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