Textron Inc.

Ladies and gentlemen, thank you for standing by and welcome to the Textron second quarter earnings call 2021. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session. If you wish to ask a question, please press 1 then 0 on your telephone keypad. If you should require assistance during the call, please press star then 0. I would now like to turn the conference over to our host, Mr. Eric Salander, Vice President of Investor Relations. Please go ahead, sir.

Thanks, Connie, 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 $3.2 billion, up from $2.5 billion in last year's second quarter. During this year's second quarter, we reported net income at $0.81 per share. Adjusted net income and non-GAAP measure was also $0.81 per share for the second quarter of 2021, compared to $0.13 per share in the second quarter of 2020. Segment profit in the quarter was $289 million, up from $82 million in the second quarter of 2020. Manufacturing cash flow before pension contributions totaled $509 million, up $294 million from last year's second quarter. With that, I'll turn the call over to Scott.

Thanks, Eric, and good morning, everyone. We had a strong second quarter with higher revenues across all of our manufacturing segments, operating margins of 9.1%, and strong cash generation. At Bell, revenues were up in the quarter on higher commercial revenues, partially offset by lower military revenues. On the commercial side at Bell, we delivered 47 helicopters, up from 27 in last year's second quarter. We continue to see strong commercial demand and solid order activity in the quarter across all our commercial models, both domestically and internationally, and across multiple end markets, including corporate, private, utility, and EMS. Moving to future vertical lift in June, following 214 flight hours over three years, Bell retired the V-280 Valor demonstrator aircraft. Over this three-year period, the Valor successfully demonstrated all key performance parameters from the FLARA program, including low-speed agility, long-range cruise, 305-knot high-speed flights, autonomous flight, and rapid mission systems integration. On July 6th, the Army issued the FLARA RFP, The program remains on track to the Army's schedule, with bids due in September, followed by a down-selected award in the second quarter of 2022. On FARA, Bell is about 45% of the way through its build of the 360 Invictus prototype. And lastly, Bell announced plans for a new systems integration lab in Arlington to provide integration verification validation testing on aircraft and mission systems needed to meet the requirements for both FPL programs. Moving to Textron Systems, we saw another strong quarter of... Execution with operating margins 14.4%, up 310 basis points from last order. We saw strong performance at ATAC by increased flight activity, led by our F-1 fleet on the U.S. Air Force CAPCAS program, where we have made significant investments over the last few years. In June, Sea Systems delivered the third ship-to-shore connector, LCAP 102, to the U.S. Navy. As the development contract portion of this program continues to wind down through the remainder of 2021, We expect to see revenue growth and margin expansion on the program as we increase our activity on the production contract. Also in the quarter, Land Systems delivered the fourth and final Ripsaw M5 vehicle to the U.S. Army for RCV Medium Program. The customer will begin integration and testing of these vehicles in preparation for the 2022 Soldier Operational Experiment. Land systems also unveiled the Cottonmouth, a vehicle purpose-built for the U.S. Marine Corps' Advanced Reconnaissance Vehicle Program, and was recently selected for further prototype development under an anticipated OTA contract award. Offsetting hard revenues in most of its operating units in the quarter, we did experience some top-line pressure at air systems largely related to the reduction in hours or fee-for-service activities due to the U.S. Army's Afghanistan withdrawal and impact of the sale of the true simulation business earlier this year. At aviation, revenues were up in the quarter on higher volumes for citation jets and commercial turboprops, as well as in our aftermarket business. We delivered 44 jets, up from 23 last year, and 33 commercial turboprops, up from 15 in last year's second quarter. We continue to see strong commercial demand and order activity for our aircraft, which resulted in backlog growth of $689 million to $2.7 billion at the quarter end. Through the first half of the year, we recorded over $1.1 billion in backlog growth in aviation. Both the Citation Longitude and Citation CJ-4 Gen 2 received EASA-type certification in the quarter. These certifications are expected to generate additional demand opportunities for each of these models. On the new product front, the Sussex Skycarrier Aircraft Certification Program has now accumulated over 1,200 flight hours and continues to progress well as we work towards entry into service targeted for later this year. Moving to industrial, revenues and margins were up. at both Caltechs and Specialized Vehicles from last year's second quarter, primarily due to higher volume and mix in each of the businesses. At Caltechs, despite the higher revenues, we've experienced order disruptions related to the global auto OEM supply chain shortages, which have directly impacted our production scheduling, resulting in intermittent line shutdowns and manufacturing efficiencies. At Specialized Vehicle, we saw higher revenues and improved operating performance from a strong retail pricing environment, driven by continued high customer demand in our end markets. While we've experienced continued strong retail demand for our products, we have been impacted by our supply chain's ability to fully meet this demand, and we continue to work through these production challenges. In summary, we continue to see increased commercial order flow at aviation and Bell, solid execution in our military businesses, strong retail demand for our products, the industrial segment, and improved cash generation that all contributed to the second quarter performance and our improved EPS and cash outlook. With that, I'll turn the call over to Frank.