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Textron Inc (NYSE:TXT)
Q3 2019 Earnings Call
Oct 17, 2019, 8:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Textron Third Quarter Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.

I will now like to turn the conference over to your host, Vice President, Investor Relations, Mr. Eric Salander. Please go ahead.

Eric Salander -- Vice President of Investor Relations

Thanks, Greg, 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 Connor, our Chief Financial Officer. Our earnings call presentation can be found in the Investor Relations section of our website.

Textron's revenues in the quarter were $3.3 billion, up $59 million from last year's third quarter. Net income in the third quarter was $0.95 per share compared to $0.61 per share of adjusted net income in the prior year. Manufacturing cash flow before pension contributions, totaled $181 million compared to $239 million in last year's third quarter.

With that, I will turn the call over to Scott.

Scott C. Donnelly -- Chairman, President and Chief Executive Officer

Thanks Eric, and good morning everybody. Revenues were up in the quarter, primarily driven by Textron Aviation and Industrial. Segment profit margin was up 140 basis points as we continue to see strong execution across our businesses. A Bell revenues were up in the quarter, largely due to commercial deliveries of our 407 and 429 aircraft. Year-to-date orders of these models are ahead of last year's rate and we look forward to continue higher deliveries of these popular platforms as we continue to ramp production to align with customer demand. In the quarter, our Bell 407GXi received IFRS certification from the FAA. Bell has proposed a new 407GXi as its entry from the Navy's advanced Advanced Helicopter Training System program, where an award decision is expected later this year.

Moving to the military side. The Czech Republic, announced their intent to acquire mixed fleet of 8 Bell UH-1Y utility and 4 Bell AH-1Z attack helicopter as part of a total transaction estimated at $620 million. This is one of the several for military opportunities for the H1 platform that we're continuing to pursue. Within Future Vertical Lift we recently unveiled the full scale model of the new Bell 360 Invictus Rotor craft. Our interest in the Future Attack Reconnaissance Aircraft program of the U.S. Army's AUSA Annual Meeting. The Bell 360 Invictus combined new technology validated on our 525 commercial helicopter with unique characteristics to deliver the US Army and affordable agile and lethal solution to win on the modern battlefield.

At systems revenues were down on lower armored vehicle deliveries at Textron Marine & Land Systems. In the quarter, Textron Systems was among three companies down selected by the US Army to deliver prototypes for the next phase of the next generation squad weapon program. Also in the quarter our Ship-to-Shore Connector craft 100 successfully completed builders trials will now be followed by Navy with acceptance trials. Within Unmanned or fee for service product line captured over $50 million of new wins in the quarter for the Aerosonde platform. Earlier this week at AUSA, we unveiled the Repsol M5 as Textron Systems offering for the U.S. Army's robotic combat vehicle program.

Moving to Industrial revenues were higher primarily reflecting improved pricing at Textron Specialized Vehicles. The Specialized Vehicles, we saw continued favorable performance from the cost reduction and manufacturing realignment actions we initiated in the fourth quarter of last year. Also in the quarter, we continue to onboard Bass Pro and Cabela's stores as well as independent TRACKER Marine dealers and have seen steady retail volume growth through this channel.

Moving to Textron Aviation revenues were up from higher jet and aftermarket volumes partially offset by lower defense volume. In the quarter, we delivered 45 jets, 41 last year, and 39 commercial turboprops down from 43 last year. Looking at commercial turboprops, we saw a pickup in order activity sequentially, as well as compared to the third quarter of last year. In late September, we received FAA certification of the all new citation longitude and began customer deliveries in the first week of October, which will excited to have this innovative aircraft in the hands of our customers and expect this platform to drive revenue growth and margin expansion in the future. Overall Aviation had a solid quarter with mid single-digit revenue growth.

Coming into the year, we had planned for higher growth in our legacy jet models with commercial turboprops about flat. Year-to-date Legacy jet volume is running ahead of last year with 135 deliveries, compared to 125, with commercial turboprops tracking to plan. As we look to the remainder of the year and in light of some uncertainty in the marketplace, we are adjusting our outlook for legacy aircraft sales and now expect Q4 deliveries excluding Longitude to be about flat with last year. With respect to longitude we started customer deliveries and expect to continue those through the current quarter, although we've seen some deliveries pushed into next year to allow for required aircraft modifications related to certification that was granted at the very end of the quarter.

We've also experienced some delays in defense order activity and volume compared to our original plan, all of which have been reflected in our revised full-year guidance for 2019.

With that, I will turn the call over to Frank.

Frank T. Connor -- Executive Vice President and Chief Financial Officer

Thank you, Scott, and good morning everyone. Segment profit in the quarter was $297 million, up $52 million from the third quarter of 2018 with segment profit margin of 9.1%, up 140 basis points from a year ago. Let's review how each of the segments contributed starting with Textron Aviation. Revenues at Textron Aviation of $1.2 billion were up $68 million from last year's third quarter, primarily due to higher jet and aftermarket volumes, partially offset by lower defense volume.

Segment profit was $104 million in the third quarter, up $5 million from a year ago due to the higher volume and mix and favorable performance, partially offset by higher net inflation. Textron Aviation backlog at the end of the third quarter was $1.9 billion.

Bell revenues were $783 million, up $13 million from last year on higher commercial revenues, partially offset by lower military volume. Bell delivered 42 commercial helicopters in the quarter compared to 43 last year. Segment profit of $110 million was down $3 million from a year ago, primarily due to an unfavorable impact from performance which included lower net favorable program adjustments, partially offset by higher volume and mix. Bell backlog at the end of the third quarter was $5.6 billion.

Revenues at Textron Systems were $311 million, down $41 million from last year, primarily reflecting lower armored vehicle volume at Textron Marine & Land Systems. Segment profit of $31 million was up $2 million from last year's third quarter. Textron Systems' backlog at the end of the third quarter was $1.4 billion.

Industrial revenues of $950 million increased $20 million from a year ago, largely related to a favorable impact from pricing within the Textron Specialized Vehicles product line. Segment profit was up $46 million from the third quarter of 2018, largely due to favorable performance and a favorable impact from net pricing, primarily related to the Specialized Vehicles product line. Finance segment revenues were down $1 million, and profit was up $2 million from last year's third quarter.

Moving below segment profit corporate expenses were $17 million and interest expense was $39 million in the quarter. We also repurchased 2.3 million shares at an overall cost of $109 million. Year-to-date, we have repurchased 9.3 million shares, returning $470 million in cash to shareholders.

To wrap up with guidance, we are narrowing our expected full-year earnings per share to a range of $3.70 to $3.80. This includes revised tax guidance and an effective rate of 17% for the full year. We are revising our outlook for manufacturing cash flow before pension contributions to a range of $600 million to $700 million, largely reflecting higher ending inventories at Textron Aviation.

That concludes our prepared remarks. So, Greg, we can open the line for questions.

Questions and Answers:

Operator

[Operator Instructions] Your first question comes from the line of Sheila Kahyaoglu from Jefferies. Please go ahead.

Sheila Kahyaoglu -- Jefferies -- Analyst

Hi, good morning and thank you for the time.

Scott C. Donnelly -- Chairman, President and Chief Executive Officer

Good morning, Sheila.

Sheila Kahyaoglu -- Jefferies -- Analyst

Scott, I wanted to talk about how Kautex and your decision to put out strategic alternatives for the business. You've talked about not selling it for as long as I've known you. Kind of what's changed and what are you thinking about them here?

Scott C. Donnelly -- Chairman, President and Chief Executive Officer

First of all, I think there is obviously we get a fair bit of feedback from investors as to the fit of a Tier 1 automotive business in a company that is otherwise kind of an end market product highly engineered sort of a business, and then we've been paying attention to that, we think that we do a pretty good analysis every year to make sure that nothing the portfolio is holding back our stock from a some of the parts standpoint and we've obviously said, you disconnect in that over the last year or so. And given that, and the feedback that we get, we thought it was appropriate to at least explore what it would look like and what alternatives there might be for Kautex. And so that's why we announced that we were launching that process.

Sheila Kahyaoglu -- Jefferies -- Analyst

Got it. Thank you. And then, Frank, on just the free cash flow, working capital is an hindrance here, kind of how do we think about that ramp. How much is pushed out given the Longitude and working capital into 2020?

Frank T. Connor -- Executive Vice President and Chief Financial Officer

Yeah, again, we're going to see, we think some higher inventory levels at Aviation given kind of the outlook on the legacy models that Scott discussed and a little bit of Longitude. The $100 million reflects that working capital growth -- we'll liquidate, a lot of inventory here in the fourth quarter, but we think some will get pushed into early next year.

Scott C. Donnelly -- Chairman, President and Chief Executive Officer

So I feel there's several pieces of that as Frank said, we will have a few longitude just the modular the aircraft, which are our trivial from a technical and production standpoint but are kind of invasive and we're rolling craft through that based on these last minute changes means a few aircraft that we had in our plan will probably move into next year there will still be a bunch of Longitude deliveries in the quarter, obviously. We have a military customer, for whom we built T-6s that originally was planned. to take delivery this year has asked to take that deliver next year, which again that's, that's fine, but it does put some obviously some inventory.

And as we've said all year, if we see any softness, we're going to align and trade volume versus having to drive price to get there. So, with sort of the dynamic we're seeing in the marketplace. We'd rather back off on that number and obviously there is some penalty to us and carrying some of the inventory in the next year, but I'd rather do that and then try to push more volume into a market if it's shows any signs of softness.

Sheila Kahyaoglu -- Jefferies -- Analyst

All right. Thank you. Thanks a lot.

Operator

Your next question comes from the line of Cai von Rumohr from Textron. Please go ahead.

Cai von Rumohr -- Cowen & Co., LLC -- Analyst

Thank you. I didn't know -- I joined.

Scott C. Donnelly -- Chairman, President and Chief Executive Officer

Welcome to board, Cai.

Cai von Rumohr -- Cowen & Co., LLC -- Analyst

Yes. So, to follow up on Sheila's question, you know if you sell Kautex it looks like it's quite dilutive. And then , if you're going to look at selling that part of industrial wouldn't you also sell the more troubled part specialty vehicles. So ultimately, I think the question becomes, Scott. What is Textron going to be in three to five years?

Scott C. Donnelly -- Chairman, President and Chief Executive Officer

Okay. Obviously, we haven't -- had made -- had any commentary on the vehicle business, as you know, the vehicle business historically for us has been a good business. As said good growth that generates, good margins and cash. I think obviously we went through some issues last year, which we've been working hard to get turned back around, I think it's heading absolutely in the right direction. And in a business that has a lot of potential for us in terms of growth and strong performance. And it is like the rest of our business is one were product matters investing and having a better product and the other guy is how you win in the market and those are the kind of businesses that we like.

Cai von Rumohr -- Cowen & Co., LLC -- Analyst

Got it. Thank you. And then, so Frank. If we look at Industrial, the margins look like they were weaker than I thought and you keep on talking about the better pricing and specialty vehicles was Kautex down significantly?

Scott C. Donnelly -- Chairman, President and Chief Executive Officer

No, Kautex was fine, I mean we -- this is the pricing obviously was relative to the third quarter of last year, which was a really tough quarter at TSV. And so we made considerable progress in terms of kind of no longer discounting in the marketplace and having a more appropriate distribution strategy and pricing therefore pricing strategy, but Kautex performed well, Kautex was kind of flat at the revenue line and saw a better kind of margins year-over-year.

Cai von Rumohr -- Cowen & Co., LLC -- Analyst

Thank you very much.

Operator

Your next question comes from the line of Seth Seifman from JPMorgan. Please go ahead.

Seth Seifman -- JPMorgan -- Analyst

Thanks very much and good morning. Scott, I just wanted to follow up on some of the -- the weakness that you mentioned in the business jet market. I think the commentary you made suggest that excluding Longitude deliveries will be down about 10 units year-on-year in the fourth quarter. And is there particular -- set of models that's affecting more particular geographical area or customer that -- that's, that's driving that?

Scott C. Donnelly -- Chairman, President and Chief Executive Officer

Well, Seth, I think on the fourth quarter, we would expect again ex-longitude to be fairly flat from 2018. So we're not expecting it to be down. But the market and obviously the order activity has been obviously the sort of an implied book-to-bill here about one -- in Q3. So it's not horrible market. But I mean, we do see some softness, as we saw sort of in the latter part of Q2, we saw again in the latter part of Q3, just uncertainty in the end market and some customers who have been in discussions and clearly intend to buy new aircraft debating do I do it now, do I wait. And again I think we would rather take prudent action and not go out and try to use, tries to incentivize those transactions to happen if they're going to move into next year. Then they move into next year, but there is no reason after all the work we've done to try to get pricing back to a healthy level that we should compromise that.

But again it's, I think we're talking about a flat market on in terms of legacy deliveries, not one that's down we're up 10 units on non-longitude so far year-to-date. So that's what we're compare, right. It's not that we were giving those 10 back, we just expect to be flat on a quarter-over-quarter basis -- year-over-year basis, I'm sorry.

Seth Seifman -- JPMorgan -- Analyst

Okay. So, year-on-year then you'll be up 10 -- you're up 10 year-to-date and if you're flat. Okay.

Scott C. Donnelly -- Chairman, President and Chief Executive Officer

Yeah, that's right. Sorry for the confusion. It's not a down. It's a flat on a year-over-year basis on the quarter.

Seth Seifman -- JPMorgan -- Analyst

In the fourth quarter?

Scott C. Donnelly -- Chairman, President and Chief Executive Officer

Correct.

Seth Seifman -- JPMorgan -- Analyst

Okay. Great. Thanks. And then, just as a quick follow-up in terms of thinking about Kautex proceeds that come in there is obviously potential do you share buyback. There is also I think about $1 billion of debt coming due in the next two years. So how do you think about those proceeds in light of the -- also in light of whatever target leverage level you have?

Scott C. Donnelly -- Chairman, President and Chief Executive Officer

Well, look I think -- our balance sheet while it's somewhat under-levered at this point. We'll have to make a decision at that point, how much we think is appropriate on the share buyback and then obviously some debt retirement would go in line with that.

Seth Seifman -- JPMorgan -- Analyst

Great. Thank you very much.

Operator

Your next question comes from the line of Peter Arment from Baird. Please go ahead.

Peter Arment -- Baird -- Analyst

Yeah, thanks. Good morning, Scott, Frank. Hey, Scott, just a follow-up I guess on Seth's question lastly on Kautex. Can you maybe just provide a little color is there, since you've made the announcement, have you seen interest in what historically has been a very good business for you?

Scott C. Donnelly -- Chairman, President and Chief Executive Officer

Look I -- we can't give a whole lot of commentary, I mean obviously the process is fairly early on Goldman has been running that process for us, there has been a lot of NDAs. There has been a lot of management meetings with prospective interested folks, but it's fairly early on in that process.

Peter Arment -- Baird -- Analyst

Okay. I appreciate that. And then just quickly on the 360 Invictus unveiling maybe you could just give us some commentary what the feedback you've heard already since that announcements come out kind of leveraging the 525 and what advantages you think you'll have there? Thanks.

Scott C. Donnelly -- Chairman, President and Chief Executive Officer

Sure. I was at AUSA all day on Monday, so we had the opportunity with our teams to interact with a lot of folks from the customer community. I'd say their interest level is pretty high, their intrigued with what we've done, obviously the Army has seen us for a while, when we submitted our proposals. I mean -- our under contract is at this point as well as a number of others for the first phase of that program, which is kind of aiming toward a down select and I think probably, March of next year to go down to the two, that will then go build five more aircraft.

But I think the positive -- the reaction is very positive. I mean, clearly, this is great technology. It's not in some way portrayed as, well, this is older technology, absolutely not. I mean this is the way that you get the speed and the agility from this -- this craft leverages huge investment that we made, obviously on the 525 front and scaling that rotor technology and fly by-wire technology into the Invictus. So their performance numbers meet or exceed the customers' requirements and we think we can do it very cost-effectively -- the risk in terms of the entrants of the technology has been validated already with a lot of flying on the 525. So I think the response is very positive, but we'll see where this falls out. Obviously, the down-select is next March and we're hoping to be one of the two that gets to proceed into the final phase.

Peter Arment -- Baird -- Analyst

Appreciate the color. Thanks, Scott.

Scott C. Donnelly -- Chairman, President and Chief Executive Officer

Thank you.

Operator

Your next question comes from the line of Pete Skibitski from Alembic. Please go ahead.

Pete Skibitski -- Alembic -- Analyst

Hey, good morning, guys. Scott, I want to ask you -- just kind of the lessons learned from the Longitude Certification anything you guys are taken away from future design or documentation or process efforts that would lead -- you know lead you to think that maybe the next Certification, if there won't be so painful. On the other hand, I think about this issue that the FAA has gone through with Boeing is this going to maybe make things going forward more painful for everybody. I just want to get your thoughts on all that?

Scott C. Donnelly -- Chairman, President and Chief Executive Officer

I think there's a lot to learn from this both on our part and interactions with the FAA. I think this is a pretty extraordinary case the reality here is that we had a new process frankly one that we did not understand very well and which was evolving in sort of changing and the reality is, we had an aircraft that was essentially designed and built before the total scope of the process was understood. And so we ended up having to do a lot of work to conform what we have done, which is a very safe fantastic aircraft to this new process and the scope of the changes were not material, but they were painful to have to go through and make the mass, and the changes and understand this new documentation process and the analysis, and what that drove in most cases, it didn't impact the aircraft, but in the several critical cases it did.

And so again the aircraft we end up with today through certification is not wildly different than -- fundamentally different than what we had already designed and built, but there were several critical areas that in order to gain the certification work our way through that process required changes that were painful. And so, look I think as we go forward, we now, first of all understand that process very well. The aircraft that are in our pipeline -- I'm going to start with SkyCourier that's next on deck. Obviously this is the Part 23 aircraft not a 525 aircraft.

So, the process is much different obviously, we've done a lots of Part 23 aircraft in the past. So I think we understand and have been working very closely with the FAA in a very collaborative way to make sure that we lay out what is the process and what -- how do we get from here to there on certification of that aircraft. So I think we're in a much better place in terms of understanding of the process interaction work with the FAA and again this is a Part 23 aircraft as it's been always. So it's a -- it's something that's much more familiar to us and I would certainly expect it to go much smoother than process than the process that we went through on Longitude.

Pete Skibitski -- Alembic -- Analyst

Got it. Appreciate the color.

Scott C. Donnelly -- Chairman, President and Chief Executive Officer

Sure.

Operator

Your next question comes from the line of George Shapiro from Shapiro Research. Please go ahead.

George Shapiro -- Shapiro Research -- Analyst

Yes, good morning.

Scott C. Donnelly -- Chairman, President and Chief Executive Officer

Good morning, George.

George Shapiro -- Shapiro Research -- Analyst

Scott, you had commented in the release that the net inflation was higher in Aviation what's happened since for the last three or four quarters, we've been seeing you ahead of that?

Scott C. Donnelly -- Chairman, President and Chief Executive Officer

Well, what happened, George is, well, I mean we do have inflation and unfortunately price was pretty flat, but we didn't have price to offset that inflation and generally speaking we should and like that's part of our -- looking at the market and the dynamic and so in that we're going to be cautious about the volume side of this thing because we need to be netting price inflation obviously now there was a lot of performance and Aviation and a lot of good execution that helped to offset some of that, that disconnect between price inflation. But we need to be -- I mean I'm not suggesting necessarily we're going to continue to get big price increases, but we certainly can't give price sell and we really saw price flatten in the quarter.

George Shapiro -- Shapiro Research -- Analyst

So is that continuing to the fourth quarter or no?

Scott C. Donnelly -- Chairman, President and Chief Executive Officer

Well, we'll see, right I'm -- I think clearly from a volume standpoint. What we're saying we're going to -- back off a little bit on our plan on volume to continue to maintain and not give up on the price front. Obviously, we've got to continue to do work to offset inflation.

George Shapiro -- Shapiro Research -- Analyst

And Scott, you talked about the market weakening some into September, that it continue and so October, and where was the strength because normally you've said July and August are pretty weak?

Scott C. Donnelly -- Chairman, President and Chief Executive Officer

Well, George, I would say that, when you -- if you looked at the level of activity with customers has been lumpy it's been that way through the whole year, right, I mean turboprops is a great example when you look at, for instance, Q2 to Q3 , Q2 was very light, you know on turboprops and we had a fair number of concerns and what should we do on volume and Q3, we had a lot of order activity in turboprop. So literally it's when you have a market that has uncertainty in it as -- what kind of something we see high level activity then things soften out a little bit. So it kind of comes and goes. And that's why we'll keep an eye on it as we work through the quarter.

George Shapiro -- Shapiro Research -- Analyst

And then one last one. In Industrial, you said the Kautex did quite well. So that would imply to me that special vehicles performed worse than in the second quarter? Is that a correct statement?

Scott C. Donnelly -- Chairman, President and Chief Executive Officer

I don't think we've --

Frank T. Connor -- Executive Vice President and Chief Financial Officer

No, I mean, we don't disclose things at that level, George. But my comment was that Kautex did on a year-over-year basis, Kautex did kind of improved margins Q -- '18 to '19.

George Shapiro -- Shapiro Research -- Analyst

Okay. And then let me get one last one, how much was aftermarket up you'd commented in the release.

Scott C. Donnelly -- Chairman, President and Chief Executive Officer

In Aviation?

George Shapiro -- Shapiro Research -- Analyst

Right.

Scott C. Donnelly -- Chairman, President and Chief Executive Officer

About 7%.

George Shapiro -- Shapiro Research -- Analyst

Okay. And you had been running kind of flat or down a little bit, but that was 22606. So maybe you've overlap that is, that's what's happening--

Scott C. Donnelly -- Chairman, President and Chief Executive Officer

I think on the Aviation side, George. The first half of the year was a little lighter than we expected it, kind of stabilize more in the second quarter. And again, we saw the 7% increase in Q3. So again whether there was deferrals what was going on, but I mean it started out a little bit lighter, but obviously it's 7% in Q3, it was a pretty strong quarter.

George Shapiro -- Shapiro Research -- Analyst

Okay. Thanks very much.

Scott C. Donnelly -- Chairman, President and Chief Executive Officer

Sure.

Operator

Your next question comes from the line of Rajeev Lalwani from Morgan Stanley. Please go ahead.

Rajeev Lalwani -- Morgan Stanley -- Analyst

Hi, good morning. Just two relatively quick questions. Scott. Can you provide a little more color on your comments into the fourth quarter on the Aviation side, just different parts of the market and how they're doing whether it's turboprop are going to the upper end of the business side for you on Longitude. So just some broader color there. And the second question just higher level -- Scott, do you think in order to get Aviation margins back to where they used to be simply need a recovery in the end market. Do you think consolidation may be necessary, just given how fragmented the overall market?

Scott C. Donnelly -- Chairman, President and Chief Executive Officer

Well, so first of all there is commentary on the quarter again, I think we've seamlessly move it around a little bit in terms of strengths and weakness in the end market through the course of the year -- or should I say the order activity, right? I mean you've seen Turboprops -- kind of soften, and turboprops are pretty strong. Jet, again, from month-to-month is moving around. I don't think there is a, there certainly not our collapsed the market, it's just a question of -- is it a stronger market and can you deliver more volume and delivered last year and I think we've been sort of one of the non-Longitude have been exceeding that from last year, a little bit.

We think it will be more flat in Q4, Longitude at the high end, the demand and the interest in that aircraft continues to be very strong, obviously, we're in a good position in terms of the units that we have on the book and we just got to get deliveries rolling as we go through the quarter and in the next year. So I think we feel good about where that aircraft is in terms of its interest in the marketplace. But what you'll see, I say we're seeing is kind of flattish at this point.

And we've talked for you about the fact that given where the market is -- mostly what you see probably is kind of flat and that we need to control our own destiny in terms of growth by for new products out there and Longitude obviously is a big example of that. SkyCourier behind that. Denali behind that. We need to make sure -- we're making the right investments to continue to grow our business even in a flattish market, sometimes the market's going to be better, sometimes it's not to be better, but we got to manage and whatever, that market is.

So, hope we're continuing to drive the margin performance of the business, we expect certainly to see dilution associated with these early aircraft, particularly in light of the rework that we're having to put into them. But in terms of the learning curves and the productivity in the cost line, I think we're in a good place with that, but we need to get through this rework phase of getting these aircraft model and getting them into the field again from a technical standpoint is not a big deal, but it's, it's fairly invasive just in terms of the amount of touch labor that we have to put in to make those smart. So I think margins will continue to track in the right direction, obviously volume and a strong and market is only helpful to us.

As to -- is there opportunity for consolidation. I'll get, look I think everybody would tell you, given the nature of how this market has been for the last decade or so that they're probably still or too many guys and too many products in some of these crowded spaces. We think, we've been performing very well and gaining share in these areas we continue to invest in the right products, and if there's consolidation opportunities and we'll see how that plays out over time.

Rajeev Lalwani -- Morgan Stanley -- Analyst

Thank you, sir.

Scott C. Donnelly -- Chairman, President and Chief Executive Officer

Sure.

Operator

Your next question comes from the line of David Strauss from Barclays. Please go ahead.

David Strauss -- Barclays -- Analyst

Thanks, good morning. So Scott, following up on that, on the Longitude when the Latitude got certified. We saw a very, very aggressive quick ramp. You had big backlog with NetJets there. You had a big backlog with NetJets on the Longitude, how should we think about that program ramping and has NetJets firmed up any additional options, since there from it actually certified.

Scott C. Donnelly -- Chairman, President and Chief Executive Officer

The Longitude for NetJets as we do with Latitude we work with NetJets and kind of have sort of a one-year horizon, as we look at what comes into the order book. So we don't put as you know, we do not have that big Longitude order with NetJets, in our backlog until it affirms up, which is again roughly usually looking out about 12 months is the horizon that they do their planning and we work together to move those into kind of firm backlog. So, like the absolute numbers, obviously you're not going to be as high on Longitudes they were on a Latitude and that's a smaller piece of the market, but I think that the ramp will obviously will see a significant ramp here in Q4, and we'll see that continue to ramp through 2020.

David Strauss -- Barclays -- Analyst

Okay. And from an inventory perspective on Longitude. I mean given the airplane was delayed 12 to 18 months, for the certification it delayed 12 to 18 months. I mean, can you give us any sort of sense how much I know if its excess inventory or inventory your extra inventory you're carrying on Longitude given that will be the another extended delay.

Scott C. Donnelly -- Chairman, President and Chief Executive Officer

Well, I mean, I wouldn't give you an absolute number, David like as we said, I think as you look at our revision to our cash guidance for the year that is inventory at Aviation and several aircraft that will have been in our plan with our original guide are going to move into 2020. I mean these are aircraft for which they're sold, this is just a matter of our ability to make these mods, incorporate the mods and get them [Phonetic] delivered to a customer. So I think just given the limited amount of time we're going to see several of those move into 2020, that would have originally been in our 2019 plan. So you combine that, you combine of T-6s that were expected to be delivered this year that, that drives the bulk of that change to our cash guidance it is inventory at Aviation, but again these are largely aircraft that are sold aircraft ordered aircraft, deposited aircraft that are simply going to turn into deliveries in 2020.

David Strauss -- Barclays -- Analyst

Okay. Got it. Thanks very much.

Scott C. Donnelly -- Chairman, President and Chief Executive Officer

Sure.

Operator

Your next question comes from the line of Jon Raviv from Citi. Please go ahead.

Jon Raviv -- Citi Investment Research -- Analyst

Hey, good morning guys. So just on this once again -- just last year around this time we talked about tweaking some like you see rates up. It sounds like we're tweaking down right now fully understand that. Would it be fair to expect legacy jet deliveries to perhaps be down in 2020, if we just run rate 4Q '19? Or is it still too early to say and can you improve obviously jet margin if the volumes are down?

Scott C. Donnelly -- Chairman, President and Chief Executive Officer

I would say it's a long way till 2020, right. So I mean, we still have NBAA coming up. We got another full 2.5 months. So I think, again as we said the deliveries we would expect in the quarter to be flat on a year-over-year basis. That's our view of -- how we finish 2019, it's way too early for us to be guiding what we think 2020 is going to look like, but obviously we'll be working out over the next few months. And as always adjust our production run rate accordingly.

Jon Raviv -- Citi Investment Research -- Analyst

Okay. Thanks, Scott. And then follow-up on the Industrial segment. Can you just give -- I missed any built guide by sub-segment within an industrial. But margins didn't seem to get that pick-up in 3Q that perhaps we've sort of expected with the restructuring efforts going through. How do you see that Industrial segment margin pacing out over the rest of the year into next year?

Scott C. Donnelly -- Chairman, President and Chief Executive Officer

I think they're pretty in line with what we expected given our -- year-over-year changes in terms of the inventory levels and not needing to do the kind of rebating that impacted us in 2018, the discipline around inventory management is on track with what we said we're going to go do the volume increase, the channel development that's going on both in the Arctic Cat channel as well as the TRACKER channel, is going well. We had a very successful launch of kind of our business model around snow with Snowmageddon. The vast majority of that was delivered obviously in Q3 we built to what was pre-ordered. So from our perspective, the margins and the performance of the business are in line with what we expected in our plan. So it's not a one-year turnaround to get to where we want to be, there is more improvement coming absolutely, but I think we're on track with where we want to be.

Jon Raviv -- Citi Investment Research -- Analyst

Okay. Thank you.

Scott C. Donnelly -- Chairman, President and Chief Executive Officer

Sure.

Operator

Your next question comes from the line of Robert Spingarn from Credit Suisse. Please go ahead.

Robert Spingarn -- Credit Suisse -- Analyst

Hey, good morning. I just wanted to ask what the fading of the Longitude how we think about margins in Aviation in Q4 and beyond. How will that learning curve factor in?

Scott C. Donnelly -- Chairman, President and Chief Executive Officer

Well, Q4, the Longitude obviously as we've talked about all along. We're going to have a significant dilution to our overall margin rates as those come into the market and again the early units combined with labor that we're putting into to incorporate the modifications, which again are not material from a -- what is the aircraft. But it's a fairly labor intensive invasive process are going to cause the dilution. So I think we will certainly see that. In Q4, we've accounted for all that in the guidance that we've put out, and clearly as we go into 2020, you get to where you are now running aircraft that are just coming through our production lines productivity, which is good cost positions, which is good. So we will see those margins become stronger as we work our way into 2020.

Robert Spingarn -- Credit Suisse -- Analyst

Okay. And then just separately on the helicopter side, with FARA, I guess, just coming into spring, what is the trajectory at Bell military, if you're not part of that down select?

Scott C. Donnelly -- Chairman, President and Chief Executive Officer

Well, there's two big pieces sort of -- the Bell, I shouldn't say just two -- the Bell military story is more complicated than that, right. I mean, I think we've continue to sustain the Multiyear III rates on V-22, which is where we are, I think we're seeing a significant uptick in aftermarket because those fleets both on V-22 and H1, continue to grow. Obviously FMS is important, we just saw the announcement of being selected in the Czech Republic. There are several additional FMS cases that are out there. I think you've probably seen publicly the Israelis have now requested formerly the P&A, on the V-22, which is encouraging. Obviously we've started deliveries on the Navy for their CMV-22. I think there is potential to see that grow over time, which is would be very good for the business.

So I think we have a pretty good plan in place to sustain where we are on the military side of Bell. The long-term big upside is around far and obviously around far, which is the V2V. And the good news is both those programs seem to be moving out very well with the Army. So we already are under contract on FARA. We'll see that down select, I think next March. And on the V-280 as you know the army has come out and made a pretty significant move to the left in terms of their dates from 2035 to 2030. I think there is potential for that to accelerate further. But at this point they expect to put people under contract again in the early part of next year to do -- to start their official process that would be under contract they're saying it's probably a 19-month process and then award in the MD contract for the selective winner.

And I think our V-280s is in a great position, obviously that's an army decision that's got to be made, but I think we're have clear line of sight to compete and hopefully the win what would be a very large program on the V-280 front. So those are the future obviously and they are terrific programs, but I think we have a pretty good plan in place to sustain that military business in both V-22 and H1 and aftermarket to bridge that gap.

Robert Spingarn -- Credit Suisse -- Analyst

Okay. Thank you, Scott.

Operator

Your next question comes from the line of Noah Poponak from Goldman Sachs. Please go ahead.

Noah Poponak -- Goldman Sachs -- Analyst

Hey, good morning, everyone.

Scott C. Donnelly -- Chairman, President and Chief Executive Officer

Good morning, Noah.

Noah Poponak -- Goldman Sachs -- Analyst

Scott when you're talking to the team at Cessna or talking to customers directly, is it possible to kind of hone in on what your customer set was enthused about in the world or in their business earlier in the year and what has some concern today as it just total broad macro or stock market, if you get a trade deal does that help your business. Our folks is going to now want to wait till the 2020 election passes to act. Any help you can provide there?

Scott C. Donnelly -- Chairman, President and Chief Executive Officer

Well, Noah, I think -- I don't think it'll be a surprise that when you talk to customers and they look at uncertainty you got trade deals, you've got Brexit deal most of these guys can't feel good watching the political stuff that's going on in DC, I mean it's just it creates a lot of uncertainty. And look, I think we see this reflected in business confidence numbers, right, the surveys. And we're not economists here, but we read all those numbers as well and it's understandable that a lot of businesses is particularly small, mid-sized guys which is our big part of our customer base. Are in many case of differing CapEx investments in their business, be it business jets or otherwise. Just because of uncertainties and obviously the trade kind of things and the Brexit things and the prospects. I mean, I think concern over an administration that's anti-businesses is one that next people pause.

Noah Poponak -- Goldman Sachs -- Analyst

Yes. Okay. Okay. On the cash flow change the Longitude inventory build make total sense. But the cash flow guidance before today's change I think would have had the free cash to net income conversion, a little bit below 100% and it's kind of been below 100% -- five or the six years or so, and there has been a negative change in working capital. Can you guys help us better understand why that is -- is it percentage of completion accounting somewhere in the business? Or what's driving that and do you get to that -- do you get to a better conversion rate going forward?

Scott C. Donnelly -- Chairman, President and Chief Executive Officer

Well look, we've talked about a number of distribution issues. Obviously, the bill that we've had at Aviation around Longitude coming in, clearly has been a drag. We've had a similar situation with 525 going on in Bell. Yes, for sure, there's been a change on the military side from a cash flow -- from performance-based to -- 606 and how you roll the cash versus the cost. The cost kind of revenue recognition. So those things are all contributors. I don't know I'm not probably prepared to go back into a five year look at it, but --

Frank T. Connor -- Executive Vice President and Chief Financial Officer

Yes, I mean -- certainly not analyzing all five years as Scott said, but most recently, particularly this year in addition to the Aviation stuff that we're talking about we've highlighted, kind of what's going on in Bell, which is a significant difference from a cash timing standpoint in revenue and profit recognition relative to cash where we were kind of ahead on cash, if you will, and now we're reverting to being more in line as we close out Multiyear II. So that's been the kind of a big drag in terms of conversion this year, away from the Aviation inventory issue.

Noah Poponak -- Goldman Sachs -- Analyst

Should we, what kind of drag or lack thereof from that accounting perspective should we expect 2020, 2021?

Scott C. Donnelly -- Chairman, President and Chief Executive Officer

You -- you know that will have washed itself out as we close out Multiyear II, year. So you shouldn't expect that.

Noah Poponak -- Goldman Sachs -- Analyst

Got it. And then if I could just sneak one more in. On the -- on Ripsaw that you displayed at AUSA for RCB. I was curious if you could talk about your decision to partner with FLIR and to have the new unmanned offerings that they've recently acquired as part of that vehicle?

Scott C. Donnelly -- Chairman, President and Chief Executive Officer

No, I'm not sure, I would go into a whole lot more detail than what we've talked about at the show, and what we have on display obviously FLIR, I think when you look at the, obviously what -- we acquired how because we felt they have some fabulous technology in terms of the vehicle, which I think shows itself in both SMET and now the RCV [Phonetic] programs. FLIR has been a terrific partner in terms of bringing their technology to that platform. Obviously, the technology that we brought really, which has its roots in our Hunt Valley and then aircraft business though -- the intersection of that stuff is really I think brought out a terrific vehicle with great on sensor partner in FLIR and obviously our organic technology around the control capabilities. So, I don't know that I would go into much more than that. I think it's been really well received it's a spectacular vehicle and obviously one that we're looking forward to competing for some of these future Army programs.

Noah Poponak -- Goldman Sachs -- Analyst

Okay. Thanks a lot.

Scott C. Donnelly -- Chairman, President and Chief Executive Officer

Sure.

Operator

Your next question comes from the line of Ronald Epstein from Bank of America Merrill Lynch. Please go ahead.

Katelyn DeLante -- Bank of America Merrill Lynch -- Analyst

Hi guys. This is Katelyn DeLante on for Ron. Textron Systems was down 12% year-over-year this quarter and you mentioned that Aviation are weaker in military volumes. Can you expand on what areas and programs will provide growth in defense for you guys in the short to mid-term. Did anything new come from AUSA this week?

Scott C. Donnelly -- Chairman, President and Chief Executive Officer

Well, on the system side, obviously we're sort of -- the year-over-year change is the end of the TAPV program and ANA programs, which were all vehicle programs which are all -- vehicle programs. In terms of the rest of that business look like it's in pretty good shape. Obviously as we go into 2020 and beyond the big change in the Marine & Land Systems business is ship-to-shore connective moving from a developmental program into a production program. We are in detailed negotiations with the customer at this point on the FY '17, '18, '19 as I said the we've passed our builders trials we're getting ready to go through the Navy acceptance trials, by the way earlier this week we flew craft 101, which is the second one. It did its first time on the water and ran flawlessly for over six hours and accomplished an awful lot of the test cards.

So in terms of the -- I think we feel very good about that program, which has been a challenging developmental program transitioning now -- into the balance of those units and obviously in the production contract, so that -- is a big turnaround for the business as we go into 2020.

On the defense side, at Aviation you know T-6 has been -- it's mostly foreign military sales these things always take time, again we saw a little bit problematic this year that we had a delay in the light attack program. Obviously, something at this time a year ago was going to start early in 2019. We're still being assured by the customer, this program is going to happen, obviously from a budgeting funding standpoint in Congress it's fully supported. So we expect and are being told this is now going to be a 2020 activity, that sort of deferred that from '19 into '20 versus our plan and again, we have a customer that was already on the books on that just for bunch of reasons, whatever that have moved into 2020.

So, there's a lot of, there's not one big program at Aviation, these are, tend to be a number of smaller FMS driven programs. So we just were notified to Congress on Tunisia, which again is a nice T-6 program, but one that will you know all that you have probably have deliveries in '21, but which we started to production next year.

Katelyn DeLante -- Bank of America Merrill Lynch -- Analyst

Okay. That's very helpful. Thank you.

Scott C. Donnelly -- Chairman, President and Chief Executive Officer

Sure.

Operator

Your next question comes from the line of Robert Stallard from Vertical Research. Please go ahead.

Robert Stallard -- Vertical Research -- Analyst

Thanks so much. Good morning.

Scott C. Donnelly -- Chairman, President and Chief Executive Officer

Good morning, Robert.

Robert Stallard -- Vertical Research -- Analyst

Scott, on the BizJet front, and I'm not sure if you can answer this, but you don't have a go. What are you seeing from the competition. Are they matching what you're doing in terms of a discipline on price and volume? Or is that making your life more difficult?

Scott C. Donnelly -- Chairman, President and Chief Executive Officer

Well, Robert I'd say -- our guys always say, it makes our life more difficult, but this is every deal is a competitive deal and I think again our share is based on the products we're putting for customers, we are absolutely as we look at things like Longitude feel like we've got a better product in the market, than our competitors do. We get great feedback from customers that look at the aircraft to fly the aircraft to take demos in the aircraft. And I think we see those convert to sales and I do believe that today we see a premium on the pricing on that because it's a better aircraft.

Robert Stallard -- Vertical Research -- Analyst

Are you seeing similar sort of dynamics on some of your older models as well?

Scott C. Donnelly -- Chairman, President and Chief Executive Officer

Yeah, I mean but I don't know that it's very different than it's been for the last few years, Robert, it's -- I mean, it will be a (Technical Difficulty) in the M2s, and the CJs, I mean actually lot of some -- looking for Embraer obviously it's those, it's I don't think there's a big difference in the dynamic that we're seeing in most of that -- most of those segments of the market, which again we've been driving price over the last couple of years successfully. And I think we want to make sure that we continue to do that.

Robert Stallard -- Vertical Research -- Analyst

Okay. And then secondly on Kautex, and what could happen there. Historically been very reluctant to make any disposals if there diluted to earnings. So this is a pretty big change here. Are there any other parts of the portfolio, where you think there is this disconnect between, what's reflected in the share price and what people think of the businesses?

Scott C. Donnelly -- Chairman, President and Chief Executive Officer

I don't think so.

Robert Stallard -- Vertical Research -- Analyst

So this is also one-off in saying Kautex.

Scott C. Donnelly -- Chairman, President and Chief Executive Officer

No, what Robert, as we said it's -- it is arguably a different business model, right. A Tier 1 automotive is different than engineering and manufacturing and selling and servicing in product. And that's, that is the difference in that model. It's a good business, it's been a successful business for us, but it's one that warranted at least understanding what options there might be.

Robert Stallard -- Vertical Research -- Analyst

Okay. Thanks so much.

Operator

Your next question comes from the line of Carter Copeland from Melius Research. Please go ahead.

Carter Copeland -- Melius Research -- Analyst

Hey guys, thanks. Just a couple of quick clarifications. One, Scott, with respect to the Longitude rework, roughly how many aircraft are we talking about here is it handful less that slightly, so I think more than that. And then, Frank, just, I wondered if you could give us some insight and what the -- if there was a favorable net EAC impact in systems? Thanks.

Scott C. Donnelly -- Chairman, President and Chief Executive Officer

Carter. I don't, we don't go into specific unit numbers, we haven't forecast specific number deliveries. I'm not sure I want to go into that number, obviously it's a finite number the aircraft have been produced and we'll get this behind us here in the quarter. So, it shouldn't, obviously we will not extend beyond that.

Frank T. Connor -- Executive Vice President and Chief Financial Officer

Yeah. In terms of the EACs, as you know, we don't break that out by segment, there was -- for the total company, the net program adjustments, was $21 million in the quarter, but we don't break that out between where that resides.

Carter Copeland -- Melius Research -- Analyst

Okay. And just maybe -- maybe to get at it another way Scott, just to try to bound the outcome here. Where was it a limited finite number of aircraft and construction that had to go back for rework? Or was it all of them pre-cert?

Scott C. Donnelly -- Chairman, President and Chief Executive Officer

I mean, it's all of them, right. I mean you have to bring them all up to the same configuration. So all of the aircraft are going through the same process in terms of the mods.

And these mods, by the way, Carter, as I said, that it's wiring for some changes, so hey guys, we got to go through multiple channels and different connectors. It's not a big deal, but it is kind of invasive, right, to get at that sort of stuff. And it's -- so it's -- I mean you wouldn't see any difference in the aircraft that, there is no performance difference in the aircraft. The customer, there is no change to the aircraft, it's largely to do with some of these redundancies and things that we just had to make these really technically minor modifications, but -- they are invasive, but again we will have that behind us.

Carter Copeland -- Melius Research -- Analyst

It's well understood work scope, it's just tedious.

Scott C. Donnelly -- Chairman, President and Chief Executive Officer

It's tedious.

Carter Copeland -- Melius Research -- Analyst

All right. All right. Thanks guys for the color as always.

Scott C. Donnelly -- Chairman, President and Chief Executive Officer

Sure. Thanks.

Operator

Your next question comes from the line of David Strauss from Barclays. Please go ahead.

David Strauss -- Barclays -- Analyst

Thanks for taking the follow up. So, you talked a little bit about this on the V-22. Can you talk to us exactly when you're going to be through all the way through Multiyear II and completely on the Multiyear III and how is that transition going and how do you feel about the Bell margin profile as you get closer to be to being fully on in the Multiyear III?

Scott C. Donnelly -- Chairman, President and Chief Executive Officer

Well, I think the last delivery, this probably in the Q1 or in the beginning of Q2 next year. I remember [Phonetic] under the accounting, most of the revenue is complete. So from a margin standpoint, no that, I think the margin and the productivity, we continue to drive a Multiyear III is -- it's going to take all time to get Multiyear II obviously the big difference, which again, we've seen a lot of this year, is that the program adjustments are lower than they were a year ago because of the breaching in a Multiyear II and the reductions and management reserve and so forth. So, but most of that we're seeing, as we go from '18 into '19 but there'll be some further into '20. I'm not sure, I can give you a lot more I don't think we going to get the margin rates pipe specific contract at this point. But like all multi-years you had some -- you had pretty good productivity and efficiency. And we're working on that now as we've started to roll the Multiyear III aircraft. I mean a lot of the revenue this year is Multiyear III aircraft because it's on the cost-to-cost basis.

David Strauss -- Barclays -- Analyst

Right. Okay. And Frank, with interest rates down a fair amount year-over-year at least based on where we are today. Any thoughts on pension for next year. I think we're booking pension income currently and contribution. And then also on corporate -- corporate and the tax rate learning. I think that's a fair amount lower than what you originally projected -- those kind of numbers carry through into 2020?

Frank T. Connor -- Executive Vice President and Chief Financial Officer

So on the pension, obviously, you kind of -- we'll see how things ultimately play out from a rate standpoint, kind of 50 basis points of discount rate is about $31 million of pension expense that's disclosed in our 10-K. So, well we haven't kind of obviously run those all those numbers yet, as we looked at corporate in our kind of this year, we're probably maybe $10-ish million below our original guide of $140 million. We're probably looking at $130 million. That obviously depends on share price. As you know, that impacts corporate expense. I wouldn't expect any kind of significant change to those types of ranges as we look at next year, but we haven't gone through all those budgeting exercises this year.

David Strauss -- Barclays -- Analyst

And tax rate for next year?

Frank T. Connor -- Executive Vice President and Chief Financial Officer

Tax rate, kind of we've had some discrete items this year that got us to 17%. We're probably in the 20-ish percent type area, we'll continue to have some items as we kind of look forward that are slight benefit to rate versus kind of the lower '20s area that we had talked about, so maybe 20-ish percent type area.

David Strauss -- Barclays -- Analyst

Okay. Thanks very much.

Operator

Yeah. Your next question comes from the line of George Shapiro from Shapiro Research. Please go ahead.

George Shapiro -- Shapiro Research -- Analyst

Yes, just a couple of quick ones. Frank earlier in the year, you said the systems revenues for the year would be about $1 billion for it certainly doesn't look like we're going to get there, what's kind of a new number for the year?

Scott C. Donnelly -- Chairman, President and Chief Executive Officer

We're running around to that level, maybe a little slightly less than that level, but not a significant change from that level. Systems you know it's going to do better on a margin standpoint and kind of maybe just a little short of that $1.4 billion from a revenue standpoint, but it's in that area.

Frank T. Connor -- Executive Vice President and Chief Financial Officer

Our revenue should be very close to what we thought, George, and the performance of the business has been very good from a margin standpoint. So I think it will actually exceed our guidance on the -- actually exceed our guidance on the upside and should be pretty much in line of the revenue side.

George Shapiro -- Shapiro Research -- Analyst

So that implies a big jump to like $470 million or so in the fourth quarter and what's going to drive that from what was like $311 million this quarter?

Scott C. Donnelly -- Chairman, President and Chief Executive Officer

I don't know, George, I don't know if that -- I mean your numbers are roughly right. It's probably going to be north of $400 million, if you do the math, but it's, I mean, we're not going to get into program by program deliveries. But that's -- what's in our plan in our latest forecast. As Frank said, it's probably going to be a little lighter than $1.4 billion, but not dramatically and the margin and performance is very strong. And I think we continue to feel very good about the opportunities and the wins on new programs and selections are just obviously more to come, but I think we're in a pretty good place.

George Shapiro -- Shapiro Research -- Analyst

Okay. Thanks very much for the follow-up.

Operator

Your next question comes from the line of Jon Raviv from Citi. Please go ahead.

Jon Raviv -- Citi Investment Research -- Analyst

Hi, thanks. On the Longitude -- I think for -- waiting for the certification for a while, what the certification and entering the service mean for actually selling the plane. Can you talk a little bit about your backlog and pipeline, whether it's fractional versus individual versus corporate and does the pricing in that backlog support the margin plan?

Scott C. Donnelly -- Chairman, President and Chief Executive Officer

Because I don't, I mean, we're not going to -- I don't think we will, we going to go into the dissecting the backlog. I think we have a good backlog on Longitude. It's -- it has certainly some fractional with NetJets, who is a great partner and we expect to see a lot of success of that platform, much as we saw with Latitude in that class, but it also we have a lot of retail customers as we said all along is are lined up for the aircraft as well. So -- I mean the pricing has been, where we expected it to be, the cost is where we expect it to be, again, we have this issue of getting through the already built aircraft and making the mods which is a problem. But again we'll just as we finally got sort of behind us will get that activities behind us here in the fourth quarter. And I think we have a great outlook on both the success of the product and the profitability, the product going forward.

Jon Raviv -- Citi Investment Research -- Analyst

Thank you, Scott.

Operator

Your next question comes from the line of Cai von Rumohr from Cowen. Please go ahead.

Cai von Rumohr -- Cowen & Co., LLC -- Analyst

Just a quick follow-up. So obviously, with interest rates down close to 100 bps you're talking $50 million, $60 million non-cash headwind. Any thoughts about switching to mark-to-market?

Scott C. Donnelly -- Chairman, President and Chief Executive Officer

I don't know if we comment on that yet. Cai, I mean certainly, we've seen some other companies do that and it's something our team will look at. And just as -- I'm sure many companies are, but your mouth is probably about right. I'm sure you.

Cai von Rumohr -- Cowen & Co., LLC -- Analyst

Okay. Great. Thanks so much.

Scott C. Donnelly -- Chairman, President and Chief Executive Officer

Sure. Okay. Greg, I think that does it for the call. And if there are any follow-up questions, I can be reached today, tomorrow, next week. So that's it.

Operator

[Operator Closing Remarks]

Duration: 59 minutes

Call participants:

Eric Salander -- Vice President of Investor Relations

Scott C. Donnelly -- Chairman, President and Chief Executive Officer

Frank T. Connor -- Executive Vice President and Chief Financial Officer

Sheila Kahyaoglu -- Jefferies -- Analyst

Cai von Rumohr -- Cowen & Co., LLC -- Analyst

Seth Seifman -- JPMorgan -- Analyst

Peter Arment -- Baird -- Analyst

Pete Skibitski -- Alembic -- Analyst

George Shapiro -- Shapiro Research -- Analyst

Rajeev Lalwani -- Morgan Stanley -- Analyst

David Strauss -- Barclays -- Analyst

Jon Raviv -- Citi Investment Research -- Analyst

Robert Spingarn -- Credit Suisse -- Analyst

Noah Poponak -- Goldman Sachs -- Analyst

Katelyn DeLante -- Bank of America Merrill Lynch -- Analyst

Robert Stallard -- Vertical Research -- Analyst

Carter Copeland -- Melius Research -- Analyst

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