Textron Reports Second Quarter 2017 Results; Reaffirms 2017 Financial Outlook

(a) During 2016, we initiated a plan to restructure and realign our businesses by implementing headcount reductions, facility consolidations and other actions in order to improve overall operating efficiency across Textron. In the three and six months ended July 1, 2017, we recorded Special charges of $12 million and $27 million, respectively, related to this plan. In connection with the acquisition of Arctic Cat, we recorded Special charges of $23 million in the six months ended July 1, 2017, which consisted of severance costs of $19 million, principally related to change-of-control provisions, and integration and transaction costs of $4 million.

(b) Adjusted income from continuing operations and adjusted diluted earnings per share are non-GAAP financial measures as defined in "Non-GAAP Financial Measures" attached to this release.

         
Textron Inc.
Condensed Consolidated Balance Sheets
(In millions)
(Unaudited)
             

July 1,
2017

   

 

December 31,
2016

Assets
Cash and equivalents $ 938 $ 1,137
Accounts receivable, net 1,236 1,064
Inventories 4,655 4,464
Other current assets 357 388
Net property, plant and equipment 2,669 2,581
Goodwill 2,340 2,113
Other assets 2,376 2,331
Finance group assets   1,204       1,280
Total Assets $ 15,775     $ 15,358
 
 
Liabilities and Shareholders' Equity
Short-term debt and current portion of long-term debt $ 362 $ 363
Current liabilities 3,643 3,530
Other liabilities 2,275 2,354
Long-term debt 2,774 2,414
Finance group liabilities   1,039       1,123
Total Liabilities 10,093 9,784
 
Total Shareholders' Equity   5,682       5,574
Total Liabilities and Shareholders' Equity $ 15,775     $ 15,358
 
                       
TEXTRON INC.
MANUFACTURING GROUP
Condensed Schedule of Cash Flows
(In millions)
(Unaudited)
   
Three Months Ended Six Months Ended
July 1, July 2, July 1, July 2,
2017       2016 2017      

2016

Cash flows from operating activities:
Income from continuing operations $ 150 $ 174 $ 244 $ 322
Depreciation and amortization 108 111 211 217
Changes in working capital 88 (211 ) (225 ) (601 )
Changes in other assets and liabilities and non-cash items 67 4 40 (8 )
Dividends Received from TFC   -           29     -           29  
Net cash from operating activities of continuing operations   413           107     270           (41 )
Cash flows from investing activities:
Net cash used in acquisitions (11 ) (15 ) (329 ) (179 )
Capital expenditures (85 ) (119 ) (161 ) (207 )
Proceeds from the sale of property, plant and equipment - 3 - 5
Other investing activities, net   -           -     1           (2 )

Net cash from investing activities

  (96 )         (131 )   (489 )         (383 )
Cash flows from financing activities:
Proceeds from long-term debt - - 347 345
Increase (decrease) in short-term debt (100 ) (30 ) - 12
Purchases of Textron common stock (143 ) - (329 ) (215 )
Other financing activities, net   (3 )         (2 )   10           (1 )
Net cash from financing activities   (246 )         (32 )   28           141  
Total cash flows from continuing operations 71 (56 ) (191 ) (283 )
Total cash flows from discontinued operations 2 (1 ) (23 ) (1 )
Effect of exchange rate changes on cash and equivalents   7           (5 )   15           (1 )
Net change in cash and equivalents 80 (62 ) (199 ) (285 )
Cash and equivalents at beginning of period   858           723     1,137           946  
Cash and equivalents at end of period $ 938         $ 661   $ 938         $ 661  
 

Manufacturing Cash Flow GAAP to Non-GAAP Reconciliation:

                   
Net cash from operating activities of continuing operations - GAAP $ 413 $ 107 $ 270 $ (41 )
Less: Capital expenditures (85 ) (119 ) (161 ) (207 )

Dividends received from TFC

- (29 ) - (29 )
Plus: Total pension contributions 13 12 27 24
Proceeds from the sale of property, plant and equipment   -           3     -           5  
Manufacturing cash flow before pension contributions- Non-GAAP (a) $ 341         $ (26 ) $ 136         $ (248 )
 
 

(a) Manufacturing cash flow before pension contributions is a non-GAAP financial measure as defined in "Non-GAAP Financial Measures" attached to this release.

 
TEXTRON INC.
Condensed Consolidated Schedule of Cash Flows
(In millions)
(Unaudited)
                   
Three Months Ended

Six Months Ended

July 1, July 2, July 1, July 2,
2017       2016 2017       2016
Cash flows from operating activities:
Income from continuing operations $ 153 $ 178 $ 253 $ 329
Depreciation and amortization 112 114 218 223
Changes in working capital 128 (168 ) (219 ) (568 )
Changes in other assets and liabilities and non-cash items   65           (4 )   37           (14 )
Net cash from operating activities of continuing operations   458           120     289           (30 )
Cash flows from investing activities:
Net cash used in acquisitions (11 ) (15 ) (329 ) (179 )
Capital expenditures (85 ) (119 ) (161 ) (207 )
Finance receivables repaid 9 19 24 36
Other investing activities, net   21           42     34           52  
Net cash from investing activities   (66 )         (73 )   (432 )         (298 )
Cash flows from financing activities:
Proceeds from long-term debt 13 - 375 362
Increase (decrease) in short-term debt (100 ) (30 ) - 12
Principal payments on long-term debt and nonrecourse debt (36 ) (44 ) (74 )

(90

)
Purchases of Textron common stock (143 ) - (329 ) (215 )
Other financing activities, net   (3 )         (2 )   10           (1 )
Net cash from financing activities   (269 )         (76 )   (18 )         68  
Total cash flows from continuing operations 123 (29 ) (161 ) (260 )
Total cash flows from discontinued operations 2 (1 ) (23 ) (1 )
Effect of exchange rate changes on cash and equivalents   7           (5 )   15           (1 )
Net change in cash and equivalents 132 (35 ) (169 ) (262 )
Cash and equivalents at beginning of period   997           778     1,298           1,005  
Cash and equivalents at end of period $ 1,129         $ 743   $ 1,129         $ 743  
 
 
TEXTRON INC.
Non-GAAP Financial Measures
  (Dollars in millions, except per share amounts)

We supplement the reporting of our financial information determined under U.S. generally accepted accounting principles (GAAP) with certain non-GAAP financial measures.  These non-GAAP financial measures exclude certain significant items that may not be indicative of, or are unrelated to, results from our ongoing business operations.  We believe that these non-GAAP measures may be useful for period-over-period comparisons of underlying business trends and our ongoing business performance, however, they should be used in conjunction with GAAP measures.  Our non-GAAP measures should not be considered in isolation or as a substitute for the related GAAP measures, and other companies may define similarly named measures differently. We encourage investors to review our financial statements and publicly-filed reports in the entirety and not to rely on any single financial measure.  We utilize the following definitions for the non-GAAP financial measures included in this release:

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