Textron Reports Second Quarter 2002 Earnings Per Share of $0.82 Before Special Charges, Costs Related to Restructuring and a Gain From Transactions Related to the Divested Automotive Trim Business

July 18, 2002

Providence, Rhode Island - July 18, 2002 - Textron Inc. (NYSE: TXT) today reported second quarter diluted earnings per share of $0.82 and net income of $116 million before special charges, costs related to restructuring and a gain from transactions related to the divested Automotive Trim business, compared to last year's diluted earnings per share of $1.10 and net income of $157 million before special charges and costs related to restructuring.

Results before non-recurring items are useful in analyzing operating performance, but should be used only in conjunction with results reported in accordance with generally accepted accounting principles. Reported second quarter 2002 earnings per share were $0.74 and net income was $105 million, compared with last year's reported earnings per share of $0.88 and net income of $126 million. These results include a pre-tax gain of $25 million from transactions related to the divestiture of Automotive Trim in the second quarter 2002 and pre-tax special charges and costs related to restructuring in the second quarter 2002 and the second quarter 2001 of $29 million and $48 million, respectively. Last year's results included $25 million of goodwill amortization.

Second quarter revenues were $2.8 billion, down from $3.3 billion in 2001, primarily due to the divestitures of Automotive Trim and a number of other businesses and softer sales in several of Textron's segments, partially offset by higher sales in the Aircraft segment. For the quarter, Textron recorded free cash flow before restructuring of $143 million. The company continued to make excellent progress on its restructuring program, with incremental savings in the quarter of about $32 million.

Textron Chairman, President and Chief Executive Officer Lewis B. Campbell said, Given the continued weakness in many of our industrial markets, we are pleased with our results for the quarter, which reflect our aggressive cost reduction activities. We remain confident in our ability to achieve our full year EPS and free cash flow targets.

Goodwill and Other Intangible Assets

Consistent with the adoption of Statement of Financial Accounting Standards (SFAS) No. 142, Textron recorded, as a cumulative effect of change in accounting, an after-tax, non-cash, transitional goodwill impairment charge of $488 million, retroactive to the first quarter. This charge applies to the operating segments as follows: $274 million in Industrial Products; $111 million in Industrial Components; $88 million in Fastening Systems; and $15 million in Finance.

Outlook

Textron said that it expects earnings per share of approximately $0.68 before special charges and costs related to restructuring in the third quarter. The Company continues to expect full-year earnings per share of approximately $3.00, before special charges, costs related to restructuring, the gain from transactions related to the divested Automotive Trim business and the transitional goodwill impairment charge. The company also continues to expect free cash flow before restructuring for the year of approximately $325 million.

Second Quarter Year-Over-Year Segment Analysis

Due to the company's adoption of SFAS No. 142, this year's net income excludes goodwill amortization. The company no longer includes amortization of goodwill in its internal evaluation of segment performance. Therefore, the company has recast its prior year segment results for comparability by reclassifying goodwill amortization and treating this expense as a below-segment profit item. Segment profits and margins discussed below for both periods also reflect amounts before deducting special charges and costs related to restructuring.

Aircraft

Aircraft segment revenues increased $65 million and profit increased $19 million.

Cessna revenues increased $61 million primarily due to higher volume and higher pricing, higher used aircraft sales and higher spare parts and service sales, partially offset by lower sales of single engine piston aircraft that have been affected by the weak economy. Profit increased as a result of higher pricing, higher Citation volume, a favorable mix of aircraft sold and lower engineering expenses, partially offset by the lower sales of single engine piston aircraft and lower resale prices for trade-in aircraft. Backlog at Cessna was $4.5 billion at the end of the quarter.

Bell Helicopter revenues increased $4 million primarily due to higher sales to the U.S. Government on the V-22 program and the H-1 upgrade contract, partially offset by lower foreign military sales and lower commercial sales. Bell's profit decreased primarily as a result of lower profit in its commercial business, partially offset by higher profit in its U.S. Government business, primarily due to the higher revenues on the V-22 contract. Backlog at Bell was $1.1 billion at the end of the quarter.

Fastening Systems

Fastening Systems revenues decreased $20 million and profit decreased $15 million.

The revenue decrease was primarily due to the divestiture of non-core product lines, customer price reductions and depressed market demand, partially offset by the favorable impact of foreign exchange. Profit decreased primarily due to customer price reductions, lower sales and manufacturing inefficiencies, partially offset by the benefit of restructuring activities.

Industrial Products

Industrial Products revenues decreased $36 million and profit decreased $53 million.

Revenues decreased in most of the segment's businesses primarily due to depressed markets and the divestiture of non-core product lines during 2001, partially offset by higher revenues in the aerospace and defense business. Profit decreased primarily due to the lower volumes, an unfavorable mix of products sold, an increase in reserves for receivables and inventory and the impact of a gain on the sale of a product line in 2001, partially offset by the benefit of restructuring activities.

Industrial Components

Industrial Components revenues decreased $457 million and profit decreased $59 million.

Excluding the divestitures of Automotive Trim, Turbine Engine Components Textron and several small product lines in 2001, revenues increased $27 million while profit decreased $18 million. Revenues increased at Kautex, where higher volume from new program launches was partially offset by customer price reductions and lower machine tool shipments. The increase in revenues at Kautex was also partially offset by decreases in revenue at Power Transmission and Fluid Handling Products as a result of soft industrial markets. Profit decreased primarily due to lower volumes and manufacturing inefficiencies at Power Transmission and Fluid Handling Products, customer price reductions and the impact of a gain on the sale of a product line in 2001, partially offset by higher sales at Kautex and the benefit of restructuring activities.

Finance

Finance segment revenues decreased $16 million and profit decreased $14 million.

Revenues decreased primarily due to a lower average yield reflecting the lower interest rate environment, partially offset by higher fee income, higher syndication and securitization income and higher operating lease revenue. Profit decreased primarily due to a higher provision for loan losses as a result of increased delinquencies, and higher operating expenses primarily related to higher credit and collection expenses and growth in managed receivables, partially offset by higher interest margin.

Conference Call Information

Textron will host a conference call at 10:00 a.m. Eastern time today to discuss results and the company's outlook. This conference call will be accessible via webcast at www.textron.com or by direct dial at (888) 428-4470 in the U.S. or (612) 332-0107 outside of the U.S. (request the Textron Earnings Conference). The call will be available for playback beginning at 1:30 p.m. Eastern time on Thursday, July 18th by dialing (320) 365-3844 - Access Code 639107.

Textron Inc. is a $12 billion multi-industry company with more than 51,000 employees in 40 countries. The company leverages its global network of businesses to provide customers with innovative solutions and services in industries such as aircraft, fastening systems, industrial products, industrial components, and finance. We are known around the world for our powerful brands such as Bell Helicopter, Cessna Aircraft, Kautex, Lycoming, E-Z-GO and Greenlee, among others. More information is available at www.textron.com.

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 achieve savings from its restructuring plans, (b) changes in worldwide economic and political conditions that impact interest and foreign exchange rates, © the occurrence of work stoppages and strikes at key facilities of Textron or Textron's customers or suppliers, (d) government funding and program approvals affecting products being developed or sold under government programs, (e) cost and delivery performance under various program and development contracts, (f) successful implementation of supply chain and other cost-reduction programs, (g) the timing of certifications of new aircraft products, (h) the occurrence of further downturns in customer markets to which Textron products are sold or supplied, (i) Textron's ability to offset, through cost reductions, raw material price increases and pricing pressure brought by OEM customers and (j) Textron Financial's ability to maintain credit quality and control costs.

                              Unaudited

                             TEXTRON INC.
                REVENUES AND INCOME BY BUSINESS SEGMENT
          THREE MONTHS ENDED JUNE 29, 2002 AND JUNE 30, 2001
                (In millions except per share amounts)

                          June 29, 2002             June 30, 2001
                         As           As           As          As
                      Reported    Adjusted(a)   Reported   Adjusted(a)

 REVENUES

 MANUFACTURING: (b)
   Aircraft           $  1,323     $  1,323     $  1,258     $  1,258
   Fastening
    Systems                431          431          451          451
   Industrial
    Products               505          505          541          541
   Industrial
    Components             417          417          874          874

                         2,676        2,676        3,124        3,124

 FINANCE                   148          148          164          164

     Total revenues   $  2,824     $  2,824     $  3,288     $  3,288

 PROFIT (LOSS)

 MANUFACTURING:
  (b) (c)
   Aircraft           $    147     $    147     $    120     $   128
   Fastening
    Systems                 20           21           35           36
   Industrial
    Products                12           13           65           66
   Industrial
    Components              24           25           81           84

                           203          206          301          314

 FINANCE (c)                29           29           43           43

 Segment profit            232          235          344          357

 Gain on sale of
  division (d)              25            -            -            -
 Special charges(e)        (26)           -          (35)           -
 Goodwill
  amortization (c)           -            -          (25)         (25)
 Corporate expenses
  and other - net          (31)         (31)         (39)         (39)
 Interest expense,
  net                      (25)         (25)         (40)         (40)

Income before
 income taxes              175          179          205          253

Income taxes               (63)         (56)         (72)         (89)
Distribution on
 preferred
 securities of
 manufacturing
 subsidiary trust,
 net of income
 taxes                      (7)          (7)          (7)          (7)

Net income  (c)       $    105     $    116     $    126     $    157

 Earnings per
  share:

    Net income  (c)   $   0.74     $   0.82     $   0.88     $   1.10

Average diluted
 shares
 outstanding       141,599,000  141,599,000  143,411,000  143,411,000


                              Unaudited

                             TEXTRON INC.
                REVENUES AND INCOME BY BUSINESS SEGMENT
           SIX MONTHS ENDED JUNE 29, 2002 AND JUNE 30, 2001
                (In millions except per share amounts)

                         June 29, 2002              June 30, 2001
                         As          As            As           As
                      Reported   Adjusted (a)   Reported  Adjusted (a)

 REVENUES

MANUFACTURING: (b)
  Aircraft            $  2,370     $  2,370     $  2,280     $  2,280
  Fastening
   Systems                 827          827          917          917
  Industrial
   Products                973          973        1,090        1,090
  Industrial
   Components              779          779        1,706        1,706

                         4,949        4,949        5,993        5,993

FINANCE                    293          293          335          335

    Total revenues    $  5,242     $  5,242     $  6,328     $  6,328

PROFIT

MANUFACTURING:
 (b) (c)
  Aircraft            $    226     $    226     $    227     $    235
  Fastening
   Systems                  28           31           77           78
  Industrial
   Products                 42           44          125          128
  Industrial
   Components               46           48          160          164

                           342          349          589          605

FINANCE (c)                 51           51           92           92

Segment profit             393          400          681          697

Gain on sale of
 division (d)               25           --           --           --
Special charges(e)         (36)          --          (77)          --
Goodwill
 amortization (c)           --           --          (49)         (49)
Corporate expenses
 and other - net           (60)         (60)         (81)         (81)
Interest expense,
 net                       (55)         (55)         (84)         (84)

Income before
 income taxes              267          285          390          483

Income taxes               (92)         (90)        (138)        (170)
Distribution on
 preferred
 securities of
 manufacturing
 subsidiary trust,
 net of income
 taxes                     (13)         (13)         (13)         (13)

Income from
 continuing
 operations                162          182          239          300

Cumulative effect
 of a change in
 accounting
 principle, net
 of income
 taxes (f)                (488)          --           --           --

Net income
 (loss) (c)           $   (326)    $    182     $    239     $    300

Earnings per
 share:
   Income from
    continuing
    operations            1.14         1.29         1.67         2.10
   Cumulative
    effect of a
    change in
    accounting
    principle, net
    of income
    taxes (f)            (3.44)          --           --           --

   Net income
    (loss) (c)        $  (2.30)    $   1.29     $   1.67     $   2.10

   Average diluted
    shares
    outstanding    141,682,000  141,682,000  143,060,000  143,060,000


                              Unaudited

                             TEXTRON INC.
                REVENUES AND INCOME BY BUSINESS SEGMENT
      THREE AND SIX MONTHS ENDED JUNE 29, 2002 AND JUNE 30, 2001
                (In millions except per share amounts)


(a) The "As Adjusted" column excludes costs related to restructuring
recorded in segment profit, expenses recorded in special charges, the
gain on transactions related to the divestiture of the Automotive Trim
business and the cumulative effect effect of the change in accounting
principle. A reconciliation of income as reported to income as
adjusted is as follows:

                         Second Quarter             Six Months
                       2002         2001         2002         2001

Net income, as
 reported             $   105      $   126      $  (326)     $   239
Adjustments:
  Gain on sale of
   division               (25)          --          (25)          --
  Costs related to
   restructuring            3           13            7           16
  Special charges:
    Restructuring          17           24           25           53
    Fixed asset
     impairment             9           10           11           20
    Intangible
     impairment                          1                         1
    E-business losses      --           --           --            3
  Tax impact of
   excluded costs           7          (17)           2          (32)
  Cumulative effect of
   a change in
   accounting
   principle, net of
   income taxes            --           --          488           --


Net income, as
 adjusted             $   116      $   157      $   182      $   300



(b) In January 2002, Textron reorganized to reflect the sale of the
Automotive Trim business and now reports under the following new
segments: Aircraft, Fastening Systems, Industrial Products, Industrial
Components and Finance. Prior periods have been recast to reflect this
change.

(c) Pursuant to SFAS No. 142, beginning on December 30, 2001, goodwill
is no longer amortized. To reflect the adoption of this statement and
the fact that the Company does not include amortization of goodwill in
its internal evaluation of segment performance, the Company has recast
its segment data for comparability by reclassifying goodwill
amortization from segment profit in prior periods.

(d) In the second quarter 2002, Textron recorded an adjustment to the
gain on the divestiture of the Automotive Trim business as a result of
transactions associated with the divestiture. The Automotive Trim
business was sold to Collins & Aikman Products Co. in the fourth
quarter 2001.

(e) Special charges include restructuring expenses and fixed asset
impairment write-downs associated with reducing overhead and closing,
consolidating and downsizing manufacturing facilities, reducing
corporate and segment personnel, consolidating operations and exiting
non-core product lines.

(f) With the implementation of SFAS No. 142, Textron recorded a $488
million after-tax transitional goodwill impairment charge comprised of
$274 million in the Industrial Products segment, $111 million in the
Industrial Components segment, $88 million in the Fastening Systems
segment and $15 million in the Finance segment. As required by the
Statement, these charges were recorded retroactively to the beginning
of fiscal year 2002 as a cumulative effect of a change in accounting
principle.

                              Unaudited

                             TEXTRON INC.
                 Condensed Consolidated Balance Sheets
                             (In millions)


                                             June 29,    December 29,
                                               2002         2001

Assets
Cash and cash equivalents                   $       595  $       241
Accounts receivable, net                          1,293        1,149
Inventories                                       1,779        1,727
Other current assets                                437          900
Net property                                      2,014        2,044
Other assets                                      3,079        3,527
Textron Finance assets                            6,795        6,464

        Total Assets                        $    15,992  $    16,052

Liabilities and Shareholders' Equity
Current portion of long-term debt and
 short-term debt                            $       537  $       673
Other current liabilities                         2,296        2,402
Other liabilities                                 1,765        1,842
Long-term debt                                    1,671        1,261
Textron Finance liabilities                       5,794        5,427

        Total Liabilities                        12,063       11,605

Obligated mandatorily redeemable preferred
 securities                                         512          513
Total Shareholders' Equity                        3,417        3,934

        Total Liabilities and
         Shareholders' Equity               $    15,992  $    16,052

Connect with Textron IR

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

Email Alert

Enter your Email *
Mailing Lists *





 
Enter the code shown above.