General Dynamics 2015 Annual Report Download - page 28

2016 Outlook
We expect the Marine Systems group’s 2016 revenue to be consistent
with 2015. Operating margin is expected to improve to the mid-9
percent range.
CORPORATE
Corporate results consist primarily of compensation expense for stock
options. Corporate costs totaled $41 in 2015, $72 in 2014 and $96 in
2013. The decrease in 2015 is due primarily to lower compensation
expense for stock options, as options granted beginning in 2015 have
a three-year vesting period versus a two-year vesting period for prior
option grants. See Note O to the Consolidated Financial Statements in
Item 8 for additional information regarding our equity compensation
plans, including changes made to our equity compensation plans in
2015. We expect Corporate operating costs in 2016 of approximately
$45.
OTHER INFORMATION
PRODUCT AND SERVICE REVENUE AND OPERATING COSTS
Review of 2015 vs. 2014
Year Ended December 31 2015 2014 Variance
Revenue:
Products $ 20,280 $ 19,564 $ 716 3.7%
Services 11,189 11,288 (99) (0.9)%
Operating Costs:
Products $ 15,871 $ 15,335 $ 536 3.5%
Services 9,468 9,644 (176) (1.8)%
The increase in product revenue in 2015 consisted of the following:
Ship construction $ 476
Aircraft manufacturing, outfitting and completions 200
Other, net 40
Total increase $ 716
Ship construction revenue increased in 2015 due to higher volume
on the Virginia-class submarine program and commercial Jones Act
ships. Aircraft manufacturing, outfitting and completions revenue
increased in 2015 due to additional deliveries of G650 aircraft.
Product operating costs increased in 2015 due primarily to higher
volume on the programs described above.
The decrease in service revenue in 2015 consisted of the following:
Ship engineering, repair and other services $ 224
IT services (176)
Military vehicle services (65)
Other, net (82)
Total decrease $ (99)
Ship engineering, repair and other services revenue was up in 2015
due to increased development work on the Ohio-class submarine
replacement program. IT services revenue decreased in 2015 due to
lower volume on several programs. Military vehicle services revenue
decreased in 2015 due primarily to the completion of the GCV design
and development program.
Service operating costs decreased in 2015 due primarily to lower
volume on the programs described above, as well as cost-reduction
efforts in the Information Systems and Technology group.
Review of 2014 vs. 2013
Year Ended December 31 2014 2013 Variance
Revenue:
Products $ 19,564 $ 19,100 $ 464 2.4%
Services 11,288 11,830 (542) (4.6)%
Operating Costs:
Products $ 15,335 $ 15,065 $ 270 1.8%
Services 9,644 10,137 (493) (4.9)%
The increase in product revenue in 2014 consisted of the following:
Ship construction $ 626
Aircraft manufacturing, outfitting and completions 619
C4ISR products (541)
Pre-owned aircraft (143)
Other, net (97)
Total increase $ 464
Ship construction revenue increased in 2014 due to higher volume on
the Virginia-class submarine program and commercial Jones Act ships.
Aircraft manufacturing, outfitting and completions revenue increased due
to additional deliveries of large-cabin aircraft. Offsetting these increases,
lower U.S. Army spending negatively impacted revenue from C4ISR
products. Pre-owned aircraft sales were down as there were fewer
aircraft trade-ins and resulting sales in 2014.
Product operating costs increased in 2014 due primarily to higher
volume on the programs described above. Costs in 2014 were also
affected by higher net R&D expenses in the Aerospace group associated
with ongoing product development efforts.
24 General Dynamics Annual Report 2015