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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
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-3671
GENERAL DYNAMICS CORPORATION
(Exact name of registrant as specified in its charter)
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
Registrant's telephone number, including area code (703) 876-3000
--------------
Securities registered pursuant to Section 12(b) of the Act:
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
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 $4,725,449,330 at March 9, 1998, calculated in accordance
with the Securities and Exchange Commission rules as to beneficial ownership.
126,236,874 shares of the registrant's common stock were outstanding at
March 9, 1998 (adjusted for two-for-one stock split effected in the form of a
100 percent stock dividend declared on March 4, 1998 and payable on April 2,
1998 to shareholders of record on March 13, 1998).
DOCUMENTS INCORPORATED BY REFERENCE:
Parts I and II incorporate information from certain portions of the
registrant's Annual Report to security holders for the fiscal year ended
December 31, 1997 (1997 Shareholder Report).
Part III incorporates information from certain portions of the
registrant's definitive Proxy Statement for the 1998 annual meeting of
shareholders to be filed with the Securities and Exchange Commission within
120 days after the close of the fiscal year.
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2
GENERAL DYNAMICS CORPORATION
INDEX
PART I PAGE
----
Item 1. Business 1
Item 2. Properties 6
Item 3. Legal Proceedings 7
Item 4. Submission of Matters to a Vote of Security Holders 7
Supplementary
Item. Executive Officers of the Company 8
PART II
Item 5. Market for the Company's Common Equity and
Related Shareholder Matters 10
Item 6. Selected Financial Data 10
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10
Item 8. Financial Statements and Supplementary Data 10
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 10
PART III
Item 10. Directors and Executive Officers of the Registrant 10
Item 11. Executive Compensation 10
Item 12. Security Ownership of Certain Beneficial Owners
and Management 11
Item 13. Certain Relationships and Related Transactions 11
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K 11
SIGNATURES 12
3
PART I
ITEM 1. BUSINESS
INTRODUCTION
The primary business of General Dynamics (the company) is supplying
weapons systems and services to the U.S. government and its international
allies. The company is a Delaware corporation formed in 1952 as successor to the
Electric Boat Company. Two of the company's primary operating units, General
Dynamics Land Systems Inc. and Bath Iron Works Corporation, were acquired in
1982 and 1995, respectively. On January 1, 1997, the company acquired the assets
of Defense Systems and Armament Systems, formerly operating units of Lockheed
Martin Corporation. On October 1, 1997, the company acquired the assets of
Advanced Technology Systems, formerly an operating unit of Lucent Technologies.
On December 31, 1997, the company acquired the assets of Computing Devices
International, formerly a division of Ceridian Corporation. During the period
1992 through 1994, the company divested its tactical military aircraft, missile
systems and space launch systems businesses.
The company currently operates in the following business segments: Marine,
Combat Systems, Information Systems and Technology, and Other. Marine includes
Electric Boat Corporation (Electric Boat), Bath Iron Works Corporation (BIW),
and American Overseas Marine Corporation (AMSEA). Combat Systems includes
General Dynamics Land Systems Inc. (Land Systems), General Dynamics Defense
Systems, Inc. (Defense Systems), and General Dynamics Armament Systems, Inc.
(Armament Systems). Information Systems and Technology includes General Dynamics
Advanced Technology Systems, Inc. (ATS) and three operating units which
comprised Computing Devices International: General Dynamics Information Systems,
Inc. (GDIS), Computing Devices Canada, Ltd., and Computing Devices Company Ltd.
in the United Kingdom. The Other business segment includes Freeman Energy
Corporation (Freeman Energy), Material Service Corporation (Material Service),
and Patriot I, II and IV Shipping Corporations (Patriots). Information on
revenues, operating profit or loss and identifiable assets attributable to each
of the company's business segments is included in Note R to the Consolidated
Financial Statements on page 38 of the 1997 Shareholder Report, filed as
Exhibit 13 to this Annual Report on Form 10-K for the year ended December 31,
1997, and is incorporated herein by reference. A description of the company's
products and services, competition, and other related information follows.
PRODUCTS AND SERVICES
MARINE
Net Sales (in millions) 1997 1996 1995
------ ------ ------
Nuclear Submarines $1,321 $1,443 $1,567
Surface Combatants 839 791 246
Other 151 98 71
------ ------ ------
$2,311 $2,332 $1,884
====== ====== ======
Electric Boat designs and builds nuclear submarines for the U.S. Navy,
having contracts for the design of the New Attack Submarine (NSSN), and for
construction of the last two Seawolf class attack submarines. Electric Boat
entered into a Team Agreement with Newport News Shipbuilding and Drydock
Company, providing that Electric Boat will be the prime contractor on
construction contracts for the NSSN. In addition, Electric Boat performs 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. Electric Boat also serves as ship
integrator for certain components and subassemblies of the submarines, such as
electronic equipment.
BIW has contracts for the construction of 21 Arleigh Burke class
destroyers (DDG 51) and plays a lead role in providing design, engineering, and
ongoing life cycle support services for DDG 51 class ships. BIW is a member of a
three-contractor team which was awarded a contract to design and build the
Navy's new class of amphibious transport ships (LPD 17), and is a member of a
three-contractor team recently formed to compete for the development, design,
construction and life-cycle support of the U.S. Navy's next generation surface
combatant ships (DD 21).
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AMSEA provides ship management services for five of the U.S. Navy's
Maritime Prepositioning Ships (MPS), nine of the U.S. Maritime Administration's
Ready Reserve Force ships (RRF) and two U.S. Maritime Army War Reserve vessels
(AWR-3). The MPS are under five-year contracts of which three were renewed in
1995, and two were renewed in 1996. These contracts are renewable through the
year 2011. The RRF ships are in the last year of their five-year contracts. The
MPS and AWR-3 vessels operate worldwide; the RRF vessels are located on the
east, gulf and west coasts of the United States.
COMBAT SYSTEMS
Net Sales (in millions) 1997 1996 1995
------ ------ ------
Armored Vehicles $ 960 $ 889 $ 933
Ordnance 265 - -
Other 284 137 117
------ ------ ------
$1,509 $1,026 $1,050
====== ====== ======
Land Systems designs and manufactures the M1 Series Abrams Main Battle
Tank for the U.S. Army and various foreign governments. Land Systems also
performs engineering and upgrade work, and provides support for existing armored
vehicles. Production of the M1A2, the latest version of the M1, was initiated in
1992. Land Systems is currently in its second year of its five year multiyear
contract with the U.S. Army to upgrade 120 tanks per year from the M1 to the
M1A2 version.
Land Systems is also under contract for the development of several other
major armored vehicle programs. The first is the Advanced Amphibious Assault
Vehicle program for which Land Systems was recently awarded a development
contract, including prototype design and construction. Two prototypes are
currently under contract with an option for a third. The second is the Heavy
Assault Bridge program which is currently under development and is expected to
enter production late in this decade. The third is the Crusader Self-Propelled
Howitzer development program of which the company's share is approximately 25
percent.
Land Systems will complete production of the Single Channel Ground and
Airborne Radio System in late 1998 under a contract with the U.S. Army.
Armament Systems designs, develops and produces advanced gun and
ammunition handling systems based on the Gatling principal for applications on
various platforms. Armament Systems is also a leader in the production of
ammunition products and operates the Milan Army Ammunition Plant in Milan,
Tennessee, for the U.S. Army.
Defense Systems builds light armored vehicles, and turrets and
transmissions for armored vehicles for both the U.S. Army and foreign
governments. As part of a restructuring plan being implemented in 1998, these
product lines are being transferred to Land Systems. The remaining business of
Defense Systems, the design and manufacture of missile guidance and fire control
systems for the U.S. Navy, will be reported in the Marine segment beginning in
1998.
INFORMATION SYSTEMS AND TECHNOLOGY
This segment was formed effective January 1, 1998, following the
acquisitions of ATS and Computing Devices International. The net sales of ATS
for the fourth quarter of 1997 were reported in the Marine segment.
ATS provides both fixed and mobile undersea fiber-optic surveillance
systems as well as special purpose signal and information processors for the
U.S. Navy. ATS also provides vibration reduction technologies for the
elimination of radiant noise and engine fatigue on various platforms. ATS
designs command, communications, control and intelligence systems and network
architecture solutions for the NSSN and the LPD 17. ATS also builds power feed
and terminal transmission equipment for the commercial undersea fiber-optic
market.
GDIS provides world class information processing systems for airborne,
land-based, seaborne, and space-based platforms, as well as information
management services for the U.S. government and a number of allied nations. The
company also provides contract manufacturing services for a number of defense
and commercial electronics contractors. Computing Devices Canada, Ltd. is the
systems integrator on the Iris program, whose objective is to modernize and
fully digitize the tactical command, control and communications systems of the
Canadian land forces. In addition, it provides advanced systems products in the
areas of maritime surveillance, land based vectronics and display systems.
Computing Devices Company Ltd. in the United Kingdom provides and supports
electronics technology for airborne, ground and naval systems, and has the
second largest share of the European Fighter Aircraft.
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OTHER
Net Sales (in millions) 1997 1996 1995
------ ------ ------
Aggregates $ 110 $ 87 $ -
Coal Mining 107 111 116
Other 25 25 17
------ ------ ------
$ 242 $ 223 $ 133
====== ====== ======
Material Service is engaged in the mining and sale of aggregates (e.g.
stone, sand and gravel) for use in the construction of highways and other
infrastructure projects, and for commercial and residential building
construction primarily in northern and central Illinois. This business is
cyclical and seasonal in nature.
Freeman Energy mines coal, producing approximately 5 million tons in each
of the last three years. Freeman Energy owns or leases rights to over 600
million tons of coal reserves in Illinois.
Patriots are financing subsidiaries that lease liquefied natural gas
tankers to a nonaffiliated company.
COMPETITION
Historically, competition for U.S. government defense contracts was
characterized by a number of major companies competing for a variety of weapon
system contracts. The customer's procurement policy generally required
competitive bids based on strict product specifications. In addition, the
customer often awarded contracts to more than one company in order to ensure
competition on subsequent contracts.
In recent years, because of reduced defense spending, the industry has
consolidated through mergers and acquisitions to maintain critical mass
resulting in fewer and larger competitors. With fewer but more complex programs
in competition, companies frequently have formed strategic alliances to pursue
these programs. The Department of Defense faces challenges due to the reduction
in available procurement funds as it must address industrial base issues while
assessing competing needs between and among the various branches of the service.
Finally, Congress continues to be very influential in its role of selecting
which programs to fund and at what level based on limited budget dollars. As a
result, the defense procurement policy is evolving and will be affected by these
various and sometimes conflicting factors.
A discussion of competition on individual programs is included in
Management's Discussion and Analysis of the Results of Operations and Financial
Condition on pages 18 through 23 of the 1997 Shareholder Report, filed as
Exhibit 13 to this Annual Report on Form 10-K and incorporated herein by
reference.
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 the customer.
Historically, the company's largest FMS sales are M1 tanks and related services,
including training in operation and maintenance, and other logistical support.
U.S. government sales were as follows (dollars in millions):
Year Ended December 31
----------------------------
1997 1996 1995
------ ------ ------
Domestic $3,485 $3,051 $2,422
FMS 166 261 476
------ ------ ------
Total U.S. government $3,651 $3,312 $2,898
====== ====== ======
Percent of net sales 90% 92% 94%
3
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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 for
default a contract with the company and McDonnell Douglas Corporation for the
full-scale development of the U.S. Navy's A-12 aircraft. On February 23, 1998, a
final judgment was entered in favor of the contractors for $1,200 million plus
interest. The U.S. government has filed a notice of appeal. For further
discussion, see Note O to the Consolidated Financial Statements on page 34 of
the 1997 Shareholder Report, filed as Exhibit 13 to this Annual Report on Form
10-K and incorporated herein by reference.
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 defense 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 had
no substantial operations in foreign countries until the acquisition of
Computing Devices Canada, Ltd. and Computing Devices Company Ltd. Direct
foreign sales were $132 million, $38 million and $29 million in 1997, 1996 and
1995, respectively.
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 the company 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.
RESEARCH AND DEVELOPMENT
Research and development activities in Marine and Combat Systems
are conducted principally under U.S. government contracts. These research
efforts are concerned with developing products for large systems development
programs or performing work under research and development technology contracts.
Beginning in 1996, the company experienced a decline in customer-sponsored
expenditures for research and development due primarily to the NSSN program at
Electric Boat moving to the design phase. 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.
The table below details expenditures for research and development (dollars
in millions):
Year Ended December 31
------------------------
1997 1996 1995
---- ---- ----
Company-sponsored $ 55 $ 38 $ 25
Customer-sponsored 58 89 178
---- ---- ----
$113 $127 $203
==== ==== ====
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BACKLOG
Summary backlog information for each business segment follows:
December 31 1997 Backlog
------------------- Not Filled
1997 1996 in 1998
------- ------- ------------
Marine $ 5,864 $ 7,566 $ 4,088
Combat Systems 2,323 2,057 968
Information Systems and Technology 805 - 268
Other 607 727 542
------- ------- -------
Total Backlog $ 9,599 $10,350 $ 5,866
======= ======= =======
Funded Backlog $ 6,796 $ 6,161 $ 3,342
======= ======= =======
Total backlog represents the estimated remaining sales value of work to be
performed under firm contracts. Funded backlog represents the portion of total
backlog that has been appropriated by Congress and funded by the procuring
agency. To the extent backlog has not been funded, there is no assurance that
congressional appropriations or agency allotments will be forthcoming. Total
backlog also includes amounts for long-term coal contracts. For further
discussion, see Management's Discussion and Analysis of the Results of
Operations and Financial Condition on pages 18 through 23 of the 1997
Shareholder Report, filed as Exhibit 13 to this Annual Report on Form 10-K and
incorporated herein by reference.
ENVIRONMENTAL CONTROLS
The 1990 Clean Air Act (Act) had a significant impact on Freeman Energy.
The Act requires, among other things, a phased reduction in sulfur dioxide
emissions by coal burning facilities. Virtually all of the coal in Freeman
Energy's Illinois basin mines has medium or high sulfur content. Freeman
Energy's two long-term contract customers have clean coal technologies which
allow for utilization of Freeman Energy's coal under the new regulations.
Freeman Energy has targeted customers with clean coal technology to mitigate the
impact of regulations in the near term. The long-term impact of the Act is not
known.
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. Additional information relating to the impact of environmental
controls is included under the caption "Environmental" in Note N to the
Consolidated Financial Statements on page 33 of the 1997 Shareholder Report,
filed as Exhibit 13 to this Annual Report on Form 10-K, and is incorporated
herein by reference.
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 government may consent to the company's use of inventions
covered by patents. Patents and licenses are important in the operation of the
company's business, as one of management's key objectives is developing and
providing its customers with advanced technological solutions.
EMPLOYEES
At December 31, 1997, the company had approximately 29,000 employees
(excluding contract labor), of whom 47 percent were covered by collective
bargaining agreements with various unions, the most significant of which are
the International Association of Machinists and Aerospace Workers, the
Industrial Union of Marine and Shipbuilding Workers of America, the Metal
Trades Council (MTC) of New London, Connecticut, the United Auto Workers Union,
the Office and Professional Employees International Union and the United Mine
Workers of America. Several agreements are due to expire during 1998, the most
significant of which is the MTC.
5
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ITEM 2. PROPERTIES
A summary of floor space at the main facilities of the Marine, Combat
Systems, and Information Systems and Technology segments follows (square feet in
millions):
COMPANY GOVERNMENT
OWNED LEASED FURNISHED
FACILITIES FACILITIES FACILITIES TOTAL
---------- ---------- ----------- --------
MARINE:
Electric Boat
Groton, Connecticut 2.6 .2 2.8
Quonset Point, Rhode Island 0.4 1.1 1.5
Avenel, New Jersey 0.4 0.4
Bath Iron Works
Bath, Maine 1.1 1.1
East Brunswick, Maine 0.6 0.6
Portland, Maine 0.1 0.1
---------- ---------- ----------- --------
TOTAL MARINE 5.1 1.4 0.0 6.5
========== ========== =========== ========
COMBAT SYSTEMS:
Land Systems
Lima, Ohio 1.6 1.6
Muskegon, Michigan 1.0 0.1 1.1
Scranton, Pennsylvania 0.3 0.3
Woodbridge, Virginia 0.1 0.1
Tallahassee, Florida 0.1 0.1
Sterling Heights, Michigan 0.6 0.6
Anniston, Alabama 0.1 0.1
Imperial, California 0.1 0.1
Chesterfield, Michigan 0.1 0.1
Armament Systems
Burlington, Vermont 0.6 0.6
Milan, Tennessee 3.9 3.9
Defense Systems
Pittsfield, Massachusetts 0.1 0.8 0.9
---------- ---------- ----------- --------
TOTAL COMBAT SYSTEMS 2.4 0.7 6.4 9.5
========== ========== =========== ========
INFORMATION SYSTEMS AND
TECHNOLOGY:
GDIS
Bloomington, Minnesota 0.5 0.5
Computing Devices Canada, Ltd.
Ottawa, Ontario 0.2 0.1 0.3
Calgary, Alberta 0.2 0.2
ATS
Greensboro, North Carolina 0.1 0.1 0.2
---------- ---------- ----------- --------
TOTAL INFORMATION
SYSTEMS AND TECHNOLOGY 0.5 0.7 0.0 1.2
========== ========== =========== ========
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BIW began in 1997 a $200 million project to construct a fifteen acre land
level transfer facility and manufacturing support center, and a 750-foot
dry-dock in Bath, Maine to improve productivity.
OTHER. Freeman Energy operates two underground mines and one surface mine
in Illinois. Coal preparation facilities and rail loading facilities are located
at each mine sufficient for its output.
Material Service operates several stone quarries, as well as sand and
gravel pits and yards in the Chicago, Illinois area for its aggregates business.
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 and marketing efforts which are intended to maximize the market value
of these properties. The remaining properties include 232 acres in Kearny Mesa
and 2,420 acres in Sycamore Canyon, both of which are in San Diego, California;
and 308 acres in Rancho Cucamonga, California. Most of this property is
undeveloped. The company owns 10,000 square feet of building space at Rancho
Cucamonga and 200,000 square feet of building space at Sycamore Canyon. Most of
the buildings at Kearny Mesa were demolished in 1997 in preparation for
development activity. In 1997, two buildings and 55 acres in Rancho Cucamonga
were sold.
ITEM 3. LEGAL PROCEEDINGS
The information under the captions "Litigation" and "Environmental" in
Note N and the information in Note O to the Consolidated Financial Statements
appearing on pages 33 through 34 of the 1997 Shareholder Report, included in
this Annual Report on Form 10-K 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, 1997.
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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:
AGE AT
DECEMBER 31
NAME, POSITION AND OFFICE 1997
------------------------- -----------
David D. Baier -- Vice President Taxes since August 1995; Staff Vice President Taxes 43
March 1994 -- August 1995; Corporate Tax Counsel and Director of Planning
and Litigation September 1991 -- March 1994
G. Kent Bankus -- Vice President Government Relations since April 1993; Staff Vice President 55
Aerospace Programs and Field Offices July 1991 -- April 1993
Edward C. Bruntrager -- Vice President and General Counsel since March 1994; Assistant General 50
Counsel January 1987 -- March 1994
Allan C. Cameron -- Vice President of the company and President of Bath Iron Works since 51
March 1996; Executive Vice President and Chief Operating Officer of Bath Iron Works
July 1994 -- March 1996; Facility Manager of Electric Boat May 1993 -- June 1994;
Director of Operations of Electric Boat January 1989 -- May 1993
Gordon R. England -- Executive Vice President since March 1997; 60
President - Lockheed Fort Worth March 1993 - March 1995; Executive Vice President
of the company and President - Aircraft Systems of the Fort Worth Division
August 1992 -- March 1993
James I. Finley -Vice President of the company and President General Dynamics Information 51
Systems since January 1998; Vice President of Government Information Systems November 1995 -
December 1997; Vice President Programs and Engineering, Westinghouse/United
Technologies 1990 - October 1995
David H. Fogg -- Vice President and Treasurer since March 1998; Staff Vice President and Treasurer 42
November 1994 -- March 1998; 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 November 1991 -- January 1994
Paul A. Hesse -- Vice President Communications and Secretary since February 1996; Vice President 56
Communications May 1991 -- February 1996
Kenneth A. Hill - Vice President Information Technology since April 1997; Staff Vice President 48
Personnel Relations November 1994 - April 1997; Director Salaried Compensation
March 1989 - November 1994
Raymond E. Kozen -- Vice President Planning and Analysis since March 1997; Staff Vice President 56
for Special Projects December 1987 -- March 1997
Kenneth J. Leenstra -- Vice President of the company and President of Armament Systems 60
since February 1997; President of Armament Systems - Lockheed Martin January 1990 --
January 1997
Michael J. Mancuso -- Senior Vice President and Chief Financial Officer 55
since March 1997; Vice President and Chief Financial Officer November 1994 -- March
1997; Vice President and Controller May 1994 -- November 1994; Division Vice
President and Chief Financial Officer of Land Systems September 1993 -- May 1994;
Vice President and Controller - Commercial Engine Business, Pratt & Whitney,
United Technologies Corporation July 1992 -- September 1993
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AGE AT
DECEMBER 31
NAME, POSITION AND OFFICE 1997
------------------------- -----------
Charles E. McQueary - Vice President of the company and President of Advanced Technology 58
Systems since October 1997; President - Advanced Technology Systems, AT&T/Lucent
Technologies January 1994 - September 1997; Vice President Federal Systems Advanced
Technologies, AT&T October 1987 - December 1993
David A. Savner -- Senior Vice President Law effective April 1998; Senior Partner 54
of Jenner & Block May 1987 -- March 1998
Daniel P. Schmutte -- Vice President of the company and President of Defense Systems 47
since February 1997; Vice President Operations August 1995 - February 1997;
Staff Vice President and Assistant to the President/Chief Executive Officer
June 1993 -- August 1995; Assistant to the President December 1990 -- June
1993
John W. Schwartz -- Vice President and Controller since March 1998; 41
Staff Vice President and Controller November 1994 -- March 1998; Corporate Director
of Accounting July 1992 -- November 1994
David E. Scott - Vice President of the company and President of Computing Devices 52
Canada since February 1998; President Computing Devices Canada June 1997 -
January 1998; Vice President Communications Division November 1990 - May 1997
James E. Turner, Jr. - President and Chief Operating Officer since June 1997; 63
Executive Vice President of the Marine Group October 1995 - June 1997;
Executive Vice President of the company and President of Electric Boat April 1993 --
October 1995; Executive Vice President of the Marine, Land Systems and Services Group
February 1991 -- April 1993
Arthur J. Veitch -- Vice President of the company and President of Land Systems since 51
February 1997; Vice President of the company and Senior Operating Officer of
Land Systems August 1995 -- February 1997; Division Vice President and General Manager
of the Convair Division August 1992 -- August 1995
John K. Welch -- Vice President of the company and President of Electric Boat since 47
October 1995; Division Vice President Programs and Planning of Electric Boat
April 1994 -- October 1995; Division Vice President Program Management and
Development of Electric Boat June 1989 -- April 1994
W. Peter Wylie -- Vice President Human Resources and Administration since August 1995; 58
Group Vice President - Hughes Missile Systems Company August 1992 -- December 1994;
Division Vice President Human Resources of the company's Missiles and Electronics Group
May 1991 -- August 1992
Michael W. Wynne -- Senior Vice President International, Planning and Development 53
since March 1997; Vice President and General Manager of Lockheed Martin,
Martin Marietta Astronautics Division May 1994 -- February 1997; Vice
President of the company and President of the Space Systems Division August
1992 -- May 1994
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.
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PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED
SHAREHOLDER MATTERS
The company's common stock is listed on the New York Stock Exchange,
Chicago Stock Exchange and Pacific Stock Exchange.
The high and low market price of the company's common stock and the cash
dividends declared for each quarterly period during the two most recent fiscal
years are included in Note S to the Consolidated Financial Statements appearing
on page 38 of the 1997 Shareholder Report, included in this Annual Report on
Form 10-K as Exhibit 13, and are incorporated herein by reference.
There were 21,046 common shareholders of record of the company's common
stock at December 31, 1997.
ITEM 6. SELECTED FINANCIAL DATA
The information appearing on page 40 of the 1997 Shareholder Report,
included in this Annual Report on Form 10-K 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 18 through 23 of the 1997 Shareholder
Report, included in this Annual Report on Form 10-K 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 24 through 40 of the 1997 Shareholder
Report, included in this Annual Report on Form 10-K 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.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required to be set forth herein, except for a list of the
executive officers other than directors that is provided in Part I of this
report, is included under the caption "Election of Directors" in the company's
definitive Proxy Statement which is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information required to be set forth herein is included under the
captions "Board of Directors and Board Committees" and "Executive Compensation"
in the company's definitive Proxy Statement which is incorporated herein by
reference.
10
13
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required to be set forth herein is included under the
captions "Election of Directors" and "Principal Shareholders" in the company's
definitive Proxy Statement which is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required to be set forth herein is included under the
captions "Employment Agreements and Other Agreements" and "Transactions
Involving Directors and Others" in the company's definitive Proxy Statement
which is incorporated herein by reference.
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 Financial
Statements appearing in the 1997 Shareholder Report on the pages listed in the
following index are included in this Annual Report on Form 10-K as Exhibit 13,
and are incorporated herein by reference.
Page of
1997
Shareholder
Report
------
Report of Independent Public Accountants 39
Consolidated Financial Statements:
Consolidated Statement of Earnings 24
Consolidated Balance Sheet 25
Consolidated Statement of Cash Flows 26
Consolidated Statement of Shareholders' Equity 27
Notes to Consolidated Financial Statements (A to S) 28-38
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 13 and 14 of this Annual Report on
Form 10-K.
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the fourth quarter of 1997.
11
14
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.
GENERAL DYNAMICS CORPORATION
By: /s/ John W. Schwartz
------------------------
John W. Schwartz
Vice President and Controller
March 18, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below on March 18, 1998, by the following persons on
behalf of the Registrant and in the capacities indicated, including a majority
of the directors.
/s/ Nicholas D. Chabraja Chairman, Chief Executive Officer and Director
- ------------------------ (Principal Executive Officer)
Nicholas D. Chabraja
/s/ James E. Turner, Jr. President and Chief Operating Officer
- ------------------------
James E. Turner, Jr.
/s/ Michael J. Mancuso Senior Vice President and Chief Financial Officer
- ---------------------- (Principal Financial Officer)
Michael J. Mancuso
/s/ John W. Schwartz Vice President and Controller
- -------------------- (Principal Accounting Officer)
John W. Schwartz
Julius W. Becton, Jr.* Director
James S. Crown* Director
Lester Crown* Director
Charles H. Goodman* Director
George A. Joulwan* Director
Paul G. Kaminski* Director
James R. Mellor* Director
Gordon R. Sullivan* Director
Carlisle A. H. Trost* Director
*By Paul A. Hesse pursuant to Power of Attorney executed by the directors listed
above, which Power of Attorney has been filed with the Securities and Exchange
Commission.
/s/ Paul A. Hesse
-----------------
Paul A. Hesse
Secretary
12
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INDEX TO EXHIBITS
Note Exhibit
Number Number Description
- ------ ------ -----------
(5) 3-1A --Restated Certificate of Incorporation, effective May 21, 1991
3-2D --Bylaws as amended effective October 1, 1997
(11) 4 --Letter re agreement to furnish copy of indenture
(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
(3) 10-6A --General Dynamics Corporation Incentive Compensation Plan adopted February 3, 1988,
approved by the shareholders on May 4, 1988
(4) 10-6B --General Dynamics Corporation Incentive Compensation Plan (as amended),
approved by shareholders on May 1, 1991
(4) 10-7E --Facilities Contract DAAE07-90-E-A001 dated June 24, 1990, between General Dynamics
Land Systems, Inc. and the United States relating to government-owned facilities and
equipment at the Lima Army Tank Plant, Lima, Ohio
(7) 10-8B --General Dynamics Corporation Retirement Plan for Directors adopted March 6, 1986, as
amended May 5, 1993
(11) 10-14A --Lease Agreement dated December 20, 1996, between Electric Boat Corporation and the
Rhode Island Economic Development Corporation
(6) 10-18 --Employment Agreement between the company and James R. Mellor dated as of
March 17, 1993
(9) 10-18A --Amendment to employment agreement between the company and James R. Mellor dated as of
October 3, 1995
(11) 10-18B --Amendment to employment agreement between the company and James R. Mellor dated as of
November 5, 1996
(6) 10-22 --Form of Agreement entered into in 1993 between the company and Corporate Officers who
were being retained in employment with the company
(8) 10-24 --Asset Purchase Agreement, dated August 17, 1995, between the company and Bath Iron Works
Corporation
(9) 10-25 --Lease Agreement dated January 14, 1982, between Bath Iron Works Corporation and the City of
Portland, Maine, relating to pier facilities in the Portland, Maine harbor
(9) 10-26 --Lease Agreement dated January 14, 1982, between Bath Iron Works Corporation and the State of
Maine, relating to a dry dock facility in the Portland, Maine harbor
(10) 10-28 --Asset Purchase and Sale Agreement, dated November 6, 1996, as amended December 20, 1996,
between the company and Lockheed Martin Corporation
(11) 10-29 --Employment agreement between the company and Nicholas D. Chabraja dated
November 12, 1996
(11) 10-30 --General Dynamics Corporation Incentive Compensation Plan adopted February 5, 1997,
approved by shareholders on May 7, 1997
10-31 --Retirement Benefit Agreement between the company and Gordon R. England dated
February 14, 1997
10-32 --Credit Enhancement Agreement between Bath Iron Works Corporation and the City of Bath,
Maine dated September 19, 1997, relating to the development program of facilities in Bath,
Maine
10-33 --Retirement Benefit Agreement between the company and Michael J. Mancuso dated
March 6, 1998
10-34 --Consulting agreement between the company and Paul G. Kaminski dated August 18, 1997
10-35 --Salary and benefit continuation agreement between the company and Michael W. Wynne dated
February 7, 1997
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16
INDEX TO EXHIBITS
Note Exhibit
Number Number Description
- ------ ------ -----------
13 --1997 Shareholder Report (pages 18 through 40)
21 --Subsidiaries
23 --Consent of Independent Public Accountants
24 --Power of Attorney of the Board of Directors
27 --Financial Data Schedule
27A --Restated Financial Data Schedule for the nine months ended September 28, 1997
27B --Restated Financial Data Schedule for the six months ended June 29, 1997
27C --Restated Financial Data Schedule for the three months ended March 30, 1997
27D --Restated Financial Data Schedule for the year ended December 31, 1996
27E --Amended and Restated Financial Data Schedule for the nine months ended September 29, 1996
27F --Restated Financial Data Schedule for the six months ended June 30, 1996
27G --Restated Financial Data Schedule for the three months ended March 31, 1996
27H --Restated Financial Data Schedule for the year ended December 31, 1995
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) Not used.
(3) 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.
(4) 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.
(5) 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.
(6) 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.
(7) Filed as an exhibit to the company's annual report on Form 10-K for the
year ending December 31, 1994, and filed with the Commission March 9,
1995, and incorporated herein by reference.
(8) Filed as an exhibit to the company's current report on Form 8-K filed with
the Commission September 28, 1995, 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, 1995, and filed with the Commission March 21,
1996, and incorporated herein by reference.
(10) Filed as an exhibit to the company's current report on Form 8-K filed with
the Commission January 15, 1997, and incorporated herein by reference.
(11) Filed as an exhibit to the company's annual report on Form 10-K for the
year ending December 31, 1996, and filed with the Commission March 21,
1997, and incorporated herein by reference.
14