Textron Inc. (NYSE: TXT) today reported third quarter 2017
income from continuing operations of $0.60 per share or $0.65 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 $1.10 per share or $0.61 per share
(non-GAAP) of adjusted income from continuing operations in the
third quarter of 2016. During this year’s third quarter, the
company recorded $25 million of pre-tax special charges ($0.05 per
share, after-tax).
Revenues in the quarter were $3.5 billion, up 7.2 percent from
the third quarter of 2016. Textron segment profit in the quarter
was $295 million, down $15 million from the third quarter of
2016.
“Growth in the third quarter was the result of strong commercial
demand at Bell, increased deliveries at Textron Systems and higher
revenues at Industrial due to the acquisition of Arctic Cat,” said
Textron Chairman and CEO Scott C. Donnelly.
Cash Flow
Net cash provided by operating activities of continuing
operations of the manufacturing group for the third quarter totaled
$100 million, compared to $178 million in last year’s third
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 $279 million compared to $94
million during last year’s third quarter. The company contributed
$311 million to its pension plans during the quarter.
The company is increasing its expected full-year manufacturing
cash flow before pension contributions (a non-GAAP measure) by $150
million to a range of $800 to $900 million. With expected pension
contributions of about $355 million, net cash provided by operating
activities of continuing operations of the manufacturing group is
now expected to be in a range of $895 million to $995 million.
Earnings Outlook
Textron expects full-year 2017 GAAP earnings per share from
continuing operations will be in the range of $2.20 to $2.30, or
$2.40 to $2.50 on an adjusted basis (non-GAAP), which is reconciled
to GAAP in an attachment to this release.
Third Quarter Segment Results
Textron Aviation
Revenues at Textron Aviation were down $44 million, as Textron
Aviation delivered 41 new Citation jets, flat with last year, 24
King Air turboprops compared to 29 in last year’s third quarter,
and 5 Beechcraft T-6 trainers, down from 8 last year.
Textron Aviation recorded a segment profit of $93 million in the
third quarter compared to $100 million a year ago, due to
unfavorable performance and lower volume and mix, partially offset
by a favorable impact from pricing.
Textron Aviation backlog at the end of the third quarter was
$1.2 billion, up $142 million from the end of the second
quarter.
Bell
Bell revenues were up $78 million, as Bell delivered 39
commercial helicopters, up from 25 units last year, 8 H-1’s, flat
with last year, and 5 V-22’s, down from 6 in last year’s third
quarter.
Segment profit was up $9 million primarily due to a favorable
impact from performance and other.
Bell backlog at the end of the third quarter was $5.0 billion,
down $413 million from the end of the second quarter.
Textron Systems
Revenues at Textron Systems were up $45 million, primarily due
to higher volume in the Marine and Land Systems product line,
partially offset by lower volume in the Weapons and Sensors product
line.
Segment profit was down $4 million.
Textron Systems’ backlog at the end of the third quarter was
$1.5 billion, down $85 million from the end of the second
quarter.
Industrial
Industrial revenues increased $156 million largely due to the
impact of the Arctic Cat acquisition.
Segment profit was down $17 million due to unfavorable volume
and mix, pricing and inflation.
Finance
Finance segment revenues decreased $2 million and segment profit
increased $4 million.
Conference Call Information
Textron will also host a conference call today, October 19, 2017
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 Thursday, October 19,
2017 by dialing (320) 365-3844; Access Code: 408728.
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
(Dollars in millions, except per share
amounts)
(Unaudited)
Three
Months Ended Nine Months Ended
September 30, 2017 October 1,
2016 September 30, 2017
October 1, 2016
REVENUES
MANUFACTURING: Textron Aviation
$
1,154
$
1,198
$
3,295
$
3,485
Bell 812 734 2,334 2,352 Textron Systems 458 413 1,351 1,224
Industrial 1,042 886 3,147
2,842 3,466 3,231 10,127 9,903 FINANCE 18
20 54 60
Total
revenues $ 3,484
$
3,251
$
10,181
$
9,963
SEGMENT
PROFIT
MANUFACTURING: Textron Aviation
$
93
$
100
$
183
$
254
Bell 106 97 301 260 Textron Systems 40 44 102 133 Industrial 49
66 207 256 288 307
793 903 FINANCE 7 3 16
15
Segment Profit
295
310 809 918 Corporate expenses and
other, net
(30
)
(53
)
(88
)
(116
)
Interest expense, net for Manufacturing group
(37
)
(35
)
(107
)
(105
)
Special charges (a) (25 ) (115 ) (75 ) (115 )
Income from continuing operations before income taxes 203
107 539 582 Income tax benefit (expense) (b) (44 ) 192
(127 ) 46
Income from
continuing operations 159 299 412
628 Discontinued operations, net of income taxes (b)
- 122 1 120
Net
income
$
159
$
421
$
413
$
748
Earnings per share: Income from continuing
operations
$
0.60
$
1.10
$
1.53
$
2.31
Discontinued operations, net of income taxes -
0.45 - 0.44
Net income
$
0.60
$
1.55
$
1.53
$
2.75
Diluted average shares outstanding 266,989,000
272,099,000 269,734,000
272,051,000
Income
from Continuing Operations and Diluted Earnings Per Share (EPS)
GAAP to Non-GAAP Reconciliation:
Three Months Ended Nine Months
Ended September 30, 2017
October 1, 2016 September 30, 2017
October 1, 2016 Income from
continuing operations - GAAP
$
159
$
299
$
412
$
628
Restructuring, net of taxes of $6 million, $42 million,
$15 million and $42 million,
respectively
9 73 27 73 Arctic Cat restructuring, integration and transaction
costs,
net of taxes of $4 million and $11
million, respectively
6 - 22 - Income tax settlement - (206 )
- (206 ) Total Special charges, net of income taxes
15 (133 ) 49 (133 )
Adjusted income from continuing operations - Non-GAAP (c)
$
174
$
166
$
461
$
495
Earnings per share: Income from continuing
operations - GAAP
$
0.60
$
1.10
$
1.53
$
2.31
Restructuring, net of taxes 0.03 0.27 0.10 0.27 Arctic Cat
restructuring, integration and transaction costs, net of taxes 0.02
- 0.08 - Income tax settlement - (0.76 )
- (0.76 )
Total Special charges, net of income
taxes
0.05 (0.49 ) 0.18 (0.49 )
Adjusted income from continuing operations - Non-GAAP (c)
$
0.65
$
0.61
$
1.71
$
1.82
(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 connection with this plan,
we recorded Special charges of $15 million and $42 million in the
three and nine months ended September 30, 2017, respectively, and
$115 million in both the three and nine months ended October 1,
2016. In addition, we recorded Special charges of $10 million and
$33 million in the three and nine months ended September 30, 2017,
respectively, related to the Arctic Cat acquisition, which included
restructuring and integration and transaction costs.
(b) The three and nine months ended October 1, 2016 include an
income tax benefit of $319 million, inclusive of interest, of which
$206 million is attributable to continuing operations and $113
million is attributable to discontinued operations. This benefit is
a result of the final settlement with the Internal Revenue Service
Office of Appeals for our 1998 to 2008 tax years.
(c) 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)
September
30,
2017
December 31,2016
Assets Cash and equivalents $ 1,104 $ 1,137 Accounts
receivable, net 1,344 1,064 Inventories 4,518 4,464 Other current
assets 408 388 Net property, plant and equipment 2,701 2,581
Goodwill 2,354 2,113 Other assets 2,269 2,331 Finance group assets
1,177 1,280 Total Assets $ 15,875
$ 15,358
Liabilities and
Shareholders' Equity Short-term debt and current portion of
long-term debt $ 364 $ 363 Current liabilities 3,677 3,530 Other
liabilities 1,931 2,354 Long-term debt 3,078 2,414 Finance group
liabilities 1,007 1,123 Total
Liabilities 10,057 9,784 Total Shareholders' Equity
5,818 5,574 Total Liabilities and
Shareholders' Equity $ 15,875 $ 15,358
TEXTRON INC. MANUFACTURING GROUP Condensed
Schedule of Cash Flows (In millions) (Unaudited)
Three Months Ended Nine
Months Ended September 30, October 1,
September 30, October 1, 2017
2016 2017 2016 Cash flows from
operating activities: Income from continuing operations $ 155 $
291 $ 399 $ 613 Depreciation and amortization 122 105 333 322
Changes in working capital (19 ) (266 ) (244 ) (867 ) Changes in
other assets and liabilities and non-cash items (158 ) 48 (118 ) 40
Dividends Received from TFC - -
- 29
Net cash from operating activities of
continuing operations
100 178 370
137
Cash flows from investing activities: Net
cash used in acquisitions (1 ) - (330 ) (179 ) Capital expenditures
(138 ) (99 ) (299 ) (306 ) Proceeds from the sale of property,
plant and equipment 6 3 6 8 Other investing activities, net
- (1 ) 1 (3 ) Net
cash from investing activities (133 ) (97 )
(622 ) (480 )
Cash flows from financing
activities: Proceeds from long-term debt 298 - 645 345
Principal payments on long-term debt - (251 ) (3 ) (253 ) Increase
in short-term debt 2 98 2 110 Purchases of Textron common stock
(122 ) - (451 ) (215 ) Other financing activities, net 8
3 21 4
Net cash from financing activities 186
(150 ) 214 (9 ) Total cash flows
from continuing operations 153 (69 ) (38 ) (352 ) Total cash flows
from discontinued operations (1 ) (1 ) (24 ) (2 ) Effect of
exchange rate changes on cash and equivalents 14
(2 ) 29 (3 )
Net
change in cash and equivalents 166 (72 ) (33 ) (357 ) Cash and
equivalents at beginning of period 938
661 1,137 946 Cash and
equivalents at end of period $ 1,104 $ 589 $
1,104 $ 589
Manufacturing Cash Flow
GAAP to Non-GAAP Reconciliation:
Net cash from operating activities of continuing
operations - GAAP $ 100 $ 178 $ 370 $ 137 Less: Capital
expenditures (138 ) (99 ) (299 ) (306 )
Dividends received from TFC
- - - (29 ) Plus: Total pension contributions 311 12 338 36
Proceeds from the sale of property, plant and equipment 6
3 6 8
Manufacturing cash flow before pension contributions-
Non-GAAP (a) $ 279 $ 94 $ 415 $
(154 ) (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 Nine Months Ended
September 30, October 1, September 30,
October 1, 2017 2016 2017
2016 Cash flows from operating activities: Income
from continuing operations $ 159 $ 299 $ 412 $ 628 Depreciation and
amortization 125 108 343 331 Changes in working capital (2 ) (280 )
(221 ) (848 ) Changes in other assets and liabilities and non-cash
items (163 ) 48 (126 )
34 Net cash from operating activities of continuing
operations 119 175 408
145
Cash flows from investing
activities: Net cash used in acquisitions (1 ) - (330 ) (179 )
Capital expenditures (138 ) (99 ) (299 ) (306 ) Finance receivables
repaid 3 4 27 40 Other investing activities, net 14
1 48 53 Net
cash from investing activities (122 ) (94 )
(554 ) (392 )
Cash flows from financing
activities: Proceeds from long-term debt 307 158 682 520
Increase in short-term debt 2 98 2 110 Principal payments on
long-term debt and nonrecourse debt (39 ) (341 ) (116 ) (433 )
Purchases of Textron common stock (122 ) - (451 ) (215 ) Other
financing activities, net 7 3
20 4 Net cash from financing
activities 155 (82 ) 137
(14 ) Total cash flows from continuing operations 152
(1 ) (9 ) (261 ) Total cash flows from discontinued operations (1 )
(1 ) (24 ) (2 ) Effect of exchange rate changes on cash and
equivalents 14 (2 ) 29
(3 )
Net change in cash and equivalents 165 (4
) (4 ) (266 ) Cash and equivalents at beginning of period
1,129 743 1,298
1,005 Cash and equivalents at end of period $ 1,294
$ 739 $ 1,294 $ 739
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:
Three Months Ended Nine
Months Ended September 30, 2017
October 1, 2016
September 30, 2017
October 1, 2016
Income from continuing operations - GAAP $
159 $ 299 $ 412 $
628 Restructuring, net of taxes of $6 million, $42 million,
$15 million and $42 million,
respectively
9 73 27 73 Arctic Cat restructuring, integration and transaction
costs,
net of taxes of $4 million and $11
million, respectively
6 - 22 - Income tax settlement - (206 )
- (206 ) Total Special
charges, net of income taxes 15 (133 )
49 (133 )
Adjusted
income from continuing operations - Non-GAAP $
174 $ 166
$ 461 $ 495
Earnings per share: Income from continuing operations -
GAAP $ 0.60 $ 1.10 $
1.53 $ 2.31 Restructuring, net of taxes 0.03
0.27 0.10 0.27 Arctic Cat restructuring, integration and
transaction costs, net of taxes 0.02 - 0.08 - Income tax settlement
- (0.76 ) -
(0.76 ) Total Special charges, net of income taxes
0.05 (0.49 )
0.18 (0.49 )
Adjusted income from
continuing operations - Non-GAAP $ 0.65
$ 0.61 $
1.71 $ 1.82
2017 Outlook
Diluted EPS Income from continuing operations - GAAP
$ 590 - $ 620
$ 2.20 - $ 2.30
Restructuring, net of taxes of $17 million 31 0.11 Arctic Cat
restructuring, integration and transaction costs,
net of taxes of $12 million
24 0.09 Total Special charges, net of income taxes 55
0.20
Adjusted income from continuing operations -
Non-GAAP
$ 645 - $ 675
$ 2.40 - $ 2.50
Manufacturing Cash Flow Before Pension
Contributions GAAP to Non-GAAP Outlook:
2017 Outlook Net cash from operating
activities of continuing operations - GAAP $ 895 - $ 995
Less: Capital expenditures (450) Plus: Total pension contributions
355
Manufacturing cash flow before pension contributions-
Non-GAAP $ 800 - $ 900
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Textron Inc.Eric Salander, 401-457-2288D’Ante Natili,
401-457-2288orMedia Contact:David Sylvestre, 401-457-2362
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