E-Z-GO 2009 Annual Report Download - page 30

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21
Textron Inc.
In 2009, the effective tax rate was favorably impacted by the adoption for Canadian tax purposes, of the U.S. dollar as the functional currency for
one of our Canadian subsidiaries, a reduction in unrecognized tax benefits due to the recognition of a capital gain in connection with the sale of
the CESCOM assets and a reduction in a valuation allowance related to contingent payments on a prior year transaction, partially offset by a write-
off of non-tax deductible goodwill in the Industrial segment.
In 2008, the effective tax rate was significantly impacted by the plan announced in the fourth quarter of 2008 to exit portions of the Finance
segment’s business. This plan resulted in the impairment of all of the Finance segment’s goodwill, of which only a small portion was deductible
for tax purposes. In addition, due to the change in the investment status of the Finance segment’s Canadian subsidiary, we incurred $31 million in
additional tax expense.
Income from Discontinued Operations, Net of Income Taxes
Discontinued Operations includes an $8 million gain on the sale of HR Textron in 2009 and a $111 million gain on the sale of the Fluid & Power
business in 2008, along with income (loss) from operations of these discontinued businesses prior to each disposition.
Segment Analysis
We operate in, and report financial information for, the following five business segments: Cessna, Bell, Textron Systems, Industrial and Finance.
Segment profit is an important measure used for evaluating performance and for decision-making purposes. Segment profit for the manufacturing
segments excludes interest expense, certain corporate expenses and special charges. The measurement for the Finance segment includes interest
income and expense and excludes special charges.
Cessna
(Dollars in millions) 2009 2008 2007
Revenues $ 3,320 $ 5,662 $ 5,000
Segment profit $ 198 $ 905 $ 865
Profit margin 6% 16% 17%
Backlog $ 4,893 $ 14,530 $ 12,583
The deterioration in the global economy in 2009 significantly impacted the business jet market as evidenced by order cancellations and a decline
in new aircraft orders. In response to these conditions, Cessna reduced its aircraft production schedule to align output with customer demand and
reduced its headcount by approximately 47% in 2009. See the “Special Charges” section regarding this restructuring program, including
cancellation of the Citation Columbus development program in the second quarter of 2009.
Cessna Revenues
Cessna’s revenues decreased $2.3 billion in 2009, compared with 2008, primarily due to lower volume in business jets and other aircraft,
reflecting the impact of fewer deliveries due to the economic recession. We delivered 289, 467 and 387 Citation business jets in 2009, 2008 and
2007, respectively. Cessna’s spare parts, product support and maintenance activities also experienced $152 million in lower volume largely due
to a decline in aircraft utilization, primarily as a result of the economic recession, and CitationAir had lower volume of $79 million, primarily due
to lower demand. We expect 2010 business jet volumes and margins will continue to be impacted by weakness in the general aviation industry.
The $9.6 billion decrease in backlog reflects the cancellation of numerous business jets orders largely due to the economic recession, and
included a $2.1 billion impact from our decision to cancel the development of the Citation Columbus aircraft and a $1.3 billion impact due to
cancellations by one customer. We expect ongoing volatility in our backlog until economic conditions begin to recover.
In 2008, Cessna’s revenues increased $662 million, compared with 2007, due to higher volume of $341 million, higher pricing of $252 million
and a benefit from a newly acquired business of $69 million.
Cessna Segment Profit
Cessna’s segment profit decreased $707 million in 2009, compared with 2008, primarily due to an $883 million impact from lower sales volume
and $48 million due to idle capacity related to lower production levels and temporary plant shutdowns. These decreases were partially offset by
$131 million of favorable cost performance and a $50 million gain in the first quarter of 2009 on the sale of assets related to CESCOM, which
provided maintenance tracking services to Cessna’s customers.