- Revenue down $332 million, or 10.7% from prior year largely due
to COVID-19 impacts
- EPS of $0.22; adjusted EPS of $0.35, excluding first quarter
special charges
- Strong liquidity position, Q1 2020 ending cash balance of $2.4
billion
Textron Inc. (NYSE: TXT) today reported first quarter 2020 net
income of $0.22 per share, compared to $0.76 per share in the first
quarter of 2019. Adjusted net income, a non-GAAP measure, was $0.35
per share for the first quarter of 2020, which excludes $39 million
of pre-tax special charges ($0.13 per share, after-tax) recorded in
the first quarter, related to the impairment of intangible assets
at Textron Aviation and Industrial due to economic disruptions
caused by the COVID-19 pandemic.
“Our team is meeting the unprecedented challenges presented by
this pandemic with a commitment to the health and safety of our
employees and communities while meeting customer commitments,” said
Textron Chairman and CEO Scott C. Donnelly. “We have taken measures
to reduce cost and conserve cash, including temporary plant
shutdowns and employee furloughs at many of our commercial
businesses. While the effects of COVID-19 on many of our end
markets has been unfavorable, Bell and Textron Systems delivered
higher revenue and strong margin performance for the quarter in
their military businesses.”
Cash Flow
Net cash used by operating activities of continuing operations
of the manufacturing group for the first quarter was $393 million,
compared to $196 million of net cash used last year. Manufacturing
cash flow before pension contributions, a non-GAAP measure that is
defined and reconciled to GAAP in an attachment to this release,
reflected a use of cash of $430 million compared to a use of cash
of $291 million last year.
First Quarter Segment Results
Textron Aviation
Revenues at Textron Aviation of $872 million were down $262
million in the first quarter of 2019, primarily due to lower volume
and mix of $260 million, largely the result of lower Citation jet
volume of $154 million and lower commercial turboprop volume of $99
million. The decrease in Citation jet and turboprop volume
reflected a decline in demand related to the pandemic, disruption
in our composite manufacturing production due to a plant accident
that occurred in December 2019, and delays in the acceptance of
aircraft related to COVID-19 travel restrictions.
Textron Aviation delivered 23 jets, down from 44 last year, and
16 commercial turboprops, down from 44 last year.
Segment profit was $3 million in the first quarter, down $103
million from a year ago, primarily due to the lower volume and the
unfavorable impact of $23 million from performance, which includes
$12 million of idle facility costs recognized in the first quarter
of 2020 due to temporary manufacturing facility closures and
employee furloughs resulting from the COVID-19 pandemic.
Textron Aviation backlog at the end of the first quarter was
$1.4 billion.
Bell
Bell revenues were $823 million, up $84 million or 11% from last
year, primarily on higher military volume, partially offset by
lower commercial volume.
Bell delivered 15 commercial helicopters in the quarter, down
from 30 last year.
Segment profit of $115 million was up $11 million, largely on
higher military volume partially offset by the unfavorable impact
of $8 million from performance and other. Performance and other
included $25 million in lower net favorable program adjustments,
partially offset by lower research and development costs.
Bell backlog at the end of the first quarter was $6.4
billion.
Textron Systems
Revenues at Textron Systems were $328 million, up $21 million or
7% from last year, primarily due to higher volume in most product
lines.
Segment profit of $26 million was down $2 million from last
year, as unfavorable performance was largely offset by the impact
of higher volume.
Textron Systems’ backlog at the end of the first quarter was
$1.4 billion.
Industrial
Industrial revenues were $740 million, a decrease of $172
million from last year, primarily related to lower volume and mix
in the Fuel Systems and Functional Components product line from
manufacturing facility closures related to the COVID-19 pandemic
that began in China in January and expanded to European and North
American locations by the end of the quarter.
Segment profit of $9 million was down $41 million from the first
quarter of 2019, primarily related to the lower volume and mix.
Industrial also realized approximately $13 million of unfavorable
performance in the first quarter due to manufacturing facility
closures and employee furloughs resulting from the COVID-19
pandemic, that was mostly offset by other favorable
performance.
Finance
Finance segment revenues were down $3 million, and profit was
down $3 million from last year’s first quarter.
Outlook
“Textron is well-prepared to handle this period of uncertainty.
Our financial profile consists of ample liquidity and diversified
revenue streams. We are confident in the actions we are taking
during this downturn and we expect them to position us for success
as we begin to exit this global shutdown,” said Textron Chairman
and CEO Scott C. Donnelly.
Conference Call Information
Textron will host its conference call today, April 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, April 30,
2020 by dialing (402) 970-0847; Access Code: 1767619.
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
(Dollars in millions, except per
share amounts)
(Unaudited)
Three Months Ended
April 4,
2020
March 30,
2019
REVENUES MANUFACTURING: Textron
Aviation
$
872
$
1,134
Bell
823
739
Textron Systems
328
307
Industrial
740
912
2,763
3,092
FINANCE
14
17
Total revenues
$
2,777
$
3,109
SEGMENT PROFIT
MANUFACTURING: Textron Aviation
$
3
$
106
Bell
115
104
Textron Systems
26
28
Industrial
9
50
153
288
FINANCE
3
6
Segment Profit
156
294
Corporate expenses and other, net
(14
)
(47
)
Interest expense, net for Manufacturing group
(34
)
(35
)
Special charges (a)
(39
)
-
Income before income taxes
69
212
Income tax expense
(19
)
(33
)
Net Income
$
50
$
179
Earnings Per Share
$
0.22
$
0.76
Diluted average shares outstanding
228,927,000
236,437,000
Net Income and Diluted Earnings Per Share (EPS)
GAAP to Non-GAAP Reconciliation: Three Months
EndedApril 4, 2020 Diluted EPS Net income - GAAP
$
50
$
0.22
Add: Special charges, net of taxes (a)
30
0.13
Adjusted net income - Non-GAAP (b)
$
80
$
0.35
(a)
Special charges included 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 COVID-19 pandemic. (b) 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)
April 4,2020 January 4,2020
Assets Cash and equivalents
$
2,263
$
1,181
Accounts receivable, net
870
921
Inventories
4,385
4,069
Other current assets
984
894
Net property, plant and equipment
2,483
2,527
Goodwill
2,150
2,150
Other assets
1,854
2,312
Finance group assets
957
964
Total Assets
$
15,946
$
15,018
Liabilities and Shareholders' Equity
Short-term debt and current portion of long-term debt
$
1,396
$
561
Accounts payable
1,322
1,378
Other current liabilities
1,797
1,907
Other liabilities
2,143
2,288
Long-term debt
2,956
2,563
Finance group liabilities
798
803
Total Liabilities
10,412
9,500
Total Shareholders' Equity
5,534
5,518
Total Liabilities and Shareholders' Equity
$
15,946
$
15,018
TEXTRON INC. MANUFACTURING GROUP Condensed
Schedule of Cash Flows (In millions) (Unaudited)
Three Months Ended April 4, March 30,
2020
2019
Cash flows from operating activities: Net income
$
48
$
175
Depreciation and amortization
89
100
Deferred income taxes and income taxes receivable/payable
9
6
Pension, net
(5
)
(14
)
Changes in assets and liabilities: Accounts receivable, net
47
(33
)
Inventories
(368
)
(241
)
Accounts payable
(49
)
47
Dividends received from Finance group
-
50
Other, net
(164
)
(286
)
Net cash from operating activities
(393
)
(196
)
Cash flows from investing activities: Capital expenditures
(50
)
(59
)
Other investing activities, net
(6
)
3
Net cash from investing activities
(56
)
(56
)
Cash flows from financing activities: Increase in short-term
debt
603
100
Proceeds from long-term debt
643
-
Proceeds from borrowings against corporate-owned insurance policies
377
-
Principal payments on long-term debt and nonrecourse debt
(7
)
-
Purchases of Textron common stock
(54
)
(202
)
Dividends paid
(5
)
(5
)
Other financing activities, net
(9
)
9
Net cash from financing activities
1,548
(98
)
Total cash flows from continuing operations
1,099
(350
)
Total cash flows from discontinued operations
(1
)
-
Effect of exchange rate changes on cash and equivalents
(16
)
9
Net change in cash and equivalents
1,082
(341
)
Cash and equivalents at beginning of period
1,181
987
Cash and equivalents at end of period
$
2,263
$
646
Manufacturing Cash Flow GAAP to Non-GAAP
Reconciliation: Three Months Ended
April 4,
March 30,
2020
2019
Net cash from operating activities - GAAP
$
(393
)
$
(196
)
Less: Capital expenditures
(50
)
(59
)
Dividends received from TFC
-
(50
)
Plus: Total pension contributions
12
13
Proceeds from the sale of property, plant and equipment
1
1
Manufacturing cash flow before pension contributions - Non-GAAP
(a)
$
(430
)
$
(291
)
(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
April 4,
March 30,
2020
2019
Cash flows from operating activities: Net income
$
50
$
179
Depreciation and amortization
90
102
Deferred income taxes and income taxes receivable/payable
10
8
Pension, net
(5
)
(14
)
Changes in assets and liabilities: Accounts receivable, net
47
(33
)
Inventories
(368
)
(215
)
Accounts payable
(49
)
47
Captive finance receivables, net
-
(1
)
Other, net
(169
)
(289
)
Net cash from operating activities
(394
)
(216
)
Cash flows from investing activities: Capital
expenditures
(50
)
(59
)
Finance receivables repaid
13
12
Other investing activities, net
(6
)
5
Net cash from investing activities
(43
)
(42
)
Cash flows from financing activities: Increase in
short-term debt
603
100
Proceeds from long-term debt
643
-
Proceeds from borrowings against corporate-owned insurance policies
377
-
Principal payments on long-term debt and nonrecourse debt
(24
)
(19
)
Purchases of Textron common stock
(54
)
(202
)
Dividends paid
(5
)
(5
)
Other financing activities, net
3
10
Net cash from financing activities
1,543
(116
)
Total cash flows from continuing operations
1,106
(374
)
Total cash flows from discontinued operations
(16
)
-
Effect of exchange rate changes on cash and equivalents
(1
)
9
Net change in cash and equivalents
1,089
(365
)
Cash and equivalents at beginning of period
1,357
1,107
Cash and equivalents at end of period
$
2,446
$
742
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 and adjusted
diluted earnings per share
Adjusted net income and adjusted diluted earnings per share both
exclude Special charges, net of taxes. 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.
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 and Diluted Earnings Per Share (EPS) GAAP to Non-GAAP
Reconciliation: Three Months EndedApril 4, 2020
Diluted EPS Net income - GAAP
$
50
$
0.22
Special charges, net of income taxes of $9M
30
0.13
Adjusted net income - Non-GAAP
$
80
$
0.35
Manufacturing Cash Flow Before Pension
Contributions GAAP to Non-GAAP Reconciliation: Three
Months Ended April 4,2020 March 30,2019 Net
cash from operating activities of continuing operations - GAAP
$
(393
)
$
(196
)
Less: Capital expenditures
(50
)
(59
)
Dividends received from TFC
-
(50
)
Plus: Total pension contributions
12
13
Proceeds from the sale of property, plant and equipment
1
1
Manufacturing cash flow before pension contributions -
Non-GAAP
$
(430
)
$
(291
)
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200430005116/en/
Investor Contacts: Eric Salander – 401-457-2288 Cameron
Vollmuth – 401-457-2288 Media Contact: David Sylvestre –
401-457-2362
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