Textron (TXT) 19 Jul 182018 Q2 Earnings call transcript

Company Profile

Participants

Eric Salander	Vice President, Investor Relations
Scott Donnelly	Chairman and Chief Executive Officer
Frank Connor	Chief Financial Officer
Robert Stallard	Vertical Research
Carter Copeland	Melius
Peter Arment	Baird
David Strauss	Barclays
Sheila Kahyaoglu	Jefferies
Seth Seifman	JPMorgan
George Shapiro	Shapiro Research
Sam Pearlstein	Wells Fargo
Caitlin Dullanty	Bank of America/Merrill Lynch
Jon Raviv	Citi
Cai von Rumohr	Cowen & Company
Drew Lipke	Stephens Inc.
Rajeev Lalwani	Morgan Stanley

Call transcript

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Operator

Ladies and gentlemen, thank you for standing by and welcome to the Textron Second Quarter Earnings Conference Call. [Operator Instructions] As a reminder, today’s call is being recorded.

Now I would like to turn the conference over to our host, Vice President of Investor Relations, Mr. Eric Salander. Please go ahead, sir.

Eric Salander

morning good and Brad everyone. Thanks,

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

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

the website. quarter in found $X.X Our million share, or earnings was Manufacturing over Textron’s million in Investor compared section million year’s on $X.XX With revenues of basis can adjusted last second year’s $X.XX share $X.XX in second second from $XXX cash in call I call pension up the our year’s quarter. were quarter. Relations billion, be before the quarter. will turn per last last $XXX continuing from to per flow that, presentation from to up Income $XXX an totaled Scott. contributions operations

Scott Donnelly

Thanks, Aviation, morning everybody. At Bell was continued our margin in lower the we revenue Eric with quarter. expectations. and in revenues revenues on at Bell. Operationally, execution Industrial, and commercial by offset up volumes in our partially improvements higher saw good Systems, up Systems quarter consistent Aviation and strength again in Bell, with Segment were for the

from helicopters, the in last XX On second XX year’s side, up we commercial quarter. delivered

basic aircraft with X XXX delivered commercial the China quarter, We broaden demonstrating the first June representation units to as Coast international we to to presence. continue The XXXs received its with space, as all in suitability strong X Japanese our aircraft’s trainer. in positive the in the being In the a delivered continues demand across certification models. the see helicopter Guard

business, billion Bell’s has contract, deliver for $X.X program a DoD flexibility structured content, which the $X.X aircraft. production stability in allow signed Moving V-XX units, contract least procurement the represents XXXX. XX of of The to billion also we third multiyear contract to with for at multiyear military beginning side to the XXXX. additional provides The

gained also attack to We helicopters approval Congressional the XX provide H-X to quarter Bahrain. in

continues new the cruise to front, expand opened It after to also May knots is flight Vertical flight during months just first its is really its Lift in from now Bell Pentagon. the mode, its Center street new Advanced flight demonstration December. X located May, program, and flown test in envelope in reached product the Valor down ongoing. On the the XXX V-XXX the just which

Bell’s technology to partners allows customers, V-XXX. of and with the V-XXX in policymakers military and interact future unmanned Bell’s Vertical office including New for Lift, the the

on revenues were volumes, the Training, our primarily qualified to Cap Flight by Simulation the successfully Systems At Systems, level Full Textron to Moving Marine marking of be highest Level-D. TRU at XXX lower to MAX first of on and related qualification Simulator Weapons Land the production MAX simulator and was deliveries. & SFW XXX D the updated discontinuance at lower to of down Sensors, FAA,

increase Vehicles, XX-volt in vehicle transport Express in our Textron powered XX% the At revenues businesses. we the both saw each to Moving industry’s by Specialized E-Z-Go electric personal with Personnel a Shuttle Industrial, we the and Cushman first drivetrain. growth Carrier introduced of AC

Safeaero the efficiency its line growing Capital increase received operations deicers of busiest and Also, airport. the market. Pro Airport our Textron continue of comfort the the vehicle reliability off-road this to at GSC lineup, to International X Beijing expand to at Prowler line, power, utility side-by-side, we our TSV, delivering the purchase from product world’s order an Within introducing product for new second

year. delivered up last turboprops, year from XX and XX XX were revenues XX last Aviation, Textron up jets, commercial from to X%. Moving We up

turboprop commercial We increasing lines international continue to with and markets. product our jet strength see improving order from flow the coming across

the the is than new the On has conditions with longer past engineering to the Based flight new first the team process. works program has to initially the its first process Fabrication of midsize super amount nearly FAA the as by met certification certification continues our entered development completed FAA’s taking SkyCourier doubled planned, in new of to front, be Longitude Citation the certification and certification development. our the time. of phase through programs. track on Continuing articles Denali next process the enhancement test test ground the alongside our FAA aircraft the Longitude, for requirements, plan. new product on This the continues products, number on

We new for our enter solutions array leverage market customers. are wider aviation the of provide aircraft, to excited segments of these to clean a sheet

On turn Wolverine the has aircraft very With Frank. during the AT-X positive attack our flight military call to I will the the had second phase Force’s experiment Air of side, that, performance over light program.

Frank Connor

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

Aviation, at year, the volume, At how higher to $XXX each due review revenues the and due Textron primarily starting contributed, segments Backlog Let��s price. million to of $X.X a million year ago volume price. segment quarter up and from the $XX $XXX up billion. in Textron profit were this favorable with was from Segment mix ended the Aviation. million, period last

Sensors down at $X $X million, lower production revenues the largely second XXXX. by up down Bell, in lower at in TAPV revenues. of XXXX the on higher $X.X Backlog segment lines favorable increased largely primarily from across the profit the $X and offset the Finance $XXX Textron profit and profit in a Segment Systems. the quarter increase was volume SFW second million, profit second to were military to volumes exchange. billion. foreign of compared on lower volumes Moving to billion favorable volume Weapons our both the of increased reflecting $XX higher million revenues Backlog by deliveries $X related and flat in product $X.X of revenues discontinuance segment Land million year’s was quarter due partially the XXXX quarter. segment commercial revenues impact at quarter. Marine performance. offset despite products primarily At to Systems, the end in Segment net all from was was down revenues last Segment Industrial were the were the and mix million related to million, from and lower sold. partially

last year corporate $XX primarily Moving million, in increase compared in expense was expenses below were segment on Interest to with quarter expense. impact price to due of $XX million compensation the about $XX profit, last share the million the year. flat

$X.XX To $XXX in $X.XX quarter. Through to of shareholders cash shareholders. guidance, shares, up months we the first of shares, X XX.X X.X year, expected a in up repurchased million repurchased million we returning share, a $X.XX to also per our returning million share cash have raising to prior in $XXX million are the year wrap We our operations outlook. to full from range with from earnings continuing the

gain outlook. We $XXX third quarter test approximately tools expect updated one-time not million which in and the from of this divestiture reflected is of a XXXX, in the

prior to remarks. That of contributions flow $XXX to We raising pension our outlook. prepared the continuing million range concludes million before group from operations $XXX of million, a from our are up $XX cash manufacturing also

So line Brad, the open we for can questions.

Operator

go from Vertical [Operator Research. line of question Robert Stallard the ahead. comes with Instructions] And Please our first today

Robert Stallard

commentary because morning. On months, wondering the the sequentially. in bit shed about over on I was division this parts if the that be saw seem the be to the various could for that, for Good rather Aviation, of X you. last you business one example? jets, to backlog a strengthening Scott, color flat might the what was of would contrary

Scott Donnelly

Well, think it that way I it’s the same pretty the Robert, strong. market feels did,

were as I are well think our in flow. Obviously, the pretty flow well. orders deliveries we matches think the the and up with I up of order pleased quarter

robust. turboprop Obviously, terms that, and side of the end we So and push for continue work still are got the we to we on we that has both in the to markets the still pricing seeing continue in it because jet lines. but the to strong dynamic, volume, in are trade think stayed

Robert Stallard

sustainable And a through if you step system then V-XX follow-up point? having profitability the Systems are strong of a some the as levels in Okay. Bell, you rolling these quarter. at Textron obviously are particularly do in very down How separately, margins think

Scott Donnelly

Well, expect that we an wouldn’t quarter. think extremely long-term sustain, a had it. to being Bell margin about think has feel done the in still look strong we job. how talked I that’s I second margin about XX% The a have business rate over but here the nice and I team XX%, business that

our multi-year terms in contract the where range in think expected I terms long X we landed of thinking. about of

see well couple that in aircraft some opportunities. As for as ultimately some demand foreign I am I increases said, there. will allows contract optimistic of or and terms that here of we a the both military as U.S.

obviously thought gives some to within So, it’s one our and done good and stability we we that fully around are expectations glad forward. have and going and it’s us contract a so it where

Robert Stallard

too? And similar margin situation strong well, that had as very with Systems

Scott Donnelly

year. expect in year. the very of Yes, the a lighter I the strong certainly back think to we bit so be to Systems half start They little a had

still businesses. number a in Cap most Obviously, will of performance see seeing of deliveries. good are in ongoing very reductions We D we

will development the will down really dominate the so is won’t winds on start and the year as until well. pickup you program that in SSC into see that we XXXX. half its see of the year, in the phase, still of margins course obviously As the that revenues back program through production towards still and test we the And

strong I half, total that year So, expect second lighter but performance say, still business. we guess, let’s for Rob, a in the

Robert Stallard

That’s very much. great. you Thank

Operator

Carter Please from we question the a Melius. have And go Copeland with ahead. of line do

Carter Copeland

I guys should Hey, say. good good or morning afternoon

in second Rob’s know, been important on Scott, And of was what us price called there net then on in could be Bell helpful? quick give the just any question, other must mix favorable more some strength and Aviation you over a in color tell I us that for the contributor color should just items out kind one have Just quarter. notable Frank, a just you we guys. a wonder and the and aftermarket can follow-up will you Thanks, of margin Was it was the one which those expanded Systems?

Scott Donnelly

the guess. you color give I can first, I part Well,

an year, know we was basis look Aviation, it of power board. is that much The deliveries which were it across was as high turboprop has of The the so side have And up we The an in is front, I in that mean turboprop this aftermarket, about us. second last the accounting reality like we for couple international The stronger there. bit is Obviously, it particularly you think we are it some X guys single-digit, those been flatter. pretty which terms ceased expected. of a good up know the had – Aviation Mustang. last we little of a than the were pricing I you looks reality quite revenue, change a quarter stronger. There will jets. the in of on market, on the production apples-to-apples strong deliveries year. obviously

the that because was like-to-like profitable mix model our us. that in actually a not turned So basis, X – region. margin a those are better, our very aircraft a was discontinued X aircraft on more And in say, model we into other for

So mix was well. positive the as I think

price, the mix across lines. strength both it’s and say product So I’d all

Frank Connor

adjustments good program side, program program we both had we Bell side for Systems would the and indicate performance numbers the the million as of $XX and on quarter. on of the So out saw

Carter Copeland

net? In

Frank Connor

consolidated a on Net right. That’s basis.

Carter Copeland

Thanks, guys. Awesome.

Operator

we a Arment from And ahead. Please line the go do Baird. Peter with of have question

Peter Arment

Nice Yes, some of the the the on FAA morning, Good comments regarding is quarter. certification thanks. longer. Scott, regarding kind taking process asking made just guys. you Longitude

this, you timeline a one that’s by only of affected give color Longitude? really introduction just are us the kind looking not more for at you are as but of been could You maybe little the

Scott Donnelly

it’s couple of and it’s pages conflict new was FAA guys certifications or thousands just of next the of how think just anything process done months. there really of bit wasn’t between or creation The had and really is The aircraft in there I the this look new just technical on is and it’s of we amount issue, is no working just and lot the this. are that Peter, – hard Well, the mean, enormous it’s us a here this within programmatic involves documentation, work of an itself a interpreted at it’s result of the which we implemented that process is haven’t of good news over a unplanned. that the being haven’t past that previous anticipated. I is implementation a this paperwork not

is paperwork. there do any something is or the to disagreement with a lot of we news good of aircraft just the again, So, in a like not are problem, here anything. It’s it’s over not form

So through through working way we FAA with is are it. us. working our it The

them create things to all them and review have these off. You and sign

Peter Arment

Okay. have And it the is sounds your thinking unrelated had discussions a like flight just good just on your some the as on there? with then AT-X, potential follow-up customer of kind How performance. you

Scott Donnelly

certainly accumulated. lot think was obviously Well, accident the the in we think If open program. sufficient. They I can with is testing very their described. this that our competitors the continuing program. done well. continuing mean, piece been out the A resulted to flight it’s are us felt been was and flight information of to have Force has before they work they they of the discontinuance process more that Air testing test I data as But an fact that reach they had and the was gone that of They sort need. awful accomplished to lot flight the there the are of about got

will So, continue part going are we of and in interest publicly next the aircraft forward get through job this mean, program open with and and a with about I we in be clearly great they did of the area guys customer RFP kind the a some work We activity customer the see form work continue the we we an demand process. the feel would very year, and of the the of to the but if as well. latter performing did product steps hopefully is felt this like this for to like the – just hopeful we

Peter Arment

Great. Thanks, Scott.

Operator

of the go with Barclays. we Strauss And do line Please question from a have David ahead.

David Strauss

or Good Thanks. morning afternoon. good

Scott Donnelly

Hi, David.

David Strauss

Hi, can you hear me?

Scott Donnelly

Yes.

David Strauss

about saw that on it say ex that’s fair is aftermarket a the One number X.X the jet for to specifically? side fair kind and the so, assessment, quarter, book-to-bill in was you about Okay. book-to-bill if the is of what

Scott Donnelly

Obviously at Well, – the up was within mean I is activity all the in were commensurately consolidated that one-to-one within fair look it’s representation. the we think a are line jet different there, we where which but going military, And it’s the always a means jets and we bit think deliveries mix one-to-one turboprops up, I book-to-bill in number, the think when is and between have little fair I to revenue as are of models representation in the but I was and side. of order again up. a

QX think they mean, So, were than I particularly when we think I where is, in QX. about order were better rates

number the QX, a activity pace. that it though even the So in not be continues book-to-bill what the may good at reality the is was market in

David Strauss

looks in like better than you said year, the for in to guidance your side Are follow-up of year, for Cessna, Okay. jet X% will on specifically year higher earlier. today And through you if as this missed Aviation, the and to that? for out I terms what compared higher each seeing apologize a margin you ahead of the Cessna deliveries I also [indiscernible] the guidance come

Scott Donnelly

I look and in guidance stronger it’s is EPS thinking Yes, increase but we reflecting at Industrial, slightly of because disposition, below will in segments. strong think sorry, it we margin three David obviously Aviation margin better margin the guidance the I mostly which is performance those by as our revised am really on be tools and test Systems, at in in just probably Bell I where performance were and business a the driven think

David Strauss

it. Thanks, Okay. guys. Appreciate

Operator

Please of question Sheila have from with the And Jefferies. ahead. go we Kahyaoglu line do

Sheila Kahyaoglu

good Hey, morning everyone.

Scott Donnelly

Hi, Sheila.

Sheila Kahyaoglu

maybe be can elsewhere? helicopter are focused the and market, maybe well? bizjet you. in landscape wondering the comment as So, but the on seeing both you changes landscape, competitive competitive commercial might market Bombardier and was on Embraer just I given also on Scott, you the Thank the

Scott Donnelly

I quarters, Well, have are first through a big couple haven’t a still change. I very market. it’s of dynamic the Sure. the comparisons we competitive the as haven’t here mean of been. There competitive same mean, model-to-model obviously obviously been they the seen

product, of good competitive particularly competitive. and about I It the the largely coming also There its end try we its The is the So, but the ramping as is upgrades side. on the market pretty as and lot think volume given but unchanged we seeing some is great true in you model same it’s of but but we over said, deliveries where as very price are performance would continued deliveries XXX guys performance a market it’s into out, order But dynamic, lot it’s helicopter that to I say are the year, strong marketplace, significantly. the a of is. well very like and will still very, and thing activity lighter coming capabilities, Even marketplace, have Obviously, sort a the news the to a are competitive some trade but lighter growth it’s around has quite XXXs, on nice is we that up that in put competitive very is as discipline feel production XXX. new to expecting product. XXX product and to the strong up this little been. stepped competes of as are seeing I know, we a which

competitive that are So and again of we doing market I set think the a well. have very great very is got products

Sheila Kahyaoglu

high if to the you are over through could R&D, focusing XX gone next what have on comment on R&D, just Then phase of you a you months? XX

Scott Donnelly

obviously reduction coming like on invest down. Scorpion, scale probably as side guiding to we Longitude. year, back as number, do the continue this we in I largely things to got Denali but we aviation R&D We but overall fixed our see wing modest beyond much are we too at you think know, Well, expect some looking

We SkyCourier coming have along.

still seen So just we other program, has there have and V-XXX strong Aviation spending is hand, stepped have as probably we in years. of on Bell, the as in we test little the as at flying. flight the not R&D bit a couple last have much XXX up

bit important still as but obviously there we some of it we product rates. margin see see businesses, I us somewhat is of think benefit frankly spending is of these these better there, obviously overall the become of terms does increases a see So forward us we in end-markets launches, in a around of the will revenue that of largely some tailwind and what’s in some the but new R&D sort shifting for going of a for

Sheila Kahyaoglu

Thank Great. you.

Operator

And the we for Seth JPMorgan. Please line have of with ahead. a Seifman question go

Seth Seifman

Thanks very much good and afternoon.

Following down ramp and understanding just be some much very to amount can starts headwind expect can year, might earnings of as we all the V-XX our give people headwind up V-XX the helpful it’s at I commentary that guidance to year over want about it’s know on next you there? to $XXX one year, set of million think beyond how qualitative happening, the level little this this for EBIT think we that that even is the don’t thing if just we Bell

Scott Donnelly

anymore, think sure in kind exactly cost accumulation, – to hard contract Well, into until next public start know to because I its this me this of mean, so for Bell, year fiscal really specifically you are. next it’s delivery what how doesn’t to beyond. And you of the it need not be that I to to kind it funding. so given the get to really year, rate of right guys obviously see articulate you you dates late much out I delivers terms am a play impact won’t careful of more was XXX here, I lower really as to

into volumes there will be probably As unit additional I think I some each said, year. added

the expect if of as I floor, more So XXXX, impact contract a sort think become wouldn’t XXXX. big into will, but in starts you of to new a material I it

Seth Seifman

much. Great. Thanks very

Scott Donnelly

way help offline. probably contract just in Yes. of terms We the stuff by can guys the probably you

Seth Seifman

Great. Thank you.

Operator

George we And with Shapiro line of ahead. a from Shapiro Please go do question the have Research.

George Shapiro

separate the the quick defense couple out new of the into jets how new can turboprop how it Yes, jets? being the the you was or was book-to-bill versus on one, questions. Back versus

Scott Donnelly

strong. kind No think George, standpoint, just give out I from again, going – the mean of by and whatnot, don’t start product book-to-bill to it’s are breaking not a are going but color the we individual models been to I we pretty

jets We the order happy the with very, both you the deliveries see side. up turboprop very were the quarter, in will T-Xs. on that in flow Military are right and the

of was and and the to impact than flow stronger some T-X, that’s strong obviously the their good about than you one-to-one it we facts okay, where – okay is quarter the one-to-one on but well, it’s are second is there say, feel the market quarter order commercial continue on sales So, was both in business. first heading jet turboprop despite the

George Shapiro

R&D the comments? sequentially Aviation, you quarter little a give year-over-year, down Scott, And can qualitative bit in it those was at two

Scott Donnelly

Well, from we of again offset consistent indicated, was Bell some that have largely quarter that is Aviation I flight on difficult activity at was kind there. some the the a see as the mean, have with think with we look, increases going been by at and which I providing, the quarter reduction we will color standpoint, George, color

George Shapiro

you year and low one your rate it low? the pretty Frank, was outlook changed the And you, for tax why that again, for was have

Frank Connor

benefits quarter. some had some in We from Yes. the items discrete

for guidance of but revised about of a from. this actually first assumes the XX.X% benefited quarters items tax of discrete our year, reflects the couple So rate we that

George Shapiro

into much Thanks queue. Okay. and get back I will very

Operator

do a Fargo. Pearlstein And the have with from go line of ahead. Please Sam we question Wells

Sam Pearlstein

afternoon. Good

is million of to on to it about straight CapEx, how can spend increase looks cash is is $XX adversary that the CapEx Just the half adversary you a the and the in and talk before? next about you net Can air reduction. it viewing guidance, related are just air, income you flow, like talk it compared the year just improvement then on this

Scott Donnelly

Yes, Sam.

business not in falling Obviously, expectations There a the that is earnings So margin there out of is obviously debit for in here. of a a where second contracts the of test tools on given there having is work, generation, are the so and that timelines deferring those obviously of better the And some on aggressor reduction through we take not we in half we being cash CapEx some on is flow stronger from the in benefit of going year. are the some of couple Force still free everything we that. and that have is lined to rate Obviously, comfortable second reflective we but in things of up both therefore defer in of of that but Air are been some to with there cash that CapEx support half future flow. able programs, have CapEx we little had that XXXX.

all into to that that taking net those $XX benefit of So, sort all million are of consideration. contributing

Sam Pearlstein

then And Cat Arctic you have end the that winter season a with distribution you you how inventory just now the of about kind looking? just that bit Okay. where little did talk can and levels ended up is

Scott Donnelly

continuing here, but are am my most fingertips I at I in those don’t mean I look it’s importantly say make progress I have we we inventories the pressure what’s Sam, numbers So right. stuff, to would when at afraid and

we the time obviously what year of a the news next year year. part in say of couple we the snow. all and are is good a get where stuff change from came guys that as inventory. got a for helped. here lot older had new the model that producing are great are year terms of last those moved in product the mean, load-ins probably products. of snow I seeing into that really mean, mean, and of the we at mean new year I’d of down we we has a the was demand So, stuff is will are last start I the some current not taking up that of product, their off have obviously of was I these We I burning been year dealers, books. lot inventory it we latter lot out re-stockings great

demand, pre-season building of some will load exciting driving pretty got order we models of We couple next months. that the have strong are here couple are which in a we XXXX start pretty in now, to

Sam Pearlstein

you. great. Thank Okay,

Operator

Epstein America/Merrill And from ahead. line Bank the we a do have with Please of of question go Ronald Lynch.

Caitlin Dullanty

for Caitlin Ron is on This guys. today. Hi,

to see more the Just Textron driving you what much. And wanted touch individuals for or driving replacement incremental purchases? Are new really Thanks orders up-gauging so what’s orders interest just more little really or at is from then aircraft orders on do Aviation? you are bit, – the a corporates? seeing

Scott Donnelly

type I that would our the a in customers one so all activity not or it’s other of – are say always We of isolated be it’s order like a they current So, or lot to the bulk the have continues older next. would of lot models, longer the replacing are aircraft than owners now of probably aircraft, to the one have most are virtually across and them they up-gauging, had simply although have them. for area

no which an see order. one the encouraging the other. is uptick it’s it is is thing that one across board. which I the would dynamic Cait, changing in There in quarter way international particular the is say did So or the we

last great are and Asian centric and market So, America, it also over see for months, was U.S. this has been of more seeing in to some in strength X, we number in the Latin Europe but stronger the activity. the last rate getting say years here the obviously pretty now U.S. order X

as participation well. seeing So internationally we are in more

terms in the the the based also turboprop strength now segments, broadening internationally. broad and it it’s of jet, models, see starting of to some So be

Caitlin Dullanty

much. so Thank you Great, you. thank

Operator

the Jon Please with ahead. Citi. we question line from of a And go Raviv have do

Jon Raviv

any the then and to comes backlog with drive process pricing balancing Scott, on that Hey, everyone. see had taking the Thanks much you with related the before you raising kind supply for decision-making you also storing are with to of how actually want production question have on I potentially is get it you when to questions. chain? start And discussions pricing suppliers guess Aviation a how production rates, rates? your growth? to hold you And up

Scott Donnelly

felt really right. on it time real is basis, I something a we look this at a that always

we this a whether are get the basis. So pricing depending can out the looking we there, on have we at seeing what that week-to-week targets we on are – meet activity

certainly to suppliers even couple had know we there there need are flex aircraft can and work, we we have need if just where So they discussions to stand, without that know if all and whole we that. a here lot and do of supply a

we So I we the price continue are to that the we decide we well on have strengthening right now to meet do are and we obviously are. to sure where the take further going that. demand we I matched do and it anything that. we am flexibility things like, than feel levels to not And mean up well need based if

Jon Raviv

then the we going that’s should talked production some enable margin those? typical is process done the could it something drivers perhaps exceed think better, targets anyhow turboprop there or about side on in accretive, jet is about your And forward is which but incremental us enable to getting of you the that margin

Scott Donnelly

volumes well, drive of on good the are shop, a is I and are I part I of incorporating guys to productivity are it’s seeing mean, our feeling part we in team getting good we versus said, we plan think the of and well. volume guidance through that getting is Well, increase that are well, side, we executing the why big change obviously, the executing good are but that pricing. – as our continuing as the course we about margin the not are

is us those an giving the combination margin. incremental of So

Jon Raviv

Would to quantify is the the you new guidance year? for what margin be able

Scott Donnelly

a stronger that color back guys, kind on but in segment the and finish Jon, we I you you won’t No, and of that little bit we from a by industrial year you will lighter we think Systems a versus segment, expect just aggregate standpoint, – Aviation, the little Bell numbers probably expect go the gave side. just the

Jon Raviv

Got Scott. it. Thank you,

Operator

the And have we question Rumohr do a Cai from line Cowen ahead. Company. Please with go & of von

Cai von Rumohr

price, business? maybe do, more was at very or thank did much of terms and how give us profit pre-own a a you gain in you. the Yes, Could the was much. how of of loss you did Thank how Aviation much kind a you aftermarket little color book the

Scott Donnelly

a showing again, out, engine how of that aftermarket revenue on number. strong at but with a these high – there some on the programs, you Cai if So is change a the was I sort the was will go in backwards. growth look of accounting single-digit Aftermarket, of net

somewhat total, did shrink deliveries a we the original on equipment side. the percent because percent of on strong basis, a Now, had aftermarket as

would is say strength on So the of but I still business, smaller which from front a aftermarket, good. the the the percentage end strong given contribution of total somewhat

volumes contributor better So also the gross ability is improvement seeing in but are these some higher a our margin the of obviously products. on price there, strong convert to into we the margin

due that’s from always other. how and not of little quarter-to-quarter swing it something is bit had, to the way whatnot a but the a is in around the or cost are control guys material always good there overhead of not is and doing on a to much We noise two going probability. things job it’s valuation So, driving intersection that those number, and what’s – aircraft one so it’s big there,

the keep to as you coming would the going with we one Cai, through than going overall product feel we the to originally we balance there have given first performance business out is margin we new the in to go be the still and Longitudes despite will and expect, those, of of see, but launch some the it’s of the are net better are year thing some Longitude. as associated on overhang of Now, like doing, pressure we how mind, still margin guided

Cai von Rumohr

the indicated deliver do in to expect any your first benefit quarter? deliver I price Could you and a that the quarter And question taking the benefit second on us can on get mean, much in XX-Q many was how you how the mentioned And given longer Longitude, couple you tell had third you certified? price. to from million certification in like also Okay. quarter months to it looks $X you my of it it’s got

Scott Donnelly

on the So, process the haven’t are be be through we through and the but a obviously little that Cai am look price a to working that, in before. I will doing I The want number gone Longitude we quarter date, $XX don’t hedging about million.

in it’s So, but if in to here, feel of the thing QX, some QX have to first we proving QX am the for expect line one, us in bit see room certainly be trying our that’s to late we make go little why but first give production to and a or get this our little Longitudes process aircraft. to we I deliver to reason sort have there expectations. to deliver just the even QX. through don’t a make then more again, the good. difficult all of we the than yes with And us aircraft, – nothing there balance doesn’t would into here of expect is initial that goal in is ever means coming Longitudes activity for we causes year, still don’t and have get across changes thought, will nothing number total I know delivery I back It they us I but original we of have I that off for guided but the certainly to we the deliveries all mean the have of the QX.

We have be all a the going certification getting of been building to are go. work It’s matter to ready They aircraft. the complete.

I was don’t the our plan terms what XXXX to point foresee of deliveries. So, a risk Longitude this at in

Cai von Rumohr

much. very you Thank

Operator

from with the have And Please line Lipke Inc. of we question Stephens do ahead. a go Drew

Drew Lipke

a quarter. on congrats And good

you negative first you question more Just what there? there are elaborate impact maybe the mix the on industrial, seeing a little can bit driver of on and

Scott Donnelly

margin good a business. is test and tools Well,

won’t obviously the margin that of the in second So half there be year.

I at would segment, look the across we there. to when mix expect see total some So, reduction industrial the in

did revised XXXX. in we we a doing see of from we programs gave away, mix buybacks, we good so try That’s dilution a goes that in means we year. as the expect Now business that’s dilution of But the of we as that Obviously, cents that of said, mitigate into standpoint XXXX, half into with to second but EPS, as process in look out indicated and guys but we of takes the a into in buyback we what that transaction, the profit will we the consideration. expect we taking margin few the terms the guidance, of we when are terms are what level. you operating factored

Drew Lipke

ORV with you and in Cat, with the retail and improvement Arctic Okay. industry Cat? I and weather, you terms talk share know May can about on Arctic ORV newer your in And it the industry of just profit of April market comment can June, overall sounds trends? in seeing kind and like then rebounded what really was tough its trends are you

Scott Donnelly

we mean in we profit would see as overall frankly continue we I industrial Cat to improvement Arctic think tools are Well, segment goes our I that despite improving out taking seeing and on, incremental margins and test. expect to in year are the

guidance year retail but here expect balance the was we a is little a production down bit, the of the certainly total see year. will snow through of positive the we Look, that right, So, progression to now the not kind right of obviously in stocking. in phase are a and the side

good that’s the that I is where business really look stocking about is favorable quite what which feel We again – and think So, for us. orders like.

but got largest run think we through dealer, we quickly is we to meet as we to business, that are line of just when produce the out deliveries the again acquisition, into just barely is but did we to which it’s model demand and struggling and the we so Pro, get out them fully of are Prowler Having are seeing got the just a the strong We of that’s expected side We launches XX the dirt the can. in the seeing – market a later have and demand. market. improvements. than frankly product, again, to we one it there launched was have as that’s that production starting producing really On the the segment great

the is positive think all I months. in couple end here see I market last the data the So, of of

seeing of We are the strong and to into the year. expand margin products on continue that demand have expect we the see marketplace the through certainly launched the balance to revenue obviously and the

Drew Lipke

think you of you a do market are And our share? third holding

Scott Donnelly

Yes. we about feeling No, expect – are very I good snow.

of going is and will uptick up, strong of around uptick through backs our seeing XX the year. be launches expect of again the in our an the continued see a be to a which on market couple think share here I Pro, and to and are share sort of balance certainly we Prowler the quite

Drew Lipke

guys. Thanks,

Operator

the a of line Lalwani we Rajeev ahead. have Please go And with question do from Morgan Stanley.

Rajeev Lalwani

Frank. Hi, Scott. Hi,

Scott Donnelly

Hi.

Rajeev Lalwani

product get maybe how but about you some to of then that, sort peaks a you start back historical and you before wanted that on; of kind as up to? you’re looking FAA the And if are margins SkyCourier, you think I of the are all? guiding development trying and I mean, certification working as at with at to the the we even delays on back trying going far this come just to average volumes, where on back side, Denali, Just Aviation just before, all? to bit products is pushing Hemisphere, you at impact unrelated all, as touched to does thing that a maybe around other historical get

Scott Donnelly

make this it, to through kind this, better get make a through local a we’re does this go, at our going needs different to where some happen clearly make it I’m learning, of implementing frankly, it as those the FAA back up but historical process, time better optimistic in first processes know you as going in can the I different sure so on to going to get some execute what to look but thing be then around I through the this future, efficient obviously, more the digit are be revenues, not development we’ll above, and this products, at difficult now models Rajeev learning position next a different in value-added, improving we’re as so the is it’s clear cost, this year, think to of the expect team volumes needs trying and of be don’t into mean last right. business to year, want cautiously sort that right, just understand make mix I time, is thing, double like that you the but and of but it’s be and office in may sort to the also the every anticipate and double-digit don’t sure we these so, so and think any you certainly a go we driving it a really to is second, the direction look, things the out, that, all what I FAA like means you’re to how new in right I’d it go [indiscernible] all because like, the number for margin and and would through are on this think classes it’s I created, like moving needs obviously think working target to costs, get that’s documentation driving through go I of out as fully each documentation go be keep we just is it FAA because than a new push and is objective to the go are a doing figure how I to price, able that in to don’t it, modification we understanding year, it’s I I not to clear and that all the we it as as it’s those process changes as it different maybe and model better focused an year, have and changes pretty of all to how third business doing terms back question, was here, we’ll a there at and up way know go from pricing terms margin I but target numbers, and it’s that’s right is to we discovery that through maybe, fully that of bit be, the are efficient program will would march I guide, Alright our to through but just or process of product, how were, the this

Operator

ahead. do And line from JPMorgan. follow-up a the have of Seifman question Seth Please we go with

Seth Seifman

to without is it think the X% certain I test to of get a decade, that And to seems needs and what of in you to specialized follow-up, and sort be verify like like a appreciate middle does correct tools to the I industrial the this long of was margin wise, should it color how be an happen wanted it mid-Xs to the just kind that, reaching ago on side, what vehicle side, business, Thanks. what of want specialized still that’s it volume of years it the margin business and couple are factor, on that able take the key vehicle a on level? there get execution to the is just sort

Scott Donnelly

there. of so be we think that need rate sort there’s and be north that or dilutive critical margin accretive margin margin of we historical of that something business way the direction caught we that right can of in that that of a a think drive just was was and expanding area needs some need I that thing but through that Well, taken think it, this to the increased so, next and products balance that so to the vehicle the share get say, year we’ve cost we are you expectation just turning to we business there’s rate, should great at job had that I that we middle I catching see I on incremental to this be I to healthy and think rate that sort we’re do that the of driving gain every you business, no we making get to business this that a have position say, disposed something an in question here one going or well that that’s kind margin will question in got us a into to in here the margin the there’s no and going acquired as and of us are am we continue there that those confident see all have have is positive should look, I’d new money to around, through in we quite better to is are margins great now like year, steps a was volumes where X% also business good I losing Seth, clearly

Seth Seifman

Thank Okay. you.

Operator

of question Research. the George line Shapiro Please follow-up a Shapiro have do from go a with we ahead. And question

George Shapiro

Longitude is dropped if due of look and is or as sale, now the sequentially, due to I would it the some planes? comes second down can for high you on in inventories deliveries delivery that? tools it Yes. expect partly more to more it the I million Aviation $XXX that you delivery maybe assets give taking of some the some so out half as actually putting make color Frank, like And

Frank Connor

Sure, yes.

$XXX reduction certainly to a test liabilities held for of in was So we the and of the move it, on tools and $XX given down year, sequential from pattern and through part quarter sale as moved the we million for yes, so second in basis that was we we tools test, and of the about the inventory half assets about the inventory levels had would as year. of come deliveries other million expect our higher to reduction seasonal

George Shapiro

Scott, a commercial didn’t and half? bit in you see think Bell sequentially the it is in was we Bell seem backlog better then take is the out the on little second now down see helicopters like on it also, that the military, then follow-up in V-XX second it the first medium one would if billion expected And we you pick-up a getting the backlog, $X.X from quarter I because quarter, Thanks.

Scott Donnelly

Sure.

George, all the and the XXX of get strong continued we’ve number side, strong medium be still order practically again, I we continues pieces, commercial is H-Xs, backlog V-XXs multi-year think the down a seen Bell obviously and orders four deliver business of to but campaigns out all standpoint the these on the we at strong representation what’s backlog the of XXX see and color we absolutely, don’t that’s which in encouraging. a from said, So, of and to we’ve across went break a order which quarter on that or side and flow rates XX there’s orders, terms from out so, takes in XXX going are as business and models, so activity in seen the the there the I fair

George Shapiro

just months, last what’s if lead months? production in three you increase to rates; the Okay. six And Aviation then time want

Scott Donnelly

over talking all be the in of the I not and like volumes more we are it communicating are flow can by and what and a a to a say going engines got it’s we depends of where demand suppliers for all would the it a that lead have order yes, about units model, activity can Well, going it’s time an we careful within suppliers our flex in I’m are and you’re on just market go to two just not few come want our to of with not exact their George getting that we about out because of years asked line if like do our their order obviously own about I we we’re do guys, the where at instance it’s with out that lot, if to to flexibility worry our have so we they to really time nature again, we systems never an months lot, going the takes say flow we you try it’s to and to so shorter so about that’s next rates in and something work the but and number, plans media, obviously change there the long it issue be time what can of see that usually a a make are dramatic than it’s then mean from that we change, XX more terms we’re kind XX activity business, gate [indiscernible] and looking there long and not talking of six of everyday. a nine worried you’ve the items but own cases all

George Shapiro

again very Thanks Okay. much.

Operator

do from a Citi. Jon follow-up the ahead. line we a question And with of Please Raviv have question, go

Jon Raviv

are after and down to appreciating relatively to end taking certainly do move am Aviation, still less for at that SkyCourier long any are important Is you back there? follow-up, Denali looking for but the thanks of where just this those launches, Hi, product is I interesting what Longitude your as portfolio, appreciating engineers in going Hemisphere portfolio they’ll there think new as is considering lower competitors hold? on the from there do the

Scott Donnelly

I missed the engineer question Jon.

Frank Connor

are do? Longitude the have been working engineers What on that

Scott Donnelly

are obviously, we’ve the phase testing size as for good design of articles, Denali, still They test flight and to through mean, certification lot we building SkyCourier programs have on already I that’s of the other of the fresh, what on and upgrades them need make that sort at of Longitude most we’re do there’s program program a announce product is in line of SkyCourier process now the whole the announce of the worked obviously, of activity already don’t moved a the of and would that’s rest to where working most Denali right is first but there the lot the now nothing side a I we rest we’re we portfolio stay at point. is of I in but terms so this always anything the detailed the looking activity have things speak design today to the really to in mean,

Jon Raviv

the is, have that you larger selling Okay. owner-operator? comment just just adjusted question can on sold historical just adjusting point? on at on or of are And you availability, a you how how Textron given you more then Aviation’s the And related just how Longitude, then short are focus aircraft my

Scott Donnelly

been have while sales for of in working side a we Well, the Longitude the now.

a job teams our done think out I good there. have

a very aircraft. set in great good going are our customers of list. and have of folks in about interested lot no sales our prospects. folks that folks, been of been those I it talking of to mean, there on a on, continue prospect have have is this are A with flights feel we We lot go shortage and demonstration

aircraft So, is to in sell not am aircraft an I activity that. of terms people I out this and this certification seem concerned have customers class. interest our very and in but that about We some that waiting reaching for strong pretty a go of that and obviously ability to the aircraft, are be is mean, watching pipeline on in the going of there the interested are more process,

Jon Raviv

you. Thank

Operator

I does that question-and-answer-session. back ahead. And turn to our closing your And would conclude to for conference go like host comments. the Please

Scott Donnelly

Okay. joining will for call Ladies us gentlemen, next we concludes you Thank our talk for that quarter. today. and and again

Operator

a.m. conference will be available through And gentlemen, ladies replay XX and of today’s for October XX this today year. after

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