General Dynamics 2015 Annual Report Download - page 29

The decrease in service revenue in 2014 consisted of the following:
Military vehicle services $ (194)
C4ISR services (224)
IT services (155)
Other, net 31
Total decrease $ (542)
C4ISR services and military vehicle services revenue was lower due
to decreased U.S. Army spending, while IT services revenue decreased
due to reduced commercial wireless work.
Service operating costs decreased in 2014 due primarily to lower
volume on the programs described above.
G&A EXPENSES
As a percentage of revenue, G&A expenses were 6.2 percent in 2015,
6.4 percent in 2014 and 6.6 percent in 2013. G&A expenses in 2014
included $29 of severance-related charges in our European military
vehicles business in the Combat Systems group. We expect G&A
expenses in 2016 to be generally consistent with 2015.
INTEREST, NET
Net interest expense was $83 in 2015 and $86 in 2014 and 2013. We
expect full-year 2016 net interest expense to be approximately $95, up
from 2015 due to less interest income on lower cash balances
expected in 2016.
PROVISION FOR INCOME TAX, NET
Our effective tax rate was 27.7 percent in 2015, 29.7 percent in 2014
and 31.2 percent in 2013. The decrease in the effective tax rate in
2015 was due primarily to the favorable impact of contract close-outs
in 2015. For further discussion and a reconciliation of our effective tax
rate from the statutory federal rate, see Note E to the Consolidated
Financial Statements in Item 8. We anticipate the full-year effective tax
rate to be in the mid-29 percent range in 2016.
DISCONTINUED OPERATIONS, NET OF TAX
In 2014, we entered into an agreement to sell our axle business in the
Combat Systems group and recognized a $146 loss, net of tax (the
sale was completed in January 2015). In 2013, we recognized a $129
loss, net of tax, from the settlement of our litigation with the U.S. Navy
related to the terminated A-12 contract in the company’s discontinued
tactical military aircraft business. See Note A to the Consolidated
Financial Statements in Item 8 for further discussion of these
transactions.
BACKLOG AND ESTIMATED POTENTIAL
CONTRACT VALUE
$100,000
$75,000
$50,000
$25,000
$0
2013 2014 2015
Estimated Potential
Contract Value
Unfunded
Funded
Our total backlog, including funded and unfunded portions, was $66.1
billion at the end of 2015, compared with $72.4 billion on December 31,
2014. Our total estimated contract value, which combines total backlog
with estimated potential contract value, was $90.6 billion on
December 31, 2015.
Estimated potential contract value includes work awarded on
unfunded indefinite delivery, indefinite quantity (IDIQ) contracts or
unexercised options associated with existing firm contracts. Contract
options in our defense business represent agreements to perform
additional work under existing contracts at the election of the customer.
The actual amount of funding received in the future may be higher or
lower than our estimate of potential contract value. We recognize options
in backlog when the customer exercises the option and establishes a
firm order.
AEROSPACE
$20,000
15,000
10,000
5,000
0
2013 2014 2015
Estimated Potential
Contract Value
Unfunded
Funded
General Dynamics Annual Report 2015 25