Textron Reports Second Quarter 2014 Income from Continuing Operations of $0.51 per Share, up 27.5%; Revenues up 23.5%

  Textron Reports Second Quarter 2014 Income from Continuing Operations of   $0.51 per Share, up 27.5%; Revenues up 23.5%  Business Wire  PROVIDENCE, R.I. -- July 16, 2014  Textron Inc. (NYSE: TXT) today reported second quarter 2014 income from continuing operations of $0.51 per share, up 27.5 percent from $0.40 per share in the second quarter of 2013.  Total revenues in the quarter were $3.5 billion, up from $2.8 billion in the second quarter of 2013, a 23.5 percent increase. Beechcraft contributed $425 million to the increase. Segment profit in the quarter was $304 million, up $91 million from the second quarter of 2013.  Second quarter 2014 manufacturing cash flow before pension contributions was $271 million compared to a use of cash of $362 million during the second quarter of 2013. The company contributed $27 million to its pension plans during the second quarter.  “Revenues at Textron Aviation, Bell and Industrial were up during the quarter, while revenues at Textron Systems were down, as we expected,” said Textron Chairman and CEO Scott C. Donnelly. Donnelly continued, “Operationally, we achieved significant margin improvements across our manufacturing businesses, reflecting higher volumes and good performance.”  This year’s results reflect a full-quarter impact from the company’s acquisition of Beechcraft, completed at the end of the first quarter. This includes a $33 million ($0.08 per share, after tax) negative impact from fair value step-up adjustments of acquired inventories sold during the quarter and $20 million ($0.05 per share, after-tax) in restructuring costs, recorded as part of Acquisition and Restructuring Costs. Last year’s results included $28 million ($0.07 per share, after-tax) in severance costs recorded in Cessna’s segment results.  Outlook  Textron confirmed its 2014 earnings per share from continuing operations guidance of $1.92 to $2.12 and its expectation for cash flow from continuing operations of the manufacturing group before pension contributions of $600 million to $700 million with expected pension contributions of about $90 million.  Second Quarter Segment Results  Textron Aviation  Revenues at Textron Aviation were up $623 million, reflecting the impact of the Beechcraft acquisition and higher jet deliveries. Textron Aviation delivered 36 new jets in the quarter, up from 20 jets in last year’s second quarter, and 34 King Air turboprops.  Textron Aviation recorded a segment profit of $28 million in the second quarter compared to a loss of $50 million a year ago in our Cessna segment. The improvement reflects higher volumes, $28 million in severance costs recorded in the second quarter of 2013 and the impact of the Beechcraft acquisition.  Textron Aviation backlog at the end of the second quarter was $1.4 billion, down $100 million from the end of the first quarter.  Bell  Bell revenues increased $94 million, primarily the result of higher aircraft deliveries and a $41 million revenue benefit related to settlement with the U.S. DOD related to the System Development and Demonstration phase of the company’s former Armed Reconnaissance Helicopter (ARH) program, which was terminated in October 2008.  Bell delivered 10 V-22’s and 8 H-1’s in the quarter, compared to 9 V-22’s and 6 H-1’s in last year’s second quarter and 46 commercial helicopters, compared to 44 units last year.  Segment profit increased $6 million due to the ARH settlement.  Bell backlog at the end of the second quarter was $5.8 billion, down $422 million from the end of the first quarter.  Textron Systems  Revenues at Textron Systems decreased $140 million, reflecting lower overall volumes.  Segment profit was flat despite lower volumes, reflecting favorable performance across all product lines and favorable mix of contract revenues during the quarter.  Textron Systems’ backlog at the end of the second quarter was $3.0 billion, up $186 million from the end of the first quarter.  Industrial  Industrial revenues increased $93 million, primarily due to higher overall volumes and the impact of acquisitions. Segment profit increased $15 million reflecting the higher volumes and favorable performance.  Finance  Finance segment revenues decreased $4 million primarily due to gains on finance receivable dispositions during the second quarter of 2013. Segment profit decreased $8 million primarily due to the prior year impacts of loan loss reversals and gains on the finance receivables dispositions, partially offset by lower administrative expenses.  Conference Call Information  Textron will host its conference call today, July 16, 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, July 16, 2014 by dialing (320) 365-3844; Access Code: 307262.  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, Beechcraft, Hawker, Jacobsen, Kautex, Lycoming, E-Z-GO, Greenlee, and Textron Systems. For more information visit: 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: 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; continued demand softness or volatility in the markets in which we do business; 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  Three and Six Months Ended June 28, 2014 and June 29, 2013  (Dollars in millions, except per share amounts)  (Unaudited)                   Three Months Ended                          Six Months Ended                     June 28, 2014        June 29, 2013       June 28, 2014        June 29, 2013 REVENUES                                                                         MANUFACTURING:                                                                                Textron           $ 1,183                 $ 560                 $ 1,968                 $ 1,268     Aviation     Bell                1,119                   1,025                 1,992                   1,974     Textron             282                     422                   645                     851     Systems     Industrial         894                   801                 1,691                 1,528                                3,478                   2,808                 6,296                   5,621                                                                                              FINANCE                27                    31                  56                    73               Total             $ 3,505                $ 2,839              $ 6,352                $ 5,694            revenues                                                                                              SEGMENT PROFIT MANUFACTURING:     Textron           $ 28                    $ (50         )       $ 42                    $ (58         )     Aviation (1)     Bell                141                     135                   237                     264     Textron             34                      34                    73                      72     Systems     Industrial         94                    79                  160                   136                                  297                     198                   512                     414                                                                                              FINANCE                7                     15                  11                    34               Segment             304                     213                   523                     448     Profit                                                                                              Corporate expenses and            (38         )           (20         )         (81         )           (75         ) other, net Interest expense, net for                 (36         )           (30         )         (71         )           (67         ) Manufacturing group Acquisition and restructuring          (20         )          -                   (36         )          -            costs (2)                                                                                              Income from continuing              210                     163                   335                     306 operations before income taxes Income tax             (65         )          (49         )        (103        )          (77         ) expense                                                                                              Income from continuing              145                     114                   232                     229 operations   Discontinued   operations, net      (1          )          (1          )        (3          )          3              of income taxes Net income            $ 144                  $ 113                $ 229                  $ 232                                                                                                       Earnings per share:   Income from   continuing          $ 0.51                  $ 0.40                $ 0.82                  $ 0.80   operations   Discontinued   operations, net      -                     -                   (0.01       )          0.01           of income taxes   Net income          $ 0.51                 $ 0.40               $ 0.81                 $ 0.81                                                                                                          Diluted     average           282,764,000         283,824,000       283,099,000         286,269,000      shares     outstanding     (1) Includes $28 million in severance costs for the three and six months ended June 29, 2013.  (2) Acquisition and restructuring costs for the three and six months ended June 28, 2014 include $20 million and $25 million, respectively, of restructuring costs incurred related to the acquisition of Beech Holdings, LLC, the parent of Beechcraft Corporation, which was completed on March 14, 2014. Transaction costs of $11 million related to the Beechcraft acquisition are also included in the six months ended June 28, 2014                                                                                                                               Textron Inc. Condensed Consolidated Balance Sheets (In millions) (Unaudited)                                                                                                                                                                             June 28, 2014     December 28,                                                                   2013 Assets Cash and equivalents                       $    680             $    1,163 Accounts receivable, net                         1,200                 979 Inventories                                      4,017                 2,963 Other current assets                             578                   467 Net property, plant and equipment                2,463                 2,215 Goodwill                                         2,006                 1,735 Other assets                                     2,511                 1,697 Finance group assets                            1,680            1,725         Total Assets                       $    15,135       $    12,944                                                                                                                                       Liabilities and Shareholders' Equity Current portion of long-term debt          $    358             $    8 Other current liabilities                        3,599                 2,995 Other liabilities                                2,450                 2,118 Long-term debt                                   2,686                 1,923 Finance group liabilities                       1,464            1,516         Total Liabilities                        10,557                8,560                                                                    Total Shareholders' Equity                      4,578            4,384         Total Liabilities and              $    15,135       $    12,944         Shareholders' 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              Six Months Ended                        June 28,         June 29,       June 28,           June 29,                         2014       2013         2014         2013      Cash flows from   operating   activities:   Income from   continuing           $ 141            $ 103          $ 225              $ 206   operations   Depreciation and       112              90             207                182   amortization   Changes in             125              (509 )         (138   )           (1,038 )   working capital   Changes in other   assets and             (31  )           33             (11    )           (121   )   liabilities and   non-cash items   Dividends   received from          -                10             -                  30   TFC   Capital   contributions         -          (1   )        -            (1     )   paid to TFC   Net cash from   operating   activities of         347        (274 )        283          (742   )   continuing   operations   Cash flows from   investing   activities:   Net cash used in       (61  )           (35  )         (1,550 )           (53    )   acquisitions   Capital                (106 )           (113 )         (172   )           (190   )   expenditures   Proceeds from   the sale of            3                17             5                  17   property, plant   and equipment   Other investing       (7   )      -            (10    )      -         activities, net   Net cash from   investing             (171 )      (131 )        (1,727 )      (226   )   activities   Cash flows from   financing   activities:   Proceeds from          -                150            1,093              150   long-term debt   Purchases of   Textron common         -                -              (150   )           -   stock   Increase   (decrease) in          (184 )           161            -                  366   short-term debt   Principal   payments on            (1   )           -              (1     )           (312   )   long-term debt   Settlement of          -                (215 )         -                  (215   )   convertible debt   Proceeds from   settlement of          -                75             -                  75   capped call   Other financing       6          (4   )        19           2         activities, net   Net cash from   financing             (179 )      167          961          66        activities   Total cash flows   from continuing        (3   )           (238 )         (483   )           (902   )   operations   Total cash flows   from                   (1   )           (3   )         (2     )           (7     )   discontinued   operations   Effect of   exchange rate         2          (1   )        2            (10    )   changes on cash   and equivalents   Net change in   cash and               (2   )           (242 )         (483   )           (919   )   equivalents   Cash and   equivalents at        682        701          1,163        1,378     beginning of   period   Cash and   equivalents at       $ 680       $ 459         $ 680         $ 459       end of period                                                                              Manufacturing   Cash Flow GAAP   to Non-GAAP   Reconciliations:                                                                   Net cash from   operating   activities of        $ 347            $ (274 )       $ 283              $ (742   )   continuing   operations -   GAAP   Less: Capital          (106 )           (113 )         (172   )           (190   )   expenditures   Dividends   received from          -                (10  )         -                  (30    )   TFC   Plus: Capital   contributions          -                1              -                  1   paid to TFC   Proceeds from   the sale of            3                17             5                  17   property, plant   and equipment   Total pension         27         17           44           157       contributions   Manufacturing   cash flow before   pension              $ 271       $ (362 )       $ 160         $ (787   )   contributions-   Non-GAAP                                                                                                                              2014 Outlook   Net cash from   operating   activities of                                        $ 970 - $ 1,070   continuing   operations -   GAAP   Less: Capital                                        (465)                          expenditures   Plus: Proceeds   from the sale of                                     5   property, plant   and equipment   Total pension                                        90                             contributions   Manufacturing   cash flow before   pension                                              $ 600 - $ 700                  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 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            Six Months Ended                        June 28,       June 29,       June 28,         June 29,                         2014      2013         2014        2013     Cash flows   from   operating   activities:   Income from   continuing           $ 145          $ 114          $ 232            $ 229   operations   Depreciation   and                    116            95             214              192   amortization   Changes in   working                156            (301 )         (77    )         (741  )   capital   Changes in   other assets   and                   (38  )     25           (16    )     (142  )   liabilities   and non-cash   items   Net cash   from   operating   activities            379       (67  )        353         (462  )   of   continuing   operations   Cash flows   from   investing   activities:   Net cash   used in                (61  )         (35  )         (1,550 )         (53   )   acquisitions   Capital                (106 )         (113 )         (172   )         (190  )   expenditures   Finance   receivables            25             40             58               112   repaid   Other   investing             14        24           16          63       activities,   net   Net cash   from                  (128 )     (84  )        (1,648 )     (68   )   investing   activities   Cash flows   from   financing   activities:   Proceeds   from                   20             361            1,151            402   long-term   debt   Purchases of   Textron                -              -              (150   )         -   common stock   Principal   payments on   long-term              (59  )         (443 )         (121   )         (925  )   and   nonrecourse   debt   Increase   (decrease)   in                     (184 )         161            -                366   short-term   debt   Settlement   of                     -              (215 )         -                (215  )   convertible   debt   Proceeds   from   settlement             -              75             -                75   of capped   call   Other   financing             6         (4   )        19          2        activities,   net   Net cash   from                  (217 )     (65  )        899         (295  )   financing   activities   Total cash   flows from             34             (216 )         (396   )         (825  )   continuing   operations   Total cash   flows from             (1   )         (3   )         (2     )         (7    )   discontinued   operations   Effect of   exchange   rate changes          2         (1   )        2           (10   )   on cash and   equivalents   Net change   in cash and            35             (220 )         (396   )         (842  )   equivalents   Cash and   equivalents           780       791          1,211       1,413    at beginning   of period   Cash and   equivalents          $ 815      $ 571         $ 815        $ 571      at end of   period  Contact:  Textron Inc. Investor Contacts: Douglas Wilburne, 401-457-2288 or Robert Bridge, 401-457-2288 or Media Contact: David Sylvestre, 401-457-2362  
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