E-Z-GO 2004 Annual Report Download - page 38

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Textron Inc.
$70 million of inflation and the unfavorable impact of lower business jet volume and unfavorable mix of $20 million. The benefit
from lower used aircraft overtrade allowances and valuation adjustments was primarily due to fewer trade-ins and a stabilization in
market values for used jets in 2004.
Segment profit decreased $177 million in 2003, compared with 2002, 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.
Cessna Outlook
We expect Cessna’s revenues to increase in 2005 due to higher sales of jets based on our current backlog. Margins are also
expected to increase primarily as a result of the higher business jet volume. Cessna plans to continue its investment in new prod-
ucts such as the CJ1+, CJ2+ and Mustang, broadening its product line to take advantage of the improving business jet market.
Fastening Systems (Dollars in millions) 2004 2003 2002
Revenues $ 1,924 $ 1,737 $ 1,650
Segment profit $ 53 $ 66 $ 72
Profit margin 3% 4% 4%
Textron Fastening Systems is one of the world’s largest providers of integrated fastening systems solutions and offers a full range
of fastening technologies, including fasteners, engineered assemblies and automation equipment. Major markets served include
aerospace, automotive, computer, construction, electronics, electrical equipment, industrial equipment, non-automotive trans-
portation, telecommunications and white good markets. These markets are highly competitive, and suppliers are often required to
make price concessions to win new business and maintain existing customers. Consequently, significant cost reductions are
required not only to offset inflation and price concessions, but also to improve margins.
During 2004, an increase in the global demand for steel resulted in significantly higher prices for materials used in the manufac-
turing process at Fastening Systems, a major supplier of steel fasteners. As a result, Fastening Systems took action to raise prices
and impose surcharges on its steel products to mitigate the impact of higher raw material costs. There has been about a six-month
lag between the increases in cost and full implementation of the new customer pricing programs. These price increases for steel
have been partially offset by price concessions required to win new business and retain existing customers.
Fastening Systems Revenues
The Fastening Systems segment’s revenues increased $187 million in 2004, compared with 2003, primarily due to favorable for-
eign exchange of $116 million, higher volume of $57 million, largely due to improvements in many of its end markets, and $20
million of higher pricing. The Fastening Systems segment’s revenues increased $87 million in 2003, compared with 2002, primar-
ily due to a favorable foreign exchange impact of $128 million, reflecting a weak U.S. dollar, partially offset by higher pricing con-
cessions of $13 million in 2003 and lower volume primarily in the European industrial markets.
Fastening Systems Segment Profit
Segment profit decreased $13 million in 2004, compared with 2003, primarily due to inflation of $88 million, partially offset by
improved cost performance of $35 million, pricing of $20 million, the impact of the higher sales volume of $10 million and favor-
able foreign exchange of $10 million. Inflation includes $62 million of higher steel prices, which were partially offset by $35 mil-
lion in price increases and surcharges to customers. Segment profit in 2003 remained relatively flat with some deterioration,
compared with 2002, reflecting the soft demand for the segment’s products and higher pricing concessions of $13 million.
Fastening Systems Outlook
We expect revenues at Fastening Systems will remain relatively flat in 2005 with a slight improvement in profit margin as we begin
to realize the full benefit of our substantially completed restructuring program and other process improvements.
Industrial (Dollars in millions) 2004 2003 2002
Revenues $ 3,046 $ 2,836 $ 2,627
Segment profit $ 194 $ 150 $ 169
Profit margin 6% 5% 6%