Textron Reports Second Quarter 2020 Results

TEXTRON INC. Revenues by Segment and Reconciliation of Segment Profit to Net Income (Loss) (Dollars in millions, except per share amounts) (Unaudited)
		Three Months Ended								Six Months Ended
		July 4, 2020				June 29, 2019				July 4, 2020				June 29, 2019
REVENUES
MANUFACTURING:
	Textron Aviation		$	747			$	1,123			$	1,619			$	2,257
	Bell			822				771				1,645				1,510
	Textron Systems			326				308				654				615
	Industrial			562				1,009				1,302				1,921
				2,457				3,211				5,220				6,303

FINANCE				15				16				29				33
	Total Revenues		$	2,472			$	3,227			$	5,249			$	6,336

SEGMENT PROFIT
MANUFACTURING:
	Textron Aviation		$	(66	)		$	105			$	(63	)		$	211
	Bell			118				103				233				207
	Textron Systems			37				49				63				77
	Industrial			(11	)			76				(2	)			126
				78				333				231				621

FINANCE				4				6				7				12
	Segment Profit			82				339				238				633

Corporate expenses and other, net				(30	)			(24	)			(44	)			(71	)
Interest expense, net for Manufacturing group				(37	)			(36	)			(71	)			(71	)
Special charges (a)				(78	)			-				(117	)			-
Inventory charge (b)				(55	)			-				(55	)			-
Income (loss) before income taxes				(118	)			279				(49	)			491
Income tax (expense) benefit				26				(62	)			7				(95	)
Net Income (Loss)			$	(92	)		$	217			$	(42	)		$	396

Earnings (Loss) Per Share			$	(0.40	)		$	0.93			$	(0.18	)		$	1.69

Diluted average shares outstanding (c)				228,247,000				233,545,000				228,279,000				234,993,000

Net Income (Loss) and Diluted Earnings (Loss) Per Share (EPS) GAAP to Non-GAAP Reconciliation:

		Three Months Ended July 4, 2020						Six Months Ended July 4, 2020
					Diluted EPS						Diluted EPS
Net Income (Loss) - GAAP		$	(92	)	$	(0.40	)	$	(42	)	$	(0.18	)
Add: Special charges, net of taxes			67			0.29			97			0.42
	Inventory charge, net of taxes		55			0.24			55			0.24
Adjusted Net Income - Non-GAAP (d)		$	30		$	0.13		$	110		$	0.48

(a)

In June 2020, we initiated a restructuring plan to reduce operating expenses through headcount reductions, facility consolidations and other actions in response to the economic challenges and uncertainty resulting from the COVID-19 pandemic. The restructuring plan primarily impacts the TRU Simulation + Training (TRU) business within the Textron Systems segment, the Textron Aviation segment and the Textron Specialized Vehicles business within the Industrial segment. In connection with this plan, special charges includes severance and related costs of $51 million, asset impairment charges of $15 million and contract termination and other facility closing costs of $12 million for both the three and six months ended July 4, 2020. Special charges for the six months ended July 4, 2020 also includes the impairment of indefinite-lived trade name intangible assets totaling $32 million in the Textron Aviation segment and $7 million in the Industrial segment resulting from changes in valuation assumptions related to the economic and business disruptions caused by the pandemic.

(b)

In connection with the restructuring plan initiated in the second quarter of 2020, we ceased manufacturing at TRU's facility in Montreal, Canada, resulting in the production suspension of our commercial air transport simulators. As a result of this action and current market conditions, we recorded a $55 million charge to write-down the related inventory to its net realizable value.

(c)

For the three and six months ended July 4, 2020, the diluted average shares used to calculated EPS on a GAAP basis excludes potential common shares (stock options and restricted stock units), due to their antidilutive effect resulting from the net loss. For the three and six months ended June 29, 2019, fully dilutive shares were used to calculate EPS.

(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)


		July 4, 2020		January 4, 2020
Assets
Cash and equivalents		$	2,176	$	1,181
Accounts receivable, net			764		921
Inventories			4,262		4,069
Other current assets			863		894
Net property, plant and equipment			2,446		2,527
Goodwill			2,153		2,150
Other assets			1,857		2,312
Finance group assets			950		964
	Total Assets	$	15,471	$	15,018


Liabilities and Shareholders' Equity
Short-term debt and current portion of long-term debt		$	1,107	$	561
Accounts payable			982		1,378
Other current liabilities			1,983		1,907
Other liabilities			2,128		2,288
Long-term debt			2,955		2,563
Finance group liabilities			789		803
	Total Liabilities		9,944		9,500

Total Shareholders' Equity			5,527		5,518
	Total Liabilities and Shareholders' Equity	$	15,471	$	15,018

TEXTRON INC.
MANUFACTURING GROUP
Condensed Schedule of Cash Flows
(In millions)
(Unaudited)

	Three Months Ended						Six Months Ended
	July 4,			June 29,			July 4,			June 29,
		2020			2019			2020			2019
Cash Flows from Operating Activities:
Net income (loss)	$	(95	)	$	212		$	(47	)	$	387
Depreciation and amortization		97			99			186			199
Deferred income taxes and income taxes receivable/payable		(49	)		37			(40	)		43
Pension, net		(3	)		(15	)		(8	)		(29	)
Changes in assets and liabilities:
Accounts receivable, net		110			69			157			36
Inventories		124			(291	)		(244	)		(532	)
Accounts payable		(351	)		85			(400	)		132
Dividends received from Finance group		-			-			-			50
Other, net		412			(33	)		248			(319	)
Net cash from operating activities		245			163			(148	)		(33	)
Cash Flows from Investing Activities:
Capital expenditures		(46	)		(76	)		(96	)		(135	)
Net proceeds from corporate-owned life insurance policies		15			2			17			4
Other investing activities, net		2			3			(6	)		4
Net cash from investing activities		(29	)		(71	)		(85	)		(127	)
Cash Flows from Financing Activities:
Increase (decrease) in short-term debt		(104	)		(100	)		499			-
Proceeds from long-term debt		(1	)		297			642			297
Net borrowings against corporate-owned insurance policies		(15	)		-			362			-
Principal payments on long-term debt and nonrecourse debt		(187	)		(1	)		(194	)		(1	)
Purchases of Textron common stock		-			(159	)		(54	)		(361	)
Dividends paid		(4	)		(4	)		(9	)		(9	)
Other financing activities, net		1			10			(8	)		19
Net cash from financing activities		(310	)		43			1,238			(55	)
Total cash flows from continuing operations		(94	)		135			1,005			(215	)
Total cash flows from discontinued operations		1			(1	)		-			(1	)
Effect of exchange rate changes on cash and equivalents		6			(5	)		(10	)		4
Net Change in Cash and Equivalents		(87	)		129			995			(212	)
Cash and Equivalents at Beginning of Period		2,263			646			1,181			987
Cash and Equivalents at End of Period	$	2,176		$	775		$	2,176		$	775

Manufacturing Cash Flow GAAP to Non-GAAP Reconciliation:
		Three Months Ended						Six Months Ended
		July 4,			June 29,			July 4,			June 29,
			2020			2019			2020			2019
Net Cash from Operating Activities - GAAP		$	245		$	163		$	(148	)	$	(33	)
Less:	Capital expenditures		(46	)		(76	)		(96	)		(135	)
	Dividends received from TFC		-			-			-			(50	)
Plus:	Total pension contributions		12			12			24			25
	Proceeds from the sale of property, plant and equipment		4			3			5			4
Manufacturing Cash Flow Before Pension Contributions - Non-GAAP (a)		$	215		$	102		$	(215	)	$	(189	)

(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						Six Months Ended
	July 4,			June 29,			July 4,			June 29,
		2020			2019			2020			2019
Cash Flows from Operating Activities:
Net income (loss)	$	(92	)	$	217		$	(42	)	$	396
Depreciation and amortization		98			100			188			202
Deferred income taxes and income taxes receivable/payable		(48	)		38			(38	)		46
Pension, net		(3	)		(15	)		(8	)		(29	)
Changes in assets and liabilities:
Accounts receivable, net		110			69			157			36
Inventories		124			(290	)		(244	)		(505	)
Accounts payable		(351	)		85			(400	)		132
Captive finance receivables, net		(14	)		(18	)		(14	)		(19	)
Other, net		418			(30	)		249			(319	)
Net cash from operating activities		242			156			(152	)		(60	)
Cash Flows from Investing Activities:
Capital expenditures		(46	)		(76	)		(96	)		(135	)
Finance receivables repaid		7			8			20			20
Net proceeds from corporate-owned life insurance policies		15			2			17			4
Other investing activities, net		3			4			(5	)		7
Net cash from investing activities		(21	)		(62	)		(64	)		(104	)
Cash Flows from Financing Activities:
Increase (decrease) in short-term debt		(104	)		(100	)		499			-
Proceeds from long-term debt		(1	)		297			642			297
Net borrowings against corporate-owned insurance policies		(15	)		-			362			-
Principal payments on long-term debt and nonrecourse debt		(205	)		(16	)		(229	)		(35	)
Purchases of Textron common stock		-			(159	)		(54	)		(361	)
Dividends paid		(4	)		(4	)		(9	)		(9	)
Other financing activities, net		1			9			4			19
Net cash from financing activities		(328	)		27			1,215			(89	)
Total cash flows from continuing operations		(107	)		121			999			(253	)
Total cash flows from discontinued operations		1			(1	)		-			(1	)
Effect of exchange rate changes on cash and equivalents		6			(5	)		(10	)		4
Net Change in Cash and Equivalents		(100	)		115			989			(250	)
Cash and Equivalents at Beginning of Period		2,446			742			1,357			1,107
Cash and Equivalents at End of Period	$	2,346		$	857		$	2,346		$	857

TEXTRON INC.

Non-GAAP Financial Measures

(Dollars in millions, except per share amounts)

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