E-Z-GO 2005 Annual Report Download - page 39

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The Bell segment is a supplier of aircraft and weapon systems providing advanced product and service solutions to both military and commercial
customers. Bell Helicopter is a leading manufacturer of 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.
Textron Systems is a primary supplier to the defense, aerospace and general aviation markets.
Bell Helicopter participates in several major programs with the U.S. Government. In association with The Boeing Company, Bell Helicopter is the
only supplier of military tiltrotor aircraft – the V-22. The U.S. Government has issued contracts for 83 production V-22 aircraft with a total require-
ment of 458 aircraft. In September 2005, Bell received authorization to proceed to full-rate production of the V-22.
Bell Helicopter is nearing completion of the Engineering and Manufacturing Development (“EMD”) phase of the H-1 Upgrade Program for the
U.S. Marine Corps. This program will produce an advanced attack and a utility model helicopter, the AH-1Z and UH-1Y, respectively. The Opera-
tional Evaluation for this program is planned to begin shortly after the delivery of the remaining two aircraft in 2006. The U.S. Government has
also issued contracts for the production of ten UH-1Y aircraft and six AH-1Z aircraft through Low Rate Initial Production. A contract for an addi-
tional lot, along with a priced option for another lot, is planned to be exercised in the second quarter of 2006.
Additionally, Bell was awarded a contract for System Development and Demonstration of the Army’s Armed Reconnaissance Helicopter (“ARH”)
with an expected requirement of 368 aircraft. Bell will also participate in the production of the VH-71 Presidential helicopter fleet through
AWB LLC.
During 2005, Bell Helicopter’s commercial business gained momentum with an increase in orders and deliveries. Bell continued to invest in com-
mercial programs as evidenced by the significant progress made on the 429 Global Ranger and other program upgrades in response to customer
requests to improve speed, lower operating costs and reduce noise.
Textron Systems’ principal strategy and focus is to address the emphasis being placed by the U.S. Department of Defense on network centric war-
fare and the leveraging of advances in information technology by focusing on the development and production of advanced weapon systems.
Additionally, Textron Systems has received orders to deliver more than 1,100 armored security vehicles (“ASV”). Currently, production capacity is
ramping up to meet these deliveries in spite of the disruptions caused by Hurricane Katrina.
Bell Revenues
U.S. Government Business
U.S. Government revenues increased $491 million in 2005 primarily due to higher revenue of $288 million from the V-22 program, higher ASV
volume of $61 million, the benefit of $36 million from the US Helicopter acquisition, higher military spares volume of $32 million and increased
sales of $20 million for air-launched weapons. Additionally, Bell recognized $21 million from the new ARH contract.
U.S. Government revenues decreased $166 million in 2004 largely due to lower revenue of $243 million on the V-22 program primarily as a result
of lower effort on production lots three through six as these contracts neared completion and a decrease in development activities. Lower sales of
$30 million related to the completion of a contract for training aircraft in 2003 and an $11 million reduction in revenue, related to a final agree-
ment with the U.S. Government to settle an overhead cost rate matter, also contributed to the revenue decrease. 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 Business
Commercial revenues increased $136 million in 2005 primarily due to higher aircraft sales of $68 million, higher spares volume of $41 million
and higher international military sales of $26 million due primarily to higher ASV deliveries to foreign customers of $58 million that were partially
offset by lower helicopter volume of $32 million.
Commercial revenues increased $72 million in 2004 primarily due to higher international 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 aircraft sales of $6 million.