General Dynamics 2011 Annual Report Download - page 58

General Dynamics Annual Report 201146
H. INVENTORIES
Our inventories represent primarily business-jet components and are
stated at the lower of cost or net realizable value. Work-in-process repre-
sents largely labor, material and overhead costs associated with aircraft
in the manufacturing process and is based primarily on the estimated
average unit cost of the units in a production lot. Raw materials are
valued primarily on the first-in, first-out method. Inventories consisted
of the following:
I. PROPERTY, PLANT AND EQUIPMENT, NET
Property, plant and equipment are carried at historical cost, net of
accumulated depreciation. The major classes of property, plant and
equipment were as follows:
We depreciate most of our assets using the straight-line method and
the remainder using accelerated methods. Buildings and improvements
are depreciated over periods up to 50 years. Machinery and equipment
are depreciated over periods up to 30 years.
G. CONTRACTS IN PROCESS
Contracts in process represent recoverable costs and, where applicable,
accrued profit related to long-term contracts that have been inventoried
until the customer is billed, and consisted of the following:
Contract costs consist primarily of labor, material, overhead and gen-
eral and administrative (G&A) expenses. Contract costs also include esti-
mated contract recoveries for matters such as contract changes, negoti-
ated settlements and claims for unanticipated contract costs. We record
revenue associated with these matters only when the amount of recovery
can be estimated reliably and realization is probable. Assumed recoveries
for these items were not material on December 31, 2010 or 2011.
Other contract costs represent amounts that are not currently allocable
to government contracts, such as a portion of our estimated workers’
compensation obligations, other insurance-related assessments, pension
and other post-retirement benefits and environmental expenses. These
costs will become allocable to contracts generally after they are paid.
We expect to recover these costs through ongoing business, including
existing backlog and probable follow-on contracts. If the backlog in the
future does not support the continued deferral of these costs, the profit-
ability of our remaining contracts could be adversely affected. However,
our business base includes numerous contracts for which we have been
designated the sole source or are one of two suppliers on long-term U.S.
defense programs. We expect to bill substantially all of our year-end 2011
contracts-in-process balance during 2012, with the exception of these
other contract costs.
December 31 2010 2011
Contract costs and estimated profits $ 15,675 $ 18,807
Other contract costs 909 959
16,584 19,766
Advances and progress payments (11,711) (14,598)
Total contracts in process $ 4,873 $ 5,168
December 31 2010 2011
Machinery and equipment $ 3,388 $ 3,712
Buildings and improvements 2,084 2,172
Land and improvements 283 321
Construction in process 204 313
Total property, plant and equipment* 5,959 6,518
Accumulated depreciation (2,988) (3,234)
Property, plant and equipment, net $ 2,971 $ 3,284
* Our government customers provide certain facilities; we do not include these facilities above.
December 31 2010 2011
Work in process $ 1,124 $ 1,202
Raw materials 965 1,031
Finished goods 69 77
Total inventories $ 2,158 $ 2,310