Textron Reports EPS of $1.06 With First Quarter Operating Income Up 21%; EPS Up 14%; Revenue Increases 18% Textron Quality Management Drives Improvements to Operating Margin

April 19, 2000

EPS Up 14%; Revenue Increases 18% Textron Quality Management Drives Improvements to Operating Margin

Providence, Rhode Island - April 19, 2000 - Textron Inc. (NYSE: TXT) today reported first-quarter diluted earnings per share from continuing operations of $1.06, up 14% from $0.93 in 1999. These results were driven by revenue growth of 18%, including organic growth of 5%, and a 21% increase in operating income.

"Our strategy of investing for growth combined with delivering strong operating improvements through our company-wide Textron Quality Management and e-business initiatives has positioned us to deliver another year of strong results and further enhance shareholder value," said Textron Chairman and Chief Executive Officer Lewis B. Campbell.

Revenues increased to $3.2 billion from $2.7 billion from a year ago. Operating margin improved by 30 basis points to 10.4% as operating income increased to $336 million from $277 million last year. Income from continuing operations rose to $158 million compared to $145 million in 1999.

Strong double-digit increases in revenue and operating income at Textron were driven by each of Textron's four segments: Aircraft, Automotive, Industrial and Finance.

In Aircraft, 9% revenue growth, a 16% increase in operating income and a 50 basis point improvement in operating margin were led by increased deliveries and improved cycle times at Cessna. During the quarter, Bell Helicopter continued to invest in the development of new products to drive long-term growth. Aircraft backlog reached a record $7.4 billion from $7.3 billion at year-end 1999, positioning Textron for continued strong growth.
Automotive posted 16% revenue growth reflecting the strength of the North American market, a 32% increase in operating income, and a 130 basis point improvement in operating margin. Operating improvements in Automotive were led by the implementation of Textron Quality Management initiatives across all businesses.
In Industrial, Textron delivered 22% growth in revenues and an 11% increase in operating income, experiencing a decline in operating margin. To enhance operating performance, the segment intensified its focus on the integration of acquisitions and targeted savings aimed at reduced overhead, material cost reductions and lean manufacturing.
Textron Financial achieved strong growth of 58% in both revenue and operating income. Growth in finance was driven by increasingly strong positions in niche areas of expertise, further bolstered by acquisitions made in 1999. "We are intensely committed to delivering operating excellence through our Textron Quality Management initiatives. We are pleased with the steady margin improvements in our Aircraft and Automotive businesses, and we expect to see measurable improvements in Industrial through these initiatives as the year progresses," said Campbell.

Launch of E-Business Initiatives

During the quarter, Textron launched its e-business strategy and gained significant momentum in the introduction of company-wide e-business programs aimed at driving additional organic growth and reducing costs.

"Textron is embracing the transformational technologies of the internet to drive growth and achieve quantum improvements in the way we do business. Our initiatives range from organic growth opportunities to significant company-wide cost reduction programs in key areas, such as e-procurement and shared services that will directly improve the bottom-line," said Campbell.

Promotion of Kenneth Bohlen to Chief Innovation Officer

In April, Senior Vice President and Chief Information Officer Kenneth Bohlen was promoted to executive vice president and chief innovation officer and a member of the company's management committee. Among Bohlen's key responsibilities is the development and execution of the company's e-business strategy.
Strategic Alliance with Safeguard Scientifics

Accelerating the identification and implementation of e-business initiatives, Textron formed a strategic alliance with Safeguard Scientifics (NYSE: SFE), an Internet holding and operating company with interests in more than 250 Internet-related technology companies.

Launch of e-Business "JumpSmart"

As part of the Safeguard Scientifics partnership, Textron teamed with Cambridge Technology Partners (a Safeguard network company) to launch a comprehensive e-business immersion program. To date, this program has included training on e-business opportunities in the new economy to over 100 of Textron's top managers responsible for driving the company's e-strategy, including the Executive Leadership Team, a thirteen member body of the company's senior corporate executives and operating segment leaders responsible for Textron's overall strategic management. A similar immersion program is planned for Textron's Board of Directors this May.

Company-wide e-Procurement Initiative

Further underscoring its commitment to delivering upon one of the most significant opportunities for company-wide cost reductions, Textron also announced the promotion of Edward Arditte, formerly vice president and treasurer, to vice president e-procurement, reporting to Textron President and Chief Operating Officer John A. Janitz. Textron's e-procurement will initially focus on the purchase of indirect, non-production materials and services, such as office and maintenance supplies. "From this initiative alone, we expect savings in excess of $150 million over the next three to four years," said Janitz.

Formation of Assetcontrol.com

In March, Textron Financial announced the formation of the first of its e-business initiatives, AssetControl.com. An Internet business-to-business (B2B) joint venture, Assetcontrol.com creates the industry's most comprehensive B2B marketplace, specializing in the online resale of surplus industrial equipment, excess inventory and commercial real estate.
Further demonstrating its commitment to build shareholder value, Textron's Board of Directors announced in February a new ten million share repurchase authorization. "We have increased our existing share authorization program as a reflection of our confidence in delivering strong results this year," said Campbell. During the quarter, Textron has repurchased approximately 2.4 million shares. Further share repurchases under the new authorization will be made as market conditions permit, and will be consistent with Textron's stated financial goals.

Textron Inc. (www.textron.com) is an $11.6 billion, global, multi-industry company with market-leading businesses in Aircraft, Automotive, Industrial and Finance. Textron has a workforce of over 68,000 employees and major manufacturing facilities in 30 countries. Textron is among Fortune magazine's "Global Most Admired Companies."

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, including the following: (a) the extent which Textron is able to successfully integrate acquisitions, (b) changes in worldwide economic and political conditions and associated impact on interest and foreign exchange rates, © the occurrence of work stoppages and strikes at key facilities of Textron or Textron's customers or suppliers, (d) the extent to which the Company is able to successfully develop, introduce, and launch new products and enter new markets, (e) the level of government funding for Textron products, and (f) successful implementation of e-procurement strategies. For the Aircraft Segment: (a) the timing of certifications of new aircraft products and (b) the occurrence of a severe downturn in the U.S. economy that discourages businesses from purchasing business jets. For the Automotive Segment: (a) the level of consumer demand for the vehicle models for which Textron supplies parts to automotive original equipment manufacturers ("OEM's") and (b) the ability to offset, through cost reductions, pricing pressure brought by automotive OEM customers. For the Industrial Segment: the ability of Textron Fastening Systems to offset, through cost reductions, pricing pressure brought by automotive OEM customers. For the Finance Segment: (a) the level of sales of Textron products for which TFC offers financing and (b) the ability of TFC to maintain credit quality and control costs when entering new markets.

TEXTRON SEGMENT ANALYSIS

Aircraft

The Aircraft segment's revenues and income increased 9% and 16%, respectively, achieving a 50 basis point improvement in operating margin.

Cessna's revenues increased due to higher sales of business jets, primarily the Citation Excel and Citation Bravo, higher single-engine piston aircraft sales, and increased spares and service revenues. Income increased as a result of the higher sales, improved operating performance and a lower mix of fleet sales. Cessna's backlog increased to a record $5.5 billion from $5.3 billion at year-end 1999.

Bell Helicopter's revenues were essentially unchanged as higher revenues on the V-22 production contract and the Huey and Cobra upgrade contracts, higher foreign military sales and higher military spares sales were offset by lower sales of commercial and military helicopters, and lower V-22 spares sales. Bell's income decreased slightly due primarily to higher product development expense related to the BA 609 commercial tiltrotor aircraft and the Bell 427 helicopter, and a lower recognition into income of cash received in the fourth quarter 1998 on the formation of a joint venture on the BA 609 program. These unfavorable factors were partially offset by lower selling and administrative expense. Bell's backlog declined slightly to $1.92 billion from $1.99 billion at year-end 1999

Automotive

The Automotive segment's revenues and income increased 16% and 32%, respectively.

The increase in revenues was driven by higher sales at Trim, due to the new GM Malibu cockpit program, higher sales on DaimlerChrysler car and truck platforms, and the benefit of the Textron Breed Automotive S.r.l. joint venture. Despite customer price reductions, income increased due to the contribution from the higher sales and improved operating performance at all Textron Automotive businesses, particularly at Kautex, as a result of Textron Quality Management initiatives. The improved operating performance resulted in a 130 basis point improvement in operating margin.

Industrial

The Industrial segment's revenues and income increased 22% and 11%, respectively.

Textron Fastening Systems revenues increased, reflecting the contribution from the Flexalloy and InteSys acquisitions and higher organic sales in Commercial Solutions. This increase was partially offset by lower sales at Automotive Solutions, reflecting the unfavorable impact of foreign exchange in its European operations and customer pricing pressures. Income decreased as the benefit of higher sales was more than offset by unfavorable operating performance at certain plants in North America and the foreign exchange impact. The reorganization of Textron Fastening Systems into four customer center groups and the implementation of Textron Quality Management initiatives has been put into place to drive organic growth, improve operating efficiencies and generate cost reductions to offset the impact of pricing pressures and unfavorable performance.

Textron Industrial Products revenues increased as a result of the contribution from acquisitions, primarily OmniQuip, KSB Annecy, Benzlers, Energy & Williams, Progressive Electronics and Rifocs, and higher organic sales at Golf, Turf Care and Specialty Products, Greenlee and Motion Control Products. Income increased as a result of the contribution from acquisitions and the higher sales and improved margins at Golf, Turf Care and Specialty Products and Motion Control Products. These benefits were partially offset by lower revenues at Textron Systems due to a change in contract mix and reduced customer requirements, and lower customer demand at Turbine Engine Components and Fluid Handling Products.

Finance

The Finance segment's revenues increased 58% due to a higher level of average receivables, reflecting both acquisitive and organic growth, and higher fee and syndication income. Income also increased 58% as the benefit of higher revenues and a lower provision for loan losses was partially offset by higher expenses related to growth in managed receivables. Net interest margin was also adversely impacted by a delay in re-pricing variable rate receivables as a result of an increase in the prime rate.

Corporate Expenses and Other - Net

Corporate expenses and other - net increased $8 million due primarily to the impact of organizational changes and costs associated with strategic and e-business initiatives.

Interest Income and Expense - Net

Net interest for Textron manufacturing increased $36 million from the first quarter of 1999 due to the re-leveraging that occurred following the divestiture of AFS. Interest expense increased $20 million due to a higher level of average debt as a result of acquisitions and share repurchases. In 1999, Textron realized interest income of $16 million as a result of its net investment position.

Income Taxes

The current quarter's effective income tax rate of 36.2% is lower than the corresponding prior year rate of 37.6%, due primarily to the benefit of tax planning initiatives that are being realized in 2000.

New Accounting Pronouncements

As previously disclosed in the 1999 Annual Report of the company, Textron fully complied with the Emerging Issues Task Force consensus on Issue 99-5 concerning "Accounting for Pre-Production Costs Related to Long-Term Supply Arrangements."

As a result of this, in the first quarter of fiscal 2000, Textron reported a Cumulative Effect of Change in Accounting Principle of $59 million (net of tax), or approximately $0.40 per diluted share related to the adoption of this consensus. The effect of this change in accounting on future results will not have a significant impact on income from continuing operations in the affected segments (principally Automotive).

RECENT COMPANY HIGHLIGHTS

Corporate

In February, Textron's Board of Directors authorized a new ten-million-share repurchase authorization, superceding the previous authorization for 4.8 million shares. During the quarter, Textron repurchased a total of 2.4 million shares.

During the quarter, Textron finalized its strategic alliance with Safeguard Scientifics (NYSE: SFE), an e-business holding and operating company with approximately 250 internet technology related partner businesses. The partnership is aimed at accelerating Textron's company-wide e-business strategy.

In April, Textron promoted Kenneth Bohlen to executive vice president and chief innovation officer, and a member of Textron's management committee. Bohlen joined Textron in November 1999 as Chief Information Officer and a member of the Executive Leadership Team.

In April, Textron promoted Edward Arditte to vice-president e-procurement. Arditte was formerly vice president and treasurer of Textron.

In April, Textron promoted Mary Lovejoy to vice president and treasurer. Lovejoy was formerly vice president communications and investor relations of Textron.

In April, Textron named Douglas Wilburne vice president communications and investor relations. Wilburne formerly headed the investor relations program for Rite Aid and AMP Incorporated.

Textron ranked number 154 in this year's Fortune 500 ranking. Textron was also selected again by Fortune magazine as one of "America's Most Admired Companies," a ranking by executives, directors and securities analysts based on a company's innovativeness, quality of management, employee talent, quality of products and services, long-term investment value, financial soundness, social responsibility and use of corporate assets.

Aircraft

Bell Helicopter was selected as a finalist in the Turkish attack helicopter program. Other finalists include Agusta of Italy and Russian Kamov. A final decision is expected this summer.

In late February, Cessna hosted a contract signing ceremony during the Asian Aerospace 2000 exhibition to celebrate the sale of a Citation Excel and two Skyhawks to Kawasho Corporation, Tokyo, Japan, as well as a Skyhawk sold to AirFlite, Perth, Australia. The number of Citations operating in the Asia-Pacific Rim region has grown in recent years, and today the fleet totals approximately 65 aircraft.

In March, Cessna delivered the first Citation CJ1, the lowest-priced entry-level business jet and the successor to the CitationJet. The CJ1, which adds new technology and additional utility to its predecessor, has a seating capacity of 7, a cruising speed of 381 knots and a maximum range of 1,475 nautical miles.

In March, Bell Helicopter announced that it had joined "Team Cormorant" in the bid for the Canadian Maritime helicopter program. Bell would be a subcontractor in the assembly and production test flight of the proposed EH-101, designed and built with Team Cormorant partners Agusta and GKN Westland. A decision on the program is expected by early 2001.

In April, Cessna Aircraft Company announced www.startflyingcessna.com, a new learn-to-fly web site for aspiring pilots. The web site complements a new advertising campaign designed to attract new student pilots to Cessna Pilot Centers located throughout the US and Canada.

Automotive

Ford awarded its highest suppler recognition, the "World of Excellence Award" to 50 of its suppliers, including Textron Automotive - Trim, for their outstanding performance in the Warranty Reduction Program.

For the second consecutive year, GM selected Textron Automotive - Trim as "Instrument Panel Supplier of the Year 1999." The award is based on performance in the areas of product development, quality and efficiency.

DaimlerChrysler presented Textron Automotive - Trim with its "Supply Leadership" award. The award was "In Recognition and Appreciation for their Exemplary Contribution to Continuous Improvement" and for their participation in the Extended Enterprise Scorecard Pilot along with TRW, Lear, Saturn and Continental Teves.

Textron Automotive - Trim received Toyota's "Excellent Supplier" award for Value Improvement and Performance. Trim was one of 16 North American suppliers to receive this recognition.

DaimlerChrysler awarded Trim for their "Information System Award" for Trim's CAD system.

Kautex was named as one of VW's "Top Worldwide Suppliers," particularly due to the efforts of the Kautex organization in Puebla, Mexico.

Industrial

Textron Fastening Systems reorganized into four customer center groups: Automotive Solutions, Commercial Solutions, Advanced Solutions, and Supply Chain Solutions. The reorganization is aimed at maximizing the operating efficiencies and organic growth opportunities of the Group.

Within Textron Fastening Systems' Supply Chain Solutions group, Flexalloy was awarded the 1999 Masters of Quality Award from Freightliner. The award is presented to the top performing suppliers of the company.

In March, Design News chose HR Textron's new pneumatic "27N" R-DDVTM servovalve as one of the top five products for its "Excellence in Design" competition. HR Textron is part of Textron's Fluid and Power Group.

In March, Textron acquired Chesilvale Electronics Ltd., a privately-owned supplier of telecommunications network and fiber optic test instruments and accessories in the United Kingdom. Chesilvale will become part of Greenlee Textron, a leading supplier of test, measurement and installation equipment for the data-signal-voice market.

Chesilvale's 1999 sales were approximately $10 million.

Finance

In March, Textron Financial announced the formation of AssetControl.com, an Internet business-to-business (B2B) joint venture to create the industry's most comprehensive B2B marketplace specializing in the online resale of surplus industrial equipment, excess inventory and commercial real estate. Additional partners include Entrade (NYSE: ETA), ATM Service, Ltd., a subsidiary of WorldWide Web NetworX Corporation (OTC BB: WWWX), and Safeguard Scientifics (NYSE: SFE).




Connect with Textron IR

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

Email Alert

Enter your Email *
Mailing Lists *





 
Enter the code shown above.