Textron Delivers Strong First Quarter Results

Business Wire, April 19, 2007

Reports EPS from Continuing Operations of $1.55 compared to $1.19 a Year Ago

Books 122 New Business Jet Orders

Increases 2007 Expected EPS from Continuing Operations Range by $0.20

PROVIDENCE, R.I. -- Textron Inc. (NYSE: TXT) today reported a 30% increase in earnings per share from continuing operations on a 12.6% revenue increase. The company also raised earnings guidance for 2007, reflecting continued expectations of solid top-line growth and strong operational performance.

"We outperformed again this quarter with strong organic revenue growth and improved profitability," said Textron Chairman, President and CEO Lewis B. Campbell. "Demand for our products and further improvements in enterprise management continue to drive enhanced results," Campbell added.

First quarter 2007 revenue was $3.0 billion, up 12.6% from last year. First quarter 2007 income from continuing operations was $1.55 per share, compared to $1.19 in the first quarter of 2006. Including discontinued operations, first quarter 2007 net income was $1.53 per share compared to $1.26 a year ago.

The company's 2007 first quarter results included $25 million of expenses recorded at its Bell segment related to the Armed Reconnaissance Helicopter ("ARH") program. Bell's results also include a $28 million reimbursement from the U.S. Government for costs related to Hurricane Katrina.

The company expected first quarter earnings per share from continuing operations of $1.15 to $1.25. The Katrina reimbursement was anticipated in the company's first quarter outlook, but the ARH charge was not.

Manufacturing cash flow from continuing operations for the quarter was $86 million, resulting in free cash flow of $23 million.

2007 Outlook

The company now expects full-year 2007 earnings per share to be between $6.10 and $6.30, up $0.20 per share from its previous guidance. Second quarter earnings per share are forecasted to be between $1.35 and $1.45 per share. The company expects full-year 2007 free cash flow in the range of $500 - $550 million.

Campbell added, "Continued revenue growth across the portfolio combined with the momentum of our operational improvement initiatives provide us with greater confidence in our outlook for 2007. Add to these factors, further visibility in our aircraft businesses, and our outlook longer-term is clearly positive as well."

First Quarter Segment Results

Bell

Bell segment revenue increased $156 million due to higher revenue in both the U.S. Government and commercial businesses. Segment profit was up $22 million.

U.S. Government revenue increased $129 million primarily due to higher net volume and mix, the Hurricane Katrina cost reimbursement and acquisition revenues. The largest contributors to the higher volume came from ASV, H-1 and Intelligent Battlefield Systems products, offsetting lower parts, service, JDAM and SFW volumes.

Commercial revenues increased $27 million as higher pricing and acquisitions offset slightly lower volume. Lower Huey II Kit deliveries more than offset increased commercial helicopter deliveries resulting in the lower volume.

Profit in our U.S. Government business increased $12 million. The increase was primarily due to favorable performance, which was partially offset by inflation. The favorable performance reflected the Hurricane Katrina reimbursement and lower H-1 expenses, partially offset by the costs recorded on the ARH program and lower profit rates on the V-22 program.

Commercial profit increased $10 million due to higher pricing and favorable cost performance, partially offset by lower volume, unfavorable product mix and inflation.

Backlog at Bell Helicopter was $2.9 billion at the end of the first quarter, down from $3.1 billion at year-end.

Cessna

Revenues at Cessna increased $99 million primarily due to Citation business jet mix and favorable pricing.

Segment profit increased $38 million as a result of higher pricing and mix, partially offset by inflation and increased development expenses.

Cessna's backlog increased to $9.0 billion at the end of the first quarter from $8.5 billion at the end of last year.

Industrial

Revenues in the Industrial segment increased $49 million due to favorable foreign exchange, higher volume and pricing, partially offset by the divestiture of non-core product lines.

Industrial segment profit increased $11 million due to improved cost performance, higher pricing and volume, partially offset by inflation.

Finance

Revenues in the Finance segment increased $28 million primarily due to higher average finance receivables and a higher interest rate environment.

Finance segment profit increased $3 million as the benefits from higher finance receivables, higher securitization gains and lower provision for loan losses were partially offset by a residual value impairment charge and lower pricing spreads.

Conference Call Information

Textron will host a conference call Thursday, April 19, 2007, at 9:00 a.m. Eastern time to discuss its results and outlook. The call will be available via webcast at www.textron.com or by direct dial at (877) 531-2989 in the U.S. or (612) 332-0342 outside of the U.S. (request the Textron Earnings Call).