Textron Reports Strong Fourth Quarter Manufacturing Operating Results and Cash Flow

  Byline: Benzinga Staff    PROVIDENCE, R.I.--(BUSINESS WIRE)--    Textron Inc. ( NYSE:TXT ) today reported a fourth quarter 2011 loss from continuing operations of $0.06 per share, compared to income of $0.20 per share in the fourth quarter of 2010. Last year's fourth quarter result included $0.13 per share in special charges.

   This year's fourth quarter result included $0.55 in charges, consisting of a $0.41 per share mark-to-market adjustment at the Finance Segment to reflect the transfer to the held for sale classification ofthe remainder of the Golf Mortgage portfolio, a $0.14 per share lossassociated with convertible note repurchases, $0.13 per share in theTextron Systems segment for intangible asset impairment and severance    costs and a $0.13 per share gain related to the payment of a note receivable from the 2008 sale of the company's Fluid & Power business.    Excluding the items described above, fourth quarter 2011 adjusted earnings per share from continuing operations were $0.49 per share and    full-year 2011 earnings per share from continuing operations were $1.31 per share.    Total revenues in the quarter were $3.3 billion, up 4.1% from the fourth quarter of 2010, led by manufacturing revenues, which were up 4.6%.    Full-year manufacturing cash flow before pension contributions was$1.0 billion compared to $759 million last year. The company contributed $421 million to its pension plans during the fourth quarter, bringing full-year contributions to $642 million. Textron's consolidatednet debt ended the year at $3.5 billion, down $1.5 billion from the end of last year.    At the end of the fourth quarter, as part of its continuing strategy to orderly liquidate its non-captive finance business, the companytransferred the remainder of its Golf Mortgage portfolio to held forsale status and recorded a pretax charge of $186 million to reflect the current fair value of these assets. Finance receivables ended theyear at $2.9 billion, of which $950 million are non-captive.    "Fourth quarter operating results reflected outstanding performance    at Bell, continued improvement at Cessna, good performance in our Industrial segment, and actions we're taking to strengthen our competitive position at Systems in a difficult defense environment," said Textron Chairman and CEO Scott C. Donnelly.    Donnelly continued, "We also liquidated another $386 million from our finance receivables during the quarter. With the mark-to-market adjustment, we've reached a notable milestone with our liquidation strategy, ending the year with less than $1 billion in non-captive finance receivables."    Convertible Notes    During the fourth quarter, the company repurchased approximately $384 million in face value or 64% of its outstanding convertible notesat an overall cash cost of about $580 million. This included $225 million in face value of notes purchased pursuant to its recent tender offer and an additional $159 million of notes purchased subsequent tothe tender.    Outlook    Textron is forecasting 2012 revenues of approximately $12.5 billion, up about 11%. Earnings per share from continuing operations are expected to be in the range of $1.80 to $2.00. Cash flow from continuing    operations of the manufacturing group before pension contributions is estimated to be between $700 and $750 million with planned pensioncontributions of about $200 million.    Donnelly continued, "In 2012, we see relatively flat revenues at Textron Systems, modest growth at Industrial, and double digit growth at both Cessna and Bell. We expect Bell's commercial business to be particularly robust next year, as our investment in product development    is driving strong order flow."    Fourth Quarter Segment Results and Actions    Cessna    Revenues increased $51 million, reflecting the delivery of 67 new Citation jets in the quarter, compared with 79 in last year's fourth quarter, more than offset by higher volumes of used jets, single engine aircraft and Caravans.    Segment profit increased $37 million primarily due to favorable performance, higher non-jet volume and a beneficial mix of jets.    Cessna backlog at the end of the fourth quarter was $1.9 billion, down $275 million from the end of the third quarter 2011.    Bell    Revenues increased $35 million in the fourth quarter from the sameperiod in the prior year. Bell delivered 7 V-22's, 6 H-1's and 62 commercial aircraft in the quarter compared to 7 V-22's, 7 H-1's and 71commercial units in last year's fourth quarter.    Segment profit increased $29 million, reflecting improved performance.    Bell backlog at the end of the fourth quarter was $7.3 billion, up$981 million from the end of the third quarter 2011.    Textron Systems    Revenues at Textron Systems decreased $14 million. Segment profit decreased $63 million, primarily due to intangible asset impairment and severance charges.    Textron Systems' backlog at the end of the fourth quarter was $1.3billion, down $191 million from the end of the third quarter 2011.    Industrial    Industrial revenues increased $70 million, primarily due to higheroverall volumes. Segment profit increased $24 million reflecting improved performance and the higher volume.    Finance    Finance segment revenues decreased $15 million compared to the fourth quarter of 2010, primarily due to reduced earnings on lower finance receivables.    Finance segment loss increased $175 million, primarily the result of the Golf Mortgage portfolio mark-to-market adjustment.    Since the end of the third quarter 2011, nonaccrual finance receivables decreased from $606 million to $321 million and sixty-day plus delinquencies decreased from $275 million to $166 million, both measures reflecting the impact of the transfer of the Golf Mortgage portfolio into the held for sale classification.    Finance receivables ended the quarter at $2.9 billion, down $652 million from the end of the third quarter 2011, reflecting liquidations    of $386 million during the quarter, the $186 million mark-to-marketadjustment and the transfer of $80 million of allowances for losses related to the classification of the Golf Mortgage portfolio to held for sale.    Conference Call Information    Textron will host its conference call today, January 25, 2012 at 8:00 a.m. (Eastern) to discuss its results and outlook. The call will be available via webcast at www.textron.com or by direct dial at (877)    209-9920 in the U.S. or (612) 332-7488 outside of the U.S. (requestthe Textron Earnings Call).    In addition, the call will be recorded and available for playback beginning at 10:30 a.m. (Eastern) on Wednesday, January 25, 2012 by dialing (320) 365-3844; Access Code: 186401.    A package containing key data that will be covered on today's callcan be found in the Investor Relations section of the company's website at www.textron.com .    About Textron Inc.    Textron Inc. is a multi-industry company that leverages its globalnetwork of aircraft, defense, 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 Company, Jacobsen, Kautex, Lycoming, E-Z-GO, Greenlee, and Textron Systems. More information is available at www.textron.com .    Non-GAAP Measures    Adjusted earnings per share from continuing operations and manufacturing cash flow before pension contributions are non-GAAP measures that are defined and reconciled to GAAP in an attachment to this release.    Forward-looking Information    Certain statements in this release and other oral and written statements made by us from time to time are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of1995. These forward-looking statements, which may describe strategies, goals, outlook or other non-historical matters, or project revenues, income, returns or other financial measures, often include words such as "believe,""expect,""anticipate,""intend", "plan,""estimate,""guidance", "project", "target", "potential", "will", "should", "could",    "likely" or "may" and similar expressions intended to identify forward-looking statements. These statements are only predictions and involve known and unknown risks, uncertainties, and other factors that may cause our actual results to differ materially from those expressedor implied by such forward-looking statements. Given these uncertainties, you should not place undue reliance on these forward-looking statements. 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. In addition to those factors described    in our Annual Report on Form 10-K under "Risk Factors", among the factors that could cause actual results to differ materially from pastand projected future results are the following: changing priorities or reductions in the U.S. Government defense budget, including those related to military operations in foreign countries; changes in worldwide economic or political conditions that impact demand for our products, interest rates or foreign exchange rates; our ability to perform    as anticipated and to control costs under contracts with the U.S. Government; the U.S. Government's ability to unilaterally modify or terminate its contracts with us for the U.S. Government's convenience or    for our failure to perform, to change applicable procurement and accounting policies, or, under certain circumstances, to withhold payment or suspend or debar us as a contractor eligible to receive future contract awards; changes in foreign military funding priorities or budget constraints and determinations, or changes in government regulations or policies on the export and import of military and commercial products; our Finance segment's ability to maintain portfolio credit quality or to realize full value of receivables and of assets acquired    upon foreclosure of receivables; our ability to access the capital markets at reasonable rates; performance issues with key suppliers, subcontractors or business partners; legislative or regulatory actionsimpacting our operations or demand for our products; our ability to control costs and successfully implement various cost-reduction activities; the efficacy of research and development investments to develop    new products or unanticipated expenses in connection with the launching of significant new products or programs; the timing of our new product launches or certifications of our new aircraft products; our ability to keep pace with our competitors in the introduction of new products and upgrades with features and technologies desired by our customers; the extent to which we are able to pass raw material price increases through to customers or offset such price increases by reducing other costs; Increases in pension expenses or employee and retiree    medical benefits; uncertainty in estimating reserves, including reserves established to address contingent liabilities, unrecognized taxbenefits, or potential losses on TFC's receivables; difficult conditions in the financial markets which may adversely impact our customers' ability to fund or finance purchases of our products; and continued    volatility in the economy resulting in a prolonged downturn in the markets in which we do business.                                                                                            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                  Twelve Months Ended                                                                                December 31,2011         January 1,2011        December 31,2011        January 1,2011                                                REVENUES                                                                                                                                    MANUFACTURING:                                                        Cessna    $  1,011     $  960    $  2,990     $  2,563                Bell     1,010      975     3,525      3,241                          Textron Systems     513      527     1,872      1,979                Industrial     708      638     2,785      2,524                           3,242      3,100     11,172      10,307                          FINANCE     12      27     103      218                              Total revenues    $  3,254     $  3,127    $  11,275     $  10,525                                                                          SEGMENT PROFIT                                                                                                                              MANUFACTURING:                                                        Cessna    $  60     $  23    $  60     $  (29  )                      Bell     167      138     521      427                                Textron Systems (a)     (8  )     55     141      230                Industrial     49      25     202      162                                 268      241     924      790                                    FINANCE (b)     (232  )     (57  )    (333  )     (237  )                                                                                  Segment profit     36      184     591      553                                                                                            Corporate expenses and                                                other, net (c)     (39  )     (48  )    (114  )     (137  )          Interest expense, net                                                for Manufacturing group     (27  )     (37  )    (140  )     (140  )                                                                      Special charges(d)     -      (54  )    -      (190  )                                                                                      Income (loss) from continuing operations                              before income taxes     (30  )     45     337      86                                                                                      Income tax (expense) benefit (e)     13      18     (95  )     6                                                                            Income (loss) from continuing operations     (17  )     63     242      92                                                                Discontinued operations,                                              net of income taxes     (2  )     (3  )    -      (6  )                                                                                    Net income (loss)    $  (19  )    $  60    $  242     $  86                                                                                Earnings per share:                                                  Continuing operations     (0.06  )     0.20     0.79      0.30        Discontinued operations     (0.01  )     (0.01  )    -      (0.02  )                                                                                                                                            Net Income (Loss)    $  (0.07  )    $  0.19    $  0.79     $  0.28                                                                          Average shares outstanding (f)    278,881,000       308,491,000    307,255,000       302,555,000                                                                                                                (a)   Fourth quarter of 2011 includes a $41 million non-cash impairment charge to write down certain intangible assets and approximately $19 million in severance costs.                                                                                                              (b)   Fourth quarter of 2011 includes a $186 million non-cash initial mark-to-market adjustment for remaining finance receivables in the Golf Mortgage portfolio that were transferred to the held for sale classification in the quarter.                                                                                                                (c)   Fourth quarter of 2011 includes a $55 million loss on the extinguishment of convertible notes, which was substantially offset by a $52 million gain on collection of notes receivable from the sale of a business in 2008 that were collected in December.                                                                                          (d)   Fourth quarter and full-year of 2010 includes restructuring costs of $54 million and $99 million, respectively, primarily for severance. Full-year 2010 also includes a $91 million non-cash charge to reclassify a foreign exchange loss from equity to the income statement as a result of substantially liquidating a Finance segment entity.                                                                          (e)   Full-year 2010 includes a $17 million tax benefit related to the above foreign exchange reclassification and an $11 million discrete tax charge related to the federal health-care legislation enacted in 2010.                                                                                                                                      (f)   For the fourth quarter of 2011, the potential dilutive effect of stock options, restricted stock units and the shares that could be issued upon the conversion of our 4.50% Convertible Senior Notes and upon the exercise of the related warrants was excluded from the computation of diluted weighted-average shares outstanding as the shares would have an anti-dilutive effect on the loss from continuing operations. Fully diluted shares were used to calculate earnings per share for the other reported periods.                                                                                                                    Textron Inc.                                                          Condensed Consolidated Balance Sheets                                  (In millions)                                                          (Unaudited)                                                                                                                                                                                                     December 31,2011     January 1,2011                                Assets                                                                Cash and equivalents  $  871   $  898                                Accounts receivable, net   856    892                                Inventories   2,402    2,277                                          Other current assets   1,134    980                                  Net property, plant and equipment   1,996    1,932                    Other assets   3,143    3,354                                        Finance group assets   3,213    4,949                                Total Assets  $  13,615   $  15,282                                                                                                                                                                              Liabilities and Shareholders' Equity                                  Short-term debt and current portion of long-term debt  $  146   $  19                                                                      Other current liabilities   2,785    2,638                            Other liabilities   2,826    2,993                                    Long-term debt   2,313    2,283                                      Finance group liabilities   2,800    4,377                            Total Liabilities   10,870    12,310                                                                                                        Total Shareholders' Equity   2,745    2,972                          Total Liabilities and Shareholders' Equity  $  13,615   $  15,282                                                                                          TEXTRON INC.                                                          MANUFACTURING GROUP                                                    Condensed Schedule of Cash Flows and Free Cash Flow GAAP to Non-GAAP Reconciliations                                                        (In millions)                                                          (Unaudited)                                                                                                                                                                                                Three Months Ended               Twelve Months Ended              December 31,       January 1,       December 31,       January 1,                                                                          2011       2011       2011       2011                              Cash flows from operating activities:                                Income from continuing operations  $  134    $  102    $  464    $  320                                                                    Dividends received from TFC   -     150     179     505              Capital contributions paid to TFC   (30  )    (155  )    (182  )    (383  )                                                                Depreciation and amortization   104     102     371     362          Changes in working capital   152     267     54     (44  )            Changes in other assets and liabilities and non-cash items   (118  )    (167  )    (125  )    (30  )                                      Net cash from operating activities of continuing operations   242     299     761     730                                                  Cash flows from investing activities:                                Capital expenditures   (152  )    (136  )    (423  )    (270  )      Collection on notes receivable from a prior disposition   58     -     58     -                                                            Net cash used in acquisitions   (11  )    (10  )    (14  )    (57  )                                                                      Other investing activities, net   (17  )    -     (44  )    (26  )    Net cash from investing activities of continuing operations   (122  )    (146  )    (423  )    (353  )                                    Cash flows from financing activities:                                Proceeds from issuance of long-term debt   -     -     496     -      Net intergroup borrowings   100     (52  )    (175  )    98          Decrease in short-term debt   (227  )    -     -     -                Principal payments on long-term debt   (16  )    -     (29  )    (130  )                                                                  Settlement of a portion of convertible debt   (580  )    -     (580  )    -                                                                Purchase of capped call   (32  )    -     (32  )    -                Payments on long-term line of credit facilities   -     -     -     (1,167  )                                                              Dividends paid   (5  )    (6  )    (22  )    (22  )                  Other financing activities, net   -     4     (18  )    6            Net cash from financing activities of continuing operations   (760  )    (54  )    (360  )    (1,215  )                                    Total cash flows from continuing operations   (640  )    99     (22  )    (838  )                                                          Total cash flows from discontinued operations   (2  )    (1  )    (5  )    (9  )                                                          Effect of exchange rate changes on cash and equivalents   (4  )    (2  )    -     (3  )                                                    Net change in cash and equivalents   (646  )    96     (27  )    (850  )                                                                  Cash and equivalents at beginning of period   1,517     802     898     1,748                                                              Cash and equivalents at end of period  $  871    $  898    $  871    $  898                                                                                                                                      Manufacturing Cash Flow GAAP to Non-GAAP Reconciliations:                                                                                                                                                        Net cash from operating activities of continuing operations - GAAP  $  242    $  299    $  761    $  730                                  Less: Capital expenditures   (152  )    (136  )    (423  )    (270  )                                                                      Dividends received from TFC   -     (150  )    (179  )    (505  )    Plus: Capital contributions paid to TFC   30     155     182     383                                                                      Proceeds on sale of property, plant and equipment   4     -     17     4                                                                  Total pension contributions   421     365     642     417            Manufacturing cash flow before pension contributions- Non-GAAP  $  545    $  533    $  1,000    $  759                                                                                                                          2012 Outlook                                          Net cash from operating activities of continuing operations - GAAP                $ 950 - $ 1,000                                          Less: Capital expenditures                (450)                      Dividends received from TFC                (260)                      Plus: Capital contributions paid to TFC                260            Total pension contributions                200                        Manufacturing cash flow before pension contributions- Non-GAAP                $700 - $ 750                                                                                                                        Free cash flow is a measure generally used by investors, analysts and management to gauge a company's ability to generate cash from operations in excess of that necessary to be reinvested to sustain and grow the business and fund its obligations. Our definition of Manufacturing free cash flow adjusts net cash from operating activities of continuing operations for dividends received from TFC, capital contributions provided under the Support Agreement, capital expenditures, proceeds from the sale of property, plant and equipment and contributions    to our pension plans. Beginning in 2011, we changed our basis for projecting and measuring Manufacturing cash flow to adjust for all pension contributions, both mandatory and voluntary, so that the total impact of these contributions can be more clearly understood. We believe that our calculation provides a relevant measure of liquidity and is a useful basis for assessing our ability to fund operations and obligations. This measure is not a financial measure under GAAP and should be used in conjunction with GAAP cash measures provided in our Consolidated Statement of Cash Flows. Prior periods have been recast toconform with this presentation.                                                                                        TEXTRON INC.                                                          Condensed Consolidated Schedule of Cash Flows                                                                                              (In millions)                                                          (Unaudited)                                                                                                                          Three Months Ended               Twelve Months Ended              December 31,       January 1,       December 31,       January 1,                                                                          2011       2011       2011       2011                              Cash flows from operating activities:                                Income (loss) from continuing operations  $  (17  )   $  63    $  242    $  92                                                            Depreciation and amortization   114     111     403     393          Provision for losses on finance receivables   (15  )    15     12     143                                                                  Changes in working capital   292     203     336     337              Changes in other assets and liabilities and non-cash items   31     (166  )    75     28                                                  Net cash from operating activities of continuing operations   405     226     1,068     993                                                Cash flows from investing activities:                                Finance receivables originated or purchased   (38  )    (72  )    (187  )    (450  )                                                      Finance receivables repaid   159     370     824     1,635            Proceeds on receivable sales   145     27     421     528            Collection on notes receivable from a prior disposition   58     -     58     -                                                            Capital expenditures   (152  )    (136  )    (423  )    (270  )      Net cash used in acquisitions   (11  )    (10  )    (14  )    (57  )                                                                      Proceeds from sale of repossessed assets and properties   32     37     109     129                                                        Other investing activities, net   2     (5  )    55     34            Net cash from investing activities of continuing operations   195     211     843     1,549                                                Cash flows from financing activities:                                Proceeds from issuance of long-term debt   135     184     926     231                                                                    Decrease in short-term debt   (227  )    -     -     -                Settlement of a portion of convertible debt   (580  )    -     (580  )    -                                                                Purchase of capped call   (32  )    -     (32  )    -                Principal payments on long-term debt   (142  )    (378  )    (785  )    (2,241  )                                                          Payments on long-term line of credit facilities   (400  )    (300  )    (1,440  )    (1,467  )                                            Dividends paid   (5  )    (6  )    (22  )    (22  )                  Other financing activities, net   -     4     (18  )    6            Net cash from financing activities of continuing operations   (1,251  )    (496  )    (1,951  )    (3,493  )                              Total cash flows from continuing operations   (651  )    (59  )    (40  )    (951  )                                                      Total cash flows from discontinued operations   (2  )    (1  )    (5  )    (9  )                                                          Effect of exchange rate changes on cash and equivalents   (4  )    -     (1  )    (1  )                                                    Net change in cash and equivalents   (657  )    (60  )    (46  )    (961  )                                                                Cash and equivalents at beginning of period   1,542     991     931     1,892                                                              Cash and equivalents at end of period  $  885    $  931    $  885    $  931                                                                                                                                      TEXTRON INC.                                                          GAAP to Non-GAAP Reconciliation                                      Adjusted Income/Earnings Per Share from Continuing Operations        (In millions, except share data)                                                                                                                                                                                    A reconciliation of income/(loss) from continuing operations in accordance with GAAP (Generally Accepted Accounting Principles) to adjusted income from continuing operations on a non-GAAP basis is provided    below.                                                                                                                                                     Q4 2011               Full Year 2011                                Pre-Tax       EPS       Pre-Tax       EPS                          Loss from continuing operations -- GAAP   (30  )    (0.06  )    337     0.79                                                              Valuation allowance on transfer of Golf Mortgage portfolio to heldfor sale   186     0.41     186     0.39                                Loss on extinguishment of convertible notes   55     0.14     55     0.13                                                                  Textron Systems intangible asset impairment and severance costs   60     0.13     60     0.12                                              Gain on collection of notes receivable from a prior disposition   (59  )    (0.13  )    (59  )    (0.12  )                                Adjusted income from continuing operations - Non-GAAP  $  212    $  0.49    $  579    $  1.31                                                                                                                    Diluted average shares outstanding (in thousands)       292,492         307,255                                                                                                                                    Adjusted income from continuing operations is a non-GAAP financial measure. This measure is disclosed by management as additional information to investors in order to provide them with an alternative method for assessing our operating results. This measure is not in accordance with, or a substitute for, GAAP, and may be different from or inconsistent with non-GAAP financial measures used by other companies.                                                                                                                                                Per share information for the fourth quarter is calculated using fully diluted shares outstanding.                                          Textron Inc.    Investor Contacts:    Doug Wilburne, 401-457-2288    or    Becky Rosenbaum, 401-457-2288    or    Media Contact:    David Sylvestre, 401-457-2362  

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