Textron Inc. (NYSE: TXT) today reported second quarter 2016
income from continuing operations of $0.66 per share, up 10.0
percent from $0.60 per share in the second quarter of 2015.
Revenues in the quarter were $3.5 billion, up 8.1 percent from
the second quarter of 2015. Textron segment profit in the quarter
was $328 million, up $22 million from the second quarter of
2015.
“Revenues were up at Systems, Industrial and Textron Aviation
despite a challenging global environment, reflecting our continued
investment in new products and acquisitions,” 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 second quarter was
$107 million, compared to $183 million in last year’s second
quarter. Manufacturing cash flow before pension contributions, a
non-GAAP measure which is defined and reconciled to GAAP in an
attachment to this release, reflected a use of cash of $26 million
compared to a positive $106 million cash flow during last year’s
second quarter.
Tax Settlement
On July 11, 2016, the U.S. Internal Revenue Service Office of
Appeals approved a final settlement for our 1998 to 2008 tax years.
As a result, in the third quarter we expect to record an income tax
benefit, including reversal of accrued interest, of approximately
$315 million, of which approximately $200 million, or $0.74 per
share, is attributable to continuing operations.
Outlook
Textron reiterated its 2016 earnings per share from continuing
operations guidance of $2.60 to $2.80, not including the estimated
impact related to the tax settlement discussed above. The company
also confirmed its 2016 manufacturing cash flow before pension
contributions guidance of $600 - $700 million.
Donnelly continued, “We are confirming our full-year operating
outlook, as we continue to believe that our new products and
acquisitions will contribute to solid overall growth in revenue,
earnings and cash this year.”
Second Quarter Segment Results
Textron Aviation
Revenues at Textron Aviation were up $72 million, primarily due
to volume and mix.
Textron Aviation delivered 45 new Citation jets and 23 King Air
turboprops in the quarter, compared to 36 jets and 30 King Airs in
last year’s second quarter.
Textron Aviation recorded a segment profit of $81 million in the
second quarter compared to $88 million a year ago. The decrease in
segment profit in the second quarter was primarily due to an
unfavorable impact from the mix of products sold in the period.
Textron Aviation backlog at the end of the second quarter was
$1.1 billion, up $122 million from the end of the first
quarter.
Bell
Bell revenues were down $46 million, as Bell delivered 6 V-22’s
in the quarter, flat with last year’s second quarter, 9 H-1’s
compared to 6 H-1’s last year and 24 commercial helicopters,
compared to 39 units last year.
Segment profit was down $20 million, primarily due to the lower
volume and mix.
Bell backlog at the end of the second quarter was $4.9 billion,
down $376 million from the end of the first quarter.
Textron Systems
Revenues at Textron Systems increased $165 million, primarily
due to higher volumes in our Weapons and Sensors and Unmanned
Systems product lines. Segment profit was up $39 million,
reflecting the higher volumes and mix.
Textron Systems’ backlog at the end of the second quarter was
$2.3 billion, down $242 million from the end of the first
quarter.
Industrial
Industrial revenues increased $77 million due to higher volumes
and the impact of acquisitions.
Segment profit increased $13 million reflecting the higher
volumes.
Finance
Finance segment revenues decreased $4 million and segment profit
decreased $3 million.
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.
Conference Call Information
Textron will host its conference call today, July 22, 2016 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) 288-8960 in the U.S. or (651) 291-0344 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 Friday, July 22, 2016
by dialing (320) 365-3844 ; Access Code: 373339.
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.
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; and cybersecurity threats, including the potential
misappropriation of assets or sensitive information, corruption of
data or operational disruption.
TEXTRON INC.
Revenues by Segment and Reconciliation
of Segment Profit to Net Income
Three and Six Months Ended July 2, 2016
and July 4, 2015
(Dollars in millions, except per share
amounts)
(Unaudited)
Three Months Ended Six Months Ended July 2,
2016 July 4, 2015 July 2, 2016
July 4, 2015
REVENUES
MANUFACTURING: Textron Aviation $ 1,196 $ 1,124 $
2,287 $ 2,175 Bell 804 850 1,618 1,663 Textron Systems 487 322 811
637 Industrial 1,004 927 1,956
1,799 3,491 3,223 6,672 6,274 FINANCE
20 24 40 46
Total revenues $ 3,511 $
3,247 $ 6,712 $
6,320
SEGMENT
PROFIT
MANUFACTURING: Textron Aviation $ 81 $ 88 $ 154 $ 155 Bell 81 101
163 177 Textron Systems 60 21 89 49 Industrial 99
86 190 168 321 296 596
549 FINANCE 7 10 12
16
Segment Profit 328 306
608 565 Corporate expenses and other, net (31
) (33 ) (63 ) (75 ) Interest expense, net for Manufacturing group
(37 ) (32 ) (70 ) (65 ) Income
from continuing operations before income taxes 260 241 475 425
Income tax expense (82 ) (72 ) (146 )
(128 )
Income from continuing operations 178
169 329 297 Discontinued operations, net of
income taxes (1 ) (2 ) (2 ) (2 )
Net
income $ 177 $ 167
$ 327 $ 295
Earnings per share: Income from continuing operations
$ 0.66 $ 0.60 $ 1.21
$ 1.06 Discontinued operations, net of income taxes
(0.01 ) - (0.01 ) (0.01 )
Net
income $ 0.65 $ 0.60
$ 1.20 $ 1.05
Diluted average shares outstanding 271,316,000
279,935,000 272,172,000
280,024,000
Textron Inc.
Condensed Consolidated Balance Sheets (In millions)
(Unaudited)
July 2,2016
January 2,2016
Assets Cash and equivalents $ 661 $ 946 Accounts receivable,
net 1,144 1,047 Inventories 4,595 4,144 Other current assets 370
341 Net property, plant and equipment 2,582 2,492 Goodwill 2,118
2,023 Other assets 2,339 2,399 Finance group assets 1,225
1,316 Total Assets $ 15,034 $ 14,708
Liabilities and Shareholders' Equity Short-term debt
and current portion of long-term debt $ 278 $ 262 Other current
liabilities 3,420 3,530 Other liabilities 2,293 2,376 Long-term
debt 2,785 2,435 Finance group liabilities 1,072
1,141 Total Liabilities 9,848 9,744 Total
Shareholders' Equity 5,186 4,964 Total
Liabilities and Shareholders' Equity $ 15,034 $ 14,708
TEXTRON INC. MANUFACTURING GROUP
Condensed Schedule of Cash Flows and Manufacturing Cash Flow
GAAP to Non-GAAP Reconciliations (In millions) (Unaudited)
Three Months Ended Six Months Ended July
2, July 4, July 2, July 4,
2016 2015
2016 2015 Cash flows
from operating activities: Income from continuing operations $
174 $ 163 $ 322 $ 287 Depreciation and amortization 111 107 217 215
Dividends received from TFC 29 - 29 - Changes in working capital
(211 ) (101 ) (601 ) (406 ) Changes in other assets and liabilities
and non-cash items 4 14
(8 ) 20 Net cash from operating activities of
continuing operations 107 183
(41 ) 116
Cash flows from investing
activities: Capital expenditures (119 ) (94 ) (207 ) (173 ) Net
cash used in acquisitions (15 ) (2 ) (179 ) (34 ) Proceeds from the
sale of property, plant and equipment 3 3 5 4 Other investing
activities, net - 3 (2 )
(4 ) Net cash from investing activities (131 )
(90 ) (383 ) (207 )
Cash
flows from financing activities: Proceeds from long-term debt -
- 345 - Increase (decrease) in short-term debt (30 ) 80 12 105
Purchases of Textron common stock - (87 ) (215 ) (87 ) Other
financing activities, net (2 ) 14
(1 ) 10 Net cash from financing
activities (32 ) 7 141
28 Total cash flows from continuing operations
(56 ) 100 (283 ) (63 ) Total cash flows from discontinued
operations (1 ) (1 ) (1 ) (3 ) Effect of exchange rate changes on
cash and equivalents (5 ) 1 (1 )
(4 )
Net change in cash and equivalents (62 )
100 (285 ) (70 ) Cash and equivalents at beginning of period
723 561 946
731 Cash and equivalents at end of period $ 661
$ 661 $ 661 $ 661
Manufacturing Cash Flow GAAP to Non-GAAP Reconciliations:
Net cash from operating
activities of continuing operations - GAAP $ 107 $ 183 $ (41 ) $
116 Less: Capital expenditures (119 ) (94 ) (207 ) (173 )
Dividends received from TFC
(29 ) - (29 ) - Plus: Total pension contributions 12 14 24 34
Proceeds from the sale of property, plant and equipment 3
3 5 4
Manufacturing cash flow before pension contributions-
Non-GAAP $ (26 ) $ 106 $ (248 ) $ (19 )
2016 Outlook Net cash from operating
activities of continuing operations - GAAP
$ 1,044 - $ 1,144
Less: Capital expenditures
(475)
Dividends received from TFC
(29) Plus: Total pension contributions 60 Manufacturing cash flow
before pension contributions- Non-GAAP $ 600 - $ 700
Manufacturing cash flow before pension contributions 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. Our definition of Manufacturing cash flow before pension
contributions adjusts net cash from operating activities of
continuing operations (GAAP) for the following: dividends received
from Textron Financial Corporation (TFC), capital contributions to
TFC 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. Our calculation
provides a focus on cash generated from true manufacturing
operations, before discretionary and required pension
contributions. While we believe this calculation provides 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. We further believe this measure may be useful for
period-over-period comparisons of underlying business trends and
our ongoing operations, however, our calculation may differ
significantly from methods used by other companies to compute
similar measures.
TEXTRON INC. Condensed Consolidated
Schedule of Cash Flows (In millions) (Unaudited)
Three Months Ended Six Months Ended
July 2, July 4, July 2, July
4, 2016 2015
2016 2015 Cash
flows from operating activities: Income from continuing
operations $ 178 $ 169 $ 329 $ 297 Depreciation and amortization
114 110 223 220 Changes in working capital (168 ) (66 ) (568 ) (335
) Changes in other assets and liabilities and non-cash items
(4 ) 11 (14 ) 23
Net cash from operating activities of continuing operations
120 224 (30 ) 205
Cash flows from investing activities: Capital
expenditures (119 ) (94 ) (207 ) (173 ) Net cash used in
acquisitions (15 ) (2 ) (179 ) (34 ) Finance receivables repaid 19
15 36 46 Other investing activities, net 42
3 52 26 Net cash
from investing activities (73 ) (78 )
(298 ) (135 )
Cash flows from financing
activities: Proceeds from long-term debt - - 362 9 Increase
(decrease) in short-term debt (30 ) 80 12 105 Principal payments on
long-term debt and nonrecourse debt (44 ) (60 ) (90 ) (130 )
Purchases of Textron common stock - (87 ) (215 ) (87 ) Other
financing activities, net (2 ) 5
(1 ) 10 Net cash from financing activities
(76 ) (62 ) 68 (93
) Total cash flows from continuing operations (29 ) 84 (260 ) (23 )
Total cash flows from discontinued operations (1 ) (1 ) (1 ) (3 )
Effect of exchange rate changes on cash and equivalents (5 )
1 (1 ) (4 )
Net change
in cash and equivalents (35 ) 84 (262 ) (30 ) Cash and
equivalents at beginning of period 778
708 1,005 822 Cash and
equivalents at end of period $ 743 $ 792 $ 743
$ 792
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160722005053/en/
Textron Inc.Investor Contacts:Douglas Wilburne,
401-457-2288orD’Ante Natili, 401-457-2288orMedia
Contact:David Sylvestre, 401-457-2362
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