TXT - Earnings call transcript Q4 2019

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Textron Earnings Call. And at this time, all participants are in a listen-only mode. [Operator Instructions].

As a reminder, today's conference is being recorded.

the Eric to Salander. turn President, host, now Relations, Investor will conference your over Vice I Please ahead. go

Eric Salander

Thanks, Kevin. And good morning, everyone.

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

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

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

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

fourth recorded largely after-tax. Aviation, During quarter, this special and $X.XX pretax or million charges, year's to Textron Industrial we $XX share in per related

year's net was flow compared charges, cash per quarter. $XXX special before pension adjusted these contributions Excluding fourth up last income year's quarter. from fourth $XXX was million Manufacturing in $X.XX last million, share to $X.XX

per year million last from net contributions For income billion, down before $XXX flow million, the X% was $X.XX compared year. revenues $XX.X pension $XXX full down ago. Adjusted were And cash share from a last to year, was year. $X.XX

I'll over turn the Scott. that, to With call

Scott Donnelly

Aviation, driven everybody. Eric. fourth and primarily Thanks, higher at by Bell Systems. Textron in double-digit morning, were Textron quarter, growth the And Revenues good

in up XX were last XXX our XXX, year's models. higher quarter. largely XXX revenues bell from commercial fourth The and helicopters, commercial We to due deliveries up of delivered XX

aftermarket milestone support in Japan, hours. installed as utilized of Navy, to Corps, On the increasingly operation internationally Force Marine flight military US V-XX drive continues V-XX as to with side, the highly Air XXX,XXX the well the more surpassed significant base large across opportunities than recently With this fleet. tiltrotor XXX this aircraft and

fleet; awarded including the and million material Bell Boeing to fourth contracts support consumable activities, million provide US $XXX quarter, was the across Force Navy, to $XXX maintenance In and multiple support military across totaling repair Office logistics Program over engineering the Air part the engineering and logistics program; $XXX Marine support support of for modernization Marine Corps for US $XXX and Japan. for million million operations; CCRam million to Corps aircraft as $XX and

Bell U.S. Navy their upgrades Zulu also for and aircraft. HX received logistics contract to $XXX,XXX performance-based an the five-year for Yankee

product in of In marked second two the anniversary On inform years December. for hours the the data flown successful future XXX aircraft flight and the flight program. requirements aircraft first of V-XXX's Bell long-range assault front, highly to new more than U.S. Army's collect has demonstrations,

and Bell's V-XXX to the flight time, conversion the flew all of and goals, landing, December, cruise meeting precision In more anonymously first demonstration navigation. automated takeoff for including

largely announced were At on systems ship-to-shore higher Marine trials Systems, with & Textron line. revenues the that Land volumes, up product successfully XXX Systems completed acceptance Craft within In U.S. Navy. connector our unmanned quarter,

contracted authorized of air ATAC Also also as contract. ATAC services quarter, combat Air was the contracted their started selected Systems the an Mirage provider its US in adversary Navy U.S. of fighters current in support Force has program. FX support flying force's for air Textron air

part as contract the vehicles January, Textron its to of Ripsaw award Early Army in intention combat four U.S. program. Systems its a for medium robotic vehicle announced MX

with our completed careful range a And Kautex Textron. our of of business. our of that part Industrial, of options The the previously to as are recently review Kautex shareholders review we best business Moving remaining alternatives we after unit. considered strategic interest the determined for for announced consideration, served

channel dealers Vehicles, retail independent continued Textron added quarter. we saw growth in distribution new the additional to At tractor Specialized volume our and

quarter. down last were up in quarter, Aviation, year, year's from in XX the XX and XX%. We last revenues Textron fourth Moving $X.X up from to turboprops, jets, delivered billion, XX commercial XX

Citation Longitude, delivered to including quarter, the NetJets. first the XX initiated also with of in We deliveries aircraft new aircraft

X Plant on you update at Wichita facility. I would to like now December the accident XX

hospital and one priority fortunate been recovering. of all from our employees employees First our the and is have are number XX released safety injured we're the that and health and foremost,

From accident an SkyCourier, Plant that operational standpoint, containing Cessna the and unaffected located schedule. on is program been also X, in has by

we SkyCourier, the a the the month, accomplished milestone this wing successful mate turboprop. of last development Just of in twin-utility key

but The plant operations production our to damage, composite impact recover expect significant to did expect working by in first are plan. deliver affecting and no ability we manufacturing the will to aircraft do some and entire facility. to disruptions our of impact complete our recover the half to with incur year-end our we We XXXX, fully that annual

improve operating of restructuring new to largely and Citation and, reflecting cost the reductions plan in headcount a product other headcount into through included Longitude. Aviation, In reduce actions. of period At actions resulting reductions, of development, overall Latitude service the a December, entering efficiencies long recently, Citation most we completion and announced these

legacy development ongoing the aircraft requirements actions within reduced Longitude, demand structure and production to we These were up for necessary operating programs. our current of the cost align environment lower ramp anticipate as

We locations of also acquired in reach to Asia-Pacific reflecting continued which services the has our our with expanded support Premiair three Australia, region, investment customers our Aviation in its aftermarket internationally.

increased Within over drove were higher the revenues, aftermarket XX% which from the up aviation volumes prior-year. aftermarket,

continued aircraft's of highlight In of the the the a knots, arc XXXX achieving controlling over Bell, [ph] and Valor, agility. to many for aircraft army's have maneuverability speed XXX the cruise improved to summary, across successful flight highest our standards we segments. V-XXX the items in we At testing

U.S. Future the unveiled our offering Bell Invictus, for competition. XXX Reconnaissance Army's also Aircraft the Attack We

key in Ripsaw combat robotic the Bell's deliveries we on order weapons HQ to Tactical program, increased participate last selected CAS On army's including ATAC Future MX the continue Force army's program, army's the business, selected seen to several Textron we've selected and the selected next-generation wins for the CAF UAS X Systems, from vehicle for higher Aerosonde saw At programs, squad over the phase program. of in commercial demand development we [indiscernible] Air had year-and-a-half. program,

dealers. channel, partnership through our independent Cabela's, distribution with new Bass TRACKER and a Shops launched we TSV, Pro Within Marine an

model improved outdoor the our align demand actions also better powersports with in both business. business production a business in to both We snow we performance and new growth expect drive to implemented and

we new Citation aviation, turboprop Denali. deliveries and of SkyCourier At two and Longitude certified Textron Cessna advanced development programs, and of the new began our

With financial Textron's production we're higher by we're aftermarket higher guidance. At of projecting backdrop, and execution for volumes. this offset military billion continued XXXX XXXX, Bell, $XX lower revenues strong expecting about in with military commercial

partially expecting the Systems, revenue wins growth, new XXXX by At we're earlier. highlighted modest program driven

our maintain our drive focus improve business in we XXXX continue At and vehicle Industrial, we'll profitability. execution to as on improved

demand. increased partially aircraft, Citation At new deliveries our Aviation, offset growth are we Longitude of from lower protecting legacy by

range $X.XX contributions per $X.XX cash Manufacturing be of of and expected million. in to to We range flow pension share. million before are the $XXX projecting EPS $XXX is in the

Frank. With that, call turn to I'll the over

Frank Connor

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

of and XX%, each Aviation Longitude's with primarily review Textron higher largely mix, entry contributed, due at Revenues to how Let's into segments Textron billion were volume Aviation. service. the starting reflecting up of $X.X

unfavorable Segment of profit to down was the quarter, of year pricing. $XXX primarily and million sold a net in the mix ago, from inflation impact an million from products fourth due $XXX

mix deliveries and modifications lower the required the rework type the in due billion. initial resulting quarter basis to The the deliveries. certification the from to sold segment that at associated the by final the and in for the legacy cost was of launch margin dilution $X.X Backlog aircraft ended higher largely included quarter

largely million Bell, the $X.X up at of the million, the higher was XX% to primarily commercial $XXX $XXX up ended volume. quarter on $XXX Moving profit on million, $XX were revenues from volume. last higher in commercial Backlog billion. year, Segment segment

revenues from a At higher $XXX $XXX Systems, Textron primarily up million, to were XX% due year volume. million ago,

performance, offset mix. due million Backlog ended by the was down $X.X Segment billion. the the unfavorable $XX quarter profit in partially and higher to of million at segment $X primarily volume

related to of of Vehicles, $XXX Textron reflecting the Industrial that mix the volume quarter timing new sales due lower third snow at was this million, principally to the million business Specialized earlier the year. $XX in XXXX, and model decreased shift revenues implemented to of largely

offset million year $XX largely was in at Segment TSV. compared Kautex TSV, shift due price partially ago, the favorable and profit to a and volume by at volume lower million $XX at to performance

million profit Finance segment revenues and increased increased million. $X $X

expenses segment With and million in restructuring $XX debt quarter. We the recorded Moving the we respect manufacturing pretax of plan, profit, were $XX million. to special interest ended $XX with million expense was year our corporate below of billion. $X.X charges

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

on the begin Turning about we're our with slide related volume. legacy lower nine margin increased reflecting inventory lower call Segment outlook, Textron XXXX expected and and reflecting costs now earnings X%, revenues deliveries offset dilution partially curve segments approximately of deliveries. the to of presentation. Aviation, deliveries, higher Longitude learning higher $X.X associated by be to higher our expecting with billion, At Longitude legacy the to I'll is

overall of of volume. we revenues about in Bell, forecasting reflecting billion. Looking mix to $X.X XX.X%, a about change margin of military a largely expect We're

to Systems, estimating Segment of about At expected about higher be we're is $X.X XXXX margin XX.X%. billion. revenues

a expecting we're about of segment Industrial, $X.X At about revenues of margin and billion X.X%.

we profit At forecasting about segment are Finance, of million. $XX

$XX XX, versus $XX pension pension Turning to year. we're be of about income slide million costs million estimating last to XXXX

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

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

cash share XXX million deploy the free our we assumes repurchases continue flow of majority XXXX. Our an average in of toward share outlook to about as count shares

concludes remarks. our That prepared

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

Operator

open question Arment One Please Instructions]. [Operator now. Arment, is And of you. Thank line go line from your Peter Mr. queue please. in moment Baird. ahead. the the is of first

Peter Arment

Scott, Yeah. Good morning, Frank.

Scott Donnelly

morning. Good

Peter Arment

I Scott. Aviation. on Hey, guess, I'll high-level, start I guess just

a legacy forward, Just just XXXX? I and of outlook, for with it down. Is volume Longitude coming step on there the unit like of expectation kind across talking ramping line, rates you that's see the finally big the an kind expect feels about goal getting but

Scott Donnelly

unit fairly I the volume flat be for will year. think, our overall,

a a we'll on unit number, So, clearly more lot Longitudes.

volumes is fact by have as although of guide significant the obviously revenue of will it But said, unit higher revenues mix the kind Longitudes. So, the have driven a be flattish, up. we'll will unit I that

Peter Arment

a Longitude Is around in expectations that an expectation inflection learning then, was was through just there or curves? on we point the absorption time just a kind factory of lot the side. to there that? What's on And the help where itself, this get Okay. your going

Scott Donnelly

first get quarter a most the Look, half, – we were a of last fabricating lot we is Clearly. deliver the more half have Obviously, curve as was inventoried the The we'll number normalized we'll well. of particularly year. year. But into see and rate of back first of all to learning going for the selling the a rework we'll here the that first be sure, really, on basically that late in margin aircraft quarter. the those expect Longitude

the to half deliver going in the So, see we mix feel that's really coming the that and the under as lines side in into to moving line terms assembly early But that year has of which that get the fair feeder our and first those bit learning the in are we about final. terms half. second aircraft the we'll our challenge going process of of start fabs aircraft the of the the all final here certification into are belt, through sort incurred in rework, getting is good curve a then of

Peter Arment

some current year. just take? maybe your overall demand jets, what's and Can your and us And starts the you fits just on with stresses of lastly had last in overall Obviously, trade give you've biz kind environment? just

Scott Donnelly

some which consistent we very I and new talked think brand it's third what we into going. legacy quarter. is On the a feel great. going well-received about with a Longitude we activity, The new talked bring a will how like would don't of being volumes, continue have drive got that to be where drive in that's back And, market, bunch situation clearly, the production down. as we've things product to product obviously side, about pretty of good demand to approach sure And pricing we make a get lower our here excess sort to into capacity, some and aircraft we that the in our about that and activity. our start flat is of third quarter,

or think and half So, at starts those we'll point, this going think things into made fourth strengthen change XXXX. the we adjustments hold that quarter through If prospective hold our we'll I we I – see something to saw for – those conversation, of whole It's XXXX. market to that there's bit not the like there, but the back has through certainly been and high we Peter. is a lot softer getting out a of little commit people

has for six I the last months. pretty to here three So, been think market stable the

Peter Arment

the color. all Thanks. Appreciate

Scott Donnelly

Sure.

Operator

you. Thank

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

Sheila Kah

morning, follow-up last to my question. Good just on wanted guys. name. Peter's dropping I'm quickly I

margins XX quarter, X.X% had door. the the in You fourth Longitudes out

So, in expect when we picture the cadence, incident in margin a the too? half? does it and X half the dip is first – about below Plant steeper kind the So, aviation think first we this quarterly the the in into do putting also drop of that

Scott Donnelly

Yeah.

somewhere we go operation repairable, up all we it which QX process will and and So, the kind look, but to think appears the back I considering of the XX impact time XX particularly composite QX. finalizing the in of We're still running. some will don't understanding quarterly and to with in to take tooling, light in be everything a to normally X, probably progression, the into be but that aircraft Plant get

I the on that's And margin to but into composite – rate more the factory make Longitudes kind So, kind going the with compounded year of have given of we we of then move that lighter a we And to sort tougher about on Aviation again, think becoming are through sort the and will and that QX talked of mid-single that course QX people level single-digit progression Peter going understand go give digit single-digit QX driven detail, high really going of year get that with of we QX. just a Longitudes exiting I sure digit is deliveries sort margin don't normalized think have the in QX progression. and low of double of start the going and and as change us that in the normally, of the by progression issue. XXXX, It's QX. margin to to from in we at

that intact sort going So, I are at clearly it's the – But be to margin of with consistent full QX, the you. year rates we and that expect given again, guide our think we've normalized more will QX a that we Longitude the impacted be light it legacy and expect the out of deliveries Plant frankly by But and X light mix of the lot the aircraft this situation. business. QX of given in QX

Sheila Kah

clear. pretty That's Thanks. Okay.

rationale it? in that for restructuring to sorry And announced in the deciding But keep detail now. you've I that to behind also what all today brings that Kautex. to? levels for you're quarter. row was decided and question, you picture keep to business bigger that X.X% what And is the years the a some guess profitability range Where guiding up two back

Scott Donnelly

Kautex, holds is always Well, We ability good that good solid this heard within a It our were stock and sort us. lot a cash for about, is a better a been of a look, we've investors returns. to our generator ROIC, and PE the maybe very It's as price. talked good something of generate generates that portfolio from business. asked back

We the knowing where that a the into dilution. this. go versus at were look, see that of automotive probably result look the could went would said, and we shareholders. of things that considering business some profitability our re-rate good some something multiple to for potential sort But dilution on in in going we the So, sector we're process

there's, business would would a went our for willing pricing terms good have that was what been that on the we shareholders. multiple would to anyone of the have re-rate our that in created of that reality be in through dilution As level what for have the the enough pay of view, a process, would was created

cash. towards through bottom job that. for a in to there us and looked a good the going kind has some business. we part that cycle, options. Again, through we And automotive you're did that different around sitting done we're get would of business. head a accretive team snapping It was It be – generates not something of And cycle, our auto managing the come it back. a this there's of being stayed to at way We really process. solid also but end, good was Look, good an probably low for earnings. nice that the Obviously, So, went no has a our at we alternatives rigorous. very it's restructuring the because lot it's but shareholders. of It think of generates

I sure we good to and right the business, wanted we margins we So, relatively we a do think make that lower period adjusted we'll sure make volumes, as the we so maintain that. that in go cost, through of, speaking,

Sheila Kah

Okay, thank you.

Scott Donnelly

Sure.

Operator

Research. next Our from Carter question go the ahead. Copeland is Melius of of line Please

open. is line Your

Carter Copeland

Carter, you there?

Operator

is Mr. your Okay. Copeland, line open.

Scott Donnelly

Kevin. next We'll one, the go to

Operator

please. moment One

Pete of sir. Next question from the line Please ahead, Skibitski. is go

Pete Skibitski

beat to more margin Longitude, than accurate? in that's almost issue, sorry pressure Scott, issue a So, so XXXX the wholly in right? revenue Plant a the due X of margin Am issue. that the I this, that the on is half understanding first to is

Scott Donnelly

No, Pete.

considering the our that QX, more SG&A, to be of volume, think R&D I evenly year. costs in going lower course that the spread obviously, are period-expensed our our all and of we QX, over the

So, or revenue. big a our that's when chunk business. XX pull And of XX good it's a legacy particularly, lot margin out, aircraft you of

course it what Longitude we look that to margin a think QX that's through I through not of of revenue the would trivial. the the expect is the impact year. course of that of help both progression rate But year. like why try QX, missing of the it's to that I So, thought to the combination And profitability guide

Pete Skibitski

you. Thank that's No, Yeah. helpful.

– doesn't assuming know happen things any business in to think but And double-digit assuming there to that you've a Longitude, be you've true [indiscernible] can't past again. on on this Plant I – be obviously, business, X wanted XXXX and is reason stay so, track, the if said in

Scott Donnelly

ready not just to to yet. XXXX Look, careful, be we're Pete. guide going quite We're

Pete Skibitski

Of course.

Scott Donnelly

the in expect and quarter, you into place. third margin of indicative business in normal rates that as look, get I fourth to yeah, perform But, how that see aviation a would should are

in said, digit, should be high-single range. I that that As low-double digit

Pete Skibitski

Okay. Thanks, guy.

Scott Donnelly

Sure.

Operator

question the go line next Please ahead. one is from Barclays. David That moment, of is The – Strauss please.

David Strauss

morning. Thanks. Good

Scott Donnelly

morning, Good David.

David Strauss

pricing what Aviation? You thinking net of baked inflation for guide noted And a how got in out at break inflation Could in inflation then maybe pricing? versus in pricing there, was Aviation, for –or QX pieces you're XXXX also, versus headwind. the the you've you

Scott Donnelly

was price a negative there we The dynamic so And was and offset that. to we that's in have QX. QX price didn't flattish, was clearly, inflation pretty because, in have why some

fairly part on the industry. Again, dynamic make that volume, to on particularly we it and flat. we in sure for have was our of So, that legacy rationale back price pulling is levels the the maintain aircraft those can

don't get inflation drive out clearly components like number, get around would we'll I into we price the guide So, to balance. to of breaking back the you that the think probably sort of but in

David Strauss

potential the Okay. And couple order was potential quarters just Could ago MAX simulators. asked, see you following mandatory up a on for there like what in upside interest now Obviously, upside maybe and there's from to terms going about this? you on it I looks training. be of question talk simulator

Scott Donnelly

continued with service. certainly MAX particularly around see there associated for to the with in publicly have a order out some up. return you're we picking to capacity Well, – sim interest, training seeing what That's I think, now need

of to simulators been the is this following have we increase we've customer in we So, Boeing that space production. are our going of MAX number and biggest lead largely the who in

be not number it's MAX So, a a I of material we bit but of upside impact, an certainly for total to sims. see think the going will that's our on good. little Look, company,

David Strauss

much. very Thanks Okay.

Scott Donnelly

Sure.

Operator

Raviv of go Citi. – the moment from Jon Our please line next question – is Please of ahead. one

Jon Raviv

I about some could Apologies, second pretty power if in we the this thinking just half Hey, digit, margin, that low-double morning. of were you'll But that point, thank incremental back it strong to could At as going a made? down, appreciate high-single some overall year, always earnings this of you'd but think a of Good jump beat margin the the this reemerge as you digit normative. is is underlying business. to really tough of be you. you've Aviation still be business. this changes year business Clearly, given that dynamics, fair what double-digit year out still forward, of rates kind with type some this some about given the thinking a of

Scott Donnelly

Absolutely. our That's expectations.

of of look, that think here first dilution next I a had bit in year. expect obviously – that we in and QX fair the half

a of flying you to received Longitude, circumstance, Feedback bunch an obviously, Plant expect been product. be thing an It's them strong customers. have a is the If we who which It's those Several in product. by this taken field aside, thing outstanding set flying X margin got It's unusual hard customers now. on outstanding. fully the delivery. are is well beautifully. who We've

into entry you be them outstanding the this is we thing cost part I this to going a the and this the going some into XXXX line lot world a go that out has transient pursuit is is rates So, these And process was margin clearly, business. But that getting the and there. service. to product certification costs our that It's problem. roll product. going around jet through kind expect to we was think associated in all a and great we in an thing There's on of be there always the entailed across marketplace. as still of things certifications But, the more in have of with a costs XXXX into as

we up a we for think very I margin good in a good place expectation double-digit and be business. to have very end business this

Jon Raviv

some talked is how lower about going the you forward. of then, And development on restructuring based plans Thanks.

There's could helped parts think new here suggest, portfolio, would I has what there. that investing drive use in market. in growth still a you flattish that ability some How products upgrades going is some to your the think forward? do could recently some and be of Something about and you guys

about the beyond Denali? skyline SkyCourier are So, how and thinking you

Scott Donnelly

going and line be the very a think you high-performance in obviously, driving think fabulous in which in It's jet Denali. in new That's for single. a for at very great a right good to been will the think driver. Longitude if growth SkyCourier our place have really. We've which a market product completely us Aviation, you get when It's market, I look portfolio good the transformed and Latitude great now product of participation. the last is a not segment positions rationale I Look, product years five our

have obviously that we're things we at. that, Beyond some looking always

I think to opportunity in there's core clearly some upgrades turboprop refreshes and side things. some do across line the of both product Industrial and the jet the of

the just And so, those. pursue we'll won't Longitude. clean magnitude of a a or brand-new sheet, be They of airplane like Latitude a

talk So, have aircraft of R&D, XXX process. when we are just about that's on you pulling that major think the I some back reflecting two don't that in

upgrades. So, continue in lineup, to I a robust think SkyCourier/Denali other product both we'll and the have

a the the So, concerned here. we into XXX across do program, programs is into R&D to to put of the I'm start on of down like to clearly a move going terms share have level underwhelm of larger into couple true products funded have under now side. you year, the virtually really and R&D government we're FLRAA R&D down Well, winding of been same the rest things to that not obviously program, and in and at the We is things its that's in but business lot as to the continue next that made refresh FARA some that our know the R&D come driven of to program, have like all growth support cost because all We've drive certification. that XXX actually will money V-XXX go investments FARA a in our see portfolio. massive you'll you

it's the ship-to-shore some in product unmanned that smaller things to if are everything Obviously, at a those a the drive So, our look the was growth, drive happening XXXX, obviously. the still of but been vehicles, bulk starting and investment. of those Systems two making we've generation just businesses of that next lines number, R&D, programs result as air huge you seeing that new like we're of a is from around which investments FTUAS. in are

lot in production, going drive The in to and As putting turn that over turns those small to businesses cases, much is that around we've help this and growth growth acquisitions drive last RCV, of that are and, improved starting to that's the businesses. MX, some these been R&D a again, to into this profitability. few years some

Jon Raviv

I appreciate you. color, Yeah, all that Thank Scott.

Scott Donnelly

Sure.

Operator

next our JP of ahead. of the question is from And Please line Seifman Morgan. go Seth

Seth Seifman

Thanks good very morning. much. And

Scott Donnelly

morning. Good

Seth Seifman

you're talked go about to delivery and portfolio outlook the kind majority adding deliveries mix coming changing with generally that portfolio decline overall flattish view visibility. not the seeing is deliveries volumes the Longitude down, you one customer Latitude a a expected of the in Or and when being spot for of the from legacy market? Scott, Cessna? that it of customer of in there's ton is what Is its of legacy

Scott Donnelly

I'm not I sure Seth. understand entirely,

Seth Seifman

a and transformation NetJets. the market lot are down deliveries significantly your it is why coming making legacy legacy to spot Longitude, legacy that's being from down? sense If deliveries and to Is that's are Or Latitude Latitudes down? are coming down, a and of the of legacy deliveries NetJets why weaker deliveries are

Scott Donnelly

the as general, outlook be we in of market. we overall given think in to just I deliveries legacy down expect talked the QX, Well, about

When And Latitudes at on do next yeah, delivery versus look don't right. year we lower expect a necessarily you're you You're to Latitude, think trade. levels it's NetJets right, this of year. I

a market the now. aircraft as coming right you'll a more see class in brand lot new With deliveries the where NetJets XXXX. to Just product, Longitude Longitude is of

we previously, the with year in dynamic yes, of it's next how than saw back – to QX. Latitudes there had somewhat just So, the it but certainly certainly we a fewer NetJets Not deliver we to right, is are expect inconsistent legacy you're softer market.

Seth Seifman

Bell so or margin about higher you've executed for of well this baseline talked traditionally very Yeah, at margin at maybe like Starting XX% kind kind has Is the now. to you for Bell guide the Understand. of understand. And business The years then, XX.X%. Bell, five a as probably XX% year business. than thought?

Scott Donnelly

it, Look, little We that move I think we programs very particularly higher position good year, is benefit opposed share that's that is real levels we'll of very military XX% XX.X%, having R&D. now Again, performance would a strong. XX% right? in from we quite as I strong about So, we're a in military I do still obviously, the feel business. programs range, level as that to for acquisition think bit have high to in look, at the and cost still some funded. of say – Bell yeah, right But, IRAD of very this straight

margin I to mix to you're going If to which margin, right, in program, what terrific EMD rate to stay lot XX% program driving lower news which tends that be in would phase. had But circumstance, that the a a at you even in XX% it with EMD going of a that large that's a production think future a be down obviously be large bit. little growth a will very you're story,

kind I there. XX% leave So, XX% to would of out that

Seth Seifman

Okay. Thanks very much, Scott.

Scott Donnelly

Sure.

Operator

next And Spingarn question Robert Suisse. go ahead. Please the of of line is Credit from

Robert Spingarn

to were higher on Good Hi. to, level about you answering and to view and go go And question the back you wanted wanted it morning. Sheila's to disposition. And think I to on Scott, desire valuation your cash and flows. improve Kautex here. valuation I touched when the

earnings the from period where flows been XXXX, we've that's in again. say, the And growth somewhat XXXX You've have got gone and XXXX in sales through cash here, but flattish. a let's forecast case to

learning sales number Other of for of level? kind return a about on takes to this and some is needs the on get reasons. talked curve what What you've the puts to happen cash this talked than other potential Longitude business? about, flow You've above and X% the of the

year, quarter extra And for were? does where out regarding fourth then, play Frank, separately I guess, we to in we Are and the week, that back XXXX? just the how in the

Scott Donnelly

Well, significant V-XX time, in the a few level, $X.X billion, over a digit double things had V-XXX. from done a business low from like year. it's business. world years in And XX a billion the a things to of that to Bell At gone year XXX been V-XX $X.X the high has down we've billion last like down peak heavily investing same ramp the and XX a $X.X has the from to year obviously,

do here, things think like sure to margin forward making go that. been and important in that really goes, focus point V-XXX our rates. acquisition future, into that some we've has at there's strong certainly maintaining think execution for milestones strong XXXX, been we're the think I where And process we And I the while investing So, business able a around program. I we're on as the still

going completing and XXX. through Finally certs on

So, few right? really stayed I down things the to over last the see has but good that similar with certainly to go absolute margin the sort revenue we margin Systems revenue. through place as in pressure good, think owing really, here years. that reduced been have a the have turn So, few we're next But of… costs number certainly come years been a the has points, or no is

Robert Spingarn

could You little here. a get bit revenue the turn

XXXX. decent you growth Are up got end, catch in revenue other saying You've you on XXXX? XXXX, the

Scott Donnelly

Absolutely.

the which side and as starts think part the large the the side, in growth the see that aftermarket, is we in military, out on very we there what and the now that deliveries very largely on to the programs. driving business, the a XXXX the starting of this also but V-XX a to growth on have and What's from growing aftermarket fact commercial installed we're you're base I in to interim is base Bell we installed HX said, that's significant here large seeing. some owing more see to drive transition unit of what

we've V-XXXs of which been these investing, then driven really and growth drive around like some new next What XXXs. will that in the tranche of is the platforms

So, that dynamic in Bell. the is

had that Systems their on just the start but the new to program awarding business. that the of out, XX% of Again, we've is plus they downside a are positioned making winning similar are been plus get year this wins. that margins, platforms, them of XX% program as of record That's forecasting these were the a that now investments sort see great platforms in margins. and some delivering story. some will phased good We contracts

guided overall the going start and positive revenue for business drive see that issue talked get we've about. The to been has as to and to we're in XXXX us to

think one turn. I making is already that that So,

portfolio sort tough we've that the and been of many again, really period just sort to that resulted spot. But be a having cases replace in platforms. frustrating in the of see investment Latitude you'd of Aviation, through Longitudes. a Latitudes, in that with gone without legacy heavy very It's a has Longitude,

business great feel I very that team about The has well. executed So, positioned. where is historically

just challenge a Longitude withdrawn get way just have line have and to we As sight our have we we a work through XXXX. we production, they need of around to obviously, margins there where getting those be, as clearly but

on I a no a beyond we we what and is call XXXX into help pipeline, really business of lineup that. good that have that more much how obviously, the market think dependent and the does do things product But in have other will that yet. XXXX, to make end idea couple Obviously,

had growing, of So, have we're as get XXXX too XXXX enough start that saw growing. our the not think we pressure we in revenue line the on and I here much can where growth, have to opportunities been earnings we seeing end at the but top are

Robert Spingarn

Okay. Thank you for all that color.

Operator

Thank you.

Sachs. Next Poponak Goldman ahead. of the go question from Noah Please line is of

Noah Poponak

everyone. morning, Hey, good

Scott Donnelly

Good morning, Noah.

Noah Poponak

it been learned and or of in – into business any over used Scott, X it's don't see you've to deteriorated typically PMI, And economic broken month? weak up just hasn't months? market every new the keeps middle just growth as that Is why going this an specifically, just You revelations cycle. why anything simple and X it last the inventory jet as global back the new out has there?

Scott Donnelly

seen over we've I months. X growth last don't think as the much

pause. to right? business which a Look, CapEx of plenty spending, back I the bulk is jet our in been the think biz have guys there's some reasons base They've little smaller you've seen is for certainly bit. holding of market been size in customer

are uncertainty resolved down, very does certain. seems which noise some but – direct sort to impact of as Brexit think again us, settling huge the I trade noise So, the of get things have is starting that shouldn't on a And, it's cycle right now. to that in we're at like the look, and political middle a path the on market, becoming least a create of in it

terms we So, to politics optimistic things a back to and I the I'd in work businesses move aggressive become going year land and through more our in the be of what clearer, as get would certainly where that aircraft, invest think more then not which just their into and early the way growth late if of in back of went businesses, willingness to is part but lot in spend CapEx XXXX. drove you are XXXX, general a

that but need So, we're we to hopeful that happen. see that happens,

Noah Poponak

Do kind or pause to and election it on is your necessarily? an to concerning them not of customers particularly you specify puts that

Scott Donnelly

get it, politics differing business election. depending like views there's outcome But, the of Noah. into not rather of the I'd the the certainly, climate looks what about on

people So, that. But it's kind are of reflection businesspeople. natural that there some on that be

Noah Poponak

us then, still Frank, related there to flow a you're capital also And for amount help cash making in you think Longitude Yeah. net out because decent outlook the you rates. can working XXXX, production the on the had but I unwind, you're ramping assumption with

that piece would I just underlying and the So, to piece that. outside like then therefore understand total company of

Frank Connor

kind income. Yeah, on reflects end, at at one upper the conversion guide, net the least of cash overall one to

the isn't continue but expect to of performance. relative expecting generally to maybe nothing there's anything of kind headwind standpoint way all there They of multiyear associated ramp did I capital work to our kind working Longitude, to that. significant extraordinary with kind transitioning we in X. say kind multiyear XXXX, in from some of the working that embedded certainly a have X, good There we're So, capital in Longitude. through

we kind relates did millions that So, as performance in kind cash reflect XXXX XXXX it of that hundreds to performance, XXXX. we of us we reversal that absorbed as of put dollars and that on into behind of move of XXXX

good in XXXX. we're So, performance see cash we'll that expecting flow

Noah Poponak

that had that impacted I XXXX thought and been was Longitude XXXX. would you saying substantially buildup pretty by release beyond

Frank Connor

kind build that, of working with also payables build. kind X X government payments was can that incurring then to structure before this kind on is there ahead on of and from drag that if see receive overall costs the of – of kind XXXX some offset of some – were some we you we – standpoint there's there's timing but biggest The of Well, capital inventory the us at cash. we multiyear has Bell multiyear where go

XXXX see that big that was impacted in a that we XXXX. not will reversal so, And

Noah Poponak

Okay. Thanks so much.

Operator

next Vertical is of Please The question Research. line Stallard from ahead. of the Robert go

Robert Stallard

much. in jet the any so Scott, you wondering morning. in demand environment, more competitors to entry if was manner irrational of on Good the seeing even into Longitude service? to response of you're acting the environment? Or business an I response change pricing Thanks your all, are and seeing perhaps any first in its

Scott Donnelly

is production want guess, change, general, we're about, all That making cautious market. to running I – have Well, probably bad greater not I know that think demand. I than seen This a Robert. in don't in behavior again, that be always will we some huge the sure create we

XXXX, not always the reasonable of it We over I product. participating get which we want XXXX the value Of a the to to got I represents guy, right? just make think back think course, that other that level, in to And we're we process. And time fought that pricing sure back have frame.

It's think. that going get to So, take perfectly inflation business we position and to on. of increases pricing just that are hold want the we a sure reflective make I reasonable

it how overall I way the as we the think, we think dynamic behave. So, we in general, and that's should see

we're the value there I and Customers think pleased the love levels that. expect get we're appropriate right we Longitude cabin, range, to an that's continuing value the are make the that We're that from the in pricing, speed aircraft. well. sure performing aircraft of the Look, our getting price getting we're to with very and

Robert Stallard

reconsider improve higher, the Kautex, and the if moved the multiples sell that And Okay. a have the a business, matter, not actually, were decision on on future? as automotive environment and in would there to this sale you then, follow-up to different

Scott Donnelly

forecast view practice. And that. we other given is want our think that really back general on difficult, in very – this think can to I we to don't make M&A. one comments any team But on we are I way out M&A. go a don't you do way process, and we as went the through don't had was or where make imagine, to we'll we in which will about We public our comment to or that go

focus going Does it. business. and good a us well So, for really running on it's we're to

Robert Stallard

much, very Thanks Scott.

Operator

And next George ahead. we Please Shapiro Shapiro go Research. have of

George Shapiro

Yes. Good morning.

Scott Donnelly

Good morning, George.

George Shapiro

wondering stable improvement some was year It you We the economic of environment, sounds that I we would the is. that talked the economic wise. and pretty just market a think business. your Scott, why just had see haven't. got environment comments you if I more have the in was from about wondering good might towards you like stock that end certainly

Scott Donnelly

fair uncertainty seem I'm bit know. point this not amount enormous things still an down, I trying uncertainty. political is don't – trade but to still there's of front it the day. I but economic that George, of quieting think of they're in us of And like I is there's a Well, think lot at be forecaster, a every

and in So, large a want policies of makes to out. this I It big think part, when think about that nature. difference things tax plays how people see all you

production yet. customers to that that going think going our I on people – are activity hasn't is but market think they that decisions going decision that priced still and fair does their not just decision, we're bit go doing why So, conversations ahead Again, create of that uncertainty on, don't stopped. There's the deal, still position pulled a and the does little it's that's There it is and going going accelerate lots – of some back – a fine. on. I make to make we to to friction that's if bit it

George Shapiro

the any interest of have state and And competition part have their seen an from tougher given would business? ever that in Lombardier in you they are aviation the you

Scott Donnelly

lots seems whatnot of and And don't the dynamic been any activity seen stable. it's dramatic we've competitive George, look, deals. change fairly price are – I think deals like in

in hear M&A with we we and to respect And articles would not M&A big the but the any noise, hope we change side, again, a see all see on the don't I activity. comment So, that.

George Shapiro

for up inventories $XXX year. the Okay. are million And, like Frank, for The one you.

delivered an is quarter? still what So, effectively that the inventory wasn't fourth in

Scott Donnelly

of Aviation that Well, across and inventory ramp. George. But, the at entirety corporation, that ramping Longitude, additional there \we is are so reflects the that's again,

George Shapiro

than just cash turned bit a you out weaker was flow expecting. the I wondering little because were

else something I so, thought there. on there's maybe going And

Scott Donnelly

year flow impacted cash military associated No, programs. for guide. again, our of before, with flow the headwind I as kind And of was the right cash by Bell middle a certainly is the at in the significant said

George Shapiro

can Kautex, between Kautex and Vehicles. much in if expand you've correct the didn't that I guess And release mix in much, imply the last one. wasn't If Industrial on profit one that Special to alluded so, you then, Special was it earn Vehicles a if Special And it assumption? that at why. down Is primarily The would quarter. that

Scott Donnelly

George, generally, in margin we mix don't get segment. into the the

we part the it lower in was certainly Frank that think big delivering in a to vehicles, snow QX of should be that, we relates year as as delivered had them QX I largely volume snow and product commentary a because was said, we year-over-year. And QX. ago versus a

QX that thing good them versus did we in a QX. it's So,

but on detail don't overall different not which has lower, – more the certainly an sub margin, margin So, impact the to between splits segments. volume the on was going any breakout we we're

George Shapiro

Okay, much. thanks very

Operator

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

Cai von Rumohr

be some you'll But your of own would therefore, earnings want money? are win – selects what's the really upcoming And what's to be you ticket the they us because, be next the update that have on and, the of a maybe win just for spending potential. FARA chance of because both some know them, of a huge. win or I an And you own money one Scott, your essentially, to level that FLRAA. What's down drag very will you if and you for sizeable competition. dollars not that a spending

Scott Donnelly

that, guide our So, Cai. incorporates

that's we really been our numbers. but again with and money There match the V-XXX spending years little been been some IRAD government no over the IRAD has money on on our So, program, have on through certainly match FLRAA. FARA largely funded

government level straight you a just than we co-funding look but actually higher of So, we of under our if participation increases Bell, funding. have you have of IRAD XXXX, what in at the is, much in R&D amount had plans

down to two the go FARA, a So, do fly FARA. I something takes like it to think off. companies they the select will

saying. army frame our lot love the new on accomplish that that taking fabulous they they in a technology way – is great be to terms that requirements, this time talked XXX. but few We – expect critical that. remember, It of what matured that we're very We've a requirements. meets program they're think the how running prescriptive is are they're thinking The offering. We in provide you not we performance. to a is level it's the high about We clearly March February

very process If it that effort a select we from business, we large the time to will more actually of government less happen, X than portion does will March February, will IRAD in lot before none in have on previous in we spent you where X had of again, cost in because, R&D be but do it share again the R&D happen down terms have the program. probably So, a frame. periods

it's So, share. R&D relatively plan, even a of cost neutral more because of it's to the the dynamic overall though the lot

The With V-XXX, sometime it's contracts right. risk that has they're because be through of of and we in in two what they're on FARA the but a is two. decision reduction going have They late say is really towards March dotting obviously OTA what working is sort program, still the and suppose that two, in sort or XXXX all expectation and EMD crossing probably one of it Ts you're timeframe, would ultimate program likelihood. the we would don't saying it to expectation they not be saying. those. Is huge probably is the which I again, anticipation That's is The award is

mover but not on it's is. us So, big have way year, program again, a does level have cost FARA headwind though a one even much it a higher in of But, a large that's because you other not program, for that the R&D the or the share.

Cai von Rumohr

allowed Terrific. And Have becoming mean, you any second XXXX thinking what then, might SARS The in a to this What or a the to? a this negative? not air jets your of one. are this want biz at Bell? Was travel preliminary because coronavirus benefit What bigger public were look done do Great transport on thoughts? it does a to people for issue. and clearly answer. i.e. terms was virus and taking didn't

Scott Donnelly

Well, to not to gone try a Cai, good back to Look, question. I've XXXX do that. it's

question. to know the I know I that don't So, answer don't I certainly – that

impact the In of side. company, terms of business in direct the largely automotive do China obviously, the in we

So, last the been of in down of couple course, automotive have already pretty volumes dramatically years.

further got Chinese this hard has a on become has like start think, it down and impact look, everyone, to bigger thing they watch to or that and after contained the it does what weather not New wait to or Year I And tell. is settle we've problem. So, to a happens get through get and see

So, or more watch at wait. think we're I and a point, in less this

Cai von Rumohr

Thank you.

Operator

go line you. Copeland Thank Please is today's Melius And from conference Research. question the Carter on our final of of ahead.

Carter Copeland

Good to morning, right. the All gentlemen. figured use out have how I mute button.

for on A&D up. for my years, anybody first So, screw isn't who's been this calls

the on give some color take us could if around the decision what and So, terms the of should just of board TSR addition changes the relative the that as corporation? to thanks opportunities you back. me for see in you I having for incentive wondered compensation that and we what risks the to Scott, from plan,

Scott Donnelly

So, around many, performance. years, as Look, that kind it year many Carter, term that that been was a plan of long had rolled of the of genesis will, okay? that plan a company you three-year kind a is this through if on wrapper, three three thing for years, that TSR has

enormous that to the you any were absolutely So, that can a to business And put objectives TSR But set factor. was together three credibility around jets a just goals annually. really back and really plan has volatility it. year stems and

So, to around. is wrap a a TSR. direct obviously the has factor still as It opposed new plan

three performance it together So, important rather of do we ultimately, objectives could forecasted year part plan a year than that and, our year a to built put plan. three plans series But that one something try very of remains our that a compensation.

we what period and longer to biz hard So, around consider three unknown of and that of around businesses, cash, it's like predict the term one when try lot our things to a just looks to business biggest ROICs like long-term end metrics, is where a just adapt over jet do market of years. have and we

you an conforming, come will, we've volatility accommodate that of with that TSR I can think set of and plan, up So, which some if important three-year have a more remains still metrics of metric. a

Carter Copeland

Scott. Great. Thanks,

Scott Donnelly

Sure.

Eric Salander

we And With Kevin. call. thank you. you Thank all. that, the can end

Operator

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

now may good a day. Have You disconnect.

Textron (TXT) 29 Jan 202019 Q4 Earnings call transcript