Textron Inc. (NYSE: TXT) today reported first quarter 2017
income from continuing operations of $0.37 per share or $0.46 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 $0.55 per share in the first quarter of
2016. During this year’s first quarter, the company recorded $37
million of pre-tax special charges ($0.09 per share,
after-tax).
Revenues in the quarter were $3.1 billion, down 3.4 percent from
the first quarter of 2016. Textron segment profit in the quarter
was $219 million, down $61 million from the first quarter of
2016.
“Overall, revenues and profit were down in the quarter
consistent with our expectations,” said Textron Chairman and CEO
Scott C. Donnelly. “We are continuing to execute our restructuring
plan while maintaining our focus on new product investment and the
integration of acquired businesses, all of which will have a
positive impact on our long term growth outlook.”
Cash Flow
Net cash used by operating activities of continuing operations
of the manufacturing group for the first quarter totaled $143
million, compared to a use of cash of $148 million in last year’s
first quarter. 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
$205 million compared to a use of cash of $222 million during last
year’s first quarter.
Outlook
As a result of the March 6, 2017 closing of the Arctic Cat
acquisition, the company is adjusting its 2017 earnings guidance.
The company now expects full-year 2017 GAAP earnings per share from
continuing operations in a range 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. This reflects earnings per share
dilution of $0.10 per share, consistent with our expectations at
the time we announced the transaction. The company also estimates
that it will record 2017 full-year Arctic Cat pretax acquisition
and restructuring costs of $30 million on the special charges line,
which is included in its GAAP guidance range.
The company still expects net cash provided by operating
activities of continuing operations of the manufacturing group of
$1,045 million to $1,145 million and manufacturing cash flow before
pension contributions (the non-GAAP measure) of $650 to $750
million.
First Quarter Segment Results
Textron Aviation
Revenues at Textron Aviation were down $121 million, primarily
due to lower military and commercial turboprop volumes.
Textron Aviation delivered 35 new Citation jets, up from 34 jets
last year, 12 King Air turboprops compared to 26 in last year’s
first quarter, and 2 Beechcraft T-6 trainers, down from 9 last
year.
Textron Aviation recorded a segment profit of $36 million in the
first quarter compared to $73 million a year ago, primarily due to
lower volume and mix.
Textron Aviation backlog at the end of the first quarter was
$1.0 billion, approximately flat from the end of the fourth
quarter.
Bell
Bell revenues were down $117 million, as Bell delivered 27
commercial helicopters compared to 30 units last year, 6 V-22’s in
the quarter, flat with last year’s first quarter and 3 H-1’s
compared to 10 H-1’s last year.
Segment profit was up $1 million despite the decline in
revenues, primarily due to improved performance.
Bell backlog at the end of the first quarter was $5.7 billion,
up $292 million from the end of the fourth quarter.
Textron Systems
Revenues at Textron Systems increased $92 million, primarily due
to higher volume at Weapons and Sensors and Marine and Land
Systems.
Segment profit was down $9 million, due to unfavorable
performance at Marine and Land Systems.
Textron Systems’ backlog at the end of the first quarter was
$1.7 billion, down $113 million from the end of the fourth
quarter.
Industrial
Industrial revenues increased $40 million due to the impact of
acquisitions and higher volumes at Kautex.
Segment profit was down $15 million, primarily due to
unfavorable performance which includes the operating results of
Arctic Cat.
Finance
Finance segment revenues decreased $2 million and segment profit
decreased $1 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, April 19,
2017 by dialing (320) 365-3844; Access Code: 408726.
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, 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 Months Ended April 1, 2017 and
April 2, 2016
(Dollars in millions, except per share
amounts)
(Unaudited)
Three Months Ended
April 1, 2017
April 2, 2016
REVENUES
MANUFACTURING: Textron Aviation $ 970 $ 1,091
Bell 697 814 Textron Systems 416 324 Industrial 992
952 3,075 3,181 FINANCE 18
20
Total revenues $ 3,093
$ 3,201
SEGMENT
PROFIT
MANUFACTURING: Textron Aviation $ 36 $ 73 Bell 83 82 Textron
Systems 20 29 Industrial 76 91 215 275
FINANCE 4 5
Segment
Profit 219 280 Corporate expenses and
other, net (27 ) (32 ) Interest expense, net for Manufacturing
group (34 ) (33 ) Special charges (a) (37 ) -
Income from continuing operations before income taxes 121
215 Income tax expense (21 ) (64 )
Income
from continuing operations 100 151 Discontinued
operations, net of income taxes 1 (1 )
Net
income $ 101 $ 150
Earnings per share: Income from continuing
operations $ 0.37 $ 0.55
Discontinued operations, net of income taxes -
-
Net income $ 0.37 $
0.55 Diluted average shares outstanding
272,830,000 273,022,000
Income from
Continuing Operations and Diluted Earnings Per Share (EPS) GAAP to
Non-GAAP Reconciliation:
Three Months Ended
April 1, 2017
Diluted EPS Income
from continuing operations - GAAP $ 100 $
0.37 Restructuring, net of taxes of $5 million 10 0.04
Arctic Cat acquisition and restructuring costs, net of taxes of $7
million 15 0.05 Total Special charges,
net of income taxes 25 0.09
Adjusted
income from continuing operations - Non-GAAP (b) $
125 $ 0.46
(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 months ended
April 1, 2017, we recorded Special charges of $15 million related
to this plan. In connection with the acquisition of Arctic Cat, we
recorded Special charges of $22 million in the three months ended
April 1, 2017, which consisted of severance costs of $19 million,
principally related to change-of-control provisions, and
transaction costs of $3 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)
April 1,
2017
December 31, 2016
Assets Cash and equivalents $ 858 $ 1,137 Accounts
receivable, net 1,198 1,064 Inventories 4,709 4,464 Other current
assets 361 388 Net property, plant and equipment 2,637 2,581
Goodwill 2,332 2,113 Other assets 2,398 2,331 Finance group assets
1,210 1,280 Total Assets
$ 15,703 $ 15,358
Liabilities and Shareholders' Equity Short-term debt and
current portion of long-term debt $ 462 $ 363 Other current
liabilities 3,561 3,530 Other liabilities 2,283 2,354 Long-term
debt 2,768 2,414 Finance group liabilities 1,047
1,123 Total Liabilities 10,121 9,784
Total Shareholders' Equity 5,582
5,574 Total Liabilities and Shareholders' Equity $
15,703 $ 15,358
TEXTRON
INC. MANUFACTURING GROUP Condensed Schedule of Cash
Flows (In millions) (Unaudited)
Three Months Ended April 1, April
2, 2017 2016 Cash
flows from operating activities: Income from continuing
operations $ 94 $ 148 Depreciation and amortization 103 106 Changes
in working capital (313 ) (390 ) Changes in other assets and
liabilities and non-cash items (27 )
(12 ) Net cash from operating activities of
continuing operations (143 )
(148 )
Cash flows from investing activities: Net cash
used in acquisitions (318 ) (164 ) Capital expenditures (76 ) (88 )
Proceeds from the sale of property, plant and equipment - 2 Other
investing activities, net 1
(2 ) Net cash from investing activities (393 )
(252 )
Cash flows from
financing activities: Proceeds from long-term debt 347 345
Increase in short-term debt 100 42 Purchases of Textron common
stock (186 ) (215 ) Other financing activities, net 13
1 Net cash from
financing activities 274
173 Total cash flows from continuing operations (262
) (227 ) Total cash flows from discontinued operations (25 ) -
Effect of exchange rate changes on cash and equivalents 8
4
Net change in
cash and equivalents (279 ) (223 ) Cash and equivalents at
beginning of period 1,137
946 Cash and equivalents at end of period $ 858
$ 723
Manufacturing Cash Flow GAAP to Non-GAAP Reconciliation:
Net cash from operating
activities of continuing operations - GAAP $ (143 ) $ (148 ) Less:
Capital expenditures (76 ) (88 ) Plus: Total pension contributions
14 12 Proceeds from the sale of property, plant and equipment
- 2
Manufacturing cash flow before pension contributions- Non-GAAP (a)
$ (205 ) $ (222 )
(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 1, April
2, 2017 2016 Cash
flows from operating activities: Income from continuing
operations $ 100 $ 151 Depreciation and amortization 106 109
Changes in working capital (347 ) (400 ) Changes in other assets
and liabilities and non-cash items (28 )
(10 ) Net cash from operating activities of
continuing operations (169 )
(150 )
Cash flows from investing activities: Net cash
used in acquisitions (318 ) (164 ) Capital expenditures (76 ) (88 )
Finance receivables repaid 15 17 Other investing activities, net
13 10 Net
cash from investing activities (366 )
(225 )
Cash flows from financing activities:
Proceeds from long-term debt 362 362 Increase in short-term debt
100 42 Principal payments on long-term debt and nonrecourse debt
(38 ) (46 ) Purchases of Textron common stock (186 ) (215 ) Other
financing activities, net 13
1 Net cash from financing activities
251 144 Total cash
flows from continuing operations (284 ) (231 ) Total cash flows
from discontinued operations (25 ) - Effect of exchange rate
changes on cash and equivalents 8
4
Net change in cash and
equivalents (301 ) (227 ) Cash and equivalents at beginning of
period 1,298 1,005
Cash and equivalents at end of period $ 997
$ 778
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 April 1,
2017
Diluted EPS Income from
continuing operations - GAAP $ 100 $
0.37 Restructuring, net of taxes of $5 million 10 0.04
Arctic Cat acquisition and restructuring costs, net of taxes of $7
million 15 0.05 Total
Special charges, net of income taxes 25
0.09
Adjusted income from continuing operations -
Non-GAAP $ 125
$ 0.46
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 acquisition
and restructuring 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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Textron Inc.Eric Salander, 401-457-2288orD’Ante Natili,
401-457-2288orMedia Contact:David Sylvestre,
401-457-2362
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