Adjusted Net Income (Loss) and Adjusted Diluted Earnings Per Share
Adjusted net income (loss) and adjusted diluted earnings per share both exclude Special charges, net of taxes and an Inventory charge, net of taxes, related to the restructuring plan initiated in the second quarter of 2020. We consider items recorded in Special charges such as enterprise-wide restructuring, certain asset impairment charges and acquisition-related restructuring, integration and transaction costs, to be of a non-recurring nature that is not indicative of ongoing operations. For the second quarter of 2020, the inventory charge is also excluded as it relates to the write-down of inventory in connection with an action taken under the restructuring plan at our TRU Simulation + Training (TRU) business. Due to the substantial decline in demand and order cancellations for flight simulators resulting from the impact of the pandemic on the commercial air transportation business, we ceased manufacturing at TRU’s facility in Montreal, Canada, resulting in the production suspension of its commercial air transport simulators. As a result of this action and current market conditions, the related inventory was written-down to its net realizable value.
Manufacturing Cash Flow Before Pension Contributions
Manufacturing cash flow before pension contributions adjusts net cash from operating activities (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.
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.
Net Income (Loss) and Diluted Earnings (Loss) Per Share (EPS) GAAP to Non-GAAP Reconciliation: | ||||||||||||||||||||||||||||||
Three Months Ended July 4, 2020 |
|
Six Months Ended July 4, 2020 |
||||||||||||||||||||||||||||
Diluted EPS | Diluted EPS | |||||||||||||||||||||||||||||
Net Income (Loss) - GAAP | $ |
(92 |
) |
$ |
(0.40 |
) |
$ |
(42 |
) |
$ |
(0.18 |
) |
||||||||||||||||||
Special charges, net of income taxes |
|
67 |
|
|
0.29 |
|
|
97 |
|
|
0.42 |
|
||||||||||||||||||
Inventory charge, net of income taxes |
|
55 |
|
|
0.24 |
|
|
55 |
|
|
0.24 |
|
||||||||||||||||||
Adjusted Net Income - Non-GAAP | $ |
30 |
|
$ |
0.13 |
|
$ |
110 |
|
$ |
0.48 |
|
||||||||||||||||||
Manufacturing Cash Flow Before Pension Contributions GAAP to Non-GAAP Reconciliation: | ||||||||||||||||||||||||||||||
Three Months Ended |
Six Months Ended |
|||||||||||||||||||||||||||||
July 4, 2020 |
June 29, 2019 |
July 4, 2020 |
June 29, 2019 |
|||||||||||||||||||||||||||
Net Cash from Operating Activities - GAAP | $ |
245 |
|
$ |
163 |
|
$ |
(148 |
) |
$ |
(33 |
) |
||||||||||||||||||
Less: | Capital expenditures |
|
(46 |
) |
|
(76 |
) |
|
(96 |
) |
|
(135 |
) |
|||||||||||||||||
Dividends received from TFC |
|
- |
|
|
- |
|
|
- |
|
|
(50 |
) |
||||||||||||||||||
Plus: | Total pension contributions |
|
12 |
|
|
12 |
|
|
24 |
|
|
25 |
|
|||||||||||||||||
Proceeds from the sale of property, plant and equipment |
|
4 |
|
|
3 |
|
|
5 |
|
|
4 |
|
||||||||||||||||||
Manufacturing Cash Flow Before Pension Contributions - Non-GAAP | $ |
215 |
|
$ |
102 |
|
$ |
(215 |
) |
$ |
(189 |
) |
||||||||||||||||||