Textron Inc. (NYSE: TXT) today reported second quarter 2017
income from continuing operations of $0.57 per share or $0.60 per
share of adjusted income from continuing operations, a non-GAAP
measure that is defined and reconciled to GAAP in an attachment to
this release, compared to $0.66 per share in the second quarter of
2016. During this year’s second quarter, the company recorded $13
million of pre-tax special charges ($0.03 per share,
after-tax).
Revenues in the quarter were $3.6 billion, up 2.6 percent from
the second quarter of 2016. Textron segment profit in the quarter
was $295 million, down $33 million from the second quarter of
2016.
“Revenues were up in the quarter primarily driven by the Arctic
Cat acquisition,” said Textron Chairman and CEO Scott C. Donnelly.
“We saw strong performance at Bell and were encouraged by the
continued strengthening in commercial helicopter demand.”
Cash Flow
Net cash provided by operating activities of continuing
operations of the manufacturing group for the second quarter
totaled $413 million, compared to $107 million in last year’s
second quarter. Manufacturing cash flow before pension
contributions, a non-GAAP measure that is defined and reconciled to
GAAP in an attachment to this release, totaled $341 million
compared to a use of cash of $26 million during last year’s second
quarter.
Donnelly continued, “we saw strong year over year cash
performance principally driven by improvements in working capital.
We are continuing to invest in our businesses, while taking the
opportunity to buy back shares.”
Outlook
Textron reiterated its full-year 2017 GAAP earnings per share
from continuing operations guidance of $2.22 to $2.45, or $2.40 to
$2.60 on an adjusted basis (non-GAAP), which is reconciled to GAAP
in an attachment to this release. The company also confirmed its
net cash provided by operating activities of continuing operations
of the manufacturing group guidance of $1,045 million to $1,145
million and manufacturing cash flow before pension contributions
(the non-GAAP measure) of $650 to $750 million.
Second Quarter Segment Results
Textron Aviation
Revenues at Textron Aviation were down $25 million, primarily
due to lower military and commercial turboprop volume, partially
offset by higher jet volume.
Textron Aviation delivered 46 new Citation jets, up from 45 jets
last year, 19 King Air turboprops compared to 23 in last year’s
second quarter, and 4 Beechcraft T-6 trainers, down from 11 last
year.
Textron Aviation recorded a segment profit of $54 million in the
second quarter compared to $81 million a year ago, primarily due to
lower volume and mix.
Textron Aviation backlog at the end of the second quarter was
$1.0 billion, approximately flat from the end of the first
quarter.
Bell
Bell revenues were up $21 million, as Bell delivered 14 H-1’s up
from 9 H-1’s last year, 4 V-22’s in the quarter, down from 6 in
last year’s second quarter, and 21 commercial helicopters compared
to 24 units last year.
Segment profit was up $31 million primarily due to improved
performance.
Bell backlog at the end of the second quarter was $5.4 billion,
down $234 million from the end of the first quarter.
Textron Systems
Revenues at Textron Systems decreased $10 million, primarily due
to lower volumes in the Weapons and Sensors and Unmanned Systems
product lines partially offset by higher volumes at Marine and Land
Systems.
Segment profit was down $18 million, due to lower volume and
mix.
Textron Systems’ backlog at the end of the second quarter was
$1.6 billion, down $170 million from the end of the first
quarter.
Industrial
Industrial revenues increased $109 million largely due to the
impact of the Arctic Cat acquisition.
Segment profit was down $17 million due to an operating loss at
Arctic Cat, which was consistent with our integration plan, and
unfavorable pricing and inflation.
Finance
Finance segment revenues decreased $2 million and segment profit
decreased $2 million.
Conference Call Information
Textron will also host a conference call at 8:00 a.m. (Eastern)
to discuss the results and the company’s outlook. The call will be
available via webcast at www.textron.com or by direct dial at (877)
209-9921 in the U.S. or (612) 332-0107 outside of the U.S. (request
the Textron Earnings Call).
In addition, the call will be recorded and available for
playback beginning at 10:30 a.m. (Eastern) on Wednesday, July 19,
2017 by dialing (320) 365-3844; Access Code: 408727.
A package containing key data that will be covered on today’s
call can be found in the Investor Relations section of the
company’s website at www.textron.com.
About Textron Inc.
Textron Inc. is a multi-industry company that leverages its
global network of aircraft, defense, industrial and finance
businesses to provide customers with innovative solutions and
services. Textron is known around the world for its powerful brands
such as Bell Helicopter, Cessna, Beechcraft, Hawker, Jacobsen,
Kautex, Lycoming, E-Z-GO, Greenlee, Textron Off Road, Arctic Cat,
Textron Systems, and TRU Simulation + Training. For more
information visit: www.textron.com.
Forward-looking Information
Certain statements in this release and other oral and written
statements made by us from time to time are “forward-looking
statements” within the meaning of the Private Securities Litigation
Reform Act of 1995. These forward-looking statements, which may
describe strategies, goals, outlook or other non-historical
matters, or project revenues, income, returns or other financial
measures, often include words such as “believe,” “expect,”
“anticipate,” “intend,” “plan,” “estimate,” “guidance,” “project,”
“target,” “potential,” “will,” “should,” “could,” “likely” or “may”
and similar expressions intended to identify forward-looking
statements. These statements are only predictions and involve known
and unknown risks, uncertainties, and other factors that may cause
our actual results to differ materially from those expressed or
implied by such forward-looking statements. Given these
uncertainties, you should not place undue reliance on these
forward-looking statements. Forward-looking statements speak only
as of the date on which they are made, and we undertake no
obligation to update or revise any forward-looking statements. In
addition to those factors described in our Annual Report on Form
10-K and our Quarterly Reports on Form 10-Q under “Risk Factors”,
among the factors that could cause actual results to differ
materially from past and projected future results are the
following: Interruptions in the U.S. Government’s ability to fund
its activities and/or pay its obligations; changing priorities or
reductions in the U.S. Government defense budget, including those
related to military operations in foreign countries; our ability to
perform as anticipated and to control costs under contracts with
the U.S. Government; the U.S. Government’s ability to unilaterally
modify or terminate its contracts with us for the U.S. Government’s
convenience or for our failure to perform, to change applicable
procurement and accounting policies, or, under certain
circumstances, to withhold payment or suspend or debar us as a
contractor eligible to receive future contract awards; changes in
foreign military funding priorities or budget constraints and
determinations, or changes in government regulations or policies on
the export and import of military and commercial products;
volatility in the global economy or changes in worldwide political
conditions that adversely impact demand for our products;
volatility in interest rates or foreign exchange rates; risks
related to our international business, including establishing and
maintaining facilities in locations around the world and relying on
joint venture partners, subcontractors, suppliers, representatives,
consultants and other business partners in connection with
international business, including in emerging market countries; our
Finance segment’s ability to maintain portfolio credit quality or
to realize full value of receivables; performance issues with key
suppliers or subcontractors; legislative or regulatory actions,
both domestic and foreign, impacting our operations or demand for
our products; our ability to control costs and successfully
implement various cost-reduction activities; the efficacy of
research and development investments to develop new products or
unanticipated expenses in connection with the launching of
significant new products or programs; the timing of our new product
launches or certifications of our new aircraft products; our
ability to keep pace with our competitors in the introduction of
new products and upgrades with features and technologies desired by
our customers; pension plan assumptions and future contributions;
demand softness or volatility in the markets in which we do
business; cybersecurity threats, including the potential
misappropriation of assets or sensitive information, corruption of
data or, operational disruption; difficulty or unanticipated
expenses in connection with integrating acquired businesses; and
the risk that acquisitions do not perform as planned, including,
for example, the risk that acquired businesses will not achieve
revenue and profit projections.
TEXTRON INC.
Revenues by Segment and Reconciliation
of Segment Profit to Net Income
Three and Six Months Ended July 1, 2017
and July 2, 2016
(Dollars in millions, except per share
amounts)
(Unaudited)
Three
Months Ended
Six Months Ended
July 1, 2017
July 2, 2016
July 1, 2017
July 2, 2016
REVENUES
MANUFACTURING: Textron
Aviation $ 1,171 $ 1,196 $ 2,141 $ 2,287 Bell 825 804 1,522 1,618
Textron Systems 477 487 893 811 Industrial 1,113
1,004 2,105 1,956 3,586
3,491 6,661 6,672 FINANCE 18 20
36 40
Total revenues $
3,604 $ 3,511 $
6,697 $ 6,712
SEGMENT
PROFIT
MANUFACTURING: Textron Aviation $ 54 $ 81 $ 90 $ 154 Bell 112 81
195 163 Textron Systems 42 60 62 89 Industrial 82
99 158 190 290 321 505
596 FINANCE 5 7 9
12
Segment Profit 295 328
514 608 Corporate expenses and other, net (31
) (31 ) (58 ) (63 ) Interest expense, net for Manufacturing group
(36 ) (37 ) (70 ) (70 ) Special charges (a) (13 ) -
(50 ) - Income from continuing
operations before income taxes 215 260 336 475 Income tax expense
(62 ) (82 ) (83 ) (146 )
Income from continuing operations 153 178
253 329 Discontinued operations, net of income taxes
- (1 ) 1 (2 )
Net
income $ 153 $ 177
$ 254 $ 327
Earnings per share: Income from continuing operations
$ 0.57 $ 0.66 $ 0.94
$ 1.21 Discontinued operations, net of income taxes
- (0.01 ) - (0.01 )
Net income $ 0.57 $ 0.65
$ 0.94 $ 1.20
Diluted average shares outstanding 269,299,000
271,316,000 271,076,000
272,172,000
Income from Continuing Operations and
Diluted Earnings Per Share (EPS) GAAP to Non-GAAP
Reconciliation:
Three Months Ended
July 1, 2017
Six Months Ended
July 1, 2017
Diluted EPS
Diluted EPS Income from continuing operations -
GAAP $ 153 $ 0.57 $
253 $ 0.94 Restructuring, net of taxes of $4
million and $9 million, respectively 8 0.03 18 0.07 Arctic Cat
restructuring, integration and transaction costs,
net of taxes of $0 million and $7 million,
respectively
1 - 16 0.05
Total Special charges, net of income taxes 9
0.03 34 0.12
Adjusted income from continuing
operations - Non-GAAP (b)
$ 162 $ 0.60 $
287 $ 1.06
(a) During 2016, we initiated a plan to restructure and realign
our businesses by implementing headcount reductions, facility
consolidations and other actions in order to improve overall
operating efficiency across Textron. In the three and six months
ended July 1, 2017, we recorded Special charges of $12 million and
$27 million, respectively, related to this plan. In connection with
the acquisition of Arctic Cat, we recorded Special charges of $23
million in the six months ended July 1, 2017, which consisted of
severance costs of $19 million, principally related to
change-of-control provisions, and integration and transaction costs
of $4 million.
(b) Adjusted income from continuing operations and adjusted
diluted earnings per share are non-GAAP financial measures as
defined in "Non-GAAP Financial Measures" attached to this
release.
Textron Inc. Condensed
Consolidated Balance Sheets (In millions) (Unaudited)
July 1,2017
December 31,2016
Assets Cash and equivalents $ 938 $ 1,137 Accounts
receivable, net 1,236 1,064 Inventories 4,655 4,464 Other current
assets 357 388 Net property, plant and equipment 2,669 2,581
Goodwill 2,340 2,113 Other assets 2,376 2,331 Finance group assets
1,204 1,280 Total Assets $ 15,775
$ 15,358
Liabilities and
Shareholders' Equity Short-term debt and current portion of
long-term debt $ 362 $ 363 Current liabilities 3,643 3,530 Other
liabilities 2,275 2,354 Long-term debt 2,774 2,414 Finance group
liabilities 1,039 1,123 Total
Liabilities 10,093 9,784 Total Shareholders' Equity
5,682 5,574 Total Liabilities and
Shareholders' Equity $ 15,775 $ 15,358
TEXTRON INC. MANUFACTURING GROUP
Condensed Schedule of Cash Flows (In millions) (Unaudited)
Three Months Ended Six Months Ended
July 1, July 2, July 1, July 2,
2017 2016 2017
2016
Cash flows from operating activities: Income from continuing
operations $ 150 $ 174 $ 244 $ 322 Depreciation and amortization
108 111 211 217 Changes in working capital 88 (211 ) (225 ) (601 )
Changes in other assets and liabilities and non-cash items 67 4 40
(8 ) Dividends Received from TFC -
29 -
29 Net cash from operating activities of continuing
operations 413 107
270 (41 )
Cash flows
from investing activities: Net cash used in acquisitions (11 )
(15 ) (329 ) (179 ) Capital expenditures (85 ) (119 ) (161 ) (207 )
Proceeds from the sale of property, plant and equipment - 3 - 5
Other investing activities, net -
- 1
(2 )
Net cash from investing activities
(96 ) (131 ) (489 )
(383 )
Cash flows from financing
activities: Proceeds from long-term debt - - 347 345 Increase
(decrease) in short-term debt (100 ) (30 ) - 12 Purchases of
Textron common stock (143 ) - (329 ) (215 ) Other financing
activities, net (3 ) (2 )
10 (1 ) Net cash from financing
activities (246 ) (32 )
28 141 Total cash flows
from continuing operations 71 (56 ) (191 ) (283 ) Total cash flows
from discontinued operations 2 (1 ) (23 ) (1 ) Effect of exchange
rate changes on cash and equivalents 7
(5 ) 15 (1
)
Net change in cash and equivalents 80 (62 ) (199 ) (285 )
Cash and equivalents at beginning of period 858
723 1,137
946 Cash and equivalents at end of
period $ 938 $ 661 $ 938
$ 661
Manufacturing Cash Flow GAAP to
Non-GAAP Reconciliation:
Net cash from operating activities of continuing operations
- GAAP $ 413 $ 107 $ 270 $ (41 ) Less: Capital expenditures (85 )
(119 ) (161 ) (207 )
Dividends received from TFC
- (29 ) - (29 ) Plus: Total pension contributions 13 12 27 24
Proceeds from the sale of property, plant and equipment -
3 -
5 Manufacturing cash flow before
pension contributions- Non-GAAP (a) $ 341
$ (26 ) $ 136 $ (248 )
(a) Manufacturing cash flow before pension
contributions is a non-GAAP financial measure as defined in
"Non-GAAP Financial Measures" attached to this release.
TEXTRON INC. Condensed Consolidated Schedule of
Cash Flows (In millions) (Unaudited)
Three Months
Ended
Six Months Ended
July 1, July 2, July 1, July 2,
2017 2016 2017
2016 Cash flows from operating
activities: Income from continuing operations $ 153 $ 178 $ 253
$ 329 Depreciation and amortization 112 114 218 223 Changes in
working capital 128 (168 ) (219 ) (568 ) Changes in other assets
and liabilities and non-cash items 65
(4 ) 37 (14
) Net cash from operating activities of continuing operations
458 120 289
(30 )
Cash flows from
investing activities: Net cash used in acquisitions (11 ) (15 )
(329 ) (179 ) Capital expenditures (85 ) (119 ) (161 ) (207 )
Finance receivables repaid 9 19 24 36 Other investing activities,
net 21 42
34 52 Net cash from
investing activities (66 ) (73 )
(432 ) (298 )
Cash flows from
financing activities: Proceeds from long-term debt 13 - 375 362
Increase (decrease) in short-term debt (100 ) (30 ) - 12 Principal
payments on long-term debt and nonrecourse debt (36 ) (44 ) (74 )
(90
) Purchases of Textron common stock (143 ) - (329 ) (215 ) Other
financing activities, net (3 )
(2 ) 10 (1 ) Net cash
from financing activities (269 )
(76 ) (18 ) 68 Total cash
flows from continuing operations 123 (29 ) (161 ) (260 ) Total cash
flows from discontinued operations 2 (1 ) (23 ) (1 ) Effect of
exchange rate changes on cash and equivalents 7
(5 ) 15
(1 )
Net change in cash and equivalents 132
(35 ) (169 ) (262 ) Cash and equivalents at beginning of period
997 778
1,298 1,005 Cash and
equivalents at end of period $ 1,129 $
743 $ 1,129 $ 743
TEXTRON INC. Non-GAAP Financial Measures
(Dollars in millions, except per share amounts)
We supplement the reporting of our financial
information determined under U.S. generally accepted accounting
principles (GAAP) with certain non-GAAP financial
measures. These non-GAAP financial measures exclude
certain significant items that may not be indicative of, or are
unrelated to, results from our ongoing business
operations. We believe that these non-GAAP measures may
be useful for period-over-period comparisons of underlying business
trends and our ongoing business performance, however, they should
be used in conjunction with GAAP measures. Our non-GAAP
measures should not be considered in isolation or as a substitute
for the related GAAP measures, and other companies may define
similarly named measures differently. We encourage investors to
review our financial statements and publicly-filed reports in the
entirety and not to rely on any single financial
measure. We utilize the following definitions for the
non-GAAP financial measures included in this release:
Adjusted income from
continuing operations and adjusted diluted earnings per
shareAdjusted income from continuing operations and
adjusted diluted earnings per share both exclude Special charges,
net of income taxes. We consider items recorded in Special charges,
net of income taxes, such as enterprise-wide restructuring and
acquisition-related restructuring, integration and transaction
costs, to be of a non-recurring nature that is not indicative of
ongoing operations.
Manufacturing cash
flow before pension contributionsManufacturing cash flow
before pension contributions adjusts net cash from operating
activities of continuing operations (GAAP) for the following:
- Excludes dividends received from
Textron Financial Corporation (TFC) and capital contributions to
TFC provided under the Support Agreement and debt agreements as
these cash flows are not representative of manufacturing
operations;
- Deducts capital expenditures and
includes proceeds from the sale of property, plant and equipment to
arrive at the net capital investment required to support ongoing
manufacturing operations;
- Adds back pension contributions as we
consider our pension obligations to be debt-like liabilities.
Additionally, these contributions can fluctuate significantly from
period to period and we believe that they are not representative of
cash used by our manufacturing operations during the period.
While we believe this measure provides a focus on cash generated
from manufacturing operations, before pension contributions, and
may be used as an additional relevant measure of liquidity, it does
not necessarily provide the amount available for discretionary
expenditures since we have certain non-discretionary obligations
that are not deducted from the measure.
Income from Continuing Operations and Diluted Earnings Per
Share (EPS) GAAP to Non-GAAP Reconciliation and Outlook:
ThreeMonths EndedJuly 1, 2017
SixMonths EndedJuly 1, 2017
Diluted EPS
Diluted EPS Income from continuing operations - GAAP
$ 153 $ 0.57
$ 253 $ 0.94
Restructuring, net of taxes of $4 million and $9 million,
respectively 8 0.03 18 0.07 Arctic Cat restructuring, integration
and transaction costs,
net of taxes of $0 million and $7 million,
respectively
1 - 16
0.05 Total Special charges, net of income taxes
9 0.03 34
0.12
Adjusted income from continuing operations -
Non-GAAP $ 162 $
0.60 $ 287 $
1.06
2017 Outlook
Diluted EPS Income from continuing operations - GAAP
$ 600 - $ 659 $ 2.22 - $ 2.45 Restructuring, net of
taxes of $18 million and $12 million 29 - 20 0.10 - 0.07 Arctic Cat
restructuring, integration and transaction costs, net of taxes of
$9 million 21 0.08 Total Special charges, net of income taxes 50 -
41 0.18 - 0.15
Adjusted income from continuing operations -
Non-GAAP $ 650 - $ 700 $ 2.40 - $ 2.60
Manufacturing Cash Flow Before Pension
Contributions GAAP to Non-GAAP Outlook:
2017 Outlook Net cash from operating activities of
continuing operations - GAAP $ 1,045 - $ 1,145 Less:
Capital expenditures (450) Plus: Total pension contributions 55
Manufacturing cash flow before pension contributions-
Non-GAAP $ 650 - $ 750
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version on businesswire.com: http://www.businesswire.com/news/home/20170719005192/en/
Textron Inc.Eric Salander, 401-457-2288orD’Ante Natili,
401-457-2288orMedia Contact:David Sylvestre,
401-457-2362
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