-----BEGIN PRIVACY-ENHANCED MESSAGE-----
Proc-Type: 2001,MIC-CLEAR
Originator-Name: webmaster@www.sec.gov
Originator-Key-Asymmetric:
MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen
TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB
MIC-Info: RSA-MD5,RSA,
PijuR5LPwuMwyJO2hwluiWIiz6ZV43BNJaHYoTRbW/YIx3uf4zdCTwMgIb6zQt5u
Qni9XfIX+noZbsljlJGXWw==
<SEC-DOCUMENT>0000950135-02-001340.txt : 20020415
<SEC-HEADER>0000950135-02-001340.hdr.sgml : 20020415
ACCESSION NUMBER: 0000950135-02-001340
CONFORMED SUBMISSION TYPE: 10-K405
PUBLIC DOCUMENT COUNT: 11
CONFORMED PERIOD OF REPORT: 20011229
FILED AS OF DATE: 20020314
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-K405
SEC ACT: 1934 Act
SEC FILE NUMBER: 001-05480
FILM NUMBER: 02574692
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-K405
<SEQUENCE>1
<FILENAME>b42129tie10-k405.txt
<DESCRIPTION>TEXTRON INC.
<TEXT>
<PAGE>
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 29, 2001
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)(140,033,068 New York Stock Exchange
shares outstanding at March 1, 2002); 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. [X]
The aggregate market value of voting stock held by non-affiliates of the
registrant is $6,796,294,628 as of March 1, 2002.
Portions of Textron's Annual Report to Shareholders for the fiscal year
ended December 29, 2001, 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 24, 2002, are incorporated by reference in Part
III of this Report.
<PAGE>
PART I
ITEM 1. BUSINESS OF TEXTRON
We are a global multi-industry company with operations in five business
segments - Aircraft, Fastening Systems, Industrial Components, Industrial
Products and Finance. As explained below under "Business Segments," we
reorganized our segments effective with the first quarter of 2002. Prior to this
reorganization, our operations were conducted through Aircraft, Automotive,
Fastening Systems, Industrial Products and Finance segments. Our business
segments include operations that are unincorporated divisions of Textron Inc. or
its subsidiaries and others that are separately incorporated subsidiaries.
BUSINESS SEGMENTS
SEGMENT CHANGES
Through the end of 2001, we conducted operations through our Aircraft,
Automotive, Fastening Systems, Industrial Products and Finance segments. In
December 2001, we sold our Automotive Trim operations to Collins & Aikman
Products Co. and consequently reorganized our segments effective with the first
quarter of 2002.
Our Aircraft segment continues to include Bell Helicopter and Cessna
Aircraft, but now also includes Lycoming, which previously was part of our
Industrial Products segment. Our new Industrial Components segment includes
Textron Power Transmission and Textron Fluid Handling Products, both formerly
part of our Industrial Products segment, and Kautex, formerly part of our
Automotive segment. In addition, Kautex has assumed responsibility for CWC,
formerly part of our Automotive segment, and Micromatic, formerly part of our
Industrial Products segment. Our Industrial Products segment now is comprised of
Greenlee, Golf and Turf, OmniQuip, Tempo and Textron Systems. Our Fastening
Systems and Finance segments were unaffected by the segment reorganization. Our
Automotive segment has been eliminated.
Financial information for our previous business segments appears on pages
18, 58 and 59 of our 2001 Annual Report to Shareholders. Financial information
by geographic area appears on
2
<PAGE>
page 59 of our 2001 Annual Report to Shareholders. Those pages of our 2001
Annual Report to Shareholders are incorporated by reference into this Annual
Report on Form 10-K.
Set forth below is a description of the business of each of our new
segments.
AIRCRAFT SEGMENT
Bell Helicopter
Bell is one of the largest supplier of helicopters, spare parts and
helicopter-related services in the world. Bell currently manufactures four
military and six civilian helicopter models. Bell's revenues accounted for
approximately 13%, 12% and 13% of our total revenues in 2001, 2000 and 1999.
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.
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. On December 21, 2001, the Department of Defense signed an Acquisition
Decision Memorandum that authorizes the V-22 program to proceed with continued
low rate production. The Memorandum requires additional flight testing to ensure
that the V-22 can be deployed as a safe, reliable and operationally suitable
aircraft.
Bell is a member of Bell/Agusta Aerospace Company, L.L.C., a joint
venture with Agusta, Italy's leading helicopter manufacturer, for the design,
manufacture, sale and customer
3
<PAGE>
support of a commercial tiltrotor, the BA609, and a new medium twin-engine
helicopter, the AB139. Bell expects deliveries of the AB139 to begin in early
2003.
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 general
aviation aircraft. Cessna currently has four major product lines: Citation
business jets, single engine turboprop Caravans, Cessna single engine piston
aircraft and after-market services. Cessna's revenues accounted for
approximately 25%, 21% and 21% of our total revenues in 2001, 2000, and 1999,
respectively.
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. By the end of 2001,
Cessna had delivered its 3,562nd business jet. Under development is the mid-size
Citation Sovereign. First customer delivery of this model is scheduled for late
2004.
The Cessna Caravan is the world's best selling utility turboprop. More than
1,276 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
4
<PAGE>
Stationair and T206 Turbo Stationair. By the end of 2001, Cessna had delivered
3,737 single engine piston aircraft since production was restarted in 1997.
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. The
Cessna-owned Service Centers provide customers 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.
Cessna markets its products worldwide primarily through its own sales
force, as well as through a network of authorized independent sales
representatives, depending upon the product line. 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.
Cessna engages in the business jet fractional ownership market through a
joint venture with TAG Aviation S.A., a worldwide aircraft management and
charter enterprise. This program, called CitationShares, offers shares of
Citation aircraft in the eastern United States.
Lycoming
Lycoming is the world leader in the design, manufacture and overhaul of
reciprocating piston aircraft engines for the global general aviation market. In
July 2001, Lycoming delivered its 300,000th horizontally opposed engine.
Lycoming sells new products directly to general aviation airframe manufacturers,
including The New Piper Aircraft, Robinson Helicopter, and EADS SOCATA, a
division of Aerospatiale. Lycoming is also the exclusive supplier of engines for
Cessna's product line of new single-engine aircraft. Aftermarket sales are made
to the more than 180,000 existing owners of Lycoming products through a
worldwide network of independently owned distributors.
FASTENING SYSTEMS SEGMENT
Our Fastening Systems segment, Textron Fastening Systems (TFS),
manufactures and sells fasteners, fastening systems, engineered assemblies and
automation equipment to the
5
<PAGE>
aerospace, automotive, business equipment, construction, consumer goods,
electronics, electrical equipment, industrial equipment, medical, non-automotive
transportation, and telecommunications markets. 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 three other companies. TFS is headquartered in Troy, Michigan, and
has facilities located in the following 18 countries: Australia, Austria,
Brazil, Canada, China, France, Germany, Hong Kong, Italy, Japan, Korea,
Malaysia, Mexico, Singapore, Spain, Taiwan, the U.K. and the U.S.
TFS is a major global supplier and distributor of engineered fasteners,
components and value added services to original equipment manufacturers,
contract producers, component manufacturers and distributors. 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 14%, 15%, and 18% of our
total revenues in 2001, 2000 and 1999.
TFS produces engineered threaded fasteners, blind fastening systems and
installation tools, aerospace fasteners, construction fasteners and tooling,
cold formed components, clips, cage nuts, engineered and laser weld assemblies,
metal stampings, blind fastening systems, injection molded plastic components,
and precision fine blanked products. These products are produced and sold under
a variety of brand names including Avdel, Boesner, BSK, Camcar, Cherry, Elco,
Ring Screw, Sukosim, Valmex and VBF to both automotive and non-automotive
customers. TFS also provides its customers with supply chain management services
through global vendor managed inventory programs, plant provider programs,
warehouse and JIT (just-in-time) programs, and sourcing. TFS offers a wide range
of design and engineering services to its customers and is a licensor of various
fastening technologies including Torx and Torx Plus.
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 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. 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
6
<PAGE>
of products sold to such customers, it is unlikely that these customers will
cease all purchases from TFS.
INDUSTRIAL PRODUCTS SEGMENT
Greenlee
Our Greenlee group consists of Greenlee, Fairmont and Klauke. These
businesses manufacture powered equipment, electrical test instruments, hand and
hydraulic powered tools and electrical connectors. The products are principally
used in electrical construction and maintenance, telecommunications and plumbing
industries, and are distributed through a global network of sales
representatives and distributors. Our Greenlee group faces competition from
numerous manufacturers based primarily on price, quality, performance,
reliability, delivery and reputation.
Textron Golf, Turf and Specialty Products
Our Golf, Turf and 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 commercial 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 manufactures 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.
7
<PAGE>
OmniQuip
OmniQuip produces telescopic material handlers and aerial work platforms
under the trade names SkyTrak, Lull and Snorkel, and has facilities in the U.S.,
U.K., Australia and New Zealand. OmniQuip divested its compact construction
business and the associated Scat Trak trade name in 2001.
Large national equipment rental fleets account for approximately 30 percent
of OmniQuip's sales. Remaining sales are through independent distributors and
rental centers. The majority of OmniQuip's 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 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.
Tempo
Our Tempo group supplies test and measurement equipment to the data, signal
and voice market. Textron initially developed a substantial presence in this
market within the Greenlee group and, in 2001, Tempo became a separate group in
recognition of the group's significant growth. In January 2001, we acquired
Tempo Research Corporation, which produces advanced measurement and test
equipment for the telecommunications and cable television industries. In July
2001, we acquired Industrial Technology, Inc. and Opto-Electronics Inc., both
leaders in the telecommunications test and measurement industry. Also in 2001,
InteSys Technologies was transferred from Textron's Fastening Systems segment to
the Tempo group. InteSys is a leading supplier of components and assemblies for
telecommunications and other markets.
Tempo products are distributed through a global network of distributors and
sales representatives and directly to original equipment manufacturers. The
Tempo group faces competition from numerous manufacturers based primarily on
price, quality, performance, reliability, delivery and reputation.
Textron Systems
Textron Systems, a primary supplier to the defense and aerospace markets,
manufactures "smart" weapons, airborne and ground-based surveillance systems,
aircraft landing systems, hovercraft, search and rescue vessels, armored
vehicles and turrets, and aircraft and missile
8
<PAGE>
control actuators, valves and related components. While Textron Systems sells
most of its products directly to U.S. customers, it also sells an increasing
number of products through a growing, global network of sales representatives
and distributors. Now operating in over thirty-five countries, Textron Systems'
products continue to receive high level of global interest.
Actuation products for the aerospace, defense and industrial markets are
sold under trade names of HR Textron and APCO. Specialty marine, land vehicle,
and turret products are sold under trade names of Textron Marine & Land Systems
and Cadillac Gage. Weapons, surveillance, and landing systems are sold under the
Textron Systems name.
INDUSTRIAL COMPONENTS SEGMENT
Textron Power Transmission
Textron Power Transmission offers products under the brand names David
Brown, Cone Drive, and Benzlers. Textron Power Transmission designs and
manufactures industrial gears, double enveloping worm gear speed reducers,
mechanical and hydraulic transmission systems, gear motors and gear sets. These
products are sold to a variety of customers, including original equipment
manufacturers, distributors and end-users. Textron Power Transmission faces
competition from other manufacturers based primarily on price, quality, product
support, delivery and reputation.
Textron Fluid Handling Products
Our Textron Fluid Handling Products business, which includes David Brown
Union Pumps, David Brown Hydraulics, 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 original equipment
manufacturers, distributors and end-users. Textron Fluid Handling Products faces
competition from other manufacturers based primarily on price, quality, product
support, performance, delivery and reputation.
Kautex
Kautex is a leading manufacturer of blow-molded plastic fuel tank systems
and other blow-molded plastic parts for original equipment manufacturers
throughout Europe, North America, South America and parts of Asia. In 2001,
Kautex established a majority-owned joint venture in Hiroshima, Japan, to
manufacture plastic fuel tanks for Mazda, and production began in early 2002. In
Germany, Kautex produces plastic containers and sheeting for household and
9
<PAGE>
industrial uses. In North America, Kautex also produces metal fuel filler
systems in addition to plastic fuel tanks.
Kautex also 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.
In early 2002, Kautex assumed responsibility for CWC and Micromatic. CWC
designs and manufactures engine camshafts and vibration damper components for
North American automotive original equipment manufacturers and the aftermarket.
Micromatic manufactures automatic assembly machines and systems, perishable
tools and abrasives, and hydraulic components for the North American automotive
and industrial markets.
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: aircraft finance, revolving credit, specialty
finance, and structured capital. The aircraft finance business segment is
focused on financing Cessna aircraft, Bell helicopters and other general
aviation aircraft. The revolving credit segment specializes in dealer floorplan
financing, asset based lending and small business financing. The specialty
finance segment includes golf course and equipment finance, financing for
developers of vacation interval resorts and residential and recreational land
lots, franchise finance, and media finance. The structured capital segment
includes leveraged lease transactions and investment grade and near investment
grade structured secured term and revolving credit facilities. This segment also
originates factoring arrangements and working capital loans in the
telecommunications, trucking, and specialty financial services industries.
Textron Financial's other financial services and products include transaction
syndications, equipment appraisal and disposition, portfolio servicing and
insurance brokerage.
Textron Financial's financing activities are confined almost exclusively to
secured lending and leasing to commercial markets. 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.
10
<PAGE>
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 2001 Annual
Report to Shareholders. This page is incorporated by reference into this Annual
Report on Form 10-K.
Approximately 40% of our total backlog of $7.5 billion at December 29,
2001, represents orders which are not expected to be filled within our 2002
fiscal year. At December 29, 2001, approximately 97% of the total government
backlog of $1 billion was funded.
U.S. GOVERNMENT CONTRACTS
In 2001, 18% of the revenues of our Aircraft segment and 15% 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
11
<PAGE>
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 page 58 of our 2001 Annual Report to Shareholders. These pages are
incorporated 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 Report on Form 10-K: AB139; Avdel; BA609; Bell Helicopter; Bell
Model 427; Benzlers; Bob-Cat; Boesner; Brouwer; BSK; Bunton; Cadillac Gage;
Camcar; Caravan 675; Caravan Floatplane; Cessna; Cessna Aircraft Company; Cessna
Caravan; Cherry; Citation Bravo; Citation CJ1; Citation CJ2; Citation Encore;
Citation Excel; CitationShares; Citation X; Cone Drive; Cushman; CWC; David
Brown; David Brown Guinard Pumps; David Brown Hydraulics; David Brown Union
Pumps; Elco; E-Z-GO; Fairmont; Greenlee; HR Textron; Industrial Technology,
Inc.; InteSys Technologies; Jacobsen; Kautex; Kaywood Products, Klauke; Lull;
Lycoming; Maag Pump Systems; McCord Winn; Micromatic; OmniQuip;
Opto-Electronics; Ransomes; Ring Screw; RITec; Ryan; 172 Skyhawk; 172 Skyhawk
SP; 182 Skylane; Sky Trak; Snorkel; 206 Stationair; Steiner; Sukosim; Super
Cargomaster; T206 Turbo Stationair; Tempo; Tempo Research Corporation; Textron;
Textron Fastening Systems; Textron Financial Corporation; Textron Fluid Handling
Products; Textron Golf, Turf and Specialty Products; Textron Marine & Land
Systems; Textron Power Transmission; Textron Systems; Torx; Torx Plus; Turbo 182
Skylane; V-22 Osprey; Valmex; VBF; 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.
12
<PAGE>
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 57 of our 2001 Annual Report
to Shareholders. These pages are incorporated by reference into this Annual
Report on Form 10-K.
EMPLOYEES
At December 29, 2001, we had approximately 51,000 employees.
ITEM 2. PROPERTIES
At December 29, 2001, we operated a total of 158 plants located throughout
the U.S. and 103 plants outside the U.S. Of the total of 261 plants, we owned
133 and the balance were leased. In the aggregate, the total manufacturing space
was approximately 31 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 February 28, 2002, Cessna completed the settlement of the previously
reported action brought against Cessna in the Circuit Court in and for Escambia
County, Florida, by James M. Cassoutt, Cindy I. Cassoutt and Judy L. Kealey, for
injuries incurred in a 1989 crash of a Cessna 185 aircraft. The amount of the
settlement in excess of that which will be paid by Cessna's insurance carriers
will be covered by our pre-existing product liability reserves.
On May 12, 2000, the Massachusetts Water Resources Authority issued a
Notice of Violation to Textron Systems relating to industrial discharges to the
Authority's sewer system from our Wilmington, Massachusetts, facility. The
Notice of Violation, which seeks a civil administrative penalty, alleges a
failure to obtain a permit for certain discharges, discharge
13
<PAGE>
reporting violations, and violations of discharge limits. The penalty assessed
for the Notice of Violation is expected to exceed $100,000.
On November 1, 2001, Cone Drive Operations, Inc., a subsidiary of Textron,
received a notice from the Michigan Department of Environmental Quality that the
Department intends to fine Cone Drive's Traverse City, Michigan, plant in
connection with groundwater contamination discharging to a surface body in
excess of Michigan criteria. Resolution of this matter may cost in excess of
$100,000.
We are subject to actual and threatened legal proceedings arising out of
the conduct of our business. These proceedings include claims arising from
private transactions, government contracts, product liability, employment 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 legal proceedings will
not have a material effect on our financial position or results of operations.
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.
14
<PAGE>
EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information concerning our executive
officers as of March 14, 2002. Unless otherwise indicated, the employer is
Textron Inc.
Name Age Position
- ---- --- --------
Lewis B. Campbell 55 Chairman, President and Chief Executive
Officer since September 2001. Formerly,
Chairman and Chief Executive Officer 1999 to
September 2001; President and Chief Executive
Officer, 1998 to 1999; President and Chief
Operating Officer, 1994 to 1998; Director
since 1994.
Kenneth C. Bohlen 49 Executive Vice President and Chief Innovation
Officer since 2000. Formerly, Senior Vice
President and Chief Information Officer, 1999
to 2000; Vice President and Chief Information
Officer, 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 54 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, General Motors
International Operations (Zurich,
Switzerland), 1990 to 1997.
Theodore R. French 47 Executive Vice President and Chief Financial
Officer since 2000. Formerly, President,
Financial Services and Chief Financial
Officer, CNH Global N.V. and its predecessor,
Case Corporation, 1992 to 2000.
Mary L. Howell 49 Executive Vice President Government, Strategy
Development and International, Communications
and Investor Relations, since 2000. Formerly,
Executive Vice President Government,
International, Communications and Investor
Relations 1998 to 2000; Executive Vice
President Government and International, 1995
to 1998.
Terrence O'Donnell 58 Executive Vice President and General Counsel
since 2000; Partner, Williams & Connolly,
since 1992.
15
<PAGE>
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 29, 2001, 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 60 of our 2001 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 61
of our 2001 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 19 through 32 of
our 2001 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 2001 Annual
Report to Shareholders is incorporated by reference into this Annual Report on
Form 10-K.
16
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements, together with the report thereon of
Ernst & Young LLP dated January 24, 2002, and supplementary information
contained in our 2001 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" and "Directors
Continuing in Office" on pages 3 through 6 of the Proxy Statement for our Annual
Meeting of Shareholders to be held on April 24, 2002, is incorporated by
reference into this Annual Report on Form 10-K.
Information regarding Textron's executive officers is included on page 15
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 21 of the Proxy Statement for our Annual
Meeting of Shareholders to be held on April 24, 2002, is incorporated by
reference into this Annual Report on Form 10-K.
17
<PAGE>
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 24, 2002,
is incorporated by reference into this Annual Report on Form 10-K.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information appearing under "Transactions with Management" on page 20
of the Proxy Statement for our Annual Meeting of Shareholders to be held on
April 24, 2002, is incorporated by reference into this Annual Report on Form
10-K.
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
2.1 Purchase Agreement dated as of August 7, 2001, as amended and
restated as of November 30, 2001, by and among Textron Inc.,
Collins & Aikman Corporation and Collins & Aikman Products Co.,
including Exhibit 1 (Certificate of Designation of the Series A
Redeemable Preferred Stock, the Series B Redeemable Preferred
Stock and the Series C Redeemable Preferred Stock) and Exhibit 7
(Asset Purchase Agreement dated as of August 7, 2001, as amended
and restated November 30, 2001, by and between Textron Automotive
Exteriors Inc. and JPS Automotive, Inc.). Incorporated by
reference to Textron's Current Report on Form 8-K filed on
January 4, 2002.
18
<PAGE>
NOTE: The Table of Contents of the Purchase Agreement listed as
Exhibit 2.1 contains a list briefly identifying the contents of
all omitted schedules and exhibits. Textron will supplementally
furnish a copy of any omitted schedule or exhibit to the
Commission upon request.
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 Indenture dated as of November 30, 2001, between Textron
Financial Canada Funding Corp. and SunTrust Bank, guaranteed by
Textron Financial Corporation. Incorporated by reference to
Exhibit 4.2 to Textron Financial Corporation's Registration
Statement on Form S-3 (No. 333-88509)
4.3 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.
19
<PAGE>
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.
10.2 Deferred Income Plan for Textron Key Executives.
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. Incorporated by reference to
Exhibit 10.4 to Textron's Annual Report on Form 10-K for the
fiscal year ended December 30, 2000.
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.
20
<PAGE>
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.
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.
10.9A 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.
10.9B Amendment to 1999 Plan.
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.
21
<PAGE>
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.
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. Incorporated by reference to Exhibit 10.14D to
Textron's Annual Report on Form 10-K for the fiscal year ended
December 30, 2000.
10.14E Amendments to Retention Awards granted to Lewis B. Campbell.
10.15A Employment Agreement between Textron and Theodore R. French dated
December 21, 2000. Incorporated by reference to Exhibit 10.15A to
Textron's Annual Report on Form 10-K for the fiscal year ended
December 30, 2000.
10.15B Retention Award granted to Theodore R. French on January 1, 2001.
Incorporated by reference to Exhibit 10.15B to Textron's Annual
Report on Form 10-K for the fiscal year ended December 30, 2000.
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.
22
<PAGE>
10.17 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.
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.
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.
13 A portion (pages 18 through 61) of Textron's 2001 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
The following reports on Form 8-K were filed during the quarter ended
December 29, 2001:
Current reports on Form 8-K (Items 5 and 7), filed on November 9,
2001, and November 19, 2001, to file certain exhibits to a
Registration Statement on Form S-3.
Current report on Form 8-K (Item 5), filed on December 3, 2001, to
report that Textron will proceed with the sale of its Automotive Trim
business on revised terms.
23
<PAGE>
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 2002.
TEXTRON INC.
Registrant
By: /s/ Michael D. Cahn
------------------------------
Michael D. Cahn
Attorney-in-fact
24
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below on this 14th day of March 2002, by the following
persons on behalf of the registrant and in the capacities indicated:
NAME TITLE
---- -----
* Chairman, President and Chief Executive Officer,
- ------------------------- Director
Lewis. B. Campbell
* Director
- -------------------------
H. Jesse Arnelle
* Director
- -------------------------
Teresa Beck
* Director
- -------------------------
R. Stuart Dickson
* Director
- -------------------------
Lawrence K. Fish
* Director
- -------------------------
Joe T. Ford
* Director
- -------------------------
Paul E. Gagne
25
<PAGE>
* 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)
* Vice President and Controller
- ------------------------- (principal accounting officer)
Richard L. Yates
26
<PAGE>
*By: /s/ Michael D. Cahn
----------------------------
Michael D. Cahn
Attorney-in-fact
27
<PAGE>
TEXTRON INC.
INDEX TO FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULES
ITEM 14(a)
2001 Annual Report to
Shareholders Page
---------------------
Report of Independent Auditors 33
Consolidated Statements of Income for each of the years in 34
the three-year period ended December 29, 2001
Consolidated Balance Sheets at December 29, 2001 and 35
December 30, 2000
Statements of Cash Flows for each of the years in the 36
three-year period ended December 29, 2001
Consolidated Statements of Changes in Shareholders' Equity 38
for each of the years in the three-year period ended
December 29, 2001
Notes to Consolidated Financial Statements 39
Business Segment Data 18
Supplementary Information (Unaudited):
Quarterly Data for 2001 and 2000 60
All 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.
28
<PAGE>
EXHIBITS
2.1 Purchase Agreement dated as of August 7, 2001, as amended and
restated as of November 30, 2001, by and among Textron Inc.,
Collins & Aikman Corporation and Collins & Aikman Products Co.,
including Exhibit 1 (Certificate of Designation of the Series A
Redeemable Preferred Stock, the Series B Redeemable Preferred
Stock and the Series C Redeemable Preferred Stock) and Exhibit 7
(Asset Purchase Agreement dated as of August 7, 2001, as amended
and restated November 30, 2001, by and between Textron Automotive
Exteriors Inc. and JPS Automotive, Inc.). Incorporated by
reference to Textron's Current Report on Form 8-K filed on
January 4, 2002.
NOTE: The Table of Contents of the Purchase Agreement listed as
Exhibit 2.1 contains a list briefly identifying the contents of
all omitted schedules and exhibits. Textron will supplementally
furnish a copy of any omitted schedule or exhibit to the
Commission upon request.
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 Indenture dated as of November 30, 2001, between Textron
Financial Canada Funding Corp. and SunTrust Bank, guaranteed by
Textron Financial Corporation. Incorporated by reference to
Exhibit 4.2 to Textron Financial Corporation's Registration
Statement on Form S-3 (No. 333-88509)
4.3 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.
10.2 Deferred Income Plan for Textron Key Executives.
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. Incorporated by reference to
Exhibit 10.4 to Textron's Annual Report on Form 10-K for the
fiscal year ended December 30, 2000.
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.
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.
10.9A 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.
10.9B Amendment to 1999 Plan.
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.
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. Incorporated by reference to Exhibit 10.14D to
Textron's Annual Report on Form 10-K for the fiscal year ended
December 30, 2000.
10.14E Amendments to Retention Awards granted to Lewis B. Campbell.
10.15A Employment Agreement between Textron and Theodore R. French dated
December 21, 2000. Incorporated by reference to Exhibit 10.15A to
Textron's Annual Report on Form 10-K for the fiscal year ended
December 30, 2000.
10.15B Retention Award granted to Theodore R. French on January 1, 2001.
Incorporated by reference to Exhibit 10.15B to Textron's Annual
Report on Form 10-K for the fiscal year ended December 30, 2000.
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 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.
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.
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.
13 A portion (pages 18 through 61) of Textron's 2001 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-10.2
<SEQUENCE>3
<FILENAME>b42129tiex10-2.txt
<DESCRIPTION>DEFERRED INCOME PLAN
<TEXT>
<PAGE>
EXHIBIT 10.2
DEFERRED INCOME PLAN FOR TEXTRON KEY EXECUTIVES
This Plan has been established for the benefit of designated Textron Key
Executives to secure their goodwill, loyalty, and achievement and to attract and
retain persons of outstanding competence.
This Plan is restated and effective as of May 1, 2001.
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 "Beneficiary" means the person or persons entitled under this Plan to
receive Plan benefits after a Participant's death.
1.02 "Benefits Committee" means the Benefits Committee of Textron.
1.03 "Board" means the Board of Directors of Textron.
1.04 "Compensation" means base salary, annual incentive compensation, cash
distributions for performance share units under a long term incentive
compensation plan, and any other item designated as Compensation under this Plan
by the Benefits Committee or its designee.
1.05 "Deferral Period" means for a Participant (1) any complete months
remaining in the calendar year in which she becomes a Key Executive, and (2)
each succeeding calendar year in which she is a Key Executive.
1.06 "Deferred Income" means any Compensation the receipt of which is
deferred under this Plan.
"Automatic Deferred Income" means amounts in excess of 100% of a
Participant's Annual Incentive Compensation Target, as defined in Section
4.01(a) of the Annual Incentive Compensation Plan for Textron Employees, in the
years following a Participant's fifth full year of participation in this Plan,
but only if the Participant has not achieved or maintained a Minimum Stock
Ownership Level.
"Discretionary Deferred Income" means additional contributions made at
Textron's discretion to any account maintained for a Participant under this
Plan.
"Elective Deferred Income" means amounts elected by the Participant to be
deferred under this Plan.
1.07 "Determination Date" means the last day of each calendar month.
1
<PAGE>
1.08 "Fund Election Agreement" means an agreement in a form prescribed by the
Benefits Committee or its designee, by which a Participant elects the funds that
will be used to determine earnings on Deferred Income.
1.09 "Interest" means interest computed under Article III of this Plan.
1.10 "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.
1.11 "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.
1.12 "Participation Agreement" means an agreement in a form prescribed by the
Benefits Committee or its designee, by which a Participant elects to defer the
receipt of Compensation pursuant to this Plan.
1.13 "Plan" means this Deferred Income Plan for Textron Key Executives, as
amended and restated from time to time.
1.14 "Stock Ownership" means Textron shares obtained through open market
purchases and stock option exercises, shares in the Textron Savings Plan, stock
units in the Deferred Income Plan and in the Supplemental Benefits Plan; and any
other share or share equivalent approved by the Board as qualified stock
ownership.
"Minimum Stock Ownership Level" means a dollar value of Textron shares that
equals or exceeds as of the end of the third quarter each year:
Participant Minimum Stock Ownership Level
----------- -----------------------------
CEO/COO 5 times base salary
Other TLT Members 3 times base salary
Other Corporate Officers 2 times base salary
All Other Key Executives 1 times base salary
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.
1.17 "Textron Employment" means employment with a Textron Company. Leaves of
absence for such periods and purposes as are approved by Textron and transfers
of employment within or between Textron Companies shall not be deemed
interruptions of Textron Employment.
1.18 "Total Disability" has the same meaning under this Plan as in the
Textron Master Retirement Plan with respect to any Participant at the date his
Textron Employment ends.
2
<PAGE>
ARTICLE II - PARTICIPATION AND DEFERRED INCOME
2.01 A Participant indicates his choices under this Plan for a Deferral
Period by filing a Participation Agreement and, if applicable, a Fund Election
agreement with the Benefits Committee or its designee within the time specified
by that committee or designee.
2.02 For any complete calendar months remaining in the calendar year in which
a Participant becomes a Key Executive, she may defer up to 100% of her
Compensation otherwise payable during those months. For any subsequent Deferral
Period, a Participant may defer up to 25% of her base salary, and up to 100% of
her Compensation other than base salary, otherwise payable during that period.
(For purposes of this 25% limitation, "base salary" includes any base salary the
receipt of which by the Participant is deferred under the Textron Savings Plan
or this Plan.) A Participant may not defer any Compensation which she has earned
at the time she files her Participation Agreement relating thereto.
2.03 The Benefits Committee may, at a Participant's request but in its sole
discretion, suspend in whole or in part a Participant's commitment under any
Participation Agreement for such time as it may deem necessary upon a finding
that the Participant has suffered a severe financial hardship.
2.04 If at any time a Participant shall cease to be a Key Executive, his
Participation Agreements and Deferral Periods shall terminate at that time and
no further Deferred Income shall be withheld from his Compensation.
2.05 No Deferred Income, Interest or dividends shall be payable to a
Participant while he is employed by a Textron Company.
2.06 Textron shall withhold for taxes or other reasons as required by law.
ARTICLE III - PARTICIPANT'S ACCOUNTS, INTEREST, AND EARNINGS
3.01(a) For record-keeping purposes only, Textron shall maintain a Moody's
Account, a Stock Unit Account and an Interest Account, as is necessary, for each
Participant who has Deferred Income under this Plan.
(b) Textron may in its sole discretion from time to time make additional
contributions to any account maintained for a Participant. These additional
contributions, if any, may be subject to a vesting schedule set by the Benefits
Committee.
(c) The existence of these accounts shall not require any segregation of
assets.
(d) Amount deferred as Elective Deferred Income and Automatic Deferred Income
shall always be 100% vested.
3.02 The Moody's Account shall reflect a Participant's investment in an
interest-bearing account.
(a) The Moody's Account shall be adjusted as of each Determination Date and
shall consist of (1) the balance of the Account as of the immediately preceding
Determination Date, (2) amounts of Deferred Income credited to the Account in
the intervening month,
3
<PAGE>
and (3) Interest earned since the immediately preceding Determination Date based
on one-twelfth of the applicable interest rate(s) described in Sections 3.03 or
3.04 on the average daily balance of the Account (or portion thereof) during the
intervening month; reduced by (4) any distributions from the account (or portion
thereof) during the intervening month.
(b) The interest rates applicable to the Moody's Account shall be either the
Moody's Rate or the Moody's Plus Rate.
3.03 The Moody's Rate shall be the average for the calendar month in which
the applicable Determination Date falls of the Moody's Corporate Bond Yield
Index as published by Moody's Investors Service, Inc. (or any successor
thereto), or, if such monthly yield is no longer published, a substantially
similar average selected by the Benefits Committee. For Participant deferrals
made prior to January 1, 2002, and after 1988, the crediting rate shall not be
less than 8% per year for deferrals made prior to 2002.
3.04(a) The Moody's Plus Rate applicable on a Determination Date to any
portion of the Moody's Account which is attributable to Deferred Income deferred
before 1988 shall be the average described in Section 3.03, plus three
percentage points. The crediting rate shall not be less than 11% per year for
deferrals made prior to 1988.
(b) The Moody's Plus Rate applicable on a Determination Date to any portion
of the Moody's Account which is attributable to deferrals from 1988 through 2001
shall be the average described in Section 3.03, plus two percentage points. The
crediting rate shall not be less than 10% per year for deferrals made from 1988
through 2001.
(c) For all deferrals made on or after January 1, 2002, the Rate on the
Determination Date shall be the Moody's Rate.
3.05 The Stock Unit Account shall consist of stock units, which are fictional
shares of Textron Common Stock, accumulated and accounted for under this Plan
for the sole purpose of determining the cash amount of any distribution on
account of this portion of Deferred Income. Notwithstanding any Plan provision
to the contrary, 100% of Automatic Deferred Income shall be deferred to the
Stock Unit Account.
3.06 The Stock Unit Account shall be adjusted as of each Determination Date
and shall consist of the stock units (1) in the account as of the immediately
preceding Determination Date, (2) credited under Section 3.07 and 3.08 during
the intervening month, and (3) credited under Section 3.09 during the
intervening month.
3.07(a) To the extent that a Participant puts Elective Deferred Income in the
Stock Unit Account, the amount initially credited to her Account shall equal
110% of such Compensation deferred on or after January 1, 2002 and 125% for
compensation deferred in 2001.
(b) The amount in excess of 100% of the Elective Deferred Income is the
"Textron Company Contribution." A Participant's right to receive the Textron
Company Contribution, as adjusted under Section 3.09, shall become
nonforfeitable according to this schedule:
4
<PAGE>
(1) 50% on December 31 of the calendar year in which that Elective Deferred
Income otherwise would have been paid to him, but only if his Textron Employment
continues on that December 31; and
(2) the remaining 50% on the next December 31, but only if his Textron
Employment continues on that next December 31.
(c) A Participant's right to receive her Textron Company Contribution shall
be nonforfeitable in the event her Textron employment ends because of disability
or death.
(d) A Participant's right to receive her Textron Company Contribution shall
become nonforfeitable according to the above schedule if a Participant ends
employment when she is at least 55 with ten or more years of Textron service, or
is at least age 60, or has completed 20 or more years of Textron service.
3.08 With respect to deferrals into this Plan of amounts from the Annual
Incentive Compensation Plan for Textron Employees and the Long Term Incentive
Plan for Textron Employees, Textron shall credit stock units to a Participant's
Stock Unit Account, equal to the number of shares the deferred amount could have
purchased at the "Current Value" of a share of Textron Common Stock. The Current
Value is defined in Section 3.07 of the Long Term Incentive Plan for Textron
Employees. With respect to deferrals into this Plan of any other amounts, each
month Textron shall credit stock units to a Participant's Stock Unit Account
equal in number to the number of shares of Textron Common Stock that the
deferred amount could have purchased at a price per share equal to the average
of the composite closing prices of Textron Common Stock, as reported in The Wall
Street Journal for the month the contribution is credited.
3.09 From time to time, Textron shall credit Stock Units 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.
3.10 The number of Stock Units credited to a Participant's account under this
Article III shall be adjusted, without receipt of any consideration by Textron,
on account of any recapitalization, stock split, stock dividend or similar
increase or decrease affecting Textron Common Stock, as if the Stock Units were
actually shares of Textron Common Stock.
3.11 The Interest Account shall be established when the benefits relating to
a Participant's Stock Unit Account become due to the Participant under Article
IV. 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 Interest
Account.
5
<PAGE>
(a) Any transfer made shall be made in cash and shall be in an amount equal
to the product of (x) the Current Value of Textron Common Stock on the date on
which the stock units are converted and transferred to the Interest Account,
times (y) the number of whole and fractional stock units which are
nonforfeitable.
(b) As used in the Plan, the current value of a share of Textron Common Stock
on 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.
(c) Interest on amounts in the Interest Account shall be credited monthly at
the Moody's rate. Stock units transferred related to deferrals made prior to
January 1, 2002, shall have a minimum rate of 8%.
ARTICLE IV - BENEFITS
4.01 If a Key Executive's Textron Employment ends other than by death or for
less than acceptable performance (1) at or after age 62, or (2) as a result of
Total Disability, the amount credited to his Moody's Account at the Moody's Plus
Rate, the amount in his Stock Unit Account which is then nonforfeitable
according to Section 3.07, and the amount in his Interest Account, shall be
distributed in accordance with Article V.
4.02 If a Participant's Textron Employment ends because of death, the benefit
distributed pursuant to Article IV shall be the sum of the amount credited to
her Moody's Account (computed at the Moody's Plus Rate), the amount in her Stock
Unit Account as of the Determination Date immediately following her death and
the amount in her Interest Account.
For purposes of this Section, Deferred Income includes only the deferral of
Base Salary, Annual Incentive Compensation, or Long-Term Incentive Compensation,
and will not include the deferral of any other Compensation.
4.03 If a Key Executive's Textron Employment ends other than as described in
Section 4.01 or a Participant's Textron Employment ends other than as described
in Section 4.02, the amount credited to his Moody's Account computed at the
Moody's Rate (unless the Chief Executive Officer and Chief Human Resources
Officer of Textron in their sole discretion approve computation at the Moody's
Plus Rate), the amount in his Stock Unit Account which is then nonforfeitable
according to Section 3.07, and the amount in his Interest Account, shall be
distributed in accordance with Article V.
4.04 In the event of a Change in Control as defined in Section 9.03, the
amount credited to her Moody's Account computed at the Moody's Plus Rate, the
amount in her Stock Unit Account and the amount in her Interest Account shall be
distributed in accordance with Article V.
4.05 Benefits shall be payable to a Participant or Beneficiary under only one
Section of this Article IV.
ARTICLE V - PAYMENT OF BENEFITS
6
<PAGE>
5.01 The Benefits Committee or its designee shall choose in its sole
discretion the methods in Section 5.02 by which benefits payable under Article
IV shall be distributed, after considering any method of payment requested by
the Participant or by the Beneficiaries entitled to receive the benefits.
5.02 After benefits relating to a Participant's Moody's Account, his Stock
Unit Account and his Interest Account become payable under Article IV, Textron,
upon the written instructions of the Benefits Committee or its designee, shall
distribute the benefits in accordance with any one of the following methods:
(1) payment in a single sum; or
(2) payment in a number of annual installments, each payable as soon as
practicable after the end of each successive calendar year. For Participants
terminating after December 31, 2001, the number of installments shall not exceed
the lesser of 15 or life expectancy of the Participant. For Participants who
terminate on or before December 31, 2001, installments shall not exceed 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 in a manner which provides substantially equal
annual installments, or shall be calculated each year by dividing the unpaid
amount of the benefits as of January 1 of that year by the remaining number of
unpaid installments; or
(3) payment through a combination of the foregoing methods.
5.03(a) For Participants who terminate prior to January 1, 2002, Plan
benefits payable under Section 5.02 shall begin to be paid not later than
February 15 of the first calendar year which begins after the date on which (1)
the final payment of the Participant's Compensation is scheduled to be made, or
(2) the Participant attains or would have attained age 65, whichever is later.
For Participants who terminate on or after January 1, 2002, Plan benefits under
Section 5.02(2) shall begin to be paid in January following the year the
Participant terminated.
(b) For Participants who terminate on or prior to December 31, 2001, Plan
benefits are paid from a Moody's Account in accordance with Section 5.02(2) or
5.02(3), amounts (if any) described in Section 3.04 shall be paid first from
3.04(c), and will be paid from 3.04(b) next, and lastly from 3.04(a).
5.04 Notwithstanding any Plan provision to the contrary, the amount then
credited to the Moody's Account, Stock Unit Account and Interest Account of each
Key Executive shall become due and payable immediately upon a Change in Control
as defined in Section 9.03.
5.05 Distributions under this Article V shall be made on a pro-rata basis
from each account in which there is an amount.
ARTICLE VI - BENEFICIARIES
6.01 A Participant may designate one or more Beneficiaries to receive Plan
benefits payable on the Participant's account after his death. A Beneficiary may
designate one or
7
<PAGE>
more Beneficiaries to receive any unpaid Plan benefits to the extent this
designation does not contravene any designation filed by the deceased
Participant through whom the Beneficiary himself claims under this Plan.
Beneficiaries shall be designated only upon forms made available by or
satisfactory to the Benefits Committee or its designee, and filed by the
Participant or Beneficiary with that committee or designee.
6.02 At any time prior to his death, a Participant or Beneficiary may change
his own designation of Beneficiary by filing a substitute designation of
Beneficiary with the Benefits Committee or its designee.
6.03 In the absence of an effective designation of Beneficiary, or if all
persons so designated shall have predeceased the Participant/Beneficiary or
shall have died before the complete distribution of Plan benefits, the balance
of Plan benefits shall be paid to the Participant/Beneficiary's surviving spouse
or, if none, to the Participant/Beneficiary's issue per stirpes or, if no issue,
to the executor or administrator of the Participant/Beneficiary's estate.
6.04 If a Participant's Compensation or a Plan benefit is community property,
any designation of Beneficiary shall be valid or effective only as permitted
under applicable law.
6.05 If a Plan benefit is payable to a minor or person declared incompetent
or to a person incapable of handling the disposition of his property, the
Benefits Committee may direct Textron to pay such Plan benefit to the guardian,
legal representative or person having the care and custody of such minor,
incompetent or person. The Benefits Committee may require proof of incompetency,
minority, incapacity or guardianship as it deems appropriate prior to
distribution of the Plan benefit. Such distribution shall completely discharge
the Benefits Committee and any Textron Company from all liability with respect
to such benefit.
ARTICLE VII - UNFUNDED PLAN
7.01 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 the Participants whose lives are
insured nor their Beneficiaries shall have any ownership rights in such policies
of insurance.
7.02 This Plan is intended to provide benefits for a select group of
management employees who are highly compensated, pursuant to Section 110 of the
Employee Retirement Income Security Act of 1974, as amended.
ARTICLE VIII - PLAN ADMINISTRATION
8.01 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
8
<PAGE>
establish rules for the administration of this Plan and the transaction of its
business. Subject to Section 8.04, 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.
8.02 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.
8.03 Textron may require proof of the death or Total Disability of any
Participant, former Participant or Beneficiary and evidence of the right of any
person to receive any Plan benefit.
8.04 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.
8.05 Textron shall withhold from benefits paid under this Plan any taxes or
other amounts required to be withheld by law.
ARTICLE IX - MISCELLANEOUS
9.01 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.
9.02 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
9
<PAGE>
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.
9.03 Notwithstanding any 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 the amount credited to any Moody's Account, Stock Unit
Account or Interest Account immediately before the effective date of the
amendment, modification, suspension or termination; or
(2) shall be made to Article V or this Section 9.03 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 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.
9.04 This Plan shall be construed in accordance with the laws of the State of
Delaware.
10
<PAGE>
9.05 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.
9.06 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 May 1, 2001.
TEXTRON INC.
By:
-------------------------------
George Metzger
Vice President, Human Resources
and Benefits
11
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.9B
<SEQUENCE>4
<FILENAME>b42129tiex10-9b.txt
<DESCRIPTION>AMENDMENT 1999 PLAN
<TEXT>
<PAGE>
EXHIBIT 10.9B
1999 LONG-TERM INCENTIVE PLAN
AMENDMENT
On April 25, 2001, the shareholders approved an amendment to the 1999 Long-Term
Incentive Plan increasing the total number of awards available for grant and the
individual grant limits for those awards.
The total number of shares of Textron common stock for which options may be
granted under the amended plan is 12,200,000, and the maximum number of options
that may be granted to any individual in any calendar year is 150,000. The
maximum number of Performance Share Units which may be granted under the amended
plan is 2,000,000, and the maximum number of Performance Share Units that may be
granted to any individual for any award period is 120,000.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.14E
<SEQUENCE>5
<FILENAME>b42129tiex10-14e.txt
<DESCRIPTION>AMENDMENTS TO RETENTION AWARDS
<TEXT>
<PAGE>
EXHIBIT 10.14E
L.B. CAMPBELL'S RETENTION AWARD
AMENDMENTS
At its October 24, 2001 meeting, the Board of Directors approved the following:
The Earnings Per Share goals for the Retention Awards granted to executives be
eliminated.
At its February 26, 2002 meeting, the Organization and Compensation Committee of
the Board of Directors approved the following:
With respect to the 300,000 shares of restricted stock awarded to L.B. Campbell,
Textron will repurchase the vested restricted shares on each vest date provided
(a) the executive has met his stock ownership requirement on the vest date and
(b) the repurchase has no impact on compensation expense. The repurchase price
will equal the market value of the shares on the vest date. The market value
shall be defined as the average of the highest and lowest trading prices of
Textron common stock on the vest date. If the vest date is a date on which
Textron stock is not traded, the market value shall be the average of the
highest and lowest trading prices for the first day preceding and the first day
following the vest date on which Textron stock is traded.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-12.1
<SEQUENCE>6
<FILENAME>b42129tiex12-1.txt
<DESCRIPTION>COMPUTATION OF RATIO TO INCOME
<TEXT>
<PAGE>
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
-------------------------------------------------------
2001 2000 1999 1998 1997
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Fixed charges:
Interest expense $ 183 $ 158 $ 56 $ 146 $ 117
Distributions on preferred securities of
subsidiary trust, net of income taxes 26 26 26 26 26
Estimated interest portion of rents 32 30 26 20 14
------- ------- ------- ------- -------
Total fixed charges $ 241 $ 214 $ 108 $ 192 $ 157
======= ======= ======= ======= =======
Income:
Income from continuing operations
before income taxes and distributions
on preferred securities of subsidiary
trust $ 419 $ 611 $ 1,030 $ 763 $ 648
Fixed charges * 215 188 82 166 131
Eliminate equity in undistributed pretax
income of finance subsidiaries (148) (112) (92) (47) (36)
------- ------- ------- ------- -------
Adjusted income $ 486 $ 687 $ 1,020 $ 882 $ 743
======= ======= ======= ======= =======
Ratio of income to fixed charges 2.02 3.21 9.44 4.59 4.73
======= ======= ======= ======= =======
</TABLE>
- ------------------------
* Adjusted to exclude distributions on preferred securities of subsidiary
trust, net of income taxes.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-12.2
<SEQUENCE>7
<FILENAME>b42129tiex12-2.txt
<DESCRIPTION>COMPUTATION OF RATIO...INCLUDING SUBSIDIARIES
<TEXT>
<PAGE>
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
----------------------------------------------
2001 2000 1999 1998 1997
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Fixed charges:
Interest expense $ 453 $ 492 $ 245 $ 301 $ 270
Distributions on preferred securities of
subsidiary trust, net of income taxes 26 26 26 26 26
Estimated interest portion of rents 34 31 27 21 14
------ ------ ------ ------ ------
Total fixed charges $ 513 $ 549 $ 298 $ 348 $ 310
====== ====== ====== ====== ======
Income:
Income from continuing operations
before income taxes and distributions
on preferred securities of subsidiary
trust $ 419 $ 611 $1,030 $ 763 $ 648
Fixed charges * 487 523 272 322 284
------ ------ ------ ------ ------
Adjusted income $ 906 $1,134 $1,302 $ 1085 $ 932
====== ====== ====== ====== ======
Ratio of income to fixed charges 1.77 2.07 4.37 3.12 3.01
====== ====== ====== ====== ======
</TABLE>
- ------------------------
* Adjusted to exclude distributions on preferred securities of subsidiary
trust, net of income taxes.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-13
<SEQUENCE>8
<FILENAME>b42129tiex13.txt
<DESCRIPTION>PORTION OF ANNUAL REPORT
<TEXT>
<PAGE>
EXHIBIT 13
FINANCIAL TABLE OF CONTENTS
<TABLE>
<S> <C>
18 BUSINESS SEGMENT DATA
19 MANAGEMENT'S DISCUSSION AND ANALYSIS
33 REPORT OF MANAGEMENT, REPORT OF INDEPENDENT AUDITORS
34 CONSOLIDATED FINANCIAL STATEMENTS
39 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
60 QUARTERLY DATA
61 SELECTED FINANCIAL INFORMATION
62 TEXTRON LEADERSHIP
64 TEXTRON BUSINESS DIRECTORY
66 SHAREHOLDER INFORMATION
</TABLE>
BUSINESS SEGMENT DATA
<TABLE>
<CAPTION>
SEGMENT
REVENUES SEGMENT PROFIT* PROFIT MARGINS
------------------------------------------------------------------------------------------------
(In millions) 2001 2000 1999 2001 2000 1999 2001 2000 1999
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Aircraft $ 4,664 $ 4,394 $ 4,019 $ 311 $ 451 $ 362 6.7% 10.3% 9.0%
Automotive 2,601 2,924 2,868 158 244 220 6.1 8.3 7.7
Fastening Systems 1,679 1,996 2,059 46 175 188 2.7 8.8 9.1
Industrial Products 2,668 3,085 2,445 120 350 303 4.5 11.3 12.4
Finance 709 691 463 193 190 128 27.2 27.5 27.6
- ------------------------------------------------------------------------------------------------------------------------------------
$ 12,321 $ 13,090 $ 11,854 828 1,410 1,201 6.7% 10.8% 10.1%
==================================================================== =========================
Special charges, net*** (437) (483) 1
------------------------------
Segment operating income 391 927 1,202
Gains on sale of divisions 342 -- --
Corporate expenses and other, net (152) (164) (143)
Interest expense, net (162) (152) (29)
- -----------------------------------------------------------------------------------------------------
Income from continuing operations
before income taxes** $ 419 $ 611 $ 1,030
=====================================================================================================
</TABLE>
* Segment profit represents a measurement used by Textron to evaluate
operating performance. 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, and excludes special charges.
** Before distributions on preferred securities of manufacturing subsidiary
trust.
*** Special charges, net includes goodwill, intangible asset and investment
portfolio impairment write-downs and restructuring expenses. In 2001,
special charges totaled $351 million in Industrial Products, $45 million
in Fastening Systems, $17 million in Automotive, $5 million in Aircraft,
$3 million in Finance and $16 million in Corporate. In 2000, special
charges totaled $209 million in Industrial Products, $128 million in
Fastening Systems, $29 million in Automotive and $117 million in
Corporate.
2001 REVENUES
[PIE CHART, PLOT POINTS BELOW]
<TABLE>
<S> <C> <C>
FINANCE $ 709 6%
AIRCRAFT $4,664 38%
AUTOMOTIVE $2,601 21%
FASTENING SYSTEMS $1,679 13%
INDUSTRIAL PRODUCTS $2,668 22%
</TABLE>
2001 SEGMENT PROFIT
[PIE CHART, PLOT POINTS BELOW]
<TABLE>
<S> <C> <C>
FINANCE $ 193 23%
AIRCRAFT $ 311 38%
AUTOMOTIVE $ 158 19%
FASTENING SYSTEMS $ 46 6%
INDUSTRIAL PRODUCTS $ 120 14%
</TABLE>
18 Textron Annual Report
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
REVENUES
[BAR GRAPH, PLOT POINTS BELOW]
<TABLE>
<S> <C> <C>
99 $11,854 20 %
00 $13,090 10 %
01 $12,321 (6)%
</TABLE>
EARNINGS PER SHARE*
[BAR GRAPH, PLOT POINTS BELOW]
<TABLE>
<S> <C> <C>
99 $4.05 51 %
00 $1.90 (53)%
01 $1.16 (39)%
</TABLE>
* Income from continuing operations -- diluted
TEXTRON INC.
2001 vs. 2000
- Revenues decreased to $12.3 billion in 2001 from $13.1 billion in
2000, primarily due to softening sales in most short-cycle
businesses and pricing pressures, partially offset by higher
aircraft sales. Net income was $166 million for 2001, down from $218
million in 2000. Diluted earnings per share from continuing
operations were $1.16 in 2001 and $1.90 in 2000. During 2001,
Textron recognized special charges of $437 million and gains of $342
million on the sale of two divisions. In 2000, Textron recognized
$483 million in special charges and recorded a cumulative effect of
a change in accounting principle of $59 million (net of tax) for the
adoption of EITF consensus on Issue No. 99-5 "Accounting for
Pre-Production Costs Related to Long Term Supply Arrangements."
- Special charges of $437 million in 2001 included goodwill and
intangible asset impairment write-downs of $319 million,
restructuring expense of $81 million, write-downs for fixed asset
impairments under the restructuring program of $28 million and
e-business investment losses of $9 million.
- Textron recorded $342 million for gains on the sale of two divisions
in 2001. In December 2001, Textron recorded a gain of $339 million
on the sale of its Automotive Trim business to Collins & Aikman
Products Co., a subsidiary of Collins & Aikman Corporation. Under
the terms of the sale, Textron received $625 million in cash along
with other consideration as disclosed in Note 2 to the consolidated
financial statements. In August 2001, Textron recorded a gain of $3
million on the sale of its Turbine Engine Components business.
- At year-end 2001, Textron's reportable segments include Aircraft,
Automotive, Fastening Systems, Industrial Products and Finance.
During 2001 and 2000, management responsibility for certain
divisions was reorganized as described in Note 1 to the consolidated
financial statements. All prior period data has been appropriately
reclassified. Subsequent to year-end 2001, management responsibility
was reorganized to reflect the sale of the Automotive Trim business,
and in 2002, Textron will report under the following new segments:
Aircraft, Fastening Systems, Industrial Products, Industrial
Components and Finance.
- Segment profit of $828 million in 2001 decreased from $1.410 billion
in 2000 due to lower sales volumes and pricing pressures at
Automotive, Fastening Systems and Industrial Products; lower profit
at Bell Helicopter due primarily to reduced profitability on certain
military contracts and commercial helicopter programs; manufacturing
inefficiencies resulting from reduced production at Fastening
Systems and Industrial Products; and $34 million in additional costs
related to restructuring included in cost of sales. These negative
factors were partially offset by higher Citation business jet volume
at Cessna Aircraft, the benefit of restructuring and other cost
reduction activities and an increase in syndication and
securitization income in the Finance segment.
- Total segment margin decreased to 6.7% in 2001 from 10.8% in 2000
due primarily to lower margins across the manufacturing segments.
- Corporate expenses and other, net decreased $12 million, due
primarily to the impact of organizational changes made in 2000.
- Net interest expense for Textron Manufacturing increased $10
million. Interest expense increased $4 million due to a higher level
of average debt, primarily as a result of lower cash flow from
operations during the first nine months of 2001, partially offset by
the benefit of a lower interest rate environment. Interest income
decreased $6 million due to the settlement of a note receivable in
the fourth quarter 2000.
- Income Taxes - the effective tax rate for 2001 was 54.2% primarily
due to the impact of the gain on the sale of the Automotive Trim
business in 2001 and the non-tax deductibility of goodwill
written-off in 2001. Excluding the impact of these two items, the
effective tax rate for 2001 was 35.0%. The effective tax rate for
2000 was also impacted by the non-tax deductibility of goodwill
written-off during 2000. Excluding the impact of this goodwill
write-off, the effective tax rate for 2000 was 35.5%. The decrease
in the annual effective tax rate from 35.5% in 2000 to 35.0% in
2001, was due to the benefit of tax planning initiatives realized in
2001.
Textron Annual Report 19
<PAGE>
- At this time, there are no indications that the weakened economy has
begun to recover. Textron anticipates the economy will remain
sluggish at least for the first half of 2002. To strengthen
operating efficiencies and better align its operations with current
economic and market conditions in its manufacturing businesses,
Textron expects to continue to incur restructuring charges from its
previously announced program throughout 2002.
2000 vs. 1999
- Revenues increased to $13.1 billion in 2000 from $11.9 billion in
1999. Income from continuing operations for 2000 was $277 million,
down from $623 million in 1999. Diluted earnings per share from
continuing operations were $1.90 and $4.05 for 2000 and 1999,
respectively. Net income (including the cumulative effect of a
change in accounting principle and 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 a gain on the sale of
Avco Financial Services (AFS) in January 1999.
- Special charges of $483 million in 2000 include restructuring
charges of $17 million, associated with the modernization and
consolidation of manufacturing facilities in the Automotive and
Industrial Products segments, $349 million for goodwill impairment
and $117 million for the write-down of Textron's e-business
investment portfolio.
- Segment profit of $1.410 billion increased from $1.201 billion in
1999, as a result of continued improved financial results in
Aircraft, Automotive, Industrial Products and Finance, and 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 January 2000, Textron implemented the EITF consensus on
Issue No. 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 a change in accounting
principle of $59 million (net of tax), or $0.41 per share related to
the adoption of this consensus.
- Textron completed the sale of AFS to Associates First Capital
Corporation for $3.9 billion in cash in January 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 $0.27
per share on the early retirement of debt in 1999.
- Corporate expenses and other, net increased $21 million due
primarily to the impact of organizational changes and costs
associated with strategic and e-business initiatives in 2000,
partially offset by higher income related to retirement benefits.
- Net interest expense for Textron Manufacturing increased $123
million. 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 Textron's net investment
position during the year.
- 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.
20 Textron Annual Report
<PAGE>
AIRCRAFT
Revenues
[BAR GRAPH, PLOT POINTS BELOW]
<TABLE>
<S> <C> <C>
99 $4,019 19 %
00 $4,394 9 %
01 $4,664 6 %
</TABLE>
Segment Profit
[BAR GRAPH, PLOT POINTS BELOW]
<TABLE>
<S> <C> <C>
99 $ 362 7 %
00 $ 451 25 %
01 $ 311 (31)%
</TABLE>
AIRCRAFT
2001 vs. 2000
The Aircraft segment's revenues increased $270 million, while profit decreased
$140 million.
- Cessna Aircraft's revenues increased $229 million due to higher
sales of Citation business jets and increased spare parts and
service sales. This was partially offset by lower sales of used
aircraft and Caravan and single engine piston models that have been
adversely affected by the weakening economy. Profit increased $44
million as a result of the higher revenues and improved operating
performance, partially offset by a write-down of used aircraft
inventory to reflect lower prices in the current market, lower
re-sale prices for trade-in aircraft, higher engineering expense for
planned program spending related to the Sovereign business jet and
the reduced volume of Caravan and single engine piston models.
- Bell Helicopter's revenues increased $41 million primarily due to
higher revenue on the V-22 tiltrotor aircraft contract ($54 million)
and other sales to the U.S. Government ($25 million) and higher
sales of commercial spares ($21 million), partially offset by lower
foreign military sales ($74 million). Bell's profit decreased $184
million primarily due to reduced profitability expectations ($124
million) on certain development and production contracts including
the Huey and Cobra upgrade contracts, the Model 412 and Model 427
commercial helicopters, and the V-22 Engineering Manufacturing and
Development contract. The reduced profitability expectations were
based on program reviews in the second half of 2001, and reflect the
clarification of several matters including extended development
schedules and planned design changes on a number of programs, as
well as ongoing development efforts. Profit also decreased due to
lower margins on commercial sales, lower income ($17 million in 2001
vs. $30 million in 2000) from a joint venture related to the BA609
program, lower foreign military sales and costs related to
outsourcing the manufacture of certain parts. A favorable LIFO
inventory reserve adjustment of $8 million from a reduction in LIFO
inventories was offset by higher reserves related to receivables and
product liability issues.
In December 2000, the U.S. Marine Corps temporarily restricted the
use of their V-22 tiltrotor aircraft pending an investigation by the
Department of Defense of a mishap. In April 2001, a Blue Ribbon
Panel appointed by the U.S. Secretary of Defense recommended
specific changes to the software and hydraulic systems and issued
its unanimous recommendation for the continuation of the program. On
December 21, 2001, the Department of Defense signed an Acquisition
Decision Memorandum that authorizes the V-22 program to proceed with
continued low-rate production. The Memorandum requires additional
flight testing to ensure that the V-22 can be deployed as a safe,
reliable and operationally suitable aircraft. Management expects to
finalize contracts in early 2002 for the next two lots which include
twenty aircraft. Under the current schedule, Textron plans to return
the V-22 to flight in April 2002 for completion of extensive flight
testing before returning to operational use in the third quarter of
2003. Textron recognized revenue of $485 million in 2001 and $432
million in 2000 under the V-22 program. Under the current low-rate
production level, revenue in 2002 is expected to be comparable to
revenue in 2001.
2000 vs. 1999
The Aircraft segment's revenues and profit increased $375 million and $89
million, respectively.
- Cessna Aircraft's revenues increased $342 million due to higher
sales of Citation business jets and increased spare parts and
service sales. Profit increased $69 million as a result of the
higher revenues and improved operating performance, partially offset
by higher engineering expense related to the Sovereign business jet.
- 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 tiltrotor aircraft contract
($41 million) were partially offset by lower sales of commercial and
other military helicopters ($71 million). Bell's profit increased
$20 million due to the higher revenues and higher income related to
retirement benefits. This favorable impact was partially offset by
the lower income ($30 million in 2000 vs. $37 million in 1999) from
a joint venture related to 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 fuselage) was offset by
lower spending on other programs.
Textron Annual Report 21
<PAGE>
AUTOMOTIVE
Revenues
[BAR GRAPH, PLOT POINTS BELOW]
<TABLE>
<S> <C> <C>
99 $2,868 22 %
00 $2,924 2 %
01 $2,601 (11)%
</TABLE>
Segment Profit
[BAR GRAPH, PLOT POINTS BELOW]
<TABLE>
<S> <C> <C>
99 $ 220 29 %
00 $ 244 11 %
01 $ 158 (35)%
</TABLE>
AUTOMOTIVE
2001 vs. 2000
The Automotive segment's revenues and profit decreased $323 million and $86
million, respectively.
- Trim revenues decreased $263 million primarily due to North American
automotive original equipment manufacturer production decreases,
customer price reductions and an unfavorable foreign exchange impact
resulting from a weaker Brazilian Real, partially offset by the
contribution from acquisitions. Profit decreased $84 million
primarily due to the lower sales volume, customer price reductions
and start-up costs on new programs, partially offset by the benefit
of restructuring and other cost containment activities, and the
settlement of outstanding customer claims.
- Fuel Systems and Functional Components revenues decreased $60
million primarily as a result of the divestiture of non-core product
lines in the fourth quarter of 2000 and the first half of 2001,
customer price reductions and the unfavorable impact of foreign
exchange, partially offset by higher sales volume. Strong European
sales in the first half of 2001, coupled with the success of several
customer platforms at Kautex, have mitigated the negative impact
from reduced North American volumes. Profit decreased $2 million
primarily due to customer price reductions, a $4 million gain in
2000 on the sale of two non-core product lines and the unfavorable
impact of foreign exchange, partially offset by the benefit of cost
reduction activities and a $7 million gain on the sale of a small
product line in 2001.
2000 vs. 1999
The Automotive segment's revenues and profit increased $56 million and $24
million, respectively. These results were achieved despite North American
automotive original equipment manufacturer production decreases in the fourth
quarter 2000.
- Trim revenues increased $46 million due to the contribution from
acquisitions and major new program launches, partially offset by
customer price reductions. Profit increased $13 million 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 $11 million 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.
FASTENING SYSTEMS
Revenues
[BAR GRAPH, PLOT POINTS BELOW]
<TABLE>
<S> <C> <C>
99 $2,059 17 %
00 $1,996 (3)%
01 $1,679 (16)%
</TABLE>
Segment Profit
[BAR GRAPH, PLOT POINTS BELOW]
<TABLE>
<S> <C> <C>
99 $ 188 1 %
00 $ 175 (7)%
01 $ 46 (74)%
</TABLE>
FASTENING SYSTEMS
2001 vs. 2000
The Fastening Systems segment's revenues and profit decreased $317 million and
$129 million, respectively. The revenue and profit decreases were primarily due
to depressed market demand in most businesses, customer price reductions and the
unfavorable impact of foreign exchange in its European operations, partially
offset by the contribution from acquisitions. Profit decreased primarily due to
the lower sales, customer price reductions, manufacturing inefficiencies
primarily as a result of production decreases to reduce inventory levels and the
impact of smaller production lot sizes, a $5 million loss on the divestiture of
a non-core product line and a customer warranty issue, partially offset by the
benefit of restructuring activities.
2000 vs. 1999
The Fastening Systems segment's revenues and profit decreased $63 million and
$13 million, respectively. Revenues decreased due to the unfavorable impact of
foreign exchange in its European operations, lower volume in the heavy truck
industry and customer price reductions, partially offset by the contribution
from acquisitions. Profit decreased as improved operating performance and the
benefit from acquisitions were more than offset by the unfavorable impact of
customer price reductions, foreign exchange and lower volume in the heavy truck
industry. Textron recorded a $128 million goodwill impairment write-down related
to this segment, as discussed in the "Special Charges, net" section.
22 Textron Annual Report
<PAGE>
INDUSTRIAL PRODUCTS
Revenues
[BAR GRAPH, PLOT POINTS BELOW]
<TABLE>
<S> <C> <C>
99 $2,445 21 %
00 $3,085 26 %
01 $2,668 (14)%
</TABLE>
Segment Profit
[BAR GRAPH, PLOT POINTS BELOW]
<TABLE>
<S> <C> <C>
99 $ 303 31 %
00 $ 350 16 %
01 $ 120 (66)%
</TABLE>
INDUSTRIAL PRODUCTS
2001 vs. 2000
The Industrial Products segment's revenues and profit decreased $417 million and
$230 million, respectively. Revenues decreased primarily due to lower sales in
most of the segment's businesses reflecting softening demand from the depressed
economy, with the largest decreases occurring at OmniQuip, Golf, Turf and
Specialty Products, and Fluid and Power and reduced sales due to the divestiture
of Turbine Engine Components in the third quarter 2001 ($39 million), partially
offset by the contribution from acquisitions. Profit decreased primarily due to
the decline in sales volume, other decreases in profit at Golf, Turf and
Specialty Products and OmniQuip, and the impact of the divestiture of Turbine
Engine Components ($6 million) partially offset by the benefit of restructuring
activities and a $5 million gain on the divestiture of a small product line. In
addition to lower volumes, the decreases in profit at Golf, Turf and Specialty
Products and OmniQuip were primarily caused by manufacturing inefficiencies
resulting from reduced production which included the shut-down of certain
facilities in an effort to reduce inventory levels, the impact of higher rebates
at Golf, Turf and Specialty Products to stimulate retail sales, a write-down of
used golf car and other inventories, and an increase in the reserve for
receivables. During 2001, Textron recorded an impairment charge at OmniQuip of
$317 million, including goodwill of $306 million and intangibles of $11 million,
as discussed in the "Special Charges, net" section.
2000 vs. 1999
The Industrial Products segment's revenues and profit increased $640 million and
$47 million, respectively. Revenues increased as a result of the contribution
from acquisitions, primarily OmniQuip and InteSys Technologies. Profit increased
primarily as a result of the contribution from acquisitions and higher income
related to retirement benefits, partially offset by lower organic sales and
unfavorable operating performance at OmniQuip and Turbine Engine Components.
During the fourth quarter 2000, Textron recorded a write-down of Turbine Engine
Components goodwill for $178 million, as discussed in the "Special Charges, net"
section.
FINANCE
Revenues
[BAR GRAPH, PLOT POINTS BELOW]
<TABLE>
<S> <C> <C>
99 $ 463 26 %
00 $ 691 49 %
01 $ 709 3 %
</TABLE>
Segment Profit
[BAR GRAPH, PLOT POINTS BELOW]
<TABLE>
<S> <C> <C>
99 $ 128 13 %
00 $ 190 48 %
01 $ 193 2 %
</TABLE>
FINANCE
2001 vs. 2000
The Finance segment's revenues and profit increased $18 million and $3 million,
respectively. Revenues increased primarily due to higher syndication and
securitization income ($68 million in 2001 vs. $37 million in 2000), a $14
million gain from a leveraged lease prepayment, higher servicing fees and higher
investment income, partially offset by a lower average yield reflecting the
lower interest rate environment. Profit increased primarily due to higher
revenue, partially offset by a higher provision for loan losses ($82 million in
2001 vs. $37 million in 2000) as a result of higher charge-offs and higher
operating expenses primarily related to managed receivables.
2000 vs. 1999
The Finance segment's revenues and profit increased $228 million and $62
million, respectively. Revenues increased due to a higher level of average
receivables ($5.8 billion in 2000 vs. $4.3 billion in 1999), reflecting a
balance of both acquisitive and organic growth, a higher yield on receivables
and higher syndication and securitization income ($37 million in 2000 vs. $14
million in 1999). 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.
Textron Annual Report 23
<PAGE>
SPECIAL CHARGES, NET AND OTHER COSTS RELATED TO RESTRUCTURING
2001 vs. 2000
Textron recorded $437 million in special charges in 2001 in comparison to $483
million in 2000. Special charges in 2001 included $319 million in goodwill and
intangible asset impairment write-downs, $81 million in restructuring expense,
$28 million in fixed asset impairment write-downs, and $9 million in write-downs
of e-business investments. In 2000, special charges included $349 million in
goodwill impairment write-downs, $17 million in restructuring expense, and $117
million in an impairment charge related to e-business investments.
In the fourth quarter of 2000, Textron initiated its restructuring program to
strengthen operating efficiencies and better align its operations with current
economic and market conditions. Projects include reducing overhead and closing,
consolidating and downsizing manufacturing facilities, reducing corporate and
segment personnel, consolidating operations and exiting non-core product lines
throughout Textron. The restructuring program costs and savings have been driven
primarily from efforts within the Industrial Products and Fastening Systems
segments. Under the restructuring program, Textron's workforce has been reduced
by approximately 5,700 employees through December 29, 2001, including
approximately 2,400 in Industrial Products, 1,600 in Fastening Systems, 900 in
Automotive, 600 in Aircraft and 200 in Finance and Corporate. Excluding Textron
Automotive Trim, total headcount reductions have been approximately 5,000.
Through the consolidations, Textron is closing 59 facilities, including 30
manufacturing plants representing over 2.2 million square feet of manufacturing
floor space. As of December 29, 2001, 44 facilities have been closed primarily
in the Industrial Products and Fastening Systems segments.
In 2001, restructuring expenses of $81 million were incurred in Industrial
Products ($27 million), Fastening Systems ($25 million), Automotive ($14
million), Aircraft ($5 million), Finance ($3 million) and Corporate ($7
million). In conjunction with the restructuring efforts, Textron recorded
write-downs for fixed asset impairment of $28 million in Fastening Systems ($18
million), Industrial Products ($7 million) and Automotive ($3 million). In 2001,
Textron also incurred $34 million in costs related to restructuring in Aircraft
($10 million), Industrial Products ($12 million), Fastening Systems ($8 million)
and Automotive ($4 million), which have been included in segment profit.
Under the expanded restructuring program, Textron expects to incur total special
charges and costs related to restructuring, excluding goodwill write-downs, of
at least $325 million, of which $160 million has been expended at year-end 2001.
The program includes an additional workforce reduction of approximately 2,300
and should be substantially completed by the end of 2002. Excluding Textron
Automotive Trim, Textron expects a total reduction of approximately 7,300
employees, representing approximately 12% of Textron's global workforce since
the restructuring was first announced. Restructuring savings, excluding projects
at Textron Automotive Trim, were $124 million in 2001 and are expected to be at
least $225 million in 2002 and $250 million in 2003.
During the third quarter of 2001, Textron performed a long-lived asset
impairment review as a result of certain impairment indicators being identified.
These key impairment indicators included OmniQuip's operating performance
against plan despite restructuring efforts to improve operating efficiencies and
streamline operations. Additionally, the strategic review process completed in
August 2001 confirmed that the economic and market conditions combined with the
saturation of light construction equipment handlers in the market had negatively
impacted the projected operating results for the foreseeable future. The
impairment calculation resulted in a third quarter impairment charge in the
Industrial Products segment of $317 million, including goodwill of $306 million
and other intangible assets of $11 million. OmniQuip has approximately $107
million in remaining long-lived assets which are deemed substantially
recoverable.
Textron continues to address and execute strategic initiatives to enhance the
overall profitability of OmniQuip. Through December 29, 2001, OmniQuip's
workforce has been reduced by over 700 employees, along with the closure of five
facilities including one plant.
2000 vs. 1999
Textron recorded $483 million in special charges, net in 2000 in comparison to a
$1 million net gain in 1999. In 2000, special charges included $349 million in
goodwill impairment write-downs, $17 million in restructuring expense, and $117
million in an impairment charge related to e-business investments. The
restructuring expense of $17 million was associated with the modernization and
consolidation of manufacturing facilities in the Automotive ($2 million) and
Industrial Products ($15 million) segments.
24 Textron Annual Report
<PAGE>
In conjunction with the initiation of the 2000 restructuring program and
Textron's fourth quarter multi-year financial planning process, management
identified certain indicators of potential impairment of long-lived assets
including goodwill. As a result, Textron performed an impairment review which
identified impaired goodwill of $194 million in Industrial Products, $128
million in Fastening Systems and $27 million in Automotive, resulting in an
aggregate write-down of $349 million. The largest portions of the goodwill
charge were at Turbine Engine Components ($178 million) and Flexalloy ($96
million).
During the end of 2000, the value of Textron's e-business investment portfolio
had fallen substantially. Textron determined that this decline in value was
other than temporary and recorded a pre-tax charge of $117 million to write-down
the portfolio to the current fair value.
In 1999, Textron recorded special charges of $18 million related to
restructuring activities. The charges included 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. These restructuring expenses were offset by
a $19 million gain as a result of shares granted to Textron from Manulife
Financial Corporation's initial public offering on their demutualization of
Manufacturers Life Insurance Company.
CRITICAL ACCOUNTING POLICIES
Recently, the Securities and Exchange Commission (SEC) issued new advice
regarding disclosure of critical accounting policies. In response to this
advice, we have identified the accounting policies listed below that we believe
are most critical to the portrayal of Textron's financial condition and results
of operations, and that require management's most difficult, subjective and
complex judgments in estimating the effect of inherent uncertainties. This
section should be read in conjunction with Note 1 to the consolidated financial
statements which includes other significant accounting policies.
RECEIVABLE AND INVENTORY RESERVES
We evaluate the collectibility of our commercial and finance receivables based
on a combination of factors. In circumstances where we are aware of a specific
customer's inability to meet its financial obligations to us (e.g., bankruptcy
filings, substantial down-grading of credit scores), we record a specific
reserve for bad debts for amounts we estimate to be potentially uncollectible.
For homogenous loan pools and all other receivables, we recognize reserves for
bad debts based on current delinquencies, historical loss experience, the value
of underlying collateral and general economic conditions and trends.
In areas where we have significant collateralized finance receivables with large
customers such as national rental companies, a single default could have a
material impact on Textron if there is a significant decline in the market value
of the collateral due to market saturation as a result of numerous companies
trying to sell used equipment during an economic recession. We also have
receivable and collateral concentrations in aircraft and other equipment that
may require additional reserves if the market weakens and becomes saturated with
used aircraft and equipment resulting in lower market values. While we believe
our reserves are adequate, if economic circumstances change significantly
resulting in higher expected defaults or there is an unexpected material adverse
change in a major customer's ability to meet its financial obligations to us,
our original estimates of the recoverability of amounts due us could be reduced
by a significant amount requiring additional reserves.
LONG-TERM CONTRACTS
We recognize revenue and profit as work on certain government long-term
engineering, development and production contracts progresses using the contract
method of accounting, which relies on estimates of the total contract cost and
revenue. Estimated contract cost and revenue are based on current contract
specifications, expected engineering requirements and the achievement of
contract milestones, including product deliveries. Since the financial reporting
of these contracts depends on estimates, which are assessed periodically during
the term of the contract, contract earning rates are subject to revisions as the
contract progresses. Revisions in earnings estimates are reflected in the period
in which the facts that give rise to the revision become known. Accordingly,
favorable changes in estimates result in additional profit recognition, and
unfavorable changes in estimates result in the reversal of previously recognized
earnings. Any anticipated losses on contracts are charged to earnings when
identified. Program earnings could be reduced by a material amount resulting in
a charge to income if (a) total estimated contract costs are significantly
higher than expected due to changes in customer specifications prior to contract
amendment, (b) there is a change in engineering efforts required during the
development stage of the contract, or (c) we are unable to meet contract
milestones.
Textron Annual Report 25
<PAGE>
GOODWILL AND OTHER INTANGIBLE ASSETS
Management periodically evaluates the recoverability of goodwill and other
intangible assets whenever events or changes in circumstances, such as declines
in sales, earnings or cash flows or material adverse changes in the business
climate indicate that the carrying amount of an asset may not be recoverable.
Textron's goodwill and other intangible assets are not considered impaired based
on management's estimates of future cash flows applying the current accounting
standards. The implementation of new accounting standards in this area during
2002 may result in an impairment charge in certain segments. Any impairment
charge upon the implementation of these standards would be recorded as a
cumulative effect of a change in accounting principle.
SECURITIZED TRANSACTIONS
Securitized transactions involve the sale of finance receivables to qualified
special purpose trusts. While the assets sold are no longer on our balance
sheet, our retained interests are included in other assets. Textron Finance
retains servicing responsibilities and subordinated interests in the form of
interest-only securities, subordinated certificates and cash reserve accounts.
Textron continues to be exposed to the credit risk inherent in the securitized
receivables because it has provided credit enhancement to the third party
investors by its retained interests in the securitization trusts. We estimate
the fair value of the retained interests based on the present value of future
expected cash flows using our best estimates of credit losses, prepayment
speeds, forward interest rate yield curves, and discount rates commensurate with
the risks involved. These assumptions are reviewed each quarter, and the
retained interests are written down when the carrying value exceeds the fair
value and the decline is estimated to be other than temporary. Based on our
sensitivity analysis, as discussed in Note 3 to the consolidated financial
statements, a 20% adverse change in either the prepayment speed, expected credit
losses or the residual cash flows discount rate would not result in a material
charge to income.
PENSION BENEFITS
An important element in determining pension income is the expected return on
plan assets. We have assumed that the expected long-term rate of return on plan
assets will be 9.25%. Over the last ten years, our pension plan assets have
earned just under 11%; therefore, we believe that our assumption of future
returns is reasonable. The plan assets have earned a rate of return
substantially less than 9% in the last two years. Should this trend continue,
future pension income will decline.
At the end of each year, we determine the discount rate that reflects the
current rate at which the pension liabilities could be effectively settled at
the end of the year. This rate should be in line with rates for high quality
fixed income investments available for the period to maturity of the pension
benefits, and changes as long term interest rates change. At year-end 2001, we
determined this rate to be 7.25%. Changes in discount rates over the past three
years have not materially affected pension income, and the net effect of changes
in the discount rate, as well as the net effect of other changes in actuarial
assumptions and experience, have been deferred as allowed by SFAS No. 87.
OTHER POSTRETIREMENT BENEFITS
We use various actuarial assumptions including the discount rate and the
expected trend in health care costs to estimate the costs and benefit
obligations for our retiree health plan. The trend in health care costs is
difficult to estimate and it has an important effect on postretirement
liabilities. Postretirement benefit plan discount rates are the same as those
used by Textron's defined benefit pension plan in accordance with the provisions
of SFAS No. 106.
The 2001 health care cost trend rate, which is the weighted average annual
projected rate of increase in the per capita cost of covered benefits, was 8%.
This rate is assumed to decrease to 5.5% by 2005 and then remain at that level.
26 Textron Annual Report
<PAGE>
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-owned commercial finance
subsidiary, Textron Financial Corporation, consolidated with its subsidiaries.
The financial results of Textron Financial 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.
Textron Inc. provides a support agreement to Textron Finance that requires
Textron Inc. to maintain 100% ownership of Textron Finance. The agreement also
requires Textron Finance to maintain fixed charge coverage of 125% and
consolidated shareholder's equity of no less than $200 million. Textron
Finance's bank agreements prohibit the termination of the support agreement
under any circumstances.
OPERATING CASH FLOWS
Textron's financial position continued to be strong at the end of 2001. During
2001, cash flows from operations was the primary source of funds for the
operating needs, dividends 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 of $51 million and $82 million
during 2001 and 2000, respectively.
FINANCING
Textron Manufacturing's debt (net of cash) to total capital ratio was 28% at
December 29, 2001 down slightly from 29% at December 30, 2000. We have
established a financial target of a debt to capital ratio in the high 20% range.
Consistent with the analytical methodology used by members of the financial
community, leverage of the manufacturing operations excludes the debt of Textron
Finance. In addition, the obligated mandatorily redeemable preferred securities
are not treated as debt, but are included as capital 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 our 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 needs. Our credit ratings are predominantly a function of
our ability to generate operating cash flow and satisfy certain financial
ratios. Since high-quality credit ratings provide us with access to a broad base
of global investors at an attractive cost, we target a long-term A rating from
the independent debt-rating agencies. Our credit ratings remain strong from
Standard & Poor's (Textron Manufacturing: A Long-Term; A1 Short-Term and Textron
Finance: A Long-Term; A2 Short-Term). Our credit ratings for Textron
Manufacturing and Textron Finance are also strong from Moody's Investors Service
(A3 Long-Term; P2 Short-Term) and Fitch (A Long-Term; F1 Short-Term).
During the second half of 2001, both Textron Manufacturing's and Textron
Finance's credit ratings were placed on Negative Outlook by all three rating
agencies and were downgraded from an A-2 to an A-3 rating by Moody's Investors
Service. The economic environment and its potential impact on the financial
performance from the aerospace and financial services industries were listed as
contributing factors. While the action of the rating agencies did cause our cost
of capital to increase modestly, it did not cause us to lose access to capital.
For example, Textron Manufacturing issued $300 million of seven-year term
financing at 6.375% in November 2001, and both borrowing groups have continued
to issue commercial paper to investors with the revised credit ratings. Although
Textron Finance's borrowing spreads have increased as a result of the
downgrades, Textron Finance has not experienced any change in its access to the
commercial paper and securitization markets. Additional downgrades in Textron
Finance's ratings could further increase its borrowing spreads or limit its
access to the commercial paper, securitization and long-term debt markets.
Textron Annual Report 27
<PAGE>
SHORT-TERM FINANCING
For liquidity purposes, we maintain sufficient unused lines of credit to support
all of our outstanding commercial paper. During 2001, Textron Manufacturing
increased its primary committed credit facilities by $600 million to $1.6
billion. Of these primary facilities, $600 million expires in 2002 and $1.0
billion expires in 2003. At December 29, 2001, these facilities remain undrawn,
and only $96 million has been reserved as support for commercial paper. Textron
Manufacturing's credit facilities contain material adverse change (MAC) clauses
at every borrowing along with certain financial covenants. MAC clauses allow
financial institutions to withhold future financing if there is a significant
change in the business, operations, properties, assets or condition of Textron
or any of its subsidiaries, which has a material adverse impact on Textron.
There were no material adverse changes during 2001 and we are in compliance with
the financial covenants. We expect to renegotiate and extend the maturity of
these facilities in the first half of 2002.
Textron Finance has bank line of credit agreements of $1.5 billion, of which
$500 million will expire in 2002 and $1.0 billion will expire in 2006. None of
these lines of credit were used at December 29, 2001, and the amount not
reserved as support for commercial paper totaled $875 million. These facilities
contain certain financial covenants that Textron Finance needs to comply with to
maintain its ability to borrow under the facilities, but do not include MAC
clauses. Textron Finance was in full compliance with these covenants at year-end
2001. We expect to negotiate and extend the maturity of the $500 million
facility by the end of the second quarter of 2002.
Textron Manufacturing received approximately $582 million in after-tax proceeds
from the sale of the Automotive Trim business, along with other consideration as
described in Note 2 to the consolidated financial statements. Approximately $510
million of these proceeds was invested with Textron Finance as a temporary
investment under a short-term revolving note agreement. On January 24, 2002,
Textron Finance paid off its obligation and terminated this agreement with
Textron Manufacturing. The proceeds from the sale will ultimately be deployed to
pay for share repurchases and debt retirement.
Textron Finance utilizes the asset securitization market to manage credit
exposures and diversify funding sources. During 2001, Textron Finance received
proceeds from securitizations of $625 million of floorplan finance receivables
(on a revolving basis), $309 million of aircraft finance receivables, $198
million of captive golf and turf finance receivables, $90 million of franchise
finance receivables, $56 million of land finance receivables and $19 million of
resort receivables. These securitizations provided Textron Finance with an
alternate source of financing while maintaining desired debt-to-capital ratios.
Textron Finance used the proceeds from the securitizations to retire commercial
paper. We anticipate that we will enter into additional securitization
transactions in 2002.
LONG-TERM FINANCING
At December 29, 2001, Textron Manufacturing had $1.2 billion available under its
existing shelf registration statement filed with the SEC. During 2001, Textron
Manufacturing's Euro Medium-Term Note facility expired. It is anticipated that
this facility will be reactivated early in 2002.
Under a shelf registration statement filed with the SEC, Textron Finance may
issue public debt securities in one or more offerings up to a total maximum
offering of $3.0 billion. At December 29, 2001, Textron Finance had $3.0 billion
available under this facility. During 2001, Textron Finance issued $550 million
of floating-rate notes and $300 million of fixed-rate notes that mature in 2003
and 2004, respectively. The proceeds from these issuances were used to refinance
maturing commercial paper and long-term debt at par. Through a private issuance
in 2001, Textron Finance also entered into a $50 million variable-rate note
maturing in 2003.
OTHER ARRANGEMENTS
We participate in two joint ventures for the development of certain aircraft.
Bell Helicopter has partnered with The Boeing Company in the development of the
V-22 tiltrotor and with Agusta in the development of the BA609 and Agusta's
AB139. These agreements enable us to share expertise and costs, and ultimately
the profits, with our partners in these ventures. We have not guaranteed any
debt obligations related to these ventures.
We do have certain other ventures where we have guaranteed an aggregate amount
of approximately $85 million. Included in this amount, is our guarantee of
one-half of CitationShare's debt and lease obligations up to a maximum of $70
million. At year-end 2001, Textron's portion of the outstanding debt and
operating lease commitments covered by this guarantee totaled $25 million. See
Note 15 to the consolidated financial statements regarding our joint ventures.
28 Textron Annual Report
<PAGE>
At year-end 2001, Textron Finance had unused commitments to fund new and
existing customers under $1.3 billion and $599 million of committed and
uncommitted, respectively, revolving lines of credit. Since many of the
agreements will not be used to the extent committed or will expire unused, the
total commitment amount does not necessarily represent future cash requirements.
Textron Finance has certain contracts that contemplate a capital commitment or
the requirement to provide letters of credit should its credit rating drop below
a middle to low BBB. The aggregate of the exposure is approximately $55 million.
Textron Manufacturing has entered into an equity forward contract in Textron
stock. The contract is intended to hedge the earnings and cash volatility of
compensation granted in Textron stock. The forward contract requires annual cash
settlement between the counterparties. Settlement is calculated based upon a
number of shares multiplied by the difference between the strike price and the
actual Textron common stock price. Currently, Textron's forward contract is for
approximately two million shares with a strike price of $48.20.
USES OF CAPITAL
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 29
companies, acquired the minority interest of two entities and entered into three
joint ventures for an aggregate cost of $1.5 billion, including treasury stock
issued for $32 million and $344 million of debt assumed.
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 five
companies. The capital required for these acquisitions was $377 million. The
actual cost of the acquisitions was $1.6 billion, including debt assumed of $547
million.
Capital spending in 2001 continued at a level consistent with 2000, increasing
only slightly to $532 million. Combined capital spending for the past three
years totaled $1.6 billion.
In 2001, Textron repurchased 738,000 shares of common stock under its Board
authorized share repurchase program for a total cash payment of $47 million.
Textron's Board of Directors approved the annual dividend per common share of
$1.30 in 2001. Dividend payments to shareholders in 2001 amounted to $184
million, a decrease of $5 million from 2000.
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, Textron 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. Textron's
mix of floating- and fixed-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 2001 or 2000.
Textron Finance's strategy of matching interest-sensitive assets with
interest-sensitive liabilities limits its risk to changes in interest rates and
includes entering into interest rate exchange agreements as part of this
matching strategy. At year-end 2001, Textron Finance's interest-sensitive assets
in excess of interest-sensitive liabilities were $410 million, net of $370
million of variable-rate interest rate exchange agreements on long-term debt and
$97 million of variable-rate interest rate exchange agreements on finance
receivables. Interest-sensitive assets in excess of interest-sensitive
liabilities were $415 million at year-end 2000, net of $150 million of
fixed-rate interest rate exchange agreements on long-term debt and $100 million
of variable-rate interest rate exchange agreements on finance receivables. The
change in net position does not reflect a change in management's match funding
strategy. The net impact of these agreements was immaterial in 2001, 2000 and
1999.
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) and the British Pound.
Textron Annual Report 29
<PAGE>
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. During 2001, 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 $605
million at year-end 2001 and $840 million at year-end 2000.
QUANTITATIVE RISK MEASURES
Textron utilizes a sensitivity analysis to quantify the market risk inherent in
its financial instruments. Financial instruments held by Textron 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, marketable equity securities and marketable security price
forward contracts.
Presented below is a sensitivity analysis of the fair value of Textron's
financial instruments entered into for purposes other than trading at year-end.
The following table illustrates the hypothetical change in the fair value of the
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>
2001 2000
----------------------------------------------------------------------------
HYPOTHETICAL Hypothetical
CARRYING FAIR CHANGE Carrying Fair Change
(In millions) VALUE VALUE IN FAIR VALUE Value Value in Fair Value
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INTEREST RATE RISK
Textron Manufacturing:
Debt $(1,934) $(1,972) $ (29) $(2,061) $(2,105) $ (31)
Interest rate swaps -- -- -- -- 8 9
Textron Finance:
Finance receivables 4,795 4,884 4 4,767 4,840 31
Interest rate swaps
- receivables (8) (8) 1 -- 6 5
Debt (4,188) (4,208) (36) (4,667) (4,688) (33)
Interest rate swaps - debt 3 3 1 -- (17) (10)
FOREIGN EXCHANGE RATE RISK
Textron Manufacturing:
Debt (661) (655) (66) (1,101) (1,113) (111)
Foreign exchange contracts (7) (7) (26) 3 3 22
Textron Finance:
Debt (32) (32) (3) (32) (32) (5)
EQUITY PRICE RISK
Textron Manufacturing:
Available for sale securities 90 90 (9) 16 16 (2)
Marketable security price
forward contracts (11) (11) (8) (26) (26) (8)
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
30 Textron Annual Report
<PAGE>
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 $14 million, $11 million
and $16 million in 2001, 2000 and 1999, respectively. Textron currently projects
that expenditures for remediation will range between $8 million and $15 million
for each of the years 2002 and 2003.
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 financial position or
results of operation. 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 $6.5 billion and $8.5 billion at the end of
2001 and 2000, respectively, and U.S. Government backlog was $1.0 billion at the
end of 2001 and $1.4 billion at the end of 2000. Backlog for the Aircraft
segment was approximately 85% and 84% of Textron's commercial backlog at the end
of 2001 and 2000, respectively, and 68% and 74% of Textron's U.S. Government
backlog at the end of 2001 and 2000, respectively.
FOREIGN MILITARY SALES
Certain Textron 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 1.2% of
Textron's consolidated revenue in 2001 (0.4% in the case of foreign military
sales and 0.8% in the case of direct sales) and 1.7% in 2000 (1.0% and 0.7%,
respectively). Such sales include military and commercial helicopters, armored
vehicles, turrets, and spare parts and in 2001, were made primarily to the
countries of Taiwan (32%), El Salvador (21%), Colombia (13%), Botswana (4%),
Pakistan (4%), Saudi Arabia (4%), Canada (3%) and Germany (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 2001, the Financial Accounting Standards Board (FASB) issued Statements
of Financial Accounting Standards (SFAS) No. 141, "Business Combinations," and
No. 142, "Goodwill and Other Intangible Assets," effective for fiscal years
beginning after December 15, 2001. Under the new rules, goodwill, along with
intangible assets deemed to have indefinite lives, will no longer be amortized
but will be subject to annual impairment tests in accordance with the
Statements. Also, business combinations initiated after June 30, 2001 must be
accounted for using the purchase method of accounting.
Textron will apply the new rules on accounting for goodwill and other intangible
assets beginning in the first quarter of 2002. Application of the
nonamortization provisions of the Statement, excluding Automotive Trim, would
have resulted in an increase in net income of $81 million in 2001. During 2002,
Textron will perform the first of the required impairment tests of goodwill and
indefinite lived intangible assets as of December 30, 2001 and has not yet
determined what the effect of these tests will be on Textron's results of
operations and financial position.
Textron Annual Report 31
<PAGE>
In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets." SFAS No. 144 requires that one accounting model
be used for long-lived assets to be disposed of by sale. Discontinued operations
will be measured similar to other long-lived assets classified as held for sale
at the lower of its carrying amount or fair value less cost to sell. Future
operating losses will no longer be recognized before they occur. SFAS No. 144
also broadens the presentation of discontinued operations to include a component
of an entity when operations and cash flows can be clearly distinguished. The
provisions of this Statement are effective for financial statements issued for
fiscal years beginning after December 15, 2001. At this time, adoption of this
Statement is not expected to have a material effect on Textron's results of
operations or financial position.
Forward-looking Information: Certain statements in this release 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 achieve savings from its restructuring plans (b) changes in
worldwide economic and political conditions that impact interest and foreign
exchange rates, (c) the occurrence of work stoppages and strikes at key
facilities of Textron or Textron's customers or suppliers, (d) government
funding and program approvals affecting products being developed or sold under
government programs, (e) cost and delivery performance under various program and
development contracts, (f) successful implementation of supply chain and other
cost-reduction programs, (g) the timing of certifications of new aircraft
products, (h) the occurrence of further downturns in customer markets to which
Textron products are sold or supplied, (i) Textron's ability to offset, through
cost reductions, raw material price increases and pricing pressure brought by
original equipment manufacturer customers and (j) Textron Financial's ability to
maintain credit quality and control costs.
32 Textron Annual Report
<PAGE>
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's 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 Textron, 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. Campell /s/Ted R. French
LEWIS B. CAMPBELL TED R. FRENCH
Chairman, President and Executive Vice
Chief Executive Officer President and Chief
January 24, 2002 Financial Officer
REPORT OF INDEPENDENT TO THE BOARD OF DIRECTORS AND SHAREHOLDERS TEXTRON
AUDITORS INC.
We have audited the accompanying consolidated balance
sheets of Textron Inc. as of December 29, 2001 and
December 30, 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 29, 2001. These financial
statements are the responsibility of Textron'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 consolidated financial statements
referred to above present fairly, in all material
respects, the consolidated financial position of
Textron Inc. at December 29, 2001 and December 30,
2000, and the consolidated results of its operations
and its cash flows for each of the three years in the
period ended December 29, 2001, in conformity with
accounting principles generally accepted in the
United States.
As discussed in Note 6 to the consolidated financial
statements, in 2000 Textron 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/Ernst and Yound LLP
Boston, Massachusetts
January 24, 2002
Textron Annual Report 33
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
For each of the years in the three-year period ended December 29, 2001
<TABLE>
<CAPTION>
(In millions except per share amounts) 2001 2000 1999
- ----------------------------------------------------------------------------------------------------------------------
REVENUES
<S> <C> <C> <C>
Manufacturing revenues $ 11,612 $ 12,399 $ 11,391
Finance revenues 709 691 463
- ----------------------------------------------------------------------------------------------------------------------
Total revenues 12,321 13,090 11,854
- ----------------------------------------------------------------------------------------------------------------------
COSTS, EXPENSES AND OTHER
Cost of sales 9,760 10,028 9,242
Selling and administrative 1,532 1,445 1,318
Interest, net 433 486 233
Provision for losses on finance receivables 82 37 32
Special charges, net 437 483 (1)
Gains on sale of divisions (342) -- --
- ----------------------------------------------------------------------------------------------------------------------
Total costs, expenses and other 11,902 12,479 10,824
- ----------------------------------------------------------------------------------------------------------------------
Income from continuing operations before income taxes and
distributions on preferred securities of subsidiary trusts 419 611 1,030
Income taxes (227) (308) (381)
Distributions on preferred securities of subsidiary trusts, net of income taxes (26) (26) (26)
- ----------------------------------------------------------------------------------------------------------------------
INCOME FROM CONTINUING OPERATIONS 166 277 623
Gain on disposal of discontinued operations, net of income taxes -- -- 1,646
- ----------------------------------------------------------------------------------------------------------------------
Income before extraordinary loss and cumulative effect of change
in accounting principle 166 277 2,269
Extraordinary loss from debt retirement, net of income taxes -- -- (43)
Cumulative effect of change in accounting principle, net of income taxes -- (59) --
- ----------------------------------------------------------------------------------------------------------------------
NET INCOME $ 166 $ 218 $ 2,226
======================================================================================================================
PER COMMON SHARE:
BASIC:
INCOME FROM CONTINUING OPERATIONS $ 1.17 $ 1.92 $ 4.14
Discontinued operations, net of income taxes -- -- 10.94
Extraordinary loss from debt retirement, net of income taxes -- -- (.28)
Cumulative effect of change in accounting principle, net of income taxes -- (.41) --
- ----------------------------------------------------------------------------------------------------------------------
NET INCOME $ 1.17 $ 1.51 $ 14.80
======================================================================================================================
DILUTED:
INCOME FROM CONTINUING OPERATIONS $ 1.16 $ 1.90 $ 4.05
Discontinued operations, net of income taxes -- -- 10.70
Extraordinary loss from debt retirement, net of income taxes -- -- (.27)
Cumulative effect of change in accounting principle, net of income taxes -- (.41) --
- ----------------------------------------------------------------------------------------------------------------------
NET INCOME $ 1.16 $ 1.49 $ 14.48
======================================================================================================================
</TABLE>
See notes to the consolidated financial statements.
34 Textron Annual Report
<PAGE>
CONSOLIDATED BALANCE SHEETS
As of December 29, 2001 and December 30, 2000
<TABLE>
<CAPTION>
(Dollars in millions) 2001 2000
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
TEXTRON MANUFACTURING
Cash and cash equivalents $ 241 $ 282
Commercial and U.S. Government receivables (less allowance
for doubtful accounts of $54 in 2001 and $58 in 2000) 1,149 1,318
Inventories 1,727 1,871
Due from Textron Finance 510 --
Other current assets 390 443
- --------------------------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 4,017 3,914
- --------------------------------------------------------------------------------------------------------------------
Property, plant and equipment, net 2,044 2,568
Intangibles, net 1,965 2,340
Other assets 1,562 1,417
- --------------------------------------------------------------------------------------------------------------------
TOTAL TEXTRON MANUFACTURING ASSETS 9,588 10,239
- --------------------------------------------------------------------------------------------------------------------
TEXTRON FINANCE
Cash 19 7
Finance receivables, net 5,492 5,473
Other assets (including net intangibles of $204 in 2001 and $217 in 2000) 953 651
- --------------------------------------------------------------------------------------------------------------------
TOTAL TEXTRON FINANCE ASSETS 6,464 6,131
- --------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 16,052 $ 16,370
====================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
TEXTRON MANUFACTURING
Current portion of long-term debt and short-term debt $ 673 $ 615
Accounts payable 994 1,200
Income taxes payable 24 77
Other accrued liabilities 1,384 1,371
- --------------------------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 3,075 3,263
- --------------------------------------------------------------------------------------------------------------------
Accrued postretirement benefits other than pensions 623 715
Other liabilities 1,219 1,224
Long-term debt 1,261 1,469
- --------------------------------------------------------------------------------------------------------------------
TOTAL TEXTRON MANUFACTURING LIABILITIES 6,178 6,671
- --------------------------------------------------------------------------------------------------------------------
TEXTRON FINANCE
Other liabilities 372 211
Deferred income taxes 357 315
Due to Textron Manufacturing 510 --
Debt 4,188 4,667
- --------------------------------------------------------------------------------------------------------------------
TOTAL TEXTRON FINANCE LIABILITIES 5,427 5,193
- --------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 11,605 11,864
- --------------------------------------------------------------------------------------------------------------------
TEXTRON FINANCE - OBLIGATED MANDATORILY REDEEMABLE PREFERRED SECURITIES OF FINANCE
SUBSIDIARY HOLDING SOLELY JUNIOR SUBORDINATED DEBENTURES 28 28
- --------------------------------------------------------------------------------------------------------------------
TEXTRON - OBLIGATED MANDATORILY REDEEMABLE PREFERRED SECURITIES OF SUBSIDIARY TRUST
HOLDING SOLELY TEXTRON JUNIOR SUBORDINATED DEBT SECURITIES 485 484
- --------------------------------------------------------------------------------------------------------------------
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) 6 7
Common stock (196,337,000 and 195,394,000 shares issued and 141,251,000
and 140,933,000 outstanding) 25 24
Capital surplus 1,064 1,026
Retained earnings 5,829 5,848
Accumulated other comprehensive loss (223) (172)
- --------------------------------------------------------------------------------------------------------------------
6,706 6,738
Less cost of treasury shares 2,772 2,744
- --------------------------------------------------------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY 3,934 3,994
====================================================================================================================
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 16,052 $ 16,370
====================================================================================================================
</TABLE>
See notes to the consolidated financial statements.
Textron Annual Report 35
<PAGE>
STATEMENTS OF CASH FLOWS
For each of the years in the three-year period ended December 29, 2001
<TABLE>
<CAPTION>
CONSOLIDATED
-----------------------------
(In millions) 2001 2000 1999
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income from continuing operations $ 166 $ 277 $ 623
Adjustments to reconcile income from continuing
operations to net cash provided by operating activities:
Earnings of Textron Finance greater than distributions -- -- --
Depreciation 400 382 349
Amortization 114 112 91
Provision for losses on finance receivables 82 37 32
Gains on sale of divisions (342) -- --
Special charges, net 437 483 (1)
Gains on securitizations (43) (22) --
Deferred income taxes 96 9 63
Changes in assets and liabilities excluding those
related to acquisitions and divestitures:
Commercial and U.S. Government receivables (102) 69 34
Inventories 103 5 13
Other assets (72) (206) (144)
Accounts payable 166 (95) 149
Other accrued liabilities (27) (43) (85)
Other - net 5 15 (8)
- ---------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 983 1,023 1,116
- ---------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Finance receivables:
Originated or purchased (7,527) (7,032) (4,920)
Repaid 5,750 5,233 3,783
Proceeds on receivables sales and securitization sales 2,019 1,556 307
Cash used in acquisitions (596) (85) (1,574)
Net proceeds from dispositions 608 (9) 2,950
Capital expenditures (532) (527) (532)
Due (from) to Textron (Finance) Manufacturing -- -- --
Net decrease (increase) in investment securities 8 (134) --
Other investing activities - net (50) 76 29
- ---------------------------------------------------------------------------------------------------
NET CASH (USED) PROVIDED BY INVESTING ACTIVITIES (320) (922) 43
- ---------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Decrease in short-term debt (608) (450) (1,131)
Proceeds from issuance of long-term debt 1,480 2,005 3,195
Principal payments and retirements on long-term debt (1,360) (1,048) (2,174)
Proceeds from exercise of stock options 27 14 50
Purchases of Textron common stock (47) (353) (751)
Dividends paid (184) (189) (192)
Dividends paid to Textron Manufacturing -- -- --
Capital contributions to Textron Finance -- -- --
- ---------------------------------------------------------------------------------------------------
NET CASH (USED) PROVIDED BY FINANCING ACTIVITIES (692) (21) (1,003)
- ---------------------------------------------------------------------------------------------------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (29) 80 156
Cash and cash equivalents at beginning of year 289 209 53
- ---------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 260 $ 289 $ 209
===================================================================================================
SUPPLEMENTAL INFORMATION:
Cash paid during the year for interest $ 421 $ 479 $ 239
Cash paid during the year for income taxes (includes $2 and $9
in 2001 and 2000, respectively, for AFS disposal and
$28 million in 2001 related to the Automotive Trim sale) $ 126 $ 327 $ 1,167
===================================================================================================
</TABLE>
- -------------
*"Textron Manufacturing" income from continuing operations includes income 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.
See notes to the consolidated financial statements.
36 Textron Annual Report
<PAGE>
<TABLE>
<CAPTION>
TEXTRON MANUFACTURING* TEXTRON FINANCE*
- --------------------------------------------------------------------------------
2001 2000 1999 2001 2000 1999
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 166 $ 277 $ 623 $ 121 $ 118 $ 79
(70) (36) (43) -- -- --
381 365 337 19 17 12
92 97 84 22 15 7
-- -- -- 82 37 32
(342) -- -- -- -- --
437 483 (1) -- -- --
-- -- -- (43) (22) --
50 (9) 68 46 16 (5)
(102) 69 34 -- -- --
103 5 13 -- -- --
(86) (215) (143) 14 9 (1)
126 (82) 147 40 (13) 2
(44) (33) (113) 17 (10) 28
31 21 1 (26) (2) (9)
- --------------------------------------------------------------------------------
742 942 1,007 292 165 145
- --------------------------------------------------------------------------------
-- -- -- (7,614) (7,032) (4,920)
-- -- -- 5,750 5,233 3,783
-- -- -- 2,019 1,556 307
(209) (85) (859) (387) -- (715)
695 (9) 2,945 -- -- 5
(514) (513) (521) (18) (14) (11)
(510) -- -- 510 -- --
8 (134) -- -- -- --
85 80 55 (135) (5) (26)
- --------------------------------------------------------------------------------
(445) (661) 1,620 125 (262) (1,577)
- --------------------------------------------------------------------------------
(330) (77) (1,045) (278) (373) (86)
307 516 799 1,173 1,488 2,396
(62) (97) (974) (1,298) (951) (1,200)
27 14 50 -- -- --
(47) (353) (751) -- -- --
(184) (189) (192) -- -- --
-- -- -- (51) (82) (36)
(49) (5) (353) 49 5 353
- --------------------------------------------------------------------------------
(338) (191) (2,466) (405) 87 1,427
- --------------------------------------------------------------------------------
(41) 90 161 12 (10) (5)
282 192 31 7 17 22
- --------------------------------------------------------------------------------
$ 241 $ 282 $ 192 $ 19 $ 7 $ 17
================================================================================
$ 156 $ 154 $ 57 $ 282 $ 325 $ 182
$ 111 $ 249 $ 1,132 $ 15 $ 78 $ 35
================================================================================
</TABLE>
Textron Annual Report 37
<PAGE>
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
For each of the years in the three-year period
ended December 29, 2001
<TABLE>
<CAPTION>
SHARES OUTSTANDING* DOLLARS
(In thousands) (In millions)
----------------------------------------------------------
2001 2000 1999 2001 2000 1999
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$2.08 PREFERRED STOCK
Beginning balance 143 159 178 $5 $5 $6
Conversion to common stock (10) (16) (19) - - (1)
- -------------------------------------------------------------------------------------------------------------------------------
Ending balance 133 143 159 $5 $5 $5
===============================================================================================================================
$1.40 PREFERRED STOCK
Beginning balance 67 74 86 $7 $7 $7
Conversion to common stock (5) (7) (12) (1) - -
- -------------------------------------------------------------------------------------------------------------------------------
Ending balance 62 67 74 $6 $7 $7
===============================================================================================================================
COMMON STOCK
Beginning balance 140,933 147,002 154,742 $24 $24 $24
Purchases (738) (6,627) (9,779) - - -
Exercise of stock options 882 430 1,428 - - -
Conversion of preferred stock to common stock 60 97 129 1 - -
Other issuances of common stock 114 31 482 - - -
- -------------------------------------------------------------------------------------------------------------------------------
Ending balance 141,251 140,933 147,002 $25 $24 $24
===============================================================================================================================
CAPITAL SURPLUS
Beginning balance $1,026 $1,009 $931
Conversion of preferred stock to common stock - 1 1
Exercise of stock options and other issuances 38 16 77
- -------------------------------------------------------------------------------------------------------------------------------
Ending balance $1,064 $1,026 $1,009
===============================================================================================================================
RETAINED EARNINGS
Beginning balance $5,848 $5,817 $3,786
Net income 166 218 2,226
Dividends declared:
Preferred stock - - (1)
Common stock (per share: $1.30) (185) (187) (194)
- -------------------------------------------------------------------------------------------------------------------------------
Ending balance $5,829 $5,848 $5,817
===============================================================================================================================
TREASURY STOCK
Beginning balance $2,744 $2,387 $1,661
Purchases of common stock 34 358 748
Issuance of common stock (6) (1) (22)
- -------------------------------------------------------------------------------------------------------------------------------
Ending balance $2,772 $2,744 $2,387
===============================================================================================================================
ACCUMULATED OTHER COMPREHENSIVE LOSS
Beginning balance $(172) $(98) $(96)
Currency translation adjustment (20) (74) 8
Deferred losses on hedge contracts (32) - -
Unrealized gains (losses) on securities 1 - (13)
Pension liability adjustment - - 3
- -------------------------------------------------------------------------------------------------------------------------------
Other comprehensive loss (51) (74) (2)
- -------------------------------------------------------------------------------------------------------------------------------
Ending balance $(223) $(172) $(98)
===============================================================================================================================
COMPREHENSIVE INCOME
Net income $166 $218 $2,226
Other comprehensive loss (51) (74) (2)
- -------------------------------------------------------------------------------------------------------------------------------
Comprehensive income $115 $144 $2,224
===============================================================================================================================
</TABLE>
- ---------
*Shares issued at the end of 2001, 2000, 1999 and 1998, were as follows (in
thousands): $2.08 Preferred - 202; 212; 228; and 247 shares, respectively; $1.40
Preferred - 549; 554; 561; and 573 shares, respectively; Common - 196,337;
195,394; 194,858; and 193,277 shares, respectively.
See notes to the consolidated financial statements.
38 Textron Annual Report
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF NATURE OF OPERATIONS AND PRINCIPLES OF CONSOLIDATION
SIGNIFICANT Textron is a global, multi-industry company with
ACCOUNTING manufacturing and finance operations. Its principal
POLICIES markets (listed within segments in order of the
amount of 2001 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 - Western Europe
- General aviation - South America
- Overnight express package carriers - Asia and Australia
- Commuter airlines, relief flights,
tourism and freight
----------------------------------------------------------------------------------------------------------
AUTOMOTIVE - Automotive original equipment manufacturers - North America
and their suppliers - Western Europe
- South America
----------------------------------------------------------------------------------------------------------
FASTENING - Automotive - North America
SYSTEMS - Industrial - Western Europe
- Non-Auto Transportation - Asia and Australia
- Aerospace - South America
- Electronics
- Construction
----------------------------------------------------------------------------------------------------------
INDUSTRIAL PRODUCTS - Industrial components: commercial aerospace - North America
and defense - Western Europe
- Golf and turf-care products: golf courses, resort - Asia and Australia
communities, and commercial and industrial users
- 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>
The consolidated financial statements include the
accounts of Textron and all of its majority- and
wholly owned subsidiaries. Investments in which
Textron does not have control, but has the ability to
exercise significant influence over the operating and
financial policies, are accounted for under the
equity method. Textron's share of net earnings and
losses from these investments is included in the
consolidated statement of income.
Textron's financings are conducted through two
borrowing groups, Textron Finance and Textron
Manufacturing. This framework is designed to enhance
Textron'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. Certain intercompany
transactions between borrowing groups have not been
eliminated in the consolidated financial statements.
See "Due to Textron Manufacturing" in Note 7 for
further details. All other significant intercompany
transactions are eliminated.
Textron Manufacturing is Textron Inc., the parent
company, consolidated with the entities which
operated in the Aircraft, Automotive, Fastening
Systems and Industrial Products business segments
during 2001. In 2001, management responsibility for a
division previously reported in the Fastening Systems
segment was 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 receivables, product liability, workers
compensation, actuarial assumptions for the pension
and postretirement plans, estimates of future cash
flows associated with long-lived assets,
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
Textron Annual Report 39
<PAGE>
made, historical experience, risk of loss, general
economic conditions and trends, and management's
assessments of the probable future outcome of these
matters. Actual results could differ from such
estimates.
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 risk and rewards of ownership.
Revenue under fixed-price contracts are generally
recorded as deliveries are made. Certain long-term
fixed-price contracts provide for 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 low-rate
initial production contract with the U.S. Government
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.
Revenue from certain qualifying non-cancelable
aircraft and other product lease contracts are
accounted for as sales-type leases. The present value
of all payments, net of executory costs, is recorded
as revenue, and the related costs of the product are
charged to cost of sales. Generally, this lease
financing is through Textron Finance and the
associated interest is recorded over the term of the
lease agreement using the interest method. Lease
financing transactions which do not qualify as
sales-type leases are accounted for under the
operating method wherein revenue is recorded as
earned over the lease period.
Finance revenues include interest on finance
receivables which is recognized in revenues using the
interest method to provide a constant rate of return
over the terms of the receivables. Finance revenues
also include direct loan origination costs and fees
received which are deferred and amortized over the
contractual lives of the respective receivables using
the interest method. Accrual of interest income is
suspended for accounts which are contractually
delinquent by more than three months, unless
collection is not doubtful. In addition, detailed
reviews of loans may result in earlier suspension if
collection is doubtful. Accrual of interest is
resumed when the loan becomes contractually current,
and suspended interest income is recognized at that
time.
ALLOWANCE FOR LOSSES ON FINANCE RECEIVABLES
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
deemed to be uncollectible. Finance receivables are
written down to the fair value (less estimated costs
to sell) of the related collateral at the earlier of
the date when the collateral is repossessed or when
no payment has been received for six months, unless
management deems the receivable collectible.
RECEIVABLE SECURITIZATIONS
Textron Finance sells or securitizes loans and leases
and retains servicing responsibilities and
subordinated interests, including interest-only
securities, subordinated certificates and cash
reserves, all of which are retained interests in the
securitized receivables. These retained interests are
subordinate to investors' interest. Gains or losses
on sale of the finance receivables depend in part on
the previous carrying amount of the finance
receivables involved in the transfer, allocated
between assets sold and retained interests based on
their relative fair values at the date of transfer.
Textron Finance estimates fair value based on the
present value of future expected cash flows using
management's best estimates of the key assumptions -
credit losses, prepayment speeds, forward interest
rate yield curves, and discount rates commensurate
with the risks involved. Textron Finance reviews the
fair value of the retained interests quarterly using
40 Textron Annual Report
<PAGE>
updated assumptions and compares such amounts with
the carrying value of the retained interests. When
the carrying value exceeds the fair value of the
retained interests and the decline is determined to
be other than temporary, the retained interest is
written down to fair value.
INVESTMENT SECURITIES
Investments in marketable securities and retained
interests from securitizations are classified as
available-for-sale and are recorded at their fair
value as a component of other assets. Unrealized
gains and losses on these securities, net of income
taxes, are included in shareholders' equity as a
component of accumulated other comprehensive loss
(OCL). If a decline in the fair value of a marketable
security is judged to be other than temporary, the
cost basis is written down to fair value with a
charge to earnings. Non-marketable equity securities
are accounted for under either the cost or equity
method of accounting.
INVENTORIES
Inventories are carried at the lower of cost or
market. The cost of approximately 60% of inventories
is determined using the last-in, first-out method.
The cost of remaining inventories, other than those
related to certain long-term contracts, are generally
valued by the first-in, first-out method. Costs for
commercial helicopters are determined on an average
cost basis by model considering the expended and
estimated costs for the current production release.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are recorded at cost
and are depreciated primarily using the straight-line
method. Land improvements and buildings are
depreciated primarily over estimated lives ranging
from 12 to 40 years, while machinery and equipment
are depreciated primarily over 3 to 10 years.
Expenditures for improvements that increase asset
values and extend useful lives are capitalized.
Expenditures for maintenance and repairs are expensed
as incurred.
INTANGIBLE ASSETS
Intangible assets are primarily comprised of goodwill
which is amortized using the straight-line method
over the estimated period of benefit, ranging from 10
to 40 years. Accumulated amortization of goodwill
totaled $654 million and $564 million in 2001 and
2000, respectively. Textron periodically evaluates
the recoverability of intangible assets whenever
events or changes in circumstances, such as declines
in sales, earnings or cash flows or material adverse
changes in the business climate indicate that the
carrying amount of an asset may not be recoverable.
DERIVATIVE FINANCIAL INSTRUMENTS
As of December 31, 2000, Textron adopted Statement of
Financial Accounting Standards (SFAS) No. 133,
"Accounting for Derivative Instruments and Hedging
Activities," as amended, which requires that all
derivative instruments be reported on the balance
sheet at fair value and establishes criteria for
designation and effectiveness of hedging
relationships. Changes in the fair value of
derivative financial instruments are either
recognized periodically in income or in shareholders'
equity as a component of comprehensive income (loss)
depending on whether the derivative financial
instrument qualifies for hedge accounting, and if so,
whether it qualifies as a fair value hedge or cash
flow hedge. In accordance with SFAS No. 133, Textron
recorded a cumulative transition adjustment to
increase accumulated OCL by approximately $15
million, net of income taxes, to recognize the fair
value of cash flow hedges as of the date of adoption.
The cumulative effect of adoption was not material to
the consolidated statement of income.
Textron is exposed to market risk, primarily from
changes in interest rates, currency exchange rates
and securities pricing. To manage the volatility
relating to these exposures, Textron nets the
exposures on a consolidated basis to take advantage
of natural offsets. For the residual portion, Textron
enters into various derivative transactions pursuant
to Textron's policies in such areas as counterparty
exposure and hedging practices. Designation is
performed on a specific exposure basis to support
hedge accounting. Changes in fair value of financial
instruments qualifying as fair value hedges are
recorded in income, offset in part or in whole by
corresponding changes in the fair value of the
underlying exposures being hedged. Changes in fair
values of derivatives accounted for as cash flow
hedges, to the extent they are effective as hedges,
are recorded in OCL net of deferred taxes. Textron
has not incurred or recognized any gains or losses in
earnings as the result of the ineffectiveness of or
the exclusion from its assessment of hedge
effectiveness of its fair value or cash flow hedges.
Changes in fair value of derivatives not qualifying
as hedges are reported in income. Textron does not
hold or issue derivative financial instruments for
trading or speculative purposes.
Prior to the adoption of SFAS No. 133, interest rate
swaps were accounted for on the accrual basis with
the differential to be paid or received recorded
currently as an adjustment to interest expense.
Premiums
Textron Annual Report 41
<PAGE>
paid to terminate agreements designated as hedges
were deferred and amortized to expense over the
remaining term of the original life of the contract.
If the underlying debt was then paid early,
unamortized premiums were recognized as an adjustment
to the gain or loss associated with the debt's
extinguishment. For foreign currency forward
contracts hedging firm sales and purchase
commitments, gains and losses were included in the
measurement of the underlying transactions when they
occurred. Gains and losses from currency rate changes
on hedges of foreign currency transactions were
recorded currently in income.
Foreign currency denominated assets and liabilities
are translated into U.S. dollars with the adjustments
from the currency rate changes being recorded in the
cumulative translation adjustment account in
shareholders' equity until the related foreign entity
is sold or substantially liquidated. Foreign currency
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 cumulative translation adjustment account in
accumulated OCL with the offset recorded as an
adjustment to the non-U.S. dollar financing
liability.
FAIR VALUES OF FINANCIAL INSTRUMENTS
Fair values of cash and cash equivalents, accounts
receivable, accounts payable and variable-rate
receivables and debt approximate cost. The estimated
fair values of other financial instruments, including
debt, equity and risk management instruments, have
been determined using available market information
and valuation methodologies, primarily discounted
cash flow analysis or independent investment bankers.
The estimated fair value of nonperforming loans
included in finance receivables are based on
discounted cash flow analyses using risk-adjusted
interest rates or the fair value of the related
collateral. 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.
STOCK-BASED COMPENSATION
Stock-based compensation awards to employees are
accounted for using the intrinsic value method
prescribed in APB 25, "Accounting for Stock Issued to
Employees" and related interpretations.
PRODUCT AND ENVIRONMENTAL LIABILITIES
Product liability claims are accrued on the
occurrence method based on insurance coverage and
deductibles in effect at the date of the incident and
management's assessment of the probability of loss
when reasonably estimable.
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.
NEW ACCOUNTING PRONOUNCEMENTS
In June 2001, the Financial Accounting Standards
Board (FASB) issued Statements of Financial
Accounting Standards (SFAS) No. 141, "Business
Combinations," and No. 142, "Goodwill and Other
Intangible Assets," effective for fiscal years
beginning after December 15, 2001. Under the new
rules, goodwill, along with intangible assets deemed
to have indefinite lives, will no longer be amortized
but will be subject to annual impairment tests in
accordance with the Statements. Also, business
combinations initiated after June 30, 2001 must be
accounted for using the purchase method of
accounting.
Textron will apply the new rules on accounting for
goodwill and other intangible assets beginning in the
first quarter of 2002. Application of the
nonamortization provisions of the Statement,
excluding Automotive Trim, would have resulted in an
increase in net income of $81 million. During 2002,
Textron will perform the first of the required
impairment tests of goodwill and indefinite lived
intangible assets as of December 30, 2001 and has not
yet determined what the effect of these tests will be
on Textron's results of operations and financial
position.
In August 2001, the FASB issued SFAS No. 144,
"Accounting for the Impairment or Disposal of
Long-Lived Assets." SFAS No. 144 requires that one
accounting model be used for long-lived assets to be
disposed of by sale. Discontinued operations will be
measured similar to other long-lived assets
classified as held for sale at the lower of its
carrying amount or fair value less cost to sell.
Future operating losses will no longer be recognized
before they occur. SFAS No. 144 also broadens the
presentation of discontinued operations to include a
component of an entity when operations and cash flows
can be clearly distinguished. The provisions of this
Statement are effective for financial statements
issued for fiscal years beginning after December 15,
2001. At this time, the adoption of this Statement is
not expected to have a material effect on Textron's
results of operations or financial position.
42 Textron Annual Report
<PAGE>
2. ACQUISITIONS ACQUISITIONS
AND During 2001, Textron Manufacturing
DISPOSITIONS acquired four companies at a total cost of $209
million. Textron Manufacturing also made a $40
million capital contribution to Textron Finance in
support of its acquisition of a $387 million loan
portfolio. The largest of Textron Manufacturing's
acquisitions was Tempo Research Corporation which
expanded Textron's growing presence in the
data-signal-voice test and installation equipment
market in the Industrial Products segment.
During 2000, Textron Manufacturing acquired 11
companies and 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.
One of the larger acquisitions was Advantage Molding
and Decorating - a leading supplier of injection
molded parts, tooling and pad-printed designs.
During 1999, Textron Manufacturing acquired 14
companies and entered into two joint ventures. 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 manufacturer of light
construction equipment, 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, 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.
The purchase method of accounting has been used for
all acquisitions during the past three years.
DISPOSITIONS
On December 20, 2001, Textron completed the sale of
its Automotive Trim business to Collins & Aikman
Products Company, a subsidiary of Collins & Aikman
Corporation, for $668 million in cash, non-marketable
preferred shares of Collins & Aikman valued at $147
million, 18 million shares of Collins & Aikman common
stock valued at $90 million and a transfer of $60
million in indebtedness. In addition, Textron
Automotive Trim entered into an $87 million lease
agreement whereby equipment used by the Automotive
Trim business was retained by Textron and leased back
to the business through Textron Financial
Corporation. Textron also retained a 50% interest in
the Italian operating company, which Textron will
have the right to sell to Collins & Aikman for $23
million at a future date. Textron recognized a $339
million gain on the sale, and received after-tax
proceeds of approximately $582 million, including the
transfer of indebtedness. Textron intends to
repurchase shares and reduce debt with these
proceeds. The agreement also includes a provision
that entitles Textron to an additional cash payment
of up to $125 million to be calculated based on
Collins & Aikman's operating results for the
five-year period ending 2006.
In January 1999, Textron completed the sale of Avco
Financial Services (AFS) to Associates First Capital
Corporation for $3.9 billion in cash. Net after-tax
proceeds were approximately $2.9 billion, resulting
in an after-tax gain of $1.65 billion.
3. FINANCE FINANCE RECEIVABLES
RECEIVABLES AND Textron Finance provides financial services primarily
SECURITIZATIONS to the aircraft, golf, vacation interval resort,
dealer floorplan and middle market industries under a
variety of financing vehicles with various
contractual maturities.
Installment contracts and finance leases have initial
terms ranging from one to 15 years, and are generally
secured by the financed equipment. Floorplan and
revolving receivables generally mature within one to
three years. Floorplan receivables are generally
secured by the inventory at the financed distributor,
while revolving loans are secured by trade
receivables, inventory, plant and equipment, and
pools of vacation interval notes receivables and the
underlying real property. Golf course mortgages have
initial terms ranging from three to seven years with
amortization periods from 15 to 25 years. Resort
mortgages generally represent construction and
inventory loans with terms up to 24 months. Golf
course and resort mortgages are secured by real
property and are generally limited to 75% or less of
the property's appraised market value at loan
origination. Leveraged leases are secured by the
ownership of the leased equipment or real property
and have initial terms up to 30 years.
Textron Annual Report 43
<PAGE>
At the end of 2001 and 2000, Textron Finance had
nonaccrual finance receivables, excluding receivables
with recourse to the Manufacturing group, totaling
$114 million and $102 million, respectively.
Approximately $54 million and $76 million of these
respective amounts were considered impaired, which
excludes finance leases and homogeneous loan
portfolios. The allowance for losses on finance
receivables related to impaired loans was $11 million
and $34 million at the end of 2001 and 2000,
respectively. The average recorded investment in
impaired loans during 2001 and 2000 was $51 million
and $76 million, respectively.
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 repayment or refinancing of
receivables prior to maturity. Cash collections from
finance receivables, excluding finance charges and
proceeds from receivable sales or securitizations,
were $5.8 billion and $5.2 billion in 2001 and 2000,
respectively. In the same periods, the ratio of cash
collections (net of finance charges) to average net
receivables, excluding floorplan receivables and
revolving loans, was approximately 65% and 59%,
respectively.
<TABLE>
<CAPTION>
FINANCE RECEIVABLES
CONTRACTUAL MATURITIES OUTSTANDING
-------------------------------------------------------------------
(In millions) 2002 2003 2004 2005 Thereafter 2001 2000
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Installment contracts $ 359 $210 $181 $174 $1,123 $2,047 $1,985
Floorplan receivables 327 92 3 11 41 474 894
Revolving loans 691 249 90 266 283 1,579 1,305
Finance leases 42 37 44 126 70 319 361
Golf course and
resort mortgages 102 95 101 121 394 813 683
Leveraged leases (16) (14) 27 18 389 404 361
---------------------------------------------------------------------------------------------------
$1,505 $669 $446 $716 $2,300 5,636 5,589
==============================================================================
Less allowance for
credit losses 144 116
-------------------
$5,492 $5,473
===================================================================================================
</TABLE>
The net investment in finance leases and leveraged
leases were as follows:
<TABLE>
<CAPTION>
(In millions) 2001 2000
------------------------------------------------------------------
<S> <C> <C>
Finance and leveraged lease receivables $ 490 $ 508
Estimated residual values on leased assets 589 589
------------------------------------------------------------------
1,079 1,097
Unearned income (356) (375)
------------------------------------------------------------------
Investment in leases 723 722
Deferred income taxes (258) (265)
------------------------------------------------------------------
Net investment in leases $ 465 $ 457
==================================================================
</TABLE>
The activity in the allowance for credit losses on
finance receivables is as follows:
<TABLE>
<CAPTION>
(In millions) 2001 2000 1999
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at the beginning of the year $116 $113 $84
Provision for losses 82 37 32
Charge-offs (82) (45) (28)
Recoveries 8 7 5
Acquisitions and other 20 4 20
---------------------------------------------------------------------------------------------------
Balance at the end of the year $144 $116 $113
===================================================================================================
</TABLE>
At year-end 2001, Textron Finance had unused
commitments to fund new and existing customers under
$1.3 billion and $599 million of committed and
uncommitted, respectively, revolving lines of credit.
Generally, interest rates on these commitments are
not set until the loans are funded; therefore,
Textron Finance is not exposed to interest rate
changes.
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 $9.3 billion at year-end 2001, and
$8.0 billion at year-end 2000.
Owned and securitized finance receivables are
primarily diversified geographically across the
United States, along with 12% held internationally.
At December 29, 2001, Textron Finance's most
significant collateral concentration was aircraft,
which accounted for 23% of owned and securitized
receivables. Textron Finance has industry
concentrations in the golf and vacation interval
industries, which accounted for 17% and 11%,
respectively.
44 Textron Annual Report
<PAGE>
TRANSACTIONS BETWEEN FINANCE AND MANUFACTURING GROUPS
A portion of Textron Finance's business involves financing retail purchases and
leases for new and used aircraft and equipment manufactured by Textron
Manufacturing's Aircraft and Industrial Products segments. In 2001, 2000 and
1999, Textron Finance paid Textron Manufacturing $1.3 billion, $1.4 billion, and
$1.3 billion, respectively, for receivables and operating lease equipment.
Operating agreements specify that Textron Finance generally has recourse to
Textron Manufacturing for outstanding balances from these transactions. At
year-end 2001 and 2000, the amounts guaranteed by Textron Manufacturing totaled
$652 million and $903 million, respectively. Included in the finance receivables
guaranteed by Textron Manufacturing are past due loans of $90 million at the end
of 2001 ($105 million at year-end 2000) that meet the non-accrual criteria but
are not classified as non-accrual by Textron Finance due to the guarantee.
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 Manufacturing has established reserves for losses
related to these guarantees which are included in other current liabilities.
SECURITIZATIONS
Textron Finance securitized and sold (with servicing rights retained) $1.3
billion and $1.2 billion of finance receivables in 2001 and 2000, respectively.
Gains from securitized trust sales were approximately $43 million and $22
million in 2001 and 2000, respectively, and proceeds were approximately $1.3
billion and $1.1 billion, respectively. At year-end 2001, $2.3 billion in
securitized loans were outstanding with $69 million in past due loans. Textron
Finance has securitized certain receivables generated by Textron Manufacturing
for which it has retained full recourse to Textron Manufacturing.
Textron Finance retained subordinated interests in the trusts which are
approximately 2% to 10% of the total trust. Servicing fees range from 30 to 150
basis points. During 2001, key economic assumptions used in measuring the
retained interests at the date of each securitization included prepayment speeds
ranging from 7.5% to 20%, weighted average lives ranging from 0.3 to 8.9 years,
expected credit losses ranging from 0.2% to 1.5%, and residual cash flows
discount rates ranging from 7.1% to 11%. At year-end 2001, key economic
assumptions used in measuring these retained interests were as follows:
<TABLE>
<CAPTION>
EQUIPMENT
LOANS LAND
AIRCRAFT AND FRANCHISE LOAN FLOORPLAN
(Dollars in millions) LOANS LEASES LOANS RECEIVABLES LOANS
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Carrying amount of retained
interests in securitizations, net $ 67 $ 41 $ 37 $ 20 $ 68
Weighted-average life (in years) 3.6 1.8 8.0 8.9 0.3
Prepayment speed (annual rate) 21.0% 6.6% 8.0% 20.0% --
Expected credit losses (annual rate) 0.2% 0.2% 0.3% 1.5% 1.0%
Residual cash flows discounted at 8.2% 7.0% 9.0% 11.0% 9.0%
- ------------------------------------------------------------------------------------------------------
</TABLE>
Hypothetical adverse changes of 10% and 20% to either 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. These hypothetical sensitivities should
be used with caution as the effect of a variation in a particular assumption on
the fair value of the retained interest is calculated without changing any other
assumption. In reality, changes in one factor may result in another that may
magnify or counteract the sensitivities losses, such as increases in market
interest rates may result in lower prepayments and increased credit losses.
4. INVENTORIES
<TABLE>
<CAPTION>
DECEMBER 29, December 30,
(In millions) 2001 2000
- ----------------------------------------------------------------------------
<S> <C> <C>
Finished goods $ 719 $ 727
Work in process 856 930
Raw materials 377 454
- ----------------------------------------------------------------------------
1,952 2,111
Less progress payments and customer deposits 225 240
- ----------------------------------------------------------------------------
$1,727 $1,871
============================================================================
</TABLE>
Inventories aggregating $1.0 billion and $1.2 billion at year-end 2001 and 2000,
respectively, 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 $188 million and $192 million higher at those respective dates.
During the fourth quarter of 2001, certain inventory quantities were reduced,
which resulted in a liquidation of LIFO inventory layers carried at lower costs
from prior years. The effect of the liquidation was
Textron Annual Report 45
<PAGE>
to decrease the cost of sales by approximately $16 million and to increase net
income by approximately $10 million. The remaining inventories, other than those
related to certain long-term contracts, are valued primarily by the first-in,
first-out method. Inventories related to long-term contracts, net of progress
payments and customer deposits, were $105 million at year-end 2001 and $161
million at year-end 2000.
5. LONG-TERM CONTRACTS
Long-term contract receivables at year-end 2001 and 2000 totaled $264 million
and $199 million, respectively. This includes $220 million and $135 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. During the second half of
2001, program reviews on certain long-term development and production contracts
indicated reduced profitability expectations resulting in a $124 million charge
to earnings. The reduced profitability expectations reflected the clarification
of several matters including extended development schedules and planned design
changes on a number of programs, as well as ongoing development efforts.
6. LONG-TERM ASSETS
Property, plant and equipment for Textron Manufacturing at year-end 2001 and
2000 consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 29, December 30,
(In millions) 2001 2000
- ------------------------------------------------------------
<S> <C> <C>
Land and buildings $1,011 $1,166
Machinery and equipment 2,962 3,666
- ------------------------------------------------------------
3,973 4,832
Less accumulated depreciation 1,929 2,264
- ------------------------------------------------------------
$2,044 $2,568
============================================================
</TABLE>
Prior to 2000, customer engineering and tooling project costs for which customer
reimbursement was anticipated, were capitalized and classified in other assets.
In 2000, Textron adopted the EITF consensus, 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 a change in accounting principle of $59 million, net of
tax, 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 No. 99-5 had been
applied during the year ended 1999 were:
<TABLE>
<CAPTION>
(In millions, except per share data) As Reported Pro Forma
- -----------------------------------------------------------------------------------
<S> <C> <C>
Income from continuing operations $ 623 $ 612
Income from continuing operations per diluted share $ 4.05 $ 3.98
Net income $ 2,226 $ 2,215
Net income per diluted share $ 14.48 $ 14.41
</TABLE>
7. DEBT AND CREDIT FACILITIES
Debt at year-end 2001 and 2000 consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 29, December 30,
(In millions) 2001 2000
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
TEXTRON MANUFACTURING:
Short-term debt:
Borrowings under or supported by long-term credit facilities* $ 146 $ 528
Current portion of long-term debt 527 87
- ----------------------------------------------------------------------------------------------
Total short-term debt 673 615
- ----------------------------------------------------------------------------------------------
Long-term senior debt:
Medium term notes due 2010-2011 (average rate - 9.85%) 16 43
6.750% due 2002 500 500
6.375% due 2004 300 300
5.625% due 2005 270 273
6.375% due 2008 300 --
6.625% due 2020 217 221
Other long-term debt (average rate - 6.77%) 185 219
- ----------------------------------------------------------------------------------------------
1,788 1,556
- ----------------------------------------------------------------------------------------------
Current portion of long-term debt (527) (87)
- ----------------------------------------------------------------------------------------------
Total long-term debt 1,261 1,469
- ----------------------------------------------------------------------------------------------
Total Textron Manufacturing debt $ 1,934 $ 2,084
==============================================================================================
</TABLE>
*The weighted average interest rates on these borrowings, before the effect of
interest rate exchange agreements, were 3.2%, 5.6% and 5.8% at year-end 2001,
2000 and 1999, respectively. Comparable rates during the years 2001, 2000 and
1999 were 4.3%, 5.7% and 4.9%, respectively.
46 Textron Annual Report
<PAGE>
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 21 banks available on a revolving
basis until April 2003, (b) a $600 million domestic credit agreement with five
banks available through May 2002 and (c) $71 million in multi-currency
agreements with two banks available through December 2002. At year-end 2001,
$1.5 billion of the credit facilities was not used or reserved as support for
commercial paper or bank borrowings.
<TABLE>
<CAPTION>
DECEMBER 29, December 30,
(In millions) 2001 2000
- ---------------------------------------------------------------------------------
<S> <C> <C>
TEXTRON FINANCE:
Borrowings under or supported by credit facilities* $ 688 $ 966
6.84% average rate debt; due 2002 to 2004 1,512 1,432
2.41% average rate variable notes; due 2002 to 2004 1,988 2,269
- ---------------------------------------------------------------------------------
Total Textron Finance debt $4,188 $4,667
=================================================================================
</TABLE>
*The weighted average interest rates on these borrowings, before the effect of
interest rate exchange agreements, were 2.5%, 6.7% and 6.4% at year-end 2001,
2000 and 1999, respectively. Comparable rates during the years 2001, 2000 and
1999 were 4.2%, 6.4% and 5.4%, respectively.
Textron Finance has its primary lines of credit with various banks aggregating
$1.5 billion at year-end 2001, of which $500 million will expire in 2002 and
$1.0 billion will expire in 2006. Of these lines, $875 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 $452 million of Textron
Finance's net assets of $1,009 million at year-end 2001. 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 2001. The payment schedule excludes amounts that are
payable under or supported by long-term credit facilities.
<TABLE>
<CAPTION>
(In millions) 2002 2003 2004 2005 2006
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Textron Manufacturing $ 527 $ 10 $ 307 $273 $3
Textron Finance 1,580 983 938 -- --
- ----------------------------------------------------------------------------------
$2,107 $ 993 $1,245 $273 $3
==================================================================================
</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 2001, 2000 or 1999 for Textron Finance to meet these
standards.
DUE TO TEXTRON MANUFACTURING
On December 20, 2001, Textron Manufacturing entered into a promissory demand
note agreement with Textron Finance, whereby Textron Finance can borrow up to
$600 million. At year-end 2001, the amount outstanding under this agreement is
$510 million which has not been eliminated, and is included in total assets and
total liabilities on the consolidated balance sheet. This note was repaid in
January 2002.
EXTRAORDINARY LOSS FROM DEBT RETIREMENT
During 1999, Textron retired $553 million of long-term high-coupon debt and
terminated $479 million of interest rate exchange agreements designated as
hedges of the retired borrowings. As a result of this retirement, Textron
recorded an after-tax loss in 1999 of $43 million, which has been reflected as
an extraordinary item.
8. DERIVATIVES AND OTHER FINANCIAL INSTRUMENTS
INTEREST RATE HEDGING
Textron Manufacturing's policy is to manage interest cost using a mix of fixed-
and variable-rate debt. To manage this mix in a cost efficient manner, Textron
Manufacturing will enter into interest rate swaps to agree to exchange, at
specified intervals, the difference between fixed and variable interest amounts
calculated by reference to an agreed-upon notional principal amount. The
mark-to-market values of both the fair value hedge instruments and underlying
debt obligations are recorded as equal and offsetting unrealized gains and
losses in interest expense. At December 31, 2000, Textron Manufacturing had
swaps with a fair value of $8 million designated as fair value hedges of
underlying fixed-rate debt obligations which was recorded as a reduction of
debt. In March 2001, Textron Manufacturing terminated all
Textron Annual Report 47
<PAGE>
outstanding interest rate swaps and received a payment of $15 million which is
being amortized into income over the remaining life of the original hedged debt.
Textron Manufacturing had no outstanding interest rate swaps at year-end 2001.
Textron Finance entered into interest rate swap agreements to mitigate its
exposure to interest rate changes by converting certain of its fixed-rate
receivables and debt issues to floating rates. The agreements require Textron
Finance to pay fixed-rate amounts in exchange for floating-rate amounts based on
specified notional amounts. Textron Finance has designated these agreements fair
value hedges. Textron Finance has also entered into interest rate swap, cap and
floor agreements to mitigate its exposure on interest-only securities resulting
from securitizations. The swap agreements require Textron Finance to make
periodic variable payments in exchange for periodic fixed-rate receipts and vice
versa based on specified notional amounts. The cap and floor agreements require
the payment of variable-rate amounts based on specified notional amounts if
interest rates exceed or fall below specified rates. These agreements are
designated as cash flow hedges. For cash flow hedges during 2001, Textron
Finance recorded a charge of $11 million, net of taxes, to accumulated OCL with
no impact to the statement of income. For fair value hedges at December 29,
2001, Textron Finance had interest exchange agreements with a fair value
liability of $6 million designated as fair value hedges of a fixed-rate
receivable portfolio and debt. The fair value hedges are highly effective
resulting in an immaterial net impact to earnings due to hedge ineffectiveness.
Interest rate swap agreements are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 29, 2001 December 30, 2000
------------------------------------------------------------------------------
WEIGHTED Weighted
WEIGHTED AVERAGE Weighted Average
AVERAGE REMAINING Average Remaining
NOTIONAL INTEREST TERM Notional Interest Term
(Dollars in millions) AMOUNT RATE (IN YEARS) Amount Rate (in Years)
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
TEXTRON MANUFACTURING:
Variable-pay swaps -- -- -- $415 6.91% 3.9
TEXTRON FINANCE:
Fixed-pay swaps - debt -- -- -- $150 6.52% 2.0
Variable-pay swaps - debt $370 1.88% 0.6 -- -- --
Variable-receive
swaps - receivables $ 97 8.14% 12.0 $100 8.14% 12.6
Basis swaps* -- -- -- $715 6.77% 0.8
Forward starting
fixed-pay swaps -- -- -- $228 7.31% 7.6
</TABLE>
*Amounts at December 30, 2000 require U.S. Prime Rate-based payments, as stated
above, and LIBOR-based receipts of 6.77%.
In addition, Textron Finance utilizes interest rate agreements to protect
against the interest rate risk associated with their retained interest in
securitized assets. At year-end 2001 and 2000, Textron Finance had $675 million
and $509 million, respectively, of such agreements outstanding. During 2001,
Textron also entered into an interest rate agreement tied to the one-month LIBOR
for $337 million that caps the weighted average rate at 6.35%. Textron had
minimal exposure to loss from nonperformance by the counterparties to its
interest rate swaps at the end of 2001, 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.
CURRENCY RATE HEDGING
Textron manufactures and sells its products in a number of countries throughout
the world and, as a result, is exposed to movements in foreign currency exchange
rates. The primary purpose of Textron's foreign currency hedging activities is
to manage the volatility associated with foreign currency purchases of
materials, foreign currency sales of its products and other assets and
liabilities created in the normal course of business. Textron primarily utilizes
forward exchange contracts and purchased options with maturities of no more than
18 months that qualify as cash flow hedges. These are intended to offset the
effect of exchange rate fluctuations on forecasted sales, inventory purchases
and overhead expenses. The fair value of these instruments at December 29, 2001
was a $9 million liability. At year-end 2001, $7 million of after-tax loss was
reported in accumulated OCL from qualifying cash flow hedges. This loss is
generally
48 Textron Annual Report
<PAGE>
expected to be reclassified to earnings in the next 12 months as the underlying
transactions occur. Textron Manufacturing also enters into certain foreign
currency derivative instruments that do not meet hedge accounting criteria, and
are primarily intended to protect against exposure related to intercompany
financing transactions and income from international operations. The fair value
of these instruments at year-end 2001 and the net impact of the related gains
and losses on selling and administrative expense was not material in 2001.
The table below summarizes, by major currency, Textron Manufacturing's forward
exchange contracts in U.S. dollars. The buy and sell amounts represent the U.S.
dollar equivalent of commitments to purchase and 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 29, 2001
British Pound $ 7 $ -- $ -- $--
Canadian Dollar 217 (7) 23 --
Euro 23 (3) 67 --
Other 106 -- 162 --
- ---------------------------------------------------------------------------------
Total $353 $(10) $252 $--
=================================================================================
December 30, 2000
British Pound $208 $ (1) $105 $--
Canadian Dollar 281 -- 15 --
Euro 116 -- 51 --
Other 26 -- 38 1
- ---------------------------------------------------------------------------------
Total $631 $ (1) $209 $1
=================================================================================
</TABLE>
NET INVESTMENT HEDGING
Textron hedges its net investment position in major currencies and generates
foreign currency interest payments, that offset other transactional exposures in
these currencies. To accomplish this, Textron borrows directly in foreign
currency and designates a portion of foreign currency debt as a hedge of net
investments. In addition, certain currency forwards are designated as hedges of
Textron's related foreign net investments. Currency effects of these hedges
which are reflected in the cumulative translation adjustment account within OCL,
produced a $9 million after-tax gain during 2001, leaving an accumulated net
balance of $36 million.
STOCK-BASED COMPENSATION HEDGING
Textron manages the expense related to stock-based compensation awards using
cash settlement forward contracts on its common stock. The use of these forward
contracts modifies Textron's compensation expense exposure to changes in the
stock price with the intent to reduce potential variability. The fair value of
these instruments at December 29, 2001 was a $11 million liability. Gains and
losses on these instruments are recorded as an adjustment to compensation
expense when the award is charged to expense. These contracts generated expense
of $22 million and $69 million in 2001 and 2000, respectively, and income of
approximately $5 million in 1999.
FAIR VALUES OF FINANCIAL INSTRUMENTS
The carrying amounts and estimated fair values of Textron's financial
instruments that are not reflected in the financial statements at fair value as
a matter of accounting policy, are as follows:
<TABLE>
<CAPTION>
DECEMBER 29, 2001 December 30, 2000
----------------------------- -------------------------------
ESTIMATED Estimated
CARRYING FAIR Carrying Fair
(In millions) VALUE VALUE Value Value
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TEXTRON MANUFACTURING:
Debt $(1,934) $(1,972) $(2,061) $(2,105)
TEXTRON FINANCE:
Finance receivables 4,795 4,884 4,767 4,840
Debt (4,188) (4,208) (4,667) (4,688)
=======================================================================================================
</TABLE>
Textron Annual Report 49
<PAGE>
9. 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
is 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. As a result of its acquisition of Litchfield, Textron
Financial Corporation has agreed to make payments to the holders of the
Preferred Securities when due, to the extent not paid by or on behalf of the
trust or subsidiary.
10. 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.
11. SHAREHOLDERS' EQUITY
CAPITAL STOCK
Textron has authorization for 15,000,000 shares of preferred stock and
500,000,000 shares of 12.5 cent per share par value common 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.
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. In 2001, Textron's Board of Directors amended the 1999 Plan to revise the
maximum number of share awards authorized as follows: (a) 12,200,000 options to
purchase Textron shares; (b) 2,000,000 performance units and (c) 500,000 shares
of restricted stock.
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 $26 million or $0.18 per
diluted share in 2001, $25 million or $0.17 per diluted share in 2000, and $9
million or $0.06 per diluted share in 1999.
The assumptions used to estimate the fair value of an option granted in 2001,
2000 and 1999, respectively, are approximately as follows: dividend yield of
approximately 3%, 3% and 2%; expected volatility of 34%, 27% and 22%; risk-free
interest rates of 4%, 5% and 6%, 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 2001, 2000 and 1999 was approximately $11, $10 and
$15, respectively.
50 Textron Annual Report
<PAGE>
At year-end 2001, 6,139,000 stock options were available for future grant under
the 1999 Plan as amended. Stock option activity is summarized as follows:
<TABLE>
<CAPTION>
2001 2000 1999
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>
Outstanding at
beginning of year 12,631 $52.32 8,822 $55.26 8,342 $47.23
Granted 315 $50.93 4,618 $46.31 2,176 $73.75
Exercised (884) $30.20 (440) $30.67 (1,451) $34.86
Canceled (1,086) $58.01 (369) $76.41 (245) $67.06
- -----------------------------------------------------------------------------------------------------
Outstanding at end of year 10,976 $53.50 12,631 $52.32 8,822 $55.26
- -----------------------------------------------------------------------------------------------------
Exercisable at end of year 8,653 $55.33 7,012 $53.25 5,815 $45.60
=====================================================================================================
</TABLE>
Stock options outstanding at year-end 2001 are summarized as follows:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
REMAINING AVERAGE AVERAGE
CONTRACTUAL EXERCISE EXERCISE
(Shares in thousands) OUTSTANDING LIFE (IN YEARS) PRICE EXERCISABLE PRICE
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$17 - $37 1,542 3.1 $29.61 1,507 $29.83
$38 - $63 6,212 7.9 $48.75 3,935 $49.80
$64 - $94 3,222 7.5 $73.94 3,211 $73.96
</TABLE>
RESERVED SHARES OF COMMON STOCK
At year-end 2001, common stock reserved for the subsequent conversion of
preferred stock and shares reserved for the exercise of stock options were
2,865,000 and 10,976,000, 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.
INCOME PER COMMON SHARE
A reconciliation of income from continuing operations and basic to diluted share
amounts is presented below.
<TABLE>
<CAPTION>
2001 2000 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 $166 $277 $623
Less: Preferred stock dividends (1) - (1)
- ---------------------------------------------------------------------------------------------------------
BASIC
Available to common shareholders 165 141,050 277 143,923 622 150,389
Dilutive effect of convertible preferred
stock and stock options 1 1,887 - 2,227 1 3,365
DILUTED
Available to common shareholders
and assumed conversions $166 142,937 $277 146,150 $623 153,754
- ---------------------------------------------------------------------------------------------------------
</TABLE>
Textron Annual Report 51
<PAGE>
ACCUMULATED OTHER COMPREHENSIVE LOSS (OCL)
The components of Textron's accumulated OCL is as follows:
<TABLE>
<CAPTION>
UNREALIZED DEFERRED
CURRENCY GAINS PENSION LOSSES
TRANSLATION (LOSSES) LIABILITY ON HEDGE ACCUMULATED
(In millions) ADJUSTMENT ON SECURITIES ADJUSTMENT CONTRACTS OCL
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at January 2, 1999 $(104) $ 13 $(5) $ -- $ (96)
Change, net of income taxes (71) -- 3 -- (68)
AFS disposal, net of income taxes 79 (13) -- -- 66
- --------------------------------------------------------------------------------------------------------------------------------
Balance at January 1, 2000 (96) -- (2) -- (98)
Change, net of income taxes (74) -- -- -- (74)
Net unrealized losses* -- (59) -- -- (59)
Reclassification adjustment* -- 59 -- -- 59
- --------------------------------------------------------------------------------------------------------------------------------
Balance at December 30, 2000 (170) -- (2) -- (172)
Transition adjustment due to change
in accounting for derivative
instruments and hedging, net of taxes -- -- -- (15) (15)
Change, net of income taxes (31) 1 -- (17) (47)
Automotive Trim disposal,
net of income taxes 11 -- -- -- 11
Net unrealized losses* -- (6) -- -- (6)
Reclassification adjustment* -- 6 -- -- 6
- --------------------------------------------------------------------------------------------------------------------------------
Balance at December 29, 2001 $(190) $ 1 $(2) $(32) $(223)
================================================================================================================================
</TABLE>
*Net of income tax benefit of $3 million and $31 million for 2001 and 2000,
respectively.
12. 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 $48 million in 2001, $51 million in 2000 and $40
million in 1999. 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 29, December 30, DECEMBER 29, December 30,
(In millions) 2001 2000 2001 2000
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CHANGE IN BENEFIT OBLIGATION
Benefit obligation at beginning of year $3,941 $3,665 $612 $603
Service cost 109 101 6 6
Interest cost 282 265 49 45
Amendments 34 110 (14) (5)
Net effect of acquisitions/dispositions (220) 4 (65) -
Plan participants' contributions 4 4 5 5
Actuarial losses 28 80 113 27
Benefits paid (258) (249) (70) (68)
Foreign exchange rate changes (11) (39) (1) -
Curtailments (1) - (3) (1)
- ---------------------------------------------------------------------------------------------------------
Benefit obligation at end of year $3,908 $3,941 $632 $612
=========================================================================================================
</TABLE>
52 Textron Annual Report
<PAGE>
<TABLE>
<CAPTION>
POSTRETIREMENT BENEFITS
PENSION BENEFITS OTHER THAN PENSIONS
- -----------------------------------------------------------------------------------------------------------------------------
DECEMBER 29, December 30, DECEMBER 29, December 30,
(In millions) 2001 2000 2001 2000
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CHANGE IN PLAN ASSETS
Fair value of plan assets at beginning of year $ 5,170 $ 5,342 $ -- $ --
Actual return on plan assets (218) 77 -- --
Employer contributions 22 41 -- --
Plan participants' contributions 4 4 -- --
Net effect of acquisitions/dispositions (229) 3 -- --
Benefits paid (258) (249) -- --
Foreign exchange rate changes (11) (48) -- --
- -----------------------------------------------------------------------------------------------------------------------------
Fair value of plan assets at end of year $ 4,480 $ 5,170 $ -- $ --
=============================================================================================================================
Funded status of the plan $ 572 $ 1,229 $(632) $(612)
Unrecognized actuarial gain (133) (871) 26 (88)
Unrecognized prior service cost 162 154 (20) (15)
Unrecognized transition net asset (23) (43) -- --
- -----------------------------------------------------------------------------------------------------------------------------
Net amount recognized in the balance sheet $ 578 $ 469 $(626) $(715)
=============================================================================================================================
Amounts recognized in the balance sheet
consists of:
Prepaid benefit cost $ 745 $ 621 $ -- $ --
Accrued benefit liability (171) (156) (626) (715)
Intangible asset 2 2 -- --
Accumulated OCL 2 2 -- --
- -----------------------------------------------------------------------------------------------------------------------------
Net amount recognized in the balance sheet $ 578 $ 469 $(626) $(715)
=============================================================================================================================
</TABLE>
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 $248 million, $209 million and $42 million,
respectively, as of year-end 2001, and $199 million, $161 million and $10
million, respectively, as of year-end 2000.
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 29, December 30, January 2, DECEMBER 29, December 30, January 2,
(In millions) 2001 2000 2000 2001 2000 2000
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
COMPONENTS OF NET
PERIODIC BENEFIT COST
Service cost $ 109 $ 101 $ 109 $ 6 $ 6 $ 7
Interest cost 282 265 252 49 45 41
Expected return on plan assets (454) (423) (378) -- -- --
Amortization of unrecognized
transition asset (17) (17) (17) -- -- --
Recognized actuarial (gain)/loss (30) (24) 2 (2) (8) (10)
Recognized prior service cost 20 14 16 (6) (4) (4)
Curtailments (6) -- -- (5) (1) --
- ------------------------------------------------------------------------------------------------------------------------------------
Net periodic benefit cost $ (96) $ (84) $ (16) $ 42 $ 38 $ 34
====================================================================================================================================
</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 29, December 30, January 1, January 2,
2001 2000 2000 1999
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Discount rate 7.25% 7.50% 7.50% 6.75%
Expected rate of return on plan assets 9.25 9.25 9.25 9.25
Annual rate of compensation increase 4.50 4.80 4.80 4.80
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
Postretirement benefit plan discount rates are the same as those used by
Textron's defined benefit pension plans.
Textron Annual Report 53
<PAGE>
The 2001 health care cost trend rate, which is the weighted average annual
assumed rate of increase in the per capita cost of covered benefits, was 8% for
all retirees. This rate is assumed to decrease to 5.5% by 2005 and then remain
at that level. A one-percentage-point change in assumed health care cost trend
rate 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 $ (4)
Effect on postretirement benefit obligation $54 $(47)
</TABLE>
13. INCOME TAXES
Textron files a consolidated federal income tax return for all U.S. subsidiaries
and separate returns for foreign subsidiaries.
Income from continuing operations before income taxes and distributions on
preferred securities of subsidiary trusts is as follows:
<TABLE>
<CAPTION>
(In millions) 2001 2000 1999
- -----------------------------------------------------------------
<S> <C> <C> <C>
United States $ 451 $366 $ 831
Foreign (32) 245 199
- -----------------------------------------------------------------
Total $ 419 $611 $1,030
=================================================================
</TABLE>
Income tax expense is summarized as follows:
<TABLE>
<CAPTION>
(In millions) 2001 2000 1999
- --------------------------------------------------------------------
<S> <C> <C> <C>
Federal:
Current $136 $ 246 $222
Deferred 48 (37) 54
State 26 35 36
Foreign 17 64 69
- --------------------------------------------------------------------
Income tax expense $227 $ 308 $381
====================================================================
</TABLE>
The following reconciles the federal statutory income tax rate to the effective
income tax rate reflected in the consolidated statements of income:
<TABLE>
<CAPTION>
2001 2000 1999
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Federal statutory income tax rate 35.0% 35.0% 35.0%
Increase (decrease) in taxes resulting from:
State income taxes 2.7 3.8 2.3
Goodwill 22.3 19.0 2.2
Permanent items from Automotive Trim disposition 2.7 -- --
Foreign tax rate differential (0.9) (2.2) 0.6
Foreign sales corporation benefit (2.9) (1.9) (0.9)
Other, net (4.7) (3.3) (2.2)
- ---------------------------------------------------------------------------------------------------------
Effective income tax rate 54.2% 50.4% 37.0%
=========================================================================================================
</TABLE>
Textron's net deferred tax asset consisted of gross deferred tax assets of $1.7
billion and gross deferred tax liabilities of $1.7 billion at year-end 2001 and
$1.7 billion and $1.5 billion, respectively, at year-end 2000. 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>
DECEMBER 29, December 30,
(In millions) 2001 2000
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Self insured liabilities, (including environmental) $ 110 $ 146
Deferred compensation 140 140
Obligation for postretirement benefits 44 118
Investment securities 9 45
Allowance for credit losses 49 44
Amortization of goodwill and other intangibles 30 37
Other, principally timing of other expense deductions 280 278
- ----------------------------------------------------------------------------------------------
Total deferred tax assets $ 662 $ 808
- ----------------------------------------------------------------------------------------------
Deferred tax liabilities:
Textron Finance transactions, principally leasing $(387) $(366)
Fixed assets, principally depreciation (150) (190)
Inventory (59) (53)
Currency translation adjustment (29) (26)
- ----------------------------------------------------------------------------------------------
Total deferred tax liabilities (625) (635)
- ----------------------------------------------------------------------------------------------
Net deferred tax assets $ 37 $ 173
==============================================================================================
</TABLE>
54 Textron Annual Report
<PAGE>
Deferred income taxes have not been provided for the undistributed earnings of
foreign subsidiaries, which approximated $488 million at year-end 2001.
Management intends to reinvest those earnings for an indefinite period, except
for distributions having an immaterial tax effect. If foreign subsidiaries'
earnings were distributed, 2001 taxes, net of foreign tax credits, would be
increased by approximately $61 million.
14. SPECIAL CHARGES, NET
GOODWILL AND OTHER INTANGIBLE ASSETS
In conjunction with Textron's restructuring activities and review of long-lived
assets, Textron wrote down goodwill and other intangible assets by $319 million
and $349 million in 2001 and 2000, respectively. For 2001, the impairment charge
related primarily to OmniQuip within the Industrial Products segment. For 2000,
Textron recognized goodwill impairment charges of $194 million in Industrial
Products primarily related to Turbine Engine Components Textron (TECT), $128
million in Fastening Systems primarily related to Flexalloy, and $27 million in
Automotive.
During the third quarter of 2001, certain long-lived asset impairment indicators
were identified for OmniQuip which caused Textron to perform an impairment
review. Key impairment indicators included OmniQuip's operating performance
against plan despite restructuring efforts to improve operating efficiencies and
streamline operations. Additionally, the strategic review process completed in
August 2001 confirmed that the economic and market conditions combined with the
saturation of light construction equipment handlers in the market had negatively
impacted the projected results for the foreseeable future. The undiscounted cash
flow projections performed were less than the carrying amount of OmniQuip's
long-lived assets indicating that there was an impairment. Textron used a
discounted pre-tax cash flow calculation in determining the fair value of the
long-lived assets utilizing the multi-year forecast to project future cash flows
and a risk-based rate of 11%. The calculation resulted in an impairment charge
of $317 million, including goodwill of $306 million and other intangible assets
of $11 million.
For 2000, indicators of potential impairment of long-lived assets were
identified in connection with multi-year financial planning, as well as the
initiation of the current restructuring program. Based on the indicators,
Textron 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, were
deteriorating margins and its inability to generate new contracts that had
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 cannot 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, were considerably less than anticipated.
Accordingly, future cash flow projections were 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 indicating that
there was an impairment. The discounted pre-tax cash flow calculations for
purposes of determining the fair value of the long-lived assets were 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 other
operating units.
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.
RESTRUCTURING
To improve returns at core businesses and to complete the integration of certain
acquisitions, Textron approved and committed to a restructuring program in the
fourth quarter of 2000 based upon targeted cost reductions. The program includes
corporate and segment direct and indirect workforce reductions, consolidation of
facilities primarily in the United States and Europe, rationalization of certain
product lines, outsourcing of non-core production activity, the divestiture of
non-core businesses and streamlining of sales and administrative overhead.
In 2001, Textron recorded restructuring expenses of $109 million in special
charges. These restructuring costs included $81 million of severance and related
benefits, and other exit costs ($27 million for Industrial Products, $25 million
for Fastening Systems, $14 million for Automotive, $5 million for Aircraft, $3
million for Finance and $7 million at Corporate) and $28 million for fixed asset
impairment write-downs, primarily
Textron Annual Report 55
<PAGE>
at Fastening Systems. As of December 29, 2001, Textron has reduced its workforce
by approximately 5,700 employees and has closed 44 facilities, including 18
manufacturing plants, primarily in the Industrial Products and Fastening Systems
segments. In 2000, Textron recorded restructuring costs of $15 million in
Industrial Products and $2 million in Automotive for fixed asset impairment,
severance-related benefits and certain other exit costs.
An analysis of Textron's special charges for restructuring and related reserve
accounts for its current program is summarized below:
<TABLE>
<CAPTION>
ASSET FACILITIES
(In millions) IMPAIRMENTS SEVERANCE & OTHER TOTAL
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Charges $ 1 $ 15 $ 1 $ 17
Utilized (1) (1) -- (2)
- --------------------------------------------------------------------------------------------------
Balance at December 30, 2000 $ -- $ 14 $ 1 $ 15
Charges 28 77 4 109
Utilized (28) (60) (2) (90)
- --------------------------------------------------------------------------------------------------
Balance at December 29, 2001 $ -- $ 31 $ 3 $ 34
==================================================================================================
</TABLE>
The specific restructuring measures and associated estimated costs are based on
Textron's best judgment under prevailing circumstances. Textron believes that
the restructuring reserve balance of $34 million is adequate to carry out the
restructuring activities formally identified and committed to as of December 29,
2001 and anticipates that all actions related to these liabilities will be
completed within a twelve-month period.
Restructuring costs and asset impairment charges recorded in earnings have been
included in special charges, net on the consolidated statement of income. In
2001, Textron also incurred $34 million in costs related to restructuring that
have not been included in special charges, net. These expenses consist of costs
for outsourcing certain operations in the Aircraft segment, plant rearrangement,
machinery and equipment relocation, employee replacement and relocation costs,
and are included in cost of sales and selling and administrative expenses within
segment profit.
In 1999, Textron recorded severance of $28 million and an asset impairment
charge of $14 million primarily related to cost reduction efforts in the
Industrial Products segment designed to significantly reduce headcount by
downsizing an underperforming plant in Europe, the announcement of the closing
of seven facilities, and through targeted headcount reductions across most of
its divisions. Textron also reversed $24 million of reserves no longer deemed
necessary after it was determined that certain projects would be cancelled.
These actions were completed by December 30, 2000, with substantially all
reserve spending occurring in 1999 and 2000.
E-BUSINESS INVESTMENT AND OTHER
During 2001, Textron recorded a $6 million impairment charge related to its
e-business securities and realized a $3 million net loss on the sale of its
remaining e-business securities. In 2000, Textron recorded an impairment charge
of $117 million related to these investment securities. These charges are
included in special charges, net on the consolidated statement of income.
Special charges, net for 1999 include 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.
15. JOINT VENTURES
In the normal course of business, Textron has entered into various joint venture
agreements. At December 29, 2001 and December 30, 2000, other assets includes
$37 million and $29 million, respectively, attributable to investments in
unconsolidated joint ventures. Textron accounts for its interest in these
ventures under the equity method of accounting, and its equity in income (loss)
from joint ventures for the three years ended December 29, 2001 is reported in
cost of sales.
Textron has entered into an agreement with Agusta to share certain costs and
profits for the joint design, development, manufacture, marketing, sale,
customer training and product support of Bell Helicopter's BA609 and Agusta's
AB139. These programs are currently in the development stage, and only certain
marketing costs are being charged to the venture. Bell Helicopter's share of the
development costs are being charged to earnings as a period expense. Bell
Helicopter has also partnered with the Boeing Company in the development of the
V-22 tiltrotor aircraft.
56 Textron Annual Report
<PAGE>
Textron has also entered into a joint venture with TAG Aviation USA, Inc. to
sell fractional share interests in small business jets. During 2001 and 2000,
Textron recorded revenue of $38 million and $26 million, respectively, for the
sale of aircraft to this venture through arm's length transactions. Profit on
these sales is initially deferred then recognized on a pro-rata basis as
fractional share interests are sold to third parties. Textron has guaranteed
one-half of the venture's debt and lease obligations up to a maximum of $70
million. At December 29, 2001, Textron's portion of the outstanding debt and
operating lease commitments covered by this guarantee totaled $25 million.
While Textron has several other joint venture agreements that have external
financing arrangements, Textron has only guaranteed approximately $15 million in
debt obligations related to these ventures.
16. COMMITMENTS, CONTINGENCIES AND ENVIRONMENTAL REMEDIATION
COMMITMENTS AND CONTINGENCIES
Textron is subject to legal proceedings and other claims arising out of the
conduct of Textron's business, relating to private transactions, government
contracts, production partners, product liability, employment, and
environmental, safety and health matters. Some of these legal proceedings and
claims 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
proceedings and claims will not have a material effect on Textron's financial
position or results of operations.
Cessna is a defendant in a previously-reported action filed in June 1991 in the
Circuit Court in and for Escambia County, Florida, brought by certain
individuals for injuries incurred in a 1989 crash of a Cessna 185 aircraft. In
January 2002, the parties reached an agreement to settle this action. The amount
of the settlement in excess of that which will be paid by Cessna's insurance
carriers will be covered by pre-existing product liability reserves.
In the ordinary course of business, Textron enters into letters of credit and
other similar arrangements with financial institutions. The letters of credit
typically serve as a guarantee of payment or performance to certain third
parties in accordance with specified terms and conditions. Management knows of
no event of default that would require Textron to satisfy these guarantees at
year-end 2001.
In addition to its financing relationship with Textron Finance, OmniQuip also
utilizes third-party finance institutions to provide wholesale financing to
certain of its customers. While these finance receivables are not reflected on
Textron's balance sheet, the finance institutions generally have recourse to
OmniQuip and may require OmniQuip to repurchase equipment related to customer
defaults. The balance of this portfolio at December 29, 2001 and December 30,
2000 was $57 million and $43 million, respectively.
LEASES
Rental expense approximated $103 million, $101 million and $94 million in 2001,
2000 and 1999, respectively. Future minimum rental commitments for
noncancellable operating leases in effect at year-end 2001 approximated $61
million for 2002; $50 million for 2003; $35 million for 2004; $26 million for
2005; $21 million for 2006; and a total of $192 million thereafter.
ENVIRONMENTAL REMEDIATION
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 $50 million to $160
million. At year-end 2001, environmental reserves of approximately $93 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 Annual Report 57
<PAGE>
17. SUPPLEMENTAL FINANCIAL INFORMATION
ACCRUED LIABILITIES
Included in Textron Manufacturing's accrued liabilities at the end of 2001 and
2000 were the following:
<TABLE>
<CAPTION>
DECEMBER 29, December 30,
(In millions) 2001 2000
- --------------------------------------------------------------------------
<S> <C> <C>
Customer deposits $ 279 $ 279
Reserve for warranties 242 236
Salaries, wages and employer taxes 212 260
Contract reserves 113 52
Other 538 544
- --------------------------------------------------------------------------
Total accrued liabilities $1,384 $1,371
==========================================================================
</TABLE>
RESEARCH AND DEVELOPMENT COSTS
Company-funded research and development costs include amounts for
company-initiated programs, the cost sharing portions of customer-initiated
programs, and losses incurred on customer-initiated programs. Textron also
carries out research and development under contracts with others, primarily the
U.S. Government. A significant portion of company-initiated programs include
independent research and development related to government products and services
which is recoverable through overhead cost allowances.
Company-funded and customer-funded research and development costs are as
follows:
<TABLE>
<CAPTION>
(In millions) 2001 2000 1999
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Company-funded $366 $307 $257
Customer-funded 323 414 413
- --------------------------------------------------------------------------------
Total research and development $689 $721 $670
================================================================================
</TABLE>
18. SEGMENT REPORTING
Textron has five reportable segments: Aircraft, Automotive, Fastening Systems,
Industrial Products and Finance. See Note 1 for principal markets and major
locations 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 in Note 1. Textron evaluates segment performance based on
segment profit. 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) 2001 2000 1999
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Aircraft:
Fixed-Wing Aircraft $ 3,043 $ 2,814 $ 2,472
Rotor Aircraft 1,621 1,580 1,547
Automotive:
Trim 1,579 1,842 1,796
Fuel Systems and Functional Components 1,022 1,082 1,072
Fastening Systems 1,679 1,996 2,059
Industrial Products:
Industrial Components and Other 1,446 1,693 1,131
Golf, Turf and Specialty Products 738 823 773
Fluid and Power 484 569 541
Finance 709 691 463
- -------------------------------------------------------------------------------------------------
$12,321 $13,090 $11,854
=================================================================================================
</TABLE>
58 Textron Annual Report
<PAGE>
The following tables and page 18 summarize selected financial information by
segment:
<TABLE>
<CAPTION>
PROPERTY, PLANT AND
ASSETS EQUIPMENT EXPENDITURES
---------------------------------------------------------------------------------------------------
(In millions) 2001 2000 1999 2001 2000 1999
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Aircraft $ 2,788 $ 2,551 $ 2,348 $173 $154 $164
Automotive 706 1,738 1,800 165 127 132
Fastening Systems 1,537 1,776 1,970 61 108 103
Industrial Products 2,619 2,981 3,232 110 120 114
Finance 6,464 6,131 5,989 18 14 11
Corporate 4,119 3,339 1,743 5 4 8
Eliminations (2,181) (2,146) (689) -- -- --
- ----------------------------------------------------------------------------------------------------------------------------------
$ 16,052 $ 16,370 $ 16,393 $532 $527 $532
==================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
AMORTIZATION DEPRECIATION
--------------------------------------------------------------------------------------
(In millions) 2001 2000 1999 2001 2000 1999
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Aircraft $ 11 $ 10 $ 10 $115 $105 $ 97
Automotive 12 14 19 98 87 83
Fastening Systems 16 18 18 78 82 80
Industrial Products 57 45 32 86 87 73
Finance 22 15 7 19 17 12
Corporate (4) 10 5 4 4 4
- ---------------------------------------------------------------------------------------------------------------------
$ 114 $112 $ 91 $400 $382 $349
=====================================================================================================================
GEOGRAPHIC DATA
Presented below is selected financial information by geographic area of
Textron's operations:
PROPERTY, PLANT
REVENUES* AND EQUIPMENT**
---------------------------------------------------------------------------------------------
(In millions) 2001 2000 1999 2001 2000 1999
- ---------------------------------------------------------------------------------------------------------------------------------
United States $ 8,022 $ 8,569 $ 7,540 $1,502 $1,791 $1,718
Canada 692 798 710 78 127 118
Latin America and Mexico 826 790 738 45 121 68
Germany 613 584 694 183 165 187
Asia and Australia 518 603 441 12 13 14
United Kingdom 367 385 481 98 145 161
France 311 352 344 80 79 82
Other 972 1,009 906 90 164 165
- ---------------------------------------------------------------------------------------------------------------------------------
$12,321 $13,090 $11,854 $2,088 $2,605 $2,513
=================================================================================================================================
</TABLE>
*Revenues are attributed to countries based on the location of the customer.
**Property, plant and equipment is based on the location of the asset.
Revenues include sales to the U.S. Government of $1.2 billion in both 2001 and
2000 and $1.3 billion in 1999. Revenues also include sales to DaimlerChrysler,
primarily through the Automotive Trim business, of $1.4 billion, $1.5 billion
and $1.6 billion in 2001, 2000 and 1999, respectively.
Textron Annual Report 59
<PAGE>
QUARTERLY DATA
<TABLE>
<CAPTION>
2001
(Unaudited) -----------------------------------------------------
(Dollars in millions except per share amounts) Q4 Q3 Q2 Q1
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES
Aircraft $ 1,391 $ 1,064 $ 1,223 $ 986
Automotive 629 579 716 677
Fastening Systems 373 389 451 466
Industrial Products 594 600 734 740
Finance 196 178 164 171
- ---------------------------------------------------------------------------------------------------------
TOTAL REVENUES $ 3,183 $ 2,810 $ 3,288 $ 3,040
=========================================================================================================
SEGMENT PROFIT (LOSS)
Aircraft $ 132* $ (31)* $ 112 $ 98
Automotive 23 14 61 60
Fastening Systems (23) 1 30 38
Industrial Products (11) (16) 76 71
Finance 59 48 40 46
- ---------------------------------------------------------------------------------------------------------
TOTAL SEGMENT PROFIT 180 16 319 313
Special charges, net (22) (338) (35) (42)
- ---------------------------------------------------------------------------------------------------------
Total segment operating income (loss) 158 (322) 284 271
Gains on sale of divisions 339 3 -- --
Corporate expenses and other, net (38) (33) (39) (42)
Interest expense, net (37) (41) (40) (44)
Benefit (provision) for income taxes (158) 69 (72) (66)
Distribution on preferred securities of
manufacturing subsidiary trust, net of income
taxes (7) (6) (7) (6)
- ---------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM OPERATIONS BEFORE CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE 257 (330) 126 113
Cumulative effect of change in accounting
principle, net of income taxes -- -- -- --
- ---------------------------------------------------------------------------------------------------------
Net income (loss) $ 257 $ (330) $ 126 $ 113
=========================================================================================================
EARNINGS PER COMMON SHARE
BASIC:
Income (loss) from operations $ 1.82 $ (2.34) $ .89 $ .80
Cumulative effect of change in accounting
principle, net of income taxes -- -- -- --
- ---------------------------------------------------------------------------------------------------------
Net income (loss) $ 1.82 $ (2.34) $ .89 $ .80
=========================================================================================================
Average shares outstanding (in thousands) 141,256 141,196 141,055 140,733
- ---------------------------------------------------------------------------------------------------------
DILUTED:
Income (loss) from operations $ 1.81 $ (2.34) $ .88 $ .79
Cumulative effect of change in accounting
principle, net of income taxes -- -- -- --
- ---------------------------------------------------------------------------------------------------------
Net income (loss) $ 1.81 $ (2.34) $ .88 $ .79
=========================================================================================================
Average shares outstanding (in thousands)** 142,460 141,196 143,411 142,752
- ---------------------------------------------------------------------------------------------------------
SEGMENT PROFIT MARGINS
Aircraft 9.5% (2.9)% 9.2% 9.9%
Automotive 3.7 2.4 8.5 8.9
Fastening Systems (6.2) 0.3 6.7 8.2
Industrial Products (1.9) (2.7) 10.4 9.6
Finance 30.1 27.0 24.4 26.9
SEGMENT PROFIT MARGIN 5.7 0.6 9.7 10.3
=========================================================================================================
COMMON STOCK INFORMATION
Price range: High $ 42.40 $ 56.90 $ 59.89 $ 59.26
Low $ 31.65 $ 32.80 $ 52.95 $ 45.94
Dividends per share $ .325 $ .325 $ .325 $ .325
=========================================================================================================
</TABLE>
<TABLE>
<CAPTION>
2000
(Unaudited) ------------------------------------------------------
(Dollars in millions except per share amounts) 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 450 469 529 548
Industrial Products 755 730 804 796
Finance 185 184 170 152
- --------------------------------------------------------------------------------------------------------------
TOTAL REVENUES $ 3,312 $ 3,208 $ 3,277 $ 3,293
==============================================================================================================
SEGMENT PROFIT (LOSS)
Aircraft $ 139 $ 127 $ 107 $ 78
Automotive 54 40 69 81
Fastening Systems 37 46 49 43
Industrial Products 83 71 103 93
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
Gains on sale of divisions -- -- -- --
Corporate expenses and other, net (43) (34) (41) (46)
Interest expense, net (36) (42) (41) (33)
Benefit (provision) for 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 OPERATIONS BEFORE CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE (218) 158 179 158
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 operations $ (1.53) $ 1.10 $ 1.25 $ 1.08
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 operations $ (1.53) $ 1.08 $ 1.23 $ 1.06
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 8.2 9.8 9.3 7.8
Industrial Products 11.0 9.7 12.8 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
Low $ 41.44 $ 44.88 $ 53.94 $ 51.50
Dividends per share $ .325 $ .325 $ .325 $ .325
==============================================================================================================
</TABLE>
* See Management's Discussion and Analysis for Bell Helicopter on page 21.
** Assumes full conversion of outstanding preferred stock and exercise of
options. The average share base for the third quarter 2001 and 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 operations.
60 Textron Annual Report
<PAGE>
SELECTED FINANCIAL INFORMATION
<TABLE>
<CAPTION>
(Dollars in millions except where
otherwise noted and per share amounts) 2001 2000 1999 1998 1997
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
REVENUES
Aircraft $ 4,664 $ 4,394 $ 4,019 $ 3,380 $ 3,217
Automotive 2,601 2,924 2,868 2,356 2,072
Fastening Systems 1,679 1,996 2,059 1,758 1,498
Industrial Products 2,668 3,085 2,445 2,013 1,738
Finance 709 691 463 367 350
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL REVENUES $ 12,321 $ 13,090 $ 11,854 $ 9,874 $ 8,875
==========================================================================================================================
SEGMENT PROFIT
Aircraft $ 311 $ 451 $ 362 $ 338 $ 313
Automotive 158 244 220 171 141
Fastening Systems 46 175 188 186 167
Industrial Products 120 350 303 232 188
Finance 193 190 128 113 108
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL SEGMENT PROFIT 828 1,410 1,201 1,040 917
Special charges, net (437) (483) 1 (87) --
- ---------------------------------------------------------------------------------------------------------------------------
Total segment operating income 391 927 1,202 953 917
Gains on sale of divisions 342 -- -- 97 --
Corporate expenses and other, net (152) (164) (143) (141) (152)
Interest expense, net (162) (152) (29) (146) (117)
Income taxes (227) (308) (381) (294) (250)
Distributions on preferred securities
of manufacturing
subsidiary trust, net of income taxes (26) (26) (26) (26) (26)
- ---------------------------------------------------------------------------------------------------------------------------
INCOME FROM CONTINUING OPERATIONS* $ 166 $ 277 $ 623 $ 443 $ 372
==========================================================================================================================
PER SHARE OF COMMON STOCK
Income from continuing operations - basic* $ 1.17 $ 1.92 $ 4.14 $ 2.74 $ 2.25
Income from continuing operations - diluted* $ 1.16 $ 1.90 $ 4.05 $ 2.68 $ 2.19
Dividends declared $ 1.30 $ 1.30 $ 1.30 $ 1.14 $ 1.00
Book value at year-end $ 27.76 $ 28.24 $ 29.67 $ 19.27 $ 19.78
Common stock price: High $ 59.89 $ 74.94 $ 97.00 $ 80.31 $ 70.75
Low $ 31.65 $ 41.44 $ 68.44 $ 52.06 $ 45.00
Year-end $ 42.40 $ 46.50 $ 76.69 $ 75.94 $ 62.63
Common shares outstanding (in thousands):
Basic average 141,050 143,923 150,389 161,254 164,830
Diluted average** 142,937 146,150 153,754 165,374 169,503
Year-end 141,251 140,933 147,002 154,742 167,315
==========================================================================================================================
FINANCIAL POSITION
Total assets $ 16,052 $ 16,370 $ 16,393 $ 13,721 $ 11,330
Debt:
Textron Manufacturing $ 1,934 $ 2,084 $ 1,767 $ 2,615 $ 1,221
Textron Finance $ 4,188 $ 4,667 $ 4,551 $ 2,829 $ 2,365
Obligated mandatorily redeemable preferred
securities of
subsidiary trusts:
Textron Manufacturing $ 485 $ 484 $ 483 $ 483 $ 483
Textron Finance $ 28 $ 28 $ 29 $ -- $ --
Shareholders' equity $ 3,934 $ 3,994 $ 4,377 $ 2,997 $ 3,228
Textron Manufacturing debt to total capital
(net of cash) 28% 29% 25% 43% 24%
==========================================================================================================================
INVESTMENT DATA
Capital expenditures $ 532 $ 527 $ 532 $ 475 $ 374
Depreciation $ 400 $ 382 $ 349 $ 292 $ 254
Research and development $ 689 $ 721 $ 670 $ 613 $ 602
==========================================================================================================================
OTHER DATA
Number of employees at year-end 51,000 71,000 68,000 64,000 56,000
Number of common shareholders at year-end 21,000 21,000 22,000 23,000 24,000
==========================================================================================================================
</TABLE>
* Before cumulative effect of a change in accounting principle in 2000.
** Assumes full conversion of outstanding preferred stock and exercise of stock
options.
Textron Annual Report 61
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-21
<SEQUENCE>9
<FILENAME>b42129tiex21.txt
<DESCRIPTION>CERTAIN SUBSIDIARIES
<TEXT>
<PAGE>
EXHIBIT 21
TEXTRON INC. - SIGNIFICANT SUBSIDIARIES
(AS OF MARCH 8, 2002)
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.
- ------------------------------------------------------------------------------
NAME JURISDICTION
- ------------------------------------------------------------------------------
Avco Corporation Delaware
- ------------------------------------------------------------------------------
Textron Systems Corporation Delaware
- ------------------------------------------------------------------------------
Bell Aircraft Services Company Delaware
- ------------------------------------------------------------------------------
Edwards & Associates, Inc. Tennessee
- ------------------------------------------------------------------------------
Bell Helicopter Textron Inc. Delaware
- ------------------------------------------------------------------------------
Cadillac Gage Textron Inc. Michigan
- ------------------------------------------------------------------------------
Cessna Aircraft Company Kansas
- ------------------------------------------------------------------------------
Cone Drive Operations Inc. Delaware
- ------------------------------------------------------------------------------
David Brown (Delaware) Holdings Corp. Delaware
- ------------------------------------------------------------------------------
David Brown Union Pumps Co. (95%; 5% - Textron Inc.) Michigan
- ------------------------------------------------------------------------------
David Brown Union Pumps (Canada), Ltd. New Brunswick
- ------------------------------------------------------------------------------
Greenlee Textron Inc. Delaware
- ------------------------------------------------------------------------------
Kautex Corporation Nova Scotia
- ------------------------------------------------------------------------------
Kautex Textron de Mexico, S. de R.L. de C.V. Mexico
(98%; 2% - Textron Atlantic Inc.)
- ------------------------------------------------------------------------------
MAAG Pump Systems Textron Inc. North Carolina
- ------------------------------------------------------------------------------
OmniQuip Textron Inc. Delaware
- ------------------------------------------------------------------------------
Snorkel International, Inc. Delaware
- ------------------------------------------------------------------------------
TRAK International, Inc. Delaware
- ------------------------------------------------------------------------------
Tempo Research Corporation Delaware
- ------------------------------------------------------------------------------
Industrial Technology, Inc. Texas
- ------------------------------------------------------------------------------
Textron Atlantic Inc. Delaware
- ------------------------------------------------------------------------------
MAAG Pump Systems Textron A.G. Switzerland
- ------------------------------------------------------------------------------
Mapri-Textron do Brasil Ltda. (99.9%; 1 share - Brazil
Companhia Siderurgica Belgo Mineira)
- ------------------------------------------------------------------------------
Textron Acquisition Limited England
- ------------------------------------------------------------------------------
Avdel plc/Avdel plc Inc. England/Delaware
- ------------------------------------------------------------------------------
Avdel International B.V. Netherlands
- ------------------------------------------------------------------------------
Textron Sistemi di Fissaggio S.r.l. Italy
- ------------------------------------------------------------------------------
Ransomes Investment Corporation Delaware
- ------------------------------------------------------------------------------
Ransomes America Corporation Delaware
- ------------------------------------------------------------------------------
Cushman Inc. Delaware
- ------------------------------------------------------------------------------
Ransomes Inc. Wisconsin
- ------------------------------------------------------------------------------
Ransomes plc England
- ------------------------------------------------------------------------------
Ransomes Jacobsen Limited England
- ------------------------------------------------------------------------------
Textron Fluid and Power Systems Holdings Limited England
- ------------------------------------------------------------------------------
David Brown Group plc England
- ------------------------------------------------------------------------------
David Brown Engineering Ltd. England
- ------------------------------------------------------------------------------
Textron Limited England
- ------------------------------------------------------------------------------
Kautex Textron CVS Limited England
- ------------------------------------------------------------------------------
Kautex Textron Ltd. England
- ------------------------------------------------------------------------------
Textron International Holding, S.L. Spain
- ------------------------------------------------------------------------------
Bell Helicopter Supply Center N.V. Netherlands
- ------------------------------------------------------------------------------
Bell Helicopter Textron Canada Limited Canada
- ------------------------------------------------------------------------------
Bell Helicopter Canada International Inc. Canada
- ------------------------------------------------------------------------------
Kautex Textron Benelux B.V.B.A. (99.9%; 1 share - Belgium
Kautex Textron Iberica S.L.)
- ------------------------------------------------------------------------------
Kautex Textron Bohemia spol. s.r.o. Czech Republic
- ------------------------------------------------------------------------------
Kautex Textron Iberica S.L. Spain
- ------------------------------------------------------------------------------
Textron Fastening Systems Canada Limited Canada
- ------------------------------------------------------------------------------
Textron France Holding S.A.R.L. (99.9%; 1 share - France
Textron Industries Management S.N.C.)
- ------------------------------------------------------------------------------
Textron France S.A.R.L. (99.9%; 1 share - Textron France
Industries Management S.N.C.)
- ------------------------------------------------------------------------------
Avdel S.A. France
- ------------------------------------------------------------------------------
David Brown Guinard Pumps S.A.S. France
- ------------------------------------------------------------------------------
Page 1
<PAGE>
- ------------------------------------------------------------------------------
NAME JURISDICTION
- ------------------------------------------------------------------------------
Textron Atlantic Holding GmbH (99.9%; 0.1% - Germany
Textron Atlantic Inc.)
- ------------------------------------------------------------------------------
Avdel Verbindungselemente GmbH Germany
- ------------------------------------------------------------------------------
Gustav Klauke GmbH (99%; 1% - Germany
Textron Atlantic Inc.)
- ------------------------------------------------------------------------------
Kautex Textron Verwaltungs GmbH Germany
- ------------------------------------------------------------------------------
Kautex Textron GmbH & Co. K.G. (98%; 1% - Germany
Jacobsen E-Z-GO Textron
Vermietungs und Beteiligungs GmbH; 1% - NWW,
Deutsche Bank subsidiary)
- ------------------------------------------------------------------------------
Peiner Umformtechnik GmbH Germany
- ------------------------------------------------------------------------------
Textron Verbindungstechnik Beteiligungs GmbH Germany
- ------------------------------------------------------------------------------
Textron Verbindungstechnik GmbH & Co. O.H.G. Germany
(99%; 1% - Jacobsen E-Z-GO
Textron Vermietungs und Beteiligungs GmbH)
- ------------------------------------------------------------------------------
Textron Industries S.A.S. France
- ------------------------------------------------------------------------------
Textron Automotive Company Inc. Delaware
- ------------------------------------------------------------------------------
McCord Corporation Michigan
- ------------------------------------------------------------------------------
McCord Winn Textron Inc. Massachusetts
- ------------------------------------------------------------------------------
Textron Holdco Inc. Rhode Island
- ------------------------------------------------------------------------------
Micromatic Operations Inc. Delaware
- ------------------------------------------------------------------------------
Micro-Precision Operations Inc. Delaware
- ------------------------------------------------------------------------------
Textron FSC Inc. Barbados
- ------------------------------------------------------------------------------
Textron Fastening Systems Inc. Delaware
- ------------------------------------------------------------------------------
Burkland Textron Inc. Michigan
- ------------------------------------------------------------------------------
Elco Textron Inc. Delaware
- ------------------------------------------------------------------------------
Flexalloy Inc. Ohio
- ------------------------------------------------------------------------------
InteSys Technologies, Inc. Massachusetts
- ------------------------------------------------------------------------------
Ring Screw Textron Inc. Michigan
- ------------------------------------------------------------------------------
Textron Financial Corporation Delaware
- ------------------------------------------------------------------------------
Cessna Finance Corporation Kansas
- ------------------------------------------------------------------------------
FBS Investments Inc. Delaware
- ------------------------------------------------------------------------------
Litchfield Financial Corporation Massachusetts
- ------------------------------------------------------------------------------
Ironwood Acceptance Company Delaware
- ------------------------------------------------------------------------------
IAC Tax V, LLC Delaware
- ------------------------------------------------------------------------------
Land Finance Company Delaware
- ------------------------------------------------------------------------------
RFC Capital Corporation Delaware
- ------------------------------------------------------------------------------
Systran Financial Services Holding Corporation Washington
- ------------------------------------------------------------------------------
Systran Financial Services Corporation Oregon
- ------------------------------------------------------------------------------
TFC Foreign Sales Corporation Barbados
- ------------------------------------------------------------------------------
Textron Financial Canada Funding Corp. Nova Scotia
- ------------------------------------------------------------------------------
Textron Financial Investment Corporation Rhode Island
- ------------------------------------------------------------------------------
Textron Receivables Corporation III Delaware
- ------------------------------------------------------------------------------
Textron IPMP Inc. Delaware
- ------------------------------------------------------------------------------
Textron Rhode Island Inc. Rhode Island
- ------------------------------------------------------------------------------
Page 2
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23
<SEQUENCE>10
<FILENAME>b42129tiex23.txt
<DESCRIPTION>CONSENT OF ERNST & YOUNG LLP
<TEXT>
<PAGE>
EXHIBIT 23
Consent of Independent Auditors
We consent to the incorporation by reference in this Annual Report (Form 10-K)
of Textron Inc. of our report dated January 24, 2002, included in the 2001
Annual Report to Shareholders of Textron Inc.
We consent to the incorporation by reference in the Registration Statements
(Form S-3 No. 333-84599, Form S-8 No. 333-78145, Form S-8 No. 333-50931, Form
S-8 No. 333-07121, Form S-8 No. 33-63741, Form S-8 No. 33-57025, Form S-8 No.
33-38094) of Textron Inc. and in the related Prospectus and Prospectus
Supplements of our report dated January 24, 2002, with respect to the
consolidated financial statements of Textron Inc. included or incorporated by
reference in this Annual Report (Form 10-K) for the year ended December 29,
2001.
/s/ Ernst & Young LLP
Boston, Massachusetts
March 14, 2002
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-24.1
<SEQUENCE>11
<FILENAME>b42129tiex24-1.txt
<DESCRIPTION>POWER OF ATTORNEY
<TEXT>
<PAGE>
Exhibit 24.1
POWER OF ATTORNEY
The undersigned, Textron Inc. ("Textron") a Delaware corporation, and the
undersigned directors and officers of Textron, do hereby constitute and appoint
Terrence O'Donnell, Arnold M. Friedman, Michael D. Cahn and Ann T. Willaman, and
each of them, with full powers of substitution, their true and lawful attorneys
and agents to do or cause to be done any and all acts and things and to execute
and deliver any and all instruments and documents which said attorneys and
agents, or any of them, may deem necessary or advisable in order to enable
Textron to comply with the Securities and Exchange Act of 1934, as amended, and
any requirements of the Securities and Exchange Commission in respect thereof,
in connection with the filing of Textron's Annual Report on Form 10-K for the
fiscal year ended December 29, 2001, including specifically, but without
limitation, power and authority to sign the names of the undersigned directors
and officers in the capacities indicated below and to sign the names of such
officers on behalf of Textron to such Annual Report filed with the Securities
and Exchange Commission, to any and all amendments to such Annual Report, to any
instruments or documents or other writings in which the original or copies
thereof are to be filed as a part of or in connection with such Annual Report or
amendments thereto, and to file or cause to be filed the same with the
Securities and Exchange Commission; and each of the undersigned hereby ratifies
and confirms all that such attorneys and agents, and each of them, shall do or
cause to be done hereunder and such attorneys and agents, and each of them,
shall have, and may exercise, all of the powers hereby conferred.
IN WITNESS WHEREOF, Textron has caused this Power of Attorney to be
executed and delivered in its name and on its behalf by the undersigned duly
authorized officer and its corporate seal affixed, and each of the undersigned
has signed his or her name thereto, on this 27th day of February, 2002.
TEXTRON INC.
By: /s/ Lewis B. Campbell
-----------------------------------
Lewis B. Campbell
Chairman, President and Chief
Executive Officer
ATTEST:
/s/ Frederick K. Butler
- ----------------------------------
Frederick K. Butler
Vice President and Secretary
<PAGE>
/s/ Lewis B. Campbell /s/ Lord Powell of Bayswater KCMG
- --------------------------------- ---------------------------------
Lewis B. Campbell Lord Powell of Bayswater KCMG
Chairman and Chief Executive Director
Officer, Director
/s/ Brian H. Rowe
---------------------------------
Brian H. Rowe
Director
/s/ H. Jesse Arnelle /s/ Sam F.Segnar
- --------------------------------- ---------------------------------
H. Jesse Arnelle Sam F. Segnar
Director Director
/s/ Teresa Beck /s/ Martin D. Walker
- --------------------------------- ---------------------------------
Teresa Beck Martin D. Walker
Director Director
/s/ Stuart Dickson /s/ Thomas B. Wheeler
- --------------------------------- ---------------------------------
R. Stuart Dickson Thomas B. Wheeler
Director Director
/s/ Lawrence K. Fish Theodore R. French
- --------------------------------- ---------------------------------
Lawrence K. Fish Theodore R. French
Director Executive Vice President
and Chief Financial Officer
(principal financial officer)
/s/ Joe Ford
- ---------------------------------
Joe T. Ford
Director /s/ Richard L. Yates
---------------------------------
Richard L. Yates
Vice President and Controller
(principal accounting officer)
/s/ Paul E. Gagne
- -------------------------------------
Paul E. Gagne
Director
/s/ John D. Macomber
- -------------------------------------
John D. Macomber
Director
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-24.2
<SEQUENCE>12
<FILENAME>b42129tiex24-2.txt
<DESCRIPTION>CERTIFIED COPY OF A RESOLUTION
<TEXT>
<PAGE>
Exhibit 24.2
TEXTRON INC.
ASSISTANT SECRETARY'S CERTIFICATE
I, ANN T. WILLAMAN, a duly elected Assistant Secretary of TEXTRON INC., a
Delaware corporation (hereinafter, the "Corporation"), DO HEREBY CERTIFY that
set forth below is a true and correct copy of resolutions passed at a meeting of
the Corporation's Board of Directors held on February 27, 2002, at which a
quorum was present and voted throughout:
RESOLVED, that the officers of the Corporation be, and they hereby
are, authorized, in the name and on behalf of the Corporation, to
prepare and execute, and to file with the Securities and Exchange
Commission, the Corporation's Annual Report on Form 10-K for its
fiscal year ended December 29, 2001, and any amendments thereto.
RESOLVED, that the officers of the Corporation be, and they hereby
are, authorized in the name and on behalf of the Corporation, to
execute and deliver a power of attorney appointing Terrence O'Donnell,
Arnold M. Friedman, Michael D. Cahn and Ann T. Willaman, or any of
them, to act as attorneys-in-fact for the Corporation for the purpose
of executing and filing the Corporation's Annual Report on Form 10-K
for its fiscal year ended December 29, 2001, and any amendments
thereto.
I DO HEREBY FURTHER CERTIFY that the foregoing resolutions have been
neither amended nor modified, and remain in full force and effect as of the date
hereof.
IN WITNESS WHEREOF, I have hereunto set my hand and caused the Corporate
seal of TEXTRON INC. to be affixed as of the 14th day of March, 2002.
/s/ Ann T. Willaman
----------------------------
CORPORATE SEAL Assistant Secretary
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----