Recent Developments

The global pandemic caused by the novel coronavirus, known as "COVID-19", has led to worldwide facility closures, workforce disruptions, supply chain destabilizations, reduced demand for many products and services, volatility in the capital markets and uncertainty in the economic outlook. Our operations have experienced and continue to experience various degrees of disruption due to the unprecedented conditions surrounding the pandemic. While certain of our commercial manufacturing facilities had temporarily closed during the first quarter through the latter part of the second quarter due to reduced demand for our products, substantially all manufacturing activities have resumed.

In the first quarter, we formed enterprise-wide pandemic response teams, which have guided our operations in the implementation of processes and procedures to comply with applicable government-imposed health and safety-related operating restrictions and to enhance the safety of our facilities to protect the health of our employees. Among other actions, we have increased cleaning and disinfecting of our facilities and reconfigured workspaces to enable adherence to social distancing guidelines while minimizing disruption to our manufacturing processes and other work activities. We have outfitted our facilities with signage regarding required face coverings, proper physical distancing, symptom checks, revised elevator and room capacities, etc. Our businesses are and may continue to be affected by these operating restrictions as well as various other COVID-19 related challenges, including travel restrictions, quarantines, remote working arrangements, employee furloughs and other workforce and supply chain disruptions. During the course of the pandemic, our response teams will continue to provide guidance for our businesses on preventing the spread of COVID-19 in the workplace.

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 plan primarily impacts the TRU Simulation + Training (TRU) business within the Textron Systems segment, the Textron Aviation segment and the Textron Specialized Vehicles (TSV) business within the Industrial segment.

Additional information related to this plan is provided in the Special Charges section on page 22. The impact of the COVID-19 pandemic and the current operating status of our segments are provided below:

Textron Aviation temporarily shut down most aircraft production and instituted

employee furloughs during the first quarter through the latter part of the

? second quarter as a result of decreased demand for its products and services

related to the pandemic. To align our cost structure with reduced production

levels, in the second quarter, we initiated direct and indirect workforce

reductions under the restructuring plan.

At Bell and Textron Systems, as U.S. defense contractors, operations have

largely remained open and these businesses continue to fulfill their contracts

with the U.S. Government. At Textron Systems, however, TRU has experienced a

? substantial decline in demand and order cancellations for its flight simulators

in light of the expected long-term impact of the pandemic on the commercial air

transportation business. Accordingly, as part of the restructuring plan, TRU

will cease manufacturing at its facility in Montreal, Canada, resulting in the

production suspension of its commercial air transport simulators.

Industrial has been significantly impacted by lower demand in certain markets

that it serves and has experienced temporary manufacturing facility closures

throughout the world, as well as employee furloughs. In the latter half of the

? second quarter, substantially all of its facilities reopened and employees

returned to work. The TSV business also initiated headcount reductions, in

part, related to its ground support equipment business, which has been severely

impacted by the reduction in global air travel as a result of the pandemic.

The Finance segment continues to work with customers impacted by the pandemic

? to provide temporary payment relief as discussed in Note 3 to the consolidated


   financial statements.

During the second quarter, we generated $242 million of net cash from operating activities. At the end of the second quarter, we have $2.3 billion in cash and equivalents and a $1.0 billion credit facility which remains undrawn. We strengthened our cash position in the first quarter by issuing $650 million in senior debt and by borrowing $500 million under a new 364-Day Term Loan Credit Agreement. We also suspended share repurchases beginning in the first quarter.

During the second quarter, we continued certain measures taken in the first quarter to reduce costs and conserve cash, including employee furloughs at many of our commercial businesses and at corporate headquarters, reducing capital expenditures and delaying certain research and development projects. In addition, we initiated the restructuring plan as discussed above to further reduce costs and preserve cash. While we expect the impacts of COVID-19 to continue to have an adverse effect on our business, we cannot reasonably estimate the length or severity of this pandemic, or the extent to which the disruption may impact our consolidated financial position, results of operations and cash flows in 2020 and beyond.





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We reviewed our assets that are subject to impairment in light of the pandemic, resulting in charges in the first quarter that are discussed in the Special Charges section on page 22. While we do not currently anticipate any material impairments on our other assets as a result of the pandemic, as discussed in the Critical Accounting Estimates - Goodwill section on page 31, future changes in revenue expectations, earnings and cash flows related to intangible assets, goodwill and other long-lived assets below current projections could cause these assets to be impaired. There are many uncertainties regarding the pandemic, and we are closely monitoring the impact of the pandemic on all aspects of our business, including how it will impact our customers, employees, suppliers, vendors, business partners and distribution channels. See Item 1A. Risk Factors on page 33 for additional risks and uncertainties related to the pandemic's impact on our business. The ultimate extent of the effects of the pandemic on the company is uncertain and will depend on future developments, and such effects could exist for an extended period of time, even after the pandemic ends.

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