E-Z-GO 2014 Annual Report Download - page 26

x Lower Finance revenues of $83 million, primarily attributable to an unfavorable impact of $46 million from lower
average finance receivables and a decrease of $25 million in revenues related to the resolution of a Timeshare account in
2012.
x Lower Textron Systems revenues of $72 million, largely due to lower volume of $51 million in the Marine and Land
Systems product line and lower volume of $28 million in the Unmanned Systems product line.
x Higher Bell revenues of $237 million, largely due to higher volume of $163 million in our military programs, primarily
reflecting higher V-22 deliveries and aftermarket volume, and $74 million of higher commercial revenues, largely due to
higher aircraft volume.
x Higher Industrial segment revenues of $112 million, primarily due to higher volume of $58 million and the impact from
acquisitions of $46 million.
Cost of Sales and Selling and Administrative Expense
(Dollars in millions)
2014
2013
2012
Operating expenses
$ 12,782
$ 11,257
$ 11,184
Cost of sales
11,421
10,131
10,019
% change compared with prior period
13%
1%
Gross margin as a percentage of Manufacturing revenues
17.1%
15.4%
16.7%
Selling and administrative expenses
1,361
1,126
1,165
% change compared with prior period
21%
(3)%
Manufacturing cost of sales and selling and administrative expenses together comprise our operating expenses. Cost of sales
increased $1.3 billion, 13%, in 2014, compared with 2013, largely due to the impact of acquired businesses, primarily Beechcraft.
In 2014, gross margin as a percentage of manufacturing revenues increased 170 basis points largely due to improved leverage
resulting from higher revenues primarily at Textron Aviation.
Selling and administrative expense increased $235 million, 21%, in 2014, compared with 2013, largely related to businesses
acquired in the past year and compensation expense. These increases were partially offset by $28 million in severance costs
incurred in 2013 in connection with a voluntary separation program at Textron Aviation.
Manufacturing cost of sales increased $112 million, 1%, in 2013, compared with 2012, primarily due to higher volume at Bell and
the impact from businesses acquired in 2013, partially offset by lower sales at Textron Aviation and Textron Systems. In 2013,
gross margin as a percentage of manufacturing revenues decreased 130 basis points primarily due to unfavorable performance at
Bell, largely due to manufacturing inefficiencies associated with labor disruptions resulting from negotiations with bargained
employees and with the implementation of a new enterprise resource planning system in the first quarter of 2013, as well as lower
Citation jet and CitiationAir volume at Textron Aviation.
Selling and administrative expenses decreased $39 million, 3%, in 2013 compared with 2012, largely due to a reduction in
administrative expenses of $26 million and lower provision for loan losses of $20 million at the Finance segment, both primarily
associated with the non-captive business. Selling and administrative expense was also impacted by $28 million in severance costs
incurred in 2013 at Textron Aviation, which were largely offset by a $27 million charge from an unfavorable arbitration award in
2012 at Textron Aviation.
Acquisition and Restructuring Costs
In connection with the integration of Beechcraft, we initiated a restructuring program in our Textron Aviation segment in the first
quarter of 2014 to align the Cessna and Beechcraft businesses, reduce operating redundancies and maximize efficiencies. During
2014, we recorded charges of $41 million related to these restructuring activities that were included in the Acquisition and
restructuring costs line on the Consolidated Statements of Operations. In addition, we incurred transaction costs of $11 million in
2014 related to the acquisition that were also included in the Acquisition and restructuring costs line. We expect to incur additional
restructuring costs in 2015, but do not expect these costs to be material.
20 Textron Inc. Annual Report • 2014