Textron Reports Strong Fourth Quarter and Full-Year Financial Results

Delivers 4Q Earnings from Continuing Operations of $1.25 per Shareand Annual Revenue Growth of 20%; Board Increases Dividend andAuthorizes New 12 Million Share Repurchase Plan; Company Provides 2006Guidance

Reporting increases in both revenues and earnings per share fromcontinuing operations, Textron Inc. (NYSE: TXT) today posted strongfourth quarter and full-year 2005 results. The company also providedits outlook for 2006, reflecting an expansion in earnings per sharefrom continuing operations of 30 to 35 percent.

"Excellent revenue growth combined with the continued execution ofour transformation efforts drove robust performance in 2005," saidTextron Chairman, President and CEO Lewis Campbell. "We deliveredexceptional revenue growth last year, and --more importantly -- we arewell positioned for further growth and performance improvements for2006 and beyond. This will continue to bolster the competitiveness andearnings power of our businesses," Campbell added.

Textron reported fourth quarter 2005 earnings per share fromcontinuing operations of $1.25 per share compared to $0.86 per sharein the fourth quarter 2004. Including discontinued operations, fourthquarter 2005 net income was $0.88 per share, compared to $0.89 pershare a year ago. Revenue in the fourth quarter was $2.7 billion, up14.7 percent from a year ago.

Full-year 2005 income from continuing operations was $3.78 pershare, compared to $2.68 per share a year ago. Including discontinuedoperations, full-year 2005 net income was $1.49 per share, compared to$2.61 per share for full-year 2004.

Full-year 2005 revenues were $10.0 billion, up from $8.3 billionin 2004, reflecting revenue growth of 20 percent. Manufacturing cashflow from continuing operations for the full-year 2005 was $894million, resulting in free cash flow of $546 million. For the year,return on invested capital reached 13.2 percent, up 260 basis pointsfrom the prior year.

As a result of the company's plan to sell its Fastening Systemsbusiness, the segment was classified as a discontinued operationduring the quarter and results of this segment are reportedaccordingly.

During the quarter Textron recorded $53 million in after-taxcharges in discontinued operations related to Fastening Systems,primarily for deferred foreign translation losses, employee retirementplan curtailment losses and deal-related costs that were incurredduring the quarter. Historical results from 2001 through 2005 havebeen recast to reflect the reclassification and are available fordownloading on Textron's investor relations homepage atwww.textron.com.

Board Authorizes Increase to Dividend and New Share RepurchaseProgram

Textron's Board of Directors has authorized a $0.15 per shareincrease in the company's annualized Common Stock dividend, from $1.40per share to $1.55 per share. Textron's Board of Directors alsoauthorized a new, 12 million share repurchase program. This programreplaces the company's previous 12 million share repurchase programauthorized October 20, 2004, which has been fully exercised.

"The increase in Textron's dividend and repurchasing authorizationreflects the Board of Directors' confidence in the company's strongoutlook for generating cash from operations and the redeployment ofcash anticipated upon the expected sale of the Fastening Systemsbusiness," said Campbell.

Outlook (All outlook amounts are expressed in terms of continuingoperations.)

Textron expects full-year 2006 revenues will be up about eightpercent, while earnings per share from continuing operations areexpected to be between $4.90 and $5.10. First quarter earnings pershare from continuing operations are expected to be between $1.00 and$1.10.

The company's outlook is based on a projected, average,fully-diluted share count of about 131 million shares and reflectsapproximately two to four percent in earnings dilution from theexpected Fastening Systems disposition. The company's 2006 earningsoutlook also reflects a year-over-year increase in non-cash, after-taxpension costs of $0.28 per share and an increase in research anddevelopment expenses of $0.40 per share. The company adopted theaccounting for expensing stock options in 2005.

Textron expects full-year 2006 manufacturing cash flow fromcontinuing operations will be about one billion dollars. Free cashflow is expected to be in the range of $550 - $600 million, withcapital expenditures of about $410 million.

Fourth Quarter Segment Results

Bell

Bell segment revenues increased $215 million due to higher revenuein the U.S. Government business, partially offset by lower revenue inthe commercial business, while profit was up $53 million.

The increase in U.S. Government revenue was primarily due tohigher V-22 revenue, higher volume of armored security vehicles, thebenefit from the acquisition of US Helicopter, higher spares andservice volume and revenue associated with the Armed ReconnaissanceHelicopter.

Commercial revenues decreased primarily due to lower internationalmilitary sales. This decrease was partially offset by highercommercial helicopter sales.

Segment profit increased in both the commercial and U.S.Government businesses. Commercial profit increased primarily due to again on the sale of Bell's interest in the AB139 commercial helicopterand reimbursements from a risk sharing partner, which were partiallyoffset by a charge for a program to retire additional crankshafts thatwe have chosen to implement as a precautionary measure. The increasedprofit in the U.S. Government business was largely due to higher V-22volume.

Backlog at Bell Helicopter was $2.8 billion at the end of thefourth quarter. Government backlog was lower by $275 million from theend of last year largely due to V-22 completions, while commercialbacklog increased $244 million, or 70%. Bell has orders for the new429 Global Ranger worth approximately $685 million, which are not yetincluded in backlog.

Cessna

Cessna segment revenues and profits increased $111 million and $13million, respectively.

Revenues and profits increased primarily as a result of highervolume of Citation Jets, higher pricing and growth in aftermarketrevenues.

Continued strength in orders led to a further increase in backlogof $296 million during the quarter, yielding an ending backlog of $6.3billion to unaffiliated customers, plus an additional $571 million forCitationShares.

Industrial

Industrial segment revenues decreased $19 million primarily due tolower sales volume at E-Z-GO and Jacobsen and unfavorable foreignexchange, partially offset by higher volume at Greenlee and higherpricing.

Segment profit decreased $31 million primarily due to inflation,unfavorable cost performance and lower volume, partially offset byhigher pricing.

Finance

Finance segment revenues increased $40 million, while profitsincreased $7 million.

Revenues increased primarily as a result of higher financecharges. The increase in finance charges was largely due to the higherinterest rate environment and higher average finance receivables.

The profit increase was primarily due to higher net interestmargin principally due to receivable portfolio growth and improvedportfolio performance, which was partially offset by higher sellingand administrative expense.

Conference Call Information

Textron will host a conference call today, January 26, 2006, at9:00 a.m. Eastern time to discuss its results and outlook. The callwill be available via webcast at www.textron.com or by direct dial at(888) 428-4480 in the U.S. or (612) 288-0318 outside of the U.S.(request the Textron Earnings Conference).

The call will be recorded and available for playback beginning at12:30 p.m. Eastern time on Thursday, January 26, 2006 by dialing (320)365-3844; Access Code: 794251.

About Textron

Textron Inc. is a $10 billion multi-industry company with 46,000employees operating in 36 countries. The company leverages its globalnetwork of aircraft, industrial and finance businesses to providecustomers with innovative solutions and services. Textron is knownaround the world for its powerful brands such as Bell Helicopter,Cessna Aircraft, Jacobsen, Kautex, Lycoming, E-Z-GO and Greenlee,among others. More information is available at www.textron.com.

Forward-looking Information: Certain statements in this report andother oral and written statements made by Textron from time to timeare forward-looking statements, including those that discussstrategies, goals, outlook or other non-historical matters; or projectrevenues, income, returns or other financial measures. Theseforward-looking statements speak only as of the date on which they aremade, and we undertake no obligation to update or revise anyforward-looking statements. These forward-looking statements aresubject to risks and uncertainties that may cause actual results todiffer materially from those contained in the statements, includingthe following: (a) changes in worldwide economic and politicalconditions that impact interest and foreign exchange rates; (b) theinterruption of production at Textron facilities or Textron'scustomers or suppliers; (c) Textron's ability to perform asanticipated and to control costs under contracts with the U.S.Government; (d) the U.S. Government's ability to unilaterally modifyor terminate its contracts with Textron for the Government'sconvenience or for Textron's failure to perform, to change applicableprocurement and accounting policies, and, under certain circumstances,to suspend or debar Textron as a contractor eligible to receive futurecontract awards; (e) changes in national or international fundingpriorities and government policies on the export and import ofmilitary and commercial products; (f) the adequacy of cost estimatesfor various customer care programs including servicing warranties; (g)the ability to control costs and successful implementation of variouscost reduction programs; (h) the timing of certifications of newaircraft products; (i) the occurrence of slowdowns or downturns incustomer markets in which Textron products are sold or supplied orwhere Textron Financial offers financing; (j) changes in aircraftdelivery schedules or cancellation of orders; (k) the impact ofchanges in tax legislation; (l) the extent to which Textron is able topass raw material price increases through to customers or offset suchprice increases by reducing other costs; (m)Textron's ability tooffset, through cost reductions, pricing pressure brought by originalequipment manufacturer customers; (n) Textron's ability to realizefull value of receivables and investments in securities; (o) theavailability and cost of insurance; (p) increases in pension expensesrelated to lower than expected asset performance or changes indiscount rates; (q) Textron Financial's ability to maintain portfoliocredit quality; (r) Textron Financial's access to debt financing atcompetitive rates; (s) uncertainty in estimating contingentliabilities and establishing reserves to address such contingencies;(t) performance of acquisitions; (u) the efficacy of research anddevelopment investments to develop new products; (v) bankruptcy orother financial problems at major suppliers or customers that couldcause disruptions in Textron's supply chain or difficulty incollecting amounts owed by such customers; and (w) Textron's abilityto execute planned dispositions.
TEXTRON INC.
REVENUES AND INCOME BY BUSINESS SEGMENT (a)
THREE AND TWELVE MONTHS ENDED DECEMBER 31, 2005 AND JANUARY 1, 2005
(Dollars in millions except per share amounts)
(Unaudited)


Three Months Ended Twelve Months Ended
----------------------------------------------------
REVENUES December 31, January 1, December 31, January 1,
2005 2005 2005 2005
-------- ------------ ------------- ------------ -------------
MANUFACTURING:
Bell $ 805 $ 590 $ 2,881 $ 2,254
Cessna 967 856 3,480 2,473
Industrial 744 763 3,054 3,046
------------ ------------ ------------ -------------
2,516 2,209 9,415 7,773
FINANCE 185 145 628 545
------------ ------------ ------------ -------------
$ 2,701 $ 2,354 $ 10,043 $ 8,318
============ ============ ============ =============
PROFIT
------
MANUFACTURING:
Bell $ 121 $ 68 $ 368 $ 250
Cessna 132 119 457 267
Industrial 16 47 150 194
------------ ------------ ------------ -------------
269 234 975 711
FINANCE 51 44 171 139
------------ ------------ ------------ -------------
Segment profit 320 278 1,146 850
Special charges (b) (21) (21) (118) (59)
Corporate expenses
and other, net (54) (49) (199) (157)
Interest expense,
net (21) (22) (90) (94)
------------ ------------ ------------ -------------
Income from
continuing
operations
before income
taxes 224 186 739 540
Income taxes (56) (66) (223) (165)
------------ ------------ ------------ -------------
Income from
continuing
operations 168 120 516 375
Discontinued
operations, net
of income taxes (c) (50) 5 (313) (10)
------------ ------------ ------------ -------------
Net income $ 118 $ 125 $ 203 $ 365
============ ============ ============ =============
Earnings per
share:
Income from
continuing
operations $ 1.25 $ 0.86 $ 3.78 $ 2.68
Discontinued
operations,
net of
income taxes (c) (0.37) 0.03 (2.29) (0.07)
------------ ------------ ------------ -------------
Net income $ 0.88 $ 0.89 $ 1.49 $ 2.61
============ ============ ============ =============
Average diluted
shares
outstanding 134,300,000 139,704,000 136,446,000 140,169,000
============ ============ ============ =============

(a) On December 7, 2005, Textron's Board of Directors approved a plan
to sell the Fastening Systems segment. As a result, the Fastening
Systems segment was reclassified to discontinued operations in the
fourth quarter of 2005. All periods presented have been recast to
conform to this presentation.

(b) The items included in special charges are summarized in the table
below:

Three Months Twelve Months
Ended Ended
--------------- ---------------
2005 2004 2005 2004
------- ------- ------- -------
Collins & Aikman investment
(charges) gains $ - $ - $ (91) $ 12
Collins & Aikman lease impairment
and other charges (21) - (21) -
Restructuring charges - (21) (6) (71)

------- ------- ------- -------
Total special charges $ (21) $ (21) $ (118) $ (59)
======= ======= ======= =======

(c) Discontinued operations by segment are summarized in the table
below:

Three Months Ended Twelve Months Ended
----------------------------------------------------
2005 2004 2005 2004
------------ ------------ ------------ ------------
After- EPS After- EPS After- EPS After- EPS
Tax Tax Tax Tax
----- ------ ----- ------ ----- ------ ----- ------
Fastening Systems $ (53)$(0.39)$ - $ - $(358)$(2.63)$ - $ -
Industrial 6 0.04 5 0.03 48 0.36 (10) (0.07)
Finance (3) (0.02) - - (3) (0.02) - -
----- ------ ----- ------ ----- ------ ----- ------
Discontinued
operations, net
of income taxes $ (50)$(0.37)$ 5 $ 0.03 $(313)$(2.29)$ (10)$(0.07)
===== ====== ===== ====== ===== ====== ===== ======


TEXTRON INC.
Condensed Consolidated Balance Sheets
(In millions)
(Unaudited)

December 31, January 1,
2005 2005
------------ ------------
Assets
Cash and cash equivalents $ 786 $ 570
Accounts receivable, net 891 843
Inventories 1,712 1,536
Other current assets 464 515
Net property, plant and equipment 1,574 1,513
Other assets 2,509 2,527
Assets of discontinued operations 1,122 1,633
Textron Finance assets 7,441 6,738
------------ ------------
Total Assets $ 16,499 $ 15,875
============ ============

Liabilities and Shareholders' Equity
Current portion of long-term debt and
short-term debt $ 275 $ 420
Other current liabilities 2,426 2,210
Other liabilities 2,026 2,020
Long-term debt 1,659 1,350
Liabilities of discontinued operations 446 520
Textron Finance liabilities 6,391 5,703
------------ ------------
Total Liabilities 13,223 12,223

Total Shareholders' Equity 3,276 3,652
------------ ------------
Total Liabilities and Shareholders'
Equity $ 16,499 $ 15,875
============ ============

Textron Inc.
Calculation of Free Cash Flow
(Dollars in millions)

--------------------
2005 2004
Actual Actual
----------------------------------------------------------------------
Net cash provided by operating activities of
continuing operations $ 894 $ 973
Less: capital expenditures (356) (238)
Plus: proceeds on sale of property, plant and
equipment 23 38
Less: capital expenditures financed through capital
leases (15) (44)
----------------------------------------------------------------------
Free cash flow $ 546 $ 729
----------------------------------------------------------------------


2004 and 2005 Full-Year Return on Invested Capital
(Dollars in millions)


ROIC Income 2005 2004
----------------------
GAAP net income $ 203 $ 365
Eliminations, net of taxes
Charges related to Textron Fastening Systems 346 -
Charges/(gains) related to other discontinued
operations (45) -
Charges related to 2004 restructuring - 114
Charges/(gains) related to Collins & Aikman 112 (12)
Charges/(gains) related to transaction with
Bell Agusta Aerospace Corporation (30) -
Income tax related to above items (13) 4
Amortization of intangible assets, net of
taxes 2 3
Interest expense, net of taxes 58 60
----------------------------------------------------------------------
ROIC Income $ 633 $ 534
======================================================================

Invested Capital
Average shareholders' equity $ 3,464 $ 3,671
Average adjustment to shareholders' equity
related to 2005 charges/(gains) excluding CTA
in equity 166 -
Average Textron Manufacturing debt 1,872 1,909
Average cash and cash equivalents of Textron
Manufacturing (711) (546)
----------------------------------------------------------------------
Average Invested Capital $ 4,791 $ 5,034
----------------------------------------------------------------------

Return on Invested Capital 13.2% 10.6%
======================================================================