Textron Exceeds Third Quarter EPS and Cash Flow Targets; Announces Increased Dividend and New Share Repurchase Program

October 21, 2004

Providence, RI - October 21, 2004 - Textron Inc. (NYSE: TXT) today reported third quarter 2004 net income of $103 million or $0.73 per share, compared with third quarter 2003 net income of $47 million or $0.34 per share.

Revenues were $2.57 billion, up 15% from $2.23 billion in the third quarter of last year, reflecting higher volumes in the company's manufacturing segments.

Third quarter earnings included $0.10 per share in after-tax costs related to restructuring. For the same period last year, earnings included $0.18 per share in after-tax costs related to restructuring and a $0.07 per share after-tax charge for unamortized issuance costs related to the redemption of the $500 million Textron Capital I trust preferred securities.

Excluding these items, Textron's third quarter 2004 adjusted earnings per share were up 41% at $0.83, compared to $0.59 per share in the third quarter of 2003. The company's previous target for third quarter adjusted earnings per share was $0.70 to $0.80.

Cash flow from operating activities for the first nine months of 2004 was $805 million, compared to $300 million during the same period last year, resulting in free cash flow before restructuring for the first nine months of 2004 of $669 million, compared to $183 million last year. The company had previously targeted full-year free cash flow before restructuring in the range of $500 - $550 million.

"The majority of our end markets continued to strengthen and helped drive our top-line growth for the quarter. This, combined with the benefits of our enterprise management initiatives, resulted in an improvement in our overall performance, including cash flow," said Lewis B. Campbell, Textron chairman, president and CEO.

Outlook

Textron now expects full-year 2004 adjusted earnings per share will be between $3.25 and $3.35, up from $2.79 per share in 2003. The company expects fourth quarter adjusted earnings per share to be between $0.99 and $1.09. These amounts exclude restructuring costs and other special items.

Textron now expects full-year free cash flow before restructuring to be between $600 and $700 million, with cash flow from operations ranging from $805 to $905 million.

"We are encouraged by our prospects for strong top-line growth over the next several years and expect to deliver even stronger growth in earnings as a result of our ongoing progress in reducing costs," Campbell added.

The company currently expects its 2005 GAAP earnings per share will be up 15%-20%, compared to this year's adjusted earnings per share.

Board Approves Increase in Dividend Payment and New Share Repurchase Program

Textron's Board of Directors has authorized a $0.10 per share increase in the company's annualized common stock dividend, from $1.30 per share to $1.40 per share. The first increased dividend payment will be paid on January 3, 2005 to holders of record at the close of business on December 10, 2004.

Textron's Board of Directors also authorized a new, 12-million-share repurchase program. This program supersedes the company's previous authorization, under which less than one million shares remained.

Presentation of Results and Outlook

Textron presents adjusted results and outlook before restructuring costs and other special items because such items are outside normal business operations and are difficult to forecast accurately for specific periods. Such items are either isolated or temporary in nature. Therefore, it is helpful to understand results without these items, especially when comparing results to previous periods or forecasting performance in future periods.

For example, Textron incurred $18 million in pre-tax costs during the third quarter for its restructuring program. The restructuring program is expected to be substantially complete in 2004. During the execution of the restructuring program, the company is incurring costs that are supplementary to the ongoing operating costs of the business. These costs are not directly related to ongoing business results during the quarter and are not expected to occur with any regularity or predictability.

Results before restructuring costs and other special items are also the basis for measuring operating performance for management compensation purposes. However, analysis of the company's results and outlook before restructuring costs and other special items should be used only in conjunction with data presented in accordance with Generally Accepted Accounting Principles (GAAP). Reconciliations of the company's results and outlook to GAAP are included below.

Segment Analysis

Bell

Bell segment revenues increased $49 million, while profit decreased $10 million.

U.S. Government revenues were down due to lower revenue on the V-22 program and lower sales related to a contract for training aircraft completed in 2003, partially offset by higher sales of air-launched weapons, higher revenue on the H-1 upgrade program and increased demand for spares. Commercial revenues were up due to higher helicopter unit volume and higher volume in the aircraft engine business.

Segment profit decreased due to lower profit in the U.S. Government business, partially offset by higher profit in the commercial business. U.S. Government profit decreased primarily due to the decrease in V-22 revenue and the impact of lower training aircraft volume, partially offset by higher sales of air-launched weapons. The higher commercial profit was primarily due to the impact of higher commercial helicopter volume, partially offset by higher engineering expense, lower pension income, higher insurance costs and certain positive 2003 items that did not reoccur.

Bell Helicopter's backlog of $2.4 billion was down $51 million from the second quarter 2004.

Cessna

Cessna segment revenues and profit increased $183 million and $51 million, respectively.

Cessna revenues increased primarily due to higher Citation business jet volume, higher single engine aircraft volume, higher used aircraft volume and higher pricing. Additionally, sales increased as a result of the consolidation of CitationShares during the second quarter of 2004.

Segment profit increased due to improved cost performance, increased volume and higher pricing, partially offset by inflation.

Backlog of $4.9 billion was up $128 million from the second quarter of 2004. In addition, at the end of the third quarter Cessna also had orders from its CitationShares joint venture totaling $555 million, up $139 million from the second quarter of 2004.

Fastening Systems

Fastening Systems segment revenues increased $50 million, while profit decreased $9 million.

Revenues increased primarily due to higher sales volume, favorable foreign exchange and higher pricing. Profit decreased due to inflation and launch costs related to plant consolidations, partially offset by higher pricing, higher sales volume, improved cost performance and favorable foreign exchange. Inflation included higher steel costs, which were only partially offset by pricing actions during the quarter.

Industrial

Industrial segment revenues and profit increased $63 million and $21 million, respectively.

Revenues increased primarily due to higher sales volume at each of the Industrial divisions, except Fluid and Power, and the favorable impact of foreign exchange, partially offset by the divestiture of a non-core product line during the second quarter of 2004. Profit increased primarily due to improved cost performance, higher volume and improved credit performance, partially offset by inflation and the impact of the divestiture of a non-core product line.

Finance

Finance segment revenues decreased $7 million, while profit increased $4 million.

Revenues decreased primarily due to a lower average finance receivable portfolio, reflecting the continued liquidation of non-core assets. Profit increased primarily due to a lower provision for loan losses and lower operating expenses, partially offset by the impact of lower average finance receivables.

Conference Call Information

Textron will host a conference call today, October 21, 2004, at 9:00 a.m. Eastern time to discuss its results and outlook. The call will be available via webcast at www.textron.com or by direct dial at (888) 428-4474 in the U.S. or (612) 332-0107 outside of the U.S. (request the Textron Earnings Conference). The call will be recorded and available for playback beginning at 12:30 p.m. Eastern time today by dialing (320) 365-3844; Access Code: 723574.

Textron Inc. (NYSE:TXT) is a $10 billion multi-industry company with more than 43,000 employees in nearly 40 countries. The company leverages its global network of aircraft, 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 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 speak only as of the date on which they are made, and we undertake no obligation to update or revise any forward-looking statements. 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) uncertainty in estimating the amount and timing of restructuring charges and related costs; (c ) 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) cost and delivery performance under various program and development contracts; (g) the adequacy of cost estimates for various customer care programs including servicing warranties; (h) the ability to control costs and successful implementation of various cost reduction programs; (i) the timing of certifications of new aircraft products; (j) the occurrence of slowdowns or downturns in customer markets in which Textron products are sold or supplied or where Textron Financial offers financing; (k) changes in aircraft delivery schedules or cancellation of orders; (l) the impact of changes in tax legislation; (m) Textron's ability to offset, through cost reductions, raw material price increases and pricing pressure brought by original equipment manufacturer customers; (n) the availability and cost of insurance; (o) increases in pension expenses related to lower than expected asset performance or changes in discount rates; (p) Textron Financial's ability to maintain portfolio credit quality; (q) Textron Financial's access to debt financing at competitive rates; and (r )uncertainty in estimating contingent liabilities and establishing reserves to address such contingencies.

                             TEXTRON INC.
                Revenues and Income by Business Segment
       Three Months Ended October 2, 2004 and September 27, 2003
            (Dollars in millions except per share amounts)
                              (Unaudited)

                       October 2, 2004          September 27, 2003
                  -------------------------  -------------------------
                      GAAP      As Adjusted      GAAP      As Adjusted
                                    (a)                         (a)
                  ------------ ------------  ------------ ------------
REVENUES
MANUFACTURING:
 Bell               $     570   $      570     $     521    $     521
 Cessna                   699          699           516          516
 Fastening Systems        454          454           404          404
 Industrial               717          717           654          654
                  ------------ ------------  ------------ ------------
                        2,440        2,440         2,095        2,095
FINANCE                   129          129           136          136
                  ------------ ------------  ------------ ------------
   Total revenues   $   2,569   $    2,569     $   2,231    $   2,231
                  ============ ============  ============ ============
PROFIT
MANUFACTURING:
 Bell               $      59   $       59     $      69    $      69
 Cessna                    82           82            31           31
 Fastening Systems          1            1            10           10
 Industrial                44           44            23           23
                  ------------ ------------  ------------ ------------
                          186          186           133          133
FINANCE                    28           28            24           24
                  ------------ ------------  ------------ ------------
Segment profit            214          214           157          157
Special charges(b)        (18)           -           (42)           -
Corporate expenses
 and other, net           (30)         (30)          (19)         (19)
Interest expense,
 net                      (23)         (23)          (26)         (26)
                  ------------ ------------  ------------ ------------
Income before
 income taxes             143          161            70          112
Income taxes              (40)         (44)          (23)         (31)
                  ------------ ------------  ------------ ------------
Net income          $     103   $      117     $      47    $      81
                  ============ ============  ============ ============
Earnings per
 share:(f)
     Net income     $    0.73   $     0.83     $    0.34    $    0.59
                  ============ ============  ============ ============
Average diluted
 shares
 outstanding      140,618,000  140,618,000   136,828,000  136,828,000
                  ============ ============  ============ ============


                             TEXTRON INC.
                Revenues and Income by Business Segment
       Nine Months Ended October 2, 2004 and September 27, 2003
            (Dollars in millions except per share amounts)
                              (Unaudited)

                       October 2, 2004          September 27, 2003
                  -------------------------  -------------------------
                      GAAP      As Adjusted      GAAP      As Adjusted
                                    (a)                        (a)
                  ------------ ------------  ------------ ------------
REVENUES
MANUFACTURING:
 Bell               $   1,664    $   1,664     $   1,673    $   1,673
 Cessna                 1,617        1,617         1,679        1,679
 Fastening Systems      1,445        1,445         1,280        1,280
 Industrial             2,344        2,344         2,110        2,110
                  ------------ ------------  ------------ ------------
                        7,070        7,070         6,742        6,742
FINANCE                   400          400           418          418
                  ------------ ------------  ------------ ------------
   Total revenues   $   7,470    $   7,470     $   7,160    $   7,160
                  ============ ============  ============ ============
PROFIT
MANUFACTURING:
 Bell               $     182    $     182     $     165    $     165
 Cessna                   148          148           156          156
 Fastening Systems         45           45            49           49
 Industrial               152          152            97           97
                  ------------ ------------  ------------ ------------
                          527          527           467          467
FINANCE                    95           95            70           70
                  ------------ ------------  ------------ ------------
Segment profit            622          622           537          537
Special charges(b)       (103)           -           (94)           -
Gain on sale of
 businesses(c)              7            -            15            -
Corporate expenses
 and other, net          (101)        (101)          (81)         (81)
Interest expense,
 net                      (73)         (73)          (72)         (72)
                  ------------ ------------  ------------ ------------
Income from
 continuing
 operations
 before income
 taxes and
 distributions
 on preferred
 securities of
 subsidiary
 trusts                   352          448           305          384
Income taxes             (112)        (130)          (94)        (115)
Distributions on
 preferred
 securities
 of manufacturing
 subsidiary
 trust,
 net of income
 taxes(d)                   -            -           (13)         (13)
                  ------------ ------------  ------------    ---------
Income from
 continuing
 operations               240          318           198          256
(Loss) income from
 discontinued
 operations, net
 of income taxes(e)         -            -           (22)           2
                  ------------ ------------  ------------ ------------
Net income          $     240    $     318     $     176    $     258
                  ============ ============  ============ ============
Earnings per
 share:(f)
 Income from
  continuing
  operations        $    1.71    $    2.26     $    1.45    $    1.87
 (Loss) income
  from
  discontinued
  operations, net
  of income
  taxes(e)                  -            -         (0.16)        0.02
                  ------------ ------------  ------------ ------------
     Net income     $    1.71    $    2.26     $    1.29    $    1.89
                  ============ ============  ============ ============
Average diluted
 shares
 outstanding      140,378,000  140,378,000   136,761,000  136,761,000
                  ============ ============  ============ ============


                             TEXTRON INC.
                Revenues and Income by Business Segment
  Three and Nine Months Ended October 2, 2004 and September 27, 2003
            (Dollars in millions except per share amounts)
                              (Unaudited)

(a) The "As Adjusted" column excludes items recorded in special
    charges and gain on sale of businesses. Textron presents its
    results "as adjusted", before restructuring and other special
    items, because such items are outside normal business operations,
    as well as difficult to forecast accurately for specific periods.
    Such items are either isolated or temporary in nature; therefore,
    it is helpful to understand results without these items,
    especially when comparing results for previous periods or
    forecasting performance in future periods. In addition, Textron
    uses "as adjusted" results to measure operating performance for
    management compensation purposes. Any analysis of results before
    restructuring costs and other special items should be used only in
    conjunction with data presented in accordance with Generally
    Accepted Accounting Principles (GAAP).

    A reconciliation of net income as reported under GAAP to net
    income, as adjusted is as follows:

                                      Third Quarter      Nine Months
                                   ----------------- -----------------
                                     2004     2003     2004     2003
                                   -------- -------- -------- --------
   GAAP net income                  $  103   $   47    $ 240     $176
   Adjustments:
     Special charges                    18       42      103       94
     Gain on sale of businesses          -        -       (7)     (15)
     Tax impact of excluded items       (4)      (8)     (18)     (21)
     Special charges included in
      discontinued operations,
      net of income taxes                -        -        -       24
                                   -------- -------- -------- --------
   Net income, as adjusted          $  117   $   81    $ 318     $258
                                   ======== ======== ======== ========

(b) Special charges include 1) restructuring expenses and fixed asset
    impairment charges associated with reducing overhead and closing,
    consolidating and downsizing manufacturing facilities, headcount
    reductions, consolidating operations and exiting non-core product
    lines, 2) a $12 million pretax gain in 2004 on the sale of the
    remaining shares of Collins & Aikman common stock and 3) $15
    million in unamortized issuance costs written off in 2003 upon the
    redemption of preferred securities described in note (d).

(c) During the second quarter of 2004, Textron recorded a gain on the
    sale of its interest in two Brazilian-based joint ventures to its
    joint venture partner, Metegal Telecom Participacoes Ltda. In the
    first quarter of 2003, Textron recorded a gain on the sale of its
    interest in an Italian automotive joint venture to Collins &
    Aikman.

(d) Textron Inc. redeemed the $500 million Textron Capital I trust
    preferred securities in July 2003. The redemption was mandatory
    following Textron's call of its 7.92% Junior Subordinated
    Deferrable Interest Debentures, which were held by the trust and
    also redeemed in July 2003.

(e) During the third quarter of 2003, Textron consummated the sale of
    its remaining OmniQuip business to JLG Industries, Inc. and has
    reclassified the financial results of the OmniQuip division, net
    of income taxes, to discontinued operations. During the fourth
    quarter of 2003, Textron sold its Small Business Direct portfolio
    to MBNA America Bank, N.A. and has reclassified the financial
    results, net of income taxes, to discontinued operations.

(f) Reconciliation of GAAP EPS to EPS, as adjusted:

                                     Third Quarter      Nine Months
                                  ----------------- ------------------
                                     2004     2003     2004      2003
                                  -------- -------- -------- ---------
   GAAP EPS                        $ 0.73   $ 0.34   $ 1.71   $  1.29
   Adjustments:
     Special charges                 0.10     0.25     0.56      0.51
     Gain on sale of businesses         -        -    (0.01)    (0.09)
     Special charges included in
      discontinued operations,
      net of income taxes               -        -        -      0.18
                                  -------- -------- -------- ---------
   EPS, as adjusted                $ 0.83   $ 0.59   $ 2.26   $  1.89
                                  ======== ======== ======== =========


                             TEXTRON INC.
                 Condensed Consolidated Balance Sheets
                             (In millions)
                              (Unaudited)

                                                October 2,  January 3,
                                                   2004        2004
                                                ----------  ----------
Assets
Cash and cash equivalents                            $687        $486
Accounts receivable, net                            1,143       1,135
Inventories                                         1,663       1,439
Other current assets                                  429         532
Net property                                        1,878       1,925
Other assets                                        3,208       3,240
Textron Finance assets                              6,544       6,333
                                                ----------  ----------
      Total Assets                                $15,552     $15,090
                                                ==========  ==========

Liabilities and Shareholders' Equity
Current portion of long-term debt and short-term
 debt                                                $395        $316
Other current liabilities                           2,338       1,940
Other liabilities                                   2,161       2,109
Long-term debt                                      1,342       1,711
Textron Finance liabilities                         5,545       5,324
                                                ----------  ----------
      Total Liabilities                            11,781      11,400

Total Shareholders' Equity                          3,771       3,690
                                                ----------  ----------
      Total Liabilities and Shareholders' Equity  $15,552     $15,090
                                                ==========  ==========


                             TEXTRON INC.
         Reconciliation of GAAP Measures to Non-GAAP Measures
            (Dollars in millions except per share amounts)

                                 Fourth Quarter           Full Year
                           -------------------------------------------
                                  2004     2003        2004      2003
                                Outlook   Actual     Outlook    Actual
----------------------------------------------------------------------

GAAP EPS                    $0.81 - 0.91  $ 0.60  $2.52 - 2.62 $ 1.89
Adjustments:
 Special charges                0.18        0.31      0.74       0.82
 Gain on sale of businesses       -           -      (0.01)     (0.09)
 Special charges included
  in discontinued
  operations, net of
  income taxes                    -           -         -        0.17
----------------------------------------------------------------------

EPS as adjusted             $0.99 - 1.09  $ 0.91  $3.25 - 3.35 $ 2.79
----------------------------------------------------------------------

                                        September
                        Third Quarter  Year-to-Date       Full Year
                       -----------------------------------------------
                         2004   2003   2004   2003      2004     2003
                        Actual Actual Actual Actual   Outlook   Actual
----------------------------------------------------------------------

Cash flow from
 operations - GAAP     $  360 $  145 $  805 $  300 $ 805 - 905 $  681
 Capital expenditures
  and lease additions     (82)   (80)  (228)  (198)    (330)     (310)
 Proceeds on sale of
  fixed assets             10     12     37     41      45         55
----------------------------------------------------------------------

Free cash flow after
 restructuring            288     77    614    143   520 - 620    426

After-tax cash used for
 restructuring
 activities                21     15     55     40      80         57
----------------------------------------------------------------------

Free cash flow before
 restructuring
 - as adjusted         $  309 $   92 $  669 $  183 $ 600 - 700 $  483
----------------------------------------------------------------------

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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