E-Z-GO 2010 Annual Report Download - page 31

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Cost of Sales
(Dollars in millions)
2010
2009
2008
Cost of Sales
$ 8,605
$ 8,468
$ 10,583
% change compared with prior period
2%
(20)%
Gross margin as a percentage of Manufacturing revenues
16.5%
16.5%
20.4%
Cost of sales as a percentage of Manufacturing revenues remained flat at 83.5% in 2010 and 2009. On a dollar basis, cost of sales
increased $137 million, 2%, in 2010, compared with 2009, principally due to the net sales volume changes in the Industrial, Bell and
Cessna segments described above, as well as higher pension costs and inflation. In 2010, favorable conversion costs in the Bell and
Industrial segments, resulting from improved leverage and manufacturing efficiencies on higher volumes, were offset by increased
conversion costs at Cessna. Conversion costs increased at Cessna as cost reduction activities, including workforce reductions and
facility consolidations, did not fully offset the impact of lower production volumes.
Cost of sales as a percentage of Manufacturing revenues increased to 83.5% in 2009 from 79.6% in 2008. On a dollar basis, cost of
sales decreased $2.1 billion, 20%, in 2009, compared with 2008, principally due to the sales volume changes in the Cessna and
Industrial segments described above. In 2009, cost of sales was unfavorably impacted from lower production levels and temporary
plant shutdowns in the Cessna and Industrial segments resulting in increased conversion costs and idle capacity.
Selling and Administrative Expense
(Dollars in millions)
2010
2009
2008
Selling and administrative expenses
$ 1,231
$ 1,338
$ 1,590
% change compared with prior period
(8)%
(16)%
Selling and administrative expense decreased $107 million, 8%, to $1.2 billion in 2010, compared with 2009, primarily due to $41
million in lower expenses in the Finance segment reflecting lower compensation and related costs due to headcount reductions
associated with its exit from the non-captive commercial finance business, $39 million of lower commissions primarily resulting from
lower Cessna sales volume, and $27 million lower corporate expenses.
In 2009, selling and administrative expense decreased $252 million, 16%, to $1.3 billion, 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 services and travel costs due to cost-reduction efforts.
Special Charges
(Dollars in millions)
2010
2009
2008
Special charges
$ 190
$ 317
$ 526
% change compared with prior period
(40)%
(40)%
In the fourth quarter of 2008, we initiated a restructuring program to reduce overhead costs and improve productivity across the
company and announced the exit of portions of our commercial finance business. This restructuring program primarily included
corporate and segment direct and indirect workforce reductions and the closure and consolidation of certain operations throughout the
company. In the fourth quarter of 2010, we initiated the final series of restructuring actions under this program, which included
workforce reductions in the Bell, Textron Systems and Industrial segments and at Corporate, along with the decision to exit a plant in
the Industrial segment. With the completion of this program at the end of 2010, we have terminated approximately 12,100 positions
worldwide representing approximately 28% of our global workforce since the inception of the program and have exited 30 leased and
owned facilities and plants.
Special charges included restructuring charges of $99 million, $237 million and $64 million in 2010, 2009 and 2008, respectively,
primarily related to severance costs and asset impairment charges. In 2010, special charges also included a $91 million non-cash pre-
tax charge to reclassify a foreign exchange loss from equity to the Statement of Operations as a result of substantially liquidating a
Canadian Finance entity. In 2009, special charges also include a goodwill impairment charge of $80 million in the Industrial segment.
In 2008, special charges include an initial mark-to-market adjustment of $293 million that was made when we classified certain
finance receivables from held for investment to held for sale in connection with our decision to sell the non-captive portion of our
Finance business, along with a goodwill impairment charge of $169 million in the Finance segment.