Providence, Rhode Island - July 21, 1998 - Textron today announced a 14 percent increase in second-quarter diluted earnings per share to 98 cents, extending the company's record to 35 consecutive quarters of year-to-year income improvement.
Led by double-digit income gains in the Aircraft, Automotive and Industrial segments, the strong pace of the global, multi-industry company continued with net income increasing 13 percent to $164 million and revenues rising 11 percent to $3 billion from the year-ago quarter.
"With close to nine years of consistent quarterly income improvement, Textron's second-quarter results underscore the proven performance of our balanced mix of strong, market-leading businesses," said Textron President and CEO Lewis B. Campbell.
"We continue to actively manage our business mix and strengthen our core businesses by making strategic acquisitions that augment existing operations. We also continue to review and reorganize or divest operations that are not aligned with our strategic growth objectives," said Campbell.
In June, Textron announced it is evaluating strategic options for Avco Financial Services including a possible sale, spin-off or other disposition. A decision is targeted for the third quarter. Also in the second quarter, Textron acquired U.S.-based Ring Screw Works and Germany-based Peiner, with combined 1997 sales of $250 million; and sold Fuel Systems Textron, with 1997 sales of $82 million, at a pretax gain of $97 million.
In the second quarter, the company recorded an $87 million pre-tax charge to exit non-strategic product lines and realign some of its operations in the Automotive and Industrial Segments, as well as recognize costs related to a litigation settlement. "This charge represents a number of restructuring decisions that we believe will further enhance future growth of the company's core businesses," said Campbell. On an after-tax basis, the gain from the Fuel Systems sale and the special charges had no impact on earnings per share.
For the first six months of 1998, earnings per share were up 15 percent to $1.83 and net income rose 13 percent to $306 million. Revenues for the six-month period increased nine percent to $5.7 billion in 1998, up from $5.2 billion in 1997.
Textron Inc. (TXT:NYSE) is a $10.5 billion, global, multi-industry company with market-leading operations in Aircraft, Automotive, Industrial and Finance.
RECENT COMPANY HIGHLIGHTS
Corporate
Under a previously announced planned succession strategy, President and COO Lewis B. Campbell assumed the additional title of chief executive officer on July 1, 1998. James F. Hardymon will remain chairman of Textron's Board of Directors until his retirement at year-end 1999 at age 65.
Aircraft
Cessna Aircraft delivered its first Citation Excel and its 250th CitationJet.
Automotive
Randall Textron, a leading maker of automotive fuel filler assemblies, was merged into Kautex Textron's North American operations. Jane L. Warner, president of Randall Textron, was named president of the newly formed Kautex North America, with plants in Canada, the United States and Mexico. Germany-based Kautex is a leading, global manufacturer of plastic fuel tanks and fuel filling systems.
Industrial
Textron completed the sale of Fuel Systems Textron to Woodward Governor Company for $160 million.
In May, Textron acquired Ring Screw Works, a $200 million, Detroit-based maker of specialty threaded fasteners to the automotive industry; and Peiner Umformtechnik GmbH, a $50 million, Germany-based manufacturer of large-diameter bolts and nuts for the large truck, heavy industrial and construction industries.
Ransomes Textron and Jacobsen Textron were reorganized into Textron Turf Care and Specialty Products, marketing their products under the brand names of Ransomes, Jacobsen, Cushman, Ryan, Bob-Cat, Brouwer, Bunton and Steiner.
Randy P. Smith, 48, was named president of Textron Fastening Systems Americas. Smith joins Textron from Automatic Switch Company, a subsidiary of Emerson Electric, and will oversee more than 40 plants in North and South America employing over 10,000 people. George Dettloff, 49, was named president of Camcar Textron. He joins Textron from the Eaton Corporation and will oversee its 13 manufacturing operations in the Americas and Asia employing nearly 4,600 people.
Finance
Textron announced it is reviewing strategic options for Avco Financial Services (AFS). The review includes evaluation of a sale, spin-off, or other disposition of AFS, and is targeted for completion in the third quarter.
Avco Financial Services acquired approximately $500 million in branch-based consumer receivables from NationsCredit Consumer Corp., while NationsCredit acquired nearly $350 million in a centralized real estate secured portfolio from Avco.
TEXTRON SEGMENT ANALYSIS
Aircraft
Revenues increased 14 percent and income rose 15 percent, due to higher results at Cessna Aircraft.
Cessna posted increases in revenues and income, reflecting higher sales of business jets, single engine aircraft and Caravans. Backlog increased to $3.2 billion from $2.8 billion at year-end 1997.
Bell Helicopter's revenues increased primarily due to higher commercial aircraft and spares sales, as well as increased revenues on the V-22 program and the Huey and Cobra upgrade contract. The higher sales were partially offset by the 1997 completion of the three-year Canadian Forces contract for model 412 helicopters and lower foreign military sales. Bell's income, however, decreased primarily due to a change in product mix. Backlog increased to $2.0 billion from $1.9 billion at the end of 1997.
Automotive
Revenues increased 11 percent and income increased 30 percent. The revenue increase was due to higher volume at Kautex associated with capacity expansion in North America and higher sales at the Trim operations primarily due to increased Chrysler production, which was depressed in 1997 by a strike at Chrysler. Income increased due to higher sales and improved performance at Trim, partially offset by the current strike at General Motors.
Industrial
Revenues and income increased 14 percent and 15 percent, respectively, reflecting the contribution from acquisitions and internal growth combined with ongoing margin improvement. The following acquisitions contributed to the growth for the quarter: Burkland (7/1/97), Brazaco Mapri Industrias (12/1/97), Ransomes PLC (1/26/98), Sükosim (3/31/98), and Ring Screw Works (5/9/98). Internal growth was driven by continued strength in the fluid power and industrial components businesses. Partially offsetting the benefits of the acquisitions and internal growth was the divestiture of Speidel (12/31/97), and impact of a one-month strike at Textron's Jacobsen plant, and the current strike at General Motors.
Finance
Segment revenues increased 2 percent, while income increased 3 percent. Revenues and income at Avco Financial Services increased 2 percent and 4 percent, respectively. The revenue increase was due to a gain on the sale of its centralized real estate receivable portfolio and a higher level of commercial finance receivables outstanding. These benefits were partially offset by a decrease in yields on finance receivables, reflecting both decreases in yields on receivables and the impact of an increase in lower-yielding commercial receivables.
Income increased as a result of higher revenues, a decrease in the ratio of insurance losses to earned premiums, and an improvement in the ratio of credit losses to average receivables.
Revenues in Textron's commercial finance division -- Textron Financial Corporation -- increased 2 percent, reflecting the benefit of higher revenues due to higher yields, partially offset by a lower level of average receivables reflecting the securitization of Textron-related receivables in the third quarter of 1997.
Income approximated last year's level as the benefits from increased revenues and a lower provision for losses were offset by growth in businesses with higher operating expense ratios.
Gain On Sale of Division
Fuel Systems Textron was sold to Woodward Governor Company for $160 million in cash on June 15, 1998. A pretax gain of $97 million has been recorded as a result of this transaction.
Special Charges
To enhance the competitiveness and profitability of its core businesses, Textron recorded a pretax charge of $87 million in the second quarter. This charge was recorded to cover asset impairments, severance costs, and other exit-related costs associated with its decision to exit several small, non-strategic product lines in Automotive and the former Systems and Components divisions which did not meet Textron's return criteria, and to realign certain operations in the Industrial segment. The pretax charge also included the cost of a litigation settlement in the Aircraft segment.
Income Taxes
The second quarter's effective income tax rate of 40.2 percent was higher than the corresponding prior year rate of 38.5 percent, due primarily to the non-tax deductibility of goodwill related to the divestiture of Fuel Systems Textron.
