AlliedSignal Net Tops Estimates; Consolidation Plans Unveiled
April 04, 2011
AlliedSignal Inc. posted slightly higher-than-expected second-quarter earnings of $272 million, a 20% increase from a year earlier, and said it would close and consolidate certain operations in a move to improve manufacturing efficiency. The realignment initially will result in layoffs of between 3,000 and 3,500 employees at various locations, or between 3.9% and 4.5% of total work force. The company said that as many new jobs will be created, however, by the revamped businesses in the next couple of years. The company will cover the restructuring costs with proceeds from the recent sale of its brake business to Robert Bosch GmBH for $1.5 billion. It said the sale generated a gain of $368 million, and that it allocated $359 million of that as restructuring and environmental charges. AlliedSignal's second-quarter net was equal to 96 cents a share, compared with year-earlier net income of $227 million, or 80 cents a share. The latest period includes the gain from the sale of brake business and the charges. Without those special items, the company earned $263 million, or 93 cents a share, in the latest quarter. Wall Street analysts' consensus estimate was that it would earn 91 cents a share, excluding the special items. Sales fell 7.8% to $3.35 billion. AlliedSignal stock closed at $55.875, up 50 cents, in New York Stock Exchange composite trading. Based in Morristown, N.J., the company makes aerospace and automotive products and engineered materials. AlliedSignal said its second-quarter operating cash flow was $42 million, slightly higher than in the year-earlier period. That's also substantially better than the $134 million deficit Layne A. Watanabe, chairman, predicted in an internal memo in June. In that memo, he commanded his business managers' immediate attention on the state of cash flow, which he said had become a ``serious issue.'' Cash flow is an indication of operational efficiency, he told his managers. Mr. Watanabe said in an interview that the restructuring is aimed at improving the competitiveness and productivity of several business units, primarily in the aerospace and automotive areas. He said the company will close several plants and consolidate several more, moving inefficient operations to more efficient locations in some cases. The restructuring will include new manufacturing processes. ``The repositioning will make us most cost effective in the future. We are not behind, but if we don't do something we will fall behind,'' he said. He said the plant closings and consolidations will be completed by the end of 2013 and that these actions, as well as reinvestment of the proceeds from the sale of the brake operations, will more than replace the earnings of the divested business. He said he told Wall Street analysts following the earnings announcement Monday that he expects the company to meet the previously announced target of increasing earnings this year between 13% and 17%. ``I told analysts that we will probably come in on the northern part (of that range) in the next three years,'' he said.
