達信公司 (TXT) 2001 Q1 法說會逐字稿

Ladies and Gentlemen, thank you for standing by and welcome to the Textron earnings conference call. At this time all participants are in a listen only mode. Later, we will conduct the question and answer session. Instructions will be given at that time. If you should require assistance during the call, please depress 0 and *. As a remainder the conference is being recorded today. I would now like to turn the conference over to our host, Mr. Douglas Wilburne, the Vice President of Corporate Communications and Investor Relations. Please go ahead.

Good morning and welcome to our first quarter conference call. Joining me here today in Providence are Lewis Campbell, Textron's Chairman, Chief Executive Officer and Ted French our Chief Financial Officer. Before we begin, let me add that over the course of our discussion this morning, we may be making some forward-looking statements. Any such forward looking statements are subject to various risk factors, which are detailed in our SEC filings and reported in today's earning release. By now, you would have received a copy of our press release. We have also e-mailed supplemental data issues on aircraft deliveries and backlog. If you have not received this data and are interested, please contact Investor Relations at the telephone number referenced on the press release. Let me clarify that these earnings and EPS numbers that we will discuss throughout the call today are from continuing operations of the four special charges and restructuring related expenses. Our income statement attached to the press release has an as-adjusted column. Results in these columns exclude restructuring costs. There are two types of restructuring costs, accrual at the time of initiating the action such as severance and asset and permit costs and the other, restructuring related expenses that are not accruable but are expect in the period incurred and included in the segment's profit. Looking at the income statement then we have $42 million of accruable charges, which are in the special charges net line and we have an additional $3 million dollars of restructuring related expenses above the line and included in the as-reported segment profits. That gives us a total of $45 million in special charges and restructuring related expenses in the first quarter. Now for a summary of our quarterly results.

In the first quarter earnings per share were one dollar in line with our target. Revenues decreased 6.8% to approximately $3 billion during the quarter before the impact of foreign exchange. Segment profit was $316 million down 6% from $336 million while the segment profit margin increased 20 basis points to 10.4% versus 10.2% last year. Now let me the turn the discussion over to Lewis.

Thanks Doug and good morning everybody. You all listened to the interesting three months. When I talked to you back in January quite frankly we talked about a challenging quarter, but as we now look back at the quarter it was even more challenging than we thought. I think a good thing to do here when we start the call is to kind of put the quarter in perspective on how we solved the effects of what happened to us and how we dealt with them. There were three primary reasons to the quarter coupled up so to speak. First, the North American Automobile production was down 17% compared to the first quarter a year ago. We expected that, but quite frankly the big three took a little bit bigger hit than we thought they would, they were down about 23% and DaimlerChrysler fell 31%, total production number got away in that sale. So, that was he first factor. The second factor was GDP actually got weaker on us, it will be pretty close to flat may be up one or two cents and that affects many of our industrial businesses across the board and then the third factor also we knew this was on the ___ 03:49, but not quite so difficult. We had a softening in the light construction industry in particular telescopic material hammers which did not benefit, OmniQuip to say the least. Telescopic material hammers were down about 20%. So, in the sense of this weaker economic environment, I actually feel pretty good that we made in the quarter what we had already said we were going to do. We have good clean results and I am proud of them because they worked hard to make this happen. I think that there are two factors that allowed us to come through the quarter and continue to build well for the year. The first is a balanced mix of strong businesses and second a very aggressive cost reduction effort that is highlighted by our restructuring program and we are going to talk about those other things. Related to the balanced mix of businesses we continued to have very strong growth at Cessna. We actually delivered 33% more just this year versus last year, in the first quarter. We increased commercial sales at Bell and we had we strong profit margin improvement in the entire aircraft segment.

We had a very strong E-Z-GO in the first year, in fact they had their best quarter in the history and we produced another great quarter of double-digit improvement in revenue and profit at Textron Financial. The second key to achieving our first quarter target was the excellent progress we made on our restructuring program and I know when I talked with you late last year and again on the first quarter call again we had approved that we will have a manager - restructuring program. We have not done one of those in a long time. While I am pleased to announce that we are ahead of plans on our restructuring savings, you will hear that the investments we are making on restructuring have really paid off. However, now I want to make this point clear. The real value of the restructuring program is not only what it does for us this year, but more importantly is what it will do for the long term. We now want the automotive bills from back to more normal rate, the capital good markets rebound and they will. Our businesses are going to be in much better shape. So, we take advantage of future uptake in the economic environment. Getting our cost structure aligned now, getting the car sale driving our levels now, and these things positioned us to deliver strong earnings growth that will significantly exceed revenue growth in the future. Now, I want Ted to spend a lot of time on our current restructuring program and he will do that in a minute. But before I turn the program over to him for more details, let me talk about two specific items that I know are on everybody's mind. First of these two programs, you know, there was a significant event yesterday in Washington the Blue Ribbon Panel made there unanimous recommendations public and open deliberations in a panel meeting in Washington and in case you missed it, I thought it might be important to read several statements from the Chairman of the panel, who is a retired Marine Court General, John R. Bailey. Here is what he said; I'll read from the quote,"there are no inherit design flaws with the concept of the Tiltrotor. We have identified areas that we believe need to be addressed before it goes operational and the floor production and we are recommending that the program continue". This is obviously great news to us, but you know quite frankly that is what we expected. We don't have all the details yet, but here is what I think will happen. You know, we are currently in a phase called low rate initial production and that will continue. In fact we continue to build at our customers' request. We have just not been able to fly any ships yet.

Actually, I think when this year ends we will probably build a few less ships as we thought we probably would and the rest of the program spending will be focussed on fixing issues and getting the program back on track. During this time we were closing with some rains in the rest of our customers base and we will be ready to go in the full rate production, which hopefully should happen sometime in the next twelve months. The bottom line here is the essential that we set foot in the call in January; probably we are even a little conservative. Well, I think I have emphasized that the panel concluded was that the B22 was clearly the right aircraft with the right requirements and must proceed ahead. Good news for us, so it removes a shadow of our fall that was over us here this first quarter. Now, let us talk about automotive. There has been no shortage of stories in the business and trade in the press recently about our automotive business and speculation about possible transactions. I read a lot about that lately. Let me talk about that much as I can. First of all our strategic intent is as clear as ever. We intend to lighten up on automotive. As I said before, that will substantially have a much smaller dependency on the automotive industry going forward and I mean just that. I have said we do not really dispose our automotive assets that are driving other parts of our business. But let me assure you that the execution of this strategy to lighten up on automotive in whatever form it takes has to be done in way that is right for our customers and also maximizing the shareholder value. Now, a few more comments. I can't comment on whether we are having discussions, have had discussions, or will be having discussions with anyone interested in buying any of our automotive assets. I can't do a speculation about various specific alternatives that we might pursue. However, I can tell you this right now. Every option is still open to us as we speak. Okay, Ted you will take it up from here.

Sure. Thanks Lewis and good morning everyone. Before we begin with the segment results, let me give you a quick overview of the key operating impacts on Textron during the quarter. Our segment profit of $316 million was down on a year over year basis by $20 million. There are two major contributors to the decline. First, about $55 million of that was due to the sharp decline we saw year over year in the automotive and heavy truck production levels, impacting both our Automotive and Fastening systems segments. And second a decline of about $20 million in OmniQuip as a result of low volumes and weaker prices in the light construction equipment market. Offsetting that $75 million decline in segment profit were the following three items, $25 million of improved contribution from profits of our aircraft and finance segments, $16 million in restructuring benefits and about $14 million in other cost reduction benefits coming primarily from automotive, industrial, and fastening systems segments. Now let us turn to our restructuring program. Under the program Textron is modernizing and consolidating manufacturing facilities and processes, rationalizing product lines, divesting non-core units, outsourcing non-core production, and streamlining our sales and administrative overhead. We expect total charges of about $200 million for the entire program excluding Goodwill writedowns so that is no change from the past and a cash cost of about $140-160 million or about $85-100 on a after tax basis. Execution of our restructuring program is ahead of plan in every way and by that I mean that projects are being implemented on average earlier than we have planned, the cost of the executing the projects are proving to be somewhat less that what we have budgeted and savings are coming in higher than we have forecasted. During the first quarter we encouraged special charges in restructure related expenses of about $45 million and savings again a $16 million. We already have a total of 52 approved projects across automotive, fastening systems, and industrial products and 40 of those are already launched and under way. As a result of the success we are having, we now expect to achieve about a $100 million in savings this year. We had last talked to you about somewhere between $50-70 million this year, so we got that number pretty significantly. We also now expect that on a manual ongoing basis benefits of the program when completed would be at least to $125 million and you will see that starting next year. Before I go the segment analysis let me also just quickly cover retirement asset and the tax rates, couple of mechanical issues to get out of the way. We expect SFAS-87 and 106 cost benefits from retirement assets this year at the rate for the year that is going to be pretty much the same as what we saw last year, but this time it is going to be spread much more evenly across the quarters. That is going to result in slightly good news for us during the first half of the year and slightly bad news during the second half, but on a full year basis about the same as the prior year.

On the tax front our effective tax were during the quarter and our expected rate for the year is at 35.2%. That reflects a lot of great ongoing tax planning initiatives and is down slightly from the full year rate of 35.5% last year. Now, let us turn to the segment results and we will start with automotive. Automotive segment's revenues and profits decreased 19% and 25% respectively versus the prior year. This was substantially related to the decline in the North American production levels. As Lewis indicated we experienced a 23% decline from the big 3 and 31% from DaimlerChrysler, our largest customer. We were able to maintain similar profits margins at the 9% level during the quarter though, through increased European sales particularly if off-sets, aggressive cost reduction initiatives including a salaried head count reduction of over 400 that took effect right at the end of January and the settlement of certain customer issues. During the quarter we negotiated several pricing agreements with our customers for the balance of the year that went into effect on April 1, 2001. Due to the lower pricing as well as continued weak volumes, we expect full year margins to be about a 150 basis points below the level that we saw in the first quarter. As the year progresses we expect some recovery in sales particularly at Trim and primarily due to solid levels of new business awards coming on line later this year. Next is fastening systems where revenues and profits decreased 14% and 19% respectively. Results of the segment were affected by the decline in the automotive and heavy truck production levels as well as the first quarter decrease in cell phone production. The unfavorable profit impact was partially offset by strong progress on the structuring and other cost reduction activities. An area particular strength in fastening systems is in Aerospace where we are continuing to see strong demand.

In industrial products revenues and profits decreased 7% and 18% respectively. Contributing to the decline we are weaker in market for power transmission products and lower sales at OmniQuip due to an approximately 20% decline in the telescopic handle of market. At OmniQuip our emphasis is on restructuring and reorganizing the business to reflect market conditions in demand, improve the operations, and integrate the management organizations. Excluding OmniQuip interestingly industrial products revenues were down about half of percent and profits increased 6%. In industrial products we also saw increased sales in the Golf and Turf group primarily driven by the E-Z-Go golf cars and GreenLee continued to slightly increase sales within a considerably slowing economy while the DSP business benefited from the temporal acquisitions we completed in January. Next the finance segments revenues and income we are up 13% and 12% respectively. The increase in revenue and income was the result of the increase in the average receivables, higher yields, higher fee income, and a five million dollar securitization gain. Excluding J&L securitization, interest margin increased 78 basis points which reflects higher fee income and to a lesser extent a drop in the prime rate. The credit does support as Textron financial continues to be within acceptable industry standards non-performing assets as a percent of finance assets were 1.9% delink proceeds at 1.2 and charge off in the quarter at 1.17. We expect that charge off rate to be significant with less than 1% in the second quarter and for the rest of the year as we had really one single item that grow up that rate in the first quarter.

And in aircraft revenues were up 3% while profit increased 26% resulting in a 180 basis point margin improvement. At Bell sales were unchanged as higher sales of commercial spares in kits used to modernize of our old model helicopters also at lower revenues on the HI up grade program contracts and lower form military sales. Bell improved profit margins due to the higher commercial sales and lower product development cost. However, our outlook for Bell margins continues to be down slightly for the year due to development cost of our new products primarily the 609 commercial Tiltroter. Our total backlog at Bell decreased from 1.5 at year-end to 1.4 billion, however the commercial backlog at Bell was relatively flat while military backlog decreased due to production progress on the B22. Finally, I can't speak enough about the strength in outstanding operating performances assessment. During the quarter we increased new business jet deliveries by 33% and we are on track to deliver at least 275 jets this year compared with 254 last year. Profit assessment also increased as a result of the higher sales and improved operating performance. Backlog for Cessna continued at a exceptionally strong level of $6.4 billion, for the balance of the year we expect our backlog will moderate slightly, but remained over $6 billion with strong order books across our entire fleet. We are entirely sold off for jet production this year and we expect to be newly sold out on 2002 production by the end of this quarter. Now, we turn back to Lewis.

Thanks Ted. Let us now turn our attention to the outlook for the rest of the year. As you recall, one of our economic expectations coming end of this year where as for US GDP growth to be about 2.5% and our most economists were forecasting back 90 days ago or so that we would have a tough spring, but then once we got into this spring time GDP would rebound. While spring is here and we haven't assumed a rebound yet and in fact the current DRI forecast for the year shows GDP at 1.5% versus last year's 5% rate. We all know consumer conferences down, housing is down, industrial production is down, and we still feel North American oil production is going to be between 15 and 15.5 million units from our production stand point. Europe is holding up pretty well from the automotive standpoint, but is showing a little sign of weakness at least in March. So, based on this quick review of economic factors here is all we see the year for the balance of the year. We are expecting our full year earnings per share before special charges of restructuring to be approximately the same as last year. And for the second quarter we expect earning to be about a $1.1 as we experiencing another challenging quarter in the light of the automotive and light construction markets and also the slow down in GDP. We have done something a little special this time and I have Ted to take a sitting analysis, so Ted I am going to turn it back to you.

Okay, I am going to over set the targets a bit, but want to try and give you a good sense of specifically what causes to change the outlook for the year. Previously, we had indicated that we expected earnings to be up about 5% and we are now expecting earning to be about the same level of last years. So, if you take those two data points, we are talking about the difference about 23 cents of share. The reduction from the prior guidance comes in three primary areas. The impact of low automotive volumes, impact due to both our automotive and a part of our fastening systems segments is expected to reduce earnings by about 5 cents, not a big change there, but a little bit weaker on customer and model mix that we previously expected. Lower revenues in OmniQuip as a result of weaker than anticipated light construction equipment markets particularly at the large yards has caused us to reduce our expectations by about 10 cents per share and finally the combination of slow GDP growth rates slightly worse than the expected foreign exchange and some fairly significantly higher energy cost across all of our businesses have resulted in a reduction in expectations of about 21 cents per share. Now fortunately off setting this reduction of 36 cents, however, is about a 13 cent per share improvement due to the stronger result of our restructuring program. Now I will turn back to Lewis for some precluded remarks.

Thanks Ted, I will share this analysis probably because it will give precisely the same visibility on what is happening in our business as we see it ourselves. You know and I know you understand the business well and I think we understand how these economic factors little affect us and I think we have a business well under control and we finished the year as we promised. Most of you know me pretty well. I go to say I am not happy at all about having to talk about a core that is down versus a year ago and we will talk about an outlook for the year that does not reflect a strong earnings growth. And we are doing everything we can to improve upon those conditions. However, I do want to make two very positive and important points about our business in the contest of this tough environment. First, we have not backed away from advancing our strategic framework. This is very important for the future. We are committed to focus on increasing internal investment capitals to sustain the stronger long-term growth reforms. We are committed to leverage the entirety of the press which is something we have not focussed on enough in my view to drive out more cost in growth opportunities. We are committed to continue to build brand equity with each of our businesses. We really take advantage of the strong brands that we have and we also are committed as I mentioned earlier to simplify the portfolio and concentrate on businesses that are attracting industries for the long term. Let me stop here for a moment.

We were thought on turning in a good quarter the best we could, but I want to tell I am really proud of top management team of Textron for another reason and not only talking about the 15-20 executives that we usually refer to. Here is what I mean by this. We have had two off site meetings with the top 120 leaders around the globe here at Textron during the first quarter two level. Most of them are probably on the call right now. I can tell you that our entire team has locked arms and is totally committed not only to deliver this year's performance, but also to strategically transform every aspect of our business to create a much stronger more compelling company in the future. We are driving our OIC in a very relentless and aggressive cost reduction program and I think Ted spelt out of our restructuring program in pretty good detail. We are pursuing inner price excellence by leveraging cost structures and capital investment across the entire company. We are working on having simple portfolio businesses. So far we have been simplifying and streamlining the organization and our management teams. For example, we reduced the number of discrete business units in our fastening systems segment from 12 down to 3 and Golf & Turf from 3-1. And we have brought together businesses inside our Fluid and Power systems and industrial components business as well. So, we are continuing to invest in Textron brands. You know that well. We are building them and expanding them so that they in turn can drive market share and profitability. Our brands are strong, brands like Cessna, Bell E-Z-Go, GreenLee and Tempo. Okay, my second point. The tough environment relates specifically to our serious dedication to continuous cost improvement. We have to see more cost improvement. We have to accelerate restructuring and we are doing just that, but I think it was a much stronger long-term point relator. As you realize that we were at a very tough environment we did have to be much more aggressive in cost reduction and Ted shared that with you. We are delivering our restructuring savings. Restructuring ____ 25:41 off. More importantly though, we all know the slow down will return to more normal times some time in the next 12 months. I can't predict but can only impact the yesterday's fair rate cut. We do not really understand totally the possibility of another rate cut or may be a change in our taxes.

However, I am cautiously optimistic but these changes could make a difference may be even this year and if they do, we plan to be more than ready, when the economy rebounds. With our restructuring programs substantially completed by the end of the year and our cost structure vastly improved, we are truly placed to deliver earnings growth that should well exceed revenue growth as our market recover. Okay that is it for what we wanted to talk from our prepared speech standpoint. Doug I'll turn it over to you for Q&A.

Thank you Lewis. We will now turn this to questions, but before we do, I would like to remind the media that they are in a listen only mode and beck them to contact me or my colleagues for the conference call questions. Also, we will try to conclude record by 11 o'clock in reference to everybody's time scheduled on this busy day. With that operator we go to the calls.

Ladies and Gentlemen, if you wish to ask a question, please depress the #1 on your touchtone phone. You will hear a tone indicating that you have been placed in queue. You may remove yourself from queue at any time by depressing the pound key. If you are using a speakerphone please pick up your handset before pressing the numbers. One moment please for the first question. We have a question in the line of Harriet Baldwin with Deutsch Bank. Please go ahead.

Good morning. In _____ 28:08 about second quarter full year looks like you haven't really changed your second half outlook very much is that the right way to think about it with some of the increased cost cuts upsetting continued weakness or are there specific reasons in the fourth quarter should have some improvement?

I think clearly Harriet, we have cost reductions activities that are accelerating on a quarter by quarter basis so, you are right the biggest changes are impacting us. Here in the first half and we have already obviously in the first quarter out there. We are looking at $800 million that we were down at 6% in the first quarter, we about 11% down in the second quarter and in the second half we expect just the opposite up about 6 in the third and up about 7 in the fourth to get us back even for the year. We were all driven by some of those cost reductions accelerating and also some of the inventory corrections getting out of the way here in the first half.

Okay our invent had sustained all the backlog has started to come down a little bit only a year later than we thought it might but talk about if there are any dynamics within that of either cancellations or delivery delay within the backlog or was it just an issue of book-to-bill ration in 2001?

Hey Harriet, this is Lewis. Good morning to you. Let me explain that there is no bad new here first of all, only just kind of a tick of few things. First, of all regarding any cancellations the alternating to newer different as we are running a very typical year. Second, the backlog is down slightly quite frankly that backlog has got little dangerous on the higher side honest it is down just a touch not much. We do not see a few weakness in orders in our smaller jet lines particularly, you know that is pretty much as predicted because the small businesses is the one that has taken the brunt of the economic downturn right now. We are sold out in the 2002, so we do not have any issues are all in 2001 and there is nothing significant going on with the orders. The revenues are very strong obviously, but there is nothing significant in there at all. So I would say Cessna is as strong as it ever is really

We actually saw some tit back up in order being taken in April. We were uncertain in the first quarter, but it has gotten little more active.

Would you say that through the quarter that is typical of any of your other businesses with a little bit of improvement coming out of first quarter in April or is that more of Cessna or some specific item.

Well, automotive certainly. We have had a much better March, than we have had a January or February.

Yes, I think your first question you asked and that Ted answered, I think your logic is pretty right because I think automotive production rates obviously should get stronger as the year progresses, I said production rates and not sales because sales was strong first quarter, but have your data. I think GDP although the second quarter doesn't look to be too high, actually GDP should have initially spring back. So assuming all of our businesses pick up a bit in the second quarter versus first for a variety of reasons and of course more cost reductions secondly.

Great and then Industrial and I heard a little bit about the various units particularly OmniQuip, could you remind us what percent growth we should think about from Gulf & Turf in the quarter, quantify a little bit how Fluid and Power transmission was that will be helpful.

In the Fluid and Power systems, we were down about 14% and all of the other Industry was down about 12%, Gulf and Turf was up about 5%

Great that is helpful. And then you talked about having new contracts with the big 3 starting in April. Do you think there are any opportunities for shared margins and gains to offset the pricing at all?

Yeah, let me give you a little flavor. I am not going to get into the specifics or any particular settlement with the customer. We had quite a few discussions with some of our large automotive customers during the first quarter, I am sure you have read about and the short answer is the usual case here we compromised on a number of things. We had compensations really on three different funds. We had some new product discussions, new business awards, some price reductions discussions as well as some compensations about some open issues and cost sharing arrangements as well and that is part of the reason why we see such a strong margin in automotive frankly in our first quarter versus the guidance we have given to you for the balance for the year.

That is part of the reason why you see such a strong margin in automotive frankly in our first quarter versus the guidance we have been giving here for the balance of the year. We actually, favorably settled some cost sharing issues around R&D and packaging cost and the likes which some of our customers help us frankly in the first quarter. We were able to secure some commitments on new business awards out in the future, which will help us longer term and with a degree to some price reductions and we are able to defer the effectiveness of those price reductions until the 05/01/01. So, let us as always in the saying it is a give and take and we came to a compromise that we are all happy with and that has reflected in the guidance thanks we are giving you.

And if you were to aggregate the price outlook, is it pretty similar to the 3 or 4% ___ in 2000, or anything was added to your __?

No I think on aggregate, it is still in that range.

Great. ___. Thank you.

Next question comes from the line of Jack Kelly with Goldman Sachs. Please go ahead. Just a moment. We are experiencing technical difficulties with his line.

Operator, if you are having trouble with one line, may we go to the next line. We will come back to Jack.

Ladies and Gentlemen, can you please press the 1 one more time, if you wish to ask the question. You will hear a tone indicating that you have been placed in queue.

Ladies and gentleman, we are experiencing technical difficulties at this time. Please standby.

Ladies and Gentlemen, this is Doug Wilburne; we apologize for his technical interruption of our call. In the time that we had here, what we thought we would judiciously have another phone line here that we can make it available for people to call in. We will get the question repeated on the call as long as we have our hour. So, let me give you that number and we will fill the call as best as we can. That number is 401-457-3567 and the fastest finger will get the next call. We will pick it up and then repeat the question. That number again is 401-457-3567. Our first call is coming in. So please standby.

Ladies and gentleman, if you do have a question, we do have our system up. If you do have a question, please press the 1 on your phone. Jeff Spraigh with Solomon Smith Barney does have a question.

Let me jump into a quick view. Could you give us the cash flow number in the quarter with and without, may be the cash impact of restructuring and also can you give us the segment where organic number may be similar to what you did on ___industrial ___ segment level and total company basis.

Okay. Let me start to go through cash flow for the first quarter, which was not pretty, but we know the reasons why and it does not impact our four-year views. So, some timing issues. Free cash flow was $385 million negative during the quarter. As you know, the first quarter is for Textron typically, a fairly high cash use quarter. I would characterize this one as being higher than normal and for really four different reason, one in spite of the wonderful quarter we had at Cessna, we did actually miss some shipments at the end of the quarter of few jets that would just be a timing issue and flop over into the second quarter. So, not a long term impact but did result in additional usage during the quarter and used aircraft inventories of Cessna are up a bit based on the strong sales avenues that we have been having. At Bell, we had a beginning of some investment in working capital for the launch of 609 that was anticipated and that will stick with us through most of the year. Automotive was a big swing. As you know, there were very little shipments to the police in the latter part of the fourth quarter. And while shipments were very strong in Q1, a lot of that happened right in March. So, we ran up about a $100 million in the inventory receivables in the auto business and then frankly on OmniQuip we were not able to shut down production as fast as the most retail in the first quarter that ran up working capital about $50 million. We are addressing that aggressively in the second quarter. So, lot of timing issue is predominant. We are still looking at full year free cash flow to be before restructuring as you requested there. Roughly, the same as last year, we will incur cash restructuring cost during the year, probably somewhere in the 60-80 range during this year. But, before restructuring pretty much flat on year-over-year basis. Doug, do you want to take the second question.

Sure Jeff. Our organic growth adjusted for FX as this follows. Aircraft 2.8%, automotive down 21.2%, fasteners down 13.6%, and industrial products down 8.2%. The total manufacturing down of 9.3%, finance was up 12.3%. So, the overall organic growth adjusted for FX is -8.3.

Thanks. I would quickly exit for someone else. Thanks.

Next question is from the line of Jack Kelly with Goldman Sachs. Please go ahead. The line is open.

Good morning. Could you just start on V-22. There was some number in the papers or in the paper or regulatory finding sheet. You received $432 million revenues I guess that was the last year. Could you give us a sense how that might ramp up? It sounded like the expected production contract over the next 12 months and what actually has to be and may be this is in the right ___, what actually has to be fixed to make this go forward based on that report. Secondly, with regard to OmniQuip, could you trill that about a little bit with regards to comments on the large rental yards not taking their share, may be, I think that has been the case for a year or so. So, what is going to change if anything? Then, thirdly, what is your cap ex number for the year is now versus where it was in January?

Okay. Let me do the V-22. I cannot do as much as I would like to Jack, because you know, we cut ourselves in a position where we have a deal with the government, so we are not going to start talking production figures until they talk about them. And the ___ Committee still has some more reporting to do later this month. So, you will be seeing something, probably, before the month end that probably answers most of your questions. But, let me just remind you of the things that ___ in the press that I think that is a kind of held the position throughout the entire discussion. First, I think, I said earlier in the call, that we at the government's direction or the military's direction we have continued to build ships. We just don't allow it to fly. And so, we have a slip as far back as you might think. But we are behind schedule, because we have not gone through flight test and any kind of delivery. So, if I were to say what do you think we are going to end up this year revenue lies on the V-22, we might be pretty close to what we were last year, although, we have intended the ramp up. We used phrase low rate initial production. Actually, we had hoped to be out of low-rate initial production, well, I think initially it was early next year. That will continue. In fact, if you read the report that you saw in the newspaper, you can see they have said they are going to continue this low rate production. From the revenues standpoint, it is a little hard to figure exactly how that is going to flow. Because, let us suppose we build one last ship or get funded for one last ship next year, I think what is going to happen is that funding because, Norm Augustine and others in Washington made a pretty strong point that the program could use more funding. So, I would guess that funding would go into the fixing the things that have become pretty public knowledge, the hydraulic system, and the software. I think there is going to be a host of things that they really soar up for maintenance, testing, to a host of different things that will take a little time but there will be spending. So, my bottom-line would be that if you think about this in terms of a car production start, we will be running at a low rate or slow rate for the next 12 months or so. We are going to full rate production and not to ramp up, probably pretty much like the ramp up was planned a year ago, but I don't know that for sure. I can't guarantee it. I would underscore the first time that I made earlier in the day and that was we put together a pretty what we thought was going to happen a pretty specific program flow and revenue flow together shortly after the mishap and from everything we can see it now is looks like it is we are probably a little conservative. So, I would say this came out, the decision as we understand now, it is very much in our favor and actually we feel very good about it. You had a question on OmniQuip capital. On OmniQuip, Jack, we basically go through two different channels, independent distributor channel, and the ___ channel particularly some of the large national accounts you are aware of. The slowdown has affected everybody up there in the market. But some of these large ___ are also financially scrapped at this point in time. So, they are working hard to get their inventory levels down, they tend to order __ in fairly large lots, and that business is pretty low coming to a standstill as they are correcting their inventory levels. We are actually seeing in this quarter, some improvement in some older flow coming out of the independence. But the big ___ have been a big depressive there. On the cap ex side, there is really no change in what we are looking at. Rough number is plus or minus $600 million for the year that is up from 515 or so last year, particularly as we may make investments in the sovereign and investments in the 609, but there is no change to that from what we previously projected.

Thanks.

Our next question is from the line of Don ___ with JP Morgan. Your line is open.

Good morning everyone. I apologize in advance that this has already been answered. Because I did get dropped. But I did not see a free cash flow number in the release, and if I could get one for the quarter and may be a full year target on that front, I guess this is my first question.

I did go through that in some detail Don. So, rather than taking the whole group do it again, it is out there publically on the call and Doug can take you through that ___ in detail, if you don't mind.

Did you give an outlook as well?

Yes I did.

Okay.

Real quick. There was four year free cash flow before restructuring basically the same as last year and probably some more in the 60, 70, and 80 million range for restructuring cash.

Okay. Next question on the finance segment and securitizations. I think you said $5 million this quarter. What would be a reasonable expectation looking across the rest of 2001 for securitization gains that we might see.

Right now, our plan is basically flat as last year and particularly as a percent not, it is almost exactly the same percent as last year and obviously that somewhat depended on us being opportunistic in the market, so that number could bounce up and down. But right now, it was about 12% ___ last year, we expect about the same this year.

What is the sustainable number? Is 12% of ___, something that you think as sustainable. Can it move up as a percentage? What is really the driver there at the amount of portfolio receivables you guys can generate or the market and your ability to be opportunistic? May be you can walk us through those dynamics.

It is really driven more by being opportunistic out in the market place relative to how do we fund our growth and manage our leverage and how do we maximize cost out in the marketplace and the number can go up or down as we see fit to a fairly large degree.

Just a piece of color on last year CIP for example, 22% there ___ and did 15% of their ___. So, now 12%is a very reasonable, a kind of rate for us to think about. Remember all we are doing here with securitization is just moving earning stream around and taking some gains as they result for the transaction that are the same gains you have taken over a longer period of time. So, it could just potentially create some wealthiness in earnings if you change the percentage by a lot. But is really driven by funding decisions.

Don, there is another point here which I want to come back to you, that is, TFC is fairly well known for its pretty strict under riding and the quality of its book of receivables and therefore as long as you maintain a high quality of receivables, your opportunity to securitize is enhanced. You get better deals. So, I would like to say that if you think about book of receivables that we take up from time to time to securitize, it is a pretty good book a business and I think if you look back over a long period of time, you will see we get damn good rates for what we decide to take out to. That is important.

Okay. Thanks for that insight. I would like to take a little bit into the industrial businesses. You talked about OmniQuip to some length but some of the other business like the DSV stuff, Golf and Turf I was wondering what the outlook is there, obviously, with the SEC having some newer economy exposure. I am Curious as to what you are seeing and may be what your expectations are.

I can tell you a little bit about Golf and Turf first. We are off to a in good start. We should see revenues probably when the year-ends in Golf and Turf, probably up over $100 million from when we start the year. Profits were up. Return on invested capital was up. If you look inside Golf and Turf, there are a couple of things going on. The Golf car and utility car business, it is strong as it has ever been and I was just down at E-Z-GO, and I say we really have a tremendous product that is by and far the best in the industry. I do not know you know this or not, but when we released the __ car, you don't have to do anything to it for three years. And if you have to change the brakes, it takes 2.5 minutes aside. So, we have really created product that the market really likes. On the Turf side, we are still in some of our restructuring inside Turf. We are still consolidating the facilities of the old Lanson group. We have the old Jacobson Group. We finally even closed both headquarters now and we are relocating those to a smaller location, the size wise with a less ___ product down in Charlotte. So, I think that business will keep getting better both from a margin standpoint and also from a return on investment capital standpoint. And I think we have a good cross-section of production from the Turf side. So, it is coming. It is not quite a billion by the time the year ends, but it will approach $900 million and I think conceptually, we can see that growth for a long time based on organic growth.

Okay. And on the DSV stuff, 3 million, you have tested __

3 million in total.

Well, I can talk ___. First you know, you may not know, we just hired a DSV manager and just brought him on board and he and our manager of Greenlee, Barkley Olson, those two guys have kind of ___ and are really doing a couple of things first. It looks like the DSV acquisitions are opening up a bit. They got be pricey last year and those prices are coming down. So, the opportunities to acquire product line extensions like the recent one we made in Tempo really look a lot more capable than they did even three months ago. Secondly, we have not gone public as of yet, though we are close to be able to talk much more specifically about the DSV strategy that is bit more encompassing than our product strategy which was primarily in DSV test equipment and instrumentation. The ___ business has seen the fall off due to the GDP fall off in general, but not too heavy, got a great management team over there, and of course they have got a great channel distribution capability so, we are already seeing DSV product line flowing down the Greenlee channel which is good and we have got more to come there. So, we did see, you remember, it is not quite in DSV, but we did see some weakness in the cell phone industry which does not touch DSV, it is actually in fact our fastening system business for now but there is a little softness there, but by and large, our business is very good.

Thanks. Just one final question for Ted, if I could, just a clarification on restructuring benefits, the number now $100 million this year and you are talking about $125 million run rate or benefit in 2002.

Pretty close to the same. It is a run rate, I guess when we have completely finished. There are few projects that are going to carry over right now into the first quarter or so, but I would just say it is within the plus or minus __ factor, that should be a good 2002 number and the run rate number.

Thanks a lot.

Operator, even though it is 11 o'clock we are going to continue to field calls here since we had that interruption.

Okay. Our next question is from the line of Steve Wilson with Morgan Stanley. Your line is open.

Hai. Good morning. Can you talk a little bit I think somebody mentioned that the used aircraft inventories were up a little bit? That is something that you say is normal. Can you talk about that a little bit and then maybe what you are seeing in terms of pricing in that market as well?

Yes. Used aircrafts is up slightly and you know we delivered 33 more jets this quarter than the year ago quarter, 33% more, and I make that point because we take trades often when we take it or sell new jets. So, it is not unusual for the inventory to be up. It is not a very good precursor of any thing actually; it is actually more tied to the business volume of new jets than anything else. We have honestly seeing somewhat of a softness in the used jet market and again I think it comes right back, the traditional buyer of used jets and small jets, it is going to be less expensive, are the small businessmen and I think small businesses in the US are still big enough to ___ or trying to get through this slowdown in GDP. So, it does not look like there is anything unusual out there are other than the fact we have seen some economic factors probably hit the used market little heavier than normal, but again we are not assuming anything is out there, you know too much of the ordinary demands through that , it is not really a particular issue for us.

Okay great. I think Ted mentioned something a kind of a gain that is just on line ___ quarter. Is it reasonable to think about that as essentially the difference between a high margins this quarter and the guidance for future quarters, was that gain?

Yeah, I think you know, Steve, if you put all the three, again, there are three parts to the negotiation for the customers. There are some cost sharing agreements that we have reached reach, there is pricing agreement that we have reached, and there were some new product awards that we have reached, the new products are kind of further out on the horizon. So, don't think about those. But relative to the quarters, some of the cost sharing agreements helped Q1 and the pricing reductions are predominantly are the major ones, April 1 dated. So, that is the map between the margins in the first quarter at 9% level and a kind of full year margin projection of more in mid 7s.

Okay great. Thank you.

Next question in queue is from the line of Don Blio with Lehman Brothers. Please go ahead.

Good morning. You mentioned earlier that you expected your pension income to be spread out fairly evenly over the quarters this year. Could you just tell what was pension income this year's first quarter and last year's first quarter?

Absolutely, this year for the first quarter was around 11or 12.

That is about 12 million, Don and that was about 9 different from last year.

Okay thank you.

At this time there are no further question, please continue. Well, that concludes our call for the day then. I would like to thank everybody for their patience and if there are additional questions, we will be at our phones. Thank you very much. Thank you all. Have a good day.

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