___________________________________________________
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 31, 1994
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 $.0125; (85,212,128 shares New York Stock
outstanding at March 3, 1995) Exchange
Preferred Stock Purchase Rights Pacific Stock Exchange
Chicago Stock Exchange
$2.08 Cumulative Convertible Preferred Stock, New York Stock
Series A - no par value Exchange
$1.40 Convertible Preferred Dividend Stock, Series B
(preferred only as to dividends) - no par value New York Stock
Exchange
9.25% Debentures due March 15, 2016 New York Stock
Exchange
8.75% Debentures due July 1, 2022
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1)
has filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has
been subject to such filing requirements for the past 90
days. Yes X . No .
Indicate by check mark if disclosure of delinquent
filers pursuant to Item 405 of Regulation S-K is not
contained herein, and will not be contained, to the best of
registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ ]
The aggregate market value of voting stock held by
non-affiliates of the registrant is $4,628,908,473 as of
March 3, 1995.
Portions of Textron's Annual Report to
Shareholders for the fiscal year ended December 31,
1994 are incorporated by reference in Parts I and II of
this Report. Portions of Textron's Proxy Statement for
its Annual Meeting of Shareholders on April 26, 1995 are
incorporated by reference in Part III of this Report.
__________________________________________________
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<PAGE>
PART I
ITEM 1. BUSINESS OF TEXTRON*
Textron is a multi-industry company with operations in
two business sectors - Manufacturing and Financial Services. The
Manufacturing sector consists of four business segments -
Aircraft, Automotive, Industrial, and Systems and Components. The
business segments of the Financial Services sector are Finance and
Paul Revere.
Financial information by business segment and geographic area
is incorporated herein by reference to pages 28, 53 and 54 of
Textron's 1994 Annual Report to Shareholders.
Manufacturing
Information regarding the segments of the Manufacturing sector
is contained on pages 29 through 31, 41 and 61 through 63 of
Textron's 1994 Annual Report to Shareholders, which pages are
incorporated herein by reference.
The Aircraft segment consists of Bell Helicopter and Cessna.
Bell Helicopter is a leading manufacturer of light and medium
helicopters for civil and military uses. Bell is teamed with
Boeing Helicopters in the development of the V-22 tilt rotor
aircraft for the U.S. Department of Defense. In the light and
medium helicopter market, Bell Helicopter has two major U.S.
competitors and one major European competitor. Certain of its
competitors are substantially larger and more diversified aircraft
manufacturers. Bell Helicopter markets its products worldwide
through its own sales force as well as through independent
representatives. Price, financing terms, aircraft performance,
reliability and product support are significant factors in the
sale of helicopters. Revenues of Bell Helicopter accounted for
approximately 14%, 13% and 11% of Textron's total revenues in
1994, 1993 and 1992, respectively.
____________________
* Reference herein to "Textron" includes Textron Inc., its
divisions and subsidiaries. A Textron "Division" is an operating
unit which may be comprised of an unincorporated division of
Textron, a subsidiary of Textron, or an unincorporated division of
a subsidiary.
<page 2>
Cessna is the world's largest designer and manufacturer of
light and mid-sized business jets and single-engine utility
turboprop aircraft. Cessna is also developing the Citation X, a
larger business jet with first deliveries scheduled for 1996.
Cessna recently announced its intention to re-commence production
of the Cessna 172, 182 and 206 piston-engine general aviation
aircraft upon completion of new manufacturing facilities. Cessna
markets its products worldwide primarily through its own sales
force as well as through independent representatives. Cessna has
five major competitors, two of which are located in the U.S. and
three overseas. Cessna's fanjets and turboprops compete with
other aircraft that are comparable in size, speed, range,
capacity, handling characteristics and price. Reliability and
product support are also significant factors in the sale of these
aircraft.
The Divisions of the Automotive segment supply products
primarily to automotive original equipment manufacturers. In
April 1994, Textron established Textron Automotive Company as an
umbrella organization for the Divisions of the Automotive segment.
In July 1994, the Davidson Exterior Trim Division was merged with
Textron Acustar Plastics to become Textron Automotive Exteriors,
and the Davidson Interiors Division was renamed Textron Automotive
Interiors. The headquarters of these Divisions and the Randall
and McCord Winn Divisions have been relocated, with Textron
Automotive Company, to the Detroit, Michigan area. Products of
the Automotive segment are marketed through the sales force of
each Division. In general, these Divisions operate in markets
that are very competitive. These Divisions compete in their
markets on the basis of price, product quality and delivery.
The Divisions of the Industrial segment sell products to the
industrial and consumer markets. Products are marketed through
the sales force of each Division, and, where applicable,
independent distributors, sales representatives and retailers. In
general, these Divisions operate in markets that are very
competitive. In varying degrees, these Divisions compete in their
markets on the basis of price, product quality and performance,
brand image, service and delivery. In August 1994, Textron's
Homelite Division was sold to Deere & Company.
The Divisions of the Systems and Components segment
manufacture products primarily for the commercial aerospace and
defense industries. All Divisions of the Systems and Components
segment are subject to keen competition. Each Division markets
its products through its own sales force and, where applicable,
independent representatives. The principal competitive factors
are price, reliability, product performance and, where applicable,
product support. In October 1994, the Textron Lycoming Turbine
Engine Division was sold to AlliedSignal Inc. Effective January
11, 1995, the Aircraft Engine Components Textron Division was
merged into the Airfoil Textron Division; the name of the combined
division has been changed to Turbine Engine Components Textron.
<page 3>
Financial Services
Information regarding the segments of the Financial Services
sector is contained on pages 26, 27, 31, 32, 41, 57, 58 and 63 of
Textron's 1994 Annual Report to Shareholders, which pages are
incorporated herein by reference.
Products of the Financial Services sector are marketed through
company-owned sales offices and, where applicable, independent
brokers. The insurance and consumer and commercial finance
businesses are highly competitive and subject to regulation by
various government authorities.
The Finance segment consists of Avco Financial Services and
Textron Financial Corporation. Avco Financial Services competes
with other consumer finance companies as well as companies which
finance the sale of their own merchandise or the merchandise of
others, industrial banks, and the personal loan departments of
commercial banks and credit unions. Revenues of Avco Financial
Services accounted for approximately 14%, 15% and 16% of Textron's
total revenues in 1994, 1993 and 1992, respectively. Textron
Financial Corporation competes with other commercial finance
companies as well as institutional lenders, primarily banks.
Price and service are the principal competitive factors in the
Finance segment.
Paul Revere is the leading provider of individual
non-cancellable disability insurance in North America. Paul
Revere competes with many other insurance companies offering
similar products. Insurance companies compete on the basis of
many factors including financial strength, pricing and other terms
and conditions of products, commission structure, perceived
stability of the insurer, claims paying ratings, service, name
recognition and reputation.
Backlog
Information regarding Textron's backlog of government and
commercial orders by business segment at the end of the past two
fiscal years is contained on page 28 of Textron's 1994 Annual
Report to Shareholders, which page is incorporated herein by
reference.
Approximately 49% of Textron's total backlog at December 31,
1994 represents orders which are not expected to be filled within
the 1995 fiscal year. Approximately 64% of the total backlog is
funded.
<page 4>
Government Contracts
In 1994, 37% and 53% of the revenues of the Aircraft and
Systems and Components segments, respectively, constituting 17% of
Textron's consolidated revenues, were generated by or resulted
from contracts with the United States 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.
A substantial portion of Textron's government contracts are
fixed-price or fixed-price incentive contracts. Contracts which
contain incentive pricing terms provide for upward or downward
adjustments in the prices paid by the U.S. Government thereunder
upon completion of the contract or any agreed portion thereof,
based on cost or other performance factors. U.S. Government
contracts generally may be terminated in whole or in part at the
convenience of the U.S. Government or if the contractor is in
default. Upon termination of a contract for the convenience of
the U.S. Government, the contractor is normally entitled to
reimbursement for allowable costs incurred (up to a maximum equal
to the contract price) and an allowance for profit or adjustment
for loss if the contractor would have incurred a loss had the
entire contract been completed. If, however, a contract is termi
nated for default: (i) the contractor is paid such amount as may
be agreed upon for manufacturing materials and partially completed
products accepted by the U.S. Government; (ii) the U.S. Government
is not liable for the contractor's costs with respect to
unaccepted items and is entitled to repayment of advance payments
and progress payments, if any, related to the terminated portions
of the contract; and (iii) the contractor may be liable for excess
costs incurred by the U.S. Government in procuring undelivered
items from another source. Additional information regarding
defense expenditures is contained on pages 29 through 31 of
Textron's 1994 Annual Report to Shareholders, which pages are
incorporated herein by reference.
Research and Development
Information regarding Textron's research and development
expenditures is contained on pages 40 and 48 of Textron's 1994
Annual Report to Shareholders, which pages are incorporated herein
by reference.
Patents and Trademarks
Textron owns, or is licensed under, a number of patents and
trademarks throughout the world relating to methods of
manufacturing and products. Patents and trademarks 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 the opinion of Textron, materially affect the conduct of
its business.
<page 5>
Environmental Considerations
Textron's operations, like those of other companies engaged in
similar businesses, are subject to numerous laws and regulations
designed to protect the environment. Compliance with such laws
has not had, and is not expected to have, a material effect on
capital expenditures, earnings or the competitive position of
Textron. Expenditures for environmental control facilities have
not had, and are not expected to have, a material effect on
capital expenditures, earnings or the competitive position of
Textron. Additional information regarding environmental matters
is contained on pages 25, 40 and 53 of Textron's 1994 Annual
Report to Shareholders, which pages are incorporated herein by
reference.
Employees
At December 31, 1994, Textron had approximately 53,000
employees.
ITEM 2. PROPERTIES
At December 31, 1994, Textron operated a total of 138 plants
located throughout the United States and 9 plants outside the
United States. Of the total of 147 plants, Textron owned 102 and
the balance was leased. In the aggregate, the total manufacturing
space was approximately 25 million square feet.
In addition, Textron owns or leases offices, warehouse and
other space at various locations throughout the United States and
outside the United States. Textron also owns or leases such
machinery and equipment as is necessary in the operation of its
Divisions. Textron considers the productive capacity of the
plants operated by each of its business segments to be adequate.
In general, the plants and machinery 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 January 19, 1995, Textron and the Ohio Environmental
Protection Agency ("Ohio EPA") entered into a consent order
concerning previously reported compliance issues related to air
emissions from Textron's Randall Division plant in Wilmington,
Ohio, which included payment of a civil penalty of $267,500.
In addition, there are pending or threatened against Textron
and its subsidiaries lawsuits and other proceedings, some of which
allege violations of federal government procurement regulations,
involve environmental matters, or are or purport to be class
actions. Among these suits and proceedings are some which seek
compensatory, treble or punitive damages in substantial amounts;
fines, penalties or restitution; the cleanup of allegedly
hazardous wastes; or, under federal government procurement
regulations, could result in suspension or debarment of Textron or
its subsidiaries from U.S. Government contracting for a period of
time. These suits and proceedings are being defended or contested
on behalf of Textron and its subsidiaries.
<page 6>
On the basis of information presently available, Textron
believes that any liability for the suits and proceedings
mentioned above, or the impact of the application of relevant
government regulations, would not have a material effect on
Textron's net income or financial condition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of Textron's security
holders during the last quarter of the period covered by this
Report.
EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information
concerning the executive officers of Textron as of March 20, 1995.
Unless otherwise indicated, the employer is Textron.
Name Age Position
James F. Hardymon 60 Chairman since 1993,
and Chief Executive Officer
since 1992; formerly President,
1989 through 1993, and Chief
Operating Officer, 1989 through
1991; Director since 1989.
CORPORATE OPERATING MANAGEMENT
Lewis B. Campbell 48 President and Chief
Operating Officer since 1994;
formerly Executive Vice
President and Chief Operating
Officer, 1992 to 1993; Vice
President of General Motors
(1988 to 1992) and General
Manager of its GMC Truck
Division (1991 to 1992), and
General Manager of the Flint
Automotive Division Buick -
Oldsmobile - Cadillac Group
(1988 to 1991); Director since
1994.
Gary E. Atwell 51 Group Vice President since 1986.
Herbert L. Henkel 46 Group Vice President
since 1993; formerly President
of the Greenlee Textron
Division, 1987 to 1993.
<page 7>
Fred L. Hubacker 50 President Textron
Automotive Company and Vice
President Textron since April
1994; formerly Group Vice
President and President Textron
Acustar Plastics Inc., 1993 to
April 1994; Group Controller,
Procurement and Supply
Operations (1991 to 1993) and
Vice President Finance, Acustar
Inc. unit (1989 to 1991) of
Chrysler Corporation.
Derek Plummer 61 Chairman Textron Automotive
Company and Vice President Textron
since April 1994; formerly Group
Vice President, 1986 to April 1994.
Terry D. Stinson 53 Group Vice President
since 1991; formerly President
of the Hamilton Standard
Division of United Technologies
Corporation, 1986 to 1991.
Richard A. Watson 50 Group Vice President
since 1990; formerly Vice
President Textron and President
Textron Investment Management
Company Inc., 1986 to 1990.
CORPORATE STAFF MANAGEMENT
Thomas P. Hollowell 51 Executive Vice
President Corporate Development
since 1992; formerly Managing
Director of Bowles Hollowell
Conner & Co., an investment
banking firm, 1975 to 1992.
Richard A. McWhirter 60 Executive Vice
President and Chief Financial
Officer since 1993; formerly
Senior Vice President and Secre
tary, 1991 to 1993; Senior Vice
President - Insurance and
Environmental Affairs, 1988 to
1991.
Thomas D. Soutter 60 Executive Vice
President and General Counsel
since 1985.
<page 8>
William F. Wayland 59 Executive Vice
President Administration and
Chief Human Resources Officer
since 1993; formerly Executive
Vice President - Human
Resources, 1989 to 1993.
Frank Gulden 58 Senior Vice President -
Human Resources since 1993;
formerly Group Vice President,
1990 to 1993; Vice President
North and South America,
Fastening Systems Group of
Emhart Corporation, 1989 to
1990.
Mary L. Howell 42 Senior Vice President
Government and International
Relations since 1993; formerly
Vice President - Government
Affairs, 1985 to 1993.
Edward C. Arditte 39 Vice President -
Communications and Risk
Management since 1993; formerly
Vice President - Investor Rela
tions, 1991 to 1993; Director -
Investor Relations, 1990 to
1991; Assistant Treasurer, 1986
to 1990.
Brian T. Downing 47 Vice President and
Treasurer since 1986.
Peter B. S. Ellis 41 Vice President
Strategic Planning since March
1995; formerly Managing
Director, Telecommunications
Practice of Arthur D. Little,
Inc., 1991 to March 1995; Vice
President, Business Development
of Contel Corporation, 1988 to
1991.
Arnold M. Friedman 52 Vice President and
Deputy General Counsel since
1984.
Gregory E. Hudson 48 Vice President - Taxes since 1987.
William P. Janovitz 52 Vice President and Controller since
1983.
<page 9>
Richard J. Millman 53 Vice President
Operations Services since March
1995; formerly Vice President
Office of the Chairman, 1994 to
March 1995; President of the HR
Textron Division, 1987 to 1994.
Karen A. Quinn-Quintin 37 Vice President and
Secretary since 1993; formerly
Director, Corporate Office
Human Resources, 1992 to 1993;
Manager, Corporate Office
Personnel, 1991 to 1992;
Manager, Group Insurance, 1989
to 1991.
Daniel L. Shaffer 58 Vice President Audit
and Business Ethics since
November 1994; formerly
President of Textron's Aircraft
Engine Components Division,
1992 to November 1994; Vice
President Finance of the
Textron Defense Systems
Division (formerly Avco
Systems), 1984 to 1992.
Wayne W. Juchatz, 48, has been named Executive Vice President
and General Counsel to succeed Mr. Soutter who is retiring on
March 31, 1995. Mr. Juchatz served since 1985 as Executive Vice
President, General Counsel and Secretary of R.J. Reynolds Tobacco
Company, a subsidiary of RJR Nabisco, Inc. Stephen L. Key, 51,
has been named Executive Vice President and Chief Financial
Officer to succeed Mr. McWhirter who will become Executive Vice
President and Corporate Secretary in April 1995. (Ms. Quinn-
Quintin is taking an international assignment for Textron.) Mr.
Key was Executive Vice President and Chief Financial Officer of
ConAgra, Inc. since 1992, and Managing Partner of the New York
office of Ernst and Young from 1988 to 1992.
No family relationship exists between any of the individuals
named above.
PART II
ITEM 5. MARKETS FOR THE REGISTRANT'S COMMON
EQUITY AND RELATED STOCKHOLDER MATTERS
Textron's common stock is traded on the New York, Chicago and
Pacific Stock Exchanges. Additional information regarding
"Markets for the Registrant's Common Equity and Related
Stockholder Matters" is contained
<page 10>
on pages 59 and 60 and on the
inside back cover of Textron's 1994 Annual Report to Shareholders,
which pages are incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
Information regarding "Selected Financial Data" is contained
in the Five Year Summary on page 60 of Textron's 1994 Annual
Report to Shareholders, which page is incorporated herein by
reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
"Management's Discussion and Analysis of Financial Condition
and Results of Operations" is contained in the Financial Review on
pages 25 through 32 of Textron's 1994 Annual Report to
Shareholders, which pages are incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements and the supplementary
information listed in the accompanying index to financial
statements and financial statement schedules are filed as part of
this Report.
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
Information regarding Textron's directors is contained on
pages 2 through 6 of Textron's Proxy Statement for the 1995 Annual
Meeting of Shareholders on April 26, 1995, which pages are
incorporated herein by reference.
Information regarding Textron's executive officers is included
on pages 7 through 10 of Part I of this Report.
<page 11>
ITEM 11. EXECUTIVE COMPENSATION
Information regarding "Executive Compensation" is contained on
pages 16 through 21 of Textron's Proxy Statement for the 1995
Annual Meeting of Shareholders on April 26, 1995, which pages are
incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
Information regarding "Security Ownership of Certain
Beneficial Holders" is contained on page 9, and information
regarding "Security Ownership of Management" is contained on
pages 9 and 10, of Textron's Proxy Statement for the 1995 Annual
Meeting of Shareholders on April 26, 1995, which pages are incorpo
rated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information regarding certain relationships and related
transactions is contained on page 21 of Textron's Proxy Statement
for the 1995 Annual Meeting of Shareholders on April 26, 1995,
which page is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K
(A) Financial Statements and Schedules
The consolidated financial statements, supplementary
information and financial statement schedules listed in the
accompanying index to financial statements and financial statement
schedules are filed as part of this Report.
Exhibits
3.1 Restated Certificate of Incorporation of Textron as
filed March 24, 1988. Incorporated by reference to
Exhibit 3.1 to Textron's Annual Report on Form 10-K
for the fiscal year ended January 2, 1988.
3.2 By-Laws of Textron, restated December 10, 1992.
Incorporated by reference to Exhibit 3.2 to
Textron's Annual Report on Form 10-K for the fiscal
year ended January 2, 1993.
<page 12
NOTE: Exhibits 10.1 through 10.21 below are management
contracts or compensatory plans, contracts or
agreements.
10.1A Supplemental Benefits Plan for Textron Key
Executives effective from and after
December 16, 1987 ("Supplemental Plan").
Incorporated by reference to Exhibit 10.1 to
Textron's Annual Report on Form 10-K for the fiscal
year ended January 2, 1988.
10.1B Market Square Profit Sharing Plan Schedule to
Supplemental Plan effective as of January 1, 1989,
amended and restated as of December 10, 1991.
Incorporated by reference to Exhibit 10.1(b) to
Textron's Annual Report on Form 10-K for the fiscal
year ended December 28, 1991.
10.1C Amendment to Market Square Profit Sharing Plan
Schedule to Supplemental Plan effective December 30,
1992. Incorporated by reference to Exhibit 10.1(f)
to Textron's Annual Report on Form 10-K for the
fiscal year ended January 2, 1993.
10.1D Ex-Cell-O Salaried Retirement Plan Schedule to
Supplemental Plan effective as of July 1, 1989,
amended and restated as of July 1, 1991.
Incorporated by reference to Exhibit 10.1(c) to
Textron's Annual Report on Form 10-K for the fiscal
year ended December 28, 1991.
10.1E First Amendment to Supplemental Plan effective as of
April 25, 1990. Incorporated by reference to
Exhibit 10.1(d) to Textron's Annual Report on Form
10-K for the fiscal year ended December 29, 1990.
10.1F Second Amendment to Supplemental Plan effective as
of September 25, 1991. Incorporated by reference to
Exhibit 10.1(e) to Textron's Annual Report on Form
10-K for the fiscal year ended December 28, 1991.
10.2 Survivor Benefit Plan for Textron Key Executives
effective from and after December 16, 1987.
Incorporated by reference to Exhibit 10.2 to
Textron's Annual Report on Form 10-K for the fiscal
year ended January 2, 1988.
10.3A Deferred Income Plan for Textron Key Executives
effective from and after December 16, 1987.
Incorporated by reference to Exhibit 10.3 to
Textron's Annual Report on Form 10-K for the fiscal
year ended January 2, 1988.
<page 13>
10.3B First Amendment to Deferred Income Plan for Textron
Key Executives effective as of October 27, 1992.
Incorporated by reference to Exhibit 10.3(b) to
Textron's Annual Report on Form 10-K for the fiscal
year ended January 2, 1993.
10.4A Corporate Office Annual Incentive Compensation Plan
executed on December 23, 1987. Incorporated by
reference to Exhibit 10.4 to Textron's Annual Report
on Form 10-K for the fiscal year ended January 2,
1988.
10.4B First Amendment to Corporate Office Annual Incentive
Compensation Plan effective as of December 10, 1992.
Incorporated by reference to Exhibit 10.4(b) to
Textron's Annual Report on Form 10-K for the fiscal
year ended January 2, 1993.
10.5A Textron 1982 Long-Term Incentive Plan ("1982 Plan").
Incorporated by reference to Exhibit 10.5(a) to
Textron's Annual Report on Form 10-K for the fiscal
year ended December 31, 1988.
10.5B First Amendment to 1982 Plan effective as of
February 25, 1987. Incorporated by reference to
Exhibit 10.5(b) to Textron's Annual Report on Form
10-K for the fiscal year ended January 3, 1987.
10.5C Second Amendment to 1982 Plan effective as of
December 16, 1987. Incorporated by reference to
Exhibit 10.5(c) to Textron's Annual Report on Form
10-K for the fiscal year ended January 2, 1988.
10.6A Textron 1987 Long-Term Incentive Plan ("1987 Plan")
effective as of February 25, 1987, amended and
restated as of April 27, 1988. Incorporated by
reference to Exhibit 10.6 to Textron's Annual Report
on Form 10-K for the fiscal year ended December 30,
1989.
10.6B First Amendment to 1987 Plan effective as of
September 25, 1991. Incorporated by reference to
Exhibit 10.6(b) to Textron's Annual Report on Form
10-K for the fiscal year ended December 28, 1991.
<page 14>
10.7A Textron 1990 Long-Term Incentive Plan ("1990 Plan")
effective as of April 25, 1990. 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 effective as of
September 25, 1991. Incorporated by reference to
Exhibit 10.7(b) to Textron's Annual Report on Form
10-K for the fiscal year ended December 28, 1991.
10.7C Second Amendment to 1990 Plan effective as of
December 10, 1992. 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.
10.8 Textron 1994 Long-Term Incentive Plan effective as
of April 17, 1994. Incorporated by reference to
Exhibit 10 to Textron's Quarterly Report on Form 10-
Q for the fiscal quarter ended July 2, 1994.
10.9 Textron Executive Supplemental Retirement Plan
effective as of December 15, 1994.
10.10A Employment Agreement between Textron and James F.
Hardymon dated November 24, 1989 ("Employment
Agreement"). Incorporated by reference to Exhibit
10.9 to Textron's Annual Report on Form 10-K for the
fiscal year ended December 30, 1989.
10.10B Amendment dated as of December 15, 1994 to
Employment Agreement.
10.11 Employment Agreement between Textron and Lewis B.
Campbell dated as of September 22, 1992.
Incorporated by reference to Exhibit 10.9 to
Textron's Annual Report on Form 10-K for the fiscal
year ended January 2, 1993.
10.12 Employment Agreement between Textron and Thomas P.
Hollowell dated as of January 1, 1993. Incorporated
by reference to Exhibit 10.10 to Textron's Annual
Report on Form 10-K for the fiscal year ended
January 2, 1993.
10.13 Employment Agreement between Textron and Mary L.
Howell dated as of May 4, 1993. Incorporated by
reference to Exhibit 10.11 to Textron's Annual
Report on Form 10-K for the fiscal year ended
January 1, 1994.
<page 15>
10.14 Employment Agreement between Textron and Richard A.
McWhirter dated as of February 16, 1993.
Incorporated by reference to Exhibit 10.11 to
Textron's Annual Report on Form 10-K for the fiscal
year ended January 2, 1993.
10.15 Employment Agreement between Textron and Thomas D.
Soutter dated as of March 1, 1985, as amended by
Amendment to Employment Agreement dated as of
February 1, 1987 and Amendment to Employment
Agreement dated as of February 1, 1988. Incorporat
ed by reference to Exhibit 10.11 to Textron's Annual
Report on Form 10-K for the fiscal year ended
December 30, 1989.
10.16 Employment Agreement between Textron and William F.
Wayland dated January 1, 1989. Incorporated by
reference to Exhibit 10.12 to Textron's Annual
Report on Form 10-K for the fiscal year ended
December 30, 1989.
10.17 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.
10.18 Textron Executive Severance Plan effective
December 16, 1987. Incorporated by reference to
Exhibit 10.13 to Textron's Annual Report on Form
10-K for the fiscal year ended January 2, 1988.
10.19A Pension Plan for Directors originally effective as
of March 8, 1986, as amended by a First Amendment
effective as of August 26, 1987. Incorporated by
reference to Exhibit 10.14 to Textron's Annual
Report on Form 10-K for the fiscal year ended
December 31, 1988.
10.19B Second Amendment to Pension Plan for Directors
effective as of October 1, 1990. Incorporated by
reference to Exhibit 10.16(b) to Textron's Annual
Report on Form 10-K for the fiscal year ended
December 29, 1990.
10.20 Deferred Income Plan for Textron Directors effective
May 26, 1993. Incorporated by reference to Exhibit
10.18 to Textron's Annual Report on Form 10-K for
the fiscal year ended January 1, 1994.
10.21 Additional Benefits for certain executive officers.
Incorporated by reference to Exhibit 10.16 to
Textron's Annual Report on Form 10-K for the fiscal
year ended January 2, 1988.
<page 16>
10.22A Credit Agreement dated as of November 1, 1993 among
Textron, the Lenders listed therein and Bankers
Trust Company as Administrative Agent ("Credit
Agreement"). Incorporated by reference to Exhibit
10.20A to Textron's Annual Report on Form 10-K for
the fiscal year ended January 1, 1994.
10.22B First Amendment dated as of October 30, 1994 to
Credit Agreement.
10.23A Line of Credit dated as of November 1, 1993 among
Textron, the Lenders listed therein and Bankers
Trust Company as Administrative Agent ("Line of
Credit"). Incorporated by reference to Exhibit
10.20B to Textron's Annual Report on Form 10-K for
the fiscal year ended January 1, 1994.
10.23B First Amendment dated as of October 30, 1994 to Line
of Credit.
12.1 Computation of ratio of income to fixed charges of
the Textron Parent Company Borrowing Group.
12.2 Computation of ratio of income to fixed charges of
Textron Inc. including all majority-owned
subsidiaries.
13 A portion (pages 25 and following) of Textron's 1994
Annual Report to Shareholders. Except for pages or
items specifically incorporated by reference herein,
such portion of Textron's 1994 Annual Report to
Shareholders is furnished for the information of the
Commission and is not filed as part of this Report.
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.
27 Financial Data Schedule
<page 17>
(B) Reports on Form 8-K
No reports on Form 8-K were filed during the last quarter
of the period covered by this Report.
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
28th day of March, 1995.
TEXTRON INC.
Registrant
By: /s/ Arnold M. Friedman
Arnold M. Friedman
Attorney-in-fact
Pursuant to the requirements of the Securities Exchange Act of
1934, this Report has been signed below on this 28th day of March,
1995, by the following persons on behalf of the registrant and in
the capacities indicated:
NAME TITLE
* Chairman and Chief
Executive Officer,
James F. Hardymon Director
(principal executive officer)
* President and Chief Operating Officer,
Lewis B. Campbell Director
* Director
H. Jesse Arnelle
<page 18>
* Director
R. Stuart Dickson
* Director
B.F. Dolan
* Director
Webb C. Hayes, III
* Director
John D. Macomber
* Director
Barbara Scott Preiskel
* Director
Sam F. Segnar
* Director
Jean Head Sisco
* Director
John W. Snow
* Director
Martin D. Walker
<page 19>
* Director
Thomas B. Wheeler
* Executive Vice President and
Richard A. McWhirter Chief Financial Officer
(principal financial officer)
* Vice President and Controller
William P. Janovitz (principal accounting officer)
*By: /s/ Arnold M. Friedman
Arnold M. Friedman
Attorney-in-fact
<page 20>
TEXTRON INC.
INDEX TO FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULES
Item 14(a)
Form Annual Report
Textron Inc. 10-K to Shareholders
Report of Independent Auditors 33
Consolidated Statement of Income for each of the three
years in the period ended December 31, 1994 34
Consolidated Balance Sheet at December 31, 1994 and 35
January 1, 1994
Consolidated Statement of Cash Flows for each of the
three years in the period ended December 31, 1994 36
Consolidated Statement of Changes in Shareholders' Equity
for each of the three years in the period ended 37
December 31, 1994
Summary of Significant Accounting Policies 38 - 40
Notes to Consolidated Financial Statements 41 - 58
Revenues and Income by Business Segment 28
Supplementary Information (Unaudited):
Quarterly Financial Information 1994 and 1993 59
Financial Statement Schedules for each of the three years
in the period ended December 31, 1994
I Condensed financial information of registrant 21
II Valuation and qualifying accounts 22
All other schedules are omitted because the conditions requiring the filing
thereof do not exist or because the information required is included in the
financial statements and notes thereto.
<PAGE 21>
TEXTRON INC.
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
For each of the three years in the period ended December 31, 1994
Financial information of the Registrant is omitted because condensed
financial information of the Textron Parent Company Borrowing Group, which
includes the Registrant and all of its majority-owned subsidiaries other than
its finance and insurance subsidiaries, is shown on pages 55-56 of Textron's
1994 Annual Report to Shareholders. Management believes that the disclosure of
financial information on the basis of the Textron Parent Company Borrowing Group
results in a more meaningful presentation, since this group constitutes the
Registrant's basic borrowing entity and the only restrictions on net assets of
Textron's subsidiaries relate to its finance and insurance subsidiaries. The
Registrant's investment in its finance and insurance subsidiaries is reflected
on page 55 of Textron's 1994 Annual Report to Shareholders under the caption
"Investments in finance and insurance subsidiaries."
The Textron Parent Company Borrowing Group received dividends of $115
million, $94 million and $78 million from its finance and insurance subsidiaries
in 1994, 1993 and 1992, respectively. The portion of the net assets of
Textron's finance and insurance subsidiaries available for cash dividends and
other payments to the Textron Parent Company Borrowing Group is restricted by
the terms of lending agreements and insurance statutory requirements. As of
December 31, 1994, approximately $245 million of their net assets of $2.2
billion was available to be transferred to the Textron Parent Company Borrowing
Group pursuant to these restrictions.
For information concerning the Textron Parent Company Borrowing Group's
long-term debt and restrictions contained in its debt agreements, see Note 8 to
the consolidated financial statements appearing on pages 45-47 of Textron's 1994
Annual Report to Shareholders.
<PAGE 22>
<TABLE>
TEXTRON INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
For each of the three years in the period ended December 31, 1994
(In millions)
<CAPTION>
Allowance for credit losses on finance receivables 1994 1993 1992
<S> <C> <C> <C>
Balance at beginning of year $225 $212 $183
Additions charged to income (a) 191 171 189
Deductions from reserves (b) (169) (158) (176)
Acquisitions and other items 3 - 16
Balance at end of year $250 $225 $212
<FN>
(a) Excludes the effect of recoveries on accounts previously written off of $31
million, $29 million and $28 million in 1994, 1993 and 1992, respectively,
which have been credited directly to income.
(b) Consists primarily of receivables written off.
</TABLE>
<PAGE 23>
TEXTRON INC.
Index of Exhibits
Annual Report on Form 10-K
for the Fiscal Year Ended December 31, 1994
Exhibit Description
10.9 Textron Executive Supplemental Retirement Plan
Effective as of December 15, 1994.
10.10B Amendment dated as of December 15, 1994 to
Employment Agreement between Textron and James
F. Hardymon dated as of November 24, 1989.
10.22B First Amendment dated as of October 30, 1994 to
Credit Agreement dated as of November 1, 1993
among Textron, the Lenders listed therein and
Bankers Trust Company as Administrative Agent.
10.23B First Amendment dated as of October 30, 1994 to
Line of Credit dated as of November 1, 1993
among Textron, the Lenders listed therein and
Bankers Trust Company as Administrative Agent.
12.1 Computation of ratio of income to fixed charges
of the Textron Parent Company Borrowing Group.
12.2 Computation of ratio of income to fixed charges
of Textron Inc. including all majority-owned
subsidiaries.
13 A portion (page 25 and following) of Textron's
1993 Annual Report to Shareholders. Except for
pages or items specifically incorporated by
reference therein, such portion of Textron's
Annual Report to Shareholders is furnished for
the information of the Commission and is not
filed as part of this Report.
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.
27 Financial Data Schedule.
TEXTRON INC.
EXECUTIVE SUPPLEMENTAL RETIREMENT PLAN
ARTICLE 1 - GENERAL
1.01 The purpose of this Plan is to provide a retirement benefit
that will enable Textron to attract and retain selected
executives whose employment with a Textron Company will begin or
has begun at or after age forty-five (45).
ARTICLE II - EFFECTIVE DATE
2.01 This Plan shall be effective from and after December 15,
1994.
ARTICLE III - PARTICIPATION
3.01 An executive shall participate in this Plan if (i) his
employment with a Textron Company commenced at or after age forty-
five (45) and (ii) he has been approved for participation by
Textron's Chief Executive Officer.
ARTICLE IV - BENEFIT
4.01 Subject to Section 4.02, the benefit provided to
Participants who qualify for benefits under this Plan is an
annuity commencing upon retirement on or after the date the
Participant reaches age sixty-five (65) equal to 50% of Average
Pay. The benefit shall be paid as a single life annuity or other
optional form of benefit as provided by the qualified Textron
Pension Plan.
4.02 The benefit provided by this Plan shall be reduced by any
amounts payable to the Participant under Textron's qualified
Pension Plans, Textron's non-qualified Pension Plans and pension
arrangements provided to the Participant by a Textron Company or
any prior employer. The qualified and non-qualified Avco
Financial Services, Inc. Profit Sharing Retirement Plans are
considered as pension plans for this section of this Plan.
4.03 To be eligible for benefits under this Plan, the Participant
must maintain continued employment with a Textron Company until
age sixty-five (65).
4.04 One hundred percent (100%) of the benefit payable hereunder
shall be provided to a Participant if the Participant has
achieved at least fifteen (15) years of employment with a Textron
Company prior to age sixty-five (65). A full or pro rata
benefit, at the discretion of Textron's Chief Executive Officer,
may be provided to a Participant who has less than fifteen (15)
years of Textron service at age sixty-five (65) or whose
employment with a Textron Company ends prior to age 65.
ARTICLE V - UNFUNDED PLAN
5.01 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.
5.02 This Plan is intended in part to provide benefits for a
select group of management employees who are highly compensated,
pursuant to Section 110 of ERISA and Labor Department Regulations
Section 2520.104-23, and in part to be an excess benefit plan,
pursuant to section 3(36) of ERISA.
5.03 No participant shall be required or permitted to make
contributions to this Plan.
ARTICLE VI - PLAN ADMINISTRATION
6.01 Textron Shall be the administrator of this Plan and shall be
solely responsible for its general administration and
interpretation and for carrying out the provisions hereof, and
shall have all such powers as may be necessary to do so. Textron
may from time to time establish rules for the administration of
this Plan and the transaction of its business.
6.02 The payment of any benefit under Article IV shall be made at
the same time, in the same manner, to the same persons and in the
same proportions as is made the payment or distribution under the
related Qualified Plan, or otherwise as determined by the
Textron's Chief Executive Officer in his sole discretion.
Textron may withhold from benefits and accounts under this Plan
any taxes or other amounts required by law to be withheld. For
purposes of this Section 6.02, "Qualified Plan" means the Textron
Pension Plan.
6.03 Textron may employ or engage such agents, accountants,
actuaries, counsel, other experts and other persons as it shall
deem 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 and all action so taken, suffered or omitted shall be
conclusive upon each of them and upon all other person interest
in this Plan.
6.04 Claims under this Plan shall be filed with Textron on its
prescribed forms. If a claim is denied wholly or in part it
shall be denied within a reasonable time after its filing in
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 this claim, he or his
authorized representative shall submit to Textron within 90 days
after his claim has been denied a written request for a hearing.
Such claimant or his authorized representative may then review
pertinent documents and submit issues and comments in writing.
Textron shall schedule an opportunity for a full and fair hearing
of the issue within the next 60 days. Within 60 days after the
hearing Textron shall communicate its decision to the claimant in
writing, stating the reasons for its decision and referring to
pertinent Plan provisions.
ARTICLE VII - MISCELLANEOUS
7.01 Unless a contrary or different meaning is expressly
provided, each use in this Plan of the masculine gender shall
include the feminine and each use of the singular number shall
include the plural.
7.02 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 Textron's Chief Executive Officer. Any
attempt to alienate, sell, transfer, assign, pledge or otherwise
encumber any benefit, whether presently or subsequently payable,
shall be void unless so approved. Except as required by law, no
benefit payable under this Plan shall in any manner be subject to
garnishment, attachment, execution or other legal process, or be
liable for or subject to the debts or liability of any
Participant or beneficiary.
7.03 Notwithstanding the above, in the event that the participant
retires or his employment otherwise terminates at any time after
a "Change in Control" as defined below, the participant shall, in
lieu of the benefit payable under Section 4.01, and regardless of
his age at retirement or termination, receive a pro rata portion
of the benefit that would have been payable under Section 4.01 in
accordance with the following schedule of a benefit determined by
the Chief Executive Officer pursuant to Section 4.04 of this
Plan.
Years of Service % of Benefit
15 or more 100
14 95
13 90
12 85
11 80
10 75
less than 10 0
For the purpose 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 the beneficial owner (as defined in
Rule 13d-3 under the Act) of more than thirty percent (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 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 approved) cease for any
reason to constitute a majority thereof, or (iii) the
shareholders of Textron approve 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 be being converted into voting
securities of the surviving entity) more than eighty percent
(80%) of the combined voting securities of Textron or such
surviving entity outstanding immediately after such merger or
consolidation, or (iv) the shareholders of Textron approve a plan
of complete liquidation of Textron or an agreement for the sale
or disposition by Textron or an agreement for the sale or
disposition by Textron of all or substantially all of Textron's
assets.
7.04 This Plan shall be construed in accordance with the laws of
the State of Delaware.
7.05 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 any capacity with, or as an employee of, any Textron
Company.
7.06 The Organization and Compensation Committee of Textron's
Board of Directors shall render all decisions under this Plan
affecting Textron's Chief Executive Officer.
ARTICLE VII - DEFINITIONS
8.01 "Average Pay" shall mean the Participant's highest
consecutive five year average Compensation.
8.02 "Compensation" shall mean base salary, accrued annual
incentive compensation and paid long term incentive compensation
awards including deferrals.
8.03 "ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
8.04 "Participant" means an executive who is participating in
this Plan pursuant to Article III.
8.05 "Plan" means this Executive Supplemental Retirement Plan.
8.06 "Textron" means Textron Inc., a Delaware Corporation, or any
successor of Textron Inc. that shall assume its obligations under
this Plan.
8.07 "Textron Company" means Textron or any company controlled by
or under common control with Textron.
8.08 "Textron Pension Plan" means the qualified Textron Pension
Plan, as amended and restated from time to time.
IN WITNESS WHEREOF, Textron Inc. has caused this document to
be executed by its proper officer duly authorized there this
15th day of December, 1994.
TEXTRON INC.
By: /s/ William F. Wayland
Executive Vice President
Administration and Chief Human
Resources Officer
AMENDMENT TO
EMPLOYMENT AGREEMENT
THIS AMENDMENT, dated as of December 15, 1994, amends the
Employment Agreement (the `Agreement") dated November 24, 1989,
between Textron Inc., a Delaware corporation (the "Corporation")
and James F. Hardymon (the "Executive").
The Corporation and the Executive hereby agree to add a new
Section 4(h) as follows:
(h) Retirement Units
(a) The Corporation hereby grants to the Executive
500,000 Retirement Units (the "Retirement Units") with a
stated value of $49.1875 per unit (the "Stated Value").
Upon the Executive's retirement from the Corporation on or
after November 30, 1999, the Corporation shall award to the
Executive for each Retirement Unit a cash amount equal to
the amount by which (i) the average of the composite closing
prices (as reported on the New York Stock Exchange
Consolidated Tape) of the Corporation's common stock for the
first ten trading days after the Executive's retirement date
exceeds (ii) the Stated Value. Such award shall be paid to
the Executive in a lump sum or in annual installments as may
be determined by the Organization and Compensation Committee
of the Corporation's Board of Directors. Except as
otherwise provided herein, the Executive shall not be
entitled to receive such award if his employment with the
Corporation ends for any reason prior to November 30, 1999,
provided that if the Executive's employment ends prior to
such date because of his death or disability, the Executive
or the Executive's estate may receive a pro-rata portion of
such award in the discretion of the Corporation's Board of
Directors.
Notwithstanding the above, in the event that the
Executive retires or his employment otherwise terminates at
any time after a "change in control" (as defined in the
Textron 1994 Long-Term Incentive Plan), the Corporation
shall, in lieu of the above award, award to the Executive
(or to the Executive's estate in the event of his death
prior to payment) upon such retirement or other termination
of employment, a cash amount equal to the amount by which
(i) the highest closing price per share of the
Corporation's Common Stock (as reported on the New York
Stock Exchange Consolidated Tape during the 30-day period
ending on the date of such change in control exceeds (ii)
the Stated Value.
The number of Retirement Units granted to the Executive
hereunder and the Stated Value of each Retirement Unit shall
be proportionately adjusted for any increase or decrease in
the number of issued shares of the Corporation's Common
Stock resulting from a stock split, stock dividend or any
other increase or decrease in such shares effective without
receipt of consideration by the Corporation.
IN WITNESS WHEREOF, the parties have caused this Amendment
to be duly executed as of the day and year first above written.
/s/ James F. Hardymon
James F. Hardymon
TEXTRON INC.
By: /s/ Martin D. Walker
Martin D. Walker
Chairman, Organization and
Compensation Committee
ATTEST:
/s/ Karen A. Quinn-Quintin
Secretary
FIRST AMENDMENT TO CREDIT AGREEMENT
THIS AMENDMENT is dated as of the 30th day of Octo
ber, 1994 (the "First Amendment") among TEXTRON INC., a Dela
ware corporation (including its successors and assigns as
permitted by the Credit Agreement as defined below, "Company"),
THE LENDERS LISTED ON THE SIGNATURE PAGES HEREOF (individually
referred to herein as a "Lender" and collectively as
"Lenders"), and BANKERS TRUST COMPANY ("Bankers"), as Adminis
trative Agent for Lenders ("Agent").
RECITALS
WHEREAS, Company, the lenders listed therein and Agent
entered into a credit agreement dated as of November 1, 1993
("Credit Agreement"); and
WHEREAS, Company, Lenders and Agent desire to amend the
Credit Agreement;
NOW, THEREFORE, in consideration of the premises and the
agreements, provisions and covenants herein contained, Company,
Lenders and Agent agree as follows:
1. Subsection 2.7A(i)(a) of the Credit Agreement is
hereby deleted in its entirety and the following substituted
therefor:
"(a) Each Eurodollar Rate Loan shall bear interest on
the unpaid principal amount thereof for the applicable
Interest Period at an interest rate per annum equal to the
sum of the Applicable Margin plus the applicable Adjusted
Eurodollar Rate. The "Applicable Margin" for any Interest
Period means the applicable percentage amount set forth in
the table below based upon the rating issued by Standard &
Poor's Corporation and Moody's Investors Service, Inc. for
the Company's long-term unsecured indebtedness at the
Interest Rate Determination Date for such Interest Period:
Rating Category* Applicable Margin
A/A2 or higher .2250%
A-/A3 .2500%
BBB+/Baal .3125%
BBB/Baa2 .3550%
BBB-/Baa3 or lower
or no rating .4250%
_______________
* In the case of "split" ratings ( i.e., if the ratings of
each such rating agency differ by one or more categories,
including numerical modifiers and (+) and (-) as
categories), the Applicable Margin will be based upon the
higher of the two ratings."
2. Subsection 2.8A(i) of the Credit Agreement is
hereby deleted in its entirety and the following substituted
therefor:
"(A) Facility Fees. (i) The Company shall pay
to the Agent for the account of the Banks a facility
fee as set forth in the table below, accrued from and
including the Effective Date to and including the
Final Maturity Date, on the daily average aggregate
amount of the Commitments (whether used or unused)
based upon the rating issued by Standard & Poor's
Corporation and Moody's Investors Service, Inc. for
the Company's long-term unsecured indebtedness at the
beginning of each fiscal quarter of the Company:
Rating Category* Facility Fee
A/A2 or higher .1250%
A-/A3 .1500%
BBB+/Baal .1875%
BBB/Baa2 .2250%
BBB-/Baa3 or lower
or no rating .2500%
_______________
* In the case of "split" ratings ( i.e., if the ratings of
each such rating agency differ by one or more categories,
including numerical modifiers and (+) and (-) as
categories), the facility fee will be based upon the
higher of the two ratings."
3. The Final Maturity Date is hereby extended to October
29, 1997 and the Facility Extension Date is hereby extended to
October 29, 1995.
4. The execution and delivery of this First Amendment by
the Company is deemed a certification by the Company that (i)
the representations and warranties set forth in Section 4 of
the Credit Agreement, as amended by this First Amendment, are
true and correct on and as of the date hereof as if made on and
as of the date hereof, (ii) there exists no Event of Default or
Potential Event of Default on and as of the date hereof and
(iii) between November 1, 1993 and October 30, 1994 there have
been no changes in generally accepted accounting principles
which have had a material effect on the Company's financial
condition.
5. This First Amendment shall not constitute a consent
or waiver to or modification of any other provision, term or
condition of the Credit Agreement. All terms, provisions,
covenants, representations, warranties, agreements and condi
tions contained in the Credit Agreement, as amended hereby,
shall remain in full force and effect.
6. As permitted by Section 10.16 of the Credit Agree
ment, this First Amendment may be executed in any number of
counterparts and by different parties hereto in separate coun
terparts, each of which when so executed and delivered shall be
deemed an original, but all such counterparts together shall
constitute but one and the same instrument. Subject to the
prior execution of a counterpart of this First Amendment by
each of the parties hereto and delivery of copies hereof to
Company and Agent, this First Amendment shall be deemed effec
tive as of October 30, 1994.
7. Certain Computations. All interest, fees and other
amounts accruing under the Credit Agreement on or prior to, or
determined in respect of any day accruing on or prior to
October 30, 1994 shall be computed and determined as provided
in this Agreement before giving effect to this First Amendment.
8. THIS FIRST AMENDMENT SHALL BE GOVERNED BY, AND CON
STRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK
WITHOUT REGARD TO THE PRINCIPLES OF CONFLICT OF LAWS.
WITNESS the due execution hereof by the respective duly
authorized officers of the undersigned as of the date first
above written.
Borrower
TEXTRON INC.
By: /s/ Brian T. Downing
Title: Vice President and Treasurer
ABN-Amro Bank, N.V.
By: /s/ James E. Davis
James E. Davis
President
By: /s/ Elliott O. May
Elliott O. May
Group Vice President and
Marketing Manager
Bank of American National Trust
and Savings Association
By: /s/ Michael J. Brown
Vice President
Bank of American Illinois
By: /s/ Michael J. Brown
Vice President
Bank of Montreal/Harris Bank
By: /s/ Marc R. Heyden
Director
Bank of New York
By: /s/ David C. Judge
Vice President
The Bank of Nova Scotia
By: /s/ R. Bradley
Bank of Tokyo Trust Company
By: /s/ G. Stewart
VP & Deputy Manager
Bankers Trust Company
By: /s/ Edward G. Benedict
Vice President
Banque Nationale de Paris
By: /s/ Phil Truesdale
Vice President
Banque Paribas
By: /s/ John J. McCormick, III
Assistant Vice President
By: /s/ Mary T. Finnegan
Vice President
Barclays Bank PLC
By: /s/ Philip S.A. Capparis
Associate Director
Canadian Imperial Bank of Commerce
By: /s/ J. Anderson
Chase Manhattan Bank
By: /s/ Robert D. Dunbar, Jr.
Vice President
Chemical Bank
By: /s/ Robert Wood
Vice President
Citibank, N.A.
By: /s/ W. Marten
Comerica Bank
By: /s/ Jon A. Bird
Vice President
CoreStates Bank, N.A.
By: /s/ Donna J. Emhart
Asst. Vice President
Credit Lyonnais New York Branch
By: /s/ Robert Ivosevich
Sr. Vice President
Credit Lyonnais Cayman Island Branch
By: /s/ Robert Ivosevich
Authorized Signature
Credit Suisse
By: /s/ Juerg Johner
Associate
Deutsche Bank AG, New York Branch
By: /s/ Robert B. Landis
Managing Director
By: /s/ J. Tracy Mehr
Asst. Vice President
First American National
By: /s/ Scott M. Bane
Vice President
First Interstate Bank of California
By: /s/ Peter G. Olson
Sr. Vice President
By: /s/ Wendy V. C. Purcell
Asst. Vice President
The First National Bank of Boston
By: /s/ Carol A. Lovell
Director
The First National Bank of Chicago
By: /s/ Thomas M. Harklin
The Fuji Bank, Limited, New York Branch
By: /s/ Yoshihito Shotyuso
Vice President
The Industrial Bank of Japan
Trust Company
By: /s/ Takeshi Kawano
Sr. Vice President
Morgan Guaranty Trust Company
By: /s/ Steven Keneally
Vice President
Mellon Bank, N.A.
By: /s/ Diane P. Durnin
Vice President
National Westminster Bank PLC
By: /s/ David Apps
NationsBank
By: /s/ William Casperson
Vice President
NBD Bank, N.A.
By: /s/ Carolyn J. Parks
Vice President
Royal Bank of Canada
By: /s/ Alexander Bill
Senior Manager
The Sanwa Bank, Limited
By: /s/ Marjorie Futornick
Vice President
Shawmut Bank
By: /s/ John B. Desmond
Vice President
Swiss Bank Corporation
By: /s/ Michael T. Fabiano
Associate Director
By: /s/Donald H. Lucardi
Director
The Toronto-Dominion Bank
By: /s/ Diane Bailey
Mgr. Cr. Admin.
THIRD NATIONAL BANK in Nashville
By: /s/ Peter Gentry
Asst. Vice President
FIRST AMENDMENT TO LINE OF CREDIT
THIS AMENDMENT is dated as of the 30th day of Octo
ber, 1994 (the "First Amendment") among TEXTRON INC., a Dela
ware corporation (including its successors and assigns as
permitted by the Line of Credit as defined below, "Company"),
THE LENDERS LISTED ON THE SIGNATURE PAGES HEREOF (individually
referred to herein as a "Lender" and collectively as "Lend
ers"), and BANKERS TRUST COMPANY ("Bankers"), as Administrative
Agent for Lenders ("Agent").
RECITALS
WHEREAS, Company, the lenders listed therein and Agent
entered into a line of credit agreement dated as of November 1,
1993 ("Line of Credit"); and
WHEREAS, Company, Lenders and Agent desire to amend the
Line of Credit;
NOW, THEREFORE, in consideration of the premises and the
agreements, provisions and covenants herein contained, Company,
Lenders and Agent agree as follows:
1. Subsection 2.7A(i)(a) of the Line of Credit is
hereby deleted in its entirety and the following substituted
therefor:
"(a) Each Eurodollar Rate Loan shall bear interest on
the unpaid principal amount thereof for the applicable
Interest Period at an interest rate per annum equal to the
sum of the Applicable Margin plus the applicable Adjusted
Eurodollar Rate. The "Applicable Margin" for any Interest
Period means the applicable percentage amount set forth in
the table below based upon the rating issued by Standard &
Poor's Corporation and Moody's Investors Service, Inc. for
the Company's long-term unsecured indebtedness at the
Interest Rate Determination Date for such Interest Period:
Rating Category* Applicable Margin
A/A2 or higher .2600%
A-/A3 .3000%
BBB+/Baal .3750%
BBB/Baa2 .4300%
BBB-/Baa3 or lower
or no rating .4500%
_______________
* In the case of "split" ratings ( i.e., if the ratings of
each such rating agency differ by one or more categories,
including numerical modifiers and (+) and (-) as
categories), the Applicable Margin will be based upon the
higher of the two ratings."
2. Subsection 2.8A(i) of the Line of Credit is
hereby deleted in its entirety and the following substituted
therefor:
"(A) Facility Fees. (i) The Company shall pay
to the Agent for the account of the Banks a facility
fee as set forth in the table below, accrued from and
including the Effective Date to and including the
Final Maturity Date, on the daily average aggregate
amount of the Commitments (whether used or unused)
based upon the rating issued by Standard & Poor's
Corporation and Moody's Investors Service, Inc. for
the Company's long-term unsecured indebtedness at the
beginning of each fiscal quarter of the Company:
Rating Category* Facility Fee
A/A2 or higher .0900%
A-/A3 .1000%
BBB+/Baal .1250%
BBB/Baa2 .1500%
BBB-/Baa3 or lower
or no rating .2250%
_______________
* In the case of "split" ratings ( i.e., if the ratings of
each such rating agency differ by one or more categories,
including numerical modifiers and (+) and (-) as
categories), the applicable margin will be based upon the
higher of the two ratings."
3. The Final Maturity Date is hereby extended to October
29, 1995.
4. The execution and delivery of this First Amendment by
the Company is deemed a certification by the Company that (i)
the representations and warranties set forth in Section 4 of
the Line of Credit, as amended by this First Amendment, are
true and correct on and as of the date hereof as if made on and
as of the date hereof, (ii) there exists no Event of Default or
Potential Event of Default on and as of the date hereof and
(iii) between November 1, 1993 and October 30, 1994 there have
been no changes in generally accepted accounting principles
which have had a material effect on the Company's financial
condition.
5. This First Amendment shall not constitute a consent
or waiver to or modification of any other provision, term or
condition of the Line of Credit. All terms, provisions, cove
nants, representations, warranties, agreements and conditions
contained in the Line of Credit, as amended hereby, shall
remain in full force and effect.
6. As permitted by Section 10.16 of the Line of Credit,
this First Amendment may be executed in any number of counter
parts and by different parties hereto in separate counterparts,
each of which when so executed and delivered shall be deemed an
original, but all such counterparts together shall constitute
but one and the same instrument. Subject to the prior
execution of a counterpart of this First Amendment by each of
the parties hereto and delivery of copies hereof to Company and
Agent, this First Amendment shall be deemed effective as of
October 30, 1994.
7. Certain Computations. All interest, fees and other
amounts accruing under the Line of Credit on or prior to, or
determined in respect of any day accruing on or prior to,
October 30, 1994 shall be computed and determined as provided
in this Agreement before giving effect to this First Amendment.
8. THIS FIRST AMENDMENT SHALL BE GOVERNED BY, AND CON
STRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK
WITHOUT REGARD TO THE PRINCIPLES OF CONFLICT OF LAWS.
WITNESS the due execution hereof by the respective duly
authorized officers of the undersigned as of the date first
above written.
Borrower
TEXTRON INC.
By: /s/ Brian T. Downing
Title: Vice President and Treasurer
ABN-Amro Bank, N.V.
By: /s/ James E. Davis
James E. Davis
President
By: /s/ Elliott O. May
Elliott O. May
Group Vice President and
Marketing Manager
Bank of American National Trust
and Savings Association
By: /s/ Michael J. Brown
Vice President
Bank of American Illinois
By: /s/ Michael J. Brown
Vice President
Bank of Montreal/Harris Bank
By: /s/ Marc R. Heyden
Director
Bank of New York
By: /s/ David C. Judge
Vice President
The Bank of Nova Scotia
By: /s/ M. R. Bradley
Bank of Tokyo Trust Company
By: /s/ G. Stewart
VP & Deputy Manager
Bankers Trust Company
By: /s/ Edward G. Benedict
Vice President
Banque Nationale de Paris
By: /s/ Phil Truesdale
Vice President
Banque Paribas
By: /s/ John J. McCormick, III
Assistant Vice President
By: /s/ Mary T. Finnegan
Vice President
Barclays Bank PLC
By: /s/ Philip S.A. Capparis
Associate Director
Canadian Imperial Bank of Commerce
By: /s/ J. Anderson
Chase Manhattan Bank
By: /s/ Robert D. Dunbar, Jr.
Vice President
Chemical Bank
By: /s/ Robert Wood
Vice President
Citibank, N.A.
By: /s/ W. Marten
Comerica Bank
By: /s/ Jon A. Bird
Vice President
CoreStates Bank, N.A.
By: /s/ Donna J. Emhart
Asst. Vice President
Credit Lyonnais New York Branch
By: /s/ Robert Ivosevich
Sr. Vice President
Credit Lyonnais Cayman Island Branch
By: /s/ Robert Ivosevich
Authorized Signature
Credit Suisse
By: /s/ Juerg Johner
Associate
Deutsche Bank AG, New York Branch
By: /s/ Robert B. Landis
Managing Director
By: /s/ J. Tracy Mehr
Asst. Vice President
First American National
By: /s/ Scott M. Bane
Vice President
First Interstate Bank of California
By: /s/ Peter G. Olson
Sr. Vice President
By: /s/ Wendy V. C. Purcell
Asst. Vice President
The First National Bank of Boston
By: /s/ Carol A. Lovell
Director
The First National Bank of Chicago
By: /s/ Thomas M. Harklin
The Fuji Bank, Limited, New York Branch
By: /s/ Yoshihito Shotyuso
Vice President
Fleet National Bank
By: /s/ Timothy J. McCormick
Vice President
The Industrial Bank of Japan
Trust Company
By: /s/ Takeshi Kawano
Sr. Vice President
Morgan Guaranty Trust Company
By: /s/ Steven Keneally
Vice President
Mellon Bank, N.A.
By: /s/ Diane P. Durnin
Vice President
National Westminster Bank PLC
By: /s/ David Apps
NationsBank
By: /s/ William Casperson
Vice President
NBD Bank, N.A.
By: /s/ Carolyn J. Parks
Vice President
Royal Bank of Canada
By: /s/ Alexander Bill
Senior Manager
The Sanwa Bank, Limited
By: /s/ Marjorie Futornick
Vice President
Shawmut Bank
By: /s/ John B. Desmond
Vice President
Swiss Bank Corporation
By: /s/ Michael T. Fabiano
Associate Director
By: /s/Donald H. Lucardi
Director
The Toronto-Dominion Bank
By: /s/ Diane Bailey
Mgr. Cr. Admin.
THIRD NATIONAL BANK in Nashville
By: /s/ Peter Gentry
Asst. Vice President
EXHIBIT 12.1
<TABLE>
TEXTRON PARENT COMPANY BORROWING GROUP
COMPUTATION OF RATIO OF INCOME TO FIXED CHARGES
(Unaudited)
(In millions except ratios)
<CAPTION>
Year
1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
Fixed charges:
Interest expense (1) $ 206 $ 236 $ 254 $ 244 $ 259
Estimated interest portion of rents 20 21 19 19 20
Total fixed charges $ 226 $ 257 $ 273 $ 263 $ 279
Income:
Income before income taxes (2) $ 754 $ 616 $ 527 $ 495 $ 459
Fixed charges 226 257 273 263 279
Eliminate equity in undistributed
pretax income of finance and
insurance subsidiaries (347) (341) (286) (246) (163)(3)
Adjusted income $ 633 $ 532 $ 514 $ 512 $ 575
Ratio of income to fixed charges 2.80 2.07 1.88 1.95 2.06
<FN>
____________________
(1) Includes interest unrelated to borrowings of $37 million in 1994, $37 million in 1993, $36 million in 1992, $27
million in 1991 and $26 million in 1990 (primarily interest accretion).
(2) Excludes the cumulative effect of changes in accounting principles in 1992.
(3) Net of an extraordinary dividend of $50 million.
</TABLE>
EXHIBIT 12.2
<TABLE>
TEXTRON INC. INCLUDING ALL MAJORITY-OWNED SUBSIDIARIES
COMPUTATION OF RATIO OF INCOME TO FIXED CHARGES
(Unaudited)
(In millions except ratios)
<CAPTION>
Year
1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
Fixed charges:
Interest expense (1) $ 665 $ 668 $ 743 $ 754 $ 775
Estimated interest portion of rents 41 43 41 39 39
Total fixed charges $ 706 $ 711 $ 784 $ 793 $ 814
Income:
Income before income taxes (2) $ 754 $ 616 $ 527 $ 495 $ 459
Elimination of minority interest in
pretax income of Paul Revere (22) (4) 0 0 0
Fixed charges 706 711 784 793 814
Adjusted income $ 1,438 $ 1,323 $ 1,311 $ 1,288 $ 1,273
Ratio of income to fixed charges 2.04 1.86 1.67 1.62 1.56
<FN>
____________________
(1) Includes interest unrelated to borrowings of $37 million in 1994, $37 million in 1993, $36 million in 1992,
$27 million in 1991 and $26 million in 1990 (primarily interest accretion).
(2) Excludes the cumulative effect of changes in accounting principles in 1992.
</TABLE>
<PAGE> 25
-------------------------------------------------------------------------------
FINANCIAL REVIEW
LIQUIDITY AND CAPITAL RESOURCES
Financing for Textron is conducted through two separate borrowing
groups: the Textron Parent Company Borrowing Group (consisting of all
entities of Textron other than its finance and insurance subsidiaries)
and Textron's finance and insurance subsidiaries. This framework allows
the finance and insurance subsidiaries, with specialized needs related
to their portfolios of receivables and investments, to finance their
respective operations, each through its own external group of creditors
without guarantee from the Textron Parent Company Borrowing Group.
Accordingly, the liquidity and capital resources of Textron's operations
are best understood by separately considering its independent borrowing
groups.
TEXTRON PARENT COMPANY BORROWING GROUP
Sources of cash to the Textron Parent Company Borrowing Group include
cash generated by the operations comprising this group and dividends
received from the finance and insurance subsidiaries, supplemented with
borrowings. Information about the cash flows of this group for each of
the three years in the period ended December 31, 1994 is set forth in
the Group's statement of cash flows included in Note 18 (page 56) to the
consolidated financial statements.
The Group's operating activities provided cash flows of $538 million in
1994, down from $584 million in 1993. The decrease was due to (a) higher
receivables in 1994, due in large part to changed payment terms with a
major customer and higher sales volume, and (b) lower reductions in
inventories in 1994 compared to those in 1993, partially offset by (c)
increased income and (d) increased customer deposits in 1994. The
Group's debt decreased by $443 million in 1994, as operating cash flows
and cash proceeds from the sales of Textron's Homelite and Lycoming
Turbine Engine divisions exceeded capital asset additions, payments of
dividends and purchases of 3.3 million shares of Textron's common stock.
Such purchases were made under a program to purchase up to five million
shares of Textron's common stock from time to time in the open market,
as conditions warrant. Textron's ratio of debt to total capital
decreased to 35% at December 31, 1994, from 42% at January 1, 1994.
Cash flows from operating activities in 1993 of $584 million were higher
than the 1992 level due principally to a higher reduction in
inventories, a higher level of trade payables and higher income from
operations. The Group's debt decreased by $258 million in 1993 as
operating cash flows and the proceeds from the sale of a minority
interest in the Paul Revere Corporation (PRC) exceeded capital asset
additions, payments of dividends, the cost of the acquisition of Textron
Acustar Plastics and a $100 million contribution to the capital of PRC.
Cash flows from operating activities in 1992 of $402 million were higher
than the 1991 level due principally to a decrease in inventories in 1992
versus an increase in 1991. The Group's debt increased by $463 million
in 1992 due to financing the $605 million acquisition of Cessna.
Capital asset additions during 1994, 1993 and 1992 of $272 million, $226
million and $198 million, respectively, were primarily for (a) the
replacement of machinery and equipment, (b) machinery and equipment
required for increased capacity at existing facilities and (c)
production tooling for new aircraft at Cessna. Capital asset additions
during 1995 are not expected to differ substantially from the level of
such additions in 1994.
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, $18 million and $25 million
in 1994, 1993 and 1992, respectively. Textron currently projects that
expenditures for remediation will range between $15 million and $25
million for each of the years 1995 and 1996. (See Textron's Summary of
Significant Accounting Policies and Note 16 to the consolidated
financial statements for further information about environmental
matters.)
Based upon the information currently available, Textron believes it has
made adequate provision for costs associated with known remediation
efforts. Despite the uncertainty concerning the overall costs of
additional remedial actions that might be identified in the future, it
is not currently anticipated that such costs will have a material
adverse effect on Textron's liquidity, net income or financial
condition.
In August 1994, Textron sold its Homelite division and in October 1994
it sold its Lycoming Turbine Engine division. Cash proceeds from these
sales aggregated $495 million and were used for general corporate
purposes including debt reduction and the purchase of Textron common
stock.
In 1993, Textron purchased the plastics operations of the Acustar
division of Chrysler Corporation at a cost of $139 million and in 1992
it purchased Cessna at a cost of $605 million.
Also in 1993, Textron, which had been the sole shareholder of PRC, sold
7.5 million shares of PRC, representing 16.7% of the outstanding shares
of PRC, for $175 million (net of related expenses) in an
T E X T R O N 25
<PAGE> 26
-------------------------------------------------------------------------------
underwritten public offering registered under the Securities Act of 1933.
Textron contributed $100 million to the capital of PRC just prior to the
sale. The proceeds from the sale were used to reduce debt.
During 1994, Textron redeemed an aggregate principal amount of $121
million of its 9 1/4% Senior and Subordinated Notes, due 2016 and 2017,
resulting in a pretax charge to income of $9 million. During 1993,
Textron redeemed an aggregate principal amount of $221 million of its
10 3/4%, 9 1/2% and 9 1/4% Senior and Subordinated Notes, due through 2017,
resulting in a pretax charge to income of $14 million.
In 1993, Textron's Board of Directors approved Textron's purchase of all
of the shares of Textron common stock owned by PRC in four annual
installments of 424,125 shares each, at a share price to be equal to the
average closing price of Textron's stock over the fiscal quarter
preceding each such purchase. The first of the four purchases (for $25
million) was made in April 1994.
Textron had $236 million available at December 31, 1994 for the issuance
of unsecured debt securities under its shelf registration statement with
the Securities and Exchange Commission. Also at December 31, 1994,
Textron had credit facilities aggregating $1.5 billion. The portion of
the credit facilities not used or reserved as support for commercial
paper or bank borrowings at that date was $1.1 billion.
Management believes that the Textron Parent Company Borrowing Group will
continue to have adequate access to credit markets and that its credit
facilities and cash flows from operations--including dividends received
from Textron's finance and insurance operations--will continue to be more
than sufficient to meet its operating needs and to finance growth.
FINANCE AND INSURANCE SUBSIDIARIES
This group includes Avco Financial Services (AFS), Textron Financial
Corporation (TFC) and PRC. Information about the cash flows of this
group for each of the three years in the period ended December 31, 1994
is set forth in the Group's statement of cash flows included in Note 18
(page 58) to the consolidated financial statements.
The amount of the net assets of Textron's finance and insurance
subsidiaries available for cash dividends and other payments to the
Textron Parent Company Borrowing Group is restricted by the terms of
lending agreements and insurance statutory requirements. The finance and
insurance subsidiaries paid dividends to the Textron Parent Company
Borrowing Group of $115 million, $94 million and $78 million in 1994,
1993 and 1992, respectively.
AFS and TFC each utilize a broad base of financial sources for their
respective liquidity and capital requirements. Cash is provided from
both operations and several different sources of borrowings, including
unsecured borrowings under bank lines of credit, the issuance of
commercial paper and short-term bank debt, and sales of medium- and
long-term debt in the U.S. and foreign financial markets. During 1994,
the net proceeds from medium- and long-term financing sources, including
the issuances described below, totaled $1.5 billion. Debt increased by
$935 million in 1994, due principally to receivable growth.
During 1994, AFS issued $1.0 billion of unsecured debt securities,
including $950 million under its shelf registration statements. At
December 31, 1994, AFS had $797 million available for unsecured debt
securities under its shelf registration statement with the Securities
and Exchange Commission and $544 million available for similar
securities under its shelf registration statements with the Canadian
provincial security exchanges.
In June 1994, TFC established a medium-term note facility for $500
million under Rule 144A of the Securities Act of 1933, as amended, under
which it had no outstanding borrowings at December 31, 1994.
By utilizing medium- and long-term fixed rate financing, as well as
interest rate exchange agreements, Textron's finance subsidiaries
effectively had a ratio of variable rate debt to total debt of 49% at
December 31, 1994. For liquidity purposes, AFS and TFC have a policy of
maintaining sufficient unused bank lines of credit to support their
outstanding commercial paper and short-term bank borrowings.
Textron's finance and insurance subsidiaries have substantial amounts of
investments and finance receivables backed up or secured by real estate.
AFS had residential real estate loans outstanding of $2.4 billion at
December 31, 1994, which were secured primarily by first and second
mortgages on single family homes, and averaged $27 thousand in
outstanding principal balance. Residential real estate loans are
geographically dispersed among many customers and the loan amounts are
limited to a maximum of 85% of the property's appraised market value at
the date of the loans, although most loans are made at significantly
lower loan to value ratios.
TFC had real estate loans and leveraged leases of real estate
aggregating $440 million and $181 million, respectively, at December 31,
1994 including $174 million of golf course mortgages. The commercial
real estate portfolio of $266 million consisting
26 T E X T R O N
<PAGE> 27
-------------------------------------------------------------------------------
principally of first mortgages on income producing properties is
diversified both geographically and by type of property financed. This
portion of the real estate loan portfolio was down from $369 million at the
end of 1993 due primarily to collections on outstanding balances and TFC's
sale of a portion of the performing loans in its commercial real estate
loan portfolio. The sale included the servicing of the remaining accounts
in the portfolio. The portfolio was underwritten at loan origination so
that historic cash flows exceed debt service and so that loans were
generally for less than 80% of the property's appraised market value at
the date of the loans. This policy is not necessarily indicative of the
current portfolio ratios. Loans were written with scheduled maturities
generally between three and five years. However, a substantial number of
loans have been refinanced at contractual maturity. At December 31,
1994, TFC had suspended the accrual of interest on $76 million of real
estate loans ($77 million at December 31, 1993).
In addition, at December 31, 1994, Textron's insurance subsidiaries held
$191 million of first mortgages on real estate. The real estate
portfolio is well diversified geographically and by type of property
financed. Loans are generally limited to 75% of the property's appraised
market value at the date of the loans with sufficient cash flows to meet
debt service requirements.
Foreclosed real estate loans of Textron's finance and insurance
subsidiaries are transferred out of finance receivables or investments
in mortgages into other assets or other investments at the lower of fair
value (less estimated costs to sell) or the outstanding loan balance.
The carrying value of real estate is periodically reevaluated and, where
appropriate, adjustments are made through a valuation allowance to
reflect subsequent changes in fair value, but carrying value is never
increased above the amount originally transferred. At December 31, 1994,
real estate classified in other assets or other investments aggregated
$68 million ($74 million at December 31, 1993).
Although Textron believes it has made adequate provision for its
nonperforming real estate assets, realization of these assets remains
subject to uncertainties. Subsequent evaluations of nonperforming
assets, in light of factors then prevailing, including economic
conditions, may require additional increases in the allowance for losses
for such assets.
Textron's insurance subsidiaries' investments also included mortgage-
backed securities with an amortized cost of $810 million at December 31,
1994 ($1.1 billion at December 31, 1993), a substantial portion of which
is guaranteed by the U.S. Government or U.S. Government agencies. Future
investment income from mortgage-backed securities may be affected by the
timing of principal payments and the yields on reinvestment alternatives
available at the time of such payments.
Textron also has significant investments in other debt securities. A
substantial portion of these investments is in high quality, investment
grade assets. In 1994 and 1993, accelerated prepayments on mortgage-
backed securities and call activity on all investments generated an
increase in funds available for investment at a time when interest rates
were lower than the current portfolio yield. Textron's investment
strategies place an emphasis on matching investment maturities with the
timing of amounts estimated to be payable under insurance contracts.
------------------------
Textron has recognized net deferred tax assets of $199 million at
December 31, 1994, attributable to temporary differences between the
financial reporting basis and income tax basis of certain assets and
liabilities. Management believes that such net deferred tax assets will
be realized based on Textron's history of earnings and its expectations
for the future. (See Note 14, "Income Taxes," to the consolidated
financial statements for further information.)
For further information about investments and collateral for finance
receivables, see Note 2, "Investments," and Note 3, "Finance
Receivables," to the consolidated financial statements.
As part of managing its interest rate exposure on its variable rate
borrowings, Textron is a party to various interest rate exchange
agreements. These agreements, or "swaps," have been entered into as
hedges which do not involve a high degree of complexity or risk. Textron
does not trade swaps or enter into leveraged swaps. The objective of
Textron's use of swaps is not to speculate for profit but to cost
effectively manage the risk in its debt portfolio by fixing the cost or
matching the rate of interest incurred on its financing with the rate of
interest earned on certain of its variable rate finance receivables. For
further information about these agreements and the debt and credit
facilities of the Textron Parent Company Borrowing Group and the finance
and insurance subsidiaries, see Note 8, "Debt and Credit Facilities," to
the consolidated financial statements.
T E X T R O N 27
<PAGE> 28
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<TABLE>
REVENUES AND INCOME BY BUSINESS SEGMENT
For a description of the businesses comprising each segment, see pages
61 to 63 of this report.
For additional financial information by business segment, see Note 17.
------------------------------------------------------------------------------------------------------------
<CAPTION>
BUSINESS SEGMENTS Revenues Income
------------------------------ ------------------------------
(In millions) 1994 1993 1992 1994 1993 1992
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Manufacturing:
Aircraft $2,186 $1,987 $1,520 $ 194 $ 171 $ 128
Automotive 1,557 1,221 835 139 96 74
Industrial 1,395 1,224 1,139 142 106 97
Systems and Components 1,540 1,839 2,122 99 125 182
------------------------------------------------------------------------------------------------------------
6,678 6,271 5,616 574 498 481
------------------------------------------------------------------------------------------------------------
Financial Services:
Finance 1,672 1,610 1,622 331 289 250
Paul Revere 1,331 1,193 1,106 131 146 115
------------------------------------------------------------------------------------------------------------
3,003 2,803 2,728 462 435 365
------------------------------------------------------------------------------------------------------------
$9,681 $9,074 $8,344 1,036 933 846
------------------------------------------==============================------------------------------------
Corporate expenses and other - net (78) (85) (69)
Interest expense - net (204) (232) (250)
------------------------------------------------------------------------------------------------------------
Income before income taxes $ 754 $ 616 $ 527
============================================================================================================
<FN>
Notes:
(i) Revenues by business segment exclude interest income of the Textron
Parent Company Borrowing Group of $2 million, $4 million and $4 million
in 1994, 1993 and 1992, respectively. Revenues between segments were
insignificant in each year.
(ii) Income of the Systems and Components segment for 1994 includes $30
million applicable to the Lycoming Turbine Engine division, sold in
1994, the benefit of which was immaterial to Textron's net income due to
the nontax deductibility of goodwill.
(iii) Income of the Finance segment is net of interest expense.
(iv) Corporate expenses and other - net for 1994 and 1993 include pretax
charges of $9 million and $14 million, respectively, related to the
early redemption of debt.
</TABLE>
-------------------------------------------------------------------------------
<TABLE>
BACKLOG
<CAPTION>
(Unaudited) December 31, January 1,
(In billions) 1994 1994
------------------------------------------------
<S> <C> <C>
U.S. Government:
Aircraft $1.6 $1.0
Systems and Components .7 1.2
------------------------------------------------
2.3 2.2
------------------------------------------------
Commercial:
Aircraft 2.2 1.6
Industrial .3 .2
Systems and Components .5 1.2
------------------------------------------------
3.0 3.0
------------------------------------------------
$5.3 $5.2
================================================
<FN>
Notes:
(i) The increase in the Aircraft segment's U.S. Government backlog was
due primarily to completion of negotiations in 1994 on the Bell-Boeing
engineering and manufacturing development contract on the V-22 program.
The increase in the Aircraft segment's commercial backlog was due
primarily to the introduction of Cessna's Excel and Ultra Citation
aircraft.
(ii) The decrease in the Systems and Components segment's U.S.
Government and commercial backlog was due primarily to the sale of the
Lycoming Turbine Engine division.
</TABLE>
28 TEXTRON
<PAGE> 29
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RESULTS OF OPERATIONS
1994 vs. 1993
Textron's net income in 1994 was $433 million ($4.80 per share), up 14%
from income of $379 million ($4.21 per share) in 1993. Revenues
increased 7% to $9.7 billion in 1994 from $9.1 billion in 1993.
Operating income of Textron's six business segments aggregated $1.036
billion in 1994, up 11% from $933 million in 1993. The drivers of the
increase in income were the Aircraft, Automotive, Industrial and Finance
segments, which reported a 22% aggregate growth in income, more than
offsetting the lower results in the Systems and Components and Paul
Revere segments. See the table under the caption "Revenues and Income by
Business Segment" and the discussion of the results of each segment
below.
Corporate expenses and other - net in 1994 were lower by $7 million than
their corresponding level in 1993, principally as a result of a lower
pretax charge ($9 million in 1994 vs. $14 million in 1993) related to
the early redemptions of high coupon debt and the benefit of foreign
exchange gains in 1994 compared to foreign exchange losses in 1993. The
lower interest expense of the Textron Parent Company Borrowing Group --
$204 million in 1994 vs. $232 million in 1993 -- principally reflected a
lower level of average borrowing. Textron's effective income tax rate of
40.8% in 1994 was higher than the 1993 rate of 38.0%, due principally to
the impact in 1994 of the nontax deductibility of goodwill related to
the divestiture of the Textron Lycoming Turbine Engine division and a
one-time benefit in 1993 resulting from new tax legislation passed in
that year.
1993 vs. 1992
Textron's income in 1993 was $379 million ($4.21 per share), up 17% from
income of $324 million ($3.66 per share) before the one-time cumulative
effect of accounting changes in 1992. Revenues increased 9% to $9.1
billion in 1993 from $8.3 billion in 1992. Operating income aggregated
$933 million in 1993, up 10% from $846 million in 1992.
Corporate expenses and other - net in 1993 were higher by $16 million
than their corresponding level in 1992, principally as a result of a $14
million pretax charge related to the early redemption of high coupon
debt and foreign exchange gains in 1992. The lower interest expense of
the Textron Parent Company Borrowing Group -- $232 million in 1993 vs.
$250 million in 1992 -- reflected both a lower level of average borrowing
and a decreased average cost of borrowing. Textron's effective income
tax rate of 38.0% in 1993 was lower than the 1992 rate of 38.5%, due to
new tax legislation, as the one-time benefit from increasing net
deferred tax assets more than offset the effect of the increase in the
federal statutory tax rate from 34% to 35%.
AIRCRAFT
1994 vs. 1993
The Aircraft segment's revenues and income increased $199 million (10%)
and $23 million (13%), respectively, related principally to Bell
Helicopter. Bell Helicopter's revenues increased primarily as a result
of higher sales under the V-22 engineering and manufacturing development
contract and other military contracts and higher international aircraft
sales, partially offset by lower sales of spare parts, both military and
commercial. Bell's income increased as a result of the higher revenues
and improved manufacturing efficiencies, partially offset by increased
product development expenses related to three new helicopter models and
lower margins on commercial spares. Cessna's revenues and income
increased as a result of (a) improved margins, (b) lower product
development expenses related to the Citation X aircraft and (c) lower
bid and proposal expenses for the JPATS competition for a new U.S.
military trainer. These favorable factors more than offset higher
product support costs in 1994 and an $18 million gain in 1993 from an
insurance settlement.
1993 vs. 1992
The Aircraft segment's revenues and income increased in 1993 by $467
million (31%) and $43 million (34%), respectively, due to higher results
at both Bell Helicopter and Cessna. Bell Helicopter's income increased
as a result of higher revenues in both its U.S. Government and non-U.S.
Government businesses and the effect in 1992 of a $10 million loss
provision on the V-22 full scale development contract. Cessna's income
increased as a result of (a) higher sales, due to the inclusion of
Cessna's manufacturing operations for twelve months in 1993 compared
with ten months in 1992, and (b) an $18 million gain from an insurance
settlement, which were partially offset by (c) a higher level of
expenses in 1993, primarily related to higher product development
expenses for the Citation X aircraft and bid and proposal expenses for
the JPATS competition for a new U.S. military trainer.
T E X T R O N 29
<PAGE> 30
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AUTOMOTIVE
1994 vs. 1993
The Automotive segment's revenues and income increased $336 million
(28%) and $43 million (45%), respectively, due primarily to (a) the
inclusion for the full year of a business acquired in May 1993, (b)
higher automotive production, (c) lower warranty provisions in 1994 and
(d) a provision in 1993 for the consolidation of certain manufacturing
operations.
1993 vs. 1992
The Automotive segment's revenues increased $386 million (46%) in 1993
primarily as a result of the inclusion of the operating results of an
acquisition for eight months in 1993, higher automotive production and a
broader market penetration of automotive interior products. Income
increased $22 million (30%), due to the higher revenues, partially
offset by a special warranty provision and a provision for the
consolidation of certain manufacturing operations.
INDUSTRIAL
1994 vs. 1993
The Industrial segment's revenues increased $171 million (14%), due
principally to higher fasteners sales (including the sales of Avdel, the
results of which have been included in Textron's consolidated results
beginning in the second quarter of 1994), partially offset by lower
sales, due to the divestiture of the Homelite division in August 1994.
Income increased $36 million (34%), due to (a) the higher sales and
improved productivity in the fasteners business, (b) a provision in 1993
for the consolidation of certain manufacturing operations and (c) a gain
in 1994 on the divestiture of the Homelite division, partially offset by
lower income at Jacobsen, due to lower sales, principally resulting from
the implementation of a change in distribution, and higher costs.
1993 vs. 1992
The Industrial segment's revenues increased $85 million (7%) and income
increased $9 million (9%). Revenues increased due to growth in the
outdoor products and fasteners businesses. Income increased as a result
of the higher volume, partially offset by a provision for the
consolidation of certain manufacturing operations.
SYSTEMS AND COMPONENTS
1994 vs. 1993
The Systems and Components segment's reported revenues and income
included those of the Textron Lycoming Turbine Engine division, which
was sold in October 1994. Excluding Textron Lycoming Turbine Engine and
the effects of provisions ($25 million in 1994; $31 million in 1993) for
legal matters and the consolidation of certain manufacturing operations,
revenues and income in 1994 were $1.161 billion and $94 million,
respectively, compared to $1.224 billion and $105 million, respectively,
for 1993. The decreases in revenues of $63 million and income of $11
million were due primarily to further weakness in the defense and
commercial aerospace markets, principally at Textron Defense Systems and
Textron Aerostructures, respectively, partially offset by higher
revenues and income at Textron Lycoming Reciprocating Engine.
Excluding from consideration the revenues and income applicable to the
Lycoming Turbine Engine division and the effects of the provisions in
1994 relative to legal matters and the consolidation of certain
manufacturing operations, revenues and operating income of the Systems
and Components segment are expected to further decline in 1995 from
their corresponding 1994 levels. This is principally the result of a
continued wind down of certain U.S. Government contracts, a decline in
U.S. Government spending for the defense products of this segment and
the current depressed business conditions in the commercial airline
industry.
In response to this adverse business environment, Textron will continue
to focus its resources where it has technological or other competitive
advantages, so as to minimize the effect of these difficult business
conditions. However, the outlook for this segment's businesses contains
uncertainties relative to (a) the programs and funding levels in future
defense budgets as a result of continuing pressures to reduce federal
outlays and (b) the length and severity of the commercial airline
industry downturn.
30 T E X T R O N
<PAGE> 31
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1993 vs. 1992
The Systems and Components segment's reported results included revenues
and income of Textron Lycoming Turbine Engine, which was sold in 1994,
the effects of provisions (which aggregated $31 million) for legal
matters and the consolidation of certain manufacturing operations in
1993, and provisions ($14 million) for the consolidation of certain
manufacturing operations and a gain ($8 million) on the sale of the
Textron Filtration Systems division in 1992. Excluding these factors,
revenues and income in 1993 for the remaining divisions in this segment
were $1.224 billion and $105 million, respectively, compared to $1.430
billion and $147 million, respectively, for 1992. The decreases in
revenues of $206 million and income of $42 million were principally at
Textron Defense Systems, Airfoil Textron, Textron Lycoming Reciprocating
Engine and Textron Specialty Materials. At Textron Defense Systems,
revenues and income decreased due to the benefit in 1992 of an equitable
price adjustment on a long-term contract and the wind down in 1993 of
several U.S. Government contracts. The lower results at Airfoil Textron
and Textron Lycoming Reciprocating Engine were attributable to further
softness in the commercial aerospace and general aviation industries,
respectively, while the lower results at Textron Specialty Materials
were attributable to lower sales of its fire protection materials.
FINANCE
1994 vs. 1993
The Finance segment's revenues increased $62 million (4%), while income
increased $42 million (15%). AFS' revenues increased slightly, due
primarily to a higher level of finance receivables outstanding,
partially offset by a decline in yields on finance receivables. In
response to increasing cost of borrowed funds, AFS began increasing the
interest rates it charges its finance customers in the second half of
1994. Its income increased, due to (a) the higher level of finance
receivables outstanding, (b) a decrease in the blended cost of borrowed
funds, despite increasing interest rates, (c) a decrease in insurance
losses in both finance-related and nonfinance-related insurance
operations and (d) a decrease in policy acquisition costs due to a
reduction in nonfinance-related insurance premiums earned. These
favorable factors were partially offset by (a) the decline in yields and
(b) an increase in loan loss provisions, due to growth in finance
receivables outstanding offset in part by an improvement in credit
quality. The ratio of net credit losses to average net receivables
decreased to 1.99% in 1994 from 2.14% in 1993. In TFC's commercial
finance business, revenues increased, due to a higher level of finance
receivables outstanding and higher leveraged lease income, primarily
related to the sales of residual appreciation rights and the benefit of
a nonrecourse debt refinancing. Its income increased due to those
factors and a decrease in loan loss provisions, reflecting a
stabilization of nonperforming real estate loans and an improvement in
equipment portfolios, partially offset by an increase in the blended
cost of borrowed funds.
1993 vs. 1992
The Finance segment's revenues decreased $12 million while income
increased $39 million (16%). AFS' revenues decreased, due to a decline
in yields on finance receivables and a decline in foreign exchange
translation rates, partially offset by a higher level of finance
receivables outstanding. Its income increased, due principally to (a) a
decrease in the cost of borrowed funds, (b) a higher level of finance
receivables outstanding and (c) a decrease in insurance losses, as 1992
included losses related to Hurricane Andrew, partially offset by (d) the
decline in yields on
T E X T R O N 31
<PAGE> 32
-------------------------------------------------------------------------------
finance receivables and (e) higher insurance commissions resulting from
improved loss experience on nonfinance-related insurance business. The
ratio of net credit losses to average net receivables decreased to 2.14% in
1993 from 2.20% in 1992. In TFC's commercial finance business, revenues
increased as a result of (a) an increased level of receivables, (b) the
inclusion of the operating results of Cessna's finance operations for
twelve months in 1993 compared with ten months in 1992 and (c) a lower
level of accounts on which the accrual of interest income has been
suspended, partially offset by a decline in yields and lower gains on the
sales of finance receivables portfolios. Its income increased due to those
factors, a decrease in the cost of borrowed funds and a decrease in loan
loss provisions, primarily related to reductions in equipment loan losses
and, to a lesser extent, losses on real estate loans.
PAUL REVERE
1994 vs. 1993
Paul Revere's revenues increased $138 million (12%), due to continued
growth in its individual disability insurance line, increased premium
volume in group insurance and higher net investment income. Its income
decreased $15 million (10%), primarily attributable to a significantly
higher individual disability insurance benefit ratio, partially offset
by higher net investment income and increased income in group insurance,
individual life insurance and financial products. The higher benefit
ratio in the individual disability insurance business was the result of
adverse claims experience from (a) the block of policies issued between
1985 and 1989, especially in Florida and California, (b) physicians
concentrated in five selected specialties and (c) excess risk disability
reinsurance, for which new business is no longer being written. Paul
Revere has undertaken an extensive program to address this situation
through new products, pricing and underwriting adjustments. In addition,
the claims department staff has been increased to address these problem
areas. Paul Revere expects a gradual improvement throughout 1995 in the
individual disability insurance benefit ratio from the corresponding
ratio experienced in the fourth quarter of 1994. Paul Revere's net
investment income increased as a result of (a) a higher level of
invested assets, offset in part by declining portfolio yields, and (b)
higher net realized investment gains ($23 million in 1994 vs. $15
million in 1993).
1993 vs. 1992
Paul Revere's revenues increased $87 million (8%) and income increased
$31 million (27%). Revenues increased primarily in the individual
disability insurance line, principally through marketing arrangements
with other companies. Its income increased as a result of higher income
in its individual disability insurance line (due to the higher revenues
and lower operating expense and benefit ratios, which reflect the
benefit of recapture gains on terminating reinsurance agreements),
partially offset by lower income in group insurance, due to an increase
in long-term disability benefit ratios. Paul Revere's investment income
increased as a result of (a) a higher level of invested assets, offset
in part by lower investment yields, and (b) higher net realized
investment gains ($15 million in 1993 vs. $2 million in 1992). Realized
investment gains in 1993 ($37 million) were partially offset by an
increased provision for other than temporary declines in values of
investments ($22 million).
32 T E X T R O N
<PAGE> 33
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REPORT OF MANAGEMENT
The consolidated financial statements of Textron Inc. have been prepared
by management and have been audited by Textron's independent auditors,
Ernst & Young LLP, whose report appears below. Management is responsible
for the consolidated financial statements, which have been prepared in
conformity with generally accepted accounting principles and include
amounts based on management's judgments.
Management is also responsible for maintaining internal control systems
designed to provide reasonable assurance, at appropriate cost, that
assets are safeguarded and that transactions are executed and recorded
in accordance with established policies and procedures. Textron's
systems are under continuing review and are supported by, among other
things, business conduct and other written guidelines, an internal audit
function and the selection and training of qualified personnel.
The Board of Directors, through its Audit Committee, oversees
management's financial reporting responsibilities. The Audit Committee,
comprised of four outside directors, meets regularly with the
independent auditors, representatives of management and the internal
auditors to discuss and make inquiries into their activities. Both the
independent auditors and the internal auditors have free access to the
Audit Committee, with and without management representatives in
attendance.
/s/ James F. Hardymon
James F. Hardymon
Chairman and Chief Executive Officer
/s/ Richard A. McWhirter
Richard A. McWhirter
Executive Vice President and Chief Financial Officer
February 2, 1995
-------------------------------------------------------------------------------
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Shareholders
Textron Inc.
We have audited the accompanying consolidated balance sheet of Textron
Inc. as of December 31, 1994 and January 1, 1994, 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 31, 1994. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Textron Inc. at December 31, 1994 and January 1, 1994 and the
consolidated results of its operations and its cash flows for each of
the three years in the period ended December 31, 1994 in conformity with
generally accepted accounting principles.
As discussed in Notes 13 and 14 to the consolidated financial
statements, in fiscal 1992 the Company changed its methods of accounting
for postretirement benefits other than pensions and income taxes.
/s/ Ernst & Young LLP
New York, New York
February 2, 1995
T E X T R O N 33
<PAGE> 34
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<TABLE>
CONSOLIDATED STATEMENT OF INCOME
<CAPTION>
For each of the three years in the period ended December 31, 1994
(In millions except per share amounts) 1994 1993 1992
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues
Sales $6,678 $6,271 $5,616
Interest, discount and service charges 1,333 1,260 1,273
Insurance premiums 1,233 1,137 1,094
Investment income (including net realized investment gains) 439 410 365
------------------------------------------------------------------------------------------------------------
Total revenues 9,683 9,078 8,348
------------------------------------------------------------------------------------------------------------
Costs and expenses
Cost of sales 5,514 5,210 4,560
Selling and administrative 1,489 1,438 1,402
Interest 665 668 743
Provision for losses on collection of finance receivables, less recoveries 162 153 160
Insurance benefits and increase in policy liabilities 992 850 824
Amortization of insurance policy acquisition costs 107 143 132
------------------------------------------------------------------------------------------------------------
Total costs and expenses 8,929 8,462 7,821
------------------------------------------------------------------------------------------------------------
Income before income taxes 754 616 527
Income taxes (308) (234) (203)
Elimination of minority interest in net income of Paul Revere (13) (3) -
------------------------------------------------------------------------------------------------------------
Income before cumulative effect of changes in accounting principles 433 379 324
Cumulative effect of changes in accounting principles, net of income taxes - - (679)<F*>
------------------------------------------------------------------------------------------------------------
Net income (loss) $ 433 $ 379 $ (355)
============================================================================================================
Income (loss) per common share:
Income before cumulative effect of changes in accounting principles $ 4.80 $ 4.21 $ 3.66
Cumulative effect of changes in accounting principles - - (7.67)<F*>
------------------------------------------------------------------------------------------------------------
Net income (loss) $ 4.80 $ 4.21 $(4.01)
============================================================================================================
<FN>
<F*>These one-time charges relate to changes in accounting for retiree benefits other than pensions and income
taxes, implemented as of the beginning of 1992.
See summary of significant accounting policies and notes to consolidated financial statements.
</TABLE>
34 T E X T R O N
<PAGE> 35
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<TABLE>
CONSOLIDATED BALANCE SHEET
<CAPTION>
December 31, January 1,
(Dollars in millions) 1994 1994
------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Cash $ 49 $ 26
Investments 5,294 4,764
Receivables - net:
Finance 8,583 7,562
Commercial and U.S. Government 702 678
------------------------------------------------------------------------------------------------------------
9,285 8,240
Inventories 1,211 1,488
Property, plant and equipment, less accumulated depreciation of $1,450 and $1,528 1,253 1,269
Insurance policy acquisition costs 911 784
Goodwill, less accumulated amortization of $381 and $343 1,512 1,437
Other assets (including net prepaid income taxes) 1,410 1,650
------------------------------------------------------------------------------------------------------------
Total assets $20,925 $19,658
============================================================================================================
Liabilities and shareholders' equity
Liabilities
Accounts payable $ 619 $ 614
Accrued postretirement benefits other than pensions 951 1,033
Other accrued liabilities (including income taxes) 2,424 2,268
Insurance reserves and claims 4,685 4,091
Debt:
Textron Parent Company Borrowing Group 1,582 2,025
Finance and insurance subsidiaries 7,782 6,847
------------------------------------------------------------------------------------------------------------
9,364 8,872
------------------------------------------------------------------------------------------------------------
Total liabilities 18,043 16,878
============================================================================================================
Shareholders' equity
Capital stock:
Preferred stock (15,000,000 shares authorized):
$2.08 Cumulative Convertible Preferred Stock, Series A
(liquidation value - $18.3) 9 9
$1.40 Convertible Preferred Dividend Stock, Series B
(preferred only as to dividends) 7 7
Common stock, 12.5 cents par value (250,000,000 shares authorized;
92,284,000 and 91,859,000 shares issued) 12 12
Capital surplus 702 687
Retained earnings 2,518 2,209
Other (108) (52)
------------------------------------------------------------------------------------------------------------
3,140 2,872
Less cost of treasury shares 258 92
------------------------------------------------------------------------------------------------------------
Total shareholders' equity 2,882 2,780
------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $20,925 $19,658
============================================================================================================
See summary of significant accounting policies and notes to consolidated financial statements.
</TABLE>
T E X T R O N 35
<PAGE> 36
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<TABLE>
CONSOLIDATED STATEMENT OF CASH FLOWS
<CAPTION>
For each of the three years in the period ended December 31, 1994
(In millions) 1994 1993 1992
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 433 $ 379 $ (355)
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Cumulative effect of changes in accounting principles - - 679
Depreciation and amortization 398 424 397
Provision for losses on receivables 200 195 196
Increase in insurance policy liabilities 417 342 309
Deferred income taxes 92 28 37
Changes in assets and liabilities excluding those related to
acquisitions and divestitures of businesses:
Increase in commercial and U.S. Government receivables (163) (27) (2)
Decrease in inventories 64 176 55
Additions to insurance policy acquisition costs (232) (235) (205)
Increase in other assets (58) (80) (22)
Increase (decrease) in accounts payable 34 108 (50)
Increase (decrease) in accrued liabilities 92 (11) 20
Other - net (14) 1 (17)
------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 1,263 1,300 1,042
------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Purchases of:
Securities to be available for sale (1,066) (220) -
Securities to be held to maturity (849) (1,497) (1,846)
Other investments (39) (27) (17)
Proceeds from disposition of securities:
Sales of:
Securities available for sale 758 205 -
Securities held to maturity 10 173 737
Maturities and calls 545 768 743
Proceeds from disposition of other investments 61 42 27
Finance receivables:
Originated or purchased (6,020) (5,011) (4,853)
Repaid or sold 4,803 4,253 4,212
Cash used in acquisitions of businesses (9) (139) (905)
Net proceeds from sales of businesses and minority interest in subsidiary 492 175 -
Capital expenditures (302) (252) (217)
Other investing activities - net 2 27 (15)
------------------------------------------------------------------------------------------------------------------------
Net cash used by investing activities (1,614) (1,503) (2,134)
------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Increase (decrease) in short-term debt 449 485 (50)
Proceeds from issuance of long-term debt 2,099 1,669 2,913
Principal payments on long-term debt (2,072) (1,954) (1,780)
Interest-sensitive insurance products:
Receipts 295 193 142
Return of account balances (126) (105) (88)
Proceeds from exercise of stock options 12 19 34
Purchases of Textron common stock (166) - -
Dividends paid (124) (110) (98)
------------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 367 197 1,073
Effect of foreign exchange rate changes on cash 7 1 -
------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash 23 (5) (19)
Cash at beginning of year 26 31 50
------------------------------------------------------------------------------------------------------------------------
Cash at end of year $ 49 $ 26 $ 31
========================================================================================================================
See summary of significant accounting policies and notes to consolidated financial statements.
</TABLE>
36 T E X T R O N
<PAGE> 37
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<TABLE>
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
<CAPTION>
Shares outstanding<F*> Dollars
(In thousands) (In millions)
For each of the three years in the ---------------------------- ----------------------------
period ended December 31, 1994 1994 1993 1992 1994 1993 1992
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$2.08 Preferred stock
Beginning balance 321 377 421 $ 9 $ 11 $ 12
Conversion to common stock (24) (56) (44) - (2) (1)
------------------------------------------------------------------------------------------------------------------------
Ending balance 297 321 377 $ 9 $ 9 $ 11
========================================================================================================================
$1.40 Preferred stock
Beginning balance 138 153 163 $ 7 $ 8 $ 8
Conversion to common stock (12) (15) (10) - (1) -
------------------------------------------------------------------------------------------------------------------------
Ending balance 126 138 153 $ 7 $ 7 $ 8
========================================================================================================================
Common stock
Beginning balance 88,413 87,563 86,088 $ 12 $ 11 $ 11
Purchases (3,346) - - - - -
Conversion of preferred stock to
common stock 75 151 114 - 1 -
Exercise of stock options 349 695 1,334 - - -
Issuance of common stock 6 4 27 - - -
------------------------------------------------------------------------------------------------------------------------
Ending balance 85,497 88,413 87,563 $ 12 $ 12 $ 11
========================================================================================================================
Capital surplus
Beginning balance $ 687 $ 661 $ 647
Conversion of preferred stock to common stock 1 1 1
Exercise of stock options 14 25 13
------------------------------------------------------------------------------------------------------------------------
Ending balance $ 702 $ 687 $ 661
========================================================================================================================
Retained earnings
Beginning balance $2,209 $1,940 $2,393
Net income (loss) 433 379 (355)
Dividends declared:
Preferred stock (1) (1) (1)
Common stock (per share: $1.40 in 1994; $1.24 in 1993 and $1.12 in 1992) (123) (109) (97)
------------------------------------------------------------------------------------------------------------------------
Ending balance $2,518 $2,209 $1,940
========================================================================================================================
Treasury stock
Beginning balance $ 92 $ 91 $ 119
Exercise of stock options - 1 (27)
Purchases of common stock 166 - -
Issuance of common stock - - (1)
------------------------------------------------------------------------------------------------------------------------
Ending balance $ 258 $ 92 $ 91
========================================================================================================================
Other
Beginning balance $ (52) $ (52) $ (24)
Currency translation adjustment 1 (23) (49)
Securities valuation adjustment (71) 11 5
Pension liability adjustment - (3) 1
Shares allocated to ESOP participants 14 15 15
------------------------------------------------------------------------------------------------------------------------
Ending balance $ (108) $ (52) $ (52)
========================================================================================================================
<FN>
<F*>Shares issued at the end of 1994, 1993, 1992 and 1991 were as follows (in thousands): $2.08 Preferred - 366; 390; 446
and 490 shares, respectively; $1.40 Preferred - 613; 625; 640 and 650 shares, respectively; Common - 92,284; 91,859;
91,007 and 90,767 shares, respectively.
See summary of significant accounting policies and notes to consolidated financial statements.
</TABLE>
T E X T R O N 37
<PAGE> 38
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Textron
Inc. and all of its majority- and wholly-owned subsidiaries. All
significant intercompany transactions are eliminated.
Textron consists of two borrowing groups - the Textron Parent Company
Borrowing Group (comprised of all entities of Textron other than its
finance and insurance subsidiaries) and Textron's finance and insurance
subsidiaries. To enhance the reader's understanding of Textron's
operations, Textron has presented in Note 18 separate financial
information for each of its two borrowing groups.
FINANCE RECEIVABLES
For finance receivables, interest income is recognized in revenues using
the interest method so as to produce a constant rate of return over the
terms of the receivables. Accrual of interest income is suspended for
accounts which are contractually delinquent by more than three months
unless collection is not doubtful in the case of commercial finance
receivables or three payments in the case of consumer finance
receivables. In addition, detailed reviews of commercial loans may
result in earlier suspension if collection is doubtful. Accrual of
interest on commercial loans is resumed when the loan becomes
contractually current, and suspended interest income is recognized at
that time. Subsequent interest income on consumer loans is recognized
when collected. Fees received and direct loan origination costs are
deferred and amortized to revenues over the contractual lives of the
respective loans using the interest method. Unamortized amounts are
recognized in revenues when loans are sold or paid in full.
Finance receivables are written off when they are deemed uncollectible,
but in any event all consumer loan accounts for which an amount
aggregating a full contractual payment has not been received for six
consecutive months are written off. Commercial loans are written down to
the fair value (less estimated costs to sell) of the related collateral
when the collateral is repossessed or when no payment has been received
for six months, unless management deems the loans collectible.
Foreclosed real estate loans are transferred out of finance receivables
into other assets at the lower of fair value (less estimated costs to
sell) or the outstanding loan balance. The difference between the amount
transferred and the outstanding loan balance is written off. The
carrying value of real estate owned is periodically reevaluated and,
where appropriate, adjustments are made through a valuation allowance to
reflect subsequent changes in fair value, but the carrying value is
never increased above the amount originally transferred.
Provisions for losses on finance receivables are charged to income in
amounts sufficient to maintain the allowance at a level considered
adequate to cover the losses in the existing receivable portfolio.
INSURANCE OPERATIONS
RECOGNITION OF REVENUES AND EXPENSES
Premiums from individual disability insurance and traditional life
insurance products are recognized in revenues when due. Group insurance
premiums are recognized as income over the period to which the premiums
relate. Benefits and expenses relating to those businesses are
recognized over the life of the contracts through the establishment of
reserves for future policy benefits and the amortization of deferred
policy acquisition costs. Benefits to policyholders include benefits
paid or accrued, changes in reserves for future policy benefits and
surrenders.
For investment and interest-sensitive life products, revenues consist of
policy and surrender charges assessed during the year. Benefits and
expenses for these products include amounts incurred during the year for
benefit claims in excess of related account balances, policy maintenance
expenses, interest credited and amortization of deferred policy
acquisition costs.
Unearned insurance premiums are deferred and subsequently recognized in
revenues over the lives of the policies (a) on the interest method for
decreasing term credit life insurance coverage and on the pro rata
method for level term credit life coverage, (b) in relation to
anticipated claims for credit disability insurance and (c) on the pro
rata method for casualty insurance.
DEFERRED POLICY ACQUISITION COSTS
Costs which vary with and are related primarily to, the production of
new business, have been deferred to the extent such costs are deemed
recoverable from future profits. Such costs include commissions,
selling, selection and policy issue expenses. For disability insurance,
traditional life insurance and casualty insurance products, these costs
are amortized in proportion to premiums over the estimated lives of the
policies. Anticipated investment income is considered in determining if
a premium deficiency relating to short-term contracts exists. For
investment and interest-sensitive life products, these costs are
amortized in proportion to estimated gross profits from interest,
mortality and other margins under the contracts.
38 T E X T R O N
<PAGE> 39
-------------------------------------------------------------------------------
INSURANCE RESERVES AND CLAIMS
Reserves for future policy benefits and unpaid claims and claim expenses
include policy reserves, claim reserves and claim liabilities
established for Textron's individual disability, group and individual
life insurance products.
Policy reserves represent the portion of premiums received, accumulated
with interest, to provide for future claims. Policy reserves for
individual disability insurance and traditional life insurance products
are based on Textron's withdrawal, morbidity and mortality experience.
Policy reserves for interest-sensitive life insurance products represent
the accumulated policy account value.
Claim reserves are established for future payments not yet due on claims
already incurred, primarily relating to individual disability insurance
and group long-term disability insurance products. These reserves are
established based on past experience and are periodically reviewed and
updated. Any resulting adjustments are reflected in current operations.
Claim liabilities represent policy benefits currently due but unpaid at
year end.
Other policyholder funds represent amounts accumulated under deferred
contracts to provide annuities in the future.
INVESTMENTS
Prior to 1994, investments in marketable equity securities were carried
at market value. Investments in most debt securities and all mortgage
loans were carried at amortized cost (less adjustments for other than
temporary declines in value). A portion of Textron's debt security
portfolio was considered available for sale and carried at the lower of
aggregate amortized cost or market.
Effective at the beginning of 1994, Textron adopted Statement of
Financial Accounting Standards No. 115, "Accounting for Certain
Investments in Debt and Equity Securities" (FAS 115). Securities carried
at amortized cost and classified in Textron's held to maturity category
are those which Textron has both the ability and positive intent to hold
to maturity. Securities classified in the available for sale category
are carried at estimated fair value and consist of those securities
which Textron intends to hold for an indefinite period of time but not
necessarily to maturity. Unrealized gains and losses related to
securities available for sale, net of applicable income taxes, are
reported as a separate component of shareholders' equity. To comply with
FAS 115, Textron transferred certain debt securities from the held to
maturity category to the available for sale category of its investment
portfolio. In accordance with FAS 115, prior years' financial statements
have not been restated to reflect this change in accounting principle.
The adoption of FAS 115 had no effect on Textron's net income or its
cash flows.
Net realized gains or losses resulting from sales or calls of
investments and losses resulting from declines in fair values of
investments that are other than temporary declines are included in
revenues. The cost of securities sold is determined primarily on the
specific identification method.
INVENTORIES
Inventories are carried at the lower of cost or market. See Note 5 for
further information about inventories.
LONG-TERM CONTRACTS AND PROGRAMS
Sales under fixed-price contracts and programs are generally recorded as
deliveries are made. Sales under cost reimbursement-type contracts are
recorded as costs are incurred and fees are earned. Certain contracts
are awarded on a fixed-price incentive fee basis. Incentive fees on such
contracts are considered when estimating revenues and profit rates and
are recorded when the amounts can reasonably be determined. Costs
attributed to units delivered under fixed-price contracts are based
generally on the estimated average cost per unit at contract completion
and under programs are based on the average remaining cost per unit.
Profits expected to be realized on long-term contracts and programs are
based on estimates of total sales value and costs at completion. Such
estimates are reviewed and revised periodically throughout the lives of
the contracts and programs. Revisions to contract profits are recorded
in the accounting period in which the revisions are made. Revisions to
program profits are recorded over the balance of the programs. Estimated
losses on contracts and programs are recorded when identified. See Notes
4 and 5 for further information about receivables and inventories
related to long-term contracts and programs.
PROPERTY, PLANT AND EQUIPMENT
The cost of property, plant and equipment is being depreciated based on
the estimated useful lives of the assets. See Note 6 for further
information about property, plant and equipment.
GOODWILL
Goodwill related to Textron's manufacturing operations is being
amortized on the straight-line method over periods ranging from 20 to 40
years. Goodwill related to Textron's finance and insurance subsidiaries
is being amortized on the straight-line method over 25 years.
T E X T R O N 39
<PAGE> 40
-------------------------------------------------------------------------------
INCOME PER COMMON SHARE
Income per common share is based on average common shares outstanding
during each year assuming full conversion of outstanding preferred stock
and exercise of stock options. Such average shares were 90,119,000 in
1994; 90,052,000 in 1993 and 88,580,000 in 1992.
TRANSLATION OF FOREIGN CURRENCIES AND FOREIGN
EXCHANGE TRANSACTIONS
Adjustments resulting from the translation of the financial statements
of most of Textron's foreign operations are excluded from the
determination of its income and accumulated in a separate component of
shareholders' equity until the entity is sold or substantially
liquidated.
Foreign exchange gains and losses included in income (which relate
principally to transactions denominated in foreign currencies) in 1994,
1993 and 1992 were not material.
RESEARCH AND DEVELOPMENT
Company funded research and development expenditures are charged to
expense as incurred. See Note 11 for further information about research
and development.
INTEREST RATE EXCHANGE AGREEMENTS
As part of managing its interest rate exposure on its variable interest
rate borrowings, Textron is a party to various interest rate exchange
agreements. While Textron is exposed to credit loss for the periodic
settlement of amounts due under such agreements in the event of
nonperformance by the counterparties, Textron does not anticipate
nonperformance by any of those parties. The risk of loss in the event of
nonperformance by the counterparties was insignificant at the end of
1994.
Interest differentials to be paid or received are accrued and recognized
in interest expense over the lives of the agreements.
INCOME TAXES
Deferred income taxes are recognized for temporary differences between
the financial reporting basis and income tax basis of assets and
liabilities based on enacted tax rates expected to be in effect when
such amounts are expected to be realized or settled. See Note 14 for
further information about income taxes.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair values presented in Note 15 are estimates of the fair values of
the financial instruments at a specific point in time using available
market information and appropriate valuation methodologies. These
estimates are subjective in nature and involve uncertainties and
significant judgment in the interpretation of current market data.
Therefore, the fair values presented are not necessarily indicative of
amounts Textron could realize or settle currently. Textron does not
necessarily intend to dispose of or liquidate such instruments prior to
maturity.
ENVIRONMENTAL REMEDIATION
Environmental liabilities are recorded based on the most probable cost
if known or on the estimated minimum cost, determined on a site by site
basis. Textron's environmental liabilities are undiscounted and do not
take into consideration any possible recoveries of future insurance
proceeds or significant claims against other third parties. See Note 16
for further information about environmental matters.
40 T E X T R O N
<PAGE> 41
-------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1 ACQUISITIONS AND DISPOSITIONS
ACQUISITIONS
In May 1993, Textron acquired the plastics operations of the Acustar
division of Chrysler Corporation. In February 1992, Textron acquired the
outstanding common stock of The Cessna Aircraft Company (Cessna) and
substantially all of the assets of USA Financial Services, Inc.
In conjunction with these acquisitions, Textron assumed liabilities as
follows:
<TABLE>
<CAPTION>
(In millions) 1993 1992
------------------------------------------------------------
<S> <C> <C>
Fair value of assets acquired $197 $1,964
Cash paid 139 893
------------------------------------------------------------
Fair value of liabilities assumed $ 58 $1,071
============================================================
</TABLE>
In early 1989, Textron acquired Avdel plc, a fastening systems
manufacturing business based in England. Due to a challenge of the
acquisition under the antitrust laws by the U.S. Federal Trade
Commission (FTC) in February 1989, Textron did not acquire control of
Avdel until May 1994 after complying with a settlement reached with the
FTC. Avdel's results of operations are included in Textron's financial
statements beginning in the second quarter of 1994.
In January 1995, Avco Financial Services (AFS) acquired the stock of HFC
of Australia Ltd. and its Australian subsidiaries (HFCA), subsidiaries
of Household International, Inc. This acquisition added approximately
$436 million of finance receivables to AFS' portfolio.
DISPOSITIONS
On August 29, 1994, Textron sold its Homelite division and on October
28, 1994, it sold its Lycoming Turbine Engine division for cash plus the
assumption of certain liabilities. Cash proceeds from these sales
aggregated $495 million. The aftertax effect on net income of the sales
of these divisions (which was due to the nontax deductibility of
goodwill) was immaterial.
-------------------------------------------------------------------------------
2 INVESTMENTS
<TABLE>
<CAPTION>
December 31, January 1,
(In millions) 1994 1994
------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Debt securities to be held to maturity, at amortized cost (estimated fair value:
$2,294 and $4,014) $2,470 $3,779
Debt securities available for sale at estimated fair value in 1994 (cost: $2,556);
at the lower of aggregate amortized cost or market in 1993
(estimated fair value: $611) 2,437 574
------------------------------------------------------------------------------------------------------------
4,907 4,353
Marketable equity securities, at market (cost: $54 and $40) 74 74
First mortgages on real estate, at cost (estimated fair value: $197 and $199) 191 179
Insurance policy loans and other investments, at cost (estimated fair value:
$129 and $164) 122 158
------------------------------------------------------------------------------------------------------------
$5,294 $4,764
============================================================================================================
</TABLE>
T E X T R O N 41
<PAGE> 42
-------------------------------------------------------------------------------
The amortized cost and estimated fair value of debt securities and
marketable equity securities at the end of 1994 and of debt securities
at the end of 1993 were as follows:
<TABLE>
<CAPTION>
December 31, 1994
------------------------------------------------------------------------------------------------------------
Gross Gross
Amortized unrealized unrealized Estimated
(In millions) cost gains losses fair value
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Obligations of U.S., foreign and other governments
and government agencies $ 347 $ 2 $ 16 $ 333
Public utility securities 501 1 39 463
Corporate securities 1,622 15 139 1,498
------------------------------------------------------------------------------------------------------------
Debt securities to be held to maturity 2,470 18 194 2,294
------------------------------------------------------------------------------------------------------------
Obligations of U.S., foreign and other governments
and government agencies 420 5 12 413
Public utility securities 271 2 20 253
Corporate securities 1,055 16 62 1,009
Mortgage-backed securities<F*> 810 9 57 762
Marketable equity securities 54 22 2 74
------------------------------------------------------------------------------------------------------------
Debt and marketable equity securities available
for sale 2,610 54 153 2,511
------------------------------------------------------------------------------------------------------------
$5,080 $ 72 $ 347 $4,805
============================================================================================================
<FN>
<F*>A substantial portion of these securities is guaranteed by the U.S. Government or U.S. Government agencies.
</TABLE>
<TABLE>
<CAPTION>
January 1, 1994
------------------------------------------------------------------------------------------------------------
Gross Gross
Amortized unrealized unrealized Estimated
(In millions) cost gains losses fair value
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Obligations of U.S., foreign and other governments
and government agencies $ 423 $ 42 $ - $ 465
Public utility securities 744 52 1 795
Corporate securities 1,738 102 12 1,828
Mortgage-backed securities<F*> 874 54 2 926
------------------------------------------------------------------------------------------------------------
Debt securities to be held to maturity 3,779 250 15 4,014
------------------------------------------------------------------------------------------------------------
Debt securities available for sale (principally
corporate and mortgage-backed securities) 574 39 2 611
------------------------------------------------------------------------------------------------------------
$4,353 $ 289 $ 17 $4,625
============================================================================================================
<FN>
<F*>A substantial portion of these securities is guaranteed by the U.S. Government or U.S. Government agencies.
</TABLE>
42 T E X T R O N
<PAGE> 43
-------------------------------------------------------------------------------
The amortized cost and estimated fair value of debt securities at the
end of 1994 by contractual maturity, are presented below. Expected
maturities will differ from contractual maturities because borrowers may
have the right to call or prepay obligations with or without call or
prepayment penalties.
Debt securities to be held to maturity:
<TABLE>
<CAPTION>
Amortized Estimated
(In millions) cost fair value
------------------------------------------------------------
<S> <C> <C>
Due in 1995 $ 11 $ 11
Due 1996 to 1999 154 151
Due 2000 to 2004 662 617
Due after 2004 1,643 1,515
------------------------------------------------------------
$2,470 $2,294
============================================================
</TABLE>
Debt securities available for sale:
<TABLE>
<CAPTION>
Amortized Estimated
(In millions) cost fair value
------------------------------------------------------------
<S> <C> <C>
Due in 1995 $ 150 $ 150
Due 1996 to 1999 339 334
Due 2000 to 2004 514 491
Due after 2004 743 700
------------------------------------------------------------
1,746 1,675
------------------------------------------------------------
Mortgage-backed securities 810 762
------------------------------------------------------------
$2,556 $2,437
============================================================
</TABLE>
In 1994, gross realized gains and losses from sales of securities
classified as available for sale were $32 million and $4 million,
respectively. Also in 1994, an investment in the held to maturity
category with an amortized cost of $10 million was sold due to
significant deterioration in the issuer's creditworthiness. Gross gains
and losses realized on sales of debt securities (excluding commercial
paper) were $14 million and $3 million, respectively, in 1993 and $33
million and $21 million, respectively, in 1992. Net realized gains
resulting from sales of marketable equity securities were $9 million in
1993.
-------------------------------------------------------------------------------
3 FINANCE RECEIVABLES
Contractual maturities of finance receivables outstanding at the end of
1994 and total finance receivables outstanding at that date and at the
end of 1993 were as follows:
<TABLE>
<CAPTION>
Finance receivables
Contractual maturities Less outstanding
------------------------------ finance -------------------
(In millions) 1995 1996 After 1996 charges 1994 1993
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Consumer:
Consumer loans $1,577 $1,143 $1,154 $1,152 $2,722 $2,390
Real estate loans 592 526 3,815 2,518 2,415 2,261
Retail installment contracts 784 458 412 547 1,107 742
Other 46 35 33 22 92 77
------------------------------------------------------------------------------------------------------------
2,999 2,162 5,414 4,239 6,336 5,470
------------------------------------------------------------------------------------------------------------
Commercial:
Installment contracts 328 237 535 123 977 807
Real estate loans 81 60 304 5 440 514
Finance leases 144 138 377 136 523 470
Leveraged leases 9 9 630 327 321 295
Floorplan and other receivables 358 54 86 11 487 463
------------------------------------------------------------------------------------------------------------
920 498 1,932 602 2,748 2,549
------------------------------------------------------------------------------------------------------------
$3,919 $2,660 $7,346 $4,841 9,084 8,019
------------------------------------------==========================================------------------------
Less allowance for credit losses 250 225
Less finance-related insurance
reserves and claims 251 232
------------------------------------------------------------------------------------------------------------
$8,583 $7,562
============================================================================================================
</TABLE>
T E X T R O N 43
<PAGE> 44
-------------------------------------------------------------------------------
The maximum term over which consumer loans and retail installment
contracts are written is ten years, but approximately 90% of these loans
are written with terms of four years or less. Consumer real estate loans
are written with a maximum term of 15 years. Consumer loans are
unsecured or secured by personal property and are in relatively small
amounts. Retail installment contracts are secured by personal property.
Consumer real estate loans are secured by real property and are limited
to a maximum of 85% of the property's appraised market value at the date
of the loans.
Commercial installment contracts have initial terms generally ranging
from one to 12 years. Commercial real estate loans have initial terms
generally ranging from three to five years. Finance leases have initial
terms generally up to 12 years. Leveraged leases have initial terms up
to approximately 30 years. Finance leases and commercial installment
contracts are secured by the financed equipment and, in some instances,
by the personal guarantee of the principals or recourse arrangements
with the originating vendor. Commercial real estate loans are secured by
real property and are generally limited to a maximum of 80% of the
property's appraised market value at the date of the loans. Leveraged
leases are secured by the ownership of the leased asset.
Accounts are often repaid or refinanced prior to contractual maturity.
Accordingly, the foregoing tabulation should not be regarded as a
forecast of future cash collections. In 1994 and 1993, cash collections
of receivables (excluding finance charges) were $4.7 billion and $4.2
billion, respectively. The ratio of cash collections to average net
receivables was approximately 58% and 57%, respectively. Nonearning
finance receivables were $182 million at the end of 1994.
4 LONG-TERM CONTRACT AND PROGRAM RECEIVABLES
Long-term contract and program receivables at December 31, 1994 and
January 1, 1994 aggregated $153 million and $251 million, respectively,
including $69 million and $114 million, respectively, of unbilled costs
and accrued profits on long-term contracts for which the contractual
criteria for billing had not yet been met. An estimated $53 million and
$65 million, respectively, of the unbilled amounts are not expected to
be collected within one year. There are no significant amounts included
in receivables which represent balances billed but unpaid under
contractual retainage provisions or significant long-term contract
receivables subject to uncertainty as to collection.
5 INVENTORIES
<TABLE>
<CAPTION>
December 31, January 1,
(In millions) 1994 1994
------------------------------------------------
<S> <C> <C>
Finished goods $ 288 $ 395
Work in process 948 1,120
Raw materials 212 241
------------------------------------------------
1,448 1,756
Less progress and
advance payments 237 268
------------------------------------------------
$1,211 $1,488
================================================
</TABLE>
Inventories aggregating $664 million at December 31, 1994 and $734
million at January 1, 1994 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 $144 million and $148
million higher at those respective dates.) The remaining inventories,
other than those related to certain long-term contracts and programs,
are valued generally by the first-in, first-out method.
Inventories related to long-term contracts and programs, net of progress
and advance payments, were $451 million at December 31, 1994 and $553
million at January 1, 1994. Such inventories include unamortized
tooling, deferred learning costs and costs related to unnegotiated,
customer-directed changes of approximately $193 million at December 31,
1994 and $235 million at January 1, 1994. Textron expects to recover all
such amounts over the related contracts and programs. As to government
contracts, inventory costs also generally include general and
administrative expenses ($30 million at December 31, 1994; $40 million
at January 1, 1994).
6 PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
December 31, January 1,
(In millions) 1994 1994
------------------------------------------------
<S> <C> <C>
At cost:
Land and buildings $ 704 $ 728
Machinery and
equipment 1,999 2,069
------------------------------------------------
2,703 2,797
Less accumulated
depreciation 1,450 1,528
------------------------------------------------
$1,253 $1,269
================================================
</TABLE>
Depreciation of property, plant and equipment was $212 million in 1994,
$206 million in 1993 and $199 million in 1992, including depreciation
using accelerated methods of $40 million, $48 million and $50 million,
respectively.
44 T E X T R O N
<PAGE> 45
-------------------------------------------------------------------------------
7 INSURANCE RESERVES AND CLAIMS
<TABLE>
<CAPTION>
December 31, January 1,
(In millions) 1994 1994
------------------------------------------------
<S> <C> <C>
Paul Revere:
Future policy benefits $1,193 $1,090
Unpaid claims and
claim expenses 1,576 1,358
Other policyholder
funds 1,714 1,462
Other 202 181
------------------------------------------------
$4,685 $4,091
================================================
</TABLE>
The laws of many states in which Textron's insurance subsidiaries are
admitted to do business require as a condition of admission that all
insurance companies so admitted collectively guarantee to their
policyholders the solvency of other insurance companies admitted in the
particular state. Textron's insurance subsidiaries have not been
required to date to make any significant payments pursuant to such
guarantees. While the amount of any assessments which may be made in the
future cannot be predicted, Textron does not believe any such
assessments would be material to its net income or financial condition.
-------------------------------------------------------------------------------
8 DEBT AND CREDIT FACILITIES
The Textron Parent Company Borrowing Group (comprised of all entities of
Textron other than its finance and insurance subsidiaries) and Textron's
finance and insurance subsidiaries are independent borrowers, and,
accordingly, their debt is supported by their own respective assets and
cash flows.
At the end of 1994 and 1993, debt consisted of the following:
<TABLE>
<CAPTION>
December 31, January 1,
(In millions) 1994 1994
------------------------------------------------------------------------------------------------
<S> <C> <C>
Textron Parent Company Borrowing Group:
Senior:
Borrowings under or supported by long-term credit facilities<F*> $ 432 $ 638
8.75% - 9.25%; due 2016 to 2022 241 279
Medium-term notes; due 1995 to 2011 (average rate - 8.8%) 357 430
Variable rate notes due 1995 to 2000 (average rate - 4.9%) 365 390
Other notes (average rate - 5.5%) 158 178
------------------------------------------------------------------------------------------------
Total senior 1,553 1,915
------------------------------------------------------------------------------------------------
Subordinated - 8.86% - 8.97%; due 1998 to 1999 29 110
------------------------------------------------------------------------------------------------
Total Textron Parent Company Borrowing Group 1,582 2,025
------------------------------------------------------------------------------------------------
Finance and insurance subsidiaries:
Senior:
Borrowings under or supported by credit facilities<F**> 3,392 2,860
4.33% - 5.99%; due 1995 to 2000 1,322 1,544
6.10% - 7.84%; due 1995 to 2001 1,509 689
8.20% - 9.70%; due 1995 to 2000 710 758
10% - 11.85%; due 1995 to 1998 199 299
12.31% - 12.85%; due 1995 68 112
Variable rate notes due 1995 to 1997 (average rate - 6.6%) 543 534
------------------------------------------------------------------------------------------------
Total senior 7,743 6,796
------------------------------------------------------------------------------------------------
Senior subordinated - 9.55% - 11.56%; due 1995 to 1998 39 51
------------------------------------------------------------------------------------------------
Total finance and insurance subsidiaries 7,782 6,847
------------------------------------------------------------------------------------------------
Total debt $9,364 $8,872
================================================================================================
<FN>
<F*>The weighted average interest rates on these borrowings, before consideration of the effect
of interest rate exchange agreements, at the end of 1994, 1993 and 1992 were 6.2%, 3.6% and
3.9%, respectively. The weighted average interest rates on these borrowings, before
consideration of the effect of interest rate exchange agreements, for the years 1994, 1993
and 1992 were 4.4%, 3.4% and 4.1%, respectively.
<F**>The weighted average interest rates on these borrowings, before consideration of the effect
of interest rate exchange agreements, at the end of 1994, 1993 and 1992 were 6.1%, 3.7% and
4.5%, respectively. The weighted average interest rates on these borrowings, before
consideration of the effect of interest rate exchange agreements, for the years 1994, 1993
and 1992 were 4.7%, 3.7% and 4.4%, respectively.
</TABLE>
T E X T R O N 45
<PAGE> 46
-------------------------------------------------------------------------------
Required payments and sinking fund requirements during the next five
years on debt outstanding at December 31, 1994 (excluding amounts that
might become payable under credit facilities and revolving credit
agreements) are as follows:
<TABLE>
<CAPTION>
(In millions) 1995 1996 1997 1998 1999
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Textron Parent Company Borrowing Group $ 159 $ 184 $ 164 $ 15 $ 47
Finance and insurance subsidiaries 1,068 687 1,080 460 657
-----------------------------------------------------------------------------------------------------------
$1,227 $ 871 $1,244 $ 475 $ 704
============================================================================================================
</TABLE>
Cash payments for interest were as follows:
<TABLE>
<CAPTION>
(In millions) 1994 1993 1992
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Textron Parent Company Borrowing Group $ 177 $ 205 $ 216
Finance and insurance subsidiaries 454 440 477
------------------------------------------------------------------------------------------------------------
$ 631 $ 645 $ 693
============================================================================================================
</TABLE>
The Textron Parent Company Borrowing Group maintains credit facilities
with various banks for borrowing funds on both a short- and a long-term
basis.
Textron has credit agreements with 37 banks aggregating $1.5 billion, of
which $1.25 billion is available on a fully revolving basis until
October 29, 1997, with the remainder available on a fully revolving
basis until October 29, 1995. Textron pays fees in support of those
facilities. The credit agreements contain provisions requiring Textron
to maintain a minimum level of shareholders' equity and a minimum
interest coverage ratio. The portion of the credit facilities not used
or reserved as support for commercial paper or bank borrowings at
December 31, 1994 was $1.1 billion.
Textron's finance subsidiaries -- AFS and Textron Financial Corporation
(TFC) -- have lines of credit with various banks aggregating $3.6 billion
at December 31, 1994. The subsidiaries' lines of credit not used or
reserved as support for commercial paper or bank borrowings at December
31, 1994 were $60 million. AFS and TFC generally pay fees in support of
these lines.
The amount of the net assets of Textron's finance and insurance
subsidiaries available for cash dividends and other payments to the
Textron Parent Company Borrowing Group is restricted by the terms of
lending agreements and insurance statutory requirements. As of December
31, 1994, approximately $245 million of their net assets of $2.2 billion
was available to be transferred to the Textron Parent Company Borrowing
Group pursuant to these restrictions. AFS' and TFC's loan agreements
also contain various restrictive provisions regarding additional debt,
the creation of liens or guarantees and the making of investments.
Under interest rate exchange agreements, Textron and its finance
subsidiaries make periodic fixed payments in exchange for periodic
variable payments. Textron and its finance subsidiaries have entered
into such agreements to mitigate their exposure to increases in interest
rates on a portion of their variable rate debt. During 1994, the finance
subsidiaries had $514 million of interest rate exchange agreements go
into effect. The agreements in effect at the end of 1994 and 1993, which
had weighted average original terms of 8.3 years and 7.9 years for the
Textron Parent Company Borrowing Group and 3.5 years and 4.4 years for
the finance subsidiaries,
46 T E X T R O N
<PAGE> 47
-------------------------------------------------------------------------------
respectively, had the effect of fixing the rate of interest on variable
interest rate borrowings as follows:
<TABLE>
<CAPTION>
December 31, 1994 January 1, 1994
-----------------------------------------------------------------------------------------------------------------
Interest rate exchange agreements Weighted Weighted
Notional average Notional average
(Dollars in millions) amount interest rate amount interest rate
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Textron Parent Company Borrowing Group
(expire through 2004)<F*> $ 571 8.79% $ 621 9.05%
Finance subsidiaries (expire through 2000)<F**> 824 8.12% 447 9.46%
-----------------------------------------------------------------------------------------------------------------
$1,395 8.40% $1,068 9.22%
================================================================================================================
<FN>
<F*>The Textron Parent Company Borrowing Group's interest rate exchange agreements in effect at the end of 1994
expire as follows: $165 million (8.46%) in 1996, $100 million (9.08%) in 1997 and $306 million (8.86%)
after 1999.
<F**>The finance subsidiaries' interest rate exchange agreements in effect at the end of 1994 expire as follows:
$238 million (8.4%) in 1995, $177 million (8.8%) in 1996, $146 million (8.4%) in 1997, $121 million (8.5%)
in 1998, $127 million (6.0%) in 1999 and $15 million (6.7%) thereafter.
</TABLE>
In addition, the finance subsidiaries entered into interest rate
exchange agreements that had the effect of exchanging the indices used
to determine interest expense under certain variable rate borrowings for
the purpose of better matching the rate of interest incurred on its
financing with the rate of interest earned on certain of their variable
rate finance receivables. At the end of 1994, $205 million of such
agreements were in effect. The agreements expire in 1998.
9 SHAREHOLDERS' EQUITY
PREFERRED STOCK
Each share of $2.08 Preferred Stock ($23.63 approximate stated value) is
convertible into 2.2 shares of common stock and is redeemable by Textron
at $50 per share. In the event of involuntary liquidation, preferred
shareholders would be entitled to $50 per share and accrued dividends.
In the event of voluntary liquidation, shareholders would be entitled to
$50 per share.
Each share of $1.40 Preferred Dividend Stock ($11.82 approximate stated
value) is convertible into 1.8 shares of common stock and is redeemable
by Textron at $45 per share. In the event of liquidation, holders of
each share of such stock would be entitled to receive accrued dividends
and thereafter share ratably on a converted basis with holders of common
stock, subject to the prior rights of the $2.08 Preferred Stock.
PREFERRED STOCK PURCHASE RIGHTS
One-half of a Preferred Stock Purchase Right (Right) is attached to each
outstanding share of common stock. Each whole Right entitles the holder
to buy one unit of Series C Junior Participating Preferred Stock at an
exercise price of $175. The Rights will 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. If certain
additional events then occur, each whole Right will allow holders of
units to acquire common stock of Textron, or in some cases of an
acquiring entity, having a value equal to twice the exercise price. The
Rights expire in March 1996, but may be redeemed earlier at a price of
$.05 per whole Right.
STOCK OPTIONS AND PERFORMANCE AWARDS
In April 1994, Textron's shareholders approved the adoption of the 1994
Long-Term Incentive Plan which authorizes the granting of awards to key
employees in the following forms: (a) performance share units and (b)
options to purchase Textron common stock.
Performance share unit awards entitle recipients to payments in cash
upon the attainment of performance targets established at the time such
awards are granted. Amounts paid under performance share unit awards are
based on the degree of attainment of the performance targets and the
price of Textron's common stock at the end of the measurement period.
The Plan provides for both incentive stock options and non-qualified
stock options exercisable at a purchase price per share not less than
the fair market value of Textron common stock at the date of grant and
in the case of incentive stock options within ten years. The total
number of shares of common stock for which options may be granted under
the Plan is 5,000,000.
T E X T R O N 47
<PAGE> 48
-------------------------------------------------------------------------------
OPTION ACTIVITY
Stock option transactions in 1994, 1993 and 1992 are summarized as
follows:
<TABLE>
<CAPTION>
1994 1993 1992
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Shares under option at beginning of year (at average prices of
$42.02 in 1994; $34.07 in 1993 and $28.12 in 1992) 3,997,494 3,457,447 3,672,547
Options granted (at average prices of $49.40 in 1994; $55.83
in 1993 and $41.89 in 1992) 1,123,600 1,275,500 1,225,400
Options exercised (at average prices of $33.40 in 1994; $28.25
in 1993 and $25.29 in 1992) (349,343) (701,305) (1,348,356)
Options canceled (at average prices of $49.22 in 1994; $35.45
in 1993 and $29.56 in 1992) (75,551) (34,148) (92,144)
------------------------------------------------------------------------------------------------------------
Shares under option at end of year (at average prices of $44.31
in 1994; $42.02 in 1993 and $34.07 in 1992) 4,696,200 3,997,494 3,457,447
============================================================================================================
Shares exercisable at end of year (at average prices of $39.98 in
1994; $33.74 in 1993 and $27.97 in 1992) 2,957,074 2,119,377 1,778,078
============================================================================================================
</TABLE>
RESERVED SHARES
Shares of common stock reserved at December 31, 1994 for the subsequent
conversion of preferred stock and the exercise of stock options were as
follows:
<TABLE>
<S> <C>
$2.08 Cumulative Convertible
Preferred Stock, Series A<F*> 804,179
$1.40 Convertible Preferred
Dividend Stock, Series B<F*> 1,102,714
Options granted to employees 4,696,200
--------------------------------------------------
6,603,093
==================================================
<FN>
<F*>Includes shares issuable upon conversion of
shares of preferred stock held as treasury
shares.
</TABLE>
10 LEASES
Rental expense was approximately $124 million, $128 million and $123
million in 1994, 1993 and 1992, respectively. Future minimum rental
commitments for all noncancellable operating leases in effect at
December 31, 1994 approximated $80 million for 1995, $59 million for
1996, $42 million for 1997, $29 million for 1998, $22 million for 1999
and $138 million thereafter.
11 RESEARCH AND DEVELOPMENT
Textron performs research and development under both company initiated
programs and contracts with others, primarily the U.S. Government.
Company initiated programs include research and development for
commercial products and independent research and development related to
government products and services. A significant portion of the cost
incurred for independent research and development is recoverable from
the U.S. Government through overhead cost allowances.
Company funded research and development, as indicated below, includes
amounts charged to income with respect to (a) company initiated programs
and (b) the cost sharing portions of, and any losses incurred on,
customer initiated programs.
<TABLE>
<CAPTION>
(In millions) 1994 1993 1992
------------------------------------------------------------
<S> <C> <C> <C>
Company funded $187 $195 $172
Customer funded 424 319 258
------------------------------------------------------------
Total research and
development $611 $514 $430
============================================================
</TABLE>
12 PENSION BENEFITS
Textron and certain of its subsidiaries have a number of defined benefit
pension plans covering substantially all of their employees. Benefits
under salaried plans are based on salary and years of service, while
benefits under hourly plans generally are based on negotiated amounts
and years of service. Textron's funding policy is consistent with the
funding requirements of federal law and regulations. Plan assets consist
principally of corporate and government bonds and common stocks.
Pension cost in 1994, 1993 and 1992 included the following components:
<TABLE>
<CAPTION>
(In millions) 1994 1993 1992
--------------------------------------------------------------
<S> <C> <C> <C>
Service cost -
benefits earned
during the year $ 72 $ 67 $ 67
Interest cost on projected
benefit obligation 205 188 184
Actual return on
plan assets (25) (370) (282)
Amortization of
unrecognized transition
net asset (16) (16) (16)
Net amortization and
deferral of actuarial
gains (losses) (235) 134 59
--------------------------------------------------------------
Net pension cost $ 1 $ 3 $ 12
==============================================================
</TABLE>
48 T E X T R O N
<PAGE> 49
-------------------------------------------------------------------------------
The following table sets forth the funded status of
Textron's pension plans at December 31, 1994 and
January 1, 1994.
<TABLE>
<CAPTION>
December 31, 1994 January 1, 1994
------------------------------------------------------------------------------------------------------------
Assets Accumulated Assets Accumulated
exceed benefits exceed benefits
accumulated exceed accumulated exceed
(In millions) benefits assets benefits assets
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Actuarial present value of:
Vested benefit obligation $1,806 $ 519 $1,717 $ 731
Nonvested benefit obligation 78 35 86 51
------------------------------------------------------------------------------------------------------------
Accumulated benefit obligation 1,884 554 1,803 782
Additional amounts related to projected pay increases 207 17 219 15
------------------------------------------------------------------------------------------------------------
Projected benefit obligation 2,091 571 2,022 797
Plan assets at fair value 2,669 449 2,653 664
------------------------------------------------------------------------------------------------------------
Plan assets in excess of (less than) projected
benefit obligation 578 (122) 631 (133)
Unrecognized net actuarial gains (171) (19) (237) (5)
Unrecognized prior service cost 16 61 15 61
Unrecognized transition net obligation (net asset) (151) (3) (171) 2
Adjustment required to recognize minimum liability - (27) - (56)
------------------------------------------------------------------------------------------------------------
Net pension asset (liability) recognized on the
consolidated balance sheet $ 272 $ (110) $ 238 $ (131)
============================================================================================================
</TABLE>
Major assumptions used in the accounting for the defined benefit pension
plans are shown in the following table. Net pension cost is determined
using these factors as of the end of the prior year; the funded status
of the plans is determined using the discount rate and rate of
compensation increase as of the end of the current year.
<TABLE>
<CAPTION>
December 31, January 1, January 2, December 28,
1994 1994 1993 1991
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Discount rate 8.25% 7.25% 8.00% 8.00%
Weighted average long-term rate of compensation increase 5.00% 5.00% 5.50% 6.00%
Long-term rate of return on plan assets 9.00% 9.00% 9.00% 9.00%
===========================================================================================================
</TABLE>
13 EMPLOYEE BENEFITS OTHER THAN PENSIONS
Textron and certain of its subsidiaries have a number of defined
contribution savings and other retirement plans, including Textron's
employee stock ownership plan, covering both salaried and hourly
employees. Eligible employees who participate in certain of these plans
receive, within certain limits, matching Textron contributions. Costs
relating to these plans, which are generally funded as accrued, amounted
to approximately $37 million, $33 million and $35 million for 1994, 1993
and 1992, respectively, of which $18 million, $17 million and $20
million related to the employee stock ownership plan for 1994, 1993 and
1992, respectively.
Textron provides certain health care and life insurance benefits for
certain retired employees. Eligibility for these benefits is restricted
to the particular benefit plans at the particular locations offering
postretirement benefits. These benefits and similar benefits for active
employees are administered by insurance companies or other carriers who
determine premiums for insured plans and expected costs to be paid
during the year under self-insured plans.
In 1992, Textron adopted Statement of Financial Accounting Standards No.
106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions" (FAS 106), with respect to its retiree health care and life
insurance benefits. FAS 106 requires Textron to recognize the cost of
such benefits using the accrual method of accounting over the employees'
years of service.
The FAS 106 transition obligation - representing the accumulated
postretirement benefit obligation for Textron's retiree health care and
life insurance benefit plans at December 29, 1991 - of $570 million
T E X T R O N 49
<PAGE> 50
-------------------------------------------------------------------------------
($6.44 per share), net of related income tax benefit, was recorded as
the cumulative effect of a change in accounting principle. The
respective amounts of such retiree costs deductible for tax purposes,
allocable to government contracts and allowable in contract price
determinations are not affected by FAS 106. The adoption of FAS 106 had
no cash flow impact on Textron.
Postretirement benefit costs other than those related to pensions in
1994, 1993 and 1992 included the following components:
<TABLE>
<CAPTION>
(In millions) 1994 1993 1992
------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost - benefits
earned during the year $ 9 $ 9 $14
Interest cost on accumulated
postretirement benefit
obligation 62 68 75
Net amortization (10) (6) -
------------------------------------------------------------------------------------
Postretirement benefit
costs $61 $71 $89
====================================================================================
</TABLE>
Textron's postretirement benefit plans other than pensions currently are
not funded. The following table sets forth the funded status of these
plans at the end of 1994 and 1993:
<TABLE>
<CAPTION>
December 31, January 1,
(In millions) 1994 1994
------------------------------------------------------------------------
<S> <C> <C>
Actuarial present value
of benefits attributed to:
Retirees $ 613 $ 677
Fully eligible active
plan participants 77 153
Other active plan
participants 89 147
------------------------------------------------------------------------
Accumulated postretirement
benefit obligation 779 977
Unrecognized net actuarial gains 148 30
Unrecognized prior service cost
benefit 24 26
------------------------------------------------------------------------
Postretirement benefit
liability recognized on
the consolidated
balance sheet $ 951<F*> $1,033
========================================================================
<FN>
<F*>The decrease in the postretirement benefit liability is due primarily
to the sale of the Lycoming Turbine Engine division.
</TABLE>
An assumed discount rate of 7.25% and 8.0% was used to determine
postretirement benefit costs other than pensions for 1994 and 1993,
respectively. An assumed discount rate of 8.25% and 7.25% was used to
determine the status of Textron's plans at December 31, 1994 and January
1, 1994, respectively. The weighted average annual assumed rate of
increase in the per capita cost of covered benefits (that is, the health
care cost trend rate) is 10% for retirees age 65 and over and 14% for
retirees under age 65 in 1995, and both rates are assumed to decrease
gradually to 5.5% until 2002 and 2004, respectively, and remain at that
rate thereafter. Increasing these rates by one percentage point in each
year would have increased the accumulated postretirement benefit
obligation as of December 31, 1994 by $69 million and increased the
aggregate of the service and interest cost components of postretirement
benefit costs for 1994 by $7 million.
14 INCOME TAXES
Textron files a consolidated federal income tax return which includes
all U.S. subsidiaries. Separate returns are filed for Textron's foreign
subsidiaries.
In 1992, Textron adopted Statement of Financial Accounting Standards No.
109, "Accounting for Income Taxes" (FAS 109). FAS 109 requires Textron
to modify its income tax accounting so that deferred taxes are stated at
prevailing income tax rates and to modify the accounting for income
taxes in purchase business combinations. Textron's adoption of FAS 109
was made by a cumulative effect charge to income of $109 million ($1.23
per share). The adoption of FAS 109 had no cash flow impact on Textron.
Income before income taxes is summarized as follows:
<TABLE>
<CAPTION>
(In millions) 1994 1993 1992
------------------------------------------------------------
<S> <C> <C> <C>
United States $543 $471 $404
Foreign 211 145 123
------------------------------------------------------------
Total $754 $616 $527
============================================================
</TABLE>
<TABLE>
Income taxes before the cumulative effect of changes in accounting
principles are summarized as follows:<F*>
<CAPTION>
(In millions) 1994 1993 1992
------------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal $114 $129 $101
State 31 30 27
Foreign 71 47 38
------------------------------------------------------------
216 206 166
------------------------------------------------------------
Deferred:
Federal 80 27 31
State 4 1 2
Foreign 8 - 4
------------------------------------------------------------
92 28 37
------------------------------------------------------------
Total $308 $234 $203
============================================================
<FN>
<F*>Income taxes related to the cumulative effect of changes
in accounting principles in 1992 consist of a $335
million deferred tax benefit related to the adoption of
FAS 106 (see Note 13) and a $109 million deferred tax
provision related to the adoption of FAS 109. Federal and
state income taxes related to the cumulative effect of
changes in accounting principles were $189 million and
$37 million, respectively.
</TABLE>
50 T E X T R O N
<PAGE> 51
-------------------------------------------------------------------------------
Following is a reconciliation of the federal statutory income tax rate
to the effective income tax rate applicable to pretax income before the
cumulative effect of changes in accounting principles, as reflected in
the consolidated statement of income:
<TABLE>
<CAPTION>
1994 1993 1992
-----------------------------------------------------------------------
<S> <C> <C> <C>
Federal statutory income
tax rate 35.0% 35.0% 34.0%
Increase (decrease) in
taxes resulting from:
State income taxes 3.0 3.3 3.7
Goodwill 5.3 3.0 3.0
Effect of tax rate
change on net
deferred tax asset - (1.4) -
Foreign Sales
Corporation
benefit (.7) (.8) (1.2)
Other - net (1.8) (1.1) (1.0)
-----------------------------------------------------------------------
Effective income
tax rate 40.8%<F*> 38.0% 38.5%
=======================================================================
<FN>
<F*>The increase in the effective income tax rate is due primarily to the
impact of the nontax deductibility of goodwill related to the sale of
the Lycoming Turbine Engine division.
</TABLE>
Textron's net deferred tax asset consisted of gross deferred tax assets
and gross deferred tax liabilities of $1,373 million and $1,174 million,
respectively, at December 31, 1994 and $1,002 million and $751 million,
respectively, at January 1, 1994.
The components of Textron's net deferred tax asset as of December 31,
1994 and January 1, 1994 were as follows:
<TABLE>
<CAPTION>
December 31, January 1,
(In millions) 1994 1994
------------------------------------------------------------
<S> <C> <C>
Deferred tax (assets) liabilities:
Obligation for postretirement
benefits other than pensions $(371) $(394)
Finance subsidiary transactions,
principally leasing 295 309
Insurance policy acquisition
costs 253 223
Other insurance liabilities (171) (155)
Fixed assets, principally
depreciation 123 110
Allowance for bad debts (92) (85)
Liabilities for future policy
benefits (63) (72)
Deferred compensation
and vacation pay (66) (65)
Other, principally timing
of other expense deductions (107) (122)
------------------------------------------------------------
Total net deferred tax asset $(199) $(251)
============================================================
</TABLE>
Cash payments for income taxes were $224 million, $189 million and $147
million in 1994, 1993 and 1992, respectively.
Deferred income taxes have not been provided for the undistributed
earnings of foreign subsidiaries which aggregated approximately $571
million at the end of 1994. Management's intention is to reinvest such
undistributed earnings for an indefinite period, except for
distributions upon which incremental taxes would not be material. If
such earnings were distributed, taxes (net of foreign tax credits) would
have increased by approximately $43 million, principally due to foreign
withholding taxes.
At the end of 1994, consolidated shareholders' equity included $84
million of U.S. life insurance subsidiaries' policyholders' surplus on
which no income taxes have been provided. The amount of taxes which
would become due if the surplus were distributed to the life insurance
subsidiaries' shareholders is approximately $29 million. Under present
circumstances, it is not anticipated that any of these earnings will
become taxable.
15 FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used in estimating the fair
value of Textron's financial instruments except for certain excluded
instruments and instruments for which it is not practicable to estimate
fair value:
INVESTMENTS
The estimated fair values of investment securities, except for insurance
policy loans to policyholders, were based on quoted market prices where
available. If quoted market prices were not available, the estimated
fair values were based on independent appraisals, prices from
independent brokers or discounted cash flow analyses using interest
rates currently being offered for similar loans to borrowers of similar
credit quality. The estimated fair value of insurance policy loans to
policyholders approximated the carrying value of such loans.
FINANCE RECEIVABLES
The estimated fair values of fixed rate consumer loans, real estate
loans and commercial installment contracts were estimated based on
discounted cash flow analyses using interest rates currently being
offered for similar loans to borrowers of similar credit quality.
Estimated future cash flows were adjusted for Textron's estimates of
prepayments, refinances and loan losses based on internal historical
data. The estimated fair value of all variable rate receivables and
fixed rate retail installment contracts approximated
T E X T R O N 51
<PAGE> 52
-------------------------------------------------------------------------------
the net carrying value of such receivables. The estimated fair values of
nonperforming loans were based on independent appraisals, discounted cash
flow analyses, using risk adjusted interest rates, or Textron valuations
based upon the fair value of the related collateral. The fair values of
Textron's lease receivables and finance-related insurance reserves and
claims ($914 million and $251 million, net carrying value, respectively,
at the end of 1994 and $826 million and $232 million, net carrying
value, respectively, at the end of 1993) are not required to be
disclosed under generally accepted accounting principles.
INSURANCE RESERVES AND CLAIMS
The estimated fair value of other policyholder funds was based on the
cash surrender value of Paul Revere's financial products portfolio. The
fair value of reserves or liabilities relating to Textron's other
insurance products is not required to be disclosed under generally
accepted accounting principles.
DEBT AND INTEREST RATE EXCHANGE AGREEMENTS
The estimated fair value of fixed rate debt was determined by either
independent investment bankers or discounted cash flow analyses using
interest rates for similar debt with maturities similar to the remaining
terms of the existing debt. The fair values of variable rate debt and
borrowings under or supported by long-term credit facilities
approximated their carrying values. The estimated fair values of
interest rate exchange agreements were determined by independent
investment bankers and represent the estimated amounts that Textron or
its counterparty would be required to pay to assume the other party's
obligations under the agreements.
The carrying values and estimated fair values of
Textron's financial instruments for which it is
practicable to calculate a fair value are as follows:
<TABLE>
<CAPTION>
December 31, 1994 January 1, 1994
------------------------------------------------------------------------------------------------
Estimated Estimated
Carrying fair Carrying fair
(In millions) value value value value
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets:
Investments $5,294 $5,131 $4,764 $5,062
Finance receivables:
Consumer loans $6,074 $6,062 $5,239 $5,266
Commercial loans 1,846 1,862 1,729 1,762
------------------------------------------------------------------------------------------------
$7,920 $7,924 $6,968 $7,028
------------------------------------------------------------------------------------------------
Liabilities:
Other policyholder funds $1,714 $1,694 $1,462 $1,447
Debt:
Textron Parent Company Borrowing Group:
Variable rate debt $ 980 $ 980 $1,235 $1,235
Interest rate exchange agreements - 25 - 88
Fixed rate debt 602 617 790 885
------------------------------------------------------------------------------------------------
Total Textron Parent Company Borrowing Group 1,582 1,622 2,025 2,208
------------------------------------------------------------------------------------------------
Finance and insurance subsidiaries:
Variable rate debt 4,671 4,671 4,021 4,021
Interest rate exchange agreements - (25) - 33
Fixed rate debt 3,111 3,015 2,826 2,940
------------------------------------------------------------------------------------------------
Total finance and insurance subsidiaries 7,782 7,661 6,847 6,994
------------------------------------------------------------------------------------------------
Total debt $9,364 $9,283 $8,872 $9,202
================================================================================================
</TABLE>
52 T E X T R O N
<PAGE> 53
-------------------------------------------------------------------------------
16 CONTINGENCIES
There are pending or threatened against Textron and its subsidiaries
lawsuits and other proceedings, some of which allege violations of
federal government procurement regulations, involve environmental
matters, or are or purport to be class actions. Among these suits and
proceedings are some which seek compensatory, treble or punitive damages
in substantial amounts; fines, penalties or restitution; the cleanup of
allegedly hazardous wastes; or, under federal government procurement
regulations, could result in suspension or debarment of Textron or its
subsidiaries from U.S. Government contracting for a period of time.
These suits and proceedings are being defended or contested on behalf of
Textron and its subsidiaries. On the basis of information presently
available, Textron believes that any such liability or the impact of the
application of relevant government regulations would not have a material
effect on Textron's net income or financial condition.
With respect to environmental matters, Textron's accrued estimated
environmental liabilities are based on assumptions which are subject to
a number of factors and uncertainties which can affect the reliability
and precision of such accruals, including (a) the unavailability of
information about the number of additional sites at which Textron may be
identified as a potentially responsible party by both federal and state
governments, (b) uncertainties about the nature and application of
environmental regulations being promulgated, (c) the level of cleanup
that may be required at specific sites and choices concerning the
technologies to be applied in corrective actions, (d) the number of
contributors to the costs of remediation at specific sites and the
financial condition of the contributors, and (e) the time periods over
which remediation may occur. It is estimated that Textron's accrued
environmental remediation liabilities will be paid primarily over the
next five to ten years.
17 SELECTED FINANCIAL INFORMATION
Presented below and on page 28 of this report is selected financial
information by business segment and geographic area for Textron.
-------------------------------------------------------------------------------
<TABLE>
SELECTED FINANCIAL INFORMATION BY BUSINESS SEGMENT
For a description of the businesses comprising each segment, see pages 61 to 63 of this report.
<CAPTION>
BUSINESS SEGMENTS Identifiable assets Capital expenditures Depreciation
------------------------------ ---------------------------- ----------------------------
(In millions) 1994 1993 1992 1994 1993 1992 1994 1993 1992
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Manufacturing:
Aircraft $ 1,636 $ 1,658 $ 1,676 $ 78 $ 67 $ 56 $ 48 $ 46 $ 36
Automotive 870 686 436 87 55 31 39 33 27
Industrial 849 585 570 70 63 50 41 33 36
Systems and Components 1,216 1,832 2,011 29 32 39 56 67 74
------------------------------------------------------------------------------------------------------------------------------------
4,571 4,761 4,693 264 217 176 184 179 173
------------------------------------------------------------------------------------------------------------------------------------
Financial Services:
Finance 9,900 8,801 8,267 22 20 17 18 18 17
Paul Revere 5,909 5,377 4,561 8 6 2 6 5 5
------------------------------------------------------------------------------------------------------------------------------------
15,809 14,178 12,828 30 26 19 24 23 22
------------------------------------------------------------------------------------------------------------------------------------
Corporate 642 834 857 8 9 22 4 4 4
Eliminations (97) (115) (11) - - - - - -
------------------------------------------------------------------------------------------------------------------------------------
$20,925 $19,658 $18,367 $302 $252 $217 $212 $206 $199
====================================================================================================================================
</TABLE>
T E X T R O N 53
<PAGE> 54
-------------------------------------------------------------------------------
<TABLE>
SELECTED FINANCIAL INFORMATION BY GEOGRAPHIC AREA
<CAPTION>
GEOGRAPHIC AREAS
Revenues
-----------------------------
(In millions) 1994 1993 1992
------------------------------------------------------------
<S> <C> <C> <C>
Revenues by origin:
United States $8,299 $7,956 $7,246
Canada 833 773 707
Asia/Pacific 231 167 206
Western Europe 318 178 185
------------------------------------------------------------
$9,681 $9,074 $8,344
============================================================
<CAPTION>
Income
-----------------------------
(In millions) 1994 1993 1992
------------------------------------------------------------
<S> <C> <C> <C>
Income by origin:
United States $ 825 $ 788 $ 723
Canada 119 87 65
Asia/Pacific 46 35 34
Western Europe 46 23 24
------------------------------------------------------------
1,036 933 846
------------------------------------------------------------
Corporate expenses
and other - net (78) (85) (69)
Interest expense - net (204) (232) (250)
------------------------------------------------------------
Income before
income taxes $ 754 $ 616 $ 527
============================================================
<CAPTION>
Export sales
------------------------------
(In millions) 1994 1993 1992
------------------------------------------------------------
<S> <C> <C> <C>
Destination of
U.S. exports:
Western Europe $ 427 $ 476 $ 466
Canada 252 214 141
Asia/Pacific 161 236 183
Mexico 146 114 102
Middle East 62 113 73
Other locations 148 143 120
------------------------------------------------------------
$ 1,196 $ 1,296 $ 1,085
============================================================
<CAPTION>
Identifiable assets
------------------------------
(In millions) 1994 1993 1992
------------------------------------------------------------
<S> <C> <C> <C>
Identifiable assets
by location:
United States $16,827 $16,155 $15,044
Canada 1,800 1,674 1,570
Asia/Pacific 766 546 481
Western Europe 949 501 474
Corporate 642 834 857
Eliminations (59) (52) (59)
------------------------------------------------------------
$20,925 $19,658 $18,367
============================================================
<FN>
Notes:
(i) Revenues by geographic area exclude interest income of the Textron
Parent Company Borrowing Group of $2 million, $4 million and $4 million
in 1994, 1993 and 1992, respectively.
(ii) Revenues include sales to the U.S. Government of $1.6 billion
(including $.2 billion of sales of Lycoming Turbine Engine, which was
sold in 1994), $1.6 billion and $1.7 billion in 1994, 1993 and 1992,
respectively.
(iii) Revenues between geographic areas, predominantly revenues of U.S.
divisions, were approximately 4%, 4% and 3% of total revenues in 1994,
1993 and 1992, respectively.
(iv) Assets in foreign locations relate principally to the Financial
Services segments.
</TABLE>
-------------------------------------------------------------------------------
18 FINANCIAL INFORMATION BY BORROWING GROUP
Textron consists of two borrowing groups - the Textron Parent Company
Borrowing Group and its finance and insurance subsidiaries.
This framework is designed to enhance the borrowing power of the total
company by separating borrowing oriented units of a specialized
business nature such as financial services.
The Textron Parent Company Borrowing Group is comprised of all entities
of Textron other than its finance and insurance subsidiaries. The
financial statements of this group as set forth below reflect Textron's
investments in its finance and insurance subsidiaries on the equity
basis. Its sources of cash flow include dividends paid by the finance
and insurance subsidiaries, as well as cash generated by other
operating units.
The finance and insurance subsidiaries finance their respective
operations by borrowing from their own group of external creditors.
Textron, which had been the sole shareholder of The Paul Revere
Corporation (PRC), sold 7.5 million shares of PRC, representing 16.7%
of the outstanding shares of PRC, on October 26, 1993, in an
underwritten public offering registered under the Securities Act of
1933.
54 T E X T R O N
<PAGE> 55
-------------------------------------------------------------------------------
FINANCIAL INFORMATION FOR THE TEXTRON PARENT COMPANY BORROWING GROUP
<TABLE>
STATEMENT OF INCOME
<CAPTION>
For each of the three years in the period ended December 31, 1994
(In millions) 1994 1993 1992
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues $6,680 $6,275 $5,620
------------------------------------------------------------------------------------------------------------
Costs and expenses
Cost of sales 5,514 5,210 4,560
Selling and administrative 668 648 644
Interest 206 236 254
------------------------------------------------------------------------------------------------------------
Total costs and expenses 6,388 6,094 5,458
------------------------------------------------------------------------------------------------------------
292 181 162
Pretax income of finance and insurance subsidiaries 462 435 365
------------------------------------------------------------------------------------------------------------
Income before income taxes 754 616 527
Income taxes (308) (234) (203)
Elimination of minority interest in net income of Paul Revere (13) (3) -
------------------------------------------------------------------------------------------------------------
Income before cumulative effect of changes in accounting
principles 433 379 324
Cumulative effect of changes in accounting principles, net
of income taxes - - (679)
------------------------------------------------------------------------------------------------------------
Net income (loss) $ 433 $ 379 $ (355)
============================================================================================================
</TABLE>
<TABLE>
<CAPTION>
BALANCE SHEET December 31, January 1,
(In millions) 1994 1994
------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Cash $ 20 $ 12
Receivables - net 702 695
Inventories 1,211 1,488
Investments in finance and insurance subsidiaries 2,246 2,161
Property, plant and equipment - net 1,146 1,150
Goodwill, less accumulated amortization of $194 and $174 1,231 1,138
Other assets (including net prepaid income taxes) 1,262 1,433
------------------------------------------------------------------------------------------------
Total assets $7,818 $8,077
================================================================================================
Liabilities and shareholders' equity
Accounts payable and accrued liabilities (including income taxes) $3,354 $3,272
Debt 1,582 2,025
Shareholders' equity 2,882 2,780
------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $7,818 $8,077
================================================================================================
</TABLE>
T E X T R O N 55
<PAGE> 56
-------------------------------------------------------------------------------
FINANCIAL INFORMATION FOR THE TEXTRON PARENT COMPANY BORROWING GROUP (CONTINUED)
<TABLE>
STATEMENT OF CASH FLOWS
<CAPTION>
For each of the three years in the period ended December 31, 1994
(In millions) 1994 1993 1992
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 433 $ 379 $ (355)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Cumulative effect of changes in accounting principles - - 679
Undistributed earnings of finance and insurance subsidiaries (155) (165) (148)
Depreciation and amortization 238 229 216
Deferred income taxes 32 8 24
Interest accretion 37 37 36
Changes in assets and liabilities excluding those related to
acquisitions and divestitures of businesses:
Increase in receivables (146) (37) -
Decrease in inventories 64 176 55
Increase in other assets (87) (83) (29)
Increase (decrease) in accounts payable and accrued liabilities 154 29 (68)
Other - net (32) 11 (8)
------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 538 584 402
------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Cash used in acquisitions of businesses (9) (139) (620)
Net proceeds from sales of businesses and minority interest in subsidiary 492 175 -
Capital expenditures (272) (226) (198)
Other investing activities - net 13 22 28
------------------------------------------------------------------------------------------------------------
Net cash provided (used) by investing activities 224 (168) (790)
------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Increase (decrease) in short-term debt (36) 27 20
Proceeds from issuance of long-term debt 612 402 1,348
Principal payments on long-term debt (1,027) (670) (923)
Capital contribution to subsidiary - (100) -
Proceeds from exercise of stock options 12 19 34
Purchases of Textron common stock (166) - -
Purchases of Textron common stock from Paul Revere (25) - -
Dividends paid (124) (110) (98)
------------------------------------------------------------------------------------------------------------
Net cash provided (used) by financing activities (754) (432) 381
------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash 8 (16) (7)
Cash at beginning of year 12 28 35
------------------------------------------------------------------------------------------------------------
Cash at end of year $ 20 $ 12 $ 28
============================================================================================================
</TABLE>
56 T E X T R O N
<PAGE> 57
-------------------------------------------------------------------------------
FINANCIAL INFORMATION FOR TEXTRON'S FINANCE AND INSURANCE SUBSIDIARIES
<TABLE>
STATEMENT OF INCOME
<CAPTION>
For each of the three years ended December 31,
(In millions) 1994 1993 1992
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues
Interest, discount and service charges $1,333 $1,260 $1,273
Credit life, credit disability and casualty insurance premiums 288 301 299
Non-cancellable disability income, life and group insurance premiums 945 836 795
Investment income (including net realized investment gains) 437 406 361
------------------------------------------------------------------------------------------------------------
Total revenues 3,003 2,803 2,728
------------------------------------------------------------------------------------------------------------
Costs and expenses
Selling and administrative 821 790 758
Interest 459 432 489
Provision for losses on collection of finance receivables, less recoveries 162 153 160
Credit life, credit disability and casualty insurance losses and
adjustment expenses, less recoveries 128 132 137
Death and other insurance benefits 453 394 370
Increase in insurance policy liabilities 411 324 317
Amortization of insurance policy acquisition costs 107 143 132
------------------------------------------------------------------------------------------------------------
Total costs and expenses 2,541 2,368 2,363
------------------------------------------------------------------------------------------------------------
Income before income taxes 462 435 365
Income taxes (179) (173) (139)
------------------------------------------------------------------------------------------------------------
Income before cumulative effect of changes in accounting principles 283 262 226
Cumulative effect of changes in accounting principles,
net of income taxes - - (45)
------------------------------------------------------------------------------------------------------------
Net income 283 262 181
Minority interest in net income (13) (3) -
------------------------------------------------------------------------------------------------------------
Textron's equity in net income $ 270 $ 259 $ 181
============================================================================================================
</TABLE>
<TABLE>
<CAPTION>
BALANCE SHEET December 31, December 31,
(In millions) 1994 1993
---------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Cash $ 29 $ 14
Investments 5,265 4,760
Finance receivables - net 8,622 7,605
Property, plant and equipment - net 107 99
Insurance policy acquisition costs 911 784
Goodwill, less accumulated amortization of $187 and $169 281 299
Other assets 633 660
---------------------------------------------------------------------------------------------------
Total assets $15,848 $14,221
===================================================================================================
Liabilities and equity
Accounts payable and accrued liabilities (including income taxes) $ 953 $ 939
Insurance reserves and claims 4,685 4,091
Debt 7,782 6,847
Equity:
Textron 2,246 2,161
Minority interest 182 183
---------------------------------------------------------------------------------------------------
Total liabilities and equity $15,848 $14,221
===================================================================================================
</TABLE>
T E X T R O N 57
<PAGE> 58
-------------------------------------------------------------------------------
FINANCIAL INFORMATION FOR TEXTRON'S FINANCE AND INSURANCE SUBSIDIARIES
(CONTINUED)
<TABLE>
STATEMENT OF CASH FLOWS
<CAPTION>
For each of the three years ended December 31,
(In millions) 1994 1993 1992
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Textron's equity in net income $ 270 $ 259 $ 181
Adjustments to reconcile net income to net cash provided
by operating activities:
Cumulative effect of changes in accounting principles - - 45
Depreciation and amortization 160 195 181
Provision for losses on finance receivables 192 182 189
Increase in insurance policy liabilities 417 342 309
Deferred income taxes 60 20 13
Changes in assets and liabilities excluding those related
to the acquisition of USA Financial Services:
Additions to insurance policy acquisition costs (232) (235) (205)
Decrease (increase) in other assets (3) 3 7
Increase in accounts payable and accrued liabilities 2 75 35
Other - net (31) (31) (54)
------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 835 810 701
------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Purchases of:
Securities to be available for sale (1,065) (220) -
Securities to be held to maturity (849) (1,497) (1,846)
Other investments (39) (27) (17)
Proceeds from disposition of securities:
Sales of:
Securities available for sale 749 205 -
Securities held to maturity 10 173 737
Maturities and calls 545 768 743
Proceeds from disposition of other investments 61 42 27
Finance receivables:
Originated or purchased (6,020) (5,011) (4,853)
Repaid or sold 4,807 4,253 4,220
Capital expenditures (30) (26) (19)
Cash used in acquisition of USA Financial Services - - (285)
Other investing activities - net (2) 5 (43)
------------------------------------------------------------------------------------------------------------
Net cash used by investing activities (1,833) (1,335) (1,336)
------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Increase (decrease) in short-term debt 485 458 (70)
Proceeds from issuance of long-term debt 1,487 1,267 1,565
Principal payments on long-term debt (1,045) (1,284) (857)
Interest-sensitive insurance products:
Receipts 295 193 142
Return of account balances (126) (105) (88)
Capital contributions from Textron - 100 9
Proceeds from sale of Textron common stock to Textron 25 - -
Dividends paid to Textron (115) (94) (78)
------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 1,006 535 623
Effect of foreign exchange rate changes on cash 7 1 -
------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash 15 11 (12)
Cash at beginning of year 14 3 15
------------------------------------------------------------------------------------------------------------
Cash at end of year $ 29 $ 14 $ 3
============================================================================================================
<FN>
Notes:
(i) TFC derives a substantial portion of its business from financing the sale and lease of products
manufactured and sold by Textron. In 1994, 1993 and 1992, TFC paid Textron $595 million, $617 million and
$576 million, respectively, for the purchase of receivables and operating lease equipment. Under operating
agreements with Textron, TFC generally has recourse to Textron with respect to finance receivables
and leases of products manufactured and sold by Textron. At the end of 1994, finance receivables and
operating lease equipment of $852 million ($771 million at the end of 1993) were due from Textron or subject
to recourse to Textron.
(ii) Textron has agreed to cause TFC's pretax income available for fixed charges to be not less than 125% of
its fixed charges and its consolidated shareholder's equity to be not less than $200 million. No related
payments were required for 1994, 1993 or 1992.
(iii) Approximately 76%, 73% and 73% of the credit life and credit disability insurance premiums earned and
25%, 22% and 20% of the casualty insurance premiums earned in 1994, 1993 and 1992, respectively, were
related directly to AFS' consumer loan activities.
</TABLE>
58 T E X T R O N
<PAGE> 59
-------------------------------------------------------------------------------
<TABLE>
QUARTERLY FINANCIAL INFORMATION FOR 1994 AND 1993
<CAPTION>
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
(Unaudited) --------------- ---------------- ---------------- ---------------
(In millions except per share amounts) 1994 1993 1994 1993 1994 1993 1994 1993
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Income Statement Data:
Revenues
Manufacturing $1,688 $1,478 $1,775 $1,566 $1,621 $1,520 $1,594 $1,707
Financial Services 720 686 741 686 759 712 783 719
-------------------------------------------------------------------------------------------------------------------------------
Total revenues $2,408 $2,164 $2,516 $2,252 $2,380 $2,232 $2,377 $2,426
===============================================================================================================================
Income
Manufacturing $ 119 $ 110 $ 136 $ 126 $ 146 $ 117 $ 173 $ 145
Financial Services 120 102 120 104 114 114 108 115
-------------------------------------------------------------------------------------------------------------------------------
Operating income 239 212 256 230 260 231 281 260
Corporate expenses and other - net (17) (17) (17) (19) (24) (15) (20) (34)
Interest expense - net (53) (60) (54) (58) (51) (58) (46) (56)
-------------------------------------------------------------------------------------------------------------------------------
Income before income taxes 169 135 185 153 185 158 215 170
Income taxes (65) (52) (71) (59) (71) (58) (101)<F*> (65)
Elimination of minority interest
in net income of Paul Revere (4) - (4) - (3) - (2) (3)
-------------------------------------------------------------------------------------------------------------------------------
Net income $ 100 $ 83 $ 110 $ 94 $ 111 $ 100 $ 112 $ 102
===============================================================================================================================
Net income per common share $ 1.10 $ .92 $ 1.22 $ 1.05 $ 1.23 $ 1.10 $ 1.26 $ 1.13
===============================================================================================================================
Common Stock Information
Price Range: High $ 60 5/8 $ 48 $ 56 3/4 $ 56 1/2 $ 56 1/2 $ 58 7/8 $ 52 1/2 $ 58 3/4
Low $ 53 3/4 $ 40 3/8 $ 50 3/4 $ 45 7/8 $ 50 1/4 $ 51 $ 46 1/2 $ 52
Dividend per share $ .35 $ .31 $ .35 $ .31 $ .35 $ .31 $ .35 $ .31
===============================================================================================================================
<FN>
<F*>The effective tax rate reflects the impact of the nontax deductibility of the $58 million of goodwill related to the sale of
the Lycoming Turbine Engine division.
</TABLE>
T E X T R O N 59
<PAGE> 60
-------------------------------------------------------------------------------
<TABLE>
FIVE-YEAR SUMMARY
<CAPTION>
(Dollars in millions except per share amounts) 1994 1993 1992 1991 1990
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues
Sales $ 6,678 $ 6,271 $ 5,616 $ 5,211 $ 5,470
Interest, discount and service charges 1,333 1,260 1,273 1,184 1,139
Insurance premiums 1,233 1,137 1,094 1,073 975
Investment income (including net realized
investment gains) 439 410 365 372 333
------------------------------------------------------------------------------------------------------------
Total revenues 9,683 9,078 8,348 7,840 7,917
------------------------------------------------------------------------------------------------------------
Costs and expenses
Cost of sales 5,514 5,210 4,560 4,185 4,425
Selling and administrative 1,489 1,438 1,402 1,330 1,289
Interest 665 668 743 754 775
Provision for losses on collection of finance
receivables, less recoveries 162 153 160 135 123
Insurance benefits and increase in policy liabilities 992 850 824 812 720
Amortization of insurance policy acquisition costs 107 143 132 129 126
------------------------------------------------------------------------------------------------------------
Total costs and expenses 8,929 8,462 7,821 7,345 7,458
------------------------------------------------------------------------------------------------------------
Income before income taxes 754 616 527 495 459
Income taxes (308) (234) (203) (195) (176)
Elimination of minority interest in net income
of Paul Revere (13) (3) - - -
------------------------------------------------------------------------------------------------------------
Income before cumulative effect of changes in
accounting principles 433 379 324 300 283
Cumulative effect of changes in accounting
principles, net of income taxes - - (679) - -
------------------------------------------------------------------------------------------------------------
Net income (loss) $ 433 $ 379 $ (355) $ 300 $ 283
============================================================================================================
Per common share:
Income before cumulative effect of changes
in accounting principles $ 4.80 $ 4.21 $ 3.66 $ 3.42 $ 3.18
Cumulative effect of changes in accounting
principles - - (7.67) - -
------------------------------------------------------------------------------------------------------------
Net income (loss) $ 4.80 $ 4.21 $ (4.01) $ 3.42 $ 3.18
============================================================================================================
Dividends declared $ 1.40 $ 1.24 $ 1.12 $ 1.03 $ 1.00
============================================================================================================
Average common shares outstanding 90,119,000 90,052,000 88,580,000 87,563,000 89,014,000
============================================================================================================
Financial position at year-end
Total assets $20,925 $19,658 $18,367 $15,737 $14,892
Debt:
Textron Parent Company Borrowing Group $ 1,582 $ 2,025 $ 2,283 $ 1,820 $ 1,925
Finance and insurance subsidiaries $ 7,782 $ 6,847 $ 6,440 $ 5,664 $ 5,319
Shareholders' equity $ 2,882 $ 2,780 $ 2,488 $ 2,928 $ 2,662
Book value per common share $ 33.45 $ 31.18 $ 28.11 $ 33.65 $ 31.00
------------------------------------------------------------------------------------------------------------
Other data
Capital expenditures $ 302 $ 252 $ 217 $ 156 $ 191
Depreciation $ 212 $ 206 $ 199 $ 182 $ 179
Number of common shareholders 27,000 28,000 30,000 31,000 33,000
Common stock price range: High $ 60 5/8 $ 58 7/8 $ 44 3/4 $ 39 1/2 $ 27 1/2
Low $ 46 1/2 $ 40 3/8 $ 33 3/4 $ 25 $ 19 3/8
------------------------------------------------------------------------------------------------------------
</TABLE>
60 T E X T R O N
<PAGE> 61
------------------------------------------------------------------------
Directory of Divisions
------------------------------------------------------------------------
Aircraft Bell Helicopter Textron Webb F. Joiner, President
P.O. Box 482
Fort Worth, TX 76101
(817) 280-2011
Helicopters and spare parts for the U.S. government, foreign
governments and commercial markets; tiltrotor aircraft development;
aftermarket sales of technical, training and logistics support services.
-----------------------------------------------------------------
The Cessna Aircraft Company Russell W. Meyer, Jr., Chairman and
Chief Executive Officer
P.O. Box 7706
Wichita, KS 67277-7706
(316) 941-6000
Light and mid-size business jets and utility turboprop aircraft
supported worldwide through a network of company-owned Citation service
centers and authorized representatives.
-------------------------------------------------------------------------
Automotive Textron Automotive Company Derek Plummer, Chairman; Fred
L. Hubacker, President
750 Stephenson Highway
Troy, MI 48083
(810) 616-5100
Company headquarters, product design and engineering, program
management.
-----------------------------------------------------------------
Textron Automotive Exteriors Michael A. Mitchell, President
750 Stephenson Highway
Troy, MI 48083
(810) 616-5100
Molded and painted reaction injection molded and thermoplastic
exterior ornamentation such as bumper covers, body side moldings, grilles
and spoilers; Flexible Bright(TM) products, lighting components; structural
composite bumper beams and modular assembly in North America and Europe.
-----------------------------------------------------------------
Textron Automotive Interiors D. Michael Weston, President
750 Stephenson Highway
Troy, MI 48083
(810) 616-5100
Instrument panels, door panels, armrests, airbag doors, center
consoles and headliners for totally integrated vehicle interiors in North
America and Europe.
-----------------------------------------------------------------
CWC Castings Textron John L. Kelly, President
1085 W. Sherman Blvd.
Muskegon, MI 49441
(616) 733-1331
Gray iron and chilled iron castings, primarily camshafts, marketed
directly to automobile and engine manufacturers in North America and
Europe.
-----------------------------------------------------------------
McCord Winn Textron George F. Daniels, President
750 Stephenson Highway
Troy, MI 48083
(810) 616-5100
Seating comfort systems, windshield washer systems, precision
motors and components marketed directly to automotive OEMs in North America
and Europe.
-----------------------------------------------------------------
Micromatic Textron Michael J. Brennan, President
345 East 48th Street
Holland, MI 49423
(616) 392-1461
Proprietary machine tools, components and assembly systems designed
and manufactured for automotive, transportation and other commercial
markets worldwide.
-----------------------------------------------------------------
Randall Textron Jane L. Warner, President
750 Stephenson Highway
Troy, MI 48083
(810) 616-5100
Functional and decorative metal parts, stampings and moldings;
plastic-painted and chrome-plated components; wheel ornamentation and fuel
fillers.
-------------------------------------------------------------------------
Industrial Avdel plc John C. Castle, President
Welwyn Garden City
Hertz AL7 1QB England
44-707-372-624
Specialized engineered fastening and assembly systems, including
innovative hand-held and automatic assembly systems for global markets.
-----------------------------------------------------------------
Camcar Textron James R. MacGilvray, President
600-18th Avenue
Rockford, IL 61104-5181
(815) 961-5000
Cold-formed threaded and non-threaded metal fasteners and
components, as well as synergistic assemblies that combine fasteners,
stampings and molded plastics. Sold to automotive, appliance, business
equipment, construction and other OEM and distributor markets.
T E X T R O N 61
<PAGE> 62
-------------------------------------------------------------------------
Directory of Divisions
-------------------------------------------------------------------------
Industrial Cherry Textron George A. Andrews, President
(continued)
P.O. Box 2157
Santa Ana, CA 92707-0157
(714) 545-5511
Proprietary blind rivet fastening systems, including hand-
held and fully automated installation systems for aerospace, automotive,
transportation and other industrial markets. Supported by worldwide,
engineering-oriented distribution system.
-----------------------------------------------------------------
Cone Drive Textron John G. Melvin, President
240 East Twelfth Street
Traverse City, MI 49685-0272
(616) 946-8410
Double enveloping worm gear speed reducers, gear motors and gear
sets sold directly from Cone Drive's manufacturing locations to the mining,
steel, aerospace, automotive, printing, packaging and brewing industries.
-----------------------------------------------------------------
E-Z-GO Textron L.T. Walden, Jr., President
P.O. Box 388
Augusta, GA 30903-0388
(706) 798-4311
Electric- and gasoline-powered golf cars for fleet and individual
markets; multipurpose utility vehicles for the turf, industrial and
commercial markets.
-----------------------------------------------------------------
Greenlee Textron Carl D. Burtner, President
4455 Boeing Drive
Rockford, IL 61109
(815) 397-7070
Powered equipment, electrical test instruments and hand tools used
for the installation of electrical, communications, and security cabling
systems in residential, commercial and industrial facilities.
-----------------------------------------------------------------
Jacobsen Textron Philip J. Tralies, President
1721 Packard Avenue
Racine, WI 53403-2564
(414) 637-6711
Professional mowing and turf maintenance equipment for golf course
and commercial use including greens and fairway mowers, trim and rotary
mowers, aerators, work trucks and other powered turf maintenance equipment.
-----------------------------------------------------------------
Speidel Textron Alfred M. Massotti, Chairman;
William H. Walsh, President
70 Ship Street
Providence, RI 02903
(401) 421-8600
Watch attachments made from metal, leather and plastic materials;
fashion jewelry products including identification bracelets, neckchains and
watches. Sold primarily by Speidel's direct sales force to retail jewelers,
department and drugstores and select mass merchandisers.
-------------------------------------------------------------------------
Systems and Aircraft Engine Components Textron G.L. (Topper) Long,
Components President
P.O. Box 11906
Newington, CT 06131
(203) 666-4601
Gas turbine engine components including disks, hubs,
impellers, integrally bladed rotors, cases and frames for engine
manufacturers and the spare parts market.
-----------------------------------------------------------------
Airfoil Textron G.L. (Topper) Long, President
1211 Old Albany Road
Thomasville, GA 31792
(912) 228-2600
Fan blades, compressor blades, vanes and forgings for commercial
and military aircraft turbine engine producers worldwide.
-----------------------------------------------------------------
Fuel Systems Textron Michael Boston, President
700 N. Centennial
Zeeland, MI 49464
(616) 772-9171
Fuel systems components for aircraft and industrial gas turbine
engines (OEM and aftermarket service), including main engine fuel injection
devices, fuel metering and distribution valves, and augmentor fuel systems.
Sold to the world's major engine builders, the U.S. government and
commercial airlines.
-----------------------------------------------------------------
HR Textron Bradley W. Spahr, President
25200 W. Rye Canyon Rd.
Valencia, CA 91355
(805) 294-6000
Sophisticated control systems for prime contractors and the U.S.
government for use in high-performance aircraft, helicopters, missiles,
space launch vehicles and turbine engines; servovalves; fuel and pneumatic
systems components; and automatic test equipment.
T E X T R O N 62
<PAGE> 63
-------------------------------------------------------------------------
Directory of Divisions
-------------------------------------------------------------------------
Systems and Textron Aerostructures Dick Wells, President
Components
(continued)
P.O. Box 210
Nashville, TN 37202
(615) 361-2000
Aircraft wings and components for the business jet and
regional commuter markets as well as for the commercial and military
transport markets; design assistance to customers.
-----------------------------------------------------------------
Textron Defense Systems Harold K. McCard, President
201 Lowell Street
Wilmington, MA 01887
(508) 657-5111
"Smart" weapons development and production based on sensor fuzed
munitions technology; aircraft landing systems; surveillance systems;
inertial systems; energy technology; and special material process.
-----------------------------------------------------------------
Textron Lycoming Reciprocating Engine Philip R. Boob, President
652 Oliver Street
Williamsport, PA 17701
(717) 323-6181
Piston aircraft engines and replacement parts for the general
aviation market. Remanufacture and overhaul of Lycoming engines.
Aftermarket sales and service through a worldwide distribution network.
-----------------------------------------------------------------
Textron Marine & Land Systems John J. Kelly, President
6600 Plaza Drive
New Orleans, LA 70127
(504) 245-6600
Air cushion amphibious landing craft for the U.S. Navy; a new class
of motor lifeboat for the Coast Guard; Surface Effect Ships and commercial
air cushion vehicles; Cadillac Gage armored combat vehicles, turrets, and
advanced suspension systems for U.S. and foreign customers.
-----------------------------------------------------------------
Textron Specialty Materials Paul R. Hoffman, President
Two Industrial Avenue
Lowell, MA 01851-5199
(508) 452-8961
High performance composite materials such as boron and carbon
fibers and fabric, metal, ceramic and carbon-carbon composites; and fire
protection materials. Sold worldwide to aerospace, automotive, industrial,
and sporting goods manufacturers, as well as major oil and chemical
companies.
-------------------------------------------------------------------------
Finance Avco Financial Services Warren R. Lyons, President
P.O. Box 19701
Irvine, CA 92713-9701
(714) 553-1200
Consumer financing, both unsecured and secured by personal
property, through nearly 1,200 AFS loan offices in the United States,
Australia, Canada, New Zealand, Spain, the United Kingdom and Hong Kong;
credit life and disability insurance, collateral protection, involuntary
unemployment insurance, and credit property and property/casualty
insurance.
-----------------------------------------------------------------
Textron Financial Corporation Stephen J. Davis, President
40 Westminster Street
P.O. Box 6687
Providence, RI 02940-6687
(401) 621-4200
Commercial financing, including equipment leasing, secured
equipment lending and receivables and inventory financing. Provided
directly through 35 offices in the U.S., and indirectly through its
relationships with manufacturers, dealers and financial intermediaries.
-------------------------------------------------------------------------
Paul Revere The Paul Revere Corporation Charles E. Soule, President
and Chief Executive Officer
18 Chestnut Street
Worcester, MA 01608
(508) 799-4441
Individual, non-cancellable and group long-term disability income
insurance products designed for professionals, corporate executives and
small business owners; group life and dental insurance; individual life and
annuities. Listed on NYSE (PRL).
T E X T R O N 63
<PAGE> 64
-------------------------------------------------------------------------------
Board of Directors
James F. Hardymon <F1>
Chairman and
Chief Executive Officer
Textron Inc.
Providence, RI
Lewis B. Campbell <F1>
President and
Chief Operating Officer
Textron Inc.
Providence, RI
H. Jesse Arnelle <F4>,<F5>
Senior Partner
Arnelle, Hastie, McGee,
Willis & Greene
San Francisco, CA
R. Stuart Dickson <F1>,<F2>,<F5>
Formerly Chairman
Ruddick Corporation
(diversified holding company)
Charlotte, NC
B.F. Dolan <F1>,<F3>
Retired Chairman
Textron Inc.
Charlotte, NC
Webb C. Hayes III <F3>,<F5>,<F*>
Partner
Baker & Hostetler
(law firm)
Washington, DC
John D. Macomber <F1>,<F2>,<F3>
Principal
JDM Investment Group
(private investment firm)
Washington, DC
Barbara Scott Preiskel <F3>,<F5>
Formerly Senior Vice
President and
General Counsel
Motion Picture Association
New York, NY
Sam F. Segnar <F3>,<F4>
Retired Chairman and
Chief Executive Officer
Enron Corporation
(diversified natural gas company)
Houston, TX
Jean Head Sisco <F2>,<F4>
Partner
Sisco Associates
(international trade
consulting firm)
Washington, DC
John W. Snow <F1>,<F4>
Chairman, President and
Chief Executive Officer
CSX Corporation
(diversified transportation company)
Richmond, VA
Martin D. Walker <F1>,<F4>
Chairman and
Chief Executive Officer
M.A. Hanna Company
(an international specialty
chemicals company)
Cleveland, OH
Thomas B. Wheeler <F2>,<F5>
President and
Chief Executive Officer
Massachusetts Mutual Life
Insurance Company
Springfield, MA
Numbers indicate committee
memberships
<F1> Executive Committee:
Chairman,
James F. Hardymon
<F2> Audit Committee:
Chairman,
Jean Head Sisco
<F3> Nominating Committee:
Chairman,
Barbara Scott Preiskel
<F4> Organization and
Compensation
Committee:
Chairman,
Martin D. Walker
<F5> Pension Committee:
Chairman,
Thomas B. Wheeler
<F*>will be retiring April 26, 1995.
-------------------------------------------------------------------------------
Corporate Officers
Administrative and
Management Committee:
James F. Hardymon<F*>
Chairman and
Chief Executive Officer
Lewis B. Campbell
President and
Chief Operating Officer
Thomas P. Hollowell
Executive Vice President
Corporate Development
Mary L. Howell<F**>
Senior Vice President
Government and
International
Richard A. McWhirter<F***>
Executive Vice President
and Chief Financial
Officer
Thomas D. Soutter<F***>
Executive Vice President
and General Counsel
William F. Wayland<F**>
Executive Vice President
Administration and Chief
Human Resources Officer
Staff
Officers:
Edward C. Arditte<F*>
Vice President
Communications and
Risk Management
Brian T. Downing<F*>
Vice President and
Treasurer
Arnold M. Friedman<F**>
Vice President and
Deputy General Counsel
William B. Gauld
Staff Vice President
Corporate Information
Management and
Chief Information Officer
Frank Gulden<F*>
Senior Vice President
Human Resources
Gregory E. Hudson<F*>
Vice President
Taxes
William P. Janovitz<F**>
Vice President and
Controller
Frank W. McNally
Staff Vice President
Employee Relations and
Benefits
Richard J. Millman<F***>
Vice President
Office of the Chairman
Karen A. Quinn-Quintin<F*>
Vice President and
Secretary
Daniel L. Shaffer<F**>
Vice President
Audit and Business Ethics
John F. Zugschwert
Staff Vice President
Marketing
Textron International Inc.
Gero Meyersiek
Vice President
Operating
Management:
Gary E. Atwell<F***>
Group Vice President
Herbert L. Henkel<F*>
Group Vice President
Fred L. Hubacker
President
Textron Automotive
Company
Derek Plummer<F***>
Chairman
Textron Automotive
Company
Terry D. Stinson
Group Vice President
Richard A. Watson<F**>
Group Vice President
Service with Textron and its
subsidiaries/divisions:
<F*>5 - 9 years
<F**>10 - 19 years
<F***>20 years and over
<PAGE> 65 - INSIDE BACK COVER
-------------------------------------------------------------------------------
Shareholder Information
Annual Meeting To Be Held April 26 in Providence
The annual meeting of Textron shareholders will be held at 10:30 a.m. on
Wednesday, April 26, 1995, at The Westin Hotel, One West Exchange Street,
Providence, Rhode Island. Shareholders are encouraged to attend.
About Your Securities and Records
The common stock of Textron Inc. is listed on the New York, Midwest and
Pacific Stock Exchanges and quoted in the daily stock table carried by most
newspapers. The ticker symbol for Textron is TXT. Textron's preferred
stocks are traded only on the New York Stock Exchange.
First Chicago Trust Company of New York, 14 Wall Street, Suite 4680,
New York, New York 10005, acts as transfer agent, registrar and dividend
paying agent for Textron stock and maintains all shareholder records for
the corporation. First Chicago also acts as conversion agent for Textron's
$2.08 preferred stock and its $1.40 preferred dividend stock.
Shareholders may obtain information relating to their share position,
dividends, transfer requirements, lost certificates, conversion rights,
dividend reinvestment accounts and other related matters by telephoning
First Chicago Trust Company of New York's "Telephone Response Center" at
(201) 324-0498. Shareholders must provide their tax identification number,
the name(s) in which their shares are registered and their record address
when they request information. This service is available to all
shareholders Monday through Friday 9:00 a.m. to 5:00 p.m. Eastern Time.
Shareholders also may obtain this and other information about their
holdings by writing to First Chicago Trust Company of New York at P.O. Box
2500, Jersey City, New Jersey 07303-2500.
Dividend Payments Mailed Quarterly
Quarterly dividends are mailed with the intent of reaching shareholders of
common and preferred stock on the first business day of January, April,
July and October. Postal delays may cause actual receipt dates to vary.
Free Automatic Dividend Reinvestment
Textron's Shareholder Investment Service offers common shareholders of
record a convenient way to purchase additional shares of Textron common
stock without paying brokerage, commission or other service fees.
Participants in the plan may choose to have all or part of their dividends
automatically reinvested, to make additional cash payments or to do both in
purchasing shares of Textron common stock. Brokerage expenses for these
purchases are paid by Textron. Personal recordkeeping is simplified by an
account statement that is mailed to participants.
More information and an authorization form may be obtained by writing to
First Chicago Trust Company of New York, P.O. Box 2500, Jersey City, New
Jersey 07303-2500 or by calling (201) 324-0498.
Shareholder Information and Investor Relations Inquiries
Questions regarding Textron, investor relations matters or requests for
financial information should be directed to the Communications Department,
Textron Inc., 40 Westminster Street, Providence, Rhode Island 02903 or by
calling (401) 457-6050.
Form 10-K Available
After April 1, 1995, shareholders may, without charge, obtain copies of
Textron's Form 10-K annual report filed with the Securities and Exchange
Commission. Requests for this report should also be addressed to Textron's
Communications Department.
Exhibit 21
TEXTRON INC. - SIGNIFICANT SUBSIDIARIES
(as of December 31, 1994)
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.
Nam of Subsidiary Place of Incorporation
Ace Industries Textron Inc. California
Airfoil Forging Textron Inc. Delaware
Airfoil Textron Inc. Delaware
Compressor Components Textron Inc. Delaware
Atlantic Aerospace Textron Inc. Connecticut
Avco Corporation Delaware
ARS Two Inc. Delaware
Avco Community Developers, Inc. California
Avco Overseas Services Corporation Delaware
Textron Pacific Limited Australia
Avco Financial Services, Inc. (1) Delaware
Babco Textron Inc. Massachusetts
Bell Helicopter Services Inc. Delaware
Bell Helicopter Asia (Pte) Limited Singapore
Bell Helicopter Textron Inc. Delaware
Cadillac Gage Textron Inc. Michigan
Cessna Aircraft Company, The Kansas
Cone Drive Operations Inc. Delaware
Fuel Systems Textron Inc. Delaware
Greenlee Textron Inc. Delaware
HR Textron Inc. Delaware
McCord Corporation Michigan
Davidson Textron Inc. Delaware
Davidson Overseas Investment Inc. Delaware
Davidson Marley B.V. (2) Netherlands
McCord Winn Textron Inc. Massachusetts
Micromatic Operations Inc. Delaware
Micro-Precision Operations Inc. Delaware
The Paul Revere Corporation Massachusetts
The Paul Revere Life Insurance Company Massachusetts
The Paul Revere Protective Life Insurance
Company Delaware
The Paul Revere Variable Annuity Insurance
Company Massachusetts
The Paul Revere Equity Sales Company Massachusetts
The Paul Revere Investment Management
Company Massachusetts
_______________
(1) See page 3 hereof for details of subsidiaries of Avco Financial
Services, Inc.
(2) 50% owned by Davidson Overseas Investment Inc.
Name of Subsidiary Place of Incorporation
Textron Acustar Plastics Inc. Delaware
Textron Atlantic Inc. Delaware
Avdel plc England
Bell Helicopter Supply Center B.V. Netherlands
Textron Atlantic Belgium S.A. Belgium
Textron Limited United Kingdom
Textron Financial Corporation Delaware
Cessna Finance Corporation Kansas
Textron FSC Inc. Barbados
Textron FSC Inc. U.S. Virgin Islands
Textron Properties Inc. Delaware
Textron Canada Limited (3) Canada
Textron Realty Corporation Delaware
Wolverine Metal Specialties, Inc. Michigan
_______________
(3) 64.5% of the capital stock of Textron Canada Limited is held by
Textron Properties Inc. and the remaining 35.5% by Textron Inc.
Name of Subsidiary Place of Incorporation
AFS Corporation (1) Delaware
Avco DC Corporation (1) Delaware
Avco Enterprises, Inc. (3) California
Avco Financial Services Canada Limited (2) Ontario
Avco Financial Services International, Inc. (3) Nebraska
Avco Financial Services Ltd. (1) Australian Capital
Territory
Avco Financial Services Limited (3) New Zealand
Avco Group Limited (1) United Kingdom
Avco National Bank (4) California
Balboa Insurance Company (1) California
Balboa Life Insurance Company (3) California
Family Insurance Corporation (3) Wisconsin
Meritplan Insurance Company (5) California
Newport Insurance Company (5) Arizona
_________________
(1) Owned by Avco Financial Services International, Inc.
(2) Owned by AFS Corporation and Avco DC Corporation
(3) Owned by Avco Financial Services, Inc.
(4) Owned by Avco Enterprises, Inc.
(5) Owned by Balboa Insurance Company
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 February 2, 1995, included in the 1994 Annual Report
to Shareholders of Textron Inc.
Our audits also included the financial statement schedules
of Textron Inc. listed in the accompanying Index to
Financial Statements and Financial Statement Schedules.
These schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion
based on our audits. In our opinion, the financial
statement schedules referred to above, when considered in
relation to the basic financial statements taken as a
whole, present fairly in all material respects the
information set forth therein.
We also consent to the incorporation by reference in the
Registration Statements (Form S-3 No. 33-46501, Form S-8
No. 2-78073, Form S-8 No. 2-95413, Form S-8 No. 33-00668,
Form S-8 No. 33-19402, Form S-8 No. 33-37139, Form S-8 No.
33-38094 and Form S-8 No. 33-57025) of Textron Inc. and in
the related Prospectuses and Prospectus Supplements of our
report dated February 2, 1995, with respect to the
consolidated financial statements and schedules of Textron
Inc. included or incorporated by reference in this Annual
Report (Form 10-K) for the year ended December 31, 1994.
/s/Ernst & Young LLP
New York, New York
March 24, 1995
POWERATT.DOC
POWER OF ATTORNEY
The undersigned, Textron Inc. ("Textron") a Delaware
corporation, and the undersigned directors and officers of
Textron, do hereby constitute and appoint Thomas D. Soutter,
Arnold M. Friedman, Michael D. Cahn and Duncan I. Sutherland, 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 31, 1994,
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 25th day of March, 1995.
TEXTRON INC.
By: /s/ James F. Hardymon
James F. Hardymon
Chairman and Chief
Executive Officer
ATTEST:
/a/ Karen A. Quinn-Quintin
Karen A. Quinn-Quintin
Secretary
/s/ James F. Hardymon /s/ Barbara Scott Preiskel
James F. Hardymon Barbara Scott Preiskel
Chairman and Chief Director
Executive Officer, Director
(principal executive officer)
/s/ Lewis B. Campbell /s/ Sam F. Segnar
Lewis B. Campbell Sam F. Segnar
President and Chief Operating Director
Officer, Director
/s/ H. Jesse Arnelle /s/ Jean Head Sisco
H. Jesse Arnelle Jean Head Sisco
Director Director
/s/ R. Stuart Dickson /s/ John W. Snow
R. Stuart Dickson John W. Snow
Director Director
/s/ B. F. Dolan /s/ Martin D. Walker
B. F. Dolan Martin D. Walker
Director Director
/s/ Webb C. Hayes, III /s/ Thomas B. Wheeler
Webb C. Hayes, III Thomas B. Wheeler
Director Director
/s/ John D. Macomber /s/ Richard A. McWhirter
John D. Macomber Richard A. McWhirter
Director Executive Vice President
and Chief Financial Officer
(principal financial officer)
/s/ William P. Janovitz
William P. Janovitz
Vice President and Controller
(principal accounting officer)
EXHIBIT 24.2
TEXTRON INC.
Assistant Secretary's Certificate
I, BHIKHAJI M. MANECKJI, a duly elected Assistant
Secretary of TEXTRON INC., a Delaware corporation (the
"Corporation"), do hereby certify that set forth below is a
true and correct copy of a resolution adopted by the Corpo
ration's Board of Directors at a meeting duly called and
held on March 25, 1995, at which a quorum was present and
voting throughout:
RESOLVED, that the officers of the Corpora
tion be, and they hereby are, authorized in the
name and on behalf of the Corporation to execute
and deliver a power of attorney appointing Thomas
D. Soutter, Arnold M. Friedman, Michael D. Cahn
and Duncan I. Sutherland, 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 31, 1994 and amendments thereto;
and be it further
RESOLVED, that each of Thomas D. Soutter,
Arnold M. Friedman, Michael D. Cahn and Duncan I.
Sutherland, acting singly, be and hereby is
authorized to act as attorney-in-fact for and on
behalf of any and all directors of the Corporation
who may so appoint each of them with respect to
the execution, by such person or persons on behalf
of the Corporation, of the Corporation's Annual
Report on Form 10-K for its fiscal year ended
December 31, 1994, and the taking of any other
action in connection therewith.
I do hereby further certify that the foregoing
resolution has been neither modified nor amended, and
remains in full force and effect as of the date hereof.
IN WITNESS WHEREOF, I have hereunto set my hand and
affixed the seal of the Corporation this 28th day of March,
1995.
/s/ Bhikhaji M. Maneckji
Assistant Secretary
(SEAL)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Textron
Inc.'s Consolidated Balance Sheet as of December 31, 1994 and Consolidated
Statement of Income for the year ended December 31, 1994 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 49
<SECURITIES> 0
<RECEIVABLES> 9786
<ALLOWANCES> 250
<INVENTORY> 1211
<CURRENT-ASSETS> 0
<PP&E> 2703
<DEPRECIATION> 1450
<TOTAL-ASSETS> 20925
<CURRENT-LIABILITIES> 0
<BONDS> 9364
<COMMON> 12
0
16
<OTHER-SE> 2854
<TOTAL-LIABILITY-AND-EQUITY> 20925
<SALES> 6678
<TOTAL-REVENUES> 9683
<CGS> 5514
<TOTAL-COSTS> 6613
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 162
<INTEREST-EXPENSE> 665
<INCOME-PRETAX> 754
<INCOME-TAX> 308
<INCOME-CONTINUING> 433
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 433
<EPS-PRIMARY> 4.80
<EPS-DILUTED> 4.80
</TABLE>
