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 June 29, 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.
X Yes No
Common stock outstanding at July 27, 1996 - 83,613,000 shares
***************************************************************************
<TABLE>
<PAGE> 2.
Item 1.FINANCIAL STATEMENTS
TEXTRON INC.
Consolidated Statement of Income (unaudited)
(Dollars in millions except per share amounts)
Three Months Ended Six Months Ended
June July 1, June July
29, 1995 29, 1,
1996 1996 1995
<S> <C> <C> <C> <C>
Revenues
Manufacturing sales $ 1,867 $ 1,651 $ 3,567 $ 3,205
Finance revenues 517 487 1,031 962
Total revenues 2,384 2,138 4,598 4,167
Costs and expenses
Cost of sales 1,520 1,351 2,913 2,629
Selling and administrative 342 306 673 608
Interest 183 209 366 411
Provision for losses on
collection of finance
receivables, less recoveries 54 39 107 78
Other 69 56 139 107
Total costs and expenses 2,168 1,961 4,198 3,833
Income from continuing
operations before income taxes
and distributions on preferred
securities of subsidiary trust 216 177 400 334
subsidiary trust
Income taxes (84) (70) (156) (132)
Distributions on preferred
securities of subsidiary
trust, net of income taxes (7) - (10) -
Income from continuing
operations 125 107 234 202
Discontinued operation, net of
income taxes:
Income from operations - 14 16 28
Estimated loss on disposal - - (90) -
- 14 (74) 28
Net income $ 125 $ 121 $ 160 $ 230
Per common share:
Income from continuing
operations $ 1.44 $ 1.23 $ 2.70 $ 2.33
Discontinued operation - 0.17 (0.85) 0.32
Net income $ 1.44 $ 1.40 $ 1.85 $ 2.65
Average shares outstanding* 86,575,000 86,679,000 86,597,000 86,862,000
Dividends per share:
$2.08 Preferred stock,
Series A $ .52 $ .52 $ 1.04 $ 1.04
$1.40 Preferred stock,
Series B $ .35 $ .35 $ .70 $ .70
Common stock $ .44 $ .39 $ .88 $ .78
*Average shares outstanding assume full conversion of preferred stock and
exercise of options.
See notes to consolidated financial statements.
</TABLE>
***************************************************************************
<PAGE> 3.
<TABLE>
Item 1. FINANCIAL STATEMENTS (Continued)
TEXTRON INC.
Consolidated Balance Sheet (unaudited)
<S> <C> <C>
(In million) June 29, December 30,
1996 1995
Assets
Cash and cash equivalent $ 184 $ 84
Investments 779 778
Receivables - net:
Finance 9,524 9,362
Commercial and U.S. Government 887 777
10,411 10,139
Inventories 1,471 1,284
Property, plant and equipment, less
accumulated depreciation of $1,700
and $1,585 1,468 1,373
Goodwill, less accumulated amortization
of $376 and $347 1,599 1,491
Investment in discontinued operation,
less estimated net loss on disposal
in 1996 962 1,161
Other (including net prepaid income
taxes) 1,480 1,384
Total assets $ 18,354 $ 17,694
Liabilities and shareholders' equity
Liabilities
Accounts payable $ 765 $ 684
Accrued postretirement benefits
other than pensions 919 919
Other accrued liabilities (including
income taxes) 2,628 2,468
Debt:
Textron Parent Company Borrowing Group 1,715 1,774
Finance subsidiaries 8,563 8,437
10,278 10,211
Total liabilities 14,590 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 15 15
Common stock * 12 12
Capital surplus 770 750
Retained earnings 2,950 2,864
Other (primarily currency translation and
securities valuation adjustments) (3) 129
3,744 3,770
Less cost of treasury shares 463 358
Total shareholders' equity 3,281 3,412
Total liabilities and shareholders
equity $ 18,354 $ 17,694
*Common shares outstanding 84,175,000 84,935,000
See notes to consolidated financial statements.
</TABLE>
*****************************************************************************
<TABLE>
Item 1. FINANCIAL STATEMENTS (Continued) <PAGE> 4.
TEXTRON INC.
Consolidated Statement of Cash Flows (unaudited)
(In millions)
Six Months Ended
June 29, July 1,
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Income from continuing operations $ 234 $ 202
Adjustments to reconcile income from continuing
operations to net cash provided
by operating activities:
Depreciation and amortization 189 166
Provision for losses on receivables 109 81
Changes in assets and liabilities excluding those
related to acquisitions and divestitures:
Increase in commercial and U.S. Government
receivables (1) (65)
Increase in inventories (113) (48)
Increase in other assets (49) (10)
Decrease in accounts payable (11) (7)
Increase (decrease) in accrued liabilities 84 (147)
Other - net (31) 38
Cash provided by operating activities of
continuing operations 411 210
Cash provided by operating activities of
discontinued operation 247 247
Net cash provided by operating activities 658 457
Cash flows from investing activities:
Purchases of investments (71) (99)
Proceeds from disposition of investments 30 45
Maturities and calls of investments 27 27
Finance receivables:
Originated or purchased (3,221) (3,072)
Repaid or sold 3,027 2,827
Cash used in acquisitions (111) (40)
Capital expenditures (128) (131)
Other investing activities - net (25) (11)
Cash used by investing activities of
continuing operations (472) (454)
Cash used by investing activities of
discontinued operation (274) (304)
Net cash used by investing activities (746) (758)
Cash flows from financing activities:
Increase in short-term debt 463 54
Proceeds from issuance of long-term debt 867 1,719
Principal payments on long-term debt (1,452) (1,294)
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 25 18
Purchases of Textron common stock (117) (93)
Purchases of Textron common stock from Paul Revere (34) (22)
Dividends paid (74) (67)
Cash provided by financing activities of
continuing operations 161 315
Cash provided by financing activities of
discontinued operation 12 57
Net cash provided by financing activities 173 372
Net increase in cash 85 71
Elimination of cash flow of discontinued operation 15 -
Cash at beginning of period 84 49
Cash and cash equivalent at end of period $ 184 $ 120
See notes to consolidated financial statements.
</TABLE>
***************************************************************************
Item 1. FINANCIAL STATEMENTS (Continued) <PAGE> 5.
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,
except for recording the estimated loss on disposal of
Paul Revere -- see below for additional information on
the discontinued operation) which are, in the opinion
of management, necessary for a fair presentation of
Textron's consolidated financial position at June 29,
1996, and its consolidated results of operations for
each of the respective three and six month periods
ended June 29, 1996 and July 1, 1995 and consolidated
cash flows for each of the six month periods ended June
29, 1996 and July 1, 1995. The results of operations
for the six months ended June 29, 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 as a
discontinued operation.
Discontinued operation
Discontinued operations
relates to the sale of Paul Revere, an 83.3% owned
subsidiary. Textron has entered into an agreement with
Provident Companies, Inc. whereby Provident will
acquire all of the outstanding shares of Paul Revere's
common stock for approximately $26 per share.
The transaction has
received Federal Trade Commission clearance and is
subject to state regulatory approvals and the consent
of Provident and Paul Revere shareholders.
Paul Revere's revenues
for the three month periods ended June 30, 1996 and
June 30, 1995 were $383 million and $364 million,
respectively, and for the six month periods ended on
those dates were $766 million and $722 million,
respectively.
Note 2: Inventories
June 29, December 30,
1996 1995
(In millions)
Finished goods $ 394 $ 352
Work in process 1,020 911
Raw materials 261 217
1,675 1,480
Less progress payments and
customer deposits 204 196
$1,471 $1,284
***************************************************************************
<PAGE> 6.
Item 1. FINANCIAL STATEMENTS (Continued)
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.
***************************************************************************
<PAGE> 7.
Item 1. FINANCIAL STATEMENTS (Continued)
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.
***************************************************************************
<PAGE> 8.
<TABLE>
Item 1. FINANCIAL STATEMENTS (Continued)
Note 5: Financial information by borrowing group (continued)
TEXTRON PARENT COMPANY BORROWING GROUP
(unaudited) (In millions)
Three Months Ended Six Months Ended
June 29, July 1, June 29, July 1,
<S> <C> <C> <C> <C>
Statement of Income 1996 1995 1996 1995
Sales $1,867 $1,651 $3,567 $3,205
Costs and expenses
Cost of sales 1,520 1,351 2,913 2,629
Selling and administrative 189 158 366 315
Interest 37 52 75 102
Total costs and expenses 1,746 1,561 3,354 3,046
121 90 213 159
Pretax income of finance
subsidiaries 95 87 187 175
Income from continuing operations
before income taxes and
distributions on preferred
securities of subsidiary trust 216 177 400 334
Income taxes (84) (70) (156) (132)
Distributions on preferred
securities of subsidiary trust,
trust, net of income taxes (7) - (10) -
Income from continuing operations 125 107 234 202
Discontinued operation, net of
income taxes:
Income from operations - 14 16 28
Estimated loss on disposal - - (90) -
- 14 (74) 28
Net income $ 125 $ 121 $ 160 $ 230
</TABLE>
<TABLE>
<S> <C> <C>
June 29, December 30,
Balance Sheet 1996 1995
Assets
Cash and cash equivalent $ 160 * $ 56
Receivables - net 887 777
Inventories 1,471 1,284
Investments in finance subsidiaries 1,524 1,475
Property, plant and equipment - net 1,392 1,297
Goodwill, less accumulated amortization of
$255 and $233 1,456 1,344
Investment in discontinued operation, less
estimated net loss on disposal in 1996 962 1,161
Other (including net prepaid income taxes) 1,258 1,177
Total assets $9,110 $8,571
Liabilities and shareholders' equity
Accounts payable and accrued liabilities
(including income taxes) $3,631 $3,385
Debt 1,715 1,774
Textron-obligated mandatorily redeemable
preferred securities of subsidiary trust
holding solely Textron junior subordinated
debt securities 483 -
Shareholders' equity 3,281 3,412
Total liabilities and shareholders' equity $9,110 $8,571
</TABLE>
* Includes a short-term investment of $50 million used for
acquisitions shortly after the end of the month.
***************************************************************************
Item 1. FINANCIAL STATEMENTS (Continued) <PAGE> 9.
Note 5: Financial information by borrowing group (continued)
<TABLE>
TEXTRON PARENT COMPANY BORROWING GROUP
(unaudited) (In millions)
<S> <C> <C>
Six Months Ended
June 29 July 1,
Statement of Cash Flows 1996 1995
Cash flows from operating activities:
Income from continuing operations $ 234 $ 202
Adjustments to reconcile income from
continuing operations to net cash
provided by operating activities:
Undistributed earnings of finance
subsidiaries (49) (49)
Depreciation and amortization 125 109
Changes in assets and liabilities
excluding those related to
acquisitions and divestitures:
Increase in receivables (1) (65)
Increase in inventories (113) (48)
Decrease (increase) in other assets (55) 5
Increase (decrease) in accounts
payable and accrued liabilities 91 (118)
Other - net 13 63
Net cash provided by operating activites 245 99
Cash flows from investing activities:
Capital expenditures (117) (121)
Cash used in acquisitions (111) -
Other investing activities - net (18) (33)
Net cash used by investing activities (246) (154)
Cash flows from financing activities:
Increase (decrease) in short-term debt (38) 5
Proceeds from issuance of long-term debt 666 630
Principal payments on long-term debt (806) (347)
Issuance of Textron-obligated mandatorily
redeemable preferred securities of sub-
sidiary trust holding solely Textron junior
subordinated debt securities 483 -
Proceeds from exercise of stock options 25 18
Purchases of Textron common stock (117) (93)
Purchases of Textron common stock from Paul
Revere (34) (22)
Dividends paid (74) (67)
Net cash provided by financing activities 105 124
Net increase in cash 104 69
Cash at beginning of period 56 20
Cash and cash equivalent at end of period $ 160 $ 89
</TABLE>
***************************************************************************
Item 1. FINANCIAL STATEMENTS (Continued) <PAGE> 10.
Note 5: Financial information by borrowing group (continued)
<TABLE>
FINANCE SUBSIDIARIES
(unaudited) (In millions)
<S> <C> <C> <C> <C>
Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
Statement of Income 1996 1995 1996 1995
Revenues $ 517 $ 487 $1,031 $ 962
Costs and expenses
Selling and administrative 153 148 307 293
Interest 146 157 291 309
Provision for losses on
collection of finance
receivables, less recoveries 54 39 107 78
Other 69 56 139 107
Total costs and expenses 422 400 844 787
Income before income taxes 95 87 187 175
Income taxes (38) (33) (74) (68)
Net income $ 57 $ 54 $ 113 $ 107
</TABLE>
<TABLE>
<S> <C> <C>
June 30, December 31,
Balance Sheet 1996 1995
Assets
Cash $ 24 $ 28
Investments 773 771
Finance receivables - net 9,524 9,370
Other 678 657
Total assets $10,999 $10,826
Liabilities and equity
Accounts payable and accrued liabilities
(including income taxes) $ 912 $ 914
Debt 8,563 8,437
Equity 1,524 1,475
Total liabilities and equity $10,999 $10,826
</TABLE>
**************************************************************************
<PAGE> 11.
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)
<S> <C> <C> <C> <C>
Three Months Ended Six Months Ended
June 29, July 1, June 29, July 1,
1996 1995 1996 1995
REVENUES
MANUFACTURING:
Aircraft $ 622 $ 635 $1,248 $1,177
Automotive 449 398 864 822
Industrial 564 353 1,003 702
Systems and Components 232 265 452 504
1,867 1,651 3,567 3,205
FINANCE 517 487 1,031 962
Total revenues $2,384 $2,138 $4,598 $4,167
INCOME
MANUFACTURING:
Aircraft $ 66 $ 64 $ 119 $ 105
Automotive 42 36 80 73
Industrial 60 41 109 84
Systems and Components 20 23 38 42
188 164 346 304
FINANCE 95 87 187 175
Segment operating income 283 251 533 479
Corporate expenses and
other - net (30) (22) (58) (43)
Interest expense - net (37) (52) (75) (102)
Income from continuing
operations before income
taxes and distributions
on preferred securities
of subsidiary trust $ 216 $ 177 $ 400 $ 334
</TABLE>
***************************************************************************
<PAGE> 12.
Item 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
Financial Condition
Textron Parent Company Borrowing Group: During the six months
ended June 29, 1996, the Textron Parent Company Borrowing Group's
operating activities provided cash of $245 million versus $99
million during the corresponding period of 1995. 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 by $59 million principally due to the
issuance of preferred securities ($500 million -- see below) and
cash provided by operations ($245 million) which exceeded cash
used for (a) financing acquisitions ($343 million), (b) purchases
of 1.4 million shares of Textron common stock under its stock
repurchase program ($117 million), (c) capital expenditures ($117
million), (d) payments of dividends ($74 million), and (e)
purchases of Textron common stock from Paul Revere ($34 million).
During the six months ended July 1, 1995, the Group's operating
activities provided cash of $99 million versus $225 million
during the corresponding period of 1994. The decrease in 1995
was principally due to increased tax payments in 1995 partially
offset by increased income in 1995 and a larger increase in
receivables in 1994, due primarily to changed payment terms with
certain customers.
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.
The Textron Parent Company Borrowing Group's credit facilities
not used or reserved as support for outstanding commercial paper
or bank borrowings at June 29, 1996 were $791 million. Textron
had $511 million available at June 29, 1996 under its shelf
registration statements filed with the Securities and Exchange
Commission.
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 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 June 29, 1996.
**************************************************************************
<PAGE> 13.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
In January 1996, Textron acquired Xact Products, Inc., a
precision-formed metal parts manufacturer based in Michigan and
in April 1996, it acquired Valois Industries (which has been re-
named Textron Industries, S.A.), a Paris-based manufacturer of
engineered fastening systems, for an aggregate of approximately
$256 million.
In early July 1996, Textron acquired Klauke, a German
manufacturer of electrical connectors, sleeves, and battery-
powered tools for the utility and electrical contracting markets
and the UK-based washer systems business of Valeo Wiper Systems
Ltd, a division of France-based Valeo S.A., for an aggregate of
approximately $50 million.
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
$64 million and $58 million to the Textron Parent Company
Borrowing Group during the six month periods ended June 29, 1996
and July 1, 1995, respectively.
During the first half of 1996, the finance subsidiaries had $180
million of interest rate exchange agreements expire and $283
million of interest rate exchange agreements go into effect.
These agreements, which have a weighted average original term of
two years and expire through 1999, had the effect of fixing the
rate of interest at approximately 7.7% on $283 million of
variable rate borrowings at June 30, 1996.
Results of Operations - Three months ended June 29, 1996 vs.
Three months ended July 1, 1995
Textron reported second quarter 1996 earnings per share from
continuing operations of $1.44 per share, up 17% from the 1995
amount of $1.23. Income from continuing operations in 1996 of
$125 million was up from $107 million for 1995. Revenues
increased 12% to $2.4 billion in 1996 from $2.1 billion in 1995.
Net income was $125 million versus $121 million in 1995.
The Aircraft segment's revenues decreased $13 million (2%), due
to lower revenues at Bell Helicopter. However, income increased
$2 million (3%), principally at Cessna Aircraft. Bell
Helicopter's revenues decreased primarily as a result of lower
sales of military helicopters to the U.S. Government ($62
million) and lower revenues on the V-22 EMD contract ($32
million). Bell's income decreased, slightly, as a result of the
lower revenues and higher product development expenses related to
new helicopter models ($2 million). 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.
***************************************************************************
<PAGE> 14.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
The Automotive segment's revenues and income increased $51
million (13%) and $6 million (17%), respectively. The revenue
increase was due principally to higher North American automotive
production, particularly from the improved volume of light trucks
at Chrysler. Income increased on the higher volume and improved
operating performance.
The Industrial segment's revenues increased $211 million (60%)
and income increased $19 million (46%). These increases were due
principally to higher sales in the fastening systems business
($187 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 $33 million (12%) and $3 million (13%), respectively.
The decrease in revenues was principally due to reduced shipments
on certain U.S. Government and commercial aerospace contracts.
The Finance segment's revenues increased $30 million (6%), while
income increased $8 million (9%). AFS' revenues increased $26
million, primarily as a result of an increase in yields on
finance receivables and an increase in earned premiums in both
the finance-related and the independent insurance operations.
Its income increased $5 million due to those factors, a decrease
in the average cost of borrowed funds 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 and an
increase in the ratio of insurance losses to earned insurance
premiums in AFS' independent insurance operations. TFC's income
increased $3 million on higher revenues of $4 million, due to a
higher level of average finance receivables, higher fee income,
principally due to increased arrangement fee income and late
charges, and a decrease in the average cost of borrowed funds.
These favorable factors were 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 $8 million, due
principally to the reclassification of certain nondebt related
expense from the interest expense line ($5 million). Interest
expense - net for the Textron Parent Company Borrowing Group
decreased $15 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 - Six months ended June 29, 1996 vs. Six
months ended July 1, 1995
Textron reported first half 1996 earnings per share from
continuing operations of $2.70 per share, up 16% from the 1995
amount of $2.33. Income from continuing operations in 1996 of
$234 million was up from $202 million for 1995. Revenues
increased 10% to $4.6 billion in 1996 from $4.2 billion in 1995.
Net income was $160 million versus $230 million in 1995.
The Aircraft segment's revenues and income increased $71 million
(6%) and $14 million (13%), respectively. Bell Helicopter's
revenues decreased primarily as a result of lower sales of
***************************************************************************
<PAGE> 15.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
military helicopters to the U.S. Government ($76 million) and
lower revenues on the V-22 program ($12 million), partially
offset by higher domestic and international helicopter sales,
including increased deliveries on the Canadian Forces contract
($46 million). Bell's income increased as a result of lower
product development expenses related to new helicopter models and
additional income on the V-22 program, partially offset by lower
income related to the decreased revenues. Cessna's revenues
increased primarily as a result of the 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 $42
million (5%) and $7 million (10%), respectively. Despite overall
lower North American automotive production and 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 $301
million (43%) and $25 million (30%), respectively. These
increases were due principally to higher sales in the fastening
systems business ($264 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, while
revenues and income decreased at Speidel, due to lower retail
demand for certain products.
The Systems and Components segment's revenues and income
decreased $52 million (10%) and $4 million (10%), respectively.
The decrease in revenues was principally due to reduced shipments
on certain U.S. Government and commercial aerospace contracts.
The Finance segment's revenues increased $69 million (7%), while
income increased $12 million (7%). AFS' revenues increased $61
million, primarily as a result of an increase in yields on
finance receivables (18.59% in the first half 1996 vs. 17.88% in
the first half 1995) and an increase in earned premiums in both
the finance-related and the independent insurance operations.
Its income increased $8 million due to those factors, a decrease
in the average cost of borrowed funds (6.95% in the first half
1996 vs. 7.41% in the first half 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 (2.64%
in the first half 1996 vs. 1.89% in the first half 1995) and an
increase in the ratio of insurance losses to earned insurance
premiums in AFS' independent insurance operations. Throughout
the first six months of 1996, economic conditions have continued
to burden the consumer finance customer and, as a result,
receivable volume has been negatively affected and delinquencies
and net credit losses have remained higher than historical
norms. TFC's income increased $4 million on higher revenues of
$8 million , due to a higher level of average finance
receivables ($3.019 billion in the first half 1996 vs. $2.804
billion in the first half 1995), higher fee income, principally
due to increased arrangement fee income and late charges, and a
decrease
***************************************************************************
<PAGE> 16.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
in the average cost of borrowed funds (6.24% in the
first half 1996 vs. 6.68% in the first half 1995). These
favorable factors were partially offset by a higher provision
for loan losses, principally due to higher charge-offs in the
equipment portfolio and reserve strengthening.
Corporate expenses and other - net increased $15 million, due
principally to the reclassification of certain nondebt related
expense from the interest expense line ($11 million) and a
pretax charge related to the early redemption of debt ($2
million). Interest expense - net for the Textron Parent Company
Borrowing Group decreased $27 million due to the
reclassification, a lower average cost of borrowing and lower
average debt, due in part to the payment of debt from the
proceeds from the sale of preferred securities in February 1996.
***************************************************************************
<PAGE> 17.
PART II. OTHER INFORMATION
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At Textron's annual meeting of shareholders held on
April 24, 1996, the following items were voted upon:
1. The following persons were elected to serve
as directors in Class III for three year terms expiring
in 1999 and received the votes listed. There were no
abstentions or broker non-votes applicable to the
election of directors:
Name For Withheld
H. Jesse Arnelle 70,607,265 3,028,683
Brian H. Rowe 70,632,670 3,003,278
Sam F. Segnar 70,566,159 3,069,789
Jean H. Sisco 70,492,241 3,143,707
Martin D. Walker 70,673,894 2,962,054
The following directors have terms of office which
continued after the meeting: Lewis B. Campbell, R.
Stuart Dickson, Paul E. Gagne, James F. Hardymon, John
D. Macomber, Barbara Scott Preiskel, John W. Snow and
Thomas B. Wheeler.
2. The appointment of Ernst & Young LLP as Textron's
independent auditors for 1996 was ratified by the
following vote:
For Against Abstain Broker Non-Votes
72,872,608 441,195 322,145 0
3. A shareholder resolution recommending that
all future non-employee directors not be granted
pension benefits and that current non-employee
directors voluntarily relinquish their pension benefits
was defeated by the following vote:
For Against Abstain Broker Non-Votes
27,667,951 39,363,499 1,893,135 4,711,363
*****************************************************************************
<PAGE> 18.
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
During the quarter ended June 29, 1996, Textron
filed the following reports on Form 8-K:
(i) Current Report on Form 8-K filed with the
Securities and Exchange Commission dated May 2,
1996, reporting, under Item 5 (Other Events) and
Item 7 (Exhibits), (a) information regarding the
proposed sale to Provident Companies, Inc. of all
the outstanding shares of The Paul Revere
Corporation, 83% of which are owned by Textron, and
(b) that Textron had restated its financial
statements for each of the previous three fiscal
years to reflect The Paul Revere Corporation as a
discontinued operation.
(ii) Current Report on Form 8-K/A filed with the
Securities and Exchange Commission dated May 17,
1996, amending the above mentioned Current Report
on Form 8-K to revise certain financial data
included therein.
***************************************************************************
<PAGE> 19
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: August 12, 1996 s/R. L. Yates
R. L. Yates
Vice President and Controller
(principal accounting officer)
***************************************************************************
<PAGE>
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)
***************************************************************************
<PAGE>
EXHIBIT 12.1
TEXTRON PARENT COMPANY BORROWING GROUP
COMPUTATION OF RATIO OF INCOME TO
COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
(unaudited)
(In millions except ratio)
Six Months
Ended
June 29, 1996
Fixed charges:
Interest expense $ 75
Distributions on preferred securities of subsidiary
trust, net of income taxes 10
Estimated interest portion of rents 8
Total fixed charges $ 93
Income:
Income from continuing operations before income taxes
and distributions on preferred securities of
subsidiary trust $400
Eliminate equity in undistributed pretax income of
finance subsidiaries (123)
Fixed charges 93
Adjusted income $370
Ratio of income to fixed charges 3.98
*************************************************************************
<PAGE>
EXHIBIT 12.2
TEXTRON INC. INCLUDING ALL MAJORITY-OWNED SUBSIDIARIES
COMPUTATION OF RATIO OF INCOME TO
COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
(unaudited)
(In millions except ratio)
Six Months
Ended
June 29, 1996
Fixed charges:
Interest expense $366
Distributions on preferred securities of subsidiary
trust, net of income taxes 10
Estimated interest portion of rents 17
Total fixed charges $393
Income:
Income from continuing operations before income
taxes and distributions on preferred securities of
subsidiary trust $400
Fixed charges 393
Adjusted income $793
Ratio of income to fixed charges 2.02
************************************************************************
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted
from Textron Inc.'s Consolidated Balance Sheet as of June 29,
1996 and Consolidated Statement of Income for the six months
ended June 29, 1996 and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6 MOS.
<FISCAL-YEAR-END> DEC-28-1996
<PERIOD-END> JUN-29-1996
<CASH> 184
<SECURITIES> 0
<RECEIVABLES> 0 *
<ALLOWANCES> 0 *
<INVENTORY> 1,471
<CURRENT-ASSETS> 0
<PP&E> 3,168
<DEPRECIATION> 1,700
<TOTAL-ASSETS> 18,354
<CURRENT-LIABILITIES> 0
<BONDS> 10,278
<COMMON> 12
0
15
<OTHER-SE> 3,254
<TOTAL-LIABILITY-AND-EQUITY> 18,354
<SALES> 3,567
<TOTAL-REVENUES> 4,598
<CGS> 2,913
<TOTAL-COSTS> 3,052
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 107
<INTEREST-EXPENSE> 366
<INCOME-PRETAX> 400
<INCOME-TAX> 156
<INCOME-CONTINUING> 234
<DISCONTINUED> (74)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 160
<EPS-PRIMARY> 1.85
<EPS-DILUTED> 1.85
* Beginning in the 2nd quarter of 1996, such amounts are not
disclosed in interim periods.
</TABLE>
