Ladies and gentlemen, thank you for standing by and welcome to the Q3 2022 Textron Earnings Release Conference Call. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session. If you wish to ask a question, please press one then zero on your telephone keypad. You may withdraw your question at any time by repeating the one then zero command. If you're using a speakerphone, please pick up your handset before pressing the buttons. If you should require assistance during the call, please press star followed by the zero. As a reminder, today's call is being recorded.
I would now like to turn the conference over to the Vice President of Investor Relations, Eric Salander. Please go ahead, sir.
Thanks, Brad, 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 Connor, our Chief Financial Officer. Our earnings call presentation can be found in the investor relations section of our website. Revenues in the quarter were $3.1 billion, up $88 million from last year's third quarter.
Segment profit in the quarter was $299 million, up $20 million from the third quarter of 2021. Income from continuing operations for the quarter was $1.06 per share, compared to $0.85 per share on an adjusted basis in last year's third quarter. Manufacturing cash flow before pension contributions totaled $292 million in the quarter, up $21 million from the third quarter of 2021.
With that, I'll turn the call over to Scott.
Thanks, Eric, and good morning, everyone. Overall, we had a solid quarter across our manufacturing businesses with higher net operating profit, cash generation as compared to last year's third quarter, despite ongoing supply chain and labor challenges. Aviation generated segment profit margins of 11.9%, up from 8.3% in the third quarter of 2021, on slightly lower revenues, reflecting a favorable revenue mix with higher aftermarket volume and strong pricing net of inflation. We continue to see solid demand across our jet and turboprop products, resulting in backlog growth of $524 million in the quarter. We delivered strong performance even as we continue to experience supply chain disruptions throughout the year that have impacted production schedules. In the quarter, we delivered 39 jets, down from 49 last year, and 33 commercial turboprops, down from 35 in last year's third quarter.
Last week at NBAA, we also announced two large fleet orders that included an agreement with flyExclusive for eight XLS Gen2 aircraft with expected deliveries in 2024, and up to six Longitude aircraft with deliveries expected to begin in 2025. flyExclusive also exercised its option to purchase an additional five CJ3+ aircraft from its order earlier in the year, with deliveries expected to occur in 2024. We also had an agreement with Fly Alliance for four XLS Gen2 aircraft and options for an additional 16 aircraft, with deliveries expected to begin in 2023. At Bell, revenues were down in the quarter on lower military revenues, partially offset by higher commercial revenue. On the commercial side of Bell, we delivered 49 helicopters, up from 33 in last year's third quarter, including the 400th Bell 505 aircraft.
During the quarter, we continue to see solid commercial demand across all our models. Moving to Future Vertical Lift, we continue to await a FLRAA contract award announcement from the U.S. Army. At Textron Systems, revenues were slightly lower in the quarter. During the quarter, ATAC announced a five-year IDIQ contract with the U.S. Navy to provide chase flight services for the F-35 program. Systems was also recently awarded a contract to provide Aerosonde operational support on its fourth maritime site, with services that are expected to begin in 2023. Moving to industrial, we saw higher revenues in the quarter, driven by higher volume at both Kautex and Specialized Vehicles and favorable pricing, principally in Specialized Vehicles. Kautex, while revenues were higher in the quarter as compared to the prior year, we continue to experience order disruptions related to the global auto OEM supply chain shortages.
Moving to aviation, we are seeing increased order activity for our training aircraft like the Alpha Trainer, which is a low-cost pilot development platform. In the future, we will look to expand this training option to include the Velis Electro as we work to achieve an FAA airworthiness certificate. Also last week at NBAA, we unveiled our new Nexus eVTOL model aircraft. Our updated design reflects our ongoing investment in the underlying research and development supporting Textron's long-term strategy to offer a family of sustainable aircraft for urban aerial mobility, general aviation, cargo, and special mission roles. To wrap up, we continue to see strong demand in our end markets, and our teams are executing well in a challenging environment.
With that, I'll turn the call over to Frank.
Thanks, Scott, and good morning, everyone. Let's review how each of the segments contributed, starting with Textron Aviation. Revenues at Textron Aviation of $1.2 billion were down $14 million from the third quarter of 2021, largely due to lower Citation jet and pre-owned volume, partially offset by favorable pricing and higher aftermarket volume. Segment profit was $139 million in the third quarter, up $41 million from a year ago, largely due to favorable pricing net of inflation of $31 million. Backlog in the segment ended the quarter at $6.4 billion.
Moving to Bell, revenues were $754 million, down $15 million from last year due to lower military revenues of $112 million, primarily in the H-1 program due to lower aircraft and spares volume, offset by higher commercial revenues of $97 million. Segment profit of $85 million was down $20 million from last year's third quarter, primarily reflecting lower volume and mix, partially offset by favorable pricing net of inflation. Backlog in the segment ended the quarter at $4.9 billion. At Textron Systems, revenues were $292 million, down $7 million from last year's third quarter. Segment profit of $37 million was down $8 million from a year ago, primarily due to lower volume and mix. Backlog in the segment ended the quarter at $2 billion.
Industrial revenues were $849 million, up $119 million from last year's third quarter, primarily due to higher volume and mix of $95 million, and a $58 million favorable impact from pricing, principally in Specialized Vehicles, partially offset by an unfavorable impact of $34 million from foreign exchange rate fluctuations. Segment profit of $39 million was up $16 million from the third quarter of 2021, primarily due to higher volume and mix. Textron eAviation segment revenues were $5 million, and segment loss was $8 million in the quarter, which reflected the operating results of Pipistrel and costs for initiatives related to the development of sustainable aviation solutions. Finance segment revenues were $11 million, and profit was $7 million. Moving below segment profit, corporate expenses were $14 million, and net interest expense was $21 million.
Our manufacturing cash flow before pension contributions was $292 million in the quarter, up $21 million from last year's third quarter. Year-to-date manufacturing cash flow before pension contributions totals $810 million. In the quarter, we repurchased approximately 3.1 million shares, returning $200 million in cash to shareholders. Year-to-date share repurchases totaled $639 million. To wrap up, we now expect our full year capital expenditures will be about $375 million, and the full year tax rate to be about 16%. For the full year, we are narrowing our earnings per share guidance to a range of $3.90-$4 per share.
Also, we are increasing our full year manufacturing cash flow before pension contribution guidance to be in a range of $1.1 billion-$1.2 billion, up $300 million from our prior outlook. That concludes our prepared remarks, so Brad, we can open the line for questions.
Of course. Our first question today comes from the line of Robert Stallard with Vertical Research Partners. Please go ahead.
Thanks so much. Good morning.
Morning.
A couple of questions from me. It may be my numbers are wrong, but it looks like revenues in aviation and systems were a bit lower than what we'd anticipated in the third quarter. I was wondering if you could, you know, perhaps go into a bit more detail with what you experienced in the quarter, if it was supply chain issues and whether this has pushed some deliveries to the right.
Yeah, Robert. I think that's safe to say. You know, as you know, we've been sort of ramping up our production volumes through the course of the year. We continue to do that, but we have been hit by a number of supply chain, you know, challenges that have resulted in aircraft pushing out to the right. Our guys are managing through that. You know, we'll continue to work hard to make deliveries, and we'll continue to work on that ramp as we go into 2023 as well. You know, again, look, I see it's a very strong demand environment. Aftermarket has also been very strong, driven by high utilization. You know, for sure, we're continuing to see, you know, some difficulties around just getting parts.
Labor ramp is, I'd say, picking up and doing reasonably well, but we've had some critical part impacts.
Scott, does this impact your division by division guidance expectations for the year?
Well, as we said before on the last call, Robert, I think we expect aviation probably is gonna come in about $300 million below what we originally guided. I think we're still on track to do that. I think we'll still make, you know, strong margin performance as the teams execute well. As I said, you know, it's a tough market, but a tough situation, but they're executing very well. I think we'll be, you know, solid on the margin side, but a little bit light on the top line. I think at systems, you also mentioned like systems is pretty close. I mean, they were kinda flat-ish. We still had a little bit of impact on that year-over-year from Afghanistan.
I think as we get into the fourth quarter here, you'll start to see some, you know, some slight growth in that business, and obviously we expect that to continue into 2023.
Okay. Just a technical one for Frank. On the corporate and other, big decline year on year, what sort of run rate should we expect on that line going forward?
Yeah. I think we should probably think about $110 million or so for the year, you know, so a higher level in the fourth quarter than we've been running at. Some of that depends, obviously, on share price, but in that zone.
Okay, that's great. Thank you very much.
Thank you.
Our next question comes from the line of David Strauss with Barclays. Please go ahead.
Thanks. Good morning, guys.
Morning, David.
Scott, could you maybe touch on your, you know, your manufacturing footprint in Europe, how you feel about things there from kind of an energy perspective? You know, how we should think about, obviously, your quarter had a pretty big FX impact there. How we should think about the FX impact, given the euro dollar parity at the moment?
Yeah. The FX has been obviously, you know, quite a drag, primarily in our Kautex business. I mean, obviously we expect that to continue, but we'll, you know, manage our way through that. I think on the factory front, you know, most of the impacts we've seen in that footprint in Europe have been driven really just by auto OEM issues around, you know, hitting their volumes. It hasn't been energy related at this point. You know, most of what I'm reading here lately is actually the energy situation seems to be a bit better than they expected, you know, heading into the winter. You know, we haven't had any indications yet that anyone's gonna back off on their auto manufacturing, you know, based on that energy.
It's really more of these other supply chain issues that they're continuing to see impacted. Look, David, you know, we go kind of by IHS data, you know, in terms of how we think about and forecasting, you know, volumes going forward. Clearly the year has been, you know, disappointing in terms of what was originally thought, you know, the volumes would be achieved. Right now it's looking like IHS is probably, you know, forecasting, you know, sort of a mid- to high-single-digit growth, you know, next year on top of some growth we saw this year. That's, you know, kind of how we think about the volumes in the business, including the European footprint.
Got it. Thanks. Scott, I guess your latest update on FLRAA and the timing you're expecting now for a decision and, you know, what kind of incremental spending are you looking at for the rest of the year to kind of continue to carry on your effort? Thanks.
Sure. Look, the latest we're hearing is it's probably a November timeframe. Obviously, you know, we continue to work with the customer and, you know, we gotta make sure we've been working on this, as you guys know, for a very long time. We're not gonna do anything that's, you know, other than supportive and doing the right thing for the program, making sure we keep the team together and keep making forward progress. Obviously, we still feel good about the program. I think that, you know, there's obviously still some uncertainty around this. I mean, we don't know an exact date, but, we're doing the right thing by the program, the right thing by the people.
You know, while there is some uncertainty, I would say that we're pretty comfortable that, you know, we've incorporated, you know, any impacts over the total year from where we were on our plan, in our guidance. I think that, you know, we're comfortable that we'll land inside that guidance, despite the impacts we've seen on the FLRAA delay.
Thanks very much.
Sure.
Our next question comes from the line of Sheila Kahyaoglu with Jefferies. Please go ahead.
Hi. Good morning, guys, and good afternoon.
Hi, Sheila.
Just to follow up on the last point, Scott. You know, how do you think about Bell without a FLRAA win? You know, what would sort of the scenarios look like for Bell, without FLRAA or potentially FLRAA? Maybe can you remind us of the R&D investment impact for FLRAA associated with 2022?
I don't think about Bell without FLRAA. Look, guys, I think you know, we're in a good place. You know, we will let the performance of our products stand and just kind of work through the process. Obviously, the Army's going through a very rigorous process here, so we'll bear with them and let this thing play out. We're pretty bullish on that program, and we'll leave it at that, I suppose. You know, on 2022, the R&D has actually been down a little bit because we've had more of the cost share activity, both on the FLRAA program. You know, even with some of the impacts that we've seen on some of the delays, I think we'll be fine there.
You know, we're working our way through it. You know, clearly the FLRAA program is gonna continue to extend. You know, like I say, hopefully here, compared to all the years we've been working on this thing, the FLRAA delay is a relatively short period of time, so.
Great. No, that's helpful. Then, glad you don't think about Bell without FLRAA. Switching gears to aviation. You know, when we look at year-to-date deliveries, they're light. You mentioned supply chain. You know, how long does that linger, and how do we think about jet deliveries for 2022 in total? Does it linger into 2023?
Sure. Look, it's a good question. I think the, you know, the way we're starting to lay out the years, you know, we've been planning on ramping production all through the year. We've been achieving that. I mean, we have been increasing the number of hours and the labor and the activity in the factory. We're clearly not going to get to the number of jets that we were originally hoping to be based on some of these delays. We're gonna keep that ramping activity going through 2023.
When you look at the incremental, you know, volumes that we had in 2022, you know, I mean, we're not ready to guide 2023 yet, but it's not unreasonable to expect that we see a similar increase in volumes in 2023 from what we saw from the 2021 to 2022 timeframe.
Great. Thank you.
Sure.
Our next question comes from the line of Seth Seifman with J.P. Morgan. Please go ahead.
Hey, good morning, everybody.
Good morning.
I guess just to follow up on that question, Scott. When you think about the strong backlog that you've been able to build here, you know, and you think about where deliveries might ultimately go, I mean, I assume the aim would be to be back to kind of the 200+ level, maybe in 2023, kind of, you know, the level that had been anticipated for 2022 before the supply chain issues.
When you think about moving, you know, moving higher from there, would it, you know, make more sense to kind of focus on keeping that backlog, maybe expanding margins even, you know, a little further from this low double-digit range, and having a more steady delivery pace as we head toward mid-decade?
Well, first of all, Seth, I think your thoughts on volume here in the near term are correct. You know, we obviously would like to have had more in 2022, but it's probably reasonable to think that what we hope to get in 2022 will be there by the end of 2023. We should back to that kind of 200-ish number in the 2023 timeframe. You know, beyond that, look, we'll continue to watch demand in the marketplace. It continues to be strong. As long as we see that kind of growing backlog, you know, in a strong environment, then we'll continue that ramp. It's gonna be a slow, steady ramp, right?
I mean, we certainly like and we think it's better for, you know, I think we've talked about it's better for our company, it's better for our customers, it's better for the whole market to be operating with better visibility here around the backlog that's out there in that, you know, 18-month, you know, kind of timeframe. You know, right now the demand continues to be very robust. We're seeing a lot of order activity that's out in that, you know, 18+ sort of timeline. You know, we'll match production, you know, as we can to meet that, if the market starts to ease back or slow down, then obviously we can taper off on the ramp.
I certainly don't see that being a case going through 2023, considering where the backlog is and where the demand environment is so.
All right. Okay, great. Just to follow up, you know, very strong cash this year. When you think about next year, you know, other than what we might assume on the P&L, are there any things you'd note about cash flow, either headwinds or tailwinds heading into 2023?
I think, you know, no, not really. We've obviously had good working capital management again this year, just like last year. We certainly benefited again from strong customer activity and deposits. There's nothing from a kind of working capital or other cash impacts that are, you know, kind of out of line with where we've been.
Okay, great. Thanks very much.
Our next question comes from the line of Pete Skibitski with Alembic Global. Please go ahead.
Hey, good morning, guys.
Good morning.
Hey Scott, I just wanted to beat a dead horse a little bit on aviation, just because, you know, even at, you know, a little bit of a lower guidance number there, it still implies a pretty good hockey stick in the fourth quarter. I'm just wondering kind of on the risk assessment front, you know, do you have the engines in-house already that you need and the parts and the labor trained up? Or is there still some risk to that number, do you think, given the ramp?
Well, look, I'd say there's always some risk to the number, right? I think we're, you know, obviously, our guys are working the heck out of this every day. They're tracking all the critical components. I think, you know, kind of that number I gave you guys, we're probably a few hundred million under our original guide is still holding. Is there some risk to it? Yeah. I mean, one of the challenges is that we, you know, you get supplier issues that pop up every day. I think we're in good shape in terms of labor and the things we can control. Stuff pops up, we get all over it. I think we've got a pretty good shot at getting to the number that we told you.
If, you know, if we miss something, it'd be a few aircraft around a particular part that pops up between, you know, here and there. The guys are working every day. I think it's a good guide and, you know, could there be some risk in it in the environment we live in? Sure. I think our folks are all over it.
Okay. No, I appreciate it. Just one follow-up on the same segment. Kind of post NBAA, how are you guys feeling about, you know, kind of the health of your customer base at aviation? You know, how the conversations go and, you know, obviously, I'm sure the macro backdrop was part of the conversations down there. I'm just wondering kind of what your net assessment is.
I'd say very positive. You know, I think that, you know, we're continuing to see some new people coming into the market. We're seeing some of our, you know, historical corporate customers that are doing fleet refreshes. You know, they're putting aircraft orders in which, you know, obviously are, you know, deliveries are a ways out, but, you know, they're refreshing their fleets. Obviously, the level of flight activity in the industry, you know, continues to have kind of charter and fractional customers, you know, very motivated to bring additional assets online. I would say all in all, it's really strong, Pete. I also would put against the backdrop of hardly a bubble, right? I mean, we're talking about, you know, jet delivery volumes that are, you know, kind of back even still maybe below historical norms.
I don't think there's this, you know, euphoric, you know, bubble burst, but people are refreshing fleets. They're investing in their aircraft. It's, you know, we don't see this big pull in, right? It's just the market is strong and flying is strong, which is critical.
I was gonna say, your exposure to Europe is still fairly limited like it used to be. I think it was only, I don't know, 20%-25% of your Citation volume. Is that still the case?
Yeah, it is. I mean, look, we're seeing kind of relatively normal from what we've seen historically. Jets are probably 80%, you know, roughly U.S., 20% international. You know, the King Air turboprop lines are typically the other way around, and that's what we're seeing. We're seeing maybe like 40% U.S., 60% international. In terms of, you know, the good news here is that the demand across pretty much all the models is strong. We're seeing, you know, mix in terms of international versus domestic fleet operations that are kind of what we've normally seen historically.
Okay. Great. Thank you.
Our next question comes from the line of Noah Poponak with Goldman Sachs. Please go ahead.
Hey, good morning, everyone.
Hello, Noah.
Sorry, Scott. What are you now planning for 2022 Cessna jet units?
Oh, look, no, we never give a specific number. I said, I think from the top line, you're looking at probably about $300 million off of our original guide. Virtually all of that is, you know, jet deliveries, really.
Okay. We can back into that. You're saying. Do I have it correct that you're saying, think about that growth rate in units, that implies for 2022 repeating in 2023 approximately?
Yeah, that's good.
Okay. How much visibility do you have beyond 2023?
Well, pretty good visibility. I mean, it's, you know, most of the aircraft, I mean, we have, you know, larger aircraft, you know, frankly, are out in 2025 right now. The mix of lighter and, you know, mid-size are certainly through to 2023, well into 2024, towards the end of 2024. I, you know, this backlog is obviously very helpful to us in terms of having the kind of visibility we need to run the operations, and obviously, we'd like to do them a little more efficiently without some of the supply chain challenges. I think we're in a pretty good place. Best we've had in a very long time, obviously, in terms of the visibility of the business.
Okay. I guess, you know, that's all positive and, you know, really kind of major structural change in the business. But, you know, where the bookings are running, if they hang around in the zone that they're in now, you'd continue to run the bookings pretty far in excess of the revenue, and which would build the backlog even further. You know, when do you get to the point where that's going too far and customers are going elsewhere or have to wait too long? Or is it just with the macro level supply chain bottlenecks, everybody's in the same boat and every OEM kind of has to do the same thing, and it's almost--
No, I think you just said it. Everybody's in the same boat, right? I mean, so, you know, I don't know where that equilibrium point is, right? When it gets out too far. This is not a you know, there's not like some other supplier or OEM that says, "Hey, I've got aircraft, you know, sitting around." I think this is an industry dynamic as opposed to just being unique to us. I mean, obviously, I feel great about how our guys perform from a profitability standpoint. You know, I mean, look, this business is in fabulous condition, right? It's got great backlog, good visibility. It's generating very strong margins. It's generating very strong cash flow. I don't think there's a whole lot not to like.
Look, like, it's every day is hard with these supply chain issues and stuff like that, but our guys are fighting through it every day. I mean, I'm not sure we'll be apologetic for these kind of margins and this kind of cash and strong backlog. The guys, I'm not sure what else I would ask them to do. They're driving hard every day and performing really, really well, so.
Great. Just lastly, on price in the business, are you actually now increasing price more, in terms of the year-over-year rate of change than you were 12, 18 months ago when the market first strengthened? I get the sense that the price increases early in this strong demand environment weren't that big because you wanted to build the backlog, and now that you've done so, you can actually accelerate the pricing. Is that a fair assessment?
Well, I guess, yeah. I'm not sure. I don't do the first derivative on the pricing every day. Look, I think for sure this market has changed over the last 18 months or so as it's gotten stronger, and it's competitive market obviously, so pricing and what competition is doing matters. I think everybody, you know, I mean, the whole industry has seen, you know, stronger pricing. Again, we look at this kind of on a model-by-model basis and, you know, what's going on with the competitive environment and, you know, it's not. I'm not sure I can give you a simple answer on the slope of the curve, but it's strong.
I would say, you know, we continue to obviously very much focus on making sure we're getting price, you know, in advance of inflation. We think about this a lot when you start thinking about, you know, obviously we're, you know, we're taking contracts on aircraft that are in 2023 and 2024 and 2025, and so you've got to make appropriate assumptions in terms of, you know, inflation between here and there, and make sure you're pricing accordingly. I think that we are.
Okay. Thank you.
Our next question comes from the line of Peter Arment with Baird. Please go ahead.
Yeah, thanks. Good morning, Scott, Frank.
Morning, Peter.
Good morning.
Hey, Scott, you've been talking about supply chain disruptions obviously all year. You know, you have a ton of experience in engines. Is engines for you still in aviation the biggest shortage, or are there other components like chips or other things that you would call out and just maybe any color you could provide on the engine shortfalls?
You know, Peter, I mean, look, engines are strained and as everybody knows, there's one particular model that's important to us that had an issue that kind of stems back to this Russian-Ukrainian, you know, sanctions, but I think that's in recovery mode, so we feel good about that, you know, bouncing back. You know, I think the frustrating part for our folks, Peter, it's just sort of, you know, everywhere, right? Stuff happens. It's, I'd say that, you know, overall our avionics suppliers have done a really nice job. You know, Garmin is critical to us, and they've been able to meet deliveries. So they're managing their way. You know, that would be the area probably most highly concentrated in terms of semiconductor risk. I think they've done a nice job.
It's, you know, this is the problem in this business, right? Every part is important. It's, you know, there's certainly some, you know, things like the engine was an issue. I think that will resolve itself here in the next, you know, six-nine months or so. You know, there's just things pop up every week or it's just the world we live in. Our guys are kind of used to it. They just keep working, and they go manage each thing that pops up.
Helpful color. Just, Frank, just quickly, could you tell us what the aftermarket was up in the quarter and any comments on pricing? Thanks.
Yeah, aftermarket remained strong. It was up 18% year-over-year, 37% of total volume for the quarter. Really, you know, kind of continue, as Scott said, to see, you know, strong flying activity and therefore strong volumes in the business.
Terrific. Thanks.
Our next question comes from the line of Cai von Rumohr with Cowen. Please go ahead.
Yes, thanks so much. How much of the goodness and cash flow, that $300 million, came from you know, deposits on aircraft? Thinking about next year, you know, you've had such a big gusher from that source this year. How should we think about cash flow if book-to-bill goes back to about 1.0x?
Well, we're not gonna kind of break out separately the cash items. I mean, offsetting the, you know, the deposit activity is we have seen a little bit of inventory growth as we've had these supply chain issues, and we've seen some, you know, kind of slowdown in our ability to deliver. There has been some offset, but, you know, kind of with a book to bill above one, and strong commercial in aviation, strong commercial demand just at Bell, we benefited from that. Frankly, we benefited also from strong cash performance on the military programs at Bell. It hasn't been all that. You know, we've talked in the past about, you know, kind of generally the business over time wants to be around one-to-one cash flow to profitability, right?
We certainly have benefited, you know, kind of this year and last year from strong cash performance relative to that. You know, kind of it'll depend on lots of factors, you know, kind of when we get to a slower, you know, kind of booking rate, but it will migrate back towards that 1:1, as we do that.
Look, I guess I would emphasize that we're conscious of this, right? I mean, I think that you enjoy a benefit here with strong commercial deposits in aviation and to some degree also in Bell's commercial business, which has also seen very strong demand here. You don't change anything else you do in terms of managing the business and making sure that you're fundamentally managing working capital and CapEx and all those things. You know, for sure, you're getting a benefit of this, but I think, you know, we're delivering well over 1:1, and that's because the businesses are doing a good job of managing their cash and then enjoying the benefits of customer deposit activity on top of that.
That's, you know, the nature of where we are right now.
Terrific. Given this extra cash goodness, how are you thinking about deploying the cash?
Well, same as we've talked about. You know, we as we said, we've been an active repurchaser of stock. We've bought about $640 million year to date. You know, that's up from last year's year to date number. Last year, we ended up, you know, kind of low $900 million of share repurchase. You know, we would expect similar types of rates, you know, kind of for the year and on a, you know, at least as we sit here today on a go-forward basis. We've been, you know, we've been buying back about 5% of our stock on an annual basis. You know, kind of that type of rate is a good rate to be thinking about.
Thank you very much.
Our next question comes from the line of Robert Spingarn with Melius Research. Please go ahead.
Hi, good morning. Just wanted to turn to a couple of the other segments for a moment. In the past, you've talked about systems being a low double-digit margin business, but it's been outperforming that last year and this year. Can we talk a little bit about the trend there? Is it gonna stay more in the mid-teens?
Yeah, look, it's a good question. Again, we're not quite ready to guide for, you know, next year. But I think that business, you know, performs really well. I mean, it always has some components of it. You know, for instance, I think you'll see this everywhere, right? Where there's fixed price government contracts, obviously you can't reprice those, so there'll be some pressure on inflation on that front. But there's also a constant flow of new programs. I think overall strong execution, which has helped us deliver, you know, strong double-digit margins, and I would expect that to continue.
Okay. Scott, sticking with these other businesses, industrial was clearly strong, and I think you called out specialty vehicles. Could we talk about the forward trends there?
Look, sure. I think that the specialized vehicle business is doing well. Obviously, there were some segments of that business that took real hits through the you know the COVID periods, ground support equipment and you know things like that that are seeing robust order activity come back into those markets as well. Also, you know, achieving strong pricing. You know, our golf and you know specialized PTVs and whatnot is very strong. I think we have a great product lineup, and that team has done a nice job. They you know obviously in that business, we also see you know supply chain challenges all the time. But you know the teams work through it, and I think we'll continue to see that on a steady improvement.
You haven't really seen any evidence of this recessionary fear hitting that business? I would imagine that business is somewhat sensitive.
You know, some are more sensitive than others, you know, but absolutely. I think particularly when you look at the power sports world, we keep a very close eye on that. Inventory levels are still very much lower than they typically are in those channels because of supply chain challenges. I think you need to get those to a healthy level. Absolutely, we watch it very, very carefully because I think that particular piece, which is a relatively small piece for us, obviously, is very recession sensitive. I think when you look at a lot of the municipal stuff and ground support equipment, golf, you know, look, these things have historically been pretty resilient in terms of how they perform, you know, even in a recessionary period.
I think we're well positioned in those markets, which are, you know, a much larger piece of the business for us.
Of course. Thank you very much.
Our next question comes from the line of George Shapiro with Shapiro Research. Please go ahead.
Yes, good morning. Scott, on the supply chain issues, it seems like it's affecting your business more than, say, like Gulfstream at the high end. Is there any differentiation you can say as to why?
I haven't, George. I have a list of all the parts we're missing right now. I could call Mark, I guess, and see if he has some extra ones, but no, I don't. I mean, you know, again, guys, look, I think this is a world we live in, right? We have the challenges. I think our guys have done a nice job, you know, through this. I think we will have a strong fourth quarter. It's not without, you know, some risk on a part popping up here and there, but it's something we're gonna manage our way through. It'll be fine.
Okay. Frank, can you provide some comments on what you see for pension next year, given the big changes we're seeing in DR and asset returns?
Yeah. We don't expect it to be a headwind. We're, you know, obviously, we've got a lot of work to do in the fourth quarter in calculating the numbers and everything, but, it should not be a headwind for us.
Okay. One last one. Scott, you've been saying that the delay in FLRAA has been, you know, a cost to you in terms of carrying all the people. Can you quantify at all how much of a cost it was to Bell in the quarter? 'Cause the margin at Bell still looked pretty good this quarter.
Well, look, Bell had a very strong quarter on the commercial side, and I think we'll, you know, continue to see a strong commercial business. We talk a lot about aviation, obviously, you guys ask, but the commercial helicopter business is also seeing very robust demand. Those guys are performing well. You know, it's obviously offsetting the, you know, historical military programs which continue to ramp down a little bit. Look, I think on the FLRAA, George, it's, you know, obviously was in our original guide. That's why we're, you know, we're certainly seeing, you know, lower absorption of, you know, we expect it to be kind of under contract, you know, at this stage of the game. It's something we're managing our way through.
Like I said, I think, you know, we can't quantify or wouldn't quantify exactly the number, but, you know, suffice to say that we can live within our guidance based on, I think, you know, where we are and our expectations for the FLRAA announcement towards the latter part of this year.
Okay, thanks very much.
Our next question comes from the line of Kristine Liwag with Morgan Stanley. Please go ahead.
Hey, good morning. Scott, on aviation, you mentioned the pretty strong orders and incremental interest you're seeing from corporate buyers. You know, book-to-bill was pretty solid at 1.5x . From your conversations with your customers and potential customers, what's the key impetus for the incremental order? Is it replacement, capacity increase, or new customers to biz jets? How sensitive are they to the financing environment?
Well, it's a bit of all the above, Kristine. I mean, obviously we have some corporate customers out there that in the quarter, you know, placed orders 'cause they're gonna replenish, you know, turn over their fleets of aircraft. That, you know, as you know, the corporates, you know, they they're used to sort of looking out on that 18-month, two-year or so timeframe, you know, as they plan their fleet refreshes. The lead times that are there right now aren't, you know, something that they're not accustomed to, and that kind of fits in their plan. We are seeing that activity. We are still seeing some new activity.
Again, we continue to see, you know, a lot of, you know, there are certainly new people that are coming in more than normal that are buying a whole aircraft. But we also see just the demand of new people coming into the market that are using either fractional or, you know, charter operations. We continue to see strong demand, you know, from those customers as well. It really is across the board, which is, I think, you know, again, very healthy for the industry.
Thank you for the color. Maybe switching gears, Scott, in the past, you know, your Sensor Fuzed Weapon exposure, albeit only support in the past few years and no longer in production, it had limited the European ownership of your stock. Now that you're completely out of the Sensor Fuzed Weapon business, and it looks like you're completely out of support too, and you have the only electric aircraft certified for passenger use, it seems to me like your portfolio is more attractive on an ESG basis. So are you seeing any recognition of the portfolio shift? Are you seeing incremental interest from European asset managers and ESG investors? How do you think of that evolution?
Well, it's a good question, Kristine, and I don't know specifically, you know, those funds that have historically not wanted to, you know, invest in the company in large part because of the SFW exposure. As you know, that doesn't exist anymore. I think that's not an issue. Look, on the overall ESG front, you know, without a doubt, you know, there you're gonna see, you know, certain funds out there that are gonna be more oriented towards companies they think are investing in that future in terms of particularly electric transportation. I think we have a very good story. I mean, obviously aviation is an area we're investing, you know, and frankly, particularly as a result of the Pipistrel deal, are a leader in that field.
We're also very strong on the electric side in terms of our vehicle businesses, right? I mean, we've, you know, pioneered over the years a lot of that electrification, and frankly, that's spreading out across, you know, that business in a big way, including ground support equipment and turf care equipment. It's, you know, that trend is gonna continue to happen. I can't speak specifically to the European funds, but I absolutely and, you know, consciously, obviously, on our part, we think we're, you know, engaging in strategies that will help make us more attractive to funds that have ESG criteria.
Great. Thank you, Scott.
Our next question comes from the line of Ron Epstein with Bank of America. Please go ahead.
Hey, good morning.
Good morning, Ron.
There had been a ton of focus on FLRAA for obvious reasons, but could you walk through some of the opportunities, you know, beyond FLRAA? You know, the Navy is looking for some helicopters down the road, as is the Air Force. You guys talked about it a bit at AUSA, but not everybody was there. I was wondering if you could kind of walk through some of those other opportunities that are beyond FLRAA.
Sure. Absolutely, Ron. Look, I mean, you're right. Everybody asks a lot about FLRAA. We're obviously very, very interested in the outcome of FLRAA, but, you know, Bell is hardly a one-trick pony, right? I mean, there's a lot of other stuff going on. I think when you think about the maritime strike and [Aura], there's active AoA activity going on right now in the Department of the Navy, thinking about what they do with their future of aircraft replacement programs. Obviously, we think that our offering, which is in that tiltrotor space, is very attractive to them. You know, I mean, these are services that obviously today operate V-22s, and they need aircraft and assets that can keep up with V-22s.
It's, you know, I think we feel like a tiltrotor solution is a good answer in that space. These programs are relatively early on. Like I say, they're doing their analysis of alternatives, and that'll lead to, you know, more acquisition activity here in the next couple, two, three years. We're very close to those programs, obviously. The Air Force, you know, as has been, you know, fairly public, is, you know, talking about, you know, what they wanna do for, frankly, higher speed VTOL, right? Even beyond the kinds of speeds that we see today in a V-22 or in a V-280 class of aircraft. We're highly engaged, you know, with the Air Force on those sorts of programs. You know, I think there's no doubt that the.
You know, what we're seeing with the Army, you know, and obviously that's a huge opportunity to replace that, you know, sort of the Black Hawk class of aircraft, that you will see similar programs in the Navy, Marine Corps, and, you know, in the Air Force in one form or fashion. Our guys are highly engaged in those program opportunities.
Got it. Then maybe shifting gears back to Cessna, a bigger picture question. When you look at the portfolio of Cessna airplanes, is there any place that you think you need to do a refresh or not? How are you thinking about new product development given that, you know, the business is in a healthier place than it was just a couple years ago?
Yeah, look, I think we have a very robust set of refresh programs. You know, we've launched a couple of these Gen 2, you know, Gen 1 Mod programs. We have more of that in the works. We think it's really, really critical to be rolling those out on a fairly regular frequency. So we have, you know, a couple that are in the works right now that we haven't, you know, yet announced, but obviously the work is going on. You know, on the clean sheet front, we have the Denali program, which is, you know, still under development. So I think if you look at both jet and turboprop, you know, there's a robust level of activity. I mean, I love our product lineup right now.
I think the Longitude, Latitude obviously have been, you know, home runs in the market. The SkyCourier is just getting in, you know, kind of getting to rate in production with great demand. I think that's gonna be a home run product. Denali will similarly, I think, be a great product for us. The line is, you know, be sprinkled with a couple of these, you know, refresh programs, you know, here in the coming years.
Yeah, got it. Thank you.
Sure.
Our next question comes from the line of David Strauss with Barclays. Please go ahead.
Thanks for taking the call. Just wanted to ask about the H-1 and how that kind of rolls off from here and, you know, what sort of headwind we should be thinking about to Bell, as that program runs off. Thanks.
Sure. Look, H-1 is about to wrap up, you know, its program of record in terms of the U.S. sales. We have some FMS, you know, programs that are still under production, but those clearly will be ramping down here over the next couple years. Service programs, you know, continue to run. No question, David, that program will, you know, continue to ramp down, you know, here in the next couple years.
Scott, could you quantify how much in revenue H-1 currently accounts for?
No, we don't break out the individual programs, David. Look, obviously our plan, you know, is largely based on the fact that you'll see a ramp-up in FLRAA, you know, program activity that will, you know, largely replace what we're seeing in the ramp down on the H-1 program.
Got it. Thank you.
Sure.
Okay. Brad, that completes the call.
Ladies and gentlemen, this conference will be available for replay after today at 11 A.M. Eastern through January 24th, 2023. You may access the AT&T replay system at any time by dialing 1-866-207-1041, entering the access code 2659646. International parties may dial 402-970-0847. Those numbers again are 1-866-207-1041 and 402-970-0847. Again, entering the access code 2659646.
That does conclude your conference for today. Thank you for your participation and for using AT&T conferencing service. You may now disconnect.