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26 Textron Inc. Annual Report ● 2012
Textron Systems Revenues and Operating Expenses
Factors contributing to the 2012 year-over-year revenue change are provided below:
(In millions)
2012 versus
2011
Volume $ (141)
Other 6
Total change $ (135)
Revenues at Textron Systems decreased $135 million, 7%, in 2012, compared with 2011, primarily due to lower volume reflecting
the following changes:
• Lower Land & Marine volume of $76 million, primarily related to lower deliveries based on current contract
requirements.
• Lower Mission Support and Other product line volume of $45 million, primarily due to the completion of certain
contracts in 2011 and the timing of test and training revenues.
• Lower Weapons and Sensors volume of $13 million, primarily due to the completion of several contracts in 2011,
partially offset by higher international Sensor Fuzed Weapon volume of $67 million.
Textron Systems’ operating expenses decreased $126 million, 7%, in 2012, compared with 2011, primarily due to the lower
volume.
Operating expenses for 2012 included $37 million in charges discussed below related to our new UAS fee-for-service
contracts,
which were offset by the impact of charges at Textron Systems of $60 million during 2011, related to the impairment of
intangible assets and severance costs.
In 2012, we were awarded two indefinite delivery, indefinite quantity (IDIQ) contracts with separate U.S. Government customers
for UAS fee-for-service activities. In the third quarter of 2012, we experienced start-up issues as we began deployment for the
first of these contracts, the MEUAS II program, which required us to augment training procedures, add resources and adjust certain
estimated costs. At that time, we took an $18 million charge reflecting our estimated loss on the awarded task orders under both
contracts based on our deployment experience, which resulted in changes to certain assumptions, and also reflected higher
subcontractor, up-front training and program management costs to support the ramp-up. In the fourth quarter of 2012, we
experienced propulsion performance issues with our systems, and as a result, we were not able to perform within our previous cost
estimates. Based on the issues we have encountered, we increased our estimate of the costs to complete the awarded task orders
under both contracts through completion of those orders and recorded a $19 million unfavorable program profit adjustment in the
fourth quarter of 2012. Our current financial guidance and backlog do not reflect additional task orders under the MEUAS II IDIQ
contract after the current active orders conclude in April 2013.
Factors contributing to the 2011 year-over-year revenue change are provided below:
(In millions)
2011 versus
2010
Volume $ (112)
Other 5
Total change $ (107)
Revenues at Textron Systems decreased $107 million, 5%, in 2011, compared with 2010, primarily due to lower volume,
reflecting the following changes:
• Lower UAS volume of $84 million, largely due to lower deliveries and to the timing of revenues from various programs.
• Lower Mission Support and Other product line volume of $56 million, largely due to the completion of several test and
training programs and lower intelligence systems volume.
• Higher Land & Marine volume of $18 million, primarily related to Armored Security Vehicles.
• Higher Weapons and Sensors revenues of $10 million, largely due to higher Sensor Fuzed Weapon volume.
Textron Systems’ operating expenses decreased $18 million, 1%, in 2011, compared with 2010, primarily due to the lower
volume, which was partially offset by the $41 million intangible asset impairment charge and $19 million, primarily in severance
costs related to the workforce reduction taken in 2011.