GENERAL DYNAMICS CORP | 2013 | FY |

CONDENSED CONSOLIDATING FINANCIAL STATEMENTS

The fixed-rate notes described in Note J are fully and unconditionally guaranteed on an unsecured, joint and several basis by certain of our 100-percent-owned subsidiaries (the guarantors). The following condensed consolidating financial statements illustrate the composition of the parent, the guarantors on a combined basis (each guarantor together with its majority owned subsidiaries) and all other subsidiaries on a combined basis.

CONDENSED CONSOLIDATING STATEMENTS OF EARNINGS (LOSS)



Year Ended December 31, 2011	Parent			Guarantors on a Combined Basis			Other Subsidiaries on a Combined Basis			Consolidating Adjustments			Total Consolidated
Revenues	$	—		$	26,253		$	6,424		$	—		$	32,677
Cost of sales	(13		)	21,336			5,498			—			26,821
G&A	90			1,499			441			—			2,030
Operating earnings	(77		)	3,418			485			—			3,826
Interest, net	(143		)	—			2			—			(141		)
Other, net	5			27			1			—			33
Earnings before income taxes	(215		)	3,445			488			—			3,718
Provision for income taxes	(43		)	1,097			112			—			1,166
Discontinued operations, net of tax	(26		)	—			—			—			(26		)
Equity in net earnings of subsidiaries	2,724			—			—			(2,724		)	—
Net earnings	$	2,526		$	2,348		$	376		$	(2,724	)	$	2,526
Comprehensive income	$	1,650		$	2,228		$	183		$	(2,411	)	$	1,650
Year Ended December 31, 2012	Parent			Guarantors on a Combined Basis			Other Subsidiaries on a Combined Basis			Consolidating Adjustments			Total Consolidated
Revenues	$	—		$	26,349		$	5,164		$	—		$	31,513
Cost of sales	(20		)	23,614			4,810			—			28,404
G&A	89			1,618			569			—			2,276
Operating earnings	(69		)	1,117			(215		)	—			833
Interest, net	(158		)	(3		)	5			—			(156		)
Other, net	(126		)	(4		)	(6		)	—			(136		)
Earnings before income taxes	(353		)	1,110			(216		)	—			541
Provision for income taxes	(137		)	854			156			—			873
Equity in net earnings of subsidiaries	(116		)	—			—			116			—
Net loss	$	(332	)	$	256		$	(372	)	$	116		$	(332	)
Comprehensive loss	$	(795	)	$	21		$	(90	)	$	69		$	(795	)
Year Ended December 31, 2013	Parent			Guarantors on a Combined Basis			Other Subsidiaries on a Combined Basis			Consolidating Adjustments			Total Consolidated
Revenues	$	—		$	27,272		$	3,946		$	—		$	31,218
Cost of sales	20			22,175			3,259			—			25,454
G&A	74			1,664			341			—			2,079
Operating earnings	(94		)	3,433			346			—			3,685
Interest, net	(93		)	1			6			—			(86		)
Other, net	1			6			1			—			8
Earnings before income taxes	(186		)	3,440			353			—			3,607
Provision for income taxes	(56		)	1,058			119			—			1,121
Discontinued operations, net of tax	(129		)	—			—			—			(129		)
Equity in net earnings of subsidiaries	2,616			—			—			(2,616		)	—
Net earnings	$	2,357		$	2,382		$	234		$	(2,616	)	$	2,357
Comprehensive income	$	3,947		$	2,820		$	191		$	(3,011	)	$	3,947

CONDENSED CONSOLIDATING BALANCE SHEETS



December 31, 2012	Parent			Guarantors on a Combined Basis			Other Subsidiaries on a Combined Basis			Consolidating Adjustments			Total Consolidated
ASSETS
Current assets:
Cash and equivalents	$	2,248		$	—		$	1,048		$	—		$	3,296
Accounts receivable	—			1,254			2,950			—			4,204
Contracts in process	439			3,199			1,326			—			4,964
Inventories
Work in process	—			1,507			11			—			1,518
Raw materials	—			1,020			89			—			1,109
Finished goods	—			32			37			—			69
Pre-owned aircraft	—			80			—			—			80
Other current assets	45			249			210			—			504
Total current assets	2,732			7,341			5,671			—			15,744
Noncurrent assets:
PP&E	155			5,556			1,292			—			7,003
Accumulated depreciation of PP&E	(56		)	(2,850		)	(694		)	—			(3,600		)
Intangible assets	—			1,693			1,222			—			2,915
Accumulated amortization of intangible assets	—			(1,068		)	(464		)	—			(1,532		)
Goodwill	—			7,661			4,387			—			12,048
Other assets	700			738			328			(35		)	1,731
Investment in subsidiaries	33,324			—			—			(33,324		)	—
Total noncurrent assets	34,123			11,730			6,071			(33,359		)	18,565
Total assets	$	36,855		$	19,071		$	11,742		$	(33,359	)	$	34,309
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Customer advances and deposits	$	—		$	3,052		$	2,990		$	—		$	6,042
Other current liabilities	394			3,743			1,441			—			5,578
Total current liabilities	394			6,795			4,431			—			11,620
Noncurrent liabilities:
Long-term debt	3,881			27			—			—			3,908
Other liabilities	4,121			2,704			566			—			7,391
Total noncurrent liabilities	8,002			2,731			566			—			11,299
Intercompany	17,069			(17,388		)	319			—			—
Shareholders’ equity:
Common stock	482			6			44			(50		)	482
Other shareholders’ equity	10,908			26,927			6,382			(33,309		)	10,908
Total shareholders’ equity	11,390			26,933			6,426			(33,359		)	11,390
Total liabilities and shareholders’ equity	$	36,855		$	19,071		$	11,742		$	(33,359	)	$	34,309



December 31, 2013	Parent			Guarantors on a Combined Basis			Other Subsidiaries on a Combined Basis			Consolidating Adjustments			Total Consolidated
ASSETS
Current assets:
Cash and equivalents	$	4,175		$	—		$	1,126		$	—		$	5,301
Accounts receivable	—			1,451			2,951			—			4,402
Contracts in process	571			3,124			1,085			—			4,780
Inventories
Work in process	—			1,623			12			—			1,635
Raw materials	—			1,172			86			—			1,258
Finished goods	—			24			33			—			57
Pre-owned aircraft	—			18			—			—			18
Other current assets	35			202			198			—			435
Total current assets	4,781			7,614			5,491			—			17,886
Noncurrent assets:
PP&E	156			5,827			1,265			—			7,248
Accumulated depreciation of PP&E	(64		)	(3,062		)	(707		)	—			(3,833		)
Intangible assets	—			1,614			1,230			—			2,844
Accumulated amortization of intangible assets	—			(1,111		)	(516		)	—			(1,627		)
Goodwill	—			7,631			4,346			—			11,977
Other assets	558			483			398			(486		)	953
Investment in subsidiaries	36,067			—			—			(36,067		)	—
Total noncurrent assets	36,717			11,382			6,016			(36,553		)	17,562
Total assets	$	41,498		$	18,996		$	11,507		$	(36,553	)	$	35,448
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Customer advances and deposits	$	—		$	3,493		$	3,091		$	—		$	6,584
Other current liabilities	763			3,643			1,204			—			5,610
Total current liabilities	763			7,136			4,295			—			12,194
Noncurrent liabilities:
Long-term debt	3,883			25			—			—			3,908
Other liabilities	2,335			2,008			502			—			4,845
Total noncurrent liabilities	6,218			2,033			502			—			8,753
Intercompany	20,016			(20,108		)	92			—			—
Shareholders’ equity:
Common stock	482			6			3,570			(3,576		)	482
Other shareholders’ equity	14,019			29,929			3,048			(32,977		)	14,019
Total shareholders’ equity	14,501			29,935			6,618			(36,553		)	14,501
Total liabilities and shareholders’ equity	$	41,498		$	18,996		$	11,507		$	(36,553	)	$	35,448

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS



Year Ended December 31, 2011	Parent			Guarantors on a Combined Basis			Other Subsidiaries on a Combined Basis			Consolidating Adjustments		Total Consolidated
Net cash provided by operating activities	$	(359	)	$	3,524		$	73		$	—	$	3,238
Cash flows from investing activities:
Business acquisitions, net of cash acquired	(233		)	(1,327		)	—			—		(1,560		)
Purchases of held-to-maturity securities	(459		)	—			—			—		(459		)
Maturities of held-to-maturity securities	334			—			107			—		441
Capital expenditures	(6		)	(381		)	(71		)	—		(458		)
Purchases of available-for-sale securities	(274		)	(99		)	—			—		(373		)
Other, net	246			192			(3		)	—		435
Net cash used by investing activities	(392		)	(1,615		)	33			—		(1,974		)
Cash flows from financing activities:
Proceeds from fixed-rate notes	1,497			—			—			—		1,497
Purchases of common stock	(1,468		)	—			—			—		(1,468		)
Repayment of fixed-rate notes	(750		)	—			—			—		(750		)
Dividends paid	(673		)	—			—			—		(673		)
Other, net	216			(20		)	(3		)	—		193
Net cash used by financing activities	(1,178		)	(20		)	(3		)	—		(1,201		)
Net cash used by discontinued operations	(27		)	—			—			—		(27		)
Cash sweep/funding by parent	1,878			(1,889		)	11			—		—
Net increase in cash and equivalents	(78		)	—			114			—		36
Cash and equivalents at beginning of year	1,608			—			1,005			—		2,613
Cash and equivalents at end of year	$	1,530		$	—		$	1,119		$	—	$	2,649
Year Ended December 31, 2012	Parent			Guarantors on a Combined Basis			Other Subsidiaries on a Combined Basis			Consolidating Adjustments		Total Consolidated
Net cash provided by operating activities	$	(541	)	$	2,850		$	378		$	—	$	2,687
Cash flows from investing activities:
Capital expenditures	(2		)	(390		)	(58		)	—		(450		)
Business acquisitions, net of cash acquired	(121		)	(297		)	(26		)	—		(444		)
Other, net	221			(1		)	18			—		238
Net cash used by investing activities	98			(688		)	(66		)	—		(656		)
Cash flows from financing activities:
Repayment of fixed-rate notes	(2,400		)	—			—			—		(2,400		)
Proceeds from fixed-rate notes	2,382			—			—			—		2,382
Dividends paid	(893		)	—			—			—		(893		)
Purchases of common stock	(602		)	—			—			—		(602		)
Other, net	154			(21		)	(2		)	—		131
Net cash used by financing activities	(1,359		)	(21		)	(2		)	—		(1,382		)
Net cash used by discontinued operations	(2		)	—			—			—		(2		)
Cash sweep/funding by parent	2,522			(2,141		)	(381		)	—		—
Net increase in cash and equivalents	718			—			(71		)	—		647
Cash and equivalents at beginning of year	1,530			—			1,119			—		2,649
Cash and equivalents at end of year	$	2,248		$	—		$	1,048		$	—	$	3,296

R. CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS



Year Ended December 31, 2013	Parent			Guarantors on a Combined Basis			Other Subsidiaries on a Combined Basis			Consolidating Adjustments		Total Consolidated
Net cash provided by operating activities	$	(454	)	$	2,810		$	750		$	—	$	3,106
Cash flows from investing activities:
Capital expenditures	(1		)	(381		)	(58		)	—		(440		)
Other, net	3			59			11			—		73
Net cash used by investing activities	2			(322		)	(47		)	—		(367		)
Cash flows from financing activities:
Purchases of common stock	(740		)	—			—			—		(740		)
Dividends paid	(591		)	—			—			—		(591		)
Proceeds from option exercises	583			—			—			—		583
Other, net	23			—			—			—		23
Net cash used by financing activities	(725		)	—			—			—		(725		)
Net cash used by discontinued operations	(9		)	—			—			—		(9		)
Cash sweep/funding by parent	3,113			(2,488		)	(625		)	—		—
Net increase in cash and equivalents	1,927			—			78			—		2,005
Cash and equivalents at beginning of year	2,248			—			1,048			—		3,296
Cash and equivalents at end of year	$	4,175		$	—		$	1,126		$	—	$	5,301

GENERAL DYNAMICS CORP | 2013 | FY |

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