Textron Achieves 40th Quarter -- Tenth Year -- of Income Improvement; Organic Growth and Acquisitions Drive Strong Increases in Revenues and Income
Providence, Rhode Island - October 19, 1999 - Marking a decade of continuous quarter-over-year-ago-quarter earnings growth, Textron Inc. (NYSE: TXT) today reported third quarter diluted earnings per share from continuing operations of $0.95, up 46 percent from $0.65 last year.
"Through a combination of organic growth and acquisitions, Textron has delivered another quarter of strong, double-digit revenue and income growth and is poised to achieve another record year in 1999," said Textron Chairman and Chief Executive Officer Lewis B. Campbell.
Revenues in the third quarter grew 15 percent to $2.7 billion from $2.4 billion in 1998. Income from continuing operations increased 35 percent to $146 million from $108 million in the prior year. Net income reached $146 million compared with $142 million in 1998, which included $34 million from a discontinued operation.
All four segments posted strong revenue growth fueled by a balance of organic growth and strategic acquisitions which add complementary capabilities, technologies and product line extensions serving high-growth markets. Since the third quarter of 1998, Textron has made 15 strategic acquisitions.
"Our strong, balanced top-line growth is a testimony to the effectiveness of our growth strategies and our ability to execute them," said Campbell. "However, there is significant opportunity to improve operating margins throughout the company and we are intensely focused on this objective through our rigorous Textron Quality Management process," he continued.
Increased revenues in Textron's Aircraft segment were driven by higher sales of Cessna Citation Excel and Citation X business jets, single-engine aircraft and Bell sales to military customers. "Year-to-date Aircraft revenues have increased a strong 12%," said Campbell. "However, we are not satisfied with this segment's margin performance and we are clearly focused on making steady improvement in this area," he added.
As evidence of its commitment to achieve organic growth through innovative new products and stronger customer partnerships, Textron Automotive Company has won several new contracts from major global auto manufacturers that will ultimately add over $70 million of incremental annual revenues as these new programs are introduced to the market. In addition, Textron Automotive has received numerous industry awards in the U.S. and Europe, including Automotive Industries' "Quest for Excellence" for the Exterior and Interior Trim categories, as well as DaimlerChrysler's "Gold Pentastar" and Volkswagen's "Corporate Supplier" awards, both for Kautex plastic fuel tanks.
In the third quarter, Textron's Industrial segment completed three acquisitions, most notably OmniQuip International, Inc., a $520 million leading manufacturer of light construction equipment including telescopic material handlers and aerial work platforms. "OmniQuip has strong organic growth potential while offering significant opportunities for synergies and operational improvement," Campbell commented.
"This quarter, acquisitions continued to be the engine for delivering growth in our Industrial segment," said Campbell. "We are intensely focused on the integration of these acquisitions and the need to more aggressively drive the organic growth of our Industrial operations," he added.
In Finance, Textron Financial Corporation (TFC) continued to strengthen its market position and core competencies in higher-growth, niche markets through the acquisition of two businesses. These acquisitions bolster TFC's position in the aircraft and franchise markets, and establish a new, high growth niche for TFC in commercial lending to the telecommunications industry. In addition, TFC also announced its tender offer to acquire Litchfield Finance Corporation (NASDAQ: LTCH), a leader in resort (timeshare) financing.
"With our third-quarter acquisition activity, Textron has exceeded its goal of acquiring complementary businesses that will add $1 billion in annualized revenues to core operations by the end of 1999," Campbell noted.
For the first nine months of 1999, Textron's diluted earnings per share from continuing operations increased 51 percent to a record $2.93 per share from $1.94 in 1998. Revenues grew 18 percent to a record $8.3 billion in 1999 from $7.1 billion the prior year, while income from continuing operations rose 40 percent to $453 million from $323 million last year.
In January 1999, Textron completed the sale of Avco Financial Services and recorded a gain of $1.62 billion. Textron also recorded an extraordinary loss of $43 million on the early retirement of debt in the first quarter of 1999. Net income for the nine months, including the gain and extraordinary loss, was $2.025 billion versus $448 million in 1998, which included $125 million from a discontinued operation.
Textron Inc. is an $11 billion, global, multi-industry company with market-leading businesses in Aircraft, Automotive, Industrial and Finance. Textron has a workforce of over 65,000 employees and major manufacturing facilities in 27 countries. Textron is among Fortune magazine's "Global Most Admired Companies." Additional information is available at www.textron.com.
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, and are detailed in our Annual Report and our filings under the Securities and Exchange Act of 1934.
TEXTRON SEGMENT ANALYSIS
For the quarter, segment revenues increased 9 percent and income was unchanged from year-ago levels.
Cessna's revenues increased as a result of higher sales of business jets, primarily the Citation Excel and the Citation X, and higher single engine aircraft sales. Income for the quarter decreased as the contribution from the higher sales was more than offset by increased manufacturing costs associated with the ramp-up in production of new aircraft, higher expenses related to extended warranty programs and increased new product development expense related to the Citation CJ2. Cessna's backlog increased to a record $4.24 billion.
Bell's revenues increased primarily due to higher revenues on the Huey and Cobra upgrade and V-22 production contracts, higher foreign military sales and U.S. government spare parts sales. Income for the quarter increased primarily due to a change in product mix reflecting sales of higher margin commercial aircraft and the recognition into income of cash received in the fourth quarter of 1998 on the formation of a joint venture on the BA 609. These benefits were partially offset by higher engineering expenses in support of Bell's nine new product development programs and favorable contract adjustments in 1998 relating to the Bell-Boeing V-22 program. Bell's backlog increased to $1.84 billion.
For the quarter, revenues and income increased 24 percent and 31 percent, respectively.
The increase in revenue was primarily due to higher North American penetration at Kautex and higher sales at Trim, reflecting increased production at DaimlerChrysler, Ford and General Motors, which was depressed in 1998 by a strike. The increase in revenue also reflected the benefit of the Midland Industrial Plastics acquisition and the Textron Breed Automotive S.r.l. joint venture. Income for the quarter increased due to the contribution from higher organic sales and improved performance at Trim and Kautex.
For the quarter, revenues and income increased 15 percent and 13 percent, respectively.
The increases reflected the contribution from acquisitions, primarily David Brown and Flexalloy, and organic growth at Greenlee, E-Z-GO and Fastening Systems Americas. These factors were partially offset by lower organic sales at Fastening Systems Europe and the remaining businesses reflecting weaker demand, adverse foreign exchange impact, and timing of scheduled shipments. Overall margins approximated last year's level as the impact of lower margin acquisitions was offset by the gain on the sale of a product line.
For the quarter, revenues and income increased 23 percent and 15 percent, respectively.
Revenues for the quarter increased due to a higher level of average receivables and a higher yield, partially offset by a decrease in syndication income. Income increased as the benefit of higher revenues more than offset higher expenses related to growth in managed receivables and a higher provision for loan losses related to the revolving and term finance portfolios. A gain on sale of an investment in 1999 was offset by a gain in 1998 on the securitization of receivables.
In the third quarter, Textron recorded a gain of $19 million as a result of shares granted to Textron from Manulife Financial Corp.'s initial public offering on their demutualization of the Manufacturers Life Insurance Company. This was offset by additional restructuring reserves for the Industrial segment ($16 million) and a contribution of Manulife shares to the Textron Charitable Trust ($3 million).
Interest Income and Expense - Net
For the third quarter, net interest for Textron decreased $30 million as a result of the proceeds received in January 1999 from the sale of Avco Financial Services.
RECENT COMPANY HIGHLIGHTS
- In October, Textron was recognized by Fortune magazine as a "Global Most Admired Company." The selection was made by senior executives and outside board members of companies in relevant industries, as well as Wall Street Analysts who cover these industries. The selection was based upon criteria such as innovation, management quality, and financial performance.
- Textron announced the appointment of Juan Gallardo Thurlow, one of Mexico's most prominent business leaders, to its International Advisory Council in early October. The International Advisory Council comprises 14 distinguished individuals from Asia, Europe, Latin America and North America who provide advice and guidance on business, political and economic issues important to Textron and its global operations.
- In August, Bell Helicopter Textron acquired Edwards & Associates, Inc., a leader in the manufacture, sale and assembly of helicopter customization kits and accessories, as well as the sale of after-market Bell helicopters. Edwards & Associates 1998 sales were approximately $47 million.
- In September, the importance of tiltrotor technology was reaffirmed by U.S. Secretary of Defense William Cohen and members of Congress during a demonstration of the Bell/Boeing V-22 Osprey hosted by the Pentagon. Commenting on the technology, Cohen said, "Tiltrotors . . . are going to revolutionize not only force projection but the entire way that America conceives and sustains its policy of engagement in decades ahead." This revolutionary technology will be a key driver of the Aircraft segment's organic growth well into the next millennium.
- In August, William Maclean was named president of Textron Automotive Company's Trim Division. He succeeds Sam Licavoli, who was promoted to Chairman, President and Chief Executive Officer of Textron Automotive Company in April.
- In September, Textron Automotive Company announced the appointment of J.V. Hirsch to president and CEO of Kautex Textron's worldwide operations. Hirsch replaces Hans-Dieter Lesch, who has retired. Kautex has a total of 23 locations in 15 countries.
- In July, Textron's Fluid & Power Systems Group acquired ALSTOM Gears, part of the France-based multi-industry ALSTOM. Based in the U.K., ALSTOM Gears manufactures and sells a range of gears and gearboxes, including high-speed epicyclic and parallel shaft gearboxes, for the industrial, rail and marine industries. For the fiscal year-ended March 1999, ALSTOM Gears' revenues were approximately $10 million.
- Textron Fastening Systems won a contract to provide the full fastener requirements for Ford's Fiesta and Puma models produced in the United Kingdom and Germany. The vendor managed inventory contract covers over 520 part numbers and currently 50 suppliers of fasteners and assemblies. The contract commenced in August 1999 and will run the life of the current Ford Fiesta and Puma models.
- In September, Textron Fastening Systems acquired Aylesbury Automation Limited, a $13 million subsidiary of Roxspur plc in the U.K. Aylesbury manufactures self-piercing and cold-forged rivets, and automation systems for a variety of applications including automotive and electronics.
- In September, Textron acquired OmniQuip International, Inc. for approximately $477 million, including the assumption of debt. OmniQuip established a new group within Textron's Industrial segment in light construction equipment. With projected 1999 sales of $520 million, OmniQuip is a leader in this market, manufacturing telescopic material handlers, aerial work platforms, skid steer loaders, power lifters and power haulers, and mini-excavators.
- In October, Textron acquired Progressive Electronics and Progressive Manufacturing, a leading supplier of equipment for telecommunications technicians in the fields of wire and cable identification and testing. With 1998 revenues of approximately $23 million, Progressive has become part of Greenlee Textron, a leading supplier of products for wire and cable installation, maintenance and testing to residential, commercial and industrial markets.
- In October, the Ring Screw operation of Textron Fastening Systems - Automotive was informed by the Michigan Quality Council that it will be a recipient of the Michigan Quality Leadership Award at a ceremony this November. Recognizing performance excellence, the award is based on the Malcolm Baldrige Quality criteria.
- In July, Textron Financial Corporation acquired RFC Capital Corporation (RFC). With approximately $70 million in receivables, RFC is a specialty finance company serving the telecommunications industry.
- At the end of the third quarter, Textron Financial Corporation announced the completion of its acquisition of Green Tree Financial Servicing Corporation's aircraft and franchise financing units. Receivables for the acquired business total approximately $750 million.
- In September, Textron Financial Corporation announced the signing of a definitive agreement to acquire the entire outstanding capital stock of Litchfield Financial Corporation in a cash transaction valued at approximately $183 million. With over $550 million in managed receivables, Litchfield specializes in receivables-based finance agreements for the vacation ownership (timeshare) industry and other commercial finance niches.