TXT - Earnings call transcript Q4 2017

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Operator

Ladies and gentlemen, thank you for standing by and welcome to the Textron’s Fourth Quarter Earnings Call. At this time, all participants are in listen-only mode. [Operator Instructions] As a reminder, today’s call is being recorded.

Now, I will turn the conference over to your host, Eric Salander, VP, Investor Relations. Please go ahead.

Eric Salander

morning, good and Sean everyone. Thanks,

to I’d Before SEC be These filings mention which subject will and in release. to future we forward-looking detailed estimates our are today. begin, discussing call and we our factors, press like expectations in risk various today’s statements are during

we Scott Textron’s Chief Chairman Officer. the Financial CEO and On have call and today, our Donnelly, Frank Connor,

were Relations X call Our up in be section Investor of can the revenues our presentation from earnings the million in quarter billion, XXX last Textron’s website. found year.

items had X-K During disclosed performance impacted fourth earlier quarter, this we filing. year's a we couple as our of notable that this in month our

in $X net deferred passed to as Cuts tax recorded Act, of and the result per the non-US of re-measurement and Jobs assets charge on company earnings. fourth million XXX share our the First, undistributed quarter a related or recently repatriation the Tax the tax tax of provisional

Second, tax. million charges we per $X.XX recorded XX fourth XXX per from was was flow pension fourth XXX last to income quarter. share, quarter. contributions continuing Adjusted share compared million $X.XX down before year's year’s restructuring operations $X.XX or cash from Manufacturing last million in pretax after

XXX flow the cash ago. before For from last pension share last per Scott. call were was continuing With million up operations over $X.XX year. turn Manufacturing a the billion, contributions Adjusted million, X% revenues year, XX.X year was from that, $X.XX from to up income compared year. I'll XXX to

Scott Donnelly

compared from year; delivered XX from systems. and the Revenues to revenues X by H-Xs, Bell, higher military were helicopters with and the in at morning, at and year V-XXs, We up volumes At XX industrial quarter year’s up last quarter. X revenues commercial lower everybody. Eric on in quarter. fourth offset up Bell, good Thanks, last aviation up X and were partially last XX for increases

order Asia. earlier in we International XXXs seen the demand ordered pickup continue that order signed customers of Reignwood an to as across a received see recently commercial base year. in follow Southeast customers. We've We a aircraft were XX broad XX a for this on to several the side, for from On orders XXX

We also XXXs three existing of to Flight medical order the from Mercy fleet. an received for the upgrade air remainder

On SFW order for first and the of the At Afghan major a XX the XXX Bell National a and important quarter, the FMS agreement Valor up representing with to milestone volumes, In we XXX units. development we at signed Simulation Weapons product Airlines new mobile to program. fulfill on lower SIM front, production Full this Flight we Latin program. the with MAX strike revenues to systems flight achieved to Sensors vehicles our The for pilot down related of potential American received the Training, Boeing tiltrotor, an an on additional Army Copa growing airlines primarily discontinuance were for requirements. force provide a TRU V-XXX training

saw improved clear in Industrial, new dealers the the XX% snow and in Arctic our the allowing We drive sales, demand model reflecting of for to introductions primarily Moving youth to impact mountain up Cat. the inventory categories. were XXXX channel, retail and including quarter, revenues older

from ground golf seven de-icers. Typhoon for an in our sales ELiTE We also Textron order powered line, At lithium received saw Airpro car. transport higher our Finland business in product led our by new E-Z-GO GSC, [indiscernible]

from T-X flat we King up revenues last Aviation, X%. year, two Textron trainers, X from with and XX fourth quarter year. in the Airs, XX to last In jets, down XX delivered billion, Moving last X.X Beechcraft were down quarter, year’s

logistics in of King turboprops new and delivered jets, year, services introduction now in saw XXX Latitude the charter for both XX the North in including development and fractional industry. cargo Since deliveries. last up full from X XXXX, in quarter product delivered importance the for and this X XXX, intake for we’ve For we air configured strong a the operator XXX including three Latitudes, We Air year’s order Botswana, jets, Latitudes American XXXs Mexico. ambulance customer caravans operators for in to a demonstrating

innovation increased lines. long Moving we growth the to integration XX% shareholder the continued To product that of aftermarket plan introductions, value. term for continue execute new At and of revenues, Equally delivered. higher seen product our Cat the lithium aftermarket, the important year, up ELiTE evident we through vehicles. car, revolutionary aircraft acquisitions E-Z-GO which this to utilization over Earlier complement businesses and golf were now to need our innovate and powered to year, specialized quarter. in the continue our over to drive unveiled product create Industrial, which Arctic continues which strategic summarize throughout units was reflects has is acquisitions to core the strategy new through XX,XXX Textron’s

flight, Arctic to the strike performance a ZR continue necessary [slate Havoc horsepower our FMS XXX and services featuring airborne warden A-arm solutions, business Textron X, vehicle advanced as [ph] new leading side received leading the and snow era mobile side offroad the In introduced by up. shore best-in-class night the to making Textron wheel our we Cat package. double unmanned of to At we we force December, capitalize Textron investments [indiscernible] program system At XXX the on develop the introduced the order. side, tactical market. first line growing position On systems, suspension introduced we aircraft a snowmobile we’re of] to follow-on a class ship four class towards the product high

technology, flight flight Bell, milestone, V-XX saw significant XXX,XXX we further to demonstrating evolved first the another the the order hours, which fleet was to surpass reliability which the we V-XXX. of Moving of

market. improved the in for XXX back Textron well position year international the the helicopter and intake program the flight commercial At half leader XXX strengthening new we of the innovative in as of On the the of side, saw as as activity test the Ranger demonstrates Jet the commercial order resumption market. strong relentless Aviation, X Bell’s an order

US XXX our product of into programs on the activities flight XXX its program. its nearing in anticipate the entered product to quietest successful new customer development milestones our speed resuming test key with the In progressing In the would of November, key leading offers came in Cessna the integration aircraft. service. its towards in fleet new Denali and markets, program. We said, integrated with Force restructuring and The be entering twin the along Air service, super many end test order market and engine That We industry. nearing we V-XXX. class an several now announced is cruise certification a have Longitude knowing turboprop. entry a integration and range, on On This flight the program of businesses. aircraft quarter. of launch we challenging utility initial demonstration The Cat. surrounding we and it of in is in we've the nearing successfully front, flight first Longitude is and uncertainties XX we SkyCourier, summary, in XXXX achieved many large first payload our is year Scorpion first on the both flight end business AT-X interior had new OA-X the mid-sized certification the the is the FedEx with and to Arctic

end improving in XXXX. us behind accomplishments coming into markets, we're these positioned well With

we're financial our aviation at projecting revenues as look and and Bell we about of expect industrial, Systems. we lower As revenues growth billion guidance, XX.X with at at

pension will Bell to operations flat. share to returned With in be repurchase We XXX expect of million portion that, systems, EPS will contributions range programs million shareholders through turn call consistent the to from and with continuing expect $X.XX. flow XXXX, with in substantial margin Frank. before improvements XXX again in a the range about industrial and $X.XX I’ll to the be of to cash over across be cash aviation, we the of Manufacturing XXXX.

Frank Connor

Thank you, million of down XXXX the XXX in morning Segment profit million XXX revenues. from fourth XX good on in quarter increase Scott quarter the million, and was everyone.

were how of primarily and with X% flight test X.X Segment billion down each from year, volume. largely Aviation, from military quarter contributed, million million, Let's lower Backlog segment the the from by program. in review ended revenues At XXX of of due this Aviation. last to Longitude profit Textron up starting primarily quarter. the segments expense, period down XXX Textron year end development the million the ago, third driven the research a higher to XX at due X.X billion, was

fourth volume segment up Textron by million profit from offset Industrial Segment million the quarter. billion, end increase reflecting and At down quarter, the million related were third segment at million, military XX partially revenues favorable million the was Segment of decreased performance. profit X quarter from million. was XX XX profit primarily X.X at ago Backlog was million, in volumes. lower mix. Segment third at XXX year down XX% change the on the end from weapons primarily Backlog million despite the sensors. XX quarter. segment and the the down X.X in Bell, down commercial weapons million, lower of revenues sensors. down the in volumes, million volume to a billion largely of X year Moving revenues to related and were Cat. in was end increased last Finance profit from commercial X.X on billion, the the to XX revenues due up to XX% revenues, XXX million higher million XXX Arctic up of were XXX of was of lower a systems, XXX

million year. under into gross pre-tax below ended debt Interest This X charges the profit, With corporate XX final the represents year restructuring million, Scorpion special Moving we the manufacturing compared the the was of last plan, million our X.X the quarter. to our on aviation XX reflected with compared XX respect were restructuring of of billion. charges charge XX recorded expenses increase the line an of million programs. transition last in segment. year. million program to to expense segment We This

cost at $XXX year, full repurchased of approximately million. the overall million XX about For shares we an

our this increase quarter of we principally will relatively This cost method to impacts guidance transition Also adoption, the impact with to contracts $XX approximately overall will method. the delivery of recognizing includes Bell. profit Systems be accounting XXXX new of impact with the to million Bell XXXX, The slightly no recognition to and our out first earnings of revenue we immaterial record restatement at from in at higher adopting the related incurred to will government segment revenue prior as Turning Textron a periods. standard. and new an at Textron of retained Systems unchanged revenue adoption

a have are not will of change income but impact we accounting our our and costs OPEB accounting will statement, reporting. standard will Additionally, this a that not effective our adopting pension standard new segment change material adopting present how pension we The to results. financial on

to R&D on we with revenue our align government guidance standards, new now costs. is R&D previously basis netted recognition whereas Finally gross shared presented a US

presentation, product At Turning billion, improved expected is I’ll our all our begin lines. performance. aviation, to reflecting we're now with $X and expecting Textron of the X%, margin slide on about X. higher higher be segments across volume volumes revenues higher Segment to our reflecting approximately

Looking X.X expected forecasting unmanned down We're about volumes volumes. Segment of about to our turning. XX billion systems businesses At of we're and X.X X.X at margin revenue be finance, Bell, weapons At in to military XX%. about of slightly will billion, forecasting lower profit million expecting we're about overall margin At reflecting XXXX in X%. we're projected revenues about expecting segment is a segment each estimating growth of about we're a revenues and of lower be margin systems, resulting and reflecting in of billion, lower X%. industrial, sensors.

based down discount cost slide X.XX%, XX, plan to $XX US from rate we're last XXXX be a Turning million, estimating year. on pension of to

XXXX. slide XXX R&D Turning up about million, to gross be will year. XXX expected from from in be We're estimating down to last about XXX CapEx million, XX, is million

slide full for below a segment year of line looking tax for and million interest expense, corporate Moving about effective XX.X%. at XXX projecting we're million XX, rate the expense, about XXX

’XX than the due and estimated of rate XXXX. the Tax enactment XXXX of Jobs Act for to Our lower tax is Cut

remarks. share a million XXX prepared assumes our of count guidance in of That our share Our repurchase shares, reflecting the about activity continuation XXXX. concludes

Sean, for line So can open questions. we the

Operator

the first will come question Kahyaoglu of Our Jefferies. from from Sheila line

Sheila Kahyaoglu

assumptions? we you’re points factored XXX R&D one impact, on How margins, to those mix guess up first do X% the and assuming aviation. I basis for think about pricing into aviation

Scott Donnelly

Longitude the around on think complete work all I I the Sheila, R&D fronts. as work finished it’s favorable the the certainly we're with will on for Longitude, a on certainly I had wrap we a last the mean, have quarter. but activity, Denali of basis, front, around obviously plenty Scorpion largely year-over-year up as of it's program, here along. we the obviously lot year's SkyCourier, mean, first got Obviously, Scorpion work, there's we coming tailwind in We've them. a the

have about, that on that. line, we’ve We will talked for and business improvement our better some year-over-year good to T-X as a we As better on we'll a us certainly which we by expect been the certainly volume a driven see increase aftermarket side. have has margin

seen We strong the the rates a are utilization have half year, aircraft back higher. of given

So think, go benefit into we’ll half. basis, first that on we particularly I a year-over-year the as from

jet there will side, I the On difference. be think huge don't a

but at get will in the is will be the we initial side year. deliveries, the We going lower that half the the margin few increase be rate, Obviously, units back Longitude jet towards the which as things. will of have of to a correct most first of

Sheila Kahyaoglu

terms pricing, isn’t pricing And there? there a major of in so assumption

Scott Donnelly

price we, in Well, volume end question as in have strong fourth plan looking terms that. and of that, pricing no about better here where we will everyone that feels anticipation we we'll are much to see, had factored demand. is do you think, do Part of our the And in I at in quarter we're of in in. what fairly year-over-year terms here continue increases market we there's the

we're into better -- XXXX So much a certainly to I think compared entering market.

we healthy were sure going that think volume in successful price I continue think it we successful doing year -- this are well. that drive as and that doing to will to We we’ll next be I year and to it's make

So side. there on will the contribution be obviously a positive pricing

Sheila Kahyaoglu

to have you at for as XXX And up then way XXXX? how do into we believe might I any about million Scorpion it this? regards there Is that to R&D, think ended quantify XXXX,

Scott Donnelly

program is still demo about, going high, number some with an by not going have asked will sensors a certainly customers some integration flights, different it R&D us but minimis customer We activity Sheila. program, It was that de XXXX. don’t give to in it's XXXX. be There in of couple immaterial on, that but

Operator

next line from Melius Research. question come will Copeland of the Carter Our from

Carter Copeland

color could us around R&D give a gross I you Look, if wondered the more disclosure. just little bit

but year-over-year. in some there, up, government of you've I there, are of portion R&D think down terms? of by out now you program, pieces moving chance give on you us but any Longitude don’t XXX kind got sense called got is the disclose just some Scorpion give there that just the that a Clearly, just in and can pieces you've color you us general the moving and

Scott Donnelly

I this basis. so when recast versus gross you on a non-issue, netted apples-to-apples of numbers, Carter, the an last we’ve numbers our at you of that were we kind what's look issue year think showing is

So kind the right. at actual you're we're showing, reduction your dynamics are correct, that again, that of looking

get Longitude test lower the XXX Scorpion, the see as flight spend significantly around by in of the will and we Principally spending that’s we offset in intense back the We that have have through on have that test. flight we fact [indiscernible] more we V-XXX some certification.

are aircraft the get year, that a all So and that to here it the its last did expect the but way flying in through flight year. first January see lot we guys sustained

and rotor So programs in largely fixed couple wing some a of a -- a tiltrotor the increased spending couple it's and trade between those area.

Carter Copeland

consideration Frank around additional change tax? And pension then one prefunding an the on in front, for the with any associated

Frank Connor

the quarter Well, quarter. that million and of the that contributed did the offering for that We $XXX year. in plan. did did last we in to pension an We kind third third

good contributions rate was the in other and kind so million cash front by in we of like offset we pension on XX feel and like do from standpoint performance reduction, rate return did above we're that well but shape. a a related any we're We shape unfunded of good anticipate than plans. that have in So said not the was expected our as frankly to discount our very XXXX we feel

Operator

question line come the Research. Vertical from of Stallard Our will Robert next from

Robert Stallard

fourth had Scott, we've in demand your Would last months? turn in with things some say prognosis distinct General counterpart her general the the you three seen market the at over about environment Dynamics a to quarter. bizjet that positive over pretty agree

Scott Donnelly

would aircraft we're probably Look, I they're in think with the light seeing the with quite disagree never Phebe. seeing most is. in what larger I similar mid-size where work what is our to of

book us for side I think, very to bill. to bill amount that's you our significant know, a the think seasonably the for greater book that number fourth one-to-one hold to accomplishment sales of a or of inquiries, quarter, our is heavy I the fourth as activity quarter, in a through to pretty sustain team considering

the these the confidence we fact I interest think and amount that a is that have buyers. stronger of So, up is activity, our Business are the reflective economy. growth of

to So the than continue to out feel all there's and seen position. bit we've activity fair stuff that some orders good really We’ve Again, we great sure see cautious in a we about we're there our very question happen, I price a the little convert that same into that time. think and products. business think a that at no making being convert level of got if it's is new stronger continues I the and some in

it does well positioned benefit market think deliver, be from is in that. in shape strengthening that we're I this that if fact and to good we’ll

Robert Stallard

heading on XXXX of forward, where plans, this R&D And in XXXX? your funded company terms going CapEx then in you do follow-up a and see investment and

Scott Donnelly

expect the we make have have we to we aviation. continue markets, to stuff know I investment and I to that think our think key products need of in we go percent in work ’XX that the underway, place sure right a generate change that at you of there's to in we yet, sales, of that tailwind a in make huge R&D. going I the look, the we kind recovering think ensure amount of just We’re but great capitalize into on have to businesses can I from if in activity. pipeline but we in XXXX be ’XX don't to lot strong Obviously, a if of just terms our the don't look it

lot stuff Bell. pipeline a have at of We in the great

investments, lot of if vehicle need business. and continue to have business things in going the stuff make a going We you on you're are these where grow to these the great to

radical spend, but don't terms reduce So expectation our will changes R&D obviously we'll that percent of I a again, think sales. the as in see is it of

Operator

Our the next from Peter Baird. line question of from will Arment come

Peter Arment

I certification. Scott, of with terms get getting aircraft kind now guess as the goal of some finally the the excited before certification to What's about of in customers introduced you've of across get pretty Longitude been close some from here line to the too? feedback you the

Scott Donnelly

been It’s Peter. great,

full a result very are aircraft. very longer is customers received and is aircraft. a It's with a the aircraft. in a and that's and is got a We get we had demo I months we same great around, of get product. this in in that's feedback that been from it's back lot out very, the do industry mean space as aircraft, completely have of cabin, Latitude, and we lot demos the here this that a It's It how comfortable customer of demo aircraft a strong, getting at Interior flying the customer quiet a quietest and the aircraft that well feedback flight for the doing fitted obviously thing Obviously, been bigger few great. very it the I a quiet a a has of amazed has standpoint, think last been which feedback back

paperwork line there. beautifully. and the We we need a which mean, get issues So matter where to thing is. certification process, it’s across great. I no again, is flown will the feel this and -- we certification on feedback do. getting about of the aircraft good the through goal It's the there's It’s

Peter Arment

the just Frank on And really what's step then this a quick just or that one, year. driving maybe CapEx up,

Scott Donnelly

Air of a of phase been so these programs few is, our Well, support we've program the is we're Peter assets be having the right and public is up The to big is their in year-over-year is industry really as now. to able Navy proposal acquisition kind with acquiring days. Force that's aircraft. already The air adversary step change quite in

opportunity to reality international there the and out terms government So, of are ultimately customers adversary if do there contractors to in provide and the that assets, don’t US you you can’t air hours I the the is a have to of look number huge is, going as it. believe, well private

and the part capital in for this it us tough only of get get opportunity prepared to in materializing. facilities and bit to there maintenance little to that demos, one and to a but is the that, the in everything so frankly you So, support a assets out front have spend growth got of seems huge it's a and of there's terms of be drag

Operator

question next Cowen come the line Company. will Rumohr of & from Our Cai from

Cai Rumohr

the you XXXX the year, apples net R&D XXX last was of XXX, achieved number gross ’XX projected. basis is a So versus versus apples, to ’XX and number what projected -- this so on and was for

Scott Donnelly

Hold on second. a

other that We’re your and on to get apple-to-apple apple-to-apple out. we can so

Cai Rumohr

the into you back we is, think me If it. tell I Hello. what military can

Scott Donnelly

to to guidance number. back trying just the go We're

Cai Rumohr

net. XXX was It

Scott Donnelly

XXX. about was It

Cai Rumohr

extent Longitude? I you Scorpion million and So XX a and your to a basically was guide with by lesser assume of overran that lot the

Scott Donnelly

primarily was Air by experimental driven program. the support put into the Force we It

up cost of spend. So and between that's that and running on development as for most system what mission the and well AT-X get the ready to Scorpion the configured as test, drove

So experimentation putting in we the when was and program Air year, the didn't anything two that started know our obviously to not Force we plan. aircraft program in about

Cai Rumohr

that is the buy said it them. you good to Who's right. to outlook when? sell and going All And maybe

Scott Donnelly

Are Scorpion? about talking you

Cai Rumohr

either Yeah. AT-X, or Scorpion ones.

Scott Donnelly

very determining about Air So, has open next they're working the Force that the on steps. look, fact I think been their that

to next to really determine steps obviously and they step programs have that them, what those reason under believe any is don't these CR We have The are process CR they're working because new complicates of will budget going what therefore but be. be. a doing authority know their for terms they're we to do that that, that to in next

next the different do since able talk steps budget they for they be presumptuous their until would about situation. platforms, they what again publicly think much say go but will different want haven't I understand it been be to to that to

non-US of things, terms not There In in customers related still said, I as us. have ongoing are with discussions activities. are we that

think at continue customers asking to I the at terms to of this different we those de in looking in, and activity what support of that. we is integration level pretty point have spend of have minimis, systems to but coming we support questions,

Operator

will Our Skibitski line next question come of Hamilton. from Drexel the Pete from

Pete Skibitski

of I impact you terms to about hearing can light talk if rate you're your a what if reduction, more I the be that's bizjet got which small you're imagine, business owner, tax reform corporate customer in to helpful. They've Scott, was of base. wondering the got

light kind just think expensing media issue you've the to You've but repeal, also exchanges. got XXXX, got, up of I kind the

to So wondering hearing going bizjet net customer for out your that’s just how all you're base?

Scott Donnelly

I all it positive out Look, to the really. nets Right. think

of what's the at what tax all for business, I a and and expectation around of I say businesses rate at we're we're probably here impact a I is I there's very more a GDP is higher seeing is So, is to that economic benefit That drive very is that overall their expensing business them, tax confidence this level. guy everybody's think these And think I think and looking seeing this sitting helpful. is I of that cuts the business growth reduction would obviously anticipation, there, to reflects get beneficial. to XXX% that and importantly, sort his beyond think level mechanics certainly mechanically what own is the is The what the their their the tax. a help when expectations are even high think and driving growth for

the of positive. around as think combination business GDP the direct higher most their economic and going level very they're benefit the that I in probably tax confidence result US expensing, they’re they their of of importantly, the growth business all have low primarily growth, to around experiencing rate higher see So the in a that is

huge think around we're that And little and think for is manufacturer So good drive bit to that's a stimulation the the obviously If for the of a we seeing international I the markets. dollar US that. weakening growth, also of economies I in have ourselves, around a with again US help company helps market economic US of is like lot speaking on generally beneficial. a world, the higher the export terms

I the in on knock some markets direct the around US, in only those the different the tax but that clearly markets So in a of think not tone seeing impact international well. benefits is we're as

of combination a above. of sort So the of all

Pete Skibitski

they going UAVs to bounce could from quick down ‘XX. you will of in in to XXXX, for quantify year-over-year so One at Fuzed will be flattish a forward UAVs? return back, outlook the Are headwind, guys systems then, that headwind growth the kind Sensor weapon or be and going closure

Scott Donnelly

budgets having hard forward, get of where works, are a certainly, new but is question goes going of certainly base large upgrades in Well, this upgrade class again is the again to without that do challenges out lot it's improvements, is. a The budgets, a around there do our look around year, things has to are Peter. and programs and which down business, going we exactly this it’s to of be the one to US if in if and mean, couple be, generations centric that customer of of would is There's that next that that there's figure benefit opportunities which aircraft but enhancements go, we that. budgets, noise where I when at

for think year, that. year. direct So I think it's a last was, can't if but in number, terms year about we you XX% what to we X% went comment our don't SFW basically, of the this we SFW, future, of and you I of on have have hard me directly give had it’s the we what about last usually

of out what business historically taking we’re a that two-step now. So from of was that being business basically sort to right

a programs are situation certainly going, we're of the to there to we're of a going as makes a a trajectory. work where on, growth actively where new through know result that's lot a exit bidding munitions steep but number that gone we've business we obviously but that the budget business weapons, pursuing. back try get decline in it Again, these are difficult Now, piece have a of of on the that exactly of to SFW,

Operator

Pearlstein the question will next Wells Sam from come Our Fargo. from of line

Sam Pearlstein

what this in, thinking know us how We T-Xs your broadly, versus you delivery kind but tell year? jets the Can just aviation you Airs just Longitude King assumptions terms year-over-year? underlying of is it about are are in coming of

Scott Donnelly

about those in in commercial T-Xs, say I'd with tough at a introduction. about feeling expect the a frankly deliveries this going of the year, front activity the in those we up, flattish terms we're nice be in us year The in fairly to year increase on T-X Turboprops, the largely all driven talked by see jets, of Longitude better we we we're XXXX. and areas. T-X of and XXXX where an to Sam, probably, point this for the on of in half ’XX exception some Obviously, increase assuming clearly, the backlog was we're a We turboprops. saw weak level

in the certainly business, again, side service we I second of turboprop year half see utilization we'll saw the and commercial in in the by in So driven increases strong think of high growth well that the rates. the as total

were first see would which we'll second stronger will we see year be that continue, means particularly that quarter comparables expect clearly, the the in will of in ’XX. they than and So we

it's point, I if of the Sam, those hard service of military material, to say probably the assumptions we this But I business. mean -- in jets as and two of a to because at in side back Longitude, look you think principally the as You especially driven quarters. growth, half saw say the already we’ll year, year-over-year I lot see at around growth but get that it's our clearly far on growth in

Sam Pearlstein

expect new And out Longitude, get any of about terms programs, many whether or year. to it's way is you there can in how this to XXX think

Scott Donnelly

the do units certification would the don't Obviously, quarter the aircraft customer second again, to we you by first lot -- feedback very quarter, say, end how deliveries into it expect in we enter depends is by doing of a go is and to model. the the don't the with we on strong. so expect look, service market on and so I’d get Well, a

As as in you times through recent orders we’ve the of your won't way seen closed see until these certification. lot things start you to worked

of to year. that kind we So by have play

the end the year, you So year. this up be Everything complete right. test should all of and have won't our We flight activity of ’XX. by certification to get and in sales working process XXX, to we’ll XXX should sales the be be program sales, the expect ’XX. see the at the FAA should we at end first But wrapped don't certainly of

Sam Pearlstein

margins margins and on of kind the what more put just on what to those terms started you Bell, allowing that’s And are up key these business helicopter terms doing up XX% down of XX% in last the ended It or of changed guess then on sales sales, I XX% level? modestly a has the what’s you like year, year-over-year margin drivers at feels in lower better. versus XX in

Scott Donnelly

Well, We'll side, on year-over-year right. will military sales. a the level sales be see what's down military fewer on

order as here side. our expect up the certainly get way get frustrated to activity customers turn Congress, work we've but of want been I to notifications we progressed commercial that in certainly We that that hope turnaround. on. clearly There's some think in of lack a through going the we by think of East, category things be and to corner. to product some lot the that’s Middle on we we ’XX Obviously, try that have FMS we'll into that

important good We deliveries on year full couple strong We've closed of XXXs. on a of orders have XXXs.

So see for us obviously. year, increase volumes we’ll an certainly in XXX which product great is a this

I be think team to to commercial net So, offset the a product at you're that's but the in going managing, that, going higher and is help volume, a between of activity good job doing seeing lower trade driving military some volume all nice VPI, be front, general, of to give alive well coming for that’s BXXX the all and down programs volume, the a are significant XXX to it's some and is new the the The investments obviously driving in but and have XXX XXX XXX for line. helping the those product good upgrade we pain the a us.

doing drive and I significant of investments are going a nice business pretty products job growth. maintaining the driving productivity, some that to margins is yet So, think strong making in our future

Operator

Our next Company. will the Gabelli come from question line and Justin of Bergner from

Justin Bergner

for jets and want just I demand tax the business discuss to reform.

for team, and personal business individual. would tax return anything aware the the someone on and of business to away tax deduction personal you, to prevent as a off, as a deduction their state wealthy from going jets, taking might jet relates that be of deduction buying a a First where get are full purchases local it

Scott Donnelly

right. be I expense, Well, a business to has mean, it

that I absolutely, that is it’s obviously, with have in But one. expense. and a bonus that tax XX% rata they tax allocation a aircraft of purely the difference mean how XXX% expense matter there between is to have and depreciation purchase is no, It's in certainly The expensing law depreciation, the nothing personal there's But have legitimate versus the between which personnel we a the no, only year to So XX%. pro respect we law. business or changes Well, no mean, business that's individuals done. I change utilization.

Justin Bergner

business much a guidance are a in to are your talking recent demand And than of by in a I jet meaningful ramp signs The ramp London are but there business big then, would you know months, was of up there for you suggest? have based jets, acceleration. that quicker sort seeing going sort Times suggest extraordinary article things for any jets. tempered you're maybe guidance signs Over up of that broker Sunday seeing business about

Scott Donnelly

usually this activity fewer question say are us to there in good is for that being these liquidity. the because the so see news fruition. to market that we aircraft. out customer come is the market, I all are don't sentiment in a Sunday seeing I have know is is People move able -- aircraft I but used aircraft. selling need no we There's the the are Times, the we're this, level interaction, positive, to but Well, don't strong to things that's trades brokers Good see enough, continued think of to I very we look, read article, a be

there think obviously that that, of the we strengthens, we’ll the be big So to and we've what of to product the see but need sort and made hope sense lineup I think beneficiary that's that, is the we investments sales. I we with enthusiasm we right that have if turning out market a that

Operator

question Citi. come line next of from from The will the Raviv Jon

Jon Raviv

going industrial ’XX When see like you the the of some you digit past, higher look obviously your where risks, something about not to really see could just be at a in double in and margin, X slide of speaking forward do systems aviation we've long basis, to run presentation, higher and maybe where but more where do segment? you opportunities seen used your On in be as margin improvement want well. or

Scott Donnelly

we'd all at we look Well, the the a line. still number, of we through assuming clearly, everywhere. mean we to demand. relatively we do the that, obviously, we kind see stronger have flex legacy jet I but with improvement the guys And if ability see I aviation, year, look like work aviation to are flattish think when that

we if can to see So demand, see there, that. is we then upside market stronger if

we’ll of testing Arctic there's to through of nature is solid it's because that think get and at our milestones there guide in solid think, still on SFW a out, great as but Bell, a pretty is programs is. revenue heavy things trials. I performance. mean productivity we a know a work there's it the development systems to water that business sort and it we're are Look, I and the be okay. thing in be. get lot what now. working this year shore, balanced into to little side, the The of of generally do to pretty through think. which year side, to on we accretive, just which program major get the pretty some the along tough, say where should we wouldn't good us, and given I business great if volume that probably job but profitability is side it’s work forward, it's Cat upside see as at and integration and we're a going take would and much but kind get upside for price the to but way able now you're lot of executing Obviously, lot operating a doing pretty I I where to we upside not like on think a we're that performance, guide. We come guys the to fixed you that's of a I great we’re going I the programs, mean XX%, try it's But, right mean it's, really a there, Industrials, the I the expect right kind on even of really number well gets solid pretty I whole ship there's, think probably, go

would to I market and the from if color of Clearly, really the that guess. that. around kind accelerate be aviation business upside that’s start we’ll So benefit largest does

Jon Raviv

the about doing business, managing in the your this the you allocation changes tax you And commentary are philosophically, maybe creating how bill, bill legislated? just reform you're approaching guys do ranging relatively almost guys the capital with what wide now in economy, way

Frank Connor

already I hasn't R&D really mean, It next terms our generations our in strategy. of investing and significantly changed we've products. been of

win grow in businesses. I the product to the tooling think, we've that, new support place be continue to in programs, been in and industrial to capital support our appropriately putting it

think capital a a allocation mean, clearly, which ’XX way in really allocation that isn't capital of the for see lower tax our So, our I tax I aggressive result principal our and pretty I in been as the a of And impacted. said, to we think I cash from cash we'll ’XX, was continue strategy we benefit in as expect what perspective, returning I frankly buyback and will see that's did would to pursue on continue ’XX. side rates. shareholders

Operator

of the question Seifman come And line from Seth our next JPMorgan. will from

Seth Seifman

number would things are guidance puts in intend end up of make much risk you set some of sort you and and had downward in a – on that -- think tough it, to guys how like items year some this execution always you and year looking, and guide years, how set breaks I mean of you When so I would been years, and how of to a terms some Scott, that? compared up assess around pressure there's have how the in how estimates. recent takes but amount know came this you previous is the fair you and markets about the fair there the

Scott Donnelly

the quarter I the this through that it’s said, in just page of a of say where bit, the we in to of we’ve the and walk we’ve kind the puts third X on I is would industrial, I are TSV. little kind did think struggled so thing. mean, as some particularly Well, takes

ran than do which going probably year work year through positioned that the for guidance difficult we that investments had I expected. some -- these we we end we place markets some ’XX, things a problem a problem to do put couple think I historically our a we I of things fair on programs do, terms well a in ’XX. the I well ’XX to it. thought needed but lack as started a the to we growth, and in add a I we've softer get were there. think more is color of don't mean, saying all think, finishing as of at I track. in lot But think in know ’XX lot I we into programs on us into to dealing need still largely but the to of There's of guys are that whole mean I are had pressure the that a We that year, lot which yeah, back I issues getting with we're we to number. delivered. both obviously could work that there's we're -- is think integration, There

pretty feel going good into about we are the think year. we I where So

Seth Seifman

you, the bill an on being just update of terms where on signing you could you you, a for the V-XX? and of if us coming terms a gets maybe that’s maybe about the in V-XX, Bell And you about signed, out that’s just of are decline talked multi-year of thinking on give how XXXX XXXX some gives and follow-up as type overall for sting of the update that, plus in if next up kind we and of preparing appropriations an if think, that think sort take you're of

Scott Donnelly

multi-year the negotiations real time three, Well, right. customer. V-XX is so working are the underway, We're in with that

understand I'm I working so frame obviously think right I are now, probably their say, would budgets contract underway. they looking or at the trying whole program, but and to and that process to to multi-year a QX we're get X

well changed. a on going multi-year certainly well and program down it step lot think had But be to the it Navy I but where around will from that’s don’t a the again think volatility that be Obviously, we’ve the don't I think there's understood. program ads was whole record in volumes, I are is X. the of understood

fine. is it talking is maybe will to It's could like me, year they're were contract, There five it was year a in probably while I going think looking be more a five think seven probably a year all be program, I to looking way there, it appropriate, which a people a right. the program. of

Operator

George We Shapiro have a from Shapiro question from Research. the line of

George Shapiro

Scott, or it a back was increase would by could seems overall, book bill at the like like would have more. I have up if military the in and to little down commercial military was least been been commercial because bit that versus break out wondering you

Scott Donnelly

from color stuff the the T-X predominantly largely standpoint, the in think there. front that backlog, I in on George, been a was has --

movement most commercial by So you've of business. of the seen driven the side was the

George Shapiro

military side, the up? So have what if commercial you took been the out be would

Scott Donnelly

than that, I think the do color we'll in don't probably George terms more backlog. of any

George Shapiro

delivery million total total got R&D, here Longitude XX in quarter. Scorpion on I and to down by XX finishes, I the you've why then pretty more R&D first ’XX, figure down million. start going down R&D you close mean, zero in maybe to be ’XX? was wouldn’t And backlog down, in

coming imputed higher So the from? where's all R&D

Scott Donnelly

say we as the least a which getting the of in funding the We program. lower the Longitude, as testing. benefit in finish so on quarter the -- or you still have the at Well, year do Scorpion obviously certification here be we first strong are significantly will

So all certainly for being about the program, We in heading we the will SkyCourier but a have be work which have side, wing in on do team and that getting a is spending the and knowledge thing towards us flight. whole window think do aggressive less program that will I of we have that. we're program and first over R&D have XX-month doing that its sort great pretty fixed

world. We for not it's I work going programs will do growth programs spending do that So the away have like and us. to very be R&D is wing fixed think strong in

shift being test us. As I with V-XXX, huge program a there said, a whole here I potential the think bit back program, is of XXX of a which again is for with flight the year

R&D that that lot to well. a support as spending of area in flight So test program

George Shapiro

be would that rates saw long in market, And increase be something jet affect you strengthen then decide want for months in continued six production would to it that to if that do how ’XX? you last something one, would or you you could more the that business take would

Scott Donnelly

six in could kind think month in a a window. of I affect that and we're we Well, ’XX a more position

Operator

question of Bank Ronald line Epstein of a from We have the from America.

Ronald Epstein

of are the different with thinking moving the at a and an you XX us us on give engine you just SO in is where issues, update update on a then hemisphere an give that. to on that engine, engine, you Can about guys hemisphere if being killed program light and different can

Scott Donnelly

-- So, our will what sort engine get to guys say I timeframe track. are on would or issue that be where actively real scope engine of the is Ron and on the the guess engaged and I time of the

you mean case the what that go I do is particular think saw, of in a So the aircraft. carriers aircraft, I larger XX to

obviously airplanes would You we strategy that to a have That's well not follow. make to pretty it match obviously engine work.

do whatnot mean the range I differentiation on burn and performing fuel prospects. engine. to aircraft efficiency that engine sorry market, that to that case, to and our in I'm in get the is that requires the or aircraft dependent So, on engine,

path we are to working And of understand is. sort their Ron. with forward look, that, and they off So guys we’ll what have where to the of gate are

we're on that So in ton haven't a program. position right a money now, of where spent we

lot we to of lean level to we work early selections the you the continue work or when We to that what basic engine need around based and into have dynamic subsystems, key not that on program as see do and air fairly a make at and a That’s call, do do whatnot. a low timeline. we'll

Ronald Epstein

an there not engine possibility? that a maybe is Canada to opportunity there or like of that something use or Is kind

Scott Donnelly

challenge we Well, it make to that I the makes the want what think be it be, to to that aircraft engine do, that’s work.

do Ultimately, going not engine, So then got do we're depends if there, to larger a go it engine what we go you again, would is a you've that on engine to kind do. aircraft all larger this and say, to you're guys, step not to path a then that's back and is. do. want okay where the If to of a

yet. in us, we doesn't so is where have bigger it’s the on a all make to don't and Going sense predicated but evaluate strategy, change would know to engine our just we again,

Ronald Epstein

maybe early with to too still just from follow-on any that, something is it Safran, there project a go recourse even or for then well is didn't if guys that? you And

Scott Donnelly

an money of this game. at again, to stage Ron. not put of no, amount Well, really, But enormous we haven't the that anyway

whole could that's I there's been mean, suspend of financial said, could no obviously, there's significant you like you So, caused. step you back, I -- there's you options here, a but could, the program, could harm bunch

back I So like would kind with we it's any go not mean, of recourse.

You just and see how progresses. program engine to wait the have

Ronald Epstein

really picture Is that’s kind and that of aircraft, sooner? looking And something been on a just particularly could at big community Buck all? of like then the at talk reality have that Do can, of aviation question. if be far to more maybe is of that any a lot if propulsion. there, out Rogers around about the more I in general one electrification There's thoughts you Cessna

Scott Donnelly

in it's Look, an and to we and required looking look energy have kind that, running with when when weight aircraft there, spent I and kind range our about storage guys how concepts of go any air, is isn't mean weight, of energy the much tough some math, you take at anything your right. friend. kind technology at any of time I numbers right. advanced just is not mean talk a the you

the continue to some we drone world. By that. technologies this the look at and weight, that and I to right. far do doing same don't side on in the it's mean, side, the more are feasible way, you we've the because are and the tend more work have of so thing smaller probably go rotorcraft vehicles nature probably a there rotorcraft So, ranges less shorter just we to done small helicopter, rotorcraft on

that. base haul does energy We’re by aviation that's to things is wing propulsion, longer that the it's But doing driven to our you supply side. for the largely in short hop storage kind -- going opposed be which electric us that and fixed see as of

is Absolutely. actively of Probably not. timeframe? a with that becoming guys it thing the are that happen Do material that? on mid we So going as are to working engaged sort see in I

Operator

Stanley. question Our come of line Rajeev will from Morgan next Lalwani the from

Rajeev Lalwani

and this assets? the it seller you landscape for it’s you’re M&A whether on a approaching of buyer Just year, question a how or

Scott Donnelly

Rajeev. comments We on don't M&A front, to with respect make either any

Rajeev Lalwani

that, highlight would as it into Bell, fit can maybe of about obviously how much prices opportunity Scott, relates talking And too better in opportunity, bit then gas oil terms oil here? were gas an you and you a not with margin to just seeing and

Scott Donnelly

Yeah. don't business I we’re mean, things, I has margin think around it of side do anything the expecting to the XX%. Rajeev. Well, with

right. more -- there end think sales market, in and some seeing in gas of there, pretty in mean they’ve oil to a I through that clearly but end, went see I like and assets back haul some I got there into as is end oil they that of of also assets are of longer smaller we certainly a tough a lot lot big is I a contraction, a out opportunity strengthen But mean certification, agree, get near mean, strengthening there so as opportunity work, we gas, XXX for you If terms be we in some place, -- up start through see in that of and the XXX. that the is end XXXX clearly the we’ll right be we think the the and I actually helicopters, about the the industry, hopefully lined which impact. as in about won't but market things market it already, here that some XXX some therefore a terms in here to certainly

Rajeev Lalwani

Cat, quicker say to the is that hit going could you target of Arctic a this And being on clarification accretive year.

Scott Donnelly

Yes.

Operator

of line the Drew from Lipke from come will Stephens. question next Our

Drew Lipke

down aviation significantly turboprop, On kind pretty Air and still here the year-over-year. caravan in commercial a were level King of deliveries low second deliveries half,

and on a that you about orders convert that quarter. for a bit into You little just see then last commentary up maybe little talked Did XXXX? increased picking inquiries market

Scott Donnelly

did. We

last the earlier market went little It the the a senior of think year I started as on. soft. in part certainly year, strengthened

in be solid on. we'll in as go quite as a got think the Caravan the stronger similarly, ‘XX. pretty position here half we're the we soft I year first of went year, through

seen strong level activity we've of pretty a think I order on caravan.

feel XXXX. So very those going good into about we

Drew Lipke

your or Bell some due there opportunity order there is And market how in is been that seen sustainable of that to the in it of how and commercial, opinion? we've how is the and regulatory how China the build of that your has market book changes the you've to then much seen tied that much and on strength just

Scott Donnelly

the has we of side been regulatory areas. mean I certainly I on in Well, a noise that think than haven't change more spaces. the low other lot altitude seen

We side. continue very about we're in to light the good feel and how on of particularly China terms doing

this XXXs, large year orders past orders So obviously, large for XXXs. we for have

the has deliveries into very year is, base think Chinese particularly we So the XXX. it China we will our light, to And this as backlog be market, particularly at the look strong. I our and XXX our I think the so do as with customer feel position in I good think about pretty our and

Eric Salander

that joining our concludes Okay. Ladies and for thank gentlemen, and call. us today you

Operator

and Ladies gentlemen, thank Thank you you. for today’s It is call. concluded.

disconnect. now may You

Textron (TXT) 31 Jan 182017 Q4 Earnings call transcript