Providence, Rhode Island - January 29, 2004 - Textron Inc. (NYSE: TXT) today reported fourth quarter 2003 income from continuing operations of $83 million or $0.60 per share, compared to fourth quarter 2002 income from continuing operations of $110 million or $0.80 per share. Including discontinued operations, fourth quarter 2003 net income was $83 million or $0.60 per share, compared with the fourth quarter 2002 net income of $131 million or $0.95 per share.
Full-year 2003 income from continuing operations was $281 million or $2.05 per share, compared to $367 million or $2.62 per share for the full-year 2002. Including discontinued operations and the cumulative effect of a change in accounting principle, full-year 2003 net income was $259 million or $1.89 per share, compared to a net loss of $124 million or a loss of $0.88 per share for full-year 2002.
Full-year 2003 revenues were $9.9 billion, down from $10.4 billion in 2002, reflecting lower sales volume of Citation business jets at Cessna, partially offset by higher revenues in the Bell, Fastening Systems and Industrial segments.
Fourth quarter 2003 earnings included $0.31 per share in after-tax costs related to restructuring. Fourth quarter 2002 results included $0.15 per share in after-tax costs related to restructuring and a $0.17 per share after-tax, non-cash charge related to Textron's common stock holdings in Collins & Aikman Corporation.
Excluding these items, fourth quarter 2003 adjusted earnings per share from continuing operations were $0.91, compared to $1.12 per share in the fourth quarter of 2002.
Full-year 2003 earnings included $0.75 per share in after-tax costs related to restructuring, a $0.07 per share after-tax charge for unamortized issuance costs related to the redemption of the $500 million Textron Capital I trust preferred securities and a $0.09 per share after-tax gain from the sale of Textron's interest in an Italian automotive joint venture. Full-year 2002 results included $0.48 per share in after-tax costs related to restructuring, a $0.16 per share after-tax, non-cash charge related to Textron's common stock holdings in Collins & Aikman Corporation and a $0.06 gain from transactions related to the divested Automotive Trim business.
Excluding these items, full-year 2003 adjusted earnings per share from continuing operations were $2.78, compared to $3.20 per share in 2002.
Cash flow from operating activities for the full-year 2003 was $681 million, compared to $495 million in 2002. Free cash flow before restructuring for the full-year 2003 was $483 million, compared to $314 million last year.
"The benefits from our transformation initiatives during the year enabled us to significantly offset the impact of a decline in business jet deliveries," said Lewis B. Campbell, Textron chairman, president and CEO.
Subsequent Event
During January, Textron liquidated its remaining common shares in Collins & Aikman Corporation. This will result in cash from investing activities of $38 million and a pre-tax gain of $12 million that will be part of special charges, both in the first quarter of 2004. The gain will not be included in as-adjusted earnings.
Outlook
Textron expects full-year 2004 revenues will be down slightly, while earnings per share from continuing operations will be between $2.85 and $3.05, up from $2.78 in 2003. First quarter earnings per share will be between $0.43 and $0.53. These estimates exclude restructuring costs and other special items. The company expects full-year 2004 cash flow from operations will be between $650 million and $700 million, resulting in free cash flow before restructuring between $450 million and $500 million.
"We expect a temporary decline in revenues in our aircraft segments this year and only a modest recovery in our other manufacturing markets. However, we expect the benefits of our transformation initiatives will result in earnings growth and solid cash flow," Campbell added.
"Looking ahead to the rest of the decade, Textron is poised to deliver strong organic growth, reflecting a full recovery in our end markets, introduction of new products, and ramp-up of our military programs at Bell. The benefits of our transformation initiatives, combined with this revenue growth will generate increasingly improved profitability and cash flow."
Presentation of Results and Outlook
In the third quarter of 2003, Textron sold certain assets and liabilities related to its remaining OmniQuip business to JLG Industries, Inc. and in the fourth quarter of 2003, Textron sold its Small Business Direct business to MBNA America Bank, N.A. Textron reclassified the aggregate financial results from these businesses as discontinued operations. Historical results from 1999 have been recast to reflect the transactions and are available for downloading on Textron's investor relations homepage at www.textron.com.
Textron presents adjusted results and outlook before restructuring costs and other special items because such items are outside normal business operations, as well as difficult to forecast accurately for specific periods. Such items are either isolated or temporary in nature. Therefore, it is helpful to understand results without these items, especially when comparing results to previous periods or forecasting performance in future periods.
For example, Textron incurred $65 million in pre-tax costs during the fourth quarter for its restructuring program. The restructuring program, which is designed to reduce overhead costs and rationalize manufacturing facilities, is expected to be substantially complete in 2004. During the execution of the restructuring program, the company is incurring costs that are supplementary to the ongoing operating costs of the business. These costs are not directly related to ongoing business results during the quarter and are not expected to occur with any regularity or predictability.
Results before restructuring costs and other special items are also the basis for measuring operating performance for management compensation purposes. However, analysis of the company's results and outlook before restructuring costs and other special items should be used only in conjunction with data presented in accordance with Generally Accepted Accounting Principles (GAAP). Reconciliations of the company's results and outlook to GAAP are included below.
Fourth Quarter Segment Analysis
Bell
Bell segment revenues and profit increased $50 million and $2 million, respectively.
Revenues increased due to higher revenues in both the U.S. Government and commercial markets. U.S. Government revenues increased primarily due to higher revenues from the V-22 program, higher sales of training helicopters and higher spare parts and service sales. Commercial revenues increased primarily due to higher sales of new and used aircraft and higher sales of aircraft engines, partially offset by lower spare parts and service sales.
Segment profit increased only slightly as higher volumes were partially offset by an unfavorable mix, primarily lower commercial spare parts and service sales.
Backlog at Bell Helicopter of $1.4 billion was up from the third quarter by $227 million.
Cessna
Cessna segment revenues and profit decreased $276 million and $51 million, respectively.
Revenues decreased primarily due to lower sales volume of Citation business jets and used aircraft, partially offset by higher pricing and higher spare parts and service sales. Profit decreased primarily due to the lower sales volume, an unfavorable mix and inflation, partially offset by improved cost performance, a lower net write-down for used aircraft valuations and higher pricing.
Backlog of $4.4 billion was essentially flat with the third quarter.
Fastening Systems
Fastening Systems' revenues increased $45 million, while profit decreased $3 million.
Revenues increased due to the favorable impact of foreign exchange. Slightly higher volume was offset by lower pricing. Profit decreased primarily due to inflation and lower pricing, partially offset by improved cost performance and the favorable impact of foreign exchange.
Industrial
Industrial segment revenues increased $92 million, while profit decreased $11 million.
Revenues increased primarily due to the favorable impact of foreign exchange and higher sales volume at Kautex. Profit decreased primarily due to higher new product launch costs at two assembly plants, inflation, higher warranty provisions and higher health care costs, partially offset by other cost reductions and the favorable impact of foreign exchange.
Finance
Finance segment revenues decreased $17 million, while profit increased $2 million.
Revenues decreased primarily due to lower average finance receivables and lower syndication and securitization gains. Profit increased primarily due to a lower provision for loan losses, partially offset by lower interest margin and higher operating expense. The decrease in the provision for loan losses reflected lower portfolio growth and an improvement in portfolio quality.
Conference Call Information
Textron will host a conference call today, January 29, 2004, at 9:00 a.m. Eastern time to discuss the company's results and outlook. The call will be available via webcast at www.textron.com or by direct dial at (888) 428-4470 in the U.S. or (651) 224-7582 outside of the U.S. (request the Textron Earnings Conference). The call will be recorded and available for playback beginning at 12:30 p.m. Eastern time today by dialing (320) 365-3844 Access Code: 671453. The recording will be available until midnight on April 21, 2004.
Textron Inc. is a $10 billion multi-industry company with more than 43,000 employees in 40 countries. The company leverages its global network of aircraft, industrial and finance businesses to provide customers with innovative solutions and services. Textron is known around the world for its 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) uncertainty in estimating the amount and timing of restructuring charges and related costs; ( c ) changes in worldwide economic and political conditions that impact interest and foreign exchange rates; (d) the occurrence of work stoppages and strikes at key facilities of Textron or Textron's customers or suppliers; (e) government funding and program approvals affecting products being developed or sold under government programs; (f) cost and delivery performance under various program and development contracts; (g) the adequacy of cost estimates for various customer care programs including servicing warranties; (h) the ability to control costs and successful implementation of various cost reduction programs; (i) the timing of certifications of new aircraft products; (j) the occurrence of further downturns in customer markets to which Textron products are sold or supplied or where Textron Financial offers financing; (k) changes in aircraft delivery schedules or cancellation of orders; (l) Textron's ability to offset, through cost reductions, raw material price increases and pricing pressure brought by original equipment manufacturer customers; (m) the availability and cost of insurance; (n) pension plan income falling below current forecasts; (o) Textron Financial's ability to maintain portfolio credit quality; (p) Textron Financial's access to debt financing at competitive rates; and (q) uncertainty in estimating contingent liabilities and establishing reserves tailored to address such contingencies.
TEXTRON INC.
REVENUES AND INCOME BY BUSINESS SEGMENT
THREE MONTHS ENDED JANUARY 3, 2004 AND DECEMBER 28, 2002
(Dollars in millions except per share amounts)
(Unaudited)
January 3, 2004 December 28, 2002
----------------------------------------------------
GAAP As Adjusted GAAP As Adjusted
(a) (a)
------------ ------------ ------------ ------------
REVENUES
MANUFACTURING: (b)
Bell $ 675 $ 675 $ 625 $ 625
Cessna 620 620 896 896
Fastening Systems 457 457 412 412
Industrial 793 793 701 701
------------ ------------ ------------ ------------
2,545 2,545 2,634 2,634
FINANCE 154 154 171 171
------------ ------------ ------------ ------------
Total revenues $2,699 $2,699 $2,805 $ 2,805
============ ============ ============ ============
PROFIT
MANUFACTURING: (b)(c)
Bell $ 69 $ 69 $ 67 $ 67
Cessna 43 43 94 94
Fastening Systems 17 17 20 20
Industrial 44 44 55 55
------------ ------------ ------------ ------------
173 173 236 236
FINANCE 52 52 50 50
------------ ------------ ------------ ------------
Segment profit 225 225 286 286
Special charges (c)(d) (65) - (68) -
Corporate expenses
and other - net (38) (38) (28) (28)
Interest expense,
net (26) (26) (23) (23)
------------ ------------ ------------ ------------
Income from
continuing
operations
before income
taxes and
distribution on
preferred
securities
of subsidiary
trusts 96 161 167 235
Income taxes (13) (36) (50) (73)
Distribution on
preferred
securities
of manufacturing
subsidiary
trust,
net of income
taxes (f) - - (7) (7)
------------ ------------ ------------ ------------
Income from
continuing
operations 83 125 110 155
Income (loss) from
discontinued
operations, net
of income taxes (g) - - 21 (10)
------------ ------------ ------------ ------------
Net income $ 83 $ 125 $ 131 $ 145
============ ============ ============ ============
Earnings per
share: (i)
Income from
continuing
operations $ 0.60 $ 0.91 $ 0.80 $ 1.12
Income (loss) from
discontinued
operations, net
of income taxes(g) - - 0.15 (0.08)
------------ ------------ ------------ ------------
Net income $ 0.60 $ 0.91 $ 0.95 $ 1.04
============ ============ ============ ============
Average diluted
shares
outstanding 138,326,000 138,326,000 138,362,000 138,362,000
============ ============ ============ ============
TEXTRON INC.
REVENUES AND INCOME BY BUSINESS SEGMENT
TWELVE MONTHS ENDED JANUARY 3, 2004 AND DECEMBER 28, 2002
(Dollars in millions except per share amounts)
(Unaudited)
January 3, 2004 December 28, 2002
----------------------------------------------------
GAAP As Adjusted GAAP As Adjusted
(a) (a)
------------ ------------ ------------ ------------
REVENUES
MANUFACTURING: (b)
Bell $ 2,348 $2,348 $ 2,235 $ 2,535
Cessna 2,299 2,299 3,175 3,175
Fastening Systems 1,737 1,737 1,650 1,650
Industrial 2,903 2,903 2,706 2,706
------------ ------------ ------------ ------------
9,287 9,287 9,766 9,766
FINANCE 572 572 584 584
------------ ------------ ------------ ------------
Total revenues $ 9,859 $9,859 $10,350 $10,350
============ ============ ============ ============
PROFIT
MANUFACTURING:(b)(c)
Bell $ 234 $ 234 $ 169 $ 169
Cessna 199 199 376 376
Fastening Systems 66 66 72 72
Industrial 141 141 163 163
------------ ------------ ------------ ------------
640 640 780 780
FINANCE 122 122 118 118
------------ ------------ ------------ ------------
Segment profit 762 762 898 898
Special charges(c)(d) (159) - (135) -
Gain on sale of
businesses (e) 15 - 25 -
Corporate expenses
and other - net (119) (119) (114) (114)
Interest expense,
net (98) (98) (108) (108)
------------ ------------ ------------ ------------
Income from
continuing
operations
before income
taxes and
distribution on
preferred
securities
of subsidiary
trusts 401 545 566 676
Income taxes (107) (151) (173) (201)
Distribution on
preferred
securities
of manufacturing
subsidiary
trust,
net of income
taxes (f) (13) (13) (26) (26)
------------ ------------ ------------ ------------
Income from
continuing
operations 281 381 367 449
Income (loss) from
discontinued
operations, net
of income taxes (g) (22) 2 (3) (27)
Cumulative effect
of a change in
accounting
principle, net
of income
taxes (h) - - (488) -
------------ ------------ ------------ ------------
Net income (loss) $ 259 $ 383 $ (124) $ 422
============ ============ ============ ============
Earnings per
share: (i)
Income from
continuing
operations $ 2.05 $ 2.78 $ 2.62 $ 3.20
Income (loss) from
discontinued
operations, net
of income taxes(g) (0.16) 0.01 (0.02) (0.19)
Cumulative effect
of a change in
accounting
principle, net
of income
taxes (h) - - (3.48) -
------------ ------------ ------------ ------------
Net income (loss) $ 1.89 $ 2.79 $ (0.88) $ 3.01
============ ============ ============ ============
Average diluted
shares
outstanding 137,217,000 137,217,000 140,252,000 140,252,000
============ ============ ============ ============
TEXTRON INC.
REVENUES AND INCOME BY BUSINESS SEGMENT
THREE AND TWLEVE MONTHS ENDED JANUARY 3, 2004 AND DECEMBER 28, 2002
(Dollars in millions except per share amounts)
(Unaudited)
(a) The "As Adjusted" column excludes items recorded in special
charges, the gain on sale of businesses, the cumulative effect
of change in accounting principle and amounts previously
recorded as special charges that have been reclassified as
discontinued operations. Textron presents its results "as
adjusted," before restructuring and other special items,
because such items are outside normal business operations, as
well as difficult to forecast accurately for specific periods.
Such items are either isolated or temporary in nature;
therefore, it is helpful to understand results without these
items, especially when comparing results for previous periods
or forecasting performance in future periods. In addition,
Textron uses "as adjusted" results to measure operating
performance for management compensation purposes. Any analysis
of results before restructuring costs and other special items
should be used only in conjunction with data presented in
accordance with Generally Accepted Accounting Principles
(GAAP). A reconciliation of net income as reported under GAAP
to income from continuing operations, as adjusted is as
follows:
Fourth Full Year
Quarter
----------- ------------
2003 2002 2003 2002
----- ----- ----- ------
GAAP net income (loss) $ 83 $131 $259 $(124)
Adjustments:
Special charges 65 68 159 135
Gain on sale of businesses - - (15) (25)
Tax impact of excluded items (23) (23) (44) (28)
Discontinued operations, net of income
taxes - (21) 22 3
Cumulative effect of change in accounting
principle, net of income taxes - - - 488
----- ----- ----- ------
Income from continuing operations, as
adjusted $125 $155 $381 $ 449
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