SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 SCHEDULE 14A (Rule 14A-101) Information Required in Proxy Statement Schedule 14A Information Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934 (Amendment No. ) Filed by the Registrant |x| Filed by a Party other than the Registrant |_| Check the appropriate box: |_| Preliminary Proxy Statement |_| Definitive Proxy Statement |x| Definitive Additional Materials |_| Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12 General Dynamics Corporation ________________________________________________________________________________ (Name of Registrant as Specified In Its Charter) ________________________________________________________________________________ (Name of Person(s) Filing Proxy Statement) Payment of Filing Fee (Check the appropriate box): |x| No fee required. |_| Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11. 1) Title of each class of securities to which transaction applies: _____________________________________________________________________________ 2) Aggregate number of securities to which transaction applies: _____________________________________________________________________________ 3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11:* _____________________________________________________________________________ 4) Proposed maximum aggregate value of transaction: _____________________________________________________________________________ 5) Total fee paid [ ] Fee paid previously with preliminary materials. _____________________________________________________________________________ |_| Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the form or schedule and the date of its filing. 1) Amount previously paid: _________________________________________________ 2) Form, Schedule or Registration No. ______________________________________ 3) Filing party: ___________________________________________________________ 4) Date filed: _____________________________________________________________ ___________ *Set forth the amount on which the filing fee is calculated and state how it was determined. - ----------------------------------------------------------------------------- GULFSTEAM 43rd PARIS AIR SHOW JUNE 15, 1999 Note: This document contains forward looking statements that are subject to risks and uncertainties. It should be read in conjuction with the Company's SEC filings and disclosures. An exhibit to the Company's SEC filings discusses factors that could cause actual results to differ. - ----------------------------------------------------------------------------- Agenda - ----------------------------------------------------------------------------- o Company & Market Highlights - Bill Boisture, President & Chief Operating Officer Gulfstream Aerospace Corporation o Financial Overview - Chris Davis, Executive Vice President & Chief Financial & Administrative Officer Gulfstream Aerospace Corporation o General Dynamics Overview - Nick Chabraja, Chairman & Chief Executive Officer General Dynamics Corporation o Q&A Gulstream Leads the Industry - ----------------------------------------------------------------------------- o Pre-Eminent Designer, Developer, Manufacturer & Marketer of the Most Technologically Advanced Business Aircraft - Highest Quality, Most Reliable Large Cabin Aircraft - Leader in Development & Production of Ultra-Long Range Aircraft - More Than 1,000 Aircraft Delivered Over 40 Years o Strong Brand Name & Customer Loyalty o Worldwide Presence ... Expanding Market Through New Distribution Channels o Broad Family of Products & Services Drives Growth o Excellent Financial Performance with Strong Future Outlook Gulfstream Dominates Its Markets - ----------------------------------------------------------------------------- Long Range and Ultra-Long Range Business Jet Aircraft Deliveries Through December 1998 Double the Size of the Next Largest Competitor [Pie Chart Illustrating the Number of Deliveries and Market Share of Aircraft Produced by Gulfstream and Its Competitors showing 877 or 58% for Gulfstream GII, GIII, GIV/GIV-SP, GV; 437 or 29% for Challenger CL600/601, CL601-3A/3R, CL604, Global Express; and 207 or 13% for Falcon F900/900B/EX] Expanded Product Set Meets Customer Needs - ----------------------------------------------------------------------------- (Photos of GIV-SP and GV appear here) Offering a Full Complement of Aviation Products & Services Gulfstream IV-SP Market Share (1995-1998) - ----------------------------------------------------------------------------- Orders Deliveries ------ ---------- [Pie Chart Illustrating the Market [Pie Chart Illustrating the Market Share for Orders of the Gulfstream Share for Deliveries of the GIV and Dassault F900B/EX showing Gulfstream GIV and Dassault F900B/EX 66% for the Gulfstream GIV and 34% showing 62% for the Gulstream GIV and for the Dassault F900 B/EX] 38% for the Dassault F900B/EX] Source: Gulfstream Marketing Estimate Source: Business Aviation o GIV-SP Consistently Outsells Nearest Competitor o GIV-SP Is Most Reliable Large Cabin Jet... >99% Dispatch Reliability o GIV-SP Aircraft Design Provides Continued Opportunity for Product Enhancements o GIV-SP Is Proven Special Mission Aircraft (NOAA, JDA, US Navy, SIGINT) o Falcon 900EX Design "Fully Stretched" o Challenger No Longer a Direct Competitor Due to Performance and Pricing Gulfstream V Market Share - ----------------------------------------------------------------------------- Program Inception Through December 1998 Orders Deliveries ------ ---------- [Pie Chart Illustrating the Market [Pie Chart Illustrating the Market Share for Orders of the Gulfstream Share for Deliveries of the GV and Bombardier GEX showing 73% Gulfstream GV and Bombardier GEX for the Gulstream GV and 27% for showing 95% for the Gulfstream GV the Bombardier GEX] and 5% for the Bombardier GEX] Source: Announced orders excluding Source: Business Aviation orders to distributors o Have Sold 141 GVs Before the Competition Is In Service o Pioneered New Ultra-Long Range Market ... 50% More Range Than GIV-SP ... New York to Tokyo Non-Stop ... Paris to Los Angeles Non-Stop o Outstanding Performance Over the Entire Flight Envelope o Collier Trophy Winner ... 57 World & National Records o Commercial Airliners Not Direct Competitors Due to Size, Cost and Performance Expanded Product Offerings Expand The Market - ----------------------------------------------------------------------------- o Gulfstream Shares - Most Successful Large-Cabin Fractional Ownership Program - 68 North American Shares Orders/Options ...Valued at $2 Billion ... 20 Aircraft in Service ... 119 Shares Sold - 12 Middle East Shares Orders ... Valued at $335 Million - Expansion Opportunities in Far East and Europe - Significant New Distribution Channel ... 85% Of Shares Customers Have Never Owned a Gulfstream o Gulfstream Lease ---------------- - Industry's First Short-Term Operating Lease Program - 12 Aircraft Order Including Options ... Valued at $410 Million ... Includes GIV-SPs and GVs - Program Operational in Late 1999 Expanded Products Leverage The Brand - ----------------------------------------------------------------------------- o Gulfstream Management Services ------------------------------ - Turnkey Aircraft Management for Crew, Dispatch and Maintenance Management o Gulfstream Charter Services --------------------------- - Single Point of Contact for Chartering Gulfstream Aircraft o Gulfstream Pre-Owned Aircraft ----------------------------- - Branded Product With Factory Warranty ... Competes With Lower Priced Competitors Expanded Products Offer Competitive Advantage - --------------------------------------------- o Gulfstream Worldwide Service ---------------------------- - Network of Worldwide Gulfstream Service & Warranty Centers & Parts Depots - 24 Hour, 7 Day-a-Week Service - Non-Gulfstream Aircraft Service is Advantage For Customers With Mixed Aircraft Fleets (Challengers, Falcons, Hawkers) o Gulfstream Financial Services ----------------------------- - Third-Party Financing Facilitates New and Pre-Owned Aircraft Sales Focused R&D for Market Leadership - --------------------------------- o Continuous Improvements in Reliability o Reductions in Cost of Operations o Safety and Cockpit Enhancements - Enhanced Vision - Aging Aircraft o Integration of Technology to Remain the Market Leader o Evaluation of New Technologies for Long-Term Planning Investing Approximately $20 Million Annually in the Gulfstream IV-SP and Gulfstream V - ----------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS CHRIS DAVIS - ----------------------------------------------------------------------------- 1998 Was Another Great Year for Gulfstream ... Momentum Continues in 1999 (Photo of Gulfstream In Flight) 1998 Financial Highlights - ----------------------------------------------------------------------------- o Excellent Financial Performance - Total Revenues of $2.4 Billion ... Up 28% Over 1997 - EPS Up by 79% to $3.00 - Gross Margin (Excluding Pre-Owned) Increased to 23.6% From 20.0% ... GV Learning Curve, Productivity Initiatives and Favorable Pricing o Record New Aircraft Orders - 90 Orders, Plus 18 Options ... 45 Orders Excluding Shares & Lease Multi-A/C Orders - No Cancellations, No Russian Exposure and Minimal Asian Exposure Gulfstream 1998 Highlights - ----------------------------------------------------------------------------- o Met or Exceeded Operating Goals for Deliveries, Cost Performance and Aircraft Services Growth and Profitability - Delivered 61 Green Aircraft and 54 Completions ... Up From 51 Green and 27 Completions in 1997 - Production Expanded With Minimal Capital Investment o Invested Strong Free Cash Flow in Future Growth - Acquired K-C Aviation for $250 Million ... Accelerates Completions Ramp-Up and Service Growth - Completed $200 Million Share Repurchase Program 1999 First Quarter Highlights - ----------------------------------------------------------------------------- o 1Q99 Revenues of $625.1 Million ... Up 24% Over 1Q98 o Gross Margin of 23.9% (Excluding Pre-Owned) Up From 22.1% in 1Q98 and 23.7% in 4Q98 o Order Momentum Remains Excellent ... Broad Geographic Mix ... No Cancellations - 129 A/C Backlog Valued at $4.1 Billion as of 3/31/99 o GV Significantly Penetrating Special Mission Market - U.S. Government Ordered 3 Additional GVs ... Total Order Now at 6 Strong Start to 1999 ... On Track to Meet Operating and Financial Goals Production Expansion to Meet Strong Demand ------------------------------------------ Aircraft Deliveries ------------------- [Chart Illustrating Aircraft Deliveries During 1996, 1997, 1998 and 1999 showing 27 in 1996, 51 in 1997, 61 in 1998 and 65 in 1999] o Significantly Exceeds Original '96 Plan of 48 Deliveries in '99 o Co-Production Flexibility Allows Shift in Mix Based on Demand o Suppliers Under Long-Term Contracts For Cost Leverage Excellent Financial Performance Since IPO - ---------------------------------------------------------------------------- ($ Million, Except Units and EPS) [Chart Illustrating Sales and Income Before Taxes During 1996, 1997, 1998 and 1999 showing sales of $1,064 and income of $47 in 1996, sales of $1,904 and income of $209 in 1997, sales of $2,428 and income of $352 in 1998 and sales of $2,707 and income of $444 in 1999E (Analysts' Consensus)] 1996 1997 1998 1999E Deliveries 27 51 61 65 Fully-Taxed EPS(a) $.37 $1.68 $3.00 $3.75 (a) Assumes a 37.5% Tax Rate for 1996 & 1997 Operations and Completions Strategy Supports Growth and Margin Expansion - ---------------------------------------------------------------------------- o Reduce Costs and Increase Productivity and Quality in All Areas of the Business o Leverage Multi-Site Completions Capacity and Capabilities to Meet Production Levels - Engineering Processes Redesigned to Reduce Cycle Time and Cost - Premium Interior Packages Facilitate Customer Design Process - Incorporate CATIA Technology to Increase Quality and Support Productivity Goals o Maintain Product Leadership Through Focused R&D o Grow Service Business to Support Worldwide Fleet and Expand Non-Gulfstream Service Increasing Operating Margin - ---------------------------------------------------------------------------- [Chart Illustrating Operating Margin During 1996, 1997, 1998 and First Quarter of 1999 showing $50 in 1996, $229 in 1997, $373 in 1998 and $97 in 1Q99] Longer Term Target of 20% Near Term Target of 18% 1996 1997 1998 1Q99 Adjusted Operating Margin 5.7% 13.1% 16.8% 17.3% Excludes Pre-Owned Revenue and Margin, 98 Step Up * Excludes Pre-Owned Revenue and Margin Highly Visible Sales and Earnings Growth - ---------------------------------------------------------------------------- ($ Million, Except Units) o Backlog Runs Out Through 2007 o Approximately 64% of Backlog, Including Options, Delivers in 2000 and Beyond o 75% Of Backlog Is in North America o Nearly Half Is Corporate [Chart Illustrating Backlog During 1996, 1997, 1998 and 1st Quarter of 1999 showing $3,104 in 1996, $2,782 in 1997, $4,300* in 1998 and $4,100* in 1Q99] 1996 1997 1998 1Q99 Deliveries 27 51 61 17 New A/C Orders 65 46 108* 11 * Including Options & Middle East Shares Strong Future Outlook - ---------------------------------------------------------------------------- o Proven Management ... Committed to Growth & Enhancing Shareholder Value o Strong Company & Industry Fundamentals o Highly Visible Sales and Earnings o Expanding Margins Through Increased Volume, Favorable Pricing and Cost Performance o Will Generate Significant Free Cash Flow o New Product Offerings, New Distribution Channels and Strong Demand Generate Top Line Growth Remain Confident in Strong Earnings Growth ... At Least 25% EPS Growth in 1999 to $3.75 ... At Least 15% Growth in 2000 - ---------------------------------------------------------------------------- GENERAL DYNAMICS Nick Chabraja General Dynamics Financial Objective - ---------------------------------------------------------------------------- o Share Price Appreciation ~ 13.5% o Dividend Yield ~ 1.5% o Minimum Total Return ~ 15.0% Corporate Strategy - ---------------------------------------------------------------------------- o Organic Revenue Growth o Continual Operations Improvement o Disciplined Capital Deployment GD Stock Price Vs Objective - ---------------------------------------------------------------------------- [Graph Illustrating General Dynamics Stock Price from 12/95 through June 9, 1999 compared to an appreciation objective of 13.5% showing a price of $64 11/16 on June 9, 1999] Deployment of Capital - ---------------------------------------------------------------------------- o Internal Investment o Accretive Acquisitions Financial Resources - ---------------------------------------------------------------------------- o Cash Balance o Cash From Operations o R&D Tax Credits o Real Estate o A-12 o Debt Capacity General Dynamics Acquisition Criteria - ---------------------------------------------------------------------------- o Aggressively Pursue Businesses Related to Core Operations o Opportunistically Pursue Businesses Related to Core Competencies General Dynamics/Gulfstream Financial Fit - ---------------------------------------------------------------------------- o Operational Excellence o Strong Cash Flows o Solid Balance Sheet o Highly Visible Earnings o History of Exceeding Expectations o Strong, Firm Backlog Immediately Accretive to Earnings - $0.25 in 1999 and $0.35 in 2000 Selected 2000 Financials - Wall Street Estimates - ---------------------------------------------------------------------------- ($ Millions Except Per Share Amounts) Total ----- Sales $8,742 Operating Earnings 1,226 Net Income 773 EPS (diluted) $3.83 Free Cash Flow 733 Total Company Backlog @ $18 Billion ... Provides Strong Earnings Visibility General Dynamics/Gulfstream Strategic Fit - ---------------------------------------------------------------------------- o Clear Market Leaders o Shared Core Competencies o Shareholder Value Focused Management General Dynamics + Gulfstream = Strong Cash and Earnings Engine [MATERIALS PREPARED FOR PRESENTATION BY NICHOLAS CHABRAJA] Chart 1: Cover Slide Thank you... I believe that most of you are familiar with General Dynamics... For those who aren't, I'll briefly describe our primary businesses ... Our Marine segment is the premier supplier of nuclear submarines, surface combatants and auxilliary ships to the US Navy ... Our Combat Systems segment is the world's premier supplier of combat vehicles, subsystems and ordnance ... And, our Information Systems and Technology segment comprises a rapidly growing portfolio of advanced military electronics for land, sea and air applications ... We have annual reports available that provide more details, and our staff vice president for investor relations - Ray Lewis - will be happy to work with any of you who want to delve more deeply into our programs ... Today, I want to cover: Our financial goals ... The three part strategy we are following to achieve those goals ... The role acquisitions play in that strategy... And the excellent way our acquisition of Gulfstream fits into that whole picture ... Chart 2: GD Financial Objective [pause] At General Dynamics, our goal is a consistent total return to shareholders of at least 15% annually... Given our dividend yield of around 1.5%, that implies an annual stock price appreciation of at least 13.5%... We have a three part strategy designed to achieve that objective... Chart 3: GD strategy First, we seek moderate organic growth from our current portfolio of businesses... Given the resumption of growth in US defense budgets, we believe we can achieve on the order of 7-8% annually on the top line... Second, we seek to continually expand profit margins in each of our programs... This permits us to grow operating earnings a bit faster than revenues... Clearly, that doesn't get us to the 13 to 14% earnings growth necessary to reach our goal, assuming P/E ratios remain constant... We therefore use our ample financial resources to meet or exceed our target through disciplined capital deployment... Chart 4: GD Price vs Objective We've followed this strategy since 1995, and it has paid off handsomely for our shareholders... The red lines represent a 13.5% price appreciation from the close of the prior year... Since no good deed goes unpunished, each time we have exceeded our goal, we have reset the objective to the new level... As you can see, our current price is a bit above the target line for 1999... Of course, the reason I'm a guest here today is because of the capital deployment part of our strategy... Chart 5: Deployment of Capital Our preferred avenue for deployment of capital is through internal investment... When we do this, we clearly know the risks and rewards involved... Our current major investment is a new land level facility at our shipyard in Bath, Maine... We're spending more than $200 million there over the years 1999 and 2000... However, whether the currency is cash or stock, our primary opportunities for constructive capital deployment are through accretive acquisitions like Gulfstream... And, I want to assure you that we continue to actively seek further acquisitions because we have ample and growing financial resource that we must deploy for our shareholders... Chart 6: Financial Resources First, cash on hand - GD currently has more than $400 million in cash - with Gulfstream that would be well over $500 million ... Next, cash from operations - Absent special projects like the Bath facility, we generate well over $300 million annually in free cash - a number that we expect to double with the addition of Gulfstream to our company... There are also several non-operating sources of cash we expect to come home over the next several years... We have received well over $300 million from R&D tax credits to date, and are currently negotiating an additional claim of around $80 million, plus interest... To date, we have received more than $100 million in net proceeds from real estate sales, and expect to do at least that much more over the next few years .... Many of you know that the US Court of Claims has awarded us around $1 billion in damages and interest due to the improper termination of the A-12 by the US government.. That ruling has been appealed by the Department of Justice, and we are awaiting the appeals court's decision... Finally, we have very little debt - about $200 million total ... Combined with Gulfstream, debt amounts to $500 million plus - or about the amount of cash we have jointly ... Clearly, we have substantial untapped borrowing power... The bottom line here is that GD can easily deploy more than $3 billion over the next several years for acquisitions ... With Gulfstream, somewhat more! With that as a backdrop, I'd like to review our acquisition criteria... Chart 7: Acquisition Criteria First and foremost, we aggressively pursue businesses related to our current core operations... This keeps us focused on the businesses and markets we know best - Beyond the core businesses, we will opportunistically pursue businesses where we can apply our core competencies in marketing, technology or manufacturing. [pause] And, to my mind, Gulfstream fits our second criterion perfectly... Chart 8: Financial Fit In many respects, our two companies have a lot in common... Like GD, Gulfstream is dedicated to operational excellence... They have plans in place to continually improve their operating profit margins quarter after quarter, year after year... Like GD, Gulfstream manages for cash - As noted earlier, combined cash and debt are about equal at around $550 million, giving us the strongest balance sheet in the industry... With strong cash flows, like GD, Gulfstream has high quality earnings... As a result, like GD, they have a history of exceeding the financial community's expectations quarter after quarter... And, both companies have strong, firm backlogs based .... There's no "air" in our numbers... Put this together, and you have a combination that we believe will be accretive to GD's EPS by at least a quarter in '99 and at least 35 cents in 2000... Chart 9: Wall St. Est. for 2000 The current analysts' reports issued on the combination clearly agree with our analysis... These numbers represent the averages for each item from reports published to date... I should note that free cash is before dividends are paid... And, of course, combined we have over $18 billion in firm backlog that stretches out to 2009.... Chart 10: Strategic Fit Strategically, we share quite a few key characteristics, as well... Like all of GD's core businesses, Gulfstream is the clear leader in its markets... In fact, as Bill Boisture clearly demonstrated, they dominate their market segment... We share critical core competencies, as well, particularly in the area of manufacturing... For example, we understand airframe manufacture and are leaders in the integration of complex systems... In addition, our Electric Boat subsidiary has taken the CATIA CAD/CAM system to new levels of performance in conjunction with the New Attack Submarine... This is expertise that can be directly applied to Gulfstream's current plans to further boost productivity in its outfitting operations... [pause] Most important, Gulfstream has a culture that is focused on shareholder value... Like GD, their management team has a substantial portion of their net worth tied to their shares... Bottom line: the combination of GD and Gulfstream represents a strong cash and earnings engine that has even greater future opportunities to grow shareholder value.... Thank you and I'd like to turn this back to Bill Boisture...