Textron Reports Second Quarter EPS of $0.40 Confirms 2013 Financial Guidance Business Wire PROVIDENCE, R.I. -- July 17, 2013 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 422 389 851 766 Systems 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 34 40 72 75 Systems Industrial 79 61 136 134 198 288 414 535 FINANCE 15 22 34 34 Segment Profit 213 310 448 569 Corporate expenses and (20 ) (20 ) (75 ) (67 ) other, net Interest expense, net for (30 ) (35 ) (67 ) (70 ) Manufacturing group Income from continuing operations 163 255 306 432 before income taxes Income tax (49 ) (82 ) (77 ) (139 ) expense Income from continuing 114 173 229 293 operations Discontinued operations, (1 ) (1 ) 3 (3 ) net of income taxes Net Income $ 113 $ 172 $ 232 $ 290 Earnings per share: Income from continuing $ 0.40 $ 0.58 $ 0.80 $ 0.99 operations Discontinued operations, - - 0.01 (0.01 ) net of income taxes Net income $ 0.40 $ 0.58 $ 0.81 $ 0.98 Diluted average shares 283,824,000 295,547,000 286,269,000 295,080,000 outstanding (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, December 29, 2013 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 $ 374 $ 535 debt 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 $ 103 $ 157 $ 206 $ 267 operations Dividends received from 10 75 30 315 TFC Capital contributions (1 ) - (1 ) (240 ) paid to TFC Depreciation and 90 86 182 170 amortization Changes in working (509 ) (90 ) (1,038 ) (365 ) capital Changes in other assets and liabilities and 33 30 (121 ) (66 ) non-cash items Net cash from operating activities of continuing (274 ) 258 (742 ) 81 operations Cash flows from investing activities: Capital expenditures (113 ) (85 ) (190 ) (158 ) Net cash used in (35 ) - (53 ) - acquisitions Proceeds from the sale of property, plant and 17 2 17 2 equipment Net cash from investing (131 ) (83 ) (226 ) (156 ) activities Cash flows from financing activities: Increase in short-term 161 - 366 - debt Principal payments on - (139 ) (312 ) (139 ) long-term debt Settlement of (215 ) - (215 ) (2 ) convertible debt Proceeds from issuance 150 - 150 - of long-term debt Proceeds from settlement 75 - 75 - of capped call Net intergroup - 245 - 245 borrowings Other financing (4 ) (4 ) 2 2 activities, net Net cash from financing 167 102 66 106 activities Total cash flows from (238 ) 277 (902 ) 31 continuing operations Total cash flows from (3 ) (2 ) (7 ) (3 ) discontinued operations Effect of exchange rate changes on cash and (1 ) (5 ) (10 ) (1 ) equivalents Net change in cash and (242 ) 270 (919 ) 27 equivalents Cash and equivalents at 701 628 1,378 871 beginning of period Cash and equivalents at $ 459 $ 898 $ 459 $ 898 end of period Manufacturing Cash Flow GAAP to Non-GAAP Reconciliations: Net cash from operating activities of continuing $ (274 ) $ 258 $ (742 ) $ 81 operations - GAAP Less: Capital (113 ) (85 ) (190 ) (158 ) expenditures Dividends received from (10 ) (75 ) (30 ) (315 ) TFC Capital Plus: contributions 1 - 1 240 paid to TFC Proceeds from the sale of 17 2 17 2 property, plant and equipment Total pension 17 21 157 165 contributions Manufacturing cash flow before pension $ (362 ) $ 121 $ (787 ) $ 15 contributions- Non-GAAP 2013 Outlook Net cash from operating activities of continuing $760 operations - GAAP Less: Capital (550) expenditures Dividends received from (30) TFC Proceeds from Plus: the sale of 20 property, plant and equipment Total pension 200 contributions Manufacturing cash flow before pension $400 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 Six Months Ended June 29, June 30, June 29, June 30, 2013 2012 2013 2012 Cash flows from operating activities: Income from continuing $ 114 $ 173 $ 229 $ 293 operations Depreciation and 95 92 192 183 amortization Changes in working (301 ) (32 ) (741 ) (402 ) capital Changes in other assets and liabilities and 25 48 (142 ) (46 ) non-cash items Net cash from operating activities of continuing (67 ) 281 (462 ) 28 operations Cash flows from investing activities: Finance receivables 40 182 112 336 repaid Proceeds from sales of receivables and other 25 55 53 117 finance assets Capital expenditures (113 ) (85 ) (190 ) (158 ) Net cash used in (35 ) - (53 ) - acquisitions Other investing (1 ) 31 10 11 activities, net Net cash from investing (84 ) 183 (68 ) 306 activities Cash flows from financing activities: Principal payments on long-term and nonrecourse (443 ) (249 ) (925 ) (393 ) debt Proceeds from issuance of 361 61 402 88 long-term debt Increase in short-term 161 - 366 - debt Settlement of convertible (215 ) - (215 ) (2 ) debt Proceeds from settlement 75 - 75 - of capped call Other financing (4 ) (4 ) 2 3 activities, net Net cash from financing (65 ) (192 ) (295 ) (304 ) activities Total cash flows from (216 ) 272 (825 ) 30 continuing operations Total cash flows from (3 ) (2 ) (7 ) (3 ) discontinued operations Effect of exchange rate changes on cash and (1 ) (5 ) (10 ) (1 ) equivalents Net change in cash and (220 ) 265 (842 ) 26 equivalents Cash and equivalents at 791 646 1,413 885 beginning of period Cash and equivalents at $ 571 $ 911 $ 571 $ 911 end of period Contact: Textron Inc. Investor Contacts: Doug Wilburne, 401-457-2288 or Justin Bourdon, 401-457-2288 or Media Contact: David Sylvestre, 401-457-2362
Textron Reports Second Quarter EPS of $0.40
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