General Dynamics (GD) 10-Q 4 May 10 2010 Q1 Quarterly report Financial data

Document and Entity Information

Document and Entity Information
	3 Months Ended Apr. 04, 2010	Apr. 04, 2010
Document Type	10-Q
Amendment Flag	false
Document Period End Date	2010-04-04
Document Fiscal Year Focus	2,010
Document Fiscal Period Focus	Q1
Trading Symbol	GD
Entity Registrant Name	GENERAL DYNAMICS CORP
Entity Central Index Key	0000040533
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		385,728,673

CONSOLIDATED BALANCE SHEET

CONSOLIDATED BALANCE SHEET (USD $)
In Millions	3 Months Ended Apr. 04, 2010	12 Months Ended Dec. 31, 2009
Current assets:
Cash and equivalents	$2,025	$2,263
Accounts receivable	3,738	3,678
Contracts in process	4,692	4,449
Inventories	1,985	2,126
Other current assets	913	733
Total current assets	13,353	13,249
Noncurrent assets:
Property, plant and equipment, net	2,850	2,912
Intangible assets, net	2,032	2,098
Goodwill	12,288	12,269
Other assets	536	549
Total noncurrent assets	17,706	17,828
Total assets	31,059	31,077
Current liabilities:
Short-term debt and current portion of long-term debt	704	705
Accounts payable	2,250	2,365
Customer advances and deposits	4,102	4,313
Other current liabilities	2,881	2,988
Total current liabilities	9,937	10,371
Noncurrent liabilities:
Long-term debt	3,159	3,159
Other liabilities	5,184	5,124
Commitments and contingencies (See Note K)
Total noncurrent liabilities	8,343	8,283
Shareholders' equity:
Common stock	482	482
Surplus	1,599	1,518
Retained earnings	15,527	15,093
Treasury stock	(3,560)	(3,463)
Accumulated other comprehensive loss	(1,269)	(1,207)
Total shareholders' equity	12,779	12,423
Total liabilities and shareholders' equity	$31,059	$31,077

CONSOLIDATED STATEMENT OF EARNI

CONSOLIDATED STATEMENT OF EARNINGS (USD $)
In Millions, except Per Share data	3 Months Ended Apr. 04, 2010	3 Months Ended Apr. 05, 2009
Revenues:
Products	$5,162	$5,748
Services	2,588	2,516
Revenues, Total	7,750	8,264
Operating costs and expenses:
Products	4,144	4,690
Services	2,202	2,159
General and administrative	486	510
Costs and Expenses, Total	6,832	7,359
Operating earnings	918	905
Interest, net	(44)	(39)
Other, net		3
Earnings from continuing operations before income taxes	874	869
Provision for income taxes, net	275	276
Earnings from continuing operations	599	593
Discontinued operations, net of tax	(2)	(3)
Net earnings	$597	$590
Basic:
Continuing operations	1.56	1.54
Discontinued operations	-0.01	-0.01
Net earnings	1.55	1.53
Diluted:
Continuing operations	1.54	1.54
Discontinued operations	-0.01	-0.01
Net earnings	1.53	1.53

CONSOLIDATED STATEMENT OF CASH

CONSOLIDATED STATEMENT OF CASH FLOWS (USD $)
In Millions	3 Months Ended Apr. 04, 2010	3 Months Ended Apr. 05, 2009
Cash flows from operating activities:
Net earnings	$597	$590
Adjustments to reconcile net earnings to net cash provided by operating activities -
Depreciation of property, plant and equipment	86	85
Amortization of intangible assets	57	54
Stock-based compensation expense	29	28
Excess tax benefit from stock-based compensation	(17)	(1)
Deferred income tax provision	10	40
Discontinued operations, net of tax	2	3
(Increase) decrease in assets, net of effects of business acquisitions -
Accounts receivable	(51)	(292)
Contracts in process	(241)	64
Inventories	143	(64)
Increase (decrease) in liabilities, net of effects of business acquisitions -
Accounts payable	(114)	151
Customer advances and deposits	(230)	(512)
Income taxes payable	234	192
Other liabilities	(312)	(131)
Other, net	17	(53)
Net cash provided by operating activities	210	154
Cash flows from investing activities:
Purchases of held-to-maturity securities	(247)
Capital expenditures	(60)	(81)
Business acquisitions, net of cash acquired	(48)	(168)
Other, net	73	(36)
Net cash used by investing activities	(282)	(285)
Cash flows from financing activities:
Purchases of common stock	(200)	(109)
Proceeds from option exercises	168	27
Dividends paid	(147)	(136)
Repayment of commercial paper		(139)
Other, net	16	(1)
Net cash used by financing activities	(163)	(358)
Net cash used by discontinued operations - operating activities	(3)	(6)
Net decrease in cash and equivalents	(238)	(495)
Cash and equivalents at beginning of period	2,263	1,621
Cash and equivalents at end of period	2,025	1,126
Cash payments for:
Income taxes	35	41
Interest	$62	$29

Basis of Preparation

Basis of Preparation
	3 Months Ended Apr. 04, 2010
Basis of Preparation	A. Basis of Preparation Basis of Consolidation and Classification The unaudited Consolidated Financial Statements included in this Form 10-Q include the accounts of General Dynamics Corporation and our wholly owned and majority-owned subsidiaries. We eliminate all inter-company balances and transactions in the consolidated statements. Consistent with defense industry practice, we classify assets and liabilities related to long-term production contracts as current, even though some of these amounts are not expected to be realized within one year. In addition, some prior-year amounts have been reclassified among financial statement accounts to conform to the current-year presentation. Interim Financial Statements The unaudited Consolidated Financial Statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. These rules and regulations permit some of the information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (GAAP) to be condensed or omitted. Our fiscal quarters are 13 weeks in length. Because our fiscal year ends on December31, the number of days in our first and fourth quarters varies slightly from year to year. Operating results for the three-month period ended April4, 2010, are not necessarily indicative of the results that may be expected for the year ending December31, 2010. In our opinion, the unaudited Consolidated Financial Statements contain all adjustments, that are of a normal recurring nature, necessary for a fair presentation of our results for the three-month periods ended April4, 2010, and April5, 2009. We have evaluated material events and transactions that have occurred after the balance sheet date and concluded that no subsequent events have occurred that require adjustment to or disclosure in this Form 10-Q. These unaudited Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and notes thereto included in our Annual Report on Form 10-K for the year ended December31, 2009.

Acquisitions, Intangible Assets

Acquisitions, Intangible Assets and Goodwill
	3 Months Ended Apr. 04, 2010
Acquisitions, Intangible Assets and Goodwill	B. Acquisitions, Intangible Assets and Goodwill We completed one acquisition in the first quarter of 2010 for $48 in cash. On January8, we acquired a provider of software for military mission planning and execution. This business is included in the Information Systems and Technology group. In 2009, we acquired two businesses in the Information Systems and Technology group for an aggregate of $811 in cash. On September2, we acquired a company that designs and manufactures high-performance electro-optical and infrared (EO/IR) sensors and systems and multi-axis stabilized cameras. On January26, we acquired an information technology services business that performs work for our classified customers. We funded the above acquisitions using cash on hand. The operating results of these businesses have been included with our reported results since the respective closing dates of the acquisitions. The purchase prices of these businesses have been allocated to the estimated fair value of net tangible and intangible assets acquired, with any excess purchase price recorded as goodwill. Intangible assets consisted of the following: April4 2010 December31 2009 Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount Contract and program intangible assets (a) $ 2,351 $ (819 ) $ 1,532 $ 2,354 $ (776 ) $ 1,578 Trade names and trademarks 434 (43 ) 391 438 (36 ) 402 Technology and software 168 (79 ) 89 169 (73 ) 96 Other intangible assets (b) 207 (187 ) 20 210 (188 ) 22 Total intangible assets $ 3,160 $ (1,128 ) $ 2,032 $ 3,171 $ (1,073 ) $ 2,098 (a) Consists of acquired backlog and probable follow-on work and related customer relationships. (b) Consists primarily of aircraft product design and customer lists. The amortization lives (in years) of our intangible assets on April4, 2010, were as follows: Range of Amortization Life Weighted Average Amortization Life Contract and program intangible assets 7-30 16 Trade names and trademarks 30 30 Technology and software 7-13 9 Other intangible assets 7-21 13 Total intangible assets 17 We amortize intangible assets on a straight-line basis unless the pattern of usage of the benefits indicates an alternative method is more representative of the usage of the asset. Amortization expense was $57 for the three-month period ended April4, 2010, and $54 for the three-month period ended April5, 2009. We expect to record annual amortization expense over the next five years as follows: 2011 $ 213 2012 206 2013 171 2014 144 2015 138 The changes in the carrying amount of goodwill by reporting unit for the three months ended April4, 2010, were as follows: Aerospace Combat Systems Marine Systems Information Systemsand Technology Total Goodwill Dece

Earnings per Share, Dividends a

Earnings per Share, Dividends and Comprehensive Income
	3 Months Ended Apr. 04, 2010
Earnings per Share, Dividends and Comprehensive Income	C. Earnings per Share, Dividends and Comprehensive Income Earnings per Share We compute basic earnings per share using net earnings for the period and the weighted average number of common shares outstanding during the period. Diluted earnings per share incorporates the incremental shares issuable upon the assumed exercise of stock options and the release of restricted shares. Basic and diluted weighted average shares outstanding were as follows (in thousands): Three Months Ended April4 2010 April5 2009 Basic weighted average shares outstanding 384,823 385,845 Dilutive effect of stock options and restricted stock 4,161 696 Diluted weighted average shares outstanding 388,984 386,541 Dividends Dividends declared per share were $0.42 and $0.38 for the three-month periods ended April4, 2010, and April5, 2009, respectively. Comprehensive Income Our comprehensive income was $535 and $418 for the three-month periods ended April4, 2010, and April5, 2009, respectively. The primary components of our comprehensive income are net earnings and foreign currency translation adjustments of ($57) in 2010 and ($163) in 2009.

Fair Value of Financial Instrum

Fair Value of Financial Instruments
	3 Months Ended Apr. 04, 2010
Fair Value of Financial Instruments	D. Fair Value of Financial Instruments Our financial instruments include cash and equivalents, marketable securities and other investments; accounts receivable and accounts payable; short- and long-term debt; and derivative financial instruments. We did not have any significant non-financial assets or liabilities measured at their current fair value on April4, 2010, or December31, 2009. The carrying values of cash and equivalents, accounts receivable and payable, and short-term debt (commercial paper) on the Consolidated Balance Sheet approximate their fair value. The following table presents the carrying and fair values of our other financial assets and liabilities on April4, 2010, and December31, 2009, and the basis for determining their fair values: Financial assets (liabilities) Carrying Value Fair Value QuotedPrices in Active Markets for IdenticalAssets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) April4, 2010 Marketable securities: Available-for-sale* $ 14 $ 14 $ 14 $ $ Held-to-maturity 567 567 567 Other investments* 107 107 107 Derivatives* 44 44 44 Long-term debt, including current portion (3,863 ) (4,090 ) (4,090 ) December31, 2009 Marketable securities: Available-for-sale* $ 24 $ 24 $ 24 $ $ Held-to-maturity 336 336 336 Other investments* 122 122 122 Derivatives* 28 28 28 Long-term debt, including current portion (3,864 ) (4,079 ) (4,079 ) * Reported on the Consolidated Balance Sheet at fair value.

Contracts in Process

Contracts in Process
	3 Months Ended Apr. 04, 2010
Contracts in Process	E. Contracts in Process Contracts in process represent recoverable costs and, where applicable, accrued profit related to long-term contracts that have been inventoried until the customer is billed, and consisted of the following: April4 2010 December31 2009 Contract costs and estimated profits $ 14,970 $ 13,817 Other contract costs 949 981 15,919 14,798 Advances and progress payments (11,227 ) (10,349 ) Total contracts in process $ 4,692 $ 4,449 Contract costs consist primarily of labor and material costs and related overhead and general and administrative (GA) expenses. Contract costs also include estimated contract recoveries for matters such as contract changes, negotiated settlements and claims for unanticipated contract costs, which totaled approximately $40 on April4, 2010, and $45 on December31, 2009. We record revenue associated with these matters only when recovery can be estimated reliably and realization is probable. Other contract costs represent amounts that are not currently allocable to government contracts, such as a portion of our estimated workers compensation obligations, other insurance-related assessments, pension and other post-retirement benefits, and environmental expenses. Some of these liabilities are discounted at contractual rates agreed to with our U.S. government customer. These costs will become allocable to contracts generally when they are paid. We expect to recover these costs through ongoing business, including existing backlog and probable follow-on contracts. This business base includes numerous contracts for which we are the sole source or are one of two suppliers on long-term U.S. defense programs. However, if the backlog in the future does not support the continued deferral of these costs, the profitability of our remaining contracts could be adversely affected. We expect to bill substantially all of our April4, 2010, contracts-in-process balance, with the exception of these other contract costs, during the next 12 months.

Inventories

Inventories
	3 Months Ended Apr. 04, 2010
Inventories	F. Inventories Our inventories represent primarily commercial aircraft components and are stated at the lower of cost or net realizable value. Cost for work-in-process inventories, representing principally aircraft in the manufacturing process, is based primarily on the estimated average unit cost of the units in a production lot. Cost for aircraft parts and components is based primarily on the first-in, first-out method. We record pre-owned aircraft acquired in connection with the sale of new aircraft at the lower of the trade-in value or the estimated net realizable value. Inventories consisted of the following: April4 2010 December31 2009 Raw materials $ 955 $ 1,129 Work in process 940 907 Pre-owned aircraft 31 60 Finished goods 59 30 Total inventories $ 1,985 $ 2,126

Debt

Debt
	3 Months Ended Apr. 04, 2010
Debt	G. Debt Debt consisted of the following: InterestRate April4 2010 December31 2009 Fixed-rate notes due: August 2010 4.500 % $ 700 $ 700 July 2011 1.800 % 748 747 May 2013 4.250 % 999 999 February 2014 5.250 % 996 996 August 2015 5.375 % 400 400 Other Various 20 22 Total debt 3,863 3,864 Less current portion 704 705 Long-term debt $ 3,159 $ 3,159 Fixed-rate Notes On April4, 2010, we had outstanding $3.8 billion aggregate principal amount of fixed-rate notes. The fixed-rate notes are fully and unconditionally guaranteed by several of our 100-percent-owned subsidiaries. We have the option to redeem the notes prior to their maturity in whole or in part at 100 percent of the principal plus any accrued but unpaid interest and any applicable make-whole amounts. See Note N for condensed consolidating financial statements. Commercial Paper On April4, 2010, we had no commercial paper outstanding, but we maintain the ability to access the market. We have approximately $1.8 billion in bank credit facilities that provide backup liquidity to our commercial paper program. These credit facilities consist of an $815 364-day facility expiring in July 2010 and a $975 multi-year facility expiring in December 2011. These facilities are required by rating agencies to support the A1/P1 rating of our commercial paper issuances. We may renew or replace these facilities, in whole or in part, prior to or upon their expiration. Our commercial paper issuances and the bank credit facilities are guaranteed by several of our 100-percent-owned subsidiaries. Additionally, a number of our international subsidiaries have available local bank credit facilities aggregating approximately $1.3 billion. Other On April4, 2010, other debt consisted primarily of a capital lease arrangement and debt assumed in connection with acquired businesses. Our financing arrangements contain a number of customary covenants and restrictions. We were in compliance with all material covenants on April4, 2010.

Other Liabilities

Other Liabilities
	3 Months Ended Apr. 04, 2010
Other Liabilities	H. Other Liabilities A summary of significant liabilities by balance sheet caption follows: April4 2010 December31 2009 Salaries and wages $ 624 $ 694 Workers compensation 518 517 Retirement benefits 359 353 Other (a) 1,380 1,424 Total other current liabilities $ 2,881 $ 2,988 Retirement benefits $ 2,820 $ 2,813 Customer deposits on commercial contracts 1,142 1,161 Deferred income taxes 531 519 Other (b) 691 631 Total other liabilities $ 5,184 $ 5,124 (a) Consists primarily of income tax liabilities, dividends payable, environmental remediation reserves, warranty reserves, liabilities of discontinued operations and insurance-related costs. (b) Consists primarily of liabilities for warranty reserves and workers compensation.

Income Taxes

Income Taxes
	3 Months Ended Apr. 04, 2010
Income Taxes	I. Income Taxes Deferred Tax Assets/(Liabilities) Our net deferred tax liability was included in the Consolidated Balance Sheet as follows: April4 2010 December31 2009 Current deferred tax asset $ 31 $ 55 Current deferred tax liability (97 ) (103 ) Noncurrent deferred tax asset 169 163 Noncurrent deferred tax liability (531 ) (519 ) Net deferred tax liability $ (428 ) $ (404 ) Tax Uncertainties We periodically assess our liabilities and contingencies for all periods open to examination by tax authorities based on the latest available information. Where we believe there is more than a 50 percent chance that our tax position will not be sustained, we record our best estimate of the resulting tax liability, including interest, in the Consolidated Financial Statements. We include any interest or penalties incurred in connection with income taxes as part of income tax expense for financial reporting purposes. The IRS began its examination of our 2007 to 2009 tax returns in the fourth quarter of 2009. As of January1, 2010, the IRS selected General Dynamics to participate in its Compliance Assurance Process, a real-time audit, for 2010 and future years. We have recorded liabilities for tax uncertainties for all years that remain open to review. We do not expect the resolution of tax matters for these years to have a material impact on our results of operations, financial condition, cash flows or effective tax rate. Based on all known facts and circumstances and current tax law, we believe the total amount of unrecognized tax benefits on April4, 2010, is not material to our results of operations, financial condition or cash flows. We also believe that the total amount of unrecognized tax benefits on April4, 2010, if recognized, would not have a material impact on our effective tax rate. We further believe that there are no tax positions for which it is reasonably possible that the unrecognized tax benefits will significantly increase or decrease over the next 12 months producing, individually or in the aggregate, a material effect on our results of operations, financial condition or cash flows.

Derivative Instruments and Hedg

Derivative Instruments and Hedging Activities
	3 Months Ended Apr. 04, 2010
Derivative Instruments and Hedging Activities	J. Derivative Instruments and Hedging Activities We are exposed to market risk, primarily from foreign currency exchange rates, interest rates, commodity prices and investments. We may use derivative financial instruments to hedge some of these risks as described below. We do not use derivatives for trading or speculative purposes. Foreign Currency Risk Our foreign currency exchange rate risk relates to receipts from customers, payments to suppliers and inter-company transactions denominated in foreign currencies. To the extent possible, we include terms in our contracts that are designed to protect us from this risk. We periodically enter into derivative financial instruments, principally foreign currency forward purchase and sale contracts with terms of less than three years. These instruments are designed to minimize our risk by fixing, or limiting the adverse impact on, the amount of firmly committed and forecasted foreign currency-denominated payments, receipts and inter-company transactions related to our business and operational financing activities. Interest Rate Risk Our financial instruments subject to interest rate risk include fixed-rate long-term debt obligations and variable-rate commercial paper. However, the risk associated with these instruments is not material. Commodity Price Risk We are subject to risk of rising labor and commodity prices, primarily on long-term fixed-price contracts. To the extent possible, we include terms in our contracts that are designed to protect us from this risk. Some of the protective terms included in our contracts are considered derivatives but are not accounted for separately because they are clearly and closely related to the host contract. We have not entered into any material commodity hedging contracts but may do so as circumstances warrant. We do not believe that changes in labor or commodity prices will have a material impact on our results of operations or cash flows. Investment Risk Our investment policy allows for purchases of fixed-income securities with an investment-grade rating and a maximum maturity of one year. On April4, 2010, we held $2.6 billion in cash and equivalents and marketable securities. Our marketable securities have an average remaining duration of three months and an average credit rating of AA-. Historically, we have not experienced material gains or losses on these instruments due to changes in interest rates or market values. Hedging Activities We had $1.7 billion in notional forward foreign exchange contracts outstanding on April4, 2010, and $1.8 billion on December31, 2009. We recognize derivative financial instruments on the Consolidated Balance Sheet at fair value (see Note D). The fair value of these derivative contracts consisted of the following: April4 2010 December31 2009 Other current assets: Designated as cash flow hedges $ 49 $ 37 Not designated as cash flow hedges 27 12 Other current liabilities: Designated as cash flow hedges (20 ) (14 ) Not designated as cash flow hedges (12 ) (7 ) Total $ 44

Commitments and Contingencies

Commitments and Contingencies
	3 Months Ended Apr. 04, 2010
Commitments and Contingencies	K. Commitments and Contingencies Litigation Termination of A-12 Program. In January1991, the U.S. Navy terminated the A-12 aircraft contract for default. The A-12 contract was a fixed-price incentive contract for the full-scale development and initial production of the Navys carrier-based Advanced Tactical Aircraft. We and McDonnell Douglas, the contractors, were parties to the contract with the Navy. (McDonnell Douglas is now owned by The Boeing Company.) Both contractors had full responsibility to the Navy for performance under the contract, and both are jointly and severally liable for potential liabilities arising from the termination. As a consequence of the termination for default, the Navy demanded the contractors repay $1.4billion in unliquidated progress payments. The Navy agreed to defer collection of that amount pending a resolution by the court or a negotiated settlement. Over more than 16 years of litigation, the trial court (the U.S. Court of Federal Claims) and appeals court (the Court of Appeals for the Federal Circuit) issued multiple rulings, some in favor of the government and others in favor of the contractors. On May3, 2007, the trial court issued a decision upholding the default termination. The court did not, however, award any money judgment to the government. On June2, 2009, a three-judge panel of the appeals court affirmed the trial courts decision, and on November24, 2009, the appeals court denied the contractors petitions for rehearing. The contractors have petitioned the United States Supreme Court for review of the appeals court decision. We continue to believe that the law and facts support a determination that the governments default termination was not justified. Moreover, we continue to believe that there are significant legal obstacles to the governments ability to collect any amount from the contractors given that no court has ever entered a money judgment in favor of the government. If, contrary to our expectations, the default termination is ultimately sustained and the government prevails on its recovery theories, the contractors could collectively be required to repay the government as much as $1.4billion for progress payments received for the A-12 contract, plus interest, which was approximately $1.5 billion at April4, 2010. This would result in a liability to us of half of the total, or approximately $1.4 billion pretax. Our after-tax charge would be approximately $800, or $2.06 per share, to be recorded in discontinued operations. Our after-tax cash cost would be approximately $715. We believe we have sufficient resources to satisfy our obligation if required. Other. Various claims and other legal proceedings incidental to the normal course of business are pending or threatened against us. While we cannot predict the outcome of these matters, we believe any potential liabilities in these proceedings, individually or in the aggregate, will not have a material impact on our results of operations, financial condition or cash flows. Environmental We are subject to and affected by a variety of federal, state, local and foreign environmental laws and regulations. We are directly

Retirement Plans

Retirement Plans
	3 Months Ended Apr. 04, 2010
Retirement Plans	L. Retirement Plans We provide defined-benefit pension and other post-retirement benefits, as well as defined-contribution benefits, to eligible employees. Net periodic pension and other post-retirement benefit costs for the three-month periods ended April4, 2010, and April5, 2009, consisted of the following: Pension Benefits Other Post-retirementBenefits Three Months Ended April4 2010 April5 2009 April4 2010 April5 2009 Service cost $ 54 $ 52 $ 3 $ 2 Interest cost 127 123 15 16 Expected return on plan assets (150 ) (144 ) (8 ) (8 ) Recognized net actuarial loss (gain) 17 7 (1 ) (2 ) Amortization of prior service credit (11 ) (12 ) Net periodic cost $ 37 $ 26 $ 9 $ 8 Our contractual arrangements with the U.S. government provide for the recovery of contributions to our pension plans covering employees working in our government contracting businesses. With respect to post-retirement benefit plans, our government contracts provide for the recovery of contributions to a Voluntary Employees Beneficiary Association trust and, for non-funded plans, recovery of claims paid. Upon payment, these recoverable contributions are assigned to contracts and billed to the customer in accordance with the Cost Accounting Standards and specific contractual terms. The cumulative pension and post-retirement benefit cost for some of these plans exceeds our cost currently allocable to contracts. To the extent recovery of the cost is considered probable based on our backlog, we defer the excess in contracts in process on the Consolidated Balance Sheet until the cost is paid, charged to contracts and included in revenues. For other plans, the amount contributed to the plans, charged to contracts and included in revenues has exceeded the plans cumulative benefit cost. We have deferred recognition of these excess earnings to provide a better matching of revenues and expenses. These deferrals have been classified against the plan assets on the Consolidated Balance Sheet. (See Note E for discussion of our deferred contract costs.)

Business Group Information

Business Group Information
	3 Months Ended Apr. 04, 2010
Business Group Information	M. Business Group Information We operate in four business groups: Aerospace, Combat Systems, Marine Systems and Information Systems and Technology. We organize and measure our business groups in accordance with the nature of products and services offered. These business groups derive their revenues from business aviation; combat vehicles, weapons systems and munitions; shipbuilding design, repair and construction; and information systems, technologies and services, respectively. We measure each groups profit based on operating earnings. As a result, we do not allocate net interest, other income and expense items, and income taxes to our business groups. Summary operating results for each of our business groups follows: Revenues OperatingEarnings Three Months Ended April 4 2010 April 5 2009 April4 2010 April5 2009 Aerospace $ 1,357 $ 1,455 $ 218 $ 200 Combat Systems 2,002 2,407 269 279 Marine Systems 1,639 1,669 161 163 Information Systems and Technology 2,752 2,733 290 289 Corporate* (20 ) (26 ) $ 7,750 $ 8,264 $ 918 $ 905 * Corporate operating results include our stock option expense and a portion of the operating results of our commercial pension plans.

Condensed Consolidating Financi

Condensed Consolidating Financial Statements
	3 Months Ended Apr. 04, 2010
Condensed Consolidating Financial Statements	N. Condensed Consolidating Financial Statements The fixed-rate notes described in Note G are fully and unconditionally guaranteed on an unsecured, joint and several basis by certain of our 100-percent-owned subsidiaries (the guarantors). The following condensed consolidating financial statements illustrate the composition of the parent, the guarantors on a combined basis (each guarantor together with its majority-owned subsidiaries) and all other subsidiaries on a combined basis. Condensed Consolidating Statement of Earnings Three Months Ended April4, 2010 Parent Guarantors on a Combined Basis Other Subsidiaries on a Combined Basis Consolidating Adjustments Total Consolidated Revenues $ $ 6,432 $ 1,318 $ $ 7,750 Cost of sales (3 ) 5,252 1,097 6,346 General and administrative expenses 20 372 94 486 Operating earnings (17 ) 808 127 918 Interest expense (47 ) (47 ) Interest income 2 1 3 Other, net (1 ) 1 Earnings from continuing operations before income taxes (62 ) 807 129 874 Provision for income taxes (21 ) 270 26 275 Discontinued operations, net of tax (2 ) (2 ) Equity in net earnings of subsidiaries 638 (638 ) Net earnings $ 597 $ 537 $ 101 $ (638 ) $ 597 Three Months Ended April5, 2009 Revenues $ $ 6,663 $ 1,601 $ $ 8,264 Cost of sales 7 5,487 1,355 6,849 General and administrative expenses 19 388 103 510 Operating earnings (26 ) 788 143 905 Interest expense (39 ) (2 ) (1 ) (42 ) Interest income 2 1 3 Other, net 2 1 3 Earnings from continuing operations before income taxes (63 ) 789 143 869 Provision for income taxes (42 ) 273 45 276 Discontinued operations, net of tax (3 ) (3 ) Equity in net earnings of subsidiaries 611 (611 ) Net earnings $ 590 $ 516 $ 95 $ (611 ) $ 590 Condensed Consolidating Balance Sheet April4, 2010 Parent Guarantors on a Combined Basis Other Subsidiaries on a Combined Basis Consolidating Adjustments Total Consolidated ASSETS Current assets: Cash and equivalents $ 1,472 $ $ 553 $ $ 2,025 Accounts receivable 1,650 2,088 3,738 Contracts in process 266 3,350 1,076 4,692 Inventories Raw materials 796 159