(Updates with ratings actions, fresh stock quote)
Textron Inc. (TXT) reported first-quarter net income fell 63% on
a sharp drop in sales and weakness at several units as the defense
contractor and aircraft maker also lowered its outlook for the
year.
Shares dropped 9.1% to $10.18 in after-hours trading as the
company also said it would offer 19 million shares and $300 million
in convertible notes as it looks to boost liquidity by more than
$500 million.
Citing lower expected demand at Cessna and higher losses at its
finance unit, Textron cut its view for adjusted 2009 earnings from
continuing operations to a range of 45 cents to 75 cents on revenue
of about $11 billion. In January, the company projected per-share
earnings of $1 to $1.50 on about $12.5 billion in revenue, which
was well below analysts' then-estimates.
Textron, which makes Bell helicopters and Cessna jets, has been
battling a slump in orders for business jets and canceled defense
contracts. In recent months, the company said it would cut 14% of
its work force and shut most of the commercial-finance business
amid unstable credit markets.
After Textron reported its results, Fitch Ratings cut its credit
ratings to junk territory because of the worsening operating
results and concerns about the finance unit's asset quality and
risks in closing the commercial-finance business.
Fitch downgraded its issuer default ratings and long-term debt
ratings for Textron Inc. and Textron Financial Corp. one notch to
BB+, one step below investment grade.
Meanwhile, Moody's Investors Service cut its ratings one notch
to Baa3, the last step above junk, citing quality,
higher-than-expected charge-offs in the finance unit and
sharper-than-anticipated deterioration in the market for Cessna's
business jets.
In the first quarter, Textron's net income fell to $86 million,
or 35 cents a share, from $231 million, or 91 cents a share, a year
earlier. The latest period included $32 million in pretax
restructuring charges. Excluding items, earnings from continuing
operations were 26 cents a share
Total revenue dropped 24% to $2.53 billion.
Analysts polled by Thomson Reuters projected a penny in
per-share earnings on revenue of $2.78 billion.
Based on lower demand expectations, Textron said Tuesday it is
expanding its restructuring program to include additional headcount
reductions, facility closures and charges related to the suspension
of certain development programs. The company now estimates
full-year restructuring charges of about $75 million, up from $40
million.
Cessna's profit fell 57% as revenue declined 38%. Results again
improved at Bell, which posted a profit jump of 30% as revenue
increased 29%. Profit at its defense-and-intelligence business, now
called Textron Systems, fell 19% amid a 22% drop in revenue.
As for the stock and note offering, Textron said it expects to
use the proceeds to pay the cost of the bond-hedge transactions
entered in connection with the deal and for general corporate
purposes, including the paying back debt. Those moves come on top
of its 91% dividend cut and the drawing down of the balance of its
$3 billion committed credit line in February.
-By Lauren Pollock, Dow Jones Newswires; 201-938-5964;
lauren.pollock@dowjones.com
