Textron Reports Second Quarter Earnings Per Share of $1.10 Before Special Charges and Restructuring-Related Expenses; Company Accelerates Restructuring Savings

July 18, 2001

Company Accelerates Restructuring Savings

Providence, RI - July 18, 2001 - Textron Inc. (NYSE: TXT) today reported second quarter earnings per share of $1.10, before special charges and restructuring-related expenses, compared with $1.23 last year, and in line with the company's expectations. Income for the quarter before special charges and restructuring-related expenses was $157 million versus $179 million in 2000.

During the quarter, Textron continued to implement restructuring projects and recorded $48 million of special charges and restructuring-related expenses. After the effect of these charges, Textron reported net income of $126 million for the second quarter of 2001.

Reported revenues were $3.29 billion, compared to $3.28 billion in 2000, primarily due to a strong increase in Aircraft sales, which offset lower sales in other segments. Segment profit before restructuring-related expenses was $332 million compared to $372 million last year, primarily due to the decline in volumes in most short-cycle businesses, partially offset by restructuring savings and increased profit in Aircraft.

Textron Chairman and Chief Executive Officer Lewis B. Campbell said, "We met our earnings target in the midst of a tough economic environment by accelerating the execution of our restructuring program and across-the-board cost reduction efforts. While the restructuring is partially offsetting some of the impact of the weakness in the current economy, more importantly, it is creating a more efficient Textron with a significantly improved cost structure for the long-term.

"Moreover, we continued the implementation of our strategy announced late last year to leverage Textron's capabilities across all of our businesses. While we are cutting all unnecessary costs, we are continuing our investments and efforts in important Textron-wide strategic transformation programs such as implementing a comprehensive supply chain management process and building an enterprise-wide information technology shared services organization and infrastructure," Campbell continued.

Restructuring Plan and Other Enterprise-Wide Initiatives

During the quarter, cost savings attributable to the restructuring program were approximately $33 million, bringing the year-to-date savings to approximately $49 million. Ongoing annualized savings are expected to increase to at least $150 million, beginning in 2002.

Since the start of the restructuring program in the fourth quarter of last year, Textron has initiated 74 individual restructuring projects. The restructuring program has resulted in a reduction in headcount of approximately 3,400, including workforce reductions in factories, warehouses and corporate and administrative offices across the company. The company now expects a reduction in headcount of approximately 5,000 when the program is complete. Through the consolidations, Textron is closing 52 facilities, including 28 manufacturing plants, representing over two million square feet of manufacturing floor space.

During the quarter, Textron also continued to advance enterprise-wide initiatives in supply chain management and the development of a common information technology (IT) infrastructure and IT shared services organization.

The company is developing a comprehensive supply chain program at each of the business units and across the entire enterprise. Textron is targeting savings of 3% to 4% of its $8 billion annual procurement costs. One important aspect of the initiative is to aggregate common purchases across the business units to leverage the purchasing power of the entire enterprise. The company has initially targeted 15 key commodities for coordinated sourcing in such areas as steel, resins, tires and batteries.

In addition, Textron is making significant improvements to its IT infrastructure. Since the beginning of this year, Textron has been creating a shared services IT center and common IT infrastructure. The shared services center will manage all spending for the corporation and develop a worldwide standard for information technology. Spending for each individual business unit will be invested into a common platform with near-term savings reinvested into the company's new IT infrastructure.

Portfolio Realignment

During the quarter, Textron continued to make progress on its strategy, announced late last year, to simplify and strengthen its portfolio of businesses with strategic divestitures and the acquisition of businesses with strong brands operating in attractive industries.

On June 4, Textron Financial announced the acquisition of STI Credit Corporation (SunTrust Credit Corp), adding approximately $400 million in receivables to Textron Financial, and consolidating its small-ticket business with a more operationally efficient platform to service the small business customer.

Earlier today, Textron announced two data-signal-voice (DSV) test equipment acquisitions, Industrial Technology, Inc. and Opto-Electronics Inc. The combined annual projected 2001 revenues of the acquisitions are approximately $25 million. The acquisitions will become part of the company's Greenlee/Tempo group within Industrial Products.

Over the past three quarters, Textron has divested a number of smaller, non-core businesses, including its residential fuel tank, seating comfort, carbon materials and electric motor components businesses.

Third Quarter and Full-Year 2001 Outlook

Textron expects additional savings from its restructuring program and continued top-line growth in its Aircraft segment. However, the present weakness in the economy, particularly industrial production, will continue to have a negative impact on Textron's short cycle manufacturing businesses. Due to these factors, Textron expects full-year 2001 earnings before special charges and restructuring-related expenses to be approximately $4.00 per share. Third quarter earnings per share before special charges and restructuring-related expenses are expected to be approximately $0.70 to $0.75.

"This year is an important year of transition for Textron that, despite its challenges, will provide the foundation for us to build long-term value for shareholders. Our aggressive restructuring program and other enterprise-wide initiatives, combined with the continued realignment of our portfolio, are positioning us for a significantly lower cost structure and improved earnings growth in the years ahead," Campbell said. TEXTRON SEGMENT ANALYSIS

Aircraft

The Aircraft segment's revenues and profit before restructuring-related expenses increased $210 million and $13 million, respectively.

Cessna Aircraft's revenues increased due to higher sales of business jets, primarily the Citation Encore, the Citation Excel and the Citation CJ2. Profit increased as a result of the higher sales and improved operating performance, partially offset by higher engineering expense related to the Sovereign business jet, consistent with planned spending for the program.

  • Total backlog at Cessna was $6.2 billion at the end of the second quarter.

Bell Helicopter's revenues increased due to higher sales of commercial helicopters and higher revenue on the V-22 production contract, partially offset by lower foreign military sales and lower revenue on the H-1 upgrade contracts. Bell's profit decreased primarily due to higher net product development expense related to the BA609 commercial tiltrotor and an unfavorable profit adjustment related to an international contract, partially offset by the benefit of higher sales of commercial helicopters and a favorable mix of commercial spares.

  • The Department of Defense requested funds for production of eleven V-22 aircraft for government fiscal year 2001, and twelve aircraft for 2002. The restructured program addresses modifications recommended by the Blue Ribbon Panel.

  • Total backlog at Bell was $1.2 billion at the end of the second quarter.

Automotive

The Automotive segment's revenues and profit before restructuring-related expenses decreased $45 million and $7 million, respectively.

Trim revenues decreased primarily due to customer price reductions and North American automotive OEM production decreases, partially offset by the contribution from acquisitions. Profit before restructuring-related expenses decreased primarily due to lower sales and customer price reductions, partially offset by the benefit of restructuring and other cost containment activities.

Fuel Systems and Components revenues decreased primarily as a result of the divestiture of a non-core product line in 2000, customer price reductions and the unfavorable impact of foreign exchange, partially offset by higher volume. Profit before restructuring-related expenses increased primarily due to the benefit of cost reduction activities and a gain on the sale of a small product line, partially offset by customer price reductions.

Fastening Systems

The Fastening Systems segment's revenues and profit before restructuring-related expenses decreased $83 million and $21 million, respectively. The revenue and profit decreases were primarily due to lower volume in most businesses, customer price reductions and the unfavorable impact of foreign exchange in its European operations, partially offset by the contribution from acquisitions. The unfavorable profit impact from the lower sales and a customer warranty issue was partially offset by the benefit of restructuring and other cost reduction activities.

  • During the quarter, Textron Fastening Systems finalized negotiations with a major semiconductor equipment manufacturer to manage the company's entire North American fastener and class C hardware inventory. Full-year 2002 revenues under the new contract are expected to be approximately $35 million. Industrial Products

The Industrial Products segment's revenues and profit before restructuring-related expenses decreased $65 million and $21 million, respectively. Revenues decreased as a result of lower sales at most businesses, partially offset by higher revenues at Textron Systems and Fluid Handling Products and the contribution from the acquisition of Tempo Research Corporation in the company's data-signal-voice business. Profit decreased primarily as a result of the lower sales, partially offset by the benefit of restructuring activities, higher income related to retirement benefits, a gain on the sale of a small product line and the benefit from acquisitions.

Finance

The Finance segment's revenues and profit decreased $6 million and $4 million, respectively. Revenues decreased due to a lower average yield in a lower interest rate environment, partially offset by higher net syndication and securitization income. Profit decreased primarily due to the lower average on-book receivables, higher expenses related to growth in managed receivables and new initiatives, and a higher provision for loan losses, partially offset by lower interest expense.

Textron Inc. (www.textron.com) is a $13 billion, global, multi-industry company with market-leading businesses in Aircraft, Automotive, Industrial Products, Fastening Systems and Finance. Textron has a workforce of 70,000 employees and major manufacturing facilities in 30 countries. Textron is among Fortune magazine's "Global Most Admired Companies" and Industry Week magazine's "Best Managed Companies."

Forward-looking Information: Certain statements in this release and other oral and written statements made by Textron from time to time, 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 to which Textron is able to implement and complete its restructuring plans (b) the extent to which Textron is able to successfully integrate recent acquisitions, © changes in worldwide economic and political conditions that impact interest and foreign exchange rates, (d) the occurrence of work stoppages and strikes at key facilities of Textron or Textron's customers or suppliers, (e) government funding and program approvals affecting products being developed or sold under government programs, (f) successful implementation of supply chain and e-procurement strategies, (g) the timing of certifications of new aircraft products, (h) the occurrence of a severe downturn in the economies in which Textron operates that could reduce demand for its products (i) the level of consumer demand for the vehicle models for which Textron supplies parts to automotive original equipment manufacturers ("OEMs"), (j) Textron's ability to offset, through cost reductions, raw material price increases and pricing pressure brought by OEM customers, and (k) Textron Financial's ability to maintain credit quality and control costs when entering new markets.

                                                             Unaudited
                             TEXTRON INC.
                REVENUES AND INCOME BY BUSINESS SEGMENT
                     SECOND QUARTER AND SIX MONTHS
                (In millions except per share amounts)

                                          Second Quarter
                                  June 30, 2001              July 1,
                          As Reported    As Adjusted(a)       2000
REVENUES
MANUFACTURING:
    Aircraft             $       1,223  $       1,223  $       1,013
    Automotive                     716            716            761
    Fastening Systems              479            479            562
    Industrial Products            706            706            771
                         -------------  -------------  -------------
                                 3,124          3,124          3,107

FINANCE                            164            164            170
                         -------------  -------------  -------------
       Total revenues    $       3,288  $       3,288  $       3,277

PROFIT

MANUFACTURING:
    Aircraft             $         112  $         120  $         107
    Automotive                      61             62             69
    Fastening Systems               28             30             51
    Industrial Products             78             80            101
                         -------------  -------------  -------------
                                   279            292            328

FINANCE                             40             40             44

Segment Profit                     319            332            372
Special charges, net  (b)          (35)          --             --
Corporate expenses and
    other - net                    (39)           (39)           (41)
Interest expense                   (40)           (40)           (41)

Income before income
 taxes                             205            253            290

Income taxes                       (72)           (89)          (104)
Distribution on preferred
  securities of
  manufacturing
  subsidiary trust,
  net of income taxes               (7)            (7)            (7)

Income from continuing
 operations                        126            157            179


 Cumulative effect of
  change in accounting
  principle,
  net of income
  taxes (c)                         --             --             --

 Net income              $         126  $         157  $         179

 Diluted earnings per
  share:
 Income from continuing
  operations                      0.88           1.10           1.23

 Cumulative effect of
   change in accounting
   principle,
   net of income
   taxes (c)                        --             --             --
 Net income              $        0.88  $        1.10  $        1.23

Average shares
 outstanding               143,411,000    143,411,000    146,304,000


                                           Six Months
                                 June 30, 2001              July 1,
                           As Reported   As Adjusted(a)      2000
REVENUES
MANUFACTURING:
    Aircraft             $       2,209  $       2,209  $       1,972
    Automotive                   1,393          1,393          1,599
    Fastening Systems              980            980          1,146
    Industrial Products          1,411          1,411          1,531
                         -------------  -------------  -------------
                                 5,993          5,993          6,248

FINANCE                            335            335            322
       Total revenues    $       6,328  $       6,328  $       6,570

PROFIT

MANUFACTURING:
    Aircraft             $         210  $         218  $         185
    Automotive                     121            123            150
    Fastening Systems               66             68             98
    Industrial Products            149            153            190
                         -------------  -------------  -------------
                                   546            562            623

FINANCE                             86             86             85

Segment Profit                     632            648            708
Special charges, net (b)           (77)          --             --
Corporate expenses and
    other - net                    (81)           (81)           (87)
Interest expense                   (84)           (84)           (74)

Income before
 income taxes                      390            483            547

Income taxes                      (138)          (170)          (197)
Distribution on
 preferred securities
 of manufacturing
 subsidiary trust,
 net of income taxes               (13)           (13)           (13)

Income from
 continuing
 operations                        239            300            337

 Cumulative effect
  of change in
  accounting principle,
  net of income
  taxes (c)                       --             --              (59)

 Net income              $         239  $         300  $         278

 Diluted earnings
  per share:
 Income from
  continuing
  operations                      1.67           2.10           2.29

 Cumulative effect
  of change in
  accounting
  principle, net
  of income taxes (c)             --             --            (0.41)
 Net income              $        1.67  $        2.10  $        1.88

Average shares
 outstanding               143,060,000    143,060,000    147,630,000


(a) The "As Adjusted" column excludes restructuring expenses recorded
    in the segments as well as accruable restructuring expenses in
    special charges, net.

(b) Special charges, net for 2001 include accruable restructuring
    expenses associated with a) reducing overhead and closing,
    consolidating and downsizing manufacturing facilities, b)
    consolidating operations and exiting non-core product lines within
    the Finance segment and c) corporate and segment personnel
    reductions .

(c) In January 2000, Textron adopted the Emerging Issues Task Force
    consensus EITF 99-5 which requires certain pre-production
    engineering costs to be expensed as incurred. Textron recorded the
    cumulative effect of this accounting change in January, 2000.



                                                             Unaudited

                             TEXTRON INC.
                 Condensed Consolidated Balance Sheets
                             (in millions)

                                            June 30, Dec. 30,  July 1,
                                              2001     2000      2000
Assets
Cash and cash equivalents                  $   219   $   282   $   202
Accounts receivable, net                     1,524     1,318     1,484
Inventories                                  2,079     1,871     2,083
Other current assets                           487       443       317
Net property                                 2,552     2,568     2,529
Other assets                                 3,904     3,757     4,236
Textron Finance assets                       6,684     6,131     6,562
        Total Assets                       $17,449   $16,370   $17,413

Liabilities and Shareholders' Equity
Current portion of long-term debt
 and short-term debt                       $ 1,172   $   615   $   862
Other current liabilities                    2,598     2,648     2,643
Other liabilities                            1,941     1,939     1,974
Long-term debt                               1,449     1,469     1,526
Textron Finance liabilities                  5,679     5,193     5,622
        Total Liabilities                   12,839    11,864    12,627

Obligated mandatorily redeemable
 preferred securities                          513       512       512
Total Shareholders' Equity                   4,097     3,994     4,274

        Total Liabilities and
         Shareholders' Equity              $17,449   $16,370   $17,413

Connect with Textron IR

Eric Salander, Vice President, Investor Relations
(401) 457-2288
Cameron Vollmuth, Manager,
Investor Relations (401) 457-2288

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