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General Dynamics Annual Report • 201033
Contractual Obligations2003
Long-term debt(a)$3,620 $905 $1,240$1,466 $9
Capital lease obligations211– –
Operating leases 914 187259 151317
Purchase obligations(b) 22,460 11,2186,468 2,762 2,012
Otherlong-term liabilities (c)14,516 2,247 2,1721,759 8,338
$41,512$14,558 $10,140$6,138 $10,676
(a)Includes scheduledinterest payments. See Note Jto theConsolidated Financial Statements fordiscussionoflong-term debt.
(b)Includes amounts committedunderlegally enforceableagreements forgoodsand services withdefinedtermsastoquantity,priceand timing ofdelivery.Thisamountincludes $17.2 billionof
purchase ordersforproducts and services to bedelivered under firm governmentcontracts underwhich we havefull recourse undernormal contracttermination clauses.
(c)Represents otherlong-term liabilities onour ConsolidatedBalanceSheet, including thecurrentportionofthese liabilities. Theprojectedtiming ofcashflows associatedwiththese obligations
isbasedonmanagement'sestimates, which arebased largely onhistorical experience. Thisamountalso includes all liabilities underour defined-benefitretirementplans, asdiscussedin
Note P. See Note Pforinformationregarding theplan assets availabletosatisfy these liabilities. Retirementplan assets and liabilities arepresentednet ontheConsolidatedBalanceSheet on
a plan-by-plan basis.
Total AmountCommittedLess Than 1 Year 1-3 Years4-5 YearsMoreThan 5Years
Payments Dueby Period
Commercial Commitments2003
Lettersofcredit*$1,610$510$663 $216$221
*See Note N to theConsolidated Financial Statements fordiscussionoflettersofcreditand aircrafttrade-in options.
Total AmountCommittedLess Than 1 Year 1-3 Years4-5 YearsMoreThan 5Years
AmountofCommitmentExpirationbyPeriod
ADDITIONALFINANCIALINFORMATION
OFF-BALANCE SHEETARRANGEMENTS
OnDecember31,2010, otherthan operating leases, we had nomaterial off-balancesheet arrangements, including guarantees; retainedorcontingent
interests in assets transferredto unconsolidatedentities; derivativeinstruments indexedto our stock and classifiedinshareholders’equityonthe
ConsolidatedBalanceSheet; or variableinterests in entities thatprovideuswith financing,liquidity,market-riskorcredit-risksupportorengagewithus
in leasing,hedging orresearch and developmentservices.
CONTRACTUALOBLIGATIONSANDCOMMERCIALCOMMITMENTS
Thefollowing tables presentinformationaboutour contractual obligationsand commercial commitments onDecember31,2010:
APPLICATIONOFCRITICALACCOUNTINGPOLICIES
Management’sDiscussion and Analysisofour Financial Condition and
Results ofOperationsisbasedonour Consolidated Financial Statements,
which havebeenprepared in accordancewithU.S. generally accepted
accounting principles (GAAP). Thepreparationof financial statements in
accordancewithGAAPrequires thatwemake estimates and assumptions
thataffectthereportedamounts ofassets and liabilities and the
disclosureofcontingentassets and liabilities atthedate ofthefinancial
statements, aswell asthereportedamounts ofrevenues and expenses
during thereporting period.Onanongoing basis, we evaluate our
estimates, including those relatedto long-term contracts and programs,
goodwill and otherintangibleassets, incometaxes, pensionsand other
post-retirementbenefits, workers’compensation,warrantyobligations,
pre-owned aircraftinventory,and contingencies and litigation.Webase
our estimates onhistorical experienceand onvariousotherassumptions
thatwebelievetobereasonableunderthecircumstances. Theresults of
these estimates form thebasisfor making judgments aboutthecarrying
values ofassets and liabilities thatarenot readily availablefromother
sources. Actual results may differfromthese estimates underdifferent
assumptionsorconditions.
We believethefollowing policies arecritical and requiretheuse of
significantbusiness judgmentin their application:
Revenue Recognition.We accountforrevenues and earningsin our
defense and aerospacebusinesses using thepercentage-of-completion
methodofaccounting.Underthepercentage-of-completionmethod,
we recognize contractrevenueasthework progresses, eitherasthe
products areproducedanddeliveredorasservices arerendered,as
applicable. We estimate profitasthedifferencebetweentotal estimated
revenueand total estimatedcost ofacontractand recognize thatprofit