Textron Inc. (NYSE: TXT) today reported fourth quarter 2016
income from continuing operations of $0.78 per share compared to
$0.81 per share in the fourth quarter of 2015. During this year’s
fourth quarter, the company recorded an $8 million pre-tax
restructuring charge ($0.02 per share, after-tax). Excluding this
item, adjusted income from continuing operations, a non-GAAP
measure that is defined and reconciled to GAAP in an attachment to
this release, was $0.80 per share for the fourth quarter of
2016.
Revenues in the quarter were $3.8 billion, down 2.5 percent from
the fourth quarter of 2015. Textron segment profit in the quarter
was $391 million, up $13 million from the fourth quarter of
2015.
“Overall, revenues were down in the quarter but we were
encouraged by increasing demand at Industrial and strong operating
performance at Bell,” said Textron Chairman and CEO Scott C.
Donnelly. “We also completed the first flight of our production
Scorpion jet as we continued to ramp investment in this program to
position us to compete for opportunities in 2017.”
Full-year income from continuing operations was $3.09 per share
compared to $2.50 per share last year. Full-year adjusted income
from continuing operations, a non-GAAP measure that is defined and
reconciled to GAAP in an attachment to this release, was $2.62 per
share, compared to $2.50 in 2015.
Cash Flow
Net cash provided by operating activities of continuing
operations of the manufacturing group for the full year was $988
million, compared to $1,038 million last year. Manufacturing cash
flow before pension contributions, a non-GAAP measure that is
defined and reconciled to GAAP in an attachment to this release,
was $573 million compared to $631 million last year.
Acquisition
Today, Textron announced that it has reached a definitive
agreement to acquire Arctic Cat Inc. (NASDAQ: ACAT) in a cash
transaction valued at approximately $247 million, plus the
assumption of existing debt. Arctic Cat is a leader in the
recreational vehicle industry. The company manufactures and markets
all-terrain vehicles (ATVs), side-by-sides and snowmobiles, in
addition to related parts, garments and accessories under the
Arctic Cat® and Motorfist® brand names.
“Arctic Cat is a superb strategic fit for Textron,” said
Donnelly. “With our recent product introductions in the outdoor
recreational vehicle market under the Stampede name, we believe
Arctic Cat, one of the most recognized brands in the industry,
provides an excellent platform to expand our portfolio, increase
our distribution and create growth within our Specialized Vehicles
business.”
Textron has agreed to make a cash tender offer for all
outstanding shares of Arctic Cat common stock at a price of $18.50
per share. The tender offer is expected to commence no later than
February 7, 2017. The completion of the acquisition is subject to
customary conditions and regulatory approvals.
Share Repurchase Plan
On January 24, 2017, Textron’s Board of Directors approved a new
authorization for the repurchase of up to 25 million shares, under
which the company intends to purchase shares to offset the impact
of dilution from stock-based compensation and benefit plans and for
opportunistic capital management purposes.
Outlook
Textron is forecasting 2017 revenues of approximately $14.3
billion, up four percent. Textron expects full-year 2017 GAAP
earnings per share from continuing operations will be in the range
of $2.40 to $2.65, or $2.50 to $2.70 on an adjusted basis
(non-GAAP), which is reconciled to GAAP in an attachment to this
release. The company is estimating net cash provided by operating
activities of continuing operations of the manufacturing group will
be between $1,035 million and $1,135 million and manufacturing cash
flow before pension contributions (the non-GAAP measure) will be
between $650 and $750 million with planned pension contributions of
about $55 million. Textron intends to update its 2017 outlook to
include Arctic Cat following the completion of the transaction.
Donnelly continued, “Our outlook reflects the continuation of
our strategy around organic growth through new product investments
amid challenging end markets. As we transition our product
portfolios to comprise a greater percentage of these new offerings,
we’ll expect improvement in our growth rate and margins over the
longer term.”
Fourth Quarter Segment Results
Textron Aviation
Revenues at Textron Aviation were down $52 million, primarily
due to lower defense and turboprop volumes partially offset by
higher pre-owned volume.
Textron Aviation delivered 58 new Citation jets and 28 King Air
turboprops in the quarter, compared to 60 jets and 33 King Airs in
last year’s fourth quarter.
Textron Aviation recorded a segment profit of $135 million in
the fourth quarter compared to $138 million a year ago.
Textron Aviation backlog at the end of the fourth quarter was
$1.0 billion, down $73 million from the end of the third
quarter.
Bell
Bell revenues were down $148 million, as Bell delivered 35
commercial helicopters, compared to 56 units last year, 4 V-22’s in
the quarter, down from 8 V-22’s in last year’s fourth quarter and,
8 H-1’s compared to 9 H-1’s last year.
Segment profit was up $2 million despite the decline in
revenues, primarily due to favorable performance.
Bell backlog at the end of the fourth quarter was $5.4 billion,
up $416 million from the end of the third quarter.
Textron Systems
Revenues at Textron Systems increased $69 million, primarily due
to higher volume at Marine and Land Systems.
Segment profit was up $12 million, reflecting improved
performance.
Textron Systems’ backlog at the end of the fourth quarter was
$1.8 billion, down $367 million from the end of the third
quarter.
Industrial
Industrial revenues increased $35 million due to higher volumes
at Kautex and Specialized Vehicles.
Segment profit was essentially flat from the fourth quarter of
2015.
Finance
Finance segment revenues decreased $2 million and segment profit
increased $2 million.
Conference Call Information
Textron will host its conference call today, January 25, 2017 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 Wednesday, January
25, 2017 by dialing (320) 365-3844; Access Code: 373341.
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, operational disruption or the occurrence of any event, change
or other circumstance that could give rise to the termination of
the Agreement and Plan of Merger; the inability to complete the
transaction due to an insufficient percentage of shares being
tendered in the transaction or due to the failure to receive
required regulatory or other approvals or to satisfy other
conditions to the transaction; the risk that the proposed
transaction disrupts current plans and operations; the risk that
anticipated synergies and opportunities as a result of the
transaction will not be realized; difficulty or unanticipated
expenses in connection with integrating Arctic Cat into Textron;
the risk that the acquired business does not perform as planned;
and potential difficulties in employee retention following the
closing of the transaction.
The tender offer described herein has not yet commenced. The
description contained herein is neither an offer to purchase nor a
solicitation of an offer to sell securities of Arctic Cat. At the
time the tender offer is commenced, Textron and its wholly-owned
subsidiary intend to file a Tender Offer Statement on Schedule TO
containing an offer to purchase, forms of letters of transmittal
and other documents relating to the tender offer, and Arctic Cat
intends to file a Solicitation/Recommendation Statement on Schedule
14D-9 with respect to the tender offer. Textron, its wholly-owned
subsidiary and Arctic Cat intend to mail these documents to the
shareholders of Arctic Cat. These documents will contain important
information about the tender offer, and shareholders of Arctic Cat
are urged to read them carefully when they become available.
Shareholders of Arctic Cat will be able to obtain a free copy of
these documents (when they become available) and other documents
filed by Arctic Cat or Textron with the SEC at the website
maintained by the SEC at www.sec.gov. In addition, shareholders
will be able to obtain a free copy of these documents (when they
become available) at Textron’s website at www.textron.com or by
contacting Textron’s Investor Relations department at (401)
457-2288.
TEXTRON INC.
Revenues by Segment and Reconciliation
of Segment Profit to Net Income
Three and Twelve Months Ended December
31, 2016 and January 2, 2016
(Dollars in millions, except per share
amounts)
(Unaudited)
Three Months Ended
Twelve Months Ended
December 31, 2016
January 2, 2016 December 31, 2016
January 2, 2016
REVENUES
MANUFACTURING:
Textron Aviation $ 1,436 $ 1,488 $ 4,921 $ 4,822 Bell 887 1,035
3,239 3,454 Textron Systems 532 463 1,756 1,520 Industrial
952 917 3,794 3,544
3,807 3,903 13,710 13,340 FINANCE 18
20 78 83
Total
revenues $ 3,825 $ 3,923
$ 13,788 $ 13,423
SEGMENT
PROFIT
MANUFACTURING: Textron Aviation $ 135 $ 138 $ 389 $ 400 Bell 126
124 386 400 Textron Systems 53 41 186 129 Industrial 73
73 329 302 387 376
1,290 1,231 FINANCE 4 2
19 24
Segment Profit 391
378 1,309 1,255 Corporate expenses and
other, net (56 ) (52 ) (172 ) (154 ) Interest expense, net for
Manufacturing group (33 ) (32 ) (138 ) (130 ) Special charges (a)
(8 ) - (123 ) -
Income from continuing operations before income taxes 294 294 876
971 Income tax expense (b) (79 ) (69 ) (33 )
(273 )
Income from continuing operations
215 225 843 698 Discontinued
operations, net of income taxes (b) (1 ) 1
119 (1 )
Net income $ 214
$ 226 $ 962
$ 697 Earnings per share:
Income from continuing operations $ 0.78
$ 0.81 $ 3.09 $ 2.50
Discontinued operations, net of income taxes -
0.01 0.44 -
Net income
$ 0.78 $ 0.82 $
3.53 $ 2.50 Diluted
average shares outstanding 273,114,000
276,653,000 272,365,000
278,727,000
(a) During 2016, our Board of Directors approved 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. Special
charges for the three and twelve months ended December 31, 2016
include restructuring charges for this plan, which primarily
consists of severance costs of $4 million and $70 million,
respectively, and asset impairments of $2 million and $38 million,
respectively.
(b) The twelve months ended December 31, 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.
Textron Inc. Condensed
Consolidated Balance Sheets (In millions) (Unaudited)
December 31,
2016
January 2,2016
Assets Cash and equivalents $ 1,137 $ 946 Accounts
receivable, net 1,064 1,047 Inventories 4,464 4,144 Other current
assets 388 341 Net property, plant and equipment 2,581 2,492
Goodwill 2,113 2,023 Other assets 2,331 2,399 Finance group assets
1,280 1,316 Total Assets $ 15,358
$ 14,708
Liabilities and
Shareholders' Equity Short-term debt and current portion of
long-term debt $ 363 $ 262 Other current liabilities 3,530 3,530
Other liabilities 2,354 2,376 Long-term debt 2,414 2,435 Finance
group liabilities 1,123 1,141 Total
Liabilities 9,784 9,744 Total Shareholders' Equity
5,574 4,964 Total Liabilities and
Shareholders' Equity $ 15,358 $ 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 Twelve Months Ended December 31,
January 2, December 31, January 2, 2016
2016 2016 2016
Cash flows from operating activities: Income from continuing
operations $ 219 $ 224 $ 832 $ 684 Depreciation and amortization
115 125 437 449 Changes in working capital 468 258 (399 ) (297 )
Changes in other assets and liabilities and non-cash items 49 41 89
139 Dividends received from TFC -
43 29
63 Net cash from operating activities of continuing
operations 851 691
988 1,038
Cash
flows from investing activities: Capital expenditures (140 )
(134 ) (446 ) (420 ) Net cash used in acquisitions (7 ) - (186 )
(81 ) Proceeds from the sale of property, plant and equipment 2 2
10 8 Other investing activities, net 4
1 1
(3 ) Net cash from investing activities (141 )
(131 ) (621 ) (496
)
Cash flows from financing activities: Proceeds from
long-term debt - - 345 - Principal payments on long-term debt (1 )
(100 ) (254 ) (100 ) Decrease in short-term debt (113 ) - (3 ) -
Purchases of Textron common stock (26 ) (8 ) (241 ) (219 ) Other
financing activities, net 3
3 7 11
Net cash from financing activities (137 )
(105 ) (146 )
(308 ) Total cash flows from continuing operations 573 455
221 234 Total cash flows from discontinued operations - - (2 ) (4 )
Effect of exchange rate changes on cash and equivalents (25
) (6 ) (28 )
(15 )
Net change in cash and equivalents 548
449 191 215 Cash and equivalents at beginning of period 589
497 946
731 Cash and equivalents at end
of period $ 1,137 $ 946 $ 1,137
$ 946
Manufacturing
Cash Flow GAAP to Non-GAAP Reconciliations:
Net cash
from operating activities of continuing operations - GAAP $ 851 $
691 $ 988 $ 1,038
Less: Capital expenditures
(140 ) (134 ) (446 ) (420 ) Dividends received from TFC - (43 ) (29
) (63 ) Plus: Total pension contributions 14 18 50 68 Proceeds from
the sale of property, plant and equipment 2
2 10
8 Manufacturing cash flow before pension
contributions- Non-GAAP* $ 727 $ 534
$ 573 $ 631
2017 Outlook Net cash from operating
activities of continuing operations - GAAP $ 1,035 - $ 1,135 Less:
Capital expenditures (440) Plus: Total pension contributions 55
Manufacturing cash flow before pension contributions- Non-GAAP* $
650 - $ 750
*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
Twelve Months Ended December 31, January 2,
December 31, January 2, 2016
2016 2016 2016 Cash flows
from operating activities: Income from continuing operations $
215 $ 225 $ 843 $ 698 Depreciation and amortization 118 129 449 461
Changes in working capital 473 285 (375) (207) Changes in other
assets and liabilities and non-cash items 63
36 97 142 Net cash from operating activities
of continuing operations 869 675 1,014
1,094
Cash flows from investing activities:
Capital expenditures (140) (134) (446) (420) Net cash used in
acquisitions (7) - (186) (81) Finance receivables repaid 4 1 44 67
Other investing activities, net 12 15 65
46 Net cash from investing activities (131)
(118) (523) (388)
Cash
flows from financing activities: Proceeds from long-term debt 5
6 525 61 Principal payments on long-term debt and nonrecourse debt
(24) (160) (457) (356) Decrease in short-term debt (113) - (3) -
Purchases of Textron common stock (26) (8) (241) (219) Other
financing activities, net 4 2 8
10 Net cash from financing activities (154)
(160) (168) (504) Total cash flows from
continuing operations 584 397 323 202 Total cash flows from
discontinued operations - - (2) (4) Effect of exchange rate changes
on cash and equivalents (25) (6) (28)
(15)
Net change in cash and equivalents 559
391 293 183 Cash and equivalents at beginning of period 739
614 1,005 822 Cash and
equivalents at end of period $ 1,298 $ 1,005 $
1,298 $ 1,005
TEXTRON INC.Non-GAAP Financial
Measures
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 their 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, and a significant multi-year income tax
settlement. We consider items recorded in Special charges, net of
income taxes, such as enterprise-wide restructuring, to be of a
non-recurring nature that is not indicative of ongoing operations.
In addition, the income tax settlement is not considered to be
indicative of ongoing operations since it represents a significant
one-time favorable settlement of our 1998 to 2008 tax years.
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 Reconciliations:
Three
Months EndedDecember 31,
2016
Twelve
Months EndedDecember 31,
2016
Diluted EPS
Diluted EPS Income from continuing operations - GAAP
$ 215 $ 0.78
$ 843 $ 3.09
Special charges, net of taxes of $3 million and $45 million,
respectively 5 0.02 78 0.29 Income tax settlement -
- (206 )
(0.76 )
Adjusted income from continuing operations -
Non-GAAP $ 220 $
0.80 $ 715
$ 2.62
2017 Outlook
Diluted EPS Income from continuing
operations - GAAP $ 647 - $ 716 $ 2.40 - $ 2.65
Special charges, net of taxes of $16 million to $8 million 28 - 14
0.10 - 0.05
Adjusted income from continuing operations -
Non-GAAP $ 675 - $ 730 $ 2.50 - $ 2.70
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version on businesswire.com: http://www.businesswire.com/news/home/20170125005218/en/
Textron Inc.Investor Contacts:Eric Salander,
401-457-2288orD’Ante Natili, 401-457-2288orMedia
Contact:David Sylvestre, 401-457-2362
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