Textron Reports Second Quarter 2019 Results; Raises Full-Year EPS Outlook

  • EPS of $0.93, up 7% from a year ago
  • Operating margin of 10.5%, up from 9.3% a year ago
  • $159 million returned to shareholders through share repurchases
  • Full-year EPS guidance raised to $3.65 - $3.85 per share, up $0.10

PROVIDENCE, R.I.--()--Textron Inc. (NYSE: TXT) today reported second quarter 2019 net income of $0.93 per share, compared to $0.87 per share in the second quarter of 2018.

“Operationally, we continued to have solid margin performance across our businesses with improvements in the quarter at Aviation and Industrial, and we remain on track for growth in the second half of the year,” said Textron Chairman and CEO Scott C. Donnelly.

Cash Flow

Net cash provided by operating activities of the manufacturing group for the second quarter totaled $163 million, compared to $468 million in last year’s second quarter. Manufacturing cash flow before pension contributions, a non-GAAP measure that is defined and reconciled to GAAP in an attachment to this release, totaled $102 million compared to $399 million last year.

In the quarter, Textron returned $159 million to shareholders through share repurchases.

Outlook

Textron now expects 2019 earnings per share from continuing operations to be in a range of $3.65 to $3.85, up $0.10 from our previous outlook. Textron reiterated its expectation for cash flow from continuing operations of the manufacturing group before pension contributions of $700 to $800 million with planned pension contributions of about $50 million.

Donnelly continued, “We remain on target for a strong 2019 as we continue our focus on execution and earnings growth through the balance of the year.”

Second Quarter Segment Results

Textron Aviation

Revenues at Textron Aviation of $1.1 billion were down $153 million from last year’s second quarter, primarily due to lower volume and mix across the commercial turboprop and defense product lines.

Textron Aviation delivered 46 jets, down from 48 last year, and 34 commercial turboprops, down from 47 last year.

Segment profit was $105 million in the second quarter, up $1 million from a year ago as favorable performance was offset by the lower volume and mix.

Textron Aviation backlog at the end of the second quarter was $1.9 billion.

Bell

Bell revenues were $771 million, down 7% from last year, primarily on lower military volume.

Bell delivered 53 commercial helicopters in the quarter, down from 57 last year.

Segment profit of $103 million was down $14 million, primarily due to the lower military volume.

Bell backlog at the end of the second quarter was $6.0 billion.

Textron Systems

Revenues at Textron Systems were $308 million, down from $380 million last year, primarily reflecting lower volume at TRU Simulation + Training and Unmanned Systems.

Segment profit was up $9 million from last year’s second quarter, primarily due to favorable performance which included a gain related to the formation of our new training business with FlightSafety International Inc.

Textron Systems’ backlog at the end of the second quarter was $1.4 billion.

Industrial

Industrial revenues of $1.0 billion decreased $213 million, largely related to the impact from the disposition of our Tools & Test product line and lower volume.

Segment profit was down $4 million from the second quarter of 2018, largely due to the impact from lower volume and the product line disposition, partially offset by favorable performance primarily related to the Specialized Vehicles product line.

Finance

Finance segment revenues were down $1 million, and profit was up $1 million from last year’s second quarter.

Conference Call Information

Textron will host its conference call today, July 17, 2019 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) 230-1951 in the U.S. or (612) 288-0340 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, July 17, 2019 by dialing (320) 365-3844; Access Code: 457171.

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, Cessna, Beechcraft, Hawker, Jacobsen, Kautex, Lycoming, E-Z-GO, Arctic Cat, 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; the risk that acquisitions do not perform as planned, including, for example, the risk that acquired businesses will not achieve revenue and profit projections; and the impact of changes in tax legislation.

TEXTRON INC.
Revenues by Segment and Reconciliation of Segment Profit to Net Income

(Dollars in millions, except per share amounts)
(Unaudited)
Three Months Ended Six Months Ended
June 29, 2019 June 30, 2018 June 29, 2019 June 30, 2018
REVENUES
MANUFACTURING:
Textron Aviation

$

1,123

 

$

1,276

 

$

2,257

 

$

2,286

 

Bell

 

771

 

 

831

 

 

1,510

 

 

1,583

 

Textron Systems

 

308

 

 

380

 

 

615

 

 

767

 

Industrial

 

1,009

 

 

1,222

 

 

1,921

 

 

2,353

 

 

3,211

 

 

3,709

 

 

6,303

 

 

6,989

 

 
FINANCE

 

16

 

 

17

 

 

33

 

 

33

 

Total revenues

$

3,227

 

$

3,726

 

$

6,336

 

$

7,022

 

 
SEGMENT PROFIT
MANUFACTURING:
Textron Aviation

$

105

 

$

104

 

$

211

 

$

176

 

Bell

 

103

 

 

117

 

 

207

 

 

204

 

Textron Systems

 

49

 

 

40

 

 

77

 

 

90

 

Industrial

 

76

 

 

80

 

 

126

 

 

144

 

 

333

 

 

341

 

 

621

 

 

614

 

 
FINANCE

 

6

 

 

5

 

 

12

 

 

11

 

Segment Profit

 

339

 

 

346

 

 

633

 

 

625

 

 
Corporate expenses and other, net

 

(24

)

 

(51

)

 

(71

)

 

(78

)

Interest expense, net for Manufacturing group

 

(36

)

 

(35

)

 

(71

)

 

(69

)

 
Income before income taxes

 

279

 

 

260

 

 

491

 

 

478

 

Income tax expense

 

(62

)

 

(36

)

 

(95

)

 

(65

)

 
Net income

$

217

 

$

224

 

$

396

 

$

413

 

 
Earnings per share:
Net income

$

0.93

 

$

0.87

 

$

1.69

 

$

1.59

 

 
Diluted average shares outstanding

 

233,545,000

 

 

257,177,000

 

 

234,993,000

 

 

260,462,000

 

 
 
Textron Inc.
Condensed Consolidated Balance Sheets
(In millions)
(Unaudited)
 
 
June 29,
2019
December 29,
2018
Assets
Cash and equivalents

$

 

775

$

 

987

Accounts receivable, net

989

1,024

Inventories

4,311

3,818

Other current assets

839

785

Net property, plant and equipment

2,517

2,615

Goodwill

2,147

2,218

Other assets

2,255

1,800

Finance group assets

963

1,017

Total Assets

$

 

14,796

$

 

14,264

 
 
Liabilities and Shareholders' Equity
Short-term debt and current portion of long-term debt

$

 

457

$

 

258

Current liabilities

3,122

3,248

Other liabilities

2,157

1,932

Long-term debt

2,910

2,808

Finance group liabilities

814

826

Total Liabilities

9,460

9,072

 
Total Shareholders' Equity

5,336

5,192

Total Liabilities and Shareholders' Equity

$

 

14,796

$

 

14,264

 
TEXTRON INC.
MANUFACTURING GROUP
Condensed Schedule of Cash Flows
(In millions)
(Unaudited)
 
 
Three Months Ended Six Months Ended
June 29, June 30, June 29, June 30,

2019

2018

2019

2018

Cash flows from operating activities:
Net income

$

212

 

$

219

 

$

387

 

$

398

 

Depreciation and amortization

 

99

 

 

109

 

 

199

 

 

212

 

Changes in working capital

 

(162

)

 

98

 

 

(716

)

 

(278

)

Changes in other assets and liabilities and non-cash items

 

14

 

 

42

 

 

47

 

 

33

 

Dividends received from TFC

 

-

 

 

-

 

 

50

 

 

50

 

Net cash from operating activities of continuing operations

 

163

 

 

468

 

 

(33

)

 

415

 

Cash flows from investing activities:
Capital expenditures

 

(76

)

 

(82

)

 

(135

)

 

(159

)

Net proceeds from corporate-owned life insurance policies

 

2

 

 

40

 

 

4

 

 

98

 

Proceeds from the sale of property, plant and equipment

 

3

 

 

1

 

 

4

 

 

10

 

Net cash from investing activities

 

(71

)

 

(41

)

 

(127

)

 

(51

)

Cash flows from financing activities:
Decrease in short-term debt

 

(100

)

 

(2

)

 

-

 

 

-

 

Net proceeds from issuance of long-term debt

 

297

 

 

-

 

 

297

 

 

-

 

Purchases of Textron common stock

 

(159

)

 

(571

)

 

(361

)

 

(915

)

Other financing activities, net

 

5

 

 

30

 

 

9

 

 

33

 

Net cash from financing activities

 

43

 

 

(543

)

 

(55

)

 

(882

)

Total cash flows from continuing operations

 

135

 

 

(116

)

 

(215

)

 

(518

)

Total cash flows from discontinued operations

 

(1

)

 

(1

)

 

(1

)

 

(1

)

Effect of exchange rate changes on cash and equivalents

 

(5

)

 

(17

)

 

4

 

 

(6

)

Net change in cash and equivalents

 

129

 

 

(134

)

 

(212

)

 

(525

)

Cash and equivalents at beginning of period

 

646

 

 

688

 

 

987

 

 

1,079

 

Cash and equivalents at end of period

$

775

 

$

554

 

$

775

 

$

554

 

 
Manufacturing Cash Flow Before Pension Contributions GAAP to Non-GAAP Reconciliation:
 
Three Months Ended Six Months Ended
June 29, June 30, June 29, June 30,

2019

2018

2019

2018

Net cash from operating activities of continuing operations - GAAP

$

163

 

$

468

 

 

(33

)

$

415

 

Less: Capital expenditures

 

(76

)

 

(82

)

 

(135

)

 

(159

)

Dividends received from TFC

 

-

 

 

-

 

 

(50

)

 

(50

)

Plus: Total pension contributions

 

12

 

 

12

 

 

25

 

 

25

 

Proceeds from the sale of property, plant and equipment

 

3

 

 

1

 

 

4

 

 

10

 

Manufacturing cash flow before pension contributions - Non-GAAP (a)

$

102

 

$

399

 

 

(189

)

$

241

 

 
(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 Six Months Ended
June 29, June 30, June 29, June 30,

2019

2018

2019

2018

Cash flows from operating activities:
Net income

$

217

 

$

224

 

$

396

 

$

413

 

Depreciation and amortization

 

100

 

 

111

 

 

202

 

 

216

 

Changes in working capital

 

(174

)

 

105

 

 

(703

)

 

(264

)

Changes in other assets and liabilities and non-cash items

 

13

 

 

43

 

 

45

 

 

33

 

Net cash from operating activities of continuing operations

 

156

 

 

483

 

 

(60

)

 

398

 

Cash flows from investing activities:
Capital expenditures

 

(76

)

 

(82

)

 

(135

)

 

(159

)

Net proceeds from corporate-owned life insurance policies

 

2

 

 

40

 

 

4

 

 

98

 

Finance receivables repaid

 

8

 

 

9

 

 

20

 

 

25

 

Other investing activities, net

 

4

 

 

21

 

 

7

 

 

30

 

Net cash from investing activities

 

(62

)

 

(12

)

 

(104

)

 

(6

)

Cash flows from financing activities:
Decrease in short-term debt

 

(100

)

 

(2

)

 

-

 

 

-

 

Net proceeds from issuance of long-term debt

 

297

 

 

-

 

 

297

 

 

-

 

Principal payments on long-term debt and nonrecourse debt

 

(16

)

 

(15

)

 

(35

)

 

(34

)

Purchases of Textron common stock

 

(159

)

 

(571

)

 

(361

)

 

(915

)

Other financing activities, net

 

5

 

 

30

 

 

10

 

 

33

 

Net cash from financing activities

 

27

 

 

(558

)

 

(89

)

 

(916

)

Total cash flows from continuing operations

 

121

 

 

(87

)

 

(253

)

 

(524

)

Total cash flows from discontinued operations

 

(1

)

 

(1

)

 

(1

)

 

(1

)

Effect of exchange rate changes on cash and equivalents

 

(5

)

 

(17

)

 

4

 

 

(6

)

Net change in cash and equivalents

 

115

 

 

(105

)

 

(250

)

 

(531

)

Cash and equivalents at beginning of period

 

742

 

 

836

 

 

1,107

 

 

1,262

 

Cash and equivalents at end of period

$

857

 

$

731

 

$

857

 

$

731

 

 

TEXTRON INC.
Non-GAAP Financial Measures
(Dollars in millions, except per share amounts)

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 definition for the non-GAAP financial measure included in this release:

Manufacturing cash flow before pension contributions
Manufacturing cash flow before pension contributions adjusts net cash from operating activities (GAAP) for the following:

  • 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;
  • 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;
  • 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.
  • Excludes taxes paid related to the gain realized in 2018 on the Tools and Test business disposition. We have made this adjustment to the non-GAAP measure because we believe this use of cash is not representative of cash used by our manufacturing operations.

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.

Manufacturing Cash Flow Before Pension Contributions GAAP to Non-GAAP Reconciliation and 2019 Outlook:
 
Three Months Ended Six Months Ended
June 29,
2019
June 30,
2018
June 29,
2019
June 30,
2018
Net cash from operating activities of continuing operations - GAAP

$

163

 

$

468

 

$

(33

)

$

415

 

Less: Capital expenditures

 

(76

)

 

(82

)

 

(135

)

 

(159

)

Dividends received from TFC

 

-

 

 

-

 

 

(50

)

 

(50

)

Plus: Total pension contributions

 

12

 

 

12

 

 

25

 

 

25

 

Proceeds from the sale of property, plant and equipment

 

3

 

 

1

 

 

4

 

 

10

 

Manufacturing cash flow before pension contributions - Non-GAAP

$

102

 

$

399

 

$

(189

)

$

241

 

 
 
2019 Outlook
Net cash from operating activities of continuing operations - GAAP

$

1,066

-

$

1,166

 

Less: Capital expenditures

(380)

Dividends received from TFC

(50)

Plus: Total pension contributions

50

 

Taxes paid on gain on business disposition

10

 

Proceeds from the sale of property, plant and equipment

4

Manufacturing cash flow before pension contributions - Non-GAAP

$

700

-

$

800

 

 

Contacts

Investor Contacts:
Eric Salander – 401-457-2288
Jeffrey Trivella – 401-457-2288

Media Contact:
David Sylvestre – 401-457-2362

Contacts

Investor Contacts:
Eric Salander – 401-457-2288
Jeffrey Trivella – 401-457-2288

Media Contact:
David Sylvestre – 401-457-2362