Textron Inc. (TXT) posted quarterly earnings of five cents per share excluding one-time items, outpacing the Zacks Consensus Estimate of a two cents’ loss per share. However, this was way below the year-ago quarterly earnings of 26 cents per share.
On a reported basis, after including a tax charge related to the recently enacted federal health-care legislation and pre-tax restructuring charges, income from continuing operations came in at a loss of one cent per share in the reported quarter, compared to earnings of 18 cents in the year-ago quarter.
Operational Results
Textron in the reported quarter witnessed 12.5% lower revenues year-over-year, to $2.2 billion. This was due to lower deliveries of aircraft and the downsizing of the company’s non-captive finance business. The downside was reflected in the bottom-line as well, where the operating profit contracted 29.4% year-over-year to $96 million in the reported quarter.
Segment Results
Cessna
Cessna’s revenues decreased 43.7% year-over-year to $433 million. The downside came from lower volumes, primarily reflecting the delivery of 31 Citation jets in the reported quarter, compared to 69 jets in the year-ago quarter.
Cessna registered an operating loss of $24 million in the reported quarter compared to a profit of $114 million in the year-ago quarter. Margins were negative due to the impact of lower sales volume, and higher inflation, partially offset by improved cost performance. The favorable cost performance included lower selling and administrative expenses, largely due to workforce reductions and lower inventory reserves and used aircraft write-offs.
Bell
Bell’s revenues decreased 16.7% to $618 million in the reported quarter due to lower sales volume. Segmental profit increased $5 million year-over-year to $74 million due to better program performance, non-recurring product launch costs in the year-ago quarter and lower warranty, selling and administrative costs, which more than offset the negative impact of reduced volumes.
Textron Systems
Revenues at Textron Systems increased 9.6% year-over-year to $458 million in the reported quarter. Segmental profit also increased $3 million year-over-year to $55 million, primarily due to higher defense volumes.
Industrial
Revenue in the Industrial segment increased $150 million year-over-year to $625 million in the reported quarter. The top-line was boosted primarily due to higher automotive volume.
Industrial profit increased $58 million year-over-year to $49 million in the reported quarter compared to operating loss of $9 million in the year-ago quarter. The bottom-line increased due to higher volume and improved cost performance, partially offset by higher inflation. Cost performance improved due to workforce reductions and other cost initiatives.
Finance
Finance revenues decreased $46 million year-over-year to $76 million in the reported quarter. Revenue shrunk largely due to the impact of lower average finance receivables, a mark-to-market adjustment of the company’s held-for-sale portfolio and suspended earnings on non-accrual finance receivables.
Finance segment’s loss improved $8 million year-over-year to a loss of $58 million in the reported quarter. This was primarily due to lower loan loss provisions and reduced selling and administrative expenses, partially offset by the impact of lower average finance receivables, a mark-to-market adjustment on the held-for-sale portfolio and suspended earnings on non-accrual finance receivables.
The company was able to reduce sixty-day plus delinquencies of finance receivables held for investment to $515 million from $569 million at fiscal-end 2009. It also reduced non-accrual finance receivables to $1.03 billion from $1.04 billion at fiscal-end 2009. Net charge-offs in the reported quarter were $31 million compared with $22 million in the fourth quarter of 2009. Managed receivables at the end of the reported quarter were $6.3 billion, down from $7.1 billion at the end of fiscal 2009.
Financial Condition
Textron ended the quarter with cash and cash equivalents of $1.4 billion, compared to $1.7 billion at fiscal-end 2009. The company used $89 million of cash for operations in the reported quarter, compared to $161 million in the year-ago quarter. Long-term debt decreased to $3.4 billion at the end of the quarter from $3.5 billion at the end of fiscal 2009.
Outlook
Textron has reaffirmed its fiscal 2010 EPS from continuing operations in the range of 30 cents to 50 cents per share, in line with the Zacks Consensus Estimate of 45 cents. Textron also said that it expects free cash flow of $500 – $550 million in fiscal 2010.
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