PROVIDENCE – Textron Inc. Thursday said its continuing operations yielded earnings of $1.36 per share in the quarter just ended, up from $1.07 per share in the third quarter of 2005.
Including discontinued operations, the company posted third-quarter net income of $1.32 per share, compared with a loss of $1.20 per share a year ago.
Revenue in the third quarter was $2.8 billion, up 18 percent from the year-ago period.
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Year-to-date manufacturing cash flow from continuing operations was $636 million, resulting in free cash flow of $410 million.
“Demand continues to be exceptional in our aerospace, defense and finance businesses, with solid growth in our Industrial segment,” Lewis B. Campbell, Textron’s chairman, president and CEO, said this morning. “Furthermore, strong operating performance allowed us to exceed our financial targets while continuing to invest in future growth.”
The company’s quarterly conference call, featuring additional discussion of Textron’s earnings and outlook, is available by dialing (320) 365-3844 and entering access code 794266.
Segment results
The Bell segment’s revenue rose $181 million during the quarter, Textron said. U.S. government revenues were up $145 million, on higher volume of armored security vehicles (ASVs) and V-22 Ospreys and higher development funding for the armed reconnaissance helicopter (ARH). Commercial revenues grew $36 million, as higher aircraft, spares and service orders, and higher pricing, were partially offset by lower military orders from abroad.
But segment profit declined $22 million, as U.S. government profits rose $14 million but commercial profits fell $36 million.
The year-over-year gain in profits on federal orders was credited to favorable cost performance and ASV volume outpacing inflation. The cost performance reflected $6 million in program performance improvements – despite negative year-over-year performance in the H-1 and ARH programs, of $6 million each – and a $7 million reduction in costs from Hurricane Katrina.
On the commercial side, profit decreased $36 million in the third quarter, partly because the year-ago results included a $13 million one-time benefit related to a collaborative R&D contract. The company cited higher overhead as the other major contributor, along with higher new-product development costs and inflation, offset by pricing.
Bell Helicopter received a total of 79 commercial orders in the quarter – including 25, for the 417 and 429 models, that are not included in the segment’s backlog. Its total backlog was $3.3 billion at the end of the third quarter of 2006, compared with $2.8 billion at the end of 2005.
The Cessna segment’s revenues increased $160 million in the third quarter, on favorable pricing and higher volume of Citation business jets.
Segment profit rose $45 million, as higher pricing and volumes and lower warranty costs were partially offset by inflation and R&D costs.
Cessna hit sold-out levels for 2007 as it received 100 new business jet orders in the third quarter; 35 of them are for next-year delivery, topping off the segment’s 2007 delivery plan of 370 jets. Its backlog was $7.2 billion at the quarter’s end, compared with $6.3 billion at year-end 2005.
The industrial segment’s revenues rose $34 million, on higher volume, favorable foreign exchange rates and higher pricing, partially offset by the divestiture of non-core product lines. Its profit increased $7 million, as improved cost performance and higher pricing outpaced inflation.
The finance segment’s revenues increased $57 million, Textron said. It cited higher average finance receivables and a higher interest rate environment. Segment profit was up $10 million as a higher net interest margin – largely attributable to the growth in core receivables – was only partially offset by increased provisions for loan losses.
Outlook
For the full year, Textron has increased its outlook for earnings from continuing operations to between $5.25 and $5.35 per share, with projected fourth quarter earnings of $1.35 to $1.45 per share.
The company said it remains on track to deliver full-year manufacturing cash flow from continuing operations of about $1 billion and free cash flow of about $550 million to $600 million.
“Strong end-market demand through the rest of the decade, coupled with the benefits of our Transformation strategy and the power of our networked multi-industry model, position us to generate significant growth in earnings, cash flow and shareholder value,” Campbell said.
Textron Inc. (NYSE: TXT) is a $10 billion company with about 37,000 employees in 33 countries. Its brands include Bell Helicopter, Cessna Aircraft, Jacobsen, Kautex, Lycoming, E-Z-GO and Greenlee, among others. Additional information is available at www.textron.com.
