Textron Reports Third Quarter 2021 Results; Raises Full Year EPS

Textron Reports Third Quarter 2021 Results; Raises Full Year EPS and Cash Guidance



TEXTRON INC. Revenues by Segment and Reconciliation of Segment Profit to Net Income (Dollars in millions, except per share amounts) (Unaudited)

	Three Months Ended								Nine Months Ended
	October 2, 2021				October 3, 2020				October 2, 2021				October 3, 2020
REVENUES
MANUFACTURING:
Textron Aviation		$	1,181			$	795			$	3,207			$	2,414
Bell		769				793				2,506				2,438
Textron Systems		299				302				960				956
Industrial		730				832				2,349				2,134
		2,979				2,722				9,022				7,942
FINANCE		11				13				38				42
Total revenues		$	2,990			$	2,735			$	9,060			$	7,984

SEGMENT PROFIT
MANUFACTURING:
Textron Aviation		$	98			$	(29	)		$	241			$	(92	)
Bell		105				119				320				352
Textron Systems		45				40				144				103
Industrial		23				58				102				56
		271				188				807				419
FINANCE		8				1				17				8
Segment profit		279				189				824				427

Corporate expenses and other, net		(23		)		(28		)		(100		)		(72		)
Interest expense, net for Manufacturing group		(28		)		(38		)		(95		)		(109		)
Special charges (a)		(10		)		(7		)		(20		)		(124		)
Gain on business disposition (b)		—				—				17				—
Inventory charge (c)		—				—				—				(55		)
Income from continuing operations before income taxes		218				116				626				67
Income tax (expense) benefit		(33		)		(1		)		(86		)		6
Income from continuing operations		$	185			$	115			$	540			$	73
Discontinued operations, net of income taxes		—				—				(1		)		—
Net income		$	185			$	115			$	539			$	73

Earnings per share:
Income from continuing operations		$	0.82			$	0.50			$	2.37			$	0.32

Diluted average shares outstanding		226,490,000				229,279,000				227,795,000				228,837,000

Income from continuing operations and Diluted earnings per share (EPS) GAAP to Non-GAAP reconciliation:

	Three Months Ended								Nine Months Ended
	October 2, 2021				October 3, 2020					October 2, 2021				October 3, 2020
Income from continuing operations - GAAP		$	185			$	115			$	540			$	73
Add: Special charges, net of tax (a)		8				6				15				103
Inventory charge, net of tax (c)		—				—				—				55
Less: Gain on business disposition, net of tax (b)		—				—				(17		)		—
Adjusted income from continuing operations - Non-GAAP (d)		$	193			$	121			$	538			$	231

Earnings per share:
Income from continuing operations - GAAP		$	0.82			$	0.50			$	2.37			$	0.32
Add: Special charges, net of tax (a)		0.03				0.03				0.07				0.45
Inventory charge, net of tax (c)		—				—				—				0.24
Less: Gain on business disposition, net of tax (b)		—				—				(0.08		)		—
Adjusted income from continuing operations - Non-GAAP (d)		$	0.85			$	0.53			$	2.36			$	1.01

(a)		In the second quarter of 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 impacted the TRU Simulation + Training business within the Textron Systems segment and the Industrial and Textron Aviation segments. In connection with this plan, we incurred special charges of $10 million and $20 million for the three and nine months ended October 2, 2021, respectively, and $7 million and $85 million for the three and nine months ended October 3, 2020, respectively. Special charges for the nine months ended October 3, 2020 also included the impairment of indefinite-lived trade name intangible assets totaling $39 million, primarily in the Textron Aviation segment.
(b)		On January 25, 2021, we completed the sale of TRU Simulation + Training Canada Inc. which resulted in an after-tax gain of $17 million.
(c)		In connection with the restructuring plan described above, 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 market conditions, we recorded a $55 million charge in the second quarter of 2020 to write-down the related inventory to its net realizable value.
(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)

	October 2, 2021			January 2, 2021
Assets
Cash and equivalents		$	1,969		$	2,146
Accounts receivable, net		773			787
Inventories		3,670			3,513
Other current assets		890			950
Net property, plant and equipment		2,469			2,516
Goodwill		2,152			2,157
Other assets		2,468			2,436
Finance group assets		878			938
Total Assets		$	15,269		$	15,443


Liabilities and Shareholders' Equity
Current portion of long-term debt		$	7		$	509
Accounts payable		775			776
Other current liabilities		2,270			1,985
Other liabilities		2,292			2,357
Long-term debt		3,180			3,198
Finance group liabilities		708			773
Total Liabilities		9,232			9,598

Total Shareholders' Equity		6,037			5,845
Total Liabilities and Shareholders' Equity		$	15,269		$	15,443



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


	Three Months Ended						Nine Months Ended
	October 2, 2021			October 3, 2020			October 2, 2021			October 3, 2020
Cash Flows from Operating Activities:
Income from continuing operations	$	179		$	114		$	537		$	67
Depreciation and amortization	94			93			277			279
Gain on business disposition	—			—			(17		)	—
Deferred income taxes and income taxes receivable/payable	7			11			25			(29		)
Asset impairments and TRU inventory charge	5			1			11			111
Pension, net	(20		)	(3		)	(62		)	(11		)
Changes in assets and liabilities:
Accounts receivable, net	46			(98		)	8			59
Inventories	(2		)	(14		)	(164		)	(258		)
Accounts payable	(187		)	133			1			(267		)
Other, net	211			131			396			269
Net cash from operating activities	333			368			1,012			220
Cash Flows from Investing Activities:
Capital expenditures	(76		)	(55		)	(204		)	(151		)
Net proceeds from business disposition	—			—			38			—
Proceeds from an insurance recovery and sale of property, plant and equipment	3			20			3			25
Other investing activities, net	—			4			—			10
Net cash from investing activities	(73		)	(31		)	(163		)	(116		)
Cash Flows from Financing Activities:
Decrease in short-term debt	—			(501		)	—			(2		)
Net proceeds from long-term debt	—			495			—			1,137
Principal payments on long-term debt and nonrecourse debt	(3		)	(1		)	(522		)	(195		)
Net borrowings against corporate-owned life insurance policies	—			—			—			362
Purchases of Textron common stock	(299		)	—			(586		)	(54		)
Dividends paid	(5		)	(5		)	(14		)	(14		)
Other financing activities, net	28			10			103			2
Net cash from financing activities	(279		)	(2		)	(1,019		)	1,236
Total cash flows from continuing operations	(19		)	335			(170		)	1,340
Total cash flows from discontinued operations	—			(1		)	(1		)	(1		)
Effect of exchange rate changes on cash and equivalents	(7		)	8			(6		)	(2		)
Net change in cash and equivalents	(26		)	342			(177		)	1,337
Cash and equivalents at beginning of period	1,995			2,176			2,146			1,181
Cash and equivalents at end of period	$	1,969		$	2,518		$	1,969		$	2,518

Manufacturing cash flow GAAP to Non-GAAP reconciliation:

	Three Months Ended						Nine Months Ended
	October 2, 2021			October 3, 2020			October 2, 2021			October 3, 2020
Net cash from operating activities - GAAP	$	333		$	368		$	1,012		$	220
Less: Capital expenditures	(76		)	(55		)	(204		)	(151		)
Plus: Total pension contributions	11			11			40			35
Proceeds from an insurance recovery and sale of property, plant and equipment	3			20			3			25
Manufacturing cash flow before pension contributions - Non-GAAP (a)	$	271		$	344		$	851		$	129

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