E-Z-GO 2005 Annual Report Download - page 35

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15
Business Overview
Textron Inc. is a multi-industry company that leverages its global network of businesses to provide customers with innovative solutions and ser-
vices in four business segments: Bell, Cessna, Industrial and Finance. Textron is known around the world for its powerful brands spanning the
business jet, aerospace and defense, plastic fuel systems, golf car and turf-care markets, among others.
The global economy continued to grow in most of our major markets in 2005, despite early weakness in some regions, including parts of Europe.
The U.S. economy, in particular, proved resilient in the face of Hurricanes Katrina and Rita. Overall capital spending continued to grow at a steady
and sustainable rate. Our company’s performance is strongly related to this key economic factor, which reflects investments in longer lasting items
such as equipment, facilities and vehicles.
We had strong sales in 2005 – particularly in our aerospace and defense businesses. We were able to deliver exceptional organic growth (gains
from existing business, excluding the effects of acquisitions and other changes) of 19%, which is the result of our commitment to bringing new
products and services to our customers. Orders were strong, most notably at Bell, where a steady flow of military orders resulted from continued
spending in the defense sector and we received robust orders in our commercial helicopter business. Cessna also saw a significant increase in
new business jet orders as a result of strength in the aircraft sector and the popularity of its new model introductions, and our Finance segment
experienced significant improvement in its portfolio credit quality with fewer charge-offs and a decrease in nonperforming assets. However,
Industrial volumes were down slightly from 2004 largely due to a downturn in the North American automotive industry.
While we were impacted by inflation and higher pension costs in 2005, we were able to absorb the impact of these factors primarily as a result of
the increased volumes and the benefit of our transformation strategy to reduce costs, introduce new products and enhance our portfolio of busi-
nesses. We will continue to execute our transformation strategy and position Textron to take advantage of the improved economic conditions.
To strengthen our overall position in our markets, we have continued to improve upon our portfolio of businesses. During 2005, we sold our
interest in the Model AB139 helicopter program to Agusta, our partner in the BAAC venture. We also purchased US Helicopter to increase Bell’s
ability to provide after-sales service, bought out Kautex’s Japanese joint venture partner to take advantage of a rapidly growing market, and set up
a new joint venture with a German company, Rothenberger AG, to expand our presence in North American plumbing tools. In December 2005, our
Board of Directors authorized management’s plan for the divestiture of our Textron Fastening Systems business. With this approval, we have com-
mitted to actively market this business and anticipate no significant changes to the approved plan and the completion of the sale within the next
twelve months. As a result, this business was reclassified to discontinued operations in the fourth quarter of 2005.
Consolidated Results of Operations
* Segment profit represents the measurement used by Textron to evaluate performance for decision-making purposes. Segment profit for manufacturing segments
excludes interest expense, certain corporate expenses, special charges, and gains and losses from the disposition of significant business units. The measure-
ment for the Finance segment includes interest income and expense and excludes special charges.
Revenues
Revenues increased $1.7 billion in 2005 primarily due to higher manufacturing sales volume of $1.3 billion, higher pricing of $159 million, the
additional revenue of $115 million from acquisitions and higher revenue in the Finance segment of $83 million.
Revenues increased $263 million in 2004 primarily due to favorable foreign exchange of $167 million, the additional revenue of $76 million from
the consolidation of CitationShares, higher manufacturing volume of $31 million and higher pricing of $30 million, partially offset by lower
Finance revenues of $27 million.
Item 7. Management’s Discussion and Analysis of Financial Condition and
Results of Operations
2005 Revenues – $10.0 Billion 2005 Segment Profit* – $1.1 Billion
29%
30%
35%
6% Industrial
Bell
Cessna
Finance
32%
13%
40%
15%
Industrial
Bell
Cessna
Finance