FELLOW SHAREHOLDERS,
In 2019, our revenues were $13.6 billion, and we recorded segment profit of $1.3 billion with a profit margin of 9.3 percent. Our manufacturing businesses generated $960 million of net cash from operating activities of continuing operations as we made investments in new product development programs, technologies and processes to position us for success in 2020 and beyond.
INVESTING IN NEW PRODUCTS
We continued to develop a robust pipeline of new products and technologies to excite our customers and meet and exceed their expectations. The Cessna Citation Longitude received Federal Aviation Administration (FAA) certification in September. With this certification, we began customer deliveries of our new super-midsize jet in the fourth quarter and delivered 13 Longitudes in 2019, including the first Longitude to NetJets. The FAA certification process of the Longitude represented the most robust flight, structural and component qualification testing completed to date on a Citation with 11,000 test points and nearly 6,000 hours of flight time with the experimental and demo fleet. Customers have been very enthusiastic about this innovative aircraft and have lauded its performance as well as its quiet, comfortable cabin.
The Citation Latitude, our midsize jet which entered service in August 2015, continues to see great success in the market. For the fourth consecutive year, the Latitude was the most delivered midsize business jet in the industry. The Latitude has become the best-selling platform in the NetJets fleet and, by the end of 2019, Textron Aviation had delivered 115 Latitudes to NetJets.
Textron Aviation marked a significant milestone in the development of the Cessna SkyCourier twin utility turboprop aircraft with the successful mating of the wing and fuselage. The SkyCourier is our clean-sheet twin-engine, large-utility turboprop aircraft that we expect will have its first flight in early 2020.
In January, Textron Specialized Vehicles (TSV) announced an exciting agreement with Bass Pro Shops under which TSV would design and manufacture a new line of high-performance side-by-sides and ATVs to be branded as Tracker Off Road and distributed by Bass Pro Shops, Cabela’s and independent Tracker Marine dealers. By the end of 2019, Tracker Off Road vehicles were being offered at more than 230 retailers, with plans to add 80 more retailers in 2020.
In TSV’s Golf & Turf business, we are capitalizing on the strength of our innovative, exclusive products, including the E-Z-GO ELiTE series of lithium-battery-powered vehicles. More than 80,000 ELiTE vehicles are now in service at more than 1,350 private golf facilities worldwide, including Alabama’s Robert Trent Jones Golf Trail, which acquired more than 1,400 E-Z-GO ELiTE vehicles in 2019 to serve over 500,000 customers each year.
Also at TSV, Arctic Cat released an exciting lineup of products for the 2020 and 2021 model years. The 2020 model year lineup included the RIOT, which is designed to perform on both the groomed snow of established trails and deep powder in the backcountry. The products for the 2021 model year feature the new BLAST series of snowmobiles.
LEADING WITH NEW TECHNOLOGIES
We continue to invest in critical technologies that enable our teams to develop the products and systems to win new business and drive future growth.
In its pursuit of Future Vertical Lift military opportunities, Bell continued the successful flight test program of the Bell V-280 Valor next-generation tiltrotor and launched the Bell 360 Invictus. The V-280 delivered performance milestones beyond expectations, including speeds of over 300 knots and low-speed agility to meet the Army’s Level 1 Handling Qualities requirements. The aircraft also executed numerous, consecutive multi-sortie days of flight operations as it competes for the Future Long-Range Attack Aircraft (FLRAA) program. The V-280 has now completed its second full year of flight testing and in December closed out the year by making its first autonomous flight.
At the Association of the U.S. Army (AUSA) annual convention in October, Bell introduced the Bell 360 Invictus, our offering for the U.S. Army’s Future Attack Reconnaissance Aircraft (FARA) program. The Invictus combines low-risk technologies with advanced processes, leveraging innovations from the Bell 525 rotor system to deliver soldiers an affordable, agile and lethal solution to win on the modern battlefield.
The Bell 525 achieved several key milestones in the flight test and design validation process, including flying beyond 200 knots. There are four flight test vehicles currently gathering data for certification that have amassed more than 1,500 flight hours.
Bell completed a successful first autonomous flight of the Autonomous Pod Transport (APT) 70 at its testing site near Fort Worth and flew this concept vehicle throughout the year under an experimental type certificate. Designed to carry small cargo loads, the APT 70 won the Popular Science Best of What’s New Award in the Aerospace category for 2019. This marked the second consecutive year in which a Bell product captured an award in this category; in 2018, the Bell V-280 Valor received this distinction.
The RIPSAW M5 vehicle from Textron Systems’ Howe & Howe Technologies also made its debut at AUSA and, on January 9, 2020, the Army announced its intention to award us a contract to build four RIPSAW M5s in the Robotic Combat Vehicle – Medium program. The RIPSAW is a highly capable, agile unmanned vehicle for ground combat operations that was designed and built based on Howe & Howe’s deep knowledge of purpose-built ground vehicles.
Hybrid vehicles represent a fast-growing segment for many of Kautex’s OEM customers as they work to improve fuel efficiency and meet increasingly stringent worldwide emissions standards. As a recognized leader in the development of plastic fuel systems, which are ideal for hybrid vehicle applications, Kautex is well-positioned for this growth opportunity.
CAPTURING NEW COMMERCIAL AND MILITARY BUSINESS
We leverage our investments in new products and technologies by working closely with our commercial and military customers to understand their needs. This paid off during the year in a number of ways.
In October, ATAC won a contract with the U.S. Air Force that will utilize its previously acquired former French Air Force Mirage F1 fighter jets to provide live military air-to-air training and support services to the USAF. The Air Force and Navy have plans to significantly grow their Adversary Air requirements. With its fleet of F1s, ATAC is particularly well-suited to compete to provide related training and support services. In addition, ATAC has expanded its operations and is bringing on board highly skilled former military pilots and maintenance and support personnel at its Adversary Center of Excellence in Fort Worth, which houses its maintenance and training activities.
In a significant milestone for Textron Systems, its first Ship-to-Shore Connector, Craft 100, successfully completed Acceptance Trials after a series of in-port and underway demonstrations for our U.S. Navy customer. Our record of developing and delivering highly specialized products to the U.S. Army was also reflected in our selection as one of three companies to deliver Next Generation Squad Weapons (NGSW). Textron Systems’ NGSW Rifles and Automatic Rifles are designed with its mature, high-performance cased telescoped (CT) technology.
Bell realized a key Foreign Military Sales opportunity as the U.S. Government signed an agreement in December to sell four Bell AH-1Z and eight UH-1Y helicopters to the Government of the Czech Republic. This purchase represents the first foreign military sale that includes a fleet comprised of both AH-1Z and UH-1Y helicopters.
As airlines expand and modernize their operations, Textron Ground Support Equipment (GSE) is capitalizing on its strong relationships to win new business. In May, United Airlines entered into a multi-year agreement to procure more than 90 TUG and Douglas units for use at airports in the U.S. and Japan. In April, American Airlines placed an order for 150 TUG tow tractors and belt loaders to support growth at airports in Dallas-Fort Worth and Charlotte.
ENHANCING OUR CUSTOMER SERVICE
We continued to expand our service and sales operations in 2019. Recognizing the growing needs of our customers around the world, Bell established its first customer service facility in Argentina to handle a full range of service solutions. Bell also appointed Reignwood Star General Aviation as the first Bell Authorized Maintenance Center for the Bell 505 in China, which underscores the growth of the 505 in that country. In February, Bell broke ground on its newest customer service facility at the Fort Lauderdale Airport to serve its growing customer base in the region, including our Latin American customers.
To more quickly service and support our Beechcraft, Cessna and Hawker customers, Textron Aviation expanded its parts distribution network around the world. Strengthening its footprint in Asia Pacific, Textron Aviation acquired Premiair Aviation Maintenance Pty Ltd in Australia in January 2020, opened a new Australian parts warehouse and opened a new service location in the Philippines. In Germany, the business doubled the size of its European Distribution Center in Dusseldorf that holds thousands of parts from across Textron Aviation product lines. In the U.S., Textron Aviation expanded its parts distribution footprint at its Orlando, Phoenix-Mesa and Teterboro service centers.
Able Aerospace expanded its service and support offerings for commercial and military rotorcraft, fixed-wing aircraft and McCauley propellers. To accommodate its growth in the aftermarket support market, Able opened a 50,000-square-foot addition in September at its headquarters in Mesa, Arizona.
OPPORTUNITIES TO DRIVE GROWTH
We have a number of great opportunities in front of us. These opportunities are the result of the hard work by our teams who develop our products and technologies, our manufacturing teams who deliver great quality products and our sales and service teams that support our customers from initial sales through full life cycle support. As a result of these investments, and our ongoing commitment to providing great opportunities for the talented people who make it happen, we are well-positioned to deliver long-term value for our shareholders.
Scott C. Donnelly, Chairman and Chief Executive Officer