Textron Reports Increase in Fourth Quarter Earnings and Strong Cash Flow Initiates 2013 EPS Outlook at $2.10 - $2.30 Business Wire PROVIDENCE, R.I. -- January 23, 2013 Textron Inc. (NYSE: TXT) today reported fourth quarter 2012 income from continuing operations of $0.50 per share, compared to a loss of $0.06 per share in the fourth quarter of 2011. This year’s fourth quarter results include a previously disclosed after-tax charge of $0.06 per share at Cessna related to an unfavorable business arbitration award. Last year’s fourth quarter included net charges of $0.55 per share. Total revenues in the quarter were $3.4 billion, up 3.3% from the fourth quarter of 2011. Full-year manufacturing cash flow before pension contributions was $793 million. The company contributed $224 million to its pension plans during the fourth quarter, bringing full-year contributions to $405 million. Textron’s consolidated net debt ended the year at $2.6 billion, down $974 million from the end of last year. “Growth in the fourth quarter was the result of strong military and commercial demand at Bell and increased deliveries at Textron Systems, E-Z-GO and Jacobsen, partially offset by weakness in our automotive and business jet markets,” said Textron Chairman and CEO, Scott C. Donnelly. Share Repurchases During the fourth quarter, the company repurchased 11.1 million of its common shares under its previous share repurchase authorization. On January 22, 2013 Textron’s Board of Directors approved a new authorization for 25 million shares, under which the company intends to purchase shares to offset the impact of dilution from stock-based compensation and benefit plans and for opportunistic capital management purposes. Outlook Textron is forecasting 2013 revenues of approximately $12.9 billion, up about 6% from 2012. Earnings per share from continuing operations are expected to be in the range of $2.10 to $2.30. Cash flow from continuing operations of the manufacturing group before pension contributions is estimated to be between $500 and $550 million with planned pension contributions of about $200 million. Donnelly continued, “In 2013, we anticipate growth in revenue at Cessna on a modest increase in jet deliveries, a higher revenue mix of business jets and growth in aftermarket, modest growth at Bell, led by an increase in commercial helicopter sales, growth at Systems and revenue up slightly at Industrial.” Fourth Quarter Segment Results and Actions Cessna Revenues decreased $110 million, reflecting the delivery of 53 new Citation jets in the quarter, compared with 67 in last year’s fourth quarter. Segment profit decreased $37 million, primarily due to a $27.4 million arbitration settlement charge and lower jet volumes. Cessna backlog at the end of the fourth quarter was $1.1 billion, down $267 million from the end of the third quarter 2012. Bell Revenues increased $139 million in the fourth quarter from the same period in the prior year. Bell delivered 9 V-22’s, 6 H-1’s and 65 commercial aircraft in the quarter compared to 7 V-22’s, 6 H-1’s and 62 commercial units in last year’s fourth quarter. Segment profit increased $10 million, reflecting higher volume and mix. Bell backlog at the end of the fourth quarter was $7.5 billion, up $1.2 billion from the end of the third quarter 2012. Textron Systems Revenues at Textron Systems increased $58 million, reflecting higher deliveries in Unmanned Aerial Systems and Weapons and Sensors, partially offset by lower vehicle deliveries at Land and Marine. Segment profit in the quarter was $36 million, up $44 million when compared to last year’s fourth quarter, which included $60 million in charges. Segment profit in this year’s fourth quarter reflected higher volumes, partially offset by a $19 million charge associated with the company’s fee-for-service unmanned aerial systems contracts. Textron Systems backlog at the end of the fourth quarter was $2.9 billion, relatively flat with the end of third quarter 2012. Industrial Industrial revenues decreased $2 million from the fourth quarter of 2011. Segment profit decreased $6 million reflecting cost inflation in excess of related price increases. Finance Finance segment revenues increased $23 million compared to the fourth quarter of 2011. The segment reported a profit of $2 million compared to last year’s $232 million fourth quarter loss, which reflected a mark-to-market charge. Since the end of the third quarter 2012, nonaccrual finance receivables decreased from $145 million to $143 million and sixty-day plus delinquencies decreased from $114 million to $90 million. Finance receivables ended the quarter at $2.1 billion, reflecting liquidations of $65 million during the quarter. Conference Call Information Textron will host its conference call today, January 23, 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) 230-1059 in the U.S. or (612) 234-9959 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 23, 2012 by dialing (320) 365-3844; Access Code: 235149. 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: 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 its 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 expense 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 (Loss) (Dollars in millions, except per share amounts) (Unaudited) Three Months Ended Twelve Months Ended December 29, December 31, December 29, December 31, 2012 2011 2012 2011 REVENUES MANUFACTURING: Cessna $ 901 $ 1,011 $ 3,111 $ 2,990 Bell 1,149 1,010 4,274 3,525 Textron 571 513 1,737 1,872 Systems Industrial 706 708 2,900 2,785 3,327 3,242 12,022 11,172 FINANCE 35 12 215 103 Total $ 3,362 $ 3,254 $ 12,237 $ 11,275 revenues SEGMENT PROFIT MANUFACTURING: Cessna (a) $ 23 $ 60 $ 82 $ 60 Bell 177 167 639 521 Textron 36 (8 ) 132 141 Systems (b) Industrial 43 49 215 202 279 268 1,068 924 FINANCE (c) 2 (232 ) 64 (333 ) Segment 281 36 1,132 591 Profit Corporate expenses and (43 ) (39 ) (148 ) (114 ) other, net Interest expense, net for (38 ) (27 ) (143 ) (140 ) Manufacturing group Income (loss) from continuing 200 (30 ) 841 337 operations before income taxes Income tax (expense) (54 ) 13 (260 ) (95 ) benefit Income (loss) from continuing 146 (17 ) 581 242 operations Discontinued operations, net 2 (2 ) 8 - of income taxes Net income $ 148 $ (19 ) $ 589 $ 242 (loss) Earnings per share: Income (loss) from continuing $ 0.50 $ (0.06 ) $ 1.97 $ 0.79 operations Discontinued operations, net 0.01 (0.01 ) 0.03 - of income taxes Net income $ 0.51 $ (0.07 ) $ 2.00 $ 0.79 (loss) Diluted average shares 291,562,000 278,881,000 294,663,000 307,255,000 outstanding (d) (a) Fourth quarter of 2012 includes a $27 million charge related to an award against Cessna in an arbitration proceeding. Fourth quarter of 2011 includes a $41 million non-cash impairment charge (b) to write down certain intangible assets and approximately $19 million in severance costs. Fourth quarter of 2011 includes a $186 million non-cash initial (c) mark-to-market adjustment for remaining finance receivables in the Golf Mortgage portfolio that were transferred to the held for sale classification in the quarter. For the fourth quarter of 2011, the potential dilutive effect of stock options, restricted stock units and the shares that could be issued upon the conversion of our 4.50% Convertible Senior Notes and upon the (d) exercise of the related warrants was excluded from the computation of diluted weighted-average shares outstanding as the shares would have an anti-dilutive effect on the loss from continuing operations. Fully diluted shares were used to calculate earnings per share for the other reported periods. Textron Inc. Condensed Consolidated Balance Sheets (In millions) (Unaudited) December 29, December 31, 2012 2011 Assets Cash and equivalents $ 1,378 $ 871 Accounts receivable, net 829 856 Inventories 2,712 2,402 Other current assets 470 1,134 Net property, plant and equipment 2,149 1,996 Other assets 3,173 3,143 Finance group assets 2,322 3,213 Total Assets $ 13,033 $ 13,615 Liabilities and Shareholders' Equity Current portion of long-term debt $ 535 $ 146 Other current liabilities 2,977 2,785 Other liabilities 2,798 2,826 Long-term debt 1,766 2,313 Finance group liabilities 1,966 2,800 Total Liabilities 10,042 10,870 Total Shareholders' Equity 2,991 2,745 Total Liabilities and Shareholders' $ 13,033 $ 13,615 Equity 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 December December December 29, 31, 29, 31, 2012 2011 2012 2011 Cash flows from operating activities: Income from continuing $ 140 $ 134 $ 534 $ 464 operations Dividends received from - - 345 179 TFC Capital contributions - (30 ) (240 ) (182 ) paid to TFC Depreciation and 101 104 358 371 amortization Changes in 466 152 65 54 working capital Changes in other assets and (146 ) (118 ) (104 ) (125 ) liabilities and non-cash items Net cash from operating activities of 561 242 958 761 continuing operations Cash flows from investing activities: Capital (166 ) (152 ) (480 ) (423 ) expenditures Other investing 3 30 4 - activities, net Net cash from investing (163 ) (122 ) (476 ) (423 ) activities Cash flows from financing activities: Principal payments on (50 ) (16 ) (189 ) (29 ) long-term debt Purchases of Textron common (272 ) - (272 ) - stock Net intergroup 72 100 490 (175 ) borrowings Settlement of a portion of - (580 ) (2 ) (580 ) convertible debt Decrease in - (227 ) - - short-term debt Proceeds from issuance of - - - 496 long-term debt Other financing 2 (37 ) 2 (72 ) activities, net Net cash from financing (248 ) (760 ) 29 (360 ) activities Total cash flows from continuing 150 (640 ) 511 (22 ) operations Total cash flows from (3 ) (2 ) (8 ) (5 ) discontinued operations Effect of exchange rate (1 ) (4 ) 4 - changes on cash and equivalents Net change in cash and 146 (646 ) 507 (27 ) equivalents Cash and equivalents at 1,232 1,517 871 898 beginning of period Cash and equivalents at $ 1,378 $ 871 $ 1,378 $ 871 end of period Manufacturing Cash Flow GAAP to Non-GAAP Reconciliations: Net cash from operating activities of $ 561 $ 242 $ 958 $ 761 continuing operations - GAAP Less: Capital (166 ) (152 ) (480 ) (423 ) expenditures Dividends received from - - (345 ) (179 ) TFC Plus: Capital contributions - 30 240 182 paid to TFC Proceeds on sale of property, 6 4 15 17 plant and equipment Total pension 224 421 405 642 contributions Manufacturing cash flow before pension $ 625 $ 545 $ 793 $ 1,000 contributions- Non-GAAP 2013 Outlook Net cash from operating activities of $850 - $ 900 continuing operations - GAAP Less: Capital (550) expenditures Plus: Total pension 200 contributions Manufacturing cash flow before pension $500 - $ 550 contributions- Non-GAAP 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 Twelve Months Ended December 29, December 31, December 29, December 31, 2012 2011 2012 2011 Cash flows from operating activities: Income from continuing $ 146 $ (17 ) $ 581 $ 242 operations Depreciation and 106 114 383 403 amortization Changes in working 381 292 28 336 capital Changes in other assets and (100 ) 16 (57 ) 87 liabilities and non-cash items Net cash from operating activities of 533 405 935 1,068 continuing operations Cash flows from investing activities: Finance receivables - (38 ) (22 ) (187 ) originated or purchased Finance receivables 121 159 599 824 repaid Proceeds on receivable 3 145 116 421 sales Capital (166 ) (152 ) (480 ) (423 ) expenditures Proceeds from sale of repossessed 62 32 133 109 assets and properties Other investing 19 49 32 99 activities, net Net cash from investing 39 195 378 843 activities Cash flows from financing activities: Principal payments on long-term and (141 ) (142 ) (615 ) (785 ) nonrecourse debt Purchases of Textron (272 ) - (272 ) - common stock Proceeds from issuance of 18 135 106 926 long-term debt Payments on long-term line of - (400 ) - (1,440 ) credit facilities Settlement of a portion of - (580 ) (2 ) (580 ) convertible debt Decrease in short-term - (227 ) - - debt Other financing 2 (37 ) 2 (72 ) activities, net Net cash from financing (393 ) (1,251 ) (781 ) (1,951 ) activities Total cash flows from 179 (651 ) 532 (40 ) continuing operations Total cash flows from (3 ) (2 ) (8 ) (5 ) discontinued operations Effect of exchange rate changes on (1 ) (4 ) 4 (1 ) cash and equivalents Net change in cash and 175 (657 ) 528 (46 ) equivalents Cash and equivalents 1,238 1,542 885 931 at beginning of period Cash and equivalents $ 1,413 $ 885 $ 1,413 $ 885 at end of period Contact: Textron 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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Textron Reports Increase in Fourth Quarter Earnings and Strong Cash Flow Initiates 2013 EPS Outlook at $2.10 - $2.30
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