General Dynamics 2010 Annual Report Download - page 8

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missile submarine and the Virginia-class submarine,
which will soon achieve a two-per-year build rate.
For the year, the group’s revenues were $6.7 billion and
earnings were $674 million, each reflecting 5 percent
improvement from 2009. Margins were 10.1 percent,
a clear demonstration of our shipyards’ enduring
commitment to continuous improvement and managing
for profitability.
Marine Systems’ backlog decreased to $20.1 billion in
2010. Backlog fluctuations are typical for this group
because our shipbuilding customers place large orders
that provide work over multi-year periods. We anticipate
adding several contracts to backlog in 2011, including
two more DDG-1000 ships, another DDG-51 and the
first Mobile Landing Platform (MLP).
In addition to the Navy construction workload, the
group continues to enjoy success in repair work
and commercial programs. Our shipyards provide
comprehensive overhaul, repair and lifecycle support
services to Navy surface ships and submarines. The
Marine group’s ability to consistently deliver repaired
Navy assets in a timely and affordable manner positions
us to continue to win new work as the Navy fleet
increasingly confronts age and obsolescence challenges.
In 2010, the group completed construction of the final
two ships of a five-ship commercial product carrier
contract. Each of the vessels was delivered substantially
ahead of schedule and under budget. Given the success
of this program, the age of the commercial shipping fleet
and pending environmental regulations, we anticipate
competing successfully for new opportunities.
Marine Systems’ longer-term outlook remains robust and
includes opportunities to build additional submarines,
destroyers, auxiliaries and commercial ships. These
opportunities, when combined with the group’s current
backlog and solid customer and congressional support,
position our shipyards for continued success.
Information Systems and Technology
Information Systems and Technology (IS&T) remains the
company’s revenue leader and was the fastest-growing
segment in 2010. Revenues grew 7.5 percent to $11.6
billion, including almost 6 percent organic growth.
Volume was particularly strong in IS&T’s battlefield
communications and information technology (IT)
modernization programs. Earnings exceeded $1.2 billion
as the group maintained a healthy 10.5 percent margin,
an impressive accomplishment given its growing
IT-service workload and highly competitive, fast-moving
markets.
Demand for products across IS&T’s portfolio continued
in 2010 as the group received the highest level of orders
in its history. As a result, the group ended the year with
a backlog of $9.8 billion. This backlog does not include
$15.2 billion of unexercised options and IDIQ awards
which generally convert to backlog over time. Together,
backlog and estimated potential contract value grew
8 percent in 2010 to $25 billion.
IS&T’s revenues are diverse by market segment,
business mix, contract type and customer. The group
received a number of key awards from non-U.S. defense
customers in 2010, including multiple cyber awards
for various intelligence community customers, several
health-IT awards for customers including the Centers
for Medicare & Medicaid Services, and an award to
develop and integrate seven prototype vehicles for the
U.K. Specialist Vehicle program.
We continued to evolve and tailor IS&T’s product and
service offerings in 2010, including divesting non-core
satellite operations and adding two businesses that
enhance our U.S. and U.K. tactical communications
portfolio. The group’s opportunity pipeline in fast-
growing markets, including federal/civil information
technology, enhanced battlefield communications and
cyber security, remains robust. Current backlog and
IDIQ opportunities, and continued success in capturing
new awards, position IS&T for continued growth.
Defense Market Environment
We are operating in an increasingly dynamic and
uncertain threat environment, complicated by daunting
U.S. and global economic and budgetary challenges.
While the level of U.S. defense spending will be impacted
by these fiscal realities, there is not a foreseeable peace