E-Z-GO 2011 Annual Report Download - page 34

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Cessna’s operating expenses increased by $338 million, 13%, in 2011, compared with 2010, principally due to higher sales
volume, which resulted in a $271 million increase in direct material costs and a $27 million increase in manufacturing overhead.
Operating expenses also increased due to higher engineering and development expenses of $28 million, primarily due to new
product development. Cost inflation was offset by a $45 million favorable benefit related to the last-in, first-out (LIFO) method
of accounting for inventories. In 2011, Cessna had a LIFO benefit of $22 million resulting from operational improvements that led
to a reduction in inventory levels, compared with expense of $23 million in 2010.
Factors contributing to the 2010 year-over-year revenue change are provided below:
(In millions)
2010 versus
2009
Volume
$ (798)
Other
41
Total change
$ (757)
Cessna’s revenues decreased $757 million, 23%, in 2010, compared with 2009, primarily due to lower volume of Citation jets,
reflecting the continued downturn in the business jet market attributable to the economic recession. We delivered 179 Citation jets
in 2010, compared with 289 jets in 2009. Increased aircraft utilization and our investment in additional service capacity during
2010 contributed to increased aftermarket volume as Cessna’s aftermarket revenues increased by $80 million, 14%, from 2009.
Operating expenses decreased by $530 million, 17%, in 2010, compared with 2009, largely due to a decline in direct material and
labor costs, principally as a result of the reduced volume. During 2010, Cessna’s cost reduction activities were not able to fully
offset the lower volume.
Cessna Segment Profit (Loss)
Factors contributing to 2011 year-over-year segment profit change are provided below:
(In millions)
2011 versus
2010
Volume
$ 85
Other
4
Total change
$ 89
Cessna’s segment profit increased $89 million in 2011, compared with 2010, primarily due to higher volume of $85 million.
Segment profit was also impacted by the following contributing factors included within the Other line:
$28 million in higher engineering and development expenses, primarily due to new product development;
$22 million in cost improvements realized during the period, which were driven by factory efficiencies due to higher
production volume; and
$16 million in lower pre-owned aircraft write-downs.
In addition, cost inflation was offset by a $45 million favorable LIFO benefit discussed above.
Factors contributing to 2010 year-over-year segment profit change are provided below:
(In millions)
2010 versus
2009
Volume
$ (253)
Performance
95
Sale of CESCOM assets
(50)
Inflation, net of pricing
(19)
Total change
$ (227)
23
Textron Inc. Annual Report • 2011 23