Textron Inc TXT
Q2 2013 Earnings Call Transcript

Transcript Call Date 07/17/2013

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

I would now like to turn the conference over to our host, Vice President of Investor Relations, Mr. Doug Wilburne. Please go ahead.

Douglas R. Wilburne - VP, IR: Thanks you, Tawny, and good morning, everyone. Before we begin, I'd like to mention we will be discussing future estimates and expectations during our call today. These forward-looking statements are subject to various risk factors, which are detailed in our SEC filings and also in our earnings release.

On the call today, we have Scott Donnelly, Textron's Chairman and CEO; and Frank Connor, our Chief Financial Officer. Our earnings call presentation can be found in the Investor Relations' section of our website.

Moving now to second quarter results starting with Slide 3. Revenues in the quarter were $2.8 billion, down 6% from a year ago. Our income from continuing operations was $0.40 per share, which compares to $0.58 in the second quarter of 2012.

Moving to cash flow, second quarter Manufacturing cash flow before pension contributions was a $362 million use of cash. And second quarter pension contributions were $17 million.

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

Scott C. Donnelly - Chairman, President and CEO: Thanks, Doug, and good morning, everybody. We saw solid revenue growth at Textron Systems and our Industrial businesses, as well as strong commercial orders of Bell. On the business jet front, demand continued to be soft. As we announced in April, we took cost reduction pricing actions appropriate for this market environment. Specifically, we re-lowered our light jet production line rates, reduced associated direct headcount, downsized our indirect workforce and reduced our jet discount allowance. As we expected, reduced discounting to entice customers into the market did result in lower sales volume as we delivered 20 jets compared to 49 a year ago. However, we achieved positive new jet pricing on both a sequential and year-over-year basis, which was our intent. We still believe the overall market demand will eventually recover as global economic – the global economies continues to expand.

With respect to the rollout of our new M2, Sovereign and TEN product lines, we are making good progress with certification testing. The aircraft are performing extremely well, although minor delays in avionics software certification has slightly delayed initial delivery dates. We would now expect M2 and Sovereign to begin shipping in the fourth quarter this year with the new Citation TEN early next year. This will reduce total expected 2013 shipments resulting in a new full year Cessna revenue outlook of just over $3 billion.

Looking longer term with new products, we're making good progress in our Latitude and Longitude platforms planned for service entry in 2015 and '17. In fact, the first Latitude fuselage in those sections were mated last week, and we're on track for flight test early next year. Market receptivity for this new model has been very good as we conducted a 19-city tour with our mock up during the quarter.

Read our Earnings Call Transcript disclaimer.
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