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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