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Proc-Type: 2001,MIC-CLEAR
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<SEC-DOCUMENT>0000950135-01-000833.txt : 20010315
<SEC-HEADER>0000950135-01-000833.hdr.sgml : 20010315
ACCESSION NUMBER: 0000950135-01-000833
CONFORMED SUBMISSION TYPE: 10-K
PUBLIC DOCUMENT COUNT: 13
CONFORMED PERIOD OF REPORT: 20001230
FILED AS OF DATE: 20010314
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: TEXTRON INC
CENTRAL INDEX KEY: 0000217346
STANDARD INDUSTRIAL CLASSIFICATION: AIRCRAFT & PARTS [3720]
IRS NUMBER: 050315468
STATE OF INCORPORATION: DE
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: 10-K
SEC ACT:
SEC FILE NUMBER: 001-05480
FILM NUMBER: 1568353
BUSINESS ADDRESS:
STREET 1: 40 WESTMINSTER ST
CITY: PROVIDENCE
STATE: RI
ZIP: 02903
BUSINESS PHONE: 4014212800
MAIL ADDRESS:
STREET 1: 40 WESTMINSTER ST
CITY: PROVIDENCE
STATE: RI
ZIP: 02903
FORMER COMPANY:
FORMER CONFORMED NAME: AMERICAN TEXTRON INC
DATE OF NAME CHANGE: 19710510
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-K
<SEQUENCE>1
<FILENAME>b38194txe10-k.txt
<DESCRIPTION>TEXTRON, INC.
<TEXT>
<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 30, 2000
Commission File Number 1-5480
TEXTRON INC.
(Exact name of registrant as specified in charter)
Delaware 05-0315468
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
40 Westminster Street, Providence, R.I. 02903
(401) 421-2800
(Address and telephone number of principal executive offices)
--------------
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange on
Title of Class Which Registered
-------------- ------------------------
Common Stock - par value 12 1/2(cent) New York Stock Exchange
(140,723,761 shares outstanding at March 3, 2001); Pacific Stock Exchange
Preferred Stock Purchase Rights Chicago Stock Exchange
$2.08 Cumulative Convertible Preferred Stock, New York Stock Exchange
Series A - no par value
$1.40 Convertible Preferred Dividend Stock, Series B New York Stock Exchange
(preferred only as to dividends) - no par value
8 3/4% Debentures due July 1, 2022 New York Stock Exchange
7.92% Trust Preferred Securities of Subsidiary Trust New York Stock Exchange
(and Textron Guaranty with respect thereto)
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes |X| . No [ ].
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of voting stock held by non-affiliates of the
registrant is $7,574,922,778 as of March 3, 2001.
Portions of Textron's Annual Report to Shareholders for the fiscal year
ended December 30, 2000, are incorporated by reference in Parts I and II of this
Report. Portions of Textron's Proxy Statement for its Annual Meeting of
Shareholders to be held on April 25, 2001, are incorporated by reference in Part
III of this Report.
<PAGE> 2
PART I
ITEM 1. BUSINESS OF TEXTRON
We are a global multi-industry company with operations in five business
segments - Aircraft, Automotive, Fastening Systems, Industrial Products and
Finance. Our business segments include operations that are unincorporated
divisions of Textron Inc. or its subsidiaries and others that are separately
incorporated subsidiaries.
BUSINESS SEGMENTS
This section contains a description of the business of each of our
segments. Financial information by business segment and geographic area appears
on pages 20, 57 and 58 of our 2000 Annual Report to Shareholders. Those pages of
our Annual Report to Shareholders are incorporated by reference into this Annual
Report on Form 10-K.
AIRCRAFT SEGMENT. Our Aircraft segment consists of Bell Helicopter Textron
and Cessna Aircraft Company.
Bell Helicopter Textron
Bell is one of the largest supplier of helicopters, spare parts and
helicopter-related services in the world. Founded in 1946, Bell has delivered
over 34,000 aircraft to military and civilian customers. Bell currently
manufactures four military and six civilian helicopter models. Bell's revenues
accounted for approximately 12%, 13% and 14% of our total revenues in 2000, 1999
and 1998.
Bell supplies advanced military helicopters, spare parts and product
support to the U.S. Government and to military customers outside the U.S. There
are more helicopters manufactured by Bell in the inventory of the U.S.
Government than are manufactured by any other helicopter company. Bell makes
military sales to non-U.S. customers only with the concurrence of the U.S.
Government.
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Bell is also a leading supplier of commercially certified helicopters to
charter, offshore, utility, corporate, police, fire, rescue and emergency
medical helicopter operators. Bell's non-U.S. Government business (including
non-U.S. military customers) typically represents 50% to 65% of its annual
sales.
Bell is teamed with The Boeing Company in the development and production of
the V-22 Osprey tiltrotor aircraft for the U.S. Department of Defense. Tiltrotor
aircraft are designed to utilize the benefits of both helicopters and fixed-wing
aircraft. Through the end of 2000, 19 complete V-22 aircraft have been
manufactured under contract with the Department of Defense. The decision on full
rate production of the V-22 is under consideration at the Department of Defense.
Bell is also teamed with Agusta, Italy's leading helicopter manufacturer, for
the design, manufacture, sale and customer support of a commercial tiltrotor,
the BA609, and a new medium twin-engine helicopter, the AB139.
Bell has developed a new light twin-engine helicopter, designated the Model
427, in collaboration with Korean Aerospace Industries, LTD of South Korea. Bell
is currently manufacturing the Model 427 and began deliveries in 2000.
In the light and medium helicopter market segments, Bell has two major U.S.
competitors and one major European competitor. Some of its competitors are
substantially larger and more diversified aircraft manufacturers. Bell markets
its products around the world through its own sales force and through
independent representatives. Price, financing terms, aircraft performance,
reliability and product support are significant factors in the sale of
helicopters. Bell has developed the world's largest distribution system to sell
and support helicopters, serving customers in over 100 countries.
Cessna Aircraft Company
Based on unit sales, Cessna is the world's largest manufacturer of light
and mid-size business jets, single engine utility turboprop aircraft, and single
engine piston aircraft. Cessna currently has three major aircraft product lines:
Citation business jets, single engine turboprop Caravans and Cessna single
engine piston aircraft. Cessna's revenues accounted for approximately 21%, 21%
and 20% of our total revenues in 2000, 1999 and 1998.
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The family of business jets currently produced by Cessna includes the
Citation CJ1, Citation CJ2, the Citation Bravo, the Citation Encore, the
Citation Excel, and the Citation X. The Citation X is the world's fastest
business jet with a maximum operating speed of Mach .92. In 2000, Cessna
delivered its 3200th business jet. Under development is the mid-size Citation
Sovereign. First customer delivery of this model is scheduled for early 2004.
The Cessna Caravan is the world's best selling utility turboprop. More than
1,200 Caravans have been sold by Cessna since the first Caravan was delivered in
1985. Caravans are offered in four models: the Grand Caravan, the Super
Cargomaster, the Caravan Floatplane and the Caravan 675. Caravans are used in
the U.S. primarily to carry overnight express package shipments. International
uses of Caravans include commuter flights, humanitarian flights, tourism and
freight.
Cessna now has six models in its single engine piston product line: the
four-place 172 Skyhawk, 172 Skyhawk SP, 182 Skylane and Turbo 182 Skylane, and
the six-place 206 Stationair and T206 Turbo Stationair. In 2000, Cessna
delivered its 3000th single engine piston aircraft since production was
restarted in 1997.
Cessna markets its products worldwide primarily through its own sales force
as well as through a network of authorized independent sales representatives.
Cessna has one U.S. and three major foreign competitors for its business jet
products. Cessna's aircraft compete with other aircraft that vary in size,
speed, range, capacity, handling characteristics, and price. Reliability and
product support are significant factors in the sale of these aircraft. The
Citation family of aircraft is supported by ten Citation Service Centers owned
and operated by Cessna, along with authorized independent service stations and
centers in more than 15 countries throughout the world.
Cessna provides its business jet operators with factory-direct customer
support offering 24 hour a day service and maintenance. Cessna Caravan and
single-engine piston customers receive product support through independently
owned service stations and 24 hour a day spare parts support through Cessna.
In 2000, Cessna entered the business jet fractional ownership market
through a Joint Venture Agreement with TAG Aviation S.A., a worldwide aircraft
management and charter
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enterprise. This program, called CitationShares, offers shares of Citation
aircraft in the eastern United States.
AUTOMOTIVE SEGMENT. Our Automotive segment, organized under an umbrella
organization called Textron Automotive Company Inc., consists of Textron
Automotive Trim, CWC Textron and Kautex Textron. Some of our Automotive
operations are unincorporated divisions of Textron Inc. or its subsidiaries and
others are separately incorporated subsidiaries. These operations sell primarily
to automotive original equipment manufacturers and their suppliers operating in
North America and Europe, and, to a lesser extent, South America and Asia.
Textron Automotive is headquartered in Troy, Michigan and has over sixty
manufacturing facilities located in Argentina, Belgium, Brazil, Canada, China,
the Czech Republic, Germany, India, Italy, Mexico, the Netherlands, Portugal,
Spain, the United Kingdom and the U.S.
Through its Textron Automotive Trim operations, Textron Automotive is a
leading worldwide supplier of automotive interior and exterior plastic
components and systems. Interior trim products include instrument panels, door
and sidewall trim, airbag doors, consoles, armrests, package trays and other
trim components. In addition, Textron Automotive's Trim facilities manufacture
exterior decorative components including painted bumpers, fascia, body side
moldings and claddings, fender liners, signal lighting and structural composite
bumper beams. Many of these products are shipped just-in-time as fully
integrated systems. Revenues of Textron Automotive Trim operations accounted for
14%, 15%, and 15% of our total revenues in 2000, 1999 and 1998.
In June 2000, we acquired a 56.6% interest in Plascar Industria e Comerico
Ltda. and integrated it into our Textron Automotive Trim operations. Plascar,
based in Brazil, is the leading supplier of instrument panels and automotive
trim products to global automotive manufacturers producing vehicles in South
America. The remaining 43.3% of Plascar's equity continues to be publicly traded
on Brazilian stock exchanges in the form of preferential shares.
In September 2000, Textron Automotive purchased the interest of Gallino
Plasturgia S.r.l., a subsidiary of Breed Technologies, Inc., in Textron Breed
Automotive S.r.l., a joint venture Textron Automotive formed in Italy in 1999
with Gallino and Magneti Marelli S.p.A. This purchase increased Textron's
ownership in the joint venture to 90%. The joint venture, which was subsequently
renamed Textron Automotive Italia S.r.l., has six manufacturing and
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administrative facilities in Italy and manufactures automotive plastic parts,
including instrument panels, bumpers, and exterior and interior trim parts for
sale to original equipment manufacturers such as Fiat Auto.
CWC Textron designs and manufactures engine camshafts and vibration damper
components for original equipment manufacturers and the aftermarket. Through its
Kaywood Products operation, CWC manufactures precision machined parts and
components for assembled camshafts.
Kautex Textron is a leading manufacturer of blow-molded plastic fuel tank
systems and other blow-molded parts for original equipment manufacturers
throughout Europe, North America, South America and parts of Asia. Kautex
supplies Volkswagen in China through a joint venture with Changchun Junzilan
Industrial Group. Kautex's manufacturing plant in Puebla, Mexico supplies all of
Volkswagen's and DaimlerChrysler's plastic fuel tank requirements for their
Mexican production. Kautex produces plastic fuel tanks and metal fuel filler
systems in its North American operations.
Kautex's McCord Winn Textron operation manufactures windshield and headlamp
washer systems and continues to expand applications of its RITec (Reservoir
Integrated Technology) product, an innovative integration of automotive cooling
system components including the fan shroud and windshield washer and coolant
reservoirs. McCord Winn launched a RITec production program with DaimlerChrysler
in 1999, and other RITec development programs are in progress. We sold McCord
Winn's seating comfort business in December 2000.
More than 100 models currently contain parts made by Textron Automotive
including DaimlerChrysler's Jeep Grand Cherokee and Voyager and Caravan
mini-vans; Ford's Mondeo, Lincoln Town Car and Windstar mini-van; General
Motors' Cadillac Seville and De Ville, Chevrolet Malibu, Monte Carlo, Corvette
and Impala, and the Venture, Transport and Silhouette mini-vans; BMW's 5 series
and 8 series; Toyota's Camry and Avalon; Mitsubishi's Galant and Eclipse; Fiat's
Punto and Bravo/Brava; and VW/Audi's Golf, Passat, Polo, T4, Beetle and A4.
Textron Automotive continues its strong position on DaimlerChrysler's LH series
of cars.
Textron Automotive's manufacturing operations are supported by a staff of
research and design specialists at its Automotive Technology Center. These
specialists have developed new
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processes and products, many of which are patented, that allow Textron
Automotive to offer its customers technology-driven products and processes. In
the plastics and coatings area, Textron Automotive is a recognized leader in
interior surface material (including Textron Automotive's proprietary PVC-free
thermoplastic polyurethane product line), seamless passenger airbag door
technology, structural molded instrument panel systems, integrated modular
assemblies, and molded-in-color interior and exterior components. CWC Castings
is a leader in the design and manufacture of automotive castings. It has
developed a selective austempering heat treatment process for ductile camshafts.
In the automotive business, there is often a long lead time from the time a
supplier is selected to supply components on a new model to the time the
supplier can begin shipping production parts. During this period, the supplier
incurs engineering and development costs. The original equipment manufacturer
reimburses the supplier for these costs as incurred or in the piece prices
charged by the suppliers as the goods are shipped. In addition, automotive
original equipment manufacturers often demand just-in-time delivery, requiring
the supplier to plan shipments in advance and hold inventory.
Automotive original equipment manufacturers and their suppliers are the
principal customers of Textron Automotive. The loss of U.S. and Europe-based
automotive original equipment manufacturers and their first-tier suppliers would
have a material adverse effect on Textron Automotive. However, because of the
broad range of products sold to such customers, it is unlikely that they would
cease all purchases from Textron Automotive.
Each of Textron Automotive's businesses faces competition from a number of
other manufacturers based primarily on price, quality, reputation and delivery.
Although Textron Automotive is one of the largest manufacturers offering its
range of products and services, it faces strong competition in all of its market
segments. Because of the diversity of products and services offered, no single
company is a competitor in all market segments. In certain markets, Textron
Automotive also competes for business with the original equipment manufacturers'
own operations. Textron Automotive is under continual pressure from the original
equipment manufacturers to reduce costs and prices on an annual basis.
FASTENING SYSTEMS SEGMENT. Our Fastening Systems segment, Textron Fastening
Systems (TFS), manufactures and sells fasteners, fastening systems, engineered
assemblies and
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installation tools to the aerospace, automotive, business equipment,
construction, consumer goods, electronics, electrical equipment, industrial
equipment, medical, non-automotive transportation, and telecommunications
markets. TFS consists of three groups: Automotive Solutions, Commercial
Solutions and Advanced Solutions. Some of our TFS operations are unincorporated
divisions of Textron Inc. or its subsidiaries and others are separately
incorporated subsidiaries. TFS also has non-controlling ownership interests in a
number of other companies. TFS is headquartered in Troy, Michigan, and has
facilities located in the following 19 countries: Australia, Austria, Brazil,
Canada, China, France, Germany, Hong Kong, Ireland, Italy, Japan, Korea,
Malaysia, Mexico, Singapore, Spain, Taiwan, the U.K. and the U.S.
TFS sells to a wide range of customers throughout the world, including
original equipment manufacturers, contract producers, component manufacturers,
distributors and retail stores. Products manufactured by TFS include rivets,
threaded and non-threaded fasteners, cold-formed components, metal stampings,
clips, cage nuts, plastic components, and engineered and laser weld assemblies
that incorporate such products. TFS provides value-added products, services and
solutions that simplify manufacturing processes and maximize efficiencies
resulting in lower total system costs to the customer. Revenues of TFS accounted
for approximately 16%, 18% and 18% of our total revenues in 2000, 1999 and 1998.
Through its Automotive Solutions group, TFS is a leading supplier of
engineered fasteners, components and value added services to North American,
South American and European automotive original equipment manufacturers and
their suppliers. TFS Automotive Solutions produces cold formed components,
clips, cage nuts, engineered and laser weld assemblies, metal stampings,
engineered threaded fasteners, blind fastening systems, injection molded plastic
components, and precision fine blanked products under a variety of brand names
including Boesner, BSK, Camcar, Elco, Ring Screw, Sukosim, Valmex and VBF. TFS
Automotive Solutions provides a wide range of design and engineering services
for its global customers. The TFS Automotive Solutions plant provider program
gives manufacturers a single source for the procurement, inventory and delivery
of a broad range of products, including tooling, required for the final assembly
of their products.
TFS Commercial Solutions is a major global manufacturer and distributor of
fasteners and fastening solutions for non-automotive markets. TFS Commercial
Solutions produces engineered threaded fasteners, blind fastening systems and
installations tools, cold formed
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components, aerospace fasteners, construction fasteners and tooling under a
variety of brand names including Avdel, Camcar, Cherry and Elco. TFS Commercial
Solutions provides its customers with supply chain management services through
global vendor managed inventory programs, warehouse and JIT (just-in-time)
programs, and sourcing. TFS Commercial Solutions offers a wide range of design
and engineering services to its customers and is a licensor of various patented
fastening technologies including Torx and Torx Plus.
TFS Advanced Solutions is a major supplier of plastic molded components and
engineered assemblies to wireless telecommunications and computing
manufacturers, as well as the automotive and medical industries. TFS Advanced
Solutions offers its customers a wide range of services including precision
injection molding manufacturing, CAD/CAM tool design and fabrication, high
quality plastic painting, optical quality lens manufacturing, in-mold decorating
and automated assembly. Advanced Solutions' "Internet Manufacturing" process
allows us to produce individualized cell phone covers based on designs
downloaded by consumers to a website and then uploaded to Advanced Solutions for
production.
In May 2000, we acquired the assets of Karl Oelschlager GmbH & Co., a
Stuttgart, Germany based manufacturer of metal stamped parts and engineered
assemblies for automotive and industrial applications. Oehlschlager's
proprietary laser welding technology permits the combination of stamped metal
parts with cold-formed products, thereby increasing an assembly's overall
strength and durability at a lower cost and weight than traditional welding
processes.
In June 2000, we acquired Advantage Molding & Decorating, Inc., an
Illinois-based company, and three affiliated companies. Advantage supplies
injection-molded parts, tooling, and pad-printed designs, and manufactures
highly decorative lenses for use in the wireless telecommunications industry.
In August 2000, we acquired Rego Mold & Tool, Co. Inc., an Illinois
producer of primary tooling and plastic injection molded components for the
wireless telecommunications market and other industries. The Rego acquisition
enhances the mold-making capabilities of TFS Advanced Solutions for both
internal use and external customers.
Although TFS is one of the world's largest providers of fastener products,
engineered assemblies and services, TFS has hundreds of competitors, ranging
from small proprietorships to
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large multi-national companies. Competition is based primarily on price,
quality, reputation and delivery. In addition, larger customers of fastening
systems and engineered assemblies tend to procure products and services from the
larger suppliers, except for "niche" products that may be sourced from smaller
companies. In the wireless telecommunications industry, a major market for
Advanced Solutions, product life cycles are relatively short and subject to
rapid technological change. Only the loss of a customer that is a major original
equipment manufacturer would have a material adverse effect on TFS. However,
because of the broad range of products sold to such customers, it is unlikely
that these customers will cease all purchases from TFS.
INDUSTRIAL PRODUCTS SEGMENT. Our Industrial Products segment, Textron
Industrial Products, is comprised of the following groups: Greenlee Textron;
Textron Golf, Turf & Specialty Products; Textron Fluid and Power Systems;
Textron Systems; OmniQuip Textron; and Textron Industrial Components.
GREENLEE TEXTRON
Our Greenlee Textron group consists of Greenlee Textron and several
operations reporting through Greenlee, including Fairmont Klauke, Progressive
Electronics, Rifocs Corporation, Chesilvale Electronics, and IMAP. These
businesses manufacture powered equipment, electrical test instruments, hand and
hydraulic powered tools, electrical connectors, and certification and
verification products for information technology networks. The products are
principally used in electrical construction and maintenance, telecommunications,
electronics, and plumbing industries.
Our Greenlee Textron group is developing products and services for the
data, signal and voice market to leverage its strong relationship with the
installation services community. Greenlee's entry into this fast-growing market
was facilitated with the acquisitions of Datacom Technologies in 1998 and
Progressive Electronics and Rifocs Corporation in 1999. We further expanded this
business by acquiring IMAP and Chesilvale Electronics in March 2000. IMAP
produces a cable management software solution that incorporates both voice and
data connection management while Chesilvale Electronics manufactures test
equipment and measurement instruments for both digital and analog networks. In
January 2001, we acquired Tempo Research Corporation, which produces advanced
measurement and test equipment for the telecommunications and cable television
industries. Our Greenlee Textron group faces competition from numerous
manufacturers based primarily on price, quality, performance, reliability,
delivery and reputation.
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TEXTRON GOLF, TURF & SPECIALTY PRODUCTS
Our Golf, Turf & Specialty Products group designs, manufactures and sells
golf cars powered by electric and internal combustion engines, multipurpose
utility vehicles, professional turf maintenance equipment, lawn care machinery
and specialized industrial vehicles. Major brand names include E-Z-GO, Ransomes,
Jacobsen, Cushman, Ryan, Steiner, Brouwer, Bunton and Bob-Cat.
The industrial customers of our Golf, Turf and Specialty Products group
consist primarily of golf courses, resort communities and municipalities, as
well as commercial and industrial users such as airports, factories and
professional lawn care services. The group also manufacturers off-road utility
vehicles and golf cars for the consumer market. Sales are made through a network
of distributors and directly to end-users. Many golf and turf-care equipment
sales (both at the distributor and end-user level) are financed through Textron
Financial Corporation as an additional source of revenue to Textron and for
marketing purposes.
Textron's Golf, Turf and Specialty Products business has two major
competitors for golf cars, two major competitors for professional turf
maintenance equipment, and a number of smaller competitors for multipurpose
utility vehicles and professional lawn care machinery. Competition is based
primarily on price, quality, product support, performance, reliability and
reputation.
TEXTRON FLUID AND POWER SYSTEMS
Our Fluid and Power group consists of Textron Motion Control, Textron Power
Transmission and Textron Fluid Handling Products. These operations face
competition from other manufacturers based primarily on price, quality, product
support, performance, delivery and reputation.
Textron's Motion Control business consists of David Brown Hydraulics,
Williams Machine & Tool, Energy Manufacturing, and Micromatic Textron. Textron
Motion Control designs and manufactures control systems, components and tooling
for mobile equipment, automotive, factory and machine automation applications.
In October 2000, we transferred the Micromatic Textron business, which
manufacturers proprietary machine tools, components and assembly systems, from
Textron's Automotive Segment to Textron Motion Control.
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Our Textron Power Transmission business offers products under the brand
names David Brown, Cone Drive, and Benzlers. We design and manufacture
industrial gears, double enveloping worm gear speed reducers, frequency
inverters, mechanical and hydraulic transmission systems, gear motors and gear
sets. These products are sold to a variety of customers, including original
equipment manufacturers (OEMs), distributors and end-users.
Our Textron Fluid Handling Products business, which includes David Brown
Union Pumps, Maag Pump Systems and David Brown Guinard Pumps SAS, designs and
manufactures industrial pumps for oil, gas, petrochemical and polymer
industries. These products are sold to OEMs, distributors and end-users.
TEXTRON SYSTEMS
Textron Systems, a supplier of sensors, software and electronics for
defense, aerospace, and industrial markets, manufactures "smart" weapons,
airborne and ground-based surveillance systems, automatic aircraft landing
systems, and aircraft and missile control actuators and valves. While Textron
Systems sells most of its products directly to customers, it also sells an
increasing number of products through a growing, global network of sales
representatives and distributors. Formerly part of the Fluid and Power Group,
Textron Systems is now managed as a separate business unit, and the defense and
aerospace related product lines of the Textron Industrial Motion Control
business have been merged into Textron Systems.
In 2001, Textron Marine & Land Systems, formerly part of the Textron
Industrial Components group, became part of the Textron Systems group. Textron
Marine & Land Systems designs and manufactures specialty marine and land
systems. Products include high performance hovercraft, such as air cushion
landing craft, search and rescue vessels, and the Cadillac Gage family of
armored vehicles and turrets, which has products operating in over 35 countries.
OMNIQUIP TEXTRON
OmniQuip produces telescopic material handlers, aerial work platforms and
compact construction equipment under the trade names SkyTrak, Lull, Snorkel and
Scat Trak. It has 16 facilities located in the U.S., U.K., Australia and New
Zealand and employs approximately 1,700 people. Large national equipment rental
fleets account for approximately 50 percent of sales. Remaining sales are to
end-users through independent distributors and rental centers. The majority of
our sales occur in the second quarter; the first and fourth quarters are
traditionally soft. End-users are usually construction sub-contractors such as
masons, framers, steel erectors
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and roofers. OmniQuip competes in a fragmented market against a variety of
manufacturers. Competition is based primarily on price, quality, product
support, performance, delivery and reputation.
TEXTRON INDUSTRIAL COMPONENTS
Our Industrial Components group consists of Textron Lycoming and Turbine
Engine Components Textron. The group's product lines are sold to a wide variety
of customers, including OEMs, the U.S. and foreign governments, distributors and
end-users. The principal competitive factors affecting the group's sales include
price, quality, customer service, performance, reliability, reputation and
existing product base.
Textron Lycoming is the world leader in the design, manufacture and
overhaul of reciprocating piston aircraft engines for the global general
aviation market. Textron Lycoming sells new products directly to general
aviation airframe manufacturers, including Piper Aircraft, Robinson Helicopter,
and SOCATA, a division of Aerospatiale. Textron Lycoming is also the exclusive
supplier of engines for Cessna's product line of single-engine aircraft.
Aftermarket sales are made to the more than 180,000 existing owners of Textron
Lycoming products through a worldwide network of independently owned
distributors.
Turbine Engine Components is one of the world's largest independent
suppliers of internal components for aircraft gas turbine engines. Its product
lines include fan and compressor blades, vanes, shafts, disks, rotors, and other
rotating components, and the forgings from which those products are machined.
Turbine Engine Components manufacturers its products to the specifications of
its customers.
FINANCE SEGMENT. Our Finance segment consists of Textron Financial
Corporation and its subsidiaries. Textron Financial is a diversified commercial
finance company with core operations in four segments: small business, middle
markets, specialty finance, and structured capital. The small business segment
is focused in aircraft financing, equipment financing through vendor
relationships, factoring, and SBA (Small Business Administration) financing. The
middle markets segment focuses on dealer inventory financing, asset-based
lending, and franchise finance. The specialty finance segment includes media
finance and inventory and notes receivable financing for developers of vacation
interval resorts, residential homesites (primarily for manufactured housing) and
recreational land lots. The structured capital segment originates
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and manages a portfolio of leveraged lease transactions. The segment also
originates factoring arrangements and working capital loans in the
telecommunications industry, establishes financing programs with specialty
financial services companies, and participates in investment grade and near
investment grade structured secured term and revolving credit facilities.
Textron Financial's other financial services and products include transaction
syndications, equipment appraisal and management, portfolio servicing and
insurance brokerage.
Textron Financial's financing activities are confined almost exclusively to
commercial markets and to lease and secured lending products. Textron
Financial's services are offered primarily in North America. However, Textron
Financial does finance Textron products worldwide, principally Bell helicopters
and Cessna aircraft in South America.
The commercial finance businesses in which Textron Financial operates are
highly fragmented and extremely competitive. Textron Financial is subject to
competition from various types of financing institutions, including banks,
leasing companies, insurance companies, commercial finance companies and finance
operations of equipment vendors. Competition within the commercial finance
industry is primarily focused on price, terms, structure and service.
BACKLOG
Information regarding our backlog of government and commercial orders at
the end of the past two fiscal years is contained on page 31 of our 2000 Annual
Report to Shareholders, which page is incorporated herein by reference.
Approximately 46% of our total backlog of $9.9 billion at December 30,
2000, represents orders which are not expected to be filled within our 2001
fiscal year. At December 30, 2000, approximately 96% of the total government
backlog of $1.4 billion was funded.
14
<PAGE> 15
U.S. GOVERNMENT CONTRACTS
In 2000, 20% of the revenues of our Aircraft segment and 13% of the
revenues of our Industrial Products segment, constituting in the aggregate 10%
of our consolidated revenues, were generated by or resulted from contracts with
the U.S. Government. U.S. Government business is subject to competition, changes
in procurement policies and regulations, the continuing availability of
Congressional appropriations, world events, and the size and timing of programs
in which Textron may participate.
Our contracts with the U.S. Government generally may be terminated in whole
or in part at the convenience of the U.S. Government or if we are in default. If
the U.S. Government terminates a contract for convenience, we normally will be
entitled (up to a maximum equal to the contract price) to reimbursement for
allowable costs incurred, increased or decreased by our expected profit or loss
had the contract been completed. If, however, the U.S. Government terminates a
contract for default, generally: (a) we will be paid an agreed-upon amount for
manufacturing materials and partially completed products accepted by the U.S.
Government; (b) the U.S. Government will not be liable for our costs with
respect to unaccepted items and will be entitled to repayment of advance
payments and progress payments related to the terminated portions of the
contract; and (c) we might be liable for excess costs incurred by the U.S.
Government in procuring undelivered items from another source.
RESEARCH AND DEVELOPMENT
Information regarding our research and development expenditures is
contained on pages 50 and 51 of our 2000 Annual Report to Shareholders. This
page is incorporated herein by reference into this Annual Report on Form 10-K.
PATENTS AND TRADEMARKS
We own, or are licensed under, numerous patents throughout the world
relating to products, services and methods of manufacturing. Patents have been
of value in the past and are expected to be of value in the future. However, the
loss of any single patent or group of patents would not, in our opinion,
materially affect the conduct of our business.
We also own trademarks, trade names and service marks that are important to
our business. Some of these trademarks, trade names and service marks are used
in this Annual
15
<PAGE> 16
Report on Form 10-K: AB139; Advantage Molding & Decorating; ASCTec; Avdel;
BA609; Bell Helicopter Textron; Bell Model 427; Benzlers; Bob-Cat; Boesner;
Brouwer; BSK; Bunton; Cadillac Gage; Cam Tooling; Camcar; Caravan 675; Caravan
Floatplane; Cessna Aircraft Company; Cessna Caravan; Cherry; Chesilvale
Electronics; Citation Bravo; Citation CJ1; Citation CJ2; Citation Encore;
Citation Excel; CitationShares; Citation X; Cone Drive; Cushman; CWC; Datacom;
David Brown Guinard Pumps; David Brown Hydraulics; David Brown Union Pumps;
Elco; E-Z-GO; Fairmont Klauke; Grand Caravan; Greenlee Textron; IMAP; Jacobsen;
Karl Oelschlager GmbH & Co.; Kautex Textron; Kaywood Products, Lull; Maag Pump
Systems; McCord Winn Textron; Micromatic Textron; OmniQuip Textron; Progressive
Electronics; Ransomes; Rego Mold & Tool, Rifocs; Ring Screw; RITec; Ryan; Scat
Trak; 172 Skyhawk; 172 Skyhawk SP; 182 Skylane; Sky Trak; Snorkel; 206
Stationair; Steiner; Sukosim; Super Cargomaster; T206 Turbo Stationair; Tempo
Research Corporation; Textron; Textron Automotive Company; Textron Automotive
Trim; Textron Fastening Systems; Textron Financial Corporation; Textron Fluid
and Power Systems; Textron Fluid Handling Products; Textron Golf, Turf and
Specialty Products; Textron Industrial Components; Textron Industrial Motion
Control; Textron Lycoming; Textron Marine & Land Systems; Textron Power
Transmission; Textron Systems; TFS Advanced Solutions; TFS Automotive Solutions;
TFS Commercial Solutions; Torx; Torx Plus; Turbine Engine Components Textron;
Turbo 182 Skylane; V-22 Osprey; Valmex; VBX; Williams Machine & Tool and their
related trademark designs and logotypes (and variations of the foregoing) are
trademarks, trade names or service marks of Textron Inc., its subsidiaries,
affiliates, or joint ventures.
ENVIRONMENTAL CONSIDERATIONS
Our operations are subject to numerous laws and regulations designed to
protect the environment. Compliance with these laws and expenditures for
environmental control facilities have not had a material effect on our capital
expenditures, earnings or competitive position. Additional information regarding
environmental matters is contained on pages 31 and 56 of our 2000 Annual Report
to Shareholders. These pages are incorporated by reference into this Annual
Report on Form 10-K.
EMPLOYEES
At December 30, 2000, we had approximately 71,000 employees.
16
<PAGE> 17
ITEM 2. PROPERTIES
At December 30, 2000, we operated a total of 211 plants located throughout
the U.S. and 128 plants outside the U.S. Of the total of 339 plants, we owned
173 and the balance were leased. In the aggregate, the total manufacturing space
was approximately 41 million square feet.
In addition, we own or lease offices, warehouse and other space at various
locations throughout the U.S. and outside the U.S. We consider the productive
capacity of the plants operated by each of our business segments to be adequate.
In general, our facilities are in good condition, are considered to be adequate
for the uses to which they are being put, and are substantially in regular use.
ITEM 3. LEGAL PROCEEDINGS
On May 12, 2000, the Massachusetts Water Resources Authority (MWRA) issued
a Notice of Violation (NOV) to Textron Systems Corporation (TSC) relating to
industrial discharges to the MWRA sewer system from TSC's Wilmington,
Massachusetts facility. The NOV, which seeks a civil administrative penalty,
alleges a failure to obtain a permit for certain discharges, discharge reporting
violations, and violations of discharge limits. The penalty assessed for the NOV
may exceed $100,000.
We are subject to legal proceedings arising out of the conduct of our
business. These proceedings include claims arising from private transactions,
government contracts, product liability, and environmental, safety and health
matters. Some of these legal proceedings seek damages, fines or penalties in
substantial amounts or remediation of environmental contamination. Under federal
government procurement regulations, certain claims brought by the U.S.
Government could result in our suspension or debarment from U.S. Government
contracting for a period of time. On the basis of information presently
available, we believe that these suits and proceedings will not have a material
effect on our net income or financial condition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of our security holders during the last
quarter of the period covered by this Annual Report on Form 10-K.
17
<PAGE> 18
EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information concerning our executive
officers as of March 15, 2001. Unless otherwise indicated, the employer is
Textron Inc.
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Lewis B. Campbell 54 Chairman and Chief Executive Officer since 1999; formerly
President and Chief Executive Officer, 1998 to 1999; President
and Chief Operating Officer, 1994 to July 1998; Director since
1994.
John A. Janitz 58 President and Chief Operating Officer since 1999; formerly Chairman,
President and Chief Executive Officer, Textron Automotive Company, 1996
to 1999; Executive Vice President and General Manager of TRW Inc.'s
Occupant Restraint Group, 1990 to 1996. Director since 1999.
Kenneth C. Bohlen 48 Executive Vice President and Chief Innovation Officer since April 2000.
Formerly, Senior Vice President and Chief Information Officer, 1999 to
April 2000; Vice President and Chief Information Officer of AlliedSignal
Aerospace, 1999 to 2000; Vice President Supply Chain AlliedSignal
Engines, 1998 to 1999; Vice President SixSigma and Chief Information
Officer AlliedSignal Engines, 1997 to 1998; Director of Supply Chain
Management, AlliedSignal, Inc. 1996 to 1997.
John D. Butler 53 Executive Vice President Administration and Chief Human Resources
Officer since 1999; formerly Executive Vice President and Chief Human
Resources Officer, 1997 to 1998; Vice President Personnel of General
Motors International Operations (Zurich, Switzerland), 1990 to 1997.
Mary L. Howell 48 Executive Vice President Government, Strategy Development and
International, Communications and Investor Relations since October 2000;
formerly Vice President Government, International, Communications and
Investor Relations 1998 to October 2000; formerly Executive Vice
President Government and International, 1995 to July 1998; Senior Vice
President Government and International Relations, 1993 to 1995.
Theodore R. French 46 Executive Vice President and Chief Financial Officer since December
2000. Formerly, President, Financial Services and Chief Financial
Officer, CNH Global N.V. and its predecessor, Case Corporation, 1992 to
December 2000.
Terrence O'Donnell 57 Executive Vice President and General Counsel since March 2000; Partner,
Williams & Connolly, since 1992.
</TABLE>
18
<PAGE> 19
PART II
ITEM 5. MARKETS FOR THE REGISTRANT'S COMMON
EQUITY AND RELATED STOCKHOLDER MATTERS
Our Common Stock is traded on the New York, Chicago and Pacific Stock
Exchanges. At December 30, 2000, there were approximately 21,000 holders of
Textron Common Stock. The information on the price range of Textron's Common
Stock and dividends paid per share appearing under "Common Stock Information" on
page 59 of our 2000 Annual Report to Shareholders is incorporated by reference
into this Annual Report on Form 10-K.
ITEM 6. SELECTED FINANCIAL DATA
The information appearing under "Selected Financial Information" on page 60
of our 2000 Annual Report to Shareholders is incorporated by reference into this
Annual Report on Form 10-K.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
"Management's Discussion and Analysis," appearing on pages 21 through 32 of
our 2000 Annual Report to Shareholders is incorporated by reference into this
Annual Report on Form 10-K.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISKS
"Quantitative Risks Measures," appearing on page 30 of our 2000 Annual
Report to Shareholders is incorporated by reference into this Annual Report on
Form 10-K.
19
<PAGE> 20
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements and supplementary information
contained in our 2000 Annual Report to Shareholders and the Financial Statement
Schedules, as listed in the Index to Financial Statements and Financial
Statement Schedules attached to this Annual Report on Form 10-K, are
incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information appearing under "Nominees for Director," "Directors
Continuing in Office" and "Section 16(a) Beneficial Ownership Reporting
Compliance" on pages 3 through 6 and page 11 of the Proxy Statement for our
Annual Meeting of Shareholders to be held on April 25, 2001, is incorporated by
reference into this Annual Report on Form 10-K.
Information regarding Textron's executive officers is included on page 18
of Part I of this Annual Report on Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION
The information appearing under "Report of the Organization and
Compensation Committee on Executive Compensation, Executive Compensation and
Performance Graph" on pages 12 through 16 of the Proxy Statement for our Annual
Meeting of Shareholders to be held on April 25, 2001, is incorporated by
reference into this Annual Report on Form 10-K.
20
<PAGE> 21
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information appearing under "Security Ownership of Certain Beneficial
Holders" and "Security Ownership of Management," on pages 9 and 10 of the Proxy
Statement for our Annual Meeting of Shareholders to be held on April 25, 2001,
is incorporated by reference into this Annual Report on Form 10-K.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Not applicable.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 10-K
(a) FINANCIAL STATEMENTS AND SCHEDULES
The consolidated financial statements, supplementary information and
financial statement schedules listed in the accompanying Index to Financial
Statements and Financial Statement Schedules are filed as part of this Report.
EXHIBITS
3.1 Restated Certificate of Incorporation of Textron as filed
January 29, 1998. Incorporated by reference to Exhibit 3.1
to Textron's Annual Report on Form 10-K for the fiscal year
ended January 3, 1998.
3.2 By-Laws of Textron. Incorporated by reference to Exhibit 3.2
to Textron's Annual Report on Form 10-K for the fiscal year
ended January 1, 2000.
4.1 Indenture dated as of December 9, 1999, between Textron
Financial Corporation and Sun Trust Bank, Atlanta (including
form of debt securities). Incorporated by reference to
Exhibit 4.1 to Amendment No. 2 to Textron Financial
Corporation's Registration Statement on Form S-3 (No.
333-88509).
21
<PAGE> 22
4.2 Support Agreement dated as of May 25, 1994, between Textron
Inc. and Textron Financial Corporation. Incorporated by
reference to Exhibit 10.1 to Textron Financial Corporation's
Registration Statement on Form 10.
NOTE: Instruments defining the rights of holders of certain issues
of long-term debt of Textron have not been filed as exhibits
to this Report because the authorized principal amount of
any one of such issues does not exceed 10% of the total
assets of Textron and its subsidiaries on a consolidated
basis. Textron agrees to furnish a copy of each such
instrument to the Commission upon request.
NOTE: Exhibits 10.1 through 10.17 below are management contracts
or compensatory plans, contracts or agreements.
10.1A Annual Incentive Compensation Plan For Textron Employees.
Incorporated by reference to Exhibit 10.1 to Textron's
Annual Report on Form 10-K for the fiscal year ended
December 30, 1995.
10.1B Amendment to Annual Incentive Compensation Plan for Textron
Employees. Incorporated by reference to Exhibit 10.1 to
Textron's Quarterly Report on Form 10-Q for the fiscal
quarter ended July 3, 1999.
10.2A Deferred Income Plan for Textron Key Executives.
Incorporated by reference to Exhibit 10.2 to Textron's
Annual Report on Form 10-K for the fiscal year ended
December 30, 1995.
10.2B Amendments to Deferred Income Plan for Textron Key
Executives. Incorporated by reference to Exhibit 10.2B to
Textron's Annual Report on Form 10-K for the fiscal year
ended January 2, 1999.
10.2C Amendment to Deferred Income Plan for Textron Key
Executives. Incorporated by reference to Exhibit 10.2 to
Textron's Quarterly Report on Form 10-Q for the fiscal
quarter ended July 3, 1999.
10.2D Amendment to Deferred Income Plan for Textron Key
Executives. Incorporated by reference to Exhibit 10.2D to
Textron's Annual Report on Form 10-K for the fiscal year
ended January 1, 2000.
10.3 Special Benefits for Textron Key Executives. Incorporated by
reference to Exhibit 10.4 to Textron's Annual Report on Form
10-K for the fiscal year ended December 30, 1995.
22
<PAGE> 23
10.4 Supplemental Benefits Plan For Textron Key Executives with
Market Square Profit Sharing Plan Schedule.
10.5A Supplemental Retirement Plan for Textron Key Executives.
Incorporated by reference to Exhibit 10.6 to Textron's
Annual Report on Form 10-K for the fiscal year ended
December 30, 1995.
10.5B Amendment to Supplemental Retirement Plan for Textron Key
Executives. Incorporated by reference to Exhibit 10.5B to
Textron's Annual Report on Form 10-K for the fiscal year
ended January 2, 1999.
10.5C Amendment to Supplemental Retirement Plan for Textron Key
Executives. Incorporated by reference to Exhibit 10.4 to
Textron's Quarterly Report on Form 10-Q for the fiscal
quarter ended July 3, 1999.
10.5D Amendment to Supplemental Retirement Plan for Textron Key
Executives. Incorporated by reference to Exhibit 10.5D to
Textron's Annual Report on Form 10-K for the fiscal year
ended January 1, 2000.
10.6A Survivor Benefit Plan For Textron Key Executives.
Incorporated by reference to Exhibit 10.7 to Textron's
Annual Report on Form 10-K for the fiscal year ended
December 30, 1995.
10.6B Amendment to Survivor Benefit Plan for Textron Key
Executives. Incorporated by reference to Exhibit 10.5 to
Textron's Quarterly Report on Form 10-Q for the fiscal
quarter ended July 3, 1999.
10.7A Textron 1990 Long-Term Incentive Plan ("1990 Plan").
Incorporated by reference to Exhibit 10.7 to Textron's
Annual Report on Form 10-K for the fiscal year ended
December 30, 1989.
10.7B First Amendment to 1990 Plan. Incorporated by reference to
Exhibit 10.7(c) to Textron's Annual Report on Form 10-K for
the fiscal year ended December 28, 1991.
10.7C Second Amendment to 1990 Plan. Incorporated by reference to
Exhibit 10.7(c) to Textron's Annual Report on Form 10-K for
the fiscal year ended January 2, 1993.
10.8A Textron 1994 Long-Term Incentive Plan ("1994 Plan").
Incorporated by reference to Exhibit 10 to Textron's
Quarterly Report on Form 10-Q for the fiscal quarter ended
July 2, 1994.
23
<PAGE> 24
10.8B Amendment to 1994 Plan. Incorporated by reference to Exhibit
10.9B to Textron's Annual Report on Form 10-K for the fiscal
year ended January 2, 1999.
10.8C Amendment to 1994 Plan. Incorporated by reference to Exhibit
10.6 to Textron's Quarterly Report on Form 10-Q for the
fiscal quarter ended July 3, 1999.
10.8D Amendment to 1994 Plan. Incorporated by reference to Exhibit
10.8D to Textron's Annual Report on Form 10-K for the fiscal
year ended January 1, 2000.
10.9 Textron 1999 Long Term Incentive Plan. Incorporated by
reference to Exhibit 10.9 to Textron's Annual Report on Form
10-K for the fiscal year ended January 1, 2000.
10.10 Form of Indemnity Agreement between Textron and its
directors and executive officers. Incorporated by reference
to Exhibit A to Textron's Proxy Statement for its Annual
Meeting of Shareholders on April 29, 1987.
10.11 Deferred Income Plan for Non-Employee Directors.
Incorporated by reference to Exhibit 10.11 to Textron's
Annual Report on Form 10-K for the fiscal year ended January
1, 2000.
10.12 Employment Agreement between Textron and Kenneth C. Bohlen
dated July 18, 2000. Incorporated by reference to Exhibit
10.2 to Textron's Quarterly Report on Form 10-Q for the
fiscal quarter ended July 1, 2000.
10.13 Employment Agreement between Textron and John D. Butler
dated July 23, 1998. Incorporated by reference to Exhibit
10.2 to Textron's Quarterly Report on Form 10-Q for the
fiscal quarter ended October 3, 1998.
10.14A Employment Agreement between Textron and Lewis B. Campbell
dated July 23, 1998. Incorporated by reference to Exhibit
10.3 to Textron's Quarterly Report on Form 10-Q for the
fiscal quarter ended October 3, 1998.
10.14B Retention Award granted to Lewis B. Campbell on December 14,
1995. Incorporated by reference to Exhibit 10.16B to
Textron's Annual Report on Form 10-K for the fiscal year
ended December 30, 1995.
24
<PAGE> 25
10.14C Retention Award granted to Lewis B. Campbell on June 1,
1999. Incorporated by Reference to Exhibit 10.13C to
Textron's Annual Report on Form 10-K for the fiscal year
ended January 1, 2000.
10.14D Retention Award granted to Lewis B. Campbell on January 1,
2001, and revision of vesting schedule for the Retention
Award granted on June 1, 1999.
10.15A Employment Agreement between Textron and Theodore R. French
dated December 21, 2000.
10.15B Retention Award granted to Theodore R. French on January 1,
2001.
10.16 Employment Agreement between Textron and Mary L. Howell
dated July 23, 1998. Incorporated by reference to Exhibit
10.5 to Textron's Quarterly Report on Form 10-Q for the
fiscal quarter ended October 3, 1998.
10.17 Employment Agreement between Textron and John A. Janitz
dated May 25, 1999. Incorporated by reference to Exhibit
10.15 to Textron's Annual Report on Form 10-K for the fiscal
year ended January 1, 2000.
10.18 5-Year Credit Agreement dated as of April, 1998, among
Textron, the Banks listed therein and Morgan Guaranty Trust
Company of New York as Administrative Agent. Incorporated by
reference to Exhibit 10.2 to Textron's Quarterly Report on
Form 10-Q for the fiscal quarter ended April 4, 1998.
10.18A Employment Agreement between Textron and Stephen L. Key
dated July 23, 1998. Incorporated by reference to Exhibit
10.7 to Textron's Quarterly Report on Form 10-Q for the
fiscal quarter ended October 3, 1998.
10.18B Amendment dated December 21, 2000, to Employment Agreement
between Textron and Stephen L. Key.
10.19 Employment Agreement between Textron and Terrence O'Donnell
dated March 10, 2000. Incorporated by reference to Exhibit
10.1 to Textron's Quarterly Report on Form 10-Q for the
fiscal quarter ended July 1, 2000.
12.1 Computation of ratio of income to combined fixed charges and
preferred stock dividends of Textron Manufacturing.
12.2 Computation of ratio of income to combined fixed charges and
preferred stock dividends of Textron Inc. including all
majority-owned subsidiaries.
25
<PAGE> 26
13 A portion (pages 20 through 60) of Textron's 2000 Annual
Report to Shareholders.
21 Certain subsidiaries of Textron. Other subsidiaries, which
considered in the aggregate do not constitute a significant
subsidiary, are omitted from such list.
23 Consent of Independent Auditors.
24.1 Power of attorney.
24.2 Certified copy of a resolution of the Board of Directors of
Textron.
(b) REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the quarter ended December
30, 2000.
SIGNATURES
Pursuant to the requirement of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this Annual Report on Form
10-K to be signed on its behalf by the undersigned, thereunto duly authorized on
this 14th day of March 2001.
TEXTRON INC.
Registrant
By: /s/ Michael D. Cahn
------------------------------
Michael D. Cahn
Attorney-in-fact
<PAGE> 27
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below on this 14th day of March 2001, by the following
persons on behalf of the registrant and in the capacities indicated:
Name Title
---- -----
* Chairman and Chief Executive Officer, Director
- ----------------------------
Lewis B. Campbell
* President and Chief Operating Officer, Director
- ----------------------------
John A. Janitz
* Director
- ----------------------------
H. Jesse Arnelle
* Director
- ----------------------------
Teresa Beck
* Director
- ----------------------------
R. Stuart Dickson
* Director
- ----------------------------
Lawrence K. Fish
* Director
- ----------------------------
Joe T. Ford
27
<PAGE> 28
* Director
- ----------------------------
Paul E. Gagne
* Director
- ----------------------------
John D. Macomber
* Director
- ----------------------------
Lord Powell of Bayswater KCMG
* Director
- ----------------------------
Brian H. Rowe
* Director
- ----------------------------
Sam F. Segnar
* Director
- ----------------------------
Martin D. Walker
* Director
- ----------------------------
Thomas B. Wheeler
* Executive Vice President and
- ---------------------------- Chief Financial Officer
Theodore R. French (principal financial officer)
28
<PAGE> 29
* Vice President and Controller
- ---------------------------- (principal accounting officer)
Richard L. Yates
*By: /s/ Michael D. Cahn
- ----------------------------
Michael D. Cahn
Attorney-in-fact
29
<PAGE> 30
TEXTRON INC.
INDEX TO FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULES
ITEM 14(a)
<TABLE>
<CAPTION>
Form Annual Report to
Textron Inc. 10-K Shareholders
- ------------ ---- ------------
<S> <C> <C>
Report of Independent Auditors 33
Consolidated Statements of Income for each of the years in 34
the three-year period ended December 30, 2000
Consolidated Balance Sheets at December 30, 2000 and January 35
1, 2000
Statements of Cash Flows for each of the years 36
in the three-year period ended December 30, 2000
Consolidated Statements of Changes in Shareholders' Equity 38
for each of the years in the three-year period ended
December 30, 2000
Notes to Consolidated Financial Statements 39-58
Revenues and Profit by Business Segment 20
Supplementary Information (Unaudited):
Quarterly Financial Information 2000 and 1999 59
Financial Statement Schedule for each of the years in the
three-year period ended December 30, 2000
I Condensed financial information of registrant 31
</TABLE>
All other schedules are omitted because the conditions requiring the filing
thereof do not exist or because the information required is included in the
financial statements and notes thereto.
30
<PAGE> 31
TEXTRON INC.
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
For each of the years in the three-year period ended December 30, 2000
Financial information of the Registrant is omitted because condensed
financial information of Textron Manufacturing, which includes the Registrant
and all of its majority-owned subsidiaries other than its finance subsidiaries
(Textron Finance), is shown on pages 34 through 38 of Textron's 2000 Annual
Report to Shareholders. Management believes that the disclosure of financial
information on the basis of Textron Manufacturing results in a more meaningful
presentation, since this group constitutes the Registrant's basic borrowing
entity and the only restrictions on net assets of Textron's subsidiaries relate
to Textron Finance. The Registrant's investment in Textron Finance is $910
million in 2000 and $868 million in 1999.
Textron Manufacturing received dividends of $82 million, $36 million and
$62 million from Textron Finance in 2000, 1999, and 1998, respectively. Lending
agreements limit Textron Finance's net assets available for cash dividends and
other payments to Textron Manufacturing to approximately $351 million of Textron
Finance's net assets of $910 million at year-end 2000.
Textron Manufacturing's credit agreements contain provisions requiring it
to maintain a minimum level of shareholders' equity and a minimum interest
coverage ratio. For additional information concerning Textron Manufacturing's
long-term debt, see Note 8 to the consolidated financial statements appearing on
pages 45 and 46 of Textron's 2000 Annual Report to Shareholders.
For information concerning Textron-Obligated Mandatorily Redeemable
Preferred Securities of Subsidiary Trust Holding Solely Textron Junior
Subordinated Debt Securities, see Note 11 to the consolidated financial
statements appearing on page 48 of Textron's 2000 Annual Report to Shareholders.
31
<PAGE> 32
EXHIBITS
3.1 Restated Certificate of Incorporation of Textron as filed
January 29, 1998. Incorporated by reference to Exhibit 3.1
to Textron's Annual Report on Form 10-K for the fiscal year
ended January 3, 1998.
3.2 By-Laws of Textron. Incorporated by reference to Exhibit 3.2
to Textron's Annual Report on Form 10-K for the fiscal year
ended January 1, 2000.
4.1 Indenture dated as of December 9, 1999, between Textron
Financial Corporation and Sun Trust Bank, Atlanta (including
form of debt securities). Incorporated by reference to
Exhibit 4.1 to Amendment No. 2 to Textron Financial
Corporation's Registration Statement on Form S-3 (No.
333-88509).
4.2 Support Agreement dated as of May 25, 1994, between Textron
Inc. and Textron Financial Corporation. Incorporated by
reference to Exhibit 10.1 to Textron Financial Corporation's
Registration Statement on Form 10.
NOTE: Instruments defining the rights of holders of certain issues
of long-term debt of Textron have not been filed as exhibits
to this Report because the authorized principal amount of
any one of such issues does not exceed 10% of the total
assets of Textron and its subsidiaries on a consolidated
basis. Textron agrees to furnish a copy of each such
instrument to the Commission upon request.
NOTE: Exhibits 10.1 through 10.17 below are management contracts
or compensatory plans, contracts or agreements.
10.1A Annual Incentive Compensation Plan For Textron Employees.
Incorporated by reference to Exhibit 10.1 to Textron's
Annual Report on Form 10-K for the fiscal year ended
December 30, 1995.
10.1B Amendment to Annual Incentive Compensation Plan for Textron
Employees. Incorporated by reference to Exhibit 10.1 to
Textron's Quarterly Report on Form 10-Q for the fiscal
quarter ended July 3, 1999.
10.2A Deferred Income Plan for Textron Key Executives.
Incorporated by reference to Exhibit 10.2 to Textron's
Annual Report on Form 10-K for the fiscal year ended
December 30, 1995.
10.2B Amendments to Deferred Income Plan for Textron Key
Executives. Incorporated by reference to Exhibit 10.2B to
Textron's Annual Report on Form 10-K for the fiscal year
ended January 2, 1999.
10.2C Amendment to Deferred Income Plan for Textron Key
Executives. Incorporated by reference to Exhibit 10.2 to
Textron's Quarterly Report on Form 10-Q for the fiscal
quarter ended July 3, 1999.
10.2D Amendment to Deferred Income Plan for Textron Key
Executives. Incorporated by reference to Exhibit 10.2D to
Textron's Annual Report on Form 10-K for the fiscal year
ended January 1, 2000.
<PAGE> 33
10.3 Special Benefits for Textron Key Executives. Incorporated by
reference to Exhibit 10.4 to Textron's Annual Report on Form
10-K for the fiscal year ended December 30, 1995.
10.4 Supplemental Benefits Plan For Textron Key Executives with
Market Square Profit Sharing Plan Schedule.
10.5A Supplemental Retirement Plan for Textron Key Executives.
Incorporated by reference to Exhibit 10.6 to Textron's
Annual Report on Form 10-K for the fiscal year ended
December 30, 1995.
10.5B Amendment to Supplemental Retirement Plan for Textron Key
Executives. Incorporated by reference to Exhibit 10.5B to
Textron's Annual Report on Form 10-K for the fiscal year
ended January 2, 1999.
10.5C Amendment to Supplemental Retirement Plan for Textron Key
Executives. Incorporated by reference to Exhibit 10.4 to
Textron's Quarterly Report on Form 10-Q for the fiscal
quarter ended July 3, 1999.
10.5D Amendment to Supplemental Retirement Plan for Textron Key
Executives. Incorporated by reference to Exhibit 10.5D to
Textron's Annual Report on Form 10-K for the fiscal year
ended January 1, 2000.
10.6A Survivor Benefit Plan For Textron Key Executives.
Incorporated by reference to Exhibit 10.7 to Textron's
Annual Report on Form 10-K for the fiscal year ended
December 30, 1995.
10.6B Amendment to Survivor Benefit Plan for Textron Key
Executives. Incorporated by reference to Exhibit 10.5 to
Textron's Quarterly Report on Form 10-Q for the fiscal
quarter ended July 3, 1999.
10.7A Textron 1990 Long-Term Incentive Plan ("1990 Plan").
Incorporated by reference to Exhibit 10.7 to Textron's
Annual Report on Form 10-K for the fiscal year ended
December 30, 1989.
10.7B First Amendment to 1990 Plan. Incorporated by reference to
Exhibit 10.7(c) to Textron's Annual Report on Form 10-K for
the fiscal year ended December 28, 1991.
10.7C Second Amendment to 1990 Plan. Incorporated by reference to
Exhibit 10.7(c) to Textron's Annual Report on Form 10-K for
the fiscal year ended January 2, 1993.
10.8A Textron 1994 Long-Term Incentive Plan ("1994 Plan").
Incorporated by reference to Exhibit 10 to Textron's
Quarterly Report on Form 10-Q for the fiscal quarter ended
July 2, 1994.
<PAGE> 34
10.8B Amendment to 1994 Plan. Incorporated by reference to Exhibit
10.9B to Textron's Annual Report on Form 10-K for the fiscal
year ended January 2, 1999.
10.8C Amendment to 1994 Plan. Incorporated by reference to Exhibit
10.6 to Textron's Quarterly Report on Form 10-Q for the
fiscal quarter ended July 3, 1999.
10.8D Amendment to 1994 Plan. Incorporated by reference to Exhibit
10.8D to Textron's Annual Report on Form 10-K for the fiscal
year ended January 1, 2000.
10.9 Textron 1999 Long Term Incentive Plan. Incorporated by
reference to Exhibit 10.9 to Textron's Annual Report on Form
10-K for the fiscal year ended January 1, 2000.
10.10 Form of Indemnity Agreement between Textron and its
directors and executive officers. Incorporated by reference
to Exhibit A to Textron's Proxy Statement for its Annual
Meeting of Shareholders on April 29, 1987.
10.11 Deferred Income Plan for Non-Employee Directors.
Incorporated by reference to Exhibit 10.11 to Textron's
Annual Report on Form 10-K for the fiscal year ended January
1, 2000.
10.12 Employment Agreement between Textron and Kenneth C. Bohlen
dated July 18, 2000. Incorporated by reference to Exhibit
10.2 to Textron's Quarterly Report on Form 10-Q for the
fiscal quarter ended July 1, 2000.
10.13 Employment Agreement between Textron and John D. Butler
dated July 23, 1998. Incorporated by reference to Exhibit
10.2 to Textron's Quarterly Report on Form 10-Q for the
fiscal quarter ended October 3, 1998.
10.14A Employment Agreement between Textron and Lewis B. Campbell
dated July 23, 1998. Incorporated by reference to Exhibit
10.3 to Textron's Quarterly Report on Form 10-Q for the
fiscal quarter ended October 3, 1998.
10.14B Retention Award granted to Lewis B. Campbell on December 14,
1995. Incorporated by reference to Exhibit 10.16B to
Textron's Annual Report on Form 10-K for the fiscal year
ended December 30, 1995.
<PAGE> 35
10.14C Retention Award granted to Lewis B. Campbell on June 1,
1999. Incorporated by Reference to Exhibit 10.13C to
Textron's Annual Report on Form 10-K for the fiscal year
ended January 1, 2000.
10.14D Retention Award granted to Lewis B. Campbell on January 1,
2001, and revision of vesting schedule for the Retention
Award granted on June 1, 1999.
10.15A Employment Agreement between Textron and Theodore R. French
dated December 21, 2000.
10.15B Retention Award granted to Theodore R. French on January 1,
2001.
10.16 Employment Agreement between Textron and Mary L. Howell
dated July 23, 1998. Incorporated by reference to Exhibit
10.5 to Textron's Quarterly Report on Form 10-Q for the
fiscal quarter ended October 3, 1998.
10.17 Employment Agreement between Textron and John A. Janitz
dated May 25, 1999. Incorporated by reference to Exhibit
10.15 to Textron's Annual Report on Form 10-K for the fiscal
year ended January 1, 2000.
10.18 5-Year Credit Agreement dated as of April, 1998, among
Textron, the Banks listed therein and Morgan Guaranty Trust
Company of New York as Administrative Agent. Incorporated by
reference to Exhibit 10.2 to Textron's Quarterly Report on
Form 10-Q for the fiscal quarter ended April 4, 1998.
10.18A Employment Agreement between Textron and Stephen L. Key
dated July 23, 1998. Incorporated by reference to Exhibit
10.7 to Textron's Quarterly Report on Form 10-Q for the
fiscal quarter ended October 3, 1998.
10.18B Amendment dated December 21, 2000, to Employment Agreement
between Textron and Stephen L. Key.
10.19 Employment Agreement between Textron and Terrence O'Donnell
dated March 10, 2000. Incorporated by reference to Exhibit
10.1 to Textron's Quarterly Report on Form 10-Q for the
fiscal quarter ended July 1, 2000.
12.1 Computation of ratio of income to combined fixed charges and
preferred stock dividends of Textron Manufacturing.
12.2 Computation of ratio of income to combined fixed charges and
preferred stock dividends of Textron Inc. including all
majority-owned subsidiaries.
<PAGE> 36
13 A portion (pages 20 through 60) of Textron's 2000 Annual
Report to Shareholders.
21 Certain subsidiaries of Textron. Other subsidiaries, which
considered in the aggregate do not constitute a significant
subsidiary, are omitted from such list.
23 Consent of Independent Auditors.
24.1 Power of attorney.
24.2 Certified copy of a resolution of the Board of Directors of
Textron.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.4
<SEQUENCE>2
<FILENAME>b38194txex10-4.txt
<DESCRIPTION>SUPPLEMENT BENEFIT PLAN FOR TEXTRON KEY EXECUTIVES
<TEXT>
<PAGE> 1
EXHIBIT 10.4
SUPPLEMENTAL BENEFITS PLAN FOR TEXTRON KEY EXECUTIVES
This Plan has been established for the benefit of designated Textron Key
Executives to provide the benefits that would have been payable under Textron
qualified plans except for limitations imposed under the Internal Revenue Code.
This Plan is restated and effective on and after January 1, 2000.
ARTICLE I - DEFINITIONS
In this document, the following terms shall have the meanings set forth in
this Article, unless a contrary or different meaning is expressly provided:
1.01 "Benefits Committee" means the Benefits Committee of Textron.
1.02 "Board" means the Board of Directors of Textron.
1.03 "Compensation" means base salary, accrued annual incentive
compensation, performance units, and performance share units, whether or not
deferred under the Deferred Income Plan for Textron Key Executives. However, for
any Key Executive who is first awarded performance share units after October 26,
1999, performance share units shall not be included in Compensation. For Key
Executives who are members of the Textron Pension Plan for Cessna Employees,
compensation shall mean "Final Average Monthly Salary" as defined in Section
2.01(a) of that plan. "Final Average Monthly Salary" shall include incentive
compensation paid by Textron and shall exclude long-term incentive compensation
and shall be calculated without regard to Statutory Limits or deferrals.
Compensation does not include any award under the Textron Quality Management
Plan.
1.04 "Deferral Plan" means the Deferred Income Plan for Textron Key
Executives, as amended and restated from time to time.
1.05 "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
1.06 "Included Plan" means a Textron defined benefit or defined
contribution plan specifically designated by the Management Committee under
Article V.
1.07 "Key Executive" means an employee of a Textron Company who has been
and continues to be designated as a Key Executive under the Plan by Textron's
Chief Executive Officer and Chief Human Resources Officer.
1.08 "Management Committee" means the Management Committee of Textron.
1.09 "Participant" means a Key Executive who is participating in this Plan
pursuant to Article II and, unless the context clearly indicates to the
contrary, a former Participant who is entitled to benefits under this Plan.
1.10 "Pension Plan" means the Bell Helicopter Textron Retirement Plan, the
Textron Pension Plan for Cessna Employees, the Textron Master Retirement Plan or
an Included Plan that is a defined benefit plan.
1
<PAGE> 2
1.11 "Plan" means this Supplemental Benefits Plan for Textron Key
Executives, as amended and restated from time to time.
1.12 "Savings Plan" means the Textron Savings Plan, as amended and restated
from time to time.
1.13 "Statutory Limit" means any limit on benefits under, or annual
additions to, qualified plans imposed by Section 401(a)(17) or 415 of the
Internal Revenue Codes of 1954 or 1986, as amended from time to time.
1.14 "Supplemental Shares" means fictional shares of Textron common stock
accumulated and accounted for under this Plan for the purpose of determining the
cash value of distributions and transfers from a Participant's supplemental
savings account.
1.15 "Textron" means Textron Inc., a Delaware corporation, and any
successor of Textron Inc.
1.16 "Textron Company" means Textron or any company controlled by or under
common control with Textron.
ARTICLE II - PARTICIPATION
2.01 A Key Executive shall participate in this Plan if (1) her benefits
under a Pension Plan, or (2) the annual additions to her accounts under the
Savings Plan or any Included Plan that is a defined contribution plan, or (3)
both such benefits and such additions, are limited by one or more Statutory
Limits. In addition, a Key Executive shall participate in this Plan if her
receipt of any compensation is deferred under the Deferral Plan.
ARTICLE III - SUPPLEMENTAL PENSION BENEFITS
3.01 Textron shall pay on account of each Participant who begins to receive
payments under one or more of the Pension Plans the amount, if any, by which (1)
the normal, early or vested retirement pension that would have been payable on
the Participant's account under the Pension Plans, using Compensation as defined
in this Plan, exceeds (2) the normal, early or vested retirement pension
calculated under the Pension Plans on the Participant's account.
3.02 Textron shall pay to the beneficiary designated by the Participant
under each Pension Plan the amount, if any, by which (1) the death benefit that
would have been payable under that Pension Plan on the Participant's account
using Compensation as defined in this Plan exceeds (2) the death benefit which
is actually payable under that Pension Plan on the Participant's account. For
the purposes of this Section, the term "death benefit" shall include any period
certain death benefit and any surviving spouse benefit provided by a Textron
Company at its sole cost through a Pension Plan.
3.03 In the event Textron transfers the liability of a Pension Plan on
account of a Participant to another qualified plan, the supplemental pension or
death benefits under Sections 3.01 and 3.02, respectively, shall be determined
as of such transfer, unless otherwise decided by Textron in its sole discretion.
ARTICLE IV - SUPPLEMENTAL SAVINGS BENEFITS
4.01 Textron shall maintain a supplemental savings account and a fixed
income account for each Participant who participates in the Savings Plan for
making credits, payments, and transfers described in this Article.
2
<PAGE> 3
4.02 Textron shall, as of the end of each calendar month, credit
Supplemental Shares to each supplemental savings account, equal to the lost
employer contribution for the month divided by the average of the composite
closing prices of Textron common stock, as reported in The Wall Street Journal
for the month. The lost employer contribution for the month shall be equal to
the Participant's Savings Plan eligible compensation for the month times the
Participant's Savings Plan election percentage (not to exceed 10%) times 50%,
less the employer contribution made to the Participant's Savings Plan account
for the month.
4.03 Textron shall, in each calendar quarter, credit Supplemental Shares to
a Participant's supplemental savings account equal in number to the number of
shares of Textron common stock that would have been allocated on account of
dividends to the Participant's supplemental savings account as of that date,
based on the average of the composite closing prices of Textron common stock, as
reported in The Wall Street Journal for the month in which the date of record
occurs.
4.04 Amounts in the fixed income account shall earn the same rate of
interest that is earned under the Savings Plan fixed income account, or as
determined by the Benefits Committee.
4.05 A Participant who has terminated her Textron employment may, after a
period of 30 days, subject to the provisions of Section 16 of the Securities
Exchange Act of 1934, once each calendar quarter, elect to transfer, in 10%
increments, effective the first calendar day of the month following the minimum
notice of three business days, any amount in her supplemental savings account to
her fixed income account. The cash value transferred will be determined by
multiplying the current value of Textron common stock by the number of whole and
fractional Supplemental Shares in her Supplemental Savings Account as of the end
of the month in which the election is made times the percentage being
transferred. If any portion of a Participant's accounts under the Savings Plan
shall be forfeited, a proportionate part of the Participant's Supplemental
Shares also shall be forfeited. The current value of a share of Textron common
stock at any date shall be the average of the composite closing prices, as
reported in The Wall Street Journal, for the first ten trading days of the
effective month.
4.06 The number of Supplemental Shares credited to a Participant's account
under this Article IV shall be adjusted, without receipt of any consideration by
Textron, on account of any stock split, stock dividend or similar increase or
decrease affecting Textron common stock, as if the Supplemental Shares were
actually shares of Textron common stock.
ARTICLE V - SUPPLEMENTAL INCLUDED PLAN BENEFITS
5.01 The Management Committee may cause this Plan to provide supplemental
benefits on account of an Included Plan by adopting a Schedule to this Plan. The
Schedule shall specify any special terms or conditions upon which the
supplemental benefits shall be provided. Except as specifically provided in a
Schedule, all of the terms and conditions of this Plan shall apply to the
Included Plan.
ARTICLE VI - UNFUNDED PLAN
6.01 Benefits to be provided under this Plan are unfunded obligations of
Textron. Nothing contained in this Plan shall require Textron to segregate any
monies from its general funds, to create any trust, to make any special
deposits, or to purchase any policies of insurance with respect to such
obligations. If Textron elects to purchase individual policies of insurance on
one or more of the Participants to help finance its obligations under this Plan,
such individual policies and the proceeds therefrom shall at all times remain
the sole property of Textron and neither
3
<PAGE> 4
the Participants whose lives are insured nor their beneficiaries shall have any
ownership rights in such policies of insurance.
6.02 This Plan is intended in part to provide benefits for a select group
of management employees who are highly compensated, pursuant to Section 110 of
ERISA and Labor Department Regulations Section 2520.104-23, and in part to be an
excess benefit plan, pursuant to Section 3(36) of ERISA.
6.03 No Participant shall be required or permitted to make contributions to
this Plan.
ARTICLE VII - PLAN ADMINISTRATION
7.01 Textron shall be the plan administrator of this Plan and shall be
solely responsible for its general administration and interpretation. Textron
shall have all such powers as may be necessary to carry out the provisions
hereof. Textron may from time to time establish rules for the administration of
this Plan and the transaction of its business. Subject to Section 7.05, any
action by Textron shall be final, conclusive and binding on each Participant and
all persons claiming by, through or under any Participant. Textron (and any
person or persons to whom it delegates any of its authority as plan
administrator) shall have discretionary authority to determine eligibility for
Plan benefits, to construe the terms of the Plan, and to determine all questions
arising in the administration of the Plan, and shall make all such
determinations and interpretations in a nondiscriminatory manner.
7.02(a) The payment of any benefit under Article III or the distribution of
any account under Article IV or Article V shall be made at the same time, in the
same manner, to the same persons and in the same proportions, as is made the
payment or distribution under the related Pension Plan or Savings Plan, or
otherwise as determined by the Benefits Committee in its sole discretion.
Textron may withhold from benefits and accounts under this Plan, any taxes or
other amounts required by law to be withheld. Notwithstanding any provision to
the contrary, no benefit shall be paid to any Participant while employed by
Textron.
(b) Notwithstanding Section 7.02(a), each benefit then computed under
Article III and each amount then credited to the accounts under Article IV and
Article V shall become due and payable to the respective Participants and
beneficiaries immediately upon a Change in Control as defined in Section 8.03.
For purposes of Section 7.02, the present value of a benefit computed under
Article III shall be based on the appropriate actuarial assumptions and factors
set forth in the related Pension Plan or Savings Plan and, if no interest rate
assumption has been set forth for any purpose, an interest rate of six percent
per year.
7.03 Textron may employ or engage such agents, accountants, actuaries,
counsel, other experts and other persons as it deems necessary or desirable in
connection with the interpretation and administration of this Plan. Textron
shall be entitled to rely upon all certifications made by an accountant selected
by Textron. Textron and its committees, officers, directors and employees shall
not be liable for any action taken, suffered or omitted by them in good faith in
reliance upon the advice or opinion of any such agent, accountant, actuary,
counsel or other expert. All action so taken, suffered or omitted shall be
conclusive upon each of them and upon all other persons interested in this Plan.
7.04 Textron may require proof of death or total disability of any
Participant, former Participant or beneficiary and evidence of the right of any
person to receive any Plan benefit.
4
<PAGE> 5
7.05 Claims under this Plan shall be filed in writing with Textron. If a
claim is denied wholly or in part, it shall be denied within a reasonable time
after its filing in a writing delivered to the claimant with the reasons for the
denial, citations to pertinent provisions of the Plan, a description of any
additional material or information to be furnished by the claimant and the
reasons therefor and an explanation of the Plan's claim review procedure. If the
claimant wishes further consideration of his claim, he or his authorized
representative shall submit to Textron, within 90 days after his claim has been
denied, a written request for reconsideration. Such claimant or his authorized
representative may review pertinent documents and submit issues and comments in
writing. Within 60 days after receiving the request for reconsideration (120
days if additional time is required), Textron shall communicate its decision to
the claimant in writing, stating the reasons for its decision and referring to
pertinent Plan provisions.
ARTICLE VIII - MISCELLANEOUS
8.01 Unless a contrary or different meaning is expressly provided, each use
in this Plan of the masculine or feminine gender shall include the other and
each use of the singular number shall include the plural.
8.02 No amount payable at any time under this Plan shall be subject in any
manner to alienation, sale, transfer, assignment, pledge or encumbrance of any
kind unless specifically approved in writing in advance by the Benefits
Committee or its designee. Any attempt to alienate, sell, transfer, assign,
pledge or otherwise encumber any such benefit, whether presently or subsequently
payable, shall be void unless so approved. Except as required by law, no benefit
payable under this Plan shall in any manner be subject to garnishment,
attachment, execution or other legal process, or be liable for or subject to the
debts or liability of any Participant or beneficiary.
8.03 Notwithstanding any Plan provision to the contrary, the Board or its
designee shall have the right to amend, modify, suspend or terminate this Plan
at any time by written ratification of such action; provided, however, that no
amendment, modification, suspension or termination:
(1) shall reduce an amount payable under Article III or credited to any
supplemental account under Article IV or Article V of this Plan immediately
before the effective date of the amendment, modification, suspension or
termination; or
(2) shall be made to Section 7.02 or 8.03 following a Change in Control.
If after a Change in Control any claim is made or any litigation is brought
by a Participant or beneficiary to enforce or interpret any provision contained
in this Plan, Textron and the "person" or "group" described in the next
following sentence shall be liable, jointly and severally, to indemnify the
Participant or beneficiary for the Participant's or beneficiary's reasonable
attorney's fees and disbursements incurred in any such claim or litigation and
for prejudgment interest at the Bankers Trust Company prime interest rate on any
money award or judgment obtained by the Participant or beneficiary.
For purposes of this Plan, a "Change in Control" shall occur if (i) any
"person" or "group" (within the meaning of Sections 13(d) and 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Act")) other than Textron, any
trustee or other fiduciary holding Textron common stock under an employee
benefit plan of Textron or a related company, or any corporation which is owned,
directly or indirectly, by the stockholders of Textron in substantially the same
proportions as their ownership of Textron common stock, is or becomes (other
than by acquisition from Textron or a related company) the "beneficial owner"
(as defined in Rule 13d-3 under
5
<PAGE> 6
the Act) of more than 30% of the then outstanding voting stock of Textron, or
(ii) during any period of two consecutive years, individuals who at the
beginning of such period constitute the Board (and any new director whose
election by the Board or whose nomination for election by Textron's stockholders
was approved by a vote of at least two-thirds of the directors then still in
office who either were directors at the beginning of such period or whose
election or nomination for election was previously so approved) cease for any
reason to constitute a majority thereof, or (iii) stockholders of Textron
approve a merger or consolidation of Textron with any other corporation, other
than a merger or consolidation which would result in the voting securities of
Textron outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) more than 50% of the combined voting power of the voting
securities of Textron or such surviving entity outstanding immediately after
such merger or consolidation, or (iv) the stockholders of Textron approve a plan
of complete liquidation of Textron or an agreement for the sale or disposition
by Textron of all or substantially all of Textron's assets.
8.04 This Plan shall be construed in accordance with the laws of the State
of Delaware.
8.05 Nothing contained in this Plan shall be construed as a contract of
employment between any Participant and any Textron Company, or to suggest or
create a right in any Participant to be continued in employment as a Key
Executive or other employee of any Textron Company.
8.06 Textron, the Chief Executive Officer and the Chief Human Resources
Officer, and the Benefits Committee may impose such other lawful terms and
conditions on participation in this Plan as deemed desirable. The Chief
Executive Officer, the Chief Human Resources Officer and members of the Benefits
Committee may participate in this Plan.
IN WITNESS WHEREOF, Textron Inc. has caused this restated Plan to be
executed by its duly authorized officer to be effective as of January 1, 2000.
TEXTRON INC.
By: /s/ George Metzger
-----------------------------------------
George Metzger
Vice President, Human Resources and
Benefits
6
<PAGE> 7
MARKET SQUARE PROFIT SHARING PLAN SCHEDULE
This Schedule to the Supplemental Benefits Plan for Textron Key Executives
(the "Plan") is restated effective January 1, 2000 pursuant to Article V of the
Plan.
1.01 "Market Square Plan" means The Market Square Profit Sharing Plan, as
amended and restated from time to time.
1.02 Textron shall maintain a stock unit account and a general fund account
for each Participant for making credits, payments and transfers described in
this Schedule.
1.03 Textron shall, in each calendar quarter, credit Supplemental Shares to
a Participant's stock unit account equal in number to the number of shares of
Textron common stock that would have been allocated on account of dividends to
the Participant's stock unit account as of that date, based on the average of
the composite closing prices of Textron common stock, as reported in The Wall
Street Journal for the month in which the date of record occurs.
1.04 The general fund account shall be credited with earnings as if it were
invested in the George Putnam Fund of Boston.
1.05 A Participant who has terminated her Textron employment may, after a
period of 30 days, subject to the provisions of Section 16 of the Securities
Exchange Act of 1934, once each calendar quarter, elect to transfer, in 10%
increments, effective the first calendar day of the month following the minimum
notice of three business days, any amount in her stock unit account to her
general fund account. The cash value transferred will be determined by
multiplying the current value of Textron common stock by the number of whole and
fractional Supplemental Shares in her stock unit account as of the end of the
month in which the election is made times the percentage being transferred. The
current value of a share of Textron common stock at any date shall be the
average of the composite closing prices, as reported in The Wall Street Journal,
for the first ten trading days of the effective month.
1.06 The number of Supplemental Shares credited to a Participant's account
under this schedule shall be adjusted, without receipt of any consideration by
Textron, on account of any stock split, stock dividend or similar increase or
decrease affecting Textron common stock, as if the Supplemental Shares were
actually shares of Textron common stock.
1.07 Benefits shall become payable upon the Participant's termination of
Textron employment or such other time as determined by the Benefits Committee in
its sole discretion. Textron, upon the written instructions of the Benefits
Committee or its designee, shall distribute the benefits in accordance with any
one or a combination of the following methods after considering any method of
payment requested by the Participant or by the Beneficiaries entitled to receive
the benefits:
(1) Payment in a single sum
(2) Payment in a number of annual installments, each payable as soon as
practicable after the end of each successive calendar year, over a period not
exceeding the life expectancy of the payee or his primary Beneficiary (whichever
is greater) determined as of the date on which the benefits first became
payable. The annual installments shall be calculated each year by dividing
7
<PAGE> 8
the unpaid amount of the benefits as of January 1 of that year by the remaining
number of unpaid installments.
1.08 Plan benefits payable under Section 1.07 shall begin to be paid not
later than April 1 of the calendar year that begins after the date the
Participant attains or would have attained age 70 1/2.
IN WITNESS WHEREOF, Textron Inc. has caused this restated Plan to be
executed by its duly authorized officer to be effective as of January 1, 2000.
TEXTRON INC.
By: /s/ George Metzger
-----------------------------------------
George Metzger
Vice President, Human Resources and
Benefits
8
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.14D
<SEQUENCE>3
<FILENAME>b38194txex10-14d.txt
<DESCRIPTION>RETENETION AWARD GRANTED TO LEWIS B. CAMBELL
<TEXT>
<PAGE> 1
EXHIBIT 10.14D
Lewis B. Campbell
Restricted Stock Awards
January 1, 2001
The Board of Directors approved (1) an award of 100,000 shares of restricted
stock to Lewis B. Campbell (the "Executive") under the 1999 Long-Term Incentive
Plan and (2) a revision to the vesting schedule for the 200,000 shares of
restricted stock granted to Lewis B. Campbell on June 1, 1999. The terms of the
awards are as follows:
- - The Executive will be granted restricted shares of Textron common stock
provided he is still employed by Textron in accordance with the following
schedule and EPS from continuing operations increases at an average annual
growth rate of 8% or more over the vesting period using 1998 EPS of $2.68
as the base amount.
<TABLE>
<CAPTION>
Restricted Vest Age at
Shares Dates Vest Dates
------ ----- ----------
<S> <C> <C> <C>
50,000 5/18/02 56
50,000 5/18/03 57
40,000 5/18/04 58
40,000 5/18/05 59
30,000 5/18/06 60
30,000 5/18/07 61
30,000 5/18/08 62
30,000 5/18/11 65
-------
300,000
=======
</TABLE>
- - Textron shall retain the certificates representing the shares of restricted
stock in its possession until such time as all restrictions applicable to
such shares have lapsed.
- - Except as otherwise provided herein, the Executive shall not be entitled to
receive the restricted shares if the EPS performance objective for the
respective shares is not achieved or if his employment with Textron ends
for any reason prior to the respective vesting date, provided that if the
Executive's employment ends prior to such date because of his death,
"Disability" (Attachment A), his involuntary termination by Textron without
"Cause" (Attachment A) or by the Executive for "Good Reason" (Attachment
A), the shares shall immediately become fully vested. In the event of such
termination, the shares shall be issued within 30 days following
termination of employment.
- - Notwithstanding the above, all unvested shares shall immediately vest upon
a "Change in Control" (Attachment A).
- - Dividends shall be credited to the Executive and such dividends are to be
accounted for as if reinvested in actual Textron common stock. Such
dividends will vest immediately but payment will be deferred until the
earlier of the restricted shares vest date or termination of employment.
- - The number of restricted shares awarded to the Executive hereunder shall be
proportionately adjusted for any increase or decrease in the number of
issued shares of Textron common stock resulting from a stock split, stock
dividend or any other increase or decrease in such shares effective without
receipt of consideration by Textron.
- - With respect to withholding required upon the lapse of restrictions on the
restricted stock, the Executive may elect, subject to the approval of the
Board, to satisfy the withholding requirement, in whole or in part, by
having Textron withhold shares having a fair market value on the date the
tax is to be determined equal to the minimum statutory total tax which
could be imposed on the transaction. Such election shall be irrevocable,
made in writing, signed by the Executive, and shall be subject to any
restrictions or limitations that the Board in its sole discretion, deems
appropriate.
/s/ John D. Butler 12/15/00
- ---------------------------- ----------------------
John D. Butler Date
<PAGE> 2
ATTACHMENT A
Lewis B. Campbell
Restricted Stock Awards
January 1, 2001
"DISABILITY"
"Disability" shall mean, for purposes of this award, the inability of the
Executive, due to injury, illness, disease or bodily or mental infirmity,
to engage in the performance of his material duties of employment with the
Company for a period of more than one hundred eighty (180) consecutive days
or for a period that is reasonably expected to exist for a period of more
than one hundred eighty (180) consecutive days, provided that interim
returns to work of less than ten (10) consecutive business days in duration
shall not be deemed to interfere with a determination of consecutive absent
days if the reason for absence before and after the interim return are the
same. The existence or non-existence of a Disability shall be determined by
a physician agreed upon a good faith by the Executive (or his
representatives) and Textron.
"CAUSE"
"Cause" shall mean: (i) an act or acts of willful misrepresentation, fraud
or willful dishonesty (other than good faith expense account disputes) by
the Executive which in any case is intended to result in his or another
person or entity's substantial personal enrichment at the expense of the
Company; (ii) any willful misconduct by the Executive with regard to the
Company, its business, assets or employees that has, or was intended to
have, a material adverse impact (economic or otherwise) on the Company;
(iii) any material, willful and knowing violation by the Executive of (x)
the Company's Business Conduct Guidelines, or (y) any of his fiduciary
duties to the Company which in either case has, or was intended to have, a
material adverse impact (economic or otherwise) on the Company; (iv) the
willful or reckless behavior of the Executive with regard to a matter of a
material nature which has a material adverse impact (economic or otherwise)
on the Company; (v) the executive's willful failure to attempt to perform
his duties or his willful failure to attempt to follow the legal written
direction of the Board, which in either case is not remedied within ten
(10) days after receipt by the Executive of a written notice from the
Company specifying the details thereof; or (vi) the Executive's conviction
of, or pleading NOLO CONTENDERE or guilty to, a felony (other than (x) a
traffic infraction or (y) vicarious liability solely as a result of his
position provided the Executive did not have actual knowledge of the
actions or inactions creating the violation of the law or the Executive
relied in good faith on the advice of counsel with regard to the legality
of such action or inaction (or the advice of other specifically qualified
professionals as to the appropriate or proper action or inaction to take
with regard to matters which are not matters of legal interpretation); No
action or inaction should be deemed willful if not demonstrably willful and
if taken or not taken by the Executive in good faith as not being adverse
to the best interests of the Company. Reference in this paragraph to the
Company shall also include direct and indirect subsidiaries of the Company,
and materiality and material adverse impact shall be measured based on the
action or inaction and the impact upon, and not the size of, the Company
taken as a whole, provided that after a Change in Control, the size of the
Company, taken as a whole, shall be a relevant factor in determining
materiality and material adverse impact.
"GOOD REASON"
"Good Reason" shall mean, without the Executive's express written consent,
the occurrence of any one or more of the following: (i) the assignment to
the Executive of duties materially inconsistent with the Executive's then
authorities, duties, responsibilities, and status (including offices,
titles, and reporting requirements), or any reduction in the Executive's
then title, position, reporting lines or a material reduction (other than
temporarily while Disabled or otherwise incapacitated) in his then status,
authorities, duties, or responsibilities or, if then a director of the
Company, failure to be nominated or reelected as a director of the Company
or removal as such; (ii) relocation of the Executive from the principal
office of the Company (excluding reasonable travel on the Company's
business to an extent substantially consistent with the Executive's
business obligations) or relocation of the principal office of the Company
to a location which is at least fifty (50) miles from the Company's current
headquarters, provided, however, if the Executive at the time of the
relocation is not located at the principal office, such relocation
provision shall apply based on his then location but shall not cover a
relocation to the principal office prior to a Change in Control; (iii) a
reduction by the Company in the Executive's Base Salary; (iv) a reduction
in the Executive's aggregate level of participation in any of the Company's
short and/or long-term incentive compensation plans, or employee benefit or
retirement plans, policies, practices, or arrangements in which the
Executive participated as of the Effective Date, or, after a Change in
Control, participated immediately prior to the Change in Control; (v) the
failure of the Company to obtain and deliver to the Executive a
satisfactory written agreement from any successor to the Company to assume
and agree to perform this Agreement; or (vi) any other material breach by
the Company of this Agreement.
<PAGE> 3
Page 2
"CHANGE IN CONTROL"
A "Change in Control" of the Company shall be deemed to have occurred as of
the first day any one or more of the following conditions shall have been
satisfied:
(a) Any "person" or "group" (within the meaning of Section 13(d) and
14(d)(2) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) other than the Company, any trustee or other
fiduciary holding Company common stock under an employee benefit
plan of the Company or a related company, or any corporation
which is owned, directly or indirectly, by the stockholders of
the Company in substantially the same proportions as their
ownership of the Company's common stock, is or becomes the
beneficial owner (as defined in Rule 13d-3 under the Exchange
Act) of more than thirty percent (30%) of the then outstanding
voting stock;
(b) During any period of two (2) consecutive years, individuals who
at the beginning of such period constitute the Board and any new
director whose election by the Board or nomination for election
by the Company's stockholders was approved by a vote of at least
two-thirds of the directors then still in office who either were
directors at the beginning of the two year period or whose
election or nomination for election was previously so approved,
cease for any reason to constitute at least a majority of the
Board;
(c) The consummation of a merger or consolidation of the Company with
any other corporation, other than a merger or consolidation which
would result in the voting securities of the Company outstanding
immediately prior thereto continuing to represent (either by
remaining outstanding or being converted into voting securities
of the surviving entity) more than fifty percent (50%) of the
combined voting securities of the Company or such surviving
entity outstanding immediately after such merger or
consolidation; or
(d) The approval of the stockholders of the Company of a plan of
complete liquidation of the Company or an agreement for the sale
or disposition by the Company of all or substantially all of its
assets.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.15A
<SEQUENCE>4
<FILENAME>b38194txex10-15a.txt
<DESCRIPTION>EMPLOYMENT AGREEMENT WITH THEODORE R. FRENCH
<TEXT>
<PAGE> 1
EXHIBIT 10.15A
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT, is entered into as of the 21st day of December,
2000 by and between Textron Inc. (the "Company"), a Delaware corporation having
its principal office at 40 Westminster Street, Providence, Rhode Island 02903
and Theodore R. French residing at 611 East Woodland Road, Lake Forest,
Illinois, 60045 (the "Executive").
W I T N E S S E T H:
WHEREAS, the Company desires to employ the Executive and the Executive is
willing to be employed by the Company; and
WHEREAS, the Company and the Executive desire to set forth the terms and
conditions of such employment.
NOW THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements of the parties set forth in this Agreement, and of
other good and valuable consideration, the adequacy and receipt of which is
acknowledged, the parties hereto agree as follows:
1. TERM OF EMPLOYMENT
The Company hereby agrees to employ the Executive and the Executive hereby
accepts employment, in accordance with the terms and conditions set forth
herein, for a term (the "Employment Term") commencing on the date hereof (the
"Effective Date") and terminating, unless otherwise terminated earlier in
accordance with Section 5 hereof, on the third anniversary of the Effective Date
(the "Original Employment Term"), provided that the Employment Term shall be
automatically extended, subject to earlier termination as provided in Section 5
hereof, for successive additional one (1) year periods (the "Additional Terms"),
unless, at least ninety (90) days prior to the end of the Original Employment
Term or the then Additional Term, the Company or the Executive has notified the
other in writing that the Employment Term shall terminate at the end of the then
current term.
2. POSITION AND RESPONSIBILITIES
During the Employment Term, the Executive shall serve as the Executive Vice
President and Chief Financial Officer of the Company or in such higher capacity
as agreed by the Company and the Executive, and shall be a member of the
Management Committee and the Executive Leadership Team or any successor body
thereto ("ELT"). The Executive shall report exclusively to the Chief Executive
Officer and the Board of Directors of the Company (the "Board"). The Executive
shall, to the extent appointed or elected, serve on the Board as a director and
as a member of any committee of the Board, in each case, without additional
compensation. The Executive shall, to the extent appointed or elected, serve as
a director or as a member of any committee of the board (or the equivalent
bodies in a non-corporate subsidiary or affiliate) of any of the Company's
subsidiaries or affiliates and as an officer or employee (in a
<PAGE> 2
capacity commensurate with his position with the Company) of any such
subsidiaries or affiliates, in all cases, without additional compensation or
benefits, and any compensation paid to the Executive, or benefits provided to
the Executive, in such capacities shall be a credit with regard to the amounts
due hereunder from the Company. The Executive shall have duties, authorities and
responsibilities generally commensurate with the duties, authorities and
responsibilities of persons in similar capacities in similarly sized companies,
subject to the By-laws and organizational structure of the Company. The
Executive shall devote substantially all of his business time, attention and
energies to the performance of his duties hereunder, provided the foregoing will
not prevent the Executive from participating in charitable, community or
industry affairs, from managing his and his family's personal passive
investments, and (with the consent of the Chief Executive Officer or the
Organization and Compensation Committee (or its successor) of the Board (the
"O&C Committee"), which consent will not be unreasonably withheld, conditioned
or delayed) serving on the board of directors of other companies, provided that
these activities do not materially interfere with the performance of his duties
hereunder or create a potential business conflict or the appearance thereof.
The Executive may retain any compensation or benefits received as a
result of consented to service as a director of entities not related to the
Company.
The Executive may perform his duties hereunder, when practical, at his
office in Illinois or at such other location where Executive may reside in the
future, provided the performance of his duties at a location other than the
Company's headquarters does not materially interfere with Executive's
performance of duties hereunder, as determined in good faith by the Chief
Executive Officer.
3. COMPENSATION AND BENEFITS
During the Employment Term, the Company shall pay and provide the Executive
the following:
3.1 BASE SALARY. The Company shall pay the Executive an initial base salary
(the "Base Salary") at a rate of $550,000. Base Salary shall be paid to the
Executive in accordance with the Company's normal payroll practices for
executives. Base Salary shall be reviewed at least annually by the O&C Committee
(or as otherwise designated by the Board) to ascertain whether, in the judgment
of the reviewing committee, such Base Salary should be increased. If so
increased, Base Salary shall not be thereafter decreased and shall thereafter,
as increased, be the Base Salary hereunder.
3.2 ANNUAL BONUS. The Company shall provide the Executive with the
opportunity to earn an annual cash bonus under the Company's current annual
incentive compensation plan for executives or a replacement plan therefor at a
level commensurate with his position, provided, however, that the minimum annual
target award payable upon the achievement of reasonably attainable objective
performance goals shall be at least sixty percent (60%) of Base Salary, with a
maximum payment of two hundred percent (200%) of Executive's target. Executive
shall receive a guaranteed minimum 2001 annual bonus of $330,000, payable in
2002 in accordance with the provisions of the Company's annual incentive
compensation plan. For (a) 2001 and (b) each year thereafter, if members of the
Management Committee are eligible therefor, the Executive will have the
opportunity to earn an additional cash bonus under the
2
<PAGE> 3
Textron Quality Management ("TQM") bonus program of up to fifty percent (50%) of
his annual target incentive.
3.3 HIRING BONUS. The Company shall pay the Executive a hiring bonus of
$100,000 within five (5) days after the Effective Date.
3.4 LONG-TERM INCENTIVES. The Company shall provide the Executive the
opportunity to earn long-term incentive awards under the current equity and cash
based plans and programs or replacements therefore including the following
awards:
(a) OPTIONS. On the Effective Date the Company shall grant the Executive
stock options under the Textron Long-Term Incentive Plan (the
"Long-Term Incentive Plan") to purchase seventy thousand (70,000)
shares of the Company's common stock at an exercise price equal to
fair market value at the time of grant (the "Stock Options"). Fifty
percent (50%) of the Stock Options shall vest on the one year
anniversary of the Effective Date and the remainder shall vest on the
second anniversary of the Effective Date, provided in each case the
Executive is then employed by the Company. The Stock Options shall
terminate on the tenth anniversary of the date of grant. The Stock
Options will be granted pursuant to Non-Qualified Stock Option Award
Agreements or Incentive Stock Option Award Agreements, as applicable
and in each case shall be in all respects subject to the provisions of
such agreements and the Company's Long-Term Incentive Plan except as
otherwise expressly provided for herein.
(b) PERFORMANCE SHARE UNITS. The Company shall grant the Executive
performance share units ("PSUs") under the Company's Long-Term
Incentive Plan as follows: six thousand (6,000) PSUs for a one (1)
year award period ending December, 2001; seven thousand (7,000) PSUs
for a two (2) year award period ending December, 2002; and fifteen
thousand (15,000) PSUs for a three (3) year award period ending
December, 2003. Commencing with award periods ending in 2002,
Executive shall also have the opportunity to earn up to an additional
one hundred percent (100%) of the value of the PSUs upon achieving
outstanding performance under a special long-term incentive program
(the "Special PSU Program").
(c) RESTRICTED STOCK. On the Effective Date the Company shall grant the
Executive one hundred thousand (100,000) shares of the Company's
common stock (which shall be dividend bearing), subject to the
following vesting schedule: twenty thousand (20,000) shares shall vest
annually commencing January 1, 2002 and each anniversary thereafter
provided Executive is then employed by the Company (the "Restricted
Stock").
3.5 EMPLOYEE BENEFITS. (a) The Executive shall, to the extent eligible, be
entitled to participate at a level commensurate with his position in all
employee benefit welfare and retirement plans and programs, as well as equity
plans, generally provided by the Company to its senior executives in accordance
with the terms thereof as in effect from time to time. Such plans and programs
currently include the Key Executive Benefits Program (including the Deferred
Income Plan, the Supplemental Benefits Plan (the "SBP"), the Survivor Benefit
Plan, an
3
<PAGE> 4
executive automobile, club membership and financial planning and tax
preparation), the Company's savings and pension plan and medical and life
insurance.
(b) The Executive shall also participate in the Supplemental Retirement
Plan for Textron, Inc. Key Executives (the "SERP"). Under the SERP as currently
in effect, the Executive shall be entitled to receive a single life annuity upon
his retirement from the Company at or after his reaching age sixty-five (65)
equal to fifty percent (50%) of his highest consecutive five (5) year average
compensation. A reduced benefit is available if the Executive retires from the
Company at or after age sixty (60) and prior to age 65. The cash value of the
PSUs actually paid under the Long-Term Incentive Plan (but not under the Special
PSU Program) shall be treated as compensation in the year paid for purposes of
calculating the Executive's SERP benefit. The SERP benefit shall be reduced by
any amounts payable to Executive under any other Company or prior employer
defined benefit pension arrangement.
3.6 VACATION. The Executive shall be entitled to paid vacation in
accordance with the standard written policies of the Company with regard to
vacations of executives, but in no event less than four (4) weeks per calendar
year.
3.7 PERQUISITES. The Company shall provide to the Executive, at the
Company's cost, all perquisites to which other senior executives of the Company
are generally entitled to receive and such other perquisites which are suitable
to the character of the Executive's position with the Company and adequate for
the performance of his duties hereunder. To the extent legally permissible, the
Company shall not treat such amounts as income to the Executive. The Executive
shall also be entitled to the following special perquisites (the "Special
Perquisites"):
(a) USE OF COMPANY AIRCRAFT. The Company shall make good faith efforts to
provide the Executive upon his reasonable request with use of a
Company aircraft for the following travel: (i) commuting to and from
the Executive's primary residence and the Company's headquarters or
other facilities, (ii) business travel to perform the Executive's
duties hereunder and (iii) personal travel with the Executive's
immediate family, provided, however, that, the Executive must
accompany his family unless the Executive's absence is otherwise
approved by the Chief Executive Officer. If the Company aircraft is
unavailable, the Company shall pay the cost of first-class commercial
airline tickets for the Executive. To the extent any expenses under
(i) above result in imputed income to the Executive, the Company shall
fully gross-up reimbursement to the Executive such that the Executive
has no after tax cost for such aircraft travel. All other personal
travel will be charged to the Executive as imputed income in
accordance with the Company's standard operating procedures. The
parties recognize that in light of the Executive's position the use of
the Company aircraft for personal and family travel is desirable for
security reasons.
(b) LIVING EXPENSES. The Company shall pay the Executive's living expenses
in Providence, Rhode Island, through December 31, 2001. The expenses
must be approved by the Chief Executive Officer (which approval shall
not be unreasonably withheld) and are limited to reasonable costs
commensurate with those expenses customarily associated with a member
of the ELT. To the extent the Company's payment of such living
expenses result in imputed income to the
4
<PAGE> 5
Executive, the Company shall fully gross-up the Executive such that
the Executive has no after tax cost.
(c) RELOCATION. The Company shall pay the Executive's one (1) time
relocation costs, provided that the Company and Executive mutually
agree, in good faith, that such relocation will allow the Executive to
more efficiently and effectively perform his duties hereunder. The
payment of such relocation expenses shall be made in accordance with
the Company's relocation policy for comparable executive level
expenditures and shall include a home purchase program and full
gross-up for all taxes related to the relocation expenses regardless
of whether any such expenses qualify for tax deductibility.
3.8 RIGHT TO CHANGE PLANS. The Company shall not be obligated by reason of
this Section 3 to institute, maintain, or refrain from changing, amending, or
discontinuing any benefit plan, program, or perquisite, so long as such changes
are similarly applicable to senior executive employees generally, provided,
however, the right to change such plans, programs or perquisites shall not in
any way limit Executive's right to claim a Good Reason termination pursuant to
Section 5(f)(v) as a result of any such change. Notwithstanding the foregoing,
the Company shall not terminate, decrease or alter the Special Perquisites
provided in Section 3.7(a) through (c) without Executive's prior written
consent.
4. EXPENSES
Upon submission of appropriate documentation, in accordance with its
policies in effect from time to time, the Company shall pay for all ordinary and
necessary expenses, in a reasonable amount, which the Executive incurs in
performing his duties under this Agreement including travel, entertainment,
professional dues and subscriptions, and all dues, fees, and expenses associated
with membership in various professional, business, and civic associations and
societies in which the Executive participates in accordance with the Company's
policies in effect from time to time.
5. TERMINATION OF EMPLOYMENT
The Executive's employment with the Company (including but not limited to
any subsidiary or affiliate or the Company) and the Employment Term shall
terminate upon the occurrence of the first of the following events:
(a) Automatically on the date of the Executive's death.
(b) Upon thirty (30) days written notice by the Company to the Executive
of a termination due to Disability, provided such notice is delivered
during the period of Disability. The term "Disability" shall mean, for
purposes of this Agreement, the inability of the Executive, due to
injury, illness, disease or bodily or mental infirmity, to engage in
the performance of his material duties of employment with the Company
as contemplated by Section 2 herein for a period of more than one
hundred eighty (180) consecutive days or for a period that is
reasonably expected to exist for a period of more than one hundred
eighty (180) consecutive days, provided that interim returns to work
of less than ten (10) consecutive business days in duration shall not
be deemed to interfere with a determination of
5
<PAGE> 6
consecutive absent days if the reason for absence before and after the
interim return are the same. The existence or non-existence of a
Disability shall be determined by a physician agreed upon in good
faith by the Executive (or his representatives) and the Company. It is
expressly understood that the Disability of the Executive for a period
of one hundred eighty (180) consecutive days or less shall not
constitute a failure by him to perform his duties hereunder and shall
not be deemed a breach or default and the Executive shall receive full
compensation for any such period of Disability or for any other
temporary illness or incapacity during the term of this Agreement.
(c) Immediately upon written notice by the Company to the Executive of a
termination due to his retirement at or after the Executive's
attainment of age sixty-five (65).
(d) Immediately upon written notice by the Company to the Executive of a
termination for Cause, provided such notice is given within ninety
(90) days after the discovery by the Board or the Chief Executive
Officer of the Cause event and has been approved by the O&C Committee
at a meeting at which the Executive and his counsel had the right to
appear and address such meeting after receiving at least ten (10)
business days written notice of the meeting and reasonable detail of
the facts and circumstances claimed to provide a basis for such
termination. The term "Cause" shall mean, for purposes of this
Agreement: (i) an act or acts of willful misrepresentation, fraud or
willful dishonesty (other than good faith expense account disputes) by
the Executive which in any case is intended to result in his or
another person or entity's substantial personal enrichment at the
expense of the Company; (ii) any willful misconduct by the Executive
with regard to the Company, its business, assets or employees that
has, or was intended to have, a material adverse impact (economic or
otherwise) on the Company; (iii) any material, willful and knowing
violation by the Executive of (x) the Company's Business Conduct
Guidelines, or (y) any of his fiduciary duties to the Company which in
either case has, or was intended to have, a material adverse impact
(economic or otherwise) on the Company; (iv) the willful or reckless
behavior of the Executive with regard to a matter of a material nature
which has a material adverse impact (economic or otherwise) on the
Company; (v) the Executive's willful failure to attempt to perform his
duties under Section 2 hereof or his willful failure to attempt to
follow the legal written direction of the Board, which in either case
is not remedied within ten (10) days after receipt by the Executive of
a written notice from the Company specifying the details thereof; (vi)
the Executive's conviction of, or pleading nolo contendere or guilty
to, a felony (other than (x) a traffic infraction or (y) vicarious
liability solely as a result of his position provided the Executive
did not have actual knowledge of the actions or inactions creating the
violation of the law or the Executive relied in good faith on the
advice of counsel with regard to the legality of such action or
inaction (or the advice of other specifically qualified professionals
as to the appropriate or proper action or inaction to take with regard
to matters which are not matters of legal interpretation)); or (vii)
any other material breach by the Executive of this Agreement that is
not cured by the Executive within twenty (20) days after receipt by
the Executive of a written notice from the Company of such breach
specifying
6
<PAGE> 7
the details thereof. No action or inaction should be deemed willful if
not demonstrably willful and if taken or not taken by the Executive in
good faith as not being adverse to the best interests of the Company.
Reference in this paragraph (d) to the Company shall also include
direct and indirect subsidiaries of the Company, and materiality and
material adverse impact shall be measured based on the action or
inaction and the impact upon, and not the size of, the Company taken
as a whole, provided that after a Change in Control, the size of the
Company taken as a whole, shall be a relevant factor in determining
materiality and material adverse impact.
(e) Upon written notice by the Company to the Executive of an involuntary
termination without Cause. A notice by the Company of non-renewal of
the Employment Term pursuant to Section 1 above shall be deemed an
involuntary termination of the Executive by the Company without Cause
as of the end of the Employment Term, but the Executive may terminate
at any time after the receipt of such notice and shall be treated as
if he was terminated without Cause as of such date.
(f) Upon twenty (20) days written notice by the Executive to the Company
of a termination for Good Reason (which notice sets forth in
reasonable detail the facts and circumstances claimed to provide a
basis for such termination) unless the Good Reason event is cured
within such twenty (20) day period. The term "Good Reason" shall mean,
for purposes of this Agreement, without the Executive's express
written consent, the occurrence of any one or more of the following:
(i) the assignment to the Executive (other than temporarily while
Disabled or otherwise incapacitated) of duties materially inconsistent
with the Executive's then position, authorities, duties,
responsibilities, and status (including offices, titles, and reporting
requirements); (ii) any material reduction in the Executive's then
title, position, reporting lines or a material reduction (other than
temporarily while Disabled or otherwise incapacitated) in his then
status, authority, duties or responsibilities (it being acknowledged
by the parties that a material reduction will occur in the event of a
transaction in which the Company is acquired directly or indirectly by
another entity in such manner that the Company is no longer a
"reporting company" under the Securities Exchange Act of 1934 based on
its common stock being publicly traded, unless Executive becomes Chief
Financial Officer of the ultimate parent entity) or, if then a
director of the Company, failure to be nominated or reelected as a
director of the Company or removal as such, provided, however, that it
is not intended hereby that any incidental reallocation or
reassignment of personnel or minor changes in the areas reporting to
the Executive (so long as such changes are not core functions of
Executive's responsibilities) shall constitute Good Reason for the
Executive's resignation unless the cumulative result of such actions
is to so modify the Executive's role so as to make it materially
different from such role immediately prior to such actions; (iii)
relocation (A) of the Executive from the principal office of the
Company (excluding reasonable travel on the Company's business to an
extent substantially consistent with the Executive's business
obligations) or (B) of the principal office of the Company to a
location which is at least fifty (50) miles from the Company's current
headquarters, provided, however, in the case of clause (B), if
7
<PAGE> 8
the Executive at the time of such relocation is not located at the
principal office of the Company, such relocation provision shall apply
based on his then location but shall not cover a relocation to the
principal office prior to a Change in Control; (iv) a reduction by the
Company in the Executive's Base Salary; (v) a reduction in the
Executive's aggregate level of participation in any of the Company's
short and/or long-term incentive compensation plans, or employee
benefit or retirement plans, policies, practices, or arrangements in
which the Executive participated as of the Effective Date, or, after a
Change in Control, participated immediately prior to the Change in
Control that in either case has a disproportionate adverse aggregate
impact on the Executive as compared to other similarly situated
executives; (vi) Executive's voluntary termination of employment for
any reason during the thirty (30) day period following the one (1)
year anniversary of a Change in Control; (vii) the failure of the
Company to obtain and deliver to the Executive a satisfactory written
agreement from any successor to the Company to assume and agree to
perform this Agreement; or (viii) any other material breach by the
Company of this Agreement.
(g) Upon written notice by the Executive to the Company of the Executive's
voluntary termination of employment without Good Reason (which the
Company may, in its sole discretion, make effective earlier than any
termination date indicated in the Executive's notice). A notice by the
Executive of non-renewal of the Employment Term pursuant to Section 1
above shall be deemed a voluntary termination by the Executive without
Good Reason as of the end of the Employment Term.
6. CONSEQUENCES OF A TERMINATION OF EMPLOYMENT
6.1 TERMINATION DUE TO DEATH OR RETIREMENT. If the Employment Term ends on
account of the Executive's termination due to death pursuant to Section 5(a)
above or retirement pursuant to Section 5(c) above, the Executive (or the
Executive's surviving spouse, or other beneficiary as so designated by the
Executive during his lifetime, or to the Executive's estate, as appropriate)
shall be entitled, in lieu of any other payments or benefits, to (i) payment
promptly of any unpaid Base Salary, unpaid annual incentive compensation (for
the preceding fiscal year) and any accrued vacation, (ii) reimbursement for any
unreimbursed business expenses incurred prior to the date of termination, (iii)
any amounts, benefits or fringes due under any equity, benefit or fringe plan,
grant or program in accordance with the terms of said plan, grant or program but
without duplication (collectively, the "Accrued Obligations") and (iv) a
pro-rata portion of the annual incentive compensation for the year of
Executive's termination calculated as follows: the product of (x) the
Executive's prior year bonus (or, if a termination occurs prior to the
determination of the 2001 year bonus, the target bonus for 2001), multiplied by
(y) a fraction, the numerator of which is the number of days of the current
fiscal year during which Executive was employed by the Company, and the
denominator of which is 365, provided, however, Executive shall only receive
such pro-rata bonus if other senior executives remaining employed by the Company
through the end of such year receive an annual bonus with respect to such year
(a "Pro Rata Bonus"). In addition, Executive shall be fully vested in the Stock
Options and the Restricted Stock (the "Special Vesting") and the Company shall
pay the COBRA premiums for eighteen (18) months (or if earlier, until
termination of COBRA coverage for Executive's dependents ("COBRA Coverage").
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6.2 TERMINATION DUE TO DISABILITY. If the Employment Term ends as a result
of Disability pursuant to Section 5(b) above, the Executive shall be entitled,
in lieu of any other payments or benefits, to any Accrued Obligations and the
following:
(a) The Pro Rata Bonus.
(b) The Special Vesting.
(c) COBRA Coverage for Executive and his dependents.
(d) The Executive shall be deemed to have satisfied the definition of
"total disability" under the 1994 Long-Term Incentive Plan or the
equivalent definition under any successor plan thereto.
6.3 INVOLUNTARY TERMINATION BY THE COMPANY WITHOUT CAUSE OR TERMINATION BY
THE EXECUTIVE FOR GOOD REASON. If the Executive is involuntarily terminated by
the Company without Cause in accordance with Section 5(e) above or the Executive
terminates his employment for Good Reason in accordance with Section 5(f) above,
the Executive shall be entitled, in lieu of any other payments or benefits,
subject to Section 7(b) hereof, to any Accrued Obligations and the following:
(a) A Pro Rata Bonus.
(b) Continued payment off payroll for two (2) years (in approximately
equal monthly installments) of an amount equal to two (2) times the
sum of (i) the Executive's Base Salary and (ii) the higher of (x) the
Executive's target incentive compensation established for the fiscal
year in which the Executive's termination occurs or (y) a multiple
thereof equal to the product of such target amount and the multiple of
target earned by the Executive for the prior fiscal year (whether or
not deferred).
(c) To the extent eligible at such time or, if the Executive would be
eligible with credit for an additional two (2) years of age and
service credit, coverage under all applicable retiree health and other
retiree welfare plans for the Executive and his dependents (including,
if he is only eligible because of the extra age and service credit, an
adjustment, to the extent necessary, to put the Executive in the same
after-tax position as if he had been eligible for such coverage) and,
if not eligible for continued health coverage under the retiree health
plan, payment of the Executive's and Executive's eligible dependents'
COBRA continuation health coverage premiums for the Company's health
insurance plan that generally applies to senior executives for the two
(2) year period following the date of termination or, if earlier,
until the Executive and Executive's dependents cease to be eligible
for such coverage, provided that, if COBRA coverage cannot be provided
for the full period, any excess period shall be covered under (d)
below (and further provided that, if such premiums are taxable to the
Executive, an adjustment such that the Executive has no after tax cost
for the providing of such COBRA coverage).
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(d) To the extent eligible on the date of termination, continued
participation, at no additional after tax cost to the Executive than
the Executive would have as an employee, in all welfare plans (other
than medical plans covered under (c) above), until two (2) years after
the date of termination; provided, however, that in the event the
Executive obtains other employment that offers substantially similar
or improved benefits, as to any particular welfare plan, such
continuation of coverage by the Company for such benefits under such
plan shall immediately cease. To the extent such coverage cannot be
provided under the Company's welfare benefit plans without
jeopardizing the tax status of such plans, for underwriting reasons or
because of the tax impact on the Executive, the Company shall pay the
Executive an amount such that the Executive can purchase such benefits
separately at no greater after tax cost to the Executive than the
Executive would have had if the benefits were provided to the
Executive as an employee.
(e) Immediate full vesting of the Stock Options, the Restricted Stock and
any outstanding stock options or other equity award that would vest
within two (2) years after such termination of employment as if the
Executive had continued employment for such two (2) year period, to
the extent permitted under the plan or grant, or if such vesting is
not permitted, a cash payment equal to the difference between the fair
market value of the shares covered by the unvested options and the
exercise price of such unvested options (the "Spread") on the date of
termination, or, in the case of Restricted Stock and other non-option
equity grants that would have vested if permitted, the fair market
value of such Restricted Stock or other non-option equity as of the
date of termination. In addition, to the extent the Stock Options or
any other options are exercisable for less than two and three-
quarters (2-3/4) years after the Executive's termination, the
Executive also shall receive promptly following his termination a cash
payment equal to the estimated cash value of such options for the
lesser of two and three-quarters (2-3/4) years or the remainder of the
respective terms of such options (calculated in accordance with the
same Black-Scholes methodology used for the Company's then latest
distributed proxy statement or, if not so used, for internal valuation
of the last stock option grants made by the Company prior to the
termination). The terms of the Executive's outstanding options are
deemed to be modified to the extent required by this Section 6.3 (g).
(f) Payment when it would otherwise be paid in accordance with the 1994
Long-Term Incentive Plan of any amount due with regard to performance
share units outstanding on the date of termination to the extent
permitted under such plan, plus, outside of such plan, when it would
otherwise have been paid, an amount equal to the amount the Executive
would have received with regard to any performance share units
outstanding at the time of termination that could not be so paid. For
purposes of calculating the foregoing amounts, all discretionary
performance targets relating to the Executive's individual performance
will be deemed to be fully achieved and the actual level of
achievement of all financial performance targets will be determined as
if the Executive continued to be employed through the end of the
applicable measuring period.
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(g) Immediate full vesting of the Executive's accounts under the Deferred
Income Plan, and to the extent not permitted under such plan, a cash
payment outside of the plan equal to the value of the amount that
would have vested under the plan.
(h) Continuation of participation for two (2) years in the Company's
programs with regard to tax preparation assistance and financial
planning assistance, club dues and automobile (but based on the
automobile then being used and no new one), in accordance with the
Company's programs in effect at the time of the termination.
(i) To the extent that with regard to any particular item, the Executive
would receive better treatment under the applicable Company plan or
program, such better treatment shall apply.
6.4 TERMINATION BY THE COMPANY FOR CAUSE OR TERMINATION BY THE EXECUTIVE
WITHOUT GOOD REASON. If the Executive is terminated by the Company for Cause or
the Executive terminates his employment without Good Reason, the Executive shall
be entitled to receive all Accrued Obligations.
7. NO MITIGATION/NO OFFSET/RELEASE
(a) In the event of any termination of employment hereunder, the Executive
shall be under no obligation to seek other employment and there shall
be no offset against any amounts due the Executive under this
Agreement on account of any remuneration attributable to any
subsequent employment that the Executive may obtain. The amounts
payable hereunder shall not be subject to setoff, counterclaim,
recoupment, defense or other right which the Company may have against
the Executive or others, except as specifically set forth in Section 9
hereof or upon obtaining by the Company of a final unappealable
judgement against the Executive.
(b) Any amounts payable and benefits or additional rights provided
pursuant to Section 6.2, 6.3 or Section 8.1 beyond Accrued Obligations
and amounts or rights due under law, and, in the case of Section 6.3
and Section 8.1 beyond the sum of any amounts due (without execution
of a release) under the Company severance program then in effect, or,
if greater, three (3) months Base Salary as severance, shall only be
payable if the Executive delivers to the Company a release of all
claims of the Executive (other than those specifically payable or
providable hereunder on or upon the applicable type of termination and
any rights of indemnification under the Company's organizational
documents) with regard to the Company, its subsidiaries and related
entities and their respective past or present officers, directors and
employees in such form as reasonably requested by the Company (for
clarification, the parties intend that (i) any such release not go
beyond a release and the provisions necessary to make it effective but
(ii) this parenthetical clause not be construed as substantively
modifying the text of this subsection).
(c) Upon any termination of employment, upon the request of the Company,
the Executive shall deliver to the Company a resignation from all
offices and directorships and fiduciary positions of the Executive in
which the Executive is serving with, or at the request of, the Company
or its subsidiaries, affiliates or benefit plans.
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(d) The amounts and benefits provided under Sections 6 and 8 hereof are
intended to be inclusive and not duplicative of the amounts and
benefits due under the Company's employee benefit plans and programs
to the extent they are duplicative.
8. CHANGE IN CONTROL
8.1 EMPLOYMENT TERMINATION IN CONNECTION WITH A CHANGE IN CONTROL. In the
event of a Qualifying Termination (as defined below) during the period
commencing one-hundred eighty (180) days prior to the effective date of a Change
in Control and terminating on the second anniversary of the effective date of a
Change in Control (the "Change in Control Protection Period"), then in lieu of
the benefits provided to the Executive under Section 6.3 of this Agreement, the
Company shall pay the Executive the following amounts within (except as
otherwise provided) thirty (30) business days following the Qualifying
Termination (or, if later, the effective date of the Change in Control; in which
case any amounts or benefits previously paid, pursuant to Section 6 shall be
setoff against those under this Section 8) and provide the following benefits:
(a) Any Accrued Obligations.
(b) A lump-sum cash payment equal to three (3) times the highest rate of
the Executive's Base Salary rate in effect at any time up to and
including the date of the Executive's termination.
(c) A lump-sum cash payment equal to the Prorated Portion of the greater
of: (i) the Executive's target annual incentive compensation award
established for the fiscal year during which the Executive's award
termination occurs, or (ii) the Executive's earned annual incentive
award for the fiscal year prior to the fiscal year in which the
earlier of the Change in Control or the Qualifying Termination occurs
(whether or not deferred).
The "Prorated Portion" of the foregoing amount shall be determined by
multiplying such amount by a fraction, the numerator of which is the
number of days during the fiscal year of termination that the
Executive is employed by the Company, and the denominator of which is,
three hundred sixty-five (365).
(d) A lump-sum cash payment equal to three (3) times the greater of: (i)
the Executive's highest annual incentive compensation earned over the
three (3) fiscal years ending prior to the earlier of the Change in
Control or the Qualifying Termination (whether or not deferred); or
(ii) the Executive's target incentive compensation established for the
fiscal year in which the Executive's date of termination occurs.
(e) To the extent the Executive is eligible, was eligible prior or after
the Change in Control (or, if earlier, the Qualifying Termination) or
if the Executive would be eligible with credit for an additional three
(3) years of age and service credit, coverage under all applicable
retiree health and other retiree welfare plans for the Executive and
the Executive's eligible dependents (including an adjustment to the
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extent necessary to put the Executive on the same after tax basis as
if the Executive had been eligible for such coverage).
(f) To the extent eligible prior or after the Change in Control (or, if
earlier, the Qualifying Termination), continued participation,
(coordinated with (e) above to the extent duplicative), at no
additional after tax cost to the Executive than the Executive would
have as an employee, in all welfare plans, until three (3) years after
the date of termination, provided, however, that in the event the
Executive obtains other employment that offers substantially similar
or improved benefits, as to any particular welfare plan, such
continuation of coverage by the Company for such similar or improved
benefit under such plan shall immediately cease. To the extent such
coverage cannot be provided under the Company's welfare benefit plans
without jeopardizing the tax status of such plans, for underwriting
reasons or because of the tax impact on the Executive, the Company
shall pay the Executive an amount such that the Executive can purchase
such benefits separately at no greater after tax cost to him than he
would have had if the benefits were provided to him as an employee.
(g) A lump-sum cash payment of the actuarial present value equivalent (as
determined in accordance with the most favorable (to the Executive)
overall actuarial assumptions and subsidies in any of the Company's
tax-qualified or nonqualified type defined benefit pension plans in
which the Executive then participates) of the accrued benefits accrued
by the Executive as of the date of termination under the terms of any
nonqualified defined benefit type retirement plan, including but not
limited to, the Amended and Restated Supplemental Executive Retirement
Plan for Textron Inc. Key Executives and the Supplemental Benefits
Plan and assuming the benefit was fully vested without regard to any
minimum age or service requirements. For this purpose, such benefits
shall be calculated under the assumption that the Executive's
employment continued following the date of termination for three (3)
full years (i.e., three (3) additional years of age (including, but
not limited to, for purposes of determining the actuarial present
value), compensation and service credits shall be added).
(h) Three (3) times the amount of the maximum Company contribution or
match to any defined contribution type plan in which the Executive
participates.
(i) A lump-sum cash payment of the product of (i) the Interest Factor (as
determined in the next sentence) multiplied by (ii) the Executive's
entire account balance under the Deferred Income Plan (or any
replacement therefor), plus an additional amount equal to three (3)
times the match which the Company made for the Executive to such plan
for the fiscal year ending immediately prior to the earlier of the
Change in Control or the Qualifying Termination. The "Interest Factor"
shall be equal to one (1) plus three (3) times the rate of earnings of
the Executive's account under such plan for the fiscal year ending
immediately prior to his termination.
(j) Immediate full vesting of any outstanding stock options, performance
share units and other equity awards (and lapse of any forfeiture
provisions) to the extent
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permitted under the plan or grant, or if full vesting is not permitted
with regard to stock options, a cash payment equal to the difference
between the fair market value of the shares covered by the unvested
options and the exercise price of such unvested options on such
unvested options on the date of termination (or, if later, the date of
the Change in Control) or, in the case of Restricted Stock and other
non-option equity grants that would have vested if permitted, the fair
market value of such Restricted Stock or other non-option equity as of
the date of termination. In addition, to the extent any stock options
are exercisable for less than three (3) years after the Executive's
termination (or, if less, the remainder of the respective terms of
such options, including any termination of exercisability of all
Company stock options in connection with the Change in Control or a
merger related thereto), the Executive also shall receive, promptly
following his termination, a cash payment equal to the estimated
future value of such options for the lesser of three (3) years or the
remainder of the respective terms of such options (calculated in
accordance with the same Black-Scholes methodology used for the
Company's then latest distributed proxy statement or, if not so used,
for internal valuation of the last stock option grants made by the
Company prior to the earlier of the Qualifying Termination or the
Change in Control).
(k) Outplacement services at a level commensurate with the Executive's
position, including use of an executive office and secretary, for a
period of one (1) year commencing on the date of termination but in no
event extending beyond the date on which the Executive commences other
full time employment.
(l) Continuation of participation for three (3) additional years in the
Company's programs with regard to tax preparation assistance and
financial planning assistance, club dues and automobile (but based on
the automobile then being used and no new one), in accordance with the
Company's programs in effect at the time of the Change in Control.
(m) To the extent that with regard to any particular item, the Executive
would receive better treatment under the applicable Company plan or
program, such better treatment shall apply.
For purposes of this Section 8, a Qualifying Termination shall mean any
termination of the Executive's employment (i) by the Company without Cause, or
(ii) by the Executive for Good Reason.
8.2 DEFINITION OF "CHANGE IN CONTROL." A Change in Control of the Company
shall be deemed to have occurred as of the first day any one or more of the
following conditions shall have been satisfied:
(a) Any "person" or "group" (within the meaning of Section 13(d) and
14(d)(2) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) other than the Company, any trustee or other
fiduciary holding Company common stock under an employee benefit plan
of the Company or a related company, or any corporation which is
owned, directly or indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of the
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Company's common stock, is or becomes the beneficial owner (as defined
in Rule 13d-3 under the Exchange Act) of more than thirty percent
(30%) of the then outstanding voting stock;
(b) During any period of two (2) consecutive years, individuals who at the
beginning of such period constitute the Board and any new director
whose election by the Board or nomination for election by the
Company's stockholders was approved by a vote of at least two-thirds
of the directors then still in office who either were directors at the
beginning of the two year period or whose election or nomination for
election was previously so approved, cease for any reason to
constitute at least a majority of the Board;
(c) The consummation of a merger or consolidation of the Company with any
other corporation, other than a merger or consolidation which would
result in the voting securities of the Company outstanding immediately
prior thereto continuing to represent (either by remaining outstanding
or being converted into voting securities of the surviving entity)
more than fifty percent (50%) of the combined voting securities of the
Company or such surviving entity outstanding immediately after such
merger or consolidation; or
(d) The approval of the stockholders of the Company of a plan of complete
liquidation of the Company or an agreement for the sale or disposition
by the Company of all or substantially all of its assets.
8.3 EXCISE TAX EQUALIZATION PAYMENT. In the event that the Executive
becomes entitled to payments and/or benefits which would constitute "parachute
payments" within the meaning of Section 280G(b)(2) of the Code, the provisions
of Exhibit A will apply.
9. NONCOMPETITION, CONFIDENTIALITY AND NONDISPARAGEMENT
9.1 AGREEMENT NOT TO COMPETE.
(a) The Executive agrees that for a period of two (2) years after the
termination of the Executive's employment (the "Non-Compete Period"),
the Executive will not engage in Competition with the Company with the
Listed Companies, including, but not limited to, (i) soliciting
customers, business or orders for, or selling any products and
services in, Competition with the Company for such Listed Companies or
(ii) diverting, enticing, or otherwise taking away customers, business
or orders of the Company, or attempting to do so, in either case in
Competition with the Company for such Listed Companies. The Listed
Companies are United Technologies Corporation, General Dynamics
Corporation, Daniher Corporation, Emerson and Tyco International Ltd.
The Listed Companies may not be amended or added to without the prior
written consent of both parties hereto.
(b) The Executive agrees that the restrictions contained in this Section 9
are necessary for the protection of the business and goodwill of the
Company because of the trade secrets within the Executive's knowledge
and are considered by the Executive to be reasonable for such purpose.
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9.2 DEFINITIONS.
(a) "Competition" shall mean engaging in, as an employee, director,
partner, principal, shareholder, consultant, advisor, independent
contractor or similar capacity, with the Listed Companies.
Notwithstanding anything else in this Section 9, Competition shall not
include: (i) holding five percent (5%) or less of an interest in the
equity or debt of any publicly traded company, (ii) engaging in any
activity with the prior written approval of the Chief Executive
Officer or the O&C Committee, (iii) the providing of
accounting/auditing services in an accounting firm that audits or
provides services to Listed Companies, provided that the Executive
does not personally represent such Listed Companies, or (iv) the
employment by, or provision of services to, an investment banking firm
or consulting firm that provides services to Listed Companies,
provided that the Executive does not personally represent or provide
services to such Listed Companies.
(b) For purposes of this Section 9, "Company" shall mean the Company and
its subsidiaries and affiliates.
9.3 AGREEMENT NOT TO ENGAGE IN CERTAIN SOLICITATION. The Executive agrees
that the Executive will not, during the Executive's employment with the Company
or during the two (2) year period thereafter, directly or indirectly, solicit or
induce, or attempt to solicit or induce, any non-clerical employee(s), sales
representative(s), agent(s), or consultant(s) of the Company to terminate such
person's employment, representation or other association with the Company for
the purpose of affiliating with any entity with which the Executive is
associated ("Solicitation").
9.4 CONFIDENTIAL INFORMATION.
(a) The Executive specifically acknowledges that any trade secrets or
confidential business and technical information of the Company or its
vendors, suppliers or customers, whether reduced to writing,
maintained on any form of electronic media, or maintained in mind or
memory and whether compiled by the Executive or the Company
(collectively, "Confidential Information"), derives independent
economic value from not being readily known to or ascertainable by
proper means by others; that reasonable efforts have been made by the
Company to maintain the secrecy of such information; that such
information is the sole property of the Company or its vendors,
suppliers, or customers and that any retention, use or disclosure of
such information by the Executive during the Employment Term (except
in the course of performing duties and obligations of employment with
the Company) or any time after termination thereof, shall constitute
misappropriation of the trade secrets of the Company or its vendors,
suppliers, or customers, provided that Confidential Information shall
not include: (i) information that is at the time of disclosure public
knowledge or generally known within the industry, (ii) information
deemed in good faith by the Executive, while employed by the Company,
desirable to disclose in the course of performing the Executive's
duties, (iii) information the disclosure of which the Executive in
good faith deems necessary in defense of the Executive's rights
provided such disclosure by the
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Executive is limited to only disclose as necessary for such purpose,
or (iv) information disclosed by the Executive to comply with a court,
or other lawful compulsory, order compelling him to do so, provided
the Executive gives the Company prompt notice of the receipt of such
order and the disclosure by the Executive is limited to only
disclosure necessary for such purpose.
(b) The Executive acknowledges that the Company from time to time may have
agreements with other persons or with the United States Government, or
agencies thereof, that impose obligations or restrictions on the
Company regarding inventions made during the course of work under such
agreements or regarding the confidential nature of such work. If the
Executive's duties hereunder will require disclosures to be made to
him subject to such obligations and restrictions, the Executive agrees
to be bound by them.
9.5 SCOPE OF RESTRICTIONS. If, at the time of enforcement of this Section
9, a court holds that the restrictions stated herein are unreasonable under
circumstances then existing, the parties hereto agree that the maximum period,
scope or geographical area reasonable under such circumstances shall be
substituted for the stated period, scope or area and that the court shall be
allowed to revise the restrictions contained herein to cover the maximum period,
scope and area permitted by law.
9.6 REMEDIES.
(a) In the event of a material breach or threatened material breach of
Section 9.1(a), Section 9.3, Section 9.4 or Section 9.10, the Company,
in addition to its other remedies at law or in equity, shall be
entitled to injunctive or other equitable relief in order to enforce
or prevent any violations of the provisions of this Section 9. Except
as specifically provided with regard to Listed Companies, the Company
agrees that it will not assert to enjoin or otherwise limit the
Executive's activities based on an argument of inevitable disclosure
of confidential information.
(b) Upon written request of the Executive, the Chief Executive Officer of
the Company shall consider, in good faith, and within ten (10) days
after receipt of the latter of (i) such written notice and (ii) any
information reasonably requested in accordance with the last sentence
of this subsection, notify the Executive in writing whether or not the
Company will waive the limitation prohibiting the Executive from
working for a Listed Company during the Non-Compete Period, provided,
however, that if the Company does not reply within ten (10) days, the
Company shall be deemed to have waived such limitation. The Executive
shall promptly provide the Company with such information as it may
reasonably request to evaluate whether or not it should waive such
limitation.
(c) In the event the Executive breaches Section 9.1(a), the Company may
immediately cease payment to the Executive of all future amounts due
under Section 6.3(b), as well as otherwise specifically provided in
any other plan, grant or program.
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9.7 UNIFORMITY. In no event shall any definitions of Competition or
Solicitation (or a similar provision) as it applies to the Executive with regard
to any plan of program or grant of the Company be interpreted to be any broader
than as set forth in this Section 9.
9.8 DELIVERY OF DOCUMENTS. Upon termination of this Agreement or at any
other time upon request by the Company, the Executive shall promptly deliver to
the Company all records, files, memoranda, notes, designs, data, reports, price
lists, customer lists, drawings, plans, computer programs, software, software
documentation, sketches, laboratory and research notebooks and other documents
(and all copies or reproductions of such materials in his possession or control)
belonging to the Company. Notwithstanding the foregoing, the Executive may
retain his rolodex and similar phone directories.
9.9 NONDISPARAGEMENT.
(a) During the Employment Term and thereafter, the Executive shall not
with willful intent to damage economically or as to reputation or
vindictively disparage the Company, its subsidiaries or their past or
present respective officers, directors or employees (the "Protected
Group"), provided that the foregoing shall not apply to (i) actions or
statements taken or made by the Executive while employed by the
Company in good faith as fulfilling the Executive's duties with the
Company or otherwise at the request of the Company, (ii) statements
the Executive believes to be truthful that are made in compliance with
legal process or governmental inquiry, (iii) as the Executive in good
faith deems necessary to rebut any untrue or misleading public
statements made about him or any other member of the Protected Group,
(iv) statements made in good faith by the Executive to rebut untrue or
misleading statements made about him or any other member of the
Protected Group by any member of the Protected Group, and (v) normal
commercial puffery in a competitive business situation. No member of
the Protected Group shall be a third party beneficiary of this Section
9.9(a).
(b) During the Employment Term and thereafter, neither the Company
officially nor any then member of the Executive Leadership Team (or
the equivalent) of the Company, as such term is currently used within
the Company, shall with willful intent to damage the Executive
economically or as to reputation or otherwise vindictively disparage
the Executive, provided the foregoing shall not apply to (i) actions
or statements taken or made in good faith within the Company in
fulfilling duties with the Company, (ii) truthful statements made in
compliance with legal process, governmental inquiry or as required by
legal filing or disclosure requirements, (iii) as in good faith deemed
necessary to rebut any untrue or misleading statements by the
Executive as to any member of the Protected Group, or (iv) normal
commercial puffery in a competitive business situation.
(c) In the event of a material breach or threatened material breach of
clauses (a) or (b) above, the Company or the Executive, as the case
may be, in addition to its or the Executive's other remedies at law or
in equity, shall be entitled to injunctive or other equitable relief
in order to enforce or prevent any violations of this Section 9.9.
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9.10 POOLING OF INTERESTS. If the Company is involved in any proposed
business combination that is contemplated to be accounted for as a pooling of
interests, the Executive agrees to cooperate with the reasonable requests of the
Company with regard to the exercise of stock options, the sale of Company stock
or other matters that could affect the ability of the combination to be
accounted for as a pooling of interests.
10. LIABILITY INSURANCE AND INDEMNIFICATION
The Company shall cover the Executive under directors and officers
liability insurance both during and, while potential liability exists, after the
Employment Term in the same amount and to the same extent, if any, as the
Company covers its other officers and directors.
11. ASSIGNMENT
11.1 ASSIGNMENT BY THE COMPANY. This Agreement may and shall be assigned or
transferred to, and shall be binding upon and shall inure to the benefit of, any
successor of the Company, and any such successor shall be deemed substituted for
all purposes of the "Company" under the terms of this Agreement. As used in this
Agreement, the term "successor" shall mean any person, firm, corporation or
business entity which at any time, whether by merger, purchase, or otherwise,
acquires all or substantially all of the assets of the Company. Notwithstanding
such assignment, the Company shall remain, with such successor, jointly and
severally liable for all its obligations hereunder. Except as herein provided,
this Agreement may not otherwise be assigned by the Company.
11.2 ASSIGNMENT BY THE EXECUTIVE. This Agreement is not assignable by the
Executive. This Agreement shall inure to the benefit of and be enforceable by
the Executive's personal or legal representatives, executors, and
administrators, successors, heirs, distributees, devisees, and legatees. If the
Executive should die while any amounts payable to the Executive hereunder remain
outstanding, all such amounts, unless otherwise provided herein, shall be paid
in accordance with the terms of this Agreement to the Executive's devisee,
legatee, or other designee or, in the absence of such designee, to the
Executive's estate.
12. LEGAL REMEDIES
12.1 PAYMENT OF LEGAL FEES. The Company shall pay the Executive's
reasonable legal fees and costs associated with entering into this Agreement. To
the fullest extent permitted by law, the Company shall promptly pay upon
submission of statements all legal and other professional fees, costs of
litigation, prejudgment interest, and other expenses incurred in connection with
any dispute arising hereunder; provided, however, the Company shall be
reimbursed by the Executive for (i) the fees and expenses advanced in the event
the Executive's claim is in a material manner in bad faith or frivolous and the
arbitrator or court, as applicable, determines that the reimbursement of such
fees and expenses is appropriate, or (ii) to the extent that the arbitrator or
court, as appropriate, determines that such legal and other professional fees
are clearly and demonstrably unreasonable.
12.2 ARBITRATION. All disputes and controversies arising under or in
connection with this Agreement, other than the seeking of injunctive or other
equitable relief pursuant to Section 9 hereof, shall be settled by arbitration
conducted before a panel of three (3) arbitrators sitting in New York City, New
York, or such other location agreed by the parties hereto, in accordance
19
<PAGE> 20
with the rules for expedited resolution of commercial disputes of the American
Arbitration Association then in effect. The determination of the majority of the
arbitrators shall be final and binding on the parties. Judgment may be entered
on the award of the arbitrator in any court having proper jurisdiction. All
expenses of such arbitration, including the fees and expenses of the counsel of
the Executive, shall be borne by the Company and the Executive shall be entitled
to reimbursement of his expenses as provided in Section 12.1 hereof.
12.3 NOTICE. Any notices, requests, demands, or other communications
provided for by this Agreement shall be sufficient if in writing and if
delivered personally, sent by telecopier, sent by an overnight service or sent
by registered or certified mail. Notice to the Executive not delivered
personally (or by telecopy where the Executive is known to be) shall be sent to
the last address on the books of the Company, and notice to the Company not
delivered personally (or by telecopy to the known personal telecopy of the
person it is being sent to) shall be sent to it at its principal office. All
notices to the Company shall be delivered to the Chief Executive Officer with a
copy to the senior legal officer. Delivery shall be deemed to occur on the
earlier of actual receipt or tender and rejection by the intended recipient.
12.4 CONTINUED PAYMENTS. In the event after a Change in Control either
party files for arbitration to resolve any dispute as to whether a termination
is for Cause or Good Reason, until such dispute is determined by the
arbitrators, the Executive shall continue to be treated economically and benefit
wise in the manner asserted by him in the arbitration effective as of the date
of the filing of the arbitration, subject to the Executive promptly refunding
any amounts paid to him, paying the cost of any benefits provided to him and
paying to the Company the profits in any stock option or other equity awards
exercised or otherwise realized by him during the pendency of the arbitration
which he is ultimately held not to be entitled to; provided the arbitrators may
terminate such payments and benefits in the event that they determine at any
point that the Executive is intentionally delaying conclusion of the
arbitration.
13. MISCELLANEOUS
13.1 ENTIRE AGREEMENT. This Agreement, except to the extent specifically
provided otherwise herein, supersedes any prior agreements or understandings,
oral or written, between the parties hereto or between the Executive and the
Company, with respect to the subject matter hereof and constitutes the entire
Agreement of the parties with respect to the subject matter hereof. To the
extent any severance plan or program of the Company that would apply to the
Executive is more generous to the Executive than the provisions hereof, the
Executive shall be entitled to any additional payments or benefits which are not
duplicative, but shall otherwise not be eligible for such plan or program.
13.2 MODIFICATION. This Agreement shall not be varied, altered, modified,
canceled, changed, or in any way amended, nor any provision hereof waived,
except by mutual agreement of the parties in a written instrument executed by
the parties hereto or their legal representatives.
13.3 SEVERABILITY. In the event that any provision or portion of this
Agreement shall be determined to be invalid or unenforceable for any reason, the
remaining provisions of this Agreement shall be unaffected thereby and shall
remain in full force and effect.
20
<PAGE> 21
13.4 COUNTERPARTS. This Agreement may be executed in two (2) or more
counterparts, each of which shall be deemed to be an original, but all of which
together will constitute one and the same Agreement.
13.5 TAX WITHHOLDING. The Company may withhold from any benefits payable
under this Agreement all federal, state, city, or other taxes as may be required
pursuant to any law or governmental regulation or ruling.
13.6 BENEFICIARIES. The Executive may designate one or more persons or
entities as the primary and/or contingent beneficiaries of any amounts to be
received under this Agreement. Such designation must be in the form of a signed
writing acceptable to the Board or the Board's designee. The Executive may make
or change such designation at any time.
13.7 REPRESENTATION. The Executive represents that the Executive's
employment by the Company and the performance by the Executive of his
obligations under this Agreement do not, and shall not, breach any agreement
that obligates him to keep in confidence any trade secrets or confidential or
proprietary information of his or of any other party, to write or consult to any
other party or to refrain from competing, directly or indirectly, with the
business of any other party. The Executive shall not disclose to the Company,
and the Company shall not request that the Executive disclose, any trade secrets
or confidential or proprietary information of any other party.
13.8 CONSTRUCTION. No provision of this Agreement shall be interpreted or
construed against any party because that party or its legal representative
drafted that provision. The captions and headings of the Sections of this
Agreement are for convenience of reference only and are not to be considered in
construing this Agreement. Unless the context of this Agreement clearly requires
otherwise: (a) references to the plural include the singular, the singular the
plural, and the part the whole, (b) references to one gender include all
genders, (c) "or" has the inclusive meaning frequently identified with the
phrase "and/or," (d) "including" has the inclusive meaning frequently identified
with the phrase "including but not limited to" or "including without
limitation," (e) references to "hereunder," "herein" or "hereof" relate to this
Agreement as a whole, and (f) the terms "dollars" and "$" refer to United States
dollars. Section, subsection, exhibit and schedule references are to this
Agreement as originally executed unless otherwise specified. Any reference
herein to any agreement, including this Agreement, shall be deemed to include
such agreement as it may be modified, varied, amended or supplemented from time
to time. Any reference herein to any statute, rule or regulation shall be deemed
to include such statute, rule or regulation as it may be modified, varied,
amended or supplemented from time to time. Any reference herein to any person
shall be deemed to include the heirs, personal representatives, successors and
permitted assigns of such person.
14. GOVERNING LAW
The provisions of this Agreement shall be construed and enforced in
accordance with the laws of the state of Delaware, without regard to any
otherwise applicable principles of conflicts of laws.
IN WITNESS WHEREOF, the Executive and the Company have executed this
Agreement, as of the day and year first above written.
/s/ Theodore R. French
----------------------
THEODORE R. FRENCH
TEXTRON INC.
By: /s/ Terrence O'Donnell
---------------------------------
Name: Terrence O'Donnell
Title: Executive Vice President
and General Counsel
21
<PAGE> 22
EXHIBIT A
PARACHUTE GROSS UP
(a) In the event that the Executive shall become entitled to payments
and/or benefits provided by this Agreement or any other amounts in the "nature
of compensation" (whether pursuant to the terms of this Agreement or any other
plan, arrangement or agreement with the Company, any person whose actions result
in a change of ownership or effective control covered by Section 280G(b)(2) of
the Code or any person affiliated with the Company or such person) as a result
of such change in ownership or effective control (collectively the "Company
Payments"), and such Company Payments will be subject to the tax (the "Excise
Tax") imposed by Section 4999 of the Code (and any similar tax that may
hereafter be imposed by any taxing authority) the Company shall pay to the
Executive at the time specified in subsection (d) below: (i) an additional
amount (the "Gross-up Payment") such that the net amount retained by the
Executive, after deduction of any Excise Tax on the Company Payments and any
U.S. federal, state, and for local income or payroll tax upon the Gross-up
Payment provided for by this paragraph (a), but before deduction for any U.S.
federal, state, and local income or payroll tax on the Company Payments, shall
be equal to the Company Payments and (ii) an amount equal to the product of any
deductions disallowed for federal, state or local income tax purposes because of
the inclusion of the Gross-Up Payment in the Executive's adjusted gross income
multiplied by the highest applicable marginal rate of federal, state or local
income taxation, respectively, for the calendar year in which the Gross-Up
Payment is to be made.
(b) For purposes of determining whether any of the Company Payments and
Gross-up Payments (collectively the "Total Payments") will be subject to the
Excise Tax and the amount of such Excise Tax, (x) the Total Payments shall be
treated as "parachute payments" within the meaning of Section 280G(b)(2) of the
Code, and all "parachute payments" in excess of the "base amount" (as defined
under Section 280G(b)(3) of the Code) shall be treated as subject to the Excise
Tax, unless and except to the extent that, in the opinion of the Company's
independent certified public accountants appointed prior to any change in
ownership (as defined under Code Section 280G(b)(2)) or tax counsel selected by
such accountants (the "Accountants") such Total Payments (in whole or in part)
either do not constitute "parachute payments," represent reasonable compensation
for services actually rendered within the meaning of Section 280G(b)(4) of the
Code in excess of the "base amount" or are otherwise not subject to the Excise
Tax, and (y) the value of any non-cash benefits or any deferred payment or
benefit shall be determined by the Accountants in accordance with the principles
of Section 280G of the Code.
(c) For purposes of determining the amount of the Gross-up Payment, the
Executive shall be deemed to pay U.S. federal income taxes at the highest
marginal rate of U.S. federal income taxation in the calendar year in which the
Gross-up Payment is to be made and state and local income taxes at the highest
marginal rate of taxation in the state and locality of the Executive's residence
for the calendar year in which the Company Payment is to be made, net of the
maximum reduction in U.S. federal income taxes which could be obtained from
deduction of such state and local taxes if paid in such year. In the event that
the Excise Tax is subsequently determined by the Accountants (or by the Internal
Revenue Service or other taxing authority) to be less than the amount taken into
account hereunder at the time the Gross-up Payment is made, the Executive shall
repay to the Company, at the time that the amount of such reduction in Excise
Tax is finally determined, the portion of the prior Gross-up Payment
attributable to such
<PAGE> 23
reduction (plus the portion of the Gross-up Payment attributable to the Excise
Tax and U.S. federal, state and local income tax imposed on the portion of the
Gross-up Payment being repaid by the Executive if such repayment results in a
reduction in Excise Tax or a U.S. federal, state and local income tax
deduction), plus interest on the amount of such repayment at the rate provided
in Section 1274(b)(2)(B) of the Code. Notwithstanding the foregoing, in the
event any portion of the Gross-up Payment to be refunded to the Company has been
paid to any U.S. federal, state and local tax authority, repayment thereof (and
related amounts) shall not be required until actual refund or credit of such
portion has been made to the Executive, and interest payable to the Company
shall not exceed the interest received or credited to the Executive by such tax
authority for the period it held such portion. The Executive and the Company
shall mutually agree upon the course of action to be pursued (and the method of
allocating the expense thereof) if the Executive's claim for refund or credit is
denied.
In the event that the Excise Tax is later determined by the Accountants (or
the Internal Revenue Service or other taxing authority) to exceed the amount
taken into account hereunder at the time the Gross-up Payment is made (including
by reason of any payment the existence or amount of which cannot be determined
at the time of the Gross-up Payment), the Company shall make an additional
Gross-up Payment in respect of such excess (plus any interest or penalties
payable with respect to such excess) at the time that the amount of such excess
is finally determined.
(d) The Gross-up Payment or portion thereof provided for in subsection (c)
above shall be paid not later than the thirtieth (30th) day following an event
occurring which subjects the Executive to the Excise Tax; provided, however,
that if the amount of such Gross-up Payment or portion thereof cannot be finally
determined on or before such day, the Company shall pay to the Executive on such
day an estimate, as determined in good faith by the Accountants, of the minimum
amount of such payments and shall pay the remainder of such payments (together
with interest at the rate provided in Section 1274(b)(2)(B) of the Code),
subject to further payments pursuant to subsection (c) hereof, as soon as the
amount thereof can reasonably be determined, but in no event later than the
ninetieth day after the occurrence of the event subjecting the Executive to the
Excise Tax. In the event that the amount of the estimated payments exceeds the
amount subsequently determined to have been due, such excess shall constitute a
loan by the Company to the Executive, payable on the fifth day after demand by
the Company (together with interest at the rate provided in Section
1274(b)(2)(B) of the Code).
(e) In the event of any controversy with the Internal Revenue Service (or
other taxing authority) with regard to the Excise Tax, the Executive shall
permit the Company to control issues related to the Excise Tax (at its expense),
provided that such issues do not potentially materially adversely affect the
Executive, but the Executive shall control any other issues. In the event the
issues are interrelated, the Executive and the Company shall in good faith
cooperate so as not to jeopardize resolution of any such issues, but if the
parties cannot agree the Executive shall make the final determination with
regard to the issues. In the event of any conference with any taxing authority
as to the Excise Tax or associated income taxes, the Executive shall permit the
representative of the Company to accompany the Executive, and the Executive and
the Executive's representative shall cooperate with the Company and its
representative.
2
<PAGE> 24
(f) The Company shall be responsible for all charges of the Accountants.
(g) The Company and the Executive shall promptly deliver to each other
copies of any written communications, and summaries of any verbal
communications, with any taxing authority regarding the Excise Tax covered by
this Exhibit A.
3
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.15B
<SEQUENCE>5
<FILENAME>b38194txex10-15b.txt
<DESCRIPTION>RETENTION AWARD GRANTED TO THEODORE R. FRENCH
<TEXT>
<PAGE> 1
EXHIBIT 10.15B
Theodore R. French
Restricted Stock Awards
January 1, 2001
The Organization and Compensation Committee approved an award of 100,000 shares
of restricted stock to Theodore R. French (the "Executive"). The terms of the
awards are as follows:
- - The Executive will be granted restricted shares of Textron common stock
provided he is still employed by Textron in accordance with the following
schedule:
<TABLE>
<CAPTION>
Restricted Vest
Shares Dates
------ -----
<S> <C> <C>
20,000 1/1/02
20,000 1/1/03
20,000 1/1/04
20,000 1/1/05
20,000 1/1/06
-------
100,000
=======
</TABLE>
- - Textron shall retain the certificates representing the shares of restricted
stock in its possession until such time as the shares have vested.
- - Except as otherwise provided herein, the Executive shall not be entitled to
receive the restricted shares if his employment with Textron ends for any
reason prior to the respective vesting date, provided that if the
Executive's employment ends prior to such date because of his death,
"Disability" (Attachment A), his involuntary termination by Textron without
"Cause" (Attachment A) or by the Executive for "Good Reason" (Attachment
A), the shares shall immediately become fully vested. In the event of such
termination, the shares shall be issued within 30 days following
termination of employment.
- - Notwithstanding the above, all unvested shares shall immediately vest upon
a "Change in Control" (Attachment A).
- - Dividends shall be credited to the Executive and such dividends are to be
accounted for as if reinvested in actual Textron common stock. Such
dividends will vest immediately but payment will be deferred until the
earlier of the restricted shares vest date or termination of employment.
- - The number of restricted shares awarded to the Executive hereunder shall be
proportionately adjusted for any increase or decrease in the number of
issued shares of Textron common stock resulting from a stock split, stock
dividend or any other increase or decrease in such shares effective without
receipt of consideration by Textron.
- - With respect to withholding required upon the lapse of restrictions on the
restricted stock, the Executive may elect, subject to the approval of the
Board, to satisfy the withholding requirement, in whole or in part, by
having Textron withhold shares having a fair market value on the date the
tax is to be determined equal to the minimum statutory total tax which
could be imposed on the transaction. Such election shall be irrevocable,
made in writing, signed by the Executive, and shall be subject to any
restrictions or limitations that the Board in its sole discretion, deems
appropriate.
/s/ John D. Butler 12/20/00
- ----------------------------- -------------------------
John D. Butler Date
<PAGE> 2
ATTACHMENT A
Theodore R. French
Restricted Stock Awards
January 1, 2001
"DISABILITY"
"Disability" shall mean, for purposes of this award, the inability of the
Executive, due to injury, illness, disease or bodily or mental infirmity,
to engage in the performance of his material duties of employment with the
Company for a period of more than one hundred eighty (180) consecutive days
or for a period that is reasonably expected to exist for a period of more
than one hundred eighty (180) consecutive days, provided that interim
returns to work of less than ten (10) consecutive business days in duration
shall not be deemed to interfere with a determination of consecutive absent
days if the reason for absence before and after the interim return are the
same. The existence or non-existence of a Disability shall be determined by
a physician agreed upon a good faith by the Executive (or his
representatives) and Textron.
"CAUSE"
"Cause" shall mean: (i) an act or acts of willful misrepresentation, fraud
or willful dishonesty (other than good faith expense account disputes) by
the Executive which in any case is intended to result in his or another
person or entity's substantial personal enrichment at the expense of the
Company; (ii) any willful misconduct by the Executive with regard to the
Company, its business, assets or employees that has, or was intended to
have, a material adverse impact (economic or otherwise) on the Company;
(iii) any material, willful and knowing violation by the Executive of (x)
the Company's Business Conduct Guidelines, or (y) any of his fiduciary
duties to the Company which in either case has, or was intended to have, a
material adverse impact (economic or otherwise) on the Company; (iv) the
willful or reckless behavior of the Executive with regard to a matter of a
material nature which has a material adverse impact (economic or otherwise)
on the Company; (v) the executive's willful failure to attempt to perform
his duties or his willful failure to attempt to follow the legal written
direction of the Board, which in either case is not remedied within ten
(10) days after receipt by the Executive of a written notice from the
Company specifying the details thereof; or (vi) the Executive's conviction
of, or pleading NOLO CONTENDERE or guilty to, a felony (other than (x) a
traffic infraction or (y) vicarious liability solely as a result of his
position provided the Executive did not have actual knowledge of the
actions or inactions creating the violation of the law or the Executive
relied in good faith on the advice of counsel with regard to the legality
of such action or inaction (or the advice of other specifically qualified
professionals as to the appropriate or proper action or inaction to take
with regard to matters which are not matters of legal interpretation); No
action or inaction should be deemed willful if not demonstrably willful and
if taken or not taken by the Executive in good faith as not being adverse
to the best interests of the Company. Reference in this paragraph to the
Company shall also include direct and indirect subsidiaries of the Company,
and materiality and material adverse impact shall be measured based on the
action or inaction and the impact upon, and not the size of, the Company
taken as a whole, provided that after a Change in Control, the size of the
Company, taken as a whole, shall be a relevant factor in determining
materiality and material adverse impact.
"GOOD REASON"
"Good Reason" shall mean, without the Executive's express written consent,
the occurrence of any one or more of the following: (i) the assignment to
the Executive of duties materially inconsistent with the Executive's then
authorities, duties, responsibilities, and status (including offices,
titles, and reporting requirements), or any reduction in the Executive's
then title, position, reporting lines or a material reduction (other than
temporarily while Disabled or otherwise incapacitated) in his then status,
authorities, duties, or responsibilities or, if then a director of the
Company, failure to be nominated or reelected as a director of the Company
or removal as such; (ii) relocation of the Executive from the principal
office of the Company (excluding reasonable travel on the Company's
business to an extent substantially consistent with the Executive's
business obligations) or relocation of the principal office of the Company
to a location which is at least fifty (50) miles from the Company's current
headquarters, provided, however, if the Executive at the time of the
relocation is not located at the principal office, such relocation
provision shall apply based on his then location but shall not cover a
relocation to the principal office prior to a Change in Control; (iii) a
reduction by the Company in the Executive's Base Salary; (iv) a reduction
in the Executive's aggregate level of participation in any of the Company's
short and/or long-term incentive compensation plans, or employee benefit or
retirement plans, policies, practices, or arrangements in which the
Executive participated as of the Effective Date, or, after a Change in
Control, participated immediately prior to the Change in Control; (v) the
failure of the Company to obtain and deliver to the Executive a
satisfactory written agreement from any successor to the Company to assume
and agree to perform this Agreement; or (vi) any other material breach by
the Company of this Agreement.
<PAGE> 3
Page 2
"CHANGE IN CONTROL"
A "Change in Control" of the Company shall be deemed to have occurred as of
the first day any one or more of the following conditions shall have been
satisfied:
(a) Any "person" or "group" (within the meaning of Section 13(d) and
14(d)(2) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) other than the Company, any trustee or other
fiduciary holding Company common stock under an employee benefit
plan of the Company or a related company, or any corporation
which is owned, directly or indirectly, by the stockholders of
the Company in substantially the same proportions as their
ownership of the Company's common stock, is or becomes the
beneficial owner (as defined in Rule 13d-3 under the Exchange
Act) of more than thirty percent (30%) of the then outstanding
voting stock;
(b) During any period of two (2) consecutive years, individuals who
at the beginning of such period constitute the Board and any new
director whose election by the Board or nomination for election
by the Company's stockholders was approved by a vote of at least
two-thirds of the directors then still in office who either were
directors at the beginning of the two year period or whose
election or nomination for election was previously so approved,
cease for any reason to constitute at least a majority of the
Board;
(c) The consummation of a merger or consolidation of the Company with
any other corporation, other than a merger or consolidation which
would result in the voting securities of the Company outstanding
immediately prior thereto continuing to represent (either by
remaining outstanding or being converted into voting securities
of the surviving entity) more than fifty percent (50%) of the
combined voting securities of the Company or such surviving
entity outstanding immediately after such merger or
consolidation; or
(d) The approval of the stockholders of the Company of a plan of
complete liquidation of the Company or an agreement for the sale
or disposition by the Company of all or substantially all of its
assets.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.18B
<SEQUENCE>6
<FILENAME>b38194txex10-18b.txt
<DESCRIPTION>AMENDMENT TO EMPLOYMENT AGREEMENT WITH STEPHEN KEY
<TEXT>
<PAGE> 1
EXHIBIT 10.18B
FIRST AMENDMENT
FIRST AMENDMENT (the "First Amendment"), dated as of the 21st day of
December, 2000, to the Employment Agreement dated as of the 23rd day of July,
1998, by and between Stephen L. Key ("Key") and Textron, Inc. (the "Company")
(the "Original Employment Agreement" and, as amended by this First Amendment,
the "Employment Agreement").
W I T N E S S E T H:
WHEREAS, Key and the Company entered into the Original Employment Agreement
pursuant to which Key served the Company as, among other things, Executive Vice
President ("EVP") and Chief Financial Officer ("CFO");
WHEREAS, Key has indicated to the Company his desire to retire from
employment with the Company, and the Company wishes to accommodate Key's desire;
and
WHEREAS, the Company appointed a new CFO effective as of December 22, 2000
(the "CFO Transition Date");
WHEREAS, Key is willing to remain employed by the Company as EVP and CFO
until the CFO Transition Date and, at the Company's option, as EVP of the
Company ("Transition Position") until January 31, 2001 (the "Normal Termination
Date");
WHEREAS, Key and the Company desire to amend the Original Employment
Agreement: (a) to provide Key with certain additional severance benefits so as
to encourage his retention as EVP and CFO until the CFO Transition Date, his
retention in a Transition Position until the Normal Termination Date and his
continuing retention in a Transition Position beyond the
1
<PAGE> 2
Normal Transition Date should a Contingent Event (as defined in Exhibit A to the
Employment Agreement) occur, and (b) to document Key's waiver of certain rights,
if any, arising with respect to Key's employment to the date hereof.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements of the parties set forth in the Original Employment
Agreement and this First Amendment, and of other good and valuable
consideration, the adequacy and receipt of which is acknowledged, the parties
hereto agree as follows:
1. All terms used herein, except as otherwise specifically defined
herein, shall have the same meaning as in the Original Employment Agreement. For
purposes of the First Amendment and the Employment Agreement the term "Good
Reason" shall mean only an event of the type described in such definition in
Section 5(f) of the Original Employment Agreement that occurs from and after the
date hereof and shall not include any such event occurring prior to the date
hereof, each of which such earlier events, if any, are hereby waived by Key as
the basis for any termination pursuant to Section 5(f) of the Employment
Agreement. The term "Agreement" as used in the Employment Agreement shall have
the same meaning as "Employment Agreement."
2. Exhibit A to the Employment Agreement is amended to read as follows:
"1. Pursuant to a letter dated March 21, 1995 (the "Letter"), the
Executive is entitled to the cash equivalent of 20,000 shares of the
Company's common stock (40,000 shares post split) following his retirement
provided he retires from the Company at or after age 60. The number of
shares shall be proportionally adjusted for any increase or decrease in the
number of issued shares of the Company's common stock resulting from a
stock split, stock dividend or any other increase or decrease in such
shares effected without receipt of consideration by the Company. The cash
equivalent will be based on the average of the composite closing price (as
reported on the New York Stock Exchange consolidated tape) of the Company's
common stock for the ten (10) trading days (November 14, 2000 through
November 28, 2000 ($52.25)) immediately preceding the "Trigger Date"
(November 29, 2000) or the ten (10) trading day period starting February
13, 2001 and
2
<PAGE> 3
ending February 27, 2001, whichever provides the Executive with the greater
amount, and payment shall be made after the end of the second measuring
period, and FURTHER PROVIDED that, in the event of a Change in Control, if
a Qualified Termination occurs within the protected period under Section 8
of the Employment Agreement, the price, if higher, shall be the highest
closing price per share of the Company's common stock (as reported on the
New York Stock Exchange consolidated tape) during the 30 day period ending
on the date of such Change in Control.
2. Notwithstanding the foregoing age 60 requirement, the payment
provided for in Section 1 of this EXHIBIT A shall vest upon the effective
date of the Executive's termination of employment at any age after the date
hereof as a result of: (a) death (pursuant to Section 5(a) of the
Employment Agreement), (b) Disability (pursuant to Section 5(b) of the
Employment Agreement), (c) a termination of Executive's employment by the
Company without Cause (pursuant to Section 5(e) of the Employment
Agreement), (d) a resignation by the Executive for Good Reason (pursuant to
Section 5(f) of the Employment Agreement), or (e) any termination by
Executive (whether or not for Good Reason) after January 31, 2001 (the
"Normal Termination Date"), PROVIDED, HOWEVER, that if a vacancy occurs in
the CFO position ("Contingent Event") on or prior to the Normal Termination
Date, the term "the earlier of (i) June 1, 2001, and (ii) the appointment
of a new CFO" shall be substituted for "January 31, 2001" in this CLAUSE
(e). Once vested, such payment shall be paid out in a lump sum as provided
for in Section 1 of this EXHIBIT A.
3. Upon a Change in Control the Executive's right to the cash
payment contemplated in Section 1 of this EXHIBIT A shall immediately vest,
but such payment shall not be made until the earlier of (a) a termination
of the Executive's employment thereafter for a reason contemplated by
Section 2 of this EXHIBIT A or (b) a Qualifying Termination within the
protected period provided for in Section 8 of the Employment Agreement.
4. The foregoing award shall not be subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge, encumbrance,
attachment, garnishment, execution or levy of any kind, and any attempt to
do so shall not be recognized."
3. Section 6 of the Employment Agreement is amended by the addition of a
new Section 6.5 at the end thereof to read as follows:
"6.5 SPECIAL TERMINATION RULES. (a) In the event Section 6.3 or
Section 8.1 of this Employment Agreement becomes applicable to Executive,
for purposes of the SERP and any other pension or welfare benefit plan of
the Company, the Executive shall be deemed to have satisfied all age and
service requirements for the benefit, shall be treated as if he was the
greatest of his actual age, the minimum required age
3
<PAGE> 4
for such benefit or his "Deemed Age" (as defined below) and had service
equal to the greater of his actual service or the minimum required service
for each such benefit, and shall, if Section 8.1 is applicable, be entitled
to immediately commence benefits thereunder, or if Section 6.3 is
applicable, be entitled to commence benefits thereunder at the earlier of
(x) when he otherwise would under the terms of the applicable plan be
entitled to commence such benefit, or (y) upon the ceasing of the payment
of the amounts payable pursuant to Section 6.3(b). Executive's "Deemed Age"
shall be 62 plus one month for each month that Key remains employed as CFO
after January 31, 2001. In the event this provision applies, Section 6.3(e)
of this Agreement shall only apply with regard to the SERP to the extent
the amount of added service and age by virtue of this provision is less
than two and one-half (2 1/2) years. Application of this provision shall
not affect application of Section 8.1(g).
"(b) In the event that Executive voluntarily terminates his employment
for any reason effective on or after January 31, 2001 (PROVIDED, HOWEVER,
that should a Contingent Event occur on or prior to such date, the term
"the earlier of (i) June 1, 2001, and (ii) the appointment of a new CFO"
shall be substituted for "January 31, 2001" in this subsection), Executive
shall be treated as if he terminated his employment for Good Reason, except
that, if such termination would not be covered by Section 8.1, instead of
being entitled to any amount under Section 6.3(b): (y) Executive shall be
entitled to immediately commence retirement benefits pursuant to Section
6.3(e), being treated as if he was the greater of the Deemed Age or the
Executive's actual age, and the Company shall immediately prior to the
termination date contribute to the Executive's stock unit account under the
Company's Deferred Income Plan, without a company matching contribution,
the amount of $720,000, and in addition, if the Executive dies during the
thirty (30) month period following his termination, the Company shall
promptly pay to Executive's estate or designated beneficiary an amount
equal to $22,576.00 times thirty (30) less the number of months between
Executive's date of termination and his death.
"(c) If any benefit or equity plans or grant specifically provides for
benefits or rights in the discretion of the Chief Executive Officer, the
Senior Human Resources Officer or the Board of Directors (or a committee
thereof), such consent shall be deemed given in the event Section 6.3,
including as provided under clause (b) above, or Section 8.1 of the
Employment Agreement becomes applicable becomes applicable at any time
after the date of the First Amendment hereto.
"(d) In the event that Section 6.3, including as provided under clause
(b) above, or Section 8.1 of the Employment Agreement becomes applicable at
any time after the date of the First Amendment hereto, the Executive shall
be treated as if he qualifies as a `retiree' for all benefit plans to the
extent such status would provide him on a benefit by benefit basis with
greater rights than he otherwise would have. The parties acknowledge and
agree that (i) any reference in this Employment Agreement to "welfare
plans" is not intended to include a reference to any long-term disability
plan offered to retirees, and (ii) disability coverage is not being
provided to the Executive in the event that Section 6.3, including as
provided under clause (b) above, or Section 8.1 of the Employment Agreement
becomes applicable.
4
<PAGE> 5
4. The Executive agrees that, during the one (1) year period following
any termination of his employment with the Company, the Executive will consult
with and provide information to the Company from time to time upon the Company's
reasonable request with respect to any matter(s) or proceeding(s) arising
thereafter that relate in a material way to the Executive's duties or
responsibilities while employed by the Company or as to which the Executive may
have knowledge or insight as a result of his prior employment by the Company.
The Company will give the Executive reasonable notice of any such request and
shall use commercially reasonable means to avoid any such request's unduly
interfering with the Executive's other activities. The Company will reimburse
the Executive for any out of pocket expenses incurred in connection with
rendering such assistance and shall accord to the Executive in connection with
such activities such indemnification and exculpation protections as would be
accorded him if he were doing so as an officer of the Company.
5. As amended herein, the Employment Agreement shall remain in full force
and effect.
IN WITNESS WHEREOF, the Executive and the Company have executed this First
Amendment as of the day and year first above written.
/s/ Stephen L. Key
--------------------------------------------
Stephen L. Key
TEXTRON INC.
By /s/ John D. Butler
------------------------------------------
John D. Butler
Executive Vice President Administration
& Chief Human Resources Officer
5
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-12.1
<SEQUENCE>7
<FILENAME>b38194txex12-1.txt
<DESCRIPTION>COMPUTATION OF RATIO OF INCOME TO FIXED CHARGES
<TEXT>
<PAGE> 1
EXHIBIT 12.1
TEXTRON MANUFACTURING
COMPUTATION OF RATIO OF INCOME TO COMBINED FIXED
CHARGES AND PREFERRED STOCK DIVIDENDS
(UNAUDITED)
(In millions except ratios)
<TABLE>
<CAPTION>
Year
-----------------------------------------------------------------------------------
2000 1999 1998 1997 1996
------------- -------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Fixed charges:
Interest expense (1) $ 158 $ 56 $ 146 $ 117 $ 137
Distributions on preferred securities of
subsidiary trust, net of income taxes 26 26 26 26 23
Estimated interest portion of rents 30 26 20 14 18
------------- -------------- ------------- ------------- -------------
Total fixed charges $ 214 $ 108 $ 192 $ 157 $ 178
============= ============== ============= ============= =============
Income:
Income from continuing operations
before income taxes and distributions
on preferred securities of subsidiary
trust $ 611 $ 1,030 $ 763 $ 648 $ 540
Fixed charges (2) 188 82 166 131 155
Eliminate equity in undistributed pretax
income of finance subsidiaries (112) (92) (47) (36) (64)
------------- -------------- ------------- ------------- -------------
Adjusted income $ 687 $ 1,020 $ 882 $ 743 $ 631
============= ============== ============= ============= =============
Ratio of income to fixed charges 3.21 9.44 4.59 4.73 3.54
============= ============== ============= ============= =============
</TABLE>
- ------------------------
(1) Includes interest unrelated to borrowings of $3 million in 1999, $16
million in 1998; $12 million in 1997 and $11 million in 1996.
(2) Adjusted to exclude distributions on preferred securities of subsidiary
trust, net of income taxes in 2000, 1999, 1998, 1997 and 1996.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-12.2
<SEQUENCE>8
<FILENAME>b38194txex12-2.txt
<DESCRIPTION>COMPUTATION OF RATIO OF FIXED CHARGES TO DIVIDENDS
<TEXT>
<PAGE> 1
EXHIBIT 12.2
TEXTRON INC. INCLUDING ALL MAJORITY-OWNED SUBSIDIARIES
COMPUTATION OF RATIO OF INCOME TO COMBINED FIXED
CHARGES AND PREFERRED STOCK DIVIDENDS
(UNAUDITED)
(In millions except ratios)
<TABLE>
<CAPTION>
Year
-----------------------------------------------------------------------------------
2000 1999 1998 1997 1996
------------- -------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Fixed charges:
Interest expense (1) $ 492 $ 245 $ 301 $ 270 $ 284
Distributions on preferred securities of
subsidiary trust, net of income taxes 26 26 26 26 23
Estimated interest portion of rents 31 27 21 14 19
------------- -------------- ------------- ------------- -------------
Total fixed charges $ 549 $ 298 $ 348 $ 310 $ 326
============= ============== ============= ============= =============
Income:
Income from continuing operations
before income taxes and distributions
on preferred securities of subsidiary
trust $ 611 $ 1,030 $ 763 $ 648 $ 540
Fixed charges (2) 523 272 322 284 303
------------- -------------- ------------- ------------- -------------
Adjusted income $ 1,134 $ 1,302 $ 1085 $ 932 $ 843
============= ============== ============= ============= =============
Ratio of income to fixed charges 2.07 4.37 3.12 3.01 2.59
============= ============== ============= ============= =============
</TABLE>
- ------------------------
(1) Includes interest unrelated to borrowings of $3 million in 1999, $16
million in 1998, $12 million in 1997 and $11 million in 1996.
(2) Adjusted to exclude distributions on preferred securities of subsidiary
trust, net of income taxes in 2000, 1999, 1998, 1997 and 1996.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-13
<SEQUENCE>9
<FILENAME>b38194txex13.txt
<DESCRIPTION>PORTION OF TEXTRON'S ANNUAL REPORT TO SHAREHOLDERS
<TEXT>
<PAGE> 1
Exhibit 13
FINANCIAL REPORT
<TABLE>
<S> <C>
20 BUSINESS SEGMENT DATA
21 MANAGEMENT'S DISCUSSION AND ANALYSIS
33 REPORT OF MANAGEMENT, REPORT OF INDEPENDENT AUDITORS
34 CONSOLIDATED FINANCIAL STATEMENTS
39 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
59 QUARTERLY DATA
60 SELECTED FINANCIAL INFORMATION
61 TEXTRON BUSINESS DIRECTORY
</TABLE>
BUSINESS SEGMENT DATA
For a description of the businesses comprising each segment, see pages 61
through 63.
<TABLE>
<CAPTION>
SEGMENT
REVENUES SEGMENT PROFIT* PROFIT MARGINS
------------------------------------------------------------------------------------------
(In millions) 2000 1999 1998 2000 1999 1998 2000 1999 1998
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Aircraft $ 4,394 $ 4,019 $3,380 $ 451 $ 362 $ 338 10.3% 9.0% 10.0%
Automotive 2,924 2,868 2,356 244 220 171 8.3 7.7 7.3
Fastening Systems 2,137 2,082 1,758 182 190 186 8.5 9.1 10.6
Industrial Products 2,944 2,422 2,013 343 301 232 11.7 12.4 11.5
Finance 691 463 367 190 128 113 27.5 27.6 30.8
- ------------------------------------------------------------------------------------------------------------------------------
$13,090 $11,854 $9,874 $ 1,410 $ 1,201 $ 1,040 10.8% 10.1% 10.5%
==============================================================================================================================
Special charges, net (483) 1 (87)
Gain on sale of division -- -- 97
------------------------------
Segment operating income 927 1,202 1,050
Corporate expenses and other, net (164) (143) (141)
Interest income 6 27 --
Interest expense (158) (56) (146)
- -----------------------------------------------------------------------------------------------
Income from continuing operations
before income taxes** $ 611 $ 1,030 $ 763
===============================================================================================
</TABLE>
* Segment profit represents the measurement used by Textron to evaluate
performance for decision making purposes. Segment profit for manufacturing
segments does not include interest, certain corporate expenses, special
charges and gains and losses from the disposition of significant business
units. The measurement for the Finance segment includes interest income,
interest expense and distributions on preferred securities of Finance
subsidiary trust.
** Before distributions on preferred securities of manufacturing subsidiary
trust.
2000 REVENUES
[PIE CHART GRAPHIC]
- - 34% Aircraft $4,394
- - 22% Automotive $2,924
- - 16% Fastening Systems $2,137
- - 23% Industrial Products $2,944
- - 5% Finance $691
2000 SEGMENT PROFIT
[PIE CHART GRAPHIC]
- - 32% Aircraft $451
- - 17% Automotive $244
- - 13% Fastening Systems $182
- - 24% Industrial Products $343
- - 14% Finance $190
TEXTRON 2000 ANNUAL REPORT 20
<PAGE> 2
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS
- --------------------------------------------------------------------------------
RESULTS OF OPERATIONS
[BAR GRAPH GRAPHIC]
REVENUES
<TABLE>
<CAPTION>
98 99 00
- ----------------------------------
11% 20% 10%
<S> <C> <C>
$9,874 $11,854 $13,090
</TABLE>
EARNINGS PER SHARE*
[BAR GRAPH GRAPHIC]
<TABLE>
<CAPTION>
98 99 00
- ----------------------------------
22% 51% (53)%
<S> <C> <C>
$2.68 $4.05 $1.90
</TABLE>
* Income from continuing operations - diluted
TEXTRON INC.
2000 vs. 1999
- - Income from continuing operations for 2000 was $277 million, down from the
1999 amount of $623 million. Diluted earnings per share from continuing
operations were $1.90 and $4.05 for 2000 and 1999, respectively. Textron
recognized special charges of $483 million in 2000 or $2.75 per share
after income taxes. Revenues increased 10% to $13.1 billion in 2000 from
$11.9 billion in 1999.
- - Special charges of $483 million (pre-tax) in 2000 include accruable
restructuring charges of $16 million, associated with the modernization
and consolidation of manufacturing facilities in the Automotive and
Industrial Products segments, $350 million for goodwill and fixed asset
impairment and $117 million for the write-down of the Company's e-business
investment portfolio. The discussion that follows refers to results before
special charges unless otherwise noted.
- - Textron reorganized its management reporting structure into five segments,
separately reporting Fastening Systems and Industrial Products, which
previously comprised the Industrial segment. Additionally, management
responsibility for one division previously reported in the Automotive
segment has been transferred to the Industrial Products segment. Prior
periods have been restated to reflect these changes.
- - Segment profit of $1.410 billion increased 17% from $1.201 billion in
1999, as a result of continued improved financial results in Aircraft,
Automotive, Industrial Products and Finance. Segment profit in Fastening
Systems decreased slightly. Segment profit represents the measurement used
by Textron to evaluate performance for decision making purposes and for
manufacturing segments does not include interest, certain corporate
expenses, special charges and gains and losses from the disposition of
significant business units. The measurement for the Finance segment
includes interest income, interest expense and distributions on preferred
securities of Finance subsidiary trust.
- - Segment profit reflected gains associated with the sale of several small
non-core product lines and joint ventures, and fixed assets in the
manufacturing segments and the benefit of higher income related to the
syndication and securitization of several portfolios in the Finance
segment. Additionally, segment profit benefited from higher income related
to retirement benefits, reflecting a higher expected return on plan assets
and revised actuarial estimates.
- - Total segment margin increased to 10.8% in 2000 from 10.1% in 1999, due
primarily to higher Aircraft and Automotive margins.
- - Effective in the fourth quarter 2000, Textron reclassified certain items
in its income statement and restated revenues and costs for prior periods.
A substantial portion of the reclassifications related to the adoption of
Emerging Issues Task Force (EITF) consensus on Issue No. 99-19 "Reporting
Revenue Gross as a Principal versus Net as an Agent", whereby used
aircraft sales are now reported as revenues; previously they were netted
against costs. Prior period financial information has been reclassified to
conform with the current year presentation. The result of the
reclassifications was to increase revenue and costs by $254 million, $275
million and $191 million for 2000, 1999 and 1998, respectively. There was
no effect on income from continuing operations or net income.
- - Effective January 2000, Textron implemented the EITF consensus on Issue
99-5 "Accounting for Pre-Production Costs Related to Long Term Supply
Arrangements." As a result of this, in the first quarter 2000, Textron
reported a cumulative effect of change in accounting principle of $59
million (net of tax), or approximately $0.41 per share related to the
adoption of this consensus.
- - Textron completed the sale of Avco Financial Services (AFS) to Associates
First Capital Corporation for $3.9 billion in cash on January 6, 1999 and
recorded an after-tax gain of $1.65 billion or $10.70 per share. Textron
also recorded an extraordinary loss of $43 million (net of tax) or $.27
per share on the early retirement of debt in 1999. Net income (including
the cumulative effect of the change
21 TEXTRON 2000 ANNUAL REPORT
<PAGE> 3
in accounting principle and the special charges in 2000) was $218 million
or $1.49 per share compared to 1999 net income of $2.23 billion or $14.48
per share, which included the gain on the sale of AFS and the
extraordinary loss.
- - Interest income and expense - the net interest expense for Textron
Manufacturing increased $123 million due to the re-leveraging that
occurred following the divestiture of AFS. Interest expense increased $102
million due to a higher level of average debt as a result of acquisitions
and share repurchases. Interest income for 2000 of $6 million was related
to the settlement of a note receivable compared to income of $27 million
realized in 1999 as a result of its net investment position.
- - Corporate expenses and other, net increased $21 million due primarily to
the impact of organizational changes in the first and fourth quarters and
costs associated with strategic and e-business initiatives in 2000,
partially offset by higher income related to retirement benefits.
- - Income taxes - the effective income tax rate for 2000 was 50.4% primarily
due to the impact of the non-tax deductibility of goodwill written off in
the fourth quarter. The impact of the special charges on the effective tax
rate was 14.9%. Excluding the tax impact of the special charges, the
effective tax rate was 35.5% for 2000 compared to 37.0% in 1999. This
reduction is primarily due to the benefit of tax planning initiatives
being realized in 2000 and the tax benefit of a contribution of shares
granted to Textron in 1999 from Manulife Financial Corporation's initial
public offering on their demutualization of Manufacturers Life Insurance
Company to the Textron Charitable Trust.
- - As a result of the softening economy, especially in the automotive
industry, Textron anticipates slower growth rates for 2001, particularly
in the first quarter. To strengthen operating efficiencies and better
align its operations with current economic and market conditions in its
Automotive, Fastening Systems and Industrial Products segments, Textron
expects to incur additional restructuring charges over the next four to
five quarters as the restructuring efforts are implemented.
1999 vs. 1998
- - Income from continuing operations in 1999 of $623 million was up 41% from
$443 million in 1998. Diluted earnings per share from continuing
operations in 1999 of $4.05 were up 51% from $2.68 in 1998. Revenues
increased 20% to $11.9 billion in 1999 from $9.9 billion in 1998.
- - Segment profit of Textron's five business segments aggregated $1.201
billion in 1999, up 15% from 1998, as a result of continued improved
financial results across all business segments, reflecting the benefit of
organic growth and acquisitions.
- - Total segment margin decreased to 10.1% in 1999 from 10.5% in 1998, due
primarily to lower Aircraft margins and the impact of lower margin
acquisitions.
- - Net income in 1999, including the gain on the sale of AFS and the
extraordinary loss, was $2.23 billion or $14.48 per share, compared to
$608 million in 1998 or $3.68 per share, which included $165 million of
discontinued operating income from AFS.
- - Interest income and expense - the net interest expense for Textron
Manufacturing decreased $117 million as a result of the proceeds received
in January 1999 from the divestiture of AFS. Interest income increased $27
million, as a result of Textron's net investment position during the year,
while interest expense decreased $90 million due to a lower level of
average debt, resulting from the pay down of debt with the AFS proceeds,
partially offset by incremental debt associated with acquisitions and
share repurchases.
AIRCRAFT
2000 vs. 1999
The Aircraft segment's revenues and profit increased $375 million (9%) and $89
million (25%), respectively, achieving a 130 basis point improvement in margin.
- - Cessna Aircraft's revenues increased $342 million due to higher sales of
business jets, primarily the Citation Excel and the Citation Bravo, and
increased spares and service revenues. Its profit increased as a result of
the higher sales and improved operating performance, partially offset by
increased engineering expense related to the Sovereign business jet.
TEXTRON 2000 ANNUAL REPORT 22
<PAGE> 4
AIRCRAFT
REVENUES
[BAR GRAPH GRAPHIC]
<TABLE>
<CAPTION>
98 99 00
- ----------------------------------
5% 19% 9%
<S> <C> <C>
$3,380 $4,019 $4,394
</TABLE>
- - Bell Helicopter's revenues increased $33 million as higher foreign
military sales ($54 million), higher commercial spares sales ($21 million)
and higher revenues on the V-22 Osprey tiltrotor aircraft production
contract ($41 million) were partially offset by lower sales of commercial
and other military helicopters ($71 million). Bell's profit increased due
to the higher revenues and higher income related to retirement benefits.
This favorable impact was partially offset by the lower recognition into
income ($30 million in 2000 vs. $37 million in 1999) of cash received from
a joint venture partner in 1998 on the formation of the BA609 program.
Product development expense for 2000 increased slightly as higher spending
on the BA609 commercial tiltrotor aircraft (net of the benefit of the
contribution from a new supplier for the BA609 fuselage) was offset by
lower spending on other programs.
- - The Department of Defense is investigating a recent mishap of the V-22
tiltrotor aircraft. Pending the results of the investigation, the U.S.
Marine Corps has temporarily restricted the use of their V-22 aircraft.
While current production continues under a low rate production contract,
approval of a full rate production contract by the Department of Defense
will probably be delayed pending the outcome of the investigation. During
2000, the Company recognized total revenue of $432 million under the V-22
program.
SEGMENT
PROFIT
[BAR GRAPH GRAPHIC]
<TABLE>
<CAPTION>
98 99 00
- ----------------------------------
8% 7% 25%
<S> <C> <C>
$338 $362 $451
</TABLE>
1999 vs. 1998
The Aircraft segment's revenues and profit increased $639 million (19%) and $24
million (7%), respectively, due to higher results at Cessna Aircraft.
- - Cessna Aircraft's revenues increased $523 million as a result of higher
sales of business jets, primarily the Citation X and the Citation Excel,
higher single-engine piston aircraft sales and increased spares and
service revenues. Its profit increased as a result of the higher sales,
partially offset by increased manufacturing costs associated with the
ramp-up in production of new aircraft, higher warranty expense and
increased new product development expense related to the Citation CJ2.
- - Bell Helicopter's revenues increased $116 million, due primarily to higher
revenues on the V-22 production contract ($105 million) and the Huey and
Cobra upgrade contracts ($63 million) and higher foreign military sales
($42 million), partially offset by lower commercial and U.S. Government
helicopter sales ($102 million). Bell's profit was unchanged from the 1998
level. 1999 results reflected the full year recognition into income ($37
million in 1999 vs. $10 million in 1998) of cash received in 1998 on the
formation of a joint venture on the BA609 program, partially offset by
higher expense related to new product development, while 1998 results
reflected favorable contract adjustments related to the Bell-Boeing V-22
Engineering, Manufacturing and Development contract.
AUTOMOTIVE
REVENUES
[BAR GRAPH GRAPHIC]
<TABLE>
<CAPTION>
98 99 00
- ----------------------------------
14% 22% 2%
<S> <C> <C>
$2,356 $2,868 $2,924
</TABLE>
SEGMENT
PROFIT
[BAR GRAPH GRAPHIC]
<TABLE>
<CAPTION>
98 99 00
- ----------------------------------
21% 29% 11%
<S> <C> <C>
$171 $220 $244
</TABLE>
AUTOMOTIVE
2000 vs. 1999
The Automotive segment's revenues increased $56 million (2%) while profit
increased $24 million (11%) resulting in a 60 basis point increase in margin.
These results were achieved despite North American automotive original equipment
manufacturer (OEM) production decreases in the fourth quarter 2000.
- - Trim revenues increased $46 million due to the contribution from
acquisitions, primarily the Plascar and the Textron Automotive Italia,
S.r.l. joint venture (formerly referred to as Textron Breed Automotive,
S.r.l) and major new program launches, partially offset by customer price
reductions. Profit increased 9% due to improved operating performance and
the contribution from acquisitions partially offset by higher
petroleum-based resin prices, customer price reductions and higher
engineering and design expense to support future programs.
- - Fuel Systems and Functional Components revenues increased $10 million as a
result of higher sales volume at Kautex, partially offset by the negative
impact of foreign exchange and customer price reductions. Profit increased
14% due to improved operating performance at Kautex and a gain from the
sale of two non-core product lines, partially offset by the unfavorable
impact of foreign exchange, customer price reductions and higher
petroleum-based resin prices.
23 TEXTRON 2000 ANNUAL REPORT
<PAGE> 5
In order to address performance issues in certain businesses and better align
itself with current economic and market conditions, Textron has approved
restructuring programs at Trim and in the Fuel Systems and Functional Components
businesses.
1999 vs. 1998
The Automotive segment's revenues increased $512 million (22%), while profit
increased $49 million (29%).
- - Trim revenues increased $315 million (21%) reflecting increased production
at DaimlerChrysler, Ford and General Motors, which was depressed in 1998
by a strike. The increase in revenues also reflected the benefit of the
Textron Automotive Italia, S.r.l. joint venture and the Midland Industrial
Plastics acquisition. Profit increased 25% due to the higher sales,
partially offset by customer price reductions.
- - Fuel Systems and Functional Components revenues increased $197 million
(23%) due primarily to higher North American market penetration by Kautex.
Despite customer price reductions, profit increased 37% due to higher
sales and improved operating performance at Kautex.
FASTENING SYSTEMS
Revenues
[BAR GRAPH]
<TABLE>
<CAPTION>
98 99 00
- ----------------------------------
17% 18% 3%
<S> <C> <C>
$1,758 $2,082 $2,137
</TABLE>
Segment
Profit
[BAR GRAPH]
<TABLE>
<CAPTION>
98 99 00
- ----------------------------------
11% 2% (4)%
<S> <C> <C>
$186 $190 $182
</TABLE>
FASTENING SYSTEMS
2000 vs. 1999
The Fastening Systems segment's revenues increased $55 million (3%), while
profit decreased $8 million (4%). Revenues increased due to the contribution
from acquisitions, primarily InteSys Technologies. This increase in revenues was
partially offset by the unfavorable impact of foreign exchange in its European
operations, lower volume in the heavy truck industry and customer price
reductions. Segment profit decreased as improved operating performance at
Commercial Solutions and Automotive Solutions and the benefit from acquisitions
were offset by the unfavorable impact of customer price reductions, foreign
exchange and lower volume in the heavy truck industry. As discussed on page 25
under "Special Charges, Net", Textron recorded a $128 million goodwill
impairment write-down related to Fastening Systems.
In order to address performance issues in certain businesses and better align
itself with current economic and market conditions, Textron has approved
restructuring programs at Advanced Solutions, Automotive Solutions and
Commercial Solutions.
1999 vs. 1998
The Fastening Systems segment's revenues and profit increased $324 million (18%)
and $4 million (2%), respectively. Revenues increased as a result of the
contribution from acquisitions, primarily Flexalloy, Ring Screw Works, Peiner,
Sukosim and InteSys Technologies, partially offset by the unfavorable impact of
foreign exchange in its European operations. Its profit increased as the benefit
from acquisitions more than offset the lower revenues in Europe. Results were
also affected by unfavorable operating performance at certain plants in Europe
caused by production scheduling issues, integration costs in the Vendor Managed
Inventory business, lower profit at an automotive plant related to economic
conditions in Brazil and non-recurring costs associated with restructuring
programs started in 1999.
INDUSTRIAL PRODUCTS
Revenues
[BAR GRAPH]
<TABLE>
<CAPTION>
98 99 00
- ----------------------------------
16% 20% 22%
<S> <C> <C>
$2,013 $2,422 $2,944
</TABLE>
INDUSTRIAL PRODUCTS
2000 vs. 1999
The Industrial Products segment's revenues and profit increased $522 million
(22%) and $42 million (14%), respectively. Revenues increased as a result of the
contribution from acquisitions, primarily OmniQuip, and higher organic sales at
Golf and Turf, Textron Marine & Land Systems, Greenlee, Textron Motion Control
and Textron Lycoming. This increase in revenues was partially offset by lower
revenues at Textron Systems, due to a change in contract mix, and lower demand
at Textron Power Transmission, Textron Fluid Handling Products and Turbine
Engine Components Textron (TECT). Profit increased primarily as a result of the
contribution from acquisitions, higher income related to retirement benefits and
improved margins at Textron Motion Control and Textron Systems. This
TEXTRON 2000 ANNUAL REPORT 24
<PAGE> 6
increase in profit was partially offset by lower organic sales and unfavorable
operating performance at OmniQuip, TECT and Textron Fluid Handling Products.
During the fourth quarter 2000, Textron recorded a write-down of TECT goodwill
for $178 million as discussed below under the heading "Special Charges, Net."
In order to address performance issues in certain businesses and better align
itself with current economic and market conditions, Textron has approved
restructuring programs at OmniQuip, Greenlee, Golf and Turf, Textron Motion
Control, Textron Power Transmission, Textron Fluid Handling Products and Textron
Systems.
INDUSTRIAL PRODUCTS
Segment
Profit
[BAR GRAPH]
<TABLE>
<CAPTION>
98 99 00
- ----------------------------------
23% 30% 14%
<S> <C> <C>
$232 $301 $343
</TABLE>
1999 vs. 1998
The Industrial Products segment revenues and profit increased $409 million (20%)
and $69 million (30%), respectively. Revenues increased as a result of the
contribution from acquisitions, primarily David Brown, OmniQuip, Ransomes and
Progressive Electronics, and higher organic sales at Golf and Turf and Greenlee.
Its profit increased as a result of the higher sales combined with strong margin
improvement at Golf and Turf and Textron Systems, and a gain on the sale of a
product line. These benefits were partially offset by lower organic sales at
Textron Power Transmission, reflecting a decline in the worldwide mechanical
power transmission market, and TECT due to lower customer requirements, and the
impact of the divestiture of Fuel Systems in 1998. In addition, 1998 results
were depressed by a one-month strike at a Golf and Turf plant.
FINANCE
Revenues
[BAR GRAPH]
<TABLE>
<CAPTION>
98 99 00
- ----------------------------------
5% 26% 49%
<S> <C> <C>
$367 $463 $691
</TABLE>
FINANCE
2000 vs. 1999
The Finance segment's revenues increased $228 million (49%) while profit
increased $62 million (48%). Revenues increased due to a higher level of average
receivables ($5.782 billion in 2000 vs. $4.252 billion in 1999), reflecting a
balance of both acquisitive and organic growth, a higher yield on receivables
and higher syndication and securitization income ($34 million in 2000 vs. $14
million in 1999). Segment profit increased as the benefit of the higher revenues
was partially offset by higher expenses related to managed receivables and a
higher provision for loan losses.
Segment
Profit
[BAR GRAPH]
<TABLE>
<CAPTION>
98 99 00
- ----------------------------------
5% 13% 48%
<S> <C> <C>
$113 $128 $190
</TABLE>
1999 vs. 1998
The Finance segment's revenues increased $96 million (26%), while profit
increased $15 million (13%). Revenues increased due to a higher level of average
receivables ($4.252 billion in 1999 vs. $3.190 billion in 1998), reflecting both
acquisitive and organic growth and an increase in syndication and servicing fee
income. This was partially offset by lower yields on receivables, reflecting
lower prevailing interest rates. Profit increased as the benefit of higher
revenues was partially offset by higher expenses related to growth in managed
receivables and a higher provision for loan losses related to growth in
receivables and higher charge-offs in the revolving credit portfolio. This was
partially offset by a lower provision for loan losses in the real estate
portfolio. Included in 1999 results was a gain of $4.7 million on the sale of an
investment in the third quarter, while third quarter 1998 results included a
gain of $3.4 million on the securitization of Textron-related receivables.
SPECIAL CHARGES, NET
As discussed in Note 17, Textron recorded pre-tax charges totaling $483 million
in 2000. The charges include restructuring charges of $16 million associated
with the modernization and consolidation of manufacturing facilities in the
Automotive ($1 million) and Industrial Products ($15 million) segments, $350
million of asset impairment charges in the Industrial Products, Fastening
Systems and Automotive segments, and $117 million for the write-down of the
Company's e-business investment portfolio.
In the fourth quarter 2000, Textron finalized its 2000 restructuring program to
strengthen operating efficiencies and better align its operations with current
economic and market conditions in its Automotive, Fastening Systems and
Industrial Products segments. The Company expects to incur restructuring charges
over the next four to five quarters as the restructuring efforts are
implemented. Severance costs will be included in the restructuring charges and
are based upon established policies and practices. The total cash cost of the
program, before savings, is expected to be
25 TEXTRON 2000 ANNUAL REPORT
<PAGE> 7
between $140 and $160 million which will be incurred primarily during 2001.
Ongoing annualized savings are expected to be $100 to $120 million, beginning in
2002, with $50 to $70 million realized in 2001. Substantially all planned
actions will be executed by year-end 2001, with an estimated net reduction in
the global workforce of over 3,600.
In conjunction with the initiation of the 2000 restructuring program and the
Company's fourth quarter multi-year financial planning process, management
identified certain indicators of potential impairment of long-lived assets
including goodwill. As a result, the Company performed an impairment review
which identified impaired goodwill of $194 million in Industrial Products, $128
million in Fastening Systems and $27 million in Automotive, as well as impaired
fixed assets of $1 million in Automotive resulting in an aggregate write-down of
$350 million. The largest portions of the goodwill charge were at TECT ($178
million) and Flexalloy ($96 million). Key impairment indicators during 2000 with
respect to TECT, a manufacturer of air and land-based gas turbine engines
components and airframe structures, were deteriorating margins and its inability
to generate new contracts combined with declining sales from its largest
customer representing approximately 50% of TECT's total revenues. Key indicators
for Flexalloy, a vendor-managed inventory company, serving primarily the heavy
truck industry within Fastening Systems, were its performance against plan and
the negative effect on its vendor-managed business model by other supply chain
competitors. Flexalloy's business is dependent upon large customers and the
service level for larger customers cannot be easily replicated without
substantial additional investment. Also, the synergies within Fastening Systems,
which were initially viewed to be significant due to Textron's existing market
share, have been considerably less than anticipated. The undiscounted cash flow
projections performed for the applicable operating units were less than the
carrying amounts of long-lived assets including goodwill indicating that there
was impairment. Accordingly, Textron recorded the goodwill write-down to the
extent the carrying amount of goodwill exceeded its fair value.
During the last several months of 2000, the value of Textron's e-business
investment portfolio has fallen substantially. The Company has determined that
this decline in value is other than temporary and has taken a pre-tax charge of
$117 million to write-down its e-business investment portfolio to its current
value. The application of e-business technology across the Company remains an
important strategic investment for Textron.
Textron recorded pre-tax charges of $18 million and $87 million in 1999 and
1998, respectively, related to restructuring activities. The charges include
severance costs, asset impairments and other exit related costs associated with
the cost reduction efforts and plant closures in the former Industrial segment,
and headcount reductions in the Aircraft segment as discussed further in Note
17.
In the third quarter of 1999, Textron recorded a gain of $19 million as a result
of shares granted to Textron from Manulife Financial Corporation's initial
public offering on their demutualization of Manufacturers Life Insurance
Company.
DISCONTINUED OPERATIONS
In August 1998, Textron announced that it had reached an agreement to sell Avco
Financial Services (AFS) to Associates First Capital Corporation. The sale was
completed on January 6, 1999. AFS is classified as a discontinued operation in
1999 and 1998.
LIQUIDITY & CAPITAL RESOURCES
The liquidity and capital resources of Textron's operations are best understood
by separately considering its independent borrowing groups, Textron
Manufacturing and Textron Finance. Textron Manufacturing consists of Textron
Inc., the parent company, consolidated with the entities which operate in the
Aircraft, Automotive, Fastening Systems and Industrial Products business
segments, whose financial results are a reflection of the ability to manage and
finance the development, production and delivery of tangible goods and services.
Textron Finance consists of Textron's wholly-
TEXTRON 2000 ANNUAL REPORT 26
<PAGE> 8
owned commercial finance subsidiary, Textron Financial Corporation, consolidated
with its subsidiaries. Textron Finance's financial results are a reflection of
its ability to provide financial services in a competitive marketplace, at the
appropriate pricing, while managing the associated financial risks. The
fundamental differences between each borrowing group's activities result in
different measures used by investors, rating agencies and analysts.
OPERATING CASH FLOWS
Textron's financial position continued to be strong at the end of 2000. During
2000, cash flows from operations was the primary source of funds for operating
needs and capital expenditures of Textron Manufacturing. The Statements of Cash
Flows for each borrowing group detailing the changes in cash balances are on
pages 36-37. Textron Manufacturing's operating cash flow includes dividends
received from Textron Finance. Beginning in early 1999, the methodology used by
Textron Finance to determine the amount of dividends to be paid to Textron
Manufacturing changed from payments based on Textron Finance maintaining a
leverage ratio of 6.5 to 1 to payments based on maintaining a leverage ratio of
7.5 to 1.
FINANCING
Textron Manufacturing's debt to total capital ratio was 32% at December 30, 2000
up from 27% at January 1, 2000. The increase is consistent with Textron's
financial target of maintaining its debt to capital ratio in the low to mid-30%
range. Consistent with the analytical methodology used by members of the
financial community, leverage of the manufacturing operations excludes the debt
of Textron Finance for the purposes of calculating leverage pursuant to
Textron's financial targets. In turn, Textron Finance evaluates its leverage by
limiting borrowing so that its leverage will not exceed a ratio of debt to
tangible equity of 7.5 to 1. As a result, surplus capital of Textron Finance
will be returned to Textron, and additional capital required for growth will be
infused or left in the business, assuming Textron Finance's returns are
consistent with Textron's standards.
Borrowings have historically been a secondary source of funds for Textron
Manufacturing and, along with the collection of finance receivables, are a
primary source of funds for Textron Finance. Both Textron Manufacturing and
Textron Finance utilize a broad base of financial sources for their respective
liquidity and capital requirements. The Company's strong credit ratings from
Moody's (A2 Long-Term; P1 Short-Term), Standard & Poor's (Textron Manufacturing:
A Long-Term; A1 Short-Term. Textron Finance: A- Long-Term; A2 Short-Term) and
Fitch (A Long-Term; F1 Short-Term) provide flexibility in obtaining funds on
competitive terms. The Company's credit facilities are summarized on page 45.
During 2000, Textron Manufacturing established a two billion Euro Medium-Term
Note facility (EMTN), which provides for the issuance of debt securities
denominated in the Euro or other currencies. Under the EMTN, Textron issued 300
million Euro-denominated ($273 million U.S. dollar-equivalent as of December 30,
2000) 5.63% medium-term notes which mature in 2005 and 150 million British Pound
Sterling-denominated ($221 million U.S. dollar-equivalent as of December 30,
2000) 6.63% notes which mature in 2020. The proceeds from the sale of these
notes were used to reduce existing short-term debt and for general corporate
purposes.
During 2000, Textron Finance increased its medium-term note facility by $300
million and issued $415 million of one-year variable rate notes. The related
proceeds were used to refinance maturing commercial paper. The medium-term note
facility was fully utilized as of year-end 2000. Textron Finance also issued $73
million in variable-rate notes that mature in 2003 through 2004, and $75 million
Canadian dollar-denominated ($50 million U.S. dollar equivalent as of December
30, 2000) notes through private placements that mature in 2003. In April 2000,
Textron Finance issued $750 million in variable rate notes under its shelf
registration statement facility of which $275 million matures in 2001 and $475
million matures in 2002. The proceeds from these notes were used to refinance
maturing commercial paper and terminate $220 million of other variable rate
debt, which was prepaid at par.
During 2000, Textron Finance securitized approximately $763 million of general
aviation receivables, $275 million of equipment loans and leases, $70 million of
franchise loans and $69 million of land lot loans. In connection with the
securitizations, Textron Finance terminated $300 million notional interest
27 TEXTRON 2000 ANNUAL REPORT
<PAGE> 9
rate exchange agreements that were entered in 2000 to hedge the cash receipts
associated with the securitization. The proceeds from the securitization sales
were used to retire existing commercial paper. Realized gains recognized on
these securitizations during 2000 was $22 million. The securitizations provided
Textron Finance with an alternate source of financing while maintaining desired
debt to capital ratios. Textron Finance anticipates that it will enter
additional securitization transactions in 2001.
At year-end 2000, Textron Manufacturing had $1.5 billion available under its
existing shelf registration filed with the Securities Exchange Commission (SEC)
and approximately $1.3 billion U.S. dollar-equivalent available under the EMTN.
Also at year-end 2000, Textron Finance had $1.25 billion available under its
shelf registration filed with the SEC. The Company believes that both borrowing
groups, individually and in the aggregate, have adequate credit facilities and
have available access to capital markets to meet their long-term financing
needs.
USES OF CAPITAL
Textron measures its existing businesses, and evaluates proposed capital
projects and acquisitions on the basis of their ability to achieve a return on
invested capital (ROIC) of at least 15 percent. ROIC measures the ability of a
business or project to achieve an acceptable return on its capital irrespective
of how it is financed. Textron sets rigorous financial criteria for evaluating
potential acquisitions. Potential acquisitions must:
- - Have a capability to achieve an ROIC of at least 15 percent (18% for
Textron Finance).
- - Achieve "economic profit" - earnings over and above the cost of capital,
which approximates 10 percent after tax for domestic manufacturing (13
percent for domestic finance) - within a three-year time period. If an
acquisition cannot produce an economic profit within this time frame, it
must have a sound strategic justification (such as protecting an existing
business with acceptable returns on capital) or the capital is better
returned to shareholders.
- - Nondilutive to EPS in the first twelve months and contribute to EPS
thereafter.
Acquisitions by Textron Manufacturing are evaluated on an enterprise basis, so
that the capital employed is equal to the price paid for the target company's
equity plus any debt assumed. During the past three years, Textron acquired 32
companies, acquired the minority interest of two entities and entered into three
joint ventures in the Manufacturing segments for an aggregate cost of $2.4
billion, including notes issued for approximately $164 million, treasury stock
issued for $32 million and $529 million of debt assumed. In December 2000,
Textron agreed to acquire Tempo Research Corporation to further expand its
growing presence in the telecommunications test equipment market. This
transaction closed in early 2001.
Acquisitions of Textron Finance are evaluated on the basis of the amount of
Textron Manufacturing capital that Textron would have to set aside so that the
acquisition could be levered at a debt to tangible equity ratio with Textron
Finance of 7.5 to 1. During the past three years, Textron Finance acquired six
companies. The capital required for these acquisitions was $387 million. The
actual cost of the acquisitions was $1.5 billion, including debt assumed of $595
million.
Textron has invested approximately $100 million in Safeguard Scientifics, Inc.
common stock as part of a strategic alliance with this Internet holding and
operating company. Under the alliance, Textron is working with Safeguard partner
companies to develop and execute global e-commerce strategies. Also, Textron
invested approximately $8 million in the common stock of a Safeguard partner
company and purchased $25 million of EqualFooting.com, Inc. convertible
preferred stock in support of the Company's e-business initiative. These
investments were made to accelerate the application of critical new technology
across all of the Company's businesses. While this remains an important
strategic objective for Textron, the value of the Company's investments has
fallen substantially over the last several months of 2000. As a result, Textron
has taken a charge in December 2000 of $117 million ($76 million after tax) to
write down the Company's e-business investment portfolio to its current value.
At year-end 2000, Textron's equity investments in its e-business portfolio had a
carrying value of $17 million with no unrealized gain or loss in accumulated
other comprehensive loss.
TEXTRON 2000 ANNUAL REPORT 28
<PAGE> 10
Capital spending in 2000 continued at a level consistent with 1999, decreasing
only slightly to $527 million. Combined capital spending for the past three
years totaled $1.5 billion.
On February 23, 2000, Textron announced that its Board of Directors had
authorized a new ten million share repurchase program. In 2000, Textron
repurchased 6.6 million shares of common stock under its Board authorized share
repurchase program at an aggregate cost of $353 million. Textron's Board of
Directors approved the annual dividend per common share of $1.30 in 2000.
Dividend payments to shareholders in 2000 amounted to $189 million, a decrease
of $3 million from 1999.
FINANCIAL RISK MANAGEMENT
INTEREST RATE RISKS
Textron's financial results are affected by changes in U.S. and foreign interest
rates. As part of managing this risk, the Company enters into interest rate
exchange agreements to convert certain variable-rate debt to long-term
fixed-rate debt and vice versa. The overall objective of Textron's interest rate
risk management is to achieve a prudent balance between floating and fixed-rate
debt. The Company's mix of fixed and floating rate debt is continuously
monitored by management and is adjusted, as necessary, based on evaluation of
internal and external factors. The difference between the rates Textron
Manufacturing received and the rates it paid on interest rate exchange
agreements did not significantly impact interest expense in 2000 or 1999.
Textron Finance's strategy is to match interest-sensitive assets with
interest-sensitive liabilities to limit the Company's exposure to changes in
interest rates. As part of managing this matching strategy, Textron Finance has
entered into interest rate exchange agreements, including basis swaps, to
lock-in desired spreads between certain interest-earning assets and certain
interest-bearing liabilities. During 2000, Textron Finance entered into interest
rate exchange agreements to hedge the $750 million of variable-pay medium term
notes issued under its shelf registration statement. These included interest
rate swaps with an aggregate notional amount of $150 million to fix the interest
rates on a corresponding amount of the new notes. Further, an aggregate $600
million notional of basis swaps were entered to convert the variable interest
rate payments on $600 million of the new debt from LIBOR based payments to Prime
based payments. Textron Finance terminated fixed-pay interest rate exchange
agreements with an aggregate notional amount of $150 million that were hedging
existing variable rate debt. Textron Finance has entered forward starting
interest rate exchange agreements with an aggregate notional amount of $200
million to fix interest rates on debt expected to be issued in the first quarter
of fiscal 2001. The net impact of these agreements was immaterial in 2000 and
increased reported interest expense by $2 million in both 1999 and 1998.
FOREIGN EXCHANGE RISKS
Textron's financial results are affected by changes in foreign currency exchange
rates or weak economic conditions in the foreign markets in which products are
manufactured and/or sold. Textron Manufacturing's primary currency exposures are
the European Common Currency (Euro), British Pound and Canadian Dollar.
Textron Manufacturing manages its exposures to foreign currency assets and
earnings primarily by funding certain foreign currency denominated assets with
liabilities in the same currency and, as such, certain exposures are naturally
offset. Prior to 2000, Textron Manufacturing had primarily used synthetic
foreign borrowings to manage foreign currency exposures, however, during 2000,
Textron Manufacturing primarily used actual foreign currency borrowings for
these purposes.
In addition, as part of managing its foreign currency transaction exposures,
Textron enters into foreign currency forward exchange and option contracts.
These contracts are generally used to fix the local currency cost of purchased
goods or services or selling prices denominated in currencies other than the
functional currency. The notional amount of outstanding foreign exchange
contracts, foreign currency options and currency swaps was approximately $841
million at year-end 2000 and $1.3 billion at year-end 1999.
29 TEXTRON 2000 ANNUAL REPORT
<PAGE> 11
Effective January 1, 1999, the European Economic and Monetary Union entered into
a transition phase during which a common currency, the Euro, was introduced into
participating countries. The Euro conversion has not had a material impact on
Textron's business.
QUANTITATIVE RISK MEASURES
Textron has used a sensitivity analysis to quantify the market risk inherent in
its financial instruments. Financial instruments held by the Company that are
subject to market risk (interest rate risk, foreign exchange rate risk and
equity price risk) include finance receivables (excluding lease receivables),
debt (excluding lease obligations), interest rate exchange agreements, foreign
exchange contracts, currency swaps, marketable equity securities and marketable
security price forward contracts.
Presented below is a sensitivity analysis of the fair value of Textron's
financial instruments at year-end. The following table illustrates the
hypothetical change in the fair value of the Company's financial instruments at
year-end assuming a 10% decrease in interest rates, a 10% strengthening in
exchange rates against the U.S. dollar and a 10% decrease in the quoted market
prices of applicable marketable equity securities. The estimated fair value of
the financial instruments was determined by discounted cash flow analysis and by
independent investment bankers. This sensitivity analysis is most likely not
indicative of actual results in the future.
<TABLE>
<CAPTION>
2000 1999
- --------------------------------------------------------------------------------------------------------------------------------
Hypothetical Hypothetical
Carrying Fair Change In Carrying Fair Change In
(In millions) Value Value Fair Value Value Value Fair Value
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest Rate Risk
Textron Manufacturing:
Debt $ 2,061 $ 2,105 $ 31 $ 1,745 $ 1,740 $ 22
Interest rate
exchange agreements -- (8) (9) -- 7 (10)
Textron Finance:
Finance receivables 4,767 4,840 31 4,624 4,642 57
Interest rate
exchange agreements -- (6) (5) -- -- --
Debt 4,667 4,688 33 4,551 4,535 38
Interest rate
exchange agreements -- 17 10 -- (2) 1
Foreign Exchange Rate Risk
Textron Manufacturing:
Debt 1,101 1,113 111 285 286 23
Foreign exchange contracts (1) (1) (15) -- (6) (22)
Currency swaps -- -- -- (21) (25) 88
Interest rate
exchange agreements -- -- -- -- 1 --
Textron Finance:
Debt 50 50 5 -- -- --
Foreign exchange contracts -- -- (2) -- -- --
Currency swaps -- 1 1 -- -- --
Equity Price Risk
Textron Manufacturing:
Available for sale securities 16 16 (2) -- -- --
Marketable security price
forward contracts (26) (26) (8) 5 5 (12)
</TABLE>
TEXTRON 2000 ANNUAL REPORT 30
<PAGE> 12
OTHER MATTERS
ENVIRONMENTAL
As with other industrial enterprises engaged in
similar businesses, Textron is involved in a number
of remedial actions under various federal and state
laws and regulations relating to the environment
which impose liability on companies to clean up, or
contribute to the cost of cleaning up, sites on which
their hazardous wastes or materials were disposed or
released. Expenditures to evaluate and remediate
contaminated sites approximated $11 million, $16
million and $10 million in 2000, 1999 and 1998,
respectively. Textron currently projects that
expenditures for remediation will range between $12
million and $15 million for each of the years 2001
and 2002.
Textron's accrued estimated environmental liabilities
are based on assumptions which are subject to a
number of factors and uncertainties. Circumstances
which can affect the accruals' reliability and
precision include identification of additional sites,
environmental regulations, level of cleanup required,
technologies available, number and financial
condition of other contributors to remediation, and
the time period over which remediation may occur.
Textron believes that any changes to the accruals
that may result from these factors and uncertainties
will not have a material effect on Textron's net
income or financial condition. Textron estimates that
its accrued environmental remediation liabilities
will likely be paid over the next five to ten years.
BACKLOG
Textron's commercial backlog was $8.5 billion and
$7.2 billion at the end of 2000 and 1999,
respectively, and U.S. Government backlog was $1.4
billion at the end of 2000 and $2.0 billion at the
end of 1999. Backlog for the Aircraft segment was
approximately 84% and 81% of Textron's commercial
backlog at the end of 2000 and 1999, respectively,
and 74% and 80% of Textron's U.S. Government backlog
at the end of 2000 and 1999, respectively.
FOREIGN MILITARY SALES
Certain Company products are sold through the
Department of Defense's Foreign Military Sales
Program. In addition, Textron sells directly to
select foreign military organizations. Sales under
these programs totaled approximately 1.7% of
Textron's consolidated revenue in 2000 (1.0% in the
case of foreign military sales and 0.7% in the case
of direct sales) and 1.8% in 1999 (0.6% and 1.2%,
respectively). Such sales include military and
commercial helicopters, armored vehicles, turrets,
and spare parts and in 2000 were made primarily to
the countries of Taiwan (54%), Colombia (11%), Sri
Lanka (6%), Japan (5%), Finland (3%), Italy (3%) and
Korea (3%). All sales are made in full compliance
with all applicable laws and in accordance with
Textron's code of conduct.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards
Board (FASB) issued Statement of Financial Accounting
Standards (SFAS) No. 133 "Accounting for Derivative
Instruments and Hedging Activities." SFAS 133
requires an entity to recognize all derivatives as
either assets or liabilities and measure those
instruments at fair value. In June 1999, the FASB
issued SFAS 137, which deferred the effective date of
SFAS 133 to all fiscal quarters of years beginning
after June 15, 2000. In June 2000, the FASB issued
SFAS 138 which amended accounting and reporting
standards and addressed issues causing implementation
difficulties with SFAS 133 for certain derivative
instruments and hedging activities. These statements
became effective for the Company on December 31,
2000. The Company will record the effect of the
transition to these new accounting requirements in
the first quarter of 2001 as a cumulative effect of
change in accounting principle. The effect of this
change in accounting will not be material to the
Company's results of operations and financial
position.
Effective October 1, 2000, the Company adopted Staff
Accounting Bulletin (SAB) 101, "Revenue Recognition
in Financial Statements". SAB 101 summarizes the
Securities and Exchange Commission's views regarding
the application of generally accepted accounting
principles to selected revenue recognition issues.
The adoption and implementation of SAB 101 did not
have a material effect on the results of operations
or financial position of the Company.
31 TEXTRON 2000 ANNUAL REPORT
<PAGE> 13
As discussed in the Results of Operations section, in
the fourth quarter of 2000, Textron adopted the
Emerging Issues Task Force (EITF) consensus on Issue
No. 99-19, "Reporting Revenue Gross as a Principal
versus Net as an Agent". See page 21 for further
discussion.
In September 2000, the FASB issued SFAS 140
"Accounting for Transfers and Servicing of Financial
Assets and Extinguishments of Liabilities -- a
Replacement of FASB Statement No. 125". SFAS 140
revises criteria for accounting for securitizations,
other financial-asset and collateral transfers and
extinguishments of liabilities. The Statement also
introduces new disclosure requirements related to
securitizations, collateral and retained interests in
securitized financial assets. Textron adopted these
new disclosure requirements in the fourth quarter of
2000, as required by statement. The provisions for
SFAS 140 related to the transfers and servicing of
financial assets and extinguishments of liabilities
are effective for transactions occurring after March
31, 2001. Based upon current activities, the adoption
of this statement will not have a material effect on
the Company's results of operations or financial
position.
*********
Forward-looking Information: Certain statements in
this report and other oral and written statements
made by Textron from time to time, are
forward-looking statements, including those that
discuss strategies, goals, outlook or other
non-historical matters; or project revenues, income,
returns or other financial measures. These
forward-looking statements are subject to risks and
uncertainties that may cause actual results to differ
materially from those contained in the statements,
including the following: (a) the extent to which
Textron is able to implement and complete its
restructuring plans, (b) the extent to which Textron
is able to successfully integrate recent
acquisitions, (c) changes in worldwide economic and
political conditions that impact interest and foreign
exchange rates, (d) the occurrence of work stoppages
and strikes at key facilities of Textron or Textron's
customers or suppliers, (e) government funding and
program approvals affecting products being developed
or sold under government programs, (f) successful
implementation of supply chain and e-procurement
strategies, (g) the timing of certifications of new
aircraft products, (h) the occurrence of a severe
downturn in the economies in which Textron operates
that could reduce demand for its products, (i) the
level of consumer demand for the vehicle models for
which Textron supplies parts to automotive original
equipment manufacturers ("OEMs"), (j) Textron's
ability to offset, through cost reductions, raw
material price increases and pricing pressure brought
by OEM customers, and (k) Textron Financial
Corporation's ability to maintain credit quality and
control costs when entering new markets.
TEXTRON 2000 ANNUAL REPORT 32
<PAGE> 14
REPORT OF MANAGEMENT
Management is responsible for the integrity and
objectivity of the financial data presented in this
Annual Report. The consolidated financial statements
have been prepared in conformity with accounting
principles generally accepted in the United States
and include amounts based on management's best
estimates and judgments. The independent auditors,
Ernst & Young LLP, have audited the consolidated
financial statements and have considered the internal
control structure to the extent they believed
necessary to support their report, which appears
below.
We conduct our business in accordance with the
standards outlined in the Textron Business Conduct
Guidelines which is communicated to all employees.
Honesty, integrity and high ethical standards are the
core values of how we conduct business. Every Textron
division prepares and carries out an annual
Compliance Plan to ensure these values and standards
are maintained. Our internal control structure is
designed to provide reasonable assurance, at
appropriate cost, that assets are safeguarded and
that transactions are properly executed and recorded.
The internal control structure includes, among other
things, established policies and procedures, an
internal audit function, and the selection and
training of qualified personnel. Textron financial
managers are responsible for implementing effective
internal control systems and monitoring their
effectiveness, as well as developing and executing an
annual internal control plan.
The Audit Committee of our Board of Directors, on
behalf of the shareholders, oversees management's
financial reporting responsibilities. The Audit
Committee, comprised of six directors who are not
officers or employees of the Company, meets regularly
with the independent auditors, management and our
internal auditors to review matters relating to
financial reporting, internal accounting controls and
auditing. Both the independent auditors and the
internal auditors have free and full access to senior
management and the Audit Committee.
/s/Lewis B. Campbell /s/ Ted R. French
Lewis B. Campbell Ted R. French
Chairman and Chief Executive Vice President
Executive Officer and Chief Financial Officer
January 23, 2001
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Shareholders
Textron Inc.
We have audited the accompanying consolidated balance
sheets of Textron Inc. as of December 30, 2000 and
January 1, 2000, and the related consolidated
statements of income, cash flows and changes in
shareholders' equity for each of the three years in
the period ended December 30, 2000. These financial
statements are the responsibility of the Company's
management. Our responsibility is to express an
opinion on these financial statements based on our
audits.
We conducted our audits in accordance with auditing
standards generally accepted in the United States.
Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether
the financial statements are free of material
misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and
disclosures in the financial statements. An audit
also includes assessing the accounting principles
used and significant estimates made by management, as
well as evaluating the overall financial statement
presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to
above present fairly, in all material respects, the
consolidated financial position of Textron Inc. at
December 30, 2000 and January 1, 2000, and the
consolidated results of its operations and its cash
flows for each of the three years in the period ended
December 30, 2000, in conformity with accounting
principles generally accepted in the United States.
As discussed in Note 7 to the consolidated financial
statements, in 2000 the Company changed its method of
accounting for pre-production costs in accordance
with Emerging Issues Task Force No. 99-5, "Accounting
for Pre-Production Costs Related to Long-Term Supply
Arrangements".
/s/ Ernest & Young LLP
Boston, Massachusetts
January 23, 2001
33 TEXTRON 2000 ANNUAL REPORT
<PAGE> 15
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
For each of the years in the three-year period ended December 30, 2000
(In millions except per share amounts) 2000 1999 1998
-------------------------------------
<S> <C> <C> <C>
REVENUES
Manufacturing revenues $ 12,399 $ 11,391 $ 9,507
Finance revenues 691 463 367
- ------------------------------------------------------------------------------------------------------------
Total revenues 13,090 11,854 9,874
- ------------------------------------------------------------------------------------------------------------
COSTS AND EXPENSES
Cost of sales 10,028 9,242 7,692
Selling and administrative 1,445 1,318 1,108
Interest, net 486 233 301
Provision for losses on collection of finance receivables 37 32 20
Special charges, net 483 (1) 87
Gain on sale of division -- -- (97)
- ------------------------------------------------------------------------------------------------------------
Total costs and expenses 12,479 10,824 9,111
- ------------------------------------------------------------------------------------------------------------
Income from continuing operations before income taxes and
distributions on preferred securities of subsidiary trusts 611 1,030 763
Income taxes (308) (381) (294)
Distributions on preferred securities of subsidiary trusts,
net of income taxes (26) (26) (26)
- ------------------------------------------------------------------------------------------------------------
INCOME FROM CONTINUING OPERATIONS 277 623 443
- ------------------------------------------------------------------------------------------------------------
Discontinued operations, net of income taxes:
Income from operations -- -- 165
Gain on disposal -- 1,646 --
- ------------------------------------------------------------------------------------------------------------
-- 1,646 165
- ------------------------------------------------------------------------------------------------------------
Income before extraordinary loss and cumulative
effect of change in accounting principle 277 2,269 608
Extraordinary loss from debt retirement, net of income taxes -- (43) --
Cumulative effect of change in accounting
principle, net of income taxes (59) -- --
- ------------------------------------------------------------------------------------------------------------
NET INCOME $ 218 $ 2,226 $ 608
- ------------------------------------------------------------------------------------------------------------
PER COMMON SHARE:
BASIC:
INCOME FROM CONTINUING OPERATIONS $ 1.92 $ 4.14 $ 2.74
Discontinued operations, net of income taxes -- 10.94 1.03
Extraordinary loss from debt retirement, net of income taxes -- (.28) --
Cumulative effect of change in
accounting principle, net of income taxes (.41) -- --
- ------------------------------------------------------------------------------------------------------------
NET INCOME $ 1.51 $ 14.80 $ 3.77
- ------------------------------------------------------------------------------------------------------------
DILUTED:
INCOME FROM CONTINUING OPERATIONS $ 1.90 4.05 2.68
Discontinued operations, net of income taxes -- 10.70 1.00
Extraordinary loss from debt retirement, net of income taxes -- (.27) --
Cumulative effect of change in
accounting principle, net of income taxes (.41) -- --
- ------------------------------------------------------------------------------------------------------------
NET INCOME $ 1.49 $ 14.48 $ 3.68
- ------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to the consolidated financial statements.
TEXTRON 2000 ANNUAL REPORT 34
<PAGE> 16
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
As of December 30, 2000 and January 1, 2000
(Dollars in millions) 2000 1999
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
TEXTRON MANUFACTURING
Cash and cash equivalents $ 282 $ 192
Commercial and U.S. Government receivables
(less allowance for doubtful accounts of $58 in 2000 and 1999) 1,318 1,363
Inventories 1,871 1,859
Other current assets 443 321
- ---------------------------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 3,914 3,735
- ---------------------------------------------------------------------------------------------------------------------
Property, plant, and equipment, net 2,568 2,484
Intangibles, net 2,340 2,807
Other assets 1,417 1,378
- ---------------------------------------------------------------------------------------------------------------------
TOTAL TEXTRON MANUFACTURING ASSETS 10,239 10,404
- ---------------------------------------------------------------------------------------------------------------------
TEXTRON FINANCE
Cash 7 17
Finance receivables, net 5,473 5,465
Other assets (including net goodwill of $217 in 2000 and $211 in 1999) 651 507
- ---------------------------------------------------------------------------------------------------------------------
TOTAL TEXTRON FINANCE ASSETS 6,131 5,989
- ---------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 16,370 $ 16,393
======================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
TEXTRON MANUFACTURING
Current portion of long-term debt and short-term debt $ 615 $ 688
Accounts payable 1,200 1,214
Income taxes payable 77 87
Other accrued liabilities 1,371 1,267
- ---------------------------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 3,263 3,256
- ---------------------------------------------------------------------------------------------------------------------
Accrued postretirement benefits other than pensions 715 741
Other liabilities 1,224 1,336
Long-term debt 1,469 1,079
- ---------------------------------------------------------------------------------------------------------------------
TOTAL TEXTRON MANUFACTURING LIABILITIES 6,671 6,412
- ---------------------------------------------------------------------------------------------------------------------
TEXTRON FINANCE
Other liabilities 211 234
Deferred income taxes 315 307
Debt 4,667 4,551
- ---------------------------------------------------------------------------------------------------------------------
TOTAL TEXTRON FINANCE LIABILITIES 5,193 5,092
- ---------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 11,864 11,504
- ---------------------------------------------------------------------------------------------------------------------
TEXTRON FINANCE - OBLIGATED MANDATORILY REDEEMABLE PREFERRED SECURITIES OF
FINANCE SUBSIDIARY HOLDING SOLELY JUNIOR SUBORDINATED DEBENTURES 28 29
- ---------------------------------------------------------------------------------------------------------------------
TEXTRON - OBLIGATED MANDATORILY REDEEMABLE PREFERRED SECURITIES OF
SUBSIDIARY TRUST HOLDING SOLELY TEXTRON JUNIOR SUBORDINATED DEBT SECURITIES 484 483
- ---------------------------------------------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY
Capital stock:
Preferred stock:
$2.08 Cumulative Convertible Preferred Stock, Series A (liquidation value - $11) 5 5
$1.40 Convertible Preferred Dividend Stock, Series B (preferred only as to dividends) 7 7
Common stock (195,394,000 and 194,858,000
shares issued and 140,933,000 and 147,002,000 outstanding) 24 24
Capital surplus 1,026 1,009
Retained earnings 5,848 5,817
Accumulated other comprehensive loss (172) (98)
- ---------------------------------------------------------------------------------------------------------------------
6,738 6,764
Less cost of treasury shares 2,744 2,387
- ---------------------------------------------------------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY 3,994 4,377
- ---------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 16,370 $ 16,393
=====================================================================================================================
</TABLE>
See notes to the consolidated financial statements.
35 TEXTRON 2000 ANNUAL REPORT
<PAGE> 17
STATEMENTS OF CASH FLOWS
For each of the years in the three-year period ended December 30, 2000
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Consolidated
---------------------------------
(In millions) 2000 1999 1998
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income from continuing operations $ 277 $ 623 $ 443
Adjustments to reconcile income from continuing operations to net cash
provided by operating activities:
Earnings of Textron Finance greater than distributions - - -
Dividends received from discontinued operations - - 187
Depreciation 382 349 292
Amortization 112 91 69
Provision for losses on receivables 41 34 21
Gain on sale of division, net of income taxes - - (54)
Special charges, net 483 (1) 87
Deferred income taxes 9 63 (16)
Changes in assets and liabilities excluding those related to
acquisitions and divestitures:
Decrease (increase) in commercial and U.S. Government receivables 69 34 (116)
Decrease (increase) in inventories 5 13 (157)
Decrease (increase) in other assets (206) (144) (111)
Increase (decrease) in accounts payable (95) 149 46
Increase (decrease) in accrued liabilities (43) (85) 262
Other - net (11) (10) 8
- --------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 1,023 1,116 961
- --------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Finance receivables:
Originated or purchased (7,032) (4,920) (4,069)
Repaid 5,233 3,783 3,352
Proceeds on receivables sales and securitization sales 1,556 307 367
Cash used in acquisitions (85) (1,574) (956)
Net proceeds from dispositions (9) 2,950 117
Capital expenditures (527) (532) (475)
Cash used to purchase investment securities (134) - -
Other investing activities - net 76 29 22
- --------------------------------------------------------------------------------------------------------------------
NET CASH (USED) PROVIDED BY INVESTING ACTIVITIES (922) 43 (1,642)
- --------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in short-term debt (450) (1,131) 1,571
Proceeds from issuance of long-term debt 2,005 3,195 438
Principal payments and retirements on long-term debt (1,048) (2,174) (534)
Proceeds from exercise of stock options 14 50 71
Purchases of Textron common stock (353) (751) (712)
Dividends paid (189) (192) (143)
Dividends paid to Textron Manufacturing - - -
Capital contributions to Textron Finance - - -
- --------------------------------------------------------------------------------------------------------------------
NET CASH (USED) PROVIDED BY FINANCING ACTIVITIES (21) (1,003) 691
- --------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 80 156 10
Cash and cash equivalents at beginning of year 209 53 43
- --------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 289 $ 209 $ 53
====================================================================================================================
SUPPLEMENTAL INFORMATION:
Cash paid during the year for interest $ 479 $ 239 $ 345
Cash paid during the year for income taxes
(includes $9 and $912 in 2000 and 1999, respectively, for AFS disposal) $ 327 $ 1,167 $ 260
===================================================================================================================
</TABLE>
* "Textron Manufacturing" income from continuing operations includes income
from of Textron Inc., the parent company, consolidated with the entities
which operate in the Aircraft, Automotive, Fastening Systems and Industrial
Products business segments and the pretax income from "Textron Finance".
Textron Finance consists of Textron's wholly-owned commercial finance
subsidiary, Textron Financial Corporation consolidated with its subsidiaries.
All significant transactions between Textron Manufacturing and Textron
Finance have been eliminated from the "Consolidated" column. The principles
of consolidation are described in Note 1 to the consolidated financial
statements.
TEXTRON 2000 ANNUAL REPORT 36
<PAGE> 18
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
Textron Manufacturing*
- ------------------------------------------------------------------------------------------------------------------
(In millions) 2000 1999 1998
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income from continuing operations $ 277 $ 623 $ 443
Adjustments to reconcile income from continuing operations to net cash
provided by operating activities:
Earnings of Textron Finance greater than distributions (36) (43) (8)
Dividends received from discontinued operations - - 187
Depreciation 365 337 282
Amortization 97 84 66
Provision for losses on receivables 4 2 1
Gain on sale of division, net of income taxes - - (54)
Special charges, net 483 (1) 87
Deferred income taxes (9) 68 (18)
Changes in assets and liabilities excluding those related to
acquisitions and divestitures:
Decrease (increase) in commercial and U.S. Government receivables 69 34 (116)
Decrease (increase) in inventories 5 13 (157)
Decrease (increase) in other assets (215) (143) (130)
Increase (decrease) in accounts payable (82) 147 21
Increase (decrease) in accrued liabilities (33) (113) 245
Other - net 17 (1) 18
- ------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 942 1,007 867
- ------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Finance receivables:
Originated or purchased - - -
Repaid - - -
Proceeds on receivables sales and securitization sales - - -
Cash used in acquisitions (85) (859) (753)
Net proceeds from dispositions (9) 2,945 117
Capital expenditures (513) (521) (462)
Cash used to purchase investment securities (134) - -
Other investing activities - net 80 55 37
- ------------------------------------------------------------------------------------------------------------------
NET CASH (USED) PROVIDED BY INVESTING ACTIVITIES (661) 1,620 (1,061)
- ------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in short-term debt (77) (1,045) 1,220
Proceeds from issuance of long-term debt 516 799 8
Principal payments and retirements on long-term debt (97) (974) (190)
Proceeds from exercise of stock options 14 50 71
Purchases of Textron common stock (353) (751) (712)
Dividends paid (189) (192) (143)
Dividends paid to Textron Manufacturing - - -
Capital contributions to Textron Finance (5) (353) (59)
- ------------------------------------------------------------------------------------------------------------------
NET CASH (USED) PROVIDED BY FINANCING ACTIVITIES (191) (2,466) 195
- ------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 90 161 1
Cash and cash equivalents at beginning of year 192 31 30
- ------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 282 $ 192 $ 31
==================================================================================================================
SUPPLEMENTAL INFORMATION:
Cash paid during the year for interest $ 154 $ 57 $ 192
Cash paid during the year for income taxes
(includes $9 and $912 in 2000 and 1999, respectively, for AFS disposal) $ 249 $ 1,132 $ 230
=================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Textron Finance
- -------------------------------------------------------------------------------------------------------------------
(In millions) 2000 1999 1998
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income from continuing operations $ 118 $ 79 $ 70
Adjustments to reconcile income from continuing operations to net cash
provided by operating activities:
Earnings of Textron Finance greater than distributions - - -
Dividends received from discontinued operations - - -
Depreciation 17 12 10
Amortization 15 7 3
Provision for losses on receivables 37 32 20
Gain on sale of division, net of income taxes - - -
Special charges, net - - -
Deferred income taxes 16 (5) 2
Changes in assets and liabilities excluding those related to
acquisitions and divestitures:
Decrease (increase) in commercial and U.S. Government receivables - - -
Decrease (increase) in inventories - - -
Decrease (increase) in other assets 9 (1) 8
Increase (decrease) in accounts payable (13) 2 37
Increase (decrease) in accrued liabilities (10) 28 17
Other - net (24) (9) (10)
- -------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 165 145 157
- -------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Finance receivables:
Originated or purchased (7,032) (4,920) (4,069)
Repaid 5,233 3,783 3,352
Proceeds on receivables sales and securitization sales 1,556 307 367
Cash used in acquisitions - (715) (203)
Net proceeds from dispositions - 5 -
Capital expenditures (14) (11) (13)
Cash used to purchase investment securities - - -
Other investing activities - net (5) (26) (16)
- -------------------------------------------------------------------------------------------------------------------
NET CASH (USED) PROVIDED BY INVESTING ACTIVITIES (262) (1,577) (582)
- -------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in short-term debt (373) (86) 351
Proceeds from issuance of long-term debt 1,488 2,396 430
Principal payments and retirements on long-term debt (951) (1,200) (344)
Proceeds from exercise of stock options - - -
Purchases of Textron common stock - - -
Dividends paid - - -
Dividends paid to Textron Manufacturing (82) (36) (62)
Capital contributions to Textron Finance 5 353 59
- -------------------------------------------------------------------------------------------------------------------
NET CASH (USED) PROVIDED BY FINANCING ACTIVITIES 87 1,427 434
- -------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (10) (5) 9
Cash and cash equivalents at beginning of year 17 22 13
- -------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 7 $ 17 $ 22
===================================================================================================================
SUPPLEMENTAL INFORMATION:
Cash paid during the year for interest $ 325 $ 182 $ 153
Cash paid during the year for income taxes
(includes $9 and $912 in 2000 and 1999, respectively, for AFS disposal) $ 78 $ 35 $ 30
====================================================================================================================
See notes to the consolidated financial statements
</TABLE>
37 TEXTRON 2000 ANNUAL REPORT
<PAGE> 19
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
For each of the years in the three-year period ended December 30, 2000
<TABLE>
<CAPTION>
SHARES OUTSTANDING* DOLLARS
(In thousands) (In millions)
- -------------------------------------------------------------------------------------------------------------------
2000 1999 1998 2000 1999 1998
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$2.08 PREFERRED STOCK
Beginning balance 159 178 201 $ 5 $ 6 $ 6
Conversion to common stock (16) (19) (23) - (1) -
- -------------------------------------------------------------------------------------------------------------------
Ending balance 143 159 178 $ 5 $ 5 $ 6
===================================================================================================================
$1.40 PREFERRED STOCK
Beginning balance 74 86 92 $ 7 $ 7 $ 7
Conversion to common stock (7) (12) (6) - - -
- -------------------------------------------------------------------------------------------------------------------
Ending balance 67 74 86 $ 7 $ 7 $ 7
===================================================================================================================
COMMON STOCK
Beginning balance 147,002 154,742 162,343 $ 24 $ 24 $ 24
Purchases (6,627) (9,779) (10,189) - - -
Exercise of stock options 430 1,428 2,465 - - -
Conversion of preferred stock to common stock 97 129 123 - - -
Other issuances of common stock 31 482 - - - -
- -------------------------------------------------------------------------------------------------------------------
Ending balance 140,933 147,002 154,742 $ 24 $ 24 $ 24
===================================================================================================================
CAPITAL SURPLUS
Beginning balance $1,009 $ 931 $ 830
Conversion of preferred stock to common stock 1 1 1
Exercise of stock options and other issuances 16 77 100
- -------------------------------------------------------------------------------------------------------------------
Ending balance $1,026 $1,009 $ 931
===================================================================================================================
RETAINED EARNINGS
Beginning balance $5,817 $3,786 $3,362
Net income 218 2,226 608
Dividends declared:
Preferred stock - (1) (1)
Common stock (per share: $1.30 in both 2000 and 1999
and $1.14 in 1998) (187) (194) (183)
- -------------------------------------------------------------------------------------------------------------------
Ending balance $5,848 $5,817 $3,786
===================================================================================================================
TREASURY STOCK
Beginning balance $2,387 $1,661 $ 939
Purchases of common stock 358 748 722
Issuance of common stock (1) (22) -
- -------------------------------------------------------------------------------------------------------------------
Ending balance $2,744 $2,387 $1,661
- -------------------------------------------------------------------------------------------------------------------
ACCUMULATED OTHER COMPREHENSIVE LOSS
Beginning balance $ (98) $ (96) $ (62)
Currency translation adjustment (74) 8 (33)
Securities valuation adjustment - (13) -
Pension liability adjustment - 3 (1)
- -------------------------------------------------------------------------------------------------------------------
Other comprehensive loss (74) (2) (34)
- -------------------------------------------------------------------------------------------------------------------
Ending balance $ (172) $ (98) $ (96)
===================================================================================================================
COMPREHENSIVE INCOME
Net income $ 218 $2,226 $ 608
Other comprehensive loss (74) (2) (34)
- -------------------------------------------------------------------------------------------------------------------
Comprehensive income $ 144 $2,224 $ 574
===================================================================================================================
</TABLE>
*Shares issued at the end of 2000, 1999, 1998 and 1997, were as follows (in
thousands): $2.08 Preferred - 212; 228; 247; and 270 shares, respectively; $1.40
Preferred - 554; 561; 573; and 579 shares, respectively; Common - 195,394;
194,858; 193,277; and 190,689 shares, respectively.
See notes to the consolidated financial statements.
TEXTRON 2000 ANNUAL REPORT 38
<PAGE> 20
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1 FINANCIAL STATEMENT PRESENTATION
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
THE FINANCIAL STATEMENTS HAVE BEEN PREPARED IN
ACCORDANCE WITH ACCOUNTING PRINCIPLES GENERALLY
ACCEPTED IN THE UNITED STATES. SIGNIFICANT ACCOUNTING
POLICIES APPEAR IN ITALICS AS AN INTEGRAL PART OF THE
NOTES TO THE FINANCIAL STATEMENTS TO WHICH THE
POLICIES RELATE.
CASH AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS CONSIST OF CASH AND
SHORT-TERM, HIGHLY LIQUID SECURITIES WITH ORIGINAL
MATURITIES OF NINETY DAYS OR LESS.
REVENUE RECOGNITION
REVENUE IS GENERALLY RECOGNIZED WHEN PRODUCTS ARE
DELIVERED OR SERVICES ARE PERFORMED. WITH RESPECT TO
AIRCRAFT, DELIVERY IS UPON COMPLETION OF
MANUFACTURING, CUSTOMER ACCEPTANCE AND THE TRANSFER
OF RISKS AND REWARDS OF OWNERSHIP. SPECIFIC POLICIES
FOR THE FINANCE SEGMENT AND LONG-TERM CONTRACTS ARE
INCLUDED IN THE RELATED NOTES.
Effective October 1, 2000, the Company adopted
Staff Accounting Bulletin (SAB) 101, "Revenue
Recognition in Financial Statements". SAB 101
summarizes the Securities Exchange Commission's views
regarding the application of generally accepted
accounting principles to selected revenue recognition
issues. The adoption and implementation of SAB 101
did not have a material effect on the results of
operations or financial position of the Company.
Effective in the fourth quarter 2000, Textron
reclassified certain items in its income statement
and restated revenues and costs for prior periods. A
substantial portion of the reclassifications related
to the adoption of Emerging Issues Task Force (EITF)
consensus on Issue No. 99-19 "Reporting Revenue Gross
as a Principal versus Net as an Agent", whereby used
aircraft sales are now reported as revenues;
previously they were netted against costs. Prior
period financial information has been reclassified to
conform with the current year presentation. The
result of the reclassifications was to increase
revenue and costs by $254 million, $275 million and
$191 million for 2000, 1999 and 1998, respectively.
There was no effect on income from continuing
operations or net income.
NATURE OF OPERATIONS AND PRINCIPLES OF CONSOLIDATION
Textron is a global, multi-industry company with
manufacturing and finance operations. Its principal
markets (listed within segments in order of the
amount of 2000 revenues) and the major locations of
such markets are as follows:
<TABLE>
<CAPTION>
SEGMENT PRINCIPAL MARKETS MAJOR LOCATIONS
===================================================================================================================================
<S> <C> <C>
AIRCRAFT - Business jets - North America
- Commercial and military helicopters - Asia and Australia
- General aviation - South America
- Overnight express package carriers - Western Europe
- Commuter airlines, relief flights, tourism, and freight
- -----------------------------------------------------------------------------------------------------------------------------------
AUTOMOTIVE - Automotive original equipment manufacturers and their suppliers - North America
- Western Europe
- South America
- -----------------------------------------------------------------------------------------------------------------------------------
FASTENING - Automotive - North America
SYSTEMS - Distributors - Western Europe
- Consumers - Asia and Australia
- Other OEMs - South America
- Electronics
- Aerospace
- -----------------------------------------------------------------------------------------------------------------------------------
INDUSTRIAL - Industrial components: commercial aerospace and defense - North America
PRODUCTS - Golf and turf-care products: golf courses, resort communities, - Western Europe
and commercial and industrial users - Asia and Australia
- Fluid and power systems: original equipment manufacturers,
distributors and end-users of a wide variety of products
- Light construction equipment: commercial customers, national rental
fleets, and the U.S. Government
- -----------------------------------------------------------------------------------------------------------------------------------
FINANCE - Commercial loans and leases - North AMERICA
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
39 TEXTRON 2000 ANNUAL REPORT
<PAGE> 21
The consolidated financial statements include the
accounts of Textron and all of its majority- and
wholly-owned subsidiaries. All significant
intercompany transactions are eliminated.
Textron's financings are conducted through two
borrowing groups, Textron Finance and Textron
Manufacturing. This framework is designed to enhance
the Company's borrowing power by separating the
Finance segment. Textron Finance consists of Textron
Financial Corporation consolidated with its
subsidiaries, which are the entities through which
Textron operates its Finance segment. Textron Finance
finances its operations by borrowing from its own
group of external creditors.
Textron Manufacturing is Textron Inc., the parent
company, consolidated with the entities which operate
in the Aircraft, Automotive, Fastening Systems and
Industrial Products business segments. During 2000,
Textron reorganized its management reporting
structure into five segments, separately reporting
the financial results of Fastening Systems and
Industrial Products, which previously comprised the
Industrial segment. Additionally, management
responsibility for one division previously in the
Automotive segment has been transferred to the
Industrial Products segment. Prior period data shown
in the financial statements and related notes have
been reclassified, as appropriate.
The preparation of these financial statements in
conformity with generally accepted accounting
principles requires management to make estimates and
assumptions that affect these statements and
accompanying notes. Some of the more significant
estimates include inventory valuation, residual
values of leased assets, allowance for credit losses
on finance receivables, product liability, workers
compensation, environmental and warranty reserves,
and amounts reported under long-term contracts.
Management's estimates are based on the facts and
circumstances available at the time estimates are
made, past historical experience, risk of loss,
general economic conditions and trends and
management's assessments of the probable future
outcome of these matters. Consequently, actual
results could differ from such estimates.
During 1999, Textron Manufacturing entered into a
promissory note agreement with Textron Finance,
whereby Textron Finance could borrow up to $1.25
billion from Textron Manufacturing. The maximum
amount outstanding under this agreement during 1999
was $1.0 billion. The amount of interest
expense/income incurred/earned by Textron Finance and
Textron Manufacturing, respectively, was
approximately $15 million for 1999. Textron Finance's
operating income includes interest expense incurred
under this agreement. This agreement was cancelled
during the second quarter of 1999.
2 ACQUISITIONS AND DISPOSITIONS
ACQUISITIONS
During 2000, Textron Manufacturing acquired 11
companies, acquired the minority interests of two
entities and entered into one joint venture at a
total cost of $121 million including debt assumed of
$36 million. The largest of these acquisitions were
Plascar Industria e Comerico Ltda. - the leading
supplier of instrument panels and automotive trim
products to global manufacturers producing vehicles
in South America and Advantage Molding and Decorating
- a leading supplier of injection molded parts,
tooling and pad-printed designs.
During 1999, Textron Manufacturing segments
acquired 14 companies and entered into two joint
ventures which in turn, each acquired companies. The
largest of these acquisitions were Flexalloy Inc. - a
provider of vendor managed inventory services for the
North American fastener markets; OmniQuip
International, Inc. - a leading manufacturer of light
construction equipment including telescopic material
handlers, aerial work platforms and skid steer
loaders and InteSys Technologies Inc. - a provider of
plastics and metal engineered assemblies. The total
cost of the acquisitions and investments in joint
ventures was approximately $1.2 billion, including
treasury stock issued for $32 million and debt
assumed of $308 million.
In addition, in 1999 Textron Finance had
acquisitions totaling $1.3 billion, including debt
assumed of $547 million. The largest of these
acquisitions were Litchfield Financial Corporation, a
commercial finance company specializing in the
vacation ownership (timeshare) industry and the
aircraft and franchise finance divisions of GreenTree
Financial Servicing Corporation. Capital
contributions made by Textron Manufacturing to
Textron Finance in support of these acquisitions were
$337 million.
During 1998, Textron acquired nine companies. The
largest of these acquisitions were Ransomes PLC - a
UK-based manufacturer of commercial turf-care
machinery; Ring Screw Works - a Michigan-based
supplier of specialty threaded fasteners to the
automotive industry; and David Brown Group PLC - a
UK-based designer and manufacturer of industrial
gears and mechanical and hydraulic transmission
systems. The total cost of these acquisitions was
approximately $1.1 billion, including notes issued
for approximately $160 million. In addition,
approximately $230 million of debt was assumed as a
result of these acquisitions.
The purchase method of accounting has been used for
all acquisitions during the past three years.
TEXTRON 2000 ANNUAL REPORT 40
<PAGE> 22
DISPOSITIONS
On August 11, 1998, Textron announced that it had reached an agreement
to sell Avco Financial Services (AFS) to Associates First Capital
Corporation for $3.9 billion in cash. The sale was completed on January
6, 1999. Net after-tax proceeds were approximately $2.9 billion,
resulting in an after-tax gain of $1.65 billion. Textron has presented
AFS as a discontinued operation in these financial statements.
Fuel Systems Textron was sold to Woodward Governor Company for
$160 million in cash in 1998, at a pretax gain of $97 million ($54
million after-tax).
3 FINANCE RECEIVABLES AND SECURITIZATIONS
INTEREST INCOME IS RECOGNIZED IN REVENUES USING THE INTEREST METHOD TO
PROVIDE A CONSTANT RATE OF RETURN OVER THE TERMS OF THE RECEIVABLES.
DIRECT LOAN ORIGINATION COSTS AND FEES RECEIVED ARE DEFERRED AND
AMORTIZED OVER THE LOANS' CONTRACTUAL LIVES. THE ACCRUAL OF INTEREST
INCOME IS SUSPENDED FOR ACCOUNTS WHICH ARE CONTRACTUALLY DELINQUENT BY
MORE THAN THREE MONTHS. ACCRUAL OF INTEREST RESUMES AND SUSPENDED
INTEREST INCOME IS RECOGNIZED WHEN LOANS BECOME CONTRACTUALLY CURRENT.
PROVISIONS FOR LOSSES ON FINANCE RECEIVABLES ARE CHARGED TO INCOME
IN AMOUNTS SUFFICIENT TO MAINTAIN THE ALLOWANCE AT A LEVEL CONSIDERED
ADEQUATE TO COVER LOSSES IN THE EXISTING RECEIVABLE PORTFOLIO.
MANAGEMENT EVALUATES THE ALLOWANCE BY EXAMINING CURRENT DELINQUENCIES,
THE CHARACTERISTICS OF THE EXISTING ACCOUNTS, HISTORICAL LOSS
EXPERIENCE, THE VALUE OF THE UNDERLYING COLLATERAL, AND GENERAL
ECONOMIC CONDITIONS AND TRENDS.
FINANCE RECEIVABLES ARE WRITTEN-OFF WHEN THEY ARE DETERMINED TO BE
UNCOLLECTIBLE. FINANCE RECEIVABLES ARE WRITTEN DOWN TO THE FAIR VALUE
OF THE RELATED COLLATERAL (LESS ESTIMATED COSTS TO SELL) WHEN THE
COLLATERAL IS REPOSSESSED OR WHEN NO PAYMENT HAS BEEN RECEIVED FOR SIX
MONTHS, UNLESS MANAGEMENT DEEMS THE LOANS COLLECTIBLE. FORECLOSED REAL
ESTATE LOANS AND REPOSSESSED ASSETS ARE TRANSFERRED FROM FINANCE
RECEIVABLES TO OTHER ASSETS AT THE LOWER OF FAIR VALUE (LESS ESTIMATED
COSTS TO SELL) OR THE OUTSTANDING LOAN BALANCE.
FINANCE RECEIVABLES
Commercial installment contracts have initial terms ranging from one to
15 years. Golf course and resort mortgages have initial terms ranging
from three to seven years. Finance leases have initial terms up to 15
years. Leveraged leases have initial terms up to approximately 30
years. Floorplan and revolving receivables generally mature within one
to three years.
At the end of 2000 and 1999, Textron Finance had nonaccrual loans
and leases totaling $102 million and $84 million, respectively.
Approximately $76 million and $65 million of these respective amounts
were considered impaired, which excludes finance leases and homogeneous
loan portfolios. The allowance for losses on receivables related to
impaired loans was $34 million and $21 million at the end of 2000 and
1999. The average recorded investment in impaired loans during 2000 and
1999 were $76 million and $47 million, respectively. The percentage of
net write-offs to average finance receivables was 0.7% in 2000, and
0.5% in both 1999 and 1998.
The following table displays the contractual maturity of the
finance receivables. It does not necessarily reflect future cash
collections because of various factors including the refinancing of
receivables and repayments prior to maturity. Cash collections from
receivables, excluding finance charges and portfolio sales, were $5.2
billion and $3.8 billion in 2000 and 1999, respectively. In the same
periods, the ratio of cash collections to average net receivables was
approximately 91% and 89%, respectively.
<TABLE>
<CAPTION>
LESS FINANCE RECEIVABLES
CONTRACTUAL MATURITIES FINANCE OUTSTANDING
---------------------- -----------
(In millions) 2001 2002 AFTER 2002 CHARGES 2000 1999
- ------------- ---- ---- ---------- ------- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Installment contracts $ 402 $ 308 $ 1,410 $ (135) $ 1,985 $ 2,227
Floorplan receivables 810 77 8 (1) 894 657
Revolving loans 615 65 641 (16) 1,305 1,216
Finance leases 97 87 274 (97) 361 509
Golf course and resort mortgages 144 150 393 (4) 683 621
Leveraged leases 15 11 613 (278) 361 348
------- ------- ------- ------- ----- -----
$ 2,083 $ 698 $ 3,339 $ (531) 5,589 5,578
======= ======= ======= =======
Less allowance for credit losses 116 113
----- -----
$ 5,473 $ 5,465
======= ======= ======= ======= ===== =====
</TABLE>
41 TEXTRON 2000 ANNUAL REPORT
<PAGE> 23
The net investment in finance leases and leveraged leases were as
follows:
<TABLE>
<CAPTION>
(In millions) 2000 1999
- ------------- ---- ----
<S> <C> <C>
Finance and leveraged lease receivables $ 508 $ 656
Estimated residual values on equipment and assets 589 589
------- -------
1,097 1,245
------- -------
Unearned income (375) (388)
------- -------
Investment in leases 722 857
------- -------
Deferred income taxes arising from leveraged leases (265) (260)
------- -------
Net investment in leases $ 457 $ 597
======= =======
</TABLE>
The activity in the allowance for credit losses on finance
receivables is as follows:
<TABLE>
<CAPTION>
(In millions) 2000 1999 1998
- ------------- ---- ---- ----
<S> <C> <C> <C>
Balance at the beginning of the year $ 113 $ 84 $ 77
Provision for losses 37 32 20
Charge-offs (45) (28) (21)
Recoveries 7 5 5
Acquisitions and other 4 20 3
----- ----- -----
Balance at the end of the year $ 116 $ 113 $ 84
===== ===== =====
</TABLE>
Textron had both fixed-rate and variable-rate loan commitments
totaling $1,531 million at year-end 2000. Because interest rates on
these commitments are not set until the loans are funded, Textron is
not exposed to interest rate changes.
A portion of Textron Finance's business involves financing the
sale and lease of Textron products. In 2000, 1999 and 1998, Textron
Finance paid Textron $1,429 million, $1,260 million, and $980 million,
respectively, for receivables and operating lease equipment. Operating
agreements with Textron specify that Textron Finance generally has
recourse to Textron with respect to these purchases. At year-end 2000,
finance receivables and operating lease equipment of $834 million and
$69 million, respectively, ($841 million and $69 million, respectively,
at year-end 1999) were due from Textron or subject to recourse to
Textron. Included in the finance receivables balance guaranteed by
Textron are past due loans of $105 million at the end of 2000 ($72
million at year-end 1999) that meet the non-accrual criteria but are
not classified as non-accrual by Textron Finance due to the guarantee
from Textron Manufacturing units. Textron Finance continues to
recognize income on these loans. Concurrently, Textron Manufacturing is
charged for their obligation to Textron Finance under the guarantee so
that there are no net interest earnings for the loans on a consolidated
basis.
Textron Finance manages finance receivables for a variety of
investors, participants and third party portfolio owners. The total
managed finance receivable portfolio, including owned finance
receivables, was $7,965 million and $6,802 million, respectively for
2000 and 1999.
Textron Finance's finance receivables are diversified
geographically across the United States. There are no significant
industry or collateral concentrations at the end of 2000.
SECURITIZATIONS
Textron Finance securitized and sold without recourse (and servicing
rights retained) $1.2 billion and $273 million of finance receivables
in 2000 and 1998, respectively. Gains from securitized trust sales were
approximately $22 million and $3 million in 2000 and 1998,
respectively. Textron Finance retained subordinated interests in the
trusts which are approximately 2% to 10% of the total trust. Servicing
fees range from 30 to 75 basis points. Principal amounts sold and
assumptions used in these securitization sales for 2000 were as
follows:
<TABLE>
<CAPTION>
GENERAL EQUIPMENT LOANS LAND
(Dollars in millions) AVIATION AND LEASES FRANCHISE LOTS
- --------------------- -------- ---------- --------- ----
<S> <C> <C> <C> <C>
Principal balance $ 763 $ 275 $ 70 $ 69
Weighted-average life (in years) 2.5 1.7 7.6 5.9
Prepayment speed (annual rate) 20%-23% 15%-20% 8% 20%
Expected credit losses (annual rate) 0.06%-0.35% 0.20% 0.25% 1.50%
Residual cash flows discounted at 10% 10% 10% 11%
=========== ========= ==== ====
</TABLE>
At December 30, 2000 the carrying amount of Textron Finance's
retained interests in securitized trusts was approximately $130
million. Hypothetical adverse changes of 10% and 20% to the prepayment
speed, expected credit losses and residual cash flows discount rates
assumptions would not have a material impact on the current fair value
of the residual cash flows associated with the retained interests.
TEXTRON 2000 ANNUAL REPORT 42
<PAGE> 24
4 INVENTORIES
INVENTORIES ARE CARRIED AT THE LOWER OF COST OR MARKET.
<TABLE>
<CAPTION>
DECEMBER 30, January 1,
(In millions) 2000 2000
- ------------- ---- ----
<S> <C> <C>
Finished goods $ 634 $ 608
Work in process 1,023 970
Raw materials 454 489
------ ------
2,111 2,067
Less progress payments and customer deposits 240 208
------ ------
$1,871 $1,859
====== ======
</TABLE>
Inventories aggregating $1,153 million at year-end 2000 and $1,051
million at year-end 1999 were valued by the last-in, first-out (LIFO)
method. (Had such LIFO inventories been valued at current costs, their
carrying values would have been approximately $192 million and $174
million higher at those respective dates.) The remaining inventories,
other than those related to certain long-term contracts, are valued
generally by the first-in, first-out method.
Inventories related to long-term contracts, net of progress
payments and customer deposits, were $161 million at year-end 2000 and
$181 million at year-end 1999.
5 LONG-TERM CONTRACTS
REVENUES UNDER FIXED-PRICE CONTRACTS ARE GENERALLY RECORDED AS
DELIVERIES ARE MADE. CERTAIN LONG-TERM FIXED-PRICE CONTRACTS PROVIDE
FOR THE PERIODIC DELIVERY AFTER A LENGTHY PERIOD OF TIME OVER WHICH
SIGNIFICANT COSTS ARE INCURRED OR REQUIRE A SIGNIFICANT AMOUNT OF
DEVELOPMENT EFFORT IN RELATION TO TOTAL CONTRACT VOLUME. REVENUES UNDER
THOSE CONTRACTS AND ALL COST-REIMBURSEMENT-TYPE CONTRACTS ARE RECORDED
AS COSTS ARE INCURRED. REVENUES UNDER THE V-22 PRODUCTION CONTRACT WITH
THE U.S. GOVERNMENT, WHICH PRESENTLY IS A COST-REIMBURSEMENT-TYPE
CONTRACT, ARE RECORDED AS COSTS ARE INCURRED.
CERTAIN CONTRACTS ARE AWARDED WITH FIXED-PRICE INCENTIVE FEES.
INCENTIVE FEES ARE CONSIDERED WHEN ESTIMATING REVENUES AND PROFIT
RATES, AND ARE RECORDED WHEN THESE AMOUNTS ARE REASONABLY DETERMINED.
LONG-TERM CONTRACT PROFITS ARE BASED ON ESTIMATES OF TOTAL SALES VALUE
AND COSTS AT COMPLETION. SUCH ESTIMATES ARE REVIEWED AND REVISED
PERIODICALLY THROUGHOUT THE CONTRACT LIFE. REVISIONS TO CONTRACT
PROFITS ARE RECORDED WHEN THE REVISIONS TO ESTIMATED SALES VALUE OR
COSTS ARE MADE. ESTIMATED CONTRACT LOSSES ARE RECORDED WHEN IDENTIFIED.
Long-term contract receivables at year-end 2000 and 1999 totaled
$199 million and $156 million, respectively. This includes $135 million
and $112 million, respectively, of unbilled costs and accrued profits
that had not yet met the contractual billing criteria. Long-term
contract receivables do not include significant amounts (a) billed but
unpaid due to contractual retainage provisions or (b) subject to
collection uncertainty.
6 INVESTMENT SECURITIES
INVESTMENTS IN MARKETABLE SECURITIES, A COMPONENT OF OTHER ASSETS, ARE
CLASSIFIED AS AVAILABLE-FOR-SALE AND ARE RECORDED AT THEIR FAIR VALUE.
UNREALIZED GAINS AND LOSSES ON THESE SECURITIES, NET OF RELATED INCOME
TAXES, ARE INCLUDED IN SHAREHOLDERS' EQUITY AS A COMPONENT OF
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS). NON-MARKETABLE EQUITY
SECURITIES ARE ACCOUNTED FOR UNDER EITHER THE COST OR EQUITY METHOD OF
ACCOUNTING.
Textron invested in $134 million of e-business securities. In
December 2000, the decline in the fair value of e-business marketable
securities below cost was determined to be "other than temporary" and
accordingly, unrealized gross losses of $93 million were recognized in
2000 earnings. The Company also recorded an impairment write-down of a
non-marketable e-business investment of $24 million. These write-downs
have been included in special charges, net on the consolidated
statement of income.
Investment securities included in other assets, had a carrying
value of $17 million at year-end 2000 with no unrealized gain or loss
in accumulated other comprehensive loss.
43 TEXTRON 2000 ANNUAL REPORT
<PAGE> 25
7 LONG-TERM ASSETS
THE COST OF PROPERTY, PLANT, AND EQUIPMENT IS DEPRECIATED BASED ON THE
ASSETS' ESTIMATED USEFUL LIVES. EXPENDITURES FOR IMPROVEMENTS THAT
INCREASE ASSET VALUES AND EXTEND USEFUL LIVES ARE CAPITALIZED.
EXPENDITURES FOR MAINTENANCE AND REPAIRS ARE EXPENSED AS INCURRED.
<TABLE>
<CAPTION>
DECEMBER 30, January 1,
(In millions) 2000 2000
- ------------- ---- ----
<S> <C> <C>
At cost:
Land and buildings $1,170 $1,083
Machinery and equipment 3,729 3,499
------ ------
4,899 4,582
Less accumulated depreciation 2,294 2,069
------ ------
$2,605 $2,513
====== ======
</TABLE>
INTANGIBLE ASSETS ARE PRINCIPALLY COMPRISED OF GOODWILL WHICH IS
AMORTIZED ON THE STRAIGHT-LINE METHOD OVER 20 TO 40 YEARS. OTHER
INTANGIBLE ASSETS ARE AMORTIZED OVER THEIR ESTIMATED USEFUL LIVES.
Accumulated amortization of intangible assets totaled $564 million at
December 30, 2000 and $463 million at January 1, 2000.
GOODWILL IS PERIODICALLY REVIEWED FOR IMPAIRMENT BY COMPARING THE
CARRYING AMOUNT TO THE ESTIMATED FUTURE UNDISCOUNTED CASH FLOWS OF THE
BUSINESSES ACQUIRED. IF THIS REVIEW INDICATES THAT GOODWILL IS NOT
RECOVERABLE, THE CARRYING AMOUNT WOULD BE REDUCED TO FAIR VALUE. IN
ADDITION, THE COMPANY ASSESSES LONG-LIVED ASSETS, INCLUDING ASSOCIATED
GOODWILL, FOR IMPAIRMENT UNDER FINANCIAL ACCOUNTING STANDARDS BOARD'S
(FASB) STATEMENT NO. 121, "ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED
ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF."
During 2000, Textron recorded a write-down of goodwill and certain
other long-lived assets of $350 million as further discussed in Note
17.
Prior to fiscal year 2000, customer engineering and tooling
project costs for which customer reimbursement was anticipated were
capitalized and classified in other assets. Effective January 2, 2000,
Textron adopted EITF Issue No. 99-5 "Accounting for Pre-Production
Costs Related to Long-Term Supply Arrangements". This consensus
requires that all design and development costs for products sold under
long-term supply arrangements be expensed unless there is a contractual
guarantee that provides for specific required payments for these costs.
Textron reported a cumulative effect of change in accounting principle
of $59 million (net of tax), or approximately $0.41 per diluted share
in the first quarter of 2000 related to the adoption of this consensus.
Pro forma income from continuing operations, net income and
related diluted earnings per common share amounts as if the provisions
of EITF 99-5 had been applied during the year ended 1999 and 1998 are
as follows:
<TABLE>
<CAPTION>
(In millions, except per share data) 1999 1998
- ------------------------------------ ---- ----
<S> <C> <C>
Income from continuing operations
As reported $ 623 $ 443
Pro forma $ 612 $ 430
====== ======
Income from continuing operations per diluted share
As reported $ 4.05 $ 2.68
Pro forma $ 3.98 $ 2.60
====== ======
Net income
As reported $2,226 $ 608
Pro forma $2,215 $ 595
====== ======
Net income per diluted share
As reported $14.48 $ 3.68
Pro forma $14.41 $ 3.60
====== ======
</TABLE>
TEXTRON 2000 ANNUAL REPORT 44
<PAGE> 26
8 DEBT AND CREDIT FACILITIES
Debt at year-end 2000 and 1999 consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 30, January 1,
(In millions) 2000 2000
- ------------- ---- ----
<S> <C> <C>
TEXTRON MANUFACTURING:
Short-term debt:
Borrowings under or supported by long-term credit facilities* $ 528 $ 626
Current portion of long-term debt 87 62
------- -------
Total short-term debt 615 688
------- -------
Long-term senior debt:
Medium-term notes due 2001-2011 (average rate - 9.66%) 43 63
6.75% due 2002 500 500
6.375% due 2004 300 300
5.63% due 2005 273 --
6.63% due 2020 221 --
Other long-term debt (average rate - 8.39%) 219 278
------- -------
1,556 1,141
------- -------
Current portion of long-term debt (87) (62)
------- -------
Total long-term debt 1,469 1,079
------- -------
Total Textron Manufacturing debt $ 2,084 $ 1,767
======= =======
</TABLE>
*The weighted average interest rates on these borrowings, before the
effect of interest rate exchange agreements, were 5.6%, 5.8% and 5.8%
at year-end 2000, 1999, and 1998, respectively. Comparable rates during
the years 2000, 1999, and 1998 were 5.7%, 4.9% and 5.4%, respectively.
Textron Manufacturing maintains credit facilities with various
banks for both short- and long-term borrowings. At year-end, Textron
Manufacturing had (a) a $1.0 billion domestic credit agreement with 22
banks available on a fully revolving basis until April 1, 2003, (b) $71
million in multi-currency credit agreements with two banks available
through December 29, 2002 and (c) $209 million in other credit
facilities available with various banks. At year-end 2000, $767 million
of the credit facilities was not used or reserved as support for
commercial paper or bank borrowings.
<TABLE>
<CAPTION>
DECEMBER 30, January 1,
(In millions) 2000 2000
- ------------- ---- ----
<S> <C> <C>
TEXTRON FINANCE:
Senior:
Borrowings under or supported by credit facilities* $ 966 $1,339
6.89% average rate debt; due 2001 to 2004 1,432 1,507
6.96% average rate variable notes; due 2001 to 2004 2,269 1,705
------ ------
Total Textron Finance debt $4,667 $4,551
====== ======
</TABLE>
*The weighted average interest rates on these borrowings, before the
effect of interest rate exchange agreements, were 6.7%, 6.4% and 6.3%
at year-end 2000, 1999 and 1998, respectively. Comparable rates during
the years 2000, 1999 and 1998 were 6.4%, 5.4% and 5.8%, respectively.
Textron Finance has lines of credit with various banks aggregating
$1.4 billion at year-end 2000, of which $444 million was not used or
reserved as support for commercial paper or bank borrowings. Lending
agreements limit Textron Finance's net assets available for cash
dividends and other payments to Textron Manufacturing to approximately
$351 million of Textron Finance's net assets of $910 million at
year-end 2000. Textron Finance's loan agreements also contain
provisions regarding additional debt, creation of liens or guarantees
and the making of investments.
The following table shows required payments during the next five
years on debt outstanding at the end of 2000. The payments schedule
excludes amounts that are payable under credit facilities and revolving
credit agreements.
<TABLE>
<CAPTION>
(In millions) 2001 2002 2003 2004 2005
- ------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Textron Manufacturing $ 87 $ 510 $ 5 $ 304 $276
Textron Finance 1,098 1,580 385 638 --
------ ------ ------ ------ ----
$1,185 $2,090 $ 390 $ 942 $276
====== ====== ====== ====== ====
</TABLE>
Textron Manufacturing has agreed to cause Textron Finance to
maintain certain minimum levels of financial performance. No payments
from Textron Manufacturing were necessary in 2000, 1999, or 1998 for
Textron Finance to meet these standards.
45 TEXTRON 2000 ANNUAL REPORT
<PAGE> 27
EXTRAORDINARY LOSS FROM DEBT RETIREMENT
During 1999, Textron retired $168 million of 6.625% debentures
originally due 2007, $165 million of 8.75% debentures originally due
2022, $146 million of medium term notes with interest rates ranging
from 9.375% to 10.01%, and other debt totaling $74 million with
effective interest rates ranging from 8.25% to 10.04%. In connection
with the retirement of this long-term high coupon debt, Textron
terminated $479 million of interest rate exchange agreements designated
as hedges of the retired borrowings. As a result of these transactions,
Textron recorded an after-tax loss in 1999 of $43 million, which has
been reflected as an extraordinary item.
9 DERIVATIVES AND FOREIGN CURRENCY TRANSACTIONS
INTEREST RATE EXCHANGE AGREEMENTS
Textron is exposed to adverse movements in domestic and foreign
interest rates. Interest rate exchange agreements are used to help
manage interest rate risk by converting certain variable-rate debt or
finance receivables to fixed-rate debt or finance receivables and vice
versa. Textron Finance will also enter basis swaps to lock-in desired
spreads between certain interest-earning assets and certain
interest-bearing liabilities. Additionally, Textron will enter forward
starting fixed-pay interest rate exchange agreements to lock-in current
interest rates for probable future issuances of long-term borrowings.
INTEREST RATE EXCHANGE AGREEMENTS ARE ACCOUNTED FOR ON THE ACCRUAL
BASIS WITH THE DIFFERENTIAL TO BE PAID OR RECEIVED RECORDED CURRENTLY
AS AN ADJUSTMENT TO INTEREST EXPENSE. PREMIUMS PAID TO TERMINATE
AGREEMENTS DESIGNATED AS HEDGES ARE DEFERRED AND AMORTIZED TO EXPENSE
OVER THE REMAINING TERM OF THE ORIGINAL LIFE OF THE CONTRACT. IF THE
UNDERLYING DEBT IS THEN PAID EARLY, UNAMORTIZED PREMIUMS ARE RECOGNIZED
AS AN ADJUSTMENT TO THE GAIN OR LOSS ASSOCIATED WITH THE DEBT'S
EXTINGUISHMENT.
AGREEMENTS THAT REQUIRE THE PAYMENT OF FIXED-RATE INTEREST ARE
DESIGNATED AGAINST SPECIFIC LONG-TERM VARIABLE-RATE BORROWINGS.
Textron Manufacturing interest rate exchange agreements are
summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 30, 2000 January 1, 2000
----------------- ---------------
TEXTRON MANUFACTURING
WEIGHTED Weighted
WEIGHTED AVERAGE Weighted Average
NOTIONAL AVERAGE REMAINING Notional Average Remaining
(Dollars in millions) AMOUNT INTEREST RATE TERM Amount Interest Rate Term
- --------------------- ------ ------------- ---- ------ ------------- ----
<S> <C> <C> <C> <C> <C> <C>
Variable-pay interest rate
exchange agreements $ 415 6.91% 3.9 $ 852 6.39% 2.5
Fixed-pay interest rate
exchange agreements $ -- --% -- $ 941 4.69% 0.3
======== ==== === ========= ==== ===
</TABLE>
Textron Manufacturing's variable pay interest rate exchange
agreements were designated against specific long-term fixed-rate debt.
These agreements effectively adjusted the average rate of interest on
fixed-rate notes in 2000 to 6.9% from 7.0% and expire as follows: $26
million (11.3%) in 2001, $35 million (10.4%) in 2002, and $354 million
(6.6%) through 2020. Textron Manufacturing's fixed pay interest rate
swap agreements, which expired in March 2000, were entered in June 1999
to insulate Textron against potential interest rate increases on
variable-rate debt around year-end 1999.
Textron Finance interest rate exchange agreements are summarized
as follows:
<TABLE>
<CAPTION>
DECEMBER 30, 2000 January 1, 2000
----------------- ---------------
TEXTRON FINANCE
WEIGHTED Weighted
WEIGHTED AVERAGE Weighted Average
NOTIONAL AVERAGE REMAINING Notional Average Remaining
(Dollars in millions) AMOUNT INTEREST RATE TERM Amount Interest Rate Term
- --------------------- ------ ------------- ---- ------ ------------- ----
<S> <C> <C> <C> <C> <C> <C>
Fixed-pay interest rate exchange
agreements - debt $ 150 6.52% 2.0 $ 300 5.76% 0.8
Variable-receive interest rate
exchange agreements - receivables $ 100 8.14% 12.6 $ -- --% --
Basis swaps* $ 715 6.77% 0.8 $ 125 5.84% 0.4
Forward starting fixed-pay
interest rate exchange
agreements $ 228 7.31% 7.6 $ -- --% --
======== ==== === ======== ==== ===
</TABLE>
*Amounts at December 30, 2000 and January 1, 2000 require United States
Prime Rate-based payments as stated above and LIBOR-based receipts of
6.77% and 6.07%, respectively.
TEXTRON 2000 ANNUAL REPORT 46
<PAGE> 28
In addition, Textron Finance utilizes interest rate agreements to
protect against the interest rate risk associated with their related
interest in securitized assets. At year end 2000 and 1999, Textron
Finance had $509 million and $91 million, respectively of such interest
rate agreements outstanding.
Textron Finance's fixed-pay interest rate exchange agreements
designated as hedges of variable-rate debt effectively adjusted the
related average interest rate in 2000 to 6.91% from 6.93% and mature in
2002. Textron Finance's variable-receive interest rate exchange
agreements designated as hedges of fixed-rate finance receivables were
effective in December 2000 and did not materially impact interest
income.
Textron had minimal exposure to loss from nonperformance by the
counterparties to its interest rate exchange agreements at the end of
2000, and does not anticipate nonperformance by counterparties in the
periodic settlements of amounts due. Textron currently minimizes this
potential for risk by entering into contracts exclusively with major,
financially sound counterparties having no less than a long-term bond
rating of "A," by continuously monitoring the counterparties' credit
ratings and by limiting exposure with any one financial institution.
The credit risk generally is limited to the amount by which the
counterparties' contractual obligations exceed Textron's obligations to
the counterparty.
TRANSLATION OF FOREIGN CURRENCIES, FOREIGN EXCHANGE TRANSACTIONS AND
FOREIGN CURRENCY EXCHANGE CONTRACTS
FOREIGN CURRENCY DENOMINATED ASSETS AND LIABILITIES ARE TRANSLATED INTO
U.S. DOLLARS WITH THE ADJUSTMENTS FROM THE CURRENCY RATE CHANGES BEING
RECORDED IN THE CURRENCY TRANSLATION ADJUSTMENT ACCOUNT IN
SHAREHOLDERS' EQUITY UNTIL THE RELATED FOREIGN ENTITY IS SOLD OR
SUBSTANTIALLY LIQUIDATED. NON-U.S. DOLLAR FINANCING TRANSACTIONS,
INCLUDING CURRENCY SWAPS, ARE USED TO EFFECTIVELY HEDGE LONG-TERM
INVESTMENTS IN FOREIGN OPERATIONS WITH THE SAME CORRESPONDING CURRENCY.
FOREIGN CURRENCY GAINS AND LOSSES ON THE HEDGE OF THE LONG-TERM
INVESTMENTS ARE RECORDED IN THE CURRENCY TRANSLATION ADJUSTMENT WITH
THE OFFSET RECORDED AS AN ADJUSTMENT TO THE NON-U.S. DOLLAR FINANCING
LIABILITY.
FORWARD EXCHANGE CONTRACTS ARE USED TO HEDGE CERTAIN FOREIGN
CURRENCY TRANSACTIONS AND CERTAIN FIRM SALES AND PURCHASE COMMITMENTS
DENOMINATED IN FOREIGN CURRENCIES. GAINS AND LOSSES FROM CURRENCY RATE
CHANGES ON HEDGES OF FOREIGN CURRENCY TRANSACTIONS ARE RECORDED
CURRENTLY IN INCOME. GAINS AND LOSSES RELATING TO THE HEDGE OF FIRM
SALES AND PURCHASE COMMITMENTS ARE INCLUDED IN THE MEASUREMENT OF THE
UNDERLYING TRANSACTIONS WHEN THEY OCCUR. Foreign exchange gains and
losses included in income have not been material.
The table below summarizes, by major currency, Textron's forward
exchange contracts and currency swaps in U.S. dollars. The buy amounts
represent the U.S. dollar equivalent of commitments to purchase foreign
currencies and the sell amounts represent the U.S. dollar equivalent of
commitments to sell foreign currencies. The foreign currency amounts
have been translated into a U.S. dollar equivalent using the exchange
rate at the balance sheet date.
<TABLE>
<CAPTION>
BUY CONTRACTS SELL CONTRACTS
------------- --------------
CONTRACT UNREALIZED CONTRACT UNREALIZED
(In millions) AMOUNT GAIN/(LOSS) AMOUNT GAIN/(LOSS)
- ------------- ------ ----------- ------ -----------
<S> <C> <C> <C> <C>
DECEMBER 30, 2000
British Pound $208 $ (1) $105 $ --
Canadian Dollar 281 -- 15 --
Euro 116 -- 51 --
Other 26 -- 38 1
---- ---- ---- ----
Total $631 $ (1) $209 $ 1
==== ==== ==== ====
January 1, 2000
British Pound $ 74 $ 1 $485 $ 7
Canadian Dollar 263 5 15 --
Euro 7 -- 447 18
Other 11 -- 35 --
---- ---- ---- ----
Total $355 $ 6 $982 $ 25
==== ==== ==== ====
</TABLE>
In June 1998, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standards (SFAS) No. 133
"Accounting for Derivative Instruments and Hedging Activities." SFAS
133 requires an entity to recognize all derivatives as either assets or
liabilities and measure those instruments at fair value. In June 1999,
the FASB issued SFAS 137, which deferred the effective date of SFAS 133
to all fiscal quarters of years beginning after June 15, 2000. In June
2000, the FASB issued SFAS 138 which amended accounting and reporting
standards and addressed issues causing implementation difficulties with
SFAS 133 for certain derivative instruments and hedging activities.
These statements became effective for the Company on December 31, 2000.
The Company will record the effect of the transition to these new
accounting requirements in the first
47 TEXTRON 2000 ANNUAL REPORT
<PAGE> 29
quarter of 2001 as a cumulative effect of change in accounting
principle. The effect of this change in accounting will not be material
to the Company's results of operations and financial position.
10 TEXTRON FINANCE - OBLIGATED MANDATORILY REDEEMABLE PREFERRED SECURITIES
OF FINANCE SUBSIDIARY HOLDING SOLELY JUNIOR SUBORDINATED DEBENTURES
Litchfield Financial Corporation (Litchfield, a subsidiary of Textron
Financial Corporation) was acquired by Textron Financial Corporation
during 1999. Prior to the acquisition, a trust sponsored and
wholly-owned by Litchfield issued Series A Preferred Securities to the
public (for $26 million), the proceeds of which were invested by the
trust in $26 million aggregate principal amount of Litchfield's newly
issued 10% Series A Junior Subordinated Debentures (Series A
Debentures), due 2029. The debentures are the sole asset of the trust.
The preferred securities were recorded by Textron Financial Corporation
at the fair value of $29 million as of the acquisition date. The
amounts due to the trust under the subordinated debentures and the
related income statement amounts have been eliminated in Textron's
consolidated financial statements.
The preferred securities accrue and pay cash distributions
quarterly at a rate of 10% per annum. The trust's obligation under the
Series A Preferred Securities are fully and unconditionally guaranteed
by Litchfield. The trust will redeem all of the outstanding Series A
Preferred Securities when the Series A Debentures are paid at maturity
on June 30, 2029, or otherwise become due. Litchfield will have the
right to redeem 100% of the principal plus accrued and unpaid interest
on or after June 30, 2004.
11 TEXTRON - OBLIGATED MANDATORILY REDEEMABLE PREFERRED SECURITIES OF
SUBSIDIARY TRUST HOLDING SOLELY TEXTRON JUNIOR SUBORDINATED DEBT
SECURITIES
In 1996, a trust sponsored and wholly-owned by Textron issued preferred
securities to the public (for $500 million) and shares of its common
securities to Textron (for $15.5 million), the proceeds of which were
invested by the trust in $515.5 million aggregate principal amount of
Textron's newly issued 7.92% Junior Subordinated Deferrable Interest
Debentures, due 2045. The debentures are the sole asset of the trust.
The proceeds from the issuance of the debentures were used by Textron
for the repayment of long-term borrowings and for general corporate
purposes. The amounts due to the trust under the debentures and the
related income statement amounts have been eliminated in Textron's
consolidated financial statements.
The preferred securities accrue and pay cash distributions
quarterly at a rate of 7.92% per annum. Textron has guaranteed, on a
subordinated basis, distributions and other payments due on the
preferred securities. The guarantee, when taken together with Textron's
obligations under the debentures and in the indenture pursuant to which
the debentures were issued and Textron's obligations under the Amended
and Restated Declaration of Trust governing the trust, provides a full
and unconditional guarantee of amounts due on the preferred securities.
The preferred securities are mandatorily redeemable upon the maturity
of the debentures on March 31, 2045, or earlier to the extent of any
redemption by Textron of any debentures. The redemption price in either
such case will be $25 per share plus accrued and unpaid distributions
to the date fixed for redemption.
12 SHAREHOLDER'S EQUITY
PREFERRED STOCK
Textron has authorization for 15,000,000 shares of preferred stock.
Each share of $2.08 Preferred Stock ($23.63 approximate stated value)
is convertible into 4.4 shares of common stock and can be redeemed by
Textron for $50 per share. Each share of $1.40 Preferred Dividend Stock
($11.82 approximate stated value) is convertible into 3.6 shares of
common stock and can be redeemed by Textron for $45 per share.
COMMON STOCK
Textron has authorization for 500,000,000 shares of 12.5 cent per share
par value common stock.
PERFORMANCE SHARE UNITS AND STOCK OPTIONS
Textron's 1999 Long-Term Incentive Plan (the "1999 Plan") authorizes
awards to key employees of Textron and its related companies in three
forms: (a) options to purchase Textron shares; (b) performance share
units and (c) restricted stock. The maximum number of share awards that
are authorized by the 1999 Plan are: (a) 8,000,000 options to purchase
Textron shares; (b) 1,000,000 performance units and (c) 500,000 shares
of restricted stock.
TEXTRON 2000 ANNUAL REPORT 48
<PAGE> 30
STOCK-BASED COMPENSATION AWARDS TO EMPLOYEES UNDER THE PLAN ARE
ACCOUNTED FOR USING THE INTRINSIC VALUE METHOD PRESCRIBED IN APB 25,
"ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES" AND RELATED INTERPRETATIONS.
Textron's performance share program, measured under the intrinsic
value method, generated income of approximately $36 million in 2000,
and expense of approximately $25 million and $77 million in 1999 and
1998, respectively. To mitigate the impact of stock price fluctuations
on compensation expense, Textron has entered cash settlement forward
contracts on its common stock. These contracts generated expense of
approximately $69 million for 2000 and income of approximately $5
million and $40 million in 1999 and 1998, respectively.
Pro forma information regarding net income and earnings per share
has been determined using the fair value method. For the purpose of
developing the pro forma information, the fair values of options
granted after 1995 are estimated at the date of grant using the
Black-Scholes option-pricing model. The estimated fair values are
amortized to expense over the options' vesting period. Using this
methodology, net income would have been reduced by $25 million or $.17
per diluted share in 2000 and $9 million or $.06 per diluted share in
both 1999 and 1998.
The assumptions used to estimate the fair value of an option
granted in 2000, 1999, and 1998, respectively, are approximately as
follows: dividend yield of approximately 3%, 2% and 2%; expected
volatility of 27%, 22% and 18%; risk-free interest rates of 5%, 6% and
4%, and weighted average expected lives of 3.5 years. Under these
assumptions, the weighted-average fair value of an option to purchase
one share granted in 2000, 1999 and 1998 was approximately $10, $15 and
$12, respectively.
At year-end 2000, 1,434,000 stock options were available for
future grant under the 1999 Plan. Stock option transactions during the
last three years are summarized as follows:
<TABLE>
<CAPTION>
2000 1999 1998
---- ---- ----
WEIGHTED Weighted Weighted
AVERAGE Average Average
EXERCISE Exercise Exercise
(Shares in thousands) SHARES PRICE Shares Price Shares Price
- --------------------- ------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
Options outstanding
at beginning of year 8,822 $ 55.26 8,342 $ 47.23 9,001 $ 36.74
Options granted 4,618 $ 46.31 2,176 $ 73.75 1,909 $ 74.08
Options exercised (440) $ 30.67 (1,451) $ 34.86 (2,465) $ 29.52
Options canceled (369) $ 76.41 (245) $ 67.06 (103) $ 51.48
----- ------- ----- ------- ----- -------
Options outstanding
at end of year 12,631 $ 52.32 8,822 $ 55.26 8,342 $ 47.23
====== ======= ===== ======= ===== =======
Options exercisable
at end of year 7,012 $ 53.25 5,815 $ 45.60 5,818 $ 36.80
====== ======= ===== ======= ===== =======
</TABLE>
Stock options outstanding at the end of 2000 are summarized as
follows:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
REMAINING AVERAGE AVERAGE
CONTRACTUAL EXERCISE EXERCISE
(Shares in thousands) OUTSTANDING LIFE PRICE EXERCISABLE PRICE
- --------------------- ----------- ---- ----- ----------- -----
<S> <C> <C> <C> <C> <C>
DECEMBER 30, 2000:
$17 - $37 2,238 3.7 $28.37 2,238 $28.37
$38 - $59 5,712 9.1 $45.87 1,195 $45.71
$60 - $94 4,681 8.2 $71.42 3,579 $71.01
=== === ===== === ====== ===== ======
</TABLE>
RESERVED SHARES OF COMMON STOCK
At year-end 2000, common stock reserved for the subsequent conversion
of preferred stock and shares reserved for the exercise of stock
options were 2,927,000 and 12,631,000, respectively.
PREFERRED STOCK PURCHASE RIGHTS
Each outstanding share of Textron common stock has attached to it
one-half of a preferred stock purchase right. One preferred stock
purchase right entitles the holder to buy one one-hundredth of a share
of Series C Junior Participating Preferred Stock at an exercise price
of $250. The rights become exercisable only under certain circumstances
related to a person or group acquiring or offering to acquire a
substantial block of Textron's common stock. In certain circumstances,
holders may acquire Textron stock, or in some cases the stock of an
acquiring entity, with a value equal to twice the exercise price. The
rights expire in September 2005 but may be redeemed earlier for $.05
per right.
49 TEXTRON 2000 ANNUAL REPORT
<PAGE> 31
INCOME PER COMMON SHARE
A reconciliation of income from continuing operations and basic to
diluted share amounts is presented below.
<TABLE>
<CAPTION>
For the years ended DECEMBER 30, 2000 January 1, 2000 January 2, 1999
- ------------------- ----------------- --------------- ---------------
(Dollars in millions, AVERAGE Average Average
shares in thousands) INCOME SHARES Income Shares Income Shares
- -------------------- ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Income from continuing operations $ 277 $ 623 $ 443
Less: Preferred stock dividends -- (1) (1)
BASIC
Available to common shareholders 277 143,923 622 150,389 442 161,254
Dilutive effect of convertible
preferred stock and stock options -- 2,227 1 3,365 1 4,120
DILUTED
Available to common shareholders
and assumed conversions $ 277 146,150 $ 623 153,754 $ 443 165,374
</TABLE>
COMPREHENSIVE INCOME
The components of Textron's other comprehensive income (loss) for 2000,
1999 and 1998 were as follows:
<TABLE>
<CAPTION>
(In millions) 2000 1999 1998
- ------------- ---- ---- ----
<S> <C> <C> <C>
CURRENCY TRANSLATION ADJUSTMENT
Beginning balance $ (96) $(104) $ (71)
Change, net of income taxes (74) (71) (33)
AFS disposal -- 79 --
----- ----- -----
Ending balance $(170) $ (96) $(104)
===== ===== =====
UNREALIZED GAINS (LOSSES) ON SECURITIES
Beginning balance $ -- $ 13 $ 13
Net unrealized gains (losses) arising during the period* (59) -- 8
Reclassification adjustment for realized (gains) losses in net income* 59 -- (8)
AFS disposal (net of income tax expense of $8) -- (13) --
----- ----- -----
Ending balance $ -- $ -- $ 13
===== ===== =====
PENSION LIABILITY ADJUSTMENT
Beginning balance $ (2) $ (5) $ (4)
Change, net of income taxes -- 3 (1)
----- ----- -----
Ending balance $ (2) $ (2) $ (5)
===== ===== =====
ACCUMULATED OTHER COMPREHENSIVE LOSS
Beginning balance $ (98) $ (96) $ (62)
Other comprehensive loss (74) (2) (34)
----- ----- -----
Ending balance $(172) $ (98) $ (96)
===== ===== =====
</TABLE>
*Net of income tax expense (benefit) of $(31) million and $4
million for 2000 and 1998, respectively.
13 LEASES
Rental expense approximated $101 million, $94 million and $83 million
in 2000, 1999 and 1998, respectively. Future minimum rental commitments
for noncancellable operating leases in effect at year-end 2000
approximated $83 million for 2001; $65 million for 2002; $46 million
for 2003; $33 million for 2004; $22 million for 2005; and a total of
$186 million thereafter.
14 RESEARCH AND DEVELOPMENT
Textron carries out research and development for itself and under
contracts with others, primarily the U.S. Government. Company initiated
programs include independent research and development related to
government products and services, a significant portion of which is
recoverable from the U.S. Government through overhead cost allowances.
TEXTRON 2000 ANNUAL REPORT 50
<PAGE> 32
RESEARCH AND DEVELOPMENT COSTS FOR WHICH TEXTRON IS RESPONSIBLE ARE
EXPENSED AS INCURRED. THESE COMPANY FUNDED COSTS INCLUDE AMOUNTS FOR
COMPANY INITIATED PROGRAMS, THE COST SHARING PORTIONS OF CUSTOMER INITIATED
PROGRAMS, AND LOSSES INCURRED ON CUSTOMER INITIATED PROGRAMS. The Company
funded and customer funded research and development costs for 2000, 1999
and 1998 were as follows:
<TABLE>
<CAPTION>
(In millions) 2000 1999 1998
---------------------------------------------------------------------------
<S> <C> <C> <C>
Company funded $307 $257 $219
Customer funded 414 413 394
---------------------------------------------------------------------------
Total research and development $721 $670 $613
===========================================================================
</TABLE>
15 PENSION BENEFITS AND POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
Textron has defined benefit and defined contribution pension plans that
together cover substantially all employees. The costs of the defined
contribution plans amounted to approximately $51 million in 2000 and $40
million in both 1999 and 1998. Defined benefits under salaried plans are
based on salary and years of service. Hourly plans generally provide
benefits based on stated amounts for each year of service. Textron's
funding policy is consistent with federal law and regulations. Pension plan
assets consist principally of corporate and government bonds and common
stocks. Textron offers health care and life insurance benefits for certain
retired employees.
The following summarizes the change in the benefit obligation; the
change in plan assets; the funded status; and reconciliation to the amount
recognized in the balance sheet for the pension and postretirement benefit
plans:
<TABLE>
<CAPTION>
POSTRETIREMENT BENEFITS
PENSION BENEFITS OTHER THAN PENSIONS
-------------------------------------------------------------------------
DECEMBER 30, January 1, DECEMBER 30, January 1,
(In millions) 2000 2000 2000 2000
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CHANGE IN BENEFIT OBLIGATION
Benefit obligation at beginning of year $ 3,665 $ 3,836 $ 603 $ 665
Service cost 101 109 6 7
Interest cost 265 252 45 41
Amendments 110 9 (5) --
Effects of acquisitions 5 10 -- 5
Effects of dispositions (1) (6) -- --
Plan participants' contributions 4 4 5 4
Actuarial (gains)/losses 80 (299) 27 (54)
Benefits paid (249) (227) (68) (65)
Foreign exchange rate changes (39) (23) -- --
Curtailments -- -- (1) --
------------------------------------------------------------------------------------------------------------------------------
Benefit obligation at end of year $ 3,941 $ 3,665 $ 612 $ 603
------------------------------------------------------------------------------------------------------------------------------
CHANGE IN PLAN ASSETS
Fair value of plan assets at beginning of year $ 5,342 $ 4,824 $ -- $ --
Actual return on plan assets 77 740 -- --
Employer contributions 41 21 -- --
Plan participants' contributions 4 4 -- --
Effects of acquisitions 4 12 -- --
Effects of dispositions (1) (5) -- --
Benefits paid (249) (227) -- --
Foreign exchange rate changes (48) (27) -- --
------------------------------------------------------------------------------------------------------------------------------
Fair value of plan assets at end of year $ 5,170 $ 5,342 $ -- $ --
------------------------------------------------------------------------------------------------------------------------------
Funded status of the plan $ 1,229 $ 1,677 $ (612) $ (603)
Unrecognized actuarial gain (871) (1,331) (88) (122)
Unrecognized prior service cost 154 88 (15) (16)
Unrecognized transition net asset (43) (61) -- --
------------------------------------------------------------------------------------------------------------------------------
Net amount recognized in the
consolidated balance sheet $ 469 $ 373 $ (715) $ (741)
==============================================================================================================================
Amounts recognized in the consolidated
balance sheet consists of:
Prepaid benefit cost $ 621 $ 508 $ -- $ --
Accrued benefit liability (156) (144) (715) (741)
Intangible asset 2 7 -- --
Accumulated other comprehensive loss 2 2 -- --
------------------------------------------------------------------------------------------------------------------------------
Net amount recognized in the
consolidated balance sheet $ 469 $ 373 $ (715) $ (741)
==============================================================================================================================
</TABLE>
51 TEXTRON 2000 ANNUAL REPORT
<PAGE> 33
The projected benefit obligation, accumulated benefit obligation, and fair
value of plan assets for the pension plans with accumulated benefit
obligations in excess of plan assets were $199 million, $161 million and
$10 million, respectively, as of year-end 2000, and $191 million, $159
million and $16 million, respectively, as of year-end 1999.
The following summarizes the net periodic benefit cost for the pension
benefits and postretirement benefits plans:
<TABLE>
<CAPTION>
POSTRETIREMENT BENEFITS
PENSION BENEFITS OTHER THAN PENSIONS
--------------------------------------------------------------------------------------------------------------------------
DECEMBER 30, January 1, January 2, DECEMBER 30, January 1, January 2,
(In millions) 2000 2000 1999 2000 2000 1999
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
COMPONENTS OF NET
PERIODIC BENEFIT COST
Service cost $ 101 $ 109 $ 83 $ 6 $ 7 $ 6
Interest cost 265 252 235 45 41 45
Expected return on plan assets (423) (378) (323) -- -- --
Amortization of
unrecognized transition asset (17) (17) (17) -- -- --
Recognized actuarial (gain)/loss (24) 2 1 (8) (10) (9)
Recognized prior service cost 14 16 14 (4) (4) (4)
Curtailments -- -- -- (1) -- --
--------------------------------------------------------------------------------------------------------------------------
Net periodic benefit cost $ (84) $ (16) $ (7) $ 38 $ 34 $ 38
==========================================================================================================================
</TABLE>
Recognized actuarial (gain)/loss on net pension benefits is being amortized
over a twelve year period.
Major actuarial assumptions used in accounting for defined benefit pension
plans are presented below.
<TABLE>
<CAPTION>
DECEMBER 30, January 1, January 2, January 3,
2000 2000, 1999, 1998,
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
WEIGHTED AVERAGE ASSUMPTIONS AT YEAR-END
Discount rate 7.50% 7.50% 6.75% 7.25%
Expected return on plan assets 9.25 9.25 9.25 9.00
Rate of compensation increase 4.80 4.80 4.80 5.00
--------------------------------------------------------------------------------------------------
</TABLE>
Postretirement benefit plan discount rates are the same as those used
by Textron's defined benefit pension plans.
The 2000 health care cost trend rate, which is the weighted average
annual assumed rate of increase in the per capita cost of covered benefits,
was 6% for retirees age 65 and over and 6% for retirees under age 65. Both
rates are assumed to decrease to 5.5% by 2003 and then remain at that
level. A one-percentage-point change in assumed health care cost trend
rates would have the following effects:
<TABLE>
<CAPTION>
(In millions) 1% INCREASE 1% DECREASE
----------------------------------------------------------------------------------------
<S> <C> <C>
Effect on total of service and interest cost components $ 5 $ (5)
Effect on postretirement benefit obligation 56 (48)
----------------------------------------------------------------------------------------
</TABLE>
16 INCOME TAXES
Textron files a consolidated federal income tax return for all U.S.
subsidiaries and separate returns for foreign subsidiaries. TEXTRON
RECOGNIZES DEFERRED INCOME TAXES FOR TEMPORARY DIFFERENCES BETWEEN THE
FINANCIAL REPORTING BASIS AND INCOME TAX BASIS OF ASSETS AND LIABILITIES
BASED ON ENACTED TAX RATES EXPECTED TO BE IN EFFECT WHEN AMOUNTS ARE LIKELY
TO BE REALIZED OR SETTLED.
The following table shows income from continuing operations before
income taxes and distributions on preferred securities of subsidiary
trusts:
<TABLE>
<CAPTION>
(In millions) 2000 1999 1998
-------------------------------------------------------------------
<S> <C> <C> <C>
United States $ 366 $ 831 $ 582
Foreign 245 199 181
-------------------------------------------------------------------
Total $ 611 $1,030 $ 763
===================================================================
</TABLE>
Income tax expense is summarized as follows:
<TABLE>
<CAPTION>
(In millions) 2000 1999 1998
-----------------------------------------------------------------------
<S> <C> <C> <C>
Federal:
Current $ 246 $ 222 $ 225
Deferred (37) 54 (25)
State 35 36 33
Foreign 64 69 61
-----------------------------------------------------------------------
Income tax expense $ 308 $ 381 $ 294
=======================================================================
</TABLE>
TEXTRON 2000 ANNUAL REPORT 52
<PAGE> 34
The following reconciles the federal statutory income tax rate to the
effective income tax rate reflected in the consolidated statements of
income:
<TABLE>
<CAPTION>
2000 1999 1998
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Federal statutory income tax rate 35.0% 35.0% 35.0%
Increase (decrease) in taxes resulting from:
State income taxes 3.8 2.3 2.7
Goodwill 19.0 2.2 4.3
Foreign tax rate differential (2.2) 0.6 --
Foreign sales corporation benefit (1.9) (0.9) (0.8)
Other, net (3.3) (2.2) (2.7)
-------------------------------------------------------------------------------------------------
Effective income tax rate 50.4% 37.0% 38.5%
=================================================================================================
</TABLE>
Textron's net deferred tax asset consisted of gross deferred tax assets
and gross deferred tax liabilities of $1,704 million and $1,531 million,
respectively, at the end of 2000 and $1,623 million and $1,467 million,
respectively, at the end of 1999. The tax effects of temporary differences
that give rise to significant portions of Textron's net deferred tax assets
and liabilities were as follows:
<TABLE>
<CAPTION>
(In millions) DECEMBER 30, 2000 January 1, 2000
-------------------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Self insured liabilities, (including environmental) $ 146 $ 184
Deferred compensation 140 144
Obligation for postretirement benefits 118 171
Investment securities 45 --
Allowance for credit losses 44 38
Amortization of goodwill 37 --
Other, principally timing of other expense deductions 278 187
-------------------------------------------------------------------------------------------
Total deferred tax assets $ 808 $ 724
-------------------------------------------------------------------------------------------
Deferred tax liabilities:
Textron Finance transactions, principally leasing $(366) $(353)
Fixed assets, principally depreciation (190) (164)
Inventory (53) (51)
Currency translation adjustment (26) --
-------------------------------------------------------------------------------------------
Total deferred tax liabilities (635) (568)
-------------------------------------------------------------------------------------------
Net deferred tax assets $ 173 $ 156
===========================================================================================
</TABLE>
Deferred income taxes have not been provided for the undistributed
earnings of foreign subsidiaries, which approximated $649 million at the
end of 2000. Management intends to reinvest those earnings for an
indefinite period, except for distributions having an immaterial tax
effect. If foreign subsidiaries' earnings were distributed, 2000 taxes, net
of foreign tax credits, would be increased by approximately $88 million.
17 SPECIAL CHARGES, NET
THE COMPANY RECORDS RESTRUCTURING LIABILITIES AT THE TIME MANAGEMENT
APPROVES AND COMMITS TO A RESTRUCTURING PLAN THAT IDENTIFIES ALL
SIGNIFICANT ACTIONS TO BE TAKEN AND THE EXPECTED COMPLETION DATE OF THE
PLAN. THE RESTRUCTURING LIABILITY INCLUDES THOSE RESTRUCTURING COSTS THAT
(1) CAN BE REASONABLY ESTIMATED, (2) ARE NOT ASSOCIATED WITH AND DO NOT
BENEFIT ACTIVITIES THAT WILL BE CONTINUED, AND (3) ARE NOT ASSOCIATED WITH
OR ARE NOT INCURRED TO GENERATE REVENUES AFTER THE COMMITMENT DATE.
RESTRUCTURING COSTS ARE INCURRED AS A DIRECT RESULT OF THE PLAN AND (1) ARE
INCREMENTAL TO OTHER COSTS INCURRED BY TEXTRON IN THE CONDUCT OF ITS
ACTIVITIES PRIOR TO THE COMMITMENT DATE, OR (2) REPRESENT CONTRACTUAL
OBLIGATIONS THAT EXISTED PRIOR TO THE COMMITMENT DATE AND WILL EITHER
CONTINUE AFTER THE EXIT PLAN IS COMPLETED WITH NO ECONOMIC BENEFIT TO THE
ENTERPRISE OR REFLECT A PENALTY TO CANCEL A CONTRACTUAL OBLIGATION.
ADDITIONALLY, RESTRUCTURING LIABILITIES INCURRED IN CONJUNCTION WITH A
BUSINESS ACQUISITION ARE RECORDED AS PART OF THE ALLOCATION OF THE INITIAL
PURCHASE PRICE OF THE ACQUISITION (1) AS OF THE ACQUISITION DATE,
MANAGEMENT BEGINS TO ASSESS AND FORMULATE A RESTRUCTURING PLAN FOR THE
ACQUIRED BUSINESS AND (2) THE RESTRUCTURING PLAN IS APPROVED AND COMMITTED
TO WITHIN ONE YEAR OF THE ACQUISITION DATE.
2000 SPECIAL CHARGES
To improve returns at base businesses and to complete the integration of
recently acquired businesses, during the fourth quarter of 2000, the
Company approved and committed to a restructuring program based upon
targeted cost reductions in the Automotive, Fastening Systems and
Industrial Products segments. The 2000 program includes the consolidation
of facilities, outsourcing of non-core production activity, the
rationalization of certain product lines, and the divestiture of non-core
businesses. Restructuring costs recorded in earnings during the fourth
quarter of 2000 included $16 million of accrued severance-related benefits,
outplacement services and certain other exit
53 TEXTRON 2000 ANNUAL REPORT
<PAGE> 35
costs. Severance and other costs accrued during the fourth quarter of 2000
for the Automotive and Industrial Products segments were $1 million and $15
million, respectively. No costs were accrued for Fastening Systems during
the fourth quarter. Facility consolidations will occur primarily in the
United States and Europe. The Company anticipates incurring additional
restructuring charges as it completes and commits to additional activities
within Automotive, Fastening Systems and Industrial Products segments. The
Company expects to fund the cash requirements of its restructuring
activities with cash flow from operations and additional borrowings under
its existing credit facilities.
As of December 30, 2000, the Industrial Products segment had terminated
204 employees and Automotive did not yet have any terminations under the
2000 restructuring program.
In conjunction with the restructuring plan and review of long-lived
assets including goodwill, the Company recorded an asset impairment charge
of $1 million for fixed assets and $349 million for goodwill in the fourth
quarter of 2000 principally related to Turbine Engine Components Textron
(TECT), part of the Industrial Products segment and Flexalloy, part of the
Fastening Systems segment. Yearly amortization of this goodwill was
approximately $12 million.
Indicators of potential impairment of long-lived assets including
goodwill were identified in connection with multi-year financial planning
in the fourth quarter of 2000, as well as the initiation of the 2000
restructuring program. Based on the indicators, the Company performed an
overall impairment review for the applicable operating units. Key
indicators with respect to TECT, a manufacturer of air and land-based gas
turbine engines components and airframe structures, was deteriorating
margins and its inability to generate new contracts, which has resulted in
a significantly decreased revenue base. Key indicators for Flexalloy, a
vendor-managed inventory company, serving primarily the heavy truck
industry within Fastening Systems, were its performance against plan and
the negative effect on its vendor-managed business model by other supply
chain competitors. The business is dependent upon large customers, and the
service level for larger customers can not be easily replicated over a
large number of smaller customers without significant additional
investment. Also, the synergies within Fastening Systems, which were
initially viewed to be significant due to Textron's existing market share,
have been considerably less than anticipated. Accordingly, future cash flow
projections are not expected to achieve the level of growth originally
anticipated at the time of Flexalloy's acquisition.
The undiscounted cash flow projections performed for the applicable
operating units were less than the carrying amounts of long-lived assets
including goodwill indicating that there was an impairment. The discounted
pre-tax cash flow calculation for purposes of determining the fair value of
the long-lived assets was performed utilizing the multi-year financial plan
(adjusted for planned restructuring activities) to project future cash
flows and a risk-based rate of 11%. The calculation resulted in a fourth
quarter 2000 write down of goodwill for TECT of $178 million, Flexalloy of
$96 million and $75 million related to four other operating units. The
calculation also showed that fixed assets and approximately $57 million of
remaining goodwill were substantially recoverable at these units. By
segment, Automotive recognized goodwill impairment charges of $27 million
and fixed asset impairment charges of $1 million and Fastening Systems and
Industrial Products recognized goodwill impairment charges of $128 million
and $194 million, respectively, in 2000. The cash flow projections used in
performing the review for these operating units were based upon
management's best estimate of future results. Actual results could differ
materially from those estimates.
Accruable restructuring costs and asset impairment charges recorded in
earnings have been included in special charges, net on the consolidated
statement of income.
An analysis of Textron's 2000 restructuring related special charges and
reserve accounts is summarized below.
<TABLE>
<CAPTION>
ASSET FACILITIES
(In millions) IMPAIRMENTS SEVERANCE & OTHER TOTAL
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at January 1, 2000 $ -- $ -- $ -- $ --
Additions 350 15 1 366
Utilized (350) (1) -- (351)
---------------------------------------------------------------------------------------------------
Balance at December 30, 2000 $ -- $ 14 $ 1 $ 15
===================================================================================================
</TABLE>
The specific restructuring measures and associated estimated costs are
based on the Company's best judgment under prevailing circumstances. The
Company believes that the restructuring reserve balance of $15 million is
adequate to carry out the restructuring activities formally identified and
committed to as of December 30, 2000 and anticipates that all actions
related to these liabilities will be completed by December 29, 2001.
TEXTRON 2000 ANNUAL REPORT 54
<PAGE> 36
As discussed in Note 6, the Company recorded an impairment charge of
$117 million in the fourth quarter of 2000 relating to the Company's
investment securities. This charge is included in special charges, net on
the consolidated statement of income.
1998 - 1999 SPECIAL CHARGES, NET
To enhance the competitiveness and profitability of its core businesses,
Textron recorded a pretax charge of $87 million in the second quarter of
1998. This charge was recorded based on the decision to exit several small,
nonstrategic product lines in Automotive and the former Systems and
Components divisions which did not meet Textron's return criteria, and to
realign certain operations in the former Industrial segment. The pretax
charges associated with the Automotive and former Industrial segments were
$25 million and $52 million, respectively. The charge also included the
cost of a litigation settlement of $10 million related to the Aircraft
segment. Severance costs were included in special charges and are based on
established policies and practices.
In 1999, the Company reassessed the remaining actions anticipated in
the 1998 program and determined that certain projects should be delayed or
cancelled while other provisions were no longer necessary. Specifically,
provisions for severance and exit costs associated with the decision to
exit certain automotive product lines were no longer required due to a
decision to build different products in a plant originally anticipated to
be closed. In the former Industrial segment, certain cost reduction
programs in the Fluid and Power Group were suspended as a result of
management's evaluation of the opportunities presented by the David Brown
acquisition. Some smaller programs were delayed as the Company re-examines
strategic alternatives. Others were completed at costs less than originally
anticipated.
Concurrently, in 1999 the Company initiated a series of new cost
reduction efforts in the former Industrial segment designed to
significantly reduce headcount from levels at the beginning of the year.
Significant actions included the downsizing of an underperforming plant in
Europe and targeted headcount reductions across most Industrial divisions.
Headcount reductions were also effected at Bell Helicopter.
As a result of the above, the Company reversed approximately $24
million of reserves no longer deemed necessary for the 1998 program and
recorded severance accruals of approximately $21 million and a charge
related to asset impairment of $5 million. In addition, Textron recorded
additional restructuring charges for the Industrial segment, primarily for
severance ($7 million) and asset impairment ($9 million) associated with
the announced closing of seven facilities.
During fiscal 2000 the Company utilized the remaining $22 million
reserve for severance and other costs for these programs. As of December
30, 2000, the 1998 and 1999 programs have been completed and approximately
3,400 employees have been terminated.
An analysis of Textron's 1998 and 1999 restructuring related special
charges and reserve accounts is summarized below.
<TABLE>
<CAPTION>
ASSET SEVERANCE
(In millions) IMPAIRMENTS & OTHER TOTAL
-------------------------------------------------------------------------------
<S> <C> <C> <C>
Initial Charge $ 28 $ 49 $ 77
Utilized (28) (9) (37)
-------------------------------------------------------------------------------
Balance at January 2, 1999 -- 40 40
Additions 14 28 42
Utilized (14) (22) (36)
No longer Required -- (24) (24)
-------------------------------------------------------------------------------
Balance at January 1, 2000 -- 22 22
Additions -- -- --
Utilized -- (22) (22)
-------------------------------------------------------------------------------
Balance at December 30, 2000 $ -- $ -- $ --
===============================================================================
</TABLE>
Included in special charges, net for 1999 is a gain of $19 million as a
result of shares granted to Textron from Manulife Financial Corporation's
initial public offering on their demutualization of the Manufacturers Life
Insurance Company.
18 FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair value amounts shown in the table on the next page were
determined from available market information and valuation methodologies.
Because considerable judgment is required in interpreting market data, the
estimates are not necessarily indicative of the amounts that could be
realized in a current market exchange.
55 TEXTRON 2000 ANNUAL REPORT
<PAGE> 37
<TABLE>
<CAPTION>
DECEMBER 30, 2000 January 1, 2000
-----------------------------------------------------------------------------------------------------------------------------
ESTIMATED Estimated
CARRYING FAIR Carrying Fair
(In millions) VALUE VALUE Value Value
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS:
Textron Finance:
Finance receivables $ 4,767 $ 4,840 $ 4,624 $ 4,642
Interest rate exchange agreements -- (6) -- --
Other 141 141 46 46
LIABILITIES:
Textron Manufacturing:
Debt 2,061 2,105 1,745 1,740
Interest rate exchange agreements -- (8) -- 7
Marketable security price forward contracts 26 26 (5) (5)
Textron Finance:
Debt 4,667 4,688 4,551 4,535
Interest rate exchange agreements -- 17 -- (2)
FOREIGN EXCHANGE CONTRACTS:
Textron Manufacturing (1) (1) -- (6)
CURRENCY SWAPS:
Textron Manufacturing -- -- (21) (25)
Textron Finance -- 1 -- --
=============================================================================================================================
</TABLE>
(i) Finance receivables - The estimated fair values of real estate loans
and commercial installment contracts were based on discounted cash
flow analyses. The estimated fair values of variable-rate
receivables approximated the net carrying value. The estimated fair
values of nonperforming loans were based on discounted cash flow
analyses using risk-adjusted interest rates or the fair value of the
related collateral.
(ii) Debt, interest rate exchange agreements, foreign exchange contracts
and currency swaps - The estimated fair value of fixed-rate debt was
determined by independent investment bankers or discounted cash flow
analyses. The estimated fair values of variable-rate debt
approximated their carrying values. The estimated fair values of
interest rate exchange agreements were determined by discounted cash
flow analysis and represent the estimated amounts that Textron or
its counterparty would be required to pay to assume the other
party's obligations under the agreements. The estimated fair values
of the foreign exchange contracts and currency swaps were determined
by Textron's foreign exchange banks.
(iii) The estimated fair values of marketable security price forward
contracts were determined by quoted market prices of the related
securities and represents the amount Textron or its counterparty are
required to pay under these agreements.
19 CONTINGENCIES AND ENVIRONMENTAL REMEDIATION
CONTINGENCIES
Textron is subject to legal proceedings arising out of the conduct of the
Company's business. These proceedings include claims arising from private
transactions, government contracts, product liability and environmental,
safety and health matters. Some of these legal proceedings seek damages,
fines or penalties in substantial amounts or remediation of environmental
contamination. Under federal government procurement regulations, certain
claims brought by the U.S. Government could result in Textron's suspension
or debarment from U.S. Government contracting for a period of time. On the
basis of information presently available, Textron believes that these suits
and proceedings will not have a material effect on the Company's financial
position or results of operations.
ENVIRONMENTAL REMEDIATION
ENVIRONMENTAL LIABILITIES ARE RECORDED BASED ON THE MOST PROBABLE COST IF
KNOWN OR ON THE ESTIMATED MINIMUM COST, DETERMINED ON A SITE-BY-SITE BASIS.
TEXTRON'S ENVIRONMENTAL LIABILITIES ARE UNDISCOUNTED AND DO NOT TAKE INTO
CONSIDERATION POSSIBLE FUTURE INSURANCE PROCEEDS OR SIGNIFICANT AMOUNTS
FROM CLAIMS AGAINST OTHER THIRD PARTIES.
Textron's accrued estimated environmental liabilities are based upon
currently available facts, existing technology and presently enacted laws
and regulations and are subject to a number of factors and uncertainties.
Circumstances which can affect the accruals' reliability and precision
include identification of additional sites, environmental regulations,
level of cleanup required, technologies available, number and financial
condition of other contributors to remediation and the time period over
which remediation may occur. Accrued liabilities relate to disposal costs,
U.S. Environmental Protection Agency oversight costs, legal fees and
operating and maintenance costs for both currently and formerly owned or
operated facilities. Textron believes that any changes to the accruals that
may result from these factors and uncertainties will not have a material
effect on Textron's financial position or results of operations. Based upon
information currently available Textron estimates potential environmental
liabilities to be in the range of $70 million to $200 million. As of
December 30, 2000, environmental reserves of approximately $133 million, of
which $15 million are classified as current liabilities, have been
established to address these specific estimated potential liabilities.
Textron estimates that its accrued environmental remediation liabilities
will likely be paid over the next five to ten years.
TEXTRON 2000 ANNUAL REPORT 56
<PAGE> 38
20 SEGMENT REPORTING
Textron has five reportable segments: Aircraft, Automotive, Fastening
Systems, Industrial Products and Finance. See Note 1, for principal markets
and pages 61 through 63 for products of Textron's segments.
Textron's reportable segments are strategically aligned based on the
manner in which Textron manages its various operations. The accounting
policies of the segments are the same as those described in the summary of
significant accounting policies within the notes to the consolidated
financial statements. Textron evaluates segment performance based on
operating profit from operations. Segment profit for Textron Manufacturing
excludes interest expense, certain corporate expenses, special charges, and
gains or losses from the disposition of significant business units. The
Finance segment includes interest income, interest expense and
distributions on preferred securities of Finance subsidiary trust as part
of segment profit. Provisions for losses on finance receivables involving
the sale or lease of Textron products are recorded by the selling
manufacturing division.
The following summarizes the revenues by type of products:
<TABLE>
<CAPTION>
REVENUES
-------------------------------------------------------------------------------------------------
(In millions) 2000 1999 1998
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Aircraft:
Fixed-Wing Aircraft $ 2,814 $ 2,472 $ 1,949
Rotor Aircraft 1,580 1,547 1,431
Automotive:
Trim 1,842 1,796 1,481
Fuel Systems and Functional Components 1,082 1,072 875
Fastening Systems 2,137 2,082 1,758
Industrial Products:
Industrial Components and Other 1,432 997 931
Golf, Turf & Specialty Products 823 773 719
Fluid & Power 689 652 363
Finance 691 463 367
-------------------------------------------------------------------------------------------------
$13,090 $11,854 $ 9,874
=================================================================================================
</TABLE>
The following tables and page 20 summarize selected financial
information by segment:
<TABLE>
<CAPTION>
PROPERTY, PLANT AND
ASSETS EQUIPMENT EXPENDITURES
----------------------------------------------------------------------------------------------------------------------------
(In millions) 2000 1999 1998 2000 1999 1998
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Aircraft $ 2,551 $ 2,348 $ 2,199 $ 154 $ 164 $ 140
Automotive 1,738 1,800 1,627 127 132 110
Fastening Systems 2,029 2,199 1,760 113 103 113
Industrial Products 2,728 3,003 2,176 115 114 96
Finance 6,131 5,989 3,785 14 11 13
Corporate (including investment
in discontinued operations) 3,339 1,743 2,717 4 8 3
Eliminations (2,146) (689) (543) -- -- --
----------------------------------------------------------------------------------------------------------------------------
$ 16,370 $ 16,393 $ 13,721 $ 527 $ 532 $ 475
============================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
AMORTIZATION DEPRECIATION
-------------------------------------------------------------------------------------------------------------------------
(In millions) 2000 1999 1998 2000 1999 1998
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Aircraft $ 10 $ 10 $ 10 $105 $ 97 $ 82
Automotive 14 19 15 87 83 71
Fastening Systems 22 19 13 85 80 70
Industrial Products 41 31 23 84 73 55
Finance 15 7 3 17 12 10
Corporate 10 5 5 4 4 4
-------------------------------------------------------------------------------------------------------------------------
$112 $ 91 $ 69 $382 $349 $292
=========================================================================================================================
</TABLE>
57 TEXTRON 2000 ANNUAL REPORT
<PAGE> 39
GEOGRAPHIC DATA
Presented below is selected financial information by geographic area of
Textron's operations:
<TABLE>
<CAPTION>
PROPERTY, PLANT
REVENUES(1) AND EQUIPMENT(2)
------------------------------------------------------------------------------------------------------------------------
(In millions) 2000 1999 1998 2000 1999 1998
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
United States $ 8,569 $ 7,540 $ 6,404 $ 1,791 $ 1,718 $ 1,466
Canada 798 710 593 127 118 115
Latin America and Mexico 790 738 662 121 68 84
Asia and Australia 603 441 317 13 14 3
Germany 584 694 577 165 187 205
United Kingdom 385 481 283 145 161 171
France 352 344 332 79 82 82
Other 1,009 906 706 164 165 79
------------------------------------------------------------------------------------------------------------------------
$13,090 $11,854 $ 9,874 $ 2,605 $ 2,513 $ 2,205
========================================================================================================================
</TABLE>
(1) Revenues are attributed to countries based on the location of the
customer.
(2) Property, plant and equipment is based on the location of the asset.
Revenues include sales to the U.S. Government of $1.2 billion, $1.3
billion and $1.1 billion in 2000, 1999 and 1998, respectively and sales of
$1.5 billion, $1.6 billion and $1.3 billion in 2000, 1999, and 1998,
respectively to DaimlerChrysler.
21 OTHER INFORMATION - TEXTRON MANUFACTURING CURRENT LIABILITIES
Included in accrued liabilities at the end of 2000 and 1999 were the
following:
<TABLE>
<CAPTION>
(In millions) DECEMBER 30, 2000 January 1, 2000
------------------------------------------------------------------------
<S> <C> <C>
Customer deposits $ 279 $ 253
Salary, wages and employer taxes 260 232
Reserve for warranties 236 193
Sales rebate 83 76
Other 513 513
------------------------------------------------------------------------
Total accrued liabilities $1,371 $1,267
========================================================================
</TABLE>
TEXTRON 2000 ANNUAL REPORT 58
<PAGE> 40
QUARTERLY DATA
<TABLE>
<CAPTION>
(Unaudited)
(Dollars in millions except per share amounts) 2000
--------------------------------------------------------------------------------------------------
Q4 Q3 Q2 Q1
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES
Aircraft $ 1,251 $ 1,171 $ 1,013 $ 959
Automotive 671 654 761 838
Fastening Systems 487 504 562 584
Industrial Products 718 695 771 760
Finance 185 184 170 152
--------------------------------------------------------------------------------------------------
TOTAL REVENUES $ 3,312 $ 3,208 $ 3,277 $ 3,293
==================================================================================================
INCOME (LOSS)
Aircraft $ 139 $ 127 $ 107 $ 78
Automotive 54 40 69 81
Fastening Systems 37 47 51 47
Industrial Products 83 70 101 89
Finance 56 49 44 41
--------------------------------------------------------------------------------------------------
TOTAL SEGMENT PROFIT 369 333 372 336
--------------------------------------------------------------------------------------------------
Special charges, net (483) -- -- --
--------------------------------------------------------------------------------------------------
Total segment operating income (loss) (114) 333 372 336
--------------------------------------------------------------------------------------------------
Corporate expenses and other, net (43) (34) (41) (46)
Interest income 6 -- -- --
Interest expense (42) (42) (41) (33)
Income taxes (18) (93) (104) (93)
Distribution on preferred securities of
manufacturing subsidiary trust, net of
income taxes (7) (6) (7) (6)
--------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM CONTINUING OPERATIONS (218) 158 179 158
--------------------------------------------------------------------------------------------------
Gain on disposal of discontinued operations,
net of income taxes -- -- -- --
--------------------------------------------------------------------------------------------------
Income (loss) before extraordinary loss and
cumulative effect of change in accounting
principle (218) 158 179 158
Extraordinary loss from debt
retirement, net of income taxes -- -- -- --
Cumulative effect of change in
accounting principle, net of income taxes -- -- -- (59)
--------------------------------------------------------------------------------------------------
Net income (loss) $ (218) $ 158 $ 179 $ 99
==================================================================================================
EARNINGS PER COMMON SHARE
BASIC:
Income (loss) from continuing operations $ (1.53) $ 1.10 $ 1.25 $ 1.08
Discontinued operations, net of income
taxes -- -- -- --
Extraordinary loss from debt
retirement, net of income taxes -- -- -- --
Cumulative effect of change in accounting
principle, net of income taxes -- -- -- (.41)
--------------------------------------------------------------------------------------------------
Net income (loss) $ (1.53) $ 1.10 $ 1.25 $ .67
==================================================================================================
Average shares outstanding (in thousands) 141,969 143,185 143,981 146,281
--------------------------------------------------------------------------------------------------
DILUTED:
Income (loss) from continuing operations $ (1.53) $ 1.08 $ 1.23 $ 1.06
Discontinued operations, net of income
taxes -- -- -- --
Extraordinary loss from debt
retirement, net of income taxes -- -- -- --
Cumulative effect of change in accounting
principle, net of income taxes -- -- -- (.40)
--------------------------------------------------------------------------------------------------
Net income (loss) $ (1.53) $ 1.08 $ 1.23 $ .66
==================================================================================================
Average shares outstanding (in thousands)* 141,969 145,325 146,304 148,818
--------------------------------------------------------------------------------------------------
SEGMENT PROFIT MARGINS
Aircraft 11.1% 10.8% 10.6% 8.1%
Automotive 8.0 6.1 9.1 9.7
Fastening Systems 7.6 9.3 9.1 8.0
Industrial Products 11.6 10.1 13.1 11.7
Finance 30.3 26.6 25.9 27.0
SEGMENT PROFIT MARGIN 11.1 10.4 11.4 10.2
--------------------------------------------------------------------------------------------------
COMMON STOCK INFORMATION
Price range: High $ 55.38 $ 60.38 $ 65.56 $ 74.94
Price range: Low $ 41.44 $ 44.88 $ 53.94 $ 51.50
Dividends per share $ .325 $ .325 $ .325 $ .325
--------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
(Unaudited)
(Dollars in millions except per share amounts) 1999
-------------------------------------------------------------------------------------------------
Q4 Q3 Q2 Q1
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES
Aircraft $ 1,267 $ 955 $ 937 $ 860
Automotive 747 652 746 723
Fastening Systems 535 497 550 500
Industrial Products 678 539 602 603
Finance 141 122 104 96
-------------------------------------------------------------------------------------------------
TOTAL REVENUES $ 3,368 $ 2,765 $ 2,939 $ 2,782
=================================================================================================
INCOME (LOSS)
Aircraft $ 129 $ 91 $ 75 $ 67
Automotive 63 37 59 61
Fastening Systems 37 43 54 56
Industrial Products 78 74 82 67
Finance 34 38 30 26
-------------------------------------------------------------------------------------------------
TOTAL SEGMENT PROFIT 341 283 300 277
-------------------------------------------------------------------------------------------------
Special charges, net -- 3 (2) --
-------------------------------------------------------------------------------------------------
Total segment operating income (loss) 341 286 298 277
-------------------------------------------------------------------------------------------------
Corporate expenses and other, net (33) (37) (35) (38)
Interest income 1 4 6 16
Interest expense (29) (11) (3) (13)
Income taxes (103) (90) (97) (91)
Distribution on preferred securities of
manufacturing subsidiary trust, net of
income taxes (7) (6) (7) (6)
-------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM CONTINUING OPERATIONS 170 146 162 145
-------------------------------------------------------------------------------------------------
Gain on disposal of discontinued operations,
net of income taxes 31 -- -- 1,615
-------------------------------------------------------------------------------------------------
Income (loss) before extraordinary loss and
cumulative effect of change in accounting
principle 201 146 162 1,760
Extraordinary loss from debt
retirement, net of income taxes -- -- -- (43)
Cumulative effect of change in
accounting principle, net of income taxes -- -- -- --
-------------------------------------------------------------------------------------------------
Net income (loss) $ 201 $ 146 $ 162 $ 1,717
=================================================================================================
EARNINGS PER COMMON SHARE
BASIC:
Income (loss) from continuing operations $ 1.14 $ .97 $ 1.08 $ .95
Discontinued operations, net of income
taxes .21 -- -- 10.59
Extraordinary loss from debt
retirement, net of income taxes -- -- -- (.28)
Cumulative effect of change in accounting
principle, net of income taxes -- -- -- --
-------------------------------------------------------------------------------------------------
Net income (loss) $ 1.35 $ .97 $ 1.08 $ 11.26
=================================================================================================
Average shares outstanding (in thousands) 148,309 150,069 150,512 152,517
-------------------------------------------------------------------------------------------------
DILUTED:
Income (loss) from continuing operations $ 1.12 $ .95 $ 1.05 $ .93
Discontinued operations, net of income
taxes .21 -- -- 10.34
Extraordinary loss from debt
retirement, net of income taxes -- -- -- (.27)
Cumulative effect of change in accounting
principle, net of income taxes -- -- -- --
-------------------------------------------------------------------------------------------------
Net income (loss) $ 1.33 $ .95 $ 1.05 $ 11.00
=================================================================================================
Average shares outstanding (in thousands)* 151,267 153,406 154,096 156,112
-------------------------------------------------------------------------------------------------
SEGMENT PROFIT MARGINS
Aircraft 10.2% 9.5% 8.0% 7.8%
Automotive 8.4 5.7 7.9 8.4
Fastening Systems 6.9 8.7 9.8 11.2
Industrial Products 11.5 13.7 13.6 11.1
Finance 24.1 31.1 28.8 27.1
SEGMENT PROFIT MARGIN 10.1 10.2 10.2 10.0
-------------------------------------------------------------------------------------------------
COMMON STOCK INFORMATION
Price range: High $ 77.75 $ 90.50 $ 97.00 $ 81.44
Price range: Low $ 68.44 $ 74.50 $ 78.31 $ 70.00
Dividends per share $ .325 $ .325 $ .325 $ .325
-------------------------------------------------------------------------------------------------
</TABLE>
*Assumes full conversion of outstanding preferred stock and exercise of
options. The average share base for the fourth quarter 2000 excludes
potentially dilutive common shares (convertible preferred stock and stock
options). These shares are excluded due to their antidilutive effect
resulting from the loss from continuing operations.
59 TEXTRON 2000 ANNUAL REPORT
<PAGE> 41
SELECTED FINANCIAL INFORMATION
<TABLE>
<CAPTION>
(Dollars in millions except where
otherwise noted and per share amounts) 2000 1999 1998 1997 1996
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
REVENUES
Aircraft $ 4,394 $ 4,019 $ 3,380 $ 3,217 $ 2,774
Automotive 2,924 2,868 2,356 2,072 1,577
Fastening Systems 2,137 2,082 1,758 1,498 1,355
Industrial Products 2,944 2,422 2,013 1,738 1,654
Finance 691 463 367 350 327
--------------------------------------------------------------------------------------------------------------
TOTAL REVENUES $ 13,090 $ 11,854 $ 9,874 $ 8,875 $ 7,687
==============================================================================================================
INCOME
Aircraft $ 451 $ 362 $ 338 $ 313 $ 261
Automotive 244 220 171 141 135
Fastening Systems 182 190 186 167 148
Industrial Products 343 301 232 188 163
Finance 190 128 113 108 96
--------------------------------------------------------------------------------------------------------------
TOTAL SEGMENT PROFIT 1,410 1,201 1,040 917 803
--------------------------------------------------------------------------------------------------------------
Special charges, net (483) 1 (87) -- --
Gain on sale of division -- -- 97 -- --
--------------------------------------------------------------------------------------------------------------
Total segment operating income 927 1,202 1,050 917 803
--------------------------------------------------------------------------------------------------------------
Corporate expenses and other, net (164) (143) (141) (152) (125)
Interest expense, net (152) (29) (146) (117) (138)
Income taxes (308) (381) (294) (250) (211)
Distributions on preferred securities
of manufacturing subsidiary trust,
net of income taxes (26) (26) (26) (26) (23)
--------------------------------------------------------------------------------------------------------------
INCOME FROM CONTINUING OPERATIONS* $ 277 $ 623 $ 443 $ 372 $ 306
==============================================================================================================
PER SHARE OF COMMON STOCK
Income from continuing operations-basic* $ 1.92 $ 4.14 $ 2.74 $ 2.25 $ 1.82
Income from continuing operations-diluted* $ 1.90 $ 4.05 $ 2.68 $ 2.19 $ 1.78
Dividends declared $ 1.30 $ 1.30 $ 1.14 $ 1.00 $ .88
Book value at year-end $ 28.24 $ 29.67 $ 19.27 $ 19.78 $ 19.10
Common stock price: High $ 74.94 $ 97.00 $ 80.31 $ 70.75 $ 48.88
Common stock price: Low $ 41.44 $ 68.44 $ 52.06 $ 45.00 $ 34.56
Common stock price: Year-end $ 46.50 $ 76.69 $ 75.94 $ 62.63 $ 46.69
Common shares outstanding (in thousands):
Basic average 143,923 150,389 161,254 164,830 167,453
Diluted average** 146,150 153,754 165,374 169,503 171,652
Year-end 140,933 147,002 154,742 167,315 169,745
==============================================================================================================
FINANCIAL POSITION
Total assets $ 16,370 $ 16,393 $ 13,721 $ 11,330 $ 11,514
Debt:
Textron Manufacturing $ 2,084 $ 1,767 $ 2,615 $ 1,221 $ 1,507
Textron Finance $ 4,667 $ 4,551 $ 2,829 $ 2,365 $ 2,441
Preferred securities of subsidiary trusts:
Textron Manufacturing $ 484 $ 483 $ 483 $ 483 $ 483
Textron Finance $ 28 $ 29 $ -- $ -- $ --
Shareholders' equity $ 3,994 $ 4,377 $ 2,997 $ 3,228 $ 3,183
Textron Manufacturing debt to total capital 32% 27% 43% 25% 29%
==============================================================================================================
INVESTMENT DATA
Capital expenditures $ 527 $ 532 $ 475 $ 374 $ 312
Depreciation $ 382 $ 349 $ 292 $ 254 $ 213
Research and development $ 721 $ 670 $ 613 $ 602 $ 576
==============================================================================================================
OTHER DATA
Number of employees at year-end 71,000 68,000 64,000 56,000 49,000
Number of common
shareholders at year-end 21,000 22,000 23,000 24,000 25,000
==============================================================================================================
</TABLE>
<TABLE>
<CAPTION>
(Dollars in millions except where
otherwise noted and per share amounts) 1995 1994 1993 1992
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES
Aircraft $ 2,532 $ 2,309 $ 2,124 $ 1,609
Automotive 1,475 1,466 1,125 732
Fastening Systems 797 635 440 420
Industrial Products 1,777 2,392 2,719 2,944
Finance 311 277 259 258
------------------------------------------------------------------------------------------------
TOTAL REVENUES $ 6,892 $ 7,079 $ 6,667 $ 5,963
================================================================================================
INCOME
Aircraft $ 237 $ 194 $ 172 $ 128
Automotive 123 124 81 59
Fastening Systems 101 86 45 40
Industrial Products 161 170 200 254
Finance 88 83 74 62
------------------------------------------------------------------------------------------------
TOTAL SEGMENT PROFIT 710 657 572 543
------------------------------------------------------------------------------------------------
Special charges, net -- -- -- --
Gain on sale of division -- -- -- --
------------------------------------------------------------------------------------------------
Total segment operating income 710 657 572 543
------------------------------------------------------------------------------------------------
Corporate expenses and other, net (128) (101) (109) (89)
Interest expense, net (169) (181) (208) (230)
Income taxes (165) (160) (87) (87)
Distributions on preferred securities
of manufacturing subsidiary trust,
net of income taxes -- -- -- --
------------------------------------------------------------------------------------------------
INCOME FROM CONTINUING OPERATIONS* $ 248 $ 215 $ 168 $ 137
================================================================================================
PER SHARE OF COMMON STOCK
Income from continuing operations-basic* $ 1.45 $ 1.21 $ .95 $ .78
Income from continuing operations-diluted* $ 1.43 $ 1.19 $ .94 $ .77
Dividends declared $ .78 $ .70 $ .62 $ .56
Book value at year-end $ 19.96 $ 16.72 $ 15.59 $ 14.05
Common stock price: High $ 38.69 $ 30.31 $ 29.44 $ 22.38
Common stock price: Low $ 24.31 $ 23.25 $ 20.19 $ 16.88
Common stock price: Year-end $ 33.75 $ 25.19 $ 29.13 $ 22.38
Common shares outstanding (in thousands):
Basic average 169,848 176,474 176,071 173,334
Diluted average** 173,252 180,208 179,713 177,087
Year-end 173,340 174,616 180,509 178,366
================================================================================================
FINANCIAL POSITION
Total assets $ 11,207 $ 10,374 $ 10,462 $ 10,009
Debt:
Textron Manufacturing $ 1,774 $ 1,582 $ 2,025 $ 2,283
Textron Finance $ 2,277 $ 2,162 $ 2,037 $ 1,873
Preferred securities of subsidiary trusts:
Textron Manufacturing $ -- $ -- $ -- $ --
Textron Finance $ -- $ -- $ -- $ --
Shareholders' equity $ 3,412 $ 2,882 $ 2,780 $ 2,488
Textron Manufacturing debt to total capital 34% 35% 42% 48%
================================================================================================
INVESTMENT DATA
Capital expenditures $ 258 $ 274 $ 227 $ 199
Depreciation $ 188 $ 201 $ 196 $ 188
Research and development $ 656 $ 611 $ 514 $ 430
================================================================================================
OTHER DATA
Number of employees at year-end 46,000 43,000 46,000 44,000
Number of common
shareholders at year-end 26,000 27,000 28,000 30,000
================================================================================================
</TABLE>
* Before cumulative effect of change in accounting principles in 2000 and
1992.
** Assumes full conversion of outstanding preferred stock and exercise of
stock options.
TEXTRON 2000 ANNUAL REPORT 60
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-21
<SEQUENCE>10
<FILENAME>b38194txex21.txt
<DESCRIPTION>CERTAIN SUBSIDIARIES OF THE REGISTRANT
<TEXT>
<PAGE> 1
EXHIBIT 21
TEXTRON INC. - SIGNIFICANT SUBSIDIARIES
(AS OF MARCH 6, 2001)
Set forth below are the names of certain subsidiaries of Textron Inc. Other
subsidiaries, which considered in the aggregate, do not constitute a significant
subsidiary, are omitted from such list.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------- ----------------------
NAME JURISDICTION
- ------------------------------------------------------------------------------------------------------------- ----------------------
<S> <C>
Avco Corporation Delaware
- ------------------------------------------------------------------------------------------------------------- ----------------------
Textron Systems Corporation Delaware
- ------------------------------------------------------------------------------------------------------------- ----------------------
Turbine Engine Components Textron Inc. Delaware
- ------------------------------------------------------------------------------------------------------------- ----------------------
Avdel Cherry Textron Inc. New York
- ------------------------------------------------------------------------------------------------------------- ----------------------
Bell Aircraft Services Company Delaware
- ------------------------------------------------------------------------------------------------------------- ----------------------
Bell Aerospace Services Inc. Delaware
- ------------------------------------------------------------------------------------------------------------- ----------------------
Edwards & Associates, Inc. Tennessee
- ------------------------------------------------------------------------------------------------------------- ----------------------
Bell Helicopter Textron Inc. Delaware
- ------------------------------------------------------------------------------------------------------------- ----------------------
Burkland Textron Inc. Michigan
- ------------------------------------------------------------------------------------------------------------- ----------------------
Cessna Aircraft Company Kansas
- ------------------------------------------------------------------------------------------------------------- ----------------------
Cone Drive Operations Inc. Delaware
- ------------------------------------------------------------------------------------------------------------- ----------------------
David Brown (Delaware) Holdings Corp. Delaware
- ------------------------------------------------------------------------------------------------------------- ----------------------
Elco Textron Inc. Delaware
- ------------------------------------------------------------------------------------------------------------- ----------------------
Elco Anchor Wire Inc. Tennessee
- ------------------------------------------------------------------------------------------------------------- ----------------------
Flexalloy Inc. Ohio
- ------------------------------------------------------------------------------------------------------------- ----------------------
Greenlee Textron Inc. Delaware
- ------------------------------------------------------------------------------------------------------------- ----------------------
HR Textron Inc. Delaware
- ------------------------------------------------------------------------------------------------------------- ----------------------
Energy Mfg. Co., Inc. Delaware
- ------------------------------------------------------------------------------------------------------------- ----------------------
InteSys Technologies, Inc. Massachusetts
- ------------------------------------------------------------------------------------------------------------- ----------------------
OmniQuip Textron International Inc. Delaware
- ------------------------------------------------------------------------------------------------------------- ----------------------
Lull International, Inc. Delaware
- ------------------------------------------------------------------------------------------------------------- ----------------------
TRAK International, Inc. Delaware
- ------------------------------------------------------------------------------------------------------------- ----------------------
RIFOCS Corp. California
- ------------------------------------------------------------------------------------------------------------- ----------------------
Ring Screw Textron Inc. Michigan
- ------------------------------------------------------------------------------------------------------------- ----------------------
Textron Atlantic Inc. Delaware
- ------------------------------------------------------------------------------------------------------------- ----------------------
Klauke Handels GmbH Austria
- ------------------------------------------------------------------------------------------------------------- ----------------------
Maag Pump Systems Textron A.G. Switzerland
- ------------------------------------------------------------------------------------------------------------- ----------------------
Textron Acquisition Limited England
- ------------------------------------------------------------------------------------------------------------- ----------------------
Avdel plc/Avdel plc Inc. England/Delaware
- ------------------------------------------------------------------------------------------------------------- ----------------------
Ransomes Investment Corporation Delaware
- ------------------------------------------------------------------------------------------------------------- ----------------------
Ransomes America Corporation Delaware
- ------------------------------------------------------------------------------------------------------------- ----------------------
Cushman Inc. Delaware
- ------------------------------------------------------------------------------------------------------------- ----------------------