Company Press Release
July 21, 2000
PROVIDENCE, RI--Textron Inc. (NYSE: TXT) yesterday reported second-quarter diluted earnings per share of $1.23,
up 17% from $1.05 in 1999, marking Textron's 43rd quarter of consecutive quarter-over-year-ago-quarter earnings
growth.
Revenues for the quarter increased to $3.2 billion, up 12% from $2.9 billion, while operating income increased to $372 million, up 24% from $300 million last year. Operating margin rose 110 basis points to 11.5% from 10.4% in 1999, led by manufacturing margins, which were up 100 basis points. Net income increased to $179 million from $162 million a year ago. During the quarter, Textron repurchased 1.5 million shares.
Lewis B. Campbell, Chairman and Chief Executive Officer said, ``We are pleased to be able to deliver another quarter of strong earnings growth, while continuing to make investments in our businesses to improve operational efficiency and product innovation.''
Textron Quality Management (TQM) initiatives (including operating process improvements, intensified integration efforts and targeted cost reductions) led strong results across Textron's segments:
During the quarter, Textron also continued to execute upon its e-business strategy aimed at reducing costs and driving growth throughout the company.
Continuation of ``JumpSmart'' employee training sessions with Safeguard Scientifics
E-Procurement Agreement with CoNext and Ariba
Investment in EqualFooting.com
``As our Textron Quality Management and e-business initiatives continue to gain momentum, we are well on track to achieve our full-year and long-term targets for revenue and operating income growth and return on capital,'' said Campbell.
For the first six months of 2000, diluted earnings per share from continuing operations increased 16% to $2.29 per share from $1.98 in 1999. Revenues grew 15% to $6.5 billion from $5.6 billion the prior year, while operating income rose 23% to $708 million from $577 million last year. Income from continuing operations increased to $337 million from $307 million in 1999. During the six months, Textron repurchased 3.9 million shares.
Textron Inc. (www.textron.com) is an $11.6 billion, global, multi-industry company with market-leading businesses in Aircraft, Automotive, Industrial and Finance. Textron has a workforce of over 68,000 employees and major manufacturing facilities in 30 countries. Textron is among Fortune magazine's ``Global Most Admired Companies.''
Forward-looking Information: Certain statements in this release 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 are subject to risks and uncertainties that may cause actual results to differ materially from those contained in the statements, including the following: (a) the extent which Textron is able to successfully integrate acquisitions, (b) changes in worldwide economic and political conditions and associated impact on interest and foreign exchange rates, (c) the occurrence of work stoppages and strikes at key facilities of Textron or Textron's customers or suppliers, (d) the extent to which the Company is able to successfully develop, introduce, and launch new products and enter new markets, (e) the level of government funding for Textron products, and (f) successful implementation of e-procurement strategies. For the Aircraft Segment: (a) the timing of certifications of new aircraft products and (b) the occurrence of a severe downturn in the U.S. economy that discourages businesses from purchasing business jets. For the Automotive Segment: (a) the level of consumer demand for the vehicle models for which Textron supplies parts to automotive original equipment manufacturers (``OEM's'') and (b) the ability to offset, through cost reductions, pricing pressure brought by automotive OEM customers. For the Industrial Segment: the ability of Textron Fastening Systems to offset, through cost reductions, pricing pressure brought by automotive OEM customers. For the Finance Segment: (a) the level of sales of Textron products for which TFC offers financing and (b) the ability of TFC to maintain credit quality and control costs when entering new markets.
TEXTRON SEGMENT ANALYSIS
AIRCRAFT
The Aircraft segment's revenues and income increased 8% and 43%, respectively.
Cessna's revenues increased due to higher sales of business jets, primarily the Citation Excel and Citation Bravo, higher Caravan sales, and increased spares and service revenues. Income increased as a result of the higher sales and improved operating performance. Cessna's backlog increased to a record $5.6 billion from $5.5 billion at the end of the first quarter.
Bell Helicopter's revenues decreased as higher revenues on the V-22 production contract and the Huey and Cobra upgrade contracts, higher foreign military sales and increased military spares sales were offset by lower sales of commercial and other military helicopters and lower V-22 spares sales. Bell's income increased due to improved margins and lower product development costs, primarily as a result of the contribution from a new supplier on the BA 609 fuselage. The favorable impact was partially offset by the impact of the lower revenues and a lower recognition into income of cash received in the fourth quarter of 1998 on the formation of a joint venture on the BA 609 program. Bell's backlog at $1.9 billion remained unchanged from the end of the first quarter.
AUTOMOTIVE
The Automotive segment's revenues increased 3%, while income increased 18%, with operating margins up 120 basis points.
Increased revenues were due to the contribution from the Plascar acquisition, the Breed Automotive S.r.l. joint venture, and increased volume at GM, primarily the new GM Malibu cockpit program. This increase was partially offset by lower builds on other Trim platforms, customer price reductions and a $13 million unfavorable impact of foreign exchange at Kautex. Income increased due to the contribution from higher revenues and improved operating performance.
INDUSTRIAL
The Industrial segment's revenues and income increased 15% and 11%, respectively.
Textron Fastening Systems revenues increased, reflecting the contribution from acquisitions, primarily InteSys. This increase was partially offset by lower sales at Automotive Solutions, reflecting the unfavorable impact of foreign exchange in its European operations and customer pricing pressures, and reduced customer requirements related to the heavy truck business at the Supply Chain Solutions group. Income decreased as the benefit of higher sales and improved operating performance in Commercial Solutions was more than offset by unfavorable operating performance at certain plants in North America, lower volume at the Supply Chain Solutions group, and the foreign exchange impact.
Textron Industrial Products revenues increased as a result of the contribution from acquisitions, primarily OmniQuip, and higher organic sales at Greenlee, Motion Control Products and Textron Lycoming. These increases were partially offset by lower revenues at Textron Systems due to a change in contract mix and reduced customer requirements, and lower demand at Fluid Handling Products, Turbine Engine Components and Power Transmission Products. Income increased primarily as a result of the contribution from acquisitions and improved margins at Motion Control Products and Textron Lycoming.
FINANCE
The Finance segment's revenues increased 63% due to a higher level of average receivables, reflecting both acquisitive and organic growth, a higher yield on receivables, and higher syndication and other income. Income increased 47% as the benefit of higher revenues was partially offset by higher expenses related to the growth in managed receivables and a higher provision for loan losses related to the growth in receivables. Net interest margin was also adversely impacted by a delay in re-pricing short-term loans as a result of increases in the prime rate.
CORPORATE EXPENSES AND OTHER - NET
Corporate expenses and other - net increased $6 million primarily due to the impact of costs associated with strategic and e-business initiatives.
INTEREST INCOME AND EXPENSE - NET
Net interest for Textron manufacturing increased $44 million from the second quarter of 1999, due to the re-leveraging that occurred following the divestiture of AFS. Interest expense increased $38 million due to a higher level of average debt as a result of acquisitions and share repurchases. In 1999, Textron realized interest income of $6 million as a result of its net investment position.
INCOME TAXES
The current quarter's effective income tax rate of 35.9% was lower than the corresponding prior year rate of 36.5%. The decrease in the 2000 tax rate was primarily due to the benefit of tax planning initiatives.
RECENT COMPANY HIGHLIGHTS
Corporate
Aircraft
Automotive
Industrial
Finance
-0-
TEXTRON INC.
SECOND QUARTER AND SIX MONTHS
(Dollars in millions except per share amounts)
Second Quarter Six Months
July 1, July 3, July 1, July 3,
2000 1999 2000 1999
Revenues $ 3,222 $ 2,887 $ 6,459 $ 5,636
Income before
income taxes $ 290 $ 266 $ 547 $ 508
Income taxes (104) (97) (197) (188)
Distribution on
preferred securities of
manufacturing subsidiary
trust, net of income taxes (7) (7) (13) (13)
Income from continuing
operations 179 162 337 307
Discontinued operation,
net of income taxes (a) -- -- -- 1,615
Extraordinary loss
on retirement of
debt, net of income taxes -- -- -- (43)
Cumulative effect of change
in accounting principle,
net of income taxes (b) -- -- (59) --
Net income $ 179 $ 162 $ 278 $ 1,879
Diluted earnings per share:
Income from continuing
operations $ 1.23 $ 1.05 $ 2.29 $ 1.98
Discontinued
operation (a) -- -- -- 10.40
Extraordinary loss
on retirement
of debt -- -- -- (0.27)
Cumulative effect
of change
in accounting
principle (b) -- -- (0.41) --
Net income $ 1.23 $ 1.05 $ 1.88 $ 12.11
Average shares
outstanding 146,304,000 154,096,000 147,630,000 155,230,000
(a) The gain on the sale of Avco Financial Services, Inc. which
was sold to Associates First Capital Corporation on January 6, 1999
was recorded in the Q1 1999 results.
(b) At its September 23, 1999 meeting, the Emerging Issues Task
Force adopted EITF 99-5 which requires certain pre-production
engineering costs to be expensed as incurred. Textron adopted the
cumulative effect of this accounting change, in January, 2000.
TEXTRON INC.
REVENUES AND INCOME BY BUSINESS SEGMENT
SECOND QUARTER AND SIX MONTHS
(In millions)
Second Quarter Six Months
July 1, July 3, July 1, July 3,
2000 1999 2000 1999
REVENUES
MANUFACTURING:
Aircraft $ 958 $ 885 $ 1,861 $ 1,712
Automotive 777 757 1,625 1,491
Industrial 1,317 1,141 2,651 2,233
3,052 2,783 6,137 5,436
FINANCE 170 104 322 200
Total revenues $ 3,222 $ 2,887 $ 6,459 $ 5,636
INCOME
MANUFACTURING:
Aircraft $ 107 $ 75 $ 185 $ 142
Automotive 73 62 155 124
Industrial 148 133 283 255
328 270 623 521
FINANCE 44 30 85 56
Segment operating income 372 300 708 577
Special (charges) credits -- (2) -- (2)
Corporate expenses and other - net (41) (35) (87) (73)
Interest income -- 6 -- 22
Interest expense (41) (3) (74) (16)
Income before income taxes $ 290 $ 266 $ 547 $ 508
Textron Inc.
Investor Contact:
Doug Wilburne, 401/457-2353
Brian Sullivan, 401/457-2502
or
Media Contact:
Susan Bishop, 401/457-2362