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<IMS-DOCUMENT>0000950133-95-000118.txt : 19950615
<IMS-HEADER>0000950133-95-000118.hdr.sgml : 19950615
ACCESSION NUMBER: 0000950133-95-000118
CONFORMED SUBMISSION TYPE: 10-K
PUBLIC DOCUMENT COUNT: 10
CONFORMED PERIOD OF REPORT: 19941231
FILED AS OF DATE: 19950309
SROS: NONE

FILER:

COMPANY DATA:
COMPANY CONFORMED NAME: GENERAL DYNAMICS CORP
CENTRAL INDEX KEY: 0000040533
STANDARD INDUSTRIAL CLASSIFICATION: 3730
IRS NUMBER: 131673581
STATE OF INCORPORATION: DE
FISCAL YEAR END: 1231

FILING VALUES:
FORM TYPE: 10-K
SEC ACT: 1934 Act
SEC FILE NUMBER: 001-03671
FILM NUMBER: 95519673

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
</IMS-HEADER>
<DOCUMENT>
<TYPE>10-K
<SEQUENCE>1
<DESCRIPTION>FORM 10-K FOR GENERAL DYNAMICS CORPORATION
<TEXT>

<PAGE> 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 DECEMBER 31, 1994

OR

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/ / 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)

<TABLE>
<S> <C>
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
</TABLE>

Registrant's telephone number, including area code (703) 876-3000

--------------

Securities registered pursuant to Section 12(b) of the Act:

<TABLE>
<S> <C>
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

</TABLE>

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 $2,527,247,630 at March 6, 1995, calculated in accordance
with the Securities and Exchange Commission rules as to beneficial ownership.

62,996,594 shares of the registrant's Common Stock were outstanding at

March 6, 1995.

DOCUMENTS INCORPORATED BY REFERENCE:

Parts I, II and IV incorporate information from certain portions of

the registrant's 1994 Shareholder Report.

Part III incorporates information from certain portions of the

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registrant's definitive Proxy Statement to be filed with the Securities and
Exchange Commission within 120 days after the close of the fiscal year.

================================================================================
<PAGE> 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, Missile Systems and Space Launch Systems
businesses. 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 three years, the
company has sold its Tactical Military Aircraft, Missile Systems, General
Aviation and Space Launch Systems businesses, as well as certain other smaller
businesses. 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 Energy), 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 further discussion of the business
segments including financial information and backlog, 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 14 through 18 in the company's 1994 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) designs and

builds 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 construction of Los Angeles class

attack submarines (688), Ohio class ballistic missile submarines (Trident) and
Seawolf class attack submarines (Seawolf), 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. Approximately 45% of Electric Boat's property, plant and
equipment was fully depreciated at December 31, 1994.

Electric Boat competed with Newport News Shipbuilding and Drydock

Company (Newport News) for construction of the 688 and Seawolf submarines.
Electric Boat is currently the sole-source producer of Trident and Seawolf
submarines and the designer of the New Attack Submarine. For most engineering
work, Electric Boat competes in a highly competitive environment with several
smaller specialized firms in addition to Newport News.

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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 logistic support on international sales.

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.

-1-
<PAGE> 3
government in competition primarily with the United Defense Limited
Partnership, a partnership between FMC Corporation and Harsco Corporation. The
current international market is characterized by intense competition for a
limited number of business opportunities. The company, in cooperation with the
U.S. government, 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 a 1.6 million square foot plant on 369

acres in Lima, Ohio, and machining operations are performed at a 1.1 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 a few locations in the Detroit
area.

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 won 40% and 45% shares of the first two
competitive bids under the SINCGARS program with ITT Corporation in 1994 and
1995, respectively. The company leases space in Tallahassee, Florida, to support
SINCGARS production.

OTHER

Freeman Energy mines coal, the majority of which is sold in the spot
market or under short-term contracts to a variety of customers. Freeman
Energy'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 Energy 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
Energy's mines was approximately 5 million tons in 1994 and 1993, and 4.5
million tons in 1992. In addition, Freeman Energy 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 Energy'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 Energy's Illinois basin mines has medium
or high sulfur content. The impact of compliance with the Clean Air Act

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will be mitigated in the near-term by Freeman Energy's long-term contracts and
through installation of pollution control devices by certain of Freeman
Energy'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 ten 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 second 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. During 1994, the company signed an agreement to
terminate its contract with McDonnell Douglas after delivery of the 166th
shipset in early 1996. The Convair Division will seek no new business and will
cease operations after completion of its obligations under the contract.
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-
<PAGE> 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 are
intended to 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 city of San Diego, California; 370 acres in Rancho Cucamonga,
California; and 53 acres in Camden, Arkansas. Most of this property is
undeveloped. The company owns 3.4 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

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

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the customer. U.S. government sales were as follows (excluding discontinued
operations; dollars in millions):

<TABLE>
<CAPTION>
Year Ended December 31
----------------------------------------
1994 1993 1992
-------- --------- ---------
<S> <C> <C> <C>
Domestic $ 2,190 $ 2,202 $ 2,706
FMS 690 801 276
-------- --------- ---------
Total U.S. government $ 2,880 $ 3,003 $ 2,982
======== ========= =========
Percent of net sales 94% 94% 92%
</TABLE>

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; the company is
actively pursuing litigation against the U.S. government in the U.S. Court of
Federal Claims in connection with the termination. For further discussion,
see Note P to the Consolidated Financial Statements on page 29 of the 1994
Shareholder Report, included in this Form 10-K - Annual Report as Exhibit 13.

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 $32 million, $35 million and $42 million in 1994, 1993 and
1992, respectively.

-3-
<PAGE> 5
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.

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The table below details expenditures for research and development
(excluding discontinued operations; dollars in millions):

<TABLE>
<CAPTION>
Year Ended December 31
----------------------------------------
1994 1993 1992
-------- --------- ---------
<S> <C> <C> <C>
Company-sponsored $ 30 $ 33 $ 32
Customer-sponsored 246 142 122
-------- --------- ---------
$ 276 $ 175 $ 154
======== ========= =========
</TABLE>

Supplies

Many items of equipment and components used in the production of the

company's products are purchased from other manufacturers. The company is
dependent upon suppliers and subcontractors for a large number of components
and 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.

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. In many
cases, however, the U.S. government has an irrevocable, non-exclusive,
royalty-free license, pursuant to which the government may use or authorize
others to use the inventions covered by the patents. Pursuant to similar
arrangements, the goverment may consent to the company's use of inventions
covered by patents. While in the aggregate its patents and licenses are
considered important in the operation of the company's business, engineering,
production skills and experience are more important to the company than its
patents or licenses.

Employees

At the end of 1994, the company had approximately 24,200 employees, of

whom approximately 50% 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, the Office and Professional
Employees International Union and the United Mine Workers of America. During
1995, several collective bargaining agreements, which cover approximately

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one-half 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 Metal Trades Council at Electric Boat.

-4-
<PAGE> 6
ITEM 2. PROPERTIES

The information required for this item is included in Item 1 of

this report.

ITEM 3. LEGAL PROCEEDINGS

The information in Note O to the Consolidated Financial Statements

appearing on pages 28 and 29 of the 1994 Shareholder Report, included in this
Form 10-K - Annual Report as Exhibit 13, is incorporated herein by reference in
response to this item.

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 December 31, 1994.

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:

<TABLE>
<CAPTION>

AGE AT

DECEMBER 31
NAME, POSITION AND OFFICE
1994
-------------------------
-----------
<S>
<C>
G. Kent Bankus -- Vice President Government Relations since April 1993; Staff Vice President
Aerospace Programs and Field Offices July 1991 -- April 1993; Corporate Director for
Special Projects January 1989 -- July 1991
52

Edward C. Bruntrager -- Vice President and General Counsel since March 1994; Assistant
General Counsel January 1987 -- March 1994
47

David H. Fogg -- Staff Vice President and Treasurer since November 1994;
Staff Vice President and Assistant Treasurer May 1994 -- November 1994;
Corporate Director of Finance and Assistant Treasurer January 1994 -- May 1994;
Corporate Director of Risk Management December 1991 -- January 1994; Assistant
Treasurer of Uniroyal Goodrich Tire Company January 1989 -- November 1991
39

Paul A. Hesse -- Vice President Communications since May 1991; President and Chief
Operating Officer of Dix & Eaton 1988 -- 1991
53

Ralph W. Kiger -- Vice President Human Resources and Adminstration since June 1994;
Vice President Human Resources May 1993 -- June 1994; Staff Vice President Human
Resources March 1992 -- May 1993; Division Vice President Human Resources of

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General Dynamics Services Company July 1991 -- March 1992; Division Vice President
Human Resources of the company's Data Systems Division November 1988 -- July 1991
49

E. Alan Klobasa -- Staff Vice President and Secretary since March 1992;
Secretary September 1987 -- March 1992
47

Michael J. Mancuso -- Vice President and Chief Financial Officer since November 1994;
Vice President and Controller May 1994 -- November 1994;
Division Vice President and Controller of the company's Land Systems Division September
1993 -- May 1994; Vice President and Controller - Commercial Engine Business, Pratt & Whitney,
United Technologies Corporation (UTC) July 1992 -- September 1993; Vice President - Finance
and Administration, Hamilton Standard, UTC August 1989 -- July 1992
52

John W. Schwartz -- Staff Vice President and Controller since November 1994;
Corporate Director of Accounting July 1992 -- November 1994; Vice President
- Corporate Accounting of MNC Financial, Inc. 1988 -- June 1992
38
</TABLE>

-5-

<PAGE> 7
<TABLE>
<CAPTION>

AGE AT

DECEMBER 31
NAME, POSITION AND OFFICE
1994
-------------------------
-----------
<S>
<C>
Henry J. Sechler -- Vice President International Business Development since August 1991;
Staff Vice President International Business Development 1985 -- August 1991
62

Roger E. Tetrault --Vice President of the company and President of the company's Land Systems
Division since April 1993; Vice President of the company and President of the company's
Electric Boat Division August 1992 -- April 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
53

James E. Turner, Jr. -- Executive Vice President of the company and President of the company's
Electric Boat Division since April 1993; Executive Vice President of the company and General
Manager of the company's Electric Boat Division February 1991 -- April 1993; Vice President of
the company and General Manager of the company's Electric Boat Division September 1988 --
February 1991
60
</TABLE>

All executive officers of the company are elected annually. There are no family
relationships, as defined, among 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

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ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY 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 are included in Note T to the Consolidated Financial
Statements appearing on page 32 of the company's 1994 Shareholder Report,
included in this Form 10-K -- Annual Report as Exhibit 13, and incorporated
herein by reference.

There were 23,935 common shareholders of record of General Dynamics

Corporation common stock at December 31, 1994.

ITEM 6. SELECTED FINANCIAL DATA

The information appearing on pages 14 through 18 and 34 of the 1994

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 OPERATIONS

The information appearing on pages 14 through 18 of the 1994

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 appearing on pages 19 through 34 of the 1994

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.

-6-
<PAGE> 8
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 December 31, 1994.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a) 1. Financial Statements

The Report of Independent Public Accountants and Consolidated

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Financial Statements appearing in the 1994 Shareholder report on the pages
listed in the following index are included in this Form 10-K -- Annual Report as
Exhibit 13 and are incorporated herein by reference.

<TABLE>
<CAPTION>

Page of

Shareholder

Report
--
----------
<S>
<C>
Report of Independent Public Accountants
33

Consolidated Financial Statements:

Consolidated Statement of Earnings

19

Consolidated Balance Sheet

20

Consolidated Statement of Cash Flows

21

Consolidated Statement of Shareholders' Equity

22

Notes to Consolidated Financial Statements (A to T)

23 - 32
</TABLE>

2. Financial Statement Schedules

No schedules are submitted because they are either not

applicable or not required, or because the required information is included in
the financial statements or the notes thereto.

3. Exhibits--See Index on pages 9 and 10.

(b) Reports on Form 8-K

On December 12, 1994, the company reported to the Securities and

Exchange Commission that on December 9, 1994, the United States Court of
Federal Claims filed an order in the matter of McDonnell Douglas Corporation
and General Dynamics Corporation vs. United States of America which vacated the
U.S. Navy's termination of the company's A-12 contract for default, finding
that the A-12 contract was not terminated for contractor default, but because
the Office of the Secretary of Defense withdrew support and funding from the
A-12.

-7-
<PAGE> 9
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.

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GENERAL DYNAMICS CORPORATION

By: /s/ John W. Schwartz

--------------------
John W. Schwartz
Staff Vice President and Controller
March 9, 1995

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934,

THIS REPORT HAS BEEN SIGNED BELOW ON MARCH 9, 1995, BY THE FOLLOWING PERSONS
ON BEHALF OF THE REGISTRANT AND IN THE CAPACITIES INDICATED, INCLUDING A
MAJORITY OF THE DIRECTORS.

Nicholas D. Chabraja Director

James S. Crown Director

Lester Crown Director

Charles H. Goodman Director

Michael J. Mancuso Vice President and Chief Financial Officer

(Principal Financial Officer)

James R. Mellor Chief Executive Officer and Director

(Principal Executive Officer)

Allen E. Puckett Director

Bernard W. Rogers Director

John W. Schwartz Staff Vice President and Controller

(Principal Accounting Officer)

Carlisle A. H. Trost Director

By: /s/ E. Alan Klobasa

-------------------
E. Alan Klobasa
Attorney-in-Fact

-8-
<PAGE> 10
INDEX TO EXHIBITS

<TABLE>
<CAPTION>
Note Exhibit
Number Number Description
- - ------ ------ -----------
<S> <C> <C>
(9) 3-1A --Restated Certificate of Incorporation, effective May 21, 1991
3-2B --Bylaws as amended effective May 4, 1994
(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 January 1, 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 January 1, 1975
(4) 10-3 --Facilities Contract N-00024-87-E-5409 between the United States
and the company as

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amended, relating to facilities at Pomona, California, dated March
13, 1987
(6) 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 July 1, 1983
(8) 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
October 9, 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 August
2, 1983
(5) 10-6A --General Dynamics Corporation Incentive Compensation Plan adopted
February 3, 1988,
approved by the shareholders on May 4, 1988
(8) 10-6B --General Dynamics Corporation Incentive Compensation Plan (as
amended),
approved by shareholders on May 1, 1991
(3) 10-7C-2 --Facilities Contract DAAE07-83-E-A001 dated August 29, 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
(2) 10-7D --Facilities Contract DAAE07-83-E-A007 dated January 29, 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
(8) 10-7E --Facilities Contract DAAE07-90-E-A001 dated June 24, 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
(8) 10-7F --Facilities Contract DAAE07-91-E-A002 dated December 21, 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
10-8B --General Dynamics Corporation Retirement Plan for Directors adopted
March 6, 1986, as amended May 5,
1993
(7) 10-13 --Indenture of Lease dated January 1, 1986, by and between State of
Rhode Island and
Providence Plantations and Rhode Island Port Authority and
Economic Development
Corporation and the company
(7) 10-14 --Lease Agreement dated November 28, 1978, as amended January 15,
1989, between
Rhode Island Port Authority and Economic Development Corporation
and the company
(10) 10-18 --Employment Agreement between the company and James R. Mellor dated
as of
March 17, 1993
(10) 10-19 --Separation Agreement between the company and Lester Crown dated as
of
March 15, 1993
(10) 10-22 --Form of Agreement entered into in 1993 between the company and
Corporate Officers who
were being retained in employment with the company

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(11) 10-23 --Employment agreement between the company and Nicholas D. Chabraja,
dated
February 3, 1993, as amended December 22, 1993
</TABLE>

-9-
<PAGE> 11
<TABLE>
<CAPTION>
Note Exhibit
Number Number Description
- - ------ ------ -----------
<S> <C>
11 --Statement re computation of per share earnings
13 --1994 Shareholder Report (pages 14-34)
21 --Subsidiaries
23 --Consent of Independent Public Accountants
24-A --Power of Attorney of the Board of Directors
24-B --Power of Attorney of Michael J. Mancuso, Principal Financial
Officer
and John W. Schwartz, Principal Accounting Officer
27 --Financial Data Schedule
</TABLE>

NOTES

(1) Filed as an exhibit to the company's annual report on Form 10-K for
the year ending December 31, 1980, and filed with the Commission March
31, 1981, and incorporated herein by reference.

(2) Filed as an exhibit to the company's annual report on Form 10-K for
the year ending December 31, 1982, and filed with the Commission March
30, 1983, and incorporated herein by reference.

(3) Filed as an exhibit to the company's annual report on Form 10-K for
the year ending December 31, 1984, and filed with the Commission April
1, 1985, and incorporated herein by reference.

(4) Filed as an exhibit to the company's annual report on Form 10-K for
the year ending December 31, 1986, and filed with the Commission March
31, 1987, and incorporated herein by reference.

(5) Filed as an exhibit to the company's annual report on Form 10-K for
the year ending December 31, 1987, and filed with the Commission March
17, 1988, and incorporated herein by reference.

(6) Filed as an exhibit to the company's annual report on Form 10-K for
the year ending December 31, 1988, and filed with the Commission March
23, 1989, and incorporated herein by reference.

(7) Filed as an exhibit to the company's annual report on Form 10-K for
the year ending December 31, 1989, and filed with the Commission March
30, 1990, and incorporated herein by reference.

(8) Filed as an exhibit to the company's annual report on Form 10-K for
the year ending December 31, 1990, and filed with the Commission March
29, 1991, and incorporated herein by reference.

(9) Filed as an exhibit to the company's annual report on Form 10-K for
the year ending December 31, 1991, and filed with the Commission March
26, 1992, and incorporated herein by reference.

(10) Filed as an exhibit to the company's annual report on Form 10-K for
the year ending December 31, 1992, and filed with the Commission March
30, 1993, and incorporated herein by reference.

(11) Filed as an exhibit to the company's annual report on Form 10-K for

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the year ending December 31, 1993, and filed with the Commission
March 29, 1994, and incorporated herein by reference.

-10-
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-3.2B
<SEQUENCE>2
<DESCRIPTION>GENERAL DYNAMICS CORP. - BY LAWS
<TEXT>

<PAGE> 1
EXHIBIT 3-2B

================================================================================

GENERAL DYNAMICS CORPORATION

By - Laws

As Amended effective 4 May 1994

================================================================================
<PAGE> 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

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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
<PAGE> 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

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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

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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
<PAGE> 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

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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
<PAGE> 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

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Certificate of Incorporation and these By-Laws.

SECTION 2. Number, Qualifications and Term of Office. The number of

directors shall be not less than five nor more than fifteen, 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
<PAGE> 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.

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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
<PAGE> 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

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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
<PAGE> 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

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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 Vll

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

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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
<PAGE> 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.

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WITNESS my hand and the seal of the Corporation this day of

, 19 .

---------------------------

Secretary

(CORPORATE SEAL)

8
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.8B
<SEQUENCE>3
<DESCRIPTION>RETIREMENT PLAN FOR DIRECTORS
<TEXT>

<PAGE> 1
EXHIBIT 10-8B

RETIREMENT PLAN FOR DIRECTORS

1. Purpose. The purpose of the Retirement Plan for Directors (the "Plan")
of General Dynamics Corporation (the "Corporation") is to assist the
Corporation in attracting and retaining as directors individuals of superior
talent, ability, and achievement.

2. Eligible Director. An "eligible director" shall be anyone who has not

been an employee of the Corporation and who has served as a director of the
Corporation for at least five years or, if less than five years, retires at the
age that is established by the Board of Directors as the mandatory retirement
age for directors. However, a director who has been both an outside director
and an employee for different periods of time prior to April 1, 1993, shall
also be an "eligible director."

3. Entitlement. An eligible director who retires

(a) at the age that is established by the Board of Directors as the

mandatory retirement age for directors, or

(b) at an age expressly approved by the Board, or

(c) because of death, or sickness or disability that ends his or her active
business career,

shall be entitled to receive a retirement benefit under this Plan.

4. Benefits. An eligible director who retires on or after May 1, 1993, as

provided in Section 3 above shall be paid by the Corporation an annual benefit
equal to the average of the income consisting of the retainer and fees received
as a director for the three highest years. Benefits will be paid quarterly in
advance commencing with the first calendar quarter following entitlement. For
an eligible director who retired during the period March 1, 1986, to April 30,
1993, the benefits paid shall be as provided in the Plan as it was in effect
during that period. No payments shall be made until an individual reaches at
least age 62.

An eligible director will receive benefits for the life of the director or
ten years, whichever period is longer. However, if a director had been an
outside Board member for more than ten years, the period of payment would be
the longer of the term of life or the number of years of outside Board
membership.

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An eligible director may elect to have any unpaid portion of the guaranteed
payments paid to his/her spouse or estate. An eligible director may elect to
take the benefit as a lump sum payment if a lump sum payment is elected by no
later than the last day of the year prior to the year of retirement.

If no election is made, a lump sum payment will be made to the estate of the
director.

5. Miscellaneous. The Plan may be amended or terminated by the Board of

Directors at any time, provided that no amendment or termination shall
adversely affect the right to retirement benefits of any director who retired
prior to the date of the amendment or termination.

6. Effective Date. The effective date of the Plan shall be March 1, 1986,
as amended May 5, 1993. The Plan shall apply to eligible directors who are
retired or who retire after that date.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-11
<SEQUENCE>4
<DESCRIPTION>STATEMENT RE COMPUTATION OF PER SHARES EARNINGS
<TEXT>

<PAGE> 1
EXHIBIT 11, 1994 ANNUAL REPORT
FORM 10-K, COMMISSION FILE
NUMBER 1-3671

GENERAL DYNAMICS CORPORATION

STATEMENT RE COMPUTATION OF PER SHARE EARNINGS

(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
Year Ended December 31
----------------------
1994 1993
1992
---- ----
----
<S> <C> <C>
<C>
NET EARNINGS:
Continuing Operations $ 223 $ 270 $
305
Discontinued Operations:
Earnings (loss) from operations -- (30)
136
Gain on disposal 15 645
374
------------ ------------- --
----------
$ 238 $ 885 $
815
============ =============
============

Weighted average common shares outstanding 63,068,328 62,187,874

72,330,118
============ =============
============

NET EARNINGS PER SHARE - PRIMARY:

Continuing Operations $ 3.51 $ 4.27 $

4.05

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Discontinued Operations:
Earnings (loss) from operations -- (.47)
1.81
Gain on disposal .24 10.21
4.97
------------ ------------- --
----------
$ 3.75 $ 14.01 $
10.83
============ =============
============

Common shares from above 63,068,328 62,187,874

72,330,118
Assumed exercise of options (treasury stock method) 355,793 994,276
2,925,890
------------ ------------- --
----------
63,424,121 63,182,150
75,256,008
============ =============
============

NET EARNINGS PER SHARE - FULLY DILUTED:

Continuing Operations $ 3.51 $ 4.27 $

4.03
Discontinued Operations:
Earnings (loss) from operations -- (.47)
1.80
Gain on disposal .24 10.19
4.95
------------ ------------- --
----------
$ 3.75 $ 13.99 $
10.78
============ =============
============

Common shares from above 63,068,328 62,187,874

72,330,118
Assumed exercise of options (treasury stock method) 357,447 1,085,702
3,266,410
------------ ------------- --
----------
63,425,775 63,273,576
75,596,528
============ =============
============
</TABLE>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-13
<SEQUENCE>5
<DESCRIPTION>GENERAL DYNAMICS 1994 SHAREHOLDERS REPORT
<TEXT>

<PAGE> 1
EXHIBIT 13

General Dynamics Corporation

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MANAGEMENT'S DISCUSSION AND ANALYSIS

OF THE RESULTS OF OPERATIONS AND FINANCIAL CONDITION

(Dollars in millions, except per share amounts)

BUSINESS SEGMENT INFORMATION

A description of the company's business segments follows:

NUCLEAR SUBMARINES. The company's Electric Boat Division designs and

builds nuclear submarines for the U.S. Navy. The company has contracts for
construction of Los Angeles class attack submarines (688), Ohio class ballistic
missile submarines (Trident) and Seawolf class attack submarines (Seawolf). The
Electric Boat Division also performs overhaul and repair work on submarines as
well as a broad range of engineering work, including the design of the New
Attack Submarine (NSSN).

ARMORED VEHICLES. The company's Land Systems Division designs and

manufactures the M1 Series Abrams Main Battle Tank for the U.S. Army and the
U.S. Marine Corps. The company is currently under contract with the U.S. Army to
upgrade M1 tanks to the M1A2 configuration, the latest version of the M1. In
addition to domestic sales, the company is under contract with the U.S. Army to
manufacture M1A2 tanks for Saudi Arabia and Kuwait, and M1A1 kits to be
assembled in Egypt as part of a coproduction program. The company also provides
training, maintenance and other logistical support on international sales. The
company is the second-source producer of the Single Channel Ground and Airborne
Radio System (SINCGARS) for the U.S. Army.

OTHER. The company has coal mining operations located primarily in

central Illinois, provides ship management services for the U.S. government on
prepositioning and ready reserve ships, and leases liquefied natural gas
tankers.

<TABLE>
<CAPTION>

Net Sales Operating Earnings

Sales to U.S. Government
- - ----------------------------------------------------------------------------------------------
-------------------------------
1994 1993 1992 1994 1993 1992
1994 1993 1992
- - ----------------------------------------------------------------------------------------------
-------------------------------
<S> <C> <C> <C> <C> <C> <C>
<C> <C> <C>
Nuclear Submarines......... $ 1,678 $ 1,711 $ 1,730 $ 173 $ 124 $ 94 $
1,666 $ 1,684 $ 1,693
Armored Vehicles........... 1,184 1,286 1,261 140 174 122
1,159 1,266 1,234
Other...................... 196 190 234 8 11 39
55 53 55
--------------------------------------------------------------------
---------------------------
$ 3,058 $ 3,187 $ 3,225 $ 321 $ 309 $ 255 $
2,880 $ 3,003 $ 2,982
==================================================================================================
===========================

<CAPTION>

Depreciation, Depletion
Identifiable Assets Capital Expenditures
and Amortization
- - ----------------------------------------------------------------------------------------------
-------------------------------

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1994 1993 1992 1994 1993 1992
1994 1993 1992
- - ----------------------------------------------------------------------------------------------
-------------------------------
<S> <C> <C> <C> <C> <C> <C>
<C> <C> <C>
Nuclear Submarines......... $ 365 $ 387 $ 404 $ 6 $ 4 $ 5
$ 20 $ 24 $ 27
Armored Vehicles........... 239 296 329 5 5 4
10 11 15
Other...................... 360 372 386 6 4 8
8 6 6
Corporate*................. 1,709 1,580 2,411 6 1 4
1 15 9
--------------------------------------------------------------------
---------------------------
$ 2,673 $ 2,635 $ 3,530 $ 23 $ 14 $21
$ 39 $ 56 $ 57
==================================================================================================
===========================
</TABLE>

* Corporate identifiable assets include cash and equivalents and marketable

securities, deferred taxes, real estate held for development, net assets of
discontinued operations and prepaid pension cost.

14

<PAGE> 2

General Dynamics Corporation

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 anticipated 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
proved to be true as evidenced by declines, in real terms, in the defense budget
and by the number of industry combinations in recent years. The company has been
involved in a number of these transactions, including the sales of its Tactical
Military Aircraft, Missile Systems and Space Launch Systems businesses (see Note
B to the Consolidated Financial Statements for further discussion).

In response to budgetary pressures, the Department of Defense (DoD)

completed in 1993 the "Bottom-Up Review" (BUR), a comprehensive study to
reassess, in the post-Cold War environment, potential threats to national
security and to determine the military capabilities needed to address those
threats. The company was encouraged by the results of the BUR which recommended
construction of a third Seawolf and the NSSN, as well as designated the
company's Electric Boat Division as the shipyard to build those submarines.
Congress approved funding for long-lead activity on the third Seawolf in 1992
and for the NSSN development program in 1994. The president's FY96 budget, as
submitted to Congress, includes the remaining funding for the third Seawolf, but
based on the current political environment, opposition is expected from some
members of Congress. The contract for the third Seawolf would provide the level
of construction activity necessary to maintain operation of all of Electric
Boat's facilities until construction begins on the NSSN, which the DoD currently
plans for 1998.

The U.S. Army has a stated acquisition objective to upgrade 1,079 of its
M1 Abrams tanks to the M1A2 configuration by the year 2003. The first 210 units

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of this program have been funded. The president's FY96 budget submission
includes the upgrade of approximately 100 additional units, which the company
expects Congress to support and fund. Because the anticipated procurement rate
of the upgrade program is significantly less than previous domestic tank
production programs, the company is seeking to supplement volumes by further
expanding international sales.

The company is working closely with its customers to meet demands for
capability and affordability at significantly reduced procurement rates.
Accordingly, management is continuing to focus on aggressively reengineering the
cost structures of all operations to create highly efficient businesses capable
of operating profitably at significantly lower volumes. With DoD initiatives to
reduce its own infrastructure, additional opportunities may be available for
greater involvement in overhaul, maintenance, upgrade and modification work. In
addition, the company continues to explore ways to utilize its financial
capacity to strengthen its operations through both internal and external
investments. Accordingly, management is considering, among other things, the
benefits of corporate business combinations.

BACKLOG

The following table shows the approximate backlog of the company as calculated
at December 31, 1994 and 1993, and the portion of the December 31, 1994, backlog
not reasonably expected to be filled in 1995:

<TABLE>
<CAPTION>

December 31
- - ----------------------------------------------------------------------
Not Filled
1994 1993 in 1995
- - ----------------------------------------------------------------------
<S> <C> <C> <C>
Nuclear Submarines................ $ 2,463 $ 3,611 $1,292
Armored Vehicles.................. 1,378 1,006 337
Other............................. 721 870 650
- - ----------------------------------------------------------------------
Funded Backlog................ $ 4,562 $ 5,487 $2,279
======================================================================
Total Backlog................. $ 6,006 $ 7,015 $3,612
======================================================================
</TABLE>

Funded backlog represents the total estimated remaining sales value of

authorized work that has been appropriated by Congress, and authorized and
funded by the procuring agency. Funded backlog also includes amounts for
long-term coal contracts. To the extent backlog has not been funded, there is no
assurance that congressional appropriations or agency allotments will be
forthcoming.

RESULTS OF OPERATIONS

The following table sets forth the increase (decrease) in net sales and
operating earnings for the years ended December 31, 1994 and 1993:

<TABLE>
<CAPTION>

1994 1993
Increase (Decrease) Increase (Decrease)
Over 1993 Over 1992
- - ----------------------------------------------------------------------
Net Operating Net Operating
Sales Earnings Sales Earnings
- - ----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Nuclear Submarines...... $ (33) $ 49 $(19) $ 30
Armored Vehicles........ (102) (34) 25 52

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Other................... 6 (3) (44) (28)
- - ----------------------------------------------------------------------
$ (129) $ 12 $(38) $ 54
======================================================================
</TABLE>

NUCLEAR SUBMARINES. Operating earnings increased $49 during 1994 due to

increased earnings on all three construction programs. Cost reengineering
efforts allowed the company to increase the earnings rates on the 688 and
Trident programs and

15
<PAGE> 3
General Dynamics Corporation

begin earnings recognition on the Seawolf program in the fourth quarter of 1993.
The company further increased the earnings rates on the 688 and Trident programs
in the first and third quarters of 1994 due to continuing cost reduction
efforts. Prior to 1994, increases in Seawolf construction activity along with
the aforementioned earnings rates increases had largely offset the declines in
688 and Trident construction activity resulting from the reduced number of
submarines under construction. During 1994, Seawolf construction activity
leveled off while 688 and Trident construction activity continued to decline as
these mature programs near completion resulting in a decrease in net sales for
1994.

All of the submarines in the company's backlog are currently under

construction. In 1994, the company delivered one 688 and one Trident, reducing
backlog to one and three ships, respectively. Delivery of the final 688 is
scheduled for September of 1995, while the delivery of one Trident per year is
scheduled through 1997. The company is also constructing the first two Seawolfs,
with the lead ship scheduled to be completed in 1996 and the second ship in
1998. Construction revenues will continue to decline as the company delivers out
these ships.

Included in contracts in process at Electric Boat are certain costs

required to be recorded under generally accepted accounting principles which are
not allocable to contracts until incurred. These costs have been deferred
because their recovery under contracts is considered probable based upon
existing backlog. If the level of backlog in the future does not support the
continued deferral of these costs, their recognition, along with other cost
implications of a reduced business base, could impact the profitability of the
remaining contracts in backlog.

Net sales decreased $19 during 1993 due primarily to decreased

construction activity on the Trident and 688 programs. Operating earnings
increased $30 during 1993 due primarily to earnings rate increases during 1993
on all three construction programs.

ARMORED VEHICLES. Net sales decreased $102 during 1994 due primarily to
the completion of the Fox Nuclear, Biological and Chemical Reconnaissance
vehicle program in the fourth quarter of 1993, lower production levels on the M1
program and scheduled reductions in work content on the Egyptian coproduction
program. Operating earnings decreased $34 in 1994 due primarily to the absence
of approximately $40 of nonrecurring revenue from the close-out of certain
non-production contracts in 1993, partially offset by an increase in the M1
program earnings rate during the third quarter of 1994 as a result of continuing
cost reengineering efforts.

Production of 315 M1A2 tanks for Saudi Arabia was completed during the
third quarter of 1994, while production of 218 M1A2 tanks for Kuwait began in
1994 with final delivery expected in the first quarter of 1996. Work also began
in 1994 on the contract to upgrade 210 of the U.S. Army's tanks to the M1A2
configuration with delivery of the final unit expected in the third quarter of

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1996. These contracts collectively are referred to as the M1 program and have
been combined for revenue recognition purposes as has been the practice with
similar M1 production contracts in the past. The M1 program (as defined above)
accounted for approximately one half of Armored Vehicles' revenues in 1994. The
current M1 program earnings rate, which yields a substantially higher margin
than other armored vehicle business, has benefited from the company's cost
reengineering efforts and conservative revenue recognition practices during the
early stages of the program. Due to the method of pricing business under
government contracts, the cost reengineering benefits the company is currently
realizing will be passed on to the customer in future contracts and will result
in new business that will yield a lower margin than the current contracts which
run through mid-1996.

In addition to the 25 complete M1A1 tanks previously delivered, the

company is under contract to manufacture 499 M1A1 kits for Egypt. Revenues are
expected to remain at levels similar to 1994 through the end of 1996 as
production completes in early 1997.

Production levels continued to increase on the SINCGARS program during

1994. In addition, the company began recognizing earnings on the program during
the third quarter of 1994 due to improving performance and the favorable impact
of the approximate 40 percent share of the FY94 dual-source competitive
procurement. In February 1995, the company was awarded an approximate 45 percent
share of the FY95 procurement.

Net sales and operating earnings increased $25 and $52, respectively,
during 1993 due primarily to the nonrecurring revenue previously discussed. In
addition, 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 which also contributed to the increase in
operating earnings during 1993.

OTHER. Net sales and operating earnings decreased $44 and $28,
respectively, during 1993 due primarily to the company's coal operations. In
1993, an increasing percentage of coal was sold in the spot market, wherein
prevailing prices are lower than those under the long-term contracts which
expired at the end of 1992.

GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses

decreased during 1994 due primarily to a lower 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 tax
on the gain on disposal of the Tactical Military Aircraft business.

INTEREST, NET. The company's interest income varies from period to period
based primarily on the average balance of cash and equivalents and marketable
securities. The average balance has fluctuated significantly during the last
three years as a result of transactions such as the sales of businesses, a
tender offer and special distributions. Interest expense has decreased during
the three year period ended December 31, 1994, due to the reduction in
outstanding debt.

16

<PAGE> 4

General Dynamics Corporation

OTHER INCOME, NET. In 1993, the company recognized a $37 gain from the
sale of Federal Express Corporation stock and recognized an additional $14 in
excess of scheduled amortization of the deferred gain on the sale of the

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company's information technology operations due to the disposal of other
operations. In 1992, the company recognized a gain of $21 also on the sale of
Federal Express Corporation stock. For further discussion of other income items,
see Note N to the Consolidated Financial Statements.

The company adopted Statement of Financial Accounting Standards No. 115,

"Accounting for Certain Investments in Debt and Equity Securities," (SFAS 115)
as of January 1, 1994. The company determined all of its investments currently
held in debt and equity securities are trading securities as defined by SFAS 115
and as such are reported at fair value. Unrealized holding gains and losses (the
adjustment to fair value) recognized in other income in 1994 were not
significant. Accordingly, the adoption of SFAS 115 did not have a significant
impact on the company's financial condition or results of operations.

PROVISION FOR 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
percent to 35 percent, retroactive to January 1, 1993. This rate change did not
have a significant impact on the company's financial condition or results of
operations.

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. For further discussion of these items, as well as a
discussion of the company's net deferred tax asset, see Note E to the Consoli-
dated 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. There were no earnings (loss) from
the operations of these businesses in 1994. Earnings improved in 1994 due
primarily to the absence of the loss recognized by the company's Space Launch
Systems business in 1993. No additional losses from operations are anticipated
prior to the disposal of the remaining discontinued operations. Earnings
decreased in 1993 due primarily to the absence of earnings from businesses which
were subsequently sold. For a discussion of unusual items impacting the
operating results of discontinued operations and the financial impact from the
disposal of discontinued operations, see Note B to the Consolidated Financial
Statements.

EARNINGS PER SHARE. On March 4, 1994, the company's board of directors

authorized a two-for-one stock split effected in the form of a 100 percent stock
dividend. Accordingly, earnings per share data has been restated to give
retroactive recognition to the stock split in prior periods.

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.

FINANCIAL CONDITION

The company's liquidity and financial condition continued to improve during 1994
as the balance of cash and equivalents and marketable securities increased from
$585 at December 31, 1993, to $1,059 at December 31, 1994. A discussion of the
company's financial condition in terms of its operating, investing and financing
activities as defined in the Consolidated Statement of Cash Flows follows.

OPERATING ACTIVITIES. The net cash provided by continuing operations as

reported on the Consolidated Statement of Cash Flows is summarized by type as
follows:

<TABLE>
<CAPTION>
Year Ended December 31
- - -------------------------------------------------------------------
1994 1993 1992
- - -------------------------------------------------------------------

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<S> <C> <C> <C>
Operations....................... $ 343 $ 344 $ 337
Allocated federal income
tax payments................. (89) (78) (108)
Purchase of marketable
securities, net.............. (136) (109) (125)
Other............................ (10) 24 (25)
- - -------------------------------------------------------------------
$ 108 $ 181 $ 79
===================================================================
</TABLE>

Operations represent the pre-tax cash flows generated by the company's

three business segments. The company has generated strong cash flows from
operations during the three years ended December 31, 1994. In prior years, 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. In 1994, cash flows from operations approximated operating
earnings and the company expects the same to be true in 1995.

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.

As previously discussed, the company adopted SFAS 115 in 1994. In

accordance with SFAS 115, the net change in marketable securities is included in
operating activities on the Consolidated Statement of Cash Flows.

Other cash flows include items which are not directly attributable to a
business segment such as interest received from investments in excess of
interest paid on debt. Other cash flows were negative in 1994 and 1992 due
primarily to the payment of previously deferred compensation.

For a discussion of environmental matters and other contingencies, see

Note O to the Consolidated Financial Statements. The company believes that the
amount it has recorded with respect to these matters is adequate, and any amount
by which the liability exceeds the recorded amount would not be deemed material
to the company's financial condition or results of operations.

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

17
<PAGE> 5

General Dynamics Corporation

as an allocable portion of the company's federal income tax payments which in

1993 included approximately $180 related to the gain on disposal of the
company's Tactical Military Aircraft business. In addition to lower taxes, net
cash provided by discontinued operations increased during 1994 due to the
improved operating cash flows of the discontinued businesses and a decrease in
payments for disposition related liabilities. The improvement in operating cash
flows for the discontinued businesses was due primarily to the receipt of
scheduled payments by the company's Commercial Aircraft Subcontracting business
in accordance with the terms of the termination agreement with McDonnell Douglas
Corporation (for further discussion, see Note B to the Consolidated Financial
Statements).

INVESTING ACTIVITIES. The company has received significant proceeds over

the last three years from the sale of discontinued operations (for a discussion
of individual transactions, see Note B to the Consolidated Financial
Statements).

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As previously discussed, the company received proceeds of $37 and $21 in
1993 and 1992, respectively, from the sale of its investment in Federal Express
Corporation stock.

The significant decline in defense spending has resulted in excess

capacity. Accordingly, the company reduced its level of capital spending at its
defense businesses and sought to sell idle or underutilized assets when
possible.

As part of the sale of discontinued operations, certain 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 carrying value of these properties decreased in 1994
due to incidental rental income associated with certain of these properties
being treated as a reduction in carrying value in accordance with generally
accepted accounting principles. 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.
Development work began on certain of these properties during 1994 which was the
primary reason for the overall increase in the company's capital expenditures.
Due to increasing activity on these development projects, the company expects
total capital expenditures to be approximately $40 in 1995.

FINANCING ACTIVITIES. In order to establish liquidity and financial

strength, the company redeemed the entire series of 7 7/8 percent Notes and 9
percent Debentures which had a combined face value of $350, and $61 of the 9.95
percent Debentures in 1992. In addition, the company redeemed the entire series
of 9 3/8 percent Notes which had a face value of $100 and the remaining $45 of
5 3/4 percent Debentures in 1993.

After meeting its operational and investment needs, the company purchased
$960 of its common stock in a tender offer in 1992 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 (for further discussion, see Note C to
the Consolidated Financial Statements).

In the first quarter of 1994, the company's board of directors declared

an increased regular quarterly dividend of $.35 per share, 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.

In 1994, 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. During 1994, the company repurchased approximately
530,000 shares of its stock on the open market for a total of $22.

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 1995 at which time the company
anticipates renewing or replacing it as deemed appropriate.

18
<PAGE> 6

General Dynamics Corporation

CONSOLIDATED STATEMENT OF EARNINGS

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<TABLE>
<CAPTION>

Year
Ended December 31
- - ----------------------------------------------------------------------------------------------
------------------------------
(Dollars in millions, except per share amounts) 1994
1993 1992

<S> <C>
<C> <C>
NET SALES.............................................................. $ 3,058 $
3,187 $ 3,225
OPERATING COSTS AND EXPENSES........................................... 2,737
2,878 2,970
- - ----------------------------------------------------------------------------------------------
------------------------------
OPERATING EARNINGS..................................................... 321
309 255
Interest, net.......................................................... 22
36 27
Other income, net...................................................... --
68 28
- - ----------------------------------------------------------------------------------------------
------------------------------
EARNINGS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES................ 343
413 310
Provision for income taxes............................................. 120
143 5
- - ----------------------------------------------------------------------------------------------
------------------------------
EARNINGS FROM CONTINUING OPERATIONS.................................... 223
270 305
DISCONTINUED OPERATIONS, NET OF INCOME TAXES:
Earnings (loss) from operations........................................ --
(30) 136
Gain on disposal....................................................... 15
645 374
- - ----------------------------------------------------------------------------------------------
------------------------------
15
615 510
- - ----------------------------------------------------------------------------------------------
------------------------------
NET EARNINGS........................................................... $ 238 $
885 $ 815
==================================================================================================
==========================
NET EARNINGS PER SHARE:
Continuing operations.................................................. $ 3.51 $
4.27 $ 4.03
Discontinued operations:
Earnings (loss) from operations.................................... --
(.47) 1.80
Gain on disposal .24
10.19 4.95
- - ----------------------------------------------------------------------------------------------
------------------------------
$ 3.75 $
13.99 $ 10.78
==================================================================================================
==========================
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral part
of this statement.

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<PAGE> 7

General Dynamics Corporation

CONSOLIDATED BALANCE SHEET

<TABLE>
<CAPTION>

December 31
- - ----------------------------------------------------------------------------------------------
--------------------------
(Dollars in millions) 1994
1993

Assets
<S> <C>
<C>
CURRENT ASSETS:
Cash and equivalents......................................................... $ 382
$ 94
Marketable securities........................................................ 677
491
- - ----------------------------------------------------------------------------------------------
--------------------------
1,059
585
Accounts receivable.......................................................... 104
62
Contracts in process......................................................... 351
442
Net assets of discontinued operations........................................ 44
303
Other current assets......................................................... 239
262
- - ----------------------------------------------------------------------------------------------
--------------------------
Total Current Assets......................................................... 1,797
1,654
- - ----------------------------------------------------------------------------------------------
--------------------------
NONCURRENT ASSETS:
Leases receivable - finance operations....................................... 220
236
Real estate held for development............................................. 128
142
Property, plant and equipment, net........................................... 264
302
Other assets................................................................. 264
301
- - ----------------------------------------------------------------------------------------------
--------------------------
Total Noncurrent Assets...................................................... 876
981
- - ----------------------------------------------------------------------------------------------
--------------------------
$ 2,673
$ 2,635
- - ----------------------------------------------------------------------------------------------
--------------------------

Liabilities and Shareholders' Equity

CURRENT LIABILITIES:

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Accounts payable............................................................. $ 134
$ 157
Other current liabilities.................................................... 492
618
- - ----------------------------------------------------------------------------------------------
--------------------------
Total Current Liabilities.................................................... 626
775
- - ----------------------------------------------------------------------------------------------
--------------------------
NONCURRENT LIABILITIES:
Long-term debt............................................................... 39
38
Long-term debt - finance operations.......................................... 157
163
Other liabilities............................................................ 535
482
Commitments and contingencies (See Note O)
- - ----------------------------------------------------------------------------------------------
--------------------------
Total Noncurrent Liabilities................................................. 731
683
- - ----------------------------------------------------------------------------------------------
--------------------------
SHAREHOLDERS' EQUITY:
Common stock, including surplus (shares issued 84,387,336)................... 87
92
Retained earnings............................................................ 1,860
1,709
Treasury stock (shares held 1994, 21,391,547; 1993, 21,823,824).............. (631)
(624)
- - ----------------------------------------------------------------------------------------------
--------------------------
Total Shareholders' Equity................................................... 1,316
1,177
- - ----------------------------------------------------------------------------------------------
--------------------------
$ 2,673
$ 2,635
==================================================================================================
======================
</TABLE>

The accompanying Notes to Consolidated Financial Statements are an integral part

of this statement.

20
<PAGE> 8

General Dynamics Corporation

CONSOLIDATED STATEMENT OF CASH FLOWS

<TABLE>
<CAPTION>
Year
Ended December 31
- - ----------------------------------------------------------------------------------------------
----------------------------------
(Dollars in millions) 1994

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1993 1992

<S> <C>
<C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings........................................................... $ 238
$ 885 $ 815
Adjustments to reconcile net earnings to net
cash provided by continuing operations -
Discontinued operations................................................ (15)
(615) (510)
Depreciation, depletion and amortization............................... 39
56 57
Decrease (Increase) in -
Marketable securities.............................................. (136)
(109) (125)
Accounts receivable................................................ (42)
6 42
Contracts in process............................................... 91
(10) 76
Leases receivable - finance operations 15
14 12
Other current assets............................................... 6
(8) (24)
Increase (Decrease) in -
Accounts payable and other current liabilities..................... (105)
(73) (98)
Current income taxes............................................... 27
60 6
Deferred income taxes.............................................. 4
5 (109)
Other, net............................................................. (14)
(30) (63)
- - ----------------------------------------------------------------------------------------------
----------------------------------
Net cash provided by continuing operations............................. 108
181 79
Net cash provided (used) by discontinued operations.................... 31
(438) 303
- - ----------------------------------------------------------------------------------------------
----------------------------------
Net Cash Provided (Used) by Operating Activities....................... 139
(257) 382
- - ----------------------------------------------------------------------------------------------
----------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of discontinued operations.......................... 259
1,534 1,039
Proceeds from sale of investments and other assets..................... 17
60 32
Capital expenditures................................................... (23)
(14) (21)
- - ----------------------------------------------------------------------------------------------
----------------------------------
Net Cash Provided by Investing Activities.............................. 253
1,580 1,050
- - ----------------------------------------------------------------------------------------------
----------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of debt...................................................... (2)
(146) (454)
Repayment of debt - finance operations................................. (14)
(15) (14)
Dividends paid......................................................... (84)
(56) (55)
Special distributions to shareholders.................................. --
(1,531) --
Purchase of common stock............................................... (22)
-- (960)

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Proceeds from option exercises......................................... 14
8 57
Other.................................................................. 4
-- --
- - ----------------------------------------------------------------------------------------------
----------------------------------
Net Cash Used by Financing Activities.................................. (104)
(1,740) (1,426)
- - ----------------------------------------------------------------------------------------------
----------------------------------
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS........................ 288
(417) 6
CASH AND EQUIVALENTS AT BEGINNING OF YEAR.............................. 94
511 505
- - ----------------------------------------------------------------------------------------------
----------------------------------
CASH AND EQUIVALENTS AT END OF YEAR.................................... $ 382
$ 94 $ 511
==================================================================================================
==============================
</TABLE>

The accompanying Notes to Consolidated Financial Statements are an integral part

of this statement.

21
<PAGE> 9

General Dynamics Corporation

CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>

(Dollars in millions, except per share amounts) Common Stock

Retained Treasury Stock
----------------------------------
-----------------------
Shares Par Surplus
Earnings Shares Amount
---------------------------------------------
---------------------------------

<S> <C> <C> <C> <C>

<C> <C>
BALANCE, DECEMBER 31, 1991...................... 110,884,200 $ 111 $ -- $
2,620 27,057,036 $ 751
- - ----------------------------------------------------------------------------------------------
-------------------------------------
Net earnings....................................
815
Cash dividends declared ($.80 per share)........
(57)
Shares purchased and retired.................... (26,496,864) (27)
(933)
Shares issued under Incentive
Compensation Plan...........................
(13) (4,511,906) (109)

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- - ----------------------------------------------------------------------------------------------
-------------------------------------
BALANCE, DECEMBER 31, 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...........
(1,546)
Shares issued under Incentive
Compensation Plan........................... 8
(721,306) (18)
- - ----------------------------------------------------------------------------------------------
-------------------------------------
BALANCE, DECEMBER 31, 1993...................... 84,387,336 84 8
1,709 21,823,824 624
- - ----------------------------------------------------------------------------------------------
-------------------------------------
Net earnings....................................
238
Cash dividends declared ($1.40 per share).......
(87)
Shares purchased................................
529,600 22
Shares issued under Incentive
Compensation Plan........................... (5)
(961,877) (15)
- - ----------------------------------------------------------------------------------------------
-------------------------------------
BALANCE, DECEMBER 31, 1994...................... 84,387,336 $ 84 $ 3 $
1,860 21,391,547 $ 631
==================================================================================================
=================================
</TABLE>

The accompanying Notes to Consolidated Financial Statements are an integral part

of this statement.

22
<PAGE> 10
General Dynamics Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(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.

ACCOUNTING ESTIMATES. The preparation of financial statements in

conformity with generally accepted accounting principles (GAAP) requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and

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expenses during the reporting period.

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, including general and administrative expenses and
research and development costs, as incurred for the determination of sales and
operating earnings. 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 $234, $292 and $233 in 1994, 1993 and 1992, 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 $30, $33 and
$32 in 1994, 1993 and 1992, respectively, and are included in operating costs
and expenses on the Consolidated Statement of Earnings.

INTEREST, NET. Interest income was $27, $40 and $34 in 1994, 1993 and
1992, respectively. Interest expense of $6 and $22 has been allocated to
discontinued businesses in 1993 and 1992, respectively, on the ratio of net
assets of discontinued operations to consolidated net assets. Interest expense
incurred by the company's finance operations totaled $13, $15 and $16, in 1994,
1993 and 1992, respectively, and is classified as operating costs and expenses.
Interest payments for the total company were $16, $28 and $58 in 1994, 1993 and
1992, 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 63.4, 63.3 and 75.6
million in 1994, 1993 and 1992, 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 AND MARKETABLE SECURITIES. The company considers

securities with a remaining maturity of three months or less when purchased to
be cash equivalents. Marketable securities consist primarily of tax-exempt
municipal bonds, investment grade commercial paper, direct obligations of the
U.S. government and its agencies, preferred stock, and other short-term
investment funds. The company adopted Statement of Financial Accounting
Standards (SFAS) No. 115, "Accounting for Certain Investments in Debt and Equity
Securities," as of January 1, 1994. The company determined all of its
investments currently held in debt and equity securities are trading securities
as defined by SFAS 115 and as such are reported at fair value. Prior to adoption
of SFAS 115, cash and equivalents and marketable securities were stated at cost.
Unrealized holding gains and losses (the adjustment to fair value) recognized in
earnings during 1994 were not significant. Accordingly, the adoption of SFAS 115
did not have a significant impact on the company's financial condition or
results of operations.

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.

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Contracts in process are stated at cost, plus estimated earnings, less
progress payments. Cost includes amounts incurred, as well as amounts required
to be recorded under GAAP which have been deferred. Incurred costs include
production costs and related overhead, including general and administrative
expenses. Deferred costs represent the portion of the company's estimated
workers' compensation and retiree medical costs which is not allocable to
contracts until incurred.

REAL ESTATE HELD FOR DEVELOPMENT. As a result of the sale of businesses

discussed in Note B, certain properties were retained by the company. These
properties are carried at the lower of cost or net realizable value.

23
<PAGE> 11
General Dynamics Corporation

PROPERTY, PLANT AND EQUIPMENT. Property, plant and equipment is carried

at cost net of accumulated depreciation. The company primarily uses accelerated
methods of depreciation for depreciable assets. Depletion of coal properties is
computed using the units-of-production method.

ENVIRONMENTAL LIABILITIES. The company accrues environmental costs when

it is probable that a liability has been incurred and the amount can be
reasonably estimated. Cleanup and other environmental exit costs related to
discontinued operations are recorded at the time of disposal of the operation.
Recorded liabilities have not been discounted. To the extent the U.S. government
has specifically agreed to pay the ongoing maintenance and monitoring costs at
sites currently used in the conduct of the company's government contracting
business, these costs are treated as contract costs and recognized as incurred.

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.

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.

MISSILE SYSTEMS. 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
September 30, 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.

ELECTRONICS. 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

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on disposal of $9, or $.12 per share, net of income taxes of $5.

TACTICAL MILITARY AIRCRAFT. 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.

MATERIAL SERVICE. During the first quarter of 1994, the company closed
the sales of the lime, brick and a portion of the concrete pipe operations of
its Material Service business for a total of $50 in cash. No gains or losses
were recognized on the sales. The company intends to sell the remaining product
lines of the Material Service business.

SPACE LAUNCH SYSTEMS. On May 1, 1994, the company closed the sale of its
Space Launch Systems business to Martin Marietta Corporation for $209 in cash.
The company recognized a gain on disposal of $15, or $.24 per share, net of
income taxes of $8.

COMMERCIAL AIRCRAFT SUBCONTRACTING. On July 1, 1994, the company and

McDonnell Douglas Corporation (McDonnell Douglas) announced an agreement to
terminate their contract for the company's production of fuselage sections for
the MD-11 jetliner. Under the agreement, the responsibility for production of
fuselages will be transferred from the company's Commercial Aircraft
Subcontracting business to McDonnell Douglas with the delivery of the 166th
shipset in early 1996. Also as part of the agreement, all previous unnegotiated
contract changes were settled. The company's Commercial Aircraft Subcontracting
business will seek no new business and will cease operations after the
completion of its obligations under this agreement.

EARNINGS FROM OPERATIONS. The operating results of discontinued

operations are:

<TABLE>
<CAPTION>

Year Ended December 31

- - -------------------------------------------------------------------
1994 1993 1992
- - -------------------------------------------------------------------
<S> <C> <C> <C>
Net sales........................ $ 644 $ 1,474 $ 5,460
===================================================================
Earnings (loss) before
income taxes................. $ -- $ (44) $ 201
Provision (credit) for
income taxes................. -- (14) 65
- - -------------------------------------------------------------------
Net earnings (loss).............. $ -- $ (30) $ 136
- - -------------------------------------------------------------------
Net earnings (loss) per share.... $ -- $ (.47) $ 1.80
===================================================================
</TABLE>

The 1993 and 1992 results reflect charges of $25 ($16 after tax, or $.25
per share) and $33 ($22 after tax, or $.29 per share), respectively, related to
Space Launch Systems' Commercial Atlas Expendable Launch Vehicle program. These
charges were the direct result of launch failures in each of those periods.

The 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

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reported in earnings from discontinued operations.

24
<PAGE> 12
General Dynamics Corporation

NET ASSETS OF DISCONTINUED OPERATIONS. The assets and liabilities of

discontinued operations are:

<TABLE>
<CAPTION>

December 31
- - -------------------------------------------------------------------
1994 1993
- - -------------------------------------------------------------------
<S> <C> <C>
Current assets........................... $ 52 $ 1,429
Noncurrent assets........................ 124 185
- - -------------------------------------------------------------------
Total Assets............................. $ 176 $ 1,614
===================================================================
Current liabilities...................... $ 79 $ 1,280
Noncurrent liabilities................... 53 31
- - -------------------------------------------------------------------
Total Liabilities........................ $ 132 $ 1,311
- - -------------------------------------------------------------------
Net Assets............................... $ 44 $ 303
===================================================================
</TABLE>

C. SPECIAL DISTRIBUTIONS TO SHAREHOLDERS

On May 6, 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 December 31, 1993. The company made the following
special distributions in 1993:

<TABLE>
<CAPTION>

Charged to Retained Earnings

- - -------------------------------------------------------------------
Date Declared Paid Deferred Total
- - -------------------------------------------------------------------
<S> <C> <C> <C>
March 18...................... $ 612 $ 10 $ 622
June 2........................ 551 8 559
September 15.................. 368 5 373
- - -------------------------------------------------------------------
$ 1,531 $ 23 $ 1,554
===================================================================
</TABLE>

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

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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

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 included 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

The provision (credit) for federal income taxes for continuing operations is
summarized as follows:

<TABLE>
<CAPTION>
Year Ended December 31
- - -------------------------------------------------------------------
1994 1993 1992
- - -------------------------------------------------------------------
<S> <C> <C> <C>
Current........................ $ 116 $ 138 $ 114
Deferred....................... 4 5 (109)
- - -------------------------------------------------------------------
$ 120 $ 143 $ 5
===================================================================
</TABLE>

The reconciliation from the statutory federal income tax rate to the
company's effective income tax rate is as follows:

<TABLE>
<CAPTION>
Year Ended December 31
- - ----------------------------------------------------------------
1994 1993 1992
- - ----------------------------------------------------------------
<S> <C> <C> <C>
Statutory income tax rate......... 35.0% 35.0% 34.0%
Research and experimentation
and investment tax credits.... -- -- (30.6)
Other............................. -- (.4) (1.8)
- - ----------------------------------------------------------------
Effective income tax rate......... 35.0% 34.6% 1.6%
================================================================
</TABLE>

In 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. Claims in
excess of the research and experimentation credits recognized have been
disallowed by the Internal Revenue Service (IRS). The company is contesting this
disallowance in the U.S. Tax Court. No further benefits will be recognized until
the resolution of the Tax Court litigation.

25
<PAGE> 13

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General Dynamics Corporation

The tax effects of temporary differences that give rise to significant

portions of deferred tax assets and liabilities consist of the following:

<TABLE>
<CAPTION>
December 31
- - -------------------------------------------------------------------
1994 1993
- - -------------------------------------------------------------------
<S> <C> <C>
Long-term contract costing methods........... $ 120 $ 143
Accrued costs on disposed businesses......... 107 84
A-12 termination............................. 90 71
Restructuring costs.......................... 28 40
Coal mining liabilities...................... 27 28
Other........................................ 89 109
- - -------------------------------------------------------------------
Deferred Assets.............................. $ 461 $ 475
===================================================================
Lease income................................. $ 79 $ 86
Other........................................ 66 69
- - -------------------------------------------------------------------
Deferred Liabilities......................... $ 145 $ 155
===================================================================
Net Deferred Asset........................... $ 316 $ 320
===================================================================
</TABLE>

No valuation allowance was required for the company's deferred tax assets
at December 31, 1994 and 1993. The current portion of the net deferred tax asset
is $185 and $214 at December 31, 1994 and 1993, 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 $107, $316 and $258 in
1994, 1993 and 1992, respectively.

The IRS has completed its examination of the company's consolidated tax
returns for the years 1977 through 1989. Certain issues related to the years
1977 through 1986 are in litigation (for further discussion see Note O). Other
issues related to the years 1987 through 1989 have been protested to the IRS
Appeals Division. In addition, the IRS is currently examining the company's
consolidated tax returns for the years 1990 through 1993. As the company has
recorded liabilities for tax contingencies, resolution of these matters is 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:

<TABLE>
<CAPTION>

December 31
- - -------------------------------------------------------------------
1994 1993
- - -------------------------------------------------------------------
<S> <C> <C>
Incurred costs and estimated profits........ $ 4,072 $ 4,307
Other costs................................. 160 146

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- - -------------------------------------------------------------------
4,232 4,453
Less advances and progress payments......... 3,881 4,011
- - -------------------------------------------------------------------
$ 351 $ 442
===================================================================
</TABLE>

At December 31, 1994 and 1993, contracts in process include $129 and
$110, respectively, of deferred costs. Substantially all other amounts included
in contracts in process represent an unbilled receivable. General and
administrative costs included in contracts in process amounted to $18 and $28 at
December 31, 1994 and 1993, 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:

<TABLE>
<CAPTION>

December 31
- - -------------------------------------------------------------------
1994 1993
- - -------------------------------------------------------------------
<S> <C> <C>
Land and improvements...................... $ 72 $ 79
Coal reserves.............................. 52 53
Buildings and improvements................. 152 156
Machinery and equipment.................... 797 870
- - -------------------------------------------------------------------
1,073 1,158

Less accumulated depreciation,

depletion and amortization............. 809 856
- - -------------------------------------------------------------------
$ 264 $ 302
===================================================================
</TABLE>

Certain plant facilities are provided by the U.S. government.

H. OTHER CURRENT LIABILITIES

Other current liabilities consist of the following:

<TABLE>
<CAPTION>

December 31
- - -------------------------------------------------------------------
1994 1993
- - -------------------------------------------------------------------
<S> <C> <C>
Workers' compensation........................ $ 162 $ 174
A-12 termination liability and legal fees.... 61 57
Salaries and wages........................... 56 71
Retiree medical.............................. 50 26
Accrued costs on SINCGARS.................... 14 48
Income taxes payable......................... -- 35
Other....................................... 149 207
- - -------------------------------------------------------------------
$ 492 $ 618
===================================================================
</TABLE>

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<PAGE> 14
General Dynamics Corporation

I. LONG-TERM DEBT

Long-term debt consists of the following:

<TABLE>
<CAPTION>
December 31
- - -------------------------------------------------------------------
1994 1993
- - -------------------------------------------------------------------
<S> <C> <C>
9.95% Debentures due 2018.................. $ 39 $ 39
Other...................................... 2 --
- - -------------------------------------------------------------------
41 39
Less:
Unamortized discount....................... 1 1
Current portion............................ 1 --
- - -------------------------------------------------------------------
$ 39 $ 38
===================================================================
</TABLE>

Annual sinking fund payments, sufficient to retire 5 percent of the $100

aggregate principal amount of the 9.95 percent Debentures originally issued,
will commence in 2011. 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 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 1994 and 1993.

J. OTHER LIABILITIES

Other liabilities consist of the following:

<TABLE>
<CAPTION>

December 31
- - -------------------------------------------------------------------
1994 1993
- - -------------------------------------------------------------------
<S> <C> <C>
Accrued costs on disposed businesses......... $ 306 $ 239
Coal mining related liabilities.............. 73 74
Other........................................ 156 169
- - -------------------------------------------------------------------
$ 535 $ 482
===================================================================
</TABLE>

The company has recorded liabilities for contingencies retained by the

company related to disposed businesses. These liabilities include retiree

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medical, 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, including workers' compensation and reclamation. 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 known claims
and an actuarially-determined estimate of future claims that will be awarded to
current and former employees is discounted based on a rate of 7.25 percent and 6
percent at December 31, 1994 and 1993, respectively. Liabilities to reclaim land
disturbed by the mining process and to perform other closing functions are
recorded over the production lives of the mines.

K. SHAREHOLDERS' EQUITY

STOCK SPLIT. On March 4, 1994, the company's board of directors authorized a

two-for-one stock split effected in the form of a 100 percent stock dividend
distributed on April 11, 1994, to shareholders of record on March 21, 1994.
Shareholders' equity has been restated to give retroactive recognition to the
stock split in prior periods 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 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:

<TABLE>
<CAPTION>

BALANCE SHEET DATA

December 31
- - -------------------------------------------------------------------
1994 1993
- - -------------------------------------------------------------------
<S> <C> <C>
ASSETS
Leases receivable....................... $ 236 $ 251
Due from parent......................... 83 92
- - -------------------------------------------------------------------
$ 319 $ 343
===================================================================
LIABILITIES AND SHAREHOLDER'S EQUITY
Debt.................................... $ 161 $ 175

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Income taxes............................ 79 86
Shareholder's equity.................... 79 82
- - -------------------------------------------------------------------
$ 319 $ 343
===================================================================
</TABLE>

27
<PAGE> 15

General Dynamics Corporation

<TABLE>
<CAPTION>

EARNINGS DATA

Year Ended December 31

- - -------------------------------------------------------------------
1994 1993 1992
- - -------------------------------------------------------------------
<S> <C> <C> <C>
Interest income...................... $ 16 $ 17 $ 18
Interest expense and income taxes.... 14 16 17
- - -------------------------------------------------------------------
Net earnings......................... $ 2 $ 1 $ 1
===================================================================
</TABLE>

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:

<TABLE>
<CAPTION>

December 31
- - -------------------------------------------------------------------
1994 1993
- - -------------------------------------------------------------------
<S> <C> <C>
Aggregate future minimum
lease payments......................... $ 288 $ 319
Unguaranteed residual value................ 38 38
Less unearned interest income.............. 90 106
- - -------------------------------------------------------------------
$ 236 $ 251
===================================================================
</TABLE>

Semiannual sinking fund payments, sufficient to retire 100 percent 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 percent to 9
percent, with a weighted average rate of 8.1 percent. The schedule of principal
payments for the next five years is $4 in 1995, $14 in 1996, $14 in 1997, $16 in
1998 and $20 in 1999.

M. FAIR VALUE OF FINANCIAL INSTRUMENTS

The estimated fair values of the company's financial instruments are as follows:

<TABLE>
<CAPTION>

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December 31
- - ----------------------------------------------------------------------
1994 1993
- - ----------------------------------------------------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
- - ----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cash and equivalents and
marketable securities. $1,059 $1,059 $585 $585
Other investments......... -- -- 50 50
Long-term debt............ 40 42 38 45
Long-term debt-finance
operations............ 161 163 175 181
======================================================================
</TABLE>

Fair value is based on quoted market prices, except for long-term

debt-finance operations where fair value is based on a risk-adjusted discount
rate. The company was contingently liable for debt and lease guarantees and
other arrangements aggregating up to a maximum of approximately $105 and $160 at
December 31, 1994 and 1993, respectively. The company knows of no event of
default which would require it to satisfy these guarantees and, therefore, the
fair value of these contingent liabilities is considered immaterial.

N. OTHER INCOME, NET

Other income, net consists of the following:

<TABLE>
<CAPTION>

Year Ended December 31

- - -------------------------------------------------------------------
1994 1993 1992
- - -------------------------------------------------------------------
<S> <C> <C> <C>
Gain on sale of Federal
Express Corporation stock..... $ -- $ 37 $ 21
Amortization of gain on
sale of DSD................... 7 26 16
Other, net........................ (7) 5 (9)
- - -------------------------------------------------------------------
.................................. $ -- $ 68 $ 28
===================================================================
</TABLE>

During 1992 and 1993, the company redeemed its 5 3/4 percent Debentures
which were exchangeable for shares of Federal Express Corporation common stock
owned by the company and having no book value. As a result, the company sold
these shares 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.

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 (DSD). 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
had 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 was recognized on a
straight-line basis through the end of 1994, which was consistent with the
original amortization period.

O. COMMITMENTS AND CONTINGENCIES

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LITIGATION. On January 7, 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 company and McDonnell Douglas are
actively pursuing litigation against the U.S. government in the U.S. Court of
Federal Claims in connection with the termination (See Note P).

28
<PAGE> 16
General Dynamics Corporation

On March 8, 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 the federal securities laws, fraud, negligent
misrepresentation, and breach of fiduciary duty by the defendants with regard to
disclosures made, or omitted with regard to the subsequent divestiture of core
businesses, which disclosures were contained in the company's tender offer
completed in July 1992. The company intends to defend itself vigorously in
connection with this matter, and expects that resolution of this matter will not
have a material impact on the company's financial condition or results of
operations.

As previously reported, 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, in July 1994,
the company received a Statutory Notice of Deficiency from the IRS which the
company is contesting in the U.S. Tax Court. The company has accrued an amount
which is expected to be adequate to cover any liability arising from this
matter. Also, as part of the Tax Court litigation, the company is contesting the
disallowance by the IRS of a portion of its claims for research and
experimentation tax credits (for further discussion see Note E). The resolution
of the Tax Court litigation is expected to take several years.

The company is also a defendant in other lawsuits and claims and in other
investigations of varying nature. The company believes its liabilities in these
proceedings, in the aggregate, are not material to the company's financial
condition or results of operations.

ENVIRONMENTAL. The company is directly or indirectly involved in fifteen

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 or a state environmental agency with respect to
past shipments of hazardous waste to sites now requiring environmental cleanup.
Based on a site by site analysis of the estimated quantity of waste contributed
by the company relative to the estimated total quantity of waste, the company
believes it is a small contributor and its liability at any individual site is
not material. The company is also involved in the cleanup and remediation of
various conditions at sites it currently or formerly owned or operated.

The company measures its environmental exposure based on currently

available facts, existing technologies, and presently enacted laws and
regulations. Where a reasonable basis for apportionment exists with other PRPs,
the company has considered only its share of the liability. The company
considers the solvency of other PRPs, whether responsibility is being disputed,
and its experience in similar matters in determining its share. Based on a site
by site analysis, the company has recorded an amount which it believes will be
adequate to cover any liability arising from the sites.

OTHER. In the ordinary course of business, the company has entered into
letter of credit agreements and other arrangements with financial institutions

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aggregating approximately $120 at December 31, 1994. For a discussion of other
financial guarantees, see Note M. The company's rental commitments under
existing leases at December 31, 1994, are not significant.

In connection with the sale of its defense businesses, the company

remains contingently liable for contract performance by the purchasers of these
businesses under agreements 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 in the
aggregate 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 in Note O, the U.S. Navy terminated the company's 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 U.S. Navy's new
carrier-based Advanced Tactical Aircraft. Both the company and McDonnell Douglas
(the contractors) were parties to the contract with the U.S.Navy, each had full
responsibility to the U.S. 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 U.S. Navy
demanded that the contractors repay $1,352 in unliquidated progress payments,
but agreed to defer collection of the amount pending a decision by the U.S.
Court of Federal Claims on the contractors' appeal of the termination for
default, or a negotiated settlement.

The contractors filed a complaint on June 7, 1991, in the U.S. Court of

Federal Claims contesting the default termination. The suit, in effect, seeks to
convert the termination for default to a termination for convenience of the U.S.
government and seeks other legal and equitable relief. In the aggregate, the
contractors seek to recover payment for all costs incurred in the A-12 program
and its termination, including interest. The total amount sought, as updated
through the end of 1994, is approximately $2 billion, over and above amounts
previously received from the U.S. Navy. The company has not recognized any claim
revenue from the U.S. Navy.

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 1994,
the court issued an order vacating the termination for default, finding that the
A-12 contract was not terminated for contractor default, but because the Office
of the Secretary of Defense withdrew support and funding from the A-12. Besides
Count XVII, six other counts have been tried or are the subject of pending
motions for summary judgment. All remaining counts are set for trial in November
1995, including the amount owed by the parties as a result of the termination.

The company has fully reserved the contracts in process balance

associated with the A-12 program and has accrued the company's estimated
termination liabilities, and the liability associated with pursuing the
litigation through trial. In the unlikely event the contractors are ultimately
found to be in default of the A-12 contract and are required to repay all
unliquidated progress payments, additional losses of approximately $675 (before
tax), plus interest, may be recognized by the company. This result is considered
remote.

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<PAGE> 17
General Dynamics Corporation

Q. INCENTIVE COMPENSATION PLAN

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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 1993, the company introduced a new long-term incentive program which granted
Performance Restricted Stock and Performance Stock Options. The terms of the
grants generally provide for the quantity of restricted stock and the
exercisability of the stock options to be tied to the performance of the
company's stock price over a two year period.

There were 15,590 shares of restricted stock awarded in 1994, and 784,296
shares outstanding at year end. Information with respect to stock options is as
follows:

<TABLE>
<CAPTION>

1994 1993 1992

- - ----------------------------------------------------------------------
<S> <C> <C> <C>
NUMBER OF SHARES UNDER
STOCK OPTIONS:
Outstanding at beginning
of year................ 3,610,428 2,937,704 7,575,152
Granted................ 135,810 1,394,190 233,190
Exercised.............. (1,705,172) (493,308) (4,399,730)
Canceled............... (220,179) (228,158) (470,908)
- - ----------------------------------------------------------------------
Outstanding at end of year. 1,820,887 3,610,428 2,937,704
======================================================================
STOCK OPTIONS EXERCISABLE
AT END OF YEAR......... 509,866 205,518 324,438
======================================================================
PRICE OF STOCK OPTIONS:
Granted................ $39.81-46.84 $46.66-50.07 $28.32-39.75
Exercised.............. $ 7.21-23.56 $ 7.21-39.16 $11.91-39.16
Canceled............... $18.06-47.00 $ 7.58-38.19 $12.16-39.16
Outstanding............ $ 7.21-47.00 $ 7.21-47.00 $12.16-39.75
======================================================================
</TABLE>

At December 31, 1994, 1,999,717 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.

Federal income tax benefits of $21, $7 and $54 were credited to

shareholders' equity during 1994, 1993 and 1992, respectively, 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 primarily 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:

<TABLE>
<CAPTION>

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Year Ended December 31

- - -------------------------------------------------------------------
1994 1993 1992
- - -------------------------------------------------------------------
<S> <C> <C> <C>
Service cost-benefits earned
during period.................. $ 65 $ 70 $ 124
Interest cost on projected
benefit obligation............. 146 164 263
Actual loss (gain) on plan assets 152 (350) (246)
Net amortization and deferral.... (334) 129 (92)
- - -------------------------------------------------------------------
$ 29 $ 13 $ 49
===================================================================
</TABLE>

The following table sets forth the plans' funded status:

<TABLE>
<CAPTION>

December 31
- - --------------------------------------------------------------------
1994 1993
- - --------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of
benefit obligations:
Vested benefit obligation.............. $ (1,780) $ (1,891)
====================================================================
Accumulated benefit obligation......... $ (1,814) $ (1,933)
====================================================================
Projected benefit obligation........... $ (1,946) $ (2,138)
Plans' assets at fair value................ 2,429 2,674
- - --------------------------------------------------------------------
Plans' assets in excess of projected
benefit obligation..................... 483 536
Unrecognized net gain...................... (196) (284)
Unrecognized prior service cost............ 315 362
Unrecognized net asset at
January 1, 1986........................ (56) (65)
- - --------------------------------------------------------------------
Prepaid pension cost....................... $ 546 $ 549
====================================================================
</TABLE>

Assumptions used in accounting for the plans are as follows:

<TABLE>
<CAPTION>

December 31
- - ------------------------------------------------------------------
1994 1993 1992
- - ------------------------------------------------------------------
<S> <C> <C> <C>
Discount rate................... 8% 7% 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%
==================================================================
</TABLE>

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 recovery in long-term interest rates, the company increased

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its discount rate assumption from 7 percent to 8 percent at December 31, 1994,
which decreased the projected benefit obligation approximately $270. The sale of
the company's Tactical Military Aircraft business was the primary reason for the
overall decrease in net periodic pension cost in 1993.

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<PAGE> 18
General Dynamics Corporation

Changes 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.

In the first quarter of 1992, the company recognized a $40 (before tax)
pension settlement and curtailment gain as part of the gain on disposal of
Cessna. Later in 1992, the company began deferring gains realized by the
commercial plan for the purpose of offsetting any costs associated with its
final disposition, either through reversion or other actions. These deferred
gains have been classified against the prepaid pension cost related to the
commercial plan resulting in a net asset of $115 at December 31, 1994 and 1993,
which is included in other noncurrent assets on the Consolidated Balance Sheet.

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 December 31, 1994, approximately 67 percent of the plans' assets are

invested in securities of the U.S. government or its agencies, 14 percent in
mortgage-backed securities and 19 percent 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 $30, $43 and
$84 in 1994, 1993 and 1992, respectively. Approximately 6 million shares of the
company's common stock were held by the plans at both December 31, 1994 and
1993.

OTHER POSTRETIREMENT BENEFITS. Historically, health care and life

insurance benefits have generally been provided to retired employees. During
1993, the company announced a number of changes to the retiree medical programs
for its non-union retirees and employees. Commencing July 1, 1993, the company
discontinued its post-65, self-insured retiree medical program and continued its
pre-65 retiree medical program only for those employees who as of that date were
either a retiree age 55 and older, or an employee who had attained the age of 50
with a certain number of years of service. This change in coverage has
subsequently been negotiated with certain union groups. The coverage provided
and the extent to which retirees share in the cost of the benefits vary.

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Effective January 1, 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 in 1992. 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 Accounting Principles Board Opinion No. 30.

The net periodic postretirement benefit cost for the total company
included the following:

<TABLE>
<CAPTION>
Year Ended December 31
- - -------------------------------------------------------------------
1994 1993
- - -------------------------------------------------------------------
<S> <C> <C>
Service cost - benefits earned during period... $ 12 $ 13
Interest cost on projected benefit obligation.. 51 41
Actual loss (gain) on plan assets.............. 1 (6)
Amortization of unrecognized
transition obligation...................... 44 40
Net amortization and deferral.................. (7) 1
- - -------------------------------------------------------------------
............................................... $ 101 $ 89
===================================================================
</TABLE>

The following table sets forth the plans' funded status:

<TABLE>
<CAPTION>
December 31
- - -------------------------------------------------------------------
1994 1993
- - -------------------------------------------------------------------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees................................... $ 405 $ 368
Other fully eligible participants.......... 73 139
Other active participants.................. 195 285
- - -------------------------------------------------------------------
673 792
Less plans' assets at fair value............... 134 113
- - -------------------------------------------------------------------
Obligation in excess of plans' assets.......... 539 679
Unrecognized transition obligation............. (428) (521)
Unrecognized net loss.......................... (2) (87)
- - -------------------------------------------------------------------
Accrued post retirement benefit obligation..... $ 109 $ 71
===================================================================
</TABLE>

31
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General Dynamics Corporation

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Assumptions used in accounting for the plans are as follows:

<TABLE>
<CAPTION>
December 31
- - ------------------------------------------------------------------
1994 1993
- - ------------------------------------------------------------------
<S> <C> <C>
Discount rate............................... 8% 7%
Expected long-term rate of return on
assets............................... 8% 8%
Assumed health care cost trend rate for
next year:
Post-65 claim groups.................... 8% 9%
Pre-65 claim groups..................... 10.5-14% 11.5-15%
==================================================================
</TABLE>

As stated above, the company increased its discount rate assumption from
7 percent to 8 percent at December 31, 1994, which decreased the accumulated
postretirement benefit obligation approximately $70. The obligation also
decreased in 1994 due to a change in coverage in the represented employees of
the company's coal mining operations.

The health care cost trend rates are assumed to gradually decline to 4.5
percent and 5 percent 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 $65 in the accumulated
postretirement benefit obligation at December 31, 1994, and an increase of $8 in
the aggregate of the service and interest cost components of the 1994 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
December 31, 1994, approximately 35 percent of the trust's assets were invested
in diversified common stocks and 65 percent in securities of the U.S. government
and its agencies and other 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 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
$25 at December 31, 1994. 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 in
accordance with GAAP.

S. BUSINESS SEGMENT INFORMATION

The company's primary business is supplying weapons systems to the U.S.

government. For a discussion of the company's business segments, including their
current business environment, operating results and related uncertainties, see
Management's Discussion and Analysis of the Results of Operations and Financial
Condition.

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T. QUARTERLY DATA (Unaudited)

<TABLE>
<CAPTION>

Common Stock
-----------------
---------------------------------
Market Price
Range (a)
Net Operating Net Net Earnings ----------------
Special
Sales Earnings Earnings Per Share (d) High Low
Dividends Distributions
- - ----------------------------------------------------------------------------------------------
-------------------------------------
<S> <C> <C> <C> <C> <C> <C>
<C> <C>
1994
4th Quarter......... $ 724 $ 82 $ 58 $ .92 $45 1/8 $38
1/4 $.35 --
3rd Quarter......... 714 77 54 .85 46 5/8 38
.35 --
2nd Quarter (b)..... 820 82 71 1.12 45 39
.35 --
1st Quarter......... 800 80 55 .86 47 5/8 41
3/16 .35 --
==================================================================================================
=================================
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 (c)..... 858 90 687 10.90 60 47
11/16 .20 10
==================================================================================================
=================================
</TABLE>

Note: Quarterly data is based on a 13 week period.

(a) 1993 market prices reflect the impact of the company's special
distributions to shareholders.

(b) Includes gain from the sale of the Space Launch Systems business which
increased net earnings and net earnings per share by $15 and $.24,
respectively. See Note B.

(c) 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.

(d) Earnings per share for the four quarters, when totalled, may not equal
the earnings per share for the year due to the impact of common stock
equivalents as described in Note A.

32

<PAGE> 20

General Dynamics Corporation

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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 by management. An important element of the monitoring process is an
internal audit program that independently assesses the effectiveness of the
control environment.

The Audit and Corporate Responsibility 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
internal audit to review the activities of each.

The financial statements have been audited by Arthur Andersen LLP,

independent public accountants, whose report follows.

/s/ MICHAEL J. MANCUSO /s/ JOHN W. SCHWARTZ

------------------------ ----------------------
Michael J. Mancuso John W. Schwartz
Vice President and Corporate Controller
Chief Financial Officer

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 December
31, 1994 and 1993, and the related Consolidated Statements of Earnings,
Shareholders' Equity and Cash Flows for each of the three years in the period
ended December 31, 1994. These financial statements are the responsibility of
the company's management. Our responsibility is to express an opinion on these
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 December 31, 1994 and 1993, and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 1994, in conformity with generally accepted accounting
principles.

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As discussed in Note R to the Consolidated Financial Statements,
effective January 1, 1993, the company changed its method of accounting for
postretirement benefits other than pensions.

/s/ ARTHUR ANDERSEN LLP

-----------------------
ARTHUR ANDERSEN LLP

Washington, D.C.,
January 24, 1995

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<PAGE> 21
General Dynamics Corporation

SELECTED FINANCIAL DATA

(Unaudited)

<TABLE>
<CAPTION>

1994 1993 1992 1991

1990
-------------------------------------------------------------------------------------------------
---------------------
(Dollars in millions, except per share and per employee amounts)
<S> <C> <C> <C> <C>
<C>
Summary of Operations

Net sales....................................... $ 3,058 $ 3,187 $ 3,225 $

3,161 $ 3,051
Operating costs and expenses.................... 2,737 2,878 2,970
2,950 2,982
Interest, net................................... 22 36 27
10 (11)
Provision (credit) for income taxes............. 120 143 5(a)
(82)(b) (2)
Earnings (loss) from continuing operations...... 223 270 305(a)
274 (b) (1)
Earnings (loss) per share from..................
continuing operations....................... 3.51 4.27 4.03(a)
3.20 (b) (.01)
Cash dividends on common stock.................. 1.40 1.00 .80
.50 .50
Sales per employee.............................. 143,900 138,100 121,500
102,800 80,800
- - ----------------------------------------------------------------------------------------------
-------------------------
Financial Position at December 31

Cash and equivalents and marketable securities.. $ 1,059 $ 585 $ 943 $

812 $ 98
Property, plant and equipment, net.............. 264 302 339
380 654
Total assets.................................... 2,673 2,635 3,530
4,177 3,883
Long-term debt (including current portion)...... 40 38 183
613 611
Long-term debt - finance operations
(including current portion)................. 161 175 190
204 216
Shareholders' equity............................ 1,316 1,177 1,874
1,980 1,510

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Per share................................... 20.89 18.81 30.30
23.62 18.12
- - ----------------------------------------------------------------------------------------------
-------------------------
Other Information

Funded backlog.................................. $ 4,562 $ 5,487 $ 6,780 $

8,214 $ 7,995
Total backlog................................... 6,006 7,015 8,488
9,846 9,491
Shares outstanding at December 31
(in millions)............................... 63.0 62.6 61.8
83.8 83.3
Fully diluted weighted average shares
outstanding (in millions)................... 63.4 63.3 75.6
85.6 83.4
Common shareholders of record
at December 31.............................. 23,935 24,496 26,158
33,078 34,178
Active employees at December 31:
Total company............................... 24,200 30,500 56,800
80,600 98,100
Excluding discontinued operations........... 21,300 23,100 26,500
30,700 37,800
==================================================================================================
=====================
</TABLE>

(a) Includes a $95 gain ($1.26 per share) from the recognition of research and
experimentation and investment tax credits. See Note E.

(b) Includes a $140 gain ($1.64 per share) from an adjustment to the company's
deferred income tax liability.

34

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-21
<SEQUENCE>6
<DESCRIPTION>GENERAL DYNAMICS CORP. SUBSIDIARIES
<TEXT>

<PAGE> 1
EXHIBIT 21, 1994 ANNUAL REPORT
FORM 10-K, COMMISSION FILE
NUMBER 1-3671

GENERAL DYNAMICS CORPORATION

SUBSIDIARIES

<TABLE>
<CAPTION>
Subsidiaries of General Dynamics Place of
Percent of
Corporation (Parent and Registrant) Incorporation
Voting Power
- - ----------------------------------- -------------
------------
<S> <C>
<C>
American Overseas Marine Corporation . . . . . . . . . . . . . . Delaware . . . . . . . . . .
100
Concord I Maritime Corporation . . . . . . . . . . . . . . . . . Delaware . . . . . . . . . .
100
Braintree I Maritime Corp. . . . . . . . . . . . . . . . . Delaware . . . . . . . . . .
100
Concord II Maritime Corporation . . . . . . . . . . . . . . . . Delaware . . . . . . . . . .

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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
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 International Corporation . . . . . . . . . . . Delaware . . . . . . . . . .
100
General Dynamics Land Systems, Inc. . . . . . . . . . . . . . . . Delaware . . . . . . . . . .
100
General Dynamics Land Systems Tallahassee Operations, Inc. 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
Dealer's Ready Mix Company . . . . . . . . . . . . . . . Illinois . . . . . . . . . .
100
EPSP, Inc. . . . . . . . . . . . . . . . . . . . . . . . Texas . . . . . . . . . . . .
100
Hulcher Quarry, Inc. . . . . . . . . . . . . . . . . . . Illinois . . . . . . . . . .
100
Material Service Foundation . . . . . . . . . . . . . . Illinois . . . . . . . . . .
100
MLRB, Inc. . . . . . . . . . . . . . . . . . . . . . . . Illinois . . . . . . . . . .
100

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MSC Realty & Development Company . . . . . . . . . . . . Illinois . . . . . . . . . .
100
Mineral and Land Resources Corporation . . . . . . . . . Delaware . . . . . . . . . .
100
MLRT, Inc. . . . . . . . . . . . . . . . . . . . . . Texas . . . . . . . . . . . .
100
Thornton Quarries Corporation . . . . . . . . . . . . . Illinois . . . . . . . . . .
100
Freeman Energy Corporation . . . . . . . . . . . . . . . . . Delaware . . . . . . . . . .
100
Freeman Coal Sales, Inc. . . . . . . . . . . . . . . . . Illinois . . . . . . . . . .
100
Freeman Resources, Inc. . . . . . . . . . . . . . . . . Illinois . . . . . . . . . .
100
</TABLE>

<PAGE> 2
<TABLE>
<CAPTION>
Subsidiaries of General Dynamics Place of
Percent of
Corporation (Parent and Registrant) Incorporation
Voting Power
- - ----------------------------------- -------------
------------
<S> <C>
<C>
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
Patriot I Shipping Corporation . . . . . . . . . . . . . . . . . Delaware . . . . . . . . . .
100
Patriot II Shipping Corporation . . . . . . . . . . . . . . . . Delaware . . . . . . . . . .
100
Patriot IV Shipping Corporation . . . . . . . . . . . . . . . . Delaware . . . . . . . . . .
100
S-C 1969 Credit Corporation . . . . . . . . . . . . . . . . . . . New York . . . . . . . . . .
100
</TABLE>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23
<SEQUENCE>7
<DESCRIPTION>CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
<TEXT>

<PAGE> 1
EXHIBIT 23, 1994 ANNUAL REPORT
FORM 10-K, COMMISSION FILE
NUMBER 1-3671

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GENERAL DYNAMICS CORPORATION

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the

incorporation of our report incorporated by reference into this Form 10-K for
the year ended December 31, 1994, 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 LLP

Washington, D.C.,
March 9, 1995

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-24.A
<SEQUENCE>8
<DESCRIPTION>POWER OF ATTORNEY OF THE BOARD OF DIRECTORS
<TEXT>

<PAGE> 1
EXHIBIT 24-A
GENERAL DYNAMICS CORPORATION POWER OF ATTORNEY
COMMISSION FILE NUMBER 1-3671 REPORTS ON FORM
----------------- 10-K AND 10-Q
IRS NO. 13-1673581
---------------------------

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, MICHAEL J. MANCUSO, 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
9 day of March 1995.

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<TABLE>
<S> <C>

/s/ NICHOLAS D. CHABRAJA /s/ CHARLES H. GOODMAN

- - ------------------------------------ -------------------------------------
Nicholas D. Chabraja Charles H. Goodman

/s/ JAMES S. CROWN /s/ JAMES R. MELLOR

- - ------------------------------------ -------------------------------------
James S. Crown James R. Mellor

/s/ LESTER CROWN /s/ ALLEN E. PUCKETT

- - ------------------------------------ -------------------------------------
Lester Crown Allen E. Puckett

/s/ CARLISLE A. H. TROST /s/ BERNARD W. ROGERS

- - ------------------------------------- -------------------------------------
Carlisle A. H. Trost Bernard W. Rogers

</TABLE>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-24.B
<SEQUENCE>9
<DESCRIPTION>POWER OF ATTORNEY / MICHAEL MANCUSO, JOHN SCHWARTZ
<TEXT>

<PAGE> 1
EXHIBIT 24-B
GENERAL DYNAMICS CORPORATION POWER OF ATTORNEY
COMMISSION FILE NUMBER 1-3671 REPORTS ON FORM 10-K
------------------
IRS NO. 13-1673581
--------------------

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned officers,
Michael J. Mancuso, Vice President and Chief Financial Officer (Principal
Financial Officer), and John W. Schwartz, Staff Vice President and Controller
(Principal 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 1994 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 have hereunto set his hand this
9 day of March 1995.

/s/ MICHAEL J. MANCUSO

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----------------------------------
Michael J. Mancuso

/s/ JOHN W. SCHWARTZ

-----------------------------------
John W. Schwartz
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-27
<SEQUENCE>10
<DESCRIPTION>FINANCIAL DATA SCHEDULE
<TEXT>

<TABLE> <S> <C>

<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the General
Dynamics Corporation Consolidated Balance Sheet as of December 31, 1994,
and the related Consolidated Statement of Earnings for the year ended December
31, 1994 and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000,000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 382
<SECURITIES> 677
<RECEIVABLES> 104
<ALLOWANCES> 0
<INVENTORY> 351
<CURRENT-ASSETS> 1,797
<PP&E> 1,073
<DEPRECIATION> 809
<TOTAL-ASSETS> 2,673
<CURRENT-LIABILITIES> 626
<BONDS> 39
<COMMON> 87
<PREFERRED-MANDATORY> 0
<PREFERRED> 0
<OTHER-SE> 1,229
<TOTAL-LIABILITY-AND-EQUITY> 2,673
<SALES> 3,058
<TOTAL-REVENUES> 3,058
<CGS> 2,737
<TOTAL-COSTS> 2,737
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5
<INCOME-PRETAX> 343
<INCOME-TAX> 120
<INCOME-CONTINUING> 223
<DISCONTINUED> 15
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 238
<EPS-PRIMARY> 3.75
<EPS-DILUTED> 3.75

</TABLE>
</TEXT>

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</DOCUMENT>
</IMS-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----

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