Textron Achieves 23% Increase in Fourth-Quarter EPS
26 January 1999
Textron Achieves 23% Increase in Fourth-Quarter EPS; Posts Double-Digit Increases in Revenues and Earnings for Quarter and Year
PROVIDENCE, R.I.--Jan. 26, 1999--Textron Inc. today announced a 23% increase in fourth-quarter diluted earnings per share from continuing operations and double-digit growth in revenues and income, marking the company's 37th consecutive quarter of year-to-year income improvement. For the year, diluted earnings per share from continuing operations rose 22% driven by a 12% increase in revenues. Avco Financial Services is now reported as a discontinued operation.
"Textron's outstanding record exceeding nine consecutive years of income growth demonstrates our commitment to operational excellence in each of our businesses," said Chief Executive Officer Lewis B. Campbell. "The strategic management of our multi-industry business mix positions us to take advantage of growth opportunities and consistently deliver strong returns to our shareholders," he added. Total returns to shareholders were 24% in 1998.
For the fourth quarter, diluted earnings per share from continuing operations increased 23% to $0.74, compared with $0.60 for the corresponding period in 1997. Income from continuing operations for the quarter of $120 million was up 19% from $101 million in 1997. Revenues rose 11% to $2.6 billion, compared to $2.3 billion in 1997.
For the year, diluted earnings per share from continuing operations climbed to $2.68, up 22% from $2.19 in 1997. Income from continuing operations increased 19% to $443 million, compared to $372 million for 1997. Revenues rose 12% to $9.7 billion from $8.7 billion in 1997.
In the fourth quarter, Textron continued to position itself for further growth through strategic acquisitions and partnerships. The Industrial Segment completed the acquisition of the David Brown Group plc, establishing an important platform for future growth within the Fluid and Power Systems group. Two joint ventures in Textron's Aircraft and Industrial Segments were also announced. Bell Helicopter Textron will partner with Agusta for the continued development, sale and marketing of the commercial BA 609 tiltrotor aircraft. In addition, Textron Fastening Systems completed a joint venture with a Taiwanese fastening company, improving TFS's service to its Asian customer base as well as providing an additional low-cost source for products exported globally.
On January 6, 1999, Textron closed the sale of Avco Financial Services to Associates First Capital Corporation for $3.9 billion in cash. Net after-tax proceeds from the sale will approximate $2.9 billion. Consistent with Textron's plan at the time of the announced sale, up to 40% of the after-tax proceeds will be used to repurchase Textron shares. The remaining 60% will be used to finance acquisitions, in addition to a temporary reduction in debt levels in the short-term.
1998 financial highlights include:
--Revenue growth of 12% - our third consecutive year of double-digit growth --EPS growth of 22% - our sixth consecutive year of double-digit increases --Return on equity of 19.6% --Return on invested capital of 13.7% --Free cash flow of $348 million --Textron acquired nine companies with a total of $1.0 billion in annual revenues --Textron repurchased 10.2 million of its common shares --Total returns to shareholders of 24%
"As we move into 1999, Textron is exceptionally well positioned to take advantage of additional strategic opportunities and continue to deliver strong financial results, including strong double-digit growth in revenues and earnings-per-share," said Campbell.
Textron Inc. is a $10 billion, global, multi-industry company with market-leading businesses in Aircraft, Automotive, Industrial and Finance.
This release may contain certain 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 are subject to risks and uncertainties that may cause actual results to differ materially from those contained in the statements, including the following: (i) continued market demand for the types of products and services produced and sold by Textron, (ii) changes in worldwide economic and political conditions and associated impact on interest and foreign exchange rates, (iii) the level of sales by original equipment manufacturers of vehicles for which Textron supplies parts, (iv) the successful integration of companies acquired by Textron.
TEXTRON SEGMENT ANALYSIS
Aircraft
For the quarter, revenues decreased 2 percent while income equaled last year's level. For the year, revenues and income increased 5 percent and 8 percent, respectively, driven by higher results at Cessna Aircraft.
Cessna's revenues increased for the quarter as a result of higher sales of Caravans and single engine aircraft. Income for the quarter decreased primarily due to a greater proportion of lower margin international sales. For the year, revenues and income increased as a result of higher sales of business jets, single engine aircraft and Caravans combined with improved results in the single engine aircraft business. Backlog increased to a record $4.0 billion from $2.8 billion at year-end 1997.
Bell Helicopter's revenues decreased for the quarter and the year primarily due to the 1997 completion of the three-year Canadian Forces contract for model 412 helicopters. The full year revenues were also impacted by lower foreign military sales. For both periods, the revenue decrease was partially offset by higher commercial spares sales and higher U.S. Government revenues, as increased revenues on the V-22 program and the Huey and Cobra upgrade contracts more than offset lower U.S. Government aircraft and spares sales.
Bell Helicopter's income for the quarter increased due to the benefit on the 609 program from a joint venture with an international partner and a lower level of product development expense, which offset reduced income from the quarter's lower revenues. Income for the year decreased due to lower revenues and a change in product mix, primarily resulting from lower margins on U.S. Government contracts. The decrease was partially offset by the benefit from the 609 program joint venture and the lower level of product development expense. Backlog of $1.9 billion was unchanged from year end 1997.
Automotive
For the quarter, revenues and income increased 15 percent and 31 percent, respectively, and for the year, they increased 13 percent and 19 percent, respectively.
Results for both periods reflected higher volume at Kautex associated with capacity expansion in North America, higher sales and improved performance at the Trim operations and the contribution from acquisitions. These benefits were partially offset by customer price reductions. The full year's results were further impacted by a strike at General Motors in 1998 and by a 1997 Chrysler strike that depressed that year's results.
Industrial
For the quarter, revenues and income increased 24 percent and 25 percent, respectively, and for the year, they increased 17 percent and 18 percent, respectively.
Results for both periods reflected the contribution from acquisitions combined with ongoing margin improvement, while the year also benefited from organic growth. The following acquisitions contributed to the revenue growth for the segment: Brazaco Mapri Industrias (12/1/97), Ransomes plc (1/26/98), Sukosim (3/31/98), Ring Screw Works (5/9/98), Peiner (5/31/98), Datacom Technologies (8/14/98), and David Brown Group plc (10/10/98). Partially offsetting the benefit of the acquisitions were the divestitures of Speidel (12/31/97) and Fuel Systems (6/19/98). The full year's results were also impacted by a strike at General Motors on the Fastening Systems business and a one-month strike at a Textron Turf Care & Specialty Products plant.
Finance
Segment revenues for the quarter increased 7 percent due to a higher level of average receivables and an increase in fee income and portfolio servicing income, partially offset by a decrease in syndication income and lower yields on receivables. For the year, revenues increased 5 percent due to a higher level of average receivables and an increase in residual, prepayment and portfolio servicing income.
Income for the quarter equaled last year's level, as the benefit of higher revenues and a lower provision for losses was offset by higher expenses related to growth in managed receivables and growth in businesses with higher operating expense ratios. For the full year, income rose 5 percent as the benefit of higher revenues and a lower provision for losses was partially offset by higher operating expenses.
RECENT COMPANY HIGHLIGHTS
Corporate
--Executing its planned succession strategy, Textron announced that Chief Executive Officer Lewis B. Campbell will become chairman on February 1, 1999, following the retirement of James F. Hardymon. Campbell became chief executive officer on July 1, 1998.
--In December, Textron elected Citizens Financial Group Chairman and CEO Lawrence K. Fish and Alltel Chairman and CEO Joe T. Ford to its Board of Directors.
--In October, Textron named Sir William Purves to the company's International Advisory Council. Purves is former chairman of HSBC Holdings plc, one of the world's largest banking and financial services institutions.
--During the year, Textron was selected by Fortune magazine as one of "America's Greatest Wealth Creators" and "America's Most Admired Companies". It was also rated by Industry Week magazine as one of the "100 Best Managed Companies in the World."
Aircraft
--Bell Helicopter and Italian helicopter manufacturer Agusta completed a joint venture to oversee the development, sales and marketing of the commercial BA 609 tiltrotor aircraft and the AB 139 medium helicopter.
--During the fourth quarter, Cessna introduced two upgrades in the Citation business jet line: the Citation CJ1 and the Citation Ultra Encore. Cessna also introduced two new models to this line: the Citation CJ2 and the Citation Sovereign with a year end backlog of 117 units.
Automotive
--Textron Automotive Company's Trim Division announced the construction of a new 87,000 square-foot Integration and Advanced Technology Center located in Auburn Hills, Michigan. The Center will focus on interior and exterior trim product design and development for DaimlerChrysler models. Occupancy of the new facility is planned for March 1999.
--Textron Automotive Company (TAC) was named a finalist in the esteemed 1999 Automotive News Pace(TM) Awards. Out of 20 finalists selected, TAC was only one of two companies selected for two innovations: Textron Automotive Trim Operations for the ATPU (Aliphatic Thermoplastic Urethane) Instrument Panel Cover Material and McCord Winn Textron for its ASCTec Seat Comfort Systems.
Industrial
--In early October, Textron completed the acquisition of U.K.-based David Brown Group. David Brown, with approximately $400 million in sales, designs and manufactures industrial gears, pumps and mechanical and hydraulic transmission systems used in a wide range of applications. This acquisition has become a part of Textron's Fluid and Power Systems Group.
--Randy P. Smith was named president of Textron Fastening Systems, a world leader in fastening systems and solutions with over $2 billion in revenues. In this capacity, Smith oversees 68 fastener locations in 17 countries.
--At the end of 1998, Ring Screw Textron was awarded the Platinum Pentastar Award from DaimlerChrysler for the 2nd consecutive year. Ring Screw was one of only 14 suppliers to receive this prestigious award, and the only fastening systems company to ever receive this honor.
--In December, Textron announced a joint venture between Textron Fastening Systems and the Taiwan-based San Shing Hardware Works Company, Ltd., Taiwan's largest fastener manufacturer. Textron Fastening Systems holds an 80% interest in the new joint venture called TFS/Tri-Star Co., Ltd.
--Carl D. Burtner was named Chief Executive Officer of Textron's expanded Golf, Turf Care and Specialty Products Group, effective January 1, 1999. The expanded operation combines Textron's established brands such as E-Z-GO golf cars and Jacobsen and Bunton professional mowing and turf maintenance equipment with the Cushman and Ransomes brands acquired through the purchase of Ransomes PLC of the UK earlier in the year.
Finance
--Textron closed the sale of Avco Financial Services to Associates First Capital Corporation for $3.9 billion in cash on January 6, 1999. Net after-tax proceeds approximate $2.9 billion.
--Textron acquired Business Leasing Group, a division of NationsCredit Commercial Corporation, which is a subsidiary of BankAmerica. Business Leasing Group's $184 million in receivables will become part of Textron Financial Corporation, Textron's commercial finance subsidiary.
TEXTRON INC.
FOURTH QUARTER AND YEAR
(Dollars in millions except per share amounts)
Fourth Quarter Year
January 2, January 3, January 2,January 3,
1999 1998 1999 1998
Revenues $ 2,595 $ 2,331 $ 9,683 $ 8,683
Income before
income taxes $ 200 $ 176 $ 763 $ 648
Income taxes (73) (68) (294) (250)
Distribution on
preferred securities of
subsidiary trust, net
of income taxes (7) (7) (26) (26)
Income from continuing
operations 120 101 443 372
Discontinued operation,
net of income taxes(a) 40 49 165 186
Net income $ 160 $ 150 $ 608 $ 558
Diluted earnings per share:
Income from continuing
operations $ 0.74 $ 0.60 $ 2.68 $ 2.19
Discontinued operation(a) 0.26 0.29 1.00 1.10
Net income $ 1.00 $ 0.89 $ 3.68 $ 3.29
Average shares
outstanding 160,980,000 168,527,000 165,374,000 169,503,000
--(a) On January 6, 1999, Textron closed the sale of Avco Financial
Services, Inc. (AFS) to Associates First Capital Corporation. AFS is
now reported as a discontinued operation.
TEXTRON INC.
REVENUES AND INCOME BY BUSINESS SEGMENT
FOURTH QUARTER AND YEAR
(In millions)
Fourth Quarter Year
January 2, January 3, January 2, January 3,
1999 1998 1999 1998
REVENUES
MANUFACTURING:
Aircraft $ 849 $ 866 $ 3,189 $ 3,025
Automotive 670 583 2,405 2,127
Industrial 984 796 3,722 3,181
2,503 2,245 9,316 8,333
FINANCE 92 86 367 350
Total revenues $ 2,595 $ 2,331 $ 9,683 $ 8,683
INCOME
MANUFACTURING:
Aircraft $ 95 $ 95 $ 338 $ 313
Automotive 51 39 179 150
Industrial 104 83 410 346
250 217 927 809
FINANCE 28 28 113 108
Segment income 278 245 1,040 917
Gain on sale
of division -- -- 97 --
Special charges -- -- (87) --
Corporate expenses
and other - net (34) (41) (127) (140)
Interest expense - net (44) (28) (160) (129)
Income before income
taxes $ 200 $ 176 $ 763 $ 648