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22 Textron Inc. Annual Report ● 2012
Cessna
% Change
(Dollars in millions) 2012 2011 2010 2012 2011
Revenues $ 3,111 $ 2,990 $ 2,563 4% 17%
Operating expenses 3,029 2,930 2,592 3% 13%
Segment profit (loss) 82 60 (29) 37% 307%
Profit margin 3% 2% (1)%
Backlog $ 1,062 $ 1,889 $ 2,928 (44)% (35)%
Cessna Revenues and Operating Expenses
Factors contributing to the 2012 year-over-year revenue change are provided below:
(In millions)
2012 versus
2011
Volume and mix $ 126
Other (5)
Total change $ 121
Cessna delivered 181 Citation jets in 2012, compared with 183 jets in 2011, however revenues increased $121 million, 4%, in
2012, compared with 2011. The increase in revenues was primarily due to a $68 million impact from higher pre-owned aircraft
volume and $57 million of higher Citation jet revenues reflecting a change in mix of new jets sold during the period. During 2012,
the portion of Cessna’s revenues derived from aftermarket sales and services represented 25% of Cessna’s revenues, compared
with 24% in the corresponding period of 2011.
Cessna’s operating expenses increased by $99 million, 3%, in 2012, compared with 2011, primarily due to the following:
• $93 million in higher direct material costs, resulting from increased pre-owned aircraft sales volume and a change in the
mix of jets sold during the period.
• $35 million in cost inflation, largely reflecting a $22 million favorable benefit recorded in 2011 related to the last-in, first-
out (LIFO) method of accounting for inventories.
• $27 million charge from an unfavorable arbitration award described below.
These increases were partially offset by $33 million cost reductions from improved factory efficiency and $24 million in lower
engineering and development expenses.
On November 16, 2012, in an arbitration proceeding initiated by Avcorp Industries, Inc. against Cessna, an arbitral panel entered
an award against Cessna in the amount of $27 million. The dispute related to an alleged breach of a supply agreement under which
Avcorp made various components for Cessna aircraft. Although we are vigorously contesting this award, we recorded a charge of
$27 million in the fourth quarter of 2012.
Factors contributing to the 2011 year-over-year revenue change are provided below:
(In millions)
2011 versus
2010
Volume $ 419
Other 8
Total change $ 427
Cessna’s revenues increased $427 million, 17%, in 2011, compared with 2010, primarily due to higher Citation jet volume and the
mix of light- and mid-size jets sold during the period, which had a $262 million impact, higher pre-owned aircraft volume of $76
million reflecting improved market demand and higher aftermarket volume of $62 million, in part due to continued investment in
additional service offerings. We delivered 183 Citation jets in 2011, compared with 179 jets in 2010. During 2011, the portion of
Cessna’s revenues derived from aftermarket sales and services represented 24% of Cessna’s revenues, compared with 26% in the
corresponding period of 2010.