TXT - Earnings call transcript Q4 2020

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Operator

Ladies and gentlemen, thank you for standing by. And welcome to the Textron Fourth Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. [Operator Instructions]. recorded. being is conference This And I'd the conference to turn like President of to Vice the Investor over now Relations, Mr. Eric Salander. ahead. go Please

Eric Salander

Thanks, everyone. good And Kelly. morning,

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

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

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

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

tax a related TRU recognized sale of per favorable of also the one-time Canada to $X.XX share. benefit We

favorable contributions the last $X.XX net charges year's pension before quarter. one-time was special fourth $XXX down fourth to year's benefit, Excluding compared quarter. per in from million $X.XX was million, adjusted last $XXX flow share cash and income Manufacturing

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

Scott Donnelly

morning, good And everyone. Eric. Thanks,

year volume. down year's XX delivered the as of fourth increase to basis margins XX Bell we commercial margin revenues has and last business and XX.X% commercial in lower XX the Bell, We as points a revenues. strong out military compared quarter closed on in manufacturing Our quarter. prior in margin performance X.X% Textron's year an to Systems, improvement the operating lower saw up drove despite fourth that Industrial helicopters, from in At with were

which has Japanese of officially hours. flight fleet amassed flight aircraft, side, began the growth over operations military worldwide This of November. On continues XXX,XXX operating V-XX the the in

In Systems closed X.X and Also XX announced its quarter, Corps to This at jet business in to this of Shadow the been anniversary air the US up awarded Army transaction marked having hours. RFP ATAC the review and flown the program awards the Lift, program mid-XXXX. in CAE. program five continues In expands November, continue flight and provided administration. This now services Future Systems, globally. US very the over over services primarily program. with worth FLRAA million currently will the scope the in the to December, At have December, quarter, million the the January. $XXX training training Future million first the Shadow and simulation it's and FLRAA new into XXX draft The a of V-XXX's contract for expect Army down was supportive Vertical systems commercial aircraft sale Lift, flight to the business. true the platform lower now in revenues next the $XX of third Vertical for won fighter recompete simulator transport hours Congress leadership than we Looking under Bell US for The unmanned Army comment. volume Navy In down-select for the we of aircraft. the on are Marine has of provide anticipate army contract in the years. more

customers fourth demand approach prior business vehicles. outlook in the to revenues Industrial, to within May. their revenues from to continues support in quarter, demand reduced low point ramp improved production equipment automotive due ground has Moving steadily the Kautex's primarily specialized levels. since down And were our in as the

volume. quarter, jets, quarter. We primarily Textron year, fourth XX were to down revenues year's XX and last and XX from in the from turboprops, aftermarket delivered commercial in Aviation, lower up XX deliveries down Moving on last jet

the Aviation flying has certification the program. three to began continues Flight new track in progress, second new on XXX, aircraft defense year responded. capital commitments management flow and Cessna summary, completed aircraft a and the product the hours teams Air units new our SkyCourier XXX the deliveries with businesses, performance King focus year. we results. King On our delivering Through for of to for has a on front, cost operations, XXX. I'm And many of difficult with quarter, the and XXXX. control, to for In over business cash challenges meeting program generated test entry was able XXXX the our for program way Air with strong and operations. in proud strong working our the were At service is maintain a of manufacturing announced X customer the our flight half

in solid Shops. Lift. $X.XX driven Kautex to increased the Textron's to manufacturing of expect quarter to and deliver strong pension expecting revenue from to recover Cessna at $XX.X At the backdrop, momentum Systems, we're turboprops, performance carrying continuing and in growth and to improvement demand higher our military expecting by Vehicles, growth Specialized revenue fourth revenues increased in expansion, our financial primarily $XXX Frank. guidance. both also range lower the the XXXX. to margin of we're margin markets including and cash jets share. about commercial to powersports to We're At as margin land on margin entry continue overcame new XXXX growth $X.XX service by call and forward auto look results $XXX At continues SkyCourier. projecting expected On and be Textron marine million. into in range I'll And and Aviation, With deliveries over improvement Vertical the Bell, levels. disruptions aftermarket ATAC Pro revenue COVID systems. to we're this projecting we that, projecting fleet for side, billion driven higher aircraft contributions are Industrial, and into and we're is end as At utilization. Manufacturing we that of EPS our commercial shutdowns temporary flow revenues and million while turn pre adjusted Bass revenues, grow of business expecting growth we per in despite to before invest At is Future With we

Frank Connor

million, $XXX Thanks, everyone. the quarter a Segment morning, decrease Good Scott. fourth revenues. profit $XXX quarter was in from XXXX, $XX in the million million down

each Citation million billion. of due to jet segments the to billion aviation in and ago, how quarter, lower with Backlog starting lower primarily impact volume Revenues at volume the primarily from segment profit Segment from Textron $X.X mix. contributed, $XXX review due Let's a down volume. lower million XX%, of Aviation. Textron the the were year quarter down fourth $X.X in $XXX at ended the was and aftermarket

last was lower million, Moving year lower million vehicles. from the favorable at down Training. million, $XX support $XXX of profit military program to performance, billion. volume. lower from were million, revenues was commercial were reflecting segment Simulation and was Segment the up revenues favorable were primarily mix. on ended a favorable impact down performance. $XX to the primarily volume, by and at $XXX XXXX, to Bell, due million. was adjustments. performance, $XXX At primarily pricing Systems, million Backlog from in Backlog + on $XXX impact billion. the specialized million a largely last million, partially $X.X profit volume TRU partially inflation higher of down decrease primarily million quarter revenues of favorable lower and and $X.X Segment primarily favorable XX% in up business $X $X Industrial a due offset ago, the fourth within of were Textron by year, volume quarter ended million reduced Segment year, from to profit and $XX equipment $XX from segment revenues ground the to in at the offset from demand a $XXX million, of profit $XXX largely impact segment revenues million quarter $XX Finance due due the million,

We expense $XX charges pretax in quarter was segment $XX restructuring and million. million profit, Moving were $XX corporate the below to related special expenses activities. interest recorded million of

with quarter, level on cash $X.X the a cash higher-than-normal performance of prefunding cash in maturities. year of billion strong a $X.X the of balance represents reflecting billion hand, The Following debt the on sheet. approximately the XXXX we $XXX ended of million

liquidity. $XXX of rate on In repurchased corporate-owned first for repaid we million the matured repurchase and notes $XXX that floating of quarter shares. and we in quarter, November approximately outstanding additional the program of quarter, also our share the that were policies drawn in life million $XXX During borrowings million reactivated insurance

reflecting higher approximately Textron higher higher the earnings be Aviation, X.X%, our and and production. I'll to segments on turboprops, revenues aftermarket slide about $X.X deliveries revenues. of well is XXXX billion, presentation. outlook, Segment as volume Turning both nine call to for expected increased higher with expecting margin as we're At jets our aircraft reflecting of the begin

to lower and slightly revenues revenues million. be about be volume revenues reflecting we Vehicles. and related XX.X%. $X.X of billion. FARA. to $XX lower largely commercial and XX.X%, the about revenues X%. about a lower At about margin Systems, increased expecting about revenues estimating Segment of segment expected Industrial, and margin $X.X At investments lower of profit to to Specialized higher FLRAA $X.X margin of We're Bell, higher forecasting expected XXXX we're At R&D reflecting aftermarket commercial of deliveries. billion, and revenues military Looking about lower we're expect HX reflecting is production about billion, military segment is Segment Kautex Textron from Finance, we're forecasting at and

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

the Our one return a of strong and decrease changes rate our losses a XX.X% estimated pension our Offsetting a amortized to asset in discount XXXX XXXX decrease on domestic being X.X% points amortization basis of return plans, basis are XX these actuarial a our and X.XX%. for in long-term pension period favorable the of to in for resulting assets XX over period. for those change reflects our longer losses to item accumulated point

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

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

is previously guidance share, EPS a Our adjusted and $XX of announced to for the full of $XX excludes about TRU completion of the $X.XX restructuring pretax from of special XXXX million charges $X.XX to pretax which million Canada. gain million year plan sale $XX per our

share count prepared remarks. our of an share of majority continue million Our repurchases the cash as free That about XXX our assumes concludes deploy towards outlook we to XXXX. average shares in

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

Operator

[Operator the line Research. will from Robert Instructions]. come And of our Stallard first question of Vertical

Robert Stallard

you'd your that maybe in momentum. said continued you release, the if wondering good out was what's on And In division. you order a of seen give could in slots forecast clarity market. aviation particular, little the given on us going XXXX, question there the for how availability looking? First I more bit the is on

Scott Donnelly

from when with sequentially I improved, QX, order to updates, we've think, we the strong the that referred improved, that seen just challenges on teams. obviously, and on expect in Robert, based see going momentum our we've sales to QX dialogues continue are QX

at I people sale Obviously, aircraft demand are recovering there. feeling So, the like think data record see around is you are things used remains and for lows.

XX only of less at are X% the years Citations that than about look old, it's fleet. You

but orders a not used up our Flight quite has the US on in been has the and very strong, rebounded as think strong also I we've over strongly. on market for aircraft side, the December in ago. side. interest year seen just the activity actually November new So, were increased

at straight we of travel So, There's leisure I recognize think think that's business – and travel. still we muted the this is pretty demand primarily amount point. what

So, think as normal, improvements we'll return continue ongoing utilization as to in to these see we well.

continue level, a of business. strengthen the are the are the of in of the that interest the seen window kind very used pointing seeing, that that and of age through we're considering of within year, we've side So, the momentum course low the level macro of all order to terms the XX-year and aircraft at momentum levels

Robert Stallard

a for you I XXXX. what wasn't clarification. just share Frank, I said on typing missed quick the enough. count

Frank Connor

XXX million.

Operator

Melius of Next, we'll Copeland go Carter to the line of Research.

Carter Copeland

as Does just Vertical in we at the you same a this on is on the that investment there level? Lift. sustains the that Or clarification headwind related mean and a continued XXXX? margin made comment Scott, at Future investment the that Bell look to

Scott Donnelly

Carter. in yeah, Oh, there's a headwind XXXX,

this to year. they've to ramp and obviously, we the of through through QX the both programs continue started FLRAA latter in part course We're So, those the of and been year, that ramping on see we obviously the expect working FARA.

that's that two talked its into reduction bit, phase FLRAA, of about So risk phase. we little going a

on we've component on test manufacturing, FARA for flight initial late fully flight work ramped. an aircraft assembly get and actually program, year. And so ready So, it next the that's the the on begun to

Carter Copeland

that Or will continue Does trend peak XXX? we XXXX? to in to upward

Scott Donnelly

into flattish probably going probably not to We're of XXXX would kind guide my It's quite be XXXX. ready guess.

Carter Copeland

the just pension losses? quick the on a did much get longer amortization Frank, the clarification piece. on How period

Frank Connor

plan, For went – in would it to the from it it been years. XX have years. out And one moved seven

Carter Copeland

And portion was that of a large plan? the

Frank Connor

Plan. in our that Yeah. below being that plan is the And since moved plan. or largest XX% for Master the that It's reason the participants It's Textron have retired. actives of we

service than that, change the do to – you you remaining when rather for life remaining so, expectation life remaining period. And

Operator

of Sheila Jefferies. go to Kahyaoglu we'll of the Next, line

Sheila Kahyaoglu

about decline in units. quarter? we about given orders XXXX. do think that, aviation half previously about the delivery in implies That mid-teens fell You'd How deliveries in recovering talked of XXX the

Scott Donnelly

thinking, halfway terms that's back laid terms in well that's we you our what new out aftermarket volumes. both We're guys. in the we of of assumptions think gave get I as in we're what as aircraft about and Sheila, guide that to expecting our have

we've flight in gone been of has again, on aftermarket. So, amount and the activity steady that's up picked activity seeing the the improvement

the back of XX about we're way won't step. So, get a halfway year, there it in one assuming all also that's to but sort

Sheila Kahyaoglu

fairly aftermarket? moving stable. What I I an just pieces down it HX military On the be V-XX is guide, on are it's that think Bell should revenue Or about the Is that? to think the drop? XX%.

Scott Donnelly

On side, it's the driven HX. military primarily by

point, down down as will also, starting HX we're to this deliveries. commercial of we well. ramp So, on number the expect, And be do at

get I market know, will helicopter But you so there. closed commercial think So, much just end XXXX. It's the to here start international. been of market in deals our as to is recover tough

up I little it'll think decline orders to we'll in So, again, a start but for commercial pick a XXXX see back of well. leave that as bit

Operator

line Research. Next, to Shapiro of the we'll go Shapiro of George

George Shapiro

to last the from wanted book But pursue year's X.XX down certainly I in was were Orders the quarter. they third Scott, were fourth the better quarter. like – they're than to bill in quarter.

to in administration? new you did with to as the beat by see last bonus in potential slowing depreciation rush So, the just wondering, any the deliveries and try change quarter get people the end of the year

Scott Donnelly

of as No, tax I schedules don't regardless think is there depreciation regardless that year, of you administrations get we of tax first saw to any the know, tax driven, policies, are. the George, change. end always year what And or it's always best

pretty delivery So, that, But the to always obviously, based QX, year. that's think we're get as an we've on towards feeling for our that's of good and strengthening incremental strongest we extraordinary XXXX and always jet through we there, again, saw did the activity QX interest revenue just seen into guide a has terms of of stuff, that level we amount gave that we quarter. see deliveries respect activity in that and order order been why was the I dialogues with you but And certain out QX. flow year, and that

So is again, you delivery. highest as our always know, QX

so, a supports view challenge there. year. guide this what And I activity always book-to-bill But think for was the is in on certainly revenue order our

George Shapiro

a you're you is color implies Is it's just which seeing? pretty Aviation so pricing margin, little incremental strong? could why about your give XX% for on And on that a projection reflecting a better that if incremental. strong more Or

Scott Donnelly

better we pricing. to see certainly Well, expect do

QX in well. have as We better pricing

when lot continued idle we of also So, you've XXXX. But some would was improvement. facility that – year-over-year, in expect price at there in a George, to look you given got the cost it's environment, certainly the demand see

would certainly rebound expect considerably XXXX, leverage so, so back see of And in normally kind that we to to XX% you kind expect that better in the levels of range. to with had or we than

Operator

go to of Barclays. we'll Strauss Next, line David of the

David Strauss

so how as or year what terms, the --I about plan, plan not of prior Cessna the the that on absolute to are on back sold to compared just you in years, but past? seen relative in can entering you've Scott, you talk XXX guess deliveries, how kind

Scott Donnelly

don't situation number I a So, pretty We very the seeing, is comparable. – than different David. backlog provide usually it's used we're Right? think to don't

David Strauss

looks then been XX% Would mix? similar expect they've you us on a maybe And Longitude, update about of Latitude, you Okay. if XX%, deliveries. like running Longitude. total And could just

of Where I think overall it to today dilutive a margins. kind – seen relative that as to while, for it was average? dilutive aviation was the sits

Scott Donnelly

Well, I that you initial are there's on aircraft dilution. David, when more some expensive. those had see But it, going aircraft. doubt always don't think into to builds, Obviously, margins no look I'm we particular the get

think have strong pretty and some good shut is this done the through job there's we I it back product a that. margin I a plant track brought nice up, gross Longitude the us. working for down as but Obviously, a guys be to year of interruption think on

I has been good. think demand

this retail the have doing As there few well. aircraft in is fleet thing a you out we out – operating quite and really, really know, that's NetJets

of won't probably very margin aircraft, where I is. go with So, gross the terms by but Longitude in happy we're

David Strauss

we of deliveries, Longitude, within mix as see in a what think in similar past? the kind Latitude, Just you range

Scott Donnelly

I expect the about so. same. It be Yeah. would should

Operator

the of Global to Skibitski Pete Alembic of go we'll line Next, Advisors.

Peter Skibitski

what GBSD revenue, terms primarily. in is it XXXX? XXXX, kind of might drove I Was going be have And the to think missed kind just very to backlog. I it if in through converting of was, slow if it then, Systems big of mentioned you increase that ramp that

Scott Donnelly

several is QX. recognize any plus started as most segments, of million revenue hundred were absolutely, that on just backlog, We in so, really Pete, of which the there, of went business. across at the kind in to kind So, GBSD Systems, dollars

year kind of five that's window. So, a yeah,

into go XXXX as through So, it'll here ramp XXXX. we

the We some wins, order and We the some nice about have awards, the we well of the block Shadow adds CAPCAS as ongoing three. the recompete – the Navy, ATAC with task to talked obviously, some both backlog. program as on had

So, it of segments. across the most was

Peter Skibitski

kind that there, of Or XXXX unusual XX.X%, guidance margin business? we thinking the dynamic? kind steady that's of from of some benefit of does the be kind that Just for new should state the

Scott Donnelly

it's is business defense this probably this – think a I oriented No, very – segment. is again,

So, of where we XX%, to expect would sort XX% is that business margins be.

Operator

Citi. to Raviv we'll line the go Next, of Jon of

Jon Raviv

ask to that Any speak? this I'd the and on still XX% of the opportunity, lot other said side about year a guidance rate, to for the so margin. you of have margin margin normalized thought I just Bell understood You XX%. Bell on for thoughts sort Bell FVL. versus of the FVL opportunity

Scott Donnelly

to on goes, and right? and that. going so opportunities, to volume depend don't It's think ready where at guide much FMS I V-XXs Looking HXs we're

into you with challenges a some obviously. see to programs, to full revenue, EMG [indiscernible] very it So, be OTA going of these come One year, our this and the growth obviously, start blown revenue not high R&D is at you'll which least swings side, program, even have through margin, government doesn't right? associated

depend like. looks that mix So, a it'll on what lot

have lot some on and I to more where until into think pretty or a FMS insight So, it's mix are and we that FVL XXXX contract are out beyond. give where in you opportunities, – they hard the award

Jon Raviv

And in back could looking And conversation including still is double around there be it, And delivery can structurally call be levels? cards is appreciate with aviation, XXXX we the year, when the fleet production should and the, given that going that? feel forward? should a at in still getting of half the the just the opportunity medium get term? those drop from market you feel like your therefore, last do customers, larger you're margin an but this digit year you still that what to idea operators, back on Just this fully

Scott Donnelly

club. a No, mid-size, and business much it, very I from refer light would going that's structural still market. favor. the We're of with that sales. dialogues It's board. and you the certainly that jets, be coming is charter happening in we and fractional know on to macro want lot to customers really that say standpoint, across to a seeing customers like We a feel in new new new the We standpoint particularly however aircraft have to

to much charter demand. activity, there reflection rebound just part much I why because driven very are see think certainly by is that's operators, seen see on of guys same business Part XXX the But the of really aircraft all travel. leisure expect operators, we so that start you again. as travel the supports of used dynamic haven't these seeing demand we side And to strong out yet that's very, businesses

lot think like And this macro will is this good COVID get we of a level a the structurally, we'll why think a that still about end good for back I of half business recovery feel that a yet, which that's to not bizjet at the we XXXX seeing And drive And overhang, obviously, would when it year. get in think timeframe. larger you I to certainly XXXX we – is that level, that. market, back expect is XXXX world. why demand which pretty So, see into to impacts participant and feel everyone there's then, an we we'll see

Jon Raviv

is those business Just it get on you back opportunity, margin to levels? still a when double-digit the margin

Scott Donnelly

as XX%, those more that I our XX% levels think back see conversion beyond to on that. strong very then normalized more we leverage to we Yeah. we'll growth back And – get again, probably and were

Operator

the go Ron of we'll of line Next, Epstein America. to Bank of

Ronald Epstein

the the the for what's change with a environment? Future Scott, thinking versus flattening administration there's in how lot sense FLRAA, about on components, but are your know FARA of of Vertical I you that Lift of budget possibility a thing? kind support and

Scott Donnelly

a environment, is is about that platforms of And source, modernization on to end those. a very, as their funding to to important know part this, spending things I about years. [ph]. In versus FVL they legacy they've one Everything very, strategy. that several And focus public they talked of on these the they very what need very, to couple, a we've a even a challenging putting obviously, top Obviously, for and that remains committed one these modernize their of their of they priorities. remains they continue talk important their And that about budget is And heard, has lot be strength primary talk army and continue forward. very now of platforms. been modernizing about the lot think money

have I think are they Gen. McConville has clear, when has the fact FLRAA came and said they Gen. The full draft very been clear, Murray been on their speed expectations ahead. going and very RFP to still an middle out of that out that full RFP speed are in committing everything out see commitment, to here in still XXXX, future the we not-too-distant XXX% down-select, it's a is ahead. full

Ronald Epstein

on with up What's topic it anymore, over? you still nobody up trying the that curious it's in the if market with collecting Are it, a Maybe Scorpion? to dust. going what's guys parked but just garage anything, Is if brings just it?

Scott Donnelly

or still the certification. interest. our the fly with government side getting tell has I'll had it. last But some been so, – we've still And primary AT-X certain through you, focus the aircraft the the things its for do year military of business We has on and occasion the on

Force As aircraft, obviously. for small We've pathway. give first But you certification number it aircraft them. a to a did program us did know, delivered the do of a only the Air

aircraft. soon surgery customers and up inquired are and for to get the that wrapped pretty we already that going we international have pipe hope proposals on have So, that

through where And see get from that we we'll think go then there. first. I So,

Operator

on. of Peter Seifman go Morgan. of line Baird. of move J.P. to Arment go We'll We'll Seth next line to of we'll the Next, the

Peter Arment

you of liquidity start forward. Do of to Scott, of guys you'd regarding have going terms the continue more have like be in cash. gen to deploying guys you continued question when to lot target generate It you're lot a a liquidity, aggressive cash going ratio looks to it?

Scott Donnelly

that We're cash side. maturities, is There's tranches off this being XXXX. cash the the of a about recall, that, is pay one sheet part balance cash little After sitting the that's come $XXX But until pre-funded debt. have out we what balance the which year's bit of that sheet we right two on million, still due to this around so don't that are our conservative another year. will now

So, I on think we're cash. in position good very

buyback what's we we'll understand that. have conservative going but capital economy, doing and reinitiated we said, to plenty us think degrees on the with think be our I a certainly will little And end I beginning we forward. we the going just As at to it the maybe and program, make of where allocate gives so here markets of sure flexibility

Peter Arment

clarification first And half half, kind assume I kind plan the the of second just normal when think of just your Aviation kind of assuming it's a weighted versus on we half – cadence. about second delivery for deliveries, the

Scott Donnelly

Yeah, I say would that.

year I look going to a normal like kind it's think of us. a for

Operator

we'll J.P. Seifman's Morgan. Mr. With revisit And line.

Seth Seifman

of nice can if profitability, business missed Kautex up apologize stacks that you then where sort profitability I vehicles, number, fairly quick, And think real Industrial of are beginning, for on sort the be the this Just qualitatively. year and vehicles. not but if talk at sort it you a where kind where I it's and path between even in of of of the but if you about the expectations

Scott Donnelly

see IHS use trajectory we'll as does. data businesses in think of we go kind – we into the on I side both XXXX. The like rebounds everybody nice Kautex

I So, up, much here and in volume think XXXX. some the for hybrid chain largely be working and will all deliveries good which driving I A improved issues But and saw is I think think us. those the auto they're expectations here back ramping supply our of always, in what is as there. through We There's QX. lot shortages mix certainly automotive continued have guys into recovery expecting. been we're market that for

segment that really in of a position have market. good We the

pretty margins. about is the So, on. Kautex back of I strong good that And think the sort we frankly, feel at trajectory

when retail year, back suppliers half continued PTVs to ground was we very strong business business, and momentum. in to going To On the the and to everything even PTV just and the of look and strong. we on start whatnot. business, commercial through see at ex for continue be up us vehicle because our sides smaller powersports, see until very which equipment to keep been that's from here we challenges solid golf. snowmobiles, I see struggling to aviation the supply And the year expect chain think by challenged COVID side we've The that been side, another back, to honest, support because coming certainly be expect you last we've got based own has in

part, have by know we demand see think that I growth restocking on on to part the continued business So, and will the we do. And in side. in growth, retail

So, – level I'd low inventory the the very I and rather high obviously. inventory level, a a think see on

in we're demand our growth to end there. as we'll on restock a like both But place. see need think I as we well based retail dealers good out definitely So, feel market

Seth Seifman

then, term, that longer the business? on profitability in thoughts And

Scott Donnelly

think margins continue to The business historical are see I we'll in growing. that businesses good.

to no side, the that those, of is question years more manufacturing we've Obviously, business. segment we need we'll in in our includes that see which greater manufacturing business. here continue than to in of rates. and offroad considerably improved couple profitability the terms we And grow XXXX, last the volume capacities capability as of see On seeing what the been there's

Seth Seifman

on Aviation. follow-up Just one

of and couple the usage You that fractional direction over your mentioned out you next evolving in the course charter Do of about aircraft. terms in years? look the of base we that think mix strength customer of in as significantly

Scott Donnelly

they is a customers, they most usually and seen for asset the that balance where have companies And travel. use our that or companies. own The leisure their own I mix. asset, the they – both think of business we've issue always

because business dynamic is market, into using more coming I lack leisure will we in. customers right of of customers travel. seeing So, business the But for assets just And both use the the many to think historical leisure trips. has. base going deployed They'll now it than when our those I of marketplace see business think the you're so for new and customer like are number only the those come much it be in

Seth Seifman

of past terms over see of next similar fairly and So, in deliveries. fractional few between in looking years retail you that as has sort charter the the it mix your

Scott Donnelly

Latitude mix get of look fraction normal through those that I owning what of world? kind call our been choose has going share in flying sold a stays and more with who ratio. aircraft think you're going owning that structural But back we cycles, a like charter versus is I Longitude whole being – in Yeah, us versus about retail the think are It's would between operate going of have through that has. same the it many Obviously, by aircraft. how fractional an about to versus talking change the no, there, it these much the world. helped see You're to any out to to funny, NetJets don't

Operator

We'll go Poponak next to the line of Goldman of Noah Sachs.

Noah Poponak

how Scott, point? is Is is this what's And in that with at annual Shadow that it happening? replacement? big happening? for When happening revenue you

Scott Donnelly

FTUAS replacement, is is program, Shadow the which ongoing. The

army to few were soldier As were months, which you step probably know, several another that the coming own their There's up army there deployed different which do different in are soldiers help a bases evaluations. they'll to in where the rodeo platforms to terms process in one that of them all different the And a bring what the those hosts platforms will systems. to inform operate of them requirements. will base and each

So, come turn as they document, an evaluations requirements they all they'll then current those FTUAS through of and have their with around would that army go the which on plan rodeo, is this end issue the RFP. year, by as I think up and including year, the what have

would I sometime probably early So, in would that expect XXXX. be

Noah Poponak

systems contributes revenue that us annual point? sense give you this a Can how at much for to

Scott Donnelly

I line. you order configuration. $XX No, the within million, block the as got don't But just out segment an building revenue in break which three is saw, for don't more aircraft so. think We we individual

continue. army obviously, platform. And upgrades of operations, sort expect I what that Shadow next see going to activity the until in up we'll their terms decides continue, generation of So, they're do

Noah Poponak

there's the that and you're making year maybe investment still drivers then some I about have this on as Lift size the up And to XX.X% to investment you've margin way if just making? Following that. guess, you you the guess Bell less investment, I upside mature normally be as of that upside have you've wondering, program guess guess for incremental exceeded done if year forecasting you're the I have? I definitively year segment's Vertical any or I'm this And discussion, an margin Future started

Scott Donnelly

Well, we R&D definitely have the headwind FVL increased program. on on the

at And FLRAA test a same reaching around fair the time. flight incurring is of we've going where building point and on cost FARA FARA So, a we're both here got bit articles.

So, R&D and I somewhat with compression based HXs additional first the that's offset somewhat commercial, we're think guiding all, some R&D. driven program. fairly revenue around on it why reflects of lower revenue deliveries the lower year, those by on margin – largely higher that FVL we and going are modest see in And lower to

Noah Poponak

is? Can you higher much the how R&D size

Scott Donnelly

No.

Noah Poponak

Just the will it given pressures versus I one half. of half first correct question seasonally year at were in loaded last progression quarterly heavier first less one was in the there the than But know back-half assume to the half be through always in back that it it on is the Aviation. it's XXXX, the of the that significantly year? the

Scott Donnelly

heavier. to would biggest it's in things always Well, Frankly, of happened year, that March. badly. last quarter. hurt is just QX QX our I kind characteristically that in QX going say wasn't be

difference think QX well. I be very where going So, and XXXX XXXX different QX and The basis more the are QX fine. that was of QX QX on going look real in as year-over-year is a be XXXX QX normal in our ordinarily than to big won't to deliveries that whereas

Operator

Stanley. of Liwag go Kristine of next to Morgan line We'll

Kristine Liwag

that with not faster overall think that business recovering with than we one Scott, for rate there flights flights, should commercial to hubs a city case? business think manufacturing overall pairs that and I and dynamics should return rate of the just why that commercial especially should in you Are recover, or items fewer fewer airlines the may market? jets be than recover would a as when other the options US travel. be consider get smaller at demand still really available Because would steeper your and business at commercial

Scott Donnelly

seeing think that. we're do I

business I what They Again, have were moderate XX%. the aviation hours is leisure dynamic over up is think that to that all really obviously. prior you in flight that December, is – at a the So, actually they had above November year. recovery that recovered in dynamic have they in But much travel. US, the bit were faster driven and about than up by little been commercial,

– So, normal and world, probably in the data a again, this we is not exactly collected way.

say exact of hard augmentation But trips certainly those to and numbers of around jet leisure the then travel. aircraft it's flying utilization for an it. get are business business that most there's So you'd

now think is I right travel. seeing exclusively we're almost leisure what

is got you've a to almost flight all back flying hours, in terms normalized the were but of So, basis where almost on the you leisure. all more of flying,

to start add to you go that's because already that flying, the So, is of someone airport get airport area to which in that of and demand feel will that strong see you with you we've we're more bizjet small the past. strong very you're leisure top you to into with a schedules. demand side down, that family through small comfortable aircraft getting you think on another see fewer those as them things start It's recover, a commercial the sorts for seen restrictions what travel I business talking of is trips and it's what the over with dramatically And seeing in health the is these very see see it business fewer versus trip see land just with back, getting area onto People coming on conferences when day. on flights the And a as dynamic economy again, hubs, side, come or to lower from challenging of going about, aircraft. more you themselves it. also and part to flights, an meetings,

what is more which much issue than the this has commercial, rebound, leisure. been is we've seen in pronounced all that So,

belief our and in that, travel will really today, you so, top of little only again, because to it very And come back in people expect back though we're to strong business on about when will change, but see and And that's the the bit, muting trips. a good travel. even a have starts add this it still that as on I travel rebound very side business little you very what's feel seeing you again, is is But on recovery. business start economy travel, leisure the that

Kristine Liwag

industry in traction? really are the on could separate thinking could what's new on if gain you a your another about question urban entrants aircraft? mobility I Nexus you And How the We're progress topic. air add taxi And lot this? of your seeing a market. Do think also, air

Scott Donnelly

we've know, you our Nexus investments As made platform. in

business on looks where kind but much getting going the are but and environment model. to how how there we the what much being to Because what where There's lot to the continue real that regulatory work these cautious that gate of there for like. around uncertainty again, how is – One that air taxi lot a the these things are here. as environment and a two like. little spend you issues regulatory look to going are obviously And and program, understand a I We we invest on we people is are what invest, are here and again, still the for like routings are controlled fly it of aircraft believe, taxi. we understand they have certainty to businesses volume going at what will beings the around is, airspace the aircraft. what such air a an vision human certify what model, taxi case therefore, have trying full altitudes And through to of are regulatory standards And take evolving is a in regulatory the going don't will and Those these that to to of operate. approval to looks and go have them, other to operate with and will process. depend the approval uncertainty

technology to getting go in not that do go involved ability the ahead. of terms say to a But of would that meet I and I we can an capable that a more And aircraft other So, when and be Cai that's the business lot do out design that too you cautious next that's is in in to I line uncertain hype about successful. regulatory here very Bell to and so front far out we'll hear think to order team of allow absolutely the our to Rumohr. you far be have mission, than qualified environment much that. model would say that think there. Please the von of think I certify

Cai von Rumohr

$X.XX roughly, and haven't That earnings? million. where at Thanks. Is you centered you've it got looks is for said pension, to Bell to of like, adds, the XX guide aviation? your bps $XX it margin, XXXX? on already, If swing tax mostly And a the rate that at

Frank Connor

is tax We The that. XX%. mentioned rate had

has the separate impact because Bell Bell a pension impact side, the not plan. does On

businesses the across well otherwise as any rest the employees. as the spread is of corporate So, impact

Cai von Rumohr

continue that's I a would does at next And future I that's that Because your Bell, R&D at R&D R&D is big predominantly assume the that – you the roughly? continue at R&D. on assume mentioned lower year? of in into FARA. how level lift level, Does far V-XXX, in

Scott Donnelly

Well, right, absolutely that's Cai.

March the that now, minute XXXX. of FLRAA. So, – is on level finishing next of – is you're and because in of timeframe of lesser in lesser CRR for you're the So, the in sort of becomes assembly. and a the FLRAA manufacturing the on two you're detailed the That goes realty, FARA that starting Right? Because design, which all the program. here activity the program two component right activity, that's going where phase you're middle really is phase active of of here one right the the two, to drive the the of it now, years lot a R&D until

into the end go first flight you is XXXX. of XXXX, As at

test the in go really course the costs by the program Then ready into XXXX, the flight that's of FARA is for and of completing all you and through program. that all have getting really you So, program year. flight XXXX driven test design

schedule. program the that's So,

XXXX, the And balanced, a as of particularly you little R&D it's go get highly year, year. a in through This significant by more FARA spending relative XXXX. driven level but FARA, as into this so, is you increase

Cai von Rumohr

Cash One one. last deployment.

share you're You've dividend? think maturities. It M&A To extent looks and/or you of do on near-term repurchase. focused care basically like your of taken totally what

Scott Donnelly

to we're around the where don't I right dialogue point a think now in going of have we're dividend. a lot

opportunistic, this buybacks. year strategy going have are made as served view think to how is focused as we came that would us M&A through to see primarily the but a we lot the of a I it again, Cai. of businesses sense, for thought performing. being, If share year. the with we'll went is what's be be that and that on we along well something going kind around and gate time our economy challenging

Cai von Rumohr

got it you've you your Systems, rationalizing about that? about it's really you If Aviation lots more at if isn't. business, concentrated? that Obviously, so of and Bell look at businesses look portfolio, thoughts different systems. thought are and your Any But Any concentrated.

Scott Donnelly

of deliveries been today at on is did which augmented player small activity. You're We'll on shore, major quarter. the obviously to vehicle to side, some right. series the are start program year was medium ATAC as, that into strategy, think, business, we winning the the the primarily GBSD well important make weapons investment look, in the you for business Air first to bringing again, last that year if in where land Force invest obviously, to by some turn Systems here that on area we the the smaller winning ship has a doing has like been a at huge program, of around investments which terms of us that I things the and been defense and as largely organic Navy through on side our RCV we're a has of us, in orders, aircraft our was a Look a CAPCAS primarily for nice side. task things going on new very And in be oriented. of the recompete And program. strategy

So, those are very nice businesses.

lot that and they're a And made from of margins. nice very year here year a be programs frankly from we generate investment can we want. they and through benefiting this think new of that the I end to lot going of last going

us. to successful growing So, I nice for very a business think it's and going be

Operator

XX through that conference a.m. call. X midnight. May at This available for for And today, Eastern after Thank you. does running conclude be our today's will Time, replay session Q&A

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Textron (TXT) 27 Jan 212020 Q4 Earnings call transcript