E-Z-GO 2009 Annual Report Download - page 31

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22
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Cessna’s favorable cost performance included $116 million in lower engineering, selling and administrative expense largely due to the workforce
reductions in 2009 and $82 million in forfeiture income from order cancellations, partially offset by higher warranty expense of $35 million, a
$16 million increase in writedowns of pre-owned aircraft inventory, reflecting lower fair market values due to an excess supply in the market, and
unfavorable performance at CitationAir of $10 million.
In 2008, Cessna’s segment profit increased $40 million, compared with 2007, primarily due to the impact of higher volume of $110 million,
pricing in excess of inflation of $82 million and favorable warranty performance of $14 million, partially offset by increased engineering and
product development expense of $45 million, which included costs related to the development of new Citation models, CJ4 and Columbus,
inventory writedowns of $51 million, largely related to used aircraft, and increased overhead costs of $19 million.
Bell
(Dollars in millions) 2009 2008 2007
Revenues $ 2,842 $ 2,827 $ 2,581
Segment profit $ 304 $ 278 $ 144
Profit margin 11% 10% 6%
Backlog $ 6,903 $ 6,192 $ 3,809
Bell Revenues
Bell’s revenues increased $15 million in 2009, compared with 2008, due to higher pricing of $94 million, primarily related to certain commercial
helicopters, partially offset by lower volume of $79 million. Our volume decreased $97 million for commercial helicopters and $30 million for
spares and support services largely due to a decline in demand, along with a $76 million decrease related to the canceled ARH program. These
decreases were partially offset by increased volume in other programs with the U.S. Government, including an $80 million increase for the V-22
as we delivered more aircraft under the multi-year program.
Backlog at Bell increased $711 million in 2009, primarily due to funding for the V-22 program, partially offset by a decline in commercial aircraft
orders largely due to the economic recession.
In 2008, Bell’s revenues increased $246 million, compared with 2007, primarily due to higher volume of $134 million, higher pricing of
$87 million and revenues from newly acquired businesses of $26 million. The increase in volume related primarily to higher V-22 volume of
$125 million (largely due to delivery of 18 aircraft in 2008, compared with 14 in 2007), higher H-1 volume of $47 million (principally due to
delivery of 12 aircraft in 2008, compared with 10 in 2007), and an increase in spares and service sales volume of $28 million. These volume
increases were partially offset by lower commercial helicopter volume of $54 million and lower ARH program revenues of $19 million as a result
of the program’s termination in October 2008.
Bell Segment Profit
Bell’s segment profit increased $26 million in 2009, compared with 2008, primarily due to higher pricing in excess of inflation of $47 million and
improved cost performance of $19 million, partially offset by a change in product mix of $22 million, primarily due to commercial helicopters and
lower volume of $18 million. The improved cost performance primarily reflects:
• Lower selling and administrative expenses of $26 million;
• Lower research and development of $21 million;
• Improvement in the V-22 program of $16 million, primarily due to prior year charges; and an
• $11 million gain on a Canadian currency exchange contract that we had hedged, which was unwound during the third quarter due to a
signicant decline in the production activity; partially offset by
• Unfavorable adjustments of $24 million for the 429 model, primarily related to pricing assumptions and higher than anticipated learning
curve costs, resulting in inventory write downs;
• Costs of $11 million related to the termination of certain commercial models; and
• Lower spares and support performance of $8 million.