EPS Increases a Record 51% for Both Quarter and Year; 41st Quarter of Consecutive Earnings Improvement

"Textron's resolute commitment to creating value for its customers and shareholders has delivered over a decade of continuous earnings improvement and another quarter and year of record revenue growth," said Textron Chairman and Chief Executive Officer Lewis B. Campbell. "As we look to the future, our market-leading businesses are positioned to deliver even greater customer and shareholder value through a continued focus on innovation, operational excellence and growth, accelerated by our ability to harness and maximize emerging e-business technologies," he added.

For the fourth quarter, income from continuing operations of $170 million increased 42% from $120 million in 1998. Revenues rose a record 25% to $3.2 billion compared to $2.6 billion in 1998. Net income, including an additional gain of $31 million from the sale of a discontinued operation, was $201 million compared with $160 million in 1998, which included $40 million from a discontinued operation.

For the year, income from continuing operations of $623 million was up 41% from $443 million in 1998. Revenues increased a record 20% to $11.6 billion compared to $9.7 billion in 1998. Net income, including a gain of $1.65 billion from the sale of a discontinued operation, was $2.23 billion compared with $608 million in 1998, which included $165 million from a discontinued operation.

"Strong, double-digit revenue and earnings increases were achieved through a balance of organic growth and acquisitions, once again highlighting Textron's strength in our markets and the soundness of our growth strategies," said Campbell. "Focused on exceeding this strong performance, we continue to pursue additional opportunities for growth and operating margin expansion across the company. Our rigorous Textron Quality Management process, which encompasses every aspect of how we operate -- from material procurement to sales and marketing to acquisition integration -- will continue to drive out cost, improve efficiencies and raise profit margins throughout the company," he added.

During the fourth quarter, Textron's Aircraft segment achieved strong, double-digit growth in revenues and income, led by Cessna's continued success in both the business jet and single-engine piston aircraft markets, and Bell Helicopter sales to commercial and military customers. During the quarter, Bell delivered the third of 458 Bell-Boeing V-22 tiltrotor aircraft to be built for the U.S. Marines (360), Air Force (50) and Navy (48), while Cessna marked the delivery of its 3,000th Citation business jet and 2,000th single-engine piston aircraft since its reintroduction in 1997. During the quarter, the Aircraft segment's backlog grew to a record $7.3 billion, indicating strong market demand for its products.

Textron Automotive also posted strong results for the quarter, driven by increased market penetration, operating improvements and the delivery of innovative solutions to its customers in vehicle interiors, plastic fuel tanks and other automotive components. Honoring its innovation, Textron Automotive received the prestigious Society of Plastics Engineers award and was named a finalist in the Automotive News PACE^TM (Premier Automotive Suppliers' Contributions to Excellence) awards for its RITec integrated plastic fan shroud. During the quarter, Textron Automotive was awarded over twenty new contracts for instrument panels, cockpit system integration, plastic fuel tanks and other components from BMW, DaimlerChrysler, Fiat, Ford, GM, Mazda, Mitsubishi, Rover, Toyota and Volkswagen.

During the fourth quarter, the Industrial segment continued to strengthen its presence in its markets and pursue high growth opportunities. In the light construction equipment market, OmniQuip Textron exceeded the 1999 performance targets established at the time of acquisition and positioned itself for a strong 2000 with strengthened customer relationships, particularly among the large national rental fleets. Textron's Golf, Turf Care and Specialty Products Group continued to make significant improvements in operating performance, while aggressively developing and launching new products and taking advantage of global cross-selling opportunities. Adding new high growth opportunities to the segment, Textron Fastening Systems acquired InteSys Technologies, an innovative designer and manufacturer of plastic and metal engineered assemblies that serves the high growth wireless communications, computer and medical supply industries. Greenlee Textron continued to pursue the high growth data-signal-voice industry with the acquisitions of Progressive Electronics and Rifocs Corp., leading manufacturers of telecommunications and fiber optic test equipment, respectively. Further expanding its geographic presence and technological capabilities in the Fluid Handling and Power Transmission markets, Textron Fluid and Power Systems acquired France-based KSB Annecy and Sweden-based AB Benzlers, respectively.

In Finance, Textron Financial Corporation (TFC) continued to strengthen its niche market positions while focusing on the integration of recently-acquired businesses. In the fourth quarter, the company completed its acquisition of Litchfield Financial Corporation, a leader in timeshare financing. In 1999, Textron Financial acquired four businesses, bolstering its position in the aircraft, franchise and recreation/resort markets, and establishing new, high-growth niches in industries such as telecommunications.

1999 financial highlights for Textron Inc. include:
• Revenue growth of 20% - our fourth consecutive year of double-digit growth
• EPS growth of 51% - our seventh consecutive year of double-digit increases
• Free cash flow from manufacturing operations of $479 million
• The acquisition of nineteen companies, which are expected to contribute over $1.6 billion to full-year 2000 revenues
• The repurchase of 9.8 million of Textron's common shares

Textron Inc. (www.textron.com) is an $11.6 billion, global, multi-industry company with market-leading businesses in Aircraft, Automotive, Industrial and Finance. Textron has a workforce of over 68,000 employees and major manufacturing facilities in 27 countries. Textron is among Fortune magazine's "Global Most Admired Companies."

Forward-looking Information: Certain statements in this release are forward-looking statements, including those that discuss strategies, goals, outlook or other non-historical matters; or project revenues, income, returns or other financial measures. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those contained in the statements, including the following: (a) the extent which Textron is able to successfully integrate acquisitions, (b) changes in worldwide economic and political conditions and associated impact on interest and foreign exchange rates, ^© the occurrence of work stoppages and strikes at key facilities of Textron or Textron's customers or suppliers, (d) the extent to which the Company is able to successfully develop, introduce, and launch new products and enter new markets, and (e) the level of government funding for Textron products. For the Aircraft Segment: (a) the timing of certifications of new aircraft products and (b) the occurrence of a severe downturn in the U.S. economy that discourages businesses from purchasing business jets. For the Automotive Segment: (a) the level of consumer demand for the vehicle models for which Textron supplies parts to automotive original equipment manufacturers ("OEM's") and (b) the ability to offset, through cost reductions, pricing pressure brought by automotive OEM customers. For the Industrial Segment: the ability of Textron Fastening Systems to offset, through cost reductions, pricing pressure brought by automotive OEM customers. For the Finance Segment: (a) the level of sales of Textron products for which TFC offers financing and (b) the ability of TFC to maintain credit quality and control costs when entering new markets.

TEXTRON SEGMENT ANALYSIS

Aircraft

For the quarter, revenues and income increased 33 percent and 36 percent, respectively. For the year, revenues and income increased 17 percent and 7 percent, respectively.

Cessna's revenues increased for the quarter and year due to higher sales of business jets -- primarily the Citation X and the Citation Excel -- and single engine piston aircraft, coupled with increased spares and service revenues. Income for the quarter increased as a result of the higher sales, partially offset by higher warranty expense. Income for the year increased as a result of the higher sales, partially offset by increased manufacturing costs associated with the ramp-up in production of new aircraft, higher warranty expense and increased product development expense related to the Citation CJ2. Backlog increased to a record $5.3 billion from $4.0 billion at year-end 1998.

For the quarter, Bell Helicopter's revenues increased, primarily due to higher revenues on the V-22 production contract and the Huey and Cobra upgrade contracts, higher commercial helicopter sales and higher foreign military sales. Bell's income also increased, driven by the higher revenues, partially offset by lower margins on U. S. Government contracts. For the year, revenues increased, due primarily to higher revenues on the V-22 production contract and the Huey and Cobra upgrade contracts and higher foreign military sales, partially offset by lower commercial and other U.S. Government helicopter sales. Bell's 1999 income, which was unchanged from the 1998 level, reflected the full year recognition into income of cash received in the fourth quarter of 1998 on the formation of a joint venture on the 609 program. This impact was offset by favorable contract adjustments in 1998 related to the Bell-Boeing V-22 Engineering, Manufacturing and Development contract and higher expense related to new product development. Backlog increased to $2.0 billion from $1.9 billion at year-end 1998.

Automotive

For the quarter, revenues increased 14 percent while income increased 29 percent. For the year, revenues increased 21 percent while income increased 27 percent.

The fourth-quarter increase in revenues was primarily driven by higher sales at Kautex and Trim, reflecting increased production at DaimlerChrysler and General Motors, and the benefit of the Textron Breed Automotive S.r.l. joint venture. Despite customer price reductions, income increased for the quarter and the year primarily due to the contribution from higher organic sales and improved operating performance at Kautex and Trim. For the year, the increase in revenues was primarily due to higher North American market penetration by Kautex and higher sales at Trim, reflecting increased production at DaimlerChrysler, Ford and General Motors, which was depressed in 1998 by a strike. The increase in full-year revenues also reflected the benefit of the Midland Industrial Plastics acquisition and the Textron Breed Automotive S.r.l. joint venture.

Industrial

For the quarter, revenues and income increased 22% and 8%, respectively. For the year, revenues and income increased 20% and 18%, respectively.

Textron Fastening Systems revenues increased for the quarter and the year, reflecting the contribution from the Flexalloy and InteSys acquisitions in both periods, partially offset by lower revenues in Europe which were negatively impacted by foreign exchange. For the year, revenues also reflected the benefit of the acquisitions of Ring Screw Works, Sukosim and Peiner. Income for the quarter decreased as the benefit from acquisitions were more than offset by the lower revenues in Europe, unfavorable operating performance at certain plants in Europe caused by production scheduling issues, integration costs in the Vendor Managed Inventory business, and restructuring costs, which did not qualify for restructuring accruals, incurred on programs started earlier this year. For the year, income increased as the benefit from acquisitions more than offset the same factors that impacted the quarter, as well as lower income at an automotive plant related to economic conditions in Brazil.

Textron Industrial Products revenues and income increased for the quarter reflecting the contribution from the OmniQuip and Progressive Electronics acquisitions. This was partially offset by lower organic sales at Textron Systems due to a change in contract mix and reduced customer requirements; Power Transmission Products reflecting a decline in the worldwide mechanical power transmission market; and Turbine Engine Components due to lower customer requirements. Income also increased as a result of strong margin improvement in Golf, Turf Care and Specialty Products. For the year, revenues and income increased as a result of higher organic sales at Golf, Turf Care and Specialty Products and the contribution from acquisitions including David Brown, OmniQuip, Ransomes and Progressive Electronics. Income also increased as a result of strong margin improvement in Golf, Turf Care and Specialty Products and a gain on the sale of a product line. These benefits were partially offset by the lower organic sales at Textron Systems, Power Transmission Products and Turbine Engine Components, and the impact of the divestiture of Fuel Systems in the second quarter 1998.

Finance

For the quarter, revenues increased 53 percent, while income increased 21 percent. For the year, revenues increased 26 percent, while income increased 13 percent.

Fourth-quarter revenues increased due to a higher level of average receivables, reflecting both acquisitive and organic growth, and an increase in syndication income. Income increased as the benefit of higher revenues was partially offset by higher expenses related to growth in managed receivables and a higher provision for loan losses related to the specialty and term finance portfolios.

For the year, revenues increased due to a higher level of average receivables, reflecting both acquisitive and organic growth, and an increase in syndication and servicing fee income. This was partially offset by lower yields on receivables, reflecting lower prevailing interest rates. Income increased as the benefit of higher revenues was partially offset by higher expenses related to growth in managed receivables and a higher provision for loan losses related to growth in receivables and higher charge-offs in the revolving credit portfolio, partially offset by a lower provision for loan losses in the real estate portfolio. 1999 results included a gain of $4.7 million on the sale of an investment in the third quarter, while third quarter 1998 results included a gain of $3.4 million on the securitization of Textron-related receivables.

Interest Income and Expense - Net

Net interest for Textron decreased $12 million and $117 million for the quarter and year, respectively, as a result of a lower level of average debt, resulting from the pay down of debt with proceeds received in January 1999 from the sale of Avco Financial Services, partially offset by incremental debt associated with acquisitions and share repurchases.

Income Taxes

The current quarter's effective income tax rate of 36.8% approximated the prior year rate of 36.5%. The 1999 effective income tax rate of 37.0% was lower than the corresponding prior year rate of 38.5%, primarily due to the non-tax deductibility of goodwill related to the second quarter 1998 divestiture of Fuel Systems and the benefit of tax planning initiatives that are being realized in 1999.

Corporate

• In November, Textron named Kenneth Bohlen Senior Vice President and Chief Information Officer. As Textron's CIO, Bohlen also becomes a member of Textron's Executive Leadership Team, a thirteen member body of the company's senior corporate and operations executives responsible for Textron's overall strategic management.
• As part of its company-wide initiative to further accelerate its e-commerce strategy, Textron announced an agreement in principle to form a strategic alliance with Safeguard Scientifics, an internet holding company with holdings in 250 internet technology businesses. As part of the agreement, Textron plans to invest $100 million for 727,273 shares of Safeguard Scientifics common stock and will work with Safeguard partner companies to develop and execute Textron's global e-commerce strategies.

Aircraft

• In January, Gary W. Hay was named chief executive officer of Cessna Aircraft. Hay also remains vice-chairman, while Russell W. Meyer continues as Cessna's chairman, focusing specifically on new product development and customer relations. As Cessna's CEO, Hay replaces Meyer as a member of Textron's Executive Leadership Team.
• During the fourth quarter, Cessna celebrated the delivery of the 3,000th Citation business jet and the 2,000th single-engine piston aircraft since its reintroduction in 1997. In addition, the recent rollout of the first Citation CJ1 (Model 525, serial number 360) confirms that the program is on schedule for certification and first customer deliveries early this year.

Automotive

• Textron Automotive's McCord Winn operation received the 1999 Grand Award by the Society of Plastics Engineers' (SPE) Automotive Division and was named a finalist in the Automotive News PACE^TM (Premier Automotive Suppliers' Contributions to Excellence) awards for its patented RITec^TM (Reservoir Integration Technology) automotive modular fluid management system featured on the 2000 Dodge Durango and Dakota. The award-winning application uses the company's patented RITec^TM to provide innovative solutions to OEM partners.
• Textron Automotive's Kautex operation received the VW Group's "Corporate Supplier Award - The Leading Edge" for the fifth consecutive year. In addition, Kautex's Windsor plant was honored with the elite Chrysler Gold Pentastar Award and Kautex's Brazilian operation received the Q1 Quality Award from Ford. Automotive OEMs worldwide have recognized Kautex plants for their outstanding commitment to quality, innovation and customer service in plastic fuel tank systems.
• In November, Textron Automotive Company (TAC) celebrated the opening of a sales and engineering services facility in Yokohama City, Japan. Complementing the previously established Nagoya facility opened in 1996, the new office emphasizes TAC's commitment to the Japanese market.
• During the quarter, Textron Automotive began full production on the GM Malibu cockpit system, marking its official entry into the cockpit market.

Industrial

• In November, Jack W. Sights was appointed chairman, president and chief executive officer of the Textron Fastening Systems group, comprised of Fastening Systems, Integrated Logistics and Engineered Assemblies. He was also named a member of Textron's Executive Leadership Team.
• In November, Textron Fastening Systems acquired InteSys Technologies, Inc. With 1999 sales of approximately $160 million, InteSys is a leading provider of plastic and metal engineered assemblies for the telecommunications, automotive, computer and medical industries.
• In December, Textron acquired Optical Boring Company and Cam Tool LLC. With full-year 1999 combined sales of approximately $9 million, the two operations are providing in-house specialized tooling and fastener machinery repair parts to Textron Fastening Systems.
• In December, Textron acquired Rifocs Corp., a leading manufacturer of fiber optic test and measurement instruments and components for industrial, commercial and aerospace defense technologies. Rifocs' 1999 revenues were approximately $17 million.
• in France, a subsidiary of the German pump manufacturer KSB group. Designing and manufacturing pumps for the oil and gas industry, as well as safety-related pumps for nuclear power plants, David Brown Guinard Pumps provides additional manufacturing capacity and adds a new line of multiphase subsea completion pumps to the Textron Fluid Handling Products portfolio. The company's 1998 revenues were approximately $40 million.
• In December, Textron's Fluid & Power Systems Group completed the acquisition of AB Benzlers, a leading Swedish manufacturer of worm, helical and shaft mounted gears for the material handling, paper and food industries. AB Benzlers' fiscal year 1998 revenues were approximately $44 million.

Finance

• In October, Textron Financial Corporation acquired Litchfield Financial Corporation. With over $550 million in managed receivables, Litchfield is a commercial finance company specializing in receivables-based finance agreements for the vacation ownership (timeshare) industry and other commercial finance niches.