- $468 million returned to shareholders
through share repurchases
- Completed sale of Tools & Test
product line
- Full-year adjusted EPS guidance
narrowed to $3.20 - $3.30 per share
- Full-year cash flow guidance reaffirmed
at $750 - $850 million
Textron Inc. (NYSE: TXT) today reported third quarter 2018
income from continuing operations of $2.26 per share, reflecting
the gain on the sale of the Tools & Test product line of $1.65
per share, or $0.61 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. This compares to $0.65 per
share of adjusted income from continuing operations in the third
quarter of 2017.
“Revenues were lower in the quarter, largely reflecting declines
at Industrial and Textron Systems,” said Textron Chairman and CEO
Scott C. Donnelly. “Operationally, we achieved margin improvements
at Aviation and Bell, reflecting strong execution within those
segments.”
Cash Flow
Net cash provided by operating activities of continuing
operations of the manufacturing group for the third quarter totaled
$319 million, compared to $79 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 $259 million compared to $281 million during
last year’s third quarter.
In the quarter, Textron returned $468 million to shareholders
through share repurchases, compared to $122 million in the third
quarter of 2017.
Outlook
Textron now expects full-year 2018 GAAP earnings per share from
continuing operations will be in the range of $4.81 to $4.91, or
$3.20 to $3.30 on an adjusted basis (non-GAAP), which is reconciled
to GAAP in an attachment to this release.
The company reaffirms full-year manufacturing cash flow before
pension contributions (a non-GAAP measure) to be in a range of $750
to $850 million.
Third Quarter Segment Results
Textron Aviation
Revenues at Textron Aviation of $1.1 billion were down 2%, due
to lower volume and mix reflecting lower turboprop volume,
partially offset by favorable pricing.
Textron Aviation delivered 41 jets, flat with last year, and 43
commercial turboprops, down from 57 last year.
Segment profit was $99 million in the third quarter, up from $93
million a year ago, due to favorable price and performance,
partially offset by the impact of lower volume and mix.
Textron Aviation backlog at the end of the third quarter was
$1.8 billion.
Bell
Bell revenues were $770 million, down 5% primarily on commercial
mix, partially offset by higher military revenues.
Bell delivered 43 commercial helicopters in the quarter, up from
39 last year.
Segment profit of $113 million was up $7 million, largely the
result of favorable performance on military programs, partially
offset by commercial mix.
Bell backlog at the end of the third quarter was $5.7
billion.
Textron Systems
Revenues at Textron Systems were $352 million, down from $458
million last year, reflecting lower TAPV deliveries at Textron
Marine & Land Systems and lower volume in the Simulation,
Training & Other product line.
Segment profit was down $11 million, primarily reflecting the
lower net volume.
Textron Systems’ backlog at the end of the third quarter was
$1.1 billion.
Industrial
Industrial revenues decreased $112 million largely related to
the disposition of our Tools & Test product line.
Segment profit was down $48 million from the third quarter of
2017, largely due to unfavorable pricing and performance, and the
impact from the disposition of our Tools & Test product
line.
Finance
Finance segment revenues were down $3 million, and profit was
down $4 million from last year’s third quarter.
Conference Call Information
Textron will host its conference call today, October 18, 2018 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 (800) 230-1951 in the U.S. or (612) 288-0340 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 18,
2018 by dialing (320) 365-3844; Access Code: 431862.
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, 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; the
risk that acquisitions do not perform as planned, including, for
example, the risk that acquired businesses will not achieve revenue
and profit projections; and the impact of changes in tax
legislation (including the recently enacted Tax Cuts and Jobs
Act).
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 29, 2018
September 30, 2017
September 29, 2018
September 30, 2017
REVENUES
MANUFACTURING: Textron Aviation $ 1,133 $ 1,154 $
3,419 $ 3,295 Bell 770 812 2,353 2,334 Textron Systems 352 458
1,119 1,351 Industrial 930 1,042
3,283 3,147 3,185 3,466 10,174 10,127
FINANCE
15 18 48 54
Total revenues
$ 3,200 $ 3,484 $
10,222 $ 10,181
SEGMENT
PROFIT
MANUFACTURING: Textron Aviation $ 99 $ 93 $ 275 $ 183 Bell 113 106
317 301 Textron Systems 29 40 119 102 Industrial 1
49 145 207
242 288 856 793 FINANCE 3 7
14 16
Segment Profit 245
295 870 809 Corporate expenses and
other, net (29 ) (30 ) (107 ) (88 ) Interest expense, net for
Manufacturing group (32 ) (37 ) (101 ) (107 ) Gain on business
disposition (a) 444 - 444 - Special charges (b) -
(25 ) - (75 ) Income from
continuing operations before income taxes 628 203 1,106 539 Income
tax expense (65 ) (44 ) (130 ) (127 )
Income from continuing operations 563
159 976 412 Discontinued operations, net of
income taxes - - -
1
Net income $ 563 $
159 $ 976 $ 413
Diluted earnings per share: Income from
continuing operations $ 2.26 $ 0.60
$ 3.80 $ 1.53 Discontinued operations,
net of income taxes - - -
-
Net income $ 2.26
$ 0.60 $ 3.80 $
1.53 Diluted average shares outstanding
249,378,000 266,989,000
256,780,000 269,734,000
At the beginning of 2018, we adopted the new revenue recognition
accounting standard using a modified retrospective transition
method applied to contracts that were not substantially complete at
the end of 2017. We recorded a $90 million adjustment to increase
retained earnings to reflect the cumulative impact of adopting this
standard at the beginning of 2018, primarily related to long-term
contracts with the U.S. Government. Revenues associated with these
contracts in 2018 are primarily recognized as costs are incurred,
while revenues for 2017 were primarily recognized as units were
delivered. The comparative information has not been restated and is
reported under the accounting standards in effect for those
periods.
Income from Continuing Operations and Diluted
Earnings Per Share GAAP to Non-GAAP Reconciliation:
Three Months Ended
Nine Months Ended
September 29, 2018
September 30, 2017
September 29, 2018
September 30, 2017
Income from continuing operations - GAAP $ 563
$ 159 $ 976 $
412 Gain on business disposition, net of taxes of $34
million (410 ) - (410 ) - Restructuring, net of taxes of $6 million
and $15 million, respectively - 9 - 27
Arctic Cat restructuring, integration and
transaction costs,net of taxes of $4 million and $11 million,
respectively
- 6 - 22
Adjusted
income from continuing operations - Non-GAAP (c) $
153 $ 174 $ 566
$ 461 Diluted earnings per share:
Income from continuing operations - GAAP $
2.26 $ 0.60 $ 3.80 $
1.53 Gain on business disposition, net of taxes (1.65 ) -
(1.60 ) - Restructuring, net of taxes - 0.03 - 0.10
Arctic Cat restructuring, integration and
transaction costs, net of taxes
- 0.02 - 0.08
Adjusted income from continuing
operations - Non-GAAP (c)
$ 0.61 $ 0.65 $
2.20 $ 1.71 (a) On
July 2, 2018, Textron completed the sale of the Tools & Test
Equipment product line and recorded an after-tax gain of $410
million, subject to post-closing adjustments. (b) Special
charges for the three and nine months ended September 30, 2017
include $15 million and $42 million, respectively, related to a
2016 restructuring plan and $10 million and $33 million,
respectively, of restructuring, integration and transaction costs
related to the Arctic Cat acquisition. (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 29,2018
December 30,2017
Assets (a) Cash and equivalents $ 1,150 $
1,079 Accounts receivable, net 1,026 1,363 Inventories 4,030 4,150
Other current assets 706 435 Net property, plant and equipment
2,593 2,721 Goodwill 2,209 2,364 Other assets 1,868 2,059 Finance
group assets 1,087 1,169 Total Assets $
14,669 $ 15,340
Liabilities and
Shareholders' Equity (a) Short-term debt and current portion of
long-term debt $ 9 $ 14 Current liabilities 3,414 3,646 Other
liabilities 1,733 2,006 Long-term debt 3,069 3,074 Finance group
liabilities 901 953 Total Liabilities
9,126 9,693 Total Shareholders' Equity 5,543
5,647 Total Liabilities and Shareholders' Equity $
14,669 $ 15,340 (a) At the
beginning of 2018, we adopted the new revenue recognition
accounting standard using a modified retrospective transition
method applied to contracts that were not substantially complete at
the end of 2017. We recorded a $90 million adjustment to increase
retained earnings to reflect the cumulative impact of adopting this
standard at the beginning of 2018, primarily related to long-term
contracts with the U.S. Government. Revenues associated with these
contracts in 2018 are primarily recognized as costs are incurred,
while revenues for 2017 were primarily recognized as units were
delivered. The comparative information has not been restated and is
reported under the accounting standards in effect for those
periods.
TEXTRON INC.MANUFACTURING
GROUPCondensed Schedule of Cash Flows(In
millions)(Unaudited)
Three Months Ended
Nine Months Ended September 29,
September 30, September 29,
September 30, 2018 2017
2018 2017 Cash flows from operating
activities: Income from continuing operations $ 561 $ 155 $ 959
$ 399 Depreciation and amortization 104 111 316 322 Gain on
business disposition (444 ) - (444 ) - Changes in working capital
(a) 74 (19 ) (204 ) (268 ) Changes in other assets and liabilities
and non-cash items (a) 24 (168 ) 57 (126 ) Dividends received from
TFC - - 50
- Net cash from operating activities of
continuing operations (a) 319 79
734 327
Cash
flows from investing activities: Net proceeds from business
disposition 807 - 807 - Capital expenditures (74 ) (115 ) (233 )
(276 ) Net cash (used)/proceeds from corporate-owned life insurance
policies (a) - (2 ) 98 20 Proceeds from the sale of property, plant
and equipment 2 6 12 6 Net cash used in acquisitions (3 ) (1 ) (3 )
(330 ) Other investing activities, net -
- - 1
Net cash from investing activities (a) 732
(112 ) 681
(579 )
Cash flows from financing activities: Proceeds from
long-term debt - 298 - 645 Purchases of Textron common stock (468 )
(122 ) (1,383 ) (451 ) Other financing activities, net 16
10 49
20 Net cash from financing activities
(452 ) 186 (1,334 )
214 Total cash flows from continuing
operations 599 153 81 (38 ) Total cash flows from discontinued
operations - (1 ) (1 ) (24 ) Effect of exchange rate changes on
cash and equivalents (3 ) 14
(9 ) 29
Net change in cash
and equivalents 596 166 71 (33 ) Cash and equivalents at
beginning of period 554 938
1,079 1,137 Cash
and equivalents at end of period $ 1,150 $
1,104 $ 1,150 $ 1,104
Manufacturing Cash Flow GAAP to Non-GAAP Reconciliation:
Net cash
from operating activities of continuing operations - GAAP (a) $
319 $ 79 $ 734 $ 327 Less: Capital expenditures (74 ) (115 ) (233 )
(276 ) Dividends received from TFC - - (50 ) - Plus: Total pension
contributions 12 311 37 338 Proceeds from the sale of property,
plant and equipment 2 6
12 6
Manufacturing
cash flow before pension contributions - Non-GAAP (a) (b) $ 259
$ 281 $ 500 $ 395
(a) For the three and nine months ended
September 30, 2017, $(2) million and $20 million, respectively, of
net cash (used)/proceeds received from the settlement of
corporate-owned life insurance policies were reclassified from
operating activities to investing activities as a result of the
adoption of a new accounting standard at the beginning of 2018.
(b) 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 29,
September 30, September 29,
September 30, 2018 2017
2018 2017 Cash flows from operating
activities: Income from continuing operations $ 563 $ 159 $ 976
$ 412 Depreciation and amortization 106 114 322 332 Gain on
business disposition (444 ) - (444 ) - Changes in working capital
(a) 50 (2 ) (214 ) (245 ) Changes in other assets and liabilities
and non-cash items (a) 24 (173 )
57 (134 ) Net cash from
operating activities of continuing operations (a) 299
98 697
365
Cash flows from investing activities: Net
proceeds from business disposition 807 - 807 - Capital expenditures
(74 ) (115 ) (233 ) (276 ) Net cash (used)/proceeds from
corporate-owned life insurance policies (a) - (2 ) 98 20 Finance
receivables repaid - 3 25 27 Net cash used in acquisitions (3 ) (1
) (3 ) (330 ) Other investing activities, net 10
14 40
48 Net cash from investing activities (a) 740
(101 ) 734
(511 )
Cash flows from financing activities:
Principal payments on long-term debt and nonrecourse debt (23 ) (39
) (60 ) (116 ) Proceeds from long-term debt - 307 - 682 Purchases
of Textron common stock (468 ) (122 ) (1,383 ) (451 ) Other
financing activities, net 17 9
53 22 Net cash
from financing activities (474 ) 155
(1,390 ) 137 Total cash
flows from continuing operations 565 152 41 (9 ) Total cash flows
from discontinued operations - (1 ) (1 ) (24 ) Effect of exchange
rate changes on cash and equivalents (3 )
14 (9 ) 29
Net
change in cash and equivalents 562 165 31 (4 ) Cash and
equivalents at beginning of period 731
1,129 1,262 1,298
Cash and equivalents at end of period $ 1,293
$ 1,294 $ 1,293 $ 1,294
(a) For the three and nine months ended
September 30, 2017, $(2) million and $20 million, respectively, of
net cash (used)/proceeds received from the settlement of
corporate-owned life insurance policies were reclassified from
operating activities to investing activities as a result of the
adoption of a new accounting standard at the beginning of 2018.
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
share
Adjusted income from continuing operations and adjusted diluted
earnings per share both exclude Gain on business disposition, net
of taxes and Special charges, net of taxes. The Gain on business
disposition is not considered indicative of ongoing operations as
it is a significant one-time transaction. We consider items
recorded in Special charges 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 contributions
Manufacturing cash flow before pension contributions adjusts net
cash from operating activities of continuing operations (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.
Income from Continuing Operations and
Diluted Earnings Per Share (EPS) GAAP to Non-GAAP Reconciliation
and Outlook:
Three Months Ended
Nine Months Ended
September 29, 2018
September 30, 2017
September 29, 2018
September 30, 2017
Income from continuing operations - GAAP $ 563
$ 159 $ 976 $
412 Gain on business disposition, net of taxes of $34
million (410 ) - (410 ) - Restructuring, net of taxes of $6 million
and $15 million, respectively - 9 - 27 Arctic Cat restructuring,
integration and transaction costs,
net of taxes of $4 million and $11
million, respectively
- 6 -
22
Adjusted income from continuing operations -
Non-GAAP $ 153 $ 174
$ 566 $ 461
Diluted earnings per share: Income from continuing
operations - GAAP $ 2.26 $ 0.60
$ 3.80 $ 1.53 Gain on business
disposition, net of taxes (1.65 ) - (1.60 ) - Restructuring, net of
taxes - 0.03 - 0.10 Arctic Cat restructuring, integration and
transaction costs, net of taxes - 0.02
- 0.08
Adjusted income from
continuing operations - Non-GAAP $ 0.61
$ 0.65 $ 2.20
$ 1.71
2018 Outlook
Diluted EPS
Income from continuing operations - GAAP $
1,225 - $ 1,250 $ 4.81
- $ 4.91 Gain on business disposition, net of
taxes
(410)
(1.61)
Adjusted income from continuing operations -
Non-GAAP $ 815 - $
840 $ 3.20
- $ 3.30 Manufacturing
Cash Flow Before Pension Contributions GAAP to Non-GAAP
Reconciliation and Outlook:
Three Months Ended
Nine Months Ended
September 29, 2018
September 30, 2017
September 29, 2018
September 30, 2017
Net cash from operating activities of continuing operations -
GAAP (a) $ 319 $ 79 $
734 $ 327 Less: Capital expenditures (74 )
(115 ) (233 ) (276
)
Dividends received from TFC - - (50 ) - Plus: Total pension
contributions 12 311 37 338 Proceeds from the sale of property,
plant and equipment 2 6
12 6
Manufacturing cash flow before pension
contributions - Non-GAAP (a) $ 259
$ 281 $ 500
$ 395
2018 Outlook
Net cash from operating activities of continuing operations -
GAAP $ 1,183 - $ 1,283 Less:
Capital expenditures
(450)
Dividends received from TFC
(50)
Plus: Total pension contributions
55
Proceeds from the sale of property, plant and equipment
12
Manufacturing cash flow before pension
contributions - Non-GAAP $ 750 -
$ 850 (a) For the three
and nine months ended September 30, 2017, $(2) million and $20
million, respectively, of net cash (used)/proceeds received from
the settlement of corporate-owned life insurance policies were
reclassified from operating activities to investing activities as a
result of the adoption of a new accounting standard at the
beginning of 2018.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20181018005162/en/
Textron Inc.Investor Contacts:Eric Salander,
401-457-2288orJeffrey Trivella, 401-457-2288orMedia
Contact:David Sylvestre, 401-457-2362
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