E-Z-GO 2004 Annual Report Download - page 36

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Textron Inc.
Textron’s commercial backlog from unaffiliated customers was $6.8 billion and $5.0 billion at the end of 2004 and 2003, respec-
tively, and is primarily related to Cessna. U.S. Government backlog was $3.3 billion and $1.9 billion at the end of 2004 and
2003, respectively, which was substantially all in the Bell segment. See “Backlog” in Item 1. Business of Textron on page 6 for
more information.
Segment Analysis
(Dollars in millions) 2004 2003 2002
Revenues $ 2,254 $ 2,348 $ 2,235
Segment profit $ 250 $ 234 $ 169
Profit margin 11% 10% 8%
Backlog $ 3,775 $ 2,197 $ 1,815
Bell is a leading manufacturer of advanced military helicopters and tiltrotor aircraft for the U.S. Government and commercial heli-
copters for corporate, offshore petroleum exploration and development, utility, charter, police, fire, rescue and emergency medical
customers. Additionally, Bell is a primary supplier of advanced weapon systems to meet the demanding needs of the aerospace
and defense markets and the leading manufacturer of piston aircraft engines.
Bell Helicopter has two major programs with the U.S. Government – the V-22 and the H-1 Upgrade Program. The V-22 is the
pioneer program for tiltrotor technology with a current requirement of 458 aircraft. Bell expects to receive authorization to proceed
to full-rate production of the V-22 in 2005. The H-1 Upgrade Program is a major contract to remanufacture the U.S. Marine Corps’
fleet of AH-1W SuperCobra and UH-1N utility helicopters to an advanced configuration featuring common avionics and flight
dynamics. Bell expects to receive authorization to proceed to full-rate production in 2006 for 100 UH-1N and 180 AH-1W heli-
copters. Bell currently has orders for six UH-1Y aircraft and three AH-1Z aircraft, and expects to begin deliveries in 2006.
Bell Helicopter continues to manufacture aircraft under the V-22 low-rate initial production releases that began prior to 2003. Rev-
enues under those releases are recorded on a cost incurred basis primarily as a result of the significant engineering effort required
over a lengthy period of time during the initial development phase in relation to total contract volume. Revenues for those releases are
expected to decline through 2007 as the remaining effort is completed. The development effort was substantially complete for new
production releases in 2003, and revenue on those releases will be recognized as units are delivered, which is expected to begin in
2005. Accordingly, during 2005, V-22 program revenues related to new production releases recorded on an as-delivered basis are
expected to more than offset lower revenues associated with the diminishing development revenues recorded as costs are incurred.
During 2004, Bell Helicopter’s commercial business rebounded with increases in orders, deliveries and backlog. Bell continued
to invest in commercial programs as evidenced by the significant progress made on the newly announced 429 light twin aircraft
and other program upgrades in response to customer requests to improve speed, lower operating costs and reduce noise. In
December 2004, the Bell/Agusta Aerospace Company, L.L.C. received U.S. Federal Aviation Administration certification of the
AB139 helicopter.
Additionally, Textron Systems has received orders to deliver over 200 armored security vehicles (“ASV”) in 2005 with additional
orders expected. Currently, production capacity is ramping up to meet these deliveries.
Bell Revenues
The Bell segment’s revenues decreased $94 million in 2004, compared with 2003, due to lower revenue of $166 million in the U.S.
Government business, partially offset by higher commercial sales of $72 million. U.S. Government sales decreased primarily due
to lower revenue of $243 million on the V-22 program and lower sales of $30 million related to a contract for training aircraft com-
pleted in 2003. In addition, revenue was reduced by $11 million related to a final agreement with the U.S. Government to settle an
overhead cost rate matter. These decreases in revenue were partially offset by $34 million of higher military spares volume,
increased sales of $34 million for air-launched weapons and higher H-1 revenue of $34 million. Commercial revenues increased
primarily due to higher foreign military sales of $64 million, increased volume in the aircraft engine business of $18 million and
higher spares volume of $14 million. These increases were partially offset by lower Huey II kit sales of $16 million and lower sales
of commercial aircraft of $6 million. The lower V-22 revenue was primarily due to lower effort of $170 million on production lots
three through six as these contracts near completion and decreasing development activities of $98 million.
Bell