- Cash flow from operations of $245 million
- Bell revenue up 7% from prior year, operating margin of
14.4%
- Textron Systems revenue up 6% from prior year, operating margin
of 11.3%
- Restarted manufacturing operations at Aviation and Industrial
segments
Textron Inc. (NYSE: TXT) today reported second quarter 2020 net
loss of $0.40 per share, compared to income of $0.93 per share in
the second quarter of 2019. Adjusted net income, a non-GAAP
measure, was $0.13 per share for the second quarter of 2020.
Adjusted net income excludes $78 million of pre-tax special charges
($0.29 per share, after-tax) related to the restructuring plan
announced in June and a non-cash inventory valuation charge of $55
million ($0.24 per share, after-tax) as we ceased manufacturing at
our TRU Simulation + Training Montreal facility.
“Our defense businesses performed extremely well with both
revenue growth and strong operating performance in the quarter,
while our commercial businesses worked diligently to reduce costs
and mitigate the impacts of temporary plant closures,” said Textron
Chairman and CEO Scott C. Donnelly. “The outstanding efforts of our
teams in response to the challenging conditions arising from the
pandemic drove strong cash performance and positive adjusted
earnings in the quarter.”
Cash Flow
Net cash provided by operating activities of the manufacturing
group for the second quarter totaled $245 million, compared to $163
million in last year’s second quarter. Manufacturing cash flow
before pension contributions, a non-GAAP measure, totaled $215
million, compared to $102 million last year.
Second Quarter Segment Results
Textron Aviation
Revenues at Textron Aviation of $747 million were down $376
million from the second quarter of 2019, primarily due to lower
Citation jet volume of $178 million, reflecting a decline in demand
related to the pandemic and to a lesser extent, delays in the
acceptance of aircraft related to COVID-19 travel restrictions, and
lower aftermarket volume of $120 million, reflecting lower aircraft
utilization.
Textron Aviation delivered 23 jets, down from 46 last year, and
15 commercial turboprops, down from 34 last year.
Segment loss was $66 million in the second quarter, down from
$105 million of profit last year, primarily due to the lower volume
and mix and an unfavorable impact of $27 million from performance.
Performance includes $53 million of idle facility costs recognized
in the second quarter of 2020.
Textron Aviation backlog at the end of the second quarter was
$1.4 billion.
Bell
Bell revenues were $822 million, up $51 million or 7% from last
year, primarily on higher military volume, partially offset by
lower commercial volume.
Bell delivered 27 commercial helicopters in the quarter, down
from 53 last year.
Segment profit of $118 million was up $15 million, largely on
higher military volume, partially offset by an unfavorable impact
from performance.
Bell backlog at the end of the second quarter was $5.8
billion.
Textron Systems
Revenues at Textron Systems were $326 million, up $18 million or
6% from last year, primarily due to higher volume in our Unmanned
Systems product line, partially offset by lower volume in the
Marine and Land Systems product line.
Segment profit of $37 million was down $12 million from last
year, primarily due to an unfavorable impact from performance,
which included an $18 million gain related to our contribution of
assets to a training business formed with FlightSafety
International during last year’s second quarter.
Textron Systems’ backlog at the end of the second quarter was
$1.9 billion.
Industrial
Industrial revenues of $562 million were down $447 million from
last year, $321 million at Fuel Systems and Functional Components
and $126 million at Textron Specialized Vehicles, primarily due to
temporary manufacturing facility closures.
Segment loss was $11 million, down from $76 million of profit in
the second quarter of 2019, primarily related to lower volume and
mix, partially offset by favorable performance which included the
impact of cost reduction activities. Industrial also recognized
approximately $8 million of idle facility costs in the second
quarter of 2020.
Finance
Finance segment revenues were down $1 million, and profit was
down $2 million to last year’s second quarter.
Conference Call Information
Textron will host its conference call today, July 30, 2020 at
8:00 a.m. (Eastern) to discuss its results and outlook. The call
will be available via webcast at www.textron.com or by direct dial
at (844) 721-7241 in the U.S. or (409) 207-6955 outside of the
U.S.; Access Code: 4252363.
In addition, the call will be recorded and available for
playback beginning at 11:00 a.m. (Eastern) on Thursday, July 30,
2020 by dialing (402) 970-0847; Access Code: 8848311.
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, Cessna, Beechcraft, Hawker, Jacobsen, Kautex,
Lycoming, E-Z-GO, 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; the
risk that acquisitions do not perform as planned, including, for
example, the risk that acquired businesses will not achieve revenue
and profit projections; the impact of changes in tax legislation;
and risks and uncertainties related to the impact of the COVID-19
pandemic on our business and operations.
TEXTRON INC.Revenues by Segment and Reconciliation of Segment
Profit to Net Income (Loss)(Dollars in millions, except per share
amounts)(Unaudited)
Three Months Ended Six Months
Ended July 4,2020 June 29,2019 July 4,2020
June 29,2019 REVENUES
MANUFACTURING: Textron Aviation
$
747
$
1,123
$
1,619
$
2,257
Bell
822
771
1,645
1,510
Textron Systems
326
308
654
615
Industrial
562
1,009
1,302
1,921
2,457
3,211
5,220
6,303
FINANCE
15
16
29
33
Total Revenues
$
2,472
$
3,227
$
5,249
$
6,336
SEGMENT PROFIT
MANUFACTURING: Textron Aviation
$
(66
)
$
105
$
(63
)
$
211
Bell
118
103
233
207
Textron Systems
37
49
63
77
Industrial
(11
)
76
(2
)
126
78
333
231
621
FINANCE
4
6
7
12
Segment Profit
82
339
238
633
Corporate expenses and other, net
(30
)
(24
)
(44
)
(71
)
Interest expense, net for Manufacturing group
(37
)
(36
)
(71
)
(71
)
Special charges (a)
(78
)
-
(117
)
-
Inventory charge (b)
(55
)
-
(55
)
-
Income (loss) before income taxes
(118
)
279
(49
)
491
Income tax (expense) benefit
26
(62
)
7
(95
)
Net Income (Loss)
$
(92
)
$
217
$
(42
)
$
396
Earnings (Loss) Per Share
$
(0.40
)
$
0.93
$
(0.18
)
$
1.69
Diluted average shares outstanding (c)
228,247,000
233,545,000
228,279,000
234,993,000
Net Income (Loss) and Diluted Earnings (Loss) Per Share
(EPS) GAAP to Non-GAAP Reconciliation: Three Months
EndedJuly 4, 2020 Six Months EndedJuly 4, 2020
Diluted EPS Diluted EPS Net Income (Loss) -
GAAP
$
(92
)
$
(0.40
)
$
(42
)
$
(0.18
)
Add: Special charges, net of taxes
67
0.29
97
0.42
Inventory charge, net of taxes
55
0.24
55
0.24
Adjusted Net Income - Non-GAAP (d)
$
30
$
0.13
$
110
$
0.48
(a)
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 restructuring
plan primarily impacts the TRU Simulation + Training (TRU) business
within the Textron Systems segment, the Textron Aviation segment
and the Textron Specialized Vehicles business within the Industrial
segment. In connection with this plan, special charges includes
severance and related costs of $51 million, asset impairment
charges of $15 million and contract termination and other facility
closing costs of $12 million for both the three and six months
ended July 4, 2020. Special charges for the six months ended July
4, 2020 also includes the impairment of indefinite-lived trade name
intangible assets totaling $32 million in the Textron Aviation
segment and $7 million in the Industrial segment resulting from
changes in valuation assumptions related to the economic and
business disruptions caused by the pandemic.
(b)
In connection with the restructuring plan initiated in the second
quarter of 2020, we ceased manufacturing at TRU's facility in
Montreal, Canada, resulting in the production suspension of our
commercial air transport simulators. As a result of this action and
current market conditions, we recorded a $55 million charge to
write-down the related inventory to its net realizable value.
(c)
For the three and six months ended July 4, 2020, the diluted
average shares used to calculated EPS on a GAAP basis excludes
potential common shares (stock options and restricted stock units),
due to their antidilutive effect resulting from the net loss. For
the three and six months ended June 29, 2019, fully dilutive shares
were used to calculate EPS.
(d)
Adjusted net income 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
4,2020 January 4,2020 Assets Cash
and equivalents $
2,176
$
1,181
Accounts receivable, net
764
921
Inventories
4,262
4,069
Other current assets
863
894
Net property, plant and equipment
2,446
2,527
Goodwill
2,153
2,150
Other assets
1,857
2,312
Finance group assets
950
964
Total Assets $
15,471
$
15,018
Liabilities and Shareholders'
Equity Short-term debt and current portion of long-term
debt $
1,107
$
561
Accounts payable
982
1,378
Other current liabilities
1,983
1,907
Other liabilities
2,128
2,288
Long-term debt
2,955
2,563
Finance group liabilities
789
803
Total Liabilities
9,944
9,500
Total Shareholders' Equity
5,527
5,518
Total Liabilities and Shareholders' Equity $
15,471
$
15,018
TEXTRON INC.
MANUFACTURING GROUP
Condensed Schedule of Cash
Flows
(In millions)
(Unaudited)
Three Months Ended Six
Months Ended July 4, June 29, July
4, June 29,
2020
2019
2020
2019
Cash Flows from Operating Activities: Net income (loss)
$
(95
)
$
212
$
(47
)
$
387
Depreciation and amortization
97
99
186
199
Deferred income taxes and income taxes receivable/payable
(49
)
37
(40
)
43
Pension, net
(3
)
(15
)
(8
)
(29
)
Changes in assets and liabilities: Accounts receivable, net
110
69
157
36
Inventories
124
(291
)
(244
)
(532
)
Accounts payable
(351
)
85
(400
)
132
Dividends received from Finance group
-
-
-
50
Other, net
412
(33
)
248
(319
)
Net cash from operating activities
245
163
(148
)
(33
)
Cash Flows from Investing Activities: Capital expenditures
(46
)
(76
)
(96
)
(135
)
Net proceeds from corporate-owned life insurance policies
15
2
17
4
Other investing activities, net
2
3
(6
)
4
Net cash from investing activities
(29
)
(71
)
(85
)
(127
)
Cash Flows from Financing Activities: Increase (decrease) in
short-term debt
(104
)
(100
)
499
-
Proceeds from long-term debt
(1
)
297
642
297
Net borrowings against corporate-owned insurance policies
(15
)
-
362
-
Principal payments on long-term debt and nonrecourse debt
(187
)
(1
)
(194
)
(1
)
Purchases of Textron common stock
-
(159
)
(54
)
(361
)
Dividends paid
(4
)
(4
)
(9
)
(9
)
Other financing activities, net
1
10
(8
)
19
Net cash from financing activities
(310
)
43
1,238
(55
)
Total cash flows from continuing operations
(94
)
135
1,005
(215
)
Total cash flows from discontinued operations
1
(1
)
-
(1
)
Effect of exchange rate changes on cash and equivalents
6
(5
)
(10
)
4
Net Change in Cash and Equivalents
(87
)
129
995
(212
)
Cash and Equivalents at Beginning of Period
2,263
646
1,181
987
Cash and Equivalents at End of Period
$
2,176
$
775
$
2,176
$
775
Manufacturing Cash Flow GAAP to Non-GAAP
Reconciliation:
Three Months Ended
Six Months Ended
July 4, June 29, July 4, June 29,
2020
2019
2020
2019
Net Cash from Operating Activities - GAAP
$
245
$
163
$
(148
)
$
(33
)
Less: Capital expenditures
(46
)
(76
)
(96
)
(135
)
Dividends received from TFC
-
-
-
(50
)
Plus: Total pension contributions
12
12
24
25
Proceeds from the sale of property, plant and equipment
4
3
5
4
Manufacturing Cash Flow Before Pension Contributions - Non-GAAP
(a)
$
215
$
102
$
(215
)
$
(189
)
(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
4, June 29, July 4, June 29,
2020
2019
2020
2019
Cash Flows from Operating Activities: Net income (loss)
$
(92
)
$
217
$
(42
)
$
396
Depreciation and amortization
98
100
188
202
Deferred income taxes and income taxes receivable/payable
(48
)
38
(38
)
46
Pension, net
(3
)
(15
)
(8
)
(29
)
Changes in assets and liabilities: Accounts receivable, net
110
69
157
36
Inventories
124
(290
)
(244
)
(505
)
Accounts payable
(351
)
85
(400
)
132
Captive finance receivables, net
(14
)
(18
)
(14
)
(19
)
Other, net
418
(30
)
249
(319
)
Net cash from operating activities
242
156
(152
)
(60
)
Cash Flows from Investing Activities: Capital expenditures
(46
)
(76
)
(96
)
(135
)
Finance receivables repaid
7
8
20
20
Net proceeds from corporate-owned life insurance policies
15
2
17
4
Other investing activities, net
3
4
(5
)
7
Net cash from investing activities
(21
)
(62
)
(64
)
(104
)
Cash Flows from Financing Activities: Increase (decrease) in
short-term debt
(104
)
(100
)
499
-
Proceeds from long-term debt
(1
)
297
642
297
Net borrowings against corporate-owned insurance policies
(15
)
-
362
-
Principal payments on long-term debt and nonrecourse debt
(205
)
(16
)
(229
)
(35
)
Purchases of Textron common stock
-
(159
)
(54
)
(361
)
Dividends paid
(4
)
(4
)
(9
)
(9
)
Other financing activities, net
1
9
4
19
Net cash from financing activities
(328
)
27
1,215
(89
)
Total cash flows from continuing operations
(107
)
121
999
(253
)
Total cash flows from discontinued operations
1
(1
)
-
(1
)
Effect of exchange rate changes on cash and equivalents
6
(5
)
(10
)
4
Net Change in Cash and Equivalents
(100
)
115
989
(250
)
Cash and Equivalents at Beginning of Period
2,446
742
1,357
1,107
Cash and Equivalents at End of Period
$
2,346
$
857
$
2,346
$
857
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 definition for the non-GAAP financial measure included in
this release:
Adjusted Net Income (Loss) and Adjusted
Diluted Earnings Per Share
Adjusted net income (loss) and adjusted diluted earnings per
share both exclude Special charges, net of taxes and an Inventory
charge, net of taxes, related to the restructuring plan initiated
in the second quarter of 2020. We consider items recorded in
Special charges such as enterprise-wide restructuring, certain
asset impairment charges and acquisition-related restructuring,
integration and transaction costs, to be of a non-recurring nature
that is not indicative of ongoing operations. For the second
quarter of 2020, the inventory charge is also excluded as it
relates to the write-down of inventory in connection with an action
taken under the restructuring plan at our TRU Simulation + Training
(TRU) business. Due to the substantial decline in demand and order
cancellations for flight simulators resulting from the impact of
the pandemic on the commercial air transportation business, we
ceased manufacturing at TRU’s facility in Montreal, Canada,
resulting in the production suspension of its commercial air
transport simulators. As a result of this action and current market
conditions, the related inventory was written-down to its net
realizable value.
Manufacturing Cash Flow Before Pension
Contributions
Manufacturing cash flow before pension contributions adjusts net
cash from operating activities (GAAP) for the following:
- 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;
- 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;
- 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.
Net Income (Loss) and Diluted Earnings (Loss) Per Share (EPS)
GAAP to Non-GAAP Reconciliation:
Three Months Ended
July 4, 2020
Six Months Ended
July 4, 2020
Diluted EPS Diluted EPS Net Income (Loss) -
GAAP
$
(92
)
$
(0.40
)
$
(42
)
$
(0.18
)
Special charges, net of income taxes
67
0.29
97
0.42
Inventory charge, net of income taxes
55
0.24
55
0.24
Adjusted Net Income - Non-GAAP
$
30
$
0.13
$
110
$
0.48
Manufacturing Cash Flow Before
Pension Contributions GAAP to Non-GAAP Reconciliation:
Three Months Ended
Six Months Ended
July 4,
2020
June 29,
2019
July 4,
2020
June 29,
2019
Net Cash from Operating Activities - GAAP
$
245
$
163
$
(148
)
$
(33
)
Less: Capital expenditures
(46
)
(76
)
(96
)
(135
)
Dividends received from TFC
-
-
-
(50
)
Plus: Total pension contributions
12
12
24
25
Proceeds from the sale of property, plant and equipment
4
3
5
4
Manufacturing Cash Flow Before Pension Contributions -
Non-GAAP
$
215
$
102
$
(215
)
$
(189
)
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200730005132/en/
Investor Contacts: Eric Salander – 401-457-2288 Cameron
Vollmuth – 401-457-2288 Media Contact: David Sylvestre –
401-457-2362
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