and other concrete products. Material Service's aggregate and concrete facilities and operations are located primarily in Illinois. - 2 - 4 REAL ESTATE HELD FOR DEVELOPMENT As part of the sale of businesses, certain related properties were retained by the Company. These properties have been segregated on the Consolidated Balance Sheet as real estate held for development. The Company has retained outside experts to support the development of plans which will maximize the market value of these properties. These properties include: 232 acres in Kearny Mesa and 2,420 acres in Sycamore Canyon, both of which are in the vicinity of San Diego, California; 375 acres in Rancho Cucamonga, California; and 53 acres in Camden, Arkansas. Most of this property is undeveloped. The Company owns 3.7 million square feet of building space on the aforementioned properties, as well as .6 million square feet of building space on land leased from the San Diego Port Authority. Certain of these facilities are currently being leased by the purchasers of the related sold businesses for what is expected to be a short transition period. GENERAL INFORMATION Backlog - ------- The following table shows the approximate backlog of the Company (excluding discontinued operations) as calculated at 31 December 1993 and 1992 and the portion of the 31 December 1993 backlog not reasonably expected to be filled during 1994 (dollars in millions):
Portion of 1993 backlog not 31 December expected to --------------------- be filled 1993 1992 during 1994 ---- ---- ----------- Nuclear Submarines $ 3,787 $ 5,154 $ 2,177 Armored Vehicles 1,197 1,243 313 Other 2,031 2,091 1,911 --------- --------- --------- Total Backlog $ 7,015 $ 8,488 $ 4,401 ========= ========= ========= Total Funded Backlog $ 5,487 $ 6,780 ========= ========= Total Unfunded Backlog $ 1,528 $ 1,708 ========= =========
Backlog represents the total estimated remaining sales value of authorized work. Backlog excludes announced orders for which definitive contracts have not been executed, except for amounts funded prior to definitization. Funded backlog includes amounts that have been appropriated by the U.S. Congress, and authorized and funded by the procuring agency. Funded backlog also includes amounts which have been authorized on Foreign Military Sales and long-term coal contracts. Unfunded backlog includes amounts for which there is no assurance that congressional appropriations or agency allotments will be forthcoming. Insofar as the backlog represents orders from the U.S. Government, it is subject to cancellation and other risks associated with government contracts (see "U.S. Government Contracts"). U. S. Government Contracts - -------------------------- The Company's net sales to the U.S. Government include Foreign Military Sales (FMS). FMS are sales to foreign governments through the U.S. Government, whereby the Company contracts with and receives payment from the U.S. Government and the U.S. Government assumes the risk of collection from the customer. U.S. Government sales were as follows (excluding discontinued operations; dollars in millions):
Year Ended 31 December ------------------------------------ 1993 1992 1991 ---- ---- ---- Domestic $ 2,202 $ 2,706 $ 2,792 FMS 801 276 149 --------- --------- --------- Total U.S. Government $ 3,003 $ 2,982 $ 2,941 ========= ========= ========= Percent of net sales 94% 92% 93%
- 3 - 5 All U.S. Government contracts are terminable at the convenience of the U.S. Government, as well as for default. Under contracts terminable at the convenience of the U.S. Government, a contractor is entitled to receive payments for its allowable costs and, in general, the proportionate share of fees or earnings for the work done. Contracts which are terminated for default generally provide that the U.S. Government only pays for the work it has accepted and may require the contractor to pay for the incremental cost of reprocurement and may hold the contractor liable for damages. In 1991, the U.S. Navy terminated the Company's A-12 aircraft contract for default. For further discussion, see Item 3 of this report. Companies engaged in supplying goods and services to the U.S. Government are dependent on congressional appropriations and administrative allotment of funds, and may be affected by changes in U.S. Government policies resulting from various military and political developments. U.S. Government contracts typically involve long lead times for design and development, and are subject to significant changes in contract scheduling. Often the contracts call for successful design and production of very complex and technologically advanced items. Foreign Sales and Operations - ---------------------------- The major portion of sales and operating earnings of the Company for the past three years was derived from operations in the United States. Although the Company purchases supplies from and subcontracts with foreign companies, it has no substantial operations in foreign countries. The majority of foreign sales are made as FMS through the U.S. Government, but certain direct foreign sales are made of components and support services. Direct foreign sales were $35 million, $42 million and $50 million in 1993, 1992 and 1991, respectively. The Company has indirect offset commitments relating to foreign contracts, whereby the Company provides economic benefits to the buying country through marketing assistance, technology transfers, direct procurement of products not related to the primary contract, and direct investments. Research and Development - ------------------------ Research and development activities in the Nuclear Submarines and Armored Vehicles segments are conducted principally under U.S. Government contracts. These research efforts are generally either concerned with developing products for large systems development programs or performing work under research and development technology contracts. In addition, the defense businesses engage in independent research and development, of which a significant portion is recovered through overhead charges to U.S. Government contracts. The table below details expenditures (excluding discontinued operations) for research and development (dollars in millions):
Year Ended 31 December ------------------------------------- 1993 1992 1991 ----- ---- ----- Company-sponsored $ 33 $ 32 $ 32 Customer-sponsored 142 122 81 -------- --------- --------- $ 175 $ 154 $ 113 ======== ========= =========
Supplies - -------- Many items of equipment and components used in the production of the Company's products are purchased from other manufacturers. Although the Company has a broad base of suppliers and subcontractors, it is dependent upon the ability of its suppliers and subcontractors to meet performance and quality specifications and delivery schedules. In some cases it is dependent on one or a few sources, either because of the specialized nature of a particular item or because of domestic preference requirements pursuant to which it operates on a given project. All of the Company's operations are dependent upon adequate supplies of certain raw materials, such as aluminum and steel, and on adequate supplies of fuel. Fuel or raw material shortages could also have an adverse effect on the Company's suppliers, thus impairing their ability to honor their contractual commitments to the Company. The Company has not experienced serious shortages in any of the raw materials or fuel supplies that are necessary for its production programs. - 4 - 6 Environmental Controls - ---------------------- Federal, state and local requirements relating to the discharge of materials into the environment and other factors affecting the environment have had and will continue to have an impact on the manufacturing operations of the Company. Thus far, compliance with the requirements has been accomplished without material effect on the Company's capital expenditures, earnings or competitive position. While it is expected that this will continue to be the case, the Company cannot assess the possible effect of compliance with future requirements. Patents - ------- Numerous patents and patent applications are owned by the Company and utilized in its development activities and manufacturing operations. It is also licensed under patents owned by others. While in the aggregate its patents and licenses are considered important in the operation of the Company's business, they are not considered of such importance that their loss or termination would materially affect its business. Engineering, production skills and experience are more important to the Company than its patents or licenses. Employees - --------- From the end of 1991 to the end of 1993, the Company's total employees decreased from about 80,600 to about 30,500. Approximately 70% of this decrease is due to the disposition of businesses in which the employees of the disposed businesses were transferred to the acquiring companies. At the end of 1993, approximately 40% of the Company's employees were covered by collective bargaining agreements with various unions, the most significant of which are the International Association of Machinists and Aerospace Workers, the Metal Trades Council of New London, Connecticut, the United Auto Workers Union (UAW), the Office and Professional Employees International Union and the United Mine Workers of America. During 1994, three collective bargaining agreements, which cover approximately 20% of the union represented work force, are scheduled to expire and are subject to negotiations with the respective unions, the most significant of which is the UAW at Land Systems. ITEM 2. PROPERTIES The information required for this item is included in Item 1 of this report. ITEM 3. LEGAL PROCEEDINGS As previously reported, the Company is a defendant in U.S. vs. Davis et al, a civil action in the Federal District Court for the Southern District of New York in which the U.S. Government alleges claims under the Civil False Claims Act. A judgment in favor of the Company was entered on 2 October 1992. On 4 January 1993, the U.S. Government appealed the District Court's judgment in favor of the Company. This appeal is now pending. On 7 January 1991, the U.S. Navy terminated for default a contract with the Company and McDonnell Douglas for the full-scale development of the U.S. Navy's A-12 aircraft. The U.S. Navy has demanded repayment of unliquidated progress payments, but agreed to defer collection pending resolution of the termination dispute. The Company and McDonnell Douglas filed a complaint in the U.S. Court of Federal Claims to contest the default termination. A trial on Count XVII of the complaint, which relates to the propriety of the termination for default, was concluded in October 1993. In December 1993, the Court issued preliminary findings of fact which appear favorable to the Company and McDonnell Douglas. The Court will not issue a decision before 21 July 1994, during which time other counts in the complaint will be prepared for decision. For further discussion, see Note P to the Consolidated Financial Statements appearing on page 29 in the Company's 1993 Shareholder Report, included in this Form 10-K-Annual Report as Exhibit 13 and incorporated herein by reference. The Company believes that ultimately it will be found not to have been in default of the contract. The Company is a defendant in a shareholders' derivative action filed in the California Superior Court for San Diego County on 17 January 1991. The suit was dismissed by the court on 10 May 1993, because the plaintiffs failed to make a demand on the Board of Directors of the Company prior to bringing action. The period to amend the complaint has expired. - 5 - 7 On 8 March 1993, a class action lawsuit, Berchin et al vs. General Dynamics Corporation and William A. Anders, was filed in the Federal District Court for the Southern District of New York. The suit alleges violations of various provisions of federal securities laws, fraud, negligent misrepresentation, and breach of fiduciary duty by the defendants with regard to disclosures made, or omitted, in the Company's tender offer completed in July 1992 and the subsequent divestiture of core businesses. The Company believes there is no liability in connection with this matter and intends to vigorously defend itself. The Company is directly or indirectly involved in seventeen Superfund sites in which the Company, along with other major U.S. corporations, has been designated a potentially responsible party (PRP) by the U.S. Environmental Protection Agency (EPA) or a state environmental agency with respect to past shipments of hazardous waste to sites now requiring environmental cleanup. Chatham Brothers Barrel Yard is a hazardous waste disposal site located near Escondido, California. The California Department of Toxic Substances Control is overseeing a cleanup of the site pursuant to California state laws and is seeking to recover its costs from a variety of PRPs, including the Company and several other major corporations in the aerospace and petroleum industries. To date, California has incurred about $8.7 million in costs, and estimates an additional $40 million to $60 million in investigation and remediation costs. Under the California equivalent of the federal Superfund law, all of the PRPs are jointly and severally liable to the State of California for these costs. The Casmalia Resources site is a former industrial waste disposal facility located near Santa Maria, California. Since March 1993, the Company and a large number of other PRPs have been negotiating with the EPA to fund and perform an environmental cleanup of this site. Site investigation studies are now just beginning, but estimates of total remediation costs have ranged from $30 million to $150 million. The Company is also involved in the cleanup and remediation of various conditions at sites it currently or formerly owned or operated, many of which were sites used in the conduct of the Company's government contracting business. The Company believes that a portion of these costs are recoverable under government contracts. The Company has defenses to liability in some cases, and in other cases the Company is acting to mitigate and minimize its potential liability. The Company is participating in steering committees and taking other actions to establish its percentage liability on an allocated and sharing basis with other PRPs. Although the Company's involvement and the extent of the remediation varies from site to site, the Company believes, based upon an analysis of each site, that its liability at the sites will not be deemed material to the financial condition or results of operations of the Company. Under the Federal Black Lung Benefits Act (the Act), a disabled coal miner with coal worker's pneumoconiosis may be entitled to monthly compensation for life. Approximately 50 claims for benefits under the Act by former employees of Freeman are pending and are in various stages of procedure, including a substantial number which are being contested by the Company. The claims are reviewed by Administrative Law Judges of the U.S. Department of Labor for determination of questions of disability and compensation. Freeman has outstanding approximately 40 claims which have been filed under the Illinois Occupational Disease Act. Many of the claims are disputed. The Company has established liabilities, on an actuarial basis, to pay for the estimated costs of any benefits that are ultimately awarded. The Company is also a defendant in other lawsuits and claims and in other investigations of varying nature. The Company believes these proceedings, in the aggregate, are not material to the Company's financial condition or results of operations. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of the Company's Security Holders during the fourth quarter of the year ended 31 December 1993. - 6 - 8 SUPPLEMENTARY ITEM. EXECUTIVE OFFICERS OF THE COMPANY The name, age, offices and positions held for the last five years of the Company's executive officers who are not directors are as follows:
AGE AT 31 DECEMBER NAME, POSITION AND OFFICE 1993 ------------------------- ---- Kent G. Bankus -- Vice President of the Company since April 1993; Staff Vice President of the Company July 1991 -- April 1993; Corporate Director in Government Relations July 1989 -- July 1991 51 Edward C. Bruntrager -- Vice President and General Counsel of the Company since March 1994; Assistant General Counsel of the Company January 1987 -- March 1994 46 Paul A. Hesse -- Vice President of the Company since May 1991; President and Chief Operating Officer of Dix & Eaton 1988 -- 1991 52 J. Steven Keate -- Vice President and Controller of the Company since March 1993; Controller of the Company December 1991 -- March 1993; Director in Corporate Finance of the Company 1990 -- 1991; Manager at the Company's Convair Division 1987 -- 1990 37 Ralph W. Kiger -- Vice President of the Company since May 1993; Staff Vice President of the Company March 1992 -- May 1993; Vice President of General Dynamics Services Company July 1991 -- March 1992; Vice President of the Company's Data Systems Division November 1988 -- July 1991 48 E. Alan Klobasa -- Staff Vice President and Secretary of the Company since March 1992; Secretary of the Company September 1987 -- March 1992 46 Molly R. Salky -- Vice President of the Company since August 1992; Director of Investor Relations March 1991 -- August 1992; Manager of Investor Relations November 1986 -- March 1991 36 D. Blaine Scheideman -- Senior Vice President of the Company since February 1991; Vice President of the Company August 1989 -- February 1991; Vice President of the Company's Fort Worth Division April 1975 -- August 1989 62 Henry J. Sechler -- Vice President of the Company since August 1991; Staff Vice President of the Company 1985 -- August 1991 61 Roger E. Tetrault -- Vice President of the Company and President of the Company's Land Systems Division since March 1993; Vice President of the Company and President of the Company's Electric Boat Division August 1992--March 1993; Vice President of the Company and General Manager of the Company's Electric Boat Division August 1991 -- August 1992; Vice President and Group Executive of Babcock and Wilcox 1990 -- 1991; Vice President and General Manager of Babcock and Wilcox's Naval Nuclear Fuel Division 1985 -- 1990 52 James E. Turner, Jr. -- President of the Company's Electric Boat Division since March 1993; Executive Vice President of the Company since February 1991; Vice President of the Company and General Manager of the Company's Electric Boat Division September 1988 -- February 1991 59 Charles D. Walbrandt -- Vice President and Treasurer of the Company since July 1993; Vice President of the Company September 1991 -- July 1993; Staff Vice President of the Company 1983 -- 1991 55
- 7 - 9
AGE AT 31 DECEMBER NAME, POSITION AND OFFICE 1993 ------------------------- ---- Mark S. Woolley -- Vice President of the Company since August 1992; Staff Vice President March 1991 -- August 1992; Director of Business Development and Analysis of the Company August 1990 -- March 1991; Director of Acquisitions and Dispositions Analysis at Textron, Inc. 1989 -- 1990 38 Michael W. Wynne -- Vice President of the Company and President of the Company's Space Systems Division since August 1992; Vice President of the Company and General Manager of the Company's Space Systems Division February 1991 -- August 1992; Vice President of the Company's Land Systems Division 1982 -- 1991 49
All executive officers of the Company are elected annually. There are no family relationships, as defined, between any of the above executive officers. No executive officer of the Company was selected pursuant to any arrangement or understanding between the officer and any other person. PART II ITEM 5. MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED SHAREHOLDER MATTERS General Dynamics Corporation common stock is listed on the New York Stock Exchange, Chicago Stock Exchange and Pacific Stock Exchange. The high and low market price of General Dynamics Corporation common stock and the cash dividends declared for each quarterly period within the two most recent fiscal years is included in Note T to the Consolidated Financial Statements appearing on page 32 in the Company's 1993 Shareholder Report, included in this Form 10-K - Annual Report as Exhibit 13 and incorporated herein by reference. There were 24,496 common shareholders of record of General Dynamics Corporation common stock at 31 December 1993. 10 ITEM 6. SELECTED FINANCIAL DATA The information on pages 12 through 17 and 34 of the 1993 Shareholder Report, included in this Form 10-K -- Annual Report as Exhibit 13, is incorporated herein by reference in response to this item. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION The information on pages 12 through 17 of the 1993 Shareholder Report, included in this Form 10-K -- Annual Report as Exhibit 13, is incorporated herein by reference in response to this item. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The information on pages 18 through 34 of the 1993 Shareholder Report, included in this Form 10-K -- Annual Report as Exhibit 13, is incorporated herein by reference in response to this item. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. - 8 - 11 PART III The information required to be set forth herein, Item 10, "Directors and Executive Officers of the Registrant," Item 11, "Executive Compensation," Item 12, "Security Ownership of Certain Beneficial Owners and Management," and Item 13, "Certain Relationships and Related Transactions," except for a list of the Executive Officers which is provided in Part I of this report, is included in the Company's definitive Proxy Statement pursuant to Regulation 14A, which is incorporated herein by reference, to be filed with the Securities and Exchange Commission no later than 120 days after the close of the fiscal year ended 31 December 1993. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) 1. Financial Statements--See Index on page 11. 2. Financial Statement Schedules--See Index on page 11. 3. Exhibits--See Index on pages 17 through 19. (b) Reports on Form 8-K There were no reports on Form 8-K filed during the 4th Quarter of 1993. - 9 - 12 SIGNATURES PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED. GENERAL DYNAMICS CORPORATION By: /S/ J. Steven Keate --------------------------------- J. Steven Keate Vice President and Controller 29 March 1994 PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS REPORT HAS BEEN SIGNED BELOW ON 29 MARCH 1994 BY THE FOLLOWING PERSONS ON BEHALF OF THE REGISTRANT AND IN THE CAPACITIES INDICATED, INCLUDING A MAJORITY OF THE DIRECTORS. William A. Anders Chairman and Director Thomas G. Ayers Director Frank C. Carlucci Director Nicholas D. Chabraja Director William J. Crowe, Jr. Director James S. Crown Director Lester Crown Director Charles H. Goodman Director Harvey Kapnick Vice Chairman and Director David S. Lewis Director James R. Mellor Chief Executive Officer and Director (Principal Executive Officer) Stanley C. Pace Director Allen E. Puckett Director Bernard W. Rogers Director Elliot H. Stein Director J. Steven Keate Vice President and Controller (Principal Financial and Accounting Officer) By: /S/ E. Alan Klobasa ----------------------------------- E. Alan Klobasa Attorney-in-Fact - 10 - 13 INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES ITEM 14(a) 1. AND 2.
PAGE ---- FORM SHAREHOLDER 10-K REPORT ---- ------ Report of Independent Public Accountants 12 33 Consolidated Financial Statements: Consolidated Statement of Earnings 18 Consolidated Balance Sheet 19 Consolidated Statement of Cash Flows 20 Consolidated Statement of Shareholders' Equity 21 Notes to Consolidated Financial Statements (A to T) 22 - 32 Financial Statement Schedules: I -- Marketable Securities 13 VII -- Guarantees of Securities of Other Issuers 14 IX -- Short-term Borrowings 15 X -- Supplementary Income Statement Information 16
All other schedules are not submitted because they are not applicable or not required, or because the required information is included in the financial statements or the notes thereto. The Report of Independent Public Accountants and Consolidated Financial Statements listed in the above Index under Shareholder Report, are included in this Form 10-K -- Annual Report as Exhibit 13 and are incorporated herein by reference. - 11 - 14 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Shareholders and Board of Directors of General Dynamics Corporation: We have audited in accordance with generally accepted auditing standards, the consolidated financial statements included in General Dynamics Corporation's 1993 Shareholder Report incorporated by reference in this Form 10-K, and have issued our report thereon dated 25 January 1994 (except with respect to the stock split discussed in Note K, as to which the date is 4 March 1994). Our audit was made for the purpose of forming an opinion on those statements taken as a whole. The schedules listed in the accompanying index are the responsibility of the Company's management and are presented for purposes of complying with the Securities and Exchange Commission's rules and are not part of the basic financial statements. These schedules have been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, fairly state in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. ARTHUR ANDERSEN & CO. Washington, D.C., 25 January 1994 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our reports included and incorporated by reference into this Form 10-K for the year ended 31 December 1993 into the Company's previously filed registration statements on Form S-8 file numbers 33-23448, 2-23904, 2-23032, 2-28952, 2-50980, 2-24270 and 2-88053. ARTHUR ANDERSEN & CO. Washington, D.C., 29 March 1994 - 12 - 15 SCHEDULE I -- MARKETABLE SECURITIES 31 DECEMBER 1993 (DOLLARS IN MILLIONS)
Amount at Which Each Portfolio of Equity Number of Security Shares or Issues and Units-- Each Other Principal Market Value Security Amount of Of Each Issue Issue Carried Bonds and Cost of Each at Balance in the Name of Issuer and Title of Each Issue Notes Issue Sheet Date Balance Sheet - -------------------------------------- --------- ------------ ------------- -------------- Marketable Securities - --------------------- Tax-Exempt Municipal Obligations $ 396 $ 396 $ 396 $ 396 Money Market Preferred Stock 452 shares 81 81 81 Preferred Stock 311,075 shares 14 14 14 -------- -------- -------- Total $ 491 $ 491 $ 491 ======== ======== ======== Other Investments (a) - ------------------ Preferred Stock 1,729,530 shares $ 50 $ 50 $ 50 ======== ======== ========
(a) Included in Other Assets on the Consolidated Balance Sheet in the Company's 1993 Shareholder Report. - 13 - 16 SCHEDULE VII--GUARANTEES OF SECURITIES OF OTHER ISSUERS 31 DECEMBER 1993 (DOLLARS IN MILLIONS)
Nature of Any Default by Issuer of Securities Guaranteed Name of Issuer Amount in Principal, of Securities Owned Interest, Guaranteed Total by Person Amount in Sinking Fund by Person Title of Issue Amount or Persons Treasury of or Redemption for Which of Each Class Guaranteed for Which Issuer of Provisions, Statement of Securities and Statement Securities Nature of or Payment is Filed Guaranteed Outstanding is Filed Guaranteed Guarantee of Dividends -------- ---------- ----------- -------- ---------- --------- ------------ AMSC Subsidiary Corporation Note Payable $30 None None Principal None and interest Continental Cement Company Notes payable $13 None None Principal None and interest Carbon River Coal Company Note payable $7 None None Principal None and interest
- 14 - 17 SCHEDULE IX--SHORT-TERM BORROWINGS (DOLLARS IN MILLIONS)
Weighted Average Weighted Outstanding Interest Average During the Year Rate --------------- Category of Aggregate Balance at Interest Daily During the Short-term Borrowings(a) 31 December Rate Maximum Average(b) Year(b) - ------------------------ ----------- ---- ------- ---------- ------ 1991 - ---- Commercial paper $ - -% $ 77 $ 4 6.5% 1992 - ---- None 1993 - ---- None
Notes: (a) Maturity ranges from overnight to six months from date of issue. No borrowings have provisions for extensions of maturity. (b) Based on the amounts outstanding at the end of each day. - 15 - 18 SCHEDULE X--SUPPLEMENTARY INCOME STATEMENT INFORMATION--YEARS ENDED 31 DECEMBER (DOLLARS IN MILLIONS)
Charged to Costs and Expenses(a) --------------------------------------------------- Item 1993 1992 1991 ---- ---- ---- ---- Maintenance and repairs $66 $57 $71
(a) Continuing operations only. - 16 - 19 INDEX TO EXHIBITS
Note Exhibit Number Number Description - ------ ------ ----------- (14) 2 --Asset Purchase Agreement, dated 8 December 1992, between the Company and Lockheed Corporation (13) 3-1A --Restated Certificate of Incorporation, effective 21 May 1991 (9) 3-1B --Rights Agreement, dated as of 1 February 1989, between the Company and Bankers Trust Company (15) 3-1C --Amendment, dated 1 August 1992, to Rights Agreement between the Company and Bankers Trust Company appointing First Chicago Trust Company of New York Successor Rights Agent (13) 3-2 --Bylaws as amended and restated 11 March 1992 3-2A --Bylaws as amended effective 5 May 1993 (1) 10-1A --Amendment of Mining Leases between American National Bank and Trust of Chicago, Trustee, and La Salle National Bank, Trustee, to Freeman Coal Mining Corporation, dated 1 January 1960 (1) 10-1B --Amendatory Agreement between Freeman United Coal Mining Company and American National Bank and Trust Company, as Trustee, and La Salle National Bank, as Trustee, dated 1 January 1975 (7) 10-3 --Facilities Contract N-00024-87-E-5409 between the United States and the Company as amended, relating to facilities at Pomona, California, dated 13 March 1987 (10) 10-3A --Modifications #A0013, A0014, P00001 to Facilities Contract N00024-87-E-5409 (1) 10-4A --Facilities Contract F33657-83-E-2119 between the United States and the Company, as amended, relating to Air Force Plant 19, San Diego, California, dated 1 July 1983 (12) 10-4B --Modification #P00014 to Facilities Contract F33657-83-E-2119 (1) 10-4C --Lease between San Diego Unified Port District and the Company relating to facilities at Lindbergh Field, San Diego, California, dated 9 October 1979 (1) 10-4D --Lease Amendment between San Diego Unified Port District and the Company relating to facilities at Lindbergh Field, San Diego, California, dated 2 August 1983 (3) 10-5A --General Dynamics Corporation Stock Option Plan adopted effective 1 January 1971 (8) 10-6A --General Dynamics Corporation Incentive Compensation Plan adopted 3 February 1988, approved by the shareholders on 4 May 1988 (12) 10-6B --General Dynamics Corporation Incentive Compensation Plan (as amended), approved by shareholders on 1 May 1991 (13) 10-6E --General Dynamics Corporation Gain/Sharing Plan as terminated 3 December 1991. (13) 10-6F --Stock Purchase Agreement, dated 1 November 1991, by and between the Company and CSC Domestic Enterprises, Inc. (13) 10-6G --Stock Purchase Agreement, dated 20 January 1992, between the Company and Textron, Inc. (2) 10-7A --Facilities Contract DAA307-79-C-0143 dated 19 June 1979 between the Company's General Dynamics Land Systems Inc. subsidiary and the United States relating to the Company's facilities at the Detroit Arsenal Tank Plant, Warren, Michigan (4) 10-7A-1 --1984 modifications to Facilities Contract DAAE07-79-C-0143 (8) 10-7A-2 --Modifications #A00018, P00071, P00072, P00075, P00077, P00078, P00081, P00083-P00088 to Facilities Contract DAAE07-79-C-0143 (12) 10-7A-3 --1990 Modifications to Facilities Contract DAAE07-79-C-0143 Modifications #A00040 - 00047, P00117-00131 (3) 10-7B --Facilities Contract DAAE07-82-E-0006, dated 23 April 1982 between the Company's General Dynamics Land Systems Inc. subsidiary and the United States relating to Government-owned facilities at the Lima Army Tank Plant, Lima, Ohio and the Detroit Arsenal Tank Plant, Warren, Michigan, pertaining to the M-1 tank (4) 10-7B-1 --1984 modifications to Facilities Contract DAAE07-82-E-0006 (5) 10-7B-2 --1985 modifications to Facilities Contract DAAE07-82-E-0006 (8) 10-7B-3 --Modifications A00026-A00033, P00041, P00048-P00058 to Facilities Contract DAAE07-82-E-0006
- 17 - 20
Note Exhibit Number Number Description - ------ ------ ----------- (12) 10-7B-4 --1990 Modifications to Facilities Contract DAAE07-82-E-0006 Modifications #A00041 - 00043, P00081-00087 (4) 10-7C-2 --Facilities Contract DAAE07-83-E-A001 dated 29 August 1983 and 1984 modifications between the Company's General Dynamics Land Systems Inc. subsidiary and the United States relating to Government owned facilities and equipment located at the Company's facility at Sterling Heights, Michigan (12) 10-7C-3 --1990 Modifications to Facilities Contract DAAE07-83-E-A0001, Modification P0010 (3) 10-7D --Facilities Contract DAAE07-83-E-A007 dated 29 January 1983 between the Company's General Dynamics Land Systems Inc. subsidiary and the United States relating to Government-owned facilities at the Scranton Defense Plant, Eynon, Pennsylvania (4) 10-7D-1 --1984 modifications to Facilities Contract DAAE07-83-E-A007 (5) 10-7D-2 --1985 modifications to Facilities Contract DAAE07-83-E-A007 (8) 10-7D-3 --Modifications #A00003, A00008, A00009, A00010, P00023-P00031 to Facilities Contract DAAE07-83-E-A007 (12) 10-7D-4 --1990 Modifications to Facilities Contract DAAE07-83-E-A007, Modifications P0051-P0062 (12) 10-7E --Facilities Contract DAAE07-90-E-A001 dated 24 June 1990 between the Company's General Dynamics Land Systems Inc. subsidiary and the United States relating to the Company's facilities at the Lima Army Tank Plant, Lima, Ohio (12) 10-7E-1 --1990 Modifications to Facilities Contract DAAE07-90-E-A001 Modifications #A00001-00004, P00001, P00002 (12) 10-7F --Facilities Contract DAAE07-91-E-A002 dated 21 December 1990 between the Company's General Dynamics Land Systems Inc. subsidiary and the United States relating to the Company's facilities at the Detroit Arsenal Tank Plant, Warren, Michigan (5) 10-8A --General Dynamics Corporation Retirement Plan for Directors adopted 6 March 1986 (6) 10-8E --Employment Agreement between the Company and David S. Lewis dated 21 October 1982, as last amended on 6 June 1985 (10) 10-9 --Facilities Contract N00024-87-E-5417 between the United States and the Company relating to facilities at Rancho Cucamonga, California (11) 10-12 --Employment Agreement dated as of 22 September 1989 between the Company and William A. Anders (11) 10-13 --Indenture of Lease dated 1 January 1986 by and between State of Rhode Island and Providence Plantations and Rhode Island Port Authority and Economic Development Corporation and the Company (11) 10-14 --Lease Agreement dated 28 November 1978 as amended 15 January 1989 between Rhode Island Port Authority and Economic Development Corporation and the Company (15) 10-15 --Asset Purchase Agreement, dated 8 May 1992, between the Company and Hughes Aircraft Company (15) 10-16 --Separation Agreement between the Company and William A. Anders dated as of 17 March 1993 (15) 10-17 --Separation Agreement between the Company and Harvey Kapnick dated as of 17 March 1993 (15) 10-18 --Employment Agreement between the Company and James R. Mellor dated as of 17 March 1993 (15) 10-19 --Separation Agreement between the Company and Lester Crown dated as of 15 March 1993 (15) 10-20 --Agreement between the Company and James J. Cunnane dated as of 16 March 1993 (15) 10-21 --Form of Agreement entered into between the Company and Corporate Officers who are retiring or being released from employment with the Company (15) 10-22 --Form of Agreement entered into between the Company and Corporate Officers who are being retained in employment with the Company 10-23 --Employment agreement between the Company and Nicholas D. Chabraja, dated 3 February 1993 as amended 22 December 1993
- 18 - 21
Note Exhibit Number Number Description - ------ ------ ----------- 11 --Statement re computation of per share earnings 13 --1993 Shareholder Report (pages 12-34) 21 --Subsidiaries 23 --Consent of Arthur Andersen & Co. (See Item 14 of this Report) 24-A --Powers of Attorney of the Board of Directors 24-B --Power of Attorney of J. Steven Keate, Principal Financial and Accounting Officer
NOTES (1) Filed as an exhibit to the Company's annual report on Form 10-K for the year ending 31 December 1980, and filed with the Commission 31 March 1981 (File Reference No. 1-3671), and incorporated herein by reference. (2) Filed as an exhibit to the Company's annual report on Form 10-K for the year ending 31 December 1981, and filed with the Commission 31 March 1982, and incorporated herein by reference. (3) Filed as an exhibit to the Company's annual report on Form 10-K for the year ending 31 December 1982, and filed with the Commission 30 March 1983 and incorporated herein by reference. (4) Filed as an exhibit to the Company's annual report on Form 10-K for the year ending 31 December 1984, and filed with the Commission 1 April 1985 and incorporated herein by reference. (5) Filed as an exhibit to the Company's annual report on Form 10-K for the year ending 31 December 1985, and filed with the Commission 31 March 1986, and incorporated herein by reference. (6) Filed as an exhibit to the Company's Registration Statement No. 33-6287 on Form S-1 filed with the Commission and incorporated herein by reference. (7) Filed as an exhibit to the Company's annual report on Form 10-K for the year ending 31 December 1986 and filed with the Commission 31 March 1987 and incorporated herein by reference. (8) Filed as an exhibit to the Company's annual report on Form 10-K for the year ending 31 December 1987 and filed with the Commission 17 March 1988 and incorporated herein by reference. (9) Filed as an exhibit to the Company's current report on Form 8-K filed with the Commission on 8 February 1989 and incorporated herein by reference. (10) Filed as an exhibit to the Company's annual report on Form 10-K for the year ending 31 December 1988 and filed with the Commission 23 March 1989 and incorporated herein by reference. (11) Filed as an exhibit to the Company's annual report on Form 10-K for the year ending 31 December 1989 and filed with the Commission 30 March 1990 and incorporated herein by reference. (12) Filed as an exhibit to the Company's annual report on Form 10-K for the year ending 31 December 1990 and filed with the Commission 29 March 1991 and incorporated herein by reference. (13) Filed as an exhibit to the Company's annual report on Form 10-K for the year ending 31 December 1991 and filed with the Commission 26 March 1992 and incorporated herein by reference. (14) Filed as an exhibit to the Company's current report on Form 8-K filed with the Commission on 16 March 1993 and incorporated herein by reference. (15) Filed as an exhibit to the Company's annual report on Form 10-K for the year ending 31 December 1992 and filed with the Commission on 30 March 1993 and incorporated herein by reference.
- 19 - EX-3.2A 2 BY-LAWS 1 ====================================================================== GENERAL DYNAMICS CORPORATION By-Laws As Amended effective 5 May 1993 ====================================================================== 2 BY-LAWS of GENERAL DYNAMICS CORPORATION --------------- ARTICLE I OFFICES SECTION 1. Registered Office. The registered office of General Dynamics Corporation (hereinafter called the Corporation) in the State of Delaware shall be in the City of Dover, County of Kent. The registered agent of the Corporation in said State is United States Corporation Company. SECTION 2. Other Offices. The Corporation may have such other offices in such places, either within or without the State of Delaware, as the Board of Directors of the Corporation (hereinafter called the Board) may from time to time determine. ARTICLE II MEETINGS OF STOCKHOLDERS SECTION 1. Annual Meetings. The annual meeting of the stockholders of the Corporation for the election of directors and for the transaction of any other proper business notice of which was given in the notice of such meetings shall be held on such date and at such time as shall be designated by the Board. If any annual meeting shall not be held on the date designated therefor the Board shall cause the meeting to be held as soon thereafter as conveniently may be. SECTION 2. Special Meetings. A special meeting of the stockholders for any purpose or purposes may be called at any time by the Chairman of the Board or by a majority of the directors. SECTION 3. Place of Meeting All meetings of the stockholders shall be held at such place or places, within or without the State of Delaware, as may from time to time be designated by the Board. SECTION 4. Notice of Meetings. Every stockholder shall furnish the Corporation through its Secretary with an address at which notices of meetings and all other corporate notices may be served on or mailed to him. Except as otherwise expressly required by statute, the Certificate of Incorporation or these By-Laws, notice of each meeting of the stockholders shall be given to each stockholder entitled to vote at such meeting not less than ten nor more than sixty days before the date of the meeting, by delivering a written notice thereof to him personally, or by depositing such notice in the United States mail in a postage prepaid envelope, directed to him at his post-office address furnished by him to the Corporation, or, if he shall not have furnished to the Corporation his address but his address shall otherwise appear on the records of the Corporation, then at his address as it shall so appear on the records of the Corporation, or, if he shall not have furnished to the Corporation his post-office address and his address shall not otherwise appear on the records of the Corporation, then at the registered office of the Corporation in the State of Delaware. Except as otherwise expressly required by statute, the Certificate of Incorporation or these By-Laws, no publication of any notice of a meeting of the stockholders shall be required, nor shall the giving of any notice of any adjourned meeting of stockholders be required if the time and place thereof are announced at the meeting at which the adjournment is taken. Every notice of a meeting of the stockholders shall state the place, date and hour of the meeting and, in the case of a special meeting, the purpose or purposes for which the meeting is called. SECTION 5. Quorum. At each meeting of the shareholders, except as otherwise expressly required by statute, the Certificate of Incorporation or these By-Laws, the holders of record of a majority of the issued and outstanding shares of stock of the Corporation entitled to be voted at such meeting, present either in person or by proxy, shall constitute a quorum for the transaction of business, provided, however, that in any case where the holders of Preferred Stock or any series thereof are entitled to vote as a class, a quorum of the Common 1 3 Stock and a quorum of the Preferred Stock or such series thereof shall be separately determined. In the absence of a quorum at any such meeting or any adjournment or adjournments thereof, a majority in interest of the stockholders of the Corporation present in person or by proxy and entitled to vote, or, in the absence of any stockholders, any officer entitled to preside at, or to act as secretary of, such meeting may adjourn the meeting from time to time, provided, however, that at any such meeting where the holders of Preferred Stock or any series thereof are entitled to vote as a class, if one class or series of stock of the Corporation but not the other has a quorum present, the meeting may proceed with the business to be conducted by the class or series having a quorum present, and may be adjourned from time to time in respect of business to be conducted by the class or series not having a quorum present. At any adjourned meeting at which a quorum is present, any business may be transacted which might have been transacted at the meeting as originally called. The absence from any meeting in person or by proxy of stockholders holding the number of shares of stock of the Corporation entitled to vote thereat required by statute, the Certificate of Incorporation or these By-Laws for action upon any given matter shall not prevent action at such meeting upon any other matter which may properly come before the meeting, if there shall be present thereat in person or by proxy stockholders holding the number of shares of stock of the Corporation entitled to vote thereat required in respect of such other matter. SECTION 6. Voting. (a) Except as otherwise expressly required by statute, the Certificate of Incorporation or these By-Laws, each stockholder shall at each meeting of the stockholders be entitled to one vote in person or by proxy for each share of stock of the Corporation entitled to be voted thereat held by him and registered in his name on the books of the Corporation on such date as may be fixed pursuant to Article Vll of these By-Laws as the record date for the determination of stockholders entitled to notice of and to vote at such meeting. (b) Shares of its own stock belonging to the Corporation, or to another corporation if a majority of the shares entitled to vote in the election of directors of such other corporation is held by the Corporation, shall not be entitled to vote. (c) Persons holding stock having voting power in a fiduciary capacity, or their proxies, shall be entitled to vote the shares so held, and persons whose stock having voting power is pledged shall be entitled to vote, unless in the transfer by the pledgor on the books of the Corporation he shall have expressly empowered the pledgee to vote thereon, in which case only the pledgee, or his proxy, may represent such stock and vote thereon. (d) No proxy shall be voted or acted upon after three years from its date, unless said proxy provides for a longer period. (e) If shares shall stand of record in the names of two or more persons, whether fiduciaries, members of a partnership, joint tenants, tenants in common, tenants by the entirety or otherwise, or if two or more persons shall have the same fiduciary relationship respecting the same shares, unless the Secretary shall have been given written notice to the contrary and have been furnished with a copy of the instrument or order appointing them or creating the relationship wherein it is so provided, their acts with respect to voting shall have the following effect: (i) if only one shall vote, his act shall bind all; (ii) if more than one shall vote, the act of the majority so voting shall bind all; and (iii) if more than one shall vote, but the vote shall be evenly split on any particular matter, then, except as otherwise required by the General Corporation Law of the State of Delaware, each faction may vote the shares in question proportionally. If the instrument so filed shall show that any such tenancy is held in unequal interests, the majority or even-split for the purpose of the next foregoing sentence shall be a majority or even-split in interest. (f) At all meetings of the stockholders all matters, except as otherwise expressly required by statute, the Certificate of Incorporation or these By-Laws, shall be decided by the vote of a majority in interest of the stockholders present in person or by proxy and entitled to vote on such matters, a quorum being present. Except in the case of votes for the election of directors and for other matters where expressly so required, the vote at any meeting of the stockholders on any question need not be by ballot, unless demanded by a stockholder present in person or by proxy and entitled to vote on such matters, or directed by the chairman of the meeting. Upon a demand of any such stockholder, or at the direction of such chairman, that a vote by ballot be taken on any question, such vote shall be taken. On a vote by ballot each ballot shall be signed by the stockholder voting, or on his behalf by his proxy, and it shall show the number of shares voted by him. 2 4 SECTION 7. Lists of Stockholders. It shall be the duty of the Secretary or other officer who shall have charge of the stock ledger of the Corporation, either directly or through another officer designated by him or through a transfer agent or transfer clerk appointed by the Board, to prepare and make, at least ten days before every meeting of the stockholders, a complete list of the stockholders of each class entitled to vote at said meeting, arranged in alphabetical order and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, at the place where the meeting is to be held for said ten days and shall be produced and kept at the time and place of the meeting, during the whole time thereof, and may be inspected by any stockholder who may be present. Upon the willful neglect or refusal of the directors to produce such list at any meeting for the election of director, they shall be ineligible for election to any office at such meeting. The stock ledger shall be the only evidence as to who are the stockholders entitled to examine the stock ledger, such list or the books of the Corporation, or to vote in person or by proxy at any meeting of stockholders. SECTION 8. Inspectors of Votes - Judges. Before, or at, each meeting of the stockholders at which a vote by ballot is to be taken, the Board, or the Chairman of such meeting, shall appoint two Inspectors of Votes or Judges to conduct the vote thereat. Each Inspector of Votes or Judge so appointed shall first subscribe an oath or affirmation faithfully to execute the duties of an Inspector of Votes or Judge at such meeting with strict impartiality and according to the best of his ability. Such Inspectors of Votes or Judges shall have the duties prescribed by law and shall decide upon the qualifications of voters and accept their votes and, when the vote is completed, shall count and ascertain the number of shares voted respectively for and against the question or questions on which a vote was taken and shall make and deliver a certificate in writing to the secretary of such meeting of the results thereof. The Inspectors of Votes or Judges need not be stockholders, and any officer or director may be an Inspector of Votes or Judge on any question other than a vote for or against his election to any position with the Corporation or any other question in which he may be directly interested. The Chairman of the meeting shall fix and announce at the meeting the date and time of the opening and the closing of the polls for each matter upon which the stockholders will vote at the meeting. SECTION 9. Nomination of Directors. Only persons who are nominated in accordance with the procedures set forth in the By-Laws shall be eligible to serve as directors. Nominations of persons for election to the Board of Directors of the Corporation may be made at a meeting of stockholders (a) by or at the direction of the Board of Directors or (b) by any stockholder of the Corporation who is a stockholder of record at the time of giving of notice provided for in this Section 9, who shall be entitled to vote for the election of directors at the meeting and who complies with the notice procedures set forth in this Section 9. Such nominations, other than those made by or at the direction of the Board of Directors, shall be made pursuant to timely notice in writing to the Secretary of the Corporation. To be timely, a stockholder's notice shall be delivered to or mailed and received at the principal executive offices of the Corporation not less than 60 days nor more than 90 days prior to the meeting; provided, however, that in the event that less than 70 days' notice or prior public disclosure of the date of the meeting is given or made to stockholders, notice by the stockholder to be timely must be so received not later than the close of business on the 10th day following the day on which such notice of the date of the meeting or such public disclosure was made. Such stockholder's notice shall set forth (a) as to each person whom the stockholder proposes to nominate for election or reelection as a director all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (including such person's written consent to being named in the proxy statement as a nominee and to serving as a director if elected); and (b) as to the stockholder giving the notice (i) the name and address, as they appear on the Corporation's books, of such stockholder and (ii) the class and number of shares of the Corporation which are beneficially owned by such stockholder. At the request of the Board of Directors, any person nominated by the Board of Directors for election as a director shall furnish to the Secretary of the Corporation that information required to be set forth in a stockholder's notice of nomination which pertains to the nominee. No person shall be eligible to serve as a director of the Corporation unless nominated in accordance with the procedures set forth in this By-Law. The Chairman of the meeting shall, if the facts warrant, determine and declare to the meeting that a nomination was not made in accordance with the procedures prescribed by the By-Laws, and if he should so determine, he shall so declare to the meeting and the defective nomination shall be disregarded. Notwithstanding the foregoing provisions of this Section 9, a stockholder shall also comply with all applicable requirements of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder with respect to the matters set forth in this Section. 3 5 SECTION 10. Notice of Business. At any meeting of the stockholders, only such business shall be conducted as shall have been brought before the meeting (a) by or at the direction of the Board of Directors or (b) by any stockholder of the Corporation who is a stockholder of record at the time of giving of the notice provided for in this Section 10, who shall be entitled to vote at such meeting and who complies with the notice procedures set forth in this Section 10. For business to be properly brought before a stockholder meeting by a stockholder, the stockholder must have given timely notice thereof in writing to the Secretary of the Corporation. To be timely, a stockholder's notice must be delivered to or mailed and received at the principal executive offices of the Corporation not less than 60 days nor more than 90 days prior to the meeting; provided, however, that in the event that less than 70 days' notice or prior public disclosure of the date of the meeting is given or made to stockholders, notice by the stockholder to be timely must be received no later than the close of business on the 10th day following the day on which such notice of the date of the meeting was mailed or such public disclosure was made. A stockholder's notice to the Secretary shall set forth as to each matter the stockholder proposes to bring before the meeting (a) a brief description of the business desired to be brought before the meeting and the reasons for conducting such business at the meeting, (b) the name and address, as they appear on the Corporation's books, of the stockholder proposing such business, (c) the class and number of shares of the Corporation which are beneficially owned by the stockholder and (d) any material interest of the stockholder in such business. Notwithstanding anything in the By-Laws to the contrary, no business shall be conducted at a stockholder meeting except in accordance with the procedures set forth in this Section 10. The Chairman of the meeting shall, if the facts warrant, determine and declare to the meeting that business was not properly brought before the meeting and in accordance with the provisions of the By-Laws, and if he should so determine, he shall so declare to the meeting and any such business not properly brought before the meeting shall not be transacted. Notwithstanding the foregoing provisions of this Section 10, a stockholder shall also comply with all applicable requirements of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder with respect to the matters set forth in this Section. ARTICLE III BOARD OF DIRECTORS SECTION 1. General Powers. The property, business and affairs of the Corporation shall be managed by the Board. The Board may adopt such rules and regulations for the conduct of its meetings and the management of the affairs of the Corporation as it may deem proper, not inconsistent with statute, the Certificate of Incorporation and these By-Laws. SECTION 2. Number, Qualifications and Term of Office. The number of directors shall be not less than ten nor more than twenty, as shall be fixed from time to time by resolution of the Board pursuant to a vote of two-thirds of the directors then in office. Individuals over the age of seventy-five years may stand for election as directors only with the approval of the Executive and Nominating Committee and a two-thirds vote of the Directors then in office for a specified reason to be enumerated in the Corporation's proxy statement. In no event shall a Director stand for election beyond the age of eighty. A majority of the Board shall at all times be comprised of Outside Directors. For purposes of this Section, an Outside Director shall mean a person who is not currently employed by the Corporation or any of its Subsidiaries or Affiliates. All directors who are not Outside Directors shall be known as Inside Directors. Collectively, Inside and Outside Directors shall be known as directors. Any Inside Director who served as the Chief Executive Officer of the Corporation after January 1, 1992, and whose employment with the Corporation terminates, may be invited by the Executive and Nominating Committee to continue to serve as a member of the Board for a transitional period of up to one year following the effective date of his/her termination or for an additional period of time thereafter, but then only with a vote of two-thirds of the Directors then in office and for a specified reason to be enumerated in the Corporation's proxy statement. Each director shall hold office until the annual meeting of the stockholders next following his/her election and until his/her successor shall have been elected and shall have qualified, or until his/her death, or until he/she shall earlier resign. This Section shall not be amended except upon a vote of two-thirds of the directors then in office. SECTION 3. Chairman and Vice Chairman. The Board of Directors shall elect a Chairman of the Board and a Vice Chairman of the Board from among the directors. These individuals need not be employees of the Corporation. The Chairman of the Board shall have the overall responsibility for all matters pertaining to the Board, including, without limitation, meetings of the Board. In the absence of the Chairman of the Board, the Vice Chairman of the Board shall perform these duties. 4 6 SECTION 4. Resignations. Any director may resign at any time by giving notice to the Chairman of the Board or to the Board, in writing or by telegraph, cable or wireless. Any such resignation shall take effect at the time specified therein or, if no time is so specified, upon its receipt by the Chairman of the Board or by the Board; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. SECTION 5. Vacancies. Except as provided in the Certificate of Incorporation, any vacancy in the Board, whether caused by death, resignation, increase in the number of directors (whether by resolution of the Board, amendment of these By-Laws or otherwise) or any other cause, may be filled either by the stockholders of the Corporation entitled to vote for the election of directors, at a meeting of the stockholders called for the purpose, or by vote of two-thirds of the directors then in office though less than a quorum; and each director so chosen shall hold office until the next annual meeting of stockholders and until his successor shall have been elected and shall have qualified, or until his earlier death, or until he shall earlier resign. This Section shall not be amended except upon a vote of two-thirds of the directors then in office. SECTION 6. First Meeting. Promptly after, and on the same day as, each annual election of directors, the Board may, if a quorum be present, meet at the place at which such election was held, for the purpose of organization, the election of officers and the transaction of other business. Notice of such meeting need not be given. Such meeting may be held at any other time and place which shall be specified in a notice given as hereinafter provided for special meetings of the Board. SECTION 7. Regular Meetings. Regular meetings of the Board shall be held at such times and places as the Board shall determine. Notice of regular meetings shall be mailed to each director addressed to him at his residence or usual place of business, at least five days before the meeting. This Section shall not be amended except upon a vote of two-thirds of the directors then in office. SECTION 8. Special Meetings; Notice. Special meetings of the Board shall be held whenever called by the Chairman of the Board, or by the Secretary on the written request of any three directors. Except as otherwise expressly required by statute, the Certificate of Incorporation or these By-Laws, notices of each such meeting shall be mailed to each director, addressed to him at his residence or usual place of business, at least five days before the day on which the meeting is to be held, or shall be sent to him at such place by telegraph, cable or facsimile transmission, or shall be delivered personally or by telephone, not later than two days before the day on which the meeting is to be held. The purposes of any special meeting shall be stated with particularity in the notice thereof. This Section shall not be amended except upon a vote of two-thirds of the directors then in office. SECTION 9. Place of Meetings. The Board may hold its meetings at such place or places within or without the State of Delaware as it may from time to time determine by resolution, or as shall be specified in the respective notices of meetings. SECTION 10. Quorum and Manner of Acting. Except as otherwise expressly required by statute, the Certificate of Incorporation or these By-Laws, seven directors shall constitute a quorum for the transaction of business at any meeting, and the vote of a majority of the directors present at any meeting at which a quorum is present shall be the act of the Board. In the absence of a quorum the Chairman of the Board or a majority of the directors present may adjourn any meeting from time to time until a quorum shall be present. At any adjourned meeting at which a quorum is present, any business may be transacted which might have been transacted at the meeting as originally called. Prompt notice of any adjourned meetings shall be given. This Section shall not be amended except upon a vote of two-thirds of the directors then in office. SECTION 11. Committees of Board of Directors. Except as otherwise provided in these By-Laws, the Board may, by resolution or resolutions passed by a majority of the Board, designate one or more committees, each committee to consist of two or more of the directors of the Corporation, which, to the extent provided in said resolution or resolutions, shall have and may exercise the powers of the Board in the management of the property, business and affairs of the Corporation, and may have power to authorize the seal of the Corporation to be affixed to all papers which may require it. Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the Board. A majority of all the members of such committee may fix its rules of procedure, determine its manner of acting and fix the time and place, whether within or without the State of Delaware, of its meetings and specify what notice thereof, if any, shall be given unless the Board shall otherwise by resolution provide. The Board shall have 5 7 power to change the members of any such committee at any time, to fill vacancies therein and to discharge any such committee or to remove any member thereof, either with or without cause, at any time. SECTION 12. Ex Officio Member of Committees. The Chairman of the Board shall be a member "ex-officio" of all committees of the Board, except where expressly prohibited by statute, the Certificate of Incorporation or these By-Laws or by the terms of any plan or other document establishing any such committee. SECTION 13. Agenda. An agenda of matters to come before each meeting of the Board shall be sent to each director at least five days before each regular meeting of the Board and at least three days before each special meeting of the Board. This Section shall not be amended except upon a vote of two-thirds of the directors then in office. ARTICLE IV OFFICERS SECTION 1. Number and Qualification of Officers. The principal officers of the Corporation shall be a President, one or more Vice Presidents, a Controller, a Secretary, and a Treasurer. The Board of Directors may choose such other officers as assistants to the above as it may from time to time determine. The President shall be chosen from among the directors. SECTION 2. Election and Term of Office. The officers shall be chosen annually by the Board. Each officer shall hold office until his successor shall have been elected and shall have qualified, or until his earlier death or until his earlier resignation or removal in the manner hereinafter provided. SECTION 3. Powers and Duties of Officers. The powers and duties of the officers shall be as determined from time to time by resolution of the Board, or in such other manner as the Board may authorize, not inconsistent with statute, the Certificate of Incorporation and these By-Laws. SECTION 4. Resignation and Removal. Any officer may resign at any time by giving notice to the Chairman of the Board or to the Board, in writing or by telegraph, cable or wireless. Any such resignation shall take effect at the time specified therein or, if no time is so specified, upon its receipt by the Chairman of the Board or by the Board; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. Any officer may be removed, either with or without cause, at any time, by the vote of a majority of the Board. SECTION 5. Vacancies. A vacancy in any office because of death, resignation, removal or any other cause shall be filled for the unexpired portion of the term by the Board. ARTICLE V CONTRACTS, CHECKS, DRAFTS AND PROXIES SECTION 1. Contracts. The Board may by resolution authorize any officer or officers, or agent or agents, to enter into any contract or engagement and to execute and deliver any instrument in the name of and on behalf of the Corporation, and such authority may be general or confined to specific instances; and, unless so authorized by the Board or by these By-Laws, no officer, agent or employee shall have any power or authority to bind the Corporation by any contract or engagement or to pledge its credit or to render it liable pecuniarily for any purpose or for any amount. SECTION 2. Checks and Drafts. All checks, drafts or other orders for the payment of money, issued in the name of the Corporation, shall be signed in such manner as shall from time to time be determined by resolution of the Board. SECTION 3. Proxies. All proxies or instruments authorizing any person to attend, vote, consent or otherwise act at any and all meetings of stockholders of any corporation in which the Corporation shall own 6 8 shares or in which it shall otherwise be interested shall be executed by the Chairman of the Board or such other officer as the Chairman of the Board or the Board may from time to time determine. ARTICLE VI CAPITAL STOCK SECTION 1. Certificates for Stock. Every holder of shares of stock of the Corporation shall be entitled to have a certificate, in such form as the Board shall prescribe, certifying the number and class of shares of stock of the Corporation owned by him. Each such certificate shall be signed in the name of the Corporation by the Chairman of the Board, the President or a Vice-President and the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary of the Corporation, certifying the number of shares owned by him; provided, however, that if such certificate is countersigned (a) by a transfer agent other than the Corporation or its employee or (b) by a registrar other than the Corporation or its employee, the signatures of any such Chairman of the Board, President, Vice-President, Treasurer, Assistant Treasurer, Secretary or Assistant Secretary may be facsimiles. In case any officer who shall have signed, or whose facsimile signature shall have been placed upon, any such certificate or certificates shall cease to be such officer before such certificate or certificates shall have been issued by the Corporation, such certificate or certificates may be issued by the Corporation with the same effect as though he were such officer at the date of issue. SECTION 2. Transfer of Stock. Title to a certificate and to the shares of stock of the Corporation represented thereby shall be transferred only (a) by delivery of the certificate endorsed either in blank or to a specified person by the person appearing by the certificate to be the owner of the shares represented thereby, or (b) by delivery of the certificate and a separate document containing a written assignment of the certificate or a power of attorney to sell, assign or transfer the same or the shares represented thereby, signed by the person appearing by the certificate to be the owner of the shares represented thereby. Such assignment or power of attorney may be either in blank or to a specified person. SECTION 3. Registered Holders. The Corporation shall be entitled to treat the registered holder of any certificate for stock of the Corporation as the absolute and exclusive owner thereof and of the shares represented thereby for all purposes, including without limitation the right to receive dividends and to vote and liability for calls and assessments, and, accordingly, the Corporation shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any person, whether or not the Corporation shall have express or other notice thereof, save as expressly provided by statute. SECTION 4. Regulations. The Board may make such rules and regulations as it may deem expedient, not inconsistent with statute, the Certificate of Incorporation or these By-Laws, concerning the issue, transfer and registration of certificates for shares of stock of the Corporation. It may appoint, or authorize any principal officer or officers to appoint, one or more Transfer Clerks or one or more Transfer Agents and one or more Registrars, and may require all certificates for shares of stock of the Corporation to bear the signature or signatures of any of them. ARTICLE VII RECORD DATE SECTION 1. Fixing of Record Date. (a) In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action other than stockholder action by written consent, the Board of Directors may fix a record date, which shall not precede the date such record date is fixed and shall not be more than 60 nor less than 10 days before the date of such meeting, nor more than 60 days prior to any such other action. If no record date is fixed, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto. A determination of stockholders of record entitled to notice 7 9 of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. (b) In order that the Corporation may determine the stockholders entitled to consent to corporate action in writing without a meeting, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which date shall not be more than 10 days after the date upon which the resolution fixing the record date is adopted by the Board of Directors. Any stockholder of record seeking to have the stockholders authorize or take corporate action by written consent shall, by written notice to the Secretary, request the Board of Directors to fix a record date. The Board of Directors shall promptly, but in all events within 10 days after the date on which such a request is received, adopt a resolution fixing the record date. If no record date has been fixed by the Board of Directors within 10 days of the date on which such a request is received, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting, when no prior action by the Board of Directors is required by applicable law, shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the Corporation by delivery to its registered office in the State of Delaware, its principal place of business, or any officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery made to the Corporation's registered office shall be by hand or by certified or registered mail, return receipt requested. If no record date has been fixed by the Board of Directors and prior action by the Board of Directors is required by applicable law, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting shall be at the close of business on the date on which the Board of Directors adopts the resolution taking such prior action. ARTICLE VIII WAIVERS OF NOTICE Whenever notice is required to be given by statute, the Certificate of Incorporation or these By-Laws, a written waiver thereof, signed by the person entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting of stockholders shall constitute a waiver of notice of such meeting, except when the stockholder attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. ARTICLE IX AMENDMENTS Subject to any limitations that may be imposed by the stockholders, and except as specifically provided in Article III of these By-Laws, the Board may make by-laws and from time to time may alter, amend or repeal any by-laws. The stockholders may also adopt, alter, amend or repeal any by-laws at any meeting provided that notice of such proposed adoption, alteration, amendment or repeal is included in the notice of such meeting. CERTIFICATE The undersigned, Secretary of GENERAL DYNAMICS CORPORATION, a Delaware corporation, does hereby certify that the foregoing is a true copy of the By-Laws of the Corporation in effect as of this date. WITNESS my hand and the seal of the Corporation this day of , 19 . --------------------------------- Secretary (CORPORATE SEAL) 8 EX-10.23 3 EMPLOYMENT AGREEMENT 1 [LETTERHEAD] 3 February 1993 Mr. Nicholas D. Chabraja 440 King Muir Road Lake Forest, IL 60045 Dear Nick: This letter confirms our offer to you to become the Senior Vice President and General Counsel of General Dynamics, reporting to me effective 1 January 1993. You will be a Corporate officer as approved by the Board of Directors. The basic terms are as follows: Base Salary: Initial salary at the rate of $350,000 per year. Incentive Compensation: Participation in the Corporation's Management Incentive Plan beginning March, 1994. Annual awards are dependent upon your performance. Determination of the amount of your award is made by the Compensation Committee of the Board of Directors. Top "150" Team Front-load Restricted Stock: Additionally, you will be a member of our Top "25" key management team. In order to put you on an equal footing with the other members of this team, we will make you an award of 15,000 shares of General Dynamics restricted stock immediately. These shares of restricted stock will vest according to the lapsing rules of our normal program, provided you remain employed by General Dynamics through 31 December 1994. The amount also takes into consideration the fact that you will not achieve a vested retirement benefit during the term of this agreement. Your restricted stock will also be eligible for any accelerated lapsing of remaining restricted shares based on performance criteria set and approved by the Compensation Committee. Additionally, you will receive the normal General Dynamics benefit package and perquisites for the top executives of the Company. This includes, but is not limited to, the Retirement Plan for Salaried Employees; Group Medical and Life Insurance Plan; the Named Individual Accidental Death Insurance Plan; the Long-term Disability Plan; the Dental Plan; Executive Financial Planning; the Officer's Vacation Plan; the company-provided automobile; and the company-provided memberships to a country club and appropriate luncheon clubs. You will also be able to participate immediately in the Company's Supplemental Savings 2 and Stock Investment plan (SSIP). After you have completed one full year of employment you will be able to participate in the Company's Tax Qualified SSIP. It is further understood that during your employment with General Dynamics, you will remain a partner in the law firm of Jenner and Block and that any salary and bonus paid to you by General Dynamics will be remitted to Jenner and Block, net of taxes, and that Jenner and Block will deduct the gross payments from their annual billings to General Dynamics, effective with your 1 January 1993 hire date. Nick, we very much look forward to having you as a member of our team and believe that this letter contains all of the understandings that we have agreed to. Sincerely, /s/ WILLIAM A. ANDERS --------------------- William A. Anders Chairman & CEO WAA:daw Accepted By: /s/ NICHOLAS D. CHABRAJA March 2, 1993 - ------------------------------------------- Nicholas D. Chabraja Date 3 [LETTERHEAD] 22 December 1993 Mr. Nicholas D. Chabraja 440 King Muir Road Lake Forest, Illinois 60045 Dear Nick: This letter confirms our recent conversations and restates the terms of your employment with General Dynamics. As we have agreed, you will continue to serve as Senior Vice President and General Counsel of General Dynamics (or in any other capacity deemed appropriate by the Board of Directors), reporting directly to me. You will continue to be compensated at your current base salary of $350,000 per year, plus such additional incentive compensation as the Compensation Committee of the Board of Directors shall from time to time award to you. Annual reviews of total compensation are generally made in March of each year and are based upon your performance and that of the Company. You will also continue to participate in such health and welfare and other benefit programs of General Dynamics as are available to other senior officers of the Company. Provided you remain employed by the Company through 31 December 1994, the Restricted Stock granted to you in February 1993 will continue to vest according to the lapsing rules of the Restricted Stock Program. This letter also acknowledges that you are participating in General Dynamics' recently adopted long-term compensation plan through awards made to you in October 1993 of stock options and restricted stock. This letter confirms that you intend to continue to reside in Chicago and to remain a partner in the law firm of Jenner & Block during your employment with General Dynamics. On the other hand, you agree that you will not participate in the fees that Jenner & Block derives from its representation of General Dynamics so long as you are employed as an officer of General Dynamics. It is also understood that Jenner & Block will not bill General Dynamics for any time you personally devote to General Dynamics as an officer of the Company. 4 Nicholas D. Chabraja 2 22 December 1993 I applaud your outstanding efforts during the past year and look forward to an equally satisfying association in the future. Sincerely, GENERAL DYNAMICS CORPORATION /s/ J. R. MELLOR ---------------- J. R. Mellor President and Chief Executive Officer Agreed: By: /s/ NICHOLAS D. CHABRAJA -------------------------------- Nicholas D. Chabraja JRM:gmb EX-11 4 COMPUTATION OF PER SHARE EARNINGS 1 EXHIBIT 11, 1993 ANNUAL REPORT FORM 10-K, COMMISSION FILE NUMBER 1-3671 GENERAL DYNAMICS CORPORATION STATEMENT RE COMPUTATION OF PER SHARE EARNINGS (a) (DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
Year Ended 31 December ---------------------- 1993 1992 1991 ---- ---- ---- NET EARNINGS: Continuing Operations $ 270 $ 305 $ 274 Discontinued Operations: Earnings from operations (30) 136 231 Gain on disposal 645 374 - ------------ ------------- ------------ $ 885 $ 815 $ 505 ============ ============= ============ Weighted average common shares outstanding 62,187,874 72,330,118 83,725,180 ============ ============= ============ NET EARNINGS PER SHARE - PRIMARY: Continuing Operations $ 4.27 $ 4.05 $ 3.22 Discontinued Operations: Earnings from operations (.47) 1.81 2.72 Gain on disposal 10.21 4.97 - ------------ ------------- ------------ $ 14.01 $ 10.83 $ 5.94 ============ ============= ============ Common shares from above 62,187,874 72,330,118 83,725,180 Assumed exercise of options (treasury stock method) 994,276 2,925,890 1,029,376 Assumed issuance of common shares pursuant to incentive compensation awards (treasury stock method) - - 282,212 ------------ ------------- ------------ 63,182,150 75,256,008 85,036,768 ============ ============= ============ NET EARNINGS PER SHARE - FULLY DILUTED: Continuing Operations $ 4.27 $ 4.03 $ 3.20 Discontinued Operations: Earnings from operations (.47) 1.80 2.70 Gain on disposal 10.19 4.95 - ------------ ------------- ------------ $ 13.99 $ 10.78 $ 5.90 ============ ============= ============ Common shares from above 62,187,874 72,330,118 83,725,180 Assumed exercise of options (treasury stock method) 1,085,702 3,266,410 1,626,658 Assumed issuance of common shares pursuant to incentive compensation awards (treasury stock method) - - 270,166 ------------ ------------- ------------ 63,273,576 75,596,528 85,622,004 ============ ============= ============
(a) All share amounts and per share data have been restated to reflect the retroactive recognition of the two-for-one stock split effected in the form of a 100% stock dividend to be distributed on 11 April 1994 to shareholders of record 21 March 1994. EX-13 5 1993 SHAREHOLDER REPORT 1 GENERAL DYNAMICS MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE RESULTS OF OPERATIONS AND FINANCIAL CONDITION Dollars in millions, except per share amounts BUSINESS ENVIRONMENT The Company's primary business has historically been supplying weapons systems to the U.S. Government. In 1990, U.S. defense budgets, which had been declining since 1985, began falling sharply in response to the end of the Cold War. Management realized early on that the budget declines were structural in that, for the foreseeable future, there would be fewer new weapons systems required which would result in excess capacity in the industry. Accordingly, Management believed there would be a necessary contraction and consolidation of the U.S. defense industry. To date, Management's analysis of these developments has proven to be true as evidenced by declines, in real terms, in the defense budget and by the number of industry combinations in recent years. As an early response to this changing business environment and the Company's then weakened financial position, Management initiated in 1991 a program to improve business performance, restore financial strength, substantially refocus corporate strategy and, through incentives, reorient the corporate culture towards shareholder value. This program required the Company's major businesses to be number one or number two in their markets and have "critical mass" -- the appropriate size to retain key capabilities and ensure economies of scale. Management sought to have its businesses meet these criteria either within the Company or as part of other companies through mergers, joint ventures, acquisitions, or sales of businesses if necessary. Management also decided to sell peripheral businesses whenever appropriately valued transactions could be negotiated. To accomplish this program, the Company strengthened certain of its defense-related businesses through their sale to other companies, the most recent being the pending sale of its Space Launch Systems business to Martin Marietta Corporation. In addition, the Company's continuing operations are demonstrating improved profitability, productivity and cash flows. These steps restored the Company's financial strength permitting the repayment of approximately $600 in debt, a recapitalization effected by the purchase of $960 of the Company's common stock through a tender offer, and the tax-advantaged distribution to shareholders of $1,531 pursuant to the Company's formal plan of contraction. Even after these actions, the Company had a cash and marketable securities balance of $585 at 31 December 1993. The Company's principal continuing operations -- Nuclear Submarines and Armored Vehicles -- have been identified as critical to the U.S. Defense Industrial Base by the Department of Defense (DoD). Programs are being implemented by the DoD to help preserve their key capabilities, although at significantly reduced procurement rates. Accordingly, in the absence of significant changes in world political and economic conditions, the Company is seeking to supplement volumes in both businesses. Additional volume could come from expanded involvement in overhaul, upgrade and modification work. Management is also seeking to broaden its domestic base of armored vehicle and related electronic systems integration programs, as well as to further expand the export of these goods and services. Going forward, Management is continuing to focus on shareholder value and is aggressively re-engineering the cost structures of all operations to enhance their competitive positions by creating highly efficient businesses capable of operating profitably at significantly lower volumes. In addition, the Company continues to explore ways to utilize its financial capacity to strengthen continuing operations through both internal and external investments. Accordingly, Management is considering the benefits of corporate business combinations and financial restructuring options to further enhance the value of the Company. BUSINESS SEGMENT INFORMATION As a result of the pending sale, the Company's Space Launch Systems business segment has been classified as a discontinued operation. In addition, certain businesses previously classified as discontinued operations for which satisfactory sales terms could not be reached have been reclassified to continuing operations and now comprise the Other business segment. In addition, the Single Channel Ground and Airborne Radio System (SINCGARS) program has been reclassified to continuing operations and included in the Armored Vehicles business segment due to Management's reassessment of the program's business opportunities. Data for 1992 and 1991 has been restated accordingly. The Company's business segments are defined as follows: NUCLEAR SUBMARINES: Design, engineering, construction, overhaul and support of nuclear submarines. ARMORED VEHICLES: Design, engineering, manufacturing, upgrade and support of armored vehicles; and design, engineering, manufacturing and support of SINCGARS. OTHER: Coal mining; ship management; and ship financing. -- 12 -- 2 GENERAL DYNAMICS
NET SALES OPERATING EARNINGS SALES TO U.S. GOVERNMENT ---------------------- ---------------------- ----------------------- 1993 1992 1991 1993 1992 1991 1993 1992 1991 - -------------------------------------------------------------------------------------------------------------------- Nuclear Submarines $1,711 $1,730 $1,824 $124 $ 94 $ 84 $1,684 $1,693 $1,802 Armored Vehicles 1,286 1,261 1,129 174 122 96 1,266 1,234 1,088 Other 190 234 208 11 39 31 53 55 51 - -------------------------------------------------------------------------------------------------------------------- $3,187 $3,225 $3,161 $309 $ 255 $211 $3,003 $2,982 $2,941 ====================================================================================================================
DEPRECIATION, DEPLETION IDENTIFIABLE ASSETS CAPITAL EXPENDITURES AND AMORTIZATION ---------------------- ---------------------- ----------------------- 1993 1992 1991 1993 1992 1991 1993 1992 1991 - -------------------------------------------------------------------------------------------------------------------- Nuclear Submarines $ 387 $ 404 $ 524 $ 4 $ 5 $14 $24 $27 $ 30 Armored Vehicles 296 329 335 5 4 3 11 15 14 Other 372 386 406 4 8 2 6 6 9 Corporate* 1,580 2,411 2,912 1 4 7 15 9 85 - -------------------------------------------------------------------------------------------------------------------- $2,635 $3,530 $4,177 $14 $21 $26 $56 $57 $138 ====================================================================================================================
* Identifiable assets include cash and equivalents and marketable securities totaling $585, $943 and $812 in 1993, 1992 and 1991, respectively. In addition, identifiable assets include net assets of discontinued operations of $303, $777 and $1,695 in 1993, 1992 and 1991, respectively. RESULTS OF OPERATIONS The following table sets forth the increase (decrease) in net sales and operating earnings for the years ended 31 December 1993 and 1992:
1993 1992 INCREASE (DECREASE) INCREASE (DECREASE) OVER 1992 OVER 1991 ------------------- ------------------- NET OPERATING NET OPERATING SALES EARNINGS SALES EARNINGS - ----------------------------------------------------------------------------------- Nuclear Submarines $ (19) $ 30 $ (94) $10 Armored Vehicles 25 52 132 26 Other (44) (28) 26 8 - ----------------------------------------------------------------------------------- $ (38) $ 54 $ 64 $44 ===================================================================================
NUCLEAR SUBMARINES Operating earnings increased $30 during 1993 due to increased earnings on all three construction programs. The Company increased the earnings rate on the SSN 688 program in both the second and fourth quarters of 1993, as well as on the Trident program in the first, second and fourth quarters due to continuing cost reductions. Previously, the Company began earnings recognition on the SSN 688 program during the third quarter of 1992 due to cost reduction efforts and the reinstatement of the second Seawolf. In addition, the Company began recognizing earnings on the Seawolf program in the fourth quarter of 1993 due to the progress on the lead ship, which is now over 50% complete, and the support for the Company's shipyard provided in the DoD "Bottom-Up Review." Although total construction activity did not decrease significantly during 1993, the level of activity on the individual programs did change. Construction activity on the SSN 688 and Trident programs decreased approximately $110 and $70, respectively, reflecting the wind down of these programs. Meanwhile, construction activity on the Seawolf program increased approximately $170 reflecting the buildup of the program. During 1993, the Company delivered two SSN 688s and one Trident, reducing backlog to two and four ships, respectively, all of which are currently under construction. Delivery of the final SSN 688 is scheduled for 1995, while the final Trident is scheduled for delivery in 1997. The Company is also constructing the first two Seawolfs, with the lead ship scheduled to be completed in 1996. Based on the Company's existing backlog and absent an increase in the DoD's current procurement rate, the Company will not be able to sustain its current level of construction revenues. During 1992, the U.S. Congress authorized, and the President approved, funding for construction of the second Seawolf, as well as $540 to help maintain the "submarine industrial base." In addition, the Company is encouraged by the DoD "Bottom-Up Review" which recommended construction of a third Seawolf and the new attack submarine (NSSN), as well as designated -- 13 -- 3 GENERAL DYNAMICS the Company's Electric Boat Division as the shipyard to preserve the submarine industrial base. However, unless the Company is awarded a third Seawolf construction contract and other related government business, the current backlog is insufficient to sustain operation of the Company's facilities until construction begins on the NSSN, which is not expected until the end of this decade. Net sales decreased $94 during 1992 due to decreased construction activity on the Trident and SSN 688 programs, partially offset by increased Seawolf construction activity. Operating earnings increased $10 during 1992 due primarily to the earnings recognized on the SSN 688 program. ARMORED VEHICLES Net sales and operating earnings increased $25 and $52, respectively, during 1993 due primarily to nonrecurring revenue of approximately $40 recognized during the first and fourth quarters of 1993 related to the close-out of the Egyptian Tank Plant (ETP) and other non-production contracts which were completed in 1993. Under the ETP contract, the Company provided certain services to the Government of Egypt in the construction and preparation of a facility to assemble tank kits manufactured by the Company. Higher production levels in 1993 on the Egyptian Coproduction and the "Fox" Nuclear, Biological and Chemical Reconnaissance vehicle programs were offset by lower M1 tank production. Under the Egyptian Coproduction program, the Company is manufacturing M1A1 tank kits to be assembled by the Government of Egypt in the facility previously discussed. 114 M1A1 kits were delivered to Egypt in 1993 compared to 77 in 1992, bringing to-date deliveries to 210 from a total order of 499. Deliveries of M1A1 kits to Egypt are expected to remain at similar levels through 1996. Deliveries of Fox vehicles were completed during the fourth quarter of 1993. During the second quarter of 1993, domestic M1A1 tank production was completed and M1A2 deliveries began to Saudi Arabia. The M1A2, the latest version of the M1 main battle tank, incorporates battlefield management systems aimed at providing improved fightability, as well as improved survivability of the tank's four crew members. Of the 315 M1A2 tanks currently under contract with Saudi Arabia, 167 were delivered in 1993 while the remaining 148 will be delivered in 1994. The original order from Saudi Arabia included an additional 150 tanks, however, production of these tanks has been deferred indefinitely. In May 1993, the U.S. Government signed a letter of offer and agreement with the Kuwait Government for the procurement of 218 M1A2 tanks. Delivery of these tanks is expected to take place during 1994 and 1995. The U.S. Congress authorized and appropriated Fiscal Year 1992 funds to begin an M1 to M1A2 conversion program. Activity on this program is expected to begin in 1994. Based on the Company's existing orders and absent an increase in the DoD's current procurement rate, the Company will not be able to sustain its current level of M1 revenues if additional foreign orders are not received. Due to the favorable impact on the armored vehicle business base of international M1A2 sales, the Company increased the M1 program earnings rate during the third quarter of 1992. This earnings rate increase contributed to the increase in operating earnings during 1993 and 1992. The Company is currently participating in its first competitive bid under the SINCGARS program. The Company was selected as the second-source producer in 1988. The Company recorded losses on the original award and related options, however, the current competition provides an opportunity for profitable business. In addition, if the Company were successful in the competition, SINCGARS net sales could become a significant part of the total net sales of the segment. A decision on the competitive bid is expected during the first half of 1994. Net sales and operating earnings increased $132 and $26, respectively, during 1992 due primarily to transitioning production from M1A1 to M1A2 tanks and increased production on the Fox vehicle. OTHER Net sales and operating earnings decreased $44 and $28, respectively, during 1993 due primarily to the expiration of long-term coal contracts at the end of 1992. As a result, an increasing percentage of coal was sold in the spot market, wherein prevailing prices are lower than those under the expired contracts. Current conditions in the spot market are not expected to change in 1994. Net sales and operating earnings increased $26 and $8, respectively, during 1992 due to the reopening of a suspended mine, the acquisition of a new mine and increased productivity. The Company provides ship management services for the U.S. Navy's Maritime Prepositioning Ships (MPS) and the Maritime Administration's Ready Reserve Force. The MPS are under five year contracts which are renewable through the year 2011. Due to DoD budget pressures, two other MPS operators have agreed to earnings rate reductions in their current contracts. The U.S. Navy is currently discussing with the Company similar rate reductions as part of the contract renewals due in 1995 and 1996. The Company is confident an equitable resolution will be reached. GENERAL AND ADMINISTRATIVE EXPENSES General and administrative expenses increased during -- 14 -- 4 GENERAL DYNAMICS 1993 due primarily to the provision for state and local income taxes. State and local income taxes, which are allocable to U.S. Government contracts, were significantly higher in 1993 as a result of the gain on the disposal of the Tactical Military Aircraft business. In addition, the disposal of businesses resulted in an increase in the allocation of Corporate Office costs to the remaining businesses. Accordingly, the Company announced a reorganization of its Corporate Office in March 1993 with the objective of reducing Corporate Office costs by the end of 1994 to the same percent of total operating costs and expenses as they were prior to adopting the plan of contraction (for further discussion, see Note D to the Consolidated Financial Statements). INTEREST, NET Interest income increased $6 in 1993 and $10 in 1992 due to the increase in investments. Cash and equivalents and marketable securities totaled $585 and $943 at 31 December 1993 and 1992, respectively. Interest expense decreased $3 in 1993 and $7 in 1992 due to the reduction in outstanding debt. OTHER INCOME (EXPENSE), NET Other income increased in 1993 due primarily to a $16 increase in the gain recognized from the sale of Federal Express Corporation stock owned by the Company (for further discussion, see Note I to the Consolidated Financial Statements), and the recognition of an additional $14 of the deferred gain on the sale of the Company's information technology operations due to the disposal of other operations (for further discussion, see Note N to the Consolidated Financial Statements). Other income increased in 1992 due primarily to the recognition of gains of $26 from the sale of various investments and the first full year recognition of the deferred gain from the sale of the Company's information technology operations. PROVISION (CREDIT) FOR INCOME TAXES During the third quarter, the President signed into law the Omnibus Budget Reconciliation Act of 1993 which, among other changes, increased the statutory Federal income tax rate from 34% to 35%, retroactive to 1 January 1993. In accordance with Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes," the Company recognized in its provision for income taxes in the third quarter an $11 benefit related to the adjustment of its net deferred tax asset as of 1 January 1993 and an $11 charge related to its pretax earnings for the first six months of 1993, including the gain on disposal of the Tactical Military Aircraft business. During the fourth quarter of 1992, the Company recognized $95, or $1.26 per share, of research and experimentation and investment tax credits as a result of the completion of a company-wide study relating to certain prior years expenditures. During 1991, the Company recognized a $140 gain, or $1.64 per share, from an adjustment to its deferred income tax liability. For further discussion of these items, as well as a discussion of the Company's net deferred tax asset, see Note E to the Consolidated Financial Statements. DISCONTINUED OPERATIONS The Company has sold or intends to sell certain businesses which are accounted for as discontinued operations in accordance with Accounting Principles Board Opinion No. 30. Earnings (loss) from the operations of these businesses amounted to $(30), or $(0.47) per share, in 1993; $136, or $1.80 per share, in 1992; and $231, or $2.70 per share, in 1991. The decrease in earnings during the three years ended 31 December 1993 is due primarily to the disposal of businesses (for a discussion of unusual items impacting the operating results of discontinued operations, see Note B to the Consolidated Financial Statements). The net loss in 1993 is due primarily to losses recognized by the Space Launch Systems business. No additional losses from operations are anticipated in 1994 prior to the disposal of the remaining discontinued operations. In March 1993, the Company completed the sale of its Tactical Military Aircraft business to Lockheed Corporation, recognizing a gain on disposal of $645, or $10.19 per share, net of income taxes of $331. During 1992, the Company completed the sales of The Cessna Aircraft Company to Textron, Inc., its Missile Systems business to Hughes Aircraft Company and its Electronics business to The Carlyle Group. The Company recognized in 1992 a gain on disposal of these businesses of $374, or $4.95 per share, net of income taxes of $22. In December 1993, the Company announced the sale of its Space Launch Systems business to Martin Marietta Corporation. The sale is expected to close by April 1994 and result in the recognition of a gain on disposal. EARNINGS PER SHARE On 4 March 1994, the Company's Board of Directors authorized a two-for-one stock split effected in the form of a 100% stock dividend. Accordingly, earnings per share data has been restated to give retroactive recognition to the stock split for all periods presented. During the third quarter of 1992, the Company purchased $960 of its common stock through a tender offer. Although this transaction had no earnings impact, earnings per share subsequent to the purchase increased due to the reduction in shares outstanding. -- 15 -- 5 GENERAL DYNAMICS FINANCIAL CONDITION OPERATING ACTIVITIES In analyzing the cash provided by operating activities, Management believes it is important to note the portion derived directly from continuing operations and its relationship to operating earnings. The reconciliation of the two is quantified by the change in net operating assets, which Management defines as those net assets directly employed in operations. The change in net operating assets is segregated between working capital (e.g. receivables, inventory, payables, etc. . .) and property, plant and equipment. Accordingly, the analysis of operating cash flows includes capital expenditures. Federal income tax payments and other Corporate cash flows not directly related to operations, such as interest, are separately identified. An analysis as discussed of the net cash provided by continuing operations as reported on the Consolidated Statement of Cash Flows, after capital expenditures, is as follows:
YEAR ENDED 31 DECEMBER 1993 1992 1991 - ---------------------------------------------------------------------------- Operating earnings $309 $255 $211 Depreciation, depletion and amortization 41 48 53 Capital expenditures (13) (17) (19) Decrease in operating working capital 33 54 143 Other, primarily non-cash items (39) (20) 35 - ---------------------------------------------------------------------------- Pre-tax operating cash flow 331 320 423 Allocated Federal income tax payments (78) (108) (162) Corporate 23 (29) (29) - ---------------------------------------------------------------------------- $276 $183 $232 ============================================================================
The Company has generated strong pre-tax operating cash flows during the three years ended 31 December 1993. A substantial portion of cash flow came from aggressive actions to reduce operating working capital. These actions included more timely collection of receivables, the resolution of contractual billing issues, and reductions in inventory levels and manufacturing span times. In 1993, Other represents primarily the nonrecurring revenue recognized by the ArmoredVehicles business which had previously been billed and collected. The Company expects pre-tax operating cash flow to approximate operating earnings in 1994. For purposes of preparing the Consolidated Statement of Cash Flows, Federal income tax payments are allocated between continuing and discontinued operations based on the portion of taxable income attributed to each. Corporate cash flow in 1993 represents primarily interest received from investments in excess of interest paid on debt. Corporate cash flow was negative in 1992 due primarily to the payout of deferred compensation. The Company is cooperating with the U.S. Government and the Kingdom of Saudi Arabia in the restructuring of payments due over the next two years relating to certain arms purchases, including the Company's M1A2 tank. Because the arms purchases are Foreign Military Sales through the U.S. Government, the Company has no credit risk and expects no material negative cash flow impact to result from these discussions. As previously reported, the Company's A-12 aircraft contract was terminated for default by the U.S. Navy in January 1991. In February 1991, the U.S. Navy demanded repayment of the unliquidated progress payments made under the contract, but agreed to defer collection pending resolution of the termination dispute, which is in litigation. For further discussion of the A-12 termination and terms of the deferment agreement, see Note P to the Consolidated Financial Statements. For a discussion of environmental matters and other contingencies, see Note O to the Consolidated Financial Statements. The Company does not deem its liability, in the aggregate, with respect to these matters to be material to the Company's financial condition or results of operations. Net cash provided by discontinued operations declined during 1993 due primarily to the disposal of businesses. Included in the net cash provided by discontinued operations on the Consolidated Statement of Cash Flows are the investing and financing activities of the discontinued businesses, as well as an allocable portion of the Company's Federal income tax payments which for 1993 included the liability related to the gain on disposal of the Company's Tactical Military Aircraft business. INVESTING ACTIVITIES The Company received proceeds of $1,534 and $1,039 in 1993 and 1992, respectively, from the sale of discontinued operations (for a discussion of individual transactions, see Note B to the Consolidated Financial Statements). The Company expects to close the sale of its Space Launch Systems business to Martin Marietta Corporation by April 1994 and will receive approximately $209 in cash. Additional cash flows are expected to be generated in 1994 from the disposal of other discontinued operations. During 1993, the Company purchased $50 of investments and segregated them for the purpose of funding certain expected long-term liabilities, such as -- 16 -- 6 GENERAL DYNAMICS unfunded compensation plans. Also, as previously discussed, the Company received proceeds of $37 from the sale of its remaining investment in Federal Express Corporation stock during the third quarter of 1993. The Company had previously sold a portion of its investment in Federal Express Corporation stock in 1992 for $21. Management seeks investments that strategically enhance the Company and offer risk-adjusted after-tax cash returns that exceed the Company's long-term weighted average cost of capital. Since the late 1980s, the significant decline in defense spending resulted in the Company's existing capacity being well in excess of projected demand. This, coupled with a highly disciplined business analysis process, has resulted in dramatically reduced levels of capital spending. Accordingly, capital expenditures for continuing operations were only $14 in 1993. The Company expects capital expenditures for the continuing operations to total approximately $20 in 1994. As part of the sale of discontinued operations, certain related properties located primarily in southern California were retained by the Company. These properties have been segregated on the Consolidated Balance Sheet as real estate held for development. The Company has retained outside experts to support the development of plans which will maximize the market value of these properties. The Company does not expect to hold these properties long term. FINANCING ACTIVITIES As part of the strategy implemented in 1991, the Company's top priority for the use of cash was liquidity and financial strength. Accordingly, the Company redeemed two debt issues with a total face value of $350 in the first quarter of 1992, the entire series of 9 3/8% Notes which had a face value of $100 in May 1993, and the remaining $45 of 5 3/4% Debentures in July 1993. After meeting its operational and investment needs, the Company purchased in July 1992 $960 of its common stock in a "Dutch Auction" tender offer and made three special distributions to shareholders during 1993 totaling $1,531. The special distributions represent substantially all of the funds available for tax-advantaged distribution to shareholders from the sales of businesses under the Company's 1992 plan of contraction. On 4 March 1994, the Company's Board of Directors declared an increased regular quarterly dividend of $.35 per share, adjusted for the previously discussed stock split, reflecting the Board's confidence in the sustainability of the cash flows generated by the Company's continuing operations. The Company had previously increased the dividend to $.30 and $.20 per share in September 1993 and March 1992, respectively, also adjusted for the stock split. The Company's Board of Directors reconfirmed Management's authority to repurchase, at its discretion, up to 3 million shares of the Company's common stock. The Company expects to generate sufficient funds from operations to meet both its short and long-term liquidity needs. In addition, the Company has the capacity for long-term borrowings and currently has a committed, short-term $850 line of credit. The line of credit expires in May 1994 at which time the Company anticipates renewing the line or replacing it. ACCOUNTING CHANGE In May 1993, the Financial Accounting Standards Board issued SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities." This new standard defines three classifications for investments and the accounting for each. The Company is required to adopt the new accounting and disclosure rules on a prospective basis no later than 1994. This standard is not expected to have a material impact on the Company's financial condition or results of operations. -- 17 -- 7 GENERAL DYNAMICS CONSOLIDATED STATEMENT OF EARNINGS Restated (See Notes A and K)
YEAR ENDED 31 DECEMBER 1993 1992 1991 - ------------------------------------------------------------------------------------------------------- (Dollars in millions, except per share amounts) NET SALES $3,187 $3,225 $3,161 OPERATING COSTS AND EXPENSES 2,878 2,970 2,950 - ------------------------------------------------------------------------------------------------------- OPERATING EARNINGS 309 255 211 Interest, net 36 27 10 Other income (expense), net 68 28 (29) - ------------------------------------------------------------------------------------------------------- EARNINGS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 413 310 192 Provision (credit) for income taxes 143 5 (82) - ------------------------------------------------------------------------------------------------------- EARNINGS FROM CONTINUING OPERATIONS 270 305 274 DISCONTINUED OPERATIONS, NET OF INCOME TAXES: Earnings (loss) from operations (30) 136 231 Gain on disposal 645 374 -- - ------------------------------------------------------------------------------------------------------- 615 510 231 - ------------------------------------------------------------------------------------------------------- NET EARNINGS $ 885 $ 815 $ 505 ======================================================================================================= NET EARNINGS PER SHARE Continuing operations $ 4.27 $ 4.03 $ 3.20 Discontinued operations: Earnings (loss) from operations (.47) 1.80 2.70 Gain on disposal 10.19 4.95 -- - ------------------------------------------------------------------------------------------------------- $13.99 $10.78 $ 5.90 =======================================================================================================
The accompanying Notes to Consolidated Financial Statements are an integral part of this statement. -- 18 -- 8 GENERAL DYNAMICS CONSOLIDATED BALANCE SHEET Restated (See Notes A and K)
31 DECEMBER 1993 1992 - -------------------------------------------------------------------------------------- (Dollars in millions) ASSETS CURRENT ASSETS: Cash and equivalents $ 94 $ 511 Marketable securities 491 432 - -------------------------------------------------------------------------------------- 585 943 Accounts receivable 62 68 Contracts in process 442 432 Net assets of discontinued operations 303 777 Other current assets 262 337 - -------------------------------------------------------------------------------------- Total Current Assets 1,654 2,557 - -------------------------------------------------------------------------------------- NONCURRENT ASSETS: Leases receivable - finance operations 236 251 Real estate held for development 142 114 Property, plant and equipment, net 302 339 Other assets 301 269 - -------------------------------------------------------------------------------------- Total Noncurrent Assets 981 973 - -------------------------------------------------------------------------------------- $2,635 $3,530 ====================================================================================== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Current portion of long-term debt $ -- $ 145 Accounts payable and accrued expenses 566 491 Other current liabilities 209 342 - -------------------------------------------------------------------------------------- Total Current Liabilities 775 978 - -------------------------------------------------------------------------------------- NONCURRENT LIABILITIES: Long-term debt 38 38 Long-term debt - finance operations 163 179 Other liabilities 482 461 - -------------------------------------------------------------------------------------- Total Noncurrent Liabilities 683 678 - -------------------------------------------------------------------------------------- SHAREHOLDERS' EQUITY: Common stock, including surplus (shares issued 84,387,336) 92 84 Retained earnings 1,709 2,432 Treasury stock (shares held 1993, 21,823,824; 1992, 22,545,130) (624) (642) - -------------------------------------------------------------------------------------- Total Shareholders' Equity 1,177 1,874 - -------------------------------------------------------------------------------------- $2,635 $3,530 ======================================================================================
The accompanying Notes to Consolidated Financial Statements are an integral part of this statement. -- 19 -- 9 GENERAL DYNAMICS CONSOLIDATED STATEMENT OF CASH FLOWS Restated (See Note A)
YEAR ENDED 31 DECEMBER 1993 1992 1991 - ------------------------------------------------------------------------------------------------------- (Dollars in millions) CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings $ 885 $ 815 $ 505 Adjustments to reconcile net earnings to net cash provided by continuing operations - Discontinued operations (615) (510) (231) Depreciation, depletion and amortization 56 57 138 Decrease (Increase) in - Accounts receivable 6 42 (3) Contracts in process (10) 76 180 Leases receivable - finance operations 14 12 13 Other current assets (8) (24) 1 Increase (Decrease) in - Accounts payable and other current liabilities (73) (98) (126) Current income taxes 60 6 (108) Deferred income taxes 5 (109) (136) Other, net (30) (63) 25 - ------------------------------------------------------------------------------------------------------- Net cash provided by continuing operations 290 204 258 Net cash provided (used) by discontinued operations (438) 303 360 - ------------------------------------------------------------------------------------------------------- Net Cash Provided (Used) by Operating Activities (148) 507 618 - ------------------------------------------------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from sale of discontinued operations 1,534 1,039 -- Proceeds from sale of investments and other assets 60 32 -- Proceeds from sale of information technology operations -- -- 184 Purchases of marketable securities, net (59) (125) (307) Purchases of investments (50) -- -- Capital expenditures (14) (21) (26) - ------------------------------------------------------------------------------------------------------- Net Cash Provided (Used) by Investing Activities 1,471 925 (149) - ------------------------------------------------------------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES: Special distributions to shareholders (1,531) -- -- Repayment of debt (146) (454) (8) Dividends paid (56) (55) (42) Repayment of debt - finance operations (15) (14) (12) Purchase of common stock -- (960) -- Proceeds from option exercises 8 57 -- - ------------------------------------------------------------------------------------------------------- Net Cash Used by Financing Activities (1,740) (1,426) (62) - ------------------------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS (417) 6 407 CASH AND EQUIVALENTS AT BEGINNING OF YEAR 511 505 98 - ------------------------------------------------------------------------------------------------------- CASH AND EQUIVALENTS AT END OF YEAR $ 94 $ 511 $ 505 =======================================================================================================
The accompanying Notes to Consolidated Financial Statements are an integral part of this statement. -- 20 -- 10 GENERAL DYNAMICS CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY Restated (See Note K)
Common Stock Treasury Stock ---------------------------------------------- Retained ----------------------- Shares Par Surplus Earnings Shares Amount - ---------------------------------------------------------------------------------------------------------------------------------- (Dollars in millions, except per share amounts) BALANCE, 31 DECEMBER 1990 110,884,200 $111 $ -- $2,164 27,541,094 $765 - ---------------------------------------------------------------------------------------------------------------------------------- Net earnings 505 Cash dividends declared ($.50 per share) (42) Shares issued under Incentive Compensation Plan (7) (484,058) (14) - ---------------------------------------------------------------------------------------------------------------------------------- BALANCE, 31 DECEMBER 1991 110,884,200 111 -- 2,620 27,057,036 751 - ---------------------------------------------------------------------------------------------------------------------------------- Net earnings 815 Cash dividends declared ($.80 per share) (57) Shares purchased under tender offer (See Note K) 26,496,864 960 Shares retired (26,496,864) (27) (933) (26,496,864) (960) Shares issued under Incentive Compensation Plan (13) (4,511,906) (109) - ---------------------------------------------------------------------------------------------------------------------------------- BALANCE, 31 DECEMBER 1992 84,387,336 84 -- 2,432 22,545,130 642 - ---------------------------------------------------------------------------------------------------------------------------------- Net earnings 885 Cash dividends declared ($1.00 per share) (62) Special distributions to shareholders (See Note C) (1,546) Shares issued under Incentive Compensation Plan 8 (721,306) (18) - ---------------------------------------------------------------------------------------------------------------------------------- BALANCE, 31 DECEMBER 1993 84,387,336 $ 84 $ 8 $1,709 21,823,824 $624 ==================================================================================================================================
The accompanying Notes to Consolidated Financial Statements are an integral part of this statement. -- 21 -- 11 GENERAL DYNAMICS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Restated (See Notes A and K) Dollars in millions, except per share amounts A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION The Consolidated Financial Statements include the accounts of the Company and all majority-owned subsidiaries. SALES AND EARNINGS UNDER LONG-TERM CONTRACTS AND PROGRAMS Major defense programs are accounted for using the percentage-of-completion method of accounting. The combination of estimated profit rates on similar, economically interdependent contracts is used to develop program earnings rates. These rates are applied to contract costs as incurred for the determination of sales and operating earnings. All costs specifically reimbursable under contract terms, including general and administrative expenses and research and development costs, are treated as contract costs. Program earnings rates are reviewed quarterly to assess revisions in contract values and estimated costs at completion. Based on these assessments, any changes in earnings rates are made prospectively. Any anticipated losses on contracts or programs are charged to earnings when identified. Such losses encompass all costs, including general and administrative expenses, allocable to the contracts. Revenue arising from the claims process is not recognized either as income or as an offset against a potential loss until it can be reliably estimated and its realization is probable. GENERAL AND ADMINISTRATIVE EXPENSES General and administrative expenses amounted to $292, $233 and $240 in 1993, 1992 and 1991, respectively, and are included in operating costs and expenses on the Consolidated Statement of Earnings. RESEARCH AND DEVELOPMENT COSTS Company-sponsored research and development costs, including bid and proposal costs, amounted to $33, $32 and $32 in 1993, 1992 and 1991, respectively, and are included in operating costs and expenses on the Consolidated Statement of Earnings. INTEREST, NET Interest income was $40, $34 and $24 in 1993, 1992 and 1991, respectively. Interest expense of $6, $22 and $44 has been allocated to discontinued businesses in 1993, 1992 and 1991, respectively, on the ratio of net assets of discontinued operations to consolidated net assets. Interest expense incurred by the Company's finance operations totaled $15, $16 and $17, in 1993, 1992 and 1991, respectively, and is classified as operating costs and expenses. Interest payments for the total Company were $28, $58 and $86 in 1993, 1992 and 1991, respectively. NET EARNINGS PER SHARE Net earnings per share are based upon the weighted average number of common shares and equivalents outstanding during each period. Common share equivalents are attributable primarily to outstanding stock options. The weighted average shares and equivalents were 63.3, 75.6 and 85.6 million in 1993, 1992 and 1991, respectively. As there is not a material difference between primary and fully diluted earnings per share, only fully diluted earnings per share are presented. CASH AND EQUIVALENTS The Company considers securities with a remaining maturity of three months or less when purchased to be cash equivalents. Cash and equivalents are stated at cost, which approximates market value. MARKETABLE SECURITIES Marketable securities consist primarily of tax- exempt municipal bonds, direct obligations of the U.S. Government and its agencies, and other short-term investment funds. Marketable securities are stated at cost, which approximates market value based on quoted market prices. ACCOUNTS RECEIVABLE AND CONTRACTS IN PROCESS Accounts receivable represent only amounts billed and currently due from customers. Recoverable costs and accrued profit related to long-term contracts and programs on which revenue has been recognized, but billings have not been presented to the customer (unbilled receivable), are included in contracts in process. Contracts in process are stated at cost incurred, plus estimated earnings, less progress payments. Incurred costs include production costs and related overhead, including general and administrative expenses. Incurred costs also include certain costs required to be recorded under generally accepted accounting principles which are not currently allocable to contracts such as a portion of workers' compensation and retiree medical costs. REAL ESTATE HELD FOR DEVELOPMENT As a result of the sale of businesses discussed in Note B, certain related properties were retained by the Company. These properties are carried at the lower of cost or net realizable value. PROPERTY, PLANT AND EQUIPMENT The Company primarily uses accelerated methods of depreciation for depreciable assets. Depletion of coal properties is computed using the units-of-production method. OTHER INVESTMENTS At 31 December 1993, the Company held investments in preferred stock of $50 which are classified as noncurrent assets on the Consolidated Balance Sheet. These investments are carried at cost, which approximates market value based on quoted market prices. -- 22 -- 12 ENVIRONMENTAL LIABILITIES The Company accrues environmental costs when it is probable that a liability has been incurred and the amount can be reasonably estimated. Any recorded liabilities have not been discounted. In circumstances where the Company is jointly and severally liable, the Company has considered its relative involvement in evaluating its exposure. To the extent environmental costs are allocable to U.S. Government contracts, such reimbursement is considered in estimating the loss. Any liabilities related to businesses previously sold were accrued at the time of disposal. CHANGES IN ACCOUNTING PRINCIPLES Effective 1 January 1993, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions," and SFAS No. 109, "Accounting for Income Taxes," as described in Notes R and E, respectively. In May 1993, the Financial Accounting Standards Board issued SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities," which requires the recognition of the fair value of certain investments in the financial statements. The Company is required to adopt the provisions of this standard on 1 January 1994. Adoption of this standard is not expected to have a material impact on the Company's results of operations or financial condition. CLASSIFICATION Consistent with industry practice, assets and liabilities relating to long-term contracts and programs are classified as current although a portion of these amounts is not expected to be realized within one year. RESTATEMENTS The Consolidated Financial Statements, and the notes thereto, have been restated to reflect the Company's Space Launch Systems business segment as a discontinued operation in accordance with Accounting Principles Board Opinion No. 30 (APB 30), as well as the reclassification of certain businesses previously reported as discontinued operations to continuing operations (see Note B for further discussion). In addition, certain prior year amounts have been reclassified to conform to the current year presentation. B. DISCONTINUED OPERATIONS THE CESSNA AIRCRAFT COMPANY In February 1992, Textron, Inc. purchased The Cessna Aircraft Company (Cessna) from the Company for $600 in cash. The Company recognized a gain on disposal of $358, or $4.74 per share, net of income taxes of $14. The gain on disposal for Federal income tax purposes was significantly less than the reported gain due to the $464 purchase price write-off from the Company's acquisition of Cessna which was not recognized for tax purposes. PLAN OF CONTRACTION On 6 May 1992, the Board of Directors of the Company adopted a formal plan of contraction of the Company's business (for further discussion, see Note C). In connection with the plan, the Company determined it would focus on its area of principal competency: major weapons platform integration. The Company believes each business must be a market leader. The Company also believes that each business must have the potential to obtain "critical mass", which it defines as having sufficient production volume to retain key capabilities, ensure economies of scale and provide affordable products and services. The Company determined that four of its businesses met these criteria: Tactical Military Aircraft, Nuclear Submarines, Armored Vehicles and Space Launch Systems. The Company intended to concentrate its efforts on these businesses and therefore decided to sell all its other businesses: the Missile Systems, Commercial Aircraft Subcontracting, Coal Mining, Material Service, Electronics, Ship Management, and Ship Financing businesses. In August 1992, the Company closed the sale of its Missile Systems business to Hughes Aircraft Company (Hughes) in exchange for approximately 21.5 million shares of General Motors Corporation (GM) Class H common stock. The Company recognized a gain on disposal of the business of $7, or $.09 per share, net of income taxes of $3. In October 1992, the Company received $387 for the shares in a public offering by GM. Under the terms of the sales agreement, the Company was to receive from Hughes an additional $63 on 30 September 1993. In May 1993, the Company and Hughes reached an agreement that the $63 receivable was to be offset by amounts determined to be payable by the Company to Hughes. As a result, Hughes paid the Company a net amount of $9. As the Company had previously established liabilities for discontinued operations, this settlement did not have a material impact on the Company's results of operations. In November 1992, the Company closed the sale of its Electronics business, excluding the Single Channel Ground and Airborne Radio System (SINCGARS) program, to The Carlyle Group. The Company recognized a gain on disposal of $9, or $.12 per share, net of income taxes of $5. In December 1993, the Company announced the sale of the lime and brick operations of its Material Service business for $46 in cash. The Company expects to complete the sale in the first quarter of 1994. The businesses under the plan of contraction are accounted for as discontinued operations in accordance with APB 30 which, among other provisions, expects the plan of disposal to be carried out within one year. During the fourth quarter of 1993, the Company identified certain businesses included under the plan of contraction which no longer met this criteria. These businesses have not been sold primarily because satisfactory sales terms could not be reached. Accordingly, the Coal Mining, Ship Management and Ship Financing businesses have been reclassified to continuing operations. In addition, the SINCGARS program has been reclassified to continuing operations due to Management's reassessment of the program's business opportunities. In 1992, these businesses had net sales and operating earnings of $243 and $39, respectively, while at 31 December 1992, they had assets and liabilities totaling $399 and $422, respectively. The Company presently intends to operate these businesses, but, as the Company does with all of its businesses, will continue to evaluate alternatives to maximize the value of each business. As to the businesses remaining in discontinued operations, the Commercial -- 23 -- 13 Aircraft Subcontracting business will be sold or it will complete its current contractual obligations and seek no new business, while the Company intends to sell individually the remaining product lines of the Material Service business. TACTICAL MILITARY AIRCRAFT AND SPACE LAUNCH SYSTEMS In seeking to obtain "critical mass" for the selected businesses discussed above, and only after studying the various available strategic alternatives, the Company determined that the sale of two of these businesses was the most viable alternative to assure their continued strength. In March 1993, the Company closed the sale of its Tactical Military Aircraft business to Lockheed Corporation for $1,525 in cash. The Company recognized a gain on disposal of $645, or $10.19 per share, net of income taxes of $331. Any contingencies associated with the terminated A-12 aircraft program (see discussion at Note P) have been retained by the Company. In December 1993, the Company announced it had reached a definitive agreement with Martin Marietta Corporation for the sale of the Company's Space Launch Systems business for approximately $209 in cash. The Company expects to close the sale by April 1994 and to recognize a gain on disposal. EARNINGS FROM OPERATIONS The operating results of those businesses classified as discontinued operations at 31 December 1993 are:
Year ended 31 December 1993 1992 1991 - -------------------------------------------------------------------------------- Net sales $1,474 $5,460 $6,387 ================================================================================ Earnings (loss) before income taxes $ (44) $ 201 $ 337 Provision (credit) for income taxes (14) 65 106 - -------------------------------------------------------------------------------- Net earnings (loss) $ (30) $ 136 $ 231 ================================================================================ Net earnings (loss) per share $ (.47) $ 1.80 $ 2.70 ================================================================================
1993, 1992 and 1991 results reflect charges of $25 ($16 after tax, or $.25 per share), $33 ($22 after tax, or $.29 per share) and $71 ($47 after tax, or $.55 per share), respectively, related to Space Launch System's Commercial Atlas Expendable Launch Vehicle program. These charges were the direct result of launch failures in each of those periods. 1992 results reflect a $47 ($31 after tax, or $.41 per share) charge related to the early payout of the Company's Executive Deferred Compensation plan. Due to the significant reduction in the size of the Company, it was determined it would be prudent to terminate the plan which represented a significant long-term liability. The charge, taken during the fourth quarter, represents an equitable settlement for early termination of the plan. As this action was the result of the decision to sell certain businesses, the charge is reported in earnings from discontinued operations. 1991 results reflect a $109 reduction in Cessna's product liability accrual which increased the Company's net earnings from discontinued operations by $72, or $.84 per share. This reduction in the product liability accrual, which was based on a report prepared by an independent actuarial firm, was the result of favorable claim experience and favorable product liability legislation in a number of states. NET ASSETS OF DISCONTINUED OPERATIONS The assets and liabilities of those businesses classified as discontinued operations at 31 December 1993 are:
31 DECEMBER 1993 1992 - ----------------------------------------------------------- Current assets $1,429 $2,217 Noncurrent assets 185 449 - ----------------------------------------------------------- Total Assets $1,614 $2,666 =========================================================== Current liabilities $1,280 $1,828 Noncurrent liabilities 31 61 - ----------------------------------------------------------- Total Liabilities $1,311 $1,889 =========================================================== Net Assets $ 303 $ 777 ===========================================================
C. SPECIAL DISTRIBUTIONS TO SHAREHOLDERS On 6 May 1992, the Board of Directors of the Company adopted a formal plan of contraction of the Company's business within the meaning of Internal Revenue Code Section 302(e) (1) (B). Under the plan, the Company anticipated the sale of certain qualifying businesses and the subsequent tax-advantaged distribution of the proceeds on or before 31 December 1993. Although not contemplated as part of the original plan, the proceeds from the sale of the Tactical Military Aircraft business qualified for tax-advantaged distribution. However, the proceeds from the sale of the Space Launch Systems business will not qualify as the sale will be completed subsequent to 31 December 1993. Under the plan, the Company made the following special distributions in 1993:
CHARGED TO RETAINED EARNINGS DATE --------------------------------- DECLARED PAID DEFERRED TOTAL - ------------------------------------------------------- March 18 $ 612 $10 $ 622 June 2 551 8 559 September 15 368 5 373 - ------------------------------------------------------- $1,531 $23 $1,554 =======================================================
The deferred portion of the distributions relates to restricted shares held for the benefit of employees. These amounts will become payable as the restrictions lapse. In addition, as the deferred amounts will represent deductible compensation for Federal income tax purposes when the restrictions on the related shares lapse, the Company recorded a tax benefit of $8 directly to retained earnings related to the distributions. The total of the three special distributions represents substantially all of the funds available for tax-advantaged distribution to shareholders. -- 24 -- 14 D. CORPORATE OFFICE REORGANIZATION In March 1993, the Company announced a reorganization of its Corporate Office as a result of the contraction of the Company. This reorganization includes changes in senior management and reductions in corporate staff. During the first quarter 1993, the Company recognized the estimated total cost of these actions of approximately $75 (before tax). As a substantial amount of these costs are directly related to the Company's formal plan of contraction, they were charged to previously established liabilities for discontinued operations. Consequently, these actions did not have a material impact on the Company's results of operations. E. INCOME TAXES During the third quarter of 1993, the President signed into law the Omnibus Budget Reconciliation Act of 1993 which, among other changes, increased the statutory Federal income tax rate from 34% to 35%, retroactive to 1 January 1993. In accordance with SFAS 109, the Company recognized in its provision for income taxes in the third quarter an $11 benefit related to the adjustment of its net deferred tax asset as of 1 January 1993 and an $11 charge related primarily to the adjustment of the provision for taxes on the gain on disposal of the Tactical Military Aircraft business. During the fourth quarter of 1992, the Company recognized $95 ($1.26 per share) of research and experimentation and investment tax credits as a result of the completion of a company-wide study relating to certain prior years expenditures. The Internal Revenue Service (IRS) issued final regulations in 1989 relating to the research and experimentation tax credit. Prior to this no definitive guidance existed. Claims in excess of the $75 in research and experimentation credits recognized in 1992 have been submitted to the IRS, however, further benefits will not be recognized until realization is assured. In addition, $20 of investment tax credits were recognized relating to asset purchases qualifying under transition rules from the Tax Reform Act of 1986 which repealed the credit. During 1991, the Company recognized a $140 gain ($1.64 per share) from an adjustment to its deferred income tax liability. The adjustment reflects the conclusion of the IRS field audit of the Company's Federal income tax returns for the years 1977 through 1986. The provision (credit) for Federal income taxes for continuing operations is summarized as follows:
YEAR ENDED 31 DECEMBER 1993 1992 1991 - -------------------------------------------------------------------- Current $138 $114 $ 54 Deferred 5 (109) (136) - -------------------------------------------------------------------- $143 $ 5 $(82) ====================================================================
The reconciliation from the statutory Federal income tax rate to the Company's effective income tax rate is as follows:
YEAR ENDED 31 DECEMBER 1993 1992 1991 - ------------------------------------------------------------------------- Statutory income tax rate 35.0% 34.0% 34.0% Research and experimentation and investment tax credits -- (30.6) -- Adjustment to deferred income tax liability -- -- (72.9) Tax-exempt interest income (1.0) (.6) (2.1) Other 0.6 (1.2) (1.7) - ------------------------------------------------------------------------- Effective income tax (benefit) rate 34.6% 1.6% (42.7)% =========================================================================
The Company adopted SFAS No. 109, "Accounting for Income Taxes," as of 1 January 1993. As the Company had been following the provisions of SFAS No. 96, "Accounting for Income Taxes," adoption of SFAS 109 did not have a material impact on the Company's financial condition or results of operations. The tax effects of temporary differences that give rise to significant portions of deferred tax assets and liabilities consist of the following:
31 DECEMBER 1993 1992 - -------------------------------------------------- Long-term contract costing methods $143 $145 Accrued costs on disposed businesses 84 100 A-12 termination 71 106 Restructuring costs 40 29 Coal mining liabilities 28 32 Other 109 53 - -------------------------------------------------- Deferred Assets $475 $465 ================================================== Lease income $ 86 $ 88 Other 69 52 - -------------------------------------------------- Deferred Liabilities $155 $140 ================================================== Net Deferred Asset $320 $325 ==================================================
No valuation allowance was required for the Company's deferred tax assets as of 31 December 1993 and 1992. The current portion of the net deferred tax asset is $214 and $203 at 31 December 1993 and 1992, respectively, and is included in other current assets on the Consolidated Balance Sheet. Deferred taxes for the discontinued operations are included in the net assets of discontinued operations on the Consolidated Balance Sheet. The Company made Federal income tax payments of $316, $258 and $523 in 1993, 1992 and 1991, respectively. Certain issues related to the IRS audit of the Company's consolidated Federal income tax returns for the years 1977 through 1986 were not resolved at the administrative level. Accordingly, the Company expects to receive a Statutory Notice of Deficiency which it will contest in the U.S. Tax Court. In addition, the IRS is -- 25 -- 15 reviewing the Company's consolidated Federal income tax returns for the years 1987 through 1989. The Company has recorded liabilities for tax contingencies. Accordingly, resolution of the Tax Court litigation and the 1987-1989 audit are not expected to have a material impact on the Company's financial condition or results of operations. The provision for state and local income taxes, which is allocable to U.S. Government contracts, is included in operating costs and expenses. F. CONTRACTS IN PROCESS Contracts in process consist of the following:
31 DECEMBER 1993 1992 - ------------------------------------------------------------------- Government contracts in process $4,307 $4,144 Other 146 119 - ------------------------------------------------------------------- 4,453 4,263 Less advances and progress payments 4,011 3,831 - ------------------------------------------------------------------- $ 442 $ 432 ===================================================================
At 31 December 1993 and 1992, costs of $110 and $88, respectively, are included in contracts in process, but are not currently allocable to contracts. Substantially all other amounts included in contracts in process represent an unbilled receivable. General and administrative costs included in contracts in process amounted to $28 and $25 at 31 December 1993 and 1992, respectively. Under the contractual arrangements by which progress payments are received, the U.S. Government asserts that it has a security interest in the contracts in process identified with the related contracts. G. PROPERTY, PLANT AND EQUIPMENT, NET The major classes of property, plant and equipment are as follows:
31 DECEMBER 1993 1992 - ------------------------------------------------------------------- Land and improvements $ 79 $ 93 Coal reserves 53 52 Buildings and improvements 156 150 Machinery and equipment 870 918 - ------------------------------------------------------------------- 1,158 1,213 Less accumulated depreciation, depletion and amortization 856 874 - ------------------------------------------------------------------- $ 302 $ 339 ===================================================================
Certain plant facilities are provided by the U.S. Government. H. CURRENT LIABILITIES Current liabilities consist of the following:
31 DECEMBER 1993 1992 - ------------------------------------------------------------------- Accounts payable $157 $126 Accrued workers' compensation 174 201 Accrued salaries and wages 71 81 Income taxes payable 35 -- Other 129 83 - ------------------------------------------------------------------- Accounts payable and accrued expenses $566 $491 =================================================================== A-12 termination liability and legal fees $ 57 $112 SINCGARS loss provision 48 78 Other 104 152 - ------------------------------------------------------------------- Other current liabilities $209 $342 ===================================================================
I. LONG-TERM DEBT Long-term debt consists of the following:
31 DECEMBER 1993 1992 - ------------------------------------------------------------------- 9 3/8% Notes due 1995 $ -- $100 5 3/4% Exchangeable Subordinated Debentures due 2011 -- 45 9.95% Debentures due 2018 39 39 - ------------------------------------------------------------------- 39 184 Less: Unamortized discount 1 1 Current portion -- 145 - ------------------------------------------------------------------- $ 38 $ 38 ===================================================================
The Company redeemed on 15 May 1993 the entire series of 9 3/8% Notes at face value. In addition, in July 1993, the Company redeemed the remaining 5 3/4% Exchangeable Subordinated Debentures.The 5 3/4% Debentures were exchangeable for shares of Federal Express Corporation common stock owned by the Company and having no book value. As a result of retiring these Debentures, the Federal Express Corporation stock held by the Company was available for sale.These shares were sold during the third quarter of 1993 and the fourth quarter of 1992 for $37 and $21, respectively, with the corresponding gain reported as other income.The shares of Federal Express Corporation stock held by the Company at 31 December 1992 had a fair market value of $35 based on quoted market prices. Annual sinking fund payments, sufficient to retire 5% of the $100 aggregate principal amount originally issued, will commence in 2011 for the 9.95% Debentures. Among the restrictions under the Indenture covering the unsecured Debentures are provisions limiting the Company's ability to secure additional debt through mortgages on existing properties and sale and leaseback transactions of principal properties as defined.The -- 26 -- 16 Company's outstanding debt had a fair value of $45 and $188 at 31 December 1993 and 1992, respectively, based on quoted market prices. The Company may borrow up to $850 under a committed, short-term line of credit.Under the line of credit, the Company pays a fee on the commitment and would pay interest at varying rates based on market conditions.There were no borrowings under the line of credit during 1993 and 1992. J. OTHER LIABILITIES Other liabilities consist of the following:
31 DECEMBER 1993 1992 - ------------------------------------------------------------------- Accrued costs on disposed businesses $239 $295 Coal mining related liabilities 74 78 Other 169 88 - ------------------------------------------------------------------- $482 $461 ===================================================================
The Company has recorded liabilities for contingencies retained by the Company related to disposed businesses. These liabilities include retiree medical obligations prior to the adoption of SFAS 106, environmental, legal and the estimated cost of facility dispositions and other restructuring actions contemplated as a result of the Company's plan of contraction. The Company has certain liabilities which are specific to the coal mining industry. These liabilities include workers' compensation, reclamation, and mine suspension and closing costs. The Company is subject to the Federal Coal Mine Health & Safety Act of 1969, as amended, and the related workers' compensation laws in the states in which it operates. These laws require the Company to pay benefits for occupational disability resulting from coal workers' pneumoconiosis (black lung). The liability for these claims represents the present value, based on a 6% discount rate, of known claims and an actuarially-determined estimate of future claims that will be awarded to current and former employees. Liabilities to reclaim land disturbed by the mining process and to perform other closing functions are recorded over the production lives of the mines. Liabilities related to closed or suspended mines were established in connection with the termination of a coal supply agreement. K. SHAREHOLDERS' EQUITY STOCK SPLIT On 4 March 1994, the Company's Board of Directors authorized a two-for-one stock split effected in the form of a 100% stock dividend to be distributed on 11 April 1994 to shareholders of record on 21 March 1994. Shareholders' equity has been restated to give retroactive recognition to the stock split for all periods presented by reclassifying from retained earnings to common stock the par value of the additional shares arising from the split. In addition, all references in the financial statements to number of shares, per share amounts, stock option data, and market prices of the Company's common stock have been restated. AUTHORIZED STOCK The authorized capital stock of the Company consists of 200 million shares of $1 par value common stock and 50 million shares of $1 par value preferred stock issuable in series, with the rights, preferences and limitations of each series to be determined by the Board of Directors. TENDER OFFER During the third quarter of 1992, the Company completed the purchase of $960 of its common stock, including transaction costs of approximately $3, in accordance with the terms of its "Dutch Auction" tender offer. All shares acquired through the tender offer were retired. L. FINANCE OPERATIONS The Company owns three liquefied natural gas (LNG) tankers which have been leased to nonrelated companies through the year 2004. The leases are financed through Title XI Bonds which are secured by the LNG tankers. Under Title XI financing, the debt is guaranteed by the U.S. Government with no recourse to the Company. Accordingly, in the event the lessee defaults on the lease payments, the Company is not obligated to repay the debt. The following is a summary of the comparative financial statements for the finance operations:
BALANCE SHEET DATA 31 DECEMBER 1993 1992 - ------------------------------------------------------------------- ASSETS Leases receivable $251 $265 Due from parent 92 100 - ------------------------------------------------------------------ $343 $365 ================================================================== LIABILITIES AND SHAREHOLDER'S EQUITY Debt $175 $190 Income taxes 86 88 Shareholder's equity 82 87 - ------------------------------------------------------------------- $343 $365 ===================================================================
EARNINGS DATA YEAR ENDED 31 DECEMBER 1993 1992 1991 - ------------------------------------------------------------------- Interest income $17 $18 $18 Interest expense and income taxes 16 17 17 - ------------------------------------------------------------------- Net earnings $ 1 $ 1 $ 1 ===================================================================
-- 27 -- 17 The Company is scheduled to receive a $31 minimum lease payment annually through the year 2003. The components of the Company's net investment in the leases receivable are as follows: 31 DECEMBER 1993 1992 - ------------------------------------------------------------------- Aggregate future minimum lease payments $319 $350 Unguaranteed residual value 38 38 Less unearned interest income 106 123 - ------------------------------------------------------------------- $251 $265 =================================================================== The finance operations debt had an estimated fair value of $181 and $195 at 31 December 1993 and 1992, respectively, based on a risk-adjusted discount rate. Semiannual sinking fund payments, sufficient to retire 100% of the aggregate principal amount of the debt, have commenced and will continue through maturity in 2004. The interest rate on the debt varies from 8.0% to 9.0%, with a weighted average rate of 8.1%. The schedule of principal payments for the next five years is $12 in 1994, $13 in 1995, $14 in 1996, $15 in 1997 and $16 in 1998. M. LEASES Rental expense, substantially all of which is minimum rentals, was $24, $29 and $37 in 1993, 1992 and 1991, respectively. Rental commitments under existing operating leases at 31 December 1993 are $22 in 1994, $14 in 1995, $11 in 1996, $3 in 1997, $3 in 1998 and $6 thereafter. N. OUTSOURCING OF INFORMATION TECHNOLOGY OPERATIONS In November 1991, the Company signed an agreement with Computer Sciences Corporation (CSC) for the sale of the information technology operations of the Company's Data Systems Division. Under a related agreement, CSC has the exclusive right to provide information technology services to the Company's defense units for ten years. The agreement provides for minimum aggregate payments to CSC during the first three years of the service agreement and payments equal to 90% of the Company's estimated annual usage thereafter. At 31 December 1993, the Company has substantially fulfilled the minimum aggregate payments related to the first three years. As the Company had a significant continuing involvement in the use of the assets sold, the $51 gain (before tax) on the sale was being deferred and amortized on a straight-line basis over three years into other income. Due to the novation of the Company's agreement with CSC allowing the buyers of the Company's sold businesses to assume the remaining obligation applicable to businesses sold, the Company's continuing involvement has diminished. Accordingly, after completing an analysis during the second quarter of 1993, the Company recorded $14 of the previously deferred gain which was attributable to businesses sold. The remaining balance is being recognized on a straight-line basis through the end of 1994, which is consistent with the original amortization period. O. CONTINGENCIES As previously reported, the Company is a defendant in U.S. vs. Davis et al, a civil action in the Federal District Court for the Southern District of New York in which the U.S. Government alleges claims under the Civil False Claims Act. A judgment in favor of the Company was entered on 2 October 1992. On 4 January 1993, the U.S. Government appealed the District Court's judgment in favor of the Company. This appeal is now pending. On 7 January 1991, the U.S. Navy terminated for default a contract with the Company and McDonnell Douglas Corporation (McDonnell Douglas) for the full-scale development of the U.S. Navy's A-12 aircraft. The U.S. Navy has demanded repayment of unliquidated progress payments. The Company and McDonnell Douglas have a claim pending against the U.S. Government in the Court of Federal Claims (See Note P). The Company is a defendant in a shareholders' derivative action filed in the California Superior Court for San Diego County on 17 January 1991. The suit was dismissed by the court on 10 May 1993, because the plaintiffs failed to make a demand on the Board of Directors of the Company prior to bringing action. The period to amend the complaint has expired. On 8 March 1993, a class action lawsuit, Berchin et al vs. General Dynamics Corporation and William A. Anders, was filed in the Federal District Court for the Southern District of New York. The suit alleges violations of various provisions of federal securities laws, fraud, negligent misrepresentation, and breach of fiduciary duty by the defendants with regard to disclosures made, or omitted, in the Company's tender offer completed in July 1992 and the subsequent divestiture of core businesses. The Company believes there is no liability in connection with this matter and intends to vigorously defend itself. The Company is also involved in other suits, proceedings and investigations. The Company is involved in or has been designated a Potentially Responsible Party in respect to a number of Superfund and waste disposal sites with potential liability for cleanup costs under the Federal Comprehensive Environmental Response, Compensation and Liability Act. The Company has made a detailed review of these waste disposal sites, giving consideration to the Company's relative involvement in the sites compared to other companies. Most of the sites in question were used in the conduct of the Company's U.S. Government contracting business. To the extent cleanup costs are allocable to U.S. Government contracts, such reimbursement has been considered in estimating the Company's loss. While the extent of remediation and of the Company's liability in these matters is difficult to estimate, in the aggregate these proceedings and matters are not deemed material to the financial condition or results of operations of the Company. In the ordinary course of business, the Company has entered into letter of credit agreements and other arrangements with financial institutions aggregating approximately $120 at 31 December 1993. The Company also has a remaining firm purchase commitment for rocket engines of $255 at 31 December 1993. The Company was -- 28 -- 18 contingently liable for debt and lease guarantees and other arrangements aggregating up to a maximum of approximately $160 and $170 at 31 December 1993 and 1992, respectively. Approximately $45 of the $160 the Company was contingently liable for at 31 December 1993, as well as the aforementioned firm purchase commitment, will be assumed by the buyer of the Company's Space Launch Systems business. In connection with the sale of defense businesses, the Company remains contingently liable for performance by the purchaser of these businesses under contracts entered into with the U.S. Government. The Company believes the probability of any liability arising from this matter is remote. In addition, the sales agreements contain certain representations and warranties under which the purchasers have certain specified periods of time to assert claims against the Company. Some claims have been asserted which are material in amount, but the Company does not believe that its liability as a result of these claims will exceed the liabilities recorded at the time of the sales. P. A-12 TERMINATION As stated above, on 7 January 1991, the U.S. Navy terminated the Company's A-12 aircraft contract for default. The Company's A-12 contract was a fixed-price incentive contract for the full-scale development and initial production of the U.S. Navy's new carrier-based Advanced Tactical Aircraft. Both the Company and McDonnell Douglas were parties to the contract with the U.S. Navy and each had full responsibility to the U.S. Navy for performance under the contract. Also, the Company and McDonnell Douglas are parties to a teaming agreement in which profits and losses under the contract are shared equally. The Company and McDonnell Douglas remain jointly and severally liable to the U.S. Navy under the A-12 contract for any potential liabilities arising out of the termination. As a result of the termination, the Company fully reserved the contracts in process balance associated with the A-12 program and recognized the Company's estimated termination liabilities, primarily to its vendors. The Company has neither recognized any claim revenue from the U.S. Navy, nor any potential return of unliquidated progress payments to the U.S. Navy, in its financial statements. The Company recorded charges in 1990 totaling $724 (before tax), which are included in earnings from discontinued operations, related to the A-12 program due to its termination and earlier identified cost overruns. In February 1991, the U.S. Navy demanded payment of unliquidated progress payments in the approximate amount of $1,400 from the team, but agreed to defer collection pending resolution of the termination dispute. Terms of the deferment agreement include a requirement for the team to maintain sufficient assets or available credit to pay the unliquidated progress payments plus any accrued interest. As a result of the review, the team is also required to notify the U.S. Navy prior to any special distributions to shareholders or repurchase of a material amount of its stock. The Company and McDonnell Douglas filed a complaint on 7 June 1991 in the U.S. Court of Federal Claims to contest the default termination. The suit, in effect, seeks to convert the termination for default to a termination for convenience of the U.S. Government. The Company and McDonnell Douglas also filed, in the second quarter of 1991, an equitable adjustment claim against the U.S. Navy for approximately $1,100 and a claim in the nature of a termination settlement proposal in the approximate amount of $1,300. These claim amounts are not exclusive of each other. Additional claims are expected to be filed at a later date. In the aggregate, through these claims, the Company and McDonnell Douglas seek to recover payment for all work done and costs incurred in the A-12 program and its termination. A trial on Count XVII of the complaint, which relates to the propriety of the termination for default, was concluded in October 1993. In December 1993, the Court issued preliminary findings of fact which appear favorable to the Company and McDonnell Douglas. The Court will not issue a decision before 21 July 1994, during which time other counts in the complaint will be prepared for decision. Except for default or a violation of one of the terms on financial responsibility, the U.S. Navy has agreed not to seek to terminate the deferment agreement prior to a ruling by the U.S. Court of Federal Claims. The Company believes that ultimately it will be found not to have been in default of the contract. In the unlikely event that the Company and McDonnell Douglas are ultimately found to be in default of the A-12 contract, additional losses of approximately $650 (before tax) may be recognized by the Company. This estimated additional loss is based upon certain assumptions which are periodically reviewed by the Company and McDonnell Douglas. This estimate does not include interest that may ultimately be payable to the U.S. Government as provided by the deferment agreement. Q. INCENTIVE COMPENSATION PLAN Under the 1988 Incentive Compensation Plan, as amended, the Company may grant awards in combination of cash, common stock, stock options and restricted stock. In order to encourage Management to continue focusing on shareholder value, the Company introduced a new long-term incentive program in October 1993. The program includes Performance Restricted Stock and Performance Stock Options granted at the then current market value of $47 per share. The restricted stock has a two year performance period with 50% of the grant dependent on performance as measured at the end of 1994 and the remaining 50% dependent on performance as measured at the end of 1995. For every dollar change in the stock price during the performance period, an additional dollar's worth of restricted stock will be granted (stock price increase) or forfeited (stock price decrease) for each share originally granted. Restrictions on the shares lapse two years after the performance period. The stock options become exercisable when a specific time period has lapsed and a stock price "hurdle" has been achieved. Fifty percent of the options may be -- 29 -- 19 exercised after 31 December 1994 if the first price hurdle of $52.50 per share is achieved, and the remaining 50% may be exercised after 31 December 1995 if the second price hurdle of $60 per share is achieved. The hurdles are deemed achieved whenever the average stock price is at or above the price hurdle for 30 consecutive trading days anytime during the five year term of the options. In addition, the options become exercisable during the last 30 days of their term even if the hurdles are not achieved. There were 327,140 shares of restricted stock awarded in 1993, and 1,127,680 shares outstanding at year end. Information with respect to stock options is as follows:
1993 1992 - ------------------------------------------------------------------- NUMBER OF SHARES UNDER STOCK OPTIONS: Outstanding at beginning of year 2,937,704 7,575,152 Granted 1,394,190 233,190 Exercised (493,308) (4,399,730) Canceled (228,158) (470,908) - ------------------------------------------------------------------- Outstanding at end of year 3,610,428 2,937,704 =================================================================== PRICE OF STOCK OPTIONS: Granted $46.66-50.07 $28.32-39.75 Exercised $ 7.21-39.16 $11.91-39.16 Canceled $ 7.58-38.19 $12.16-39.16 Outstanding $ 7.21-47.00 $12.16-39.75 ===================================================================
There were 205,518 and 324,438 stock options exercisable at 31 December 1993 and 1992, respectively. An additional 2,006,000 stock options became exercisable in February 1994. At 31 December 1993, 1,915,348 shares have been reserved for options which may be granted in the future in addition to the shares reserved for issuance on the exercise of options outstanding. The price of stock options was adjusted in 1993 for the impact of the Company's special distribution to shareholders. During 1993 and 1992, Federal income tax benefits of $7 and $54, respectively, were credited to shareholders'equity primarily as a result of the exercise of non-qualified stock options which generated deductions for the Company equal to the difference between the market price at the date of exercise and the option price. R. RETIREMENT PLANS PENSION The Company has five trusteed noncontributory defined benefit pension plans covering substantially all employees. Under certain of the plans, benefits are primarily a function of both the employee's years of service and level of compensation, while under other plans, benefits are a function only of years of service. It is the Company's policy to fund the plans to the maximum extent deductible under existing Federal income tax regulations. Such contributions are intended to provide not only for benefits attributed to service to date, but also for those expected to be earned in the future. Net periodic pension cost for the total Company included the following:
YEAR ENDED 31 DECEMBER 1993 1992 1991 - ------------------------------------------------------------------------------ Service cost-benefits earned during period $ 70 $124 $153 Interest cost on projected benefit obligation 164 263 269 Actual return on plan assets (350) (246) (923) Net amortization and deferral 129 (92) 604 - ------------------------------------------------------------------------------ $ 13 $ 49 $103 ==============================================================================
The following table sets forth the plans' funded status:
31 DECEMBER 1993 1992 - ------------------------------------------------------------------- Actuarial present value of benefit obligations: Vested benefit obligation $(1,891) $(2,374) - ------------------------------------------------------------------- Accumulated benefit obligation $(1,933) $(2,424) - ------------------------------------------------------------------- Projected benefit obligation $(2,138) $(2,699) Plans' assets at fair value 2,674 3,910 - ------------------------------------------------------------------- Plans' assets in excess of projected benefit obligation 536 1,211 Unrecognized net gain (284) (823) Unrecognized prior service cost 362 282 Unrecognized net asset at 1 January 1986 (65) (139) - ------------------------------------------------------------------- Prepaid pension cost $ 549 $ 531 ===================================================================
Assumptions used in accounting for the plans are as follows:
1993 1992 1991 - ----------------------------------------------------------------- Discount rate 7% 8% 8% Varying rates of increase in compensation levels based on age 4.5-10% 4.5-10% 4.5-10% Expected long-term rate of return on assets 8% 8% 8% =================================================================
Under SFAS No. 87, "Employers' Accounting for Pensions," the Company is required to assume a discount rate at which the obligation could be currently settled. Due to the current decline in long-term interest rates, the Company reduced its discount rate assumption from 8% to 7% at 31 December 1993 which increased the projected benefit obligation at 31 December 1993 approximately $265. In addition, plan amendments were adopted during 1993 (see discussion under other postretirement benefits) which increased the projected benefit obligation at 31 December 1993 approximately $160 and net periodic pension cost for 1993 approximately $15. The sale of the Company's Tactical Military Aircraft business was the primary reason for the overall decrease in the projected benefit obligation, plan assets and net periodic pension cost in 1993. -- 30 -- 20 Increases in prior service cost resulting from plan amendments are amortized on a straight-line basis over the average remaining service period of employees expected to receive benefits under the plan. During 1992, the pension obligation associated with certain employees covered under the commercial plan was annuitized, resulting in the realization of a settlement gain of approximately $82 (before tax). This gain has been deferred to offset any costs associated with the final disposition of the commercial plan, either through reversion or other actions. This deferred gain has been classified against the prepaid pension cost related to the commercial plan resulting in a net asset of $115 and $106 at 31 December 1993 and 1992, respectively, which is included in other noncurrent assets on the Consolidated Balance Sheet. Also during 1992, the Company recognized a $40 (before tax) pension settlement and curtailment gain as part of the gain on disposal of Cessna. The Company's contractual arrangements with the U.S. Government provide for the recovery of contributions to the Company's government plans. Historically, the amount contributed to these plans, charged to contracts and included in net sales has exceeded the net periodic pension cost included in operating costs and expenses as determined under SFAS 87. Therefore, the Company has deferred recognition of earnings resulting from the difference between contributions and net periodic pension cost to provide better matching of revenues and expenses. Similarly, pension settlements and curtailments which resulted from the sale of businesses whose employees were covered under the government plans have also been deferred. As the U.S. Government will receive an equitable interest in the excess assets of a government pension plan in the event of plan termination, the aforementioned deferrals have been classified against the prepaid pension cost related to the government plans resulting in the recognition of no net asset on the Consolidated Balance Sheet. At 31 December 1993, approximately 54% of the plans' assets are invested in securities of the U.S. Government or its agencies, 34% in common stocks and equivalents, and 12% in diversified corporate fixed income securities. In addition to the defined benefit plans, the Company provides eligible employees the opportunity to participate in savings plans that permit contributions on both a pre-tax and after-tax basis. Generally, salaried employees and certain hourly employees with at least one year of continuous service are eligible to participate. Under the plans, the employee may contribute to various investment alternatives, including investment in the Company's common stock. In certain of the plans, the Company matches a portion of the employees' contributions with contributions to a fund which invests in the Company's common stock. The Company's contributions amounted to $43, $84 and $99 in 1993, 1992 and 1991, respectively. Approximately 6 million shares of the Company's common stock were held by the plans at both 31 December 1993 and 1992. OTHER POSTRETIREMENT BENEFITS Historically, the Company has provided certain health care and life insurance benefits for retired employees. The coverage provided and the extent to which retirees share in the cost of the benefits vary. During the first quarter of 1993, the Company announced a number of changes to the retiree medical programs for its non-union retirees and employees. Commencing 1 July 1993, the Company discontinued its post-65, self-insured retiree medical program. Concurrently, a pension improvement of $94 per month was provided to retirees and their spouses age 65 and older. Additionally, the Company's pre-65 retiree medical program continued to be available only for retirees age 55 and older, and those employees who had attained the age of 50 and with a certain number of years of service as of 1 July 1993. Later in 1993, this program was also negotiated with certain union groups. Effective 1 January 1993, the Company adopted SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions," which requires the recognition of postretirement benefits over the period in which active employees become eligible for such benefits. Previously, the Company recognized these costs on the cash basis which amounted to $40 and $33 in 1992 and 1991, respectively. The Company elected to implement this new standard by recognizing the transition obligation prospectively over the average estimated remaining service life of active employees. The transition obligation excludes the estimated retiree medical liability retained by the Company for businesses sold prior to the adoption of SFAS 106 which was recognized at disposition in accordance with the provisions of APB 30. The net periodic postretirement benefit cost for the total Company included the following:
YEAR ENDED 31 DECEMBER 1993 - -------------------------------------------------------------- Service cost - benefits earned during period $13 Interest cost on projected benefit obligation 41 Actual return on plan assets (6) Amortization of unrecognized transition obligation 41 - -------------------------------------------------------------- $89 ==============================================================
The following table sets forth the plans' funded status:
31 DECEMBER 1993 - -------------------------------------------------------------- Accumulated postretirement benefit obligation: Retirees $ 307 Other fully eligible participants 139 Other active participants 285 - -------------------------------------------------------------- 731 Less plans' assets at fair value 98 - -------------------------------------------------------------- Obligation in excess of plans' assets 633 Unrecognized transition obligation (518) Unrecognized net loss (88) - -------------------------------------------------------------- Accrued postretirement benefit obligation $ 27 ==============================================================
-- 31 -- 21 Since the adoption of SFAS 106 in the first quarter of 1993, the Company has reclassified certain businesses previously reported as discontinued operations to continuing operations. The accumulated postretirement benefit obligation associated with these businesses at 31 December 1993 is $130 and their net periodic cost is $20. Substantially all of the obligation and cost is related to the Company's coal mining business. Assumptions used in accounting for the plans were a discount rate of 7%, an expected long-term rate of return on plan assets of 8%, and health care cost trend rates of 9% and 11.5% to 15% for post-65 and pre-65 claim groups, respectively, in 1993, gradually declining to 4.5% and 5.0% for post-65 and pre-65 claim groups, respectively, in the year 2004 and thereafter over the projected payout period of the benefits. The effect of a one percent increase each year in the health care cost trend rate used would result in an increase of $85 in the accumulated postretirement benefit obligation at 31 December 1993, and an increase of $8 in the aggregate of the service and interest cost components of the 1993 net periodic cost. The Company established and began funding a Voluntary Employees' Beneficiary Association (VEBA) trust in 1992 for certain plans in the amount of their related annual net periodic postretirement benefit cost under SFAS 106. At 31 December 1993, the trust's assets were invested primarily in securities of the U.S. Government and short-term investment funds. The remaining plans are primarily funded as claims are received. The Company's contractual arrangements with the U.S. Government provide for the recovery of contributions to a VEBA and costs based on claims paid. The net periodic postretirement benefit cost calculated pursuant to SFAS 106 is expected to exceed the Company's currently recoverable cost. To the extent the Company has firm contracts in backlog sufficient to recover the excess SFAS 106 cost, the Company is deferring the charge in contracts in process until such time that the cost is allocable to contracts. As a result, the adoption of SFAS 106 did not have a material impact on the Company's 1993 results of operations. In addition to the provided benefits discussed above, the Company has certain employees covered by multiemployer plans, including the fund established by the Coal Industry Retiree Health Benefit Act of 1992 (the Act). The Company estimates its obligation under the Act to former employees to be approximately $35 at 31 December 1993. The Act also provides for the allocation of beneficiaries who cannot be assigned to an employer. The Company's obligation related to such beneficiaries cannot be determined at this time. The Company accounts for its contributions related to these plans on the cash basis. S. SUMMARY OF BUSINESS SEGMENT INFORMATION Business Segment Information is included in Management's Discussion and Analysis of the Results of Operations and Financial Condition. T. QUARTERLY DATA (UNAUDITED)
COMMON STOCK (e) -------------------------------------------- MARKET PRICE RANGE (f) NET OPERATING NET EARNINGS ----------------- SPECIAL SALES(d) EARNINGS(d) EARNINGS PER SHARE(e) HIGH LOW DIVIDENDS DISTRIBUTIONS - ----------------------------------------------------------------------------------------------------------------------------------- 1993 4th Quarter $779 $90 $ 64 $ 1.01 $49 9/16 $44 3/8 $.30 $ -- 3rd Quarter 776 64 73 1.15 50 3/8 43 5/8 .30 6 2nd Quarter 774 65 61 .97 49 7/8 40 3/16 .20 9 1st Quarter (a) 858 90 687 10.90 60 47 11/16 .20 10 - ----------------------------------------------------------------------------------------------------------------------------------- 1992 4th Quarter (b) $911 $77 $174 $ 2.80 $53 15/16 $42 9/16 $.20 $ -- 3rd Quarter 753 63 120 1.89 42 3/4 35 9/16 .20 -- 2nd Quarter 800 59 86 .98 35 15/16 30 3/4 .20 -- 1st Quarter (c) 761 56 435 5.01 32 5/8 26 11/16 .20 -- ===================================================================================================================================
(a) Includes gain from the sale of the Tactical Military Aircraft business which increased net earnings and net earnings per share by $645 and $10.23, respectively. See Note B. (b) Includes a gain from the recognition of research and experimentation and investment tax credits which increased net earnings and net earnings per share by $95 and $1.53, respectively. See Note E. (c) Includes gain from the sale of Cessna which increased net earnings and net earnings per share by $358 and $4.12, respectively. See Note B. (d) Data has been restated to treat the Company's Space Launch Systems business as a discontinued operation, and the reclassification of certain businesses discussed in Note B from discontinued operations to continuing operations. (e) Data has been restated to give retroactive recognition to the Company's announced two-for-one stock split. See Note K. (f) 1993 market prices reflect the impact of the Company's special distributions to shareholders. -- 32 -- 22 STATEMENT OF FINANCIAL RESPONSIBILITY To the Shareholders of General Dynamics Corporation: The management of General Dynamics Corporation is responsible for the consolidated financial statements and all related financial information contained in this report. The financial statements, which include amounts based on estimates and judgments, have been prepared in accordance with generally accepted accounting principles applied on a consistent basis. The Company maintains a system of internal accounting controls designed and intended to provide reasonable assurance that assets are safeguarded, that transactions are executed and recorded in accordance with management's authorization and that accountability for assets is maintained. An environment that establishes an appropriate level of control consciousness is maintained and monitored and includes internal audits and audits by the independent public accountants. The Audit Committee of the Board of Directors, which is composed of five outside directors, meets periodically and, when appropriate, separately with the independent auditors, management and the internal auditors to review the activities of each. The financial statements have been audited by Arthur Andersen & Co., independent public accountants, whose report follows. /s/ J. STEVEN KEATE ------------------------ J. Steven Keate Vice President and Controller REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To General Dynamics Corporation: We have audited the accompanying Consolidated Balance Sheet of General Dynamics Corporation (a Delaware corporation) and subsidiaries as of 31 December 1993 and 1992, and the related Consolidated Statements of Earnings, Shareholders' Equity and Cash Flows for each of the three years in the period ended 31 December 1993. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of General Dynamics Corporation and subsidiaries as of 31 December 1993 and 1992, and the results of their operations and their cash flows for each of the three years in the period ended 31 December 1993, in conformity with generally accepted accounting principles. As discussed in Note P to the financial statements, the U.S. Navy on 7 January 1991, terminated for default the A-12 contract between the U.S. Navy and General Dynamics Corporation and its partner, McDonnell Douglas Corporation. The companies deny they were in default on the contract and are pursuing reimbursement for all work done on the program. The U.S. Navy has demanded payment of $1.4 billion of unliquidated progress payments under the contract; however, the U.S. Navy has deferred collection enforcement pending resolution of this dispute. As a result of the uncertainties arising from the termination, General Dynamics Corporation has reserved for all A-12 related assets and has provided for known liabilities stemming from the termination. The ultimate outcome of the above dispute cannot presently be determined. Accordingly, no provision for any additional liability that may result upon resolution of this dispute has been made in the accompanying financial statements. As discussed in Note R to the financial statements, effective 1 January 1993, the Company changed its method of accounting for postretirement benefits other than pensions. ARTHUR ANDERSEN & CO. Washington, D.C., 25 January 1994 (except with respect to the stock split discussed in Note K, as to which the date is 4 March 1994) -- 33 -- 23 GENERAL DYNAMICS SELECTED FINANCIAL DATA (Unaudited)
1993 1992 1991 1990 1989 - ------------------------------------------------------------------------------------------------------------------------------- (Dollars in millions, except per share and per employee amounts) SUMMARY OF OPERATIONS (a) Net sales $ 3,187 $ 3,225 $ 3,161 $ 3,051 $ 2,975 Operating costs and expenses 2,878 2,970 2,950 2,982 2,828 Interest, net 36 27 10 (11) (15) Provision (credit) for income taxes 143 5 (82) (2) 35 Earnings (loss) from continuing operations 270 305(d) 274(e) (1) 67 Earnings (loss) per share from continuing operations (b) 4.27 4.03(d) 3.20(e) (.01) .80 Cash dividends on common stock (b) 1.00 .80 .50 .50 .50 Sales per employee 138,100 121,500 102,800 80,800 78,500 - ------------------------------------------------------------------------------------------------------------------------------- FINANCIAL POSITION AT 31 DECEMBER (a) Property, plant and equipment, net $ 302 $ 339 $ 380 $ 654 $ 696 Total assets 2,635 3,530 4,177 3,883 4,566 Long-term debt (including current portion) 38 183 613 611 610 Long-term debt - finance operations (including current portion) 175 190 204 216 226 Shareholders' equity 1,177 1,874 1,980 1,510 2,126 Per share (b) 18.81 30.30 23.62 18.12 25.57 - ------------------------------------------------------------------------------------------------------------------------------- CASH AND CASH FLOW Cash and marketable securities (a) $ 585 $ 943 $ 812 $ 98 $ 6 Free cash flow (c) 1,382 1,557 776 339 (308) Dividends, distributions and tender offer 1,587 1,015 42 41 42 - ------------------------------------------------------------------------------------------------------------------------------- OTHER INFORMATION Funded backlog (a) $5,487 $ 6,780 $ 8,214 $ 7,995 $ 8,274 Total backlog (a) 7,015 8,488 9,846 9,491 9,803 Shares outstanding at 31 December (in millions) (b) 62.6 61.8 83.8 83.3 83.2 Fully diluted weighted average shares outstanding (in millions) (b) 63.3 75.6 85.6 83.4 84.0 Common shareholders of record at 31 December 24,496 26,158 33,078 34,178 33,877 Active employees at 31 December Total Company 30,500 56,800 80,600 98,100 102,200 Excluding discontinued operations 23,100 26,500 30,700 37,800 37,900 ===============================================================================================================================
(a) Data has been restated to treat the Company's Space Launch Systems business as a discontinued operation, and the reclassification of certain businesses discussed in Note B from discontinued operations to continuing operations. (b) Data has been restated to give retroactive recognition to the Company's announced two-for-one stock split. See Note K. (c) The Company defines "free cash flow" as cash flow from operating and investing activities, excluding investment in marketable securities. (d) Includes a $95 gain ($1.26 per share) from the recognition of research and experimentation and investment tax credits. See Note E. (e) Includes a $140 gain ($1.64 per share) from an adjustment to the Company's deferred income tax liability. See Note E. -- 34 -- EX-21 6 SUBSIDIARIES OF THE REGISTRANT 1 EXHIBIT 21, 1993 ANNUAL REPORT FORM 10-K, COMMISSION FILE NUMBER 1-3671 GENERAL DYNAMICS CORPORATION SUBSIDIARIES
Subsidiaries of General Dynamics Place of Percent of Corporation (Parent and Registrant) Incorporation Voting Power - ----------------------------------- ------------- ------------ American Overseas Marine Corporation . . . . . . . . . . . . . . Delaware . . . . . . . . . . 100 Concord I Maritime Corporation . . . . . . . . . . . . . . . . . Delaware . . . . . . . . . . 100 Braintree I Maritime Corp. . . . . . . . . . . . . . . . . Delaware . . . . . . . . . . 100 Concord II Maritime Corporation . . . . . . . . . . . . . . . . Delaware . . . . . . . . . . 100 Braintree II Maritime Corp. . . . . . . . . . . . . . . . . Delaware . . . . . . . . . . 100 Concord III Maritime Corporation . . . . . . . . . . . . . . . . Delaware . . . . . . . . . . 100 Braintree III Maritime Corp. . . . . . . . . . . . . . . . Delaware . . . . . . . . . . 100 Concord IV Maritime Corporation . . . . . . . . . . . . . . . . Delaware . . . . . . . . . . 100 Braintree IV Maritime Corp. . . . . . . . . . . . . . . . . Delaware . . . . . . . . . . 100 Concord V Maritime Corporation . . . . . . . . . . . . . . . . . Delaware . . . . . . . . . . 100 Braintree V Maritime Corp. . . . . . . . . . . . . . . . . Delaware . . . . . . . . . . 100 Convair Aircraft Corporation . . . . . . . . . . . . . . . . . . Delaware . . . . . . . . . . 100 Convair Corporation . . . . . . . . . . . . . . . . . . . . . . Delaware . . . . . . . . . . 100 Elco Company, The . . . . . . . . . . . . . . . . . . . . . . . . New Jersey . . . . . . . . . 100 Electric Boat Company . . . . . . . . . . . . . . . . . . . . . Delaware . . . . . . . . . . 100 Electrocom, Inc. . . . . . . . . . . . . . . . . . . . . . . . . Delaware . . . . . . . . . . 100 E-Metrics, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . Delaware . . . . . . . . . . 100 General Dynamics (C.I.) Limited . . . . . . . . . . . . . . . . . Cayman Islands . . . . . . . 100 General Dynamics Commercial Launch Services, Inc. . . . . . . . . . . . . . . . . . . . Delaware . . . . . . . . . . 100 General Dynamics Foreign Sales Corporation . . . . . . . . . . . Virgin Islands . . . . . . . 100 General Dynamics H. A., Inc. . . . . . . . . . . . . . . . . . . Michigan . . . . . . . . . . 100 General Dynamics - Hellas S.A. . . . . . . . . . . . . . . . . . Delaware . . . . . . . . . . 100 General Dynamics International Corporation . . . . . . . . . . . Delaware . . . . . . . . . . 100 General Dynamics Land Systems Inc. . . . . . . . . . . . . . . . Delaware . . . . . . . . . . 100 General Dynamics Land Systems Tallahassee Operations . . . Delaware . . . . . . . . . . 100 General Dynamics Land Systems International, Inc. . . . . . . Delaware . . . . . . . . . . 100 G.T. Devices, Inc. . . . . . . . . . . . . . . . . . . . . . Maryland . . . . . . . . . . 100 General Dynamics Land Systems Product Support and Services Company . . . . . . . . . . . . . . . . . . . . . . . . . . . Texas . . . . . . . . . . . 100 General Dynamics Base Corporation . . . . . . . . . . . Delaware . . . . . . . . . . 100 General Dynamics Limited . . . . . . . . . . . . . . . . . . . . United Kingdom . . . . . . . 100 General Dynamics Manufacturing Limited . . . . . . . . . . . . . Canada . . . . . . . . . . . 100 General Dynamics Space Services Company . . . . . . . . . . . . Delaware . . . . . . . . . . 100 Material Service Resources Company . . . . . . . . . . . . . . . Delaware . . . . . . . . . . 100 Century Mineral Resources, Inc. . . . . . . . . . . . . . . . Illinois. . . . . . . . . . . 100 Material Service Corporation . . . . . . . . . . . . . . . . Delaware . . . . . . . . . . 100 Darlington Brick and Clay Products Corporation . . . . . Pennsylvania . . . . . . . . 100 Dealer's Ready Mix Company . . . . . . . . . . . . . . . Illinois . . . . . . . . . . 100 EPSP, Inc. . . . . . . . . . . . . . . . . . . . . . . . Texas . . . . . . . . . . . . 100 Hulcher Quarry, Inc. . . . . . . . . . . . . . . . . . . Illinois . . . . . . . . . . 100 Indian Point Limestone Products, Inc. . . . . . . . . . Illinois . . . . . . . . . . 100 Marblehead Lime Company . . . . . . . . . . . . . . . . Delaware . . . . . . . . . . 100 Missouri Marblehead Lime Company . . . . . . . . . . Delaware . . . . . . . . . . 100 Utah Marblehead Lime Company . . . . . . . . . . . . Delaware . . . . . . . . . . 100 Material Service Corporation of Indiana . . . . . . . . Indiana . . . . . . . . . . . 100 Material Service Foundation . . . . . . . . . . . . . . Illinois . . . . . . . . . . 100 MSC Realty & Development Company . . . . . . . . . . . . Illinois . . . . . . . . . . 100
2
Subsidiaries of General Dynamics Place of Percent of Corporation (Parent and Registrant) Incorporation Voting Power - ----------------------------------- ------------- ------------ Mineral and Land Resources Corporation . . . . . . . . . Delaware . . . . . . . . . . 100 MLRT, Inc. . . . . . . . . . . . . . . . . . . . . . Texas . . . . . . . . . . . . 100 Powell & Minnock Brick Works, Inc. . . . . . . . . . . . New York . . . . . . . . . . 100 Thornton Quarries Corporation . . . . . . . . . . . . . Illinois . . . . . . . . . . 100 Freeman Energy Corporation . . . . . . . . . . . . . . . . . Delaware . . . . . . . . . . 100 Freeman Coal Sales, Inc. . . . . . . . . . . . . . . . . Illinois . . . . . . . . . . 100 Freeman Resources, Inc. . . . . . . . . . . . . . . . . Illinois . . . . . . . . . . 100 Cheyenne Resources, Inc. . . . . . . . . . . . . . . Kentucky . . . . . . . . . . 100 Cumberland Collieries, Inc. . . . . . . . . . . . . Virginia . . . . . . . . . . 100 P C & H Construction, Inc. . . . . . . . . . . . . . Kentucky . . . . . . . . . . 100 Virginia Cumberland Collieries, Inc. . . . . . . . . Virginia . . . . . . . . . . 100 Freeman United Coal Mining Company . . . . . . . . . . . Delaware . . . . . . . . . . 100 Material Energy Sales Corporation . . . . . . . . . . . Illinois . . . . . . . . . . 100 Patriot I Shipping Corporation . . . . . . . . . . . . . . . . . Delaware . . . . . . . . . . 100 Patriot II Shipping Corporation . . . . . . . . . . . . . . . . Delaware . . . . . . . . . . 100 Patriot IV Shipping Corporation . . . . . . . . . . . . . . . . Delaware . . . . . . . . . . 100 Quincy Corporation . . . . . . . . . . . . . . . . . . . . . . . Delaware . . . . . . . . . . 100 S-C 1969 Credit Corporation . . . . . . . . . . . . . . . . . . . New York . . . . . . . . . . 100
EX-24.A 7 POWER OF ATTORNEY 1 GENERAL DYNAMICS CORPORATION POWER OF ATTORNEY COMMISSION FILE NUMBER 1-3671 REPORTS ON FORM IRS NO. 13-1673581 10-K AND 10-Q POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned Directors and/or officers of GENERAL DYNAMICS CORPORATION, a Delaware corporation, hereby constitutes and appoints each of NICHOLAS D. CHABRAJA, J. STEVEN KEATE, E. ALAN KLOBASA, and his true and lawful attorney and agent, in the name and on behalf of the under-signed, to do any and all acts and things and execute any and all instruments which the attorney and agent may deem necessary or advisable to enable General Dynamics Corporation to comply with the Securities Act of 1933, and the Exchange Act of 1934, as amended, and any rules and regulations and requirements of the Securities and Exchange Commission (The Commission) in respect thereof, in connection with annual reports to the commission on form 10-K, quarterly reports on form 10-Q, and other reports as required by General Dynamics Corporation, including specifically, but without limiting the generality of the foregoing, the power and authority to sign the names of the undersigned in his capacity as Director and/or Officer of General Dynamics Corporation to reports filed with the Securities and Exchange Commission with respect thereto, to any and all amendments, including hereby ratifying and confirming all that the attorneys and agents, or any of them, has done, shall do or shall cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned have hereunto set their hands this 29th day of March 1994. /S/ WILLIAM A. ANDERS /S/ CHARLES H. GOODMAN - ---------------------------------- ---------------------------------- William A. Anders Charles H. Goodman /S/ THOMAS G. AYERS /S/ HARVEY KAPNICK - ---------------------------------- ---------------------------------- Thomas G. Ayers Harvey Kapnick /S/ FRANK C. CARLUCCI /S/ DAVID S. LEWIS - ---------------------------------- ---------------------------------- Frank C. Carlucci David S. Lewis /S/ NICHOLAS D. CHABRAJA /S/ JAMES R. MELLOR - ---------------------------------- ---------------------------------- Nicholas D. Chabraja James R. Mellor /S/ WILLIAM J. CROWE, JR. /S/ STANLEY C. PACE - ---------------------------------- ---------------------------------- William J. Crowe, Jr. Stanley C. Pace /S/ JAMES S. CROWN /S/ ALLEN E. PUCKETT - ---------------------------------- ---------------------------------- James S. Crown Allen E. Puckett /S/ LESTER CROWN /S/ BERNARD W. ROGERS - ---------------------------------- ---------------------------------- Lester Crown Bernard W. Rogers /S/ ELLIOT H. STEIN ---------------------------------- Elliot H. Stein EX-24.B 8 POWER OF ATTORNEY 1 GENERAL DYNAMICS CORPORATION POWER OF ATTORNEY COMMISSION FILE NUMBER 1-3671 REPORT ON FORM 10-K ---------- IRS NO. 13-1673481 -------------- POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned officer, J. Steven Keate, Corporate Vice President and Controller (Principal Financial and Accounting Officer) of GENERAL DYNAMICS CORPORATION, a Delaware corporation, hereby constitute and appoint each of NICHOLAS D. CHABRAJA and E. ALAN KLOBASA, as their true and lawful attorney and agent, in the name and on behalf of the undersigned, to do any and all acts and things and execute any and all instruments which the attorney and agent may deem necessary or advisable to enable General Dynamics Corporation to comply with the Securities Exchange Act of 1934, as amended, and any rules and regulations and requirements of the Securities and Exchange Commission (The Commission) in respect thereof, in connection with the 1993 annual report to the Commission on Form 10-K, including specifically, but without limiting the generality of the foregoing, the power and authority to sign their names in their capacities to said report filed with the Securities and Exchange Commission with respect thereto, to any and all amendments, including hereby ratifying and confirming all that the attorneys and agents, or any of them, has done, shall do, or shall cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 29th day of March 1994. /s/ J. STEVEN KEATE --------------------- J. Steven Keate -----END PRIVACY-ENHANCED MESSAGE-----