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 March 30, 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 April 27, 1996 - 84,075,000 shares
<page 2>
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
TEXTRON INC.
Consolidated Statement of Income (unaudited)
(Dollars in millions except per share amounts)
<TABLE>
Three Months Ended
March 30, April 1,
<S> <C> <C>
1996 1995
Revenues
Manufacturing sales $1,700 $ 1,554
Finance revenues 514 475
Total revenues 2,214 2,029
Costs and expenses
Cost of sales 1,393 1,278
Selling and administrative 331 302
Interest 183 202
Provision for losses on collection of
finance receivables, less recoveries 53 39
Other 70 51
Total costs and expenses 2,030 1,872
Income from continuing operations before
income taxes and distributions on
preferred securities of subsidiary trust 184 157
Income taxes (72) (62)
Distributions on preferred securities of
subsidiary trust, net of income taxes (3) -
Income from continuing operations 109 95
Discontinued operation, net of income taxes:
Income from operations 16 14
Estimated loss on disposal (90) -
(74) 14
Net income $ 35 $ 109
Per common share:
Income from continuing operations $ 1.26 $ 1.09
Discontinued operation (0.86) .16
Net income $ 0.40 $ 1.25
Average shares outstanding* 86,680,000 87,055,000
Dividends per share:
$2.08 Preferred stock, Series A $ .52 $ .52
$1.40 Preferred stock, Series B $ .35 $ .35
Common stock $ .44 $ .39
* Average shares outstanding assume full conversion of preferred stock
and exercise of options.
See notes to consolidated financial statements.
</TABLE>
<TABLE>
Item 1. FINANCIAL STATEMENTS (Continued) <page 3>
TEXTRON INC.
Consolidated Balance Sheet (unaudited)
(In millions) March 30, December 30,
1996 1995
<S> <C> <C>
Assets
Cash $ 71 $ 84
Investments 781 778
Receivables - net:
Finance 9,394 9,362
Commercial and U.S. Government 809 777
10,203 10,139
Inventories 1,368 1,284
Property, plant and equipment, less accumulated
depreciation of $1,630 and $1,585 1,369 1,373
Goodwill, less accumulated amortization
of $363 and $347 1,483 1,491
Investment in discontinued operation, less
estimated net loss on disposal in 1996 997 1,161
Other (including net prepaid income taxes) 1,111 1,037
Total assets $ 17,383 $ 17,347
Liabilities and shareholders' equity
Liabilities
Accounts Payable $ 670 $ 684
Accrued postretirement benefits other than
pensions 919 919
Other accrued liabilities (including income
taxes) 2,197 2,121
Debt:
Textron Parent Company Borrowing Group 1,464 1,774
Finance subsidiaries 8,422 8,437
9,886 10,211
Total liabilities 13,672 13,935
Textron-obligated mandatorily redeemable preferred
securities of subsidiary trust holding solely
subordinated debt securities of Textron 484 -
Shareholders' equity
Capital stock:
Preferred stock 15 15
Common stock* 12 12
Capital surplus 769 750
Retained earnings 2,862 2,864
Other 32 129
3,690 3,770
Less cost of treasury shares 463 358
Total shareholders' equity 3,227 3,412
Total liabilities and shareholders' equity $ 17,383 $ 17,347
*Common shares outstanding 84,012,000 84,935,000
See notes to consolidated financial statements.
</TABLE>
<TABLE>
<page 4>
Item 1. FINANCIAL STATEMENTS (Continued)
TEXTRON INC.
Consolidated Statement of Cash Flows (unaudited)
(In millions)
Three Months Ended
March 30, April 1,
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Income from continuing operations $ 109 $ 95
Adjustments to reconcile income from continuing
operations to net cash provided by operating
activities:
Depreciation and amortization 92 82
Provision for losses on receivables 54 42
Changes in assets and liabilities excluding
those related to acquisitions and divestitures:
Increase in commercial and U.S. Government
receivables (31) (23)
Increase in inventories (82) (56)
Increase in other assets (27) (5)
Increase (decrease) in accounts payable (18) 32
Decrease in accrued liabilities (1) (132)
Other - net 2 10
Cash provided by operating activities of
continuing operations 98 45
Cash provided by operating activities of
discontinued operation 189 143
Net cash provided by operating activities 287 188
Cash flows from investing activities:
Purchases of investments (34) (45)
Proceeds from disposition of investments 12 10
Maturities and calls of investments 10 10
Finance receivables:
Originated or purchased (1,461) (1,486)
Repaid or sold 1,432 1,264
Cash used in acquisitions (3) (40)
Capital expenditures (52) (61)
Other investing activities - net (1) (23)
Cash used by investing activities of
continuing operations (97) (371)
Cash used by investing activities of
discontinued operation (189) (183)
Net cash used by investing activities (286) (554)
Cash flows from financing activities:
Increase (decrease) in short-term debt 130 (91)
Proceeds from issuance of long-term debt 456 1,018
Principal payments on long-term debt (955) (535)
Issuance of Textron-obligated mandatorily
redeemable preferred securities of
subsidiary trust holding solely subordinated
debt securities of Textron 484 -
Proceeds from exercise of stock options 18 7
Purchases of Textron common stock (110) (37)
Dividends paid (37) (33)
Cash provided (used) by financing activities of
continuing operations (14) 329
Cash provided (used) by financing activities of
discontinued operation (15) 40
Net cash provided (used) by financing activities (29) 369
Net increase (decrease) in cash (28) 3
Elimination of cash flow of discontinued operation 15 -
Cash at beginning of period 84 49
Cash at end of period $ 71 $ 52
See notes to consolidated financial statements.
</TABLE>
Item 1. FINANCIAL STATEMENTS (Continued) <page 5>
TEXTRON INC.
Notes to Consolidated Financial Statements (unaudited)
Note 1: Summary of significant accounting policies
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 dated April 29,
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 Note 2) which are, in the opinion of
management, necessary for a fair presentation of
Textron's consolidated financial position at March 30,
1996, and its consolidated results of operations and
cash flows for each of the respective three month
periods ended March 30, 1996 and April 1, 1995. The
results of operations for the three months ended March
30, 1996 are not necessarily indicative of results for
the full year.
Note 2: 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 $26 per share. Textron has restated
its financial statements as presented herein to treat
Paul Revere as a discontinued operation.
For its Paul Revere
shares, Textron will receive $20 per share in cash (an
aggregate of $750 million) and $6 per share in
Provident common stock, for a total of approximately
$975 million. (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.
Based on the $34 closing price of Provident's stock on
May 8, 1996, Textron would own approximately 6.6
million of Provident shares had the closing occurred on
that date.) This transaction has been approved by the
Boards of Directors of Paul Revere, Provident, and
Textron and is subject to regulatory approvals and the
consent of Provident and Paul Revere shareholders. It
is expected to close in the third quarter of 1996. The
loss on sale will be approximately $90 million, net of
Textron's share of Paul Revere's estimated net income
for the period April 1996 through the expected closing
date (approximately $40 million). Textron has recorded
this net loss in its financial statements at March 30,
1996 and for the three months then ended.
The operating results of Paul Revere are presented below:
Three months ended
(In millions)
March 30, 1996 April 1, 1995
Revenues $ 383 $ 358
Costs and expenses 352 330
Income before income taxes 31 28
Income taxes (12) (11)
Net income 19 17
Minority interest in net income (3) (3)
Textron's equity in net income $ 16 $ 14
Item. FINANCIAL STATEMENTS (Continued) <page 6>
<TABLE>
Presented below is a summary of Paul Revere's financial position
at March 30, 1996:
(In millions)
<S> <C>
Assets:
Investments $5,187
Insurance policy acquisition costs 986
Other 863
Total assets $7,036
Liabilities:
Insurance reserves $5,190
Other accrued liabilities 541
Total liabilities 5,731
Textron equity:
Currency translation adjustment (12)
Securities valuation adjustment 51
Capital and retained earnings 1,048
Total Textron equity 1,087
Minority interest 218
Total liabilities and equity $7,036
</TABLE>
Note 3: Finance receivables - net
<TABLE>
March 30, December 30,
1996 1995
(In millions)
<S> <C> <C>
Finance receivables $9,927 $9,894
Less allowance for credit losses 274 270
Less finance-related insurance
reserves and claims 259 262
$9,394 $9,362
</TABLE>
Note 4: Inventories
<TABLE>
March 30, December 30,
1996 1995
(In millions)
<S> <C> <C>
Finished goods $392 $ 352
Work in process 938 911
Raw materials 234 217
1,564 1,480
Less progress payments and
customer deposits 196 196
$1,368 $1,284
</TABLE>
Note 5: Textron-obligated mandatorily redeemable preferred
securities of subsidiary trust holding solely
subordinated debt securities of Textron
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
Item 1. FINANCIAL STATEMENTS (Continued) <page 7>
the trust in $515.5 million aggregate principal amount
of Textron's newly issued 7.92% Junior Subordinated
Deferrable Interest Debentures, due 2045. The
debentures are the sole asset of the trust. The
proceeds from the issuance of the
debentures were used by Textron for the repayment of
long-term borrowings and, ultimately, will be used for
general corporate purposes. The amounts due to the
trust under the debentures and the related income
statement amounts have been eliminated in Textron's
consolidated financial statements.
The preferred securities accrue and pay cash
distributions quarterly at a rate of 7.92% per annum.
Textron has guaranteed, on a subordinated basis,
distributions and other payments due on the preferred
securities. The guarantee, when taken together with
Textron's obligations under the debentures and in the
indenture pursuant to which the debentures were issued
and Textron's obligations under the Amended and
Restated Declaration of Trust governing the trust,
provides a full and unconditional guarantee of amounts
due on the preferred securities.
The preferred securities are mandatorily redeemable
upon the maturity of the debentures on March 31, 2045,
or earlier to the extent of any redemption by Textron
of any debentures. The redemption price in either such
case will be $25 per share plus accrued and unpaid
distributions to the date fixed for redemption.
Note 6: 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 7: 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>
Item 1. FINANCIAL STATEMENTS (Continued)
<TABLE>
Note 7: Condensed financial information by borrowing group (continued)
TEXTRON PARENT COMPANY BORROWING GROUP
(unaudited) (In millions)
Three Months Ended
March 30, April 1,
<S> <C> <C>
Statement of Income 1996 1995
Revenues $1,700 $1,554
Costs and expenses
Cost of sales 1,393 1,278
Selling and administrative 177 157
Interest 38 50
Total costs and expenses 1,608 1,485
92 69
Pretax income of finance subsidiaries 92 88
Income from continuing operations before
income taxes and distributions on preferred
securities of subsidiary trust 184 157
Income taxes (72) (62)
Distributions on preferred securities of
subsidiary trust, net of income taxes (3) -
Income from continuing operations 109 95
Discontinued operation, net of income taxes:
Income from operations 16 14
Estimated loss on disposal (90) -
(74) 14
Net income $ 35 $ 109
</TABLE>
<TABLE>
March 30, December 30,
Balance Sheet 1996 1995
<S> <C> <C>
Assets
Cash $ 51 $ 56
Receivables - net 809 777
Inventories 1,368 1,284
Investments in finance subsidiaries 1,499 1,475
Property, plant and equipment - net 1,294 1,297
Goodwill, less accumulated amortization
of $244 and $233 1,338 1,344
Investment in discontinued operation, less
estimated net loss on disposal in 1996 997 1,161
Other (including net prepaid income taxes) 1,221 1,177
Total assets $8,577 $8,571
Liabilities and shareholders' equity
Accounts payable and accrued liabilities
(including income taxes) $3,402 $3,385
Debt 1,464 1,774
Textron-obligated mandatorily redeemable
preferred securities of subsidiary trust holding
solely subordinated debt securities of Textron 484 -
Shareholders' equity 3,227 3,412
Total liabilities and shareholders' equity $8,577 $8,571
</TABLE>
Item 1. FINANCIAL STATEMENTS (Continued) <page 9>
<TABLE>
Note 7: Condensed financial information by borrowing group (continued)
TEXTRON PARENT COMPANY BORROWING GROUP (continued)
(unaudited) (In millions)
Three Months Ended
March 31, April 1,
Statement of Cash Flows 1996 1995
<s <C> <C>
Cash flows from operating activities:
Income from continuing operations $109 $ 95
Adjustments to reconcile income from
continuing operations to net cash provided
by operating activities:
Undistributed earnings of finance
subsidiaries (26) (24)
Depreciation and amortization 60 54
Other - net (153) (94)
Net cash provided (used) by operating activities (10) 31
Net cash used by investing activities (43) (93)
Net cash provided by financing activities 48 74
Net increase (decrease) in cash (5) 12
Cash at beginning of period 56 20
Cash at end of period $ 51 $ 32
</TABLE>
Item 1 FINANCIAL STATEMENTS (Continued) <page 10>
Note 7: Condensed financial information by borrowing group (continued)
<TABLE>
FINANCE SUBSIDIARIES
(unaudited) (In millions)
Three Months Ended
March 31, March 31,
<S> <C> <C>
Statement of Income 1996 1995
Revenues $ 514 $ 475
Costs and expenses
Selling and administrative 154 145
Interest 145 152
Provision for losses on collection of
finance receivables, less recoveries 53 39
Other 70 51
Total costs and expenses 422 387
Income before income taxes 92 88
Income taxes (36) (35)
Net income $ 56 $ 53
March 31, December 31,
Balance Sheet 1996 1995
Assets
Cash $ 20 $ 28
Investments 779 771
Finance receivables - net 9,397 9,370
Other 716 657
Total assets $10,912 $10,826
Liabilities and equity
Accounts payable and accrued liabilities
(including income taxes) $ 1,008 $ 914
Debt 8,422 8,437
Equity 1,482 1,475
Total liabilities and equity $10,912 $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)
Three Months Ended
March 30, April 1,
1996 1995
<S> <C> <C>
REVENUES
MANUFACTURING:
Aircraft $ 626 $ 542
Automotive 415 424
Industrial 439 349
Systems and Components 220 239
1,700 1,554
FINANCE 514 475
Total revenues $2,214 $2,029
INCOME
MANUFACTURING:
Aircraft $ 53 $ 41
Automotive 38 37
Industrial 49 43
Systems and Components 18 19
158 140
FINANCE 92 88
Segment operating income 250 228
Corporate expenses and other - net (28) (21)
Interest expense - net (38) (50)
Income from continuing operations
before income taxes and
distributions on preferred
securities of subsidiary trust $ 184 $ 157
</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 three months
ended March 30, 1996, the Textron Parent Company Borrowing
Group's operating activities used cash of $10 million versus $31
million of cash provided by operating activities during the
corresponding period of 1995. Cash flows for 1996 were affected
by (a) an inventory buildup at Cessna related to the new Citation
X aircraft and (b) higher Automotive receivables. The Group's
debt decreased by $310 million as a result of the issuance of
preferred securities ($500 million -- see below) which exceeded
cash used for purchases of 1.4 million shares of Textron common
stock under its stock repurchase program ($110 million), capital
expenditures ($47 million), and payments of dividends ($37
million).
During the three months ended April 1, 1995, the Textron Parent
Company Borrowing Group's operating activities provided cash of
$31 million versus $34 million during the corresponding period of
1994. Such cash flows approximated last year's level as
increased income was offset by increased tax payments in 1995.
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 and,
ultimately, will be used for general corporate purposes.
The Textron Parent Company Borrowing Group's credit facilities
not used or reserved as support for outstanding commercial paper
or bank borrowings at March 30, 1996 were $786 million. Textron
had $511 million available at March 30, 1996 under its shelf
registration statements filed with the Securities and Exchange
Commission.
Of the Textron Parent Company Borrowing Group's $620 million
interest rate exchange agreements outstanding at December 30,
1995, $140 million expired through April 1996.
Effective February 1, 1996, Textron acquired Xact Products, Inc.,
a precision-formed metal parts manufacturer based in Michigan,
for an aggregate cost of approximately $11 million and on April
1, 1996, it acquired Valois Industries (which has been re-named
as Textron Industries, S.A.), a Paris-based manufacturer of
engineered fastening systems, for an aggregate cost of
approximately $245 million.
<page 13>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
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
$30 million and $29 million to the Textron Parent Company
Borrowing Group during the three month periods ended March 30,
1996 and April 1, 1995, respectively.
During the first quarter of 1996, the finance subsidiaries had
$129 million of interest rate exchange agreements go into effect.
The agreements, which have a weighted average original term of
one year and expire through 1998, had the effect of fixing the
rate of interest at approximately 7.5% on $129 million of
variable rate borrowings at March 31, 1996.
Results of Operations - Three months ended March 30, 1996 vs.
Three months ended April 1, 1995
Textron reported first quarter 1996 earnings per share from
continuing operations of $1.26 per share, up 16% from 1995
earnings per share from continuing operations of $1.09. Income
from continuing operations in 1996 of $109 million was up from
1995 income from continuing operations of $95 million. Revenues
increased 9% to $2.2 billion in 1996 from $2.0 billion in 1995.
On April 29, 1996, Textron announced that The Paul Revere
Corporation, an 83.3% owned subsidiary, 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 $26 per share. Textron's loss on sale of its Paul
Revere shares will be approximately $90 million, net of Textron's
share of Paul Revere's estimated net income for the period April
1996 through the expected closing date. Textron has recorded this
net loss in its financial statements at March 30, 1996 and for
the three months then ended and has restated its financial
statements as presented herein to treat Paul Revere as a
discontinued operation. See Note 2 to the consolidated financial
statements for additional information.
Including Paul Revere's net income in both years and the
estimated loss on the disposal of Paul Revere in 1996, Textron's
first quarter 1996 earnings per share was $0.40 as compared to
1995 earnings per share of $1.25. Net income was $35 million
versus $109 million in 1995.
The Aircraft segment's revenues increased $84 million (15%) as
both Bell Helicopter and Cessna Aircraft posted double-digit
increases. Income increased $12 million (29%), due principally
to higher results at Bell Helicopter. Bell Helicopter's revenues
increased primarily as a result of higher domestic and
international helicopter sales, including increased deliveries on
the Canadian Forces contract ($35 million). Bell's income
increased due to the higher revenues, lower product development
expenses related to new helicopter models, and additional income
on the V-22 program. Cessna's revenues increased primarily as a
result of the higher sales of business jets and
<page 14>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
utility turboprop
aircraft ($25 million). Its income from the higher revenues was
largely offset by higher product development and selling and
administrative expenses due to the introduction and support of
new products.
The Automotive segment's revenues decreased $9 million (2%)
primarily as a result of overall lower North American automotive
production and the impact of a strike at certain General Motors'
plants, partially offset by the benefit of increased production
on the Chrysler minivan as well as a ramp-up in sales at
Textron's Saltillo, Mexico facility. Notwithstanding the lower
revenues, income increased $1 million (3%) as a result of
improved operating performance.
The Industrial segment's revenues and income increased $90
million (26%) and $6 million (14%), respectively. These
increases were due principally to higher sales in the fastening
systems business ($77 million), reflecting the acquisitions in
late 1995 of Elco Industries and Friedr. Boesner GmbH. 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 $19 million (8%) and $1 million (5%), respectively.
The decreases were due principally to reduced shipments on
certain commercial aerospace and U.S. Government contracts.
The Finance segment's revenues increased $39 million (8%), while
income increased $4 million (5%). AFS' revenues increased $35
million, primarily as a result of an increase in yields on
finance receivables (18.56% in the first quarter 1996 vs. 17.72%
in the first quarter 1995) and an increase in earned insurance
premiums in the independent insurance operations. Its income
increased $3 million due to those factors and a decrease in the
average cost of borrowed funds (7.01% in the first quarter 1996
vs. 7.38% in the first quarter 1995). This favorable impact was
partially offset by an increase in the ratio of net credit losses
to average finance receivables (2.61% in the first quarter 1996
vs. 1.81% in the first quarter 1995) and an increase in the ratio
of insurance losses to earned insurance premiums in both AFS'
finance-related and its independent insurance operations. TFC's
income increased $1 million, due to a higher level of finance
receivables ($2.973 billion in the first quarter 1996 vs. $2.791
billion in the first quarter 1995) and higher other income, due
principally to increases in arrangement fee income and residual
and prepayment gains. These factors were partially offset by
higher loan loss provisions, due to reserve strengthening.
Discontinued operation -- Paul Revere's revenues increased $25
million (7%) due to increased premiums and fees in the individual
disability and group insurance lines of business ($27 million)
and a gain on the sale of its Canadian life insurance business
($2 million), partially offset by lower net realized investment
gains ($4 million in 1996 vs. $6 million in 1995). Its income
increased $4 million (14%), due principally to the higher
revenues and an improved individual disability insurance benefit
ratio. That ratio improved in the first quarter of 1996 to 84.0%
from the 89.4% in the first quarter of 1995, but increased from
81.5% in the fourth quarter of 1995 as a result of lower claim
termination rates on policies in previously identified problem
areas, specifically those
<page 15>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
issued to physicians, during 1985 -
1989, and in Florida and California. Paul Revere continued its
efforts to improve operating results through new products,
pricing and underwriting adjustments, and continued emphasis on
claims management.
Corporate expenses and other - net increased $7 million, due
principally to the reclassification of certain nondebt related
expenses from the interest expense line ($6 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 $12 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 issuance of
preferred securities on February 9, 1996.
<page 16>
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
During the quarter ended March 30, 1996, Textron
filed the following reports on Form 8-K:
(i) Current Report on Form 8-K dated January 25,
1996, reporting Textron's consolidated results for
the fourth quarter and fiscal year ended December
30, 1995, under Item 5 (Other Events) and Item 7
(Exhibits).
(ii) Current Report on Form 8-K dated February 6,
1996, describing an Underwriting Agreement under
Section 5 (Other Events) and filing a copy of such
Underwriting Agreement under Item 7 (Exhibits).
<page 17>
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: May 10, 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 raio 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
TEXTRON PARENT COMPANY BORROWING GROUP
COMPUTATION OF RATIO OF INCOME TO
COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
(unaudited)
(In millions except ratio)
Three
Months
Ended
March 30,
1996
Fixed charges:
Interest expense $ 38
Distributions on preferred securities of subsidiary
trust, net of income taxes 3
Estimated interest portion of rents 4
Total fixed charges $ 45
Income:
Income before income taxes and distributions on
preferred securities of subsidiary trust $184
Eliminate equity in undistributed pretax income of
finance subsidiaries (62)
Fixed charges 45
Adjusted income $167
Ratio of income to fixed charges 3.71
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)
Three
Months
Ended
March 30,
1996
Fixed charges:
Interest expense $183
Distributions on preferred securities of subsidiary
trust, net of income taxes 3
Estimated interest portion of rents 9
Total fixed charges $195
Income:
Income before income taxes and distributions on
preferred securities of subsidiary trust $184
Fixed charges 195
Adjusted income $379
Ratio of income to fixed charges 1.94
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted
from Textron Inc.'s Consolidated Balance Sheet as of March 30,
1996 and Consolidated Statement of Income for the three months
ended March 30, 1996 and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-28-1996
<PERIOD-END> MAR-30-1996
<CASH> 71
<SECURITIES> 0
<RECEIVABLES> 10,736
<ALLOWANCES> 274
<INVENTORY> 1,368
<CURRENT-ASSETS> 0
<PP&E> 2,999
<DEPRECIATION> 1,630
<TOTAL-ASSETS> 17,383
<CURRENT-LIABILITIES> 0
<BONDS> 9,886
<COMMON> 12
0
15
<OTHER-SE> 3,200
<TOTAL-LIABILITY-AND-EQUITY> 17,383
<SALES> 1,700
<TOTAL-REVENUES> 2,214
<CGS> 1,393
<TOTAL-COSTS> 1,463
<OTHER-EXPENSES> 0
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<INTEREST-EXPENSE> 183
<INCOME-PRETAX> 184
<INCOME-TAX> 72
<INCOME-CONTINUING> 109
<DISCONTINUED> (74)
<EXTRAORDINARY> 0
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<EPS-PRIMARY> .40
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