E-Z-GO 2002 Annual Report Download - page 24

vary depending upon the actual experience of the program, recoveries received from third parties or an
expansion of the existing program.
During 2002, Citation business jet deliveries decreased to 307 jets from a record 313 in 2001 resulting in
lower business jet volume. The current downturn in the business jet market has caused Cessna to
reduce its production for 2003, scheduling about 220 jet deliveries. Cessna has responded to the mar-
ket downturn by realigning its cost structure to anticipated market demand. Cessna’s backlog as of
December 28, 2002 includes new Citation business jet models currently under development which are
scheduled to begin delivery in 2004. Cessna’s wide array of products and its strong backlog, combined
with an improved cost structure should put Cessna in a position to grow when its markets recover.
•Bell Helicopter’s revenues increased $15 million due to higher revenue of $93 million from the U.S. Gov-
ernment, partially offset by lower commercial sales of $78 million. U. S. Government revenues increased
primarily due to higher revenue of $130 million on the V-22 program, partially offset by lower revenue of
$25 million on the Huey and Cobra upgrade contracts. Sales in the commercial business primarily
reflected lower commercial aircraft sales of $96 million, partially offset by higher commercial spares and
service sales of $44 million. Bell’s profit increased $142 million primarily as a result of unfavorable 2001
profit adjustments of $149 million, including $124 million related to reduced profitability expectations or
losses on certain development and production contracts and $25 million related primarily to receivable
and inventory reserve increases. Excluding the 2001 profit adjustments, profit decreased $7 million as a
result of lower profit of $30 million in the commercial business, partially offset by higher profit of $13 mil-
lion in the U.S. Government business and $10 million in cost incurred in 2001 related to outsourcing the
manufacture of certain parts. Lower profit of $30 million in the commercial helicopter business primarily
reflected reduced pricing of $20 million related to one commercial helicopter model, increased produc-
tion and warranty costs of $20 million, increased reserves of $15 million related primarily to receivables,
lower income of $11 million ($6 million in 2002 vs. $17 million is 2001) from a joint venture partner related
to the BA609 program, a lower contribution of $9 million from the decrease in commercial helicopter
sales and increased costs of $9 million on a foreign military contract, partially offset by lower product
development costs of $30 million and a benefit of $18 million related to the higher spares and service
sales.
In December 2000, the U.S. Marine Corps temporarily restricted use of their V-22 tiltrotor aircraft pend-
ing an investigation by the Department of Defense of a mishap. In April 2001, a Blue Ribbon Panel
appointed by the U.S. Secretary of Defense recommended specific changes to the software and
hydraulic systems and issued its unanimous recommendation for continuation of the program. As autho-
rized by an Acquisition Decision Memorandum signed by the Department of Defense in December
2001, the V-22 program continues to proceed at low-rate production levels. The V-22 returned to flight
operations in May 2002 for extensive flight testing which is a prerequisite for returning to operational
use. In August 2002, Bell was awarded a modification to its contract for the next two lots, totaling twenty
aircraft, and in January 2003, a contract was awarded for long lead efforts on an additional 11 aircraft.
Revenues under the V-22 low-rate initial production contract are recorded as costs are incurred, primari-
ly due to the significant engineering effort required over a lengthy period of time during the initial devel-
opment stage in relation to total contract volume. Under the low-rate production releases, Textron contin-
ues to manufacture aircraft which may subsequently be modified for engineering changes. Beginning
with new production releases in 2003, the development effort will be substantially completed. As a
result, revenue on new production releases will be recognized as units are delivered.
2001 vs. 2000
The Aircraft segment’s revenues increased $260 million, while profit decreased $137 million.
•Cessna Aircraft’s revenues increased $219 million due to higher sales volume of Citation business jets of
$223 million, higher pricing of $111 million and higher spare parts and service sales of $16 million.
These increases were partially offset by lower sales of used aircraft of $47 million, lower sales volume of
single engine piston aircraft and aircraft engines of $25 million, higher trade-in allowances of $25 million
for used aircraft and lower Caravan sales of $22 million. Profit increased $47 million primarily as a result
of higher pricing of $111 million, improved cost performance of $20 million and the contribution of $14
million from the higher volume, partially offset by inflation of $37 million, the impact of $34 million for
trade-in allowances and inventory write-downs related to the valuation of used aircraft and higher prod-
uct development expense of $27 million related to the Sovereign business jet.
•Bell Helicopter’s revenues increased $41 million due to higher revenue of $79 million from the U.S. Gov-
ernment, partially offset by lower commercial sales of $38 million. U.S. Government revenues increased
primarily due to higher revenue of $54 million on the V-22. Sales in the commercial business primarily
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