Business Wire | Oct 29, 2020 06:30AM EDT

Textron Reports Third Quarter 2020 Results

Oct. 29, 2020

PROVIDENCE, R.I.--(BUSINESS WIRE)--Oct. 29, 2020--Textron Inc. (NYSE: TXT) today reported third quarter 2020 net income of $0.50 per share, compared to $0.95 per share in the third quarter of 2019. Adjusted net income, a non-GAAP measure, was $0.53 per share for the third quarter of 2020. Adjusted net income excludes $7 million of pre-tax special charges ($0.03 per share, after-tax) related to the restructuring plan announced in the second quarter.

"Operationally, we saw continued strength in our execution at our defense businesses with solid margin performance at Bell and Systems," said Textron Chairman and CEO Scott C. Donnelly. "On the commercial side, we saw a continuation of the recovery at Industrial with strong operating results and margin improvement. At Aviation, we were encouraged by the flow of aircraft orders in the quarter as our sales teams re-engaged customers in the field."

Cash Flow

Net cash provided by operating activities of the manufacturing group for the third quarter totaled $368 million, compared to $238 million in last year's third quarter. Manufacturing cash flow before pension contributions, a non-GAAP measure, totaled $344 million, compared to $181 million last year.

Donnelly continued, "The execution of our teams in a very challenging operating environment yielded another strong quarter of cash flow."

Third Quarter Segment Results

Textron Aviation

Revenues at Textron Aviation of $795 million were down $406 million from the third quarter of 2019, primarily due to lower Citation jet volume of $234 million and lower commercial turboprop volume of $83 million, reflecting a decline in demand related to the pandemic, and lower aftermarket volume of $95 million, reflecting lower aircraft utilization.

Textron Aviation delivered 25 jets, down from 45 last year, and 21 commercial turboprops, down from 39 last year.

Segment loss was $29 million in the third quarter, down from $104 million of profit last year, primarily due to the lower volume and mix.

Textron Aviation backlog at the end of the third quarter was $1.8 billion.

Bell

Bell revenues were $793 million, up $10 million from last year on higher military revenues, partially offset by lower commercial revenues, primarily due to the mix of aircraft sold.

Bell delivered 41 commercial helicopters in the quarter, down from 42 last year.

Segment profit of $119 million was up $9 million, primarily due to a favorable impact from performance.

Bell backlog at the end of the third quarter was $5.7 billion.

Textron Systems

Revenues at Textron Systems were $302 million, down $9 million from last year, primarily due to lower volume of $20 million at the TRU Simulation + Training business.

Segment profit of $40 million was up $9 million from last year due to a favorable impact from performance, partially offset by lower volume and mix.

Textron Systems' backlog at the end of the third quarter was $1.9 billion.

Industrial

Industrial revenues of $832 million were down $118 million from last year, primarily due to lower volume and mix in the Specialized Vehicles product line, principally reflecting the timing of snowmobile deliveries and reduced demand in the ground support equipment business, which has been impacted by the reduction in global air travel.

Segment profit was $58 million, up $11 million from the third quarter of 2019, primarily related to a favorable impact from performance of $24 million, principally reflecting cost reduction activities, partially offset by lower volume and mix.

Finance

Finance segment revenues were $13 million, and profit was $1 million.

Conference Call Information

Textron will host its conference call today, October 29, 2020 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 (844) 721-7241 in the U.S. or (409) 207-6955 outside of the U.S.; Access Code: 4252363.

In addition, the call will be recorded and available for playback beginning at 11:00 a.m. (Eastern) on Thursday, October 29, 2020 by dialing (402) 970-0847; Access Code: 4302627.

A package containing key data that will be covered on today's call can 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 global network 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, Cessna, Beechcraft, Hawker, Jacobsen, Kautex, Lycoming, E-Z-GO, Arctic Cat, Textron Systems, and TRU Simulation + Training. For more information visit: www.textron.com.

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 of 1995. 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 expressed or 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 and our Quarterly Reports on Form 10-Q under "Risk Factors", among the factors that could cause actual results to differ materially from past and projected future results are the following: Interruptions in the U.S. Government's ability to fund its activities and/or pay its obligations; changing priorities or reductions in the U.S. Government defense budget, including those related to military operations in foreign countries; 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; volatility in the global economy or changes in worldwide political conditions that adversely impact demand for our products; volatility in interest rates or foreign exchange rates; risks related to our international business, including establishing and maintaining facilities in locations around the world and relying on joint venture partners, subcontractors, suppliers, representatives, consultants and other business partners in connection with international business, including in emerging market countries; our Finance segment's ability to maintain portfolio credit quality or to realize full value of receivables; performance issues with key suppliers or subcontractors; legislative or regulatory actions, both domestic and foreign, impacting 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; pension plan assumptions and future contributions; demand softness or volatility in the markets in which we do business; cybersecurity threats, including the potential misappropriation of assets or sensitive information, corruption of data or, operational disruption; difficulty or unanticipated expenses in connection with integrating acquired businesses; the risk that acquisitions do not perform as planned, including, for example, the risk that acquired businesses will not achieve revenue and profit projections; the impact of changes in tax legislation; and risks and uncertainties related to the impact of the COVID-19 pandemic on our business and operations.

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 3, September 28, October 3, September 28, 2020 2019 2020 2019

REVENUES

MANUFACTURING:

Textron Aviation $ 795 $ 1,201 $ 2,414 $ 3,458

Bell 793 783 2,438 2,293

Textron Systems 302 311 956 926

Industrial 832 950 2,134 2,871

2,722 3,245 7,942 9,548

FINANCE 13 14 42 47

Total Revenues $ 2,735 $ 3,259 $ 7,984 $ 9,595



SEGMENT PROFIT

MANUFACTURING:

Textron Aviation $ (29 ) $ 104 $ (92 ) $ 315

Bell 119 110 352 317

Textron Systems 40 31 103 108

Industrial 58 47 56 173

188 292 419 913

FINANCE 1 5 8 17

Segment Profit 189 297 427 930



Corporate expenses and (28 ) (17 ) (72 ) (88 ) other, net

Interest expense, netfor Manufacturing (38 ) (39 ) (109 ) (110 ) group

Special charges (a) (7 ) - (124 ) -

Inventory charge (b) - - (55 ) -

Income before income 116 241 67 732 taxes

Income tax expense (1 ) (21 ) 6 (116 )

Net Income $ 115 $ 220 $ 73 $ 616



Earnings Per Share $ 0.50 $ 0.95 $ 0.32 $ 2.64



Diluted average shares 229,279,000 231,097,000 228,837,000 233,689,000 outstanding



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



Three Months Ended Nine Months Ended October 3, 2020 October 3, 2020

Diluted EPS Diluted EPS

Net Income - GAAP $ 115 $ 0.50 $ 73 $ 0.32

Add: Special charges, 6 0.03 103 0.45 net of taxes

Inventory charge, net - - 55 0.24 of taxes

Adjusted Net Income - $ 121 $ 0.53 $ 231 $ 1.01 Non-GAAP (c)



(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 for the three and nine months ended October 3, 2020, includes severance and related costs of $5 million and $56 million, respectively, asset impairment charges of $2 million and $17 million, respectively, and contract termination and other facility closing costs of $0 million and $12 million, respectively. Special charges for the nine months ended October 3, 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 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.

(c)

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.

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 for the three and nine months ended October 3, 2020,(a) includes severance and related costs of $5 million and $56 million, respectively, asset impairment charges of $2 million and $17 million, respectively, and contract termination and other facility closing costs of $0 million and $12 million, respectively. Special charges for the nine months ended October 3, 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.

In connection with the restructuring plan described above, we ceased manufacturing at TRU's facility in Montreal, Canada, resulting in the(b) 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.

Adjusted net income and adjusted diluted earnings per share are non-GAAP(c) financial measures as defined in "Non-GAAP Financial Measures" attached to this release.

Textron Inc.

Condensed Consolidated Balance Sheets

(In millions)

(Unaudited)

October 3,2020

January 4,2020

Assets

Cash and equivalents

$

2,518

$

1,181

Accounts receivable, net

872

921

Inventories

4,252

4,069

Other current assets

825

894

Net property, plant and equipment

2,438

2,527

Goodwill

2,159

2,150

Other assets

1,863

2,312

Finance group assets

934

964

Total Assets

$

15,861

$

15,018

Liabilities and Shareholders' Equity

Short-term debt and current portion of long-term debt

$

859

$

561

Accounts payable

1,121

1,378

Other current liabilities

2,011

1,907

Other liabilities

2,159

2,288

Long-term debt

3,199

2,563

Finance group liabilities

771

803

Total Liabilities

10,120

9,500

Total Shareholders' Equity

5,741

5,518

Total Liabilities and Shareholders' Equity

$

15,861

$

15,018

Textron Inc.

Condensed Consolidated Balance Sheets

(In millions)

(Unaudited)



October 3, January 4, 2020 2020

Assets

Cash and equivalents $ 2,518 $ 1,181

Accounts receivable, net 872 921

Inventories 4,252 4,069

Other current assets 825 894

Net property, plant and equipment 2,438 2,527

Goodwill 2,159 2,150

Other assets 1,863 2,312

Finance group assets 934 964

Total Assets $ 15,861 $ 15,018





Liabilities and Shareholders' Equity

Short-term debt and current portion of long-term debt $ 859 $ 561

Accounts payable 1,121 1,378

Other current liabilities 2,011 1,907

Other liabilities 2,159 2,288

Long-term debt 3,199 2,563

Finance group liabilities 771 803

Total Liabilities 10,120 9,500



Total Shareholders' Equity 5,741 5,518

Total Liabilities and Shareholders' Equity $ 15,861 $ 15,018

TEXTRON INC.

MANUFACTURING GROUP

Condensed Schedule of Cash Flows

(In millions)

(Unaudited)

Three Months Ended

Nine Months Ended

October 3,2020

September 28,2019

October 3,2020

September 28,2019

Cash Flows from Operating Activities:

Net income

$

114

$

216

$

67

$

603

Depreciation and amortization

93

98

279

297

Deferred income taxes and income taxes receivable/payable

11

(32

)

(29

)

11

Pension, net

(3

)

(15

)

(11

)

(44

)

Changes in assets and liabilities:

Accounts receivable, net

(98

)

(43

)

59

(7

)

Inventories

(14

)

(147

)

(258

)

(679

)

Accounts payable

133

2

(267

)

134

Dividends received from Finance group

-

-

-

50

Other, net

132

159

380

(160

)

Net cash from operating activities

368

238

220

205

Cash Flows from Investing Activities:

Capital expenditures

(55

)

(81

)

(151

)

(216

)

Proceeds from an insurance recovery and sale of property, plant and equipment

20

2

25

6

Net proceeds from corporate-owned life insurance policies

4

-

21

4

Other investing activities, net

-

-

(11

)

-

Net cash from investing activities

(31

)

(79

)

(116

)

(206

)

Cash Flows from Financing Activities:

Increase (decrease) in short-term debt

(501

)

118

(2

)

118

Net proceeds from long-term debt

495

-

1,137

297

Net borrowings against corporate-owned insurance policies

-

-

362

-

Principal payments on long-term debt and nonrecourse debt

(1

)

-

(195

)

(1

)

Purchases of Textron common stock

-

(109

)

(54

)

(470

)

Dividends paid

(5

)

-

(14

)

(9

)

Other financing activities, net

10

(1

)

2

18

Net cash from financing activities

(2

)

8

1,236

(47

)

Total cash flows from continuing operations

335

167

1,340

(48

)

Total cash flows from discontinued operations

(1

)

(1

)

(1

)

(2

)

Effect of exchange rate changes on cash and equivalents

8

(10

)

(2

)

(6

)

Net Change in Cash and Equivalents

342

156

1,337

(56

)

Cash and Equivalents at Beginning of Period

2,176

775

1,181

987

Cash and Equivalents at End of Period

$

2,518

$

931

$

2,518

$

931

Manufacturing Cash Flow GAAP to Non-GAAP Reconciliation:

Three Months Ended

Nine Months Ended

October 3,2020

September 28,2019

October 3,2020

September 28,2019

Net Cash from Operating Activities - GAAP

$

368

$

238

$

220

$

205

Less: Capital expenditures

(55

)

(81

)

(151

)

(216

)

Dividends received from TFC

-

-

-

(50

)

Plus: Total pension contribution

11

11

35

36

Proceeds from an insurance recovery and sale of property, plant and equipment

20

2

25

6

Taxes paid on gain on business disposition

-

11

-

11

Manufacturing Cash Flow Before Pension Contributions - Non-GAAP (a)

$

344

$

181

$

129

$

(8

)

TEXTRON INC.

MANUFACTURING GROUP

Condensed Schedule of Cash Flows

(In millions)

(Unaudited)



Three Months Ended Nine Months Ended

October September October 3, September 3, 28, 2020 28, 2020 2019 2019

Cash Flows fromOperating Activities:

Net income $ 114 $ 216 $ 67 $ 603

Depreciation and 93 98 279 297 amortization

Deferred incometaxes and income 11 (32 ) (29 ) 11 taxes receivable/payable

Pension, net (3 ) (15 ) (11 ) (44 )

Changes in assets and liabilities:

Accounts (98 ) (43 ) 59 (7 ) receivable, net

Inventories (14 ) (147 ) (258 ) (679 )

Accounts payable 133 2 (267 ) 134

Dividendsreceived from - - - 50 Finance group

Other, net 132 159 380 (160 )

Net cash fromoperating 368 238 220 205 activities

Cash Flows fromInvesting Activities:

Capital (55 ) (81 ) (151 ) (216 ) expenditures

Proceeds from aninsurancerecovery and sale 20 2 25 6 of property,plant andequipment

Net proceeds fromcorporate-owned 4 - 21 4 life insurancepolicies

Other investing - - (11 ) - activities, net

Net cash frominvesting (31 ) (79 ) (116 ) (206 ) activities

Cash Flows fromFinancing Activities:

Increase(decrease) in (501 ) 118 (2 ) 118 short-term debt

Net proceeds from 495 - 1,137 297 long-term debt

Net borrowingsagainstcorporate-owned - - 362 - insurancepolicies

Principalpayments onlong-term debt (1 ) - (195 ) (1 ) and nonrecoursedebt

Purchases ofTextron common - (109 ) (54 ) (470 ) stock

Dividends paid (5 ) - (14 ) (9 )

Other financing 10 (1 ) 2 18 activities, net

Net cash fromfinancing (2 ) 8 1,236 (47 ) activities

Total cash flowsfrom continuing 335 167 1,340 (48 ) operations

Total cash flowsfrom discontinued (1 ) (1 ) (1 ) (2 ) operations

Effect ofexchange rate 8 (10 ) (2 ) (6 ) changes on cashand equivalents

Net Change inCash and 342 156 1,337 (56 ) Equivalents

Cash andEquivalents at 2,176 775 1,181 987 Beginning ofPeriod

Cash andEquivalents at $ 2,518 $ 931 $ 2,518 $ 931 End of Period



Manufacturing Cash FlowGAAP to Non-GAAP Reconciliation:



Three Months Ended Nine Months Ended

October September October 3, September 3, 28, 2020 28, 2020 2019 2019

Net Cash fromOperating $ 368 $ 238 $ 220 $ 205 Activities - GAAP

Less: Capital (55 ) (81 ) (151 ) (216 ) expenditures

Dividends - - - (50 ) received from TFC

Plus: Totalpension 11 11 35 36 contribution

Proceeds from aninsurancerecovery and sale 20 2 25 6 of property,plant andequipment

Taxes paid ongain on business - 11 - 11 disposition

ManufacturingCash Flow BeforePension $ 344 $ 181 $ 129 $ (8 ) Contributions -Non-GAAP (a)

(a)

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

Manufacturing cash flow before pension contributions is a non-GAAP(a) 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

Nine Months Ended

October 3,2020

September 28,2019

October 3,2020

September 28,2019

Cash Flows from Operating Activities:

Net income

$

115

$

220

$

73

$

616

Depreciation and amortization

95

100

283

302

Deferred income taxes and income taxes receivable/payable

3

(31

)

(35

)

15

Pension, net

(3

)

(15

)

(11

)

(44

)

Changes in assets and liabilities:

Accounts receivable, net

(98

)

(43

)

59

(7

)

Inventories

(14

)

(147

)

(258

)

(652

)

Accounts payable

133

2

(267

)

134

Captive finance receivables, net

(11

)

41

(25

)

22

Other, net

132

158

381

(161

)

Net cash from operating activities

352

285

200

225

Cash Flows from Investing Activities:

Capital expenditures

(55

)

(81

)

(151

)

(216

)

Proceeds from an insurance recovery and sale of property, plant and equipment

20

2

25

6

Finance receivables repaid

1

-

21

20

Net proceeds from corporate-owned life insurance policies

4

-

21

4

Other investing activities, net

2

-

(8

)

3

Net cash from investing activities

(28

)

(79

)

(92

)

(183

)

Cash Flows from Financing Activities:

Increase (decrease) in short-term debt

(501

)

118

(2

)

118

Net proceeds from long-term debt

495

-

1,137

297

Net borrowings against corporate-owned insurance policies

-

-

362

-

Principal payments on long-term debt and nonrecourse debt

(6

)

(7

)

(235

)

(42

)

Purchases of Textron common stock

-

(109

)

(54

)

(470

)

Dividends paid

(5

)

-

(14

)

(9

)

Other financing activities, net

10

(1

)

14

18

Net cash from financing activities

(7

)

1

1,208

(88

)

Total cash flows from continuing operations

317

207

1,316

(46

)

Total cash flows from discontinued operations

(1

)

(1

)

(1

)

(2

)

Effect of exchange rate changes on cash and equivalents

8

(10

)

(2

)

(6

)

Net Change in Cash and Equivalents

324

196

1,313

(54

)

Cash and Equivalents at Beginning of Period

2,346

857

1,357

1,107

Cash and Equivalents at End of Period

$

2,670

$

1,053

$

2,670

$

1,053

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 ShareAdjusted net income and adjusted diluted earnings per share both exclude Special charges, net of taxes and an Inventory charge, net of taxes, related to the restructuring plan initiated in the second quarter of 2020. We consider items recorded in Special charges such as enterprise-wide restructuring, certain asset impairment charges and acquisition-related restructuring, integration and transaction costs, to be of a non-recurring nature that is not indicative of ongoing operations. The inventory charge is also excluded as it relates to the write-down of inventory in connection with an action taken under the restructuring plan at our TRU Simulation + Training (TRU) business. Due to the substantial decline in demand and order cancellations for flight simulators resulting from the impact of the pandemic on the commercial air transportation business, we ceased manufacturing at TRU's facility in Montreal, Canada, resulting in the production suspension of its commercial air transport simulators. As a result of this action and current market conditions, the related inventory was written-down to its net realizable value.

Manufacturing Cash Flow Before Pension ContributionsManufacturing cash flow before pension contributions adjusts net cash from operating activities (GAAP) for the following:

* Deducts capital expenditures and includes proceeds from an insurance recovery and 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:

TEXTRON INC.

Condensed Consolidated Schedule of Cash Flows

(In millions)

(Unaudited)

Three Months Ended Nine Months Ended

October 3, September October 3, September 2020 28, 2020 28, 2019 2019

Cash Flows fromOperating Activities:

Net income $ 115 $ 220 $ 73 $ 616

Depreciationand 95 100 283 302 amortization

Deferred incometaxes andincome taxes 3 (31 ) (35 ) 15 receivable/payable

Pension, net (3 ) (15 ) (11 ) (44 )

Changes inassets and liabilities:

Accounts (98 ) (43 ) 59 (7 ) receivable, net

Inventories (14 ) (147 ) (258 ) (652 )

Accounts 133 2 (267 ) 134 payable

Captive financereceivables, (11 ) 41 (25 ) 22 net

Other, net 132 158 381 (161 )

Net cash fromoperating 352 285 200 225 activities

Cash Flows fromInvesting Activities:

Capital (55 ) (81 ) (151 ) (216 ) expenditures

Proceeds froman insurancerecovery and 20 2 25 6 sale ofproperty, plantand equipment

Financereceivables 1 - 21 20 repaid

Net proceedsfromcorporate-owned 4 - 21 4 life insurancepolicies

Other investing 2 - (8 ) 3 activities, net

Net cash frominvesting (28 ) (79 ) (92 ) (183 ) activities

Cash Flows fromFinancing Activities:

Increase(decrease) in (501 ) 118 (2 ) 118 short-term debt

Net proceedsfrom long-term 495 - 1,137 297 debt

Net borrowingsagainstcorporate-owned - - 362 - insurancepolicies

Principalpayments onlong-term debt (6 ) (7 ) (235 ) (42 ) and nonrecoursedebt

Purchases ofTextron common - (109 ) (54 ) (470 ) stock

Dividends paid (5 ) - (14 ) (9 )

Other financing 10 (1 ) 14 18 activities, net

Net cash fromfinancing (7 ) 1 1,208 (88 ) activities

Total cashflows from 317 207 1,316 (46 ) continuingoperations

Total cashflows from (1 ) (1 ) (1 ) (2 ) discontinuedoperations

Effect ofexchange rate 8 (10 ) (2 ) (6 ) changes on cashand equivalents

Net Change inCash and 324 196 1,313 (54 ) Equivalents

Cash andEquivalents at 2,346 857 1,357 1,107 Beginning ofPeriod

Cash andEquivalents at $ 2,670 $ 1,053 $ 2,670 $ 1,053 End of Period

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 ShareAdjusted net income and adjusted diluted earnings per share both exclude Special charges, net of taxes and an Inventory charge, net of taxes, related to the restructuring plan initiated in the second quarter of 2020. We consider items recorded in Special charges such as enterprise-wide restructuring, certain asset impairment charges and acquisition-related restructuring, integration and transaction costs, to be of a non-recurring nature that is not indicative of ongoing operations. The inventory charge is also excluded as it relates to the write-down of inventory in connection with an action taken under the restructuring plan at our TRU Simulation + Training (TRU) business. Due to the substantial decline in demand and order cancellations for flight simulators resulting from the impact of the pandemic on the commercial air transportation business, we ceased manufacturing at TRU's facility in Montreal, Canada, resulting in the production suspension of its commercial air transport simulators. As a result of this action and current market conditions, the related inventory was written-down to its net realizable value.

Manufacturing Cash Flow Before Pension ContributionsManufacturing cash flow before pension contributions adjusts net cash from operating activities (GAAP) for the following:

* Deducts capital expenditures and includes proceeds from an insurance recovery and 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 Nine Months Ended October 3, 2020 October 3, 2020

Diluted EPS Diluted EPS

Net Income - GAAP $ 115 $ 0.50 $ 73 $ 0.32

Add: Special charges, net of 6 0.03 103 0.45 taxes

Inventory charge, net of taxes - - 55 0.24

Adjusted Net Income - Non-GAAP $ 121 $ 0.53 $ 231 $ 1.01



Manufacturing Cash Flow Before Pension Contributions GAAP to Non-GAAP Reconciliation:

Three Months Ended Nine Months Ended

October September October September 3, 28, 3, 28, 2020 2019 2020 2019

Net Cash from Operating $ 368 $ 238 $ 220 $ 205 Activities - GAAP

Less: Capital (55 ) (81 ) (151 ) (216 ) expenditures

Dividends received from - - - (50 ) TFC

Plus: Total pension 11 11 35 36 contribution

Proceeds from aninsurance recovery and 20 2 25 6 sale of property, plantand equipment

Taxes paid on gain on - 11 - 11 business disposition

Manufacturing Cash FlowBefore Pension $ 344 $ 181 $ 129 $ (8 ) Contributions - Non-GAAP



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CONTACT: Investor Contacts: Eric Salander - 401-457-2288 Cameron Vollmuth - 401-457-2288

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