1999 Annual Report Growthconsistent Textron Is

1999 Annual Report growthconsistent textron is an $11.6 billion global, multi-industry company focused on delivering inspired solutions to our customers and consistent growth to our shareholders. In the Aircraft, Automotive, Industrial and Finance industries, customers around the world know us for our marquee brands such as Bell Helicopter, Cessna Aircraft, Kautex, Lycoming, E-Z-GO, Greenlee, Ransomes, Camcar and David Brown, among others. Our market-leading companies are redefining industries and generating strong growth and profitability. 1999 Textron Annual Report IFC1 Aircraft page 8 Bell Helicopter page 10 Cessna Aircraft page 12 financial highlights Automotive page 14 1999 1998 change Operating Results ($ in millions) Revenues $11,579 $9,683 20% Operating income $ 1,201 $1,040 15% Industrial page 18 Income from Textron Fastening Systems page 20 continuing operations $ 623 $ 443 41% Textron Industrial Products page 22 Free cash flow from manufacturing operations $ 479 $ 232 106% Common Share Data Diluted earnings per share from continuing operations $ 4.05 $ 2.68 51% Dividends per share $ 1.30 $ 1.14 14% Finance page 24 1999 was another year of record r To Our Shareowners, Employees and Customers: In 1999, Textron delivered the ◗ Free cash flow from manufactur- strongest financial results in our ing operations rose to $479 76-year history. Our market leader- million, a marked improvement ship, industry-changing products from $232 million in 1998. and rigorous financial and man- ◗ Our year-end debt-to-capital agement discipline delivered ratio was 27%, ensuring the another year of record growth financial flexibility to support while we aggressively reshaped our future growth. our portfolio of businesses. ◗ We acquired 18 businesses and ◗ Earnings per share increased created two joint ventures with 51% – our tenth straight year of approximately $1.6 billion in consistent growth, and seventh annual revenues. consecutive year of double-digit increases. ◗ We continued to expand our geographic reach, generating ◗ Revenues increased a record 36% of our revenues outside 20%, our fourth consecutive the United States. year of double-digit revenue growth…with an exceptional 9% organic growth rate (our highest in ten years). esults. Consistent EPS Growth We exceeded the market’s expecta- strength of Textron. However, Textron has reported tions in each of these measures as our strong financial performance ten consecutive years we redeployed $2.9 billion in capi- and strategic momentum were of earnings growth, $4.05 tal from the 1999 divestiture of not rewarded in the stock market including double-digit gains in each of the Avco Financial Services – the largest in 1999. This disappointment last seven years. disposition in Textron’s history. only fueled our determination This redeployment, evident in our to execute our well-defined significant acquisition activity, strategies to build the great caused a temporary reduction company we aspire to be. in our margins and return on Our approach for delivering value invested capital (ROIC) to 10.4% is straightforward: adhere to and 12.6%, respectively. As we established financial goals, realize the increasing returns execute clear growth strategies, from our recent investments, and demand operating excellence we should continue to make from each member of the Textron significant progress in these team. We are confident that $0.70 important measures. Textron’s market valuation will Our ten-year record of 23% average ultimately reflect our sustained, annual returns to shareowners outstanding results. 89 90 91 92 93 94 95 96 97 98 99 underscores the fundamental Earnings per share from continuing operations 1999 Textron Annual Report 3 We’re managing our growtbusiness mix for higher Our Foundation fiber optics while stepping up impact performance, helping us for Growth the pace of integration, evidenced avoid surprises and achieve consis- Textron’s market-leading businesses by our 370 basis point margin tent results. It also ensures that we and world-renowned brands are improvement in Golf, Turf Care have the right people in the right our foundation for growth. In all And Specialty Products. place to successfully execute our of our business segments, we are strategies and achieve our goals. ◗ Our Finance segment marked aggressively driving the top line its 21st consecutive year of net With the Operations Management while improving the bottom line income growth while expanding Process as our guide, we are: at an even faster pace. In 1999: its position in higher-growth Investing for Growth – ◗ Our world-class aircraft businesses niche markets. extending our leadership achieved a record $7.3 billion Levers of Performance positions in existing and new order backlog, testimony to the In our world of vigorous competi- high-growth global markets. strength of our markets and out- tion and accelerating change, standing customer relationships. Driving Operational success boils down to one singular, Excellence – accelerating the ◗ Our Automotive segment potent concept: execution. speed and depth of operating improved its return on invested At Textron, our Operations improvement through Textron capital by 300 basis points and Management Process is the very Quality Management. received 17 awards for innova- blueprint of how we run the com- tion and quality from customers Leveraging E-Business – using pany. It is a rigorous discipline that around the world. the enabling technologies of the aligns our near- and long-term internet to drive growth and achieve ◗ We acquired 12 industrial busi- strategies with financial and oper- quantum improvements in how we nesses in high-growth markets ating goals. It compels us to antici- conduct business. such as telecommunications and pate issues that could negatively 4 Consistent Growth 1999 Revenues 4% 32% 25% 39% Aircraft $3,744 (32%) Automotive $2,916 (25%) Industrial $4,456 (39%) h... Finance $463 (4%) ($ in millions) Investing for Growth produced industry-changing inno- One of our core strengths is our vations such as the world’s fastest business jet, the world’s first tiltro- ability to accurately assess the Financial Goals potential of our businesses and tor aircraft, an automobile seat that plot a course to maximize results automatically adjusts to each while minimizing risk. We have unique body contour, and a revolu- Setting and achieving ambitious financial goals tionary fastener that allows ultra- demonstrated this competence for are fundamental to Textron’s over ten years by divesting non- fast assembly and ultra-easy servicing management process. core businesses – which have not of Pentium® chips. ◗ Double-Digit Earnings Per met our return targets – while This internal investment is comple- Share Growth investing, both internally and mented by our “bolt-on” acquisi- through acquisitions, in those ◗ Annual Revenue Growth tion strategy. In 1999 we acquired businesses with a potential to of 8-11% 18 companies and created two joint achieve at least 15% ROIC. ventures that complement our ◗ Operating Margins Our exceptional 9% organic growth existing core competencies while Exceeding 12% bringing us into new, higher-growth rate in 1999 is testimony to the ◗ Return on Invested markets, providing new technolo- success of our new products and Capital Exceeding 15% strong customer relationships. Over gies, and expanding our geographic ◗ Debt-to-Capital Ratio the past three years, we have funded reach. These acquisitions will con- of 30-35% $2 billion in research and develop- tribute approximately $1.6 billion ment. This strategic investment has to 2000 revenues. 1999 Textron Annual Report 5 ... and stronger perform Driving Operational track our performance in growth, Leveraging E-Business Excellence quality, cost, efficiency, safety and Textron is embracing the transfor- A commitment to operational customer satisfaction. mational technologies of the excellence has always been a internet to drive growth and The backbone of our TQM cornerstone of Textron’s strategy. achieve quantum improvements program is an in-depth, rigorous And like every other aspect of in the very way we do business. quarterly review process reinforced business, it requires continuous E-business is revolutionizing the by a new management incentive renewal and redefinition. way we think – from the way we program triggered only when serve our customers and design At Textron, we drive continuous stretch goals are reached and our products, to the way we make improvement and operational sustained. them on the shop floor. excellence through Textron Quality Through Textron Quality Management (TQM). TQM defines In 1999, we initiated an intense, Management we will make signifi- the way we approach every aspect company-wide e-business initiative cant progress toward two of our of our business – the quality of our that began to hit its stride as we key financial goals: margins and products, the efficiency of our entered the new millennium. Every ROIC. We are attacking margins processes and the level of our cus- aspect of every business strategy is with a vengeance, committed to tomer commitment. Our goal is to being examined to ensure we are achieving at least a 200 basis point delight our customers – design it making e-progress at e-speed. increase by 2003. This, coupled right, develop it right, test it right with a renewed focus on reducing Supporting our e-business strategy, and launch it right – the first time. invested capital, should drive ROIC in January 2000 we announced a Championed by our President

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