E-Z-GO 2006 Annual Report Download - page 40

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19
Textron Inc.
Cessna Segment Profit
Segment profit increased $188 million at Cessna in 2006, compared with 2005 primarily due to higher pricing of $183 million, the impact of
higher volume of $102 million and favorable warranty performance of $39 million, partially offset by inflation of $112 million and higher engi-
neering and product development costs of $41 million. Favorable warranty performance included the $24 million impact of lower estimated war-
ranty costs for aircraft sold in 2006, as well as a $15 million incremental benefit from other favorable warranty performance in 2006 (a $33 million
benefit in 2006 compared with $18 million in 2005).
During initial model launches, Cessna typically incurs higher warranty-related costs until the production process matures, at which point war-
ranty costs moderate. Based on historical production and warranty patterns, management estimated that the Sovereign and CJ3 production lines
had reached this maturity level, and that Sovereign and CJ3 aircraft produced in the third and fourth quarter of 2006 would incur lower warranty
costs than earlier production aircraft. In 2006, Cessna’s profit improved by approximately $24 million as a result of lower point of sale warranty
costs for aircraft sold during the year, primarily Sovereign and CJ3, compared with 2005. Management expects improved performance on these
models to continue in the foreseeable future.
In 2005, Cessna’s segment profit increased $190 million, compared to 2004, largely due to the $229 million impact of higher volume across all
product lines and $82 million of higher pricing, partially offset by $99 million of inflation.
Industrial
(Dollars in millions)
2006 2005 2004
Revenues $ 3,128 $ 3,054 $ 3,046
Segment profit $ 163 $ 150 $ 194
Profit margin 5% 5% 6%
The Industrial segment is composed of five businesses, including E-Z-GO, Jacobsen, Kautex, Greenlee and Fluid & Power. During 2006, we
experienced positive organic growth in each of this segment’s businesses as we continued to focus on our customers. Both Fluid & Power and
Kautex increased their presence in China to capitalize on the expanding market. Greenlee prepared to launch their new hand tool product line to
complement their existing products. In our golf and turf care businesses, we completed the sale of our commercial grounds care business, allow-
ing us to focus on our core golf, resort, sport turf and municipal markets.
Industrial Revenues
Revenues in the Industrial segment increased $74 million in 2006, compared with 2005 primarily due to higher volume of $89 million, higher
pricing of $46 million and a favorable foreign exchange impact of $10 million, partially offset by the divestiture of non-core product lines of
$72 million.
Revenues in the Industrial segment increased $8 million in 2005, compared with 2004 as higher pricing of $36 million and favorable foreign
exchange of $31 million were largely offset by lower volume of $63 million. The lower sales volume primarily reflected decreases of $80 million at
Kautex, largely due to product model changeovers, and $39 million at Jacobsen primarily related to the strategic realignment of its North Ameri-
can commercial distribution network. These decreases were partially offset by higher volume of $31 million at Greenlee.
Industrial Segment Profit
Segment profit in the Industrial segment increased $13 million in 2006, compared with 2005 mainly due to $54 million of improved cost perfor-
mance, higher pricing of $46 million and the $24 million impact of higher net volume and mix, partially offset by $100 million of inflation and a
$7 million impact from divestitures of non-core product lines.
Segment profit in the Industrial segment decreased $44 million in 2005, compared with 2004 largely due to inflation of $84 million and the
impact of lower volume and an unfavorable mix of $21 million, partially offset by higher pricing of $36 million and improved cost performance of
$24 million, primarily at Kautex.
Finance
(Dollars in millions)
2006 2005 2004
Revenues $ 798 $ 628 $ 545
Segment profit $ 210 $ 171 $ 139
Profit margin 26% 27% 26%