Textron Reports Third Quarter Results In Line with Prior Estimates

October 18, 2001

Providence, RI - October 18, 2001 - Textron Inc. (NYSE: TXT) today reported a loss before special charges and restructuring-related expenses of $35 million, or $0.25 per share, for the third quarter ended September 29, 2001, in line with the company's previously announced estimate. This compares to earnings of $158 million or diluted earnings per share of $1.08 in the third quarter of last year.

Textron reported a net loss of $330 million for the third quarter of 2001. This reflects $349 million (pre-tax) of special charges and restructuring related expenses, including the previously announced impairment charge to reduce goodwill and intangibles related to its OmniQuip business of $318 million ($275 million after-tax).

Third quarter revenues were $2.8 billion, down from $3.2 billion in 2000, primarily due to softening sales in most short cycle businesses, pricing pressures and delayed deliveries in the Aircraft segment as a result of flight restrictions related to the September 11 attacks.

Operating results were negatively impacted by lower sales volumes, pricing pressures and the economic disruptions resulting from the terrorist actions, as well as profitability adjustments on certain programs at Bell Helicopter and a write-down of used equipment at Cessna and Golf & Turf to reflect lower prices prevailing in their current markets. Offsetting these items during the quarter were cost savings of approximately $48 million attributable to Textron's ongoing restructuring program, bringing the year-to-date savings from the program to about $97 million.

Textron Chairman, President and Chief Executive Officer Lewis B. Campbell said, "We are aggressively reducing costs and resizing our business to maximize our success in these continuing difficult economic times. As announced on September 26, we have also taken immediate actions to improve the management process and business structure at Textron to address the operating issues identified during the third quarter.

"We remain committed to our three strategic initiatives of restructuring the business, re-engineering our business model to leverage the full capabilities of the enterprise and reconfiguring our portfolio as we focus on strong brands in attractive, higher growth industries. We are confident that our progress along these fronts will create a more resilient business model with a significantly improved cost structure that will provide accelerated earnings growth when the economy recovers."

Fourth Quarter Outlook

Textron said that economic pressures continue to impact its businesses across the board. Its customers and dealers are also being negatively impacted by the slow economy, putting further pressure on Textron's free cash flow, which is expected to total approximately $200 million for the year, before restructuring costs. As previously announced, Textron expects fourth quarter earnings before special charges and restructuring-related expenses to be in the range of $0.40 to $0.60 per share.

TEXTRON SEGMENT ANALYSIS

Aircraft

Aircraft segment revenues and profits before restructuring-related expenses decreased $107 million and $157 million, respectively.

Cessna revenues decreased due to lower sales of single-engine piston aircraft driven by the slower economy, and delayed deliveries of business jets and Caravans following the September 11 tragedy. Specifically, shipments and flight tests were suspended while there was a complete prohibition on flying. A continued prohibition for most internationally-registered general aviation aircraft also prevented production flight test activities and delivery to non-U.S. customers. Profit decreased as a result of the lower sales, used aircraft inventory write-downs taken to reflect lower prices, and higher engineering expense related to the development of the Sovereign business jet. These decreases were partially offset by improved operating performance.

  • Total backlog at Cessna was $5.8 billion at the end of the third quarter.

    Bell Helicopter revenues decreased due to lower sales of commercial helicopters and spares and lower foreign military sales, partially offset by higher revenue on the V-22 tiltrotor aircraft production contract. Bell profit decreased primarily due to the previously announced program review adjustments to reflect reduced profitability expectations on certain development and production contracts, including the V-22, the H-1, and Model 412 and 427 programs. These adjustments reflect the clarification of several matters including extended development schedules and design changes on a number of programs. Profit was also less due to lower income related to retirement benefits and lower income from a joint venture partner for the BA609 program.

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

    Automotive

    Automotive segment revenues and profit before restructuring-related expenses decreased $75 million and $24 million, respectively.

    Trim revenues decreased primarily due to North American automotive OEM production decreases, customer price reductions and the unfavorable impact of foreign exchange. Profit decreased primarily due to the lower sales volume 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 non-core product lines in the fourth quarter of 2000 and in the first half of 2001, customer price reductions and lower volume. Profit decreased primarily due to customer price reductions, the lower volume, and lower income related to retirement benefits, partially offset by the benefit of cost reduction activities.

    Fastening Systems

    The Advanced Solutions Group, previously part of Textron Fastening Systems, is now managed within the Tempo business unit and reported as part of the Industrial Products segment. Prior periods have been restated to reflect this change.

    Fastening Systems segment revenues and profit before restructuring-related expenses decreased $80 million and $42 million, respectively.

    The revenue and profit decreases were primarily due to lower volume, customer price reductions and the unfavorable impact of foreign exchange. The unfavorable profit impact from the lower sales, operating inefficiencies, customer price reductions and a loss on the divestiture of a non-core product line were partially offset by the benefit of restructuring and other cost reduction activities.

    Industrial Products

    Industrial Products segment revenues and profit before restructuring-related expenses decreased $130 million and $82 million, respectively.

    Revenue decreased primarily due to the unfavorable impact of the depressed economy on most of the segment's businesses plus reduced sales due to the divestiture of Turbine Engine Components, partially offset by the contribution from the acquisition of Tempo Research, Opto-Electronics and Industrial Technology. Profit decreased as a result of the lower sales volume, pricing pressures, operating inefficiencies, a write-down of used equipment inventories at Golf & Turf and lower income related to retirement benefits. These reductions were partially offset by the benefit of restructuring activities.

    Finance

    Finance segment revenues decreased $6 million due to a lower average yield reflecting a lower interest rate environment. Interest margin increased, reflecting higher fee income and higher average receivables. The higher interest margin more than offset the decrease in revenues. However, profit decreased $1 million as higher expenses related to new initiatives and a higher provision for loan losses offset the benefit of higher interest margin.

    Conference Call Information

    Textron will host a conference call at 10:00 a.m. Eastern time today to discuss third quarter results and the company's outlook. This conference call will be accessible via webcast at www.textron.com or by direct dial at (800) 230-1096 in the U.S. or (612) 288-0340 outside of the US (request the Textron Earnings Conference). The call will be recorded and available for playback beginning at 1:30 p.m. Eastern time on October 18 by dialing (320) 365-3844 - Access Code 603145.

    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 68,000 employees and major manufacturing facilities in 30 countries.

                                                        Unaudited
                                 TEXTRON INC.
                    REVENUES AND INCOME BY BUSINESS SEGMENT
                         THIRD QUARTER AND NINE MONTHS
                    (In millions except per share amounts)
                                               Third Quarter
                                          Sept. 29, 2001        Sept. 30,
                                   As Reported  As Adjusted(a)      2000
    REVENUES
    MANUFACTURING:
        Aircraft                       $ 1,064       $ 1,064      $ 1,171
        Automotive                         579           579          654
        Fastening Systems (b)              389           389          469
        Industrial Products (b)            600           600          730
                                         2,632         2,632        3,024
    FINANCE                                178           178          184
           Total revenues              $ 2,810       $ 2,810      $ 3,208
    PROFIT
    MANUFACTURING:
        Aircraft                         $ (31)        $ (30)       $ 127
        Automotive                          14            16           40
        Fastening Systems (b)                1             4           46
        Industrial Products (b)            (16)          (11)          71
                                           (32)          (21)         284
    FINANCE                                 48            48           49
    Segment Profit                          16            27          333
    Gain on Sale of Division                 3             3            -
    Special charges, net  (c)             (338)            -            -
    Corporate expenses and
        other - net                        (33)          (33)         (34)
    Interest expense                       (41)          (41)         (42)
    Income (loss) before income
     taxes                              $ (393)        $ (44)       $ 257
    Income taxes                            69            15          (93)
    Distribution on preferred
     securities of manufacturing
     subsidiary trust, net of
     income taxes                           (6)           (6)          (6)
    Income (loss) from continuing
        operations                        (330)          (35)         158
    Cumulative effect of change
     in accounting principle,
     net of income taxes (d)                 -             -            -
    Net income (loss)                   $ (330)        $ (35)       $ 158
    Earnings per share: (e)
    Income (loss) from continuing
        operations                       (2.34)        (0.25)        1.08
    Cumulative effect of change
     in accounting principle,
     net of income taxes (d)                 -             -            -
    Net income (loss)                  $ (2.34)      $ (0.25)      $ 1.08
    Average shares outstanding (e) 141,196,000   141,196,000  145,325,000
                                                Nine Months
                                          Sept. 29, 2001        Sept. 30,
                                   As Reported  As Adjusted(a)      2000
    REVENUES
    MANUFACTURING:
        Aircraft                       $ 3,273       $ 3,273      $ 3,143
        Automotive                       1,972         1,972        2,253
        Fastening Systems (b)            1,306         1,306        1,546
        Industrial Products (b)          2,074         2,074        2,330
                                         8,625         8,625        9,272
    FINANCE                                513           513          506
           Total revenues              $ 9,138       $ 9,138      $ 9,778
    PROFIT
    MANUFACTURING:
        Aircraft                         $ 179         $ 188        $ 312
        Automotive                         135           139          190
        Fastening Systems (b)               69            74          138
        Industrial Products (b)            131           140          267
                                           514           541          907
    FINANCE                                134           134          134
    Segment Profit                         648           675        1,041
    Gain on Sale of Division                 3             3            -
    Special charges, net  (c)             (415)            -            -
    Corporate expenses and
        other - net                       (114)         (114)        (121)
    Interest expense                      (125)         (125)        (116)
    Income (loss) before income
     taxes                                $ (3)        $ 439        $ 804
    Income taxes                           (69)         (155)        (290)
    Distribution on preferred
     securities of manufacturing
     subsidiary trust, net of
     income taxes                          (19)          (19)         (19)
    Income (loss) from continuing
        operations                         (91)          265          495
    Cumulative effect of change
     in accounting principle,
     net of income taxes (d)                 -             -          (59)
    Net income (loss)                    $ (91)        $ 265        $ 436
    Earnings per share: (e)
    Income (loss) from continuing
        operations                       (0.65)         1.85         3.37
    Cumulative effect of change
     in accounting principle,
     net of income taxes (d)                 -             -        (0.40)
    Net income (loss)                  $ (0.65)       $ 1.85       $ 2.97
    Average shares outstanding     140,985,000   143,093,000  146,911,000
        (a) The "As Adjusted" column excludes restructuring-related
    expenses recorded in the segments as well as expenses recorded in
    special charges.
        (b) Textron reorganized management responsibility for one of its
    divisions previously reported in the Fastening Systems segment to the
    Industrial Products segment. Prior periods have been restated to
    reflect this change.
        (c) Special charges, net for 2001 includes goodwill and
    intangibles impairment write-downs in the third quarter, 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 and
    e-business investment losses.
        (d) 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.
        (e) The diluted EPS average share base for the third quarter 2001
    excludes potential common shares (convertible preferred stock and
    stock options). The nine months "As Reported" amount also excludes
    potential common shares. These shares are excluded due to their
    antidilutive effect resulting from the third quarter and nine months
    loss from continuing operations. Additionally, the earnings available
    for common shareholders has been reduced by dividends on convertible
    preferred securities.
                                                      Unaudited
                                 TEXTRON INC.
                     Condensed Consolidated Balance Sheets
                                 (In millions)
                                          Sept. 29,   Dec. 30,  Sept. 30,
                                             2001      2000       2000
    Assets
    Cash and cash equivalents              $   261    $   282    $   134
    Accounts receivable, net                 1,500      1,318      1,482
    Inventories                              2,018      1,871      2,032
    Other current assets                       443        443        302
    Net property                             2,560      2,568      2,507
    Other assets                             3,731      3,757      4,203
    Textron Finance assets                   6,625      6,131      6,116
            Total Assets                   $17,138    $16,370    $16,776
    Liabilities and Shareholders' Equity
    Current portion of long-term
     debt and short-term debt              $ 1,353    $   615    $   825
    Other current liabilities                2,583      2,648      2,562
    Other liabilities                        1,876      1,939      1,937
    Long-term debt                           1,475      1,469      1,457
    Textron Finance liabilities              5,608      5,193      5,186
            Total Liabilities               12,895     11,864     11,967
    Obligated mandatorily redeemable
     preferred securities                      513        512        512
    Total Shareholders' Equity               3,730      3,994      4,297
       Total Liabilities and
          Shareholders' Equity             $17,138    $16,370    $16,776
    

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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