01 May 20. The First-Quarter earnings from the US majors were sullied by severe adjustments and allowances for order losses and delays in the civil sector coupled to supply chain disruptions in the defense segments.
29 Apr 20. Boeing Reports First-Quarter Results.
- Financial results significantly impacted by COVID-19 and the 737 MAX grounding
- Revenue of $16.9bn, GAAP loss per share of ($1.11) and core (non-GAAP)* loss per share of ($1.70)
- Operating cash flow of ($4.3)bn; cash and marketable securities of $15.5bn
- Total backlog of $439bn, including over 5,000 commercial airplanes
The Boeing Company [NYSE: BA] reported first-quarter revenue of $16.9bn, GAAP loss per share of ($1.11) and core loss per share (non-GAAP)* of ($1.70), primarily reflecting the impacts of COVID-19 and the 737 MAX grounding. Boeing recorded operating cash flow of ($4.3)bn.
“The COVID-19 pandemic is affecting every aspect of our business, including airline customer demand, production continuity and supply chain stability,” said Boeing President and CEO David Calhoun. “Our primary focus is the health and safety of our people and communities while we take tough but necessary action to navigate this unprecedented health crisis and adapt for a changed marketplace.”
As the pandemic continues to reduce airline passenger traffic, Boeing sees significant impact on the demand for new commercial airplanes and services, with airlines delaying purchases for new jets, slowing delivery schedules and deferring elective maintenance. To align the business for the new market reality, Boeing is taking several actions that include reducing commercial airplane production rates. The company also announced a leadership and organizational restructuring to streamline roles and responsibilities, and plans to reduce overall staffing levels with a voluntary layoff program and additional workforce actions as necessary.
Boeing has also taken action to manage near-term liquidity, as it has drawn on a term loan facility; reduced operating costs and discretionary spending; extended the existing pause on share repurchases and suspended dividends until further notice; reduced or deferred research and development and capital expenditures; and eliminated CEO and Chairman pay for the year. Access to additional liquidity will be critical for Boeing and the aerospace manufacturing sector to bridge to recovery, and the company is actively exploring all of the available options. Boeing believes it will be able to obtain sufficient liquidity to fund its operations.
“While COVID-19 is adding unprecedented pressure to our business, we remain confident in our long term future,” said Calhoun. “We continue to support our defense customers in their critical national security missions. We are progressing toward the safe return to service of the 737 MAX, and we are driving safety, quality and operational excellence into all that we do every day. Air travel has always been resilient, our portfolio of products and technology is well positioned, and we are confident we will emerge from the crisis and thrive again as a leader of our industry.”
Operating cash flow was ($4.3)bn in the quarter, primarily reflecting the impact of the 737 MAX grounding and COVID-19, as well as timing of receipts and expenditures.
Cash and investments in marketable securities increased to $15.5bn, compared to $10.0bn at the beginning of the quarter, primarily due to increased debt balance. Debt was $38.9bn, up from $27.3bn at the beginning of the quarter primarily due to the draw down of a term loan facility, partially offset by debt repayments.
Total company backlog at quarter-end was $439bn.
Commercial Airplanes first-quarter revenue was $6.2bn reflecting lower deliveries driven by the 737 MAX grounding as well as impacts of COVID-19. First-quarter operating margin decreased to (33.3) percent due to lower delivery volume, $797m of abnormal production costs from the temporary suspension of 737 MAX production, a $336m charge related to 737 Next Generation frame fitting component (pickle fork) repair costs, lower 787 margins primarily due to COVID-19, and $137m of abnormal production costs from the temporary suspension of Puget Sound operations in response to COVID-19.
COVID-19 has adversely impacted the 737 program due to a slower than previously planned production rate ramp-up driven by commercial airline industry uncertainty. To reflect COVID-19 impacts on the demand environment, 737 MAX aircraft production will resume at low rates in 2020 as timing and conditions of return to service are better understood and gradually increase to 31 per month during 2021, with further gradual increases to correspond with market demand. The estimated abnormal production costs from the temporary suspension of 737 MAX production have increased by approximately $1bn due to updated production rate assumptions, bringing the estimated total to approximately $5bn. There was no material change to estimated potential concessions and other considerations to customers related to the 737 MAX grounding.
Commercial Airplanes has updated its production rate assumptions to reflect impacts from COVID-19 on its operations and demand outlook, and will continue to assess them on an ongoing basis. The 787 production rate will be reduced from 14 per month to 10 per month in 2020, and gradually reduced to 7 per month by 2022. The 777/777X combined production rate will be reduced to 3 per month in 2021. At this time, production rate assumptions have not changed on the 767 and 747 programs.
Commercial Airplanes delivered 50 airplanes during the quarter, including 29 787s. Commercial Airplanes captured an order for 12 787 aircraft for All Nippon Airways, and produced the 1000th 787 at Boeing South Carolina. Commercial Airplanes backlog included over 5,000 airplanes valued at $352bn.
Defense, Space & Security
Defense, Space & Security first-quarter revenue decreased to $6.0bn primarily driven by a charge on the KC-46A Tanker. First-quarter operating margin decreased to (3.2) percent primarily due to a pre-tax charge of $827m for the KC-46A Tanker, of which $551m was driven by costs associated with the agreement signed in April with the U.S. Air Force to develop and integrate a new Remote Vision System, while the remaining costs reflect productivity inefficiencies and COVID-19 related factory disruption. A number of other programs were also impacted by COVID-19, further reducing margin in the quarter.
During the quarter, Defense, Space & Security received an award for 18 P-8A Poseidon maritime patrol aircraft, as well as a contract to develop a SB>1 DEFIANT™ prototype for the U.S. Army’s Future Long Range Assault Aircraft program. Defense, Space & Security also completed the System Design Review for MQ-25.
Backlog at Defense, Space & Security was $64bn, of which 28 percent represents orders from customers outside the U.S.
Global Services first-quarter revenue was $4.6 bn, reflecting higher government services volume, largely offset by lower commercial services volume due to COVID-19. First-quarter operating margin increased to 15.3 percent primarily due to favorable government services performance.
During the quarter, Global Services was awarded a P-8A integrated logistics services and site activation support contract modification from the U.S. Navy and the government of Australia and secured a logistics, components and services contract for the U.S. Army AH-64 Apache fleet. At the Singapore Airshow, Global Services announced several consumable and expendable services agreements as well as digital solutions agreements with multiple Asia-Pacific airlines.
Additional Financial Information
At quarter-end, Boeing Capital’s net portfolio balance was $2.2bn. Revenue from other unallocated items and eliminations increased primarily due to the timing of eliminations for intercompany aircraft deliveries. The change in earnings from other unallocated items and eliminations is primarily due to lower deferred compensation expense and a customer financing impairment charge taken in the first quarter of 2019. Interest and debt expense increased due to higher debt balances. The first quarter effective tax rate reflects tax benefits related to the 5 year net operating loss carryback provision in the Coronavirus Aid, Relief, and Economic Security (CARES) Act as well as the impact of pre-tax losses.
29 Apr 20. General Dynamics Reports First-Quarter 2020 Results
- COVID-19 travel restrictions delay aircraft deliveries
- Defense segments combined show modest growth in revenue and margin
- Net earnings of $706m
- Diluted EPS of $2.43
- Backlog of $85.7bn, up 24% from year-ago quarter
General Dynamics (NYSE: GD) today reported first-quarter 2020 net earnings of $706m on $8.75 bn in revenue. On a per share basis, diluted earnings per share (EPS) were $2.43.
Travel restrictions due to the COVID-19 pandemic delayed deliveries of business-jet aircraft, which resulted in a $549m decline in revenue for the Aerospace segment. Nevertheless, the segment’s backlog remains strong, up $1.1bn, or 9.1%, over the year-ago quarter.
The defense businesses on a combined basis posted revenue of $7.1 bn, a slight increase over the year-ago quarter; operating earnings of $705m, 2.2% above the year-ago quarter; and margin of 10%, an expansion of 20 basis points over the year-ago quarter. The defense businesses’ backlog of $72.5 bn was 27% higher than the year-ago quarter.
“Since the onset of the COVID-19 crisis, we have supported our government customers and implemented multiple safety measures to keep our people as safe as possible,” said Phebe N. Novakovic, chairman and chief executive officer. “We are responding to the COVID travel restrictions’ impact on Gulfstream and are managing our costs throughout our business.”
The company repurchased 3.4 m of its outstanding shares in the first quarter to cover dilution from the exercise of stock options. In March, the board of directors increased the company’s quarterly dividend 8 cents to $1.10 per share, which was the company’s 23rd consecutive annual dividend increase.
Total backlog at the end of first-quarter 2020 was $85.7bn, up 23.9% year-over-year. Estimated potential contract value, representing management’s estimate of value in unfunded indefinite delivery, indefinite quantity (IDIQ) contracts and unexercised options, was $38.1bn. Total estimated contract value, the sum of all backlog components, was $123.9 bn, up 20.1% year-over-year.
Significant awards in the quarter included an IDIQ contract with a maximum potential value of $885m to modernize the U.S. Army’s training programs, $875m for the construction of two additional U.S. Navy John Lewis-class (T-AO-205) oilers, an IDIQ contract with a maximum potential value of $505 m to provide supercomputing resources to the National Oceanic Atmospheric Administration’s (NOAA) Weather and Climate Operational Supercomputing System (WCOSS), $300 m from the Army to upgrade Abrams tanks to the M1A2 System Enhancement Package Version 3 (SEPv3) configuration and $225m for parts and support for Stryker armored fighting vehicles.
21 Apr 20. Lockheed Martin trims sales outlook as coronavirus hits supply chain. Lockheed Martin (LMT.N) said on Tuesday the spread of coronavirus has delayed shipments of vital supplies to its numerous businesses and will likely hurt its sales this year.
The Pentagon’s top weapons dealer reported quarterly results and said COVID-19 was hurting production in its biggest unit, its aeronautics division that makes the F-35 fighter jet. Still, the defense contractor reported a better-than-expected quarterly profit even as it was forced to trim its sales outlook. Quarterly sales in its aeronautics unit rose 14%to $6.4bn.
The U.S. defense sector is expected to see much less COVID-19 disruption due to generally stable cash flows compared with industrial markets, according to analysts. Early on in the pandemic the defense industry was deemed essential, giving those workers an avenue to continue production.
Lockheed’s earnings announcement disclosed that while earnings for the first quarter had not been impacted, “the corporation is beginning to experience some issues in each of its business areas related to COVID-19” such as supplier delivery delays and suspending access at work sites.
The Pentagon’s chief weapons buyer, Ellen Lord, said on Monday a three-month slowdown was now expected on major defense programs as a result of supplier operating challenges during the coronavirus pandemic.
For the aircraft the Lockheed makes, there was “likely going to be some production impacts” due to the pandemic, CFO Ken Possenriede said on a conference call with Wall Street analysts, potentially delaying F-35 deliveries.
Marillyn Hewson, the outgoing CEO, said that the company was also watching its international supply chain closely and could provide extra financial support to keep those businesses healthy.
The company said it now expects full-year sales in a range of $62.25bn to $64.00bn, down from $62.75bn to $64.25bn, forecast previously. Lockheed reaffirmed its 2020 earnings per share forecast of $23.80 – the mid point of the range.
“While defense companies like Lockheed Martin are not immune to coronavirus, the projected impact on the 2020 results looks very minor compared to what is likely to be seen elsewhere in the industrial sector,” analyst Robert Stallard of Vertical Research wrote in a note on Tuesday.
Stable demand along with the Pentagon increasing interim payments to defense contractors, and also paying them for sick time or quarantined employees are expected to buoy the defense industry as coronavirus hits the economy.
Shares of Lockheed fell 2% $375.54. Shares of Lockheed Martin fell as much as 49% during the economic fallout from the coronavirus from its 52-week high of $442.43 on Feb. 11, to $226.58 on March 23, before recovering.
Among the uncertainties Lockheed faces for its second-quarter results is the loss of an aircraft maintenance contract in the United Arab Emirates in April.
Net earnings rose to $1.72 bn, or $6.08 per share, in the first quarter ended March 29, from $1.70bn, or $5.99 per share, a year earlier, beating analysts’ average estimate of $5.80 per share.
Lockheed Martin Reports First Quarter 2020 Results
– Net sales of $15.7bn
– Net earnings of $1.7bn, or $6.08 per share
– Generated cash from operations of $2.3 bn
– Maintained backlog of approximately $144 bn
– Updates 2020 outlook for sales; maintains 2020 outlook for operating profit, earnings per share and cash from operations
– Ultimate impact of COVID-19 on 2020 outlook uncertain
21 Apr 20. Lockheed Martin Corporation (NYSE: LMT) today reported first quarter 2020 net sales of $15.7bn, compared to $14.3bn in the first quarter of 2019. Net earnings in the first quarter of 2020 were $1.7bn, or $6.08 per share, compared to $1.7bn, or $5.99 per share, in the first quarter of 2019. Cash from operations in the first quarter of 2020 was $2.3bn, compared to cash from operations of $1.7bn in the first quarter of 2019.
“As we confront the challenges introduced by the global pandemic, our corporation remains focused on providing vital national security solutions for our customers while maintaining a safe and healthy environment for our employees,” said Lockheed Martin chairman, president and CEO Marillyn Hewson. “I’m so proud of the work the dedicated men and women of Lockheed Martin are doing as part of our strong portfolio to deliver critical products and services for our customers and long-term value for our shareholders.”
The global outbreak of the coronavirus disease 2019 (COVID-19) was declared a pandemic by the World Health Organization and a national emergency by the U.S. Government in March 2020 and has negatively affected the U.S. and global economy, disrupted global supply chains, resulted in significant travel and transport restrictions, including mandated closures and orders to “shelter-in-place,” and created significant disruption of the financial markets. Lockheed Martin has taken measures to protect the health and safety of its employees, work with its customers to minimize potential disruptions and support its community in addressing the challenges posed by this global pandemic. The extent of the impact of the COVID-19 pandemic on the corporation’s operational and financial performance, including its ability to execute its programs in the expected timeframe, will depend on future developments, including the duration and spread of the pandemic and related actions taken by the U.S. Government, state and local government officials, and international governments to prevent disease spread, all of which are uncertain and cannot be predicted. The outbreak did not have a material impact on the corporation’s operating results or business in the first quarter of 2020. However, the corporation is beginning to experience some issues in each of its business areas related to COVID-19, primarily in access to some locations and delays of supplier deliveries. The corporation is updating its 2020 guidance for net sales to reflect these impacts, as production and supply chain activities have recently slowed in the Aeronautics business area.
However, the ultimate impact of COVID-19 on the corporation’s 2020 outlook for sales, segment operating profit, earnings and cash flows from operations remains uncertain. The corporation’s 2020 outlook assumes, among other things, that its production facilities continue to operate and it does not experience significant work stoppages or closures, it is able to mitigate any supply chain disruptions and these do not worsen, and it is able to recover its costs under contracts and government funding priorities do not change. In addition, the corporation’s financial performance assumes actual returns on its pension assets during 2020 will be 7.0%, and the discount rate used to re-measure its pension liabilities at year-end 2020 will be 3.25%. Differences between these assumed values and actual values will affect the corporation’s plan funded status and stockholders’ equity as measured at year-end 2020. The corporation is also monitoring the impacts of COVID-19 on the fair value of its assets. While the corporation does not currently anticipate any material impairments on its assets as a result of COVID-19, future changes in expectations for sales, earnings and cash flows related to intangible assets and goodwill below its current projections could cause these assets to be impaired. While these are the corporation’s current assumptions, this is an emerging situation and these could change, including if the duration of the pandemic is extended, which could affect outlook.
Investment in Advanced Military Maintenance, Repair and Overhaul Center LLC (AMMROC)
As of March 29, 2020, the corporation had an investment in the AMMROC joint venture with a carrying value of $435m. Substantially all of AMMROC’s current business is dependent on a single customer contract to provide maintenance, repair and overhaul (MRO) services for fixed and rotary wing military aircraft that was up for re-competition. In April 2020, subsequent to the end of the corporation’s first quarter, the customer announced its intent to award the contract to a competitor. The corporation is working with AMMROC’s management and its joint venture partner to understand its options, including whether there is a basis to challenge the award and retain the MRO services, explore the possibility of AMMROC continuing to provide MRO services as a subcontractor to the competitor, an opportunity to replace the contract with other customer arrangements, or winding down the business. At this time, the corporation cannot determine the extent of the non-cash impairment charge, if any, related to its investment. However, if the customer moves forward with transitioning the MRO services to the competitor and AMMROC is not a subcontractor (or has only a limited role), the corporation expects there would be an adverse impact to AMMROC’s business and the carrying value of its investment, which could be significant and an impairment could occur as early as the second quarter of 2020. Other than the impact to earnings for a potential non-cash impairment charge, currently the corporation does not expect any other significant impacts to its 2020 operating results, financial position or cash flows.
The corporation’s cash activities in the first quarter of 2020 included the following:
- paying cash dividends of $693m, compared to $638m in the first quarter of 2019;
- repurchasing 1.7 m shares for $756m, which includes $500m paid pursuant to an accelerated share repurchase agreement (ASR), which will settle in the second quarter; compared to 1.0m shares for $281 m in the first quarter of 2019. The actual number of shares delivered under the ASR is based on an average volume-weighted average price (VWAP) over the plan period and, based on the average VWAP as of April 20, 2020, the corporation expects to receive approximately 0.5 m additional shares upon final settlement;
- making capital expenditures of $293m, compared to $284m in the first quarter of 2019; and
- no net proceeds from or repayments of commercial paper, compared to making net repayments of $200m in the first quarter of 2019.
The corporation operates in four business segments organized based on the nature of products and services offered: Aeronautics, Missiles and Fire Control (MFC), Rotary and Mission Systems (RMS) and Space. The following table presents summary operating results of the corporation’s business segments and reconciles these amounts to the corporation’s consolidated financial results.
Net sales and operating profit of the corporation’s business segments exclude intersegment sales, cost of sales, and profit as these activities are eliminated in consolidation. Operating profit of the corporation’s business segments includes the corporation’s share of earnings or losses from equity method investees as the operating activities of the investees are closely aligned with the operations of its business segments.
Operating profit of the corporation’s business segments also excludes the FAS/CAS operating adjustment described below, a portion of corporate costs not considered allowable or allocable to contracts with the U.S. Government under the applicable U.S. Government cost accounting standards (CAS) or federal acquisition regulations (FAR), and other items not considered part of management’s evaluation of segment operating performance such as a portion of management and administration costs, legal fees and settlements, environmental costs, stock-based compensation expense, retiree benefits, significant severance actions, significant asset impairments, gains or losses from significant divestitures, and other miscellaneous corporate activities.
The corporation recovers CAS pension cost through the pricing of its products and services on U.S. Government contracts and, therefore, recognizes CAS pension cost in each of its business segments’ net sales and cost of sales. The corporation’s consolidated financial statements must present pension and other postretirement benefit plan expense calculated in accordance with U.S. generally accepted accounting principles (referred to as FAS expense). The operating portion of the net FAS/CAS pension adjustment represents the difference between the service cost component of FAS pension expense and CAS pension cost. The non-service FAS pension expense component is included in other non‑operating expense on the corporation’s consolidated statements of earnings. The net FAS/CAS pension adjustment increases or decreases CAS pension cost to equal total FAS pension expense (both service and non-service).
Changes in net sales and operating profit generally are expressed in terms of volume. Changes in volume refer to increases or decreases in sales or operating profit resulting from varying production activity levels, deliveries or service levels on individual contracts. Volume changes in segment operating profit are typically based on the current profit booking rate for a particular contract. In addition, comparability of the corporation’s segment sales, operating profit and operating margin may be impacted favorably or unfavorably by changes in profit booking rates on the corporation’s contracts for which it recognizes revenue over time using the percentage-of-completion cost-to-cost method to measure progress towards completion. Increases in profit booking rates, typically referred to as risk retirements, usually relate to revisions in the estimated total costs to fulfill the performance obligations that reflect improved conditions on a particular contract. Conversely, conditions on a particular contract may deteriorate, resulting in an increase in the estimated total costs to fulfill the performance obligations and a reduction in the profit booking rate. Increases or decreases in profit booking rates are recognized in the current period and reflect the inception-to-date effect of such changes.
Segment operating profit and margin may also be impacted favorably or unfavorably by other items, which may or may not impact sales. Favorable items may include the positive resolution of contractual matters, insurance recoveries and gains on sales of assets. Unfavorable items may include the adverse resolution of contractual matters; restructuring charges, except for significant severance actions which are excluded from segment operating results; reserves for disputes; certain asset impairments; and losses on sales of certain assets.
The corporation’s consolidated net adjustments not related to volume, including net profit booking rate adjustments, represented approximately 27 percent of total segment operating profit in the first quarter of 2020 as compared to 33 percent in the first quarter of 2019.
Aeronautics’ net sales in the first quarter of 2020 increased $785m, or 14 percent, compared to the same period in 2019. The increase was primarily attributable to higher net sales of approximately $695m for the F-35 program due to increased volume on production, sustainment, and development contracts; and about $70m for higher volume on classified development contracts.
Aeronautics’ operating profit in the first quarter of 2020 increased $87m, or 15 percent, compared to the same period in 2019. Operating profit increased approximately $80m for the F-35 program due to higher volume on production, sustainment, and development contracts. Adjustments not related to volume, including net profit booking rate adjustments, in the first quarter of 2020 were comparable to the same period in 2019.
Missiles and Fire Control
MFC’s net sales in the first quarter of 2020 increased $269m, or 11 percent, compared to the same period in 2019. The increase was primarily attributable to higher net sales of approximately $175m for tactical and strike missile programs due to increased volume (primarily High-Mobility Artillery Rocket Systems (HIMARS), Guided Multiple Launch Rocket Systems (GMLRS) and hypersonic development programs); and about $125m for integrated air and missile defense programs due to increased volume (primarily Terminal High Altitude Area Defense (THAAD) and Patriot Advanced Capability-3 (PAC-3)). These increases were partially offset by a decrease of $40m as a result of lower volume on energy programs and the divestiture of the Distributed Energy Solutions business in November 2019.
MFC’s operating profit in the first quarter of 2020 decreased $21m, or 5 percent, compared to the same period in 2019. Operating profit decreased approximately $5 m for integrated air and missile defense programs due to lower risk retirements on international contracts (primarily PAC-3 and THAAD). This decrease was partially offset by an increase of $20m for sensors and global sustainment programs due to higher risk retirements (primarily Low Altitude Navigation and Targeting Infrared for Night (LANTIRN®) and Sniper Advanced Targeting Pod (SNIPER®)). Adjustments not related to volume, including net profit booking rate adjustments, were $30m lower in the first quarter of 2020 compared to the same period in 2019.
Rotary and Mission Systems
RMS’ net sales in the first quarter of 2020 were comparable to the same period in 2019. Net sales decreased approximately $95m for Sikorsky helicopter programs due to lower volume (primarily combat rescue helicopter and Black Hawk production programs). This decrease was mostly offset by an increase of about $85m for C6ISR (command, control, communications, computers, cyber, combat systems, intelligence, surveillance, and reconnaissance) programs due to higher volume (primarily undersea combat systems programs).
RMS’ operating profit in the first quarter of 2020 was comparable to the same period in 2019. Operating profit increased approximately $20m for Sikorsky helicopter programs due to better cost performance and higher risk retirements on international military aircraft programs. This increase was offset by a $20m decrease for integrated warfare systems and sensors (IWSS) programs as lower risk retirements were partially offset by charges that were $30m lower on a ground-based radar program. Adjustments not related to volume, including net profit booking rate adjustments, were $35m lower in the first quarter of 2020 compared to the same period in 2019.
Space’s net sales in the first quarter of 2020 increased $277m, or 10 percent, compared to the same period in 2019. The increase was primarily attributable to higher net sales of approximately $180m for strategic and missile defense programs due to higher volume (primarily hypersonic development programs and fleet ballistic missile programs); and about $100m for government satellite programs due to higher volume (primarily Next Generation Overhead Persistent Infrared (Next Gen OPIR)).
Space’s operating profit in the first quarter of 2020 decreased $53m, or 16 percent, compared to the same period in 2019. Operating profit decreased approximately $40m for government satellite programs due to lower risk retirements (primarily Advanced Extremely High Frequency (AEHF)); and about $35m due to lower equity earnings from the corporation’s investment in United Launch Alliance (ULA). These decreases were partially offset by an increase of $20m for commercial satellite programs for charges recorded for performance matters in 2019 not repeated in 2020. Adjustments not related to volume, including net profit booking rate adjustments, were $40m lower in the first quarter of 2020, compared to the same period in 2019.
Total equity earnings recognized by Space from equity method investments (primarily ULA) represented approximately $30m, or 11 percent of Space’s operating profit in the first quarter of 2020, compared to approximately $65m, or 19 percent in the first quarter of 2019.
The corporation’s effective income tax rate was 15.4 percent in the first quarter of 2020, compared to 12.4 percent in the first quarter of 2019. The rate for the first quarter of 2019 benefited from additional tax deductions of $65m, or $0.23 per share, recorded discretely for 2018, based on proposed tax regulations released on March 4, 2019, which clarified that foreign military sales qualify for foreign derived intangible income treatment. The rates for both periods benefited from tax deductions for employee equity awards, the research and development tax credit, tax deductions for foreign derived intangible income, and dividends paid to the corporation’s defined contribution plans with an employee stock ownership plan feature.
Northrop Grumman Reports First Quarter 2020
• Sales Increase 5 Percent to $8.6bn
• Higher Sales in All Four Sectors
• EPS Increases 2 Percent to $5.15
• Net Awards Total $7.9bn
• 2020 Sales and MTM-adjusted EPS1 Guidance Updated for Expected COVID-19 Related Impacts; Free Cash Flow1 Guidance Unchanged
29 Apr 20. Northrop Grumman Corporation (NYSE: NOC) reported first quarter 2020 sales increased 5 percent to $8.6 bn from $8.2bn in the first quarter of 2019. First quarter 2020 net earnings increased 1 percent to $868m, or $5.15 per diluted share from $863 m, or $5.06 per diluted share, in the first quarter of 2019. First quarter 2020 net earnings were reduced by $56 m, or $0.33 per diluted share, for negative returns on marketable securities related to our non-qualified benefit plans and other nonoperating assets.
“Our results this quarter reflect the strength of our business, our portfolio’s alignment to the highest priority global security threats, and the dedication of our team to deliver for our customers and our shareholders in a challenging environment,” said Kathy Warden, chairman, chief executive officer and president. “As we respond to the global pandemic, our first priority is protecting our employees’ health, safety and well-being while continuing to deliver our mission essential products and services for our customers. We are also focused on supporting our supply chain and the communities where we work. We are updating our guidance to reflect COVID-19 related impacts as we understand them today. As we monitor and respond to the evolving challenges related to the pandemic, we continue to deliver against strong customer demand and invest for the future.”
First quarter 2020 sales increased $431m, or 5 percent, due to higher sales at all four sectors. Operating Income and Margin Rate First quarter 2020 operating income was comparable to the prior year period. First quarter 2020 operating margin rate declined to 10.8 percent reflecting a lower segment operating margin rate, partially offset by a decrease in unallocated corporate expense. Segment Operating Income and Margin Rate First quarter 2020 segment operating income decreased $14m, or 1 percent, and reflects lower segment operating income at Aeronautics Systems, partially offset by higher segment operating income at Mission Systems and Space Systems. Segment operating margin rate decreased to 11.1 percent, primarily due to lower segment operating margins at Aeronautics Systems and Defense Systems.
Federal and Foreign Income Taxes
The first quarter 2020 effective tax rate increased to 17.6 percent from 16.5 percent in the first quarter of 2019 primarily due to nondeductible losses on marketable securities and an increase in reserves for uncertain tax positions. These were partially offset by an increase in research credits. Net Earnings and Diluted Earnings Per Share First quarter 2020 net earnings were comparable to the prior year period and include a $102m increase in our FAS (non-service) pension benefit, partially offset by a $94m decrease in Other, net as a result of lower returns on marketable securities related to our nonqualified benefit plans. First quarter 2020 diluted earnings per share increased 2 percent, reflecting a 1 percent increase in net earnings and a 1 percent reduction in weighted-average diluted shares outstanding. Operating Cash Flows First quarter 2020 cash used in operating activities increased $80 m, principally due to the timing of trade working capital. The net use of cash during the first quarter is consistent with the company’s historical timing of operating cash flows, which are generally more heavily weighted toward the second half of the year. Awards and Backlog First quarter 2020 net awards totaled $7.9bn and backlog totaled $64.2bn. Significant first quarter new awards include restricted competitive prime space contracts totaling multiple billions of dollars in the aggregate; $339m for the Scalable Agile Beam Radar (SABR) program, $281m for the Triton program, $165m for the Advanced Anti-Radiation Guided Missile (AARGM) program and $160m for the Ground-based Midcourse Defense (GMD) program.
Segment Operating Results
Segment operating results for the three months ended March 31, 2019 have been recast to reflect changes in the company’s organizational structure and reportable segments effective January 1, 2020.
First quarter 2020 sales increased $25m, or 1 percent, due to higher sales in both Autonomous Systems and Manned Aircraft. Higher volume on restricted programs and Global Hawk were partially offset by lower volume on the B-2 Defensive Management System Modernization program and NATO AGS, which are both nearing completion. Operating Income First quarter 2020 operating income decreased $49m, or 16 percent, principally due to a lower operating margin rate. Operating margin rate decreased to 9.1 percent from 10.9 percent, due to lower net EAC adjustments at Autonomous Systems as well as the timing of F-35 risk retirements and contract mix at Manned Aircraft.
First quarter 2020 sales increased $113m, or 6 percent, due to higher sales in both Battle Management & Missile Systems and Mission Readiness. Battle Management & Missile Systems sales increased primarily due to higher volume on the Guided Multiple Launch Rocket System (GMLRS), Advanced Anti-Radiation Guided Missile (AARGM) program and other missile products. Mission Readiness sales increased principally due to higher volume on an international training program and the Special Electronic Mission Aircraft program. Operating Income First quarter 2020 operating income decreased $6m, or 3 percent, primarily due to a lower operating margin rate, partially offset by higher sales. Operating margin rate decreased to 10.4 percent from 11.4 percent primarily due to favorable adjustments on certain small caliber ammunition programs in the first quarter of 2019.
First quarter 2020 sales increased $137m, or 6 percent, primarily due to higher volume on Airborne Sensors & Networks and Maritime/Land Systems & Sensors programs. Airborne Sensors & Networks sales increased principally due to higher airborne radar volume, including on the F-35 and SABR programs. Maritime/Land Systems & Sensors sales increased primarily due to higher volume on marine systems and restricted programs. Operating Income First quarter 2020 operating income increased $29m, or 9 percent, due to higher sales and a higher operating margin rate. Operating margin rate increased to 14.8 percent from 14.4 percent, primarily due to improved performance on Airborne Sensors & Networks programs, partially offset by changes in contract mix at Maritime/Land Systems & Sensors and the timing of risk retirements at Navigation, Targeting & Survivability.
First quarter 2020 sales increased $147m, or 8 percent, primarily due to higher sales in Space, partially offset by lower sales in Launch & Strategic Missiles. Space sales were driven by higher volume on restricted programs, Next Generation Overhead Persistent Infrared Radar (Next Gen OPIR) and the Arctic Satellite Broadband Mission (ASBM) program. Launch & Strategic Missiles sales reflect lower volume on the Ground-based Midcourse Defense (GMD) program and Space Launch System (SLS) Booster, partially offset by higher volume on hypersonic programs and the Ground Based Strategic Deterrent (GBSD) Technology Maturation Risk Reduction (TMRR) program. Operating Income First quarter 2020 operating income increased $11m, or 6 percent, primarily due to higher sales, partially offset by a lower operating margin rate. Operating margin rate decreased to 10.2 percent from 10.4 percent principally due to the timing of favorable negotiations on certain commercial contracts recognized in the first quarter of 2019.
Guidance 2020 financial guidance, as well as outlook, trends, expectations and other forward looking statements provided by the company for 2020 and beyond, reflect the company’s judgment based on the information available to the company at the time of this release. The company is updating its 2020 financial guidance in light of both the impacts we have experienced to date from the global COVID-19 pandemic (as discussed in the company’s Form 10-Q), and what we currently anticipate, based on what we understand today, to be the impacts on the company for the remainder of the year.
The company’s updated financial guidance assumes generally that the most significant adverse impacts from the pandemic on the company’s business, financial position, results of operations or cash flows will occur in the second quarter of 2020. However, we cannot predict how the pandemic will evolve or what impact it will continue to have, and there can be no assurance that the company’s underlying assumptions are correct. As discussed more fully in our Form 10-Q and among other factors, disruptions to the company’s operations (or those of its customers or supply chain), additional costs, disruptions in the market, and impacts on programs or payments relating to the global COVID-19 pandemic, today and as it may evolve, can be expected to affect the company’s ability to achieve guidance or meet expectations. In addition, the government budget, appropriations and procurement processes can impact our customers, programs and financial results. These processes, including the timing of appropriations and the occurrence of an extended continuing resolution and/or prolonged government shutdown, as well as a breach of the debt ceiling, can impact the company’s ability to achieve guidance or meet expectations.
07 May 20. Raytheon Technologies (reflects United Technologies results including Otis and Carrier)
- Net sales of $18.2bn, down 1 percent versus prior year including flat organic sales
- GAAP EPS of a loss of $0.10, including $1.66 of charges related to Otis and Carrier portfolio separation activities
- Adjusted EPS of $1.78, down 7 percent versus prior year
Raytheon Company (not included in Raytheon Technologies first quarter 2020 results)
- Record backlog of $51.3bn with book-to-bill ratio of 1.44
- Net sales of $7.2bn, up 6.5 percent
Raytheon Technologies Corporation (NYSE: RTX) reported first quarter 2020 results for standalone United Technologies including Otis and Carrier. The separation of Otis and Carrier and merger with Raytheon Company occurred on April 3, 2020, after the quarter close.
“I’m proud of what our team has done to support our customers and do our part in fighting this global pandemic,” said Raytheon Technologies CEO Greg Hayes. “During the quarter, we delivered solid results, exceeding our expectations for adjusted EPS and free cash flow, while also completing the spin-offs of Otis and Carrier and our merger with Raytheon.”
Hayes continued, “Looking ahead, the merits and strategic rationale of the merger are clear. Raytheon Technologies has a diversified portfolio of industry-leading technologies across commercial aerospace and defense with solid positions on key platforms. We have a strong balance sheet, ample liquidity, and are well positioned to deliver value for our shareowners and customers over the long term. We are also making the right moves for the business by taking out costs and making prudent capital allocation decisions to ensure we maintain flexibility and emerge from this crisis strong.”
Raytheon Technologies first quarter net sales of $18.2bn were down 1 percent over the prior year, including flat organic sales and 1 point of foreign exchange headwind. Sales at Pratt and Whitney were up 11 percent over the prior year with Commercial Aftermarket sales up 4 percent. Sales at Collins Aerospace were down 1 percent over the prior year with Commercial aftermarket sales up 3 percent. GAAP EPS of a loss of $0.10 was down 106 percent versus the prior year and included $1.88 of net nonrecurring charges and other significant items, including $1.66 related to Otis and Carrier portfolio separation activities. Adjusted EPS of $1.78 was down 7 percent versus the prior year.
Net income in the quarter was a loss of $83m, down 106 percent versus the prior year and included $1.6 bn of net nonrecurring charges. Cash flow from operations was $66 m and capital expenditures were $412m, resulting in free cash flow of $249 m. Free cash flow included approximately $700m of one-time cash separation payments. Total cash separation payments in the quarter were approximately $1.5 bn, of which approximately $700 m was reflected as a financing outflow, principally associated with make whole payments in connection with the early retirement of debt.
Raytheon Company First Quarter 2020 Results
Raytheon Company, which was not included in Raytheon Technologies’ first quarter results, had first quarter net sales of $7.2bn, up 6.5 percent over the prior year. Bookings were $10.3bn, resulting in a book-to-bill ratio of 1.44. Backlog at the end of the first quarter 2020 was a record $51.3bn, an increase of $10.2bn or up 25 percent compared to the end of the first quarter 2019.
Raytheon Technologies 2020 Update
During this pandemic, Raytheon Technologies’ first priority is to protect the health and safety of its employees. The company has taken extraordinary steps to ensure that employees are able to work from home where possible, while implementing robust safety protocols to ensure facilities are clean and safe. At the same time, the company is contributing personal protective equipment and manufacturing other key supplies in areas of most critical need to fight the pandemic.
The COVID-19 pandemic has significantly increased global economic and demand uncertainty, and has impacted RTC’s businesses, operations and the aerospace sector as a whole. In response, the company has taken immediate actions to conserve cash and reduce costs and will continue to evaluate further actions.
The financial impact of the COVID-19 pandemic cannot be reasonably estimated at this time. The extent of such impact depends on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge. Given the ongoing uncertainty regarding the scope, severity and duration of the COVID-19 pandemic, RTC is not providing an outlook at this time and will revisit providing a 2020 outlook at our next earnings release.
On April 3, 2020, Raytheon Technologies successfully completed the separation of Otis and Carrier and the merger with Raytheon Company. Following these transactions, Raytheon Technologies had a cash balance of approximately $8.5bn and a net debt position of approximately $25bn.
- Revenue down $332m, or 10.7% from prior year largely due to COVID-19 impacts
- EPS of $0.22; adjusted EPS of $0.35, excluding first quarter special charges
- Strong liquidity position, Q1 2020 ending cash balance of $2.4bn
30 Apr 20. Textron Inc. (NYSE: TXT) today reported first quarter 2020 net income of $0.22 per share, compared to $0.76 per share in the first quarter of 2019. Adjusted net income, a non-GAAP measure, was $0.35 per share for the first quarter of 2020, which excludes $39 m of pre-tax special charges ($0.13 per share, after-tax) recorded in the first quarter, related to the impairment of intangible assets at Textron Aviation and Industrial due to economic disruptions caused by the COVID-19 pandemic.
“Our team is meeting the unprecedented challenges presented by this pandemic with a commitment to the health and safety of our employees and communities while meeting customer commitments,” said Textron Chairman and CEO Scott C. Donnelly. “We have taken measures to reduce cost and conserve cash, including temporary plant shutdowns and employee furloughs at many of our commercial businesses. While the effects of COVID-19 on many of our end markets has been unfavorable, Bell and Textron Systems delivered higher revenue and strong margin performance for the quarter in their military businesses.”
Net cash used by operating activities of continuing operations of the manufacturing group for the first quarter was $393m, compared to $196m of net cash used last year. 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 $430m compared to a use of cash of $291m last year.
First Quarter Segment Results
Revenues at Textron Aviation of $872m were down $262m in the first quarter of 2019, primarily due to lower volume and mix of $260m, largely the result of lower Citation jet volume of $154m and lower commercial turboprop volume of $99m. The decrease in Citation jet and turboprop volume reflected a decline in demand related to the pandemic, disruption in our composite manufacturing production due to a plant accident that occurred in December 2019, and delays in the acceptance of aircraft related to COVID-19 travel restrictions.
Textron Aviation delivered 23 jets, down from 44 last year, and 16 commercial turboprops, down from 44 last year.
Segment profit was $3m in the first quarter, down $103m from a year ago, primarily due to the lower volume and the unfavorable impact of $23m from performance, which includes $12 m of idle facility costs recognized in the first quarter of 2020 due to temporary manufacturing facility closures and employee furloughs resulting from the COVID-19 pandemic.
Textron Aviation backlog at the end of the first quarter was $1.4bn.
Bell revenues were $823m, up $84m or 11% from last year, primarily on higher military volume, partially offset by lower commercial volume.
Bell delivered 15 commercial helicopters in the quarter, down from 30 last year.
Segment profit of $115m was up $11m, largely on higher military volume partially offset by the unfavorable impact of $8m from performance and other. Performance and other included $25m in lower net favorable program adjustments, partially offset by lower research and development costs.
Bell backlog at the end of the first quarter was $6.4bn.
Revenues at Textron Systems were $328m, up $21m or 7% from last year, primarily due to higher volume in most product lines.
Segment profit of $26 m was down $2m from last year, as unfavorable performance was largely offset by the impact of higher volume.
Textron Systems’ backlog at the end of the first quarter was $1.4bn.
Industrial revenues were $740m, a decrease of $172 m from last year, primarily related to lower volume and mix in the Fuel Systems and Functional Components product line from manufacturing facility closures related to the COVID-19 pandemic that began in China in January and expanded to European and North American locations by the end of the quarter.
Segment profit of $9 m was down $41m from the first quarter of 2019, primarily related to the lower volume and mix. Industrial also realized approximately $13m of unfavorable performance in the first quarter due to manufacturing facility closures and employee furloughs resulting from the COVID-19 pandemic, that was mostly offset by other favorable performance.
Finance segment revenues were down $3m, and profit was down $3m from last year’s first quarter.
“Textron is well-prepared to handle this period of uncertainty. Our financial profile consists of ample liquidity and diversified revenue streams. We are confident in the actions we are taking during this downturn and we expect them to position us for success as we begin to exit this global shutdown,” said Textron Chairman and CEO Scott C. Donnelly.