Post on 06-Jul-2018
Company Confidential
Jack J. PeltonChairman, President & CEO
Cessna Aircraft Company
JPMorgan Aviation & Transportation Conference
March 18, 2008
1
Forward-Looking Information
Certain statements in today’s discussion will be forward-looking statements, including those that discuss strategies, goals, outlook or other non-historical matters; or project revenues, income, returns or other financial measures. These forward-looking statements speak only as of the date on which they are made, and we undertake no obligation to update or revise any forward-looking statements.
These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materiallyfrom those contained in the statements, including the risks and uncertainties set forth under our full disclosure located at theend of this presentation.
2
Mission• To be the premier supplier of aircraft and
related services for business, personal, utility and flight training
• To be a model organization within the communities we serve in terms of quality, profitability, corporate responsibility, people and product development
• Cessna means value, dependability and an exceptional customer experience - across design, sales, production, delivery and service - around the world
Taking Care of Customers Is Taking Care of Business
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Business Strategies
• Develop and deliver customer-focused products
• Provide superior aftermarket services
• Strengthen fractional jet ownership business
• Drive operational readiness, reduce costs and improve productivity – Create a Lean Enterprise
• Foster an environment that attracts, develops and retains high performing talent
A Global Leader in General Aviation
4
Business Performance
33%
49%
63%
15%
25%
35%
45%
55%
65%
2005 2006 2007
252
387
307
150
200
250
300
350
400
2005 2006 2007
Units
17.3%
15.5%
13.1%
5%
10%
15%
20%
2005 2006 2007
Margin ROIC
RevenuesCitation Deliveries
3.5
5.0
4.2
2
3
4
5
2005 2006 2007
$B
5
CaravanSingle EngineCitations 5%
14%
3%
Used Aircraft
Parts, Service& Other3% 5% CitationShares
70%
Cessna Aircraft2007 Revenues: $5 Billion, Up ~20% YOY
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$349K $479K$220K
$1.8M
Product RangeStep-up Strategy / Strong Brand Loyalty
65-75% of Citation
Sales Are Repeat
Purchases
Caravan
Mustang
CJ1+
CJ2+
CJ3
CJ4
Encore+
XLS+
Sover-eign
206
172
Cessna Pilot CentersFoundation for Bringing Customers into the Cessna Family
Cessna Pilot CentersFoundation for Bringing Customers into the Cessna Family
182
162
$20.1M$16.2M$11.6M$8.1M$8.0M$7.1M$6.1M$4.6M$2.5M
CitationX
$110K
350
400
$535K $620K
Columbus
$27.0M
7
Industry Leadership
Percentage Jets Shipped Light and Midsize,2001 – 2007
Source: GAMA and Cessna estimates
Cessna53%
Gulfstream6%
Hawker Beechcraft
24%
Bombardier13%
Dassault1%
Eclipse3%
• Customer-focused new product development
• Continuous improvement in quality, reliability, service and support
• Proven value propositions
• Brand strength supported by the largest, loyal customer base in general aviation
8
0
5
10
15
20
25
30
35
Ecl
ipse
50
0Business Jet Competitive Landscape
Pri
ce $
Millio
ns
CJ1
+C
J2+
Pre
mie
r 1
A
CJ4
*
CJ3
Lear
40
XR
H-4
00
XP
En
core
+
Lear
45
XR
Haw
ker
75
0
So
vere
ign
Ch
all
en
ger
30
0C
itati
on
XG
20
0
Lear
60
XR
Haw
ker
40
00
Cessna Is Well-positioned for Continued Leadership
* In development
Haw
ker
90
0X
P
Leg
acy
60
0
Ph
en
om
30
0 *
Ph
en
om
10
0 *
Source: B&CA and company press releases
HondaDiamond
PiperAdamGrob
Sino-Swearingen
HondaDiamond
PiperAdamGrob
Sino-Swearingen
Mu
stan
g
G1
50
XLS
(+*
)
Embraer DassaultGulfstreamBombardierHawker BeechcraftCessnaEclipse
Co
lum
bu
s*C
hall
en
ger
60
5Falc
on
20
00
EX
(LX
*)
G3
50
Lear
85
*
9
Business Jets – A Growth IndustryKey Drivers
• Economic expansion
– Longer cycles with less severe troughs
• New model introductions
– Entry-level jets
• Global expansion, especially Europe
• Replacement cycle opportunities
• Commercial airline environment
Source: Global Insight, JetNet, Cessna estimates
5%
10%
15%
20%
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Used Citations as % of Fleet
5%
10%
15%
20%
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Used Citations as % of Fleet
19%
35% 35%41%
48%53%
0%
10%
20%
30%
40%
50%
60%
2002 2003 2004 2005 2006 2007
International Citation Orders
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Business Jet IndustryDevelopment Criteria - The “4As”
• Affluence– Economic development
– Business and personal wealth distribution
• Airports / air traffic control– Infrastructure and support
• Airspace access– Political climate and regulatory environment
• Affordability / acceptance– Alternatives and relative cost of operations
Several Key Factors Affect the Pace of Development
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Business Jet Industry Development
Source: GDP Purchasing Power Parity per CIA website; Aircraft registry, Cessna analysis
Fleet Size
GDP
Mexico
Germany
Canada
Brazil
UnitedKingdom
China Japan
India
SwitzerlandAustria
Venezuela
Russia
S. AfricaAustralia
Argentina
Spain
Italy
France
Saudi Arabia Portugal
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Europe
Affordability / acceptance
Airspace access
Airports / air traffic control
Affluence • Robust economic growth generating wealth
• Weak dollar continues to support sales
• Jets gaining acceptance as business tools
• Infrastructure progressing
• Increasing demand from Russia and Eastern Europe
Current State
Source: Cessna analysis
Overview
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China and India
Source: Cessna analysis
Summary• Potential for long-term growth with
improved regulations and infrastructure
• Cessna creating a solid foundation for the future, tapping local capabilities and building industry leadership
Current State
India• Significant pilot shortage
• ~25% tax on non-airline aircraft imports began 4/07
• Infrastructure under strain
• Growing individual and corporate wealth
• Aircraft being accepted as business tools
• Cessna leads industry in units
China• Significant pilot shortage
• ~21% tax on foreign business jets
• First Citation delivered in 1982, followed by 10 Citations over the next 20 years
• In the last 3 years, Citation fleet doubled with 8 new and 3 used
• 145+ new Cessna single-engine pistons entered flight training by end of 2007
Affordability / acceptance
Airspace access
Airports / air traffic control
Affluence
Affordability / acceptance
Airspace access
Airports / air traffic control
Affluence
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Global GrowthSummary
• Business aviation shaped in US (~70% fleet)
• International demand growing, yet fragmented
– Europe primary driver
– Emerging countries (e.g., India, China) will slowly develop
• Strategy focused on customers
– Create and capture demand
– Support growing fleet
• Leveraging global resources (talent, capacity, cost), while minimizing risk and avoiding dilution
Cessna Capitalizing on Global Growth
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Customer Support Revenue Growth
Delivering Exceptional Customer Support
0
200
400
600
800$M
2002 2003 2004 2005 2006 2007
~12% CAGR
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Integrated Supply ChainLean Enterprise - Building Quality and Managing Growth
• Standard procedures and mistake-proofing drive and maintain first-time quality
• Enables flow through variation reduction
• Improved Independence productivity
• Continued design improvement
– Manufacturability
– Serviceability
– Reliability
• Globalization
– Textron Aerospace de Mexico
– LSA sourcing in low-cost region
Leverage Textron Production System, Drive Operational Excellence
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Cessna 162 SkyCatcherLight Sport Aircraft (LSA)
• Reverse the declining trend of new pilot starts• Stimulate emerging international segments• Maximize future step-up opportunities • Launched July 24 at Oshkosh with ~850 orders • Features include
– $109,500 introductory price– Exclusive glass cockpit
(Garmin G300)– Teledyne Continental
O-200D, 100hp engine
Exciting New Propeller Aircraft Entry
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Columbia Acquisition
• High-performance, composite aircraft• Enhances Cessna single-engine piston product line• 2008 investment in business restructuring• Expect attractive future profitability • Synergies
– Technology– Supply base– Operational excellence– Marketing and distribution– Customer support
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Citation Mustang• First fully-certified jet in segment
• Approved for steep approach
• Steps-up piston-twin and turboprop owners with a high-level of brand loyalty
• Ramp to 150 annual deliveries remains on-track
• Strong demand (200 orders in ‘07)
Attractive Entry to the Citation Family,Expanding the Addressable Market
Price: $2.52 millionFAA Cert: 2006EASA Cert: May 2007’08 Deliveries: ~ 100
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Citation CJ4
• Fully integrated Collins Pro Line 21 avionics
• Advanced diagnostic systems
• New standard integrated cabin management system
• Newly engineered, moderately swept wing
• Flying the new Williams FJ44-4A electronically-controlled engines
Upward Extension to the Single-pilot Certified Citation Family
Price: $7.995 millionFirst Flight: 1H08FAA Cert: 2H09EASA Cert: 2H10Deliveries: 1H10
21
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Citation ColumbusValue Proposition
• Significant loyal customer base supports product line extension
• Strong performance – 4,000 nm range at .80M
– Max speed of 488 ktas
– Takeoff (SL, ISA, MTOW) 5,400 ft
– Landing (SL, ISA, MLW) 3,500 ft
– Full fuel payload of 1,950 lbs
• Customer validated cabin – Best in class seated headroom and length
– Matches top competitor standing aisle height
– Comfortable seated leg and foot room
– Flat floor with refreshment area and walk-in baggage compartment
Customer Confidence in New Product Promises – Sure Thing™
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Citation ColumbusDisciplined Program Management
• Developed comprehensive business case – Citation and competitive aircraft owner surveys– Customer tested fuselage configurations– Feedback from NBAA 2006 and European mock-up tour– Opportunity validation by independent assessment
• Strong balanced design approach
– Start with proven design attributes and mature technologies to strengthen operational availability and ease of maintenance
– Optimize with leading edge computational methods and practical new technology
– Validate through extensive testing
• Linear extension of existing capabilities mitigates risk
Leveraging Successful Track Record in Launching New Aircraft
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Citation ColumbusMilestones
Engine testbed first flight (P&WC) 2009
Prototype first flight 2011
FAA type certification 2013
Entry into service 2014
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New Products Drive Growth2004 - 2010
Citation CJ3$7.1M
Backlog: ~$1.3B1st Delivery: ‘04
Citation CJ2+$6.1M
Backlog: ~$720M1st Delivery: ‘06
Citation CJ1+$4.6M
Backlog: ~$170M1st Delivery: ‘05
Citation Mustang$2.5M
Backlog: ~$1.2B1st Delivery: ‘07
Citation XLS/XLS+$11.6M
Backlog: ~$3.0B1st Delivery: ‘04/‘08
Citation Sovereign$16.2M
Backlog: ~$2.3B1st Delivery: ‘04
Backlog: ~$560M1st Delivery: ‘07
Citation Encore+$8.1M
Note: December 2007 backlogs exclude CitationShares
Citation CJ4$8.0M
Backlog: ~$1.2B1st Delivery: ‘10
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Citation Delivery and Order Trend
179
252
307
470
387
0
100
200
300
400
500
2004 2005 2006 2007 2008F
Deliveries
Mustang
Other Citations
• Booked 773 orders through December (versus 496 total in 2006)
• $12.6B Citation backlog (excludes $0.4B CitationShares)
• 2008 Sold-out
• International order mix growing, led by Europe
• 570 orders forecasted for 2008
Global Order Activity Remains Strong
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Summary• Industry outlook remains positive
• Growing international order mix
• Continued investment in customer-focused products
• Excellent service and support capability
• Effectively managing growth and driving operational excellence
80 Years: One Sure Thing®
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Forward Looking InformationForward-looking Information: Certain statements in this release and other oral and written statements made by Textron from time to time are forward-looking statements, including those that discuss strategies, goals, outlook or other non-historical matters; or project revenues, income, returns or other financial measures. These forward-looking statements speak only as of the date on which they are made, and we undertake no obligation to update or revise any forward-looking statements. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those contained in the statements, including the following: [a] changes in worldwide economic and political conditions that impact demand for our products, interest rates and foreign exchange rates; [b] the interruption of production at Textron facilities or Textron’s customers or suppliers; [c] performance issues with key suppliers, subcontractors and business partners; [d] Textron's ability to perform as anticipated and to control costs under contracts with the U.S. Government; [e] the U.S. Government's ability to unilaterally modify or terminate its contracts with Textron for the Government's convenience or for Textron's failure to perform, to change applicable procurement and accounting policies, and, under certain circumstances, to suspend or debar Textron as a contractor eligible to receive future contract awards; [f] changing priorities or reductions in the U.S. Government defense budget, including those related to Operation Iraqi Freedom, Operation Enduring Freedom and the Global War on Terrorism; [g] changes in national or international funding priorities, U.S. and foreign military budget constraints and determinations and government policies on the export and import of military and commercial products; [h] legislative or regulatory actions impacting defense operations; [i] the ability to control costs and successful implementation of various cost reduction programs; [j] the timing of new product launches and certifications of new aircraft products; [k] the occurrence of slowdowns or downturns in customer markets in which Textron products are sold or supplied or where Textron Financial offers financing; [l] changes in aircraft delivery schedules or cancellation of orders; [m] the impact of changes in tax legislation; [n] the extent to which Textron is able to pass raw material price increases through to customers or offset such price increases by reducing other costs; [o] Textron’s ability to offset, through cost reductions, pricing pressure brought by original equipment manufacturer customers; [p] Textron's ability to realize full value of receivables; [q] the availability and cost of insurance; [r] increases in pension expenses and other post-retirement employee costs; [s] Textron Financial’s ability to maintain portfolio credit quality; [t] Textron Financial’s access to debt financing at competitive rates; [u] uncertainty in estimating contingent liabilities and establishing reserves to address such contingencies; [v] risks and uncertainties related to acquisitions and dispositions; [w] the efficacy of research and development investments to develop new products; [x] the launching of significant new products or programs which could result in unanticipated expenses; [y] bankruptcy or other financial problems at major suppliers or customers that could cause disruptions in Textron’s supply chain or difficulty in collecting amounts owed by such customers; and [z] difficulties or unanticipated expenses in connection with the consummation or integration of acquisitions, potential difficulties in employee retention following acquisitions and risks that acquisitions do not perform as planned or disrupt our current plans and operations or that anticipated synergies and opportunities will not be realized.
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2007 Cessna ROIC
ROIC income calculation 2007Segment profit (excludes impact of 2007 acquisition) 867.0 Interest component of operating leases 16.2 Corporate charge (10.3) Segment ROIC income before income taxes 872.9 Income taxes (275.0) Segment ROIC income 597.9
Average invested capital calculationAverage segment investment (excludes impact of 2007 acquisition) 766.4 Operating leases 176.9 Average invested capital 943.3
Return on invested capital 63.4%