Providence, Rhode Island - July 18, 2002 - Textron Inc. (NYSE: TXT) today reported second quarter diluted earnings per share of $0.82 and net income of $116 million before special charges, costs related to restructuring and a gain from transactions related to the divested Automotive Trim business, compared to last year's diluted earnings per share of $1.10 and net income of $157 million before special charges and costs related to restructuring.
Results before non-recurring items are useful in analyzing operating performance, but should be used only in conjunction with results reported in accordance with generally accepted accounting principles. Reported second quarter 2002 earnings per share were $0.74 and net income was $105 million, compared with last year's reported earnings per share of $0.88 and net income of $126 million. These results include a pre-tax gain of $25 million from transactions related to the divestiture of Automotive Trim in the second quarter 2002 and pre-tax special charges and costs related to restructuring in the second quarter 2002 and the second quarter 2001 of $29 million and $48 million, respectively. Last year's results included $25 million of goodwill amortization.
Second quarter revenues were $2.8 billion, down from $3.3 billion in 2001, primarily due to the divestitures of Automotive Trim and a number of other businesses and softer sales in several of Textron's segments, partially offset by higher sales in the Aircraft segment. For the quarter, Textron recorded free cash flow before restructuring of $143 million. The company continued to make excellent progress on its restructuring program, with incremental savings in the quarter of about $32 million.
Textron Chairman, President and Chief Executive Officer Lewis B. Campbell said, Given the continued weakness in many of our industrial markets, we are pleased with our results for the quarter, which reflect our aggressive cost reduction activities. We remain confident in our ability to achieve our full year EPS and free cash flow targets.
Goodwill and Other Intangible Assets
Consistent with the adoption of Statement of Financial Accounting Standards (SFAS) No. 142, Textron recorded, as a cumulative effect of change in accounting, an after-tax, non-cash, transitional goodwill impairment charge of $488 million, retroactive to the first quarter. This charge applies to the operating segments as follows: $274 million in Industrial Products; $111 million in Industrial Components; $88 million in Fastening Systems; and $15 million in Finance.
Outlook
Textron said that it expects earnings per share of approximately $0.68 before special charges and costs related to restructuring in the third quarter. The Company continues to expect full-year earnings per share of approximately $3.00, before special charges, costs related to restructuring, the gain from transactions related to the divested Automotive Trim business and the transitional goodwill impairment charge. The company also continues to expect free cash flow before restructuring for the year of approximately $325 million.
Second Quarter Year-Over-Year Segment Analysis
Due to the company's adoption of SFAS No. 142, this year's net income excludes goodwill amortization. The company no longer includes amortization of goodwill in its internal evaluation of segment performance. Therefore, the company has recast its prior year segment results for comparability by reclassifying goodwill amortization and treating this expense as a below-segment profit item. Segment profits and margins discussed below for both periods also reflect amounts before deducting special charges and costs related to restructuring.
Aircraft
Aircraft segment revenues increased $65 million and profit increased $19 million.
Cessna revenues increased $61 million primarily due to higher volume and higher pricing, higher used aircraft sales and higher spare parts and service sales, partially offset by lower sales of single engine piston aircraft that have been affected by the weak economy. Profit increased as a result of higher pricing, higher Citation volume, a favorable mix of aircraft sold and lower engineering expenses, partially offset by the lower sales of single engine piston aircraft and lower resale prices for trade-in aircraft. Backlog at Cessna was $4.5 billion at the end of the quarter.
Bell Helicopter revenues increased $4 million primarily due to higher sales to the U.S. Government on the V-22 program and the H-1 upgrade contract, partially offset by lower foreign military sales and lower commercial sales. Bell's profit decreased primarily as a result of lower profit in its commercial business, partially offset by higher profit in its U.S. Government business, primarily due to the higher revenues on the V-22 contract. Backlog at Bell was $1.1 billion at the end of the quarter.
Fastening Systems
Fastening Systems revenues decreased $20 million and profit decreased $15 million.
The revenue decrease was primarily due to the divestiture of non-core product lines, customer price reductions and depressed market demand, partially offset by the favorable impact of foreign exchange. Profit decreased primarily due to customer price reductions, lower sales and manufacturing inefficiencies, partially offset by the benefit of restructuring activities.
Industrial Products
Industrial Products revenues decreased $36 million and profit decreased $53 million.
Revenues decreased in most of the segment's businesses primarily due to depressed markets and the divestiture of non-core product lines during 2001, partially offset by higher revenues in the aerospace and defense business. Profit decreased primarily due to the lower volumes, an unfavorable mix of products sold, an increase in reserves for receivables and inventory and the impact of a gain on the sale of a product line in 2001, partially offset by the benefit of restructuring activities.
Industrial Components
Industrial Components revenues decreased $457 million and profit decreased $59 million.
Excluding the divestitures of Automotive Trim, Turbine Engine Components Textron and several small product lines in 2001, revenues increased $27 million while profit decreased $18 million. Revenues increased at Kautex, where higher volume from new program launches was partially offset by customer price reductions and lower machine tool shipments. The increase in revenues at Kautex was also partially offset by decreases in revenue at Power Transmission and Fluid Handling Products as a result of soft industrial markets. Profit decreased primarily due to lower volumes and manufacturing inefficiencies at Power Transmission and Fluid Handling Products, customer price reductions and the impact of a gain on the sale of a product line in 2001, partially offset by higher sales at Kautex and the benefit of restructuring activities.
Finance
Finance segment revenues decreased $16 million and profit decreased $14 million.
Revenues decreased primarily due to a lower average yield reflecting the lower interest rate environment, partially offset by higher fee income, higher syndication and securitization income and higher operating lease revenue. Profit decreased primarily due to a higher provision for loan losses as a result of increased delinquencies, and higher operating expenses primarily related to higher credit and collection expenses and growth in managed receivables, partially offset by higher interest margin.
Conference Call Information
Textron will host a conference call at 10:00 a.m. Eastern time today to discuss results and the company's outlook. This conference call will be accessible via webcast at www.textron.com or by direct dial at (888) 428-4470 in the U.S. or (612) 332-0107 outside of the U.S. (request the Textron Earnings Conference). The call will be available for playback beginning at 1:30 p.m. Eastern time on Thursday, July 18th by dialing (320) 365-3844 - Access Code 639107.
Textron Inc. is a $12 billion multi-industry company with more than 51,000 employees in 40 countries. The company leverages its global network of businesses to provide customers with innovative solutions and services in industries such as aircraft, fastening systems, industrial products, industrial components, and finance. We are known around the world for our powerful brands such as Bell Helicopter, Cessna Aircraft, Kautex, Lycoming, E-Z-GO and Greenlee, among others. More information is available at www.textron.com.
Forward-looking Information: Certain statements in this release and other oral and written statements made by Textron from time to time, 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 to which Textron is able to achieve savings from its restructuring plans, (b) changes in worldwide economic and political conditions that impact interest and foreign exchange rates, © the occurrence of work stoppages and strikes at key facilities of Textron or Textron's customers or suppliers, (d) government funding and program approvals affecting products being developed or sold under government programs, (e) cost and delivery performance under various program and development contracts, (f) successful implementation of supply chain and other cost-reduction programs, (g) the timing of certifications of new aircraft products, (h) the occurrence of further downturns in customer markets to which Textron products are sold or supplied, (i) Textron's ability to offset, through cost reductions, raw material price increases and pricing pressure brought by OEM customers and (j) Textron Financial's ability to maintain credit quality and control costs.
Unaudited
TEXTRON INC.
REVENUES AND INCOME BY BUSINESS SEGMENT
THREE MONTHS ENDED JUNE 29, 2002 AND JUNE 30, 2001
(In millions except per share amounts)
June 29, 2002 June 30, 2001
As As As As
Reported Adjusted(a) Reported Adjusted(a)
REVENUES
MANUFACTURING: (b)
Aircraft $ 1,323 $ 1,323 $ 1,258 $ 1,258
Fastening
Systems 431 431 451 451
Industrial
Products 505 505 541 541
Industrial
Components 417 417 874 874
2,676 2,676 3,124 3,124
FINANCE 148 148 164 164
Total revenues $ 2,824 $ 2,824 $ 3,288 $ 3,288
PROFIT (LOSS)
MANUFACTURING:
(b) (c)
Aircraft $ 147 $ 147 $ 120 $ 128
Fastening
Systems 20 21 35 36
Industrial
Products 12 13 65 66
Industrial
Components 24 25 81 84
203 206 301 314
FINANCE (c) 29 29 43 43
Segment profit 232 235 344 357
Gain on sale of
division (d) 25 - - -
Special charges(e) (26) - (35) -
Goodwill
amortization (c) - - (25) (25)
Corporate expenses
and other - net (31) (31) (39) (39)
Interest expense,
net (25) (25) (40) (40)
Income before
income taxes 175 179 205 253
Income taxes (63) (56) (72) (89)
Distribution on
preferred
securities of
manufacturing
subsidiary trust,
net of income
taxes (7) (7) (7) (7)
Net income (c) $ 105 $ 116 $ 126 $ 157
Earnings per
share:
Net income (c) $ 0.74 $ 0.82 $ 0.88 $ 1.10
Average diluted
shares
outstanding 141,599,000 141,599,000 143,411,000 143,411,000
Unaudited
TEXTRON INC.
REVENUES AND INCOME BY BUSINESS SEGMENT
SIX MONTHS ENDED JUNE 29, 2002 AND JUNE 30, 2001
(In millions except per share amounts)
June 29, 2002 June 30, 2001
As As As As
Reported Adjusted (a) Reported Adjusted (a)
REVENUES
MANUFACTURING: (b)
Aircraft $ 2,370 $ 2,370 $ 2,280 $ 2,280
Fastening
Systems 827 827 917 917
Industrial
Products 973 973 1,090 1,090
Industrial
Components 779 779 1,706 1,706
4,949 4,949 5,993 5,993
FINANCE 293 293 335 335
Total revenues $ 5,242 $ 5,242 $ 6,328 $ 6,328
PROFIT
MANUFACTURING:
(b) (c)
Aircraft $ 226 $ 226 $ 227 $ 235
Fastening
Systems 28 31 77 78
Industrial
Products 42 44 125 128
Industrial
Components 46 48 160 164
342 349 589 605
FINANCE (c) 51 51 92 92
Segment profit 393 400 681 697
Gain on sale of
division (d) 25 -- -- --
Special charges(e) (36) -- (77) --
Goodwill
amortization (c) -- -- (49) (49)
Corporate expenses
and other - net (60) (60) (81) (81)
Interest expense,
net (55) (55) (84) (84)
Income before
income taxes 267 285 390 483
Income taxes (92) (90) (138) (170)
Distribution on
preferred
securities of
manufacturing
subsidiary trust,
net of income
taxes (13) (13) (13) (13)
Income from
continuing
operations 162 182 239 300
Cumulative effect
of a change in
accounting
principle, net
of income
taxes (f) (488) -- -- --
Net income
(loss) (c) $ (326) $ 182 $ 239 $ 300
Earnings per
share:
Income from
continuing
operations 1.14 1.29 1.67 2.10
Cumulative
effect of a
change in
accounting
principle, net
of income
taxes (f) (3.44) -- -- --
Net income
(loss) (c) $ (2.30) $ 1.29 $ 1.67 $ 2.10
Average diluted
shares
outstanding 141,682,000 141,682,000 143,060,000 143,060,000
Unaudited
TEXTRON INC.
REVENUES AND INCOME BY BUSINESS SEGMENT
THREE AND SIX MONTHS ENDED JUNE 29, 2002 AND JUNE 30, 2001
(In millions except per share amounts)
(a) The "As Adjusted" column excludes costs related to restructuring
recorded in segment profit, expenses recorded in special charges, the
gain on transactions related to the divestiture of the Automotive Trim
business and the cumulative effect effect of the change in accounting
principle. A reconciliation of income as reported to income as
adjusted is as follows:
Second Quarter Six Months
2002 2001 2002 2001
Net income, as
reported $ 105 $ 126 $ (326) $ 239
Adjustments:
Gain on sale of
division (25) -- (25) --
Costs related to
restructuring 3 13 7 16
Special charges:
Restructuring 17 24 25 53
Fixed asset
impairment 9 10 11 20
Intangible
impairment 1 1
E-business losses -- -- -- 3
Tax impact of
excluded costs 7 (17) 2 (32)
Cumulative effect of
a change in
accounting
principle, net of
income taxes -- -- 488 --
Net income, as
adjusted $ 116 $ 157 $ 182 $ 300
(b) In January 2002, Textron reorganized to reflect the sale of the
Automotive Trim business and now reports under the following new
segments: Aircraft, Fastening Systems, Industrial Products, Industrial
Components and Finance. Prior periods have been recast to reflect this
change.
(c) Pursuant to SFAS No. 142, beginning on December 30, 2001, goodwill
is no longer amortized. To reflect the adoption of this statement and
the fact that the Company does not include amortization of goodwill in
its internal evaluation of segment performance, the Company has recast
its segment data for comparability by reclassifying goodwill
amortization from segment profit in prior periods.
(d) In the second quarter 2002, Textron recorded an adjustment to the
gain on the divestiture of the Automotive Trim business as a result of
transactions associated with the divestiture. The Automotive Trim
business was sold to Collins & Aikman Products Co. in the fourth
quarter 2001.
(e) Special charges include restructuring expenses and fixed asset
impairment write-downs associated with reducing overhead and closing,
consolidating and downsizing manufacturing facilities, reducing
corporate and segment personnel, consolidating operations and exiting
non-core product lines.
(f) With the implementation of SFAS No. 142, Textron recorded a $488
million after-tax transitional goodwill impairment charge comprised of
$274 million in the Industrial Products segment, $111 million in the
Industrial Components segment, $88 million in the Fastening Systems
segment and $15 million in the Finance segment. As required by the
Statement, these charges were recorded retroactively to the beginning
of fiscal year 2002 as a cumulative effect of a change in accounting
principle.
Unaudited
TEXTRON INC.
Condensed Consolidated Balance Sheets
(In millions)
June 29, December 29,
2002 2001
Assets
Cash and cash equivalents $ 595 $ 241
Accounts receivable, net 1,293 1,149
Inventories 1,779 1,727
Other current assets 437 900
Net property 2,014 2,044
Other assets 3,079 3,527
Textron Finance assets 6,795 6,464
Total Assets $ 15,992 $ 16,052
Liabilities and Shareholders' Equity
Current portion of long-term debt and
short-term debt $ 537 $ 673
Other current liabilities 2,296 2,402
Other liabilities 1,765 1,842
Long-term debt 1,671 1,261
Textron Finance liabilities 5,794 5,427
Total Liabilities 12,063 11,605
Obligated mandatorily redeemable preferred
securities 512 513
Total Shareholders' Equity 3,417 3,934
Total Liabilities and
Shareholders' Equity $ 15,992 $ 16,052