Textron Reports First Quarter Earnings of $0.35 per Share; Ends Quarter with $1.7 Billion in Cash; Reduction of Finance Portfolio Ahead of Plan
Providence, RI .- Textron Inc. (NYSE: TXT) today reported first quarter 2009 earnings of $0.35 per share. Excluding special charges, income from continuing operations was $0.26 per share. Revenues in the quarter were $2.5 billion, down 24 percent from the first quarter of 2008. The company ended the quarter with $1.7 billion in cash, reflecting better-than-expected cash flow from both its manufacturing and finance operations, the sale of the HR Textron business and the draw on the company’s bank line facilities.
“While most of the company’s commercial markets experienced further softening in the quarter and TFC credit quality weakened, we had continued solid results at Bell and Textron Systems,” said Textron Chairman and CEO Lewis B. Campbell. “We continue to execute on our cash generation plan and productivity enhancements.”
Campbell continued, “Despite the tough environment, our liquidity plan is substantially ahead of schedule. This reflects excellent early progress in collecting finance receivables at TFC, actions we are taking in our manufacturing operations to adjust production to meet lower demand and to drive working capital efficiency and other liquidity actions.”
Managed receivables at Textron Financial Corporation (TFC) were reduced by $926 million from year-end. “We are encouraged by the pace of liquidations at TFC, and have increased our full-year target from $2.6 billion to $3.1 billion,” Campbell added.
Manufacturing free cash flow was a $286 million use of cash, primarily reflecting inventory expansion at Cessna and seasonal payments made across the company, partially offset by $50 million in proceeds from the sale of a customer maintenance tracking service at Cessna.
Textron recorded first quarter pre-tax, special charges of $32 million associated with the company’s restructuring program to reduce overhead costs and improve productivity. Based on lower demand expectations, the company has expanded its restructuring program to reflect additional headcount reductions, facility closures, and charges related to the suspension of certain development programs. Textron now estimates full-year restructuring charges of approximately $75 million, up from $40 million previously.
The company completed the sale of its HR Textron business in the first quarter for $376 million, which will generate after-tax cash proceeds of $275 million. Results of this business are now reflected in the company’s financial statements as a discontinued operation and all prior periods discussed in this press release and attachments have been adjusted accordingly.
The company is now estimating 2009 revenues of approximately $11.0 billion with full-year earnings per share from continuing operations excluding special charges, in the range of $0.45 to $0.75. This lower earnings estimate primarily reflects lower expected demand at Cessna, and higher losses at TFC related to the current economic environment and the impact of faster liquidations. Manufacturing free cash flow is still expected to be about $400 million.
Campbell concluded, “Over the past quarter our overall cash outlook has improved. This reflects a more rapid liquidation of managed finance receivables and progress with working capital improvements in our manufacturing businesses. We will continue to be intensely focused on these initiatives, and as a result believe we are well positioned to execute on our business plan despite ongoing economic challenges.”
Cessna’s revenues decreased $477 million in the first quarter from the same period last year. This decrease primarily reflects the delivery of 69 business jets compared to 95 during the same quarter last year, partially offset by higher pricing.
Segment profit decreased $117 million primarily due to the lower volume and higher inventory write-downs for used aircraft. These items were partially offset by a $50 million pre-tax gain on the sale of a customer maintenance tracking service and pricing in excess of inflation.
Cessna backlog at the end of the first quarter was $13.0 billion, down $1.5 billion from the end of 2008, reflecting 92 net cancellations during the quarter.
Bell’s revenues and segment profit increased $168 million and $16 million, respectively, in the first quarter. Revenues increased due to higher volume and pricing.
Segment profit increased due to the impact of higher volume and pricing in excess of inflation, partially offset by start up costs for the 429 program and other miscellaneous items.
Bell backlog at the end of the first quarter was $6.1 billion, down slightly from the end of last year, reflecting deliveries of commercial units.
Revenues decreased $101 million, primarily reflecting lower deliveries of unmanned aircraft systems, as deliveries in last year’s first quarter benefited from deliveries slipped from the fourth quarter of 2007, as well as lower training and simulation systems and aircraft engine volumes.
Segment profit decreased $15 million due to the lower volumes and inflation in excess of pricing, partially offset by favorable cost performance.
Backlog at the end of the first quarter was $2.0 billion, compared to $2.2 billion at the end of last year.
Revenues and segment profit in the Industrial segment decreased $278 million and $50 million, respectively. Revenues decreased primarily due to lower volumes and the impact of unfavorable foreign exchange, partially offset by higher pricing.
Segment profit decreased due to the impact of the lower volume, partially offset by higher pricing and improved cost performance.
Finance revenues decreased $92 million in the first quarter due to lower market interest rates, lower securitization gains and lower other income, which were partially offset by the benefit of interest rate floors.
Segment profit was down $108 million as a result of increased loan loss provisions, lower securitization gains and lower other income, in part related to the company’s liquidation plan, partially offset by the benefit of interest rate floors.
Sixty-day plus delinquencies increased to 4.29% from 2.59% at the end of the fourth quarter of 2008. Additionally, nonaccrual finance receivables to total finance receivables held for investment increased to 6.11% from 4.01% since year-end.
Beginning with the first quarter of 2009, we are presenting non-accrual finance receivables separately from assets received in satisfaction of troubled finance receivables due to the increasing significance of the latter two categories and the inherent differences in their characteristics.
Managed receivables ended the quarter at $9.9 billion, versus $10.8 billion at the end of the fourth quarter of 2008. Managed receivable reductions reflect net collections and sales of assets, as well as certain non-cash charges and transfers to other asset categories such as repossessed assets.
Income from continuing operations, excluding special charges and manufacturing free cash flow are non-GAAP measures that are defined in attachments to this release.
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