Ladies and gentlemen, thank you for standing by, and welcome to the Textron Second Quarter Earnings Call 2021. At this time, all participants are in a listen only mode. Later, we will conduct a question and answer session. I would now like to turn the conference over to our host, Mr. Eric Salander, Vice President of Investor Relations.
Please go ahead, sir.
Thanks, Toni, and good morning, everyone. Before we begin, I'd like to mention we will be discussing future estimates and expectations during our call today. These forward looking statements are subject to various risk factors, which are detailed in our SEC filings and also in today's press release. On the call today, we have Scott Donnelly, Textron's Chairman and CEO and Frank Conner, our Chief Financial Officer. Our earnings call presentation can be found in the Investor Relations section of our website.
Revenues in the quarter were $3,200,000,000 up from $2,500,000,000 in last year's Q2. During this year's Q2, we reported net income of $0.81 per share. Adjusted net income, a non GAAP measure, was also $0.81 per share for the Q2 of 2021 compared to $0.13 per share in the Q2 of 2020. Segment profit in the quarter was $289,000,000 up from $82,000,000 in the Q2 of 2020. Manufacturing cash flow Before pension contributions totaled $509,000,000 up $294,000,000 from last year's Q2.
With that, I'll turn the call over to Scott.
Thanks, Eric, and good morning, everyone. We had a strong second quarter with higher revenues across all of our manufacturing segments, Operating margins of 9.1 percent and strong cash generation. At Bell, revenues were up in the quarter on higher commercial revenues, partially offset by lower military revenues. On the commercial side of Bell, we delivered 47 helicopters, up from 27 in last year's Q2. We continue to see strong commercial demand and solid order activity in the quarter Moving to future vertical lift, in June, following 214 light hours over 3 years, Bell retired the V-two eighty Valor Demonstrator Aircraft.
Over this 3 year period, the Valor successfully demonstrated all key performance parameters with FLAR program, including low speed agility, long range cruise, 305 knot high speed flights, autonomous flight and rapid mission systems integration. On July 6, the Army issued the FLORA RFP. Program remains on track to the Army's schedule with bids due in September, followed by down select and award in the Q2 of 2022. On FARA, Bell is about 45% of the way through its build of the 360 Invictus prototype. And lastly, Bell announced plans for integration lab in Arlington to provide integration verification validation testing on aircraft emission systems needed to meet the requirements for both FPL programs.
Moving to Textron Systems, we saw another strong quarter of execution with operating margins 14.4%, up 310 basis points from last quarter. We saw strong performance at ATAC driven by increased flight activity led by our F-one fleet on the U. S. Air Force capital cash program Where we have made significant investments over the last few years. In June, Sea Systems delivered the 3rd ship to shore connector, LCAC 1 hundred and two to the U.
S. Navy. As development contract portion of this program continues to wind down through the remainder of 2021, we expect to see revenue growth and margin expansion in the program as we increase our Also in the quarter, Land Systems delivered the 4th and final Ripsaw M5 vehicle to the U. S. Army for RCV medium program.
Customer will begin integration and testing these vehicles in preparation for their 2022 soldier operational experiment. Land Systems also unveiled the Cottonmouth, Vehicle purpose built for the U. S. Marine Corps advanced reconnaissance vehicle program and was recently selected for further prototype development under an anticipated OTA contract award. Offsetting higher revenues in most of its operating units in the quarter, we did experience some top line pressure at Air Systems largely related to the reduction in hours or fee for service activities The U.
S. Army's Afghanistan withdrawal had impacted the sale of the Tru Simulation business earlier this year. At Aviation, revenues were up in the quarter on higher volumes for Citation jets and commercial turboprops as well as in our aftermarket business. We delivered 44 jets, up from 23 last year and 33 commercial up from 15 in last year's Q2. We continue to see strong commercial demand and order activity for our aircraft, which resulted in backlog growth of $689,000,000 to $2,700,000,000 at quarter end.
Through the first half of the year, we recorded over $1,100,000,000 of backlog growth in aviation. Both the Citation Longitude and Citation CJ4 Gen 2 received EASA type certification in the quarter. These certifications are expected to generate additional demand opportunities for each of these models. On the new product front, the USS Sky carrier aircraft certification program has now accumulated over 1200 flight hours and continues to progress well as we work towards entry into service targeted for later this year. Moving to industrial revenues and margins were up at both Kaltex and Specialized Vehicles from last year's Q2, primarily due to higher volume and mix in each of the businesses.
At Kaltex, despite the higher revenues, we've experienced order disruptions related to the global auto OEM supply chain shortages, which have directly impacted our production scheduling, Resulting in intermittent line shutdowns and manufacturing efficiencies. At Specialized Vehicle, we saw higher revenues and improved operating performance from a strong retail Pricing environment driven by continued high customer demand in our end markets. While we've experienced continued strong retail demand for our products, we have been impacted by our ability to fully meet this demand and we continue to work through these production challenges. In summary, we continue to see increased commercial order flow at Aviation and Bell, Solid execution in our military businesses, strong retail demand for our products industrial segment and improved cash generation that all contributed to the Q2 performance and our improved EPS and cash outlook. With that, I'll turn the call over to Frank.
Thanks, Scott, and good morning, everyone. Let's review how each of the segments Starting with Textron Aviation. Revenues to Textron Aviation of $1,200,000,000 were up $414,000,000 from a year ago, Largely due to higher Citation Jet volume of $174,000,000 aftermarket volume of $98,000,000 and commercial turboprop volume of 75,000,000 Segment profit was $96,000,000 in the 2nd quarter, up $162,000,000 from last year's Q2 due to the higher volume mix of 117,000,000 A favorable impact from performance of $34,000,000 and favorable pricing net of inflation of 11,000,000 Backlog in the segment ended the quarter at $2,700,000,000 Moving to Bell. Revenues were $891,000,000 Up $69,000,000 from last year on higher commercial revenues of $99,000,000 partially offset by lower military revenues. Segment profit of $110,000,000 was down $8,000,000 primarily due to higher research and development costs in the quarter largely related to the future vertical lift programs.
Backlog in this segment ended the quarter at $4,800,000,000 At Textron Systems, revenues were $333,000,000 up $7,000,000 from a year ago. Segment profit of $48,000,000 was up $11,000,000 due to a favorable impact from performance. Backlog in the segment ended the quarter at $2,300,000,000 Industrial revenues of $794,000,000 We're up $232,000,000 from last year with $169,000,000 from fuel systems and functional components and $63,000,000 from specialized vehicles, largely reflecting higher volume and mix. Segment profit was $32,000,000 A $43,000,000 from the Q2 of 2020, primarily due to the higher volume and mix at each of the businesses. Finance segment revenues were $12,000,000 and profit was $3,000,000 Moving below segment profit, corporate expenses were $37,000,000 And interest expense was $32,000,000 With respect to our 2020 restructuring plan, we recorded a pretax charge of $4,000,000 on the special charges line.
We had another strong quarter of cash generation reflecting our focus on working capital management across the segments And cash deposits from strong order activity at Aviation. Our manufacturing cash flow before pension contributions was $803,000,000 higher than last year's Q2. In the quarter, we repurchased approximately 3,000,000 shares returning $96,000,000 in cash to shareholders. And we repaid at par $250,000,000 of 5.95 percent notes with a stated maturity of September 2021. Following these activities, we ended the 2nd quarter with approximately $2,200,000,000 of cash on the balance sheet.
To wrap up, we now expect our full year tax rate to be 16 percent, reflecting increased tax credits related to higher qualifying domestic investments in R and D. We are raising our expected full year guidance For adjusted EPS to a range of $3 to $3.20 per share, up $0.20 from our prior outlook. We're also raising our outlook for manufacturing cash flow before pension contributions to a range of $800,000,000 to $900,000,000 up $200,000,000 from our prior outlook with planned pension contributions of $50,000,000 That concludes our prepared remarks. So operator, we can open the line for questions.
Thank you. Our first question comes from the line of Sheila Kahyaoglu with Jefferies. Please go ahead.
To bill of 1.6 times in the quarter. I guess, Scott, what are you hearing from your customers? How do you think about the sustainability of this growth and do you think there's any change in consumer behavior?
Sheila, I think we had A strong order quarter for sure. I think the Q will come out, you'll see that we had services was about aftermarket was about 31%. When you account for that and you account for used aircraft sale, our book to bill actually probably is closer to 2, in terms of new equipment. That order activity continues to be strong here as we've gone through the end of the quarter. So I think the sustainability appears to be quite strong As we've seen through the course of the year, we have an awful lot of new customers coming into the market, which I think is great.
We've got very low Used aircraft available for sale, I mean it's sort of record low level. So people that are coming into the market, there's not a whole lot To be had out there in terms of quality, relatively new used aircraft and that's driving a lot of strength in the new side. I think For everything we're seeing, it appears to be quite sustainable. The demand is there flying. If you look at that, it's at Highest levels we have seen in a very long time in terms of daily utilization.
So I think demand, if you look at sort of the macro level, everything from charter to To fractional, the whole ownership is very strong. It's very U. S. Centric in terms of jet Right now, although we're starting to see some pickup in the South American and European markets, particularly on the turboprop side, we're starting to see more activity In South America, as you know, that those international markets tend to be the dominant part of our turbo pump market. They haven't been just because they're a little slower.
So I When you look at the demand that we're seeing and then you start thinking about South America and European markets Starting to come back and frankly just corporate. I think we're talking about a lot of high net worth individuals, small businesses, Things like that are really driving it so far and the addition I think as we go further into the year and start to see more corporate activity We'll help to make it a sustainable demand environment.
Thanks for that color. And then maybe one more on Bell since you mentioned it in your prepared remarks about The R and D impact, is that more on FARA or FLARA and kind of how do we think about that progression of Company funded R and D.
It's both. But FLR, frankly, at this point is the bulk of it, although we're seeing obviously some Pickup here on B and P spending as we are preparing the flower proposal. But this year, the lion's share of it is around The fire program team is making great progress. As I said, we're progressing really well in terms of the design and the assembly of the 1st aircraft for the first flight test activity. But you'll see this composite of higher R and D spending associated principally with those FBL programs Through 2022.
Great. Thank you.
Thank you. Our next question comes from the line of Peter Arment with Baird. Please go ahead.
Yes. Thanks. Good morning, Scott and Frank.
Good morning, Bill.
Good morning. Hey, Scott, just following up on your aviation Comments, just demand environment obviously sounds like it's really broad based and across the board. I think the original plan was to kind of get back 50% of Recovery of your previous 2020 production plan, just how are you thinking about that or managing it when you think about this
I think we're on track for that, Peter. And as we go into the end of the year, obviously, we've been raising our production rates as we expected to not only accomplish This year, but as we kind of gave color around 2022 to get us back to those 2019 levels. So I think that's going well and obviously Strong demand makes us feel pretty good about continuing to bring those rates up as we go through this year and into 2022. Okay.
And just as a quick follow-up on just the margin performance. I mean, I think year to date you're kind of 7% versus guidance of 5.5%. So it's just the guidance increase that you're giving today, obviously, you're just you're Forecasting continued strong margin performance in Aviation in the second half.
Yes, we are, Peter. I think the color on Aviation given the strength of the market, we are probably going to be guiding up a couple of $100,000,000 of revenue is the way to think of it and probably a couple of 100 basis points of better margin.
Terrific. Thanks so much, Scott. Sure.
Thank you. Our next question comes from the line of Pete Skibitski with Alembic Global. Please go ahead.
Hey, good morning guys. Nice quarter. Scott, maybe to follow-up on the UAV fee for service as The U. S. Continues to pull troops out of Afghanistan and I think maybe even more out of Iraq.
Maybe you can quantify much of a headwind that program was in the quarter for you and kind of how much we're expecting it to be to negatively impact the full year?
I mean, we don't go
into that level of detail probably, but just it's I guess our point is that it is we're seeing growth in a lot of the other pieces of that business and the Afghan issue is holding some of that back. I think the margin performance continues to be strong. And Look, I think we're fairly optimistic that we'll redeploy those assets and utilize them in other applications, but that's probably something that will be more of a 2022 impact. Takes a while for that to happen. So I don't think it's not a horrible story, it's just the reality of the pullback in Afghanistan.
And I think we've been Conservative in terms of how we manage those assets. The team has done a great job with that. So it's not a bottom line problem right now. And again, I do think a lot of those assets will get redeployed in other opportunities, But it is creating a little bit of a top line headwind. So when you look at systems, I think we're really happy with the performance there.
We'll probably see margins are a couple of 100 basis points better than what we originally were guiding you guys, but we're not we're probably just kind of On track to the revenue line because of some of the pressures on that Afghanistan pullout.
Okay. Last one for me also at systems. They're bidding on some pretty meaningful ground vehicle programs, right, OMFV on a team and the Marine Corps program. How do you guys ensure that you guys get an adequate return on those programs, especially on OMFV, that's pretty it's an order of magnitude bigger than I think Most of the things that they've done there, I think about the return you get just in light of the type of return you got in the TADB program.
Thanks, Peter. These programs We'll not be structured in a way where you're taking on an EMD program and also committing The full life of production at a fixed price contract. So I get your point. I think the business Learned a lot about that and certainly we would never put ourselves in a contracting situation where we had that kind of exposure. So These could be phenomenal programs.
They could be great programs. I think our guys are technically we're in a good place on some of the line. I mean there's a long way to go Things like OMFV, but they are huge opportunities and it's going to take some time for them to come to fruition. Yes, certainly, we're not going to look at a contract situation where we have the kind of exposure that we have on TEPC.
Sounds great. Thanks guys.
Thank you. Our next question comes from the line of Carter Copeland with Melius Research. Please go ahead.
Hey, good morning, guys. Good morning. Just two quick ones. 1, Scott, I wondered specifically if you could just speak to what You saw or what you're continuing to see in terms of trade in activity, just given the used inventory Dynamic that you talked about, what you're seeing in that regard? And then a second one for Frank on The performance in ATAC and Systems, was there anything sort of one time in nature in that regard that we should be aware of or Anything we should think about, Matt, in that regard?
Thanks.
Look, on the used,
our activities reflect what's going on in the market, right? So I think our used aircraft Inventory is quite low. Aircraft have largely sold out of our book. The need for trade in is down dramatically. As you guys know, we do run what we call program, so we'll help customers with the resale of their aircraft, ideally not even ever putting it onto our book and we continue to try to do that.
And Frankly, as the backlog builds in that time frame from someone deciding to buy a new aircraft, They have a much longer window for the remarketing of their aircraft and what we saw when there was a lesser backlog and shorter cycle So I would say that the dynamic of the used aircraft has been reflected in our own used aircraft department and it's So I'd say all positive.
So on the systems mix, no, there was nothing kind of unusual in
the quarter. Overall consolidated net program reviews were positive
$15,000,000 And I think it
just again reflects, as Scott said, strong performance Across the systems businesses and the expectation of a couple of 100 basis points better than what our original guide was for the year.
Okay, great. Thanks for the color, gents.
Thank you. The next question comes from the line of Ron Epstein with Bank of America. Please go ahead.
Hey, good morning guys.
Good morning.
Good morning. Scott, could you give us a little
bit of a breakdown on Maybe the customer demographic, I mean, how much of it is wealthy individuals versus corporates? Who are you seeing coming back to the market?
I don't know if we can give a super big But as I said, it was it's largely driven by when we talk about high net worth individuals, usually folks that have family businesses, small businesses, Private companies, which is the core of our historically the core of our customer base. And I think that's where a lot of demand is coming in as you look at Larger, particularly with the Longitude out there and the Latitude where we have products that have a stronger appeal, we think, to the corporates, Those folks are just starting to come back. And as Corporate Aviation Department start to fly more, I think we'll see more activity, Particularly in those classes of aircraft in that corporate world. But in the meantime, it is That customer base that we've historically seen, you're just seeing new customers of that same demographic, I guess, as you referred to it, that are coming into the market.
Got it. Got it. And then your cash levels are relatively high versus history Pre COVID, I call it PC. Are you still interested in industry consolidation? I mean, how are you thinking about deploying
Well, look at this point, Ron, we kind of watch opportunities as we always do. I don't think there's anything Pending, we'll certainly let you guys know when that happens. But in the meantime, we continue to allocate the bulk of our cash and stock buyback. I think we'll continue to do that. As Frank said, we made a couple of debt payments here in the quarter.
We don't have any more Corporate payments until the 2024 timeframe. So I think we have a lot of flexibility around cash. But at this point, our principal allocation of that is towards Sure, bye bye.
Great. Thank you very much.
Sure.
Thank you. Our next question comes from the line of Noah Poponak with Goldman. Please go ahead.
Hi, good morning everybody. Good morning, Noah. Questions on the guidance revisions. In order to get into the middle of the new EPS range, EPS in the 3rd Q4 would have to be essentially exactly flat from the second quarter, And seasonally, the business usually ramps through the year and you have end markets that are improving through the year. So If you could just walk me through how that happens?
And then the earnings raise It looks like $45,000,000 $50,000,000 of net income and then you've taken the free cash up $200,000,000 If you could just bridge that difference.
I'm not sure how much detailed modeling I can go into on the call, Noah. But look, I think we are seeing a little bit of linearity. As you guys know, when we came through The COVID period, obviously, there was a lot of inventory reductions across the company. We're trying to be more linear And how we do that, I mean, I think aviation is a good example. We're not having some of the historical where you could this big inventory build through the first Couple of quarters and most leads off on 34.
We are seeing a little more linearity, a stronger delivery here in Q2 and That's helping to give us a more linear better managed working capital, I would say. So, In terms of the modeling around EPS, I kind of help a little bit here is think about Aviation being up a couple of 100,000,000 on revenue and a couple of 100 basis points A better margin versus the guide systems, a couple of 100,000,000 I'm sorry, a couple of 100 basis points of better margin versus our initial guide. I don't think Bell is about where we expected to be. They're performing well, but they're performing more or less to the guide. And I think Industrial will probably be around in that same area, right?
I mean, I would like to probably kind of some upside. We probably are going to be a little bit softer just because of the challenges on some of the But again, strong performance. Certainly on year over year revenues, margins are up, but It's a little more challenged in terms of capitalizing on some of that end market demand, but the opportunities are there.
Okay. I understand. And, Scott, your Response earlier to the question around the prior Cessna Jet production plan, recovering half of The 2020 decline and then getting back to 2019 2022, it sounded like you're sort of just reiterating that despite The strength in the market, maybe that's just because it's been strong, but for a short relatively short period of time, you want
to see that sustained, you
don't want to get ahead of yourself. But I wondered also how much of that is that you're looking at pricing over volumes and you had the experience of Having to reduce price and then changing the strategy to hold firm on price instead of chasing volume. And I wonder if you could just speak to how you'll handle Now that the market is stronger, can we expect a bigger focus on price over volume even as demand increases or how are you going to handle
It's a good question, Nolan. I do think that part of the dynamic here is that, as you know, we've gone through a very long period of time where Book to bill was just the backlog just wasn't strong enough to support, let's say, a 6 to 9 month Order delivery window, there was too much short cycle sale going on. It's particularly challenging for the factory to do that, to load things Right way to not every work when people buy on short cycle and you're reconfiguring and tailoring the aircraft too late in that manufacturing cycle. There is no doubt that this business, I think this industry is healthier when you've got more like a 6 to 9 month backlog. And it gives you better visibility.
It's think it's better for the customer in the end in terms of the ability to customize and get the configuration of the aircraft straight. So that's A lot of what we look at, so obviously we are increasing the volume consistent with what our expectations were for the year and Obviously, you're feeling good about that increased rate as we go into next year given the backlog. But for sure, we want to be cautious here and not Increase volume and get back to a situation where you just got too much short cycle sales going on. Okay. Excellent.
Thank you.
Thank you. Our next question comes from the line of David Strauss with Barclays. Please go ahead.
Thanks. Good morning. Good morning. Scott, on Cessna Aviation, can you talk about where headcount How levels are? Have you started to add back where you think headcount needs to go and whether you're seeing any challenges in terms of getting
So we are increasing headcount commensurate with the increase in the production volumes we've gone through the year. We Started hiring programs probably about a month or so ago to bring folks in to ramp back up again. Obviously, A number of those folks are people that had been laid off and have come back into the company, but we're having to do additional hiring beyond that. And look, it's I think everybody in the country is having the same challenge with some of the programs that are out there, but those programs should wind down as we get, I think, into that Labor Day timeframe. So we are hiring.
It is a challenge. I think hiring will get easier as the year goes on. We get off some of these unemployment programs that are Frankly, creating huge distance items for people not to work.
Okay. And I guess a big bigger picture Jim, Caltex. Can you talk about how Caltex will play in a EV World or EV penetration continues to pick up in the future, how that business The potential for that business to transform itself and participate in that. Thanks. Sure.
Look, there's 2 steps to This EV world in Caltech is the first which we're already participating on and frankly is a very good business for us It is the move from straight gas to the a lot of the hybrid vehicles, right? So the fuel systems have some unique technologies for those Hybrid applications and we've done well in that space and the volume of that frankly continues to grow and it's growing even faster now sort of post COVID than even it was on pre COVID. So our participation on those platforms is very good and a good part of our business and growing part of the business. On a pure BEV world, I think that we will see a transition just as we saw, Frankly, Kautex became Kautex because you moved from metal gas tanks to plastic or composite Yes, thanks. And we think the same opportunities there for battery enclosures and we're working with a lot of the OEMs right now It's lower weight, it's lower cost, so it's very beneficial to the OEM and to the platform and we're working through qualifications of those technologies as we speak.
Great. Appreciate the color. Thanks. Sure.
Thank you. Our next question comes from the line of Seth Seifman with JPMorgan. Please go ahead.
Thanks very much and good morning. I wonder, Scott, if you could talk a little bit more about the aftermarket in Aviation. It sounds like it was up About over 30% in the quarter, we see really high activity. Is that something where It's still accelerating as we head into the back of the year and what kind of growth do you expect for 2021 there?
That is it. It's up Around that number on a year over year basis, it's up about double digit on a sequential basis. What's happening, Seth, is as I referenced, the utilization of the aircraft is up as high as we've seen it in a long time. So people are And the aircraft are being utilized and that obviously correlates to service and parts consumption. So, we have seen it ramping up nicely as aircraft Going back into service and we do expect it to continue to grow through the balance of the year.
Okay.
Okay. And then just, I heard your comments earlier that focus on share repurchases for now, Which makes sense. When you think about opportunities for M and A, do you think at all about the defense side of the business? And We see this major focus at the Pentagon on JADC2 and is there a need In terms of thinking about the future of the defense business to be more focused on communications technology and Might that at some point become an area for M and A?
Look, I think I guess I would say Broadly set that the A and D space is primarily where we look on the M and A side. I guess I wouldn't talk about any Pacific Technology are obviously particular opportunity, but that is the space where we tend to be looking. So And from a cash standpoint, look, I think our balance sheet is in very good shape. We'll continue to do share buybacks and if There was something out there that we needed to do. I think we have plenty of access, either cash on the balance sheet or financing through debt.
So I think from A cash standpoint, we'll continue to do the buyback without being too concerned about our ability if we need to do M and A. But I would say that the I won't talk specifically about communications, but certainly the A and D space is where we look.
Okay, great. Thanks very much.
Thank you. Our next question comes from the line of Robert Stallard with Vertical Research. Please go ahead.
Thanks so much. Good morning. Scott, I just wanted to follow-up on that comment you made earlier about the 6 to 9 month window for aviation lead times. Are you actually in that window yet? Or is it still A little bit shorter than you would like.
Well, I think we're in that window.
Okay. That's nice and easy. And then secondly, again on Aviation, similar to Ron's question earlier, are you starting to see more interest from the fleet buyers? Or are you actually quite happy like going with these individual customers because generally you
get better pricing on them?
Well, our fleet sort of activity tends to be centered really around NetJets, obviously, which is a Very important customer for us and that sort of fleet obviously at the NetJet sales level, that's Individual customers buying shares. So that's the bulk of what we look at On I think what you would kind of call fleet, I mean, obviously, there's other opportunities out there where we have customers that want to buy numbers of aircraft. You probably saw the announcement around The Caravan deal, obviously, we've had programs with SkyCarrier, for instance, with FedEx, which are large Aircraft acquisitions, but I don't think we've seen anything different or unique going on or the difference between fleet or retail and our bias one way or the other. There's a good fleet opportunity and that will compete hard for that. But the bulk of our sales, when you look at this The order book and what's going on are individual aircraft sales.
Right. That makes sense. Okay. Thanks so much.
Thank you. Our next question comes from the line of George Shapiro with Shapiro Research. Please go ahead.
Good morning. Scott, I want to pursue you said that you have you're comfortable with getting jet deliveries halfway back From the last couple of years, but that would imply like if it's 165 or 170, not much of an increase in Q3 Or Q4. And usually Q3 is kind of maybe a little bit better than Q2, but Q4 is usually At least 20 airplanes above the prior quarters, which would suggest that deliveries should get back more to like 180 or 190. So I'm just Curious as to where my math is wrong.
George, I would say that if you look at what we're trying to do and I kind of referred to this earlier, we're trying to get to a much more linear Delivery flow. So when you look at, again, considering the demand environment, we're able to flow this thing in a lot Smoother fashion, the order book, the backlog supports that so that we don't have this extreme Like when you get into Q4, which has been delivered by or driven historically by later sales In the year, so I think when you look at the order book, what's happening is you're getting a more linear operation, you're getting a lot more backlog, Longer lead time on aircraft and that lets us be a lot more linear in terms of our deliveries through the course of the year.
Okay. So you're obviously not expecting that big bounce in the 4th quarter like we've traditionally seen?
No, George. Look, I think it's always a little bit stronger than the rest of the year, but nowhere near as non linear as you've seen for the last
And given Scott, given the backlog that you're seeing out, do deliveries next year get above the 2019 level?
We're probably not quite ready to guide next year, but it's certainly as I we kind of need to be further or we're trying to aim to get that back into that 20 2019 range, is it plus or minus few aircraft will probably give that guidance in January.
And could you tell us what percent of the orders this quarter were to NetJets or other fleet providers?
No, we don't break that down, George.
Okay. I figured I'd try. Thanks.
It's a good try. I was really close to giving it to you by serial number, but
Okay. Thanks. Okay.
Thank you. Our next
Good results, guys. So could you comment a little bit about pricing at both Bell and at Aviation? And kind of if you get the good orders and better pricing, I mean, I assume that would start to show up more in The next couple of quarters.
Well, yes, I mean, you will see Thank you, Cai, that when you look at aviation particularly, we're solid pricing, probably 11,000,000 Net of inflation, so again, I think the pricing environment is certainly stronger than it has been and We'll continue to press on. I mean, there's no doubt we feel like the margins in this business need to be better and Volume and productivity and efficiency are all part of it, but prices has to be part of that as well. So We don't usually get into any kind of price discussion around bells, so I don't think we need to do that. But I would suffice to say that we're pleased with the commercial Outside of the business, the order activity, much like what we've been talking about on the Textron Aviation side of things is strong.
Got it. And so I was also surprised by the vigor of the margins at Bell given that most of The volume came from commercial where the margins tend to be lower and the R and D was still strong. Can you give us some color of the margin is going to be level or as we go With the R and D for FLA, could there be more margin pressure?
Well, I mean, we did put obviously the pressures of the increased R and D spending in the FEL programs Into our guide and I think we're pretty comfortable that we're on track to hit that guide even with those R and D pressures.
Excellent. Thank you very much.
Sure.
Thank you. Our next question comes from the line of Christine Liwag with Morgan Stanley. Please go ahead.
Hi, good morning, everyone.
Good morning.
Good morning, Frank. Scott, following up on your comments in Aviation, if you're in that 6 months backlog window right now, If we continue to see strong order activity, can we see you bring forward some of this volume in 2021 and accelerate production?
The lead times of the aircraft make it difficult to have much Movement. I mean, you can always do an aircraft or 2 depending on what that demand looks like. But inside of 6 months, it's pretty hard To adjust that, just given the long cycle nature of particularly some of our supplier components.
I see. So if we see this order activity, let's say, book to bill strong for the rest of the year, that's really more of a 2022 story then?
Yes, that's correct. Yes, we would incorporate that production ramp into what would end up being 2022 deliveries for
Great. And then also on aftermarket, you mentioned, right, we're seeing strong business utilization. Also, We see that with takeoffs and landings at a 12 year high. How much of a pricing upside do you have in aftermarket? And how do we think about the margin differential between aftermarket and new aircraft deliveries in Aviation.
Well, we don't break out those margins. I mean, but it's The fact that we're seeing increased demand on the aftermarket side in general, that tends to be good margin business for us. And so It's generally good mix, but I don't think there's a real Material change in what that's doing for the business, it's highly dependent on, as you said, we're seeing, At least in modern time, record levels of utilization, be it takeoff of landing cycles, average daily utilization, and that's going to continue to drive aftermarket growth, which Just certainly good for the overall mix of the margin of the business.
Thank you.
Okay. Toni, I believe that's all the questions in the queue at this time.
Yes, that is correct.
Okay. Could you announce the replay number?
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