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Press release from Business Wire

Textron Reports Second Quarter EPS of $0.40

<p class='bwalignc'> <b>Confirms 2013 Financial Guidance</b> </p>

Wednesday, July 17, 2013

Textron Reports Second Quarter EPS of $0.40

06:30 EDT Wednesday, July 17, 2013

PROVIDENCE, R.I. (Business Wire) -- Textron Inc. (NYSE: TXT) today reported second quarter 2013 income from continuing operations of $0.40 per share, compared to income of $0.58 per share in the second quarter of 2012. Total revenues in the quarter were $2.8 billion, down 6% from the second quarter of 2012, primarily reflecting lower business jet deliveries.

Segment profit was $213 million for the quarter, compared to $310 million in the second quarter of 2012, primarily reflecting lower business jet deliveries and $28 million in pre-tax severance costs recorded at Cessna, which were previously announced. Manufacturing cash flow before pension contributions was a $362 million use of cash during the second quarter compared to $121 million of cash generated during last year's second quarter. The company contributed $17 million to its pension plans during the second quarter.

“Despite weakness in European markets, we saw solid growth at Textron Systems and our Industrial businesses, as well as continued strong commercial orders at Bell,” said Textron Chairman and CEO Scott C. Donnelly. “On the other hand, business jet demand continued to be soft, but we believe the cost, production and pricing actions we took are the right actions to support future growth at Cessna.”

Outlook

Textron confirmed its 2013 earnings per share from continuing operations guidance of $1.90 to $2.10 and its expectation for cash flow from continuing operations of the manufacturing group before pension contributions of about $400 million with expected pension contributions of about $200 million.

Second Quarter Segment Results

Cessna

Revenues at Cessna decreased $203 million, reflecting the delivery of 20 new Citation jets in the quarter compared with 49 in last year's second quarter.

Cessna recorded a segment loss of $50 million in the second quarter compared to a profit of $35 million a year ago, reflecting the lower jet deliveries and $28 million in pre-tax severance costs.

Cessna backlog at the end of the second quarter was $1.01 billion, down $23 million from the first quarter of 2013.

Bell

Bell revenues decreased $31 million in the second quarter from the same period in the prior year, primarily reflecting the delivery of 44 commercial helicopters compared to 47 units in last year's second quarter. Bell delivered 9 V-22 and 6 H-1 aircraft in the quarter, flat with last year's second quarter deliveries.

Segment profit decreased $17 million, primarily reflecting an unfavorable mix and lower commercial aircraft deliveries.

Bell backlog at the end of the second quarter was $6.95 billion, down $137 million from the first quarter of 2013.

Textron Systems

Revenues at Textron Systems increased $33 million from the second quarter of 2012, primarily due to higher volumes in the Unmanned Aircraft Systems and Weapons and Sensors product lines, partially offset by lower deliveries at Marine & Land and Mission Support. Segment profit decreased $6 million, reflecting a higher mix of lower-margin service contracts.

Textron Systems' backlog at the end of the second quarter was $2.62 billion, down $165 million from the first quarter of 2013.

Industrial

Industrial revenues increased $45 million reflecting higher volumes and an increase from acquisitions.Segment profit increased $18 million primarily due to improved performance and higher volume.

Finance

Finance segment revenues decreased $24 million compared to the second quarter of 2012. The segment reported a profit of $15 million compared to $22 million in last year's second quarter.

Conference Call Information

Textron will host its conference call today, July 17, 2013 at 8:00 a.m. (Eastern) to discuss its results and outlook. The call will be available via webcast at www.textron.com or by direct dial at (800) 230-1092 in the U.S. or (612) 234-9960 outside of the U.S. (request the Textron Earnings Call).

In addition, the call will be recorded and available for playback beginning at 10:30 a.m. (Eastern) on Wednesday, July 17, 2013 by dialing (320) 365-3844; Access Code: 265926.

A package containing key data that will be covered on today's call can be found in the Investor Relations section of the company's website at www.textron.com.

About Textron Inc.

Textron Inc. is a multi-industry company that leverages its global network of aircraft, defense, industrial and finance businesses to provide customers with innovative solutions and services. Textron is known around the world for its powerful brands such as Bell Helicopter, Cessna Aircraft Company, Jacobsen, Kautex, Lycoming, E-Z-GO, Greenlee, and Textron Systems. More information is available at www.textron.com.

Non-GAAP Measures

Manufacturing cash flow before pension contributions is a non-GAAP measure that is defined and reconciled to GAAP in an attachment to this release.

Forward-looking Information

Certain statements in this release and other oral and written statements made by us from time to time are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements, which may describe strategies, goals, outlook or other non-historical matters, or project revenues, income, returns or other financial measures, often include words such as “believe,” “expect,” “anticipate,” “intend,” “plan,” “estimate,” “guidance,” “project,” “target,” “potential,” “will,” “should,” “could,” “likely” or “may” and similar expressions intended to identify forward-looking statements. These statements are only predictions and involve known and unknown risks, uncertainties, and other factors that may cause our actual results to differ materially from those expressed or implied by such forward-looking statements. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Forward-looking statements speak only as of the date on which they are made, and we undertake no obligation to update or revise any forward-looking statements. In addition to those factors described under “Risk Factors” in our Annual Report on Form 10-K, among the factors that could cause actual results to differ materially from past and projected future results are the following: changing priorities or reductions in the U.S. Government defense budget, including those related to military operations in foreign countries; our ability to perform as anticipated and to control costs under contracts with the U.S. Government; the U.S. Government's ability to unilaterally modify or terminate its contracts with us for the U.S. Government's convenience or for our failure to perform, to change applicable procurement and accounting policies, or, under certain circumstances, to withhold payment or suspend or debar us as a contractor eligible to receive future contract awards; changes in foreign military funding priorities or budget constraints and determinations, or changes in government regulations or policies on the export and import of military and commercial products; volatility in the global economy or changes in worldwide political conditions that adversely impact demand for our products; volatility in interest rates or foreign exchange rates; risks related to our international business, including establishing and maintaining facilities in locations around the world and relying on joint venture partners, subcontractors, suppliers, representatives, consultants and other business partners in connection with international business, including in emerging market countries; our Finance segment's ability to maintain portfolio credit quality or to realize full value of receivables and of assets acquired upon foreclosure of receivables; performance issues with key suppliers or subcontractors; legislative or regulatory actions, both domestic and foreign, impacting our operations or demand for our products; our ability to control costs and successfully implement various cost-reduction activities; the efficacy of research and development investments to develop new products or unanticipated expenses in connection with the launching of significant new products or programs; the timing of our new product launches or certifications of our new aircraft products; our ability to keep pace with our competitors in the introduction of new products and upgrades with features and technologies desired by our customers; increases in pension expenses or employee and retiree medical benefits; difficult conditions in the financial markets which may adversely impact our customers' ability to fund or finance purchases of our products; and continued demand softness or volatility in the markets in which we do business.

 
TEXTRON INC.
Revenues by Segment and Reconciliation of Segment Profit to Net Income
Three and Six Months Ended June 29, 2013 and June 30, 2012

(Dollars in millions, except per share amounts)

(Unaudited)

 
 

 

Three Months Ended

 

 

Six Months Ended

 

June 29, 2013

 

 

June 30, 2012

 

June 29, 2013

 

 

June 30, 2012

REVENUES

   
MANUFACTURING:
Cessna $ 560 $ 763 $ 1,268 $ 1,432
Bell 1,025 1,056 1,974 2,050
Textron Systems 422 389 851 766
Industrial   801     756     1,528     1,511  
2,808 2,964 5,621 5,759
 
FINANCE   31     55     73     116  
Total revenues $ 2,839   $ 3,019   $ 5,694   $ 5,875  
 

SEGMENT PROFIT

MANUFACTURING:
Cessna (a) $ (50 ) $ 35 $ (58 ) $ 29
Bell 135 152 264 297
Textron Systems 34 40 72 75
Industrial   79     61     136     134  
198 288 414 535
 
FINANCE   15     22     34     34  
Segment Profit 213 310 448 569
 
Corporate expenses and other, net (20 ) (20 ) (75 ) (67 )
Interest expense, net for Manufacturing group   (30 )   (35 )   (67 )   (70 )
 
Income from continuing operations before income taxes 163 255 306 432
Income tax expense   (49 )   (82 )   (77 )   (139 )
 
Income from continuing operations 114 173 229 293
Discontinued operations, net of income taxes   (1 )   (1 )   3     (3 )
Net Income $ 113   $ 172   $ 232   $ 290  
 
Earnings per share:
Income from continuing operations $ 0.40 $ 0.58 $ 0.80 $ 0.99
Discontinued operations, net of income taxes   -     -     0.01     (0.01 )
Net income $ 0.40   $ 0.58   $ 0.81   $ 0.98  
 
Diluted average shares outstanding   283,824,000         295,547,000     286,269,000         295,080,000  
 

(a) Includes $28 million in severance costs for the three and six months ended June 29, 2013.

 
Textron Inc.
Condensed Consolidated Balance Sheets
(In millions)
(Unaudited)
               

June 29,
2013

December 29,
2012

Assets
Cash and equivalents $ 459 $ 1,378
Accounts receivable, net 1,007 829
Inventories 3,203 2,712
Other current assets 489 470
Net property, plant and equipment 2,141 2,149
Other assets 3,184 3,173
Finance group assets   1,957   2,322
Total Assets $ 12,440 $ 13,033
 
 
Liabilities and Shareholders' Equity
Short term debt and current portion of long-term debt $ 374 $ 535
Other current liabilities 2,615 2,977
Other liabilities 2,559 2,798
Long-term debt 1,904 1,766
Finance group liabilities   1,608   1,966
Total Liabilities 9,060 10,042
 
Total Shareholders' Equity   3,380   2,991
Total Liabilities and Shareholders' Equity $ 12,440 $ 13,033
 
 
TEXTRON INC.
MANUFACTURING GROUP
Condensed Schedule of Cash Flows and Manufacturing Cash Flow GAAP to Non-GAAP Reconciliations
(In millions)
(Unaudited)
                       
Three Months Ended Six Months Ended
June 29,     June 30, June 29,     June 30,
2013     2012 2013     2012
Cash flows from operating activities:
Income from continuing operations $ 103 $ 157 $ 206 $ 267
Dividends received from TFC 10 75 30 315
Capital contributions paid to TFC (1 ) - (1 ) (240 )
Depreciation and amortization 90 86 182 170
Changes in working capital (509 ) (90 ) (1,038 ) (365 )
Changes in other assets and liabilities and non-cash items   33         30     (121 )       (66 )
Net cash from operating activities of continuing operations   (274 )       258     (742 )       81  
Cash flows from investing activities:
Capital expenditures (113 ) (85 ) (190 ) (158 )
Net cash used in acquisitions (35 ) - (53 ) -
Proceeds from the sale of property, plant and equipment   17         2     17         2  
Net cash from investing activities   (131 )       (83 )   (226 )       (156 )
Cash flows from financing activities:
Increase in short-term debt 161 - 366 -
Principal payments on long-term debt - (139 ) (312 ) (139 )
Settlement of convertible debt (215 ) - (215 ) (2 )
Proceeds from issuance of long-term debt 150 - 150 -
Proceeds from settlement of capped call 75 - 75 -
Net intergroup borrowings - 245 - 245
Other financing activities, net   (4 )       (4 )   2         2  
Net cash from financing activities   167         102     66         106  
Total cash flows from continuing operations (238 ) 277 (902 ) 31
Total cash flows from discontinued operations (3 ) (2 ) (7 ) (3 )
Effect of exchange rate changes on cash and equivalents   (1 )       (5 )   (10 )       (1 )
Net change in cash and equivalents (242 ) 270 (919 ) 27
Cash and equivalents at beginning of period   701         628     1,378         871  
Cash and equivalents at end of period $ 459       $ 898   $ 459       $ 898  
 
Manufacturing Cash Flow GAAP to Non-GAAP Reconciliations:
               
Net cash from operating activities of continuing operations - GAAP $ (274 ) $ 258 $ (742 ) $ 81

Less:

Capital expenditures

(113 ) (85 ) (190 ) (158 )

 

Dividends received from TFC (10 ) (75 ) (30 ) (315 )

Plus:

Capital contributions paid to TFC

1 - 1 240
Proceeds from the sale of property, plant and equipment 17 2 17 2
Total pension contributions   17         21     157         165  
Manufacturing cash flow before pension contributions- Non-GAAP $ (362 )     $ 121   $ (787 )     $ 15  
       
2013 Outlook
Net cash from operating activities of continuing operations - GAAP $760

Less:

Capital expenditures

(550)
Dividends received from TFC (30)

Plus:

Proceeds from the sale of property, plant and equipment

20
Total pension contributions 200
Manufacturing cash flow before pension contributions- Non-GAAP $400
 

Free cash flow is a measure generally used by investors, analysts and management to gauge a company's ability to generate cash from operations in excess of that necessary to be reinvested to sustain and grow the business and fund its obligations. Our definition of Manufacturing free cash flow adjusts net cash from operating activities of continuing operations for dividends received from TFC, capital contributions provided under the Support Agreement, capital expenditures, proceeds from the sale of property, plant and equipment and contributions to our pension plans. We believe that our calculation provides a relevant measure of liquidity and is a useful basis for assessing our ability to fund operations and obligations. This measure is not a financial measure under GAAP and should be used in conjunction with GAAP cash measures provided in our Consolidated Statement of Cash Flows.

 
TEXTRON INC.
Condensed Consolidated Schedule of Cash Flows
(In millions)
(Unaudited)
                       
Three Months Ended Six Months Ended
June 29,     June 30, June 29,     June 30,
2013     2012 2013     2012
Cash flows from operating activities:
Income from continuing operations $ 114 $ 173 $ 229 $ 293
Depreciation and amortization 95 92 192 183
Changes in working capital (301 ) (32 ) (741 ) (402 )
Changes in other assets and liabilities and non-cash items   25         48     (142 )       (46 )
Net cash from operating activities of continuing operations   (67 )       281     (462 )       28  
Cash flows from investing activities:
Finance receivables repaid 40 182 112 336
Proceeds from sales of receivables and other finance assets 25 55 53 117
Capital expenditures (113 ) (85 ) (190 ) (158 )
Net cash used in acquisitions (35 ) - (53 ) -
Other investing activities, net   (1 )       31     10         11  
Net cash from investing activities   (84 )       183     (68 )       306  
Cash flows from financing activities:
Principal payments on long-term and nonrecourse debt (443 ) (249 ) (925 ) (393 )
Proceeds from issuance of long-term debt 361 61 402 88
Increase in short-term debt 161 - 366 -
Settlement of convertible debt (215 ) - (215 ) (2 )
Proceeds from settlement of capped call 75 - 75 -
Other financing activities, net   (4 )       (4 )   2         3  
Net cash from financing activities   (65 )       (192 )   (295 )       (304 )
Total cash flows from continuing operations (216 ) 272 (825 ) 30
Total cash flows from discontinued operations (3 ) (2 ) (7 ) (3 )
Effect of exchange rate changes on cash and equivalents   (1 )       (5 )   (10 )       (1 )
Net change in cash and equivalents (220 ) 265 (842 ) 26
Cash and equivalents at beginning of period   791         646     1,413         885  
Cash and equivalents at end of period $ 571       $ 911   $ 571       $ 911  
 
 

Textron Inc.
Investor Contacts:
Doug Wilburne, 401-457-2288
or
Justin Bourdon, 401-457-2288
or
Media Contact:
David Sylvestre, 401-457-2362

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