General Dynamics 2010 Annual Report Download - page 32

General Dynamics Annual Report • 2010 12
BACKLOG
Our total backlog represents the estimated remaining sales value of work to be performed under firm contracts and includes funded and unfunded
portions. For additional discussion of backlog, see Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in
Part II, Item 7, of this Annual Report on Form 10-K.
Summary backlog information for each of our business groups follows: 2010 Total
Backlog Not
Expected to be
Completed in
2011
RESEARCH AND DEVELOPMENT
To foster innovative product development and evolution, we conduct
sustained R&D activities as part of our normal business operations. In the
commercial sector, most of our Aerospace group’s R&D activities support
Gulfstream’s product enhancement and development programs. In our
defense businesses, we conduct both customer-sponsored R&D activities
under U.S. government contracts and company-sponsored R&D. In
accordance with government regulations, we recover a significant portion
of company-sponsored R&D expenditures through overhead charges to
U.S. government contracts. For more information on our R&D activities,
including our expenditures for the past three years, see Note A to the
Consolidated Financial Statements contained in Part II, Item 8, of this
Annual Report on Form 10-K.
INTELLECTUAL PROPERTY
We develop technology, manufacturing processes and systems-integration
practices. In addition to owning a large portfolio of proprietary intellectual
property, we license some intellectual property rights to and from others.The
U.S. government holds licenses to our patents developed in the performance
of U.S. government contracts, and it may use or authorize others to use the
inventions covered by our patents. Although these intellectual property rights
are important to the operation of our business, no existing patent, license
or other intellectual property right is of such importance that its loss or
termination would, in our opinion, have a material impact on our business.
EMPLOYEES
On December 31, 2010, we had approximately 90,000 employees,
one-fifth of whom work under collective agreements with various labor
unions and worker representatives. Agreements covering approximately
3 percent of total employees are due to expire during 2011. Historically,
we have renegotiated labor agreements without any significant disruption
of operating activities.
RAWMATERIALS, SUPPLIERS AND
SEASONALITY
We depend on suppliers and subcontractors for raw materials and
components. These supply networks can experience price fluctuations
and capacity constraints, which can put pressure on pricing. Effective
management and oversight of suppliers and subcontractors is an important
element of our successful performance. We attempt to mitigate these
risks through long-term agreements with our suppliers, by negotiating
flexible pricing terms in our customer contracts and by procuring from
our suppliers jointly across our business groups to achieve economies
of scale. We have not experienced, and do not foresee, significant
difficulties in obtaining the materials, components or supplies necessary
for our business operations.
Our business is not generally seasonal in nature. The timing of contract
awards, the availability of funding from the customer, the incurrence of
contract costs and unit deliveries are the primary drivers of our revenue
recognition. In the United States, these factors are influenced by the federal
government’s October-to-September fiscal year. This process has historically
resulted in higher revenues in the latter half of the year. Internationally,
many of our government customers schedule deliveries toward the end
of the calendar year, resulting in increasing revenues and earnings over
the course of the year.
December 31 2009 2010
Funded Unfunded Total Funded Unfunded Total
Aerospace $ 18,891 $ 433 $ 19,324 $ 17,443 $ 378 $ 17,821 $ 13,781
Combat Systems 11,431 1,985 13,416 10,908 892 11,800 4,486
Marine Systems 7,111 15,362 22,473 7,050 13,069 20,119 14,398
Information Systems and Technology 8,423 1,909 10,332 7,978 1,843 9,821 2,980
Total backlog $ 45,856 $ 19,689 $ 65,545 $ 43,379 $ 16,182 $ 59,561 $ 35,645