General Dynamics (GD) 8-K General Dynamics Reports Strong Earnings, Backlog Growth in Second Quarter 2008

Exhibit 99.1

2941 Fairview Park Drive Suite 100 Falls Church, VA 22042-4513 www.generaldynamics.com News

July 23, 2008

Contact: Rob Doolittle

Tel: 703 876 3199

rdoolitt@generaldynamics.com

General Dynamics Reports Strong Earnings, Backlog Growth in Second Quarter 2008

– EPS from continuing operations increases 26 percent

– Sales, earnings and operating margins increase company-wide

– Full-year EPS guidance increased

FALLS CHURCH,Va. — General Dynamics (NYSE: GD) today reported second-quarter 2008 earnings from continuing operations of $641 million, or $1.60 per share on a fully diluted basis, compared with 2007 second-quarter earnings from continuing operations of $518 million, or $1.27 per share fully diluted. Revenues grew to $7.3 billion in the quarter, a 10.8 percent increase over second-quarter 2007 revenues of $6.6 billion. Net earnings were equal to earnings from continuing operations of $641 million.

Cash

Net cash provided by operating activities in the quarter totaled $1 billion. Free cash flow from operations, defined as net cash provided by operating activities from continuing operations less capital expenditures, was $910 million for the period, or 142 percent of net earnings.

For the first half of 2008, net cash provided by operating activities was $1.5 billion, while free cash flow from operations was $1.3 billion.

Margins

Company-wide operating margins for the second quarter of 2008 increased 110 basis points over the second quarter of 2007, to 12.6 percent.

Backlog

The company’s funded backlog grew by approximately $5.2 billion or 12.9 percent in the second quarter of 2008, on strong orders for new aircraft in the Aerospace group, as well as demand for tanks, combat vehicles, tactical communications systems and information technology services. Compared to first-quarter 2008, company-wide total backlog grew by 11.2 percent.

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Taxes

The company’s 2008 second-quarter financial results include a $35 million benefit from the favorable settlement of a tax-refund suit; this factor increased earnings by approximately 9 cents per share in the quarter.

Operational Highlights

Sales, earnings and operating margins increased in all four General Dynamics business groups in the second quarter. The Combat Systems group experienced increased sales in its armored vehicle and tank programs compared to the year-ago period and significant margin growth. New-aircraft volume in the Aerospace group, increased shipbuilding activity in Marine Systems and continued strong demand for tactical communications and computing systems in the Information Systems and Technology sector also contributed to the overall strong performance.

“General Dynamics’ performance continued to be strong in the second quarter of 2008,” said Nicholas D. Chabraja, chairman and chief executive officer. “Sales, earnings and operating margins increased in all four business segments compared to the year-ago period, cash generation was exceptionally strong and the robust backlog suggests continued healthy demand for the products and services of each business area.

“Growth in the Aerospace backlog is a reflection of continued demand for the entire existing product line and extremely strong demand for the new Gulfstream G650. We are very pleased to see this interest in the new plane and view that as an indicator of Gulfstream’s ability to anticipate and exceed its customers’ product expectations.

“On the basis of these results and a clearer sense of what the remainder of 2008 will bring, we expect full-year 2008 earnings from continuing operations to be in the range of $6.00 to $6.05 per share, fully diluted,” Chabraja said.

General Dynamics, headquartered in Falls Church, Virginia, employs approximately 84,600 people worldwide and reported $27.2 billion in revenue in 2007. The company is a market leader in business aviation; land and expeditionary combat systems, armaments and munitions; shipbuilding and marine systems; and mission-critical information systems and technologies. More information about the company is available on the Internet atwww.generaldynamics.com.

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Certain statements made in this press release, including any statements as to future results of operations and financial projections, may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. Forward-looking statements are based on management’s expectations, estimates, projections and assumptions. These statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. Therefore, actual future results and trends may differ materially from what is forecast in forward-looking statements due to a variety of factors. Additional information regarding these factors is contained in the company’s filings with the Securities and Exchange Commission, including, without limitation, its Annual Report on Form 10-K and its Quarterly Reports on Form 10-Q.

All forward-looking statements speak only as of the date they were made. The company does not undertake any obligation to update or publicly release any revisions to any forward-looking statements to reflect events, circumstances or changes in expectations after the date of this press release.

WEBCAST INFORMATION:General Dynamics will webcast its second-quarter securities analyst conference call, scheduled for 11:30 a.m. Eastern Time on Wednesday, July 23, 2008. The webcast will be a listen-only audio event, available atwww.generaldynamics.com. An on-demand replay of the webcast will be available by 3 p.m. July 23 and will continue for 12 months. To hear a recording of the conference call by telephone, please call 888-286-8010 (international: 617-801-6888); passcode 16780091. The phone replay will be available from 3 p.m. July 23 until midnight July 30, 2008.

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CONSOLIDATED STATEMENT OF EARNINGS (UNAUDITED)

DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS

	Second Quarter						Variance
	2008			2007			$			%
NET SALES	$	7,303		$	6,591		$	712		10.8	%
OPERATING COSTS AND EXPENSES		6,382			5,831			(551	)
OPERATING EARNINGS		921			760			161		21.2	%
Interest, Net		(12	)		(21	)		9
Other, Net		—			1			(1	)
EARNINGS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES		909			740			169		22.8	%
Provision for Income Taxes		268			222			(46	)
EARNINGS FROM CONTINUING OPERATIONS	$	641		$	518		$	123		23.7	%
Discontinued Operations, Net of Tax		—			(5	)		5
NET EARNINGS	$	641		$	513		$	128		25.0	%
EARNINGS PER SHARE — BASIC
Continuing Operations	$	1.61		$	1.28		$	0.33		25.8	%
Discontinued Operations	$	—		$	(0.01	)	$	0.01
Net Earnings	$	1.61		$	1.27		$	0.34		26.8	%
BASIC WEIGHTED AVERAGE SHARES OUTSTANDING (IN MILLIONS)		398.5			405.1
EARNINGS PER SHARE — DILUTED
Continuing Operations	$	1.60		$	1.27		$	0.33		26.0	%
Discontinued Operations	$	—		$	(0.01	)	$	0.01
Net Earnings	$	1.60		$	1.26		$	0.34		27.0	%
DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING (IN MILLIONS)		401.8			408.9

Exhibit A

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CONSOLIDATED STATEMENT OF EARNINGS (UNAUDITED)

DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS

	Six Months						Variance
	2008			2007			$			%
NET SALES	$	14,308		$	12,891		$	1,417		11.0	%
OPERATING COSTS AND EXPENSES		12,526			11,450			(1,076	)
OPERATING EARNINGS		1,782			1,441			341		23.7	%
Interest, Net		(31	)		(47	)		16
Other, Net		3			2			1
EARNINGS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES		1,754			1,396			358		25.6	%
Provision for Income Taxes		540			438			(102	)
EARNINGS FROM CONTINUING OPERATIONS	$	1,214		$	958		$	256		26.7	%
Discontinued Operations, Net of Tax		(1	)		(11	)		10
NET EARNINGS	$	1,213		$	947		$	266		28.1	%
EARNINGS PER SHARE — BASIC
Continuing Operations	$	3.04		$	2.36		$	0.68		28.8	%
Discontinued Operations	$	—		$	(0.03	)	$	0.03
Net Earnings	$	3.04		$	2.33		$	0.71		30.5	%
BASIC WEIGHTED AVERAGE SHARES OUTSTANDING (IN MILLIONS)		399.6			405.4
EARNINGS PER SHARE — DILUTED
Continuing Operations	$	3.01		$	2.34		$	0.67		28.6	%
Discontinued Operations	$	—		$	(0.03	)	$	0.03
Net Earnings	$	3.01		$	2.31		$	0.70		30.3	%
DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING (IN MILLIONS)		402.8			409.2

Exhibit B

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NET SALES AND OPERATING EARNINGS BY SEGMENT (UNAUDITED)

DOLLARS IN MILLIONS

	Second Quarter						Variance
	2008			2007			$			%
NET SALES:
AEROSPACE	$	1,329		$	1,208		$	121		10.0	%
COMBAT SYSTEMS		2,015			1,712			303		17.7	%
MARINE SYSTEMS		1,394			1,272			122		9.6	%
INFORMATION SYSTEMS AND TECHNOLOGY		2,565			2,399			166		6.9	%
TOTAL	$	7,303		$	6,591		$	712		10.8	%
OPERATING EARNINGS:
AEROSPACE	$	240		$	199		$	41		20.6	%
COMBAT SYSTEMS		282			191			91		47.6	%
MARINE SYSTEMS		127			112			15		13.4	%
INFORMATION SYSTEMS AND TECHNOLOGY		292			269			23		8.6	%
CORPORATE		(20	)		(11	)		(9	)	(81.8	)%
TOTAL	$	921		$	760		$	161		21.2	%
OPERATING MARGINS:
AEROSPACE		18.1	%		16.5	%
COMBAT SYSTEMS		14.0	%		11.2	%
MARINE SYSTEMS		9.1	%		8.8	%
INFORMATION SYSTEMS AND TECHNOLOGY		11.4	%		11.2	%
TOTAL		12.6	%		11.5	%

Exhibit C

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NET SALES AND OPERATING EARNINGS BY SEGMENT (UNAUDITED)

DOLLARS IN MILLIONS

	Six Months						Variance
	2008			2007			$			%
NET SALES:
AEROSPACE	$	2,608		$	2,302		$	306		13.3	%
COMBAT SYSTEMS		4,012			3,280			732		22.3	%
MARINE SYSTEMS		2,772			2,529			243		9.6	%
INFORMATION SYSTEMS AND TECHNOLOGY		4,916			4,780			136		2.8	%
TOTAL	$	14,308		$	12,891		$	1,417		11.0	%
OPERATING EARNINGS:
AEROSPACE	$	476		$	372		$	104		28.0	%
COMBAT SYSTEMS		541			365			176		48.2	%
MARINE SYSTEMS		249			210			39		18.6	%
INFORMATION SYSTEMS AND TECHNOLOGY		552			519			33		6.4	%
CORPORATE		(36	)		(25	)		(11	)	(44.0	)%
TOTAL	$	1,782		$	1,441		$	341		23.7	%
OPERATING MARGINS:
AEROSPACE		18.3	%		16.2	%
COMBAT SYSTEMS		13.5	%		11.1	%
MARINE SYSTEMS		9.0	%		8.3	%
INFORMATION SYSTEMS AND TECHNOLOGY		11.2	%		10.9	%
TOTAL		12.5	%		11.2	%

Exhibit D

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PRELIMINARY CONSOLIDATED BALANCE SHEET (UNAUDITED)

DOLLARS IN MILLIONS

	June 29, 2008			December 31, 2007
ASSETS
Current Assets:
Cash and equivalents	$	2,740		$	2,891
Accounts receivable		2,962			2,874
Contracts in process		4,505			4,337
Inventories		1,672			1,621
Other current assets		569			575
Total Current Assets		12,448			12,298
Noncurrent Assets:
Property, plant and equipment, net		2,546			2,472
Intangible assets, net		920			972
Goodwill		8,986			8,942
Other assets		1,189			1,049
Total Noncurrent Assets		13,641			13,435
Total Assets	$	26,089		$	25,733
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Short-term debt and current portion of long-term debt	$	172		$	673
Accounts payable		2,115			2,318
Customer advances and deposits		3,776			3,440
Other current liabilities		2,643			2,733
Total Current Liabilities		8,706			9,164
Noncurrent Liabilities:
Long-term debt		2,117			2,118
Other liabilities		3,082			2,683
Commitments and contingencies
Total Noncurrent Liabilities		5,199			4,801
Shareholders’ Equity:
Common stock		482			482
Surplus		1,255			1,141
Retained earnings		12,313			11,379
Treasury stock		(2,545	)		(1,881	)
Accumulated other comprehensive income		679			647
Total Shareholders’ Equity		12,184			11,768
Total Liabilities and Shareholders’ Equity	$	26,089		$	25,733

Exhibit E

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PRELIMINARY CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)

DOLLARS IN MILLIONS

	Six Months Ended
	June 29, 2008			July 1, 2007
Cash Flows from Operating Activities:
Net earnings	$	1,213		$	947
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation		146			132
Amortization		67			75
Stock-based compensation expense		50			41
Excess tax benefit from stock-based compensation		(24	)		(26	)
Deferred income tax provision		26			53
Discontinued operations, net of tax		1			11
(Increase) decrease in assets, net of effects of business acquisitions:
Accounts receivable		(83	)		(186	)
Contracts in process		(163	)		(188	)
Inventories	��	(73	)		(100	)
Increase (decrease) in liabilities, net of effects of business acquisitions:
Accounts payable		(207	)		(159	)
Customer advances and deposits		548			417
Other current liabilities		(27	)		(54	)
Other, net		(18	)		(36	)
Net Cash Provided by Operating Activities from Continuing Operations		1,456			927
Net Cash Used by Discontinued Operations — Operating Activities		(5	)		(8	)
Net Cash Provided by Operating Activities		1,451			919
Cash Flows from Investing Activities:
Purchases of available-for-sale securities		(1,247	)		(48	)
Sales/maturities of available-for-sale securities		1,186			42
Capital expenditures		(200	)		(166	)
Business acquisitions, net of cash acquired		(66	)		(299	)
Proceeds from sale of assets, net		30			93
Other, net		1			(1	)
Net Cash Used by Investing Activities		(296	)		(379	)
Cash Flows from Financing Activities:
Purchases of common stock		(660	)		(153	)
Repayment of fixed-rate notes		(500	)		—
Dividends paid		(257	)		(210	)
Proceeds from option exercises		89			102
Excess tax benefit from stock-based compensation		24			26
Other, net		(2	)		(115	)
Net Cash Used by Financing Activities		(1,306	)		(350	)
Net (Decrease)/Increase in Cash and Equivalents		(151	)		190
Cash and Equivalents at Beginning of Period		2,891			1,604
Cash and Equivalents at End of Period	$	2,740		$	1,794

Exhibit F

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PRELIMINARY FINANCIAL INFORMATION (UNAUDITED)

DOLLARS IN MILLIONS EXCEPT PER SHARE AND EMPLOYEE AMOUNTS

	Second Quarter 2008						Second Quarter 2007
Non-GAAP Financial Measures:
Free Cash Flow from Operations:	Quarter			Year-to-date			Quarter			Year-to-date
Net Cash Provided by Operating Activities from Continuing Operations	$	1,025		$	1,456		$	405		$	927
Capital Expenditures		(115	)		(200	)		(113	)		(166	)
Free Cash Flow from Operations (A)	$	910		$	1,256		$	292		$	761
Return on Invested Capital:
Earnings from Continuing Operations	$	2,336					$	1,861
After-Tax Interest Expense		93						100
After-Tax Amortization Expense		94						104
Net Operating Profit after Taxes		2,523						2,065
Average Debt and Equity		14,143						12,839
Return on Invested Capital (B)		17.8	%					16.1	%
Other Financial Information:
Return on Equity (C)		20.4	%					19.0	%
Debt-to-Equity (D)		18.8	%					26.3	%
Debt-to-Capital (E)		15.8	%					20.8	%
Book Value per Share (F)	$	30.66					$	26.19
Total Taxes Paid	$	475					$	339
Company Sponsored Research and Development (G)	$	124					$	95
Employment		84,600						82,900
Sales Per Employee (H)	$	342,900					$	311,600
Shares Outstanding		397,327,979						405,623,702

(A) The company’s management believes free cash flow from operations is a measurement that is useful to investors, because it portrays the company’s ability to generate cash from its core businesses for such purposes as repaying maturing debt, funding business acquisitions and paying dividends. The company uses free cash flow from operations to assess the quality of its earnings and as a performance measure in evaluating management. The most directly comparable GAAP measure to free cash flow from operations is net cash provided by operating activities from continuing operations.

(B) The company’s management believes return on invested capital is a measurement that is useful to investors, because it reflects the company’s ability to generate returns from the capital it has deployed in its operations. The company uses ROIC to evaluate investment decisions and as a performance measure in evaluating management. The company defines ROIC as net operating profit after taxes for the latest 12-month period divided by the sum of the average debt and shareholders’ equity for the same period. Net operating profit after taxes is defined as earnings from continuing operations plus after-tax interest and amortization expense. The most directly comparable GAAP measure to net operating profit after taxes is earnings from continuing operations.

(C) Return on equity is calculated by dividing earnings from continuing operations for the latest 12-month period by the company’s average equity during that period.

(D) Debt-to-equity ratio is calculated as total debt divided by total equity as of the end of the period.

(E) Debt-to-capital ratio is calculated as total debt divided by the sum of total debt plus total equity as of the end of the period.

(F) Book value per share is calculated as total equity divided by total outstanding shares as of the end of the period.

(G) Includes independent research and development and bid and proposal costs and Gulfstream product development costs.

(H) Sales per employee is calculated by dividing net sales for the latest 12-month period by the company’s average number of employees during that period.

Exhibit G

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BACKLOG (UNAUDITED)

DOLLARS IN MILLIONS

	Funded		Unfunded		Total Backlog		Estimated Potential Contract Value*		Total Estimated Contract Value
Second Quarter 2008
AEROSPACE	$	18,195	$	634	$	18,829	$	2,309	$	21,138
COMBAT SYSTEMS		10,611		3,263		13,874		2,610		16,484
MARINE SYSTEMS		8,899		3,239		12,138		2,167		14,305
INFORMATION SYSTEMS AND TECHNOLOGY		7,531		2,950		10,481		10,348		20,829
TOTAL	$	45,236	$	10,086	$	55,322	$	17,434	$	72,756
First Quarter 2008
AEROSPACE	$	11,802	$	650	$	12,452	$	926	$	13,378
COMBAT SYSTEMS		11,116		3,171		14,287		2,292		16,579
MARINE SYSTEMS		9,552		3,056		12,608		2,272		14,880
INFORMATION SYSTEMS AND TECHNOLOGY		7,582		2,838		10,420		9,142		19,562
TOTAL	$	40,052	$	9,715	$	49,767	$	14,632	$	64,399
Second Quarter 2007
AEROSPACE	$	9,427	$	708	$	10,135	$	964	$	11,099
COMBAT SYSTEMS		10,712		2,131		12,843		1,785		14,628
MARINE SYSTEMS		8,290		4,376		12,666		236		12,902
INFORMATION SYSTEMS AND TECHNOLOGY		6,980		1,971		8,951		8,031		16,982
TOTAL	$	35,409	$	9,186	$	44,595	$	11,016	$	55,611

* The estimated potential contract value represents management’s estimate of the company’s future contract value under indefinite delivery, indefinite quantity (IDIQ) contracts and unexercised options associated with existing firm contracts. Because the value in the IDIQ arrangements is subject to the customer’s future exercise of an indeterminate quantity of delivery orders, the company recognizes these contracts in backlog only when they are funded. Unexercised options are recognized in backlog when the customer exercises the option and establishes a firm order.

Exhibit H

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SECOND QUARTER 2008 SIGNIFICANT ORDERS (UNAUDITED)

DOLLARS IN MILLIONS

General Dynamics received the following significant contract orders during the second quarter of 2008:

Combat Systems

• $139 from the Canadian government for Optimized Weapons Systems Support for the Wheeled Light Armoured Vehicle (WLAV). This contract has a potential value of approximately $370.

• $116 from the U.S. Army for long-lead materials to reset 204 M1A1 Abrams Integrated Management (AIM) main battle tanks.

• Combined orders worth $88 from the Army to continue performing contractor logistics support for the Stryker program.

• $58 from the Army for long-lead materials for the production of Stryker Infantry Carrier Vehicle and Nuclear, Biological and Chemical Reconnaissance Vehicle variants.

Marine Systems

• $132 from the U.S. Navy for Post Shakedown Availability (PSA) work for six Virginia-class submarines.

• $100 from the Navy to purchase long-lead materials for the 12^th T-AKE combat-logistics ship.

Information Systems and Technology

• $116 to build the spacecraft for NASA’s Landsat Data Continuity Mission.

• Combined orders totaling $115 under the Common Hardware/Software III program, bringing the total contract value to approximately $1.3 billion.

• $114 to develop and integrate the maritime and fixed-site joint tactical radio capabilities and provide information assurance services for the Airborne, Maritime and Fixed Site (AMF) Joint Tactical Radio System (JTRS). The contract has a potential value of over $150.

• $77 to provide life-cycle contractor support and training support for the Warfighter Field Operations Customer Support (FOCUS) program. This contract has a potential value of approximately $2 billion.

Exhibit I

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AIRCRAFT DELIVERIES (UNAUDITED)

	Second Quarter						Six Months
	2008			2007			2008			2007
GREEN (UNITS):
LARGE AIRCRAFT		22			20			44			39
MID-SIZE AIRCRAFT		17			16			32			27
TOTAL		39			36			76			66
COMPLETIONS (UNITS):
LARGE AIRCRAFT		24			20			44			40
MID-SIZE AIRCRAFT		16			16			32			26
TOTAL		40			36			76			66
PRE-OWNED:
UNITS		1			3			2			5
SALES (millions)	$	8		$	22		$	17		$	43
OPERATING EARNINGS (millions)	$	1		$	—		$	2		$	2
AEROSPACE MARGINS
EXCLUDING PRE-OWNED ACTIVITY		18.1	%		16.8	%		18.3	%		16.4	%

Exhibit J

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