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Textron Inc. Annual Report ● 2012 23
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.
Cessna Segment Profit (Loss)
Factors contributing to 2012 year-over-year segment profit change are provided below:
(In millions)
2012 versus
2011
Volume and mix $ 53
Performance 12
Inflation, net of pricing (43)
Total change $ 22
In 2012, Cessna’s segment profit increased $22 million, 37%, compared with 2011, primarily due to the change in mix of Citation
jets sold during the period. Improved performance included the following:
• $33 million in improved factory efficiency.
• $24 million in lower engineering and development expenses.
• $(27) million unfavorable arbitration award as described above.
• $(19) million of lower forfeiture income due to fewer order cancellations in 2012.
Inflation, net of pricing, included a $26 million unfavorable LIFO impact largely due to a $22 million LIFO benefit recorded in
2011.
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.
• $16 million in lower pre-owned aircraft write-downs.
In addition, cost inflation was offset by a $45 million favorable LIFO benefit discussed above.
Cessna Backlog
Cessna’s backlog decreased $827 million, 44%, in 2012 and $1.0 billion, 35%, in 2011, mainly attributable to deliveries in excess
of new orders and canceled Citation jet orders.