Textron Inc.

Ladies and gentlemen, thank you for standing by. Welcome to the Textron third quarter earnings conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. If you'd like to ask a question, please press 1, then 0. If you should require assistance during the call, please press star, then 0. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Vice President of Investor Relations, Mr. Eric Salander. Please go ahead.

Thanks, Greg, 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 today's press release. On the call today, we have Scott Donnelly, Textron's Chairman and CEO, and Frank Conner, our Chief Financial Officer. Our earnings call presentation can be found in the Investor Relations section of our website. Revenues in the quarter were $2.7 billion down from $3.3 billion in last year's third quarter. During this year's third quarter, we reported net income at $0.50 per share compared to $0.95 per share in the third quarter of 2019. Adjusted net income, a non-GAAP measure, was $0.53 per share for the third quarter of 2020. Adjusted net income excludes $7 million of pretax special charges, $0.03 per share after tax, related to the restructuring plan announced in the second quarter. Segment profit in the quarter was $189 million, down from $297 million in the third quarter of 2019. Manufacturing cash flow before pension contributions totaled $344 million, up $163 million from last year's third quarter. With that, I'll turn the call over to Scott.

Thanks, Eric, and good morning, everyone. Overall, the third quarter results reflected a strong operating performance across all our teams with strong cash generation and improved margins. At Bell, we had a very strong quarter with 15% operating margin on slightly higher revenues. On the commercial side at Bell, we delivered 41 helicopters down from 42 in last year's third quarter. Military remains strong in the quarter, largely due to a higher aftermarket volume on existing contracts in support of the V-22 and H-1 fleets. Also in the quarter, Bell continued to increase the scope of its support of the U.S. military aircraft with the award of a new $213 million H-1 spares contract. In the past year, H-1 aftermarket contracts now total over $1 billion. Also in the third quarter, Bell definitized a $272 million contract on the H-1 program with the Czech Republic for eight Yankees and four Zulus. On future vertical lift, the V-280 continues to fly in support of the Army's risk reduction program and has now flown over 190 hours as we continue to demonstrate the capabilities of this aircraft to our Army customer. On FARA, Bell has begun building the 360 Invictus prototype aircraft, starting with gearboxes, rotors, and airframe structure. Moving to Textron Systems, the third quarter was strong with margins of 13.2%. In the quarter, Systems was awarded an initial contract to support the ground-based strategic deterrent missile system as a subcontractor to Northrop Grumman, which worked beginning this year. Also in the quarter, Systems received an additional task order for the Air Force CAPCAS program to support Eglin Air Force Base. This award is in addition to the two bases announced at the end of the second quarter. Systems also announced a successful flyway of the first two ship-to-shore connector, Craft 100 and 101, These two craft are now stationed at Panama City, Florida, where they've been placed into testing and operational roles by the U.S. Navy. At aviation, revenues were down in the quarter as expected from lower new aircraft deliveries and aftermarket volume. We delivered 25 jets down from 45 last year and 21 commercial turboprops down from 39 in last year's third quarter. While the pandemic impacted volume in the quarter, we did see aircraft utilization levels continue to recover and were encouraged by new order flow. Order activity was strong in the quarter, reflecting an increase in new aircraft bookings that resulted in backlog growth of $400 million to $1.8 billion at the quarter end. On the new product front, we inducted the third Cessna SkyCurry into the aircraft certification program, which to date has accumulated over 240 flight hours. The program is progressing well, and the aircraft is on track for certification and entry into service in the second half of 2021. We announced the new Beechcraft King Air 360, which recently received FAA-type certification. This updated turboprop includes technological advances to the flight deck and enhancements to passenger comfort. Moving to industrial, revenues were down from last year's third quarter, primarily due to lower volume in specialized vehicles, principally reflecting the timing of snowmobile deliveries and reduced demand in the ground support equipment business. At specialized vehicles, we continue to see strong retail demand in our outdoor power sports business during the third quarter and expect revenue growth in the fourth quarter. At Caltechs, the automotive production outlook has steadily improved since the low point in May, and demand from our customers has returned faster than anticipated. Caltech's teams have responded well in managing costs and executing through these challenging times and delivered a strong operating performance in the third quarter. With that, I'll turn the call over to Frank.