TEXTRON INC.
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Three Months Ended | Twelve Months Ended | |||||||||||||||||||||||||||||
December 29, 2018 |
December 30, 2017 |
December 29, 2018 |
December 30, 2017 |
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REVENUES |
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MANUFACTURING: | ||||||||||||||||||||||||||||||
Textron Aviation | $ | 1,552 | $ | 1,391 | $ | 4,971 | $ | 4,686 | ||||||||||||||||||||||
Bell | 827 | 983 | 3,180 | 3,317 | ||||||||||||||||||||||||||
Textron Systems | 345 | 489 | 1,464 | 1,840 | ||||||||||||||||||||||||||
Industrial | 1,008 | 1,139 | 4,291 | 4,286 | ||||||||||||||||||||||||||
3,732 | 4,002 | 13,906 | 14,129 | |||||||||||||||||||||||||||
FINANCE | 18 | 15 | 66 | 69 | ||||||||||||||||||||||||||
Total revenues |
$ | 3,750 | $ | 4,017 | $ | 13,972 | $ | 14,198 | ||||||||||||||||||||||
SEGMENT PROFIT |
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MANUFACTURING: | ||||||||||||||||||||||||||||||
Textron Aviation | $ | 170 | $ | 120 | $ | 445 | $ | 303 | ||||||||||||||||||||||
Bell | 108 | 114 | 425 | 415 | ||||||||||||||||||||||||||
Textron Systems | 37 | 37 | 156 | 139 | ||||||||||||||||||||||||||
Industrial | 73 | 83 | 218 | 290 | ||||||||||||||||||||||||||
388 | 354 | 1,244 | 1,147 | |||||||||||||||||||||||||||
FINANCE | 9 | 6 | 23 | 22 | ||||||||||||||||||||||||||
Segment Profit | 397 | 360 | 1,267 | 1,169 | ||||||||||||||||||||||||||
Corporate expenses and other, net | (12 | ) | (44 | ) | (119 | ) | (132 | ) | ||||||||||||||||||||||
Interest expense, net for Manufacturing group | (34 | ) | (38 | ) | (135 | ) | (145 | ) | ||||||||||||||||||||||
Gain on business disposition (a) | - | - | 444 | - | ||||||||||||||||||||||||||
Special charges (b) | (73 | ) | (55 | ) | (73 | ) | (130 | ) | ||||||||||||||||||||||
Income from continuing operations before income taxes | 278 | 223 | 1,384 | 762 | ||||||||||||||||||||||||||
Income tax expense (c) | (32 | ) | (329 | ) | (162 | ) | (456 | ) | ||||||||||||||||||||||
Income (loss) from continuing operations | 246 | (106 | ) | 1,222 | 306 | |||||||||||||||||||||||||
Discontinued operations, net of income taxes | - | - | - | 1 | ||||||||||||||||||||||||||
Net income (loss) | $ | 246 | $ | (106 | ) | $ | 1,222 | $ | 307 | |||||||||||||||||||||
Earnings per share: | ||||||||||||||||||||||||||||||
Income (loss) from continuing operations (d) | $ | 1.02 | $ | (0.40 | ) | $ | 4.83 | $ | 1.14 | |||||||||||||||||||||
Discontinued operations, net of income taxes | - | - | - | - | ||||||||||||||||||||||||||
Net income (loss) | $ | 1.02 | $ | (0.40 | ) | $ | 4.83 | $ | 1.14 | |||||||||||||||||||||
Average shares outstanding (d) | 242,569,000 | 263,295,000 | 253,237,000 | 268,750,000 | ||||||||||||||||||||||||||
At the beginning of 2018, we adopted the new revenue recognition accounting standard using a modified retrospective transition method applied to contracts that were not substantially complete at the end of 2017. We recorded a $90 million adjustment to increase retained earnings to reflect the cumulative impact of adopting this standard at the beginning of 2018, primarily related to long-term contracts with the U.S. Government. Revenues associated with these contracts in 2018 are primarily recognized as costs are incurred, while revenues for 2017 were primarily recognized as units were delivered. The comparative information has not been restated and is reported under the accounting standards in effect for those periods. |
Income (Loss) from Continuing Operations and Diluted Earnings Per Share (EPS) GAAP to Non-GAAP Reconciliation: |
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Three Months Ended |
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Twelve Months Ended |
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December 29, 2018 |
December 30, 2017 |
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December 29, 2018 |
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December 30, 2017 |
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Income (loss) from continuing operations - GAAP | $ | 246 | $ | (106 | ) | $ | 1,222 | $ | 306 | ||||||||||||||
Gain on business disposition, net of income tax expense (benefit) of |
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$(9) million and $25 million, respectively (a) |
(9 |
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- | (419 | ) | - | |||||||||||||||||
Special charges, net of income taxes of $17 million, $18 million, |
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$17 million and $44 million, respectively (b) |
56 | 37 | 56 | 86 | |||||||||||||||||||
Income tax expense (benefit) resulting from the Tax Cuts and Jobs Act (c) | (14 | ) | 266 | (14 | ) | 266 | |||||||||||||||||
Adjusted income from continuing operations - Non-GAAP (e) | $ | 279 | $ | 197 | $ | 845 | $ | 658 | |||||||||||||||
Earnings per share: |
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Income (loss) from continuing operations - GAAP (d) | $ | 1.02 | $ | (0.40 | ) | $ | 4.83 | $ | 1.14 | ||||||||||||||
Gain on business disposition, net of taxes | (0.04 | ) | - | (1.65 | ) | - | |||||||||||||||||
Special charges, net of taxes | 0.23 | 0.14 | 0.22 | 0.32 | |||||||||||||||||||
Income tax expense (benefit) resulting from the Tax Cuts and Jobs Act | (0.06 | ) | 1.00 | (0.06 | ) | 0.99 | |||||||||||||||||
Adjusted income from continuing operations - Non-GAAP (e) | $ | 1.15 | $ | 0.74 | $ | 3.34 | $ | 2.45 | |||||||||||||||
(a) | On July 2, 2018, Textron completed the sale of the Tools & Test Equipment product line which resulted in an after-tax gain of $419 million. | ||
(b) | On December 4, 2018, our Board of Directors approved a plan to restructure the Textron Specialized Vehicles businesses within our Industrial segment. We incurred special charges of $73 million in the fourth quarter of 2018 under this plan, which included asset impairment charges of $47 million, contract termination and other costs of $18 million and severance and related costs of $8 million. Special charges for the three and twelve months ended December 30, 2017 included $48 million and $90 million, respectively, related to a 2016 restructuring plan, and $7 million and $40 million, respectively, of restructuring, integration and transaction costs related to the Arctic Cat acquisition. | ||
(c) | On December 22, 2017, the U.S. Government enacted tax reform legislation known as the Tax Cuts and Jobs Act (the "Tax Act"). Income tax expense for the three and twelve months ended December 30, 2017 included a $266 million one-time charge to reflect our provisional estimate of the net impact of the Tax Act. The charge is primarily related to remeasurement of U.S. federal net deferred tax assets due to the lower enacted tax rate and the Tax Act’s transition tax on previously unremitted earnings of non-U.S. subsidiaries. We completed our analysis of this legislation in the fourth quarter of 2018 and recorded a $14 million income tax benefit. | ||
(d) | For the three months ended December 30, 2017, the diluted average shares used to calculated EPS on a GAAP basis excluded potential common shares (stock options), due to their antidilutive effect resulting from the net loss. For the three and twelve months ended December 29, 2018 and the twelve months ended December 30, 2017, fully dilutive shares were used to calculate EPS. | ||
(e) | Adjusted income from continuing operations and adjusted diluted earnings per share are non-GAAP financial measures as defined in "Non-GAAP Financial Measures" attached to this release. The non-GAAP per share information for the three months ended December 30, 2017 is calculated using diluted average shares outstanding of 266,099,000. | ||
Textron Inc.
Condensed Consolidated Balance Sheets (In millions) (Unaudited) |
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December 29,
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December 30,
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Assets (a) | ||||||||||||
Cash and equivalents | $ | 987 | $ | 1,079 | ||||||||
Accounts receivable, net | 1,024 | 1,363 | ||||||||||
Inventories | 3,818 | 4,150 | ||||||||||
Other current assets | 785 | 435 | ||||||||||
Net property, plant and equipment | 2,615 | 2,721 | ||||||||||
Goodwill | 2,218 | 2,364 | ||||||||||
Other assets | 1,800 | 2,059 | ||||||||||
Finance group assets | 1,017 | 1,169 | ||||||||||
Total Assets | $ | 14,264 | $ | 15,340 | ||||||||
Liabilities and Shareholders' Equity (a) | ||||||||||||
Short-term debt and current portion of long-term debt | $ | 258 | $ | 14 | ||||||||
Current liabilities | 3,248 | 3,646 | ||||||||||
Other liabilities | 1,932 | 2,006 | ||||||||||
Long-term debt | 2,808 | 3,074 | ||||||||||
Finance group liabilities | 826 | 953 | ||||||||||
Total Liabilities | 9,072 | 9,693 | ||||||||||
Total Shareholders' Equity | 5,192 | 5,647 | ||||||||||
Total Liabilities and Shareholders' Equity | $ | 14,264 | $ | 15,340 | ||||||||
(a) | At the beginning of 2018, we adopted the new revenue recognition accounting standard using a modified retrospective transition method applied to contracts that were not substantially complete at the end of 2017. We recorded a $90 million adjustment to increase retained earnings to reflect the cumulative impact of adopting this standard at the beginning of 2018, primarily related to long-term contracts with the U.S. Government. Revenues associated with these contracts in 2018 are primarily recognized as costs are incurred, while revenues for 2017 were primarily recognized as units were delivered. The comparative information has not been restated and is reported under the accounting standards in effect for those periods. | ||
TEXTRON INC.
MANUFACTURING GROUP Condensed Schedule of Cash Flows (In millions) (Unaudited) |
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Three Months Ended | Twelve Months Ended | |||||||||||||||||||||||||
December 29, |
December 30, | December 29, | December 30, | |||||||||||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||||||||||||
Cash flows from operating activities: | ||||||||||||||||||||||||||
Income (loss) from continuing operations | $ | 239 | $ | (152 | ) | $ | 1,198 | $ | 247 | |||||||||||||||||
Depreciation and amortization | 113 | 113 | 429 | 435 | ||||||||||||||||||||||
Gain on business disposition | - | - | (444 | ) | - | |||||||||||||||||||||
Changes in working capital (a) | 1 | 364 | (203 | ) | 96 | |||||||||||||||||||||
Changes in other assets and liabilities and non-cash items (a) | 40 | 278 | 97 | 152 | ||||||||||||||||||||||
Dividends received from TFC | - | - | 50 | - | ||||||||||||||||||||||
Net cash from operating activities of continuing operations (a) | 393 | 603 | 1,127 | 930 | ||||||||||||||||||||||
Cash flows from investing activities: | ||||||||||||||||||||||||||
Net proceeds from business disposition | - | - | 807 | - | ||||||||||||||||||||||
Capital expenditures | (136 | ) | (147 | ) | (369 | ) | (423 | ) | ||||||||||||||||||
Net proceeds from corporate-owned life insurance policies (a) | 12 | (3 | ) | 110 | 17 | |||||||||||||||||||||
Proceeds from the sale of property, plant and equipment | 2 | 1 | 14 | 7 | ||||||||||||||||||||||
Net cash used in acquisitions | (20 | ) | (1 | ) | (23 | ) | (331 | ) | ||||||||||||||||||
Other investing activities, net | - | 1 | - | 2 | ||||||||||||||||||||||
Net cash from investing activities (a) | (142 | ) | (149 | ) | 539 | (728 | ) | |||||||||||||||||||
Cash flows from financing activities: | ||||||||||||||||||||||||||
Proceeds from long-term debt | - | 347 | - | 992 | ||||||||||||||||||||||
Principal payments on long-term debt | (1 | ) | (701 | ) | (5 | ) | (704 | ) | ||||||||||||||||||
Purchases of Textron common stock | (400 | ) | (131 | ) | (1,783 | ) | (582 | ) | ||||||||||||||||||
Other financing activities, net | (3 | ) | 5 | 50 | 28 | |||||||||||||||||||||
Net cash from financing activities | (404 | ) | (480 | ) | (1,738 | ) | (266 | ) | ||||||||||||||||||
Total cash flows from continuing operations | (153 | ) | (26 | ) | (72 | ) | (64 | ) | ||||||||||||||||||
Total cash flows from discontinued operations | (1 | ) | (3 | ) | (2 | ) | (27 | ) | ||||||||||||||||||
Effect of exchange rate changes on cash and equivalents | (9 | ) | 4 | (18 | ) | 33 | ||||||||||||||||||||
Net change in cash and equivalents | (163 | ) | (25 | ) | (92 | ) | (58 | ) | ||||||||||||||||||
Cash and equivalents at beginning of period | 1,150 | 1,104 | 1,079 | 1,137 | ||||||||||||||||||||||
Cash and equivalents at end of period | $ | 987 | $ | 1,079 | $ | 987 | $ | 1,079 | ||||||||||||||||||
Manufacturing Cash Flow GAAP to Non-GAAP Reconciliation: | ||||||||||||||||||||||||||
Net cash from operating activities of continuing operations - GAAP (a) | $ | 393 | $ | 603 | $ | 1,127 | $ | 930 | ||||||||||||||||||
Less: | Capital expenditures | (136 | ) | (147 | ) | (369 | ) | (423 | ) | |||||||||||||||||
Dividends received from TFC | - | - | (50 | ) | - | |||||||||||||||||||||
Plus: | Total pension contributions | 15 | 20 | 52 | 358 | |||||||||||||||||||||
Taxes paid on gain on business disposition | 10 | - | 10 | - | ||||||||||||||||||||||
Proceeds from the sale of property, plant and equipment | 2 | 1 | 14 | 7 | ||||||||||||||||||||||
Manufacturing cash flow before pension contributions - Non-GAAP (a) (b) | $ | 284 | $ | 477 | $ | 784 | $ | 872 | ||||||||||||||||||
(a) | For the three and twelve months ended December 30, 2017, $(3) million and $17 million, respectively, of net proceeds from the settlement of corporate-owned life insurance policies were reclassified from operating activities to investing activities as a result of the adoption of a new accounting standard at the beginning of 2018. | ||
(b) | Manufacturing cash flow before pension contributions is a non-GAAP financial measure as defined in "Non-GAAP Financial Measures" attached to this release. | ||
TEXTRON INC.
Condensed Consolidated Schedule of Cash Flows (In millions) (Unaudited) |
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Three Months Ended | Twelve Months Ended | |||||||||||||||||||||||||
December 29, | December 30, | December 29, | December 30, | |||||||||||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||||||||||||
Cash flows from operating activities: | ||||||||||||||||||||||||||
Income (loss) from continuing operations | $ | 246 | $ | (106 | ) | $ | 1,222 | $ | 306 | |||||||||||||||||
Depreciation and amortization | 115 | 115 | 437 | 447 | ||||||||||||||||||||||
Gain on business disposition | - | - | (444 | ) | - | |||||||||||||||||||||
Changes in working capital (a) | 12 | 352 | (202 | ) | 107 | |||||||||||||||||||||
Changes in other assets and liabilities and non-cash items (a) | 39 | 237 | 96 | 103 | ||||||||||||||||||||||
Net cash from operating activities of continuing operations (a) | 412 | 598 | 1,109 | 963 | ||||||||||||||||||||||
Cash flows from investing activities: | ||||||||||||||||||||||||||
Net proceeds from business disposition | - | - | 807 | - | ||||||||||||||||||||||
Capital expenditures | (136 | ) | (147 | ) | (369 | ) | (423 | ) | ||||||||||||||||||
Net proceeds from corporate-owned life insurance policies (a) | 12 | (3 | ) | 110 | 17 | |||||||||||||||||||||
Finance receivables repaid | 2 | 5 | 27 | 32 | ||||||||||||||||||||||
Net cash used in acquisitions | (20 | ) | (1 | ) | (23 | ) | (331 | ) | ||||||||||||||||||
Other investing activities, net | 28 | 12 | 68 | 60 | ||||||||||||||||||||||
Net cash from investing activities (a) | (114 | ) | (134 | ) | 620 | (645 | ) | |||||||||||||||||||
Cash flows from financing activities: | ||||||||||||||||||||||||||
Proceeds from long-term debt | - | 354 | - | 1,036 | ||||||||||||||||||||||
Principal payments on long-term debt and nonrecourse debt | (71 | ) | (725 | ) | (131 | ) | (841 | ) | ||||||||||||||||||
Purchases of Textron common stock | (400 | ) | (131 | ) | (1,783 | ) | (582 | ) | ||||||||||||||||||
Other financing activities, net | (3 | ) | 5 | 50 | 27 | |||||||||||||||||||||
Net cash from financing activities | (474 | ) | (497 | ) | (1,864 | ) | (360 | ) | ||||||||||||||||||
Total cash flows from continuing operations | (176 | ) | (33 | ) | (135 | ) | (42 | ) | ||||||||||||||||||
Total cash flows from discontinued operations | (1 | ) | (3 | ) | (2 | ) | (27 | ) | ||||||||||||||||||
Effect of exchange rate changes on cash and equivalents | (9 | ) | 4 | (18 | ) | 33 | ||||||||||||||||||||
Net change in cash and equivalents | (186 | ) | (32 | ) | (155 | ) | (36 | ) | ||||||||||||||||||
Cash and equivalents at beginning of period | 1,293 | 1,294 | 1,262 | 1,298 | ||||||||||||||||||||||
Cash and equivalents at end of period | $ | 1,107 | $ | 1,262 | $ | 1,107 | $ | 1,262 | ||||||||||||||||||
(a) | For the three and twelve months ended December 30, 2017, $(3) million and $17 million, respectively, of net proceeds from the settlement of corporate-owned life insurance policies were reclassified from operating activities to investing activities as a result of the adoption of a new accounting standard at the beginning of 2018. | ||
TEXTRON INC.
Non-GAAP Financial Measures |
(Dollars in millions, except per share amounts) |
We supplement the reporting of our financial information determined under U.S. generally accepted accounting principles (GAAP) with certain non-GAAP financial measures. These non-GAAP financial measures exclude certain significant items that may not be indicative of, or are unrelated to, results from our ongoing business operations. We believe that these non-GAAP measures may be useful for period-over-period comparisons of underlying business trends and our ongoing business performance, however, they should be used in conjunction with GAAP measures. Our non-GAAP measures should not be considered in isolation or as a substitute for the related GAAP measures, and other companies may define similarly named measures differently. We encourage investors to review our financial statements and publicly-filed reports in the entirety and not to rely on any single financial measure. We utilize the following definitions for the non-GAAP financial measures included in this release: |
Adjusted income from continuing operations and adjusted diluted earnings per share |
Adjusted income from continuing operations and adjusted diluted earnings per share both exclude Gain on business disposition, net of taxes, Special charges, net of taxes, and the income tax expense (benefit) resulting from the Tax Cuts and Jobs Act (the "Tax Act"). The Gain on business disposition is not considered indicative of ongoing operations as it is a significant one-time transaction. We consider items recorded in Special charges such as enterprise-wide restructuring and acquisition-related restructuring, integration and transaction costs, to be of a non-recurring nature that is not indicative of ongoing operations. In addition, the impact from the Tax Act is not considered to be indicative of ongoing operations since it represents a one-time adjustment related to a significant tax reform of a non-recurring nature. |
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Manufacturing cash flow before pension contributions |
Manufacturing cash flow before pension contributions adjusts net cash from operating activities of continuing operations (GAAP) for the following: |
• Deducts capital expenditures and includes proceeds from the sale of property, plant and equipment to arrive at the net capital investment required to support ongoing manufacturing operations; |
• Excludes dividends received from Textron Financial Corporation (TFC) and capital contributions to TFC provided under the Support Agreement and debt agreements as these cash flows are not representative of manufacturing operations; |
• Adds back pension contributions as we consider our pension obligations to be debt-like liabilities. Additionally, these contributions can fluctuate significantly from period to period and we believe that they are not representative of cash used by our manufacturing operations during the period. |
• For the 2018 periods presented, Manufacturing cash flow before pension contributions excludes taxes paid related to the gain realized on the Tools and Test business disposition. We have made this adjustment to the non-GAAP measure because we believe this use of cash is not representative of cash used by our manufacturing operations. |
While we believe this measure provides a focus on cash generated from manufacturing operations, before pension contributions, and may be used as an additional relevant measure of liquidity, it does not necessarily provide the amount available for discretionary expenditures since we have certain non-discretionary obligations that are not deducted from the measure. |
Income (loss) from Continuing Operations and Earnings Per Share (EPS) GAAP to Non-GAAP Reconciliation: | ||||||||||||||||||||||||
Three Months Ended |
Twelve Months Ended |
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December 29, 2018 |
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December 30, 2017 |
December 29, 2018 |
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December 30, 2017 |
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Income (loss) from continuing operations - GAAP | $ | 246 | $ | (106 | ) | $ | 1,222 | $ | 306 | |||||||||||||||
Gain on business disposition, net of income tax expense (benefit) of |
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$(9) million and $25 million, respectively |
(9 | ) | - | (419 | ) | - | ||||||||||||||||||
Special charges, net of income taxes of $17 million, $18 million, |
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$17 million and $44 million, respectively |
56 | 37 | 56 | 86 | ||||||||||||||||||||
Income tax expense (benefit) resulting from the Tax Cuts and Jobs Act | (14 | ) | 266 | (14 | ) | 266 | ||||||||||||||||||
Adjusted income from continuing operations - Non-GAAP | $ | 279 | $ | 197 | $ | 845 | $ | 658 | ||||||||||||||||
Earnings per share: | ||||||||||||||||||||||||
Income (loss) from continuing operations - GAAP | $ | 1.02 | $ | (0.40 | ) | $ | 4.83 | $ | 1.14 | |||||||||||||||
Gain on business disposition, net of taxes | (0.04 | ) | - | (1.65 | ) | - | ||||||||||||||||||
Special charges, net of income taxes | 0.23 | 0.14 | 0.22 | 0.32 | ||||||||||||||||||||
Income tax expense (benefit) resulting from the Tax Cuts and Jobs Act | (0.06 | ) | 1.00 | (0.06 | ) | 0.99 | ||||||||||||||||||
Adjusted income from continuing operations - Non-GAAP | $ | 1.15 | $ | 0.74 | $ | 3.34 | $ | 2.45 | ||||||||||||||||
Manufacturing Cash Flow Before Pension Contributions GAAP to Non-GAAP Reconciliation and 2019 Outlook: | ||||||||||||||||||||||||
Three Months Ended |
Twelve Months Ended |
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December 29, 2018 |
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December 30, 2017 |
December 29, 2018 |
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December 30, 2017 |
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Net cash from operating activities of continuing operations - GAAP | $ | 393 | $ | 603 | $ | 1,127 | $ | 930 | ||||||||||||||||
Less: | Capital expenditures | (136 | ) | (147 | ) | (369 | ) | (423 | ) | |||||||||||||||
Dividends received from TFC | - | - | (50 | ) | - | |||||||||||||||||||
Plus: | Total pension contributions | 15 | 20 | 52 | 358 | |||||||||||||||||||
Taxes paid on gain on business disposition | 10 | - | 10 | - | ||||||||||||||||||||
Proceeds from the sale of property, plant and equipment | 2 | 1 | 14 | 7 | ||||||||||||||||||||
Manufacturing cash flow before pension contributions - Non-GAAP | $ | 284 | $ | 477 | $ | 784 | $ | 872 | ||||||||||||||||
2019 Outlook |
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Net cash from operating activities of continuing operations - GAAP |
$ |
1,020 |
- | $ | 1,120 | |||||||||||||||||||
Less: | Capital expenditures |
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(380) |
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Plus: | Total pension contributions |
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50 |
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Taxes paid on gain on business disposition |
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10 |
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Manufacturing cash flow before pension contributions - Non-GAAP | $ | 700 | - | $ | 800 |