Textron Inc. (TXT) has commenced a cash tender offer for any and all of its 4.50% Convertible Senior Notes due 2013. The company also lowered its fiscal year 2011 earnings outlook.
Per the terms and subject to the conditions set in the company’s Offer to Purchase, dated September 14, 2011, and the related Letter of Transmittal, the company has started a tender offer to purchase for cash any and all of its outstanding 4.50% Convertible Senior Notes due 2013. Unless extended or earlier terminated, the offer will expire on October 12, 2011. Currently, there are $599,993,000 aggregate principal amount of Notes outstanding.
The Holders of Notes who do not withdraw their Notes prior to the expiration date will receive for each $1,000 principal amount of such Notes, a cash purchase price equal to the Average Volume Weighted Average Price (“VWAP”) multiplied by 57.1429 plus a fixed cash amount of $504.50, provided that in no case, the Purchase Price is less than $1,075.93 or more than $1,790.22 per $1,000 principal amount of such Notes.
The company will determine the final purchase price promptly after the close of trading on October 12, 2011. The terms and conditions of the offer are not subject to any minimum tender condition. However, it is subject to certain other conditions, including the issuance of at least $600 million principal amount of unsecured senior notes on or prior to the Expiration Date, subject to market conditions and on terms and conditions satisfactory to the company.
The company expects the completion of the offer and the issuance of $600 million principal amount of the New Notes would reduce the average number of the company’s shares of common stock outstanding for 2011 to approximately 304 million shares. The lower share count would benefit the company’s full-year 2011 EPS guidance by 4 cents per share. It also expects stock-based compensation expense to decline in 2011 as a result of a lower share price during the latter half of the year, which will likely have a positive 5 cent impact on EPS. Textron also expects shareholders’ equity to reduce by approximately $250 million.
However, based upon the company’s current business outlook, Textron expects fiscal 2011 earnings to decline by approximately 24 cents per share, resulting in a lowered EPS guidance in the range of 90 cents to $1 per share from the prior range of $1.00 – $1.15. It expects manufacturing cash flow from continuing operations before pension contributions to be in the range of $800–$850 million in 2011.
In July 2011, Textron Inc. announced second quarter 2011 earnings of 29 cents per share, in line with the year-ago quarter and ahead of the Zacks Consensus Estimate of 24 cents.
On October 17, 2011, Textron Inc. is expected to release its third quarter results. The Zacks Consensus Estimates for third quarter 2011 and fiscal year 2011 are currently at 30 cents per share and $1.13 per share, respectively.
Based in Providence, Rhode Island, Textron Inc. is a global multi-industry company that manufactures aircraft, automotive engine components and industrial tools. Going forward, the company’s diversified presence across commercial, manufacturing and industrial products, as well as financing operations, insulates it from specific business risk. It is increasingly focused on its core manufacturing business and is gradually exiting from its commercial finance business.
However, Textron remains exposed to defense spending cuts. Moreover, a slower recovery in the business jet market could lead to deferrals of orders in its backlog. The company presently retains a short-term Zacks #3 Rank (Hold) that corresponds with our long-term Neutral recommendation on the stock. The company mainly competes with General Electric Co. (GE) and United Technologies Corp. (UTX).
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