E-Z-GO 2006 Annual Report Download - page 37

Download and view the complete annual report

Please find page 37 of the 2006 E-Z-GO annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 108

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108

Each segment’s revenues and profit as a percentage of consolidated revenues and profit are provided below:
Bell
(Dollars in millions)
2006 2005 2004
Revenues $ 3,408 $ 2,881 $ 2,254
Segment profit $ 249 $ 368 $ 250
Profit margin 7% 13% 11%
Backlog at Bell Helicopter $ 3,119 $ 2,812 $ 2,842
Bell Helicopter currently is in the early stages of development or production for a number of government and commercial programs that are antici-
pated to significantly drive revenue and profit growth in future years. Government programs generally follow a three-phase cycle consisting of:
development, transition to production, and full-rate production ramp-up. Each phase has specific risks and operational challenges. Over the next
few years, Bell Helicopter’s major government programs will be transitioning through various phases of this cycle.
Bell Helicopter programs with the U.S. Government include the V-22 military tiltrotor aircraft, the H-1 upgrade program and the ARH program.
The V-22 program is in full-rate production and delivered 16 aircraft in 2006. The H-1 upgrade program is in the transition to production phase,
and the ARH program is in the System Development and Demonstration (“SDD”) phase.
In 2006, we made significant investments to conduct research and development, transition development contracts to production, increase our
production capacity and implement improved operational systems to manage anticipated growth in Bell Helicopter’s programs. These investments
have negatively impacted our financial results, and include significant ongoing production ramp-up (primarily for the V-22 program), ongoing
development efforts related primarily to the 429 model and the ARH program, and the H-1’s transition to production.
The costs of investing in improved operational systems resulted in higher overhead expenses during 2006. While these higher overhead costs
have been reflected in lower 2006 earnings in the commercial business, a portion of these costs have been absorbed into overhead in the govern-
ment business due to the relatively long production cycle, particularly into V-22 production inventory. The overhead costs are anticipated to mod-
erate in 2007. However, as V-22 aircraft currently in production are delivered in future periods, the 2006 overhead expenses reflected in inventory
will result in lower margins on these shipments.
Textron Systems has continued to experience strong growth in its U.S. Government business, delivering 471 Armored Security Vehicles (“ASV”)
in 2006 to support our troops in Iraq and elsewhere. During 2006, Textron Systems added to its offerings to the defense industry by acquiring two
businesses, Innovative Survivability Technologies and Overwatch Systems.
Bell Revenues
U.S. Government Business
In 2006, revenues increased $376 million, compared with 2005 primarily due to higher net volume and mix of $343 million and the benefit from
acquisitions of $28 million. The volume increase is primarily due to higher ASV deliveries of $286 million, higher ARH SDD development revenue
of $94 million, increased spares and service sales of $37 million, and additional Intelligent Battlefield Systems volume of $22 million, partially
offset by lower V-22 volume of $80 million and lower H-1 revenue of $18 million.
In 2005, revenues increased $491 million, compared with 2004 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 on the ARH SDD contract.
16
2006 Revenues – $11.5 Billion 2006 Segment Profit – $1.3 Billion
30%
27%
36%
7%
Industrial
Bell
Cessna
Finance
20%
13%51%
16%
Industrial
Bell
Cessna
Finance
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations