General Dynamics reported 2002 fourth quarter earnings from continuing operations of $269 million, $1.33 per share on a fully diluted basis, on sales of $3.9 billion. This included a pretax gain of $36 million from the sale of certain space propulsion assets of its munitions business in the quarter. In the fourth quarter of 2001, earnings from continuing operations were $251 million, $1.23 per share, on sales of $3.5 billion. The quarter ended on December 31, 2002.
In the fourth quarter, the company made a decision to exit its undersea fiberoptic cable-laying business, which had been part of the Information Systems and Technology group since 1998. Accordingly, it moved the business to discontinued operations, accrued the exit liabilities, and wrote down its assets to their net realizable value. This resulted in an after-tax charge of $112 million in the quarter, or 55 cents per share. Net earnings for the fourth quarter after the charge for discontinued operations were $157 million, or 78 cents per share, compared with $246 million, or $1.21 per share, in the fourth quarter of 2001.
Full year 2002 earnings from continuing operations were $1.05 billion, $5.18 per fully diluted share, on sales of $13.8 billion. Excluding a non-recurring tax gain in 2001, this was a 15 percent increase in earnings per share from continuing operations over 2001 earnings from continuing operations of $915 million, $4.51 per fully diluted share, on sales of $12 billion. After a full-year charge of $134 million after taxes, or 66 cents per share, for
the undersea cable-laying business placed in discontinued operations, net earnings were $917 million, or $4.52 per share.
"Overall, we did well in a difficult economic environment," said Nicholas D. Chabraja, General Dynamics chairman and CEO. "Cash provided by operating activities totaled $1.12 billion for the year, well ahead of net earnings. Backlog at the end of 2002 totaled almost $30 billion, an increase of 8 percent from a year ago. Our business aviation group felt the effects of the economic downturn, but still outperformed its competitors. It generated $447 million in earnings, despite our decision in the fourth quarter to aggressively liquidate our pre-owned aircraft inventory - which reduced pre-tax earnings in that group by $37 million. It has managed its costs carefully during this time, maintaining high productivity and strong margins in its core business. It also developed and brought to market several new products that are being very well received by our customers. Order activity for the quarter and the year resulted in growth of the aerospace backlog year over year.
"Our defense businesses were bolstered by many new contract awards," Chabraja said. "Marine Systems won almost a half billion dollars in contracts for the U.S. Navy's SSGN submarine conversion program, and $409 million for another DDG 51-class destroyer. Our Information Systems and Technology group won a $450 million award from the U.K. for a digital battlefield management system, and $611 million from the U.S. Coast Guard to modernize the national distress and response system. Our Spanish subsidiary, General Dynamics Santa Barbara Sistemas, has a $544 million agreement with the Spanish Army for the Pizarro Advanced Infantry Fighting Vehicle program. The U.S. Department of Defense confirmed its support for six brigades of Stryker combat vehicles, and we expect that our planned acquisition of our partner on that $4 billion program -
General Motors Defense - will close within the next two months.
"Looking ahead in 2003, we anticipate solid performance from our defense businesses - and we'll continue to manage our business aviation group cautiously to respond to an uncertain market," Chabraja said.