General Dynamics 2011 Annual Report Download - page 34

General Dynamics Annual Report 201122
In 2010, our revenues and operating costs were up due to higher volume
on aircraft services in our Aerospace group, U.S. Navy ship programs in our
Marine Systems group and tactical communication systems and IT services
in our Information Systems and Technology group, partially offset by lower
U.S. military vehicle revenues in our Combat Systems group. Growth in
operating earnings significantly outpaced revenue growth in 2010, resulting
in a 70-basis-point increase in operating margins. While each of our
business groups reported earnings growth, performance was particularly
strong in the Aerospace and Combat Systems groups.
Product revenues decreased in 2010 compared with 2009. The decrease in
product revenues consisted of the following:
In 2010, U.S. military vehicle product revenues decreased due to
lower Mine-Resistant, Ambush-Protected (MRAP) vehicle production and
reduced activity on vehicle development programs. The increase in tactical
communication products was driven by higher volume on the Warfighter
Information Network – Tactical (WIN-T) program and several ruggedized
computing products.
Product operating costs were lower in 2010 compared with 2009. The
decrease in product operating costs consisted of the following:
The primary driver of the changes in product operating costs in 2010 was
volume. In addition, pre-owned aircraft operating costs decreased due to $30
of write-downs on the carrying value of inventory in 2009.
Service revenues increased in 2010 compared with 2009. The increase
in service revenues consisted of the following:
In 2010, IT services revenues increased due to higher volume on IT
support and modernization programs for the intelligence community.
Ship engineering and repair revenues increased, primarily on the U.S.
Navy’s next-generation ballistic-missile submarine (SSBN(X)) program.
Recovery in the business-jet market resulted in growth in aircraft
services activity in 2010.
Service operating costs increased in 2010 compared with 2009. The
increase in service operating costs consisted of the following:
The drivers of increased service operating costs in 2010 were primarily
due to increased activity levels on IT, ship engineering and repair and
aircraft services.
OTHER INFORMATION
G&A Expenses
As a percentage of revenues, G&A expenses were 6.1 percent in 2009,
6 percent in 2010 and 6.2 percent in 2011. G&A expenses as a
percentage of revenues increased slightly in 2011 primarily due to higher
ongoing R&D efforts in our Aerospace group. We expect G&A in 2012 to
be approximately 6 percent of revenues.
Year Ended December 31 2009 2010 Variance
Revenues $ 21,977 $ 21,723 $ (254) (1.2)%
Operating costs 17,808 17,359 (449) (2.5)%
Product Revenues and Operating Costs
U.S. military vehicles $ (700)
Tactical communication products 421
Other, net 25
Total decrease $ (254)
U.S. military vehicles $ (695)
Tactical communication products 369
Pre-owned aircraft (57)
Other, net (66)
Total decrease $ (449)
Year Ended December 31 2009 2010 Variance
Revenues $ 10,004 $ 10,743 $ 739 7.4%
Operating costs 8,544 9,198 654 7.7%
Service Revenues and Operating Costs
IT services $ 397
Ship engineering and repair 199
Aircraft services 139
Other, net 4
Total increase $ 739
IT services $ 363
Ship engineering and repair 185
Aircraft services 101
Other, net 5
Total increase $ 654
Year Ended December 31 2009 2010 Variance
Revenues $ 31,981 $ 32,466 $ 485 1.5%
Operating costs and expenses 28,306 28,521 215 0.8%
Operating earnings 3,675 3,945 270 7.3%
Operating margin 11.5% 12.2%
REVIEW OF 2009 VS. 2010