Textron Reports Fourth Quarter 2019 Results; Announces 2020 Financial Outlook

TEXTRON INC.
Revenues by Segment and Reconciliation of Segment Profit to Net Income

(Dollars in millions, except per share amounts)
(Unaudited)
Three Months Ended Twelve Months Ended
January 4,
2020
December 29,
2018
January 4,
2020
December 29,
2018
REVENUES
MANUFACTURING:
Textron Aviation

$

 

1,729

 

$

 

1,552

 

$

 

5,187

 

$

 

4,971

 

Bell

 

961

 

 

827

 

 

3,254

 

 

3,180

 

Textron Systems

 

399

 

 

345

 

 

1,325

 

 

1,464

 

Industrial

 

927

 

 

1,008

 

 

3,798

 

 

4,291

 

 

4,016

 

 

3,732

 

 

13,564

 

 

13,906

 

 
FINANCE

 

19

 

 

18

 

 

66

 

 

66

 

Total revenues

$

 

4,035

 

$

 

3,750

 

$

 

13,630

 

$

 

13,972

 

 
SEGMENT PROFIT
MANUFACTURING:
Textron Aviation

$

 

134

 

$

 

170

 

$

 

449

 

$

 

445

 

Bell

 

118

 

 

108

 

 

435

 

 

425

 

Textron Systems

 

33

 

 

37

 

 

141

 

 

156

 

Industrial

 

44

 

 

73

 

 

217

 

 

218

 

 

329

 

 

388

 

 

1,242

 

 

1,244

 

 
FINANCE

 

11

 

 

9

 

 

28

 

 

23

 

Segment Profit

 

340

 

 

397

 

 

1,270

 

 

1,267

 

 
Corporate expenses and other, net

 

(22

)

 

(12

)

 

(110

)

 

(119

)

Interest expense, net for Manufacturing group

 

(36

)

 

(34

)

 

(146

)

 

(135

)

Special charges (a)

 

(72

)

 

(73

)

 

(72

)

 

(73

)

Gain on business disposition (b)

 

-

 

 

-

 

 

-

 

 

444

 

Income before income taxes

 

210

 

 

278

 

 

942

 

 

1,384

 

Income tax expense (c)

 

(11

)

 

(32

)

 

(127

)

 

(162

)

Net Income

$

 

199

 

$

 

246

 

$

 

815

 

$

 

1,222

 

 
Earnings Per Share

$

 

0.87

 

$

 

1.02

 

$

 

3.50

 

$

 

4.83

 

 
Diluted average shares outstanding

 

229,790,000

 

 

242,569,000

 

 

232,709,000

 

 

253,237,000

 

 
Net Income and Diluted Earnings Per Share GAAP to Non-GAAP Reconciliation:
 
Three Months Ended Twelve Months Ended
January 4,
2020
December 29,
2018
January 4,
2020
December 29,
2018
Net income - GAAP

$

 

199

 

$

 

246

 

$

 

815

 

$

 

1,222

 

Special charges, net of income taxes of $17 million for each period (a)

 

55

 

 

56

 

 

55

 

 

56

 

Gain on business disposition, net of income tax expense (benefit) of  
$(9) million and $25 million, respectively (b)

 

-

 

 

(9

)

 

-

 

 

(419

)

Income tax benefit resulting from the Tax Cuts and Jobs Act (c)

 

-

 

 

(14

)

 

-

 

 

(14

)

Adjusted net income - Non-GAAP (d)

$

 

254

 

$

 

279

 

$

 

870

 

$

 

845

 

 
Earnings per share:
Net income - GAAP

$

 

0.87

 

$

 

1.02

 

$

 

3.50

 

$

 

4.83

 

Special charges, net of income taxes

 

0.24

 

 

0.23

 

 

0.24

 

 

0.22

 

Gain on business disposition, net of income taxes

 

-

 

 

(0.04

)

 

-

 

 

(1.65

)

Income tax benefit resulting from the Tax Cuts and Jobs Act

 

-

 

 

(0.06

)

 

-

 

 

(0.06

)

Net income - Non-GAAP (d)

$

 

1.11

 

$

 

1.15

 

$

 

3.74

 

$

 

3.34

 

 
 
 
(a) In the fourth quarter of 2019, we recorded special charges of $72 million under a restructuring plan, principally impacting the Industrial and Textron Aviation segments.  Special charges of $73 million were recorded in the fourth quarter of 2018 under a restructuring plan for the Textron Specialized Vehicles businesses within our Industrial segment.
(b) On July 2, 2018, Textron completed the sale of the Tools & Test Equipment product line which resulted in an after tax gain of $419 million.
(c) In the fourth quarter of 2018, we completed our analysis of the tax reform legislation enacted in 2017, known as the Tax Cuts and Jobs Act, and recorded a $14 million income tax benefit.
(d) Adjusted net income and adjusted diluted earnings per share are non-GAAP financial measures as defined in "Non-GAAP Financial Measures" attached to this release.
 
 
Textron Inc.
Condensed Consolidated Balance Sheets
(In millions)
(Unaudited)
   
   
January 4,
2020

December 29,

2018

Assets  
Cash and equivalents

$

 

1,181

 

$

 

987

Accounts receivable, net

921

 

1,024

Inventories

4,069

 

3,818

Other current assets

894

 

785

Net property, plant and equipment

2,527

 

2,615

Goodwill

2,150

 

2,218

Other assets

2,312

 

1,800

Finance group assets

964

 

1,017

Total Assets

$

 

15,018

 

$

 

14,264

   
   
Liabilities and Shareholders' Equity  
Current portion of long-term debt

$

 

561

 

$

 

258

Current liabilities

3,285

 

3,248

Other liabilities

2,288

 

1,932

Long-term debt

2,563

 

2,808

Finance group liabilities

803

 

826

Total Liabilities

9,500

 

9,072

   
Total Shareholders' Equity

5,518

 

5,192

Total Liabilities and Shareholders' Equity

$

 

15,018

 

$

 

14,264

 
 

TEXTRON INC.

MANUFACTURING GROUP

Condensed Schedule of Cash Flows

(In millions)

(Unaudited)

 
 
Three Months Ended Twelve Months Ended
January 4, December 29, January 4, December 29,

2020

2018

2020

2018

Cash flows from operating activities:
Income from continuing operations

$ 190

$ 239

$ 793

$ 1,198

Depreciation and amortization

113

113

410

429

Changes in working capital

460

1

(380)

(203)

Changes in other assets and liabilities and non-cash items

(8)

40

87

97

Gain on business disposition

-

-

-

(444)

Dividends received from TFC

-

-

50

50

Net cash from operating activities of continuing operations

755

393

960

1,127

Cash flows from investing activities:
Capital expenditures

(123)

(136)

(339)

(369)

Net proceeds from business disposition

-

-

-

807

Net cash (used)/proceeds from corporate-owned life insurance policies

(2)

12

2

110

Proceeds from the sale of property, plant and equipment

3

2

9

14

Net cash used in acquisitions

(2)

(20)

(2)

(23)

Other investing activities, net

1

-

1

-

Net cash from investing activities

(123)

(142)

(329)

539

Cash flows from financing activities:
Decrease in short-term debt

(118)

-

-

-

Net proceeds from long-term debt

4

-

301

-

Principal payments on long-term debt

(252)

(1)

(252)

(5)

Purchases of Textron common stock

(33)

(400)

(503)

(1,783)

Other financing activities, net

7

(3)

15

50

Net cash from financing activities

(392)

(404)

(439)

(1,738)

Total cash flows from continuing operations

240

(153)

192

(72)

Total cash flows from discontinued operations

-

(1)

(2)

(2)

Effect of exchange rate changes on cash and equivalents

10

(9)

4

(18)

Net change in cash and equivalents

250

(163)

194

(92)

Cash and equivalents at beginning of period

931

1,150

987

1,079

Cash and equivalents at end of period

$ 1,181

$ 987

$ 1,181

$ 987

 
Manufacturing Cash Flow GAAP to Non-GAAP Reconciliation:
 
Net cash from operating activities of continuing operations - GAAP

$ 755

$ 393

$ 960

$ 1,127

Less: Capital expenditures

(123)

(136)

(339)

(369)

Dividends received from TFC

-

-

(50)

(50)

Plus: Total pension contributions

15

15

51

52

Taxes paid on gain on business disposition

-

10

11

10

Proceeds from the sale of property, plant and equipment

3

2

9

14

Manufacturing cash flow before pension contributions - Non-GAAP (a)

$ 650

$ 284

$ 642

$ 784

 
(a)

Manufacturing cash flow before pension contributions is a non-GAAP financial measure as defined in "Non-GAAP Financial Measures" attached to this release.

TEXTRON INC.
Condensed Consolidated Schedule of Cash Flows
(In millions)
(Unaudited)
 
Three Months Ended Twelve Months Ended
January 4, December 29, January 4, December 29,

2020

2018

2020

2018

Cash flows from operating activities:
Income from continuing operations

$

199

 

$

246

 

$

815

 

$

1,222

 

Depreciation and amortization

 

114

 

 

115

 

 

416

 

 

437

 

Changes in working capital

 

490

 

 

12

 

 

(297

)

 

(202

)

Changes in other assets and liabilities and non-cash items

 

(12

)

 

39

 

 

82

 

 

96

 

Gain on business disposition

 

-

 

 

-

 

 

-

 

 

(444

)

Net cash from operating activities of continuing operations

 

791

 

 

412

 

 

1,016

 

 

1,109

 

Cash flows from investing activities:
Capital expenditures

 

(123

)

 

(136

)

 

(339

)

 

(369

)

Net proceeds from business disposition

 

-

 

 

-

 

 

-

 

 

807

 

Net cash (used)/proceeds from corporate-owned life insurance policies

 

(2

)

 

12

 

 

2

 

 

110

 

Finance receivables repaid

 

28

 

 

2

 

 

48

 

 

27

 

Net cash used in acquisitions

 

(2

)

 

(20

)

 

(2

)

 

(23

)

Other investing activities, net

 

16

 

 

28

 

 

25

 

 

68

 

Net cash from investing activities

 

(83

)

 

(114

)

 

(266

)

 

620

 

Cash flows from financing activities:
Decrease in short-term debt

 

(118

)

 

-

 

 

-

 

 

-

 

Net proceeds from long-term debt

 

4

 

 

-

 

 

301

 

 

-

 

Principal payments on long-term debt and nonrecourse debt

 

(261

)

 

(71

)

 

(303

)

 

(131

)

Purchases of Textron common stock

 

(33

)

 

(400

)

 

(503

)

 

(1,783

)

Other financing activities, net

 

(6

)

 

(3

)

 

3

 

 

50

 

Net cash from financing activities

 

(414

)

 

(474

)

 

(502

)

 

(1,864

)

Total cash flows from continuing operations

 

294

 

 

(176

)

 

248

 

 

(135

)

Total cash flows from discontinued operations

 

-

 

 

(1

)

 

(2

)

 

(2

)

Effect of exchange rate changes on cash and equivalents

 

10

 

 

(9

)

 

4

 

 

(18

)

Net change in cash and equivalents

 

304

 

 

(186

)

 

250

 

 

(155

)

Cash and equivalents at beginning of period

 

1,053

 

 

1,293

 

 

1,107

 

 

1,262

 

Cash and equivalents at end of period

$

1,357

 

$

1,107

 

$

1,357

 

$

1,107

 

 
 
TEXTRON INC.
Non-GAAP Financial Measures
(Dollars in millions, except per share amounts)
 
 
We supplement the reporting of our financial information determined under U.S. generally accepted accounting principles (GAAP) with certain non-GAAP financial measures. These non-GAAP financial measures exclude certain significant items that may not be indicative of, or are unrelated to, results from our ongoing business operations. We believe that these non-GAAP measures may be useful for period-over-period comparisons of underlying business trends and our ongoing business performance, however, they should be used in conjunction with GAAP measures.  Our non-GAAP measures should not be considered in isolation or as a substitute for the related GAAP measures, and other companies may define similarly named measures differently. We encourage investors to review our financial statements and publicly-filed reports in the entirety and not to rely on any single financial measure.  We utilize the following definition for the non-GAAP financial measure included in this release:
 
Adjusted net income and adjusted diluted earnings per share
Adjusted net income and adjusted diluted earnings per share both exclude Special charges, net of taxes, Gain on business disposition, net of taxes, and the income tax benefit resulting from the Tax Cuts and Jobs Act (the "Tax Act"). We consider items recorded in Special charges such as enterprise-wide restructuring and acquisition-related restructuring, integration and transaction costs, to be of a non-recurring nature that is not indicative of ongoing operations. The Gain on business disposition is not considered indicative of ongoing operations as it is a significant one-time transaction related to the sale of our Tools and Test product line. In addition, the impact from the Tax Act is not considered to be indicative of ongoing operations since it represents a one-time adjustment related to a significant tax reform of a non-recurring nature.
 
Manufacturing cash flow before pension contributions
Manufacturing cash flow before pension contributions adjusts net cash from operating activities (GAAP) for the following: 
 
  • Deducts capital expenditures and includes proceeds from the sale of property, plant and equipment to arrive at the net capital investment required to support ongoing manufacturing operations;
  • Excludes dividends received from Textron Financial Corporation (TFC) and capital contributions to TFC provided under the Support Agreement and debt agreements as these cash flows are not representative of manufacturing operations;
  • Adds back pension contributions as we consider our pension obligations to be debt-like liabilities. Additionally, these contributions can fluctuate significantly from period to period and we believe that they are not representative of cash used by our manufacturing operations during the period.
  • Excludes taxes paid related to the gain realized in 2018 on the Tools and Test business disposition. We have made this adjustment to the non-GAAP measure because we believe this use of cash is not representative of cash used by our manufacturing operations.
While we believe this measure provides a focus on cash generated from manufacturing operations, before pension contributions, and may be used as an additional relevant measure of liquidity, it does not necessarily provide the amount available for discretionary expenditures since we have certain non-discretionary obligations that are not deducted from the measure.  
   
Net Income and Diluted Earnings Per Share (EPS) GAAP to Non-GAAP Reconciliation:
   
Three Months Ended Twelve Months Ended
January 4,
2020
December 29,
2018
January 4,
2020
December 29,
2018
Net Income - GAAP

$

199

 

$

246

 

$

815

 

 

$

1,222

 

Special charges, net of income taxes of $17 million for each period

 

55

 

 

56

 

 

55

 

 

 

56

 

Gain on business disposition, net of income tax expense (benefit)  
of $(9) million and $25 million, respectively

 

-

 

 

(9

)

 

-

 

 

 

(419

)

Income tax benefit resulting from the Tax Cuts and Jobs Act

 

-

 

 

(14

)

 

-

 

 

 

(14

)

Adjusted Net Income - Non-GAAP

$

254

 

$

279

 

$

870

 

 

$

845

 

   
Earnings per share:  
Net Income - GAAP

$

0.87

 

$

1.02

 

$

3.50

 

 

$

4.83

 

Special charges, net of income taxes

 

0.24

 

 

0.23

 

 

0.24

 

 

 

0.22

 

Gain on business disposition, net of income taxes

 

-

 

 

(0.04

)

 

-

 

 

 

(1.65

)

Income tax benefit resulting from the Tax Cuts and Jobs Act

 

-

 

 

(0.06

)

 

-

 

 

 

(0.06

)

Adjusted Net Income - Non-GAAP

$

1.11

 

$

1.15

 

$

3.74

 

 

$

3.34

 

   
   
   
   
Manufacturing Cash Flow Before Pension Contributions GAAP to Non-GAAP Reconciliation and 2020 Outlook:
   
Three Months Ended Twelve Months Ended
January 4,
2020
December 29,
2018
January 4,
2020
December 29,
2018
Net cash from operating activities of continuing operations - GAAP

$

755

 

$

393

 

$

960

 

 

$

1,127

 

Less: Capital expenditures

 

(123

)

 

(136

)

 

(339

)

 

 

(369

)

Dividends received from TFC

 

-

 

 

-

 

 

(50

)

 

 

(50

)

Plus: Total pension contributions

 

15

 

 

15

 

 

51

 

 

 

52

 

Taxes paid on gain on business disposition

 

-

 

 

10

 

 

11

 

 

 

10

 

Proceeds from the sale of property, plant and equipment

 

3

 

 

2

 

 

9

 

 

 

14

 

Manufacturing cash flow before pension contributions - Non-GAAP

$

650

 

$

284

 

$

642

 

 

$

784

 

   
   
   
   
2020 Outlook
Net cash from operating activities of continuing operations - GAAP

$

1,010

 

-

$

1,110

 

Less: Capital expenditures

(360)

Plus: Total pension contributions

50

Manufacturing cash flow before pension contributions - Non-GAAP

$

700

 

-

$

800

 


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