The operator introduces the Textron Fourth Quarter 2023 Earnings Call and reminds participants that the call will be recorded for replay. David Rosenberg, Vice President of Investor Relations, then discusses the company's future estimates and expectations. Revenues in the quarter were $3.9 billion, up from last year's fourth quarter, and segment profit was $384 million, up $78 million from the previous year. Adjusted income from continuing operations was $1.60 per share, compared to $1.23 per share in the previous year. Manufacturing cash flow before pension contributions totaled $380 million, up $12 million from last year. For the full year, revenues were $13.7 billion, with a segment profit of $1.3 billion and adjusted income from continuing operations of $5.59 per share. Manufacturing cash flow before pension contributions was $931 million, down $247 million from the previous year. The call is then turned over to Textron's Chairman and CEO, Scott Donnelly.

Scott Donnelly, CEO of Textron, discusses the company's solid performance in the fourth quarter, with strong margins and cash generation. Despite supply chain challenges, Aviation saw a 6.5% growth in aftermarket revenues and a $782 million increase in backlog. Textron Aviation Defense delivered 13 T-6 aircraft and Bell saw an increase in both commercial and military revenues. Textron Systems saw flat revenue and margin, but completed its Ship-to-Shore Connector program. Industrial also saw higher revenues, driven by Caltex and specialized vehicles. In Aviation, Pipistrel delivered 135 aircraft in 2023, up from 61 in 2022.

In 2023, Textron had a strong year with growth and margin expansion in all of their businesses. Aviation announced new products and programs, including the Cessna Citation Ascend and CJ3 Gen2, and delivered the first passenger variant of the Cessna SkyCourier. They also secured a new fleet agreement with NetJets and delivered the 100th Cessna Citation Longitude. Bell began work on the FARA program and Textron Systems advanced in the future tactical unmanned aircraft system competition. Textron Specialized Vehicles introduced a new street legal vehicle and Caltex received their first pentatonic order from an automotive OEM.

In the fourth quarter of 2023, Textron Aviation saw a decrease in revenues due to lower volume and mix, but this was partially offset by higher pricing. Overall, the company is projecting growth in the coming year, driven by increased deliveries and higher aftermarket volume. They also plan to continue investing in sustainable flight solutions and expect a 7% increase in revenues for the 2024 fiscal year.

In the fourth quarter, Textron saw an increase in segment profit and revenues for its Bell and Industrial segments, while Textron Systems remained flat. The company also reported a loss in its Textron eAviation segment due to research and development costs. Corporate expenses, net interest expense, and other provisions and amortization expenses were also reported.

The company announced a restructuring plan in November, resulting in special charges of $126 million. The plan is expected to be completed by the first half of 2024, with annual cost savings of $75 million. Manufacturing cash flow before pension contributions was $380 million in the quarter and $931 million for the year. The company also repurchased shares and expects adjusted earnings per share to be between $6.20 and $6.40 in 2024. Segment outlook for Textron Aviation, Bell, Systems, Industrial, eAviation, and Finance are also provided, along with a projection of $160 million in corporate expense.

The company is projecting a net interest expense of $90 million, LIFO inventory provision of $110 million, intangible asset amortization of $35 million, and nonservice pension income of $265 million for the year. The effective tax rate is expected to be around 17.5%. R&D is expected to decrease to $550 million, while CapEx is expected to increase to $425 million. The average share count for 2024 is estimated to be 191 million shares. The company expects to see a ramp in production and an increase in unit deliveries for aviation in 2024, with a 1:1 book-to-bill ratio. The market is still strong and new products, such as the CJ3 Gen2 and Ascend, are receiving positive feedback. Overall, the company's product lineup is in good shape.

The company is confident in its market position and expects continued growth in both aircraft production and aftermarket sales. They do not provide specific numbers, but expect an increase in deliveries in 2024. The FLRAA program is also progressing well, with expected revenues of around $900 million in 2024. The company is also seeing margin leverage in Aviation, with potential for a 12-13% margin and continued pricing improvements.

The speaker discusses the positive impact of pricing and inflation on their business and mentions improved performance in Q4. They also mention some headwinds on the operating side but are confident they can reach their target conversion rate. The interest expense increase is due to higher borrowing costs and lower cash balances. The V-22 grounding does not have a significant impact on the business.

The services are taking advantage of the current grounding to continue with maintenance activities and prepare aircraft for flight. The impact of the grounding is not expected to be significant. There will be some pressure on cash flow due to volume growth, timing of customer payments, and higher levels of investment. The share count is expected to decrease by 5% in 2024.

Scott Donnelly discusses the pipeline of opportunities in the systems sector and the impact of budget concerns and continuing resolutions. He mentions that the pipeline is strong and includes important down selects achieved last year. He also mentions that revenue growth will be driven by final selection awards in 2025. He then addresses the eAviation business, stating that there are two things happening in that sector.

The speaker discusses the performance of Pipistrel, a business that has seen growth in aircraft sales and is expanding distribution channels. However, the company is also investing in R&D for future projects such as the Nuuva 300 and Nexus, which may not generate revenue for several years. These investments are not tied to the revenue within the segment. The speaker also mentions progress on the Nuuva and Nexus programs, which are technology investments. In the business jet market, there is talk of pent-up demand due to previous concerns of a recession.

Scott Donnelly, CEO of a company, is confident in the end market and customer demand for their new aircraft models. They expect to stick with their assumption of a book-to-bill ratio of 1, but if the market remains robust, they could exceed that number. The delivery numbers were down in 2023 due to supply chain and labor issues, but they are confident in their ability to get airplanes out the door and meet their revenue guidance for 2024.

In this paragraph, Scott Donnelly discusses the margin and pricing of the company. He mentions that the labor productivity has improved and the number of parts that are late to PO has decreased. He also talks about the company's hiring process and how it will be less disruptive in the future. Donnelly also mentions that the supply chain situation has improved, but they are still being cautious. Overall, he believes that the company will be able to hit their target of delivering a larger number of aircraft in 2024.

The speaker is discussing the performance of the Bell margin, which was strong in the quarter and ahead of initial plans. They mention that the 2024 guide for the margin is flat year-over-year, which was unexpected as some had predicted a decrease due to the ramping up of FLRAA. The speaker states that the team is managing costs and taking cost actions to offset the decrease in military production programs. They believe that the growth benefit of the program ramping up will still generate positive contribution to overall dollars and EPS. The next question is about Aviation, and the speaker clarifies that it was not discussed as a negative variance to the profit walk in the last few quarters. They mention that there were significant price overinflation benefits in 2023.

The company expects to see improved margins and revenue in 2024 due to reduced labor inefficiencies and supplier impacts. This will result in a different dynamic than in 2023, with significant revenue growth and expanding margins. The restructuring program, which focused primarily on Bell, has helped to control costs and sustain a better margin rate, even as certain military production programs ramp down. The exact net savings for Bell and the impact on R&D are not disclosed.

During the conversation, Myles Walton asks about the decrease in R&D spending and Scott Donnelly explains that it is mostly due to the delay in the FLRAA program and the shift from IRAD to contract costs. When asked about any specific areas of concern in the supply chain, Donnelly declines to comment. He also declines to comment on any potential M&A activity and reiterates that the company's priority for capital deployment is share buyback.

The speaker, Scott Donnelly, responds to a question about the performance of Aviation and the possibility of increased deliveries in the first quarter. He declines to give quarterly guidance but confirms a revenue guide for the year. When asked about reports of potential M&A in the space end market, he declines to comment. The next question is from Kristine Liwag, who asks for more details about the company's restructuring actions and the expected payback from investments. Donnelly mentions a significant investment in Bell to align costs with lower production rates on military programs.

The company is making changes to align costs with production programs, which will have a positive impact of $75 million per year. In the aviation sector, the company has seen strong growth in services and expects this to continue due to the demand for maintenance and parts. The company has incorporated this into their forecast for next year.

During a conference call, Scott Donnelly, the operator, introduces George Shapiro from Shapiro Research. Shapiro asks about the company's supply chain and the lower deliveries in the fourth quarter. Donnelly explains that improvements in labor and parts take time to push through the system, but they have seen improvements and expect further improvement in 2024. Shapiro also asks about the book-to-bill ratio and orders, which were lower than expected. Donnelly attributes this to timing and reassures that the company's assumption for the full year is 1:1.

The company is confident in demand and believes it is healthy. They also discuss the strong margins in the quarter, driven by commercial deliveries. However, there may be some pressure on margins due to the growth of the FLRAA program. The company has taken cost actions and restructured to improve profitability on legacy programs. They believe they can manage the transition to the new EMD program and expect significant revenue growth and profit increases in the long term. The company also mentions potential weakness in Caltex in 2024 and attributes it to certain drivers.

The speaker discusses the business of aviation and how they rely on industry customer forecasts for their guidance. They mention that the turboprop market is doing well, particularly internationally. They also expect growth in their turboprop business in 2024. The speaker does not provide specific numbers for individual models but mentions that the Caravans and King Airs will do well. The speaker also addresses potential profit strength from closeouts on certain models and potential risks to FLRAA volume.

Scott Donnelly and Cai von Rumohr discuss the 2024 contracts and the potential for reserve release. Donnelly believes the company can execute well and maintain a good margin rate. The CRR may put pressure on the company, but they are working with the Army to manage through it. The order strength at Aviation is stable, with no significant changes in demand or mix of customers.

The mix between fractional and whole aircraft demand has remained strong, according to Cai von Rumohr. Scott Donnelly comments on the supply chain challenges at Bell, which have improved in the latter part of the year. However, there is still a potential for issues with specific suppliers. On the Aviation side, there has been an increase in pre-owned airplanes for sale, but pricing has not yet been significantly affected.

The speaker, Scott Donnelly, discusses the company's industrial margins and how they are expected to be flat with improved margins. He mentions that the company is not seeing any impact from used aircraft sales and that the growth in the vehicle segment will be modest due to higher dollar discretionary items.

The speaker discusses the expected growth in a specific business area and mentions that it will be factored into their guide. They also mention a partnership with NetJets and explain their process for adding orders to their backlog. The conference is available for replay until January 24, 2025.

This summary was generated with AI and may contain some inaccuracies.