OREANDA-NEWS. 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.

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.

 

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