E-Z-GO 2011 Annual Report Download - page 31

Download and view the complete annual report

Please find page 31 of the 2011 E-Z-GO annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 109

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109

Cost of Sales and Selling and Administrative Expense
(Dollars in millions)
2011
2010
2009
Operating expenses
$ 10,491
$ 9,836
$ 9,806
% change compared with prior period
7%
—%
Cost of sales
$ 9,308
$ 8,605
$ 8,468
% change compared with prior period
8%
2%
Gross margin as a percentage of Manufacturing revenues
16.7%
16.5%
16.5%
Selling and administrative expenses
$ 1,183
$ 1,231
$ 1,338
% change compared with prior period
(4)%
(8)%
Manufacturing cost of sales and selling and administrative expenses together comprise our operating expenses. Changes in
operating expenses are more fully discussed in our Segment Analysis below.
Consolidated manufacturing cost of sales as a percentage of Manufacturing revenues was 83.3% and 83.5% in 2011 and 2010,
respectively. On a dollar basis, consolidated cost of sales increased $703 million, 8%, in 2011, principally due to higher sales
volume in the Cessna, Bell and Industrial segments. In 2011, gross margin increased as a percentage of revenues primarily due to
favorable product mix and improved leverage and manufacturing efficiencies on higher volume at Cessna and Bell. These
improvements were partially offset by a $64 million increase in engineering and development expenses throughout our
manufacturing businesses and $60 million in charges at Textron Systems related to the impairment of certain intangible assets and
severance costs. In 2011, on a consolidated basis, selling and administrative expense decreased $48 million, 4%, to $1.2 billion,
compared with 2010, primarily due to $44 million in lower operating expense at the Finance segment, largely reflecting progress
towards our exit from the non-captive commercial finance business, and a $23 million decrease in corporate expense, primarily
due to the impact of changes in our stock price on compensation expense. These decreases were partially offset by higher bid and
proposal costs at Textron Systems in 2011.
In 2010 and 2009, cost of sales as a percentage of Manufacturing revenues remained flat at 83.5%. 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. In 2010, selling and
administrative expense decreased $107 million, 8%, to $1.2 billion, 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 our
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.
Interest Expense
(Dollars in millions)
2011
2010
2009
Interest expense
$ 246
$ 270
$ 309
% change compared with prior period
(9)%
(13)%
Interest expense on the Consolidated Statement of Operations includes interest for both the Finance and Manufacturing borrowing
groups with interest related to intercompany borrowings eliminated. Interest expense for the Finance segment is included within
segment profit and includes intercompany interest.
Our consolidated interest expense decreased $24 million, 9%, in 2011, compared with 2010, primarily due to a decrease for the
Finance group, largely due to the reduction in its debt as it liquidates the non-captive portfolio. In 2010, consolidated interest
expense decreased $39 million, 13%, compared with 2009, primarily due to a $63 million decrease for the Finance group, largely
due to the reduction in its debt as it liquidates the non-captive portfolio. This decrease was partially offset by higher interest
expense for the Manufacturing group of $24 million, primarily due to the full-year impact in 2010 of convertible notes issued in
May 2009.
20
20 Textron Inc. Annual Report • 2011