Textron Inc. reported first quarter 2018 income from continuing operations of $0.72 per share. This compares to $0.37 per share in the first quarter of 2017, or $0.46 per share of adjusted income from continuing operations, a non-GAAP measure that is defined and reconciled to GAAP in an attachment to this release.
“Increased revenues reflected growth at Industrial, Bell, and Textron Aviation, with lower revenues at Textron Systems, consistent with our expectations,” said Textron chairman and CEO Scott C. Donnelly. “Operationally we achieved significant margin improvements at Textron Aviation and Textron Systems over this quarter last year and sustained margin strength at Bell, reflecting strong performance in these segments.”
Net cash used by operating activities of continuing operations of the manufacturing group for the first quarter totaled $53 million, compared to $165 million in last year’s first quarter. Manufacturing cash flow before pension contributions, a non-GAAP measure that is defined and reconciled to GAAP in an attachment to this release, reflected a use of cash of $158 million compared to $227 million during last year’s first quarter.
In the quarter, Textron returned $344 million to shareholders through share repurchases, compared to $186 million in the first quarter of 2017.
Textron announced that it has reached a definitive agreement to sell its Tools & Test business to Emerson, a global technology and engineering company, for approximately $810 million in cash.
Included in the sale are all the Textron Tools & Test businesses and brands – Greenlee, Greenlee Communications, Greenlee Utility, HD Electric, Klauke, Sherman+Reilly, and Endura. The transaction is subject to regulatory approvals and other customary closing conditions, and is expected to close during the third quarter of 2018. Proceeds from the sale are expected to be used to fund additional share repurchases to offset the earnings impact related to the sale.
Share Repurchase Plan
Textron’s Board of Directors has also authorized the repurchase of up to 40 million shares of the company’s common stock which is sufficient for repurchases related to the Tools & Test divestiture as well as to continue the company’s practice of repurchasing shares to offset the impact of dilution from stock-based compensation and benefit plans, and for opportunistic capital management purposes. The new authorization replaces a previous one, approved in January 2017, which was nearing completion.
Textron confirmed its 2018 earnings per share from continuing operations guidance of $2.95 to $3.15 and its expectation for cash flow from continuing operations of the manufacturing group before pension contributions of $700 to $800 million with planned pension contributions of about $55 million.
This guidance includes the expected impact of the Tools & Test divestiture on earnings per share and cash flow from continuing operations.
Donnelly continued, “We are on track for a strong 2018 as we continue our focus on operational improvement and look to capitalize on improving end markets.”
First Quarter Segment Results
Revenues at Textron Aviation of $1.0 billion were up 4%, primarily due to higher price and volume.
Textron Aviation delivered 36 jets, up from 35 last year, and 29 commercial turboprops, up from 20 last year.
Segment profit was $72 million in the first quarter, up from $36 million a year ago, due to favorable volume and mix, performance, and price.
Textron Aviation backlog at the end of the first quarter was $1.6 billion.
Bell revenues were $752 million, up 8% on higher military volume, partially offset by lower commercial revenues due to mix of aircraft sold.
Bell delivered 46 commercial helicopters in the quarter, up from 27 last year.
Segment profit of $87 million was up $4 million, primarily due to the higher volume.
Bell backlog at the end of the first quarter was $3.6 billion.
Revenues at Textron Systems were $387 million, down from $416 million last year, largely on lower volume at Weapons & Sensors related to the discontinuance of SFW production in 2017.
Segment profit was up $30 million despite the lower revenue, primarily reflecting improved performance at Marine and Land.
Textron Systems’ backlog at the end of the first quarter was $1.4 billion.
Industrial revenues increased $139 million largely related to favorable foreign exchange, the Arctic Cat acquisition, and higher volumes across each business line.
Segment profit was down $12 million despite the increase in revenues from the first quarter of 2017, due to the timing of the Arctic Cat acquisition in the prior year.
Finance segment revenues decreased $2 million and segment profit increased $2 million.