News Column

Textron Reports 20% Increase in Fourth Quarter Earnings Per Share and Strong Cash Flow

January 22, 2014

Initiates 2014 Financial Outlook PROVIDENCE, R.I. --(BUSINESS WIRE)-- Textron Inc. (NYSE: TXT) today reported fourth quarter 2013 income from continuing operations of $0.60 per share, up from $0.50 per share in the fourth quarter of 2012. Revenues in the quarter were $3.5 billion , up four percent from the fourth quarter of 2012. Manufacturing segment profit was $305 million compared to $279 million in the fourth quarter of 2012. Manufacturing cash flow before pension contributions was $774 million compared to $625 million during last year’s fourth quarter. Full-year income from continuing operations was $1.75 per share, compared to $1.97 in 2012. Full-year revenues were $12.1 billion , down one percent. Manufacturing cash flow before pension contributions was $256 million , compared to $793 million in 2012. Textron’s consolidated net debt ended the year at $1.98 billion , down $598 million from the end of 2012. “Overall, we had a good fourth quarter to close out the year, with revenue growth at Cessna , Bell and Industrial and solid cash generation across all of our businesses,” said Textron Chairman and CEO, Scott C . Donnelly. Outlook Textron is forecasting 2014 revenues of approximately $13.2 billion , up about 9% from 2013. Earnings per share from continuing operations are expected to be in the range of $2.00 to $2.20 . Cash flow from continuing operations of the manufacturing group before pension contributions is estimated to be between $600 and $700 million with planned pension contributions of about $80 million . These projections do not include the impact of the planned acquisition of Beechcraft, which is expected to close during the first half of the year. Donnelly continued, “2013 was an important year with significant new product introductions and investments for future growth of our businesses. Our 2014 outlook reflects the benefits of those efforts and we will continue to make investments necessary to support ongoing growth and create long-term shareholder value.” Fourth Quarter Segment Results and Actions Cessna Revenues increased $22 million , primarily due to the delivery of 62 new Citation jets in the quarter, compared with 53 in the fourth quarter of 2012, partially offset by the impact of the continued wind-down of the CitationAir business and lower Caravan deliveries. Segment profit was up $10 million from the fourth quarter of 2012, primarily due to better performance, reflecting an unfavorable arbitration award recorded in the fourth quarter of 2012. Cessna backlog at the end of the fourth quarter was $1.0 billion , down $54 million from the end of the third quarter 2013. Bell Revenues increased $226 million , reflecting delivery of 13 V-22’s, 6 H-1’s and 75 commercial aircraft in the quarter compared to 9 V-22’s, 6 H-1’s and 65 commercial units in last year’s fourth quarter. Segment profit was up $1 million from the fourth quarter of 2012 as the impact of higher volumes was largely offset by lower military margins and manufacturing inefficiencies related to prior period labor negotiations and implementation of a new enterprise resource planning system. Bell backlog at the end of the fourth quarter was $6.5 billion , up $47 million from the end of the third quarter 2013. Textron Systems Revenues at Textron Systems decreased $162 million from the fourth quarter of 2012, reflecting lower volumes. Segment profit was up $4 million when compared to the fourth quarter of 2012, as improved performance more than offset the impact of lower volumes. Textron Systems backlog at the end of the fourth quarter was $2.8 billion , down $83 million from the end of third quarter 2013. Industrial Industrial revenues and profits were up $67 million and $11 million , respectively, from the fourth quarter of 2012, primarily reflecting higher volumes. Finance Finance segment revenues decreased $9 million compared to the fourth quarter of 2012. The segment reported a profit of $2 million , flat with last year’s fourth quarter. Conference Call Information Textron will host its conference call today, January 22, 2014 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, January 22, 2014 by dialing (320) 365-3844; Access Code: 265928. 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 Adjusted earnings per share from continuing operations and manufacturing cash flow before pension contributions are non-GAAP measures that are 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: interruptions in the U.S. Government’s ability to fund its activities and/or pay its obligations; 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; 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; and continued demand softness or volatility in the markets in which we do business; the inability to complete announced acquisitions; Difficulty or unanticipated expenses in connection with integrating acquired businesses; the risk that anticipated synergies and opportunities as a result of acquisitions will not be realized or the risk that acquisitions do not perform as planned, including, for example, the risk that acquired businesses will not achieve revenue projections. TEXTRON INC. Revenues by Segment and Reconciliation of Segment Profit to Net Income (Dollars in millions, except per share amounts) (Unaudited) Three Months Ended Twelve Months Ended December 28, 2013 December 29, 2012 December 28, 2013 December 29, 2012 REVENUES MANUFACTURING: Cessna $ 923 $ 901 $ 2,784 $ 3,111 Bell 1,375 1,149 4,511 4,274 Textron Systems 409 571 1,665 1,737 Industrial 773 706 3,012 2,900 3,480 3,327 11,972 12,022 FINANCE 26 35 132 215 Total revenues $ 3,506 $ 3,362 $ 12,104 $ 12,237 SEGMENT PROFIT MANUFACTURING: Cessna (a) $ 33 $ 23 $ (48 ) $ 82 Bell 178 177 573 639 Textron Systems 40 36 147 132 Industrial 54 43 242 215 305 279 914 1,068 FINANCE 2 2 49 64 Segment Profit 307 281 963 1,132 Corporate expenses and other, net (57 ) (43 ) (166 ) (148 ) Interest expense, net for Manufacturing group (27 ) (38 ) (123 ) (143 ) Income from continuing operations before income taxes 223 200 674 841 Income tax expense (52 ) (54 ) (176 ) (260 ) Income from continuing operations 171 146 498 581 Discontinued operations, net of income taxes (4 ) 2 - 8 Net income $ 167 $ 148 $ 498 $ 589 Earnings per share: Income from continuing operations $ 0.60 $ 0.50 $ 1.75 $ 1.97 Discontinued operations, net of income taxes (0.01 ) 0.01 - 0.03 Net income $ 0.59 $ 0.51 $ 1.75 $ 2.00 Diluted average shares outstanding 282,707,000 291,562,000 284,428,000 294,663,000 (a) Full year 2013 includes $28 million in severance costs. Fourth quarter of 2012 includes a $27 million charge related to an award against Cessna in an arbitration proceeding. Textron Inc. Condensed Consolidated Balance Sheets (In millions) (Unaudited) December 28 , 2013 December 29 , 2012 Assets Cash and equivalents $ 1,163 $ 1,378 Accounts receivable, net 979 829 Inventories 2,963 2,712 Other current assets 467 470 Net property, plant and equipment 2,215 2,149 Other assets 3,432 3,173 Finance group assets 1,725 2,322 Total Assets $ 12,944 $ 13,033 Liabilities and Shareholders' Equity Current portion of long-term debt $ 8 $ 535 Other current liabilities 2,995 2,977 Other liabilities 2,118 2,798 Long-term debt 1,923 1,766 Finance group liabilities 1,516 1,966 Total Liabilities 8,560 10,042 Total Shareholders' Equity 4,384 2,991 Total Liabilities and Shareholders' Equity $ 12,944 $ 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 Twelve Months Ended December 28 , December 29 , December 28 , December 29 , 2013 2012 2013 2012 Cash flows from operating activities: Income from continuing operations $ 174 $ 140 $ 470 $ 534 Dividends received from TFC 145 - 175 345 Capital contributions paid to TFC - - (1 ) (240 ) Depreciation and amortization 100 101 371 358 Changes in working capital 524 466 (364 ) 65 Changes in other assets and liabilities and non-cash items 96 (146 ) 7 (104 ) Net cash from operating activities of continuing operations 1,039 561 658 958 Cash flows from investing activities: Capital expenditures (144 ) (166 ) (444 ) (480 ) Net cash used in acquisitions (143 ) (3 ) (196 ) (11 ) Proceeds from the sale of property, plant and equipment 3 6 22 15 Other investing activities, net (6 ) - (6 ) - Net cash from investing activities (290 ) (163 ) (624 ) (476 ) Cash flows from financing activities: Principal payments on long-term debt (1 ) (50 ) (313 ) (189 ) Settlement of convertible debt - - (215 ) (2 ) Proceeds from long-term debt - - 150 - Proceeds from settlement of capped call - - 75 - Net intergroup borrowings 57 72 57 490 Decrease in short-term debt (96 ) - - - Purchases of Textron common stock - (272 ) - (272 ) Other financing activities, net 6 2 6 2 Net cash from financing activities (34 ) (248 ) (240 ) 29 Total cash flows from continuing operations 715 150 (206 ) 511 Total cash flows from discontinued operations 2 (3 ) (3 ) (8 ) Effect of exchange rate changes on cash and equivalents 2 (1 ) (6 ) 4 Net change in cash and equivalents 719 146 (215 ) 507 Cash and equivalents at beginning of period 444 1,232 1,378 871 Cash and equivalents at end of period $ 1,163 $ 1,378 $ 1,163 $ 1,378 Manufacturing Cash Flow GAAP to Non-GAAP Reconciliations: Net cash from operating activities of continuing operations - GAAP $ 1,039 $ 561 $ 658 $ 958 Less: Capital expenditures (144 ) (166 ) (444 ) (480 ) Dividends received from TFC (145 ) - (175 ) (345 ) Plus: Capital contributions paid to TFC - - 1 240 Proceeds on sale of property, plant and equipment 3 6 22 15 Total pension contributions 21 224 194 405 Manufacturing cash flow before pension contributions- Non-GAAP $ 774 $ 625 $ 256 $ 793 2014 Outlook Net cash from operating activities of continuing operations - GAAP $ 945 - $ 1,045 Less: Capital expenditures (425) Dividends received from TFC - Plus: Proceeds from the sale of property, plant and equipment - Total pension contributions 80 Manufacturing cash flow before pension contributions- Non-GAAP $ 600 - $ 700 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 and debt agreements, 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 Statements of Cash Flows. TEXTRON INC. Condensed Consolidated Schedule of Cash Flows (In millions) (Unaudited) Three Months Ended Twelve Months Ended December 28 , December 29 , December 28 , December 29 , 2013 2012 2013 2012 Cash flows from operating activities: Income from continuing operations $ 171 $ 146 $ 498 $ 581 Depreciation and amortization 104 106 389 383 Changes in working capital 537 381 (87 ) 28 Changes in other assets and liabilities and non-cash items 104 (100 ) 13 (57 ) Net cash from operating activities of continuing operations 916 533 813 935 Cash flows from investing activities: Capital expenditures (144 ) (166 ) (444 ) (480 ) Net cash used in acquisitions (143 ) (3 ) (196 ) (11 ) Finance receivables repaid 33 121 190 599 Proceeds from sales of receivables and other finance assets 26 65 178 249 Other investing activities, net (5 ) 22 8 21 Net cash from investing activities (233 ) 39 (264 ) 378 Cash flows from financing activities: Principal payments on long-term and nonrecourse debt (59 ) (141 ) (1,056 ) (615 ) Proceeds from long-term debt 36 18 448 106 Settlement of convertible debt - - (215 ) (2 ) Proceeds from settlement of capped call - - 75 - Purchases of Textron common stock - (272 ) - (272 ) Decrease in short-term debt (96 ) - - - Other financing activities, net 6 2 6 2 Net cash from financing activities (113 ) (393 ) (742 ) (781 ) Total cash flows from continuing operations 570 179 (193 ) 532 Total cash flows from discontinued operations 2 (3 ) (3 ) (8 ) Effect of exchange rate changes on cash and equivalents 2 (1 ) (6 ) 4 Net change in cash and equivalents 574 175 (202 ) 528 Cash and equivalents at beginning of period 637 1,238 1,413 885 Cash and equivalents at end of period $ 1,211 $ 1,413 $ 1,211 $ 1,413 Textron Investor Contacts: Doug Wilburne , 401-457-2288 or Justin Bourdon , 401-457-2288 or Media Contact: David Sylvestre , 401-457-2362 Source: Textron


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