Operator: Next, we go to Doug Harned with Bernstein.
Douglas Harned: I wanted to continue on the strong backlog topic. When you started the year, it looked like — I think you were thinking kind of a 1:1 book-to-bill for the year. And clearly, it’s been much better than that. Could you talk about how your expectations have changed over time? And has the mix shifted at all?
Scott Donnelly: No, it really hasn’t. Look, I mean we did sort of set our base plan, expecting kind of 1:1, and look, I think eventually, the industry has to get to 1:1. It’s not — I don’t really think it can continue to exceed that much for that long. But obviously, our sales teams are out there and customer demand is what it is. So if it’s greater than 1:1, obviously, that’s terrific for the business. And as you note, we have seen that through the course of the year. So we’ll continue to kind of plan and look at production volumes and adjust accordingly as we go forward. But the mix is markedly different. As I said, we’re still seeing strong jet demand, we’re seeing across all the turbo product lines. We’re seeing it virtually across all of our different aircraft types.
Obviously, it’s helped by having some new aircraft like the Sky Courier out there, it’s helped by having some of these upgrade programs which always stimulates the market when you do a next version of CJ3, our next version of an M2. We have [indiscernible] announced out there. So there’s a lot of things we’re always doing to invest in the product lines to kind of continue to help drive that demand in the market. But for sure, versus our estimation at the beginning of the year 1:1, the end market continues to be stronger than even we would have expected, which is obviously a positive.
Douglas Harned: Yes, it is a positive, but I’m also — I’m interested in how you deal with this because you have delays in supply — some delivery delays with the supply chain. You’ve got this huge backlog. I mean, how far out are you scheduling deliveries now? And do you start to run into an issue here if this were to continue? Because as you say, ultimately, should be at 1:1 at some point.
Scott Donnelly: Yes. Well, look, we obviously continue to work with our supply chain to try to make necessary adjustments. And as I said, I think the trend line is improving. But it still comes down to a part. So I missing a few parts. I can’t deliver an aircraft for missing one part I can’t deliver an aircraft. So it is still a problem, but I do think it’s trending in the right way. Obviously, as we adjust and think about our production rates going forward, we’re working with those suppliers to kind of forecast to them, how we’re going to adjust our rates into the future. But that’s a real-time activity, right, that’s going on all the time. So as I kind of indicated earlier, I think we’ll expect to see increased deliveries again in 2024 versus 2023. And that’s partly stronger demand, and it’s partly getting some of the supply chain issues resolved and getting back to where we can make — generate additional volume out of factory.
Operator: Next go to the line of George Shapiro with Shapiro Research.
George Shapiro: Maybe this one for Frank. The increase in guidance, I mean, this quarter, you got a big benefit from finance, somewhat offset, I guess, with eAviation being worse than what I would have expected and a lower tax rate. Was there operational benefits in that EPS increase you got? It was mainly these items I just mentioned.
Frank Connor: No, we’re seeing as Scott said. I mean, we’re seeing strong performance across Bell. And so I think Bell is going to come in at higher margins than we would have originally guided. We’re seeing strong performance at Systems. They’ll be at least the top end of our original guidance range, we’re seeing, frankly better volumes and solid and strong margin performance in the Industrial segment. And then at Aviation, we’re also seeing, despite some of the volume headwinds, we’re seeing strong profit growth and kind of a strong overall year-over-year growth. So that’s — those are certainly the operational aspects. GFC is an operational thing. It can always a recovery from write-off from many years ago. So a good solid performance out of the businesses.
George Shapiro: Okay. And Scott, on the last call, I think there was a comment that maybe deliveries would be higher, closer to somewhere in the 40s from what we saw this quarter. So I assume that’s all supply chain. I mean is that going to continue in the fourth quarter as well? So we’ll see strong deliveries but maybe less than we would have thought 6 months ago. And does that bode for next year being a lot bigger than what you might have thought before?
Scott Donnelly: I would say, George, that for sure, we are delivering fewer aircraft than we originally expected, and that is as a result of these issues and challenges that we’re still seeing in the supply chain. We have forecasted and just the way we run our manufacturing operations, obviously, we took down some of the units to accommodate that. Did we have aircraft that moved from Q3 to Q4 this year? Absolutely. Do I think we’ll have aircraft that will move from Q4 to Q1? Absolutely. Again, how much of that is our aircraft that you would add on to what we were originally planning in our 2024 guide versus where we’ll be, I mean that’s — that will all be incorporated into what we guide when we get into 2024, George. So — and again, we’re not at a point to do that.
We’re still working through all those kind of numbers. But the only color I would give you is I expect that you certainly would expect to see good growth and over the 2023 number. So for sure, be it just overall demand or things that are moving from ’23 to ’24. ’24 should be a strong year for us.
Operator: Next, we move on to Cai von Rumohr with TD Cowen.
Cai von Rumohr: And good quarter. Frank, could you maybe talk a little bit about do we see — do you get any benefit out of the latest IRS clarification of Section 174? And should we be concerned about pension being a significant headwind next year?
Frank Connor: On the 174, we had been following kind of what the guidance clarification resulted in. So we — there is no change to — from a cash tax standpoint. With regard to pension, as you know, we’ll go through our year-end process around that. I would not expect it to be a headwind. So I think that kind of we shouldn’t have a problem with pensions and from a headwind standpoint as we move into ’24.
Cai von Rumohr: Got it. Okay. And then, Scott, strategically, I mean you’ve announced a couple of new updates at NBAA, but you haven’t done a major new clean sheet in a while and not that the rest of your competitors have done anything. But what’s your thinking looking out a couple of years? Obviously, you’ve got good demand now. You’ve got some nice smaller new products coming. But do you think that you need to start something bigger for the next 3 to 5 years?
