Textron Reports First Quarter EPS
PROVIDENCE, R.I.--April 19, 2001--Textron Inc. today reported first-quarter earnings per share from continuing operations before special charges and restructuring-related expenses of $1.00, which is in line with the Company's previous guidance, compared with $1.06 last year. Income from continuing operations before special charges and restructuring-related expenses was $143 million versus $158 million in 2000.During the quarter, Textron continued to implement restructuring projects and recorded $45 million, or $0.21 per share after taxes, of special charges and restructuring-related expenses. After the effect of these charges, Textron reported net income of $113 million for the first quarter.
Textron Chairman and Chief Executive Officer Lewis B. Campbell said, "I am proud that our team was able to deliver our targeted earnings per share in the face of a particularly challenging economic environment. We are executing our restructuring program ahead of schedule in this tougher environment, giving us immediate cost savings, while dramatically improving our cost structure for the long term. While some of our businesses experienced slower sales, our Aircraft and Finance segments achieved solid revenue and income growth."
For the quarter, revenues were down 7% before the impact of foreign exchange. Reported revenues were $3.0 billion compared to $3.3 billion in 2000, primarily due to a significant decline in North American automotive production and weakness in certain industrial markets during the quarter. Segment profit before restructuring-related expenses was $316 million compared to $336 million in the prior year. Segment profit margin was up 20 basis points to 10.4% versus 10.2% last year.
Segment Quarterly Highlights
- In Aircraft, Cessna achieved strong growth as a result of the continued delivery of new products, including the Citation Encore, Citation CJ1 and Citation CJ2, launched last year. Bell also benefited from higher sales of commercial spares and upgrade kits to modernize older model Huey helicopters. Aircraft achieved a 180 basis point improvement in segment profit margin, due to improved operating performance.
- During the quarter, North American automobile production experienced a sharp decline. However, Textron's Automotive segment was able to mitigate some of the decline with increased European sales at Kautex, restructuring benefits, other significant cost containment activities and settlement of outstanding customer issues.
- The Fastening Systems segment continued to aggressively execute its restructuring program and other cost reduction activities, reducing the unfavorable impact of slower automotive and heavy truck markets.
- In Industrial Products, higher sales within Golf and Turf, acquisitions and restructuring savings, partially offset a weaker light construction market for OmniQuip and slower end markets for Power Transmission Products.
- In the Finance segment, Textron Financial achieved strong growth in revenues and profit. The segment maintained solid credit quality across its portfolio relative to the industry in a more challenging economy.
Restructuring Plan
Textron continued to execute its restructuring program to strengthen operating efficiencies and better align its operations with current economic and market conditions. Cost savings attributable to the restructuring were approximately $16 million in the first quarter. The Company now expects savings to increase to approximately $100 million during 2001.
The Company continues to expect total restructuring charges and restructuring-related expenses before goodwill charges will amount to about $200 million, of which $140 million to $160 million will be cash costs ($85 - $100 million after-tax). Ongoing annualized savings are expected to increase to at least $125 million, beginning in 2002.
Tempo Acquisition
In January, Textron completed the acquisition of Tempo Research Corporation, expanding its presence in the data-signal-voice (DSV) test and installation equipment market. The transaction also included a product line of multifunction test sets recently acquired by Tempo from Tektronix, Inc. Full-year 2000 sales for these businesses were approximately $65 million, bringing our Greenlee/DSV annual revenues to nearly $400 million.
Second Quarter and 2001 Outlook
Macro-economic indicators such as GDP growth of approximately 1.5%, lower consumer confidence and lower projected automotive build rates among Textron's largest customers have weakened the outlook for our businesses. The Company now expects full year earnings per share before special charges and restructuring-related expenses to be approximately the same as last year, which were $4.65. Second quarter earnings per share before special charges and restructuring-related expenses are expected to be approximately $1.10.
Campbell said, "The economic slowdown is challenging certain of our businesses. However, the strength of our management teams, our relentless focus on cost reduction and the diversity of our earnings stream will help us offset what is shaping up to be a difficult environment for the remainder of the year.
"We understand the dynamics of this economic slowdown and how it affects our businesses today. More importantly, we believe we will emerge from this slowdown with a much stronger growth outlook. With our restructuring program substantially completed by the end of this year and our cost structure vastly improved, we are positioned to deliver earnings growth that will significantly exceed our revenue growth."
TEXTRON SEGMENT ANALYSIS
AIRCRAFT
The Aircraft segment's revenues and profit increased 3% and 26%, respectively.
Cessna's revenues increased due to higher sales of new jets, primarily the Citation Encore, the Citation CJ2 and the Citation CJ1. Profit increased as a result of the higher sales and improved operating performance, partially offset by higher engineering expense related to the Sovereign business jet. Cessna's backlog was $6.4 billion at the end of the first quarter.
Bell Helicopter's revenues were unchanged as higher sales of kits used to modernize older model Huey helicopters and higher sales of commercial spares offset lower revenues on the H-1 upgrade contracts and lower foreign military sales. Bell's profit increased due to higher commercial sales and lower product development costs, primarily due to lower spending on the model 427 helicopter and the BA609 commercial tiltrotor aircraft, partially offset by lower profit on U.S. government business and lower income from a joint venture partner related to the BA609 program. Bell's backlog was $1.4 billion at the end of the first quarter.
AUTOMOTIVE
The Automotive segment's revenues and profit before restructuring-related expenses decreased 19% and 25%, respectively.
Trim revenues decreased primarily due to North American automotive OEM production decreases compared to record levels for the industry in the first quarter 2000, and customer price reductions. The lower revenue was partially offset by the contribution from acquisitions, primarily Plascar. Profit before restructuring-related expenses decreased, primarily due to the lower sales and customer price reductions. This unfavorable impact was partially offset by restructuring benefits, other significant cost containment activities and settlement of outstanding customer claims.
Kautex revenues decreased slightly, primarily as a result of the unfavorable impact of foreign exchange the divestiture of the seating comfort business in 2000 and customer price reductions. Strong European sales mitigated the negative impact from reduced North American volumes. Profit before restructuring-related expenses increased, primarily due to improved operating performance and cost containment efforts, which more than offset customer price reductions.
FASTENING SYSTEMS
The Fastening Systems segment's revenues decreased 14%, while profit before restructuring-related expenses decreased 19%. Revenues and profit before restructuring-related expenses decreased, primarily due to North American heavy truck and automotive production decreases, the unfavorable impact of foreign exchange in its European operations, lower cell phone volumes and customer price reductions, partially offset by the contribution from acquisitions. The unfavorable profit impact from the lower sales was partially offset by restructuring benefits and other cost reduction activities in the Automotive Solutions and Commercial Solutions groups.
INDUSTRIAL PRODUCTS
The Industrial Products segment's revenues decreased 7%, while profit before restructuring-related expenses decreased 18%. Revenues decreased as a result of lower sales at OmniQuip, due to a decline in the light construction equipment market, and lower demand at Power Transmission Products and Turbine Engine Components. These revenue decreases were partially offset by higher revenues at Golf & Turf and the contribution from the acquisition of Tempo Research Corporation. Profit before restructuring-related expenses decreased primarily as a result of a loss at OmniQuip, with the impact of lower sales at other businesses largely offset by the benefit of restructuring actions and higher income related to retirement benefits.
FINANCE
The Finance segment's revenues and profit increased 13% and 12%, respectively. Revenues increased due to a higher level of average receivables and higher syndication and securitization income. Profit increased as the benefit of the higher revenues was partially offset by higher expenses related to the growth in managed receivables and a higher provision for loan losses.
INCOME TAXES
The effective tax rate was 35.2% for the first quarter 2001 compared to 36.2% in first quarter 2000. This reduction is primarily due to the benefit of tax planning initiatives being realized in 2001.
TEXTRON INC.
REVENUES AND INCOME BY BUSINESS SEGMENT
FIRST QUARTER
(In millions except per share amounts)
First Quarter
March 31, 2001 April 1,
As Reported As Adjusted(a) 2000
REVENUES
MANUFACTURING:
Aircraft $ 986 $ 986 $ 959
Automotive 677 $ 677 838
Fastening Systems 501 $ 501 584
Industrial Products 705 $ 705 760
------------- ------------- -------------
2,869 2,869 3,141
FINANCE 171 171 152
Total revenues $ 3,040 $ 3,040 $ 3,293
PROFIT
MANUFACTURING:
Aircraft $ 98 $ 98 $ 78
Automotive 60 61 81
Fastening Systems 38 38 47
Industrial Products 71 73 89
------------- ------------- -------------
267 270 295
FINANCE 46 46 41
Segment Profit 313 316 336
Special charges, net(b) (42) -- --
Corporate expenses and
other - net (42) (42) (46)
Interest expense (44) (44) (33)
Income before
income taxes $ 185 $ 230 $ 257
Income taxes (66) (81) (93)
Distribution on
preferred securities
of manufacturing
subsidiary trust,
net of income taxes (6) (6) (6)
Income from continuing
operations 113 143 158
Cumulative effect of
change in accounting
principle, net of
income taxes(c) -- -- (59)
Net income $ 113 $ 143 $ 99
Diluted earnings per
share:
Income from continuing
operations 0.79 1.00 1.06
Cumulative effect of
change in accounting
principle, net of
income taxes (c) -- -- (0.40)
Net income 0.79 1.00 0.66
Average shares
outstanding 142,752,000 142,752,000 148,818,000
(a) The "As Adjusted" column excludes restructuring expenses recorded
in the segments as well as accruable restructuring expenses in special
charges, net.
(b) Special charges, net for the first quarter 2001 include accruable
restructuring expenses associated with reducing overhead costs and
closing, consolidating and downsizing manfacturing facilities.
(c) In January 2000, Textron adopted the Emerging Issues Task Force
consensus EITF 99-5 which requires certain pre-production engineering
costs to be expensed as incurred. Textron recorded the cumulative
effect of this accounting change in January, 2000.