SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
_______________
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal quarter ended September 28, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
Commission file number 1-5480
_______________
TEXTRON INC.
(Exact name of registrant as specified in its charter)
_______________
Delaware 05-0315468
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) No.)
40 Westminster Street, Providence, RI 02903
401-421-2800
(Address and telephone number of principal executive offices)
_______________
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
Common stock outstanding at October 26, 1996 - 82,686,000 shares
Item 1. FINANCIAL STATEMENTS
<TABLE>
TEXTRON INC.
Consolidated Statement of Income (unaudited)
(Dollars in millions except per share amounts)
<CAPTION>
Three Months Ended Nine Months Ended
September 28, September 30, September 28, September 30,
1996 1995 1996 1995
Revenues
<S> <C> <C> <C> <C>
Manufacturing sales $ 1,722 $ 1,558 $ 5,289 $ 4,763
Finance revenues 526 499 1,557 1,461
Total revenues 2,248 2,057 6,846 6,224
Costs and expenses
Cost of sales 1,395 1,276 4,308 3,905
Selling and administrative 335 310 1,008 918
Interest 183 197 549 608
Provision for losses on collection of
finance receivables, less recoveries 59 42 166 120
Other 69 59 208 166
Total costs and expenses 2,041 1,884 6,239 5,717
Income from continuing operations before
income taxes and distributions on
preferred securities of subsidiary trust 207 173 607 507
Income taxes (81) (69) (237) (201)
Distributions on preferred securities of
subsidiary trust, net of income taxes (6) - (16) -
Income from continuing operations 120 104 354 306
Discontinued operation, net of income
taxes:
Income from operations - 18 16 46
Estimated loss on disposal (155) - (245) -
(155) 18 (229) 46
Net income (loss) $ (35) $ 122 $ 125 $ 352
Per common share:
Income from continuing operations $ 1.40 $ 1.20 $ 4.10 $ 3.52
Discontinued operation (1.81) .21 (2.65) .53
Net income (loss) $ (.41) $ 1.41 $ 1.45 $ 4.05
Average shares outstanding* 85,790,000 86,692,000 86,296,000 86,857,000
Dividends per share:
$2.08 Preferred stock, Series A $.52 $.52 $1.56 $1.56
$1.40 Preferred stock, Series B $.35 $.35 $1.05 $1.05
Common stock $.44 $.39 $1.32 $1.17
</TABLE>
* Average shares outstanding assume full conversion of preferred stock and
exercise of options.
See notes to consolidated financial statements.
Item 1. FINANCIAL STATEMENTS (Continued)
<TABLE>
TEXTRON INC.
Consolidated Balance Sheet (unaudited)
<CAPTION>
(In millions) September 28, December 30,
1996 1995
Assets
<S> <C> <C>
Cash $ 169 $ 84
Investments 789 778
Receivables - net:
Finance 9,510 9,362
Commercial and U.S. Government 859 777
10,369 10,139
Inventories 1,303 1,284
Property, plant and equipment, less accumulated
depreciation of $1,633 and $1,585 1,473 1,373
Goodwill, less accumulated amortization of $390 and
$347 1,590 1,491
Investment in discontinued operation, less estimated net
loss on disposal in 1996 799 1,161
Other (including net prepaid income taxes) 1,543 1,384
Total assets $ 18,035 $ 17,694
Liabilities and shareholders' equity
Liabilities
Accounts payable $ 759 $ 684
Accrued postretirement benefits other than pensions 827 919
Other accrued liabilities (including income taxes) 2,660 2,468
Debt:
Textron Parent Company Borrowing Group 1,704 1,774
Finance subsidiaries 8,515 8,437
10,219 10,211
Total liabilities 14,465 14,282
Textron-obligated mandatorily redeemable preferred
securities of subsidiary trust holding solely Textron
junior subordinated debt securities 483 -
Shareholders' equity
Capital stock:
Preferred stock 14 15
Common stock* 12 12
Capital surplus 776 750
Retained earnings 2,878 2,864
Other (primarily currency translation and securities valuation
adjustments) (8) 129
3,672 3,770
Less cost of treasury shares 585 358
Total shareholders' equity 3,087 3,412
Total liabilities and shareholders' equity $ 18,035 $ 17,694
*Common shares outstanding 82,825,000 84,935,000
</TABLE>
See notes to consolidated financial statements.
Item 1. FINANCIAL STATEMENTS (Continued)
<TABLE>
TEXTRON INC.
Consolidated Statement of Cash Flows (unaudited)
(In millions)
<CAPTION>
Nine Months Ended
September 28, September 30,
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Income from continuing operations $ 354 $ 306
Adjustments to reconcile income from continuing operations to net cash provided
by operating activities:
Depreciation and amortization 286 252
Provision for losses on receivables 168 125
Changes in assets and liabilities excluding those related to
acquisitions and divestitures:
Increase in commercial and U.S. Government receivables (8) (89)
Increase in inventories (150) (32)
Increase (decrease) in other assets (105) 68
Increase (decrease) in accounts payable (16) 7
Increase (decrease) in accrued liabilities 176 (88)
Other - net (83) 54
Cash provided by operating activities of continuing operations 622 603
Cash provided by operating activities of discontinued operation 382 334
Net cash provided by operating activities 1,004 937
Cash flows from investing activities:
Purchases of investments (204) (155)
Proceeds from disposition of investments 143 61
Maturities and calls of investments 41 43
Finance receivables:
Originated or purchased (4,874) (4,703)
Repaid or sold 4,657 4,199
Cash used in acquisitions (172) (40)
Proceeds from sale of business 180 -
Capital expenditures (215) (195)
Other investing activities - net (25) 15
Cash used by investing activities of continuing operations (469) (775)
Cash used by investing activities of discontinued operation (405) (355)
Net cash used by investing activities (874) (1,130)
Cash flows from financing activities:
Increase (decrease) in short-term debt 230 (46)
Proceeds from issuance of long-term debt 1,222 2,347
Principal payments on long-term debt (1,648) (1,917)
Issuance of Textron-obligated mandatorily redeemable preferred securities of
subsidiary trust holding solely Textron junior subordinated debt securities 483 -
Proceeds from exercise of stock options 29 32
Purchases of Textron common stock (239) (93)
Purchases of Textron common stock from Paul Revere (34) (22)
Dividends paid (111) (100)
Cash provided (used) by financing activities of continuing operations (68) 201
Cash provided by financing activities of discontinued operation 8 21
Net cash provided (used) by financing activities (60) 222
Net increase in cash 70 29
Elimination of cash flow of discontinued operation 15 -
Cash at beginning of period 84 49
Cash at end of period $ 169 $ 78
</TABLE>
See notes to consolidated financial statements.
TEXTRON INC.
Notes to Consolidated Financial Statements (unaudited)
Note 1: Basis of presentation
The financial statements should be read in conjunction with the
financial statements included in Textron's Annual Report on Form 10-K
for the year ended December 30, 1995 and Current Report on Form 8-K/A
dated May 17, 1996. The financial statements reflect all adjustments
(consisting only of normal recurring adjustments, and the recording of
the estimated loss on disposal of Paul Revere) which are, in the
opinion of management, necessary for a fair presentation of Textron's
consolidated financial position at September 28, 1996, and its
consolidated results of operations for each of the respective three
and nine month periods ended September 28, 1996 and September 30, 1995
and consolidated cash flows for each of the nine month periods ended
September 28, 1996 and September 30, 1995. The results of operations
for the nine months ended September 28, 1996 are not necessarily
indicative of results for the full year. Textron has restated its
financial statements for prior periods as presented herein to treat
Paul Revere, an 83.3% owned subsidiary, as a discontinued operation.
Discontinued operation
On April 29, 1996, Textron announced that The Paul Revere Corporation,
an 83.3% owned subsidiary, had entered into an agreement with
Provident Companies, Inc. whereby Provident will acquire all of the
outstanding shares of Paul Revere's common stock. For its Paul Revere
shares, Textron would receive approximately $20 per share in cash and
$6 per share in Provident common stock. (The number of shares of
Provident common stock to be received will be determined in accordance
with an exchange ratio based upon closing prices of Provident common
stock prior to the closing of the transaction, subject to certain
limitations.)
On November 6, 1996, Textron announced certain modifications to this
agreement. Based on the $41 5/8 closing price of Provident's stock on
November 8, 1996, Textron would own approximately 5.9 million of
Provident shares had the closing occurred on that date. Under the
revised agreement, Textron agreed to provide additional capital to
Paul Revere, the amount of which will depend upon a final
determination of the required levels of Paul Revere's statutory
reserves, subject to certain limits. Textron also agreed to grant
certain other concessions to Provident.
As a result of the revised agreement, Textron recorded in its
financial statements an additional loss from discontinued operation in
the third quarter of 1996 of $155 million. The total loss of $245
million for the nine months ended September 28, 1996 is net of
Textron's share of Paul Revere's estimated net loss for the period
April 1996 through the expected closing date (approximately $165
million).
The transaction remains subject to the regulatory review process
relating to the joint proxy/prospectus being prepared for the required
vote of the shareholders of Provident and Paul Revere, and remains
subject to the approval of the Commonwealth of Massachusetts Division
of Insurance. The transaction is targeted to close early in the first
quarter of 1997.
Paul Revere's revenues for the three month periods ended September 30,
1996 and September 30, 1995 were $398 million and $368 million,
respectively, and for the nine month periods ended on those dates were
$1.2 billion and $1.1 billion, respectively.
Note 2: Inventories
<TABLE>
<CAPTION>
September 28, December 30,
1996 1995
(In millions)
<S> <C> <C>
Finished goods $ 371 $ 352
Work in process 825 911
Raw materials 273 217
1,469 1,480
Less progress payments and customer deposits 166 196
$1,303 $1,284
</TABLE>
Note 3: Textron-obligated mandatorily redeemable preferred securities of
subsidiary trust holding solely Textron junior subordinated debt
securities
On February 9, 1996, a trust sponsored and wholly-owned by Textron
issued preferred securities to the public (for $500 million) and
shares of its common securities to Textron (for $15.5 million), the
proceeds of which were invested by the trust in $515.5 million
aggregate principal amount of Textron's newly issued 7.92% Junior
Subordinated Deferrable Interest Debentures, due 2045. The debentures
are the sole asset of the trust. The amounts due to the trust under
the debentures and the related income statement amounts have been
eliminated in Textron's consolidated financial statements.
The preferred securities accrue and pay cash distributions quarterly
at a rate of 7.92% per annum. Textron has guaranteed, on a
subordinated basis, distributions and other payments due on the
preferred securities. The guarantee, when taken together with
Textron's obligations under the debentures and in the indenture
pursuant to which the debentures were issued and Textron's obligations
under the Amended and Restated Declaration of Trust governing the
trust, provides a full and unconditional guarantee of amounts due on
the preferred securities.
The preferred securities are mandatorily redeemable upon the maturity
of the debentures on March 31, 2045, or earlier to the extent of any
redemption by Textron of any debentures. The redemption price in
either such case will be $25 per share plus accrued and unpaid
distributions to the date fixed for redemption.
Note 4: 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; or
the remediation of allegedly hazardous wastes; or, which 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. On the basis of information
presently available, Textron believes that any liability for these
suits and proceedings, or the impact of the application of such
government regulations, would not have a material effect on Textron's
net income or financial condition.
Note 5: Financial information by borrowing group
Textron consists of two borrowing groups - the Textron Parent Company
Borrowing Group (comprised of all entities of Textron other than its
finance subsidiaries) and its finance subsidiaries.
Item 1. FINANCIAL STATEMENTS (Continued)
Note 5: Financial information by borrowing group (continued)
TEXTRON PARENT COMPANY BORROWING GROUP
(unaudited) (In millions)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 28, September 30, September 28, September 30,
Statement of Income 1996 1995 1996 1995
<S> <C> <C> <C> <C>
Sales $1,722 $1,558 $5,289 $4,763
Costs and expenses
Cost of sales 1,395 1,276 4,308 3,905
Selling and administrative 182 159 548 474
Interest 36 46 111 148
Total costs and expenses 1,613 1,481 4,967 4,527
109 77 322 236
Pretax income of finance subsidiaries 98 96 285 271
Income from continuing operations before
income taxes and distributions on preferred
securities of subsidiary trust 207 173 607 507
Income taxes (81) (69) (237) (201)
Distributions on preferred securities of sub-
sidiary trust, net of income taxes (6) - (16) -
Income from continuing operations 120 104 354 306
Discontinued operation, net of income taxes:
Income from operations - 18 16 46
Estimated loss on disposal (155) - (245) -
(155) 18 (229) 46
Net income (loss) $ (35) $ 122 $ 125 $ 352
</TABLE>
<TABLE>
<CAPTION>
September 28, December 30,
Balance Sheet 1996 1995
Assets
<S> <C> <C>
Cash $ 127 $ 56
Receivables - net 859 777
Inventories 1,303 1,284
Investments in finance subsidiaries 1,554 1,475
Property, plant and equipment - net 1,395 1,297
Goodwill, less accumulated amortization of $267 and $233 1,450 1,344
Investment in discontinued operation, less estimated net loss on 799 1,161
disposal in 1996
Other (including net prepaid income taxes) 1,311 1,177
Total assets $8,798 $8,571
Liabilities and shareholders' equity
Accounts payable and accrued liabilities (including income taxes) $3,524 $3,385
Debt 1,704 1,774
Textron-obligated mandatorily redeemable preferred securities of
subsidiary trust holding solely Textron junior subordinated debt
securities 483 -
Shareholders' equity 3,087 3,412
Total liabilities and shareholders' equity $8,798 $8,571
</TABLE>
Item 1. FINANCIAL STATEMENTS (Continued)
Note 5: Financial information by borrowing group (continued)
TEXTRON PARENT COMPANY BORROWING GROUP
(unaudited) (In millions)
<TABLE>
<CAPTION>
Nine Months Ended
September 28, September 30,
Statement of Cash Flows 1996 1995
Cash flows from operating activities:
<S> <C> <C>
Income from continuing operations $ 354 $ 306
Adjustments to reconcile income from continuing operations to net
cash provided by operating activities:
Undistributed earnings of finance subsidiaries (80) (78)
Depreciation and amortization 188 165
Deferred income taxes (8) 24
Changes in assets and liabilities excluding those related to
acquisitions and divestitures:
Increase in receivables (8) (89)
Increase in inventories (150) (32)
Decrease (increase) in other assets (95) 41
Increase (decrease) in accounts payable and accrued
liabilities 137 (64)
Other - net 3 53
Net cash provided by operating activities 341 326
Cash flows from investing activities:
Capital expenditures (197) (180)
Cash used in acquisitions (172) -
Proceeds from sale of business 180 -
Other investing activities - net (24) (13)
Net cash used by investing activities (213) (193)
Cash flows from financing activities:
Decrease in short-term debt (46) (1)
Proceeds from issuance of long-term debt 808 810
Principal payments on long-term debt (947) (722)
Issuance of Textron-obligated mandatorily redeemable preferred
securities of subsidiary trust holding solely Textron junior
subordinated debt securities 483 -
Proceeds from exercise of stock options 29 32
Purchases of Textron common stock (239) (93)
Purchases of Textron common stock from Paul Revere (34) (22)
Dividends paid (111) (100)
Net cash used by financing activities (57) (96)
Net increase in cash 71 37
Cash at beginning of period 56 20
Cash at end of period $ 127 $ 57
</TABLE>
Item 1. FINANCIAL STATEMENTS (Continued)
Note 5: Financial information by borrowing group (continued)
FINANCE SUBSIDIARIES
(unaudited) (In millions)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30, September 30, September 30,
Statement of Income 1996 1995 1996 1995
<S> <C> <C> <C> <C>
Revenues $ 526 $ 499 $1,557 $1,461
Costs and expenses
Selling and administrative 153 151 460 444
Interest 147 151 438 460
Provision for losses on collection of
finance receivables, less recoveries 59 42 166 120
Other 69 59 208 166
Total costs and expenses 428 403 1,272 1,190
Income before income taxes 98 96 285 271
Income taxes (38) (38) (112) (106)
Net income $ 60 $ 58 $ 173 $ 165
</TABLE>
<TABLE>
<CAPTION>
September 30, December 31,
Balance Sheet 1996 1995
Assets
<S> <C> <C>
Cash $ 42 $ 28
Investments 779 771
Finance receivables - net 9,514 9,370
Other 689 657
Total assets $11,024 $10,826
Liabilities and equity
Accounts payable and accrued liabilities (including income
taxes) $ 955 $ 914
Debt 8,515 8,437
Equity 1,554 1,475
Total liabilities and equity $11,024 $10,826
</TABLE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
<TABLE>
TEXTRON INC.
Revenues and Income by Business Segment
(In millions)
<CAPTION>
Three Months Ended Nine Months Ended
September 28, September 30, September 28, September 30,
1996 1995 1996 1995
REVENUES
<S> <C> <C> <C> <C>
MANUFACTURING:
Aircraft $ 610 $ 609 $ 1,858 $1,786
Automotive 365 349 1,229 1,171
Industrial 518 324 1,521 1,026
Systems and Components 229 276 681 780
1,722 1,558 5,289 4,763
FINANCE 526 499 1,557 1,461
Total revenues $2,248 $2,057 $ 6,846 $6,224
INCOME
MANUFACTURING:
Aircraft $ 69 $ 66 $ 188 $ 171
Automotive 28 26 108 99
Industrial 53 36 162 120
Systems and Components 23 24 61 66
173 152 519 456
FINANCE 98 96 285 271
Segment operating income 271 248 804 727
Corporate expenses and other - net (28) (29) (86) (72)
Interest expense - net (36) (46) (111) (148)
Income from continuing operations
before income taxes and
distributions on preferred
securities of subsidiary trust $ 207 $ 173 $ 607 $ 507
</TABLE>
Financial Condition
Textron Parent Company Borrowing Group: During the nine months ended September
28, 1996, the Textron Parent Company Borrowing Group's operating activities
provided cash of $341 million versus $326 million during the corresponding
period of 1995. Operating cash flows for 1996 were affected by income from
continuing operations partially offset by inventory buildups at the Aircraft
divisions related to the Citation X aircraft and certain helicopter models. The
Group's debt decreased as cash provided by operations, the issuance of preferred
securities, and the sale of Textron Aerostructures exceeded cash used for (a)
financing acquisitions, (b) repurchases of Textron common stock, (c) capital
expenditures, and (d) payments of dividends.
During the nine months ended September 30, 1995, the Group's operating
activities provided cash of $326 million versus $357 million during the
corresponding period of 1994. The decrease in 1995 was principally due to an
increase in receivables and inventory due principally to increased business and
a decrease in accrued liabilities due to increased tax payments, partially
offset by reductions in cash value of company-owned life insurance
(approximately $90 million).
On February 1, 1996, a new shelf registration statement became effective,
covering, in addition to the remaining unused $211 million of unsecured debt
securities previously registered, an aggregate amount of $800 million of (a)
debt issuable by Textron and (b) preferred securities issuable by entities
formed by Textron on behalf of which Textron would provide certain guarantees.
On February 9, 1996, a trust sponsored by Textron issued $500 million of such
preferred securities, the proceeds of which were invested by the trust in
Textron's newly issued 7.92% Junior Subordinated Deferrable Interest Debentures,
due 2045. The proceeds from the issuance of the debentures were initially used
by Textron for the repayment of long-term borrowings. Textron had $511 million
available at September 28,1996 under its shelf registration statements filed
with the Securities and Exchange Commission.
The Textron Parent Company Borrowing Group's credit facilities not used or
reserved as support for outstanding commercial paper or bank borrowings at
September 28,1996 were $880 million.
In July 1996, Textron entered into a five year multi-currency credit agreement
with 14 banks for $350 million to be used for its foreign operations, of which
$60 million was available at September 28, 1996.
Of the Textron Parent Company Borrowing Group's $602 million principal notional
amount of interest rate exchange agreements outstanding at December 30, 1995,
$140 million subsequently expired through September 28,1996.
During the nine months ended September 28, 1996, Textron acquired (a) Xact
Products, Inc., a precision-formed metal parts manufacturer based in Michigan,
(b) Valois Industries (which has been re-named Textron Industries, S.A.), a
Paris-based manufacturer of engineered fastening systems, (c) Klauke, a German
manufacturer of electrical connectors, sleeves, and battery-powered tools for
the utility and electrical contracting markets, (d) the UK-based washer systems
business of Valeo Wiper Systems Ltd, a division of France-based Valeo S.A., and
(e) The Bunton Company, a Louisville, Kentucky-based manufacturer of rotary
lawn-care equipment for commercial markets for an aggregate of approximately
$315 million.
On September 9, 1996, Textron sold its Aerostructures division for $180 million
in cash plus a subordinated note. The transaction resulted in no book gain or
loss to Textron. Proceeds from the sale will be used to finance acquisitions
and repurchase Textron common shares.
On November 6, 1996, Textron announced that the April 1996 agreement with
Provident Companies, Inc. has been revised. As a result of modifications
relating to capital and other considerations under the revised agreement,
Textron will provide additional capital to Paul Revere upon a final
determination of the required levels of Paul Revere's statutory reserves,
subject to certain limits. See Note 1 to the consolidated financial statements
for additional information.
On November 7, 1996, Textron announced that it has signed a definitive
agreement to acquire Bonn, Germany-based Kautex Werke Reinold Hagen AG, a
supplier of blow-molded plastic automotive systems and components. Textron will
acquire the worldwide Kautex Group from Klockner-Werke AG for approximately $300
million in cash. The transaction, which is subject to European Commission, U.S.
and Canadian regulatory approvals, is expected to be completed in early 1997.
Textron has approximately two million shares remaining under a prior five
million share repurchase program authorization. In September 1996, Textron's
Board of Directors authorized the repurchase of an additional five million
shares of common stock under its shares repurchase program.
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 operations-- will continue to be more than sufficient to meet
its operating needs and to finance growth.
Finance subsidiaries: The finance subsidiaries paid dividends of $93 million and
$87 million to the Textron Parent Company Borrowing Group during the nine month
periods ended September 30, 1996 and September 30, 1995, respectively.
During the nine months ended September 30, 1996, the finance subsidiaries had
$246 million of interest rate exchange agreements expire and $368 million of
interest rate exchange agreements go into effect. The new agreements, which
have a weighted average original term of 2.1 years and expire through 1999, had
the effect of fixing the rate of interest at approximately 7.83% on $368 million
of variable rate borrowings at September 30, 1996.
Results of Operations - Three months ended September 28, 1996 vs. Three months
ended September 30, 1995
Textron reported third quarter 1996 earnings per share from continuing
operations of $1.40 per share, up 17% from the 1995 amount of $1.20. Income
from continuing operations in 1996 of $120 million was up from $104 million for
1995. Revenues increased 9% to $2.2 billion in 1996 from $2.1 billion in 1995.
On November 6, 1996, Textron announced that the April 1996 agreement with
Provident Companies, Inc. has been revised. As a result of the revised
agreement, Textron recorded in its financial statements an additional loss from
discontinued operation in the third quarter of 1996 of $155 million ($1.81 loss
per share). See Note 1 to the consolidated financial statements for additional
information.
The Aircraft segment's revenues approximated 1995's level, while income
increased $3 million (5%). Bell Helicopter's revenues and income decreased,
primarily as a result of lower sales of military helicopters to the U.S.
Government ($32 million) and lower revenues on the V-22 program ($36 million).
These decreases were partially offset by higher commercial helicopter sales ($12
million). Cessna's revenues and income increased primarily as a result of
higher sales of business jets and utility turboprop aircraft.
The Automotive segment's revenues and income increased $16 million (5%) and $2
million (8%), respectively, due primarily to higher overall North American
automotive production, particularly from the improved volume of light trucks at
Chrysler.
The Industrial segment's revenues increased $194 million (60%) and income
increased $17 million (47%). These increases were due principally to higher
sales in the fastening systems business ($170 million), reflecting the
acquisitions of Elco Industries, Friedr. Boesner GmbH, and Textron Industries,
S.A. In addition, income increased at E-Z-GO as a result of higher sales of
golf cars and improved operating performance.
The Systems and Components segment's revenues and income decreased $47 million
(17%) and $1 million (4%), respectively. The decreases were principally due to
reduced shipments on certain U.S. Government and commercial aerospace contracts
and the impact of the divestiture of the Textron Aerostructures division as of
September 6, 1996.
The Finance segment's revenues increased $27 million (5%), while income
increased $2 million (2%). AFS' revenues increased $21 million, primarily as a
result of an increase in yields on finance receivables, an increase in earned
premiums in both the finance-related and the independent insurance operations,
and an increase in capital gains, due primarily to a higher volume of sales in
the bond investment portfolio. Its income was equal to 1995's level due to
those factors and a decrease in the average cost of borrowed funds, partially
offset by an increase in the ratio of net credit losses to average finance
receivables and an increase in the ratio of insurance losses to earned insurance
premiums in AFS' insurance operations. TFC's income increased $2 million on
higher revenues of $6 million, due to a higher level of finance receivables and
higher fee income, principally due to increased arrangement fee income and
higher prepayment and late charges income, and a decrease in the average cost of
borrowed funds, partially offset by a higher provision for loan losses,
principally due to higher charge-offs in the equipment portfolio.
Corporate expenses and other - net approximated 1995's level, as lower expenses
were partially offset by the reclassification of certain nondebt related
expenses from the interest expense line ($4 million). Interest expense - net
for the Textron Parent Company Borrowing Group decreased $10 million due to the
reclassification and lower average debt, due principally to the payment of debt
with the proceeds from the issuance of preferred securities in February 1996.
Results of Operations - Nine months ended September 28, 1996 vs. Nine months
ended September 30, 1995
Earnings per share from continuing operations for the nine months were $4.10 per
share, up 16% from the 1995 amount of $3.52. Income from continuing operations
in 1996 of $354 million was up from $306 million for 1995. Revenues increased
10% to $6.8 billion in 1996 from $6.2 billion in 1995.
As a result of the revised agreement with Provident Companies, Inc., Textron
recorded in its financial statements an additional loss from discontinued
operation in the third quarter of 1996 of $155 million or a total loss of $245
million ($2.65 loss per share) for the nine months ended September 28, 1996.
See Note 1 to the consolidated financial statements for additional information.
The Aircraft segment's revenues and income increased $72 million (4%) and $17
million (10%), respectively. Bell Helicopter's revenues decreased primarily as
a result of lower sales of military helicopters to the U.S. Government ($108
million) and lower revenues on the V-22 program ($48 million), partially offset
by higher domestic and international helicopter sales, including increased
deliveries on the Canadian Forces contract ($58 million). Bell's income
approximated 1995's level as additional income on the V-22 program and lower
product development expenses related to new helicopter models offset the impact
of the lower revenues. Cessna's revenues increased primarily as a result of
higher sales of business jets and utility turboprop aircraft. Its income
increased as a result of the higher revenues, partially offset by higher product
development and selling and administrative expenses due to the introduction and
support of new products.
The Automotive segment's revenues and income increased $58 million (5%) and $9
million (9%), respectively. Despite the impact of a strike at certain General
Motors' plants in the first quarter 1996, revenues increased as a result of
improved volume of light trucks at Chrysler as well as a ramp-up in sales at
Textron's Saltillo, Mexico facility. Income increased as a result of the higher
revenues and improved operating performance.
The Industrial segment's revenues and income increased $495 million (48%) and
$42 million (35%), respectively. These increases were due principally to higher
sales in the fastening systems business ($434 million), reflecting the
acquisitions of Elco Industries, Friedr. Boesner GmbH and Textron Industries,
S.A. In addition, income increased at E-Z-GO as a result of higher sales of
golf cars and better operating performance.
The Systems and Components segment's revenues and income decreased $99 million
(13%) and $5 million (8%), respectively. The decreases were principally due to
reduced shipments on certain U.S. Government and commercial aerospace contracts
and the impact of the divestiture of the Textron Aerostructures division as of
September 6, 1996.
The Finance segment's revenues increased $96 million (7%), while income
increased $14 million (5%). AFS' revenues increased $82 million, primarily as a
result of an increase in yields on finance receivables (18.58% in the first nine
months of 1996 vs. 18.04% in the first nine months of 1995), an increase in
earned premiums in both the finance-related and the independent insurance
operations and an increase in capital gains, due primarily to a higher volume of
sales in the bond investment portfolio. Its income increased $8 million due to
those factors, a decrease in the average cost of borrowed funds (6.93% in the
first nine months of 1996 vs. 7.35% in the first nine months of 1995) and an
increase in investment income due to a higher level of invested assets. This
favorable impact was partially offset by an increase in the ratio of net credit
losses to average finance receivables (2.74% in the first nine months of 1996
vs. 1.99% in the first nine months of 1995) and an increase in the ratio of
insurance losses to earned insurance premiums in AFS' independent insurance
operations. The proliferation of credit cards and the resulting increase in the
level of consumer debt has not only overburdened the consumer, resulting in
higher delinquencies and charge-offs, but has provided the consumer an alternate
source of funds, thereby negatively effecting AFS' receivable growth. TFC's
income increased $6 million on higher revenues of $14 million , due to a higher
level of finance receivables ($3.022 billion in the first nine months of 1996
vs. $2.815 billion in the first nine months of 1995) and higher fee income,
principally due to increased arrangement fee income and higher late charges and
prepayment income, and a decrease in the average cost of borrowed funds,
partially offset by a higher provision for loan losses, principally due to
higher charge-offs in the equipment portfolio.
Corporate expenses and other - net increased $14 million, due principally to the
reclassification of certain nondebt related expenses from the interest expense
line ($18 million). Interest expense - net for the Textron Parent Company
Borrowing Group decreased $37 million due to the reclassification and lower
average debt, due in part to the payment of debt with the proceeds from the
issuance of preferred securities in February 1996.
PART II. OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
12.1 Computation of ratio of income to combined fixed charges
and preferred securities dividends of the Textron
Parent Company Borrowing Group.
12.2 Computation of ratio of income to combined fixed charges
and preferred securities dividends of Textron Inc.
including all majority-owned subsidiaries.
27 Financial Data Schedule (filed electronically only)
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter
ended September 28, 1996.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TEXTRON INC.
Date: November 12, 1996 s/R. L. Yates
R. L. Yates
Vice President and Controller
(principal accounting officer)
LIST OF EXHIBITS
The following exhibits are filed as part of this report on Form 10-Q:
Name of Exhibit
12.1 Computation of ratio of income to combined fixed charges and
preferred securities dividends of the Textron Parent Company
Borrowing Group
12.2 Computation of ratio of income to combined fixed charges and
preferred securities dividends of Textron Inc. including all
majority-owned subsidiaries
27 Financial Data Schedule (filed electronically only)
EXHIBIT 12.1
<TABLE>
TEXTRON PARENT COMPANY BORROWING GROUP
COMPUTATION OF RATIO OF INCOME TO
COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
(unaudited)
(In millions except ratio)
<CAPTION>
Nine Months
Ended
September 28,
1996
<S> <C>
Fixed charges:
Interest expense $111
Distributions on preferred securities of subsidiary trust, net of income taxes 16
Estimated interest portion of rents 13
Total fixed charges $140
Income:
Income from continuing operations before income taxes and distributions on
preferred securities of subsidiary trust $607
Eliminate equity in undistributed pretax income of finance subsidiaries (192)
Fixed charges 140
Adjusted income $555
Ratio of income to fixed charges 3.96
</TABLE>
EXHIBIT 12.2
<TABLE>
TEXTRON INC. INCLUDING ALL MAJORITY-OWNED SUBSIDIARIES
COMPUTATION OF RATIO OF INCOME TO
COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
(unaudited)
(In millions except ratio)
<CAPTION>
Nine Months
Ended
September 28,
1996
<S> <C>
Fixed charges:
Interest expense $ 549
Distributions on preferred securities of subsidiary trust, net of income taxes 16
Estimated interest portion of rents 26
Total fixed charges $ 591
Income:
Income from continuing operations before income taxes and distributions on
preferred securities of subsidiary trust $ 607
Fixed charges 591
Adjusted income $1,198
Ratio of income to fixed charges 2.03
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Textron
Inc.'s Consolidated Balance Sheet as of September 28, 1996 and Consolidated
Statement of Income for the nine months ended September 28, 1996 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-28-1996
<PERIOD-END> SEP-28-1996
<CASH> 169
<SECURITIES> 0
<RECEIVABLES> 0*
<ALLOWANCES> 0*
<INVENTORY> 1,303
<CURRENT-ASSETS> 0
<PP&E> 3,106
<DEPRECIATION> 1,633
<TOTAL-ASSETS> 18,035
<CURRENT-LIABILITIES> 0
<BONDS> 10,219
<COMMON> 12
0
14
<OTHER-SE> 3,061
<TOTAL-LIABILITY-AND-EQUITY> 18,035
<SALES> 5,289
<TOTAL-REVENUES> 6,846
<CGS> 4,308
<TOTAL-COSTS> 4,516
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 166
<INTEREST-EXPENSE> 549
<INCOME-PRETAX> 607
<INCOME-TAX> 237
<INCOME-CONTINUING> 354
<DISCONTINUED> (229)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 125
<EPS-PRIMARY> 1.45
<EPS-DILUTED> 1.45
*Beginning in the 2nd quarter of 1996, such amounts are not
disclosed in interim periods.
</TABLE>
