E-Z-GO 2004 Annual Report Download - page 37

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16
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The Bell segment’s revenues increased $113 million in 2003, compared with 2002, due to higher U.S. Government revenue of $62
million primarily due to the ongoing development efforts on the V-22 program and higher foreign military sales volume of $35 mil-
lion related to a contract that began shipments during the third quarter of 2002.
Bell Segment Profit
Segment profit increased $16 million in 2004, compared with 2003, due to higher profit of $47 million in the commercial busi-
ness, partially offset by the impact of lower revenue of $31 million in the U.S. Government business. Commercial profit increased
primarily due to the $34 million impact of the higher foreign military sales, favorable cost performance in the commercial heli-
copter business of $31 million (including the favorable resolution of a $6 million warranty issue provided for in 2003), the $9 mil-
lion benefit from a favorable mix of commercial aircraft and the $5 million favorable impact of a nonrecurring 2003 charge related
to a recall, inspection and customer care program at the aircraft engine business, partially offset by higher engineering expenses of
$28 million. Profit in the U.S. Government business decreased primarily due to the $20 million impact of lower V-22 revenue, an
$11 million settlement with the U.S. Government and lower volume of training aircraft of $11 million, partially offset by the $10
million impact of higher volume of air-launched weapons.
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.
Bell Outlook
Bell’s revenues are expected to increase about 7% in 2005 largely due to higher V-22 and ASV deliveries. V-22 revenue is
expected to increase as deliveries of new production releases (recorded on an as-delivered basis) are expected to more than offset
lower engineering- and development-based revenues (recorded on a cost-incurred basis). Margins are expected to remain rela-
tively consistent as a result of ramp up costs for V-22 production.
Cessna
(Dollars in millions)
2004 2003 2002
Revenues $ 2,473 $ 2,299 $ 3,175
Segment profit $ 267 $ 199 $ 376
Profit margin 11% 9% 12%
Backlog $ 5,352 $ 3,947 $ 4,474
Cessna is a leading manufacturer of general aviation aircraft and the largest manufacturer of light and mid-sized business jets.
Cessna provides dependable aircraft 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, Tex-
tron’s joint venture with Tag Aviation USA, Inc. During 2004, the economy strengthened after a prolonged downturn, leading to a
significant increase in business jet and single engine aircraft orders. At the same time, Cessna also realized the benefit of its con-
tinued strategy of investment in new product development, receiving FAA certification for the Citation XLS, Sovereign and CJ3
business jets and introducing upgrades to the CJ1 and CJ2, the CJ1+ and the CJ2+.
Cessna Revenues
The Cessna segment’s revenues increased $174 million in 2004, compared with 2003, primarily due the $76 million increase from
the consolidation of CitationShares, $39 million of higher pricing and a $12 million benefit from lower used aircraft overtrade
allowances. Citation business revenue jet deliveries were 179 in 2004, compared with 194 jets in 2003.
The Cessna segment’s revenues decreased $876 million in 2003, compared with 2002, due to lower Citation business jet volume
(194 revenue jet deliveries in 2003, compared with 306 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 Segment Profit
Segment profit increased $68 million in 2004, compared with 2003, largely due to $85 million of improved cost performance, $39
million of higher pricing, $18 million of lower used aircraft valuation adjustments, a $12 million benefit from lower used aircraft
overtrade allowances and an $8 million benefit related to the expiration of prior year residual value guarantees, partially offset by