E-Z-GO 2004 Annual Report Download - page 33

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12
Business Overview
Textron Inc. is a multi-industry company that leverages its global network of businesses to provide customers with innovative
solutions and services in five business segments: Bell, Cessna, Fastening Systems, Industrial and Finance. Textron is known
around the world for its powerful brands spanning the business jet, aerospace and defense, fastening systems, plastic fuel sys-
tems, golf car and turf-care markets, among others.
Economic conditions improved in 2004, with the majority of our end markets benefiting from the turnaround. Sales volumes in our
manufacturing businesses reflected this recovery. Most notably, a steady flow of military orders at Bell resulted from increased
spending in the defense sector, while Cessna saw a significant increase in new business jet orders as a result of improvements in
the aircraft sector. In addition, our Finance segment experienced significant improvement in its portfolio credit quality with fewer
charge-offs and a decrease in nonperforming assets.
Textron was, however, affected by commodity inflation in most of its businesses during 2004, including the sharp rise in
steel prices which had an $81 million unfavorable impact, primarily in our Fastening Systems and Industrial segments. As a result
of escalating steel prices, we took actions to raise prices and impose surcharges on many of our steel products, primarily in our
Fastening Systems segment, to mitigate the impact of the higher material costs. While many of these actions were taken in 2004,
we believe it will take a few quarters to determine what impact our pricing actions will have on our customers and volumes.
In addition to the higher commodity costs, pension expense increased $36 million. We were able to absorb the impact of these
factors primarily as a result of our transformation strategy through ongoing cost-reduction initiatives, lean manufacturing, inte-
grated supply chain and restructuring. We intend to continue to execute our transformation strategy and strengthen our portfolio
through the divestiture of non-core businesses and strategic acquisitions to further position Textron to take advantage of the
improved economic conditions.
Consolidated Results of Operations
* Segment profit represents the measurement used by Textron to evaluate performance for decision-making purposes. Segment profit for
manufacturing segments does not include interest expense, certain corporate expenses, special charges, and gains and losses from the dispo-
sition of significant business units. The measurement for the finance segment includes interest income, interest expense and distributions on
preferred securities of Finance subsidiary trust, and excludes special charges.
Revenues
Revenues increased $450 million in 2004 primarily due to the favorable foreign exchange impact of $287 million, higher volume
of $93 million in the manufacturing businesses, the additional revenue of $76 million from the consolidation of CitationShares and
higher pricing of $45 million.
The decrease of $479 million in 2003 was primarily due to lower Citation business jet volume of $876 million at Cessna, due to a
depressed market and the reduction of 2003 deliveries by a major fractional jet customer, and lower sales volume of $123 million
at E-Z-GO and Jacobsen, due to a depressed golf market. These decreases were partially offset by a favorable foreign exchange
impact of $313 million in the Industrial and Fastening Systems segments and increased volume of $131 million at Kautex.
Segment Profit
Segment profit increased $132 million in 2004 primarily due to $303 million in cost-reduction initiatives, a $77 million benefit
from restructuring activities and $45 million of higher pricing. These increases were partially offset by inflation of $254 million.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
2004 Revenues – $10.2 Billion 2004 Segment Profit* – $903 Million
22%
30%
24%
5%
19% Industrial
Bell
Cessna
Finance
Fastening Systems
28%
21%
30%
15%
6%
Industrial
Bell
Cessna
Finance
Fastening Systems