E-Z-GO 2007 Annual Report Download - page 42

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21
Textron Inc.
Cessna Segment Profi t
In 2007, Cessna’s segment profi t increased $220 million, compared with 2006, primarily due to improved pricing, along with the $139 million
impact of higher volume and favorable warranty performance of $14 million, partially offset by infl ation of $106 million and increased engineering
and product development expense of $41 million. Favorable warranty performance included the $19 million impact of lower estimated warranty
costs for aircraft sold in 2007 related to initial model launches as discussed below, partially offset by a lower benefi t of $5 million from other
favorable warranty performance (a $28 million benefi t in 2007, compared with $33 million in 2006).
Segment profi t increased $188 million at Cessna in 2006, compared with 2005, primarily due to improved pricing, the $102 million impact of
higher volume and favorable warranty performance of $39 million, partially offset by infl ation of $112 million and higher engineering and product
development costs of $41 million. Favorable warranty performance included the $24 million impact of lower estimated warranty costs for aircraft
sold in 2006 related to initial model launches as discussed below, as well as a $15 million incremental benefi t from other favorable warranty
performance in 2006 (a $33 million benefi t 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
warranty costs generally moderate. For the Sovereign and CJ3 production lines, in the second half of 2006 management estimated that the
production lines had reached this maturity level based on historical production and warranty patterns, resulting in lower estimated warranty
costs than earlier production aircraft. Accordingly, Cessna has had favorable warranty performance in the past two years due to the lower point-
of-sale warranty costs for Sovereign and CJ3 aircraft sold. Management expects improved performance on these models to continue in the
foreseeable future.
Industrial
(Dollars in millions) 2007 2006 2005
Revenues $ 3,435 $ 3,128 $ 3,054
Segment profi t $ 218 $ 163 $ 150
Profi t margin 6% 5% 5%
The Industrial segment includes the businesses of Kautex, Fluid & Power, Greenlee, E-Z-GO and Jacobsen. During 2007, we experienced positive
organic revenue growth, largely due to double-digit increases at Fluid & Power and Greenlee, including record sales at Fluid & Power. In the
fourth quarter, Greenlee expanded its product offerings through its acquisition of Paladin Tools, and E-Z-GO introduced its new energy-effi cient
RXV golf car.
Industrial Revenues
Revenues in the Industrial segment increased $307 million in 2007, compared with 2006, primarily due to higher volume of $148 million,
favorable foreign exchange impact of $148 million and higher pricing of $46 million, partially offset by the 2006 divestiture of non-core product
lines of $37 million.
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.
Industrial Segment Profi t
Segment profi t in the Industrial segment increased $55 million in 2007, compared with 2006, mainly due to improved cost performance of
$60 million, higher pricing of $46 million, the $20 million impact of higher volume and mix, and a $15 million gain on the sale of land, partially
offset by infl ation of $83 million. Improved cost performance was primarily attributable to cost reduction efforts at Kautex, while infl ation largely
refl ects increases in material costs.
Segment profi t in the Industrial segment increased $13 million in 2006, compared with 2005, mainly due to $54 million of improved cost
performance, higher pricing of $46 million and the $24 million impact of higher net volume and mix, partially offset by $100 million of infl ation
and a $7 million impact from divestitures of non-core product lines.