Stories about a hypothetical Bad Bank are all the rage these days, or so I've been told. So let me tell you another one today: the story of a great industrialist who turned out to be a particularly miserable banker. Its name is Textron (NYSE:TXT).

Textron reported its fiscal Q4 and full-year numbers last week, and they went a little something like this:

Bad bank
As revealed in December, Textron's "non-captive financial business" is ruining the company, and management has decided to exit the business. "Finance" cost Textron $50 million in profits last year, reversing a $222 million profit for the segment from the previous year. Management doesn't seem to hold much hope that things will improve in the midst of a particularly brutal global economy, so it's elected to take a total of more than $557 million in "one-time" (let's hope) charges.

Good industrialist
And yet, were it not for the financial-segment vampire draining this firm's lifeblood, Textron would probably be in decent shape. Last year, the firm's manufacturing operations generated some $357 million in free cash flow before certain adjustments. Sales were up in all four of the firm's major industrial divisions:

  • 59% at Textron Systems, where the firm's Shadow unmanned aerial vehicle appears to be competing effectively against UAVs offered by Lockheed Martin (NYSE:LMT), Honeywell (NYSE:HON) and Northrop Grumman (NYSE:NOC);
  • 13% at Cessna, where Textron does battle with the likes of General Dynamics (NYSE:GD) and Embraer (NYSE:ERJ) for business jet sales;
  • 10% at Bell Helicopter, Boeing's (NYSE:BA) archrival;
  • … And even the "Industrial" business eked out a 3% rise in sales.

This year, management projects that free cash flow from its manufacturing better half will rise to $450 million, and that's just the beginning. Textron claims backlog at year-end 2008 rose some 23% year over year, hitting $23.2 billion. That's half again as fast as sales grew on the manufacturing side. With net income of $1.95 per share for the full year, and a current price of $8 and change, the stock looks like an out-and-out bargain to me.

Foolish takeaway
Unfortunately, Textron is shackled to its bad banking business. And this makes valuing the company an exceedingly dicey proposition. Against $531 million in cash and equivalents, Textron's manufacturing businesses claim a total of about $1.7 billion in long-term debt, which doesn't seem so bad. Whether this stock ever becomes worth owning again, however, depends on the fate of the $8.3 billion in obligations carried by Textron Financial -- and whether management can figure a way to unload 'em.

For further Foolishness on Textron, read:

Embraer is a Motley Fool Stock Advisor pick. Fool contributor Rich Smith owns shares of Boeing. The Motley Fool has a disclosure policy.