General Dynamics 2015 Annual Report Download - page 14

BACKLOG
Our total backlog represents the estimated remaining 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 in Item 7.
Summary backlog information for each of our business groups follows:
2015 Total
Backlog Not
Expected to Be
Completed in
2016
December 31 2015 2014
Funded Unfunded Total Funded Unfunded Total
Aerospace $ 13,292 $ 106 $ 13,398 $ 13,115 $ 117 $ 13,232 $ 7,851
Combat Systems 18,398 597 18,995 19,292 506 19,798 14,221
Information Systems and Technology 6,827 1,755 8,582 7,070 1,539 8,609 2,071
Marine Systems 13,266 11,879 25,145 13,452 17,319 30,771 17,855
Total backlog $ 51,783 $ 14,337 $ 66,120 $ 52,929 $ 19,481 $ 72,410 $ 41,998
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 U.S. defense businesses, we conduct customer-
sponsored R&D activities under government contracts and company-
sponsored R&D, investing in technologies and capabilities that provide
solutions for our customers. In accordance with government
regulations, we recover a portion of company-sponsored R&D
expenditures through overhead charges to U.S. government contracts.
For more information on our company-sponsored R&D activities,
including our expenditures for the past three years, see Note A to the
Consolidated Financial Statements in Item 8.
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 many
of our patents developed in the performance of U.S. government
contracts, and it may use or authorize others to use the inventions
covered by these 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 have a material impact on our business.
EMPLOYEES
On December 31, 2015, our subsidiaries had 99,900 employees,
approximately one-fifth of whom work under collective agreements with
various labor unions and worker representatives. Agreements covering
approximately 6 percent of total employees are due to expire in 2016.
Historically, we have renegotiated these labor agreements without any
significant disruption to operating activities.
RAW MATERIALS, SUPPLIERS AND
SEASONALITY
We depend on suppliers and subcontractors for raw materials,
components and subsystems. Our U.S. government customer is a
supplier on some of our programs. These supply networks can
experience price fluctuations and capacity constraints, which can put
pressure on our costs. Effective management and oversight of
suppliers and subcontractors is an important element of our successful
performance. We attempt to mitigate these risks with our suppliers by
entering into long-term agreements and leveraging company-wide
agreements to achieve economies of scale, and by negotiating flexible
pricing terms in our customer contracts. 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 seasonal in nature. The receipt of contract
awards, the availability of funding from the customer, the incurrence of
contract costs and unit deliveries are all factors that influence the
timing of our revenue. In the United States, these factors are influenced
by the federal government’s budget cycle based on its October-to-
September fiscal year.
10 General Dynamics Annual Report 2015