UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549
 
FORM 8-K
 
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
Date of Report (Date of earliest event reported):  July 19, 2017
 
TEXTRON INC.
(Exact name of Registrant as specified in its charter)

Delaware	 	1-5480	 	05-0315468	
(State of	 	(Commission File Number)	 	(IRS Employer	
Incorporation)	 	 	 	Identification Number)	
 
40 Westminster Street, Providence, Rhode Island  02903 
 (Address of principal executive offices)
 
Registrant’s telephone number, including area code:  (401) 421-2800
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instructions A.2. below):
 
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
o Pre-commencement communications pursuant to Rule 13e-4(c)) under the Exchange Act (17 CFR 240.13e-4(c))
 
Indicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
 
Emerging growth company  o
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    o

 

 
Item 2.02                                            Results of Operations and Financial Condition
 
On July 19, 2017, Textron Inc. (“Textron”) issued a press release announcing its financial results for the fiscal quarter ended July 1, 2017.  This press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference.
 
A discussion of the reasons why management believes that the presentation of non-GAAP financial measures provides useful information to investors regarding Textron’s financial condition and results of operations is attached to the press release attached hereto as Exhibit 99.1.
 
Item 9.01                                            Financial Statements and Exhibits
 
(d) Exhibits
 
The following exhibit is filed herewith:

Exhibit
Number	 	Description	
 	 	 	
99.1	 	Press release dated July 19, 2017 related to earnings.	
 
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SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 	TEXTRON INC.	
 	(Registrant)	

 	By:	/s/ Mark S. Bamford	
 	 	Mark S. Bamford	
 	 	Vice President and Corporate Controller	

Date:  July 19, 2017
 
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EXHIBIT INDEX

Exhibit No.	 	Description	
 	 	 	
99.1	 	Press release dated July 19, 2017 related to earnings.	
 
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Exhibit 99.1

	 

Corporate Communications
Department	
 
NEWS Release

 	 	
Contacts:
 Eric Salander — 401-457-2288
D’Ante Natili — 401-457-2288	
FOR IMMEDIATE RELEASE	
 	 	
Media Contact:
David Sylvestre — 401-457-2362	 	
 	 	
Textron Reports Second Quarter 2017 Results;
Reaffirms 2017 Financial Outlook
 
Providence, Rhode Island — July 19, 2017 — Textron Inc. (NYSE: TXT) today reported second quarter 2017 income from continuing operations of $0.57 per share or $0.60 per share of adjusted income from continuing operations, a non-GAAP measure that is defined and reconciled to GAAP in an attachment to this release, compared to $0.66 per share in the second quarter of 2016. During this year’s second quarter, the company recorded $13 million of pre-tax special charges ($0.03 per share, after-tax).
 
Revenues in the quarter were $3.6 billion, up 2.6 percent from the second quarter of 2016. Textron segment profit in the quarter was $295 million, down $33 million from the second quarter of 2016.
 
“Revenues were up in the quarter primarily driven by the Arctic Cat acquisition,” said Textron Chairman and CEO Scott C. Donnelly. “We saw strong performance at Bell and were encouraged by the continued strengthening in commercial helicopter demand.”
 
Cash Flow
 
Net cash provided by operating activities of continuing operations of the manufacturing group for the second quarter totaled $413 million, compared to $107 million in last year’s second quarter. Manufacturing cash flow before pension contributions, a non-GAAP measure that is defined and reconciled to GAAP in an attachment to this release, totaled $341 million compared to a use of cash of $26 million during last year’s second quarter.
 
Donnelly continued, “we saw strong year over year cash performance principally driven by improvements in working capital. We are continuing to invest in our businesses, while taking the opportunity to buy back shares.”

 
Outlook
 
Textron reiterated its full-year 2017 GAAP earnings per share from continuing operations guidance of $2.22 to $2.45, or $2.40 to $2.60 on an adjusted basis (non-GAAP), which is reconciled to GAAP in an attachment to this release. The company also confirmed its net cash provided by operating activities of continuing operations of the manufacturing group guidance of $1,045 million to $1,145 million and manufacturing cash flow before pension contributions (the non-GAAP measure) of $650 to $750 million.
 
Second Quarter Segment Results
 
Textron Aviation
 
Revenues at Textron Aviation were down $25 million, primarily due to lower military and commercial turboprop volume, partially offset by higher jet volume.
 
Textron Aviation delivered 46 new Citation jets, up from 45 jets last year, 19 King Air turboprops compared to 23 in last year’s second quarter, and 4 Beechcraft T-6 trainers, down from 11 last year.
 
Textron Aviation recorded a segment profit of $54 million in the second quarter compared to $81 million a year ago, primarily due to lower volume and mix.
 
Textron Aviation backlog at the end of the second quarter was $1.0 billion, approximately flat from the end of the first quarter.
 
Bell
 
Bell revenues were up $21 million, as Bell delivered 14 H-1’s up from 9 H-1’s last year, 4 V-22’s in the quarter, down from 6 in last year’s second quarter, and 21 commercial helicopters compared to 24 units last year.
 
Segment profit was up $31 million primarily due to improved performance.
 
Bell backlog at the end of the second quarter was $5.4 billion, down $234 million from the end of the first quarter.
 
Textron Systems
 
Revenues at Textron Systems decreased $10 million, primarily due to lower volumes in the Weapons and Sensors and Unmanned Systems product lines partially offset by higher volumes at Marine and Land Systems.
 
Segment profit was down $18 million, due to lower volume and mix.
 
Textron Systems’ backlog at the end of the second quarter was $1.6 billion, down $170 million from the end of the first quarter.
 
Industrial
 
Industrial revenues increased $109 million largely due to the impact of the Arctic Cat acquisition.
 
Segment profit was down $17 million due to an operating loss at Arctic Cat, which was consistent with our integration plan, and unfavorable pricing and inflation.
 
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Finance
 
Finance segment revenues decreased $2 million and segment profit decreased $2 million.
 
Conference Call Information
 
Textron will also host a conference call at 8:00 a.m. (Eastern) to discuss the results and the company’s outlook.  The call will be available via webcast at www.textron.com or by direct dial at (877) 209-9921 in the U.S. or (612) 332-0107 outside of the U.S. (request the Textron Earnings Call).
 
In addition, the call will be recorded and available for playback beginning at 10:30 a.m. (Eastern) on Wednesday, July 19, 2017 by dialing (320) 365-3844; Access Code: 408727.
 
A package containing key data that will be covered on today’s call can be found in the Investor Relations section of the company’s website at www.textron.com.
 
About Textron Inc.
 
Textron Inc. is a multi-industry company that leverages its global network of aircraft, defense, industrial and finance businesses to provide customers with innovative solutions and services. Textron is known around the world for its powerful brands such as Bell Helicopter, Cessna, Beechcraft, Hawker, Jacobsen, Kautex, Lycoming, E-Z-GO, Greenlee, Textron Off Road, Arctic Cat, Textron Systems, and TRU Simulation + Training. For more information visit: www.textron.com.
 
###
 
Forward-looking Information
 
Certain statements in this release and other oral and written statements made by us from time to time are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements, which may describe strategies, goals, outlook or other non-historical matters, or project revenues, income, returns or other financial measures, often include words such as “believe,” “expect,” “anticipate,” “intend,” “plan,” “estimate,” “guidance,” “project,” “target,” “potential,” “will,” “should,” “could,” “likely” or “may” and similar expressions intended to identify forward-looking statements. These statements are only predictions and involve known and unknown risks, uncertainties, and other factors that may cause our actual results to differ materially from those expressed or implied by such forward-looking statements. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Forward-looking statements speak only as of the date on which they are made, and we undertake no obligation to update or revise any forward-looking statements.  In addition to those factors described in our Annual Report on Form 10-K and our Quarterly Reports on Form 10-Q under “Risk Factors”, among the factors that could cause actual results to differ materially from past and projected future results are the following: Interruptions in the U.S. Government’s ability to fund its activities and/or pay its obligations; changing priorities or reductions in the U.S. Government defense budget, including those related to military operations in foreign countries; our ability to perform as anticipated and to control costs under contracts with the U.S. Government; the U.S. Government’s ability to unilaterally modify or terminate its contracts with us for the U.S. Government’s convenience or for our failure to perform, to change applicable procurement and accounting policies, or, under certain circumstances, to withhold payment or suspend or debar us as a contractor eligible to receive future contract awards; changes in foreign military funding
 
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priorities or budget constraints and determinations, or changes in government regulations or policies on the export and import of military and commercial products; volatility in the global economy or changes in worldwide political conditions that adversely impact demand for our products; volatility in interest rates or foreign exchange rates; risks related to our international business, including establishing and maintaining facilities in locations around the world and relying on joint venture partners, subcontractors, suppliers, representatives, consultants and other business partners in connection with international business, including in emerging market countries; our Finance segment’s ability to maintain portfolio credit quality or to realize full value of receivables; performance issues with key suppliers or subcontractors; legislative or regulatory actions, both domestic and foreign, impacting our operations or demand for our products; our ability to control costs and successfully implement various cost-reduction activities; the efficacy of research and development investments to develop new products or unanticipated expenses in connection with the launching of significant new products or programs; the timing of our new product launches or certifications of our new aircraft products; our ability to keep pace with our competitors in the introduction of new products and upgrades with features and technologies desired by our customers; pension plan assumptions and future contributions; demand softness or volatility in the markets in which we do business; cybersecurity threats, including the potential misappropriation of assets or sensitive information, corruption of data or, operational disruption; difficulty or unanticipated expenses in connection with integrating acquired businesses; and the risk that acquisitions do not perform as planned, including, for example, the risk that acquired businesses will not achieve revenue and profit projections.
 
4 

 
TEXTRON INC.
Revenues by Segment and Reconciliation of Segment Profit to Net Income
Three and Six Months Ended July 1, 2017 and July 2, 2016
(Dollars in millions, except per share amounts)
(Unaudited)

 	 	Three Months Ended	 	Six Months Ended	 	
 	 	July 1, 2017	 	July 2, 2016	 	July 1, 2017	 	July 2, 2016	 	
REVENUES	 	 	 	 	 	 	 	 	 	
MANUFACTURING:	 	 	 	 	 	 	 	 	 	
Textron Aviation	 	$	1,171	 	$	1,196	 	$	2,141	 	$	2,287	 	
Bell	 	825	 	804	 	1,522	 	1,618	 	
Textron Systems	 	477	 	487	 	893	 	811	 	
Industrial	 	1,113	 	1,004	 	2,105	 	1,956	 	
 	 	3,586	 	3,491	 	6,661	 	6,672	 	
 	 	 	 	 	 	 	 	 	 	
FINANCE	 	18	 	20	 	36	 	40	 	
Total revenues	 	$	3,604	 	$	3,511	 	$	6,697	 	$	6,712	 	
 	 	 	 	 	 	 	 	 	 	
SEGMENT PROFIT	 	 	 	 	 	 	 	 	 	
MANUFACTURING:	 	 	 	 	 	 	 	 	 	
Textron Aviation	 	$	54	 	$	81	 	$	90	 	$	154	 	
Bell	 	112	 	81	 	195	 	163	 	
Textron Systems	 	42	 	60	 	62	 	89	 	
Industrial	 	82	 	99	 	158	 	190	 	
 	 	290	 	321	 	505	 	596	 	
 	 	 	 	 	 	 	 	 	 	
FINANCE	 	5	 	7	 	9	 	12	 	
Segment Profit	 	295	 	328	 	514	 	608	 	
 	 	 	 	 	 	 	 	 	 	
Corporate expenses and other, net	 	(31	)	(31	)	(58	)	(63	)	
Interest expense, net for Manufacturing group	 	(36	)	(37	)	(70	)	(70	)	
Special charges (a)	 	(13	)	—	 	(50	)	—	 	
 	 	 	 	 	 	 	 	 	 	
Income from continuing operations before income taxes	 	215	 	260	 	336	 	475	 	
Income tax expense	 	(62	)	(82	)	(83	)	(146	)	
 	 	 	 	 	 	 	 	 	 	
Income from continuing operations	 	153	 	178	 	253	 	329	 	
Discontinued operations, net of income taxes	 	—	 	(1	)	1	 	(2	)	
Net income	 	$	153	 	$	177	 	$	254	 	$	327	 	
 	 	 	 	 	 	 	 	 	 	
Earnings per share:	 	 	 	 	 	 	 	 	 	
Income from continuing operations	 	$	0.57	 	$	0.66	 	$	0.94	 	$	1.21	 	
Discontinued operations, net of income taxes	 	—	 	(0.01	)	—	 	(0.01	)	
Net income	 	$	0.57	 	$	0.65	 	$	0.94	 	$	1.20	 	
 	 	 	 	 	 	 	 	 	 	
Diluted average shares outstanding	 	269,299,000	 	271,316,000	 	271,076,000	 	272,172,000	 	
 
Income from Continuing Operations and Diluted Earnings Per Share (EPS) GAAP to Non-GAAP Reconciliation:

 	 	Three Months Ended
July 1, 2017	 	Six Months Ended
July 1, 2017	 	
 	 	 	 	Diluted EPS	 	 	 	Diluted EPS	 	
Income from continuing operations - GAAP	 	$	153	 	$	0.57	 	$	253	 	$	0.94	 	
Restructuring, net of taxes of $4 million and $9 million, respectively	 	8	 	0.03	 	18	 	0.07	 	
Arctic Cat restructuring, integration and transaction costs,
net of taxes of $0 million and $7 million, respectively	 	1	 	—	 	16	 	0.05	 	
Total Special charges, net of income taxes	 	9	 	0.03	 	34	 	0.12	 	
Adjusted income from continuing operations - Non-GAAP (b)	 	$	162	 	$	0.60	 	$	287	 	$	1.06	 	

(a)          During 2016, we initiated a plan to restructure and realign our businesses by implementing headcount reductions, facility consolidations and other actions in order to improve overall operating efficiency across Textron.  In the three and six months ended July 1, 2017, we recorded Special charges of $12 million and $27 million, respectively, related to this plan. In connection with the acquisition of Arctic Cat, we recorded Special charges of $23 million in the six months ended July 1, 2017, which consisted of severance costs of $19 million, principally related to change-of-control provisions, and integration and transaction costs of $4 million.
 
(b)          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.

 
 Textron Inc.
 Condensed Consolidated Balance Sheets
 (In millions)
 (Unaudited)

 	 	July 1,
2017	 	December 31,
2016	 	
Assets	 	 	 	 	 	
Cash and equivalents	 	$	938	 	$	1,137	 	
Accounts receivable, net	 	1,236	 	1,064	 	
Inventories	 	4,655	 	4,464	 	
Other current assets	 	357	 	388	 	
Net property, plant and equipment	 	2,669	 	2,581	 	
Goodwill	 	2,340	 	2,113	 	
Other assets	 	2,376	 	2,331	 	
Finance group assets	 	1,204	 	1,280	 	
Total Assets	 	$	15,775	 	$	15,358	 	
 	 	 	 	 	 	
Liabilities and Shareholders’ Equity	 	 	 	 	 	
Short-term debt and current portion of long-term debt	 	$	362	 	$	363	 	
Current liabilities	 	3,643	 	3,530	 	
Other liabilities	 	2,275	 	2,354	 	
Long-term debt	 	2,774	 	2,414	 	
Finance group liabilities	 	1,039	 	1,123	 	
Total Liabilities	 	10,093	 	9,784	 	
 	 	 	 	 	 	
Total Shareholders’ Equity	 	5,682	 	5,574	 	
Total Liabilities and Shareholders’ Equity	 	$	15,775	 	$	15,358	 	

 
TEXTRON INC.
MANUFACTURING GROUP
Condensed Schedule of Cash Flows
(In millions)
(Unaudited)

 	 	Three Months Ended	 	Six Months Ended	 	
 	 	July 1,	 	July 2,	 	July 1,	 	July 2,	 	
 	 	2017	 	2016	 	2017	 	2016	 	
Cash flows from operating activities:	 	 	 	 	 	 	 	 	 	
Income from continuing operations	 	$	150	 	$	174	 	$	244	 	$	322	 	
Depreciation and amortization	 	108	 	111	 	211	 	217	 	
Changes in working capital	 	88	 	(211	)	(225	)	(601	)	
Changes in other assets and liabilities and non-cash items	 	67	 	4	 	40	 	(8	)	
Dividends Received from TFC	 	—	 	29	 	—	 	29	 	
Net cash from operating activities of continuing operations	 	413	 	107	 	270	 	(41	)	
Cash flows from investing activities:	 	 	 	 	 	 	 	 	 	
Net cash used in acquisitions	 	(11	)	(15	)	(329	)	(179	)	
Capital expenditures	 	(85	)	(119	)	(161	)	(207	)	
Proceeds from the sale of property, plant and equipment	 	—	 	3	 	—	 	5	 	
Other investing activities, net	 	—	 	—	 	1	 	(2	)	
Net cash from investing activities	 	(96	)	(131	)	(489	)	(383	)	
Cash flows from financing activities:	 	 	 	 	 	 	 	 	 	
Proceeds from long-term debt	 	—	 	—	 	347	 	345	 	
Increase (decrease) in short-term debt	 	(100	)	(30	)	—	 	12	 	
Purchases of Textron common stock	 	(143	)	—	 	(329	)	(215	)	
Other financing activities, net	 	(3	)	(2	)	10	 	(1	)	
Net cash from financing activities	 	(246	)	(32	)	28	 	141	 	
Total cash flows from continuing operations	 	71	 	(56	)	(191	)	(283	)	
Total cash flows from discontinued operations	 	2	 	(1	)	(23	)	(1	)	
Effect of exchange rate changes on cash and equivalents	 	7	 	(5	)	15	 	(1	)	
Net change in cash and equivalents	 	80	 	(62	)	(199	)	(285	)	
Cash and equivalents at beginning of period	 	858	 	723	 	1,137	 	946	 	
Cash and equivalents at end of period	 	$	938	 	$	661	 	$	938	 	$	661	 	
 	 	 	 	 	 	 	 	 	 	
Manufacturing Cash Flow GAAP to Non-GAAP Reconciliation:	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	
Net cash from operating activities of continuing operations - GAAP	 	$	413	 	$	107	 	$	270	 	$	(41	)	
Less:   Capital expenditures	 	(85	)	(119	)	(161	)	(207	)	
            Dividends recieved from TFC	 	—	 	(29	)	—	 	(29	)	
Plus:   Total pension contributions	 	13	 	12	 	27	 	24	 	
           Proceeds from the sale of property, plant and equipment	 	—	 	3	 	—	 	5	 	
Manufacturing cash flow before pension contributions- Non-GAAP (a)	 	$	341	 	$	(26	)	$	136	 	$	(248	)	

(a)  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)

 	 	Three Months Ended	 	Six Months Ended	 	
 	 	July 1,	 	July 2,	 	July 1,	 	July 2,	 	
 	 	2017	 	2016	 	2017	 	2016	 	
Cash flows from operating activities:	 	 	 	 	 	 	 	 	 	
Income from continuing operations	 	$	153	 	$	178	 	$	253	 	$	329	 	
Depreciation and amortization	 	112	 	114	 	218	 	223	 	
Changes in working capital	 	128	 	(168	)	(219	)	(568	)	
Changes in other assets and liabilities and non-cash items	 	65	 	(4	)	37	 	(14	)	
Net cash from operating activities of continuing operations	 	458	 	120	 	289	 	(30	)	
Cash flows from investing activities:	 	 	 	 	 	 	 	 	 	
Net cash used in acquisitions	 	(11	)	(15	)	(329	)	(179	)	
Capital expenditures	 	(85	)	(119	)	(161	)	(207	)	
Finance receivables repaid	 	9	 	19	 	24	 	36	 	
Other investing activities, net	 	21	 	42	 	34	 	52	 	
Net cash from investing activities	 	(66	)	(73	)	(432	)	(298	)	
Cash flows from financing activities:	 	 	 	 	 	 	 	 	 	
Proceeds from long-term debt	 	13	 	—	 	375	 	362	 	
Increase (decrease) in short-term debt	 	(100	)	(30	)	—	 	12	 	
Principal payments on long-term debt and nonrecourse debt	 	(36	)	(44	)	(74	)	(90	)	
Purchases of Textron common stock	 	(143	)	—	 	(329	)	(215	)	
Other financing activities, net	 	(3	)	(2	)	10	 	(1	)	
Net cash from financing activities	 	(269	)	(76	)	(18	)	68	 	
Total cash flows from continuing operations	 	123	 	(29	)	(161	)	(260	)	
Total cash flows from discontinued operations	 	2	 	(1	)	(23	)	(1	)	
Effect of exchange rate changes on cash and equivalents	 	7	 	(5	)	15	 	(1	)	
Net change in cash and equivalents	 	132	 	(35	)	(169	)	(262	)	
Cash and equivalents at beginning of period	 	997	 	778	 	1,298	 	1,005	 	
Cash and equivalents at end of period	 	$	1,129	 	$	743	 	$	1,129	 	$	743	 	

 
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 Special charges, net of income taxes. We consider items recorded in Special charges, net of income taxes, 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.
 
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:
·  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;
·  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;
·  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.
 
Income from Continuing Operations and Diluted Earnings Per Share (EPS) GAAP to Non-GAAP Reconciliation and Outlook:

 	 	Three
Months Ended
July 1, 2017	 	Six
Months Ended
July 1, 2017	 	
 	 	 	 	Diluted EPS	 	 	 	Diluted EPS	 	
Income from continuing operations - GAAP	 	$	153	 	$	0.57	 	$	253	 	$	0.94	 	
Restructuring, net of taxes of $4 million and $9 million, respectively	 	8	 	0.03	 	18	 	0.07	 	
Arctic Cat restructuring, integration and transaction costs, net of taxes of $0 million and $7 million, respectively	 	1	 	—	 	16	 	0.05	 	
Total Special charges, net of income taxes	 	9	 	0.03	 	34	 	0.12	 	
Adjusted income from continuing operations - Non-GAAP	 	$	162	 	$	0.60	 	$	287	 	$	1.06	 	

 	 	2017 Outlook	 	
 	 	 	 	Diluted EPS	 	
Income from continuing operations - GAAP	 	$  600 - $  659	 	$  2.22 - $  2.45	 	
Restructuring, net of taxes of $18 million and $12 million	 	29 - 20	 	0.10 - 0.07	 	
Arctic Cat restructuring, integration and transaction costs, net of taxes of $9 million	 	21	 	0.08	 	
Total Special charges, net of income taxes	 	50 - 41	 	0.18 - 0.15	 	
Adjusted income from continuing operations - Non-GAAP	 	$  650 - $  700	 	$  2.40 - $  2.60	 	
 
Manufacturing Cash Flow Before Pension Contributions GAAP to Non-GAAP Outlook:

 	 	2017 Outlook	 	
Net cash from operating activities of continuing operations - GAAP	 	$  1,045 - $  1,145	 	
Less:   Capital expenditures	 	(450)	 	
Plus:   Total pension contributions	 	55	 	
Manufacturing cash flow before pension contributions- Non-GAAP	 	$  650 - $  750