TXT - Earnings call transcript Q2 2019

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Textron Second Quarter Earnings Call. And at this time, all participants are in a listen only mode. Later, we will conduct a question-and-answer session [Operator Instructions]. And as a reminder, today's conference is being recorded.

I will now turn the call over to Vice President, Investor Relations, Eric Salander. sir. ahead, go Please

Eric Salander

good and morning, Kevin, everyone. Thanks,

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

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

site. the Our earnings Investor in call our of found presentation Relations Web can section be

billion, down revenues million the in were $X.X Textron's year's last quarter. $XXX second quarter from

net share, quarter. While second cash up $X.XX per $XXX totaled income pension $XXX to year's before last Manufacturing year. from million was $X.XX in compared million per share flow contributions last

I turn With over that, to will call the Scott.

Scott Donnelly

a higher across Industrial. by execution continue company. basis as for Thanks, military Aviation revenues Eric, programs. see lower solid to we up due margin continue and quarter, volume businesses, Bell quarter to our across the production down on strong lower good we as and operational Segment our improvements profit transition At our as we in XXX was was military on Textron largely points morning, focus to QX the driven margins everybody. quantities at were

continued in Corporation On and deliveries year. to the the expect the from series. This a second future. we of order into between quarter, National the been XXXepx, under Police we utility of upgrade order Bell the well commercial and XXX the Bell for support strong XXX helicopters, deliveries quarter, we the the Defense activity helicopter rates. in XX In XX half new co-developed first Despite program Ministry program year, placed down Agency program commercial has side, the delivered Japan's last newest this the for in lower and Subaru the aircraft increased see by Japan's supported the expect ramp production the to of

testing and Valor demonstration with the Vertical we Lift, flight V-XXX. our activities Future Within continue of

have roll proving Army handling level demonstrated agility, highest qualities in maneuverability mission. pitch, yaw. now the and represents critical for Army the successfully We to is standards one This which the aircraft's performance

Army's We're program. into long-range include recent days end Army's actions the the an the estimated XX or aircraft schedule development to the that identification path insight assault encouraged contractors approach, And actions manufacturing through of potential mechanism months acceleration transaction These occurred future at be should engineering industry of of tier procurement propose alternate month also by the to gain other a be authority OTA allow following program potential to this more in the awarded an date award award. middle acquisition acquisition February. regarding

which flight capabilities competitive in Attack the was Army by next far Also the Aircraft rotor program is our Future defense validated within well through five that recognized offering, innovative an FVL, among Reconnaissance US utilize of mission. will contractors Bell our for the pleased the selected Army control to advanced the phase We're program. suited progress technology aircraft to down and XXX fly-by-wire create Bell

largely Unmanned down, at due were to revenues volume Simulation Training and systems, At Systems. lower TRU

TRU our quarter, FlightSafety Training Aviation Textron second formed a the called International, During new FlightSafety company with Training. business

XX% product which company, formed owned Textron training Textron aviation broad is aircraft. through services by Newly of provides Aviation's line general

for training Textron of contract Navy, the services through resources Solutions high-quality aircraft. while fee captured product our of We quarter our ensuring the these the increasing Subsidiary, further Also new and customers, received the available and for systems, of current businesses program. and extending programs, to unmanned new efficiency $XX strengths expect our the its will combination $XX subsonic ATAC quarter Airborne the a Within in service announces million over high and to provide the Aerosonde aircraft Textron one-year, XXXX. services of to training our the line enhance Aviation extension wins modification million US in contract supersonic

line revenues In Tools from Vehicles, favorable Industrial, year's were product the year. to third that cost last the the realignment reflecting lower, fourth in of Moving continued in Specialized and primarily the disposition we quarter the saw impact quarter. manufacturing actions performance Test we and initiated last of resulting reduction of

channel. Bass continue stores, dealers momentum the in well we're in new seeing Pro and independent as quarter, Also we Tracker this our Cabela as Marine on-boarding retail build and

from ground Airlines and Safeaero equipment our contraction worldwide. to United their across Douglas both operations business Our American TUG, support service received for and multiyear our brands

due the quarter, down, XX Aviation, commercial jets, year's product last to our down XX XX from delivered turboprop Moving largely quarter. XX was last commercial and second Textron and turboprops defense year we to on volume lower down In revenue lines. from

markets. seen May, we about have further which our improved the Mexico tariff domestic in resolve, late we've growth, lower diminished and order we to around activity and concerns economic lines, outlook. towards cuts, largely product Beginning indicators cause bias customer tariffs foreign attributable uncertainties the experienced economic fed Since across these rate uncertainties a disruptions then, as in believe our stronger have largely interest and issue both which

half view into third revenue growth to of Aviation. the throughout order and Our we ramp going deliveries the the expect positive, in year, remains quarter and second driving

a on has the deliveries certification anticipated, continues documentation FAA the longitude, been the of in originally certification to quarter. third much expect to test review make efforts, continue than progress type good and the aircraft while larger and flow we with we this Moving

decision proven on that engine in program of and performance the the determine the market, the yet landscape hold. we have would engine that state performance at demonstrated competitive Any not Hemisphere, required a has future depend design the on aircraft the with for revisit the put Continuing we to time. the program and

Denali this complete the in to where later Our engineering flights remains we expect and on focus to programs certification Longitude, addition the first year. SkyCourier of

service, from half higher as deliveries at Aviation commercial we feel our into the businesses about increased growth as driven In for at Bell. well well and revenue to deliveries continue positioned by summary, good across execution Longitude entry we're second

We expect drive the generation to and balance these cash year. of throughout strong earnings developments the

Frank. the With over that, I will turn to call

Frank Connor

the Good quarter Segment everyone. XX.X%, from quarter $XXX XXXX. profit million basis ago. in down $X morning, Scott. the up a million, of year of margin you, XXX Thank profit With points second segment from was

Textron down the turboprop year. XX second year how jets, billion segments starting each Textron $XXX Aviation. delivered review $X.X lower down volume million to Let's last commercial primarily and from with and Textron down of XX were year's due from of commercial turboprops and XX contributed, Revenues from at last XX defense last mix. Aviation Aviation quarter,

and quarter, at last of volume. the year. $XXX billion. a Revenues military up TRU Unmanned the was Training offset Segment of performance Textron backlog $XXX $X the as from from at at were of XX $X end delivered XX commercial profit quarter favorable of down from the lower primarily down was at volume were Bell end Systems. lower was million in primarily primarily helicopters Systems to X% the million lower quarter Simulation Segment was year million was ago, lower second second volume. in second the $XXX down down $XXX and Bell year, $XXX by reflecting mix. volume quarter, from on backlog last Revenues $X.X military last million the million Aviation million, and Bell profit year, due million, at Textron $XX billion.

$XX impact gain from million performance, $XX an training to year's last second related million quarter, business was due of profit primarily up from Segment the our reflecting with Flightsafety $X formation International. an new million

operating business. from Moving will of the new forward, portion training the we our profit continue to record

Vehicles largely the related of from end $X the at $X.X largely our to line down Industrial the and disposition partially quarter and second impact of backlog the performance, disposition Test lower line. the product primarily Systems XXXX, offset related to $X product line by Segment due billion. and product impact from of revenues profit Textron from $XXX quarter decreased the the was to favorable volume. million, of was lower volume, second Tools billion million the Specialized

year's were million from up Finance quarter. profit was $X revenues segment million $X second down last and

$XX below expenses interest million Moving profit, was $XX corporate expense segment were million. and

overall million $XXX cash We Through shareholders. of X cost at the returning repurchased million the in we've million. first also X.X year million shares, months six $XXX repurchased an of to shares

are operations to $X.XX up to share, range $X.XX up prior outlook with raising we continuing earnings from of expected per full-year To a share per our $X.XX . our from guidance, wrap

manufacturing We are of before reiterating pension $XXX our the of outlook group contributions million. $XXX operations million to for cash from flow continuing

That concludes our prepared remarks.

So, Kevin, we questions. line for can the open

Operator

Instructions] [Operator First Please is you David Thank the go of Barclays. line ahead. Strauss. question from

David Strauss

gain just us tell Good first the for much side on how JV? clarification, the morning. the was training systems can I you guess,

Frank Connor

$XX Dave. It million, was

David Strauss

on to Stimulator And the XXX you business. with training then, up, Scott, MAX? your given about ability ramp of for maybe there? How the What's going potential the potential what's talk needs MAX many on you've that back built could your

Scott Donnelly

lot Boeing and obviously, can't I of since whole on detail several MAX customers. we've give So Dave, XXX I you it. MAX been a delivering mean,

point like on. the I a to recommendations to would of around going airlines lot flying looks out need and all us FAA SIM of on a requirements transition that be later will mandate MaxSim training. It how at then the to those put in training course them or on depend terms actual they plays and and back this probably get requirement the in it's also allows think that that for

ahead inquiries interested a from going MaxSims we've are of So certainly and had number quite order. getting customers on who in

long some for lead year, to deliveries yet. but up give support do ordering next number you started already We I firmed a to those couldn't

as think kind Boeing see strategy in to what on basis FAA forward also up of and that end really the still terms well. working training wait a and, are. their understand on mandates their go we I But I think, to have we're where of with working

Operator

Melius ahead. the line go Research. Carter question is of next our And Copeland, Please from

Carter Copeland

for efforts? more and rapidly as what rationale trying Scott, about there? rationale more on up trying growth I FlightSafety the and a set and that of here you expand scale tell profit applications that? kind the trading what of the been you expectation -- that to bit then expand to -- wondered are to been the have some there? are you've made result you're detail How change get your that's with you a does of that trying should could just the create little to much with on those organically And much just the kind for accomplish with this some us what give us try to Just what company if you

Scott Donnelly

Sure, Carter.

a from into of interested training customers in we business had as in of that us lot to a was our know, and weren't service of felt that ago, element business several sort we you We participate decided years be So, that. space. feedback in that would aftermarket we very the important part get they really participating of that

last customer the a over The we And so, know, build CapEx is of both R&D, in well and out fairly made that bit small Obviously, years, IRAD very you feedback. training we've as well, to couple great few invested as going capability. start a acquisitions. as business to fair

I and going take to would the to think out techniques the quite take training number we some how and period of a training was of do working. materials deploying were The that were to of time of fairly time challenge centers it number frame daunting was long task that, build was the that. that locations, the and

training engage We had we in many the Flightsafety, happen in whom side. years, relationship discussions to with obviously, for

basically and expand positive were rapidly. business feedback that's together the take and so, businesses that in allowing ought we lot from of Tools are we the let's take joint do together, the link developed venture, to And the much capability a getting think what and us of and what the advantages it a more that organically look, put to is, and customers and we these technology we

worlds. So think taking time this much returns of a quickly and the ability what in in now best for has that The customers and world, organically the of it the touch has the would us, the sort invest more we we significant footprint could whole accelerate combination I Flightsafety that the customers around frame. more to for of so

of terms this more have much shorter center the Flightsafety than already more putting us there. training center by out was going doing and training It capital and out there in just capital

So, in as having we function of in the joint that a assets invested venture. business said, and put those gain the is having

very You look obviously, sort of a those and, business. reevaluating created at got assets we valuable to

good thing. And so a that's

forward. grow as And I which earnings what see of share than earnings forward going we we that just result a a to path. those think stayed come we joint our go importantly, of on the more you'll will systems venture, we see is faster through going pure is as much organic had,

Carter Copeland

XX% how be as around or the that more Just you just you or terms, or can in what growth color expectation a -- is help much you've general any result? your expect do to accelerated XX what how

Scott Donnelly

I terms level I'd return. break that this rate don't out we significantly But Well, it's numbers of a played detail, and don't out on basis. say, if of the had would Carter. have we -- of the What we faster in purely organic had

difference ground, than the to that already that technology becomes a build a leveraging CapEx what of on the play. had infrastructure say, Let's play versus up capital having Flightsafety more

Operator

from Our next the Jefferies. go question is of ahead. Kahyaoglu, line Sheila Please

Sheila Kahyaoglu

Scott, just big picture the in a down sales your question, were organically XX% quarter.

decision to gain in levers kind by Hemisphere relatively think about markets. the share You've given of here, so been focused How the on tough new do well? fleet on products as just from your end you

Scott Donnelly

Sheila. Sure,

half we impacts first change second we make till out year side, that our up decision that seeing demand here when Bell That in really big were time the I coming you for that from you is think off that the year, half one commercial. time line. of need And longer commercial takes the the bit you will we last quarter talked the on -- in the to are the rates that the the aircraft the plays to have for demand. little how production indicated us around strong turn a meet the

So we the about off increase on production aircraft XXXs. available line those the didn't We have rates aircraft the XXX when and until now. coming right the like

now. fourth a quarter. and at getting is of higher demand been the and the rate delivering see the we'll are there, we up matter orders The on there, think third are it's impact I the that's increases in So and a production significant a where

production to here the and So terms by that the fourth needed benefits in in demand orders of meet we They third just have, supported the you'll side. we the see that are quarter. of already

our On the into obviously, That story be we growth side, Aviation clearly the that getting of Aviation on impact half Longitude was second for a and will service. expect the huge part year, here.

good on is a aircraft. think to I whole demand Latitudes the -- across continue, very frankly, see Longitude sell the demand we side to historical very We strongly, portfolio. good, again continue

a strong had very we quarter. Clearly, first

want to settle things the I'm good, the would And little wait shaken for second For a defer end. right get second but half. customers the who quarter, to say, there we look, in mostly pretty felt did up -- toward going I bit and to they're this markets out,

So still think market at the our I view jet business is very healthy.

the growth half. And strong so coming I service, Longitude see think into will between second the that in and we

Sheila Kahyaoglu

do then, Thank It's steep usage the think a reversing and on inventory. potential you. And primarily in How I been due one half, that think first in any for you you risks to about Frank, it? working capital.

Frank Connor

by bulk off kind Longitude Bell the the second kind that of half, with kind it's the second that Scott said half impacted inventory Scott build as Sheila, indicated. that to but year, growth into certainly Commercial Yeah. Aviation. other also and the obviously, that we of, volume sell in expect of It's at the of of liquidate and is that moving

year We of have second looking good are to where feel come the to that. half and we're in through positioned about do the

Operator

question is ahead. of line the Please Arment, Next from Peter go Baird.

Peter Arment

vehicles. specialized little I Industrial terms Scott, could us things the are segment, particularly, a more within guess, you just in how of color going give on

were better some expecting. Format kind there. to going? the seem think of a What's Pro maybe be is Just of I color Bass lot than a little how rollout us --

Scott Donnelly

No, couple there, there's Peter. things a of

and standpoint, support for and strong time like from we've obviously, performance that. good Historical an where and business a position better. much long the ground all, doing in equipment areas a had performance of is First golf very businesses operational

performance Our guys the we're markets healthy, very is right? in it quite execution well, teams doing that's where be, the is operational again, should sales the are back off-road strong in revenue, down are and conscious, world, quite

terms at American only much job better we guys, that We're hard program. which out snow the example, good to When Snow North as do a of vast a very pre-sell. our manage year the the working this the is we said, is took market sure went look world, market, that those we of to we how majority you in retail in the going position we very, channels. we're make obviously with

sold. so And what only already were build guys we've going to

around have So line we customers, went and deposits this from product is out. sold basically

we'll putting sold it's that that. where those through. just not so do unlike be inventory in on getting we'll lot if the going not field quarter we're said, and into to how and We And into out here third but years whole dependent through through, shipping rebating them of be all a out, and manufacturing previous selling then the units

a was we're across very were successful going So presale saw frankly and pre-sold. the to a do demand We only program. strong line, product but that very

dirt manage on to be little and on of is being bit profitable relationship side, how the awful did hard for different allowed individual season and a as dealers us channel, that the relationships that cautious that channel, and we again, at we how work we're lot sort relationship we dealer. out So very that of very, through about there. we a making longer have selling obviously, looking inventory much But go a where you that's of both sure into a

time we've it's result, number when Because relationship. and reduced back you not them deals through profitable get a rebating, that we of went dramatically at some had the looked And as a we the there. the of out by

the relationships majority And folks. of so, we've taken the those terminating pains vast of with

it I very, would Tracker Cabela independent is well of inventory. say, obviously, Bass dealers delivered Marine their and terms in channel, the Pro, on what run, around Specifically does extraordinarily the terrific front,

the forward. is they manage business manage So going in we consistent how quite how want with to terms of

across year. activity the load-ins stores here that the building. continue lot been trajectory, and is will dealers like and seeing through over momentum last the we've six months, balance the a So the independent both We obviously of of

So much it both Peter, I happier terms -- think some every when channels. you those we're operates managing day, how how of its business year-over-year, thinks is, in with where look that about it of

the last some we of year would of new late issues products. be Some the had with

and we those a that sure the make and lineup. great be to to how think a and market out about products risk I there much profitable channels have manage Obviously, inventory that's we we product -- business. have a did We be have the just how measured we reduce very allow good to get

Peter Arment

on. that. one a change a Appreciate pricing, you just you given any little bit end saw in And quick business price is just Scott, that in in May or did market holding? see still the jet softness

Scott Donnelly

Peter, holding. No, pricing we're still seeing

or behind there's think You got two great we chase to us there those, and not a crazy choose great service a for participate no reason So make right? it to a in crazy it's know, always deal there. network fairly is and I here product, and deal priced, we a price

So will industry. than we as we've that the the along, we're said rather trade And in all damaging discipline. price maintaining volume

that's is continue bit, and we're up think the should do. I a business little to in right? is we here pricing and think which the like -- hold price see I line the had to the for So inflation And place healthy net a what need quarter, that's you'll of we be, where to in going it

Operator

Thank you.

Research. George line the Shapiro of ahead. go of Please from is Shapiro question Next

George Shapiro

book-to-bill And the the was less one. the than obviously, quarter implied pretty weak. Scott, were orders in

from it in that here, over you quarter picking see to recovering expect one is up in quarter? Given third the book-to-bill the third things the second back quarter natural

Scott Donnelly

that's would coming strong I where We're Well, very was first the our a the the through the on backlog above it George, clearly, net front. case. first hope numbers still year. quarter into half, have that had mean, I book-to-bill we

we're I by not think overly this. So concerned

were, of June, we've with U.S. with continue around like As of things customers, I in the I pushed customers. had discussions in the in half said, the particularly some dialogs things and did given think gyrations and market those the slow that and that. talks into things down most some But would second the tariffs

-- we're a respect. that in So I place good pretty still think pretty in good with a

on as starts. market. kind where in George, seen lumpy. that's it this of We've were in the goes We fits know, light international the and turboprops, little before particularly And you a bit

through the It But be good So that's harder the see market the plays it affects of would turboprops the continue certainly my to does it expectations we'll out. year. side little predict. but business, more how to see a that, than generally we balance bit flow jet would of the order

George Shapiro

you, compare for does aftermarket, year? one that Aviation Frank, to And just how last

Frank Connor

kind fine, be a continues solid for it touch, down just It but was of us. to was

George Shapiro

a on color And down as opposed that? up the reason little it's a any touch to bit,

Frank Connor

shops or we've are of to second there. No, at a about seen kind be in in to nothing from good strong it. the significant of we time some continue how volume And kind variation time feel we're half solid performance where executing looking

Operator

And Vertical Stallard, have Research. next Robert we Please go ahead.

Robert Stallard

on have of comment Scott, launched side couple market your I so forward? impact share, going if And was far could things, wondering you products your could new on of some competitors this this BizJet the whether year. a

Scott Donnelly

Robert, nobody, our in warehouse. year, announced you Praetor. I look obviously mean the I the in mean, at earlier if Really right --

from against and, have on up I Longitude. think product competitor largely the obviously, that's those particular Latitude that lines been

are products is a our look, I see good continue on and in demand we strong to think position. And performers outstanding Latitude very think I front. Longitude the

the wouldn't to of and think in I a cert activity to just for done. more that certification. I many through get be of lot process I customers expect plenty are is the whom see waiting to there are mean,

think a from fabulous flies we from that get continue feedback demo, that I everybody performance So, aircraft. to standpoint,

to a stack marketplace, we I continue So think with been -- and but think it I be competitive we're up quite it's competitive think a well I it's always one marketplace, will that.

it, I we our pretty got transaction where share winning So good think and nature about to competitive fair we're but has every stand. feel

Robert Stallard

And then maybe one for Frank.

the see EPS divisional up the any to halfway year on if You by the split changes as your I only you full year? comment guidance the for at point wondering $X.XX. whether you being could changed of was

Frank Connor

say Bell this I'd No, intact. we've obviously, far it's seen performance good largely out so year. that, of

of Bell, of is $X.XX And there. So in kind a systems that probably of through then, the our of bit in original nice a that upside some executing guidance continuing well first done reflected performance on little job solid has kind to the half. kind give margin as kind of

kind of that places are the better So, performance -- $X.XX. contributing those we're where two seeing to the are some

Operator

Cai question is Please line Cowen of Next go from Rumohr, Company. the ahead. von and

Cai von Rumohr

Yes. Thanks so much.

Bell mentioned quarter much still doing you can the favorable year, and yes, well, it reflected two of we particularly into how kind or of So, we strong are EACs at as profit second better? go be in the XX multiyear ZXX XX next looking to on

Scott Donnelly

-- Well, last performance some I'd that certainly we always have It's process our year. we in quarter mean, and than less there. always there Cai, say EAC was I it every is

and from Right? two at So certainly then we've three lot the multiyear revenues keep revenues margin. kind have the multiyear of you sort a the kind is two we of a place comparable up and a been performance largely played of through. and and down winding I lower that talked ramping of again, reserves multiyear about that this. mean, around And

There always associated I be and expect But how performance year-over-year and to to or I EACs say, executes there the the the an would be there. drive to down, well. that'll we continue that mean, there puts on there is I through are continue improvement always and but takes. always strong performing, productivity EAC. they're anyway, I go and some the we quite basis, each team along we So gain lines time still is performance. try But recognize a would of that think we

in solid operating continue profit think the reflecting it the that. whole though lower EAC we're numbers So might see I gains even across we'll be and business quarter, to

that, perspective, overdriving out Next very worked of that's big There's cape range. sort been R&D, time we we've year well a to transitioning that of that way set large of know, will my on those part share business OTA into They will XX has run, wouldn't to part continue What had some I guide and been a and one of those. that as cape here XX been a Bell. XX% XX% two. XXX our cost there bit we sit three certainly multiyear change for would through a on, as I say, these you associated has going that's look, in fair be programs to set we and have with V-XXX that.

R&D Our high stay support think we to spending really needs level Bell. the pretty some at are for of a opportunities what significant future to

that think it. about still range think you I how is all XX to So XX

Cai von Rumohr

so in first maybe Thank some net narrowed you very was. price Aviation you're increase much. And then, It -- quarter. Frank, on us give numbers where bit at the a the

should we target slightly looking And to So or it also, fully the does be second? that have delivery where was Longitude, this a at you -- it given in year year? yet smaller certify the is number intact full your

Frank Connor

Yeah.

the quarter price So price on and gross net $X was million was Cai, million. our side, the $XX price for

to meet that. for that we in commitments no, feel deliver adjusted And kind front. have continued And, we're right I number a the continue performance anyway. good we of certification in place the we to on once Longitude be on So kind positioned we we, and of to achieved obviously, that haven't that the mean, Aviation

Operator

Our the Seifman, Seth question Please JPMorgan. go line from is ahead. of next

Seth Seifman

morning. very and much, good Thanks

big but on for pretty of that half there year. I projection deliveries, this for segment It the bigger would half about can given why -- follow-up usually understand for bigger seasonally second bigger time. even Longitude second be and think implies the is a a and the the guess Just Aviation, of I we is kind anyway, $XXX the second million earnings you've given half

of all temporary I to of so, Aviation that of third you you or extent in the orders have the in do in a in to the significant mean, kind Longitude. already of quarter, does quarter. issues mean, quarter with of weeks And demand mentioned interest there or can I that it in some earnings the us come quarter terms the through, around during fourth softness increase start the come you And the macro walk first for you third of here? expect the any that seen those indications couple in back was

Scott Donnelly

would by driven load, their Well. know, to has is I year. a by don't say I usually end this Seth, that of a business that. a that as of get change the our is aircraft progression in done deliveries I see folks tax, you wanted any back-end that lot the mean,

to that, little that accentuated normally than I to expect have just see. see, in would more coming we the be we it's service. Longitude because a the to progression think we Arguably, going

half So, of there pickup with in the more back that. be associated will a yes,

In order think, terms things the flow, normal. again, appear be to of just normal I

customers aside to wait were and June take kind as them delivery We shaken I the everything just of of more happens are actually in -- about got little in the second want late-May, quarter. that activity. think this timeframe and look, all to put into going But sort second this half did a see of what up after said a see had and to

are hard our So again, ongoing. teams, dialogs it's from sales -- to those

that around fourth most quarter back so aircraft next turn that of come third, be the would and that fact, that deliveries deals. would we into out And in expect are in this year. I summer And will see

Seth Seifman

the not Longitude, that are on think, a Right. profitable. marginally then profitable units of And handful I it's just initial -- the either or given probably

QX contribute is or earnings to basis Longitude the from all QX we're that going see platform? non-Longitude earnings for basically that in possible to on so, is it And to

Scott Donnelly

be dilutive. margin at be quarter the margin. know, no initial as be contribution, they are would lower from rate, Well, third is There but question deliveries a in a will the certainly some there you going typically to

said, think being strong performance the the here seen first very I of performance, in the half. So, business now that you've

light profitability So is relative has than revenue on our stronger been.

offsetting strong is it's against So what very performance.

still to it's basis, at going but on So Longitude you be be margins, would will -- be it respectable just dilutive. a stand-alone if certainly looked it

Operator

go question Alembic Please line next from Skibitski Pete is the ahead. of Global. of Our

Peter Skibitski

headwinds systems here when to in going basis you -- maybe expecting return there? of just the that us can you too LRP the Scott, shore initial in update of right second the one ship kind contract think I on to you're terms Is now. that that to tough comes update or us UAV Can that still that on is growth half. through

Scott Donnelly

that I first the milestone. craft definitely is -- moving builders that well, trials, Well, shore Pete, ship all, a in to was So, first of huge along think is

So moving next in process, aircraft this along we're we're halfway through of to first units for The lead is that. there. funding get the about developmental delivery are well quarter. are actually of expecting that rest of aircraft do that fiscal initial three that production, continue the We long here years lot behind

four in that We would in the expect contract. the latest, I get of we third are quarter quarter, under here or negotiation that would process. obviously,

where revenue, up this those So largely year that assembly initial have -- amount welding a really you impact XXXX revenue We is we'll generate the the some of story. ramp of will do and going first lead or with the it initial of see will associated starts but see on that to it the long be craft, materials. activity as but

perspective, in that transition driven of from clearly part program the XXXX, production large you'll of program. our the development see here is So, in by ship to XXXX sort growth from shore bottoming and in Systems to

Peter Skibitski

haven't on. doing of follow-up, in Can bid right of opportunity asked I it's program Marine making you you that just guys about on They're one strategy. you ask comfortable of interesting kind with the an acquisition I now, Corps they kind the doing of are this to it a program. Scott? Are some MUX a things that or lot for I things, they're tougher while think,

thoughts? Just your

Scott Donnelly

think Marine well is a very small that thing do. of to that everything there. done would the prices, that levels of done program. approach healthy doing concept ideas, MUX -- think work are the where how we've activity they and a best is which I have -- Marine these obviously, then we is Obviously, Corps And of on Corps, work lot soliciting I we of look, you've of just right think for aware The Well, in lot now. see the I a we've

smaller different going your industry say, Mission Systems sort projects of operations. and these We ideas hey, where have to concepts give around of some of participated in other and they're different us

in fact are So sort think mode. of a finding I they

into And to that done the in in next lot we couple we we this and of from a in -- need of help would you sort specifications, have at I think front to of largely couple turn program here program. we've put years that. like transition you them And final years. we funded information their most point, will of a over if will see of of into that the do Obviously, them then last in it hopefully work those of think feel Obviously, thing the development that advance I will, the solicitation formulate thing, of around participate that. ideas

what I solution think think. But it a the of will looking I couple over years, to ramp for. we next great they're have

Operator

And have Stanley. line of Morgan Please ahead. we Lalwani the of Rajeev go next

Rajeev Lalwani

on the the of question what a it How that engine and simply decision hold? overall Hemisphere. the seeing market just on talk First, was there? getting Can versus to much you're more in put about you signals you're

Scott Donnelly

last we've would It -- yet the with with aircraft NetJets I as for talked was we fit to required or area aircraft. feeling that area and prepared shared was niche in product performance go a challenge the be to And that a we that the year as the point. suitable there was, marketplace. one think was development purely great as engine comments, launch an price said point and about the really great point, customer only that for into hasn't our But was demonstrated the to that engine in performance performance so, the the obviously that had that the intended that engine, meet

meet certainly if can a of this we some we thing an our too to I I longer. it, sort whatever gone It's engine can't point would that mean, can't in demonstrated wait any we So uncertainty and customers has the time expect at think, -- that much in just it. revisit hold of kind or is just -- here future by

or we going product competitive customers for what's dynamic, time marketplace, still there, is there that whether going determine would it that on to what's potential not at out in later on So with sense have make what's to evaluate the and understand

just we look to meantime, take evaluate happy We'd those our clearly that, on normally we're is you drive our which that, certainly is getting and Longitude portfolio done, but here, that what getting need the which going that And of be things SkyCourier and within in focus to at mid at need know, and like updates looking Q. engineering resource kind the concepts always not term Denali other to in do. we into but are our near refreshes, opportunities to as growth and and things the

gone would program simply we're going Hemisphere of to programs. into into and portfolio current our So take just have deploy resource the engineering all that that that

Rajeev Lalwani

add thinking about going well Bell. and an of that you're enough other On are of the positioned what of sort to the start there, should sustain reconnaissance important assuming the program. I the on it? overall Bell business not like side, feel you today to military obviously, restructuring those or pretty the successful How future for we is you're long-range on do side there mean, things are there, have the of seeing

Scott Donnelly

look think if I side of the at Well, Bell. military you

pursuing. production a that 'XX FMS HX visibility in 'XX, are of out there There's on the number we're timeframe. We have out opportunities that good

some know, possibilities those that running there or opportunity increase take are I that lower some could multiyear other at to there. always with time certainly those time. they rate V-XX three. think Again were things already As over associated that you And closure. to FMS get there is

has course, base. a And large this very installed of become

platform, of future. expect there business which we associated will continue ton are is typical upgrades we large which defense of to a in see and this. There's with So enhancement service programs any the

and far business. V-XXX, talked from those be nice program growth V-XX opportunities course, the are and standpoint, MUX the the out around So the clearly tiltrotor healthy about, the some side, around going I think other in which is just and But just growth military a around a far what's opportunities Bell around of there drive we to on HX can sustain future.

several I programs. think we're well very positioned of those on

Will win But them not. are Probably these programs. are, all? large very these we

V-XX significant of ongoing sustaining of Bell programs. the one winning two so is those growth what drive on or And HX top the and of would for

Operator

go next question And ahead. of Jon from the of Citi. is line Raviv Please

Jon Raviv

morning. forward big And earnings margin those Can think with up. understand post two sales the bottoms level guess overall, you here pieces? ship connect in I but then more for just also that how 'XX, rates. Flightsafety you but ramping systems a going margin with us how about Good bit shore deal, growth to the going forward I moving the about set on dollars

Scott Donnelly

Yes, we've showed you.

margin, that see transitions drag fixed-price a on again, obviously, last business -- of been XX% should development year. around returned neighborhood to the associated a Systems XX% on we the that there track to think to production on a year, that targeting This have program. I should with bit ship We're expect a that but shore, be has business. business is into in a this we be margin

Jon Raviv

in Okay, back seems scared but especially it's through has of kind got May, kind really XXXX, going something of and just been period. some through it thanks. Aviation the gyrations, And other customers to then it June, market like even for that though

positive. sounded quite typically You

really May-June is but confidence this that's different what then this horse, back. about that a come you a customers. that's was look, the what I cutting beat for because going a thing So the slowing, economy And do mean the you think move. rates mean, nature dead of not I is good to probably Fed's gives

Scott Donnelly

-- the I you have over I look, concern this you when we mean, Well, market but had Again, think you your Right? combination happens some -- that look but a -- out. at -- this I point, flat people a to of in do problem just Mexico for gyrations, think, them. mean They tariffs. business a is couple I big that customers this and we lot was Mexico periodically. of had of

down Look, that uncertainty. some of were So to. talking created that lot of a people

is case. still The really came out down unemployment And I numbers actually forecasting. numbers numbers that would than indicate good. economy to the slow not are I most quite going The that's mean, dramatically. economists better GDP were actually were think the

steady? is where of the and are. market it I is think case a No. we of So, on that's fire? But more healthy

buy down and upgrading were say, go bit. new they settle when done. what I'm let in little didn't a hey, They interested are me that customers see happens -- aircraft, So -- things

of at timing So -- it. the and

gives month in come time customers they back get a of When are get happened but understand end more and last the you month quarter. first challenging the When it's because it's past of to they they for of move the table, little we the the the now comfortable that the quarter these one perturbations forward. of in kind of where and quarter, to

that jets, not the at just least if over were things but but -- is, number activities we were pipeline, that larger now deferred driven have quarter. had I happened, of think into those view right the our the in few think I So given that a probably would third

Operator

from Next the Robert Spingarn, go question is line ahead. Suisse. of Credit Please

Robert Spingarn

things. a couple of Just

there. year business, the On some that the first think this of forma to in in flat I'm the about I about the guiding, pro moving track half. pieces and divestiture you're seem wondering industrial for But

on product essentially distributors? I'm the HX Can -- second with flat can we're do that so expecting, Tracker HX how what you think Kautex. how against automotive some of weakness your channel other with example, macro is fill the asking. does be you For And given work the the half streamlining in that about

Scott Donnelly

world going you are to slowdown think I and the look down, side -- me QX, latter really comparisons because to the talk Let saw Clearly if the the of of volumes hit QX, that but QX at than be So, last easier you QX are automotive on most frankly year. first. part around in

well. are more is it on or thought it with I and operations how performing guys where But doubt, think basis So happy the business with is consistent is would and volume our no we mean, performance we're a lower but be. and less I there doing. margins

comps QX the QX QX, automotive saw in as said, I given the we are just than slowdown. certainly QX, easier what And and global

where well quite executing on end is team we comfortable the we're with are. market is. So, delivering Again, based and where that I think

be to opportunities in which good growth nominations and continue about future obviously as new are the and we So well. feel new programs

we and and very tell that's side, stocking they that Bass process the Pro that the process. about disciplined and off-road pleased there how inventory very very in On they way great feel business It's manage and -- you the very I'll model a and their We're a do and Tracker, Cabela the the works the healthy is and team partnership. it's that. going just how business. how way how comfortable with good a the going, It's with dealers manages

our of I the other particularly the guys, good about out just channel history brand -- around snow snow. talk piece little there, dealers deals bit have with in the We're a have of very very, we lot a side. a some that who long

extraordinarily And those Arctic carrying the brand channels. that very on disciplined same we being it complementary that because the dirt. that do we're and snowmobile dealers we'll that dealers historical side well, that way, with said are I As dirt manage they of how do are as we and Cat of that is by largely how guys are

northern that strong. Bass US where of of under independent strength Arctic to the very be of to And snowmobile where the and Canada the dealers exists. country be The the in the parts Marine the rest happens and channel brand tends their are country of Cabela's in Pro, that most Cat

I total, strong network. in very think us distribution a gives it So

Robert Spingarn

is second have find a optimistic get thing soft, it you you then is in do bigger first dirt similar and counts for factor Do to how to question especially And been helicopter, you back whether the that similar last ask one the as bounce commercial as a my How snow. I for quarter? HX. about optimistic fairly rig is when wanted in for -- or

Scott Donnelly

and I VIP, XXX really medical lot gas gas around workflow customs the those address and a is executive in what but is is about oil of and deepwater near front, what very border and a keep emergency rigs, of almost that much frankly part the here really that so market. couple -- in on really don't really stop for now in and oil Police where broader the market not in where That's of -- the today. market seen mean last, our share patrol. markets it's mind Well, we future, strength XXX on going the a the and services, frankly our is the we've strong XXX helicopter and years in drives market.

market deep not that's XXX, that around quite So there oil offshore contrast of which real strong and twins, serving light more the the is, just is it's volume that XXX, machines are around a or water and it's a position the a market single, gas the large oriented offshore XXX big again, so gas market. that not market, had between oil is right XXX, very now that and we've big

Robert Spingarn

then just snow? whether question on versus And a dirt

Scott Donnelly

it's ourselves pre-sell. we the Again, dependent lot sort dependent, that guys, of snow very from to less why Well, a part season. I'd snow say insulate a this on want is we're in is saying, by of

snow those to and built that they're snowmobiles and there's -- will before going for paid be the happen and all that are So we season. be will into even shipped get

So trying by design, were one that the or to we insulate ourselves from other. way

snow we very at the in level look our hard low the below a season. that did because what's in strong inventory we -- up course, seem ended at inventory, originally parts and very last most there was Well it targeted Of relatively a good where frankly levels a snow of products out year.

And our through did of so a dealers lot product. retail

So I us think puts position. healthy very it in a

not more not is more I on it's we've as side. -- really level -- by particular season, Dirt going the You've it of XXXX driven all and low fairly pre-sold I that mean weather a it's spring dirt got weather-dependent, isn't cycle fall have models right? doesn't difficult. out a season, inventory out. We are already mean, essentially a difficult. there of our

Operator

Please Noah Next Poponak, Goldman have we Sachs. go ahead.

Noah Poponak

the Scott, did customers jet specifically reason -- ready to hold rock a specifically to of business live then off. have as in Mexico actually the you tariff situation cited kind process

broad to an and giving opposed example. So you talking just as macro were --

Scott Donnelly

there do they on I and in And customers No, specific business their absolutely got no. a of mean with business were lot transactions that. rattled. of Mexico couple dependent that is pretty

would Now, come I will back? they so. expect

was came of more they I of if a this a I issue -- that had new thought nowhere, that that stuff. -- trade the think free -- of part look diplomatic whole mean, a sort of all you the on then issue I it, right? tariff that dust mean, out Noah, all settled agreements,

came this so a quite away. also course, now but of of going And as kind surprise, it's

those there of think but that And way contributed of when come bigger hopeful uncertainty a items of is stopped economically and to it were yeah, people just capex literally think there a will that. transaction things uncertainty. level very I I big specific because back, So spend don't in

Noah Poponak

It's thing. is, specific interesting. Not it's how -- a to diminish the pretty meaningful that thing but just specific

not we -- of are And to kind trying I we tight to up and fully everyone's, really ascertain in until are some guess suggest skittish weak on we you as be I firmed market, going of just I to to strong headline still dissimilar -- trying as all just I moving some just touching in year-to-date And right? we'll a market keep and have concerned -- had never to market. that how we spectrum of to market commentary cycle always out able we OK the a be you that, of just we there's your cycle we're to long so where and interpreted get toward go but guess, think are the new are to because stronger market until had

Scott Donnelly

them mean, And all No, right? now. but look of either, playing over been this or sort we've I always. years predict can't XX there I is

in are nature or live I some curveball world other, flavor or localized of is thrown the are currency. problem specific there yes, mean, tensions markets whether international things we the get get And it's But very in. one of based. the or this so, broad more some look, things that

But and was XXXX through feel beginning still you look think, good. 'XX the where the I very said, of I market at as

is us cycle of largely aircraft lot I things us think good talk behind all if overhang sorts have a stability I a we that and little still -- of and that a that more there feel that a you think was these of want do used to the about so list like we customers. the think. very gives way, I of

and general new are that, on are indication in to Every a rate. got typically of big at very side, big the aircraft then that obviously where I on out participant that do now. used older And have just which there clearly people market aircraft buy you've is we're side kind aircraft, the is Most in those mean a market you do overhang is don't right better still used which slower if quite trade aircraft used demand. newer case the good aircraft. that the there feeling it's liquid used on a that and transact

come You with out used they there aircraft, a good transact.

So it's market I is it think it healthy in used into we healthy But of feel our No, absolutely is, a lot the products we think as of underlying that percolating The general, I here? as it of, dynamics of still pricing will immune Does healthy. that new of about again, sort -- the help coming drive where been growth. good is time. it make like very a has in long not. to market saw something

to as bringing and the of -- a like that markets the the are even we the flattish bringing drive we if the we just approach bringing into you Again, are make market, into to the market, overall have things the the growth Longitude Those business that by growth taken investments in things we market. that Denali to if market. try SkyCourier the Latitude -- flattish sort know by we've drive an need by says, a are into

Noah Poponak

Yeah, That's that. OK. appreciate helpful. I really

you the and need the the to in as of a be aware variance the margin, between longitude the On third bring quarter quarter fourth just substantial third Aviation do we quarter? margin,

Scott Donnelly

Longitude know, you're orders we see -- anyway like our to margin upon out and between driven kind and of largely of dilution dynamic but going just would plays dilution in of that that's you volume here see lower the be mean -- of probably that a then and to the as And but tends lower a going think there of expect you stronger I QX little be out bit expect QX you Longitude. of bit because -- will -- QX the I that little to always a always is -- margin. there. initial would business of QX volume, based by Look, margin QX the sort differentiation to a QX. all somewhat

better mean, a improvement basis. again, run pretty points you I the so in business. of dilution. I year-over-year be the couple think performance But driving efficiencies strong and to the significant continued tough a underlying has performance will we'll business, given been of or But you'll the hundred the I that that they're on how see that like from basis do -- Longitude executing, QX, productivity, think

Noah Poponak

Longitude, And be to flow. I'm to the get then the year else? anything that's last one meaningfully primarily cash historical to The seasonality on assuming the guidance. than normal or more loaded back-end entirely needs

Scott Donnelly

done. are Well, the the Customers the for biggest certification Longitude single build these biggest is We -- the probably to We is certainly driver. just there. aircraft. get demand there. got The is

Bell. here. a production that to plenty little ready go. set aircraft got right ramping bit Obviously, So up about been and of talked up I we've we've

working So, the that's now here QX, capital side all of on you'll see and Bell. commercial right volumes sitting QX in considerably in higher

then, you right capital stuff instance, as And but stuff. all mean mean, look that at, are the I got now. numbers for in smaller that snow I we've working going

all we're have a always factory third mostly we sell to quarter. the but We carrying The dirt snowmobile do of need run here because in to will to produce able be going higher that some there, quarter. bit nothing and third inventory side, stuff and the little that through

we enough we channel to demand well. sure make can as in that satisfy up So inventory that build the

why mean, we with going with out. Longitude's significant I still feel our are that's loaded like snowmobile the most guidance the the Bell But that associated quite of than albeit initial is ramp, would comfortable it again, things range, I back-end dollars -- we think, more sure and that like.

Operator

And of have the Epstein, line Ronald ahead. Bank Please we of go next America.

Kristine Liwag

on was engine How the from from for seems penalties different impact for million competitor Safeaero. more hundred isn't your Scott, I them? wondering Safeaero recourse to is from no that a you there contract that performance, there contract your in release from termination Hemisphere. you of the press be put financial the largely is out Since issue both just from why few got dollars a

Scott Donnelly

few in it. we of some -- suppliers Well, a with was and again, because supporting dollars we small smaller number of is associated do There a that's had, R&D million the scale there largely on relatively very we do that's a it have don't speaking, much with hundred of R&D, penalty a sharing program. our some key have shared been

to in get R&D had we've its engine. R&D work is, can they great to If to be it it. they look the continue they're specifications, would My to So it, a going in engine. have understanding engine that

some we market, to as can ever there a So programs they deal volume not put or or kind payment that a loaded of investor these would is continue would the that size But there because up appreciate in these to -- offset is -- things. And upfront-end anybody investment not make I obligation. that massive don't well. of frankly I mean it's

Kristine Liwag

initially Can aircraft today. size mean, aircraft? describe I to think you you on there service it rolled what's the that hemisphere for sometime in first is And demand environment market. of Hemisphere in entering was year market going you when when type next about the And out. opposed that replacement

Scott Donnelly

to it this the decision point launch was be to Well, year.

the NetJets out but that entry do into to to anyway, are it be before been into retail was intended other range. requirement So we service an had they five years, market, customers, and longer the probably have aircraft a that go like would fleets that go obviously that

what nautical have a a the clean in combination. there right aircraft we going a of engine price time. I still of new airplane there, was, aircraft right was, need mile more ultra in longer there large-cabin a X,XXX Again, long even were challenge is are the you been for opportunity for we the range that And business sheet And that space right most that manufacturers the in in demand the airplane the mean, that was to right that long-haul was range. and theory place to capability was where because thought in the and at really an hadn't performance

on was that engine And so there. that always predicated having

And as to been a frankly hard and I step then back just places and had lot to Safeaero said, has a made guess of commit revisit it There can guys timeline for there there we was I of able And has not here yet work. a demonstrate. just that has the lot been says engine, progress we other now resources that that. need in we team

Kristine Liwag

the for you Thank color.

Eric Salander

you we'll Okay. questions. call. this next and follow-up that you can see you me any reach for Operator, have Thank quarter. you everyone And if does it

Operator

you conclude ladies joining. you, and for that does We gentlemen, your Thank conference. thank do

may a Have You now disconnect. day. good

Textron (TXT) 17 Jul 192019 Q2 Earnings call transcript