E-Z-GO 2003 Annual Report Download - page 22

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Segment profit in 2003 was $65 million greater than in 2002 primarily because 2002 included $31 million
of costs related to the recall, inspection and customer care programs at the aircraft engine business and
higher profit of $22 million in the commercial helicopter business. The higher profit in the commercial
helicopter business in 2003 was primarily due to lower receivable reserve provisions of $16 million and
reduced pricing of $20 million in 2002 related to one commercial helicopter model.
Segment profit increased $76 million in 2002 primarily because profit in 2001 was reduced as a result of
unfavorable profit adjustments of $149 million at Bell Helicopter. These profit adjustments included $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
these 2001 adjustments, profit decreased $73 million in 2002 primarily due to $31 million of costs related
to the recall, inspection and customer care program at the aircraft engine business and lower profit of
$30 million at Bell Helicopter's commercial business. The lower profit in the commercial business was
primarily due to reduced pricing of $20 million related to one commercial helicopter model and
increased production and warranty costs of $20 million.
Bell’s total backlog was $2.2 billion and $1.8 billion at the end of 2003 and 2002, respectively. This
includes Bell Helicopter’s U.S. Government backlog of $1.2 billion and $1.0 billion for 2003 and 2002,
respectively, which primarily related to the V-22 program.
For 2004, Bell Helicopter’s delivery volumes should be stable, but revenues are expected to be lower on
the V-22 program as development efforts wind down and revenues related to new production releases
are recorded on an as-delivered basis. Despite the lower revenue, margins are expected to improve as
a result of cost reduction initiatives.
Cessna is the world’s largest manufacturer of light and mid-size business jets providing dependable air-
craft and premier service to corporate customers in over 75 countries. Cessna also participates in the
fractional jet ownership business through its sales to a major fractional jet customer, as well as through
CitationShares, Textron’s joint venture company with TAG Aviation USA, Inc. The prolonged economic
downturn has negatively impacted corporate profits over the last two years. Declining corporate profits
usually precede a decline in the business jet market by about 18 to 24 months. While management had
expected 2003 jet deliveries to decline because of the weak economy, the decline was exaggerated by
a significant schedule change from a major fractional customer. Cessna responded to this significant
decrease in volume by adjusting production schedules to match near-term deliveries and was able to
reduce the impact of the lower sales volume through aggressive cost reduction and restructuring initia-
tives. At the same time, Cessna continued its strategy of investment in new product development and
delivered respectable profitability in 2003.
The Cessna segment revenues decreased $876 million in 2003, due to lower Citation business jet vol-
ume (197 jet deliveries in 2003, compared with 307 in 2002). Lower used aircraft volume of $87 million
and lower Caravan volume of $32 million as a result of lower demand were essentially offset by higher
spare parts and service volume of $48 million, higher pricing of $45 million related to the last remnants of
introductory pricing on certain business jet models and a $27 million benefit from lower used aircraft
overtrade allowances.
Cessna’s 2002 revenues increased by $132 million primarily due to higher sales volume of used aircraft
of $125 million, the favorable impact of $68 million related to the expiration of lower introductory pricing
on certain business jet models and higher pricing of $29 million. These increases were partially offset by
$64 million in lower sales volume of single engine piston aircraft and lower Citation business jet volume
of $49 million (307 jet deliveries in 2002, compared with 313 in 2001).
Segment profit decreased $177 million in 2003, primarily due to reduced margin of $305 million from
lower sales volume and inflation of $67 million, partially offset by improved cost performance of $125
million and higher pricing of $45 million related to the last remnants of introductory pricing on certain
business jet models and a $27 million benefit from lower used aircraft overtrade allowances.