Textron Inc. (NYSE: TXT) today reported second quarter 2015
income from continuing operations of $0.60 per share, up 17.6
percent from $0.51 per share in the second quarter of 2014.
Revenues in the quarter were $3.2 billion, down 7.4 percent
compared to $3.5 billion in the second quarter of 2014. Textron
segment profit in the quarter was $306 million, up $2 million from
the second quarter of 2014. Second quarter manufacturing cash flow
before pension contributions was $106 million compared to $271
million during last year’s second quarter.
“Revenues were down in the quarter, as expected, but the company
remains on track for growth in the second half of the year,” said
Textron Chairman and CEO Scott C. Donnelly. “Furthermore, good
margin results at Textron Aviation, Bell and Industrial contributed
to solid overall financial performance in the quarter, despite the
decrease in revenues.”
Outlook
Textron confirmed its 2015 earnings per share from continuing
operations guidance of $2.30 to $2.50 and its expectation for cash
flow from continuing operations of the manufacturing group before
pension contributions of $550 to $650 million with planned pension
contributions of about $80 million.
Second Quarter Segment Results
Textron Aviation
Revenues at Textron Aviation were down $59 million, primarily
reflecting a change in the mix of jets delivered in the quarter.
Textron Aviation delivered 36 new Citation jets and 30 King Air
turboprops in the quarter, compared to 36 Citations and 34 King
Airs in last year’s second quarter.
Textron Aviation recorded a segment profit of $88 million in the
second quarter compared to $28 million a year ago. The increase is
primarily due to improved performance, reflecting a $27 million
lower fair value step-up adjustment and the benefit of the
integrated cost structure of Beechcraft and Cessna.
Textron Aviation backlog at the end of the second quarter was
$1.4 billion, up $145 million from the end of the first
quarter.
Bell
Bell revenues decreased $269 million, primarily the result of
lower aircraft deliveries and a $41 million impact from the
settlement of the SDD phase of the ARH program in last year’s
second quarter.
Bell delivered 6 V-22’s and 6 H-1’s in the quarter, compared to
10 V-22’s and 8 H-1’s in last year’s second quarter and 39
commercial helicopters, compared to 46 units last year.
Segment profit decreased $40 million primarily due to the lower
aircraft deliveries and a $16 million favorable impact in 2014
related to the ARH program, partially offset by favorable
performance.
Bell backlog at the end of the second quarter was $4.8 billion,
down $477 million from the end of the first quarter.
Textron Systems
Revenues at Textron Systems increased $40 million, primarily due
to higher Unmanned Systems and Marine and Land Systems volumes,
partially offset by lower Weapons and Sensors volume.
Segment profit was down $13 million, reflecting an unfavorable
product mix during the quarter.
Textron Systems’ backlog at the end of the second quarter was
$2.7 billion, down $218 million from the end of the first
quarter.
Industrial
Industrial revenues increased $33 million due to higher overall
volumes, partially offset by a $69 million unfavorable
year-over-year impact from foreign exchange. Segment profit
decreased $8 million reflecting lower performance partially offset
by the impact of the higher volumes.
Finance
Finance segment revenues decreased $3 million and segment profit
increased $3 million.
Conference Call Information
Textron will host its conference call today, July 28, 2015 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) 700-7860 in the U.S. or (612) 332-1210 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 Tuesday, July 28,
2015 by dialing (320) 365-3844 ; Access Code: 337220.
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 Systems, and TRU
Simulation + Training. For more information visit:
www.textron.com.
Non-GAAP Measures
Manufacturing cash flow before pension contributions is a
non-GAAP measure that is defined and reconciled to GAAP in an
attachment to this release.
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 under “RISK FACTORS” in our
Annual Report on Form 10-K, 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 anticipated synergies and
opportunities as a result of acquisitions will not be realized or
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 and Six Months Ended July 4, 2015
and June 28, 2014
(Dollars in millions, except per share
amounts)
(Unaudited)
Three Months Ended
Six Months Ended
July 4, 2015
June 28, 2014
July 4, 2015
June 28, 2014
REVENUES
MANUFACTURING: Textron Aviation $ 1,124 $ 1,183 $ 2,175 $ 1,968
Bell 850 1,119 1,663 1,992 Textron Systems 322 282 637 645
Industrial 927 894 1,799
1,691 3,223 3,478 6,274 6,296 FINANCE
24 27 46 56
Total revenues $ 3,247 $
3,505 $ 6,320 $
6,352
SEGMENT
PROFIT
MANUFACTURING: Textron Aviation (a) $ 88 $ 28 $ 155 $ 42 Bell 101
141 177 237 Textron Systems 21 34 49 73 Industrial 86
94 168 160 296 297 549
512 FINANCE 10 7 16
11
Segment Profit 306 304
565 523 Corporate expenses and other, net (33
) (38 ) (75 ) (81 ) Interest expense, net for Manufacturing group
(32 ) (36 ) (65 ) (71 ) Acquisition and restructuring costs (b)
- (20 ) - (36 )
Income from continuing operations before income taxes 241 210 425
335 Income tax expense (72 ) (65 ) (128 )
(103 )
Income from continuing operations
169 145 297 232 Discontinued
operations, net of income taxes (2 ) (1 ) (2 )
(3 )
Net income $ 167 $
144 $ 295 $ 229
Earnings per share: Income from continuing
operations $ 0.60 $ 0.51 $
1.06 $ 0.82 Discontinued operations, net of
income taxes - - (0.01 )
(0.01 )
Net income $ 0.60 $
0.51 $ 1.05 $ 0.81
Diluted average shares outstanding 279,935,000
282,764,000 280,024,000
283,099,000
(a) Textron Aviation's segment profit includes $6 million and
$11 million, for the three and six months ended July 4, 2015,
respectively, and $33 million and $45 million for the three and six
months ended June 28, 2014, respectively, related to fair value
step-up adjustments of acquired inventories sold during the
periods.
(b) Acquisition and restructuring costs for the three and six
months ended June 28, 2014 includes $20 million and $25 million,
respectively, of restructuring costs incurred related to the
acquisition of Beech Holdings, LLC, the parent of Beechcraft
Corporation, which was completed on March 14, 2014. Transaction
costs of $11 million related to the Beechcraft acquisition are also
included in the six months ended June 28, 2014.
Textron
Inc.Condensed Consolidated Balance Sheets(In
millions)(Unaudited)
July 4,2015
January 3,2015
Assets Cash and equivalents
$
661
$
731
Accounts receivable, net 1,163 1,035 Inventories 4,437 3,928 Other
current assets 512 579 Net property, plant and equipment 2,462
2,497 Goodwill 2,015 2,027 Other assets 2,251 2,279 Finance group
assets 1,447 1,529 Total Assets
$
14,948
$
14,605
Liabilities and Shareholders' Equity
Short-term debt and current portion of long-term debt
$
263
$
8
Other current liabilities 3,800 3,630 Other liabilities 2,420 2,587
Long-term debt 2,650 2,803 Finance group liabilities 1,213
1,305 Total Liabilities 10,346 10,333 Total
Shareholders' Equity 4,602 4,272 Total Liabilities
and Shareholders' Equity
$
14,948
$
14,605
TEXTRON INC.MANUFACTURING
GROUPCondensed Schedule of Cash Flows and Manufacturing Cash
Flow GAAP to Non-GAAP Reconciliations(In millions)(Unaudited)
Three Months Ended Six Months Ended July 4,
June 28, July 4, June 28, 2015
2014 2015
2014 Cash flows from operating activities:
Income from continuing operations $ 163 $ 141 $ 287 $ 225
Depreciation and amortization 107 112 215 207 Changes in working
capital (101 ) 125 (406 ) (138 ) Changes in other assets and
liabilities and non-cash items 14 (31 )
20 (11 ) Net cash from operating activities of
continuing operations 183 347
116 283
Cash flows from investing
activities: Capital expenditures (94 ) (106 ) (173 ) (172 ) Net
cash used in acquisitions (2 ) (61 ) (34 ) (1,550 ) Proceeds from
the sale of property, plant and equipment 3 3 4 5 Other investing
activities, net 3 (7 ) (4 ) (10
) Net cash from investing activities (90 ) (171 )
(207 ) (1,727 )
Cash flows from financing
activities: Increase (decrease) in short-term debt 80 (184 )
105 - Proceeds from long-term debt - - - 1,093 Purchases of Textron
common stock (87 ) - (87 ) (150 ) Other financing activities, net
14 5 10 18
Net cash from financing activities 7 (179 )
28 961 Total cash flows from continuing
operations 100 (3 ) (63 ) (483 ) Total cash flows from discontinued
operations (1 ) (1 ) (3 ) (2 ) Effect of exchange rate changes on
cash and equivalents 1 2 (4 )
2
Net change in cash and equivalents 100 (2 )
(70 ) (483 ) Cash and equivalents at beginning of period 561
682 731 1,163 Cash
and equivalents at end of period $ 661 $ 680 $ 661
$ 680
Manufacturing Cash Flow GAAP to
Non-GAAP Reconciliations: Net cash
from operating activities of continuing operations - GAAP $ 183 $
347 $ 116 $ 283 Less: Capital expenditures (94 ) (106 ) (173 ) (172
) Plus: Total pension contributions 14 27 34 44 Proceeds from the
sale of property, plant and equipment 3 3
4 5 Manufacturing cash flow
before pension contributions- Non-GAAP $ 106 $ 271 $
(19 ) $ 160
2015 Outlook Net cash from
operating activities of continuing operations - GAAP $ 941 - $
1,041 Less: Capital expenditures (475) Plus: Total pension
contributions 80 Proceeds from the sale of property, plant and
equipment 4 Manufacturing cash flow before pension contributions-
Non-GAAP $550 - $ 650
Free cash flow is a measure generally used by investors,
analysts and management to gauge a company’s ability to generate
cash from operations in excess of that necessary to be reinvested
to sustain and grow the business and fund its obligations. Our
definition of Manufacturing free cash flow adjusts net cash from
operating activities of continuing operations for dividends
received from TFC, capital contributions provided under the Support
Agreement and debt agreements, capital expenditures, proceeds from
the sale of property, plant and equipment and contributions to our
pension plans. We believe that our calculation provides a relevant
measure of liquidity and is a useful basis for assessing our
ability to fund operations and obligations. This measure is not a
financial measure under GAAP and should be used in conjunction with
GAAP cash measures provided in our Consolidated Statements of Cash
Flows.
TEXTRON INC.Condensed Consolidated Schedule of Cash
Flows(In millions)(Unaudited)
Three Months Ended
Six Months Ended July 4, June 28, July
4, June 28, 2015 2014
2015 2014 Cash
flows from operating activities: Income from continuing
operations $ 169 $ 145 $ 297 $ 232 Depreciation and amortization
110 116 220 214 Changes in working capital (66 ) 156 (335 ) (77 )
Changes in other assets and liabilities and non-cash items
11 (38 ) 23 (16 ) Net cash from
operating activities of continuing operations 224
379 205 353
Cash flows
from investing activities: Capital expenditures (94 ) (106 )
(173 ) (172 ) Net cash used in acquisitions (2 ) (61 ) (34 ) (1,550
) Finance receivables repaid 15 25 46 58 Other investing
activities, net 3 14 26
16 Net cash from investing activities (78 )
(128 ) (135 ) (1,648 )
Cash flows from
financing activities: Principal payments on long-term and
nonrecourse debt (60 ) (59 ) (130 ) (121 ) Increase (decrease) in
short-term debt 80 (184 ) 105 - Proceeds from long-term debt - 20 9
1,151 Purchases of Textron common stock (87 ) - (87 ) (150 ) Other
financing activities, net 5 6 10
19 Net cash from financing activities
(62 ) (217 ) (93 ) 899 Total cash flows
from continuing operations 84 34 (23 ) (396 ) Total cash flows from
discontinued operations (1 ) (1 ) (3 ) (2 ) Effect of exchange rate
changes on cash and equivalents 1 2
(4 ) 2
Net change in cash and
equivalents 84 35 (30 ) (396 ) Cash and equivalents at
beginning of period 708 780 822
1,211 Cash and equivalents at end of period $
792 $ 815 $ 792 $ 815
View source
version on businesswire.com: http://www.businesswire.com/news/home/20150728005269/en/
Textron Inc.Investor Contacts:Douglas Wilburne,
401-457-2288orRobert Bridge, 401-457-2288orMedia
Contact:David Sylvestre, 401-457-2362
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