Textron Reports Second Quarter Earnings Per Share
PROVIDENCE, R.I.--July 18, 2001--Textron Inc. today reported second quarter earnings per share of $1.10, before special charges and restructuring-related expenses, compared with $1.23 last year, and in line with the company's expectations. Income for the quarter before special charges and restructuring-related expenses was $157 million versus $179 million in 2000.During the quarter, Textron continued to implement restructuring projects and recorded $48 million of special charges and restructuring-related expenses. After the effect of these charges, Textron reported net income of $126 million for the second quarter of 2001.
Reported revenues were $3.29 billion, compared to $3.28 billion in 2000, primarily due to a strong increase in Aircraft sales, which offset lower sales in other segments. Segment profit before restructuring-related expenses was $332 million compared to $372 million last year, primarily due to the decline in volumes in most short-cycle businesses, partially offset by restructuring savings and increased profit in Aircraft.
Textron Chairman and Chief Executive Officer Lewis B. Campbell said, "We met our earnings target in the midst of a tough economic environment by accelerating the execution of our restructuring program and across-the-board cost reduction efforts. While the restructuring is partially offsetting some of the impact of the weakness in the current economy, more importantly, it is creating a more efficient Textron with a significantly improved cost structure for the long-term.
"Moreover, we continued the implementation of our strategy announced late last year to leverage Textron's capabilities across all of our businesses. While we are cutting all unnecessary costs, we are continuing our investments and efforts in important Textron-wide strategic transformation programs such as implementing a comprehensive supply chain management process and building an enterprise-wide information technology shared services organization and infrastructure," Campbell continued.
Restructuring Plan and Other Enterprise-Wide Initiatives
During the quarter, cost savings attributable to the restructuring program were approximately $33 million, bringing the year-to-date savings to approximately $49 million. Ongoing annualized savings are expected to increase to at least $150 million, beginning in 2002.
Since the start of the restructuring program in the fourth quarter of last year, Textron has initiated 74 individual restructuring projects. The restructuring program has resulted in a reduction in headcount of approximately 3,400, including workforce reductions in factories, warehouses and corporate and administrative offices across the company. The company now expects a reduction in headcount of approximately 5,000 when the program is complete. Through the consolidations, Textron is closing 52 facilities, including 28 manufacturing plants, representing over two million square feet of manufacturing floor space.
During the quarter, Textron also continued to advance enterprise-wide initiatives in supply chain management and the development of a common information technology (IT) infrastructure and IT shared services organization.
The company is developing a comprehensive supply chain program at each of the business units and across the entire enterprise. Textron is targeting savings of 3% to 4% of its $8 billion annual procurement costs. One important aspect of the initiative is to aggregate common purchases across the business units to leverage the purchasing power of the entire enterprise. The company has initially targeted 15 key commodities for coordinated sourcing in such areas as steel, resins, tires and batteries.
In addition, Textron is making significant improvements to its IT infrastructure. Since the beginning of this year, Textron has been creating a shared services IT center and common IT infrastructure. The shared services center will manage all spending for the corporation and develop a worldwide standard for information technology. Spending for each individual business unit will be invested into a common platform with near-term savings reinvested into the company's new IT infrastructure.
Portfolio Realignment
During the quarter, Textron continued to make progress on its strategy, announced late last year, to simplify and strengthen its portfolio of businesses with strategic divestitures and the acquisition of businesses with strong brands operating in attractive industries.
On June 4, Textron Financial announced the acquisition of STI Credit Corporation (SunTrust Credit Corp), adding approximately $400 million in receivables to Textron Financial, and consolidating its small-ticket business with a more operationally efficient platform to service the small business customer.
Earlier today, Textron announced two data-signal-voice (DSV) test equipment acquisitions, Industrial Technology, Inc. and Opto-Electronics Inc. The combined annual projected 2001 revenues of the acquisitions are approximately $25 million. The acquisitions will become part of the company's Greenlee/Tempo group within Industrial Products.
Over the past three quarters, Textron has divested a number of smaller, non-core businesses, including its residential fuel tank, seating comfort, carbon materials and electric motor components businesses.
Third Quarter and Full-Year 2001 Outlook
Textron expects additional savings from its restructuring program and continued top-line growth in its Aircraft segment. However, the present weakness in the economy, particularly industrial production, will continue to have a negative impact on Textron's short cycle manufacturing businesses. Due to these factors, Textron expects full-year 2001 earnings before special charges and restructuring-related expenses to be approximately $4.00 per share. Third quarter earnings per share before special charges and restructuring-related expenses are expected to be approximately $0.70 to $0.75.
"This year is an important year of transition for Textron that, despite its challenges, will provide the foundation for us to build long-term value for shareholders. Our aggressive restructuring program and other enterprise-wide initiatives, combined with the continued realignment of our portfolio, are positioning us for a significantly lower cost structure and improved earnings growth in the years ahead," Campbell said.
TEXTRON SEGMENT ANALYSIS
AIRCRAFT
The Aircraft segment's revenues and profit before restructuring-related expenses increased $210 million and $13 million, respectively.
Cessna Aircraft's revenues increased due to higher sales of business jets, primarily the Citation Encore, the Citation Excel and the Citation CJ2. 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, consistent with planned spending for the program.
- Total backlog at Cessna was $6.2 billion at the end of the second quarter.
Bell Helicopter's revenues increased due to higher sales of commercial helicopters and higher revenue on the V-22 production contract, partially offset by lower foreign military sales and lower revenue on the H-1 upgrade contracts. Bell's profit decreased primarily due to higher net product development expense related to the BA609 commercial tiltrotor and an unfavorable profit adjustment related to an international contract, partially offset by the benefit of higher sales of commercial helicopters and a favorable mix of commercial spares.
- The Department of Defense requested funds for production of eleven V-22 aircraft for government fiscal year 2001, and twelve aircraft for 2002. The restructured program addresses modifications recommended by the Blue Ribbon Panel.
- Total backlog at Bell was $1.2 billion at the end of the second quarter.
AUTOMOTIVE
The Automotive segment's revenues and profit before restructuring-related expenses decreased $45 million and $7 million, respectively.
Trim revenues decreased primarily due to customer price reductions and North American automotive OEM production decreases, partially offset by the contribution from acquisitions. Profit before restructuring-related expenses decreased primarily due to lower sales and customer price reductions, partially offset by the benefit of restructuring and other cost containment activities.
Fuel Systems and Components revenues decreased primarily as a result of the divestiture of a non-core product line in 2000, customer price reductions and the unfavorable impact of foreign exchange, partially offset by higher volume. Profit before restructuring-related expenses increased primarily due to the benefit of cost reduction activities and a gain on the sale of a small product line, partially offset by customer price reductions.
FASTENING SYSTEMS
The Fastening Systems segment's revenues and profit before restructuring-related expenses decreased $83 million and $21 million, respectively. The revenue and profit decreases were primarily due to lower volume in most businesses, customer price reductions and the unfavorable impact of foreign exchange in its European operations, partially offset by the contribution from acquisitions. The unfavorable profit impact from the lower sales and a customer warranty issue was partially offset by the benefit of restructuring and other cost reduction activities.
- During the quarter, Textron Fastening Systems finalized negotiations with a major semiconductor equipment manufacturer to manage the company's entire North American fastener and class C hardware inventory. Full-year 2002 revenues under the new contract are expected to be approximately $35 million.
INDUSTRIAL PRODUCTS
The Industrial Products segment's revenues and profit before restructuring-related expenses decreased $65 million and $21 million, respectively. Revenues decreased as a result of lower sales at most businesses, partially offset by higher revenues at Textron Systems and Fluid Handling Products and the contribution from the acquisition of Tempo Research Corporation in the company's data-signal-voice business. Profit decreased primarily as a result of the lower sales, partially offset by the benefit of restructuring activities, higher income related to retirement benefits, a gain on the sale of a small product line and the benefit from acquisitions.
FINANCE
The Finance segment's revenues and profit decreased $6 million and $4 million, respectively. Revenues decreased due to a lower average yield in a lower interest rate environment, partially offset by higher net syndication and securitization income. Profit decreased primarily due to the lower average on-book receivables, higher expenses related to growth in managed receivables and new initiatives, and a higher provision for loan losses, partially offset by lower interest expense.
Unaudited
TEXTRON INC.
REVENUES AND INCOME BY BUSINESS SEGMENT
SECOND QUARTER AND SIX MONTHS
(In millions except per share amounts)
Second Quarter
June 30, 2001 July 1,
As Reported As Adjusted(a) 2000
REVENUES
MANUFACTURING:
Aircraft $ 1,223 $ 1,223 $ 1,013
Automotive 716 716 761
Fastening Systems 479 479 562
Industrial Products 706 706 771
------------- ------------- -------------
3,124 3,124 3,107
FINANCE 164 164 170
------------- ------------- -------------
Total revenues $ 3,288 $ 3,288 $ 3,277
PROFIT
MANUFACTURING:
Aircraft $ 112 $ 120 $ 107
Automotive 61 62 69
Fastening Systems 28 30 51
Industrial Products 78 80 101
------------- ------------- -------------
279 292 328
FINANCE 40 40 44
Segment Profit 319 332 372
Special charges, net (b) (35) -- --
Corporate expenses and
other - net (39) (39) (41)
Interest expense (40) (40) (41)
Income before income
taxes 205 253 290
Income taxes (72) (89) (104)
Distribution on preferred
securities of
manufacturing
subsidiary trust,
net of income taxes (7) (7) (7)
Income from continuing
operations 126 157 179
Cumulative effect of
change in accounting
principle,
net of income
taxes (c) -- -- --
Net income $ 126 $ 157 $ 179
Diluted earnings per
share:
Income from continuing
operations 0.88 1.10 1.23
Cumulative effect of
change in accounting
principle,
net of income
taxes (c) -- -- --
Net income $ 0.88 $ 1.10 $ 1.23
Average shares
outstanding 143,411,000 143,411,000 146,304,000
Six Months
June 30, 2001 July 1,
As Reported As Adjusted(a) 2000
REVENUES
MANUFACTURING:
Aircraft $ 2,209 $ 2,209 $ 1,972
Automotive 1,393 1,393 1,599
Fastening Systems 980 980 1,146
Industrial Products 1,411 1,411 1,531
------------- ------------- -------------
5,993 5,993 6,248
FINANCE 335 335 322
Total revenues $ 6,328 $ 6,328 $ 6,570
PROFIT
MANUFACTURING:
Aircraft $ 210 $ 218 $ 185
Automotive 121 123 150
Fastening Systems 66 68 98
Industrial Products 149 153 190
------------- ------------- -------------
546 562 623
FINANCE 86 86 85
Segment Profit 632 648 708
Special charges, net (b) (77) -- --
Corporate expenses and
other - net (81) (81) (87)
Interest expense (84) (84) (74)
Income before
income taxes 390 483 547
Income taxes (138) (170) (197)
Distribution on
preferred securities
of manufacturing
subsidiary trust,
net of income taxes (13) (13) (13)
Income from
continuing
operations 239 300 337
Cumulative effect
of change in
accounting principle,
net of income
taxes (c) -- -- (59)
Net income $ 239 $ 300 $ 278
Diluted earnings
per share:
Income from
continuing
operations 1.67 2.10 2.29
Cumulative effect
of change in
accounting
principle, net
of income taxes (c) -- -- (0.41)
Net income $ 1.67 $ 2.10 $ 1.88
Average shares
outstanding 143,060,000 143,060,000 147,630,000
(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 2001 include accruable restructuring
expenses associated with a) reducing overhead and closing,
consolidating and downsizing manufacturing facilities, b)
consolidating operations and exiting non-core product lines within
the Finance segment and c) corporate and segment personnel
reductions .
(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.
Unaudited
TEXTRON INC.
Condensed Consolidated Balance Sheets
(in millions)
June 30, Dec. 30, July 1,
2001 2000 2000
Assets
Cash and cash equivalents $ 219 $ 282 $ 202
Accounts receivable, net 1,524 1,318 1,484
Inventories 2,079 1,871 2,083
Other current assets 487 443 317
Net property 2,552 2,568 2,529
Other assets 3,904 3,757 4,236
Textron Finance assets 6,684 6,131 6,562
Total Assets $17,449 $16,370 $17,413
Liabilities and Shareholders' Equity
Current portion of long-term debt
and short-term debt $ 1,172 $ 615 $ 862
Other current liabilities 2,598 2,648 2,643
Other liabilities 1,941 1,939 1,974
Long-term debt 1,449 1,469 1,526
Textron Finance liabilities 5,679 5,193 5,622
Total Liabilities 12,839 11,864 12,627
Obligated mandatorily redeemable
preferred securities 513 512 512
Total Shareholders' Equity 4,097 3,994 4,274
Total Liabilities and
Shareholders' Equity $17,449 $16,370 $17,413