TXT - Earnings call transcript Q3 2018

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Operator

Ladies and gentlemen, thank you for standing by and welcome to the Textron Third Quarter Earnings Conference Call. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions]. At this time, I would like to turn the conference over to the Vice President of Investor Relations, Eric Salander. ahead. go Please

Eric Salander

good and Thanks, morning Brad, everyone.

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

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

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

third recorded $X.XX related for tools During quarter, this $XXX of test of and after-tax per million share. year's the the sale we an line gain product to

share, flow from Manufacturing $XXX the Excluding quarter. third to that, quarter. pension down before million year's third With this million will adjusted $X.XX I $X.XX in from item, last compared cash income totaled continuing contributions Scott. turn $XXX operations year's to over last per call was

Scott Donnelly

Thanks, due lower the Eric, specialized and more in in two vehicles. primarily profit Aviation. runoff. years, At Specialized was was test product profit has the industrial Revenue an profit Industrial, continues past which portfolio. than performance in expanded and at that the vehicles Industrial systems acquisition with program significant largely segment unfavorable as tools down to breakeven higher offset Bell over change operating and down everybody. by as we profit primarily the have undergone due driven quarter to good volumes and to with morning TAPV lower Segment the quarter in was

be focus cost revenue strategy to on by but growth do the the market go-to-market trends expected We've support in the the our introductions to increasing operating performance. in favorable encouraged progress on segment, the we've work seen of on and necessary sports we or product continue made need planned power the we returns. and levers to new level While haven't seen

We moving valuable believe improvements this portfolio in and are driving business we forward. that focused our have of on power

Bell, expanded on slightly in profits quarter, Moving and were the to up lower revenues. operating margin

up in high expanded its XXX side, design On in Yuma, all altitude and the Arizona, to Africa. third further delivery operating delivered completed the continues weather the Also XX in progresses footprint the we it aircraft quarter. the XX program planned the in testing Ranger as year's global the into In half from in X quarter, or with quarter, as towards first of commercial meet XXXX. last marking Jet Kenya XXX a certification we XXX exceed helicopters specifications

On in the military Corps AH-X contract a helicopters H-X side, program. support XX of awarded is for upgrade million $XXX the Marine Bell

at the in largest is as market international customers. NATO continue We military show UHX multi to this Base and we Air security days Czech Force the -- in aircraft also feature Ostrava aerial Europe our to

International surface trials to of & support lead program. the Navy this of capabilities Arlington, military DoD down vehicle into on the aircraft's Navy, Land the also a the and development of pre-delivery V-XXX parameters. $XXX the give as Land were now system understanding Earlier contract TAPV Flight provide a around our Systems and knots best-in-class announced material million and Systems long revenues maintenance Myer our form training between products, leadership Textron phase. end its Group Corps, week, we to programs network them as unmanned procurement systems, pilot & is our & Marine to the and to Marine venture program. completed of we representatives At customers. a envelope Systems Moving unmanned the performance review flight training Army, the of world to to also near to common V-XXX Marine Virginia quarter, XXX UAS. as and joint testing more Ship-to-Shore Textron and a key inspection that we Also intent Textron Land of exceeded the full through a Marine serve well customers scale expand will better us Fort the X team centers. as U.S. during were of unveiled in for at the by combination a validate Aviation successfully capabilities proposed of awarded Bell Safety enable for aerial lower At Connector from continues in This of deliveries extensive markup this recently

to through Beechcraft of our Vehicles product Textron's with all development their Aviation's such quality since in move knowledge aspects its businesses. leadership Senior This to growth. segment Specialized next of Friday, operations, Vice XXXX. the within of most and last strategy CEO. led Aviation successful developing succeeding as President is expansion Textron has CEO Moving management I the new Integrated business of a confident has consistent Ron several I'm our our who Textron was Cessna Chain depth as Supply of systems, like abilities would lead his great and sourcing to impactful manufacturing to led Aviation leaders Textron Ernest strategies. Ron change in announced of has Aviation's initiatives strategic integration our the and operations as phases Textron deployment and Aviation of Ron including the Scott global Textron of with moved address the about Aviation, that Aviation of I Draper to-date of

We last year. In from $XXX continued slightly Now quarter. quarter, down order in strength and delivered lower were the increased from of XX the finishing quarter, XX last backlog the with Aviation the Jets commercial flow Textron looking at and last over up end turboprops profits for XX operating year we saw up revenues. margin on million

in committed our in product and On and industry-leading fourth the on on with investing for reliability the deliveries forward the aircraft front, to product We track be citation week success are across in would first longitude cabin. NetJets, remain quite putting At option lines an new the and on the testing the for the functional looking performance, we quarter. an building of FAA NBAA up with an aircraft certification second half expanded reaching the agreement and the and to with outstanding Longitude's Longitudes between deliveries anticipated efficiency, XXXX. to this we beginning Aviation on relationship purchase the announced Textron latitude XXX class-leading to operating of

with an Cessna In up launch we the also addition as to the agreement for to Hemisphere that we purchase the upcoming with Citation to aircraft. an announced Longitude option XXX agreement, reached customer NetJets

With aircraft be with million in this I clean of than NetJets over represent We segment design turn are the truly We first aircraft. that, design new and $XX the large-cabin jet million partner revolutionary new XX to the to will Frank. in the believe sheet excited more Hemisphere to call will in years. $XX

Frank Connor

quarter you, $XXX Thank the in was million, million Scott, third the good quarter $XX and morning Segment XXXX, a profit down decrease $XXX from everyone. million on of in revenue.

Let's the quarter review down Industrial. with line. of to third $XXX how to the and impact our the related due from segments tools million each profit XXXX and Segment revenues tools largely performance starting Industrial disposition was the price contributed from million of and unfavorable largely test $XX disposition. of the and decreased test product

the the by line. from the Systems and programs, the $X.X commercial deliveries Land XXXX primarily was down profit by result $XX lower reflecting $X revenues. in at Segment quarter. revenues at revenues quarter million military billion Systems, training end offset Backlog lower year's quarter. Moving Marine at was ended $XX product TAPV commercial due volume. and a the segment of to segment billion. on was to third mix. offset in this million down lower down reflecting the partially was down down Textron in due in Textron simulation segment Backlog to performance up volumes price and from million last period million quarter At favorable of offset net were $XX the were and from partially largely $X mix, Segment revenues mix the ago of favorable At year last revenues impact the and largely $XXX $X.X profit million $X.X other on on lower mix. the military was billion. million higher and primarily and lower by Segment lower Bell, favorable million turboprop segment partially Textron $X offset Backlog partially increased volume $XX from million million, performance profit profit the volume volume $X Aviation, third pricing. in down were by were Finance year

to year the ago. expense and million $XX In were million $XX segment Interest disposition we million was compared gain a test. related of tools year. profit, last $XXX corporate below after-tax booked an million million the $XX Moving to quarter, compared to of expenses $XX

to expect in with now use to $X.XX. proceeds earnings share shareholders shares to $X.XX full-year $X.XX of share X per the from $X.X XX.X Year-to-date million prior shareholders be million a returning returning shares in which narrowing XX%. We and we billion of range of To tax operations up the $X.XX full-year continuing in adjusted also guidance, million wrap as tools about we've the $XXX of reflects outlook to to rate the our our cash cash test. of expected are $XXX per We sale compared to to repurchased million quarter. from repurchased

remarks. to to flow manufacturing We from of contributions pension are cash $XXX continuing our of prepared expected $XXX also That million operations concludes the million. before reaffirming group range a

can So for Brad the open line we questions.

Operator

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

George Shapiro

was was the Aviation, Yes, Scott, good the in morning. or mainly board? all longitude backlog across that increase

Scott Donnelly

the diversity and the every backlog. activity aircraft say across remains the board, It of about feel of good strength pretty we in last was I talked mean I'd see strong continued that we've about class we to George. quarter. virtually our

George Shapiro

last And just quarter the a deliveries this been something one that that's because the Air expecting King year had in year? you shipments versus phenomenon weakness up is

Scott Donnelly

expect we and still Yes that George.

all a the third started strong in deliveries you as did were on soft Air here on quarter I the had were available last rates. and QX orders so pick seeing the But and pretty third QX based and aircraft King to both Caravan. recall very year think come still frankly that through the and you're when production we quarter, up market quite few in

market So for a and aircraft in reflecting full-year market. year a the lot so deliver we the on QX, expected linear, we they more that stronger were much on quarter. third production, obviously the been the we're material has could for track from volumes absolutely basically QX cub This available

George Shapiro

the the quarter? pricing Aviation benefit in was what And to

Scott Donnelly

like X That look in QXX number -- the

Frank Connor

Sorry, was price gross price and was XX net XX.

Scott Donnelly

XX, so.

George Shapiro

Okay. just the that restructuring clearly look so guide or plan was the one, quick going year, to one that what's lower in I didn't the mean forward, better? fourth And kind number got quarter for the there you on then Industrial of much has

Scott Donnelly

Industrial in the it's primarily as seeing Well think recognition do that quarter vehicle by and it's for in business so George, in so, specialized the quarter. markets we terms in sure, team you're still that in strengthening better and driven the consumer a to some what I recognized what have expect the here we said we fair is that of a channel we particularly around work perform cost and bit to clearly of that quarter, fourth more

I'm they So sure will. that and

We also so are to had with overall expect the with quarter that's above year the business the the fourth the still third weakest guide. in shutdowns, to I George, perform seeing because all to we quarter. clearly in think deliver markets on summer strength just is what feel is comfortable market we mean where And you are just are also the and the original of the Aviation I we that stronger have auto always and we that going respect very seeing guidance, side,

and guide. I good strong. is Bell market same exceed commercial be frankly their with and to think very true going deliver I Systems year on team the is execution to with continues think that And a

will So that largely overcome guide. this segments Industrial weakness the why strength to just we're we able saw the of quarter the those which in is side and three the narrow

George Shapiro

else some to thanks. ask questions. will Okay, let I somebody

Operator

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

Jon Raviv

sense production you and trend a related morning. your production are Hey that just order just rates some the year-over-year. despite down good raise seeing at look as to Aviation potentially wanted go rising being consider of turbo this in explain. process, the would you you you could through Aviation, get then or in of good visibility of know as Scott margin terms that normalized to you quarter what confidence point? I to pretty rates just On And kind

Scott Donnelly

of that expect order that think the rates the continue. I here we trend year. very have the where feeling with strong on the we're about margin in Obviously QX Jon, through to occurred course we're positioned good

I rates think sales the our teams we year. be to we the NBAA bit of with continues have our of production and level move tweak robust as this we going teams, of as a obviously we I activity mean time do the spent week, will usually course through fair

expectations So increase not to which certainly up. will we're XXXX ready see for expect to certainly yet, clearly we continue guide production our to will not tweak but volumes

agreement think particular, made we one the show Longitudes. in around was I announcement at that the the

clearly expect volume that team going seen it that deliver out with latitude there us fractional deliver much and the on effort working business. sales start ramping announcement is community in the on NetJets on Now to up to of as the in is will team Longitude we and driving we've with marketing terms the

as production of its So increased volume for expectations a on to rate is and result sure, our going announcement. in be that terms of Longitude

Jon Raviv

just -- just out softness and a competitive ramps for been watching particular as it's where as case that because margin with be some NetJets the space there we've we're it's aircraft latitude because So incremental of could up?

Scott Donnelly

that where Jon, we for I ended couldn't deal kind us. both was the that latitude we've the do but pricing place on we've sides. agreement NetJets not for did that I that's is deal a little fair pricing something fair obviously understood deal the struck mean NetJets And we the in that size. a that think of with worked

it's operating all going answer and much guess aircraft NetJets be and more be but just a deal manage for go-to-market I good and to to have and as balanced them. it's it's discounted is they a deal So good the sales for us, that will the clearly so short the handle the to

of the in So, dilution no, sort I we that wouldn't side. saw expect latitude the to see

Operator

with we And go a Seth Morgan. Please question do the have from of J.P. line Seifman ahead.

Seth Seifman

legacy the seen I Scott, to about from about and we've and be kind morning. you Army much for Textron programs might vertical could evolved and to in and and desire your of good XXXX how very if future move has kind the approach thinking talk recently money Thanks budget? of for opportunities wonder programs news the towards that around what Bell new there the

Scott Donnelly

like next-generation of Army be we’re the in Seth. have significant the think and will are it's publicly, what I we good Well, a clearly they've question, I encouraged. guys mean been that we the Obviously investments what very been Army. mean pretty saying for would to making the Aviation

is aircraft move for polygamist fact and discussion So we we KEPZ that. is Obviously, also about, X the as we we increases working that to they're need prototype V-XXX We and that it's recognize a look encouraged move great into that are obviously There we're terms program just do they're respect of continuing -- the not some so right always in monetization fabulously the on compete not saying, X and the program. flight been the they're from the program a with huge program what to that's done expecting by to the doing and in money programs. have place very budget well. we think KEPZ been test will Army to with in develop years around we

have we think good some requirement. meet that very that can ideas I

in weapons, money; and a there we to with beneficial mean the us to number going whether I how to Armor certainly Army determined. it's programs fund monetization XXXX's number will all the could opportunity programs opportunities What we to about that's seems But there think kind So beyond over of of mean that makes there it's shift engaged I a that of years. excited be they or still to next-generation lot that the budget way are the I are that into try is and the an things exact I move monetization what Army very really think we see other to like are a be create. course of expect quote I big of their those appropriate is working the in is as programs, vehicles,

Seth Seifman

more so and thinking maybe of came I towards to could expectations, of business that tough, year do $X.XX seems what the very why this so how guess to do, it sort level if little to high long just I then sales talk year relative about profitability is of to tough, bit why And so was still you it vehicle get billion like as a there? is single-digit Okay. you or you back pricing a initial to in follow-up, expect is this think maybe maybe pricing or do get will business, take throughout

Scott Donnelly

pricing much a channel Well, that the and been in discounting is look, how of so the about team out problem overall and that sort how think managed learning this handled going of has don't I painful how is if the through a think I through our plays experience that as is market course year.

like in sure itself for discounting it manifest we So that to to work channel. more that continue would

I think that will things get and we're it's before. is about learning progress the think talked and team make we've better as with it to going on the I team

snow we were that we I the channel I'm introductions excited. lot product the pretty think got side; I had a more some last on bullish, great think year

of new We have stuff a in year. going this ton

sales part on go pipeline release it's the of side, to product So activity, of up, that that of we you to because and activity some a ready. at the again in really look sort recognize tools and when better order want last we didn't wasn't dirt was the pre-season year ready missed

So terms products are we into behind the now. a we things are feeding of that those but introducing new channel year kind of in maybe

more go think little the you’re with as probably a So to more will bottom-line I answer particularly in we where number some we think end to is through year about revenue But need the up consistent that see this start I talking but we forward. excitement growth see we momentum is and will channel channel.

Operator

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

Rajeev Lalwani

Scott, talk would you you a on going there forward? the of what weighed can underlying bit get get quarter, revenues the sense system good some just this just likely but on I obviously TAPV growth about like that saw can side little the or to you a growth

Scott Donnelly

fully say less which more From be, Ship-to-Shore revenue we're think mean more ramp-down program. the to TAPV Rajeev, see I we little expected. I would coming on through a I to a the we or expected expected we're seeing the Connector standpoint, on where we have program

I issue reached bills, I think looked at that's this at Ship-to-Shore the for volume Connector they just a we happening. the not of a contract definitized funding timing We have just appropriation point. are as expected as is we mean

rate in think million originate we As to a little coming and the thinking and we the I margin the the we year business. the the Navy and keep than I long said our of that we towards and this be XXXX, in through out material about program expect start another plans. look the program see expected at ramping that been should year later continues was certainly program, bit the into contrary prepared it's of But development be. to gave us going $XXX that normal remarks to is a balance side press But lead we the to should as it as be that in

Rajeev Lalwani

whether V-XXX on and just deliveries you you just how have maybe previously? looking could are to not gears seeing talk putting commercial you aside or strength just alluding Bell, at the a about were little bit And the side switching been that overall

Scott Donnelly

Bell, on we will. a quarter the of customer us. mix that's you be side; unit the and order numbers feel that -- air in need always for mean of in very XXX, but XXX, about of Rajeev. days. very late the to the mix just type XXX, both XXX those program obviously relatively We expect from and to absolutely, and successful vehicles We obviously certainly very, the terms dominates QX of the a quarter-to-quarter both XXX the delivery We XXX, stronger of on are deliveries if have be timing Yes, were XXXs I at activity good continues

the commercial be is on those actually So good, up production number will forward. where I we continues be models perspective, of to well tweaking from order market the think to are we a going activity rates demand we and our meet the strong, in see position a

Operator

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

Carter Copeland

that of just the Arctic wondering from couple so Scott I'm just this since versus the and change Frank a just so be color I clarifications, would piecing give a Just at just on to quarter? sounds And some that if is assume, I'm clarify in you as your like together the weakness then to seem wondered favorable vehicle adjustments related to Bell comments, all well specialized great? the would you if isolated unfavorable could secondly management us quick it be benefit that was Cat

Scott Donnelly

most of job sub-segments I of they'll good those will, require like if that's going acquired think team sort in of work So and the that enough where consumer and business chaos the we the have some but that business Carter, creates work place, a will the total. to dirt and is drive side, you you The done they've the of that performance of would is sort in particularly challenge most when most business. piece fine. going I do of great Most profitability performance recover that have say that in past down a it the forward on think operating fundamental but area most TSV, the here side the area around in very is around we the need of focus I that going in the business, it just most the and on the and

Frank Connor

at of risk and saw our continuing our improvement perform quarters, frankly; Carter, programs cost military of Systems So business same Aviation. they kind in saw other in and Bell well saw defense in continued to have we We position. as in thing the retirement performance, the in terms we

The were but was adjustments quarter of of it million at that of Bell, spread. $XX but net that other program part larger spread was our in as So was businesses across kind overall well. the kind

Carter Copeland

Thanks in Scott one, there? Okay, or last was across you any and one can Aviation additional board us benefit and mentioned and isolated you great. color quantified the the give that pricing

Scott Donnelly

the across was board. It

trying in realize it. every to We been the and have us one models continue to of classify we

Operator

have line a of from we Stallard question go the Vertical do Robert with ahead. Please And Research.

Robert Stallard

Scott, to on the do it's this and is issues vehicle sort here, do you some how charges think required? think going to additional be going take long to restructuring you out there

Scott Donnelly

dirt Well, Robert generate I think that we with we seeing are strength, we're one obviously the probably probably we're this I it's kind of the snow year not side a going right. We years to year behind have the of momentum two side still this the of again. as in quarter. expecting launches in again so schedule a to to coming that these builds kind mean be we we in see But went we feel costs sort I realize would and year like of of products think going out, the into one happen are kind the to lost accretion second we as that's that, on obviously into season. the to delay able

Robert Stallard

the the quarter in comment the Okay. achieved? side on aerospace you the on the rate the aftermarket what's Bell and on Jet, I and you did Business And secondly both heard growth then how

Scott Donnelly

of kind was when a on year-over-year the basis. numbers, the I little Well you was see flattish was up the rather or Aviation a aftermarket -- bit think Cessna or

lot been at flying a they the data, of the are utilization. is The I average improving. grow all we've think that I are to continuing mean looking modestly but daily rates part

that frankly little we would a So more have in to growth expected see side.

particularly back as strong. QX look other last at the we On year out was hand,

just bit still year-to-year. part business it on would of the going modest So to anyway, but franchise a forward. -- was expect growth growth, get but But we'll comp great little I back didn't and seeing think a very healthy we in I of little very again

Robert Stallard

on the helicopters? And

Scott Donnelly

Helicopters up it it was the was modestly. same,

Operator

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

Cai von Rumohr

Yes, thanks so much.

a delivering going and So order, assume that the quarter so in year, with the your you true to or given longitude the in Scott second fourth? next have the they're is come order of NetJets assume that start saying it if does third half the I I firm

Scott Donnelly

Cai. we So do not,

in So deal. associated there really nothing through fourth until the the is backlog didn't We the the quarter. launch with sign agreement NetJet

manage been So way have as and with latitude. doing we programs, the same as we these you know the

As that order orders at the specific tail backlog. capable I of will but in that usually excited into expect they're NetJet within and would sign is into at quarter. kind the time thing we that's are go about sales be sort in driving here to we quarter a puts agreement into we have the Longitude firming of to very market time. backlog fourth soon because this deposit the about guys we firm the do with we and until to very unleash see that That team didn't window, their again when clearly it the up sales start didn't fractional and as move nothing this one-year fourth And as start NetJet they

Cai von Rumohr

At of kind the say hemisphere issue. off are unsure? you we're enough with again, on Silver Crest given point ahead the you you And been Silver on the what definitely comfortable feel have again Okay. Crest going still to will or

Scott Donnelly

see happen that next they test engine think what's on a where are. validate Cai I year will an is we by going should mid-year, to band

of they ago guys how closely Saffron a couple well. they've very very I that through very that just understand did over models, closely Our all explaining that guys been where working the have was been been a we analytical -- get weeks well, the why had and on working was open, that team they've think the occurred the we them with understand that with issue very compressor, very

and design confident is model solution of I addresses that well We the issue understood. believe the with the which come up a cause. think is feel terrific. that understanding the very They root there's very, they've that good

it say there we confident the on to very being And That so said, think see solution. we're we're very do bullish, I in end. I would test want

the I year not. the and here folks to them and the specifications this this sure of that making looking are folks, grower mid-year continue at Obviously there make will space. a say home crew is going run at time you're to here would is So think okay, as detail it's between or we pilots as in that we a we the aircraft firm they finalize some to level will benefits next of NetJet available of customer and when a maintenance being be invest one launch

be now to be to So and the between we will both pull trigger. ready then working

Cai von Rumohr

Last some when the do where get the to development? point your of one Army you start fund V-XXX to the will Terrific. expect to

Scott Donnelly

I'm ready tomorrow.

Cai von Rumohr

know I ready? ready. But is are you Army

Scott Donnelly

a look Cai, of AUSA is hope continue level year think that shift is talked they with mean next we them to but we see saying basis very want to will over about the talked we mean clearly be start work I towards out I some that will what some as Army this Army activity and and very from encouraging, don't regular there prognosticate that obviously modernization Well that start the to next all a But will to their programs earlier, year. current would coming thing. of activity level the on on hopeful I has is I'm I encouraging. about I

Operator

from with Alembic And we the Global. Skibitski ahead. of Pete Please question go have a do line

Pete Skibitski

about you if on health wondering because or customer, was drying seems you lot Aviation out seen could perception kind lot caution I Textron of I the a some guys. kind you that like of things more indicators Scott. Aviation, look Textron there of a and I'm there of of one your if cycle the in at you it have up the if really of guess good a talk Good morning bit, of numbers market. secondhand marketplace there are feels still there like the are that still kind is of hitting in wondering

the cycle would obviously are it yet. to through is numbers really wise seem So indicate strong quite this coming delivery but

more? just want to I maybe you So characterize it

Scott Donnelly

more help. able someone would secondary the when to have people compete of do as in years no market you fact put with for a wants some about the pretty somebody certainly to to say think is it they in new is the easy a aircraft. be I'd actually aircraft, Well, Pete, of aircraft we and to quickly sell and under secondary old There's source XX the mean aircraft importantly a towards statistically little right, their market out surveys of aircraft so thin, new quite a their who healthier are that I moves seen very liquidity old I there pricing trade that's even anything is that for your first thinking of kind all

buying their comfortable people These plant, feel They much survey lot of that dialogue reflective a CapEx the think decisions, had terms that what expanding jets. a more of been of making new we're recently new have see the they obviously is folks a lot in hiring to and are building businesses good from these here information. with health now. customers, spend we about right lot capacity them opportunity yes, of are In an people, our you I with time of of

So clearly the us CapEx. has time and is in the the regulatory is pull the business to made long of spend confidence in Cuts some confidence they give than and and people back U.S. community that reform feeling thought to Tax hire better a

Peter Skibitski

to the global just kind tariff related follow-on impact Industrial, right Okay. and about automotive the and issues I guys just text seeing the from one wondering any I'm days these and appreciate talk cloud cycle of color if feeling now are how quick on maybe there's they're globally? lot

Scott Donnelly

obviously a for our in have largely contracts we tariff We where that. Remember that's those production of we of related; on I is don't pressure company do because most material of by to pricing, across the see have plants mitigating closed you raw countries most some there lot mean anyway. be

that's the coupled something one that that, I the auto susceptible just global that's for Caltech. regulate think manufacturing. tariffs itself is and with On like just shutdowns always seeing most a saw output world ways summer some and they guys at the which bit Brexit's impacts is shutdowns And of QX and hand so OEM again easy some anyway we around these an to we during in say great them global most manifest I QX the softening auto caution other deal around of the now are of OEMs. overall extend of of the a is there's to uncertainty certainly And months there the -- that of and because of the the the generally do right in

it's So had been some not modest volume a huge reduction there in declines. but

Peter Skibitski

Okay.

either? are out of nothing nothing heroic expectations Caltech your basically So terrible but

Scott Donnelly

we'll the to the auto that of do and QX going difficult but normal cyclically OEM that down about is I in certainly QX a think think I which context in think business is volume that global somewhat. see is better I No still is most be always

Operator

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

Sheila Kahyaoglu

good some Is for about Rob's to unfortunately, on it that the one think to one it not year's be mentioned how it it, recovery, last the think do about we you and just is vehicles we how issue time, and finally I getting will Industrial question product specialized do dirt how was or few airtimes long seems recovery, that introduction a product introduction a profitability is quarters? the take think that

Scott Donnelly

I probably heading year's in some XXXX which think good I do have coming dealers Sheila Well, are some, the year model out mean it's now. things here the that to we time,

do to customers I figure make think something manage we haven't done how have to is in well customers well. dealers, just as to perspective to tools we have. is the natural product move easy general way we product channel frankly something and we for help a it access how that didn't should we have sales our just as our And our that

is to I this can but that year a were that thing some of I we process problematic to it. mean some very want be things think is this get where I quickly think So fixed

behind it we lot we've think gone better to but team I don't get see been Now a is quarter performing for time, another it for a good this certainly this growing obviously that definitely And have through don't been it's and issue disappointing about saw, the quietly expect I talk go to margins don't people on business gets some better. what good it rest path. generating like obviously of the us Industrial just and a most has we segment. It's of unfortunate

Sheila Kahyaoglu

X% then think of around about joint do Systems the Thank one it business, as the more how And and capability profile how it just expands and the came venture your how to is profitability maybe in future? announced it you. it you with then about regards the Flight Safety,

Scott Donnelly

rates year kind guidance front talk we of provided beat the the back in would So it stronger the knew the the half. I half of as than overall we we be But that clearly about, we margin Systems. to full-year expect know for

XXXX the the obviously been the and think lot there there but I good guys has of programs in the been that. feel and we net strong very are opportunity out very on is performance execution chasing good has about

on training get the think grown training I the with particularly our market been maintain of for good into deal, a it our new a types products to terms time. we we our has Textron for wanted Safety area In one long the us of was aftermarket, we've into Aviation Flight as been facility decided relations the saw going attractive a dramatically, for Flight Safety been aircraft. all has large doing We provider because well customers that which and to Tampa that's very

quite getting with at you Safety order you what are as expected Flight take of look continue time programs. happy growing, they have run into thing and think business, how what mean sense Said better, have have are be I could doing if be a obviously business, to getting but on well that training our of They fair of approached going we with do a it's that have were how bit lot our kind to the to know guys to good makes -- a it's we we've and instantly the this of together for the we footprint in grow much, training of you're we I to does us. combination we this many so two in to we much business. So centers larger customers it feedback you training lot and provide and been a hearing customers.

a and good our deal us, good it's I participation a market. it's deal think them will for in for rapidly so accelerate -- will And this that

So feel and deal that it's explore a the will likely think sort very be up place it business. our the where win came I concept both for of and with we to companies good

Operator

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

Peter Arment

from still I focusing of talk revenue was from and announcements mean perspective quarter runoff Frank. I understand TAPV, just with morning, some was just the this if just on but with expected modeling the standpoint a unrelated Thanks. see quarters to Longitude also but from help the there know timing heard this you just little for guess also forward, Systems I going or guess and trying a and Ship-to-Shore some the NBAA is I level I a Good you at so mean you issue XX last then Scott, competitors? top-line, great landscape news Scott about Yes. is maybe how could competitive good

Scott Donnelly

Sure.

and will start the which on unusually TAPV ramp-up would expect expected, we think side, an I low of was QX. Ship-to-Shore a we we we little again get it runoff see I fully So we think as more quarter that on see the into Systems, to did

QX competing stronger we the our certainly the in So what -- guys competitive some selected compete marketing we the we would right and revenue are did have to expectations QX. we same With them will than been continue they be the with even the they little being in XXX to XXX will the XXX see the celebrating being XXX. same it's XXX the been and respect They aircraft, the guys. with clever are largely guys selected XXX, and the Avionics the engine if call all and celebrating dynamic,

in we good aircraft have and and comfortable helps we've respect with it products in head-to-head fractional phenomenon in but and obviously to been guys are on certification, we'll put is [indiscernible] on winning us feel driven obviously of the they against we bit products marketing their it's fractional wing huge Longitude to to to a wood see and wing very But those the very coming the mean now a extended the market that by benefit has same on feel knock selected about very get which our expect is a benefit think super we in I volume we where saw product they those done what I obviously Latitude, now the market think better -- So gas side. mid wood the have also more little validate much I good be have NetJets I in they the think side and it. retail to market their a wing the with

had always we have those two a think we I but about products always competitors feel competitor, very well show where positioned. we me let So are

Operator

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

David Strauss

of did the surprised wanted Thanks, I the dollars you back whatever ask how core million would the how game, a this so point the relatively to again in expectations fact some get was much seem to I'm Industrial at management wanted surprise just to late the for to in EBIT of you to guys out good term kind about seeing result corporate? that your of you when find given specifically were just to change to morning. you by were out to going internal find the you sense

Scott Donnelly

load which beginning the that product out end into it clearly starting I didn't. look expectation was that QX mean think of was see through, the retail of QX we look an it start was we right there sell really of would clearly a there and rolled was in that we stronger as to it at ramp the surprise Well, a as at I or product to

recognition recognizing problem retail see customers, But I been We've be the that. continue to product we progress had But channel as And so the to not level were expected it's did it what got sell doing to dealers seeing to make retailers gets actions job, great the lot on quarter going gaps has very our the feedback the the from we're talk that working have with. as field they're see to work product as how think we're the of would again to we we through as pleased the the to through we that the don't to we're retail which on we're way and the we we work product like that still forward this and still and not seeing that around in that but of that's having is is of on worked guys we we have product we're we've said into been performance I had a I side bear spectacular. how manage got performing go and to when again a of have much and as that the kind in we some adjustments that's selling great through channel. we a of those channel fabulous some the we've going are some costs mean take

So QX accordingly. see when we is got act it needed to seeing towards quarter we of as end decided a something we to that the we that's stronger and and much weren't expected really where

David Strauss

breakeven significant a result given just that so business business we're thinking that the Caltech kind and gets try Caltech next Okay. this it terms forward trying vehicle model to just is right and of should volatility? And vehicle us it in to kind the next we frame about the year is side QX, help profitability fourth how in is I'm then model going level Caltech forward on Industrial breakeven of is of high-single-digit seeing, year business, margin implies then going of help quarter business making still given or holds and to how within the that to that us loss number is the is think which about profitable

Scott Donnelly

business to expect. want is mean certainly of typically we much Well, do we how look don't know high-single-digit Caltech I what see your I what modeling the I margin and as characterization certainly but

the certainly breakeven, business lot channel a as quarter, that we're we the for the I accounting these are we QX. that a I For managing the expect that think healthier than better in terms into be of go we of vehicle of see will year costs balance clearly the to things are so

We is see TSV. as its on actions we're normal and basis will improvements which the performance at see will we stronger cyclical CapEx of of taking a result some a

David Strauss

just on it’s fourth tax that full-year Okay. you the if full-year, quarter? And rate Frank the just one you adjusted fourth for tax I assume XX expect rate said that, last from think or quarter you and is can I us what that's a tell tax then is me and a

Frank Connor

adjusted and math so fourth kind the for that's Well, a of so it's quarter. on suggest an I derive around XX% could for that adjusted the of full-year you kind as that’s rate quarter, XX% the -- as just basis, of would think fourth the the

David Strauss

Hi and clarification, I appreciate the thanks.

Operator

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

Sam Pearlstein

quantification is to and do costs, one-time Frank, this way or quarter Biz next when that's tell trying to us is Industrial was at there of Scott there just now think the sort segment just impairment test, of part impairment any look what's the one-time ongoing? to or to any an about of there

Scott Donnelly

I one-time, where what and as anticipated things Sam, inventory look nature mean and and we the around I special when is to make accrue adjustments at like some right the we we that, to it where but wouldn't of characterize we that reserve not had are discounting is. charge programs this given

would nature. than but of probably or an expect some that something it's quarter like there's something impairment we in the goodwill an in that So not or intangible more it's

Sam Pearlstein

like terms in all then have anything is the looks And $XX done about was of else divestiture CapEx million, CapEx? you that or the it Okay. reduced

Scott Donnelly

It's about half and half, Sam.

was the of things that CapEx we about -- that with tooling that just but year. of just this is associated able not need are is we don't half second having half to and half another tests to about So that tools and do that

So a split. it's

Operator

the America. do Bank we a Epstein from question Please ahead. And with Ron go have line of of

Kristine Liwag

much in a after this operational guys, better even ago Hi, a a few -- automation wouldn't versus the how line Latitude so expected it's automation and clear in to how for calling Liwag the Longitude morning actual better of as flow Longitude latitude years and expect mentioned it’s for a bottom-line? your you've few a Ron. could Latitude for in the be more that for of good to you much from order Kristine terms just how invested dilutive firm essentially weeks there's efficiency is Scott and Wichita order you production visiting Longitude that this lines, expectation efficiency lot pricing the better margin as

Scott Donnelly

the I we cost position, the the I So Longitude are standpoint lot cost mean track. both have what very feel about about its be when had I good so the sure the in automation, the I of you and talk from we we've felt side, to on playing very our think but that we making operation of the things on around both those expect Wichita always and fixturing that would is effective in tooling think investment early that Latitude made and were are where it. production I guys you Longitude, we're Latitude as guess out are around are the productive on production about that good Longitude days clearly the a cost saw and able we seeing obviously far and when and

fair around mean say guys it I we negotiation that never around do this through good well. we have issue versus that deal, as NetJets know don't the it’s was be business. deal I low deal So will a price in well Latitude the to what dilution we I we Longitude in the of on around set for deal that think fact difference it's deal that. deal we on a Longitude our will they'll it’s that terms gone is the will our to should a too it, on went expectations the just Latitude margin a sat is be the down and targets I locked -- on and very us understand the be we biggest be on low, The a cost and know for able quite how when process largely

a definitely was fair it agreement. So

Kristine Liwag

the program non-NetJets at And and up incremental on you on get down customers going how about margins Longitude, curve as presumably orders go you learning the better a the more program should from operating Great. following we for think forward? pricing,

Scott Donnelly

rest so that it programs. say to expect I clearly expect is to it starts as let's as sell, to We comes we typical, XX-plus-percent have of going think into Longitude leverage and our the production jet be

Operator

And the Poponak line we do Goldman have Please Sachs. Noah of a question with ahead. from go

Noah Poponak

moved different latest to sorry versions since and medium-term have Frank, but it's the of digesting rate thinking Bill, XXXX beyond people your a of sustainable tax question of around kind had kind rate? on just another lot what's the ask

Frank Connor

of it's low Yes, kind or XXs number. type so

Noah Poponak

was, didn’t the been market Got the and like you're much of sort if secondary of of I when but it it and all true it. in used to version everyone depreciation would just tipping in kind that I tipping jet the attractive that the were if already days manufacturers used other it buy going translation maybe into your jet I to just the more is positive business? run some going to just so where sort help of at of color the the brokerage talking that's this there one applicable inventory the or to already the wondering market two is particularly in but not, new, was spoke know watching something, new there being something lot more to spend than have when we it. little as year I about put Scott, of if new, be, out the around it market it the OEMs of in a the Business what's that those health point bullish. know like asked it could are other full kind more community hand business is out of used NBAA back or is an I use versus overall to wondering you making And slightly used brokers I'm talk just versus made and guess item to more sort used camp and over are and you don't of just that of more the tips new positive incrementally those was to you're point now market on a specifically you eventually things your was attractive

Frank Connor

of guys demarcation time the market not good But the sell mean that's of is to market reason for are new where our there for line love any of by are world so to pretty asset that, be very stretch so the I'm you I it's reason for good think somebody you providing it's I hey OEM, sell that in I to jet. source a would, your says second-hand better I for guys imagination, the it bullish. not jet, in be about the little better they How you’re about OEMs. the happen is going my older for pretty jet, no is upgrade can the new much, having brokers going bullishness that bullish is right, buy from provide and is that mean. -- time commission negative who are. that have every time we are broker are before if don't transaction that going because us liquidity jet, to buy a is much they market they on for a new second still that short, right, to get time bullish I I to you it the invest to hand there's mean know is but out the are now I there I there liquidity, to think the the right they is

where the was mean new the sort I new period had of airplanes so went because XXXX buy after there in that there used back market So [indiscernible] a is many okay airplane that airplane it out for I problem market. virtually think the that you XXXX, obviously newer was you versus XXXX, OEMs in was for a new

out situation quite here mean not to there's way just the behind we're are think us. us very in new I and to turns good it's activity inventory contrary, sales for such market, this have that hand low absolutely of competing healthy stuff right is level not days there, a -- I for on and us, second mean quick there's I it's the So those

Noah Poponak

secondary and because a airplane, now the a cited trade-in for? could had inventory matter that in of if residual increases the you're of from used improvements watching of back, someone a that bigger into few who guys pressure buy past perspective market in the something or is for You it less perspective you market the is the issue on trade-in value wanted strongly that move positive from residual your values value new more but more more volume to excess get is value in created had out a pressure then a price that the that that quarters

Frank Connor

when look of then I of mean long customer DREP normal XXXX, this unhealthy of time. frankly. of There through than down lot drive saw that is was I it better was for drop we of these mean Well, dropping the into us in aircraft just think of values an a transactions XXXX, value going that's a that that went residual flattened the or because any even such obviously into but a but a in the beneficial in terribly I largely sort absence sort period illiquid cycle, improvements dramatically value residual a to right saw more down price XXXX dramatic numbers the schedule we just market, depreciation you timeframe a reductions because

obviously that's the So industry. I trade think that's residual beneficial to that. off better because is we're come someone for looking as that beyond But make who incrementally value

Noah Poponak

kind bread. earlier Last airplane kind maybe a an cabin long like in time -- using what of could give it maybe on what us how butter, CJ and today year? to versus it, lead in one XX you update just the get was

Frank Connor

if getting time it. for, I a a look serious but hard take would about have to one I’m are you willing

Noah Poponak

CJ or it year get is than CJ more I mean X to a point? at a this X

Frank Connor

No, no, no. no,

Noah Poponak

XXXX? meant You time hard in

Frank Connor

Yes.

Noah Poponak

of Okay. What half about XXXX? first the

Frank Connor

Would go, I mean

Scott Donnelly

delivery it. of No

Frank Connor

it, into much as I Did too think. look

Noah Poponak

you of provided that consistently sort thought had number? I Okay. guys

Frank Connor

we think on No, I that. don’t focused

looking think that three are if six market that out or or are look that thing So model this this be. to think for place at months, there I I a you healthy year is

a ideal they I want something up months, right aircraft more Someone Most where year, healthy, trade is mean think at think and and to this and do match I be to to try wait for to three can’t I looking making a want for thing to we like don’t to I’m that's people year an six a right. number don't but. you'd get

Noah Poponak

in production year next So then? you are

Frank Connor

to We couple sure. are a raise of models, probably going

Noah Poponak

that's that's, so right, helpful much. color. Thanks really All Okay.

Scott Donnelly

our Brad, today. prepared Okay, for concludes that remarks

Operator

A.M. will replay through of be and today conference January gentlemen, today's XX available ladies XX And for XXXX. after

and Replay AT&T You Executive code by dial and (XXX) XXXXXX. Executive (XXX) access your for are International System the may Service. for (XXX) XXX-XXXX. today. anytime XXX-XXXX entering Teleconference XXX-XXXX the does participants Thank conference XXX-XXXX (XXX) using dialing Teleconference access X numbers participation those That the may and for your again you conclude X AT&T

may You now disconnect.

Textron (TXT) 18 Oct 182018 Q3 Earnings call transcript