Textron Announces 20% EPS Increase Nine Years of Quarterly, Year-to-Year Income Growth

October 22, 1998

Providence, Rhode Island - October 22, 1998 - Textron reporting a 20 percent increase in diluted earnings per share from continuing operations, Textron Inc. today announced record third-quarter financial results, marking the company's 36th consecutive quarter of year-to-year income growth.

 

Third-quarter diluted earnings per share from continuing operations rose 20 percent to $0.65 per share. Income from continuing operations increased 19 percent over year-ago levels to $108 million, and revenues grew 15 percent to $2.4 billion. Net income was $142 million, up from $138 million in 1997. These results reflect the reclassification of Avco Financial Services as a discontinued operation.

"For nine years, Textron has delivered consistent, quarter-to-quarter income growth," said Chief Executive Officer Lewis B. Campbell. "Textron's multi-industry strategy continues to benefit shareholders, enabling the company to deliver consistent results in a variety of economic conditions. This is especially important now, in this challenging global economic environment," he added.

Strong performances by Textron's manufacturing segments contributed to the company's record third-quarter results. The Aircraft and Industrial segments posted double-digit increases in revenues and income driven by higher sales of business jets, single-engine aircraft, fastening systems and fluid and power systems, coupled with recent acquisitions.

"We continue to execute our strategies for consistent growth, focusing on an even balance between internal growth and strategic acquisitions. This, combined with our commitment to continuous operations improvement, positions us to deliver another record year," said Campbell.

In the third quarter, Textron announced strategic transactions in each of its business segments. Three acquisitions were announced, including David Brown plc, a $400-million-in-sales maker of industrial gears, pumps and mechanical and hydraulic transmission systems which positions the Fluid and Power Systems group to be a $1 billion, global business, and provides an important platform for future growth. Other acquisitions included Midland Industrial Plastics (Automotive) and Datacom Technologies (Industrial). In addition, Bell Helicopter Textron announced a joint venture with Italian helicopter manufacturer Agusta.

In the third quarter, Textron also announced an agreement to sell Avco Financial Services to Associates First Capital Corporation for $3.9 billion in cash. The transaction is expected to close by the end of the year or early in 1999.

Sixty percent of the $2.9 billion of net proceeds from the sale of Avco will be used for strategic acquisitions, and the remaining 40 percent will fund Textron's stepped-up share repurchase program. More than 4 million shares were repurchased in the third quarter.

For the first nine months of 1998, Textron's diluted earnings per share from continuing operations rose 21 percent to $1.94 from $1.60 the year before. Income from continuing operations was $323 million, up 19 percent from $271 million in the first nine months of 1997. Revenues were $7.1 billion, up 12 percent from $6.4 billion a year ago.

Textron Inc. (NYSE: TXT) is a $10 billion, global, multi-industry company with market-leading businesses in Aircraft, Automotive, Industrial and Finance.

This release may contain certain 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: (i) continued market demand for the types of products and services produced and sold by Textron, (ii) changes in worldwide economic and political conditions and associated impact on interest and foreign exchange rates, (iii) the level of sales by original equipment manufacturers of vehicles for which Textron supplies parts, (iv) the successful integration of companies acquired by Textron.

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 $3.6 billion from $3.2 billion at end of the second quarter.

Bell Helicopter's revenues and income decreased primarily due to the 1997 completion of the three-year Canadian Forces contract for model 412 helicopters and lower commercial aircraft and spares sales. This was partially offset by higher revenues on the V-22 program and the Huey and Cobra upgrade contracts. Backlog remained unchanged at $2.0 billion from the end of the second quarter.

Automotive

Revenues increased 15 percent, while income increased 4 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 and the contribution from acquisitions. These benefits were partially offset by the impact of a strike at General Motors in 1998. The increase in income reflected the above factors, partially offset by new product development costs, and the impact of the introduction of a major replacement program with significant additional content.

Industrial

Revenues increased 17 percent and income increased 18 percent, reflecting the contribution from acquisitions and internal growth combined with ongoing margin improvement. The following acquisitions contributed to the growth for the quarter: Brazaco Mapri Industrias (12/1/97), Ransomes PLC (1/26/98), Sükosim (3/31/98), Ring Screw Works (5/9/98), and Peiner (5/31/98). Internal growth was driven by continued strength in the Fluid & Power Systems businesses. Partially offsetting the benefits of the acquisitions and internal growth were the divestitures of Speidel (12/31/97) and Fuel Systems (6/19/98), and the impact of a strike at General Motors on the Fastening Systems business

Finance

Segment revenues increased 8 percent, while income increased 14 percent. The results benefited from higher yields, a higher level of average receivables, and an increase in syndication and portfolio servicing income. These benefits were partially offset by a higher provision for losses and higher expenses related to an acquisition of a receivable factoring company, growth in managed receivables, and growth in businesses with higher operating expense ratios.

During the quarter, this segment recorded a $3 million gain on the securitization of $275 million of Textron-related receivables. A comparable gain was also recorded in the third quarter last year on the securitization of $401 million of Textron-related receivables.

 RECENT COMPANY HIGHLIGHTS

 Corporate

  • Herbert L. Henkel was promoted to Executive Vice President and Chief Operating Officer, joining Textron's Management Committee and Executive Leadership Team. Henkel was previously president of Textron's Industrial Products segment. .
  • Frank J. Feraco was named president, Industrial Products segment, succeeding and reporting to Henkel.
  • Textron's Board of Directors authorized a new 25-million-share repurchase program, superceding the 8 million shares that remained under the previous authorization.
  • Textron appointed Sir William Purves of London to the company's International Advisory Council (IAC), a distinguished group of 10 business and political leaders from eight countries which provides advice and guidance on business, political and economic issues relevant to Textron and its global operations.
  • Textron was selected as one of the "100 Best Managed Companies in the World" by Industry Week magazine.

Aircraft

  • Bell Helicopter and Italian helicopter manufacturer Agusta announced an agreement in principle to establish a joint venture whereby together they will oversee the development, sales and marketing of the Bell 609 civil tiltrotor and the Agusta 139 medium helicopter.
  • The first production V-22 Osprey, developed by Bell Helicopter and the Boeing Company, is in final assembly in Arlington, TX. This is the first of five military tiltrotor aircraft in initial production.

Automotive

  • Textron Automotive Company's Trim division acquired U.K.-based Midland Industrial Plastics, a leading maker of automotive interior and exterior trim components for European automakers.
  • Automotive Industries magazine awarded Textron Automotive Company's Trim division a top honor, the Quest for Excellence Award in the Body Exterior category

Industrial

  • In early October, Textron completed the acquisition of U.K.-based David Brown Group plc for approximately $326 million plus assumption of debt. David Brown designs and manufactures industrial gears, pumps and mechanical and hydraulic transmission systems used in a wide range of applications. The acquisition will be added to Textron's Fluid and Power Systems group.
  • Textron acquired Datacom Technologies, a manufacturer of cable test instruments used to install and service information technology networks. Datacom will become part of Rockford, Illinois-based Greenlee Textron.

Finance

  • Textron agreed to sell Avco Financial Services to Associates First Capital Corporation for $3.9 billion in cash. The transaction has received Hart-Scott-Rodino clearance and is awaiting additional regulatory approvals in the countries in which Avco does business. The sale is expected to close by year-end 1998 or early in 1999.


Connect with Textron IR

Eric Salander, Vice President, Investor Relations
(401) 457-2288
Cameron Vollmuth, Manager,
Investor Relations (401) 457-2288

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