Textron Inc. (NYSE: TXT) today reported third quarter 2016
income from continuing operations of $1.10 per share compared to
$0.63 per share in the third quarter of 2015. During this year’s
third quarter, the company recorded a tax benefit of $0.76 per
share related to settlement of U.S. Internal Revenue Service audits
and recorded a $115 million pre-tax restructuring charge ($0.27 per
share, after-tax). Excluding these items, adjusted income from
continuing operations, a non-GAAP measure that is defined and
reconciled to GAAP in an attachment to this release, was $0.61 per
share for the third quarter of 2016, down $0.02 from last year’s
third quarter.
Revenues in the quarter were $3.3 billion, up 2.2 percent from
the third quarter of 2015. Textron segment profit in the quarter
was $310 million, down $2 million from the third quarter of
2015.
“We had good execution in the quarter with margin improvements
at Systems and Bell,” said Textron Chairman and CEO Scott C.
Donnelly. “At Aviation, we continue to be encouraged by the strong
market acceptance of the Latitude and progress on our new Longitude
platform with a very successful first flight two weeks ago.”
Donnelly added, “We are also pleased with progress on the
Scorpion and have accelerated investment in this program to support
the accreditation process and increased customer engagement.”
Cash Flow
Net cash provided by operating activities of continuing
operations of the manufacturing group for the third quarter was
$178 million, compared to $231 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, was $94 million compared to $116
million during last year’s third quarter.
Restructuring
On August 30, 2016, Textron announced a restructuring plan with
estimated pretax charges in the range of $110 million to $140
million with expected cash outlays in the range of $65 million to
$85 million. The company now estimates pre-tax charges will be in
the range of $140 million to $170 million, with expected cash
outlays in the range of $100 million to $120 million.
Outlook
Textron expects full-year 2016 GAAP earnings per share from
continuing operations will be in the range of $3.06 to $3.21, or
$2.65 to $2.75 on an adjusted basis (non-GAAP), which is reconciled
to GAAP in an attachment to this release. The company revised its
expectation for cash flow from continuing operations of the
manufacturing group before pension contributions to $500 million to
$600 million from its previous estimate of $600 million to $700
million.
Donnelly continued, “We are on track to achieve our operating
plan for the year, while accelerating investments that will drive
future revenue growth and improved cost productivity.”
Third Quarter Segment Results
Textron Aviation
Revenues at Textron Aviation were up $39 million, primarily due
to volume and mix.
Textron Aviation delivered 41 new Citation jets and 29 King Air
turboprops in the quarter, compared to 37 jets and 29 King Airs in
last year’s third quarter.
Textron Aviation recorded a segment profit of $100 million in
the third quarter compared to $107 million a year ago. The decrease
in segment profit in the third quarter was primarily due to the mix
of products sold.
Textron Aviation backlog at the end of the third quarter was
$1.1 billion, approximately flat with the second quarter.
Bell
Bell revenues were down $22 million, as Bell delivered 25
commercial helicopters, compared to 45 units last year. This was
partially offset by the military business with 6 V-22’s in the
quarter, up from 4 V-22’s in last year’s third quarter and, 8 H-1’s
compared to 5 H-1’s last year.
Segment profit was down $2 million, primarily due to the lower
commercial aircraft volumes.
Bell backlog at the end of the third quarter was $4.9 billion,
approximately flat with the second quarter.
Textron Systems
Revenues at Textron Systems decreased $7 million, primarily due
to lower Weapons and Sensors volume partially offset by higher
revenues at Marine and Land Systems. Segment profit was up $5
million, reflecting improved performance.
Textron Systems’ backlog at the end of the third quarter was
$2.2 billion, down $74 million from the end of the second
quarter.
Industrial
Industrial revenues increased $58 million due to the impact of
acquired businesses and higher volumes.
Segment profit increased $5 million, largely reflecting improved
performance.
Finance
Finance segment revenues increased $3 million and segment profit
decreased $3 million.
Non-GAAP Measures
Adjusted income from continuing operations and manufacturing
cash flow before pension contributions are non-GAAP measures that
are defined and reconciled to GAAP in an attachment to this
release.
Conference Call Information
Textron will host its conference call today, October 20, 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 Thursday, October 20,
2016 by dialing (320) 365-3844; Access Code: 373340.
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 Nine Months Ended October 1,
2016 and October 3, 2015
(Dollars in millions, except per share
amounts)
(Unaudited)
Three Months Ended
Nine Months Ended
October 1, 2016
October 3, 2015 October 1, 2016
October 3, 2015
REVENUES
MANUFACTURING: Textron
Aviation $ 1,198 $ 1,159 $ 3,485 $ 3,334 Bell 734 756 2,352 2,419
Textron Systems 413 420 1,224 1,057 Industrial 886
828 2,842 2,627 3,231
3,163 9,903 9,437 FINANCE 20 17
60 63
Total revenues $
3,251 $ 3,180 $
9,963 $ 9,500
SEGMENT
PROFIT
MANUFACTURING: Textron Aviation $ 100 $ 107 $ 254 $ 262 Bell 97 99
260 276 Textron Systems 44 39 133 88 Industrial 66
61 256 229 307 306 903
855 FINANCE 3 6 15
22
Segment Profit 310 312
918 877 Corporate expenses and other, net (53
) (27 ) (116 ) (102 ) Interest expense, net for Manufacturing group
(35 ) (33 ) (105 ) (98 ) Special charges (a) (115 ) -
(115 ) - Income from continuing
operations before income taxes 107 252 582 677 Income tax benefit
(expense) (b) 192 (76 ) 46
(204 )
Income from continuing operations
299 176 628 473 Discontinued
operations, net of income taxes (b) 122 -
120 (2 )
Net income $
421 $ 176 $ 748
$ 471 Earnings per share:
Income from continuing operations $ 1.10
$ 0.63 $ 2.31 $ 1.69
Discontinued operations, net of income
taxes
0.45 - 0.44 (0.01
)
Net income $ 1.55 $
0.63 $ 2.75 $ 1.68
Diluted average shares outstanding
272,099,000 278,039,000
272,051,000 279,400,000
(a) On August 30, 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 nine months ended October 1, 2016 include
restructuring charges for this plan, which primarily consists of
severance costs of $66 million and asset impairment charges of $36
million.
(b) The three and nine months ended October 1, 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)
October 1,
2016
January 2, 2016
Assets Cash and equivalents $ 589 $ 946 Accounts receivable,
net 1,139 1,047 Inventories 4,791 4,144 Other current assets 348
341 Net property, plant and equipment 2,568 2,492 Goodwill 2,121
2,023 Other assets 2,318 2,399 Finance group assets 1,293
1,316 Total Assets $ 15,167
$ 14,708
Liabilities and
Shareholders' Equity Short-term debt and current portion of
long-term debt $ 126 $ 262 Other current liabilities 3,494 3,530
Other liabilities 1,987 2,376 Long-term debt 2,777 2,435 Finance
group liabilities 1,132 1,141
Total Liabilities 9,516 9,744 Total Shareholders' Equity
5,651 4,964 Total Liabilities
and Shareholders' Equity $ 15,167 $ 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 Nine Months Ended
October 1,2016
October 3,2015
October 1,2016
October 3,2015
Cash flows from operating activities: Income from continuing
operations $ 291 $ 173 $ 613 $ 460 Depreciation and amortization
105 109 322 324 Changes in working capital (266 ) (149 ) (867 )
(555 ) Changes in other assets and liabilities and non-cash items
48 78 40 98 Dividends received from TFC -
20 29 20 Net cash
from operating activities of continuing operations 178
231 137 347
Cash flows from investing activities: Capital
expenditures (99 ) (113 ) (306 ) (286 ) Net cash used in
acquisitions - (47 ) (179 ) (81 ) Proceeds from the sale of
property, plant and equipment 3 2 8 6 Other investing activities,
net (1 ) - (3 ) (4
) Net cash from investing activities (97 )
(158 ) (480 ) (365 )
Cash flows from
financing activities: Proceeds from long-term debt - - 345 -
Principal payments on long-term debt (251 ) - (253 ) - Increase
(decrease) in short-term debt 98 (105 ) 110 - Purchases of Textron
common stock - (124 ) (215 ) (211 ) Other financing activities, net
3 (2 ) 4 8
Net cash from financing activities (150 )
(231 ) (9 ) (203 ) Total cash flows
from continuing operations (69 ) (158 ) (352 ) (221 ) Total cash
flows from discontinued operations (1 ) (1 ) (2 ) (4 ) Effect of
exchange rate changes on cash and equivalents (2 )
(5 ) (3 ) (9 )
Net change in cash
and equivalents (72 ) (164 ) (357 ) (234 ) Cash and equivalents
at beginning of period 661 661
946 731 Cash and equivalents at
end of period $ 589 $ 497 $ 589
$ 497
Manufacturing Cash Flow GAAP to Non-GAAP
Reconciliations: Net
cash from operating activities of continuing operations - GAAP $
178 $ 231 $ 137 $ 347 Less: Capital expenditures (99 ) (113 ) (306
) (286 ) Dividends received from TFC - (20 ) (29 ) (20 ) Plus:
Total pension contributions 12 16 36 50 Proceeds from the sale of
property, plant and equipment 3 2
8 6 Manufacturing cash
flow before pension contributions- Non-GAAP $ 94 $
116 $ (154 ) $ 97
2016
Outlook Net cash from operating activities of continuing
operations - GAAP $ 944 - $ 1,044 Less: Capital expenditures (475)
Dividends received from TFC (29)
Plus: Total pension contributions
60 Manufacturing cash flow before pension contributions-
Non-GAAP $ 500 - $ 600
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 Nine Months Ended
October 1, 2016
October 3, 2015
October 1, 2016
October 3, 2015
Cash flows from operating activities:
Income from continuing operations $ 299
$ 176 $ 628 $ 473 Depreciation and amortization 108 112 331 332
Changes in working capital (280 ) (157 ) (848 ) (492 ) Changes in
other assets and liabilities and non-cash items 48
83 34
106
Net cash from operating activities of
continuing operations
175 214 145
419
Cash flows from
investing activities: Capital expenditures (99 ) (113 ) (306 )
(286 ) Net cash used in acquisitions - (47 ) (179 ) (81 ) Finance
receivables repaid 4 20 40 66 Other investing activities, net
1 5 53
31 Net cash from
investing activities (94 ) (135
) (392 ) (270 )
Cash flows
from financing activities: Proceeds from long-term debt 158 46
520 55 Principal payments on long-term debt and nonrecourse debt
(341 ) (66 ) (433 ) (196 ) Increase (decrease) in short-term debt
98 (105 ) 110 - Purchases of Textron common stock - (124 ) (215 )
(211 ) Other financing activities, net 3
(2 ) 4
8 Net cash from financing activities (82 )
(251 ) (14 )
(344 ) Total cash flows from continuing operations (1
) (172 ) (261 ) (195 ) Total cash flows from discontinued
operations (1 ) (1 ) (2 ) (4 ) Effect of exchange rate changes on
cash and equivalents (2 ) (5 )
(3 ) (9 )
Net change in cash
and equivalents (4 ) (178 ) (266 ) (208 ) Cash and equivalents
at beginning of period 743
792 1,005
822 Cash and equivalents at end of period $ 739
$ 614 $ 739
$ 614
TEXTRON INC. GAAP to Non-GAAP
Reconciliation Income from Continuing Operations (In
millions, except share data)
A reconciliation of income from continuing
operations in accordance with GAAP (Generally Accepted Accounting
Principles) to income from continuingoperations on a non-GAAP basis
along with diluted earnings per share is provided below.
Three
Months Ended October 1, 2016
Nine
Months Ended October 1, 2016
Diluted EPS
Diluted EPS Income from continuing operations - GAAP
$ 299 $ 1.10 $ 628
$ 2.31 Special charges, net of taxes of $42 million
73 0.27 73 0.27 Income tax settlement (206 )
(0.76 ) (206 )
(0.76 )
Adjusted income from continuing operations -
Non-GAAP (a) $ 166
$ 0.61 $ 495
$ 1.82
2016 Outlook
Diluted EPS
Income from continuing operations - GAAP $ 832 - $
874 $ 3.06 - $ 3.21 Special charges, net of taxes 96 -
81 0.35 - 0.30 Income tax settlement
(206)
(0.76)
Adjusted income from continuing
operations - Non-GAAP (a)
$ 722 - $ 749
$ 2.65 - $ 2.75
(a) Adjusted income from continuing operations is a non-GAAP
financial measure, that excludes certain nonrecurring items that
management believes are not indicative of the Company's ongoing
performance. This measure is disclosed by management as additional
information to investors in order to provide them with an
alternative method for assessing our operating results. This
measure is not in accordance with, or a substitute for, GAAP, and
may be different from or inconsistent with non-GAAP financial
measures used by other companies.
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version on businesswire.com: http://www.businesswire.com/news/home/20161020005274/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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