Textron reports revenue of $2.8 billion in first quarter
07/16/2014 6:44 AM
08/08/2014 10:23 AM
Editor's note: This story has been changed to clarify delivery dates for Beechcraft planes and to correct inaccurate revenue figures.
Revenue at Textron Aviation — the combined Cessna Aircraft and Beechcraft Corp. — totaled $785 million for the first three months of 2014, reflecting the impact of Textron’s acquisition of Beechcraft, higher jet deliveries and higher aftermarket sales, Textron reported Thursday.
The revenue was partially offset by a reduction in used aircraft sales and a decline in activity at fractional ownership company CitationAir, the company said.
In March, Cessna parent company Textron closed the deal to purchase Beechcraft and has been integrating Cessna and Beechcraft into Textron Aviation.
It’s the first quarterly financial report since the deal closed.
Textron expects to take restructuring costs related to Beechcraft in 2014 of about $35 million and acquisition costs of $11 million, it said.
“We estimate the acquisition will add about $45 million net to Textron Aviation segment profit this year,” Scott Donnelly, Textron chairman and CEO, told analysts on a conference call Thursday morning.
The acquisition now gives the company a global customer base of more than 9,000 business jets, more than 9,000 turboprops and more than 180,000 piston engine airplanes, Donnelly said.
Textron Aviation recorded a profit of $14 million for the first quarter, compared to a loss of $8 million a year ago. That was largely due to higher pricing for planes and higher jet and Caravan volumes.
Its parent company Textron reported revenue of about $2.8 billion, essentially flat compared to the first three months of 2013.
Textron Aviation recorded revenue of $785 million during the first three months of the year, up from $708 million for the same time a year ago.
The company delivered eight Beechcraft King Air turboprops during the last two weeks of the first quarter, under the new ownership.
It also delivered 35 new Cessna jets in the quarter, up from 32 jets for the same time a year ago.
The company estimates that Beechcraft will add about $1.5 billion in revenue to the Textron Aviation segment this year.
That reflects an expectation for higher aftermarket revenue, lower military sales and slightly fewer deliveries of King Airs this year, Donnelly said.
Textron Aviation’s backlog at the end of the first quarter totaled $1.5 billion, compared to $1 billion at the end of 2013. The backlog included $534 million of Beechcraft orders.
A number of positive indicators should help Cessna going forward, Donnelly said.
For one, the number of used Citation jets up for sale is down, and pricing for used and new jets has improved, Donnelly said.
Pricing for its Legacy Citations, the Mustang, CJ2, CJ3, CJ4 and XLS product lines, is up over a year ago, he said.
But most of the growth is driven by new products.
“So I would say in terms of trends on some of those key metrics, they are still going in the right direction,” he said. “We certainly feel better about what’s going on in the market and feel a lot more confident about where we’re heading here as we go into the second, third quarter, than we did a year ago.”
The production line is “pretty well matching” demand in the months ahead, Donnelly said.
Still, the market remains competitive.
“I mean every deal is a fight,” he said. But the market overall is strengthening, although it’s still far short of roaring.
“We would like to see it stronger, but it’s certainly improved over where we have been,” Donnelly said.
Since the acquisition, Cessna and Beechcraft sales teams have been meeting with one another.
“I would say there is a great deal of energy around it,” Donnelly said. “People are very enthusiastic, very bullish on working together to get out there and just increase our coverage and build more customer relationship.”
Cessna has been growing its sales force worldwide and moving away from an indirect sales force, or authorized representatives, to a direct sales force.
Some representatives have been outstanding and do a terrific job, he said.
“We still have a bunch of those, and we keep the guys who are doing a great job for us,” Donnelly said.
But for some, the economic downturn seemed to show some weakness in the sales approach.
“Obviously, when we put a direct person in, good times and bad doesn’t really matter,” he said. “The person is out there selling every day. They are not going to wait around for the overall market to become positive to go sell. They sell all the time. And I think that we’re seeing the benefits of that.”
Cessna’s upgraded Citation X is near certification.
The past week was its last week of flight testing. Donnelly said he expects certification and initial deliveries in this quarter.
Cessna by itself did better than expected, Cowen and Co. analyst Cai von Rumohr wrote in a report to investors Wednesday.
For Textron, the company recorded $2.85 billion for the quarter, down slightly from $2.855 billion. Net income totaled $85 million, down from $119 million a year ago.