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Textron Reports Third Quarter Earnings From Continuing Operations Of $0.48 Per Share, Up 6.7% From A Year Ago; Increases Full-year EPS Guidance

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; changes in worldwide economic or political conditions that impact demand for our products, interest rates or foreign exchange rates; 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; 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; our ability to access the capital markets at reasonable rates; performance issues with key suppliers, subcontractors or business partners; legislative or regulatory actions 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; the extent to which we are able to pass raw material price increases through to customers or offset such price increases by reducing other costs; increases in pension expenses or employee and retiree medical benefits; uncertainty in estimating reserves, including reserves established to address contingent liabilities, unrecognized tax benefits, or potential losses on our Finance segment’s receivables; difficult conditions in the financial markets which may adversely impact our customers’ ability to fund or finance purchases of our products; and volatility in the global economy resulting in 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 Nine Months Ended September 29, 2012 and October 1, 2011

(Dollars in millions, except per share amounts)

(Unaudited)

   

 

Three Months Ended

   

Nine Months Ended

 

September 29, 2012

    October 1, 2011   B(W)

September 29, 2012

  October 1, 2011   B(W)

REVENUES

                 
MANUFACTURING: % Change % Change
Cessna $ 778 0.9 $ 771 $ 7 $ 2,210 11.7 $ 1,979 $ 231
Bell 1,075 20.2 894 181 3,125 24.3 2,515 610
Textron Systems 400 (13.4 ) 462 (62 ) 1,166 (14.2 ) 1,359 (193 )
Industrial   683   4.3       655     28     2,194     5.6       2,077     117  
2,936 5.5 2,782 154 8,695 9.6 7,930 765
 
FINANCE   64   100.0       32     32     180     97.8       91     89  
Total revenues $ 3,000   6.6   $ 2,814   $ 186   $ 8,875     10.6     $ 8,021   $ 854  
 

SEGMENT PROFIT

% Profit

% Profit % Profit % Profit
MANUFACTURING: Margin Margin Margin Margin
Cessna $ 30 3.9 $ 33 4.3 $ (3 ) $ 59 2.7 $ - - $ 59
Bell 165 15.3 143 16.0 22 462 14.8 354 14.1 108
Textron Systems 21 5.3 47 10.2 (26 ) 96 8.2 149 11.0 (53 )
Industrial   38     5.6         37     5.6       1     172     7.8       153     7.4       19  
254 8.7 260 9.3 (6 ) 789 9.1 656 8.3 133
 
FINANCE   28     43.8         (24 )   (75.0 )     52     62     34.4       (101 )   (111.0 )     163  
Segment Profit 282 9.4 236 8.4 46 851 9.6 555 6.9 296
 
Corporate expenses and other, net (38 ) (13 ) (25 ) (105 ) (75 ) (30 )
Interest expense,
net for Manufacturing group   (35 )   (37 )   2     (105 )   (113 )   8  
 
Income from continuing operations
before income taxes 209 Tax rate 186 Tax rate 23 641 Tax rate 367 Tax rate 274
Income tax expense   (67 ) 32.1   (50 ) 26.9   (17 )   (206 ) 32.1   (108 ) 29.4   (98 )
 
Income from continuing operations 142 136 6 435 259 176
Discontinued operations,
net of income taxes   9     6     3     6     2     4  
           
Net Income $ 151   $ 142   $ 9   $ 441   $ 261   $ 180  
 
Earnings per share:
Income from continuing operations $ 0.48 $ 0.45 $ 0.03 $ 1.47 $ 0.83 $ 0.64
Discontinued operations,
net of income taxes   0.03     0.02   0.01   0.02     -     0.02  
Net income $ 0.51   $ 0.47   $ 0.04 $ 1.49   $ 0.83   $ 0.66  
 
Diluted Average shares outstanding   296,920,000             300,866,000             295,697,000           312,754,000          
 
 

Textron Inc.

Condensed Consolidated Balance Sheets

(In millions)
(Unaudited)
                   

September 29, 2012

December 31, 2011

Assets
Cash and equivalents $ 1,232 $ 871
Accounts receivable, net 914 856
Inventories 2,831 2,402
Other current assets 549 1,134
Net property, plant and equipment 2,078 1,996
Other assets 3,066 3,143
Finance group assets   2,395   3,213
Total Assets $ 13,065 $ 13,615
 
 
Liabilities and Shareholders' Equity
Current portion of long-term debt $ 521 $ 146
Other current liabilities 2,694 2,785
Other liabilities 2,679 2,826
Long-term debt 1,817 2,313
Finance group liabilities   2,046   2,800
Total Liabilities 9,757 10,870
 
Total Shareholders' Equity   3,308   2,745
Total Liabilities and Shareholders' Equity $ 13,065 $ 13,615
 
 
TEXTRON INC.
MANUFACTURING GROUP
Condensed Schedule of Cash Flows and Manufacturing Cash Flow GAAP to Non-GAAP Reconciliations
(In millions)
(Unaudited)
             
               
Three Months Ended Nine Months Ended
September 29, October 1, September 29, October 1,
2012   2011 2012   2011
Cash flows from operating activities:
Income from continuing operations $ 127 $ 155 $ 394 $ 330
Dividends received from TFC 30 - 345 179
Capital contributions paid to TFC - (40 ) (240 ) (152 )
Depreciation and amortization 87 87 257 267
Changes in working capital (36 ) 140 (401 ) (98 )
Changes in other assets and liabilities and non-cash items   108         31     42         (7 )
Net cash from operating activities of continuing operations   316         373     397         519  
Cash flows from investing activities:
Capital expenditures (156 ) (102 ) (314 ) (271 )
Other investing activities, net   (1 )       12     1         (30 )
Net cash from investing activities   (157 )       (90 )   (313 )       (301 )
Cash flows from financing activities:
Increase (decrease) in short-term debt - 38 - 227
Principal payments on long-term debt - - (139 ) (13 )
Proceeds from issuance of long-term debt - 496 - 496
Net intergroup borrowings 173 120 418 (275 )
Dividends paid (6 ) (6 ) (17 ) (17 )
Other financing activities, net   4         (17 )   15         (18 )
Net cash from financing activities   171         631     277         400  
Total cash flows from continuing operations 330 914 361 618
Total cash flows from discontinued operations (2 ) (1 ) (5 ) (3 )
Effect of exchange rate changes on cash and equivalents   6         (6 )   5         4  
Net change in cash and equivalents 334 907 361 619
Cash and equivalents at beginning of period   898         610     871         898  
Cash and equivalents at end of period $ 1,232       $ 1,517   $ 1,232       $ 1,517  
 
Manufacturing Cash Flow GAAP to Non-GAAP Reconciliations:
               
Net cash from operating activities of continuing operations - GAAP $ 316 $ 373 $ 397 $ 519

Less:   Capital expenditures

(156 ) (102 ) (314 ) (271 )

Dividends received from TFC

(30 ) - (345 ) (179 )

Plus:   Capital contributions paid to TFC

- 40 240 152
Proceeds on sale of property, plant and equipment 7 12 9 13
Total pension contributions   16         16     181         221  
Manufacturing cash flow before pension contributions- Non-GAAP $ 153       $ 339   $ 168       $ 455  
       
2012 Outlook
Net cash from operating activities of continuing operations - GAAP $1,055 - $ 1,105

Less:   Capital expenditures

(450)

Dividends received from TFC

(345)

Plus:   Capital contributions paid to TFC

240
Total pension contributions 200
Manufacturing cash flow before pension contributions- Non-GAAP $700 - $ 750
 
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 Nine Months Ended
September 29, October 1, September 29, October 1,
2012   2011 2012   2011
Cash flows from operating activities:
Income from continuing operations $ 142 $ 136 $ 435 $ 259
Depreciation and amortization 94 94 277 289
Changes in working capital 49 193 (353 ) 44
Changes in other assets and liabilities and non-cash items   89         21     43         71  
Net cash from operating activities of continuing operations   374         444     402         663  
Cash flows from investing activities:
Finance receivables originated or purchased (3 ) (39 ) (22 ) (149 )
Finance receivables repaid 142 243 478 665
Proceeds on receivable sales 44 19 113 276
Capital expenditures (156 ) (102 ) (314 ) (271 )
Proceeds from sale of repossessed assets and properties 23 5 71 77
Other investing activities, net   (17 )       21     13         50  
Net cash from investing activities   33         147     339         648  
Cash flows from financing activities:
Principal payments on long-term and nonrecourse debt (81 ) (132 ) (474 ) (643 )
Proceeds from issuance of long-term debt - 526 88 791
Repayment of borrowings under line of credit facilities - (100 ) - (1,040 )
Increase (decrease) in short-term debt - 38 - 227
Dividends paid (6 ) (6 ) (17 ) (17 )
Other financing activities, net   3         (17 )   15         (18 )
Net cash from financing activities   (84 )       309     (388 )       (700 )
Total cash flows from continuing operations 323 900 353 611
Total cash flows from discontinued operations (2 ) (1 ) (5 ) (3 )
Effect of exchange rate changes on cash and equivalents   6         (8 )   5         3  
Net change in cash and equivalents 327 891 353 611
Cash and equivalents at beginning of period   911         651     885         931  
Cash and equivalents at end of period $ 1,238       $ 1,542   $ 1,238       $ 1,542  
 




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