E-Z-GO 2009 Annual Report Download - page 27

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
mix represents a change due to the composition of products and/or services sold at different profit margins. Inflation represents higher material,
wages, benefits or other costs. Cost performance reflects an increase or decrease in research and development, depreciation, selling and
administrative costs, warranty, product liability, quality/scrap, labor efficiency, overhead, product line profitability, start-up, ramp-up and cost
reduction initiatives, or other manufacturing inputs. For the U.S. Government business, performance generally refers to changes in estimated
contract rates. These changes typically relate to profit recognition associated with revisions to total estimated costs to complete a contract that
reflect improved (or deteriorated) operating performance on the contract and are recognized by recording cumulative catch-up adjustments in the
current period.
Revenues
Revenues decreased $3.5 billion, or 25%, to $10.5 billion in 2009, compared with 2008. This decrease is primarily due to the following factors:
• Lower manufacturing volume of $3.3 billion, reecting:
— $2.4 billion decrease at Cessna, primarily related to fewer deliveries due to the economic recession;
— $801 million decrease in the Industrial segment, principally due to recession-related lower demand; and a
— $79 million decrease at Bell largely related to lower commercial helicopter volume as a result of the economic recession.
• Lower Finance segment revenues of $362 million, reecting an increase in portfolio losses, lower market interest rates and lower
securitization income; and
• Unfavorable foreign exchange impact of $51 million in the Industrial segment; partially offset by
• Higher pricing of $155 million, with $94 million at Bell and $48 million at Cessna.
Revenues increased $1.6 billion, or 13%, to $14.0 billion in 2008, compared with 2007. This increase is primarily due to the following factors in
our manufacturing businesses, which were partially offset by lower revenues of $152 million in the commercial finance business:
• Additional revenues from newly acquired businesses of $820 million, primarily the acquisition of AAI at Textron Systems;
• Higher manufacturing volume of $498 million, reecting:
— $341 million in higher volume at Cessna, primarily related to an increase in business jet deliveries;
— $134 million in higher volume at Bell, largely related to the V-22 and H-1 programs; and
— $85 million in increased volume at Textron Systems from higher Armored Security Vehicle aftermarket, Lycoming and Intelligent Battleeld
Systems products; partially offset by
— $62 million decrease in the Industrial segment, principally due to lower demand at Kautex;
• Higher pricing of $378 million, with $252 million at Cessna, $87 million at Bell and $34 million in the Industrial segment; and
• Favorable foreign exchange impact of $95 million in the Industrial segment.
Cost of Sales
Cost of sales as a percentage of Manufacturing revenues was 83.5%, 79.6% and 79.0% in 2009, 2008 and 2007, respectively. The increase
in 2009 is primarily due to the impact of lower production levels and temporary plant shutdowns in the Cessna and Industrial segments resulting
in increased conversion costs and idle capacity. The increase in 2008 is largely due to higher product development costs, primarily at Cessna
related to the development of new Citation models and inventory writedowns taken at Cessna at the end of 2008, largely related to pre-
owned aircraft.
Selling and Administrative Expense
Selling and administrative expense decreased $262 million to $1,344 million in 2009, compared with 2008, primarily due to workforce reductions
and furlough programs resulting in lower compensation and related costs, lower sales commissions at Cessna, and a decline in professional
service and travel costs due to cost reduction efforts. In 2008, selling and administrative expense increased $61 million to $1,606 million,
compared with 2007, primarily due to an increase in commission expense from higher business jet sales and higher operating expenses resulting
from the acquisition of AAI in 2007, partially offset by lower compensation expense largely caused by stock depreciation.
Special Charges
Special charges include restructuring charges of $237 million and $64 million in 2009 and 2008, respectively. In 2009, special charges also
includes a goodwill impairment charge of $80 million in the Industrial segment, which is discussed on page 67 of Note 10 to the Consolidated
Financial Statements. In 2008, we incurred other special charges of $462 million in the Finance segment in connection with our decision to exit
the non-captive portion of the commercial nance business. These charges include the initial mark-to-market adjustment of $293 million that was
made when we classied certain nance receivables from held for investment to held for sale and a goodwill impairment charge of $169 million.
There were no special charges in 2007.