E-Z-GO 1999 Annual Report Download - page 32

Aircraft
1999 vs. 1998
The Aircraft segment’s revenues and income increased $555 million (17%) and $24 million
(7%), respectively, due to higher results at Cessna Aircraft.
◗Cessna Aircraft’s revenues increased $435 million as a result of higher sales of business
jets, primarily the Citation X and the Citation Excel, higher single-engine piston air-
craft sales, and increased spares and service revenues. Its income increased as a result of
the higher sales, partially offset by increased manufacturing costs associated with the
ramp-up in production of new aircraft, higher warranty expense and increased new
product development expense related to the Citation CJ2.
◗Bell Helicopter’s revenues increased $120 million, due primarily to higher revenues on
the V-22 production contract ($105 million) and the Huey and Cobra upgrade contracts
($63 million) and higher foreign military sales ($42 million), partially offset by lower
commercial and U.S. Government helicopter sales ($102 million). Bell’s income was
unchanged from the 1998 level. 1999 results reflected the full year recognition into
income ($37 million in 1999 vs. $10 million in 1998) of cash received in the fourth
quarter of 1998 on the formation of a joint venture on the Bell Agusta commercial
tiltrotor program (BA609), partially offset by higher expense related to new product
development, while 1998 results reflected favorable contract adjustments related to the
Bell-Boeing V-22 Engineering, Manufacturing and Development contract.
Research and development efforts for the BA609 program are provided by each joint
venture partner in accordance with work plans developed at the time of the venture
formation. Under the agreement, the venture is jointly controlled by both partners, with
the individual parties retaining management responsibility for individual programs
within the venture. Bell’s research and development effort under the program is classi-
fied as company-funded research and development and totaled approximately $60 mil-
lion in 1999. This amount is net of approximately $23 million of reimbursements from
the joint venture partner, but excludes all amounts spent by Agusta for development
activities that it is responsible for under the joint venture agreement. In addition, a por-
tion of Bell’s development responsibilities under the partnership agreement are being
performed by risk-sharing subcontractors. The joint venture agreement provides for the
sharing of marketing and production efforts and related profits on the BA609 program,
as well as on other aircraft under development.
1998 vs. 1997
The Aircraft segment’s revenues increased $164 million (5%) and income before special
charges increased $25 million (8%) due to higher results at Cessna Aircraft.
◗Cessna Aircraft’s revenues increased $301 million, primarily as a result of higher sales of
business jets, single-engine piston aircraft and Caravans. Income increased as a result of the
higher sales combined with improved results in the single-engine piston aircraft business.
◗Bell Helicopter’s revenues decreased $137 million, due primarily to the completion
in 1997 of the Canadian Forces contract ($180 million), partially offset by higher
commercial spares sales ($23 million) and higher revenues to the U.S. Government
($29 million). The higher U.S. Government revenues were due to higher revenues
on the V-22 program ($89 million) and the Huey and Cobra upgrade contracts
($51 million), partially offset by lower foreign military sales ($39 million) and lower
revenues on other U.S. Government aircraft and spares ($72 million). Bell’s income
decreased due to the lower revenues and a change in product mix, primarily resulting
from lower margins on U.S. Government contracts. This unfavorable impact was par-
tially offset by the benefit on the BA609 program from the joint venture with Agusta
described above, and a lower level of product development expense in 1998.
Under the joint venture agreement, Bell has received $100 million in cash and
its partner has assumed a significant portion of product development effort for joint
venture aircraft. The benefit from the joint venture contribution in the fourth quarter
1998 ($10 million) has been recognized in relation to total projected product develop-
ment spending. The quarter also benefited by $7 million for development spending
that will be reimbursed by the venture partner.
30 Consistent Growth
$3,744
$3,189
$3,025
999897
17%5%17%
Aircraft
Revenues
$362
$338
$313
999897
7%8%20%
Operating
Income