SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 28, 1996
Commission File Number 1-5480
Textron Inc.
(Exact name of registrant as specified in charter)
Delaware 05-0315468
state or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
40 Westminster Street, Providence, R.I. 02903
(401) 421-2800
(Address and telephone number of principal executive offices)
______________
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange on
Title of Class Which Registered
Common Stock - par value $.125; (83,027,315 New York Stock Exchange
shares outstanding at February 28, 1997) Pacific Stock Exchange
Preferred Stock Purchase Rights Chicago Stock Exchange
$2.08 Cumulative Convertible Preferred New York Stock Exchange
Stock, Series A - no par value
$1.40 Convertible Preferred Dividend Stock, New York Stock Exchange
Series B (preferred only as to
dividends) - no par value
8.75% Debentures due July 1, 2022 New York Stock Exchange
7.92% Trust Preferred Securities of New York Stock Exchange
Subsidiary Trust (and Textron Guaranty
with respect thereto)
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1)
has filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has
been subject to such filing requirements for the past 90
days. Yes x . No .
Indicate by check mark if disclosure of delinquent
filers pursuant to Item 405 of Regulation S-K is not
contained herein, and will not be contained, to the best of
registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [x]
The aggregate market value of voting stock held by
non-affiliates of the registrant is $8,252,124,965 as of
February 28, 1997.
Portions of Textron's Annual Report to
Shareholders for the fiscal year ended December 28,
1996 are incorporated by reference in Parts I and II of
this Report. Portions of Textron's Proxy Statement for
its Annual Meeting of Shareholders to be held on April 23,
1997 are incorporated by reference in Part III of this
Report.
<PAGE>
PART I
ITEM 1. BUSINESS OF TEXTRON*
Textron is a global multi-industry company with
operations in five business segments - Aircraft, Automotive,
Industrial, Systems and Components, and Finance. A listing of the
Divisions within each business segment, including a description of
the product lines of each Division, is incorporated herein by
reference to pages 54 and 55 of Textron's 1996 Annual Report to
Shareholders. Financial information by business segment and
geographic area is incorporated herein by reference to pages 23 and
51 of Textron's 1996 Annual Report to Shareholders. Additional
information regarding each business segment and Textron in general
is set forth below.
Business Segments
Aircraft. The Aircraft segment consists of Bell Helicopter
Textron, The Cessna Aircraft Company and Textron Lycoming. Based
on unit sales, Bell is the largest supplier of helicopters, spare
parts and helicopter-related services in the world. Since it was
founded in 1946, Bell has delivered over 33,000 aircraft to
military and civilian customers in over 120 countries. Bell has
three military and six civilian helicopter models in current
production. Its aircraft are turbine powered, and range in size
from the five-place Bell Model 206 series to the Bell Model 412EP
aircraft, which carries up to fifteen people.
Bell's military business includes both U.S. Government and non-
U.S. Government customers. There are more helicopters manufactured
by Bell in field service in the inventory of the U.S. Government
than manufactured by any other helicopter company. Currently, Bell
is supplying advanced military helicopters, spare parts and product
support to the U.S. and Canadian Governments and to the governments
of several countries in the Pacific Rim, Middle East and Europe.
Military sales to non-U.S. customers are made only with the
concurrence of the U.S. Government.
Bell is also a leading supplier of commercially-certified
helicopters to charter, offshore, utility, corporate, police, fire,
rescue and emergency medical helicopter operators. Bell's non-U.S.
Government business (including non-U.S. military customers)
typically represents 40% to 60% of its annual sales. In 1996, such
sales accounted for approximately 60% of Bell's business.
____________________
* Reference herein to "Textron" includes Textron Inc., its
divisions and subsidiaries. A Textron "Division" is an operating
unit which may be comprised of an unincorporated division of
Textron, a subsidiary of Textron, or an unincorporated division of
a subsidiary.
<PAGE>2
Bell is teamed with the Helicopter Division of the Boeing
Company ("Boeing Helicopters") in the development of the V-22
Osprey tiltrotor aircraft for the U.S. Department of Defense.
Tiltrotor aircraft are designed to utilize the benefits of both
helicopters and fixed-wing aircraft. Production of V-22 aircraft
was started in 1996 upon award of a contract for the first four
aircraft. In 1996, Bell and Boeing Helicopters entered into a
joint venture to develop a commercial tiltrotor aircraft designated
the Model 609. First delivery of this nine-place aircraft is
scheduled for 2001.
In 1996, Bell was also awarded a development contract to
upgrade the U.S. Marines' fleet of AH-1W and UH-1N helicopters.
Bell introduced two new civilian helicopter models in 1996:
the single-engine Bell Model 407 (a light helicopter), and the twin-
engine intermediate size Bell Model 430. Other commercial products
and product improvements continue to be developed.
In the light and medium helicopter market, Bell has two major
U.S. competitors and one major European competitor. Certain of its
competitors are substantially larger and more diversified aircraft
manufacturers. Bell markets its products worldwide through its own
sales force as well as through independent representatives. Price,
financing terms, aircraft performance, reliability and product
support are significant factors in the sale of helicopters. Bell
has developed the world's largest distribution system to sell and
support helicopters, serving customers in over 120 countries.
Revenues of Bell accounted for approximately 16%, 18% and 16% of
Textron's total revenues in 1996, 1995 and 1994, respectively.
The Cessna Aircraft Company is, based on unit sales, the
world's largest manufacturer of light and mid-size business jets
and single-engine utility turboprop aircraft. Cessna designs,
manufactures and sells general aviation aircraft, aircraft
propellers, and related accessories worldwide. Based on units
shipped by manufacturers, Cessna's 1996 share of all manufacturers'
worldwide sales of light and mid-size jets was approximately 54%.
Cessna currently has two major product lines, Citation
business jets and single-engine turboprop Caravans. In addition,
Cessna has reentered the business of manufacturing single-engine
piston aircraft, and began deliveries in January 1997.
Cessna currently produces a family of Citation business jets
ranging from the CitationJet to the Citation X. The Citation X is
the world's fastest business jet with a maximum operating speed of
Mach .92. Certification was
<PAGE>3
completed and customer deliveries of the Citation X began in 1996.
In addition, deliveries of the new Citation Bravo and Citation Excel
business jets will commence in 1997 and 1998, respectively.
The Cessna Caravan is the world's best selling utility
turboprop. The delivery of the 850th Caravan will occur in early
1997. Caravan deliveries have averaged over 75 aircraft per year
since the Caravan's first delivery in 1985. Caravans are used in
the United States primarily to carry overnight express package
shipments. International uses of Caravans include commuter
airlines, relief flights, tourism and freight.
Cessna markets its products worldwide primarily through its
own sales force as well as through a network of authorized
independent sales representatives. Cessna has four major
competitors for its business jet products, two U.S. and two
foreign. Cessna's aircraft compete with other aircraft that vary
in size, speed, range, capacity, handling characteristics, and
price. Reliability and product support are significant factors in
the sale of these aircraft. Cessna provides its business jet
operators with factory-direct customer support offering 24 hour a
day service and maintenance. More than 40% of the worldwide
Citation fleet of more than 2,400 aircraft receive service through
Cessna-owned service centers. Cessna Caravan and piston customers
receive product support through independently owned service
stations and 24 hour spare parts support through Cessna. Revenues
of Cessna accounted for approximately 12%, 10% and 10% of Textron's
total revenues in 1996, 1995 and 1994, respectively.
Textron Lycoming, formerly reported as part of the Systems and
Components segment, is the world leader in the design, manufacture
and overhaul of reciprocating piston aircraft engines serving the
worldwide general aviation market. Textron Lycoming sells new
products directly to general aviation airframe manufacturers,
including Piper Aircraft, Robinson Helicopter, and SOCATA, a
division of Aerospatiale, and is the exclusive supplier of engines
for Cessna's new product line of single engine aircraft.
Aftermarket sales are made to the more than 180,000 existing owners
of Textron Lycoming products through a worldwide network of
independently owned distributors.
Textron Lycoming's McCauley Propeller Systems unit is a leader
in the general aviation industry. McCauley provides new propellers
directly to original equipment manufacturers ("OEMs") and sells
parts for service and repairs worldwide through independently-owned
distributors. The new Cessna single-engine piston aircraft will
use McCauley propellers exclusively.
Automotive. The Automotive segment, organized under an
umbrella organization called Textron Automotive Company ("TAC"),
consists of the Textron Automotive Trim Operations, CWC Castings,
Kautex, McCord Winn, Micromatic and Randall. These operations sell
primarily to automotive OEMs and their suppliers operating in North
America and Europe and, to a lesser extent, in Latin America and
Asia. TAC is headquartered in Troy, Michigan and
<PAGE>4
has over 45 facilities located in the United States, Belgium,
Brazil, Canada, China, the Czech Republic, Germany, Mexico,
the Netherlands,Portugal, Spain, and the United Kingdom.
Through its Textron Automotive Trim Operations, TAC is a
leading worldwide supplier of automotive interior and exterior
plastic components. Interior trim products include instrument
panels, door and sidewall trim, airbag doors, consoles, trim
components, armrests and headliner systems. During 1996, TAC
assumed 100% ownership of Textron Automotive B.V., its former joint
venture in the Netherlands for the manufacture of instrument panels
and, beginning in 1998, door trim. In addition, TAC's trim
facilities manufacture exterior decorative components including
painted bumpers and fascia, body side moldings and claddings,
fender liners, decorative wheel trim, signal lighting and
structural composite bumper beams. Revenues of the Textron
Automotive Trim Operations accounted for 15%, 15% and 16% of
Textron's total revenues in 1996, 1995 and 1994, respectively.
On January 7, 1997, Textron completed the acquisition of
Kautex Werke Reinold Hagen AG of Bonn, Germany and the assets of
its North American affiliate, Kautex North America, Inc.
(collectively "Kautex"). Kautex is a leading manufacturer of blow-
molded plastic fuel tank systems and other blow-molded plastic
technical parts for OEMs throughout Europe, North America and
Brazil. Kautex also manufactures a broad selection of blow-molded
plastic containers for a variety of industrial and consumer
applications. Kautex's sales in 1996 were approximately $500
million from fifteen plants located close to automotive customers
in Germany, Belgium, Brazil, Canada, China, the Czech Republic,
Portugal, Spain, the United Kingdom and the United States.
TAC's other operations manufacture and sell a broad variety of
functional components. CWC Castings designs and manufactures
engine camshafts and vibration damper components for OEMs and the
aftermarket. McCord Winn manufactures seating comfort systems,
windshield washer systems and armatures for precision DC motors.
In 1996, McCord Winn expanded its washer systems business with the
acquisition of Valeo Wiper Systems Limited in Wales (U.K.).
Micromatic manufactures machine tools used in the production of
automobile engines for precision bore and surface finishing, and
spline and gear production. Randall produces fuel filler systems.
More than 70 vehicle models currently carry parts made by TAC,
including Chrysler's Jeep Grand Cherokee, Voyager and Caravan
minivans, Ford's Lincoln Town Car and Windstar and Aerostar mini-
vans, and GM's Cadillac Seville, Corvette and the Venture,
Silhouette and Sintra mini-vans.
TAC's manufacturing operations are supported by a staff of
research and design specialists at TAC's Automotive Technology
Center. These specialists have developed new processes and
products, many of which are patented, that allow TAC to offer its
customers technology driven products and processes. In the
plastics and coatings area, TAC is a recognized leader in
alternative skin materials (including non-PVC materials), spray
urethane and cloth
<PAGE>5
integration, energy management foam (including
impact and knee bolsters), the development of modular integrated
assemblies and vertical body panels, and High Crystalline
Polypropylene material for complete mold-in-color interior
components. CWC Castings is a leader in the design and manufacture
of automotive castings. It has developed a selective austempering
heat treatment process for ductile camshafts as well as a vacuum
casting system for hollow steel camshafts. McCord Winn is working
with OEMs worldwide to develop advanced technologies in areas such
as "intelligent" comfort seating systems, brushless motors and
carbon commutation for flexible fuel applications. Micromatic
machine tools are used for cylindrical form generation and surface
finishing.
In the automotive business, there is often a long lead time
from the time a supplier is selected to supply components on a new
car model to the time the supplier can begin shipping production
parts. During this period, the supplier incurs engineering and
development costs. Until recently, the OEMs reimbursed the supplier
for these costs as incurred. Within the last few years, the OEMs
have begun to require that these costs be recovered in the piece
prices charged by the suppliers as the goods are shipped. In
addition, automotive OEMs often require "just-in-time" delivery, so
the manufacturer has to both plan shipments in advance and hold
inventory.
Automotive OEMs and their suppliers are the principal
customers of TAC. The only customers, the loss of which would have
a material adverse effect on TAC, are the U.S. and Europe-based
automotive OEMs and their first-tier suppliers. However, because
of the broad range of products sold to such customers, it is
unlikely that such customers would cease all purchases from TAC.
Each of TAC's businesses faces competition from a number of
other manufacturers based primarily on price, quality, reputation
and delivery. Although TAC is one of the largest manufacturers
offering its range of products and services, it faces strong
competition in all of its market segments. Because of the
diversity of products and services offered, no single company is a
competitor in all market segments. In certain markets, TAC also
competes for business with the OEMs' own operations.
Industrial. The Industrial segment consists of three major
product groups: Fastening Systems, Golf and Turf-Care Products,
and Engineered Products and Components.
The Fastening Systems Group consists of the Avdel, Camcar,
Elco, Textron Aerospace Fasteners (formerly, "Cherry"), Textron
Industries (France) and Textron Fastening Systems-Germany
Divisions. The Fastening Systems Group manufactures and sells
fasteners, fastening systems and installation tools to the
aerospace, appliance, automotive, construction, do-it-yourself,
electronics, general industrial and transportation markets. Sales
are made to a wide range of customers, including OEMs, distributors
and consumers. Fasteners manufactured by the Group include rivets,
threaded and non-threaded fasteners, cold-formed components, metal
stampings, plastic components, and assemblies
<PAGE>6
which incorporate
such products. Textron acquired Valois Industries (now renamed
Textron Industries, S.A.S.), a France-based manufacturer of
engineered fastening systems, in April 1996. The German operations
of Valois and Boesner (acquired in 1995) were combined to form
Textron Fastening Systems-Germany. In 1996, Textron also acquired
Xact Products, a Michigan-based manufacturer of metal stampings,
which is now part of the Elco operation. In addition, in 1996
certain of Randall's metal stampings operations (previously
included in the Automotive segment) were combined with Elco.
Although the Fastening Systems Group is one of the largest
manufacturers of its products and services, there are hundreds of
competitors of the Fastening Systems Group ranging from small
proprietorships to large multinational companies. As is the case
with all Divisions of the Industrial segment, competition is based
primarily on price, quality, reputation and delivery. In addition,
larger customers of fastening systems tend to procure products and
services from the larger suppliers, except for "niche" products
which may be sourced from smaller companies. Only the loss of the
major OEM automotive customers and their first-tier suppliers would
have a material adverse effect on the Fastening Systems Group.
However, because of the broad range of products sold to such
customers, it is unlikely that such customers will cease all
purchases from the Fastening Systems Group.
The Golf and Turf-Care Products Group consists of the E-Z-GO
Division, which manufactures and sells electric and gasoline
powered golf cars and multipurpose utility vehicles, and the
Jacobsen Division, which manufactures and sells professional mowing
and turf maintenance equipment. In 1996, Jacobsen acquired The
Bunton Company, a leading manufacturer of commercial lawn mowers.
The customers of the Golf and Turf-Care Products Group consist
primarily of golf courses, resort communities and commercial and
industrial users such as airports and factories. Sales are made
directly through factory branches, through a network of
distributors and to end-users. Many sales of golf and turf-care
equipment (both at the distributor and end-user level) are financed
through Textron Financial Corporation, both for marketing purposes
and as an additional source of revenue to Textron.
The Engineered Products and Components Group consists of
Divisions manufacturing a wide range of products, including double
enveloping worm gear speed reducers, gear motors and gear sets
(Cone Drive); powered equipment, electrical test instruments and
hand tools (Greenlee); and watch attachments and fashion jewelry
(Speidel). In 1996, Greenlee purchased Gustae Klauke GmbH & Co.
KG (Remschied), a Germany-based manufacturer of electrical
connectors, and its related companies. Products of these Divisions
are sold to a wide variety of customers, including OEMs,
distributors and end-users. Also included in the Engineered
Products and Components Group is HR Textron ("HRT"), formerly
reported as part of the Systems and Components segment. HRT
designs and manufactures control systems and components for
aircraft, armored vehicles, and commercial applications. Its
aerospace and defense products are marketed directly to the U.S.
Government and OEMs and, in the aftermarket, both directly and
through
<PAGE>7
service centers. In January 1997, Textron acquired Zurich,
Switzerland-based Maag Pump Systems AG and Milan, Italy-based Maag
Italia S.p.A., manufacturers of gears, gear pumps and gear systems.
Systems and Components. The Systems and Components segment
consists of four Divisions which serve both commercial and military
customers, primarily in aerospace markets, with an extensive
offering of systems, subsystems, components, materials and
services.
Fuel Systems Textron ("FST") designs, manufactures and
overhauls gas turbine engine injection and metering devices, fuel
distribution valves, and afterburner fuel injection systems for
commercial and military aircraft, and industrial, marine, and
vehicular markets. OEM sales are made directly to engine
manufacturers with aftermarket overhaul and repair services sold
directly to domestic end users and through a distributor for
international customers. FST invests in the design and development
of innovative, proprietary products, with on-site engineering
support at customer facilities and an advanced product development
facility to extend the customers' own design activities.
Textron Marine & Land Systems ("TM&LS") is a world leader in
the design and construction of advanced technology air cushion
vehicles, surface effect ships, high performance search and rescue
vessels, light armored combat vehicles, and suspension systems.
TM&LS has products operating in over 35 countries. These products
are marketed directly in the United States and through sales
representatives and distributors internationally. In 1996,
deliveries commenced for the Engineering/Manufacturing/Development
phase of the U.S. Army's Armored Security Vehicle as a prelude to
full production. In addition, a new contract for the development
of a Service Life Extension Program for the Landing Craft Air
Cushion (LCAC) was received, and the U.S. Coast Guard exercised an
option for an additional 20 Motor Lifeboats under an existing
production contract.
Textron Systems is a leading supplier of "smart" munitions,
airborne surveillance systems, and automatic aircraft landing
systems to the U.S. Department of Defense. Textron Systems also
supplies a number of key components and specialty materials for
critical defense needs, including infrared detectors, high strength
composites, reentry systems and materials, and high power lasers.
Once exclusively a supplier to the Department of Defense, Textron
Systems now applies its technologies to non-defense markets.
Current commercial products include advanced composites for
automotive, industrial, sporting goods and aircraft manufacturers;
laser ultrasonic systems for industrial control; infrared sensors
for medical and industrial applications; fire protection and
insulating materials for oil and chemical companies worldwide; and
unique decorative materials for automotive and other markets.
While Textron Systems sells most of its products directly to its
customers, it also sells some products through sales
representatives and distributors.
Turbine Engine Components Textron ("TECT") is one of the
world's largest independent suppliers of internal components for
gas turbine engines for aircraft and industrial applications. Its
products include fan and compressor
<PAGE>8
blades, vanes, shafts, disks,
rotors, blisks and other rotating components; the forgings from
which those products are machined; and stationary components of
turbine engines, such as frames, diffusers, and air collectors.
TECT manufactures its products to the specifications of its
customers, and most of its sales are made directly to its
customers.
The principal competitive factors affecting sales of the
products of the Systems and Components segment are price, quality,
customer service, performance, reliability, reputation and existing
product base.
In September 1996, Textron Aerostructures, which designs and
manufactures structural assemblies for aircraft and space vehicles,
was sold to The Carlyle Group.
Finance. The Finance segment consists of Avco Financial
Services ("AFS") and Textron Financial Corporation ("TFC").
AFS is primarily engaged in consumer finance and insurance
activities. AFS's finance operations mainly involve loans made by
the Avco Financial Services Group, consisting of consumer loans
which are unsecured or secured by personal property, real estate
loans secured by real property, and retail installment contracts,
principally covering personal property. AFS's insurance business
consists primarily of the sale of credit life, credit disability
and casualty insurance, offered through the Avco Insurance Services
Group, a significant part of which is directly related to AFS's
finance activities. AFS's consumer finance and insurance
activities are conducted through its more than 1,200 branch offices
located in the United States, Australia, Canada, Hong Kong, New
Zealand, Spain and the United Kingdom. In 1996, AFS acquired
Tuckahoe Leasing, Inc., a Canadian provider of equipment financing,
and Insurex Canada Inc., a provider of insurance premium financing.
AFS's loan business is regulated by laws that, among other
things, can limit maximum charges for loans and the maximum amount
and term thereof. Such laws also require disclosure to customers
of the interest rate and other basic terms of most credit
transactions and give customers a limited right to cancel certain
loans and retail installment contracts without penalty. The
insurance business is subject to licensing and regulation by state
authorities.
The consumer finance business is highly competitive, with
price and service being the principal competitive factors. AFS's
competitors include not only other companies operating under
consumer loan laws, but also other types of lending institutions
not so regulated and usually not limited in the size of their
loans, such as companies which finance the sale of their own
merchandise or the merchandise of others, industrial banks, the
personal loan departments of commercial banks and credit unions.
AFS's strongest competition is from commercial banks and credit
unions. The interest rates charged by these lenders are usually
lower than the rates charged by AFS. AFS's insurance businesses,
to the extent not related to AFS's finance activities, compete with
many other insurance companies offering similar
<PAGE>9
products. Revenues
of AFS accounted for approximately 19%, 20% and 17% of Textron's
total revenues in 1996, 1995 and 1994, respectively.
TFC is a diversified commercial finance company specializing
in aircraft, golf and equipment financing and revolving credit
arrangements. TFC provides commercial financing for a wide range
of customers, including those who purchase or lease Textron
products and certain suppliers to Textron Divisions. TFC presently
offers its services primarily in the United States and, to a lesser
extent, in Europe and Canada, through its 11 business units. Each
TFC business unit has a discrete market focus and specific profit
objectives and is staffed to provide responsive services to its
market. TFC's activities are subject to a variety of federal and
state regulations.
The businesses in which TFC operates are highly competitive.
TFC is subject to competition from various types of financing
institutions, including banks, leasing companies, insurance
companies, independent finance companies associated with
manufacturers and finance companies that are subsidiaries of
banking institutions. Competition within the commercial finance
industry is primarily focused on price and service.
Finance Receivables
The following table presents the Finance segment's outstanding
finance receivables by country:
December 31,
1996 1995
(In millions)
United States $7,096 $6,750
Canada 1,079 1,013
Australia 1,067 1,026
United Kingdom 692 632
Other countries 488 473
$10,422 $9,894
At December 31, 1996, finance receivables in the United States
represented 68% of Textron's total finance receivables outstanding.
At such date, no receivables outstanding in any one state other
than California exceeded 8% of the United States portfolio. In
California, outstanding receivables represented 15% of the United
States portfolio and 10% of the consolidated portfolio.
<PAGE>10
The following table presents accruing loans on which one or
more installments were more than 60 days past due on a contractual
basis (expressed as a percentage of the related gross receivables
outstanding):
Years ended Consumer Commercial Total
December, 31 loans loans loans
1996 3.25% 0.21% 2.32%
1995 2.89% 0.24% 2.10%
The following table shows gross and net write-offs, the
percentages which those amounts bear to average finance
receivables, and the amount of the provision for losses charged to
income:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Gross write-offs Recoveries Net write-offs
Percentage from Precentage Provision
of average receivables of average for losses
finance previously finance
amount receivables written off amount receivables
Years ended
December 31,
(In millions)
1996
Consumer $230 3.3% $36 $194 2.8% $203
Commercial 30 1.0% 3 27 0.9% 27
$260 2.6% $39 $221 2.2% $230
1995
Consumer $177 2.6% $33 $144 2.1% $149
Commercial 25 0.9% 4 21 0.7% 20
$202 2.1% $37 $165 1.7% $169
1994
Consumer $142 2.5% $28 $114 2.0% $136
Commercial 27 1.0% 3 24 0.4% 26
$169 2.0% $31 $138 1.6% $162
</TABLE>
Backlog
Information regarding Textron's backlog of government and
commercial orders at the end of the past two fiscal years is
contained on page 30 of Textron's 1996 Annual Report to
Shareholders, which page is incorporated herein by reference.
<PAGE>11
Approximately 37% of Textron's total backlog at December 28,
1996, represents orders which are not expected to be filled within
the 1997 fiscal year. At December 28, 1996, approximately 95% of
the total government backlog of $2.2 billion was funded.
Government Contracts
In 1996, 24% and 50% of the revenues of the Aircraft and the
Systems and Components segments, respectively, constituting in the
aggregate 10% of Textron's consolidated revenues, were generated by
or resulted from contracts with the U.S. Government. U.S.
Government business is subject to competition, changes in
procurement policies and regulations, the continuing availability
of Congressional appropriations, world events, and the size and
timing of programs in which Textron may participate.
A substantial portion of Textron's government contracts are
fixed-price or fixed-price incentive contracts. Contracts that
contain incentive pricing terms provide for upward or downward
adjustments in the prices paid by the U.S. Government upon
completion of the contract or any agreed portion thereof, based on
cost or other performance factors. U.S. Government contracts
generally may be terminated in whole or in part at the convenience
of the U.S. Government or if the contractor is in default. Upon
termination of a contract for the convenience of the U.S.
Government, the contractor is normally entitled to reimbursement
for allowable costs incurred (up to a maximum equal to the con
tract price) and an allowance for profit or adjustment for loss if
the contractor would have incurred a loss had the entire contract
been completed. If, however, a contract is terminated for default:
(i) the contractor is paid such amount as may be agreed upon for
manufacturing materials and partially completed products accepted
by the U.S. Government; (ii) the U.S. Government is not liable for
the contractor's costs with respect to unaccepted items and is
entitled to repayment of advance payments and progress payments, if
any, related to the terminated portions of the contract; and (iii)
the contractor may be liable for excess costs incurred by the U.S.
Government in procuring undelivered items from another source.
Research and Development
Information regarding Textron's research and development
expenditures is contained on page 47 of Textron's 1996 Annual
Report to Shareholders, which page is incorporated herein by
reference.
Patents and Trademarks
Textron owns, or is licensed under, a number of patents and
trademarks throughout the world relating to products and methods of
manufacturing. Patents and trademarks have been of value in the
past and are expected to be of value in the future; however, the
loss of any single patent or group of patents would not, in the
opinion of Textron, materially affect the conduct of its business.
<PAGE>12
Environmental Considerations
Textron's operations are subject to numerous laws and
regulations designed to protect the environment. Compliance with
such laws and expenditures for environmental control facilities
have not had, and are not expected to have, a material effect on
capital expenditures, earnings or the competitive position of
Textron. Additional information regarding environmental matters
is contained on pages 30 and 50 of Textron's 1996 Annual Report to
Shareholders, which pages are incorporated herein by reference.
Employees
At December 28, 1996, Textron had approximately 57,000
employees.
Recent Development
On February 26, 1997, Textron's Board of Directors declared a
two-for-one split of Textron common stock in the form of a stock
dividend, subject to shareholder approval of an increase in
Textron's authorized number of common shares from 250 million to
500 million shares. If the increase is approved at Textron's
Annual Meeting on April 23, 1997, the new shares will be
distributed on June 1, 1997, to shareholders of record on the close
of business on May 9, 1997.
ITEM 2. PROPERTIES
At December 28, 1996, Textron operated a total of 142 plants
located throughout the United States and 30 plants outside the
United States. Of the total of 172 plants, Textron owned 113 and
the balance were leased. In the aggregate, the total manufacturing
space was approximately 30 million square feet.
In addition, Textron owns or leases offices, warehouse and
other space at various locations throughout the United States and
outside the United States. Textron also owns or leases such
machinery and equipment as are necessary in the operation of its
Divisions. Textron considers the productive capacity of the plants
operated by each of its business segments to be adequate. In
general, the plants and machinery are in good condition, are
considered to be adequate for the uses to which they are being put,
and are substantially in regular use.
ITEM 3. LEGAL PROCEEDINGS
Lawsuits and other proceedings are pending or threatened
against Textron and its subsidiaries. Some allege violations of
federal government procurement regulations, involve environmental
matters, or are or purport to be class actions. Some seek
compensatory, treble or punitive damages in substantial amounts;
fines, penalties or restitution; or remediation of contamination.
Under federal government procurement regulations, some 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 would not have a material
effect on Textron's net income or financial condition.
<PAGE>13
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of Textron's security
holders during the last quarter of the period covered by this
Report.
EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information concerning
the executive officers of Textron as of February 28, 1997. Unless
otherwise indicated, the employer is Textron.
Name Age Position
James F. Hardymon 62 Chairman since 1993, and Chief
Executive Officer since 1992;
formerly President, 1989 to
1993; and Chief Operating
Officer, 1989 to 1991;
Director since 1989.
Lewis B. Campbell 50 President and Chief Operating
Officer since 1994; formerly
Executive Vice President and
Chief Operating Officer, 1992
to 1993; Vice President of
General Motors (1988 to 1992)
and General Manager of its GMC
Truck Division (1991 to 1992);
Director since 1994.
Mary L. Howell 44 Executive Vice President,
Government and International
since 1995; formerly Senior
Vice President Government and
International Relations, 1993
to 1995; Vice President
Government Affairs, 1985 to
1993.
Wayne W. Juchatz 50 Executive Vice President and
General Counsel since 1995;
formerly Executive Vice
President and General Counsel
of R.J. Reynolds Tobacco
Company, 1994 to 1995; Senior
Vice President, General
Counsel and Secretary of R.J.
Reynolds Tobacco Company, 1987
to 1994.
Stephen L. Key 53 Executive Vice President and
Chief Financial Officer since
1995; formerly Executive Vice
President and Chief Financial
Officer of ConAgra, Inc., 1992
to 1995; Managing Partner of
the New York office of Ernst &
Young (formerly Arthur Young),
1988 to 1992.
William F. Wayland 61 Executive Vice President
Administration and Chief Human
Resources Officer since 1993;
formerly
<PAGE>14
Executive Vice President Human
Resources, 1989 to 1993.
Herbert L. Henkel 48 President, Textron Industrial
Products since 1995; formerly
Group Vice President, Textron
Inc., 1993 to 1995; President
of the Greenlee Textron
Division, 1987 to 1993.
Richard A. Watson 52 Senior Vice President and
Treasurer since October 1995;
formerly Senior Vice
President, Financial Services,
August 1995 to October 1995;
Group Vice President, 1990 to
August 1995.
Frederick K. Butler 45 Vice President and Secretary
since January 1997; formerly
Group General Counsel
Financial Services, 1995 to
1996; Assistant General
Counsel, 1994 to 1995; Vice
President and General Counsel
of Paul Revere Investment
Management Company, 1993 to
1994; Senior Vice
President/Law of Textron
Investment Management Company,
1991 to 1993.
Peter B. S. Ellis 43 Vice President Strategic
Planning since 1995; formerly
Managing Director,
Telecommunications Practice of
Arthur D. Little, Inc., 1991
to 1995.
Douglas A. Fahlbeck 51 Vice President Mergers and
Acquisitions since 1995;
formerly Executive Vice
President and Chief Financial
Officer of Textron Financial
Corporation, 1994 to 1995;
Senior Vice President and
Chief Financial Officer of
Textron Financial Corporation,
1985 to 1994.
Arnold M. Friedman 54 Vice President and Deputy
General Counsel since 1984.
William B. Gauld 43 Vice President Corporate
Information Management and
Chief Information Officer
since 1995; formerly Staff
Vice President, Corporate
Information Management and
Chief Information Officer,
1994 to 1995; Chief
Information Officer of General
Electric (Electrical
Distribution and Control
business) 1992 to 1994;
Manager, Manufacturing Systems
of General Electric
(Appliances), 1989 to 1992.
Carol J. Grant 43 Vice President Human Resources
since January 1997; formerly
Vice President and Chief
Executive Officer of NYNEX
(Rhode Island Strategic
Business Unit), 1993 to
January 1997; Vice President
Public Affairs and
Communications of NYNEX -
Rhode Island, 1991 to 1993.
Gregory E. Hudson 50 Vice President Taxes since
1987.
<PAGE>15
William P. Janovitz 54 Vice President Financial
Management since January 1997;
formerly Vice President
Financial Reporting, 1995 to
January 1997; Vice President
and Controller, 1983 to 1995.
Mary F. Lovejoy 41 Vice President Communications
and Investor Relations since
September 1996; formerly Vice
President Investor Relations,
1995 to September 1996;
Director of Investor
Relations, 1993 to 1995; Vice
President and Senior Corporate
Banker of The First National
Bank of Chicago, 1991 to
1993.
John W. Mayers, Jr. 43 Vice President Risk Management
and Insurance since January
1997; formerly Director Risk
Management and Insurance, 1993
to January 1997; Treasurer of
Textron Financial Corporation,
1990 to 1993.
Frank W. McNally 57 Vice President Employee
Relations and Benefits since
1995; formerly Staff Vice
President, Employee Relations
and Benefits, 1993 to 1995;
Staff Vice President Employee
Relations, 1992 to 1993;
Director, Employee Relations,
1991 to 1992.
Gero K. H. Meyersiek 49 Vice President International
since February 1996; formerly
Vice President of Textron
International Inc., 1995 to
February 1996; Vice President,
International Business
Development of GE Financial
Services, 1991 to 1994.
Freda M. Peters 55 Vice President Executive
Development and Human Resource
Policy and Compliance since
January 1997; formerly
Director
Management/Organization
Development, July 1996 to
January 1997; Vice President,
Human Resources of Branson
Ultrasonics Corporation
(subsidiary of Emerson
Electric Company), 1985 to
July 1996.
Daniel L. Shaffer 60 Vice President Audit and
Business Ethics since 1994;
formerly President of
Textron's Aircraft Engine
Components Division, 1992 to
1994; Vice President Finance
of the Textron Systems
Division, 1984 to 1992.
Richard F. Smith 57 Vice President Government
Affairs since August 1995;
Staff Vice President
Government Affairs, March 1995
to August 1995; Director
Government Affairs, 1985 to
March 1995.
Richard L. Yates 46 Vice President and Controller
since 1995; formerly Executive
Vice President, Chief
Financial Officer and
Treasurer of Paul Revere, 1994
to 1995; Senior Vice
President, Chief Financial
Officer and Treasurer of Paul
Revere, 1991 to 1994.
<PAGE>16
John F. Zugschwert 63 Vice President Government
Marketing since 1995; Staff
Vice President, Washington
Operations, 1993 to 1995; Vice
President, Washington
Operations of Bell Helicopter
Textron, 1991 to 1993.
No family relationship exists between any of the individuals
named above.
PART II
ITEM 5. MARKETS FOR THE REGISTRANT'S COMMON
EQUITY AND RELATED STOCKHOLDER MATTERS
Textron's Common Stock is traded on the New York, Chicago and
Pacific Stock Exchanges. Additional information regarding "Markets
for the Registrant's Common Equity and Related Stockholder Matters"
is contained on pages 52 and 53 and on the inside back cover of
Textron's 1996 Annual Report to Shareholders, which pages are
incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
Information regarding "Selected Financial Data" is contained in
the Selected Financial Information on page 53 of Textron's 1996
Annual Report to Shareholders, which page is incorporated herein by
reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Management's Discussion and Analysis of Financial Condition and
Results of Operations is contained on pages 24 through 30 of
Textron's 1996 Annual Report to Shareholders, which pages are
incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements and the supplementary
information listed in the accompanying index to financial
statements and financial statement schedules are filed as part of
this Report.
<PAGE>17
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information regarding Textron's directors is contained on pages
2 through 7 and page 10 of Textron's Proxy Statement for the
Annual Meeting of Shareholders to be held on April 23, 1997, which
pages are incorporated herein by reference.
Information regarding Textron's executive officers is included
on pages 14 through 17 of Part I of this Report.
ITEM 11. EXECUTIVE COMPENSATION
Information regarding "Executive Compensation" is contained on
pages 10 through 20 and pages 23 through 26 of Textron's Proxy
Statement for the Annual Meeting of Shareholders to be held on
April 23, 1997, which pages are incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
Information regarding "Security Ownership of Certain Beneficial
Holders" and "Security Ownership of Management" is contained on
pages 9 and 10 of Textron's Proxy Statement for the Annual Meeting
of Shareholders to be held on April 23, 1997, which pages are
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information regarding certain relationships and related
transactions is contained on pages 19 and 20 of Textron's Proxy
Statement for the Annual Meeting of Shareholders to be held on
April 23, 1997, which pages are incorporated herein by reference.
<PAGE>18
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K
(a) Financial Statements and Schedules
The consolidated financial statements, supplementary
information and financial statement schedules listed in the
accompanying index to financial statements and financial statement
schedules are filed as part of this Report.
Exhibits
3.1A Restated Certificate of Incorporation of
Textron as filed March 24, 1988. Incorporated by
reference to Exhibit 3.1 to Textron's Annual Report
on Form 10-K for the fiscal year ended January 2,
1988.
3.1B Amendment to Certificate of Designations,
Preferences and Rights of Series C Junior
Participating Preferred Stock as filed March 20,
1996.
3.2 By-Laws of Textron, restated December 10, 1992.
Incorporated by reference to Exhibit 3.2 to
Textron's Annual Report on Form 10-K for the fiscal
year ended January 2, 1993.
NOTE: Exhibits 10.1 through 10.20 below are
management contracts or compensatory plans,
contracts or agreements.
10.1 Annual Incentive Compensation Plan For Textron
Employees. Incorporated by reference to Exhibit
10.1 to Textron's Annual Report on Form 10-K for the
fiscal year ended December 30, 1995.
10.2 Deferred Income Plan For Textron Key
Executives. Incorporated by reference to Exhibit
10.2 to Textron's Annual Report on Form 10-K for the
fiscal year ended December 30, 1995.
10.3 Severance Plan For Textron Key Executives.
Incorporated by reference to Exhibit 10.3 to
Textron's Annual Report on Form 10-K for the fiscal
year ended December 30, 1995.
10.4 Special Benefits for Textron Key Executives.
Incorporated by reference to Exhibit 10.4 to
Textron's Annual Report on Form 10-K for the fiscal
year ended December 30, 1995.
10.5 Supplemental Benefits Plan For Textron Key
Executives with Market Square Profit Sharing Plan
Schedule. Incorporated by reference to Exhibit 10.5
to Textron's Annual Report on Form 10-K for the
fiscal year ended December 30, 1995.
10.6 Supplemental Retirement Plan For Textron Key
Executives. Incorporated by reference to Exhibit
10.6 to Textron's Annual Report on Form 10-K for the
fiscal year ended December 30, 1995.
<PAGE>19
10.7 Survivor Benefit Plan For Textron Key
Executives. Incorporated by reference to Exhibit
10.7 to Textron's Annual Report on Form 10-K for the
fiscal year ended December 30, 1995.
10.8A Textron 1982 Long-Term Incentive Plan ("1982
Plan"). Incorporated by reference to Exhibit
10.5(a) to Textron's Annual Report on Form 10-K for
the fiscal year ended December 31, 1988.
10.8B First Amendment to 1982 Plan. Incorporated by
reference to Exhibit 10.5(b) to Textron's Annual
Report on Form 10-K for the fiscal year ended
January 3, 1987.
10.8C Second Amendment to 1982 Plan. Incorporated by
reference to Exhibit 10.5(c) to Textron's Annual
Report on Form 10-K for the fiscal year ended
January 2, 1988.
10.9A Textron 1987 Long-Term Incentive Plan ("1987
Plan"). Incorporated by reference to Exhibit 10.6
to Textron's Annual Report on Form 10-K for the
fiscal year ended December 30, 1989.
10.9B First Amendment to 1987 Plan. Incorporated by
reference to Exhibit 10.6(b) to Textron's Annual
Report on Form 10-K for the fiscal year ended
December 28, 1991.
10.10A Textron 1990 Long-Term Incentive Plan ("1990
Plan"). Incorporated by reference to Exhibit 10.7
to Textron's Annual Report on Form 10-K for the
fiscal year ended December 30, 1989.
10.10B First Amendment to 1990 Plan. Incorporated by
reference to Exhibit 10.7(c) to Textron's Annual
Report on Form 10-K for the fiscal year ended
December 28, 1991.
10.10C Second Amendment to 1990 Plan. Incorporated by
reference to Exhibit 10.7(c) to Textron's Annual
Report on Form 10-K for the fiscal year ended
January 2, 1993.
10.11 Textron 1994 Long-Term Incentive Plan.
Incorporated by reference to Exhibit 10 to Textron's
Quarterly Report on Form 10-Q for the fiscal quarter
ended July 2, 1994.
10.12 Form of Indemnity Agreement between Textron and
its directors and executive officers. Incorporated
by reference to Exhibit A to Textron's Proxy
Statement for its Annual Meeting of Shareholders on
April 29, 1987.
10.13A Pension Plan for Directors as amended by a
First Amendment (discontinued as of September 30,
1996). Incorporated by reference to Exhibit 10.14
to Textron's Annual Report on Form 10-K for the
fiscal year ended December 31, 1988.
10.13B Second Amendment to Pension Plan for Directors
(discontinued as of September 30, 1996).
Incorporated by reference to Exhibit 10.16(b) to
Textron's Annual Report on Form 10-K for the fiscal
year ended December 29, 1990.
10.14 Deferred Income Plan for Non-Employee
Directors.
<PAGE>20
10.15A Employment Agreement between Textron and James
F. Hardymon dated November 24, 1989 ("Employment
Agreement"). Incorporated by reference to Exhibit
10.9 to Textron's Annual Report on Form 10-K for the
fiscal year ended December 30, 1989.
10.15B Amendment dated as of December 15, 1994 to
Employment Agreement. Incorporated by reference to
Exhibit 10.10B to Textron's Annual Report on Form 10-
K for the fiscal year ended December 31, 1994.
10.16A Employment Agreement between Textron and Lewis B.
Campbell dated September 22, 1992. Incorporated by
reference to Exhibit 10.9 to Textron's Annual Report
on Form 10-K for the fiscal year ended January 2,
1993.
10.16B Retention Award granted to Lewis B. Campbell on
December 14, 1995. Incorporated by reference to
Exhibit 10.16B to Textron's Annual Report on Form 10-
K for the fiscal year ended December 30, 1995.
10.17 Employment Agreement between Textron and Mary
L. Howell dated May 4, 1993. Incorporated by
reference to Exhibit 10.11 to Textron's Annual
Report on Form 10-K for the fiscal year ended
January 1, 1994.
10.18 Employment Agreement between Textron and Wayne
W. Juchatz dated November 1, 1995. Incorporated
by reference to Exhibit 10.18 to Textron's Annual
Report on Form 10-K for the fiscal year ended
December 30, 1995.
10.19 Employment Agreement between Textron and
Stephen L. Key dated November 1, 1995. Incorporated
by reference to Exhibit 10.19 to Textron's Annual
Report on Form 10-K for the fiscal year ended
December 30, 1995.
10.20 Employment Agreement between Textron and
William F. Wayland dated January 1, 1989.
Incorporated by reference to Exhibit 10.12 to
Textron's Annual Report on Form 10-K for the fiscal
year ended December 30, 1989.
10.21A Credit Agreement dated as of November 1, 1993
among Textron, the Lenders listed therein and
Bankers Trust Company as Administrative Agent
("Credit Agreement"). Incorporated by reference to
Exhibit 10.20A to Textron's Annual Report on Form 10-
K for the fiscal year ended January 1, 1994.
10.21B First Amendment dated as of October 30, 1994 to
Credit Agreement. Incorporated by reference to
Exhibit 10.22B to Textron's Annual Report on Form 10-
K for the fiscal year ended December 31, 1994.
10.21C Second Amendment to Credit Agreement dated as
of July 1, 1995. Incorporated by reference to
Exhibit (b) (3) to Schedule 14D-1 filed by Textron
on September 19, 1995.
10.21D Third Amendment to Credit Agreement dated as of
July 1, 1996.
<PAGE>21
12.1 Computation of ratio of income to combined
fixed charges and preferred stock dividends of the
Parent Group.
12.2 Computation of ratio of income to combined
fixed charges and preferred stock dividends of
Textron Inc. including all majority-owned
subsidiaries.
13 A portion (pages 23 and following) of Textron's
1996 Annual Report to Shareholders. Except for
pages or items specifically incorporated by
reference herein, such portion of Textron's 1996
Annual Report to Shareholders is furnished for the
information of the Commission and is not filed as
part of this Report.
21 Certain subsidiaries of Textron. Other
subsidiaries, which considered in the aggregate do
not constitute a significant subsidiary, are omitted
from such list.
23 Consent of Independent Auditors.
24.1 Power of attorney.
24.2 Certified copy of a resolution of the Board of
Directors of Textron.
27 Financial Data Schedule.
(b) Reports on Form 8-K
During the quarter ended December 28, 1996, Textron filed
with the Securities and Exchange Commission a report on
Form 8-K dated November 8, 1996, reporting, under Item 5
(Other Events) and Item 7 (Exhibits), information
regarding the sale to Provident Companies, Inc. of all the
outstanding shares of The Paul Revere Corporation, 83% of
which are owned by Textron.
<PAGE>22
SIGNATURES
Pursuant to the requirement of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly
caused this Annual Report on Form 10-K to be signed on its
behalf by the undersigned, thereunto duly authorized on this
14th day of March, 1997.
TEXTRON INC.
Registrant
By: /s/ Michael D. Cahn
Michael D. Cahn
Attorney-in-fact
Pursuant to the requirements of the Securities Exchange Act of
1934, this Report has been signed below on this 14th day of March,
1997, by the following persons on behalf of the registrant and in
the capacities indicated:
NAME TITLE
* Chairman and Chief
James F. Hardymon Executive Officer,
Director (principal
executive officer)
* President and Chief
Lewis B. Campbell Operating Officer, Director
* Director
H. Jesse Arnelle
* Director
Teresa Beck
<PAGE>23
* Director
R. Stuart Dickson
* Director
Paul E. Gagne
* Director
John D. Macomber
* Director
Dana G. Mead
* Director
Barbara Scott Preiskel
* Director
Brian H. Rowe
* Director
Sam F. Segnar
* Director
Jean Head Sisco
<PAGE>24
* Director
John W. Snow
* Director
Martin D. Walker
* Director
Thomas B. Wheeler
* Executive Vice President and
Stephen L. Key Chief Financial Officer
(principal financial officer)
* Vice President and Controller
Richard L. Yates (principal accounting officer)
*By:/s/ Michael D. Cahn
Michael D. Cahn
Attorney-in-fact
<PAGE>25
TEXTRON INC.
INDEX TO FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULES
Item 14(a)
Form Annual Report
Textron Inc. 10-K to Shareholders
Report of Independent Auditors 31
Consolidated Statement of Income for each of the 32
three years in the period ended December 28, 1996
Consolidated Balance Sheet at December 28, 1996 and 34
December 30, 1995
Consolidated Statement of Cash Flows for each of 36
the three years in the period ended December 28,
1996
Consolidated Statement of Changes in Shareholders' 38
Equity for each of the three years in the period
ended December 28, 1996
Notes to Consolidated Financial Statements 39-51
Revenues and Income by Business Segment 23
Supplementary Information (Unaudited):
Quarterly Financial Information 1996 and 1995 52
Financial Statement Schedules for each of the three
years in the period ended December 28, 1996
I Condensed financial information of 27
registrant
II Valuation and qualifying accounts 28
All other schedules are omitted because the conditions requiring
the filing thereof do not exist or because the information required
is included in the financial statements and notes thereto.
<PAGE>26
TEXTRON INC.
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
For each of the three years in the period ended December 28, 1996
Financial information of the Registrant is omitted because
condensed financial information of the Parent Group, which includes
the Registrant and all of its majority-owned subsidiaries other
than its finance subsidiaries (Finance Group), is shown on pages 32
through 37 of Textron's 1996 Annual Report to Shareholders.
Management believes that the disclosure of financial information on
the basis of the Parent Group results in a more meaningful
presentation, since this group constitutes the Registrant's basic
borrowing entity and the only restrictions on net assets of
Textron's subsidiaries relate to its Finance Group. The
Registrant's investment in its Finance Group is shown on pages 34
and 35 of Textron's 1996 Annual Report to Shareholders under the
caption "Investments in Finance Group."
The Parent Group received dividends of $124 million, $117
million and $106 million from its Finance Group in 1996, 1995 and
1994, respectively. The portion of the net assets of Textron's
Finance Group available for cash dividends and other payments to
the Parent Group is restricted by the terms of lending agreements
and insurance statutory requirements. As of December 28, 1996,
approximately $473 million of their net assets of $1.6 billion was
available to be transferred to the Parent Group pursuant to these
restrictions.
The Parent Group's credit agreements contain provisions
requiring it to maintain a minimum level of shareholders' equity
and a minimum interest coverage ratio. For additional information
concerning the Parent Group's long-term debt, see Note 9 to the
consolidated financial statements appearing on pages 43 and 44 of
Textron's 1996 Annual Report to Shareholders.
For information concerning Textron-obligated Mandatorily
Redeemable Preferred Securities of Subsidiary Trust Holding Solely
Textron Junior Subordinated Debt Securities, see Note 11 to the
consolidated financial statements appearing on page 45 of Textron's
1996 Annual Report to Shareholders.
<PAGE>27
TEXTRON INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
For each of the three years in the period ended December 28, 1996
(In millions)
Allowance for credit losses
Changes in the allowance for credit losses for the years indicated
were as follows:
1996 1995 1994
Balance of the allowance for credit losses
at the beginning of the year $270 $250 $225
Add - charged to income:
Consumer 203 149 136
Commercial 27 20 26
230 169 162
Deduct - balances charged off:
Gross charge offs:
Consumer (230) (177) (142)
Commercial (30) (25) (27)
(260) (202) (169)
Recoveries:
Consumer 36 33 28
Commercial 3 4 3
39 37 31
Net charge offs (221) (165) (138)
Other 14 16 1
Balance of the allowance for credit losses
at the end of the year $293 $270 $250
Balance of the allowance for credit losses
at the end of the year applicable to:
Consumer $218 $195 $181
Commercial 75 75 69
$293 $270 $250
<PAGE>28
TEXTRON INC.
Index of Exhibits
Annual Report on Form 10-K
for the Fiscal Year Ended December 28, 1996
Exhibits Description
3.1A Restated Certificate of Incorporation of
Textron as filed March 24, 1988. Incorporated by
reference to Exhibit 3.1 to Textron's Annual
Report on Form 10-K for the fiscal year ended
January 2, 1988.
3.1B Amendment to Certificate of Designations,
Preferences and Rights of Series C Junior
Participating Preferred Stock as filed March 20,
1996.
3.2 By-Laws of Textron, restated December 10,
1992. Incorporated by reference to Exhibit 3.2 to
Textron's Annual Report on Form 10-K for the
fiscal year ended January 2, 1993.
NOTE: Exhibits 10.1 through 10.20 below are
management contracts or compensatory plans,
contracts or agreements.
10.1 Annual Incentive Compensation Plan For
Textron Employees. Incorporated by reference to
Exhibit 10.1 to Textron's Annual Report on Form 10-
K for the fiscal year ended December 30, 1995.
10.2 Deferred Income Plan For Textron Key
Executives. Incorporated by reference to Exhibit
10.2 to Textron's Annual Report on Form 10-K for
the fiscal year ended December 30, 1995.
10.3 Severance Plan For Textron Key Executives.
Incorporated by reference to Exhibit 10.3 to
Textron's Annual Report on Form 10-K for the
fiscal year ended December 30, 1995.
10.4 Special Benefits for Textron Key Executives.
Incorporated by reference to Exhibit 10.4 to
Textron's Annual Report on Form 10-K for the
fiscal year ended December 30, 1995.
10.5 Supplemental Benefits Plan For Textron Key
Executives with Market Square Profit Sharing Plan
Schedule. Incorporated by reference to Exhibit
10.5 to Textron's Annual Report on Form 10-K for
the fiscal year ended December 30, 1995.
10.6 Supplemental Retirement Plan For Textron Key
Executives. Incorporated by reference to Exhibit
10.6 to Textron's Annual Report on Form 10-K for
the fiscal year ended December 30, 1995.
10.7 Survivor Benefit Plan For Textron Key
Executives. Incorporated by reference to Exhibit
10.7 to Textron's Annual Report on Form 10-K for
the fiscal year ended December 30, 1995.
10.8A Textron 1982 Long-Term Incentive Plan ("1982
Plan"). Incorporated by reference to Exhibit
10.5(a) to Textron's Annual Report on Form 10-K
for the fiscal year ended December 31, 1988.
10.8B First Amendment to 1982 Plan. Incorporated
by reference to Exhibit 10.5(b) to Textron's
Annual Report on Form 10-K for the fiscal year
ended January 3, 1987.
10.8C Second Amendment to 1982 Plan. Incorporated
by reference to Exhibit 10.5(c) to Textron's
Annual Report on Form 10-K for the fiscal year
ended January 2, 1988.
10.9A Textron 1987 Long-Term Incentive Plan ("1987
Plan"). Incorporated by reference to Exhibit 10.6
to Textron's Annual Report on Form 10-K for the
fiscal year ended December 30, 1989.
10.9B First Amendment to 1987 Plan. Incorporated
by reference to Exhibit 10.6(b) to Textron's
Annual Report on Form 10-K for the fiscal year
ended December 28, 1991.
10.10A Textron 1990 Long-Term Incentive Plan ("1990
Plan"). Incorporated by reference to Exhibit 10.7
to Textron's Annual Report on Form 10-K for the
fiscal year ended December 30, 1989.
10.10B First Amendment to 1990 Plan. Incorporated
by reference to Exhibit 10.7(c) to Textron's
Annual Report on Form 10-K for the fiscal year
ended December 28, 1991.
10.10C Second Amendment to 1990 Plan. Incorporated
by reference to Exhibit 10.7(c) to Textron's
Annual Report on Form 10-K for the fiscal year
ended January 2, 1993.
10.11 Textron 1994 Long-Term Incentive Plan.
Incorporated by reference to Exhibit 10 to
Textron's Quarterly Report on Form 10-Q for the
fiscal quarter ended July 2, 1994.
10.12 Form of Indemnity Agreement between Textron
and its directors and executive officers.
Incorporated by reference to Exhibit A to
Textron's Proxy Statement for its Annual Meeting
of Shareholders on April 29, 1987.
10.13A Pension Plan for Directors as amended by a
First Amendment (discontinued as of September 30,
1996). Incorporated by reference to Exhibit 10.14
to Textron's Annual Report on Form 10-K for the
fiscal year ended December 31, 1988.
10.13B Second Amendment to Pension Plan for
Directors (discontinued as of September 30, 1996).
Incorporated by reference to Exhibit 10.16(b) to
Textron's Annual Report on Form 10-K for the
fiscal year ended December 29, 1990.
10.14 Deferred Income Plan for Non-Employee
Directors.
10.15A Employment Agreement between Textron and
James F. Hardymon dated November 24, 1989
("Employment Agreement"). Incorporated by
reference to Exhibit 10.9 to Textron's Annual
Report on Form 10-K for the fiscal year ended
December 30, 1989.
10.15B Amendment dated as of December 15, 1994 to
Employment Agreement. Incorporated by reference
to Exhibit 10.10B to Textron's Annual Report on
Form 10-K for the fiscal year ended December 31,
1994.
10.16A Employment Agreement between Textron and Lewis B.
Campbell dated September 22, 1992. Incorporated
by reference to Exhibit 10.9 to Textron's Annual
Report on Form 10-K for the fiscal year ended
January 2, 1993.
10.16B Retention Award granted to Lewis B. Campbell
on December 14, 1995. Incorporated by reference
to Exhibit 10.16B to Textron's Annual Report on
Form 10-K for the fiscal year ended December 30,
1995.
10.17 Employment Agreement between Textron and Mary
L. Howell dated May 4, 1993. Incorporated by
reference to Exhibit 10.11 to Textron's Annual
Report on Form 10-K for the fiscal year ended
January 1, 1994.
10.18 Employment Agreement between Textron and
Wayne W. Juchatz dated November 1, 1995.
Incorporated by reference to Exhibit 10.18 to
Textron's Annual Report on Form 10-K for the
fiscal year ended December 30, 1995.
10.19 Employment Agreement between Textron and
Stephen L. Key dated November 1, 1995.
Incorporated by reference to Exhibit 10.19 to
Textron's Annual Report on Form 10-K for the
fiscal year ended December 30, 1995.
10.20 Employment Agreement between Textron and
William F. Wayland dated January 1, 1989.
Incorporated by reference to Exhibit 10.12 to
Textron's Annual Report on Form 10-K for the
fiscal year ended December 30, 1989.
10.21A Credit Agreement dated as of November 1, 1993
among Textron, the Lenders listed therein and
Bankers Trust Company as Administrative Agent
("Credit Agreement"). Incorporated by reference
to Exhibit 10.20A to Textron's Annual Report on
Form 10-K for the fiscal year ended January 1,
1994.
10.21B First Amendment dated as of October 30, 1994
to Credit Agreement. Incorporated by reference to
Exhibit 10.22B to Textron's Annual Report on Form
10-K for the fiscal year ended December 31, 1994.
10.21C Second Amendment to Credit Agreement dated as
of July 1, 1995. Incorporated by reference to
Exhibit (b) (3) to Schedule 14D-1 filed by Textron
on September 19, 1995.
10.21D Third Amendment to Credit Agreement dated as
of July 1, 1996.
12.1 Computation of ratio of income to combined
fixed charges and preferred stock dividends of the
Parent Group.
12.2 Computation of ratio of income to combined
fixed charges and preferred stock dividends of
Textron Inc. including all majority-owned
subsidiaries.
13 A portion (pages 23 and following) of
Textron's 1996 Annual Report to Shareholders.
Except for pages or items specifically
incorporated by reference herein, such portion of
Textron's 1996 Annual Report to Shareholders is
furnished for the information of the Commission
and is not filed as part of this Report.
21 Certain subsidiaries of Textron. Other
subsidiaries, which considered in the aggregate do
not constitute a significant subsidiary, are
omitted from such list.
23 Consent of Independent Auditors.
24.1 Power of attorney.
24.2 Certified copy of a resolution of the Board of
Directors of Textron.
27 Financial Data Schedule.
Exhibit 3.1B
TEXTRON INC.
AMENDMENT TO CERTIFICATE OF DESIGNATIONS,
PREFERENCES AND RIGHTS OF
SERIES C JUNIOR PARTICIPATING PREFERRED STOCK
Pursuant to Section 151 of the
General Corporation Law of
the State of Delaware
Textron Inc., a corporation organized and existing
under the General Corporation Law of the State of Delaware
in accordance with the provisions of Section 103 thereof
(the "Corporation"), does here certify:
FIRST: That the Corporation filed a Certificate of
Designation, Preferences and Rights on March 11, 1986
creating a series of 500,000 shares of preferred stock
designated as "Series C Junior Participating Preferred
Stock" (the "Certificate of Designation").
SECOND: That as authorized and directed by a
resolution adopted by the Board of Directors of the
Corporation (the "Board") at a duly convened meeting of the
Board held on September 27, 1995, pursuant to the authority
vested in it by the provisions of the Restated Certificate
of Incorporation of the Corporation, the Certificate of
Designations is hereby amended to increase the number of
shares constituting the series from 500,000 to 2,000,000.
THIRD: That none of the shares of the Corporation's
Series C Junior Participating Preferred Stock have been
issued as of the date set forth below.
FOURTH: That the Certificate of Designations is hereby
amended to change the Rights Declaration Date (as referenced
therein) from March 8, 1986 to September 27, 1995 and that
the foregoing amendment to the Certificate of Designations
was effected by the following resolution adopted by the
Board at a duly convened meeting of the Board held on
September 27, 1995, pursuant to the authority vested in it
by the provisions of the Restated Certificate of
Incorporation of the Corporation;
FURTHER RESOLVED, that, subject to the filing
of an Amendment to Certificate of Designations,
Preferences and Rights of Series C Junior
Participating Preferred Stock with the Secretary
of State of the State of Delaware, the Certificate
of Designation, Preferences and Rights of Series C
Junior Participating Preferred Stock filed by the
Corporation with the Secretary of State of the
State of Delaware on March 11, 1986 (the
"Certificate of Designations") be amended to
change the Rights Declaration Date (as defined in
the Certificate of Designations) from March 8,
1986 to September 27, 1995 and to increase the
number of shares constituting the Series C Junior
Participating Preferred Stock from 500,000 to
2,000,000.
FIFTH: That the Amendment to Certificate of
Designations, Preferences and Rights of Series C Junior
Participating Preferred Stock has been duly adopted in
accordance with the provisions of Section 151 of the General
Corporation Law of the State of Delaware.
SIXTH: That this Amendment to Certificate of
Designations, Preferences and Rights of Series C Junior
Participating Preferred Stock shall not become effective
until 5:01 p.m., New York City time, on March 20, 1996.
The Corporation has caused this Certificate to be
signed by its Vice President and Deputy General Counsel this
12th day of March 1996.
/s/ Arnold M. Friedman
Vice President and Deputy
General Counsel
Exhibit 10.14
Deferred Income Plan for Non Employee Directors
This Deferred Income Plan for Non-Employee Directors, the
"Plan", is effective January 1, 1997 and replaces the plan
previously in effect.
Article I - Participation
1.1 Non-employee members of the Board of Directors of
Textron Inc. ("Textron") may elect to defer receipt
of any or all of the cash portion of the annual
retainer into either a stock unit account or an
interest-bearing account. The deferred stock portion
of the annual retainer is automatically deferred into
the stock unit account.
1.2 Each Director must have on file with Textron a
Deferral Election Form indicating deferral elections
for the following calendar year(s).
1.3 For any complete calendar quarters remaining in the
calendar year in which an individual initially
becomes a non-employee director, the Director may
elect to defer his or her fees at any time before the
start of each such quarter.
Article II - Deferred Income Accounts
2.1 For record-keeping purposes only, Textron shall
maintain a stock unit account and an interest-bearing
account for each non-employee Director.
2.2 Stock Unit Account
The Stock Unit Account shall consist of Stock Units,
which are fictional shares of Textron common stock
accumulated and accounted for the sole purpose of
determining the cash payout of any distribution under
this portion of the Plan.
As of the end of each calendar quarter, Textron shall
credit to the Stock Unit Account 125% (includes a 25%
Premium contributed by Textron, the "Premium") of the
amount, including both the cash portion and the
deferred stock portion of the annual retainer, the
Director deferred into this account during the
quarter. Textron shall also credit to this account
Stock Units equal to the number of shares of Textron
common stock that would have been allocated on
account of dividends.
The number of Stock Units Textron shall credit to the
Stock Unit Account will equal the number of shares of
Textron common stock that could have been purchased
at a price per share equal to the average price per
share of Textron common stock contributed to the
Textron Savings Plan during that quarter.
Half of the 25% Premium contributed by Textron shall
vest (become nonforfeitable) on December 31 of the
calendar year in which the deferred income otherwise
would have been paid, and the remaining half on the
next December 31. The Premium will continue to vest
after the termination of the Directorship. The
Premium will vest only if the related deferred
compensation is unpaid at the time of vesting.
Unvested Premiums shall vest immediately upon the
Director's death or total disability as determined by
the Textron Benefits Committee.
2.3 Interest Account
As of the end of each calendar quarter Textron shall
credit to the Interest Account an amount equal to
interest on the average balance in the Interest
Account during such quarter. The average balance
will be computed by adding the opening and closing
balances for the quarter and dividing by two.
Interest will be credited monthly at the greater of
8% or the Moody's Corporate Bond Yield Index rate.
Article III - Payments
3.1 Payments or withdrawals from either the Stock Unit
Account or the Interest Account or transfers between
the two accounts shall not be allowed while the
individual remains a Director of Textron. Prior to
or at the time of the Director's resignation,
removal, or retirement from the Board of Directors,
the Director must elect a payment schedule.
3.2 Upon the Director's resignation, removal or
retirement from the Board of Directors, the Director
may, once each calendar quarter, elect to transfer,
in 10% increments, any or all amounts in the Stock
Unit Account to the Interest Account. The cash
amount transferred will be determined by multiplying
the current value of Textron common stock by the
number of whole or fractional Stock Units in the
Stock Unit Account as of the end of that calendar
quarter times the percentage being transferred. The
current value shall be the average of the composite
closing prices, as reported in the Wall Street
Journal for the ten trading days immediately
following the calendar quarter in which the election
to transfer was made.
3.3 Upon the Director's resignation, removal or
retirement from the Board of Directors, he or she
must make a payment election by completing the
Payment Election Form. The Director may elect on the
Payment Election Form to receive (1) the entire
amount of his or her accounts as soon as practical
following the end of the current quarter which will
be deemed to be an election to transfer under the
provisions of paragraph 3.2 in the current quarter
all amounts in the Director's Stock Unit Account, (2)
the entire amount of his or her accounts as soon as
practical following the end of the current calendar
year which will be deemed to be an election to
transfer under the provisions of paragraph 3.2 in the
final quarter of the current calendar year all
amounts in the Director's Stock Unit Account, or (3)
payment in a number of annual installments, each
payable as soon as practical following the end of
each successive calendar year, over a period of up to
five years which will be deemed to be an election to
transfer under the provisions of paragraph 3.2 in the
final quarter of each respective calendar year an
amount, if necessary, from the Director's Stock Unit
Account sufficient to make the required payment.
Annual installments shall be calculated each year by
dividing the unpaid amount as of January 1 of that
year by the remaining number of unpaid installments.
3.4 During the installment period, the unpaid balance in
the Interest Account will continue to earn interest
at the same rate as if the individual had continued
as a Director.
3.5 If the Director or former Director dies before all
payments have been made, payment(s) shall be made to
the beneficiary designated on the Designation of
Beneficiary Form. In the event of death, the
Benefits Committee shall choose in its sole
discretion the payment schedule after considering the
method of payment that may have been requested by the
Director or by the beneficiaries.
The designated beneficiary may be changed from time
to time by delivering a new Designation of
Beneficiary Form to Textron. If no designation is
made, or if the named beneficiary predeceases the
Director, payment shall be made to the Director's
estate.
3.6 At the discretion of Textron, the payments to be made
after the Director's resignation, removal, or
retirement from the Board of Directors pursuant to
this Article III may be accelerated in such amounts
and at such times as the Benefits Committee
determines.
Article IV - Miscellaneous
4.1 Benefits provided under this Plan are unfunded
obligations of Textron. Nothing contained in this
Plan shall require Textron to segregate any monies
from its general funds with respect to such
obligations.
4.2 The Textron Benefits Committee shall be the plan
administrator of this Plan and shall be solely
responsible for its general administration and
interpretation and for carrying out the provisions
hereof, and shall have all such powers as may be
necessary to do so.
4.3 Unless a contrary or different meaning is expressly
provided, each use in this Plan of the masculine or
feminine shall include the other and each use of the
singular number shall include the plural.
4.4 No benefit payable at any time under this Plan shall
be subject in any manner to alienation, sale,
transfer, assignment, pledge or encumbrance of any
kind unless specifically approved in writing in
advance by the Textron Benefits Committee or its
designee. Any attempt to alienate, sell, transfer,
assign, pledge or otherwise encumber any such
benefit, whether presently or subsequently payable,
shall be void unless so approved. Except as required
by law, no benefit payable under this Plan shall in
any manner be subject to garnishment, attachment,
execution or other legal process, or be liable for or
subject to the debts or liability of any Participant
or Beneficiary.
4.5 The Board or its designee shall have the right to
amend, modify, suspend or terminate this Plan at any
time by written ratification of such action;
provided, however, that no amendment, modification,
suspension or termination shall reduce the amount
credited to either the Stock Unit Account or the
Interest Account immediately before the effective
date of the amendment, modification, suspension or
termination.
4.6 This Plan shall be construed in accordance with the
laws of the State of Delaware.
IN WITNESS WHEREOF, Textron Inc. has caused this restated
Plan to be executed by its duly authorized officer to be
effective as of January 1, 1997.
TEXTRON INC.
By:/s/Frederick K. Butler
Frederick K. Butler
Vice President and Secretary
EXHIBIT 10.21D
THIRD AMENDMENT TO CREDIT AGREEMENT
THIS AMENDMENT is dated as of the 1st day of July, 1996
(the "Third Amendment") among TEXTRON INC., a Delaware
corporation (including its successors and assigns as
permitted by the Credit Agreement as defined below, "Compa
ny"), THE LENDERS LISTED ON THE SIGNATURE PAGES HEREOF (indi
vidually referred to herein as a "Lender" and collectively
as "Lenders"), and BANKERS TRUST COMPANY ("Bankers"), as
Administrative Agent for Lenders ("Agent").
RECITALS
WHEREAS, Company, the lenders listed therein and Agent
entered into a credit agreement dated as of November 1,
1993, as amended on October 30, 1994 and July 1, 1995
("Credit Agreement"); and
WHEREAS, Company, Lenders and Agent desire to further
amend the Credit Agreement;
NOW, THEREFORE, in consideration of the premises and
the agreements, provisions and covenants herein contained,
Company, Lenders and Agent agree as follows:
1. Subsection 2.8A(i) of the Credit Agreement is
hereby deleted in its entirety and the following substituted
therefor:
"(A) Facility Fees. (i) The Company shall pay to the
Agent for the account of the Banks a facility fee as
set forth in the table below, accrued from and
including the Effective Date to and including the
Final Maturity Date, on the daily average aggregate
amount of the Commitments (whether used or unused)
based upon the rating issued by Standard & Poor's
Corporation and Moody's Investors Service, Inc. for
the Company's long-term unsecured indebtedness at
the beginning of each fiscal quarter of the Company:
Rating Category* Facility Fee
A/A2 or higher .0900%
A-/A3 .1000%
BBB+/Baal .1500%
BBB/Baa2 .1750%
BBB-/Baa3 or lower .2000%
or no rating
_______________
* In the case of "split" ratings ( i.e., if the ratings
of each such rating agency differ by one or more catego
ries, including numerical modifiers and (+) and (-) as
categories), the facility fee will be based upon the
higher of the two ratings."
2. The Final Maturity Date is hereby extended to July
1, 2001 and the Facility Extension Date is hereby extended
to July 1, 1997.
3. The execution and delivery of this Third Amendment
by the Company is deemed a certification by the Company that
(i) the representations and warranties set forth in Section
4 of the Credit Agreement, as amended by this Third
Amendment, are true and correct on and as of the date hereof
as if made on and as of the date hereof, (ii) there exists
no Event of Default or Potential Event of Default on and as
of the date hereof, (iii) between October 30, 1995 and July
1, 1996 there have been no changes in generally accepted
accounting principles which have had a material effect on
the Company's financial condition, and (iv) the Company has
full power, authority and legal right to execute, and
deliver, and perform its obligations under, this Third
Amendment.
4. This Third Amendment shall not constitute a
consent or waiver to or modification of any other provision,
term or condition of the Credit Agreement. All terms,
provisions, covenants, representations, warranties,
agreements and conditions contained in the Credit Agreement,
as amended hereby, shall remain in full force and effect.
5. As permitted by Section 10.16 of the Credit Agree
ment, this Third Amendment may be executed in any number of
counterparts and by different parties hereto in separate
counterparts, each of which when so executed and delivered
shall be deemed an original, but all such counterparts
together shall constitute but one and the same instrument.
This Third Amendment shall be deemed effective as of July 1,
1996, subject to the prior execution of a counterpart of
this Third Amendment by each of the parties hereto and
delivery of copies hereof to Company and Agent.
6. All interest, fees and other amounts accruing
under the Credit Agreement on or prior to, or determined in
respect of any day accruing on or prior to July 1, 1996
shall be computed and determined as provided in the Credit
Agreement before giving effect to this Third Amendment.
7. THIS THIRD AMENDMENT SHALL BE GOVERNED BY, AND CON
STRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK
WITHOUT REGARD TO THE PRINCIPLES OF CONFLICT OF LAWS.
WITNESS the due execution hereof by the respective duly
authorized officers of the undersigned as of the date first
above written.
Borrower
TEXTRON INC.
By: /s/R. A. Watson
Title: Senior Vice
President
and Treasurer
BANK OF AMERICAN NATIONAL TRUST AND SAVINGS ASSOCATION
BY: /s/Deborah J. Graziano
NAME: Deborah J. Graziano
TITLE: Vice President
COMMITTMENT $78,947,400
PRO RATA SHARE: 5.2632%
SIGNATURE PAGE TO THE THIRD AMENDMENT DATED AS OF JULY 1,
1996 TO THE TEXTRON INC. CREDIT AGREEMENT
BANKERS TRUST COMPANY
BY: /s/Cynthia A. Jay
NAME: Cynthia A. Jay
TITLE: Vice President
COMMITTMENT: $69,736,850
PRO RATE SHARE: 4.6491%
SIGNATURE PAGE TO THE THIRD AMENDMENT DATED AS OF JULY 1,
1996 TO THE TEXTRON INC. CREDIT AGREEMENT
BANQUE NATIONALE de PARIS
BY: /s/Richard L. Sted
NAME: Richard L. Sted
TITLE: Senior Vice President
BY: /s/Richard Pace
NAME: Richard Pace
TITLE: Assistant Vice President
COMMITTMENT: $15,789,450
PRO RATE SHARE: 1.0526%
SIGNATURE PAGE TO THE THIRD AMENDMENT DATED AS OF JULY 1,
1996 TO THE TEXTRON INC. CREDIT AGREEMENT
CIBC INC.
BY: /s/W. B. Anderson
NAME: W. B. Anderson
TITLE: Director
COMMITMENT: $59,210,550
PRO RATE SHARE: 3.9474%
SIGNATURE PAGE TO THE THIRD AMENDMENT DATED AS OF JULY 1,
1996 TO THE TEXTRON INC. CREDIT AGREEMENT
CHEMICAL BANK
BY: /s/J. Treger
NAME: J. Treger
TITLE: Vice President
COMMITMENT: $84,210,550
PRO RATE SHARE: 5.6140%
SIGNATURE PAGE TO THE THIRD AMENDMENT DATED AS OF JULY 1,
1996 TO THE TEXTRON INC. CREDIT AGREEMENT
MARINE MIDLAND BANK
BY: /s/William M. Holland
NAME: William M. Holland
TITLE: Vice President
COMMITMENT: $25,000,000
PRO RATE SHARE: 1.66667$
SIGNATURE PAGE TO THE THIRD AMENDMENT DATED AS OF JULY 1,
1996 TO THE TEXTRON INC. CREDIT AGREEMENT
CHEMICAL BANK
BY: /s/Chris Georvassilis
NAME: Chris Georvassilis
TITLE: Vice President
COMMITMENT: $23,684,160
PRO RATE SHARE: 1.5789%
SIGNATURE PAGE TO THE THIRD AMENDMENT DATED AS OF JULY 1,
1996 TO THE TEXTRON INC. CREDIT AGREEMENT
CREDIT LYONNAIS NEW YORK BRANCH
BY: /s/Robert Ivonevich
NAME: Robert Ivonevich
TITLE: Senior Vice President
COMMITMENT: $15,789,450
PRO RATE SHARE: 1.0526%
SIGNATURE PAGE TO THE THIRD AMENDMENT DATED AS OF JULY 1,
1996 TO THE TEXTRON INC. CREDIT AGREEMENT
CREDIT SUISSE
BY: /s/Juerg Johner
NAME: Juerg Johner
TITLE: Associate
BY: /s/Edward E. Barr
NAME: Edward E. Barr
TITLE: Associate
COMMITMENT: $25,000,000
PRO RATE SHARE: 1.6667%
SIGNATURE PAGE TO THE THIRD AMENDMENT DATED AS OF JULY 1,
1996 TO THE TEXTRON INC. CREDIT AGREEMENT
FIRST AMERICAN NATIONAL
BY: /s/Scott M. Bane
NAME: Scott M. Bane
TITLE: Senior Vice President
COMMITMENT: $7,894,710
PRO RATE SHARE: .5263%
SIGNATURE PAGE TO THE THIRD AMENDMENT DATED AS OF JULY 1,
1996 TO THE TEXTRON INC. CREDIT AGREEMENT
SUNTRUST BANK
BY: /s/Susan Boyd
NAME: Susan Boyd
TITLE: Vice President
COMMITMENT: $7,894,710
PRO RATE SHARE: .5263%
SIGNATURE PAGE TO THE THIRD AMENDMENT DATED AS OF JULY 1,
1996 TO THE TEXTRON INC. CREDIT AGREEMENT
DEUTSCHE BANK AG, NEW YORK BRANCH
BY: /s/James Fox
NAME: James FOX
TITLE: Assistant Vice President
BY: /s/Ralf Hoffmann
NAME: Ralf Hoffmann
TITLE: Vice President
COMMITMENT: $59,210,550
PRO RATA SHARE: 3.9474%
SIGNATURE PAGE TO THE THIRD AMENDMENT DATED AS OF JULY 1,
1996 TO THE TEXTRON INC. CREDIT AGREEMENT
BANQUE PARIBAS
BY: /s/John J. McCormick, III
NAME: John J. McCormick, III
TITLE: Vice President
BY: /s/Mary T. Finnegan
NAME: Mary T. Finnegan
TITLE: Group Vice President
COMMITMENT: $39,210,550
PRO RATA SHARE: 2.6140%
SIGNATURE PAGE TO THE THIRD AMENDMENT DATED AS OF JULY 1,
1996 TO THE TEXTRON INC. CREDIT AGREEMENT
CORESTATES BANK, N.A.
BY: /s/John M. Fessick
NAME: John M. Fessick
TITLE: Vice President
COMMITMENT: $7,894,710
PRO RATA SHARE: .5263%
SIGNATURE PAGE TO THE THIRD AMENDMENT DATED AS OF JULY 1,
1996 TO THE TEXTRON INC. CREDIT AGREEMENT
FLEET NATIONAL BANK
BY: /s/Roger C. Boucher
NAME: Roger C. Boucher
TITLE: Vice President
COMMITMENT: $48,684,160
PRO RATA SHARE: 3.2456%
SIGNATURE PAGE TO THE THIRD AMENDMENT DATED AS OF JULY 1,
1996 TO THE TEXTRON INC. CREDIT AGREEMENT
CITIBANK, N.A.
BY: /s/W. Martens
NAME: W. Martens
TITLE: Attorney in Fact
COMMITMENT: $59,210,550
PRO RATA SHARE: 3.9474%
SIGNATURE PAGE TO THE THIRD AMENDMENT DATED AS OF JULY 1,
1996 TO THE TEXTRON INC. CREDIT AGREEMENT
THE SANWA BANK, LIMITED
BY: /s/Tatsumi Kimishima
NAME: Tatsumi Kimishima
TITLE: Senior Deputy General Manager
COMMITMENT: $19,736,850
PRO RATA SHARE: 1.3158%
SIGNATURE PAGE TO THE THIRD AMENDMENT DATED AS OF JULY 1,
1996 TO THE TEXTRON INC. CREDIT AGREEMENT
THE FIRST NATIONAL BANK OF BOSTON
BY: /s/Harvey H. Thayer, Jr.
NAME: Harvey H. Thayer, Jr.
TITLE: Director
COMMITMENT: $61,842,110
PRO RATA SHARE: 4.1228%
SIGNATURE PAGE TO THE THIRD AMENDMENT DATED AS OF JULY 1,
1996 TO THE TEXTRON INC. CREDIT AGREEMENT
THE BANK OF NEW YORK
BY: /s/David C. Judge
NAME: David C. Judge
TITLE: Vice President
COMMITMENT: $59,210,550
PRO RATA SHARE: 3.9474%
SIGNATURE PAGE TO THE THIRD AMENDMENT DATED AS OF JULY 1,
1996 TO THE TEXTRON INC. CREDIT AGREEMENT
BANK OF TOKYO-MITSUBISHI TRUST COMPANY
BY: /s/G. Stewart
NAME: G. Stewart
TITLE: Assistant Vice President and Manager
COMMITMENT: $22,368,400
PRO RATA SHARE: 1.4912%
SIGNATURE PAGE TO THE THIRD AMENDMENT DATED AS OF JULY 1,
1996 TO THE TEXTRON INC. CREDIT AGREEMENT
NATIONAL WESTMINSTER BANK PLC.
BY: /s/Maria Amaral-LeBlanc
NAME: Maria Amaral-LeBlanc
TITLE: Vice President
COMMITMENT: $15,789,450
PRO RATA SHARE: 1.0526%
SIGNATURE PAGE TO THE THIRD AMENDMENT DATED AS OF JULY 1,
1996 TO THE TEXTRON INC. CREDIT AGREEMENT
ROYAL BANK OF CANADA
BY: /s/Michael Korine
NAME: Michael Korine
TITLE: Senior Manager
COMMITMENT: $59,210,550
PRO RATA SHARE: 3.9474%
SIGNATURE PAGE TO THE THIRD AMENDMENT DATED AS OF JULY 1,
1996 TO THE TEXTRON INC. CREDIT AGREEMENT
UNION BANK OF SWITZERLAND
BY: /s/Laurent J. Chaix
NAME: Lauren J. Chaix
TITLE: Vice President
BY: /s/Robert A. High
NAME: Robert A. High
TITLE: Assistant Treasurer
COMMITMENT: $25,000,000
PRO RATA SHARE: 1.6667%
SIGNATURE PAGE TO THE THIRD AMENDMENT DATED AS OF JULY 1,
1996 TO THE TEXTRON INC. CREDIT AGREEMENT
THE FIRST NATIONAL BANK OF CHICAGO
BY: /s/Daniel J. Lenckos
NAME: Daniel J. Lenckos
TITLE: Vice President
COMMITMENT: $78,947,400
PRO RATA SHARE: 5.2632%
SIGNATURE PAGE TO THE THIRD AMENDMENT DATED AS OF JULY 1,
1996 TO THE TEXTRON INC. CREDIT AGREEMENT
THE BANK OF NOVA SCOTIA
BY: /s/M. R. Bradley
NAME: M. R. Bradley
TITLE: Authorized Signatory
COMMITMENT: $20,000,000
PRO RATA SHARE: 1.3333%
SIGNATURE PAGE TO THE THIRD AMENDMENT DATED AS OF JULY 1,
1996 TO THE TEXTRON INC. CREDIT AGREEMENT
MORGAN GUARANTY TRUST COMPANY OF NEW YORK
BY: /s/Adam J. Silver
NAME: Adam J. Silver
TITLE: Associate
COMMITMENT: $78,947,400
PRO RATA SHARE: 5.2632%
SIGNATURE PAGE TO THE THIRD AMENDMENT DATED AS OF JULY 1,
1996 TO THE TEXTRON INC. CREDIT AGREEMENT
BANK OF MONTREAL/HARRIS TRUST AND SAVINGS BANK
BY: /s/Marc Heyden
NAME: Marc Heyden
TITLE: Director
COMMITMENT: $19,736,850
PRO RATA SHARE: 1.3158%
SIGNATURE PAGE TO THE THIRD AMENDMENT DATED AS OF JULY 1,
1996 TO THE TEXTRON INC. CREDIT AGREEMENT
SWISS BANK CORPORATION
BY: /s/James J. Diaz
NAME: James J. Diaz
TITLE: Director, Banking Finance Support, N.A.
BY: /s/Stephanie W. Kim
NAME: Stephanie W. Kim
TITLE: Associate Director
COMMITMENT: $59,210,550
PRO RATA SHARE: 3.9474%
SIGNATURE PAGE TO THE THIRD AMENDMENT DATED AS OF JULY 1,
1996 TO THE TEXTRON INC. CREDIT AGREEMENT
ABN-AMRO BANK, N.V.
Boston Branch
By: ABN AMRO North American, Inc., as Agent
BY: /s/James E. Davis
NAME: James E. Davis
TITLE: Vice President and Director
BY: /s/Carol A. Levine
NAME: Carol A. Levine
TITLE: Senior Vice President and Managing Director
COMMITMENT: $55,263,166
PRO RATA SHARE: 3.6842%
SIGNATURE PAGE TO THE THIRD AMENDMENT DATED AS OF JULY 1,
1996 TO THE TEXTRON INC. CREDIT AGREEMENT
WELLS FARGO BANK, NATIONAL ASSOCIATION
BY: /s/Bruce L. Gregory
NAME: Bruce L. Gregory
TITLE: Vice President
COMMITMENT: $35,526,315
PRO RATA SHARE: 2.3684%
SIGNATURE PAGE TO THE THIRD AMENDMENT DATED AS OF JULY 1,
1996 TO THE TEXTRON INC. CREDIT AGREEMENT
THE FUJI BANK, LTD., NEW YORK BRANCH
BY: /s/Gina Kearns
NAME: Gina Kearns
TITLE: Vice President and Manager
COMMITMENT: $22,368,400
PRO RATA SHARE: 1.4912%
SIGNATURE PAGE TO THE THIRD AMENDMENT DATED AS OF JULY 1,
1996 TO THE TEXTRON INC. CREDIT AGREEMENT
THE INDUSTRIAL BANK OF JAPAN TRUST COMPANY
BY: /s/John V. Veltri
NAME: John V. Veltri
TITLE: Senior Vice President
COMMITMENT: $22,368,400
PRO RATA SHARE: 1.4912%
SIGNATURE PAGE TO THE THIRD AMENDMENT DATED AS OF JULY 1,
1996 TO THE TEXTRON INC. CREDIT AGREEMENT
MELLON BANK, N.A.
BY: /s/R. Jane Westrich
NAME: R. Jane Westrich
TITLE: Vice President
COMMITMENT: $34,210,550
PRO RATA SHARE: 2.2807%
SIGNATURE PAGE TO THE THIRD AMENDMENT DATED AS OF JULY 1,
1996 TO THE TEXTRON INC. CREDIT AGREEMENT
NATIONS BANK
BY: /s/Eric C. Stephenson
NAME: Eric C. Stephenson
TITLE: Vice President
COMMITMENT: $82,894,710
PRO RATA SHARE: 5.5263%
SIGNATURE PAGE TO THE THIRD AMENDMENT DATED AS OF JULY 1,
1996 TO THE TEXTRON INC. CREDIT AGREEMENT
COMMERZBANK AKTIENGESELLSCHAFT
BY: /s/ Juergen Boysen
NAME: Juergen Boysen
TITLE: Senior Vice President
BY: /s/Robert Donohue
NAME: Robert Donohue
TITLE: Vice President
COMMITMENT: $19,736,850
PRO RATA SHARE: 1.315790%
SIGNATURE PAGE TO THE THIRD AMENDMENT DATED AS OF JULY 1,
1996 TO THE TEXTRON INC. CREDIT AGREEMENT
THE TORONTO-DOMINION BANK
BY: /s/L. Merghart
NAME: L. Merghart
TITLE: Director
COMMITMENT: $21,052,599
PRO RATA SHARE: 1.4035%
SIGNATURE PAGE TO THE THIRD AMENDMENT DATED AS OF JULY 1,
1996 TO THE TEXTRON INC. CREDIT AGREEMENT
THE CHASE MANHATTAN BANK, N.A.
BY: /s/J. Treger
NAME: J. Treger
TITLE: Vice President
COMMITMENT: $59,210,550
PRO RATA SHARE: 3.9474%
SIGNATURE PAGE TO THE THIRD AMENDMENT DATED AS OF JULY 1,
1996 TO THE TEXTRON INC. CREDIT AGREEMENT
<TABLE>
EXHIBIT 12.1
PARENT GROUP
COMPUTATION OF RATIO OF INCOME TO COMBINED FIXED
CHARGES AND PREFERRED STOCK DIVIDENDS
(Unaudited)
(In millions except ratios)
<CAPTION>
Year
<S> <C> <C> <C> <C> <C>
1996 1995 1994 1993 1992
Fixed charges:
Interest expense (1) $ 148 $ 178 $ 192 $ 218 $ 242
Distributions on preferred securities of
subsidiary trust, net of income taxes 23 - - - -
Estimated interest portion of rents 17 17 20 21 19
Total fixed charges $ 188 $ 195 $ 212 $ 239 $ 261
Income:
Income from continuing operations
before income taxes and distributions
on preferred securities of subsidiary
trust (2) $ 827 $ 690 $ 623 $ 470 $ 412
Fixed charges 188 195 212 239 261
Eliminate equity in undistributed pretax
income of finance subsidiaries (259) (248) (225) (195) (177)
Adjusted income $ 756 $ 637 $ 610 $ 514 $ 496
Ratio of income to fixed charges 4.02 3.27 2.88 2.15 1.90
</TABLE>
________________________
(1) Includes interest unrelated to borrowings of $11 million in 1996, $23
million in 1995, $27 million in 1994, $25 million in 1993, and $30
million in 1992.
(2) Excludes the cumulative effect of changes in accounting principles in
1992.
<TABLE>
EXHIBIT 12.2
TEXTRON INC. INCLUDING ALL MAJORITY-OWNED SUBSIDIARIES
COMPUTATION OF RATIO OF INCOME TO COMBINED FIXED
CHARGES AND PREFERRED STOCK DIVIDENDS
(Unaudited)
(In millions except ratios)
<CAPTION>
Year
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Fixed charges:
Interest expense (1) $ 731 $ 791 $ 651 $ 650 $ 731
Distributions on preferred securities of
subsidiary trust, net of income taxes 23 - - - -
Estimated interest portion of rents 35 34 36 38 36
Total fixed charges $ 789 $ 825 $ 687 $ 688 $ 767
Income:
Income from continuing operations
before income taxes and distributions
on preferred securities of subsidiary
trust (2) $ 827 $ 690 $ 623 $ 470 $ 412
Fixed charges 789 825 687 688 767
Adjusted income $1,616 $1,515 $1,310 $1,158 $1,179
Ratio of income to fixed charges 2.05 1.84 1.91 1.68 1.54
</TABLE>
________________________
(1) Includes interest unrelated to borrowings of $11 million in 1996, $23
million in 1995, $27 million in 1994, $25 million in 1993, and $30
million in 1992.
(2) Excludes the cumulative effect of changes in accounting principles in
1992.
<PAGE> 23
- -------------------------------------------------------------------------------
Business Segment Data
For a description of the businesses comprising each segment, see pages 54 and
55.
<TABLE>
<CAPTION>
Revenues Operating Income Operating Income Margins
--------------------------- ------------------------- ------------------------
(In millions) 1996 1995 1994 1996 1995 1994 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Aircraft $2,703 $2,519 $2,290 $ 271 $ 245 $ 197 10.0% 9.7% 8.6%
Automotive 1,627 1,534 1,511 146 135 132 9.0 8.8 8.7
Industrial 2,196 1,560 1,539 233 177 157 10.6 11.3 10.2
Systems and Components 653 855 1,338 57 65 88 8.7 7.6 6.6
Finance 2,095 1,985 1,672 383 365 331 18.3 18.4 19.8
- ---------------------------------------------------------------------------------------------------------------------
$9,274 $8,453 $8,350 1,090 987 905 11.8 11.7 10.8
- ------------------------------===========================------------------------------------------------------------
Corporate expenses and
other - net (115) (119) (92)
Interest expense - net (148) (178) (190)
- ----------------------------------------------------------------------------------------
Income from continuing
operations before income
taxes<F*> $ 827 $ 690 $ 623
========================================================================================
<FN>
<F*>Before distributions on preferred securities of subsidiary trust in 1996.
Income of the Finance segment is net of interest expense.
Prior year amounts have been reclassified to conform to the current year's
segment presentation as more fully described on page 24.
</TABLE>
1996 Revenues - $9.3 billion 1996 Operating Income - $1.1 billion
- -------------------------------- ----------------------------------------
[GRAPH] [GRAPH]
Aircraft 29% Aircraft 25%
Automotive 17% Automotive 14%
Industrial 24% Industrial 21%
Systems & Components 7% Systems & Components 5%
Finance 23% Finance 35%
<TABLE>
<CAPTION>
Identifiable Assets Capital Expenditures Depreciation
---------------------------- ----------------------- ---------------------
(In millions) 1996 1995 1994 1996 1995 1994 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Aircraft $ 1,896 $ 1,782 $ 1,680 $119 $ 75 $ 79 $ 55 $ 50 $ 50
Automotive 1,020 861 849 60 78 85 41 39 37
Industrial 1,811 1,372 975 110 81 76 76 50 47
Systems and Components 604 963 1,067 17 18 24 26 31 50
Finance 11,409 10,816 9,900 34 23 22 21 20 18
- ---------------------------------------------------------------------------------------------------------------------
Corporate, including
investment in discontinued
operation 1,742 1,932 1,665 3 4 8 4 5 4
Eliminations (247) (75) (33) - - - - - -
- ---------------------------------------------------------------------------------------------------------------------
$18,235 $17,651 $16,103 $343 $279 $294 $223 $195 $206
=====================================================================================================================
Prior year amounts have been reclassified to conform to the current year's
segment presentation as more fully described on page 24.
</TABLE>
T E X T R O N 2 3
<PAGE> 24
- -------------------------------------------------------------------------------
Management's Discussion and Analysis
Results of Operations
Revenues
[GRAPH]
Year 1994 1995 1996
Amount ($ in millions) $8,350 $8,453 $9,274
Change from prior year 6% 1% 10%
Earnings
per Share<F*>
[GRAPH]
[FN]
<F*>from continuing operations
Year 1994 1995 1996
Amount ($ in millions) $4.06 $4.79 $5.60
Change from prior year 22% 18% 17%
Aircraft
Revenues
[GRAPH]
Year 1994 1995 1996
Amount ($ in millions) $2,290 $2,519 $2,703
Change from prior year 10% 10% 7%
Operating
Income
[GRAPH]
Year 1994 1995 1996
Amount ($ in millions) $197 $245 $271
Change from prior year 22% 24% 11%
Textron Inc.
1996 vs. 1995
*Earnings per share from continuing operations in 1996 were $5.60 per share,
up 17% from the 1995 amount of $4.79. Income from continuing operations in
1996 of $482 million was up from $416 million for 1995. Revenues increased
10% to $9.3 billion in 1996 from $8.5 billion in 1995. Net income in 1996 was
$253 million vs. $479 million in 1995, reflecting the impact of a $229
million loss from discontinued operation in 1996.
*Operating income of Textron's five business segments aggregated $1.1 billion
in 1996, up 10% from 1995, as a result of continued improved financial
results of its four core business segments - Aircraft, Automotive,
Industrial, and Finance.
*The lower interest of the Parent Group - $148 million in 1996 vs. $178
million in 1995 - was due to lower average debt, due in part to the payment
of debt with the proceeds from the issuance of preferred securities in
February 1996.
*Business segment data for prior years has been reclassified to reflect the
transfer of certain businesses to the Aircraft and Industrial segments to
better align the overall groupings of businesses with the markets they serve.
The Aircraft segment now includes Textron Lycoming and the Industrial segment
now includes HR Textron and the metal cutting business of Randall.
1995 vs. 1994
*Earnings per share from continuing operations in 1995 were $4.79 per share,
up 18% from the 1994 amount of $4.06. Income from continuing operations in
1995 of $416 million was up from $366 million in 1994. Revenues increased 1%
to $8.5 billion in 1995. Excluding the effects of the Textron Lycoming
Turbine Engine and Homelite divisions, which were sold in 1994, revenues were
up 9%. Net income in 1995 was $479 million vs. $433 million in 1994.
*Operating income of Textron's five business segments aggregated $1.0 billion
in 1995, up 9% from 1994. An increase of 15% in the aggregate income of the
Aircraft, Industrial, and Finance segments more than offset lower results in
the Systems and Components segment. Operating income in the Automotive
segment was essentially unchanged.
*Corporate expenses and other - net increased in 1995 by $27 million due in
large part to an increase in compensation expense tied directly to changes in
the market value of Textron's common stock ($17 million). To mitigate the
impact on compensation expense of future increases in stock price, Textron
entered into a cash-settlement option program on Textron's common stock in
November 1995.
*The lower interest expense of the Parent Group - $178 million in 1995 vs.
$192 million in 1994 - reflected a lower level of average borrowing,
notwithstanding the incremental borrowing associated with acquisitions in the
fourth quarter of 1995, partially offset by an increased cost of borrowing.
Aircraft
1996 vs. 1995
The Aircraft segment's revenues and income increased $184 million (7%) and
$26 million (11%), respectively.
*Bell Helicopter's revenues decreased primarily as a result of lower sales of
military helicopters to the U.S. government ($136 million) and lower revenues
on the V-22 program ($69 million), partially offset by higher domestic and
international helicopter sales, including increased deliveries on the
Canadian Forces contract ($119 million), and increased military and
commercial spares sales ($41 million). Bell's income decreased slightly, as
the impact of lower revenues and costs associated with the introduction of
new commercial aircraft models was partially offset by additional income on
the V-22 program.
2 4 T E X T R O N
<PAGE> 25
- -------------------------------------------------------------------------------
Automotive
Revenues
[GRAPH]
Year 1994 1995 1996
Amount ($ in millions) $1,511 $1,534 $1,627
Change from prior year 28% 2% 6%
Operating
Income
[GRAPH]
Year 1994 1995 1996
Amount ($ in millions) $132 $135 $146
Change from prior year 48% 2% 8%
Industrial
Revenues
[GRAPH]
Year 1994 1995 1996
Amount ($ in millions) $1,539 $1,560 $2,196
Change from prior year 13% 1% 41%
Operating
Income
[GRAPH]
Year 1994 1995 1996
Amount ($ in millions) $157 $177 $233
Change from prior year 21% 13% 32%
*Cessna's revenues increased primarily as a result of higher sales of
business jets, principally the Citation X and Citation VII models, 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.
1995 vs. 1994
The Aircraft segment's revenues and income increased $229 million (10%) and
$48 million (24%), respectively.
*Bell Helicopter's revenues increased, primarily as a result of higher
international aircraft sales ($199 million) and higher revenues under the
V-22 engineering and manufacturing development contract ($97 million),
partially offset by lower sales to foreign military customers and to the U.S.
government ($95 million). Bell's income increased primarily as a result of
the higher revenues.
*Cessna's revenues and income increased primarily as a result of higher sales
of utility turboprop aircraft. Increased product development expenses,
principally related to the Bravo and Excel Citation aircraft ($32 million),
were partially offset by reduced JPATS bid and proposal expenses and product
support costs ($23 million).
Automotive
1996 vs. 1995
The Automotive segment's revenues increased $93 million (6%) and income
increased $11 million (8%). The improved results reflected the increased
production of models with Textron content, particularly light trucks at
Chrysler, and the benefits of the acquisitions of Valeo Wiper Systems and the
remaining 50% of a joint venture in Born, Netherlands.
Excluding the impact of the 1997 acquisition of Kautex, automotive sales are
expected to be lower in 1997 than in 1996 as a result of the timing of
replacement business and customer launches. The Kautex acquisition will more
than offset the impact of these lower sales and will contribute positively to
income, albeit at lower margins.
1995 vs. 1994
The Automotive segment's revenues increased $23 million (2%) despite a
reduction in North American automotive production, due to higher production
of models with Textron content. Income increased $3 million (2%), due to the
higher sales, partially offset by start-up costs related to the launch of new
products and facilities.
Industrial
1996 vs. 1995
The Industrial segment's revenues increased $636 million (41%) and income
increased $56 million (32%). The increases were principally due to higher
sales in the fastening systems business ($558 million), reflecting the fourth
quarter 1995 acquisitions of Elco Industries and Boesner, and the first half
1996 acquisitions of Textron Industries S.A.S. and Xact Products. In
addition, the year's results benefited from higher sales and improved
performance at E-Z-GO, and continued strong performance in the contractor
tool business, including the contribution from the Klauke acquisition.
1995 vs. 1994
The Industrial segment's revenues increased $21 million (1%) and income
increased $20 million (13%). The increases were due principally to higher
sales in the fastening systems business ($162 million), reflecting Avdel's
results for the full year in 1995 compared with nine months in 1994, and the
acquisition of Elco Industries in October 1995. In addition, sales were
higher and performance was better in the turf care equipment and contractor
tool businesses. Partially offsetting these increases was the divestiture of
the Homelite division in August 1994 ($189 million of sales and $14 million
of income). Excluding the impact of Homelite, revenues and income increased
16% and 24%, respectively.
T E X T R O N 2 5
<PAGE> 26
- -------------------------------------------------------------------------------
Systems and
Components
Revenues
[GRAPH]
Year 1994 1995 1996
Total $1,338 $855 $653
Change from prior year (19%) (36%) (24%)
Operating
Income
[GRAPH]
Year 1994 1995 1996
Amount ($ in millions) $88 $65 $57
Change from prior year (25%) (26%) (12%)
Finance
Revenues
[GRAPH]
Year 1994 1995 1996
Total $1,672 $1,985 $2,095
Change from prior year 4% 19% 6%
Operating
Income
[GRAPH]
Year 1994 1995 1996
Amount ($ in millions) $331 $365 $383
Change from prior year 15% 10% 5%
Systems and Components
1996 vs. 1995
The Systems and Components segment's revenues and income decreased $202
million (24%) and $8 million (12%), respectively, due principally to reduced
shipments on certain U.S. government and commercial aerospace contracts and
the impact of the divestiture of the Textron Aerostructures division in the
third quarter of 1996.
1995 vs. 1994
The Systems and Components segment's revenues decreased $483 million (36%)
and income decreased $23 million (26%). The decrease in revenues was due to
the divestiture of the Lycoming Turbine Engine division ($379 million) and to
reduced shipments on certain U.S. government and commercial aerospace
contracts. The income decrease was also due to the October 1994 divestiture
of Lycoming Turbine Engine ($30 million, the after-tax effect of which was
immaterial to net income due to the nontax deductibility of goodwill). These
unfavorable factors were partially offset by provisions in 1994 for legal
matters and the consolidation of certain manufacturing operations ($22
million).
Finance
1996 vs. 1995
The Finance segment's revenues increased $110 million (6%), while income
increased $18 million (5%).
*Avco Financial Services' (AFS) revenues increased $96 million, primarily as
a result of an increase in yields on finance receivables (18.52% in 1996 vs.
18.20% in 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 $11 million due to those factors, a decrease in the
average cost of borrowed funds (6.88% in 1996 vs. 7.32% in 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 (2.82% in 1996 vs. 2.10% in
1995) and the strengthening of the allowance for credit losses (3.01% of
average finance receivables at December 31, 1996 vs. 2.82% at December 31,
1995), and an increase in the ratio of insurance losses to earned insurance
premiums.
The general proliferation of credit cards and the resulting increase in the
level of consumer debt in the U.S. and Canada has continued to burden the
consumer finance customer, resulting in higher delinquencies and charge-offs,
and has provided the consumer an alternate source of funds, thereby reducing
AFS' receivable growth.
*Textron Financial Corporation's (TFC) income increased $7 million on higher
revenues of $14 million, due to a higher level of finance receivables
(average receivables were $3.036 billion in 1996 vs. $2.839 billion in 1995)
and higher fee income, partially offset by lower yields (10.03% in 1996 and
10.34% in 1995) predominantly on floating rate receivables, reflecting a
decline in the prevailing interest rate environment. The income increase
reflected the higher revenues, partially offset by a higher provision for
loan losses, principally due to charge-offs of nonperforming equipment loans.
1995 vs. 1994
The Finance segment's revenues increased $313 million (19%), while income
increased $34 million (10%).
*AFS' revenues increased $276 million due primarily to (a) a higher level of
finance receivables outstanding (average receivables were $6.867 billion in
1995 vs. $5.696 billion in 1994), (b) an increase in earned insurance
premiums ($62 million), and (c) an increase in investment income ($11
million), due primarily to higher yields (7.78% in 1995 vs. 7.06% in 1994)
and a higher level of invested assets. These higher revenues were partially
offset by a decrease in yields on finance receivables (18.20% in 1995 vs.
18.39% in 1994), due primarily to an increase in the level of retail
installment contracts outstanding. AFS' income increased $28 million, due
primarily to those factors and a decrease in the ratio of operating expenses
to revenues (32.25% in 1995 vs. 33.67% in 1994). This favorable impact was
partially offset by an increase in the average cost of borrowed funds (7.32%
in 1995 vs. 6.63% in 1994) and an increase in the
2 6 T E X T R O N
<PAGE> 27
- -------------------------------------------------------------------------------
ratio of net credit losses to average finance receivables (2.10% in 1995 vs.
1.99% in 1994). The increase in delinquencies and net credit losses, which began
during the latter part of 1995, was due to economic slowdowns in the U.S. and
other countries in which AFS operates.
*TFC's income increased $6 million on higher revenues of $37 million
primarily due to (a) higher yields on finance receivables (10.34% in 1995 vs.
9.45% in 1994), (b) a higher level of finance receivables outstanding
(average receivables were $2.839 billion in 1995 vs. $2.641 billion in 1994),
and (c) a lower provision for loan losses ($6 million), reflecting an
improvement in the equipment portfolio and stabilization of nonperforming
real estate assets. These factors were partially offset by increased interest
expense.
Liquidity &
Capital Resources
Financing for Textron is conducted through two borrowing groups: The Textron
Parent Company Borrowing Group (Parent Group) and Textron's finance
subsidiaries (Finance Group). Each group's debt is supported by its own
respective assets and cash flows. The liquidity and capital resources of
Textron's operations are best understood by separately considering its
independent borrowing groups.
The Parent Group consists of all entities of Textron (primarily
manufacturing) other than its finance subsidiaries. The Finance Group
consists of Textron's finance subsidiaries - AFS and TFC.
Parent Group
Management believes that the Parent Group will continue to have adequate
access to credit markets and that its credit facilities and cash flows from
operations--including dividends received from the Finance Group - will
continue to be more than sufficient to meet its operating needs and to
finance growth. Information about the cash flows of this group is set forth
in its statement of cash flows on page 37.
*Cash flows from operating activities in 1996 of $576 million were up from
the 1995 level primarily due to increased income from continuing operations.
*The Group's debt decreased by $267 million in 1996, as cash provided by
operations, the issuance of preferred securities, and the sale of Textron
Aerostructures exceeded cash used for (a) capital expenditures,
(b) repurchases of Textron common stock, (c) financing acquisitions, and
(d) payments of dividends. The Parent Group's ratio of debt to total
capital decreased to 29% at year-end 1996, from 34% at year-end 1995.
*Capital expenditures: See the table on page 23 for capital expenditures by
business segment for 1996, 1995, and 1994. Such expenditures continue to
reflect Textron's growth strategy in its Aircraft, Automotive, and Industrial
segments. Including the effect of 1997 acquisitions, aggregate capital
expenditures for 1997 are expected to exceed the level of spending in 1996,
as Textron invests in new Cessna aircraft models in the Aircraft segment and
increased capacity and improved manufacturing productivity in the Industrial
and Automotive segments.
*Acquisitions: During the three year period ended December 28, 1996, the
Parent Group acquired nine entities for an aggregate of approximately $620
million including the assumption of certain liabilities. The acquisitions
were accounted for as purchases and accordingly, the results of operations of
each acquired company is included in the statement of income from the date of
acquisition. In early 1997, the Parent Group acquired the Kautex Group and
Maag Pump Systems for an aggregate of approximately $390 million including
the assumption of certain liabilities.
*Dispositions: In September 1996, the Parent Group sold its Aerostructures
division for $180 million in cash plus a subordinated note. In 1994, the
Parent Group sold its Homelite and Lycoming Turbine Engine divisions; cash
proceeds aggregated $495 million.
On April 29, 1996, The Paul Revere Corporation, an 83.3% owned subsidiary,
entered into an agreement with Provident Companies, Inc. whereby Provident
will acquire all of the outstanding shares of Paul Revere's common stock. The
agreement was revised in November 1996. For each of its Paul Revere shares,
Textron will receive approximately $20 per share in cash ($750 million) and
shares of Provident common stock.
Textron has 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. Proceeds are expected
to be used for
T E X T R O N 2 7
<PAGE> 28
- -------------------------------------------------------------------------------
general corporate purposes including debt reduction, purchases of Textron common
stock, and financing acquisitions. The final determination of the required
capital contribution to Paul Revere and the share value of Provident stock
received by Textron at closing will affect Textron's reported loss from
discontinued operation in 1997. The transaction remains subject to the approval
of the Commonwealth of Massachusetts Division of Insurance. The transaction is
targeted to close early in 1997. For further information, see Note 2 to the
consolidated financial statements.
*Share repurchase program: In September 1996, Textron's Board of Directors
authorized the repurchase of an additional five million shares of common
stock under its share repurchase program. Textron has approximately seven
million shares remaining under its share repurchase program.
*Debt and credit facilities: The Parent Group has a $1.5 billion domestic
credit facility with 36 banks. At year-end 1996, $889 million of the credit
facility was not used or reserved as support for commercial paper or bank
borrowings. During 1996, Textron entered into two separate five-year multi-
currency credit agreements with 25 banks aggregating $800 million to be
used for its foreign operations. At year-end 1996, approximately 65% of total
foreign currency borrowings of $267 million under these facilities were
denominated in French francs.
In February 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. Also in February 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 used by Textron for the repayment of long-term borrowings.
Textron had $511 million available at year-end 1996 under its shelf
registration statement with the Securities and Exchange Commission.
*Interest rate exchange agreements: The difference between the variable rate
the Parent Group received and the fixed rate it paid on interest rate exchange
agreements increased its reported interest expense by $12 million in 1996, $14
million in 1995, and $27 million in 1994.
Finance Group
Information about the cash flows of this Group is set forth in its statement
of cash flows on page 37.
*Dividends: The amount of the net assets of the Finance Group available for
cash dividends and other payments to the Parent Group is governed by the
terms of lending agreements. The Finance Group paid dividends to the Parent
Group of $124 million, $117 million, and $106 million in 1996, 1995, and
1994, respectively.
*Capital resources: AFS and TFC each utilize a broad base of financial
sources for their respective liquidity and capital requirements. Cash is
provided from both operations and several different sources of borrowings,
including unsecured borrowings under bank lines of credit, the issuance of
commercial paper and short-term bank debt, and sales of medium- and long-term
debt in the U.S. and foreign financial markets. During 1996, the net proceeds
from medium- and long-term financing sources, including the issuances
described below, totaled $1.2 billion. Debt increased by $402 million in
1996, due principally to receivable growth.
*Debt and credit facilities: During 1996, AFS issued $839 million of
unsecured debt securities, including $337 million under its shelf
registration statements. At year-end 1996, AFS had $1.0 billion available for
unsecured debt securities under its shelf registration statement with the
Securities and Exchange Commission and $547 million available for similar
securities under its shelf registration statement with the Canadian
provincial security exchanges.
TFC has a medium-term note facility for $500 million; $292 million was
available at year-end 1996.
2 8 T E X T R O N
<PAGE> 29
- -------------------------------------------------------------------------------
By utilizing medium- and long-term fixed rate financing, as well as interest
rate exchange agreements, Textron's Finance Group effectively had a combined
ratio of variable rate debt to total debt of 51% at year-end 1996.
*Acquisitions: During the three year period ended December 31, 1996, the
Finance Group acquired (a) Insurex Canada Inc., (b) Tuckahoe Leasing Inc.,
and (c) HFC of Australia Ltd. for an aggregate of approximately $50 million.
*Interest rate exchange agreements: The difference between the variable rate
the Finance Group received and the fixed rate it paid on interest rate exchange
agreements increased its reported interest expense by $19 million in 1996, $13
million in 1995, and $21 million in 1994.
*Investment in real estate: The Finance Group has substantial amounts of
finance receivables backed up or secured by real estate, including leveraged
leases which were approximately 70% collaterized by real estate. Residential
real estate loans are geographically dispersed and loan amounts are limited
to a maximum of 85% of the property's appraised market value, although most
loans are made at significantly lower loan to value ratios. Commercial real
estate loans consist principally of first mortgages on income producing
properties and are diversified both geographically and by type of property
financed. Nonearning commercial real estate loans were $60 million at
year-end 1996 ($72 million at year-end 1995). For further information about
finance receivables, see Note 4 to the consolidated financial statements.
Foreclosed real estate: At year-end 1996, real estate classified in other
assets aggregated $66 million ($71 million at year-end 1995).
Reserves for nonperforming real estate: While realization of nonperforming
real estate assets is subject to uncertainties including prevailing economic
conditions and the status of the real estate market, Textron believes that
its reserves have been determined on reasonable bases and are adequate.
Subsequent evaluations of nonperforming assets, in light of factors then
prevailing, including economic conditions, may require increases in the
reserves for such assets.
*FAS 125: In June 1996, the Financial Accounting Standards Board issued
Statement No. 125, "Accounting for Transfers and Servicing of Financial
Assets and Extinguishments of Liabilities" (FAS 125). FAS 125, which is
effective for transfers and servicing of financial assets and extinguishments
of liabilities occurring after December 31, 1996, is not expected to have a
material impact on Textron's results of operations or cash flows.
Other Matters
*Net deferred tax assets: Textron has recognized net deferred tax assets of
$327 million at year-end 1996 attributable to temporary differences between
the financial reporting basis and income tax basis of certain assets and
liabilities. Management believes that such net deferred tax assets will be
realized based on Textron's history of earnings and its expectations for the
future.
*Interest rate management: Textron uses interest rate exchange agreements to
help manage interest rate risk by converting certain variable-rate debt to
fixed-rate debt. The agreements do not involve a high degree of complexity or
risk and are not used to speculate for profit. For further information about
these agreements and the debt and credit facilities of the Parent Group and
the Finance Group, see Note 9 and Note 10 to the consolidated financial
statements.
*Foreign currency rate management: Textron uses foreign currency forward
exchange contracts to manage exposures to changes in currency exchange rates
associated with firm commitments for commercial purchase and sale
transactions. Those financial instruments generally are used to fix the local
currency cost of purchased goods or services or selling prices denominated in
currencies other than the functional currency. Exchange rate exposures that
result from net investments in foreign affiliates are managed principally by
funding certain local currency denominated assets with debt denominated in
those same currencies.
T E X T R O N 2 9
<PAGE> 30
- -------------------------------------------------------------------------------
*Environmental: Textron is involved in a number of remedial actions under
various federal and state laws and regulations relating to the environment
which impose liability on companies to clean up, or contribute to the cost of
cleaning up, sites on which their hazardous wastes or materials were disposed
or released. Expenditures to evaluate and remediate contaminated sites
approximated $12 million, $15 million, and $14 million in 1996, 1995, and
1994, respectively. Textron currently projects that expenditures for
remediation will range between $10 million and $20 million for each of the
years 1997 and 1998.
In October 1996, the Accounting Standards Executive Committee issued
Statement of Position, "Environmental Remediation Liabilities" (SOP 96-1).
The SOP provides an overview of federal environmental laws, accounting
guidance on issues relating to the recognition, measurement, and disclosure
of environmental liabilities, and audit guidance. The adoption of SOP 96-1 at
the beginning of 1997 will not have a material effect on Textron's liquidity,
net income, or financial condition. For further information about
environmental matters, see Note 19 to the consolidated financial statements.
*Backlog: Textron's commercial backlog was $3.1 billion and U.S. government
backlog was $2.2 billion and $1.7 billion at the end of 1996 and 1995,
respectively. Backlog for the Aircraft segment was approximately 73% of
Textron's commercial backlog and 71% and 72% of Textron's U.S. government
backlog at the end of 1996 and 1995, respectively.
*Foreign military sales: Certain of Textron's products are sold through the
Department of Defense's Foreign Military Sales Program. In addition, Textron
sells directly to select foreign military organizations, primarily Canada.
Sales under these programs totaled approximately 4.7% of Textron's
consolidated revenues in 1996 and 5.0% in 1995. Such sales, which include
spare parts, are made only after approval of applicable United States
Government Agencies.
3 0 T E X T R O N
<PAGE> 31
- -------------------------------------------------------------------------------
Report of
Management
The consolidated financial statements of Textron Inc. have been prepared by
management and have been audited by Textron's independent auditors, Ernst &
Young LLP, whose report appears below. Management is responsible for the
consolidated financial statements, which have been prepared in conformity
with generally accepted accounting principles and include amounts based on
management's best estimates and judgments.
Management is also responsible for maintaining internal control systems
designed to provide reasonable assurance, at appropriate cost, that assets
are safeguarded and that transactions are executed and recorded in accordance
with established policies and procedures. Textron's systems are under
continuing review and are supported by, among other things, business conduct
and other written guidelines, an internal audit function and the selection
and training of qualified personnel.
The Board of Directors, through its Audit Committee, oversees management's
financial reporting responsibilities. The Audit Committee, comprised of four
outside directors, meets regularly with the independent auditors,
representatives of management and the internal auditors to discuss and make
inquiries into their activities. Both the independent auditors and the
internal auditors have free access to the Audit Committee, with and without
management representatives in attendance.
/s/ James F. Hardymon /s/ Lewis B. Campbell
James F. Hardymon Lewis B. Campbell
Chairman and Chief Executive Officer President and Chief Operating Officer
/s/ Stephen L. Key
Stephen L. Key
Executive Vice President and Chief Financial Officer
January 23, 1997
- -------------------------------------------------------------------------------
Report of
Independent Auditors
To the Board of Directors and Shareholders
Textron Inc.
We have audited the accompanying consolidated balance sheet of Textron Inc.
as of December 28, 1996 and December 30, 1995, and the related consolidated
statements of income, cash flows and changes in shareholders' equity for each
of the three years in the period ended December 28, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Textron Inc. at
December 28, 1996 and December 30, 1995, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
December 28, 1996, in conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
Boston, Massachusetts
January 23, 1997
T E X T R O N 3 1
<PAGE> 32
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Statement of Income
For each of the three years in the period ended December 28, 1996
Consolidated
------------------------------------------
(In millions except per share amounts) 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues
Manufacturing sales $7,179 $6,468 $6,680
Finance revenues 2,095 1,985 1,672
- ------------------------------------------------------------------------------------------------------------------------------------
Total revenues 9,274 8,453 8,352
- ------------------------------------------------------------------------------------------------------------------------------------
Costs and expenses
Cost of sales 5,837 5,294 5,514
Selling and administrative 1,374 1,274 1,212
Interest 731 791 651
Provision for losses on collection of finance receivables 230 169 162
Other 275 235 190
- ------------------------------------------------------------------------------------------------------------------------------------
Total costs and expenses 8,447 7,763 7,729
- ------------------------------------------------------------------------------------------------------------------------------------
827 690 623
Pretax income of the Finance Group - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Income from continuing operations before income taxes
and distributions on preferred securities of subsidiary trust 827 690 623
Income taxes (322) (274) (257)
Distributions on preferred securities of subsidiary trust,
net of income taxes (23) - -
- ------------------------------------------------------------------------------------------------------------------------------------
Income from continuing operations 482 416 366
Discontinued operation, net of income taxes:
Income from operations 16 63 67
Estimated loss on disposal (245) - -
- ------------------------------------------------------------------------------------------------------------------------------------
(229) 63 67
Net income $ 253 $ 479 $ 433
====================================================================================================================================
Per common share:
Income from continuing operations $ 5.60 $ 4.79 $ 4.06
Discontinued operation (2.66) .72 .74
========================================================================================================================
Net income $ 2.94 $ 5.51 $ 4.80
========================================================================================================================
<FN>
<F*>"Parent Group" includes all entities of Textron (primarily manufacturing)
other than its finance subsidiaries. The Parent Group's investment in
Textron's finance subsidiaries is reflected on a one-line basis under the
equity method of accounting. "Finance Group" consists of Textron's
wholly-owned finance subsidiaries, AFS and TFC. All significant transactions
between the Parent Group and the Finance Group have been eliminated from the
"Consolidated" column. The principles of consolidation are described in Note
1 to the consolidated financial statements.
The fiscal year-end for the Finance Group is December 31 for all periods
presented.
See notes to the consolidated financial statements.
3 2 T E X T R O N
<PAGE> 33
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Statement of Income
For each of the three years in the period ended December 28, 1996
Parent Group<F*> Finance Group
- --------------------------------------------------------------------------------------------------------------------------
(In millions except per share amounts) 1996 1995 1994 1996 1995 1994
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Revenues
Manufacturing sales $7,179 $6,468 $6,680 $ - $ - $ -
Finance revenues - - - 2,095 1,985 1,672
- --------------------------------------------------------------------------------------------------------------------------
Total revenues 7,179 6,468 6,680 2,095 1,985 1,672
- --------------------------------------------------------------------------------------------------------------------------
Costs and expenses
Cost of sales 5,837 5,294 5,514 - - -
Selling and administrative 750 671 682 624 603 530
Interest 148 178 192 583 613 459
Provision for losses on collection of finance receivables - - - 230 169 162
Other - - - 275 235 190
- --------------------------------------------------------------------------------------------------------------------------
Total costs and expenses 6,735 6,143 6,388 1,712 1,620 1,341
- --------------------------------------------------------------------------------------------------------------------------
444 325 292 383 365 331
Pretax income of the Finance Group 383 365 331 - - -
- --------------------------------------------------------------------------------------------------------------------------
Income from continuing operations before income taxes and
distributions on preferred securities of subsidiary trust 827 690 623 383 365 331
Income taxes (322) (274) (257) (149) (142) (128)
Distributions on preferred securities of subsidiary trust,
net of income taxes (23) - - - - -
- --------------------------------------------------------------------------------------------------------------------------
Income from continuing operations 482 416 366 234 223 203
Discontinued operation, net of income taxes:
Income from operations 16 63 67 - - -
Estimated loss on disposal (245) - - - - -
- --------------------------------------------------------------------------------------------------------------------------
(229) 63 67 - - -
Net income $ 253 $ 479 $ 433 $ 234 $ 223 $ 203
==========================================================================================================================
<FN>
<F*>"Parent Group" includes all entities of Textron (primarily manufacturing)
other than its finance subsidiaries. The Parent Group's investment in
Textron's finance subsidiaries is reflected on a one-line basis under the
equity method of accounting. "Finance Group" consists of Textron's
wholly-owned finance subsidiaries, AFS and TFC. All significant transactions
between the Parent Group and the Finance Group have been eliminated from the
"Consolidated" column. The principles of consolidation are described in Note
1 to the consolidated financial statements.
The fiscal year-end for the Finance Group is December 31 for all periods
presented.
See notes to the consolidated financial statements.
</TABLE>
T E X T R O N 3 3
<PAGE> 34
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Balance Sheet
As of December 28, 1996 and December 30, 1995 Consolidated
-----------------------------------------------------
(Dollars in millions) 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash $ 47 $ 84
Investments 820 778
Receivables - net:
Finance 9,856 9,362
Commercial and U.S. government 882 777
- ------------------------------------------------------------------------------------------------------------------------------------
10,738 10,139
Inventories 1,192 1,284
Investments in Finance Group - -
Investment in discontinued operation 770 1,118
Property, plant, and equipment - net 1,539 1,373
Goodwill - net 1,609 1,491
Other (including net prepaid income taxes) 1,520 1,384
- ------------------------------------------------------------------------------------------------------------------------------------
Total Assets $18,235 $17,651
====================================================================================================================================
Liabilities and shareholders' equity
Liabilities
Accounts payable $ 850 $ 684
Accrued postretirement benefits other than pensions 817 919
Other accrued liabilities (including income taxes) 2,556 2,425
Debt 10,346 10,211
- ------------------------------------------------------------------------------------------------------------------------------------
Total Liabilities 14,569 14,239
====================================================================================================================================
Textron - Obligated mandatorily redeemable preferred
securities of subsidiary trust holding
solely Textron junior subordinated debt securities 483 -
Shareholders' equity
Capital stock:
Preferred stock:
$2.08 Cumulative Convertible Preferred Stock,
Series A (liquidation value - $16) 7 8
$1.40 Convertible Preferred Dividend Stock,
Series B (preferred only as to dividends) 7 7
Common stock (94,456,000 and 93,462,000 shares issued) 12 12
Capital surplus 793 750
Retained earnings 2,969 2,864
Other 7 129
- ------------------------------------------------------------------------------------------------------------------------------------
3,795 3,770
Less cost of treasury shares 612 358
- ------------------------------------------------------------------------------------------------------------------------------------
Total shareholders' equity 3,183 3,412
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $18,235 $17,651
====================================================================================================================================
<FN>
<F*>"Parent Group" includes all entities of Textron (primarily manufacturing)
other than its finance subsidiaries. The Parent Group's investment in
Textron's finance subsidiaries is reflected on a one-line basis under the
equity method of accounting. "Finance Group" consists of Textron's
wholly-owned finance subsidiaries, AFS and TFC. All significant transactions
between the Parent Group and the Finance Group have been eliminated from the
"Consolidated" column. The principles of consolidation are described in Note
1 to the consolidated financial statements.
The fiscal year-end for the Finance Group is December 31 for all periods
presented.
See notes to the consolidated financial statements.
3 4 T E X T R O N
<PAGE> 35
- ------------------------------------------------------------------------------------------------------------
<CAPTION>
Balance Sheet
As of December 28, 1996 and December 30, 1995 Parent Group<F*> Finance Group
- ------------------------------------------------------------------------------------------------------------
(Dollars in millions) 1996 1995 1996 1995
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets
Cash $ 24 $ 56 $ 23 $ 28
Investments 6 7 814 771
Receivables - net:
Finance - - 9,860 9,370
Commercial and U.S. government 882 777 - -
- ------------------------------------------------------------------------------------------------------------
882 777 9,860 9,370
Inventories 1,192 1,284 - -
Investments in Finance Group 1,600 1,475 - -
Investment in discontinued operation 770 1,118 - -
Property, plant, and equipment - net 1,454 1,297 85 76
Goodwill - net 1,466 1,344 143 147
Other (including net prepaid income taxes) 1,263 1,170 484 434
- ------------------------------------------------------------------------------------------------------------
Total assets $8,657 $8,528 $11,409 $10,826
============================================================================================================
Liabilities and shareholders' equity
Liabilities
Accounts payable $ 724 $ 576 $ 130 $ 112
Accrued postretirement benefits other than pensions 782 883 35 36
Other accrued liabilities (including income taxes) 1,978 1,883 805 766
Debt 1,507 1,774 8,839 8,437
- ------------------------------------------------------------------------------------------------------------
Total liabilities 4,991 5,116 9,809 9,351
============================================================================================================
Textron - obligated mandatorily redeemable preferred
securities of subsidiary trust holding solely
Textron junior subordinated debt securities 483 - - -
Shareholders' equity
Capital stock:
Preferred stock:
$2.08 Cumulative Convertible Preferred Stock,
Series A (liquidation value - $16) 7 8 - -
$1.40 Convertible Preferred Dividend Stock,
Series B (preferred only as to dividends) 7 7 - -
Common stock (94,456,000 and 93,462,000 shares issued) 12 12 1 1
Capital surplus 793 750 800 798
Retained earnings 2,969 2,864 787 676
Other 7 129 12 -
- ------------------------------------------------------------------------------------------------------------
3,795 3,770 1,600 1,475
Less cost of treasury shares 612 358 - -
- ------------------------------------------------------------------------------------------------------------
Total shareholders' equity 3,183 3,412 1,600 1,475
- ------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $8,657 $8,528 $11,409 $10,826
============================================================================================================
<FN>
<F*>"Parent Group" includes all entities of Textron (primarily manufacturing)
other than its finance subsidiaries. The Parent Group's investment in
Textron's finance subsidiaries is reflected on a one-line basis under the
equity method of accounting. "Finance Group" consists of Textron's
wholly-owned finance subsidiaries, AFS and TFC. All significant transactions
between the Parent Group and the Finance Group have been eliminated from the
"Consolidated" column. The principles of consolidation are described in Note
1 to the consolidated financial statements.
The fiscal year-end for the Finance Group is December 31 for all periods
presented.
See notes to the consolidated financial statements.
</TABLE>
T E X T R O N 3 5
<PAGE> 36
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Statement of Cash Flows
For each of the three years in the
period ended December 28, 1996 Consolidated
------------------------------------------------------------------------------
(In millions) 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Income from continuing operations $ 482 $ 416 $ 366
Adjustments to reconcile income from
continuing operations to net cash
provided by operating activities:
Undistributed earnings of Finance
Group - - -
Depreciation and amortization 387 342 338
Provision for losses on receivables 233 172 169
Deferred income taxes 11 28 53
Changes in assets and liabilities
excluding those related to
acquisitions and divestitures:
Increase in commercial and U.S.
government receivables (33) (40) (163)
Decrease (increase) in
inventories (33) (28) 64
Decrease (increase) in other
assets (125) 25 (51)
Increase (decrease) in accounts
payable 79 54 86
Increase (decrease) in accrued
liabilities 57 (96) 100
Other - net (82) 35 (28)
- ------------------------------------------------------------------------------------------------------------------------------------
Cash provided by operating activities
of continuing operations 976 908 934
Cash provided by operating activities
of discontinued operation 516 349 314
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating
activities 1,492 1,257 1,248
- ------------------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Purchases of investments (293) (188) (189)
Proceeds from disposition of investments 204 96 65
Maturities and calls of investments 50 55 56
Finance receivables:
Originated or purchased (6,890) (6,237) (6,020)
Repaid or sold 6,310 5,731 4,834
Cash used in acquisitions (224) (252) (9)
Proceeds from sales of businesses 180 - 492
Capital expenditures (343) (279) (294)
Other investing activities - net 25 30 2
- ------------------------------------------------------------------------------------------------------------------------------------
Cash provided (used) by investing
activities of continuing operations (981) (1,044) (1,063)
Cash used by investing activities of
discontinued operation (603) (420) (520)
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash provided (used) by investing
activities (1,584) (1,464) (1,583)
- ------------------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Increase (decrease) in short-term debt 240 (253) 449
Proceeds from issuance of long-term debt 2,089 2,984 2,078
Principal payments on long-term debt (2,438) (2,347) (2,072)
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 42 42 12
Purchases of Textron common stock (266) (100) (166)
Purchases of Textron common stock from
Paul Revere (34) (22) (25)
Dividends paid (148) (133) (124)
Dividends paid to Parent Group - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Cash provided (used) by financing
activities of continuing operations (32) 171 152
Cash provided by financing activities
of discontinued operation 72 86 206
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash provided (used) by financing
activities 40 257 358
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash (52) 50 23
Elimination of cash flow of discontinued
operation 15 (15) -
Cash at beginning of year 84 49 26
- ------------------------------------------------------------------------------------------------------------------------------------
Cash at end of year $ 47 $ 84 $ 49
====================================================================================================================================
Supplemental information from
continuing operations:
Cash paid during the year for interest $ 723 $ 765 $ 624
Cash paid during the year for income taxes 278 276 194
====================================================================================================================================
<FN>
<F*>"Parent Group" includes all entities of Textron (primarily manufacturing)
other than its finance subsidiaries. The Parent Group's investment in
Textron's finance subsidiaries is reflected on a one-line basis under the equity
method of accounting. "Finance Group" consists of Textron's wholly-owned finance
subsidiaries, AFS and TFC. All significant transactions between the Parent Group
and the Finance Group have been eliminated from the "Consolidated" column. The
principles of consolidation are described in Note 1 to the consolidated
financial statements.
The fiscal year-end for the Finance Group is December 31 for all periods
presented.
See notes to the consolidated financial statements.
3 6 T E X T R O N
<PAGE> 37
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Statement of Cash Flows
For each of the three years in the
period ended December 28, 1996 Parent Group<F*> Finance Group
- -------------------------------------------------------------------------------------------------------------------------
(In millions) 1996 1995 1994 1996 1995 1994
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Income from continuing operations $ 482 $ 416 $ 366 $ 234 $ 223 $ 203
Adjustments to reconcile income from
continuing operations to net cash
provided by operating activities:
Undistributed earnings of Finance
Group (110) (106) (97) - - -
Depreciation and amortization 256 221 238 131 121 100
Provision for losses on receivables 3 3 8 230 169 162
Deferred income taxes 5 18 32 6 10 21
Changes in assets and liabilities
excluding those related to
acquisitions and divestitures:
Increase in commercial and U.S.
government receivables (33) (40) (146) - - -
Decrease (increase) in
inventories (33) (28) 64 - - -
Decrease (increase) in other
assets (123) 49 (87) (11) (1) 5
Increase (decrease) in accounts
payable 66 58 76 20 (28) 24
Increase (decrease) in accrued
liabilities 70 (116) 78 (15) (9) 37
Other - net (7) 61 6 (75) (27) (56)
- -------------------------------------------------------------------------------------------------------------------------
Cash provided by operating activities
of continuing operations 576 536 538 520 458 496
Cash provided by operating activities
of discontinued operation - - - - - -
- -------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating
activities 576 536 538 520 458 496
- -------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Purchases of investments (5) (9) (1) (288) (179) (188)
Proceeds from disposition of investments 6 30 9 198 66 56
Maturities and calls of investments - - - 50 55 56
Finance receivables:
Originated or purchased - - - (6,890) (6,237) (6,020)
Repaid or sold - - - 6,314 5,762 4,838
Cash used in acquisitions (216) (212) (9) (8) (40) -
Proceeds from sales of businesses 180 - 492 - - -
Capital expenditures (309) (256) (272) (34) (23) (22)
Other investing activities - net 28 10 5 (3) 20 (2)
- -------------------------------------------------------------------------------------------------------------------------
Cash provided (used) by investing
activities of continuing operations (316) (437) 224 (661) (576) (1,282)
Cash used by investing activities of
discontinued operation - - - - - -
- -------------------------------------------------------------------------------------------------------------------------
Net cash provided (used) by investing
activities (316) (437) 224 (661) (576) (1,282)
- -------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Increase (decrease) in short-term debt (48) (15) (36) 288 (238) 485
Proceeds from issuance of long-term debt 905 1,147 612 1,184 1,837 1,467
Principal payments on long-term debt (1,226) (982) (1,027) (1,212) (1,365) (1,045)
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 42 42 12 - - -
Purchases of Textron common stock (266) (100) (166) - - -
Purchases of Textron common stock from
Paul Revere (34) (22) (25) - - -
Dividends paid (148) (133) (124) - - -
Dividends paid to Parent Group - - - (124) (117) (106)
- -------------------------------------------------------------------------------------------------------------------------
Cash provided (used) by financing
activities of continuing operations (292) (63) (754) 136 117 801
Cash provided by financing activities
of discontinued operation - - - - - -
- -------------------------------------------------------------------------------------------------------------------------
Net cash provided (used) by financing
activities (292) (63) (754) 136 117 801
- -------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash (32) 36 8 (5) (1) 15
Elimination of cash flow of discontinued
operation - - - - - -
Cash at beginning of year 56 20 12 28 29 14
- -------------------------------------------------------------------------------------------------------------------------
Cash at end of year $ 24 $ 56 $ 20 $ 23 $ 28 $ 29
=========================================================================================================================
Supplemental information from
continuing operations:
Cash paid during the year for interest $ 140 $ 161 $ 177 $ 583 $ 604 $ 447
Cash paid during the year for income taxes 142 131 84 136 145 110
=========================================================================================================================
<FN>
<F*>"Parent Group" includes all entities of Textron (primarily manufacturing)
other than its finance subsidiaries. The Parent Group's investment in
Textron's finance subsidiaries is reflected on a one-line basis under the
equity method of accounting. "Finance Group" consists of Textron's
wholly-owned finance subsidiaries, AFS and TFC. All significant transactions
between the Parent Group and the Finance Group have been eliminated from the
"Consolidated" column. The principles of consolidation are described in Note
1 to the consolidated financial statements.
The fiscal year-end for the Finance Group is December 31 for all periods
presented.
See notes to the consolidated financial statements.
</TABLE>
T E X T R O N 3 7
<PAGE> 38
<TABLE>
- --------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Consolidated Statement of Changes in Shareholders' Equity
Shares outstanding<F*> Dollars
(In thousands) (In millions)
---------------------------- --------------------------------
For each of the three years in the
period ended December 28, 1996 1996 1995 1994 1996 1995 1994
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$2.08 Preferred stock
Beginning balance 267 297 321 $ 8 $ 9 $ 9
Conversion to common stock (24) (30) (24) (1) (1) -
- --------------------------------------------------------------------------------------------------------------------------
Ending balance 243 267 297 $ 7 $ 8 $ 9
==========================================================================================================================
$1.40 Preferred stock
Beginning balance 118 126 138 $ 7 $ 7 $ 7
Conversion to common stock (11) (8) (12) - - -
- --------------------------------------------------------------------------------------------------------------------------
Ending balance 107 118 126 $ 7 $ 7 $ 7
==========================================================================================================================
Common stock
Beginning balance 84,935 85,497 88,413 $ 12 $ 12 $ 12
Purchases (3,193) (1,734) (3,346) - - -
Conversion of preferred stock to
common stock 71 81 75 - - -
Exercise of stock options 923 1,091 349 - - -
Other issuances of common stock 73 - 6 - - -
- --------------------------------------------------------------------------------------------------------------------------
Ending balance 82,809 84,935 85,497 $ 12 $ 12 $ 12
==========================================================================================================================
Capital surplus
Beginning balance $ 750 $ 702 $ 687
Conversion of preferred stock to common stock 1 1 1
Exercise of stock options 48 47 14
Purchases of common stock (6) - -
- --------------------------------------------------------------------------------------------------------------------------
Ending balance $ 793 $ 750 $ 702
==========================================================================================================================
Retained earnings
Beginning balance $2,864 $2,518 $2,209
Net income 253 479 433
Dividends declared:
Preferred stock (1) (1) (1)
Common stock (per share: $1.76 in 1996;
$1.56 in 1995; and $1.40 in 1994) (147) (132) (123)
- --------------------------------------------------------------------------------------------------------------------------
Ending balance $2,969 $2,864 $2,518
==========================================================================================================================
Treasury stock
Beginning balance $ 358 $ 258 $ 92
Purchases of common stock 259 100 166
Issuance of common stock for acquisitions (5) - -
- --------------------------------------------------------------------------------------------------------------------------
Ending balance $ 612 $ 358 $ 258
==========================================================================================================================
Other
Beginning balance $ 129 $ (108) $ (52)
Currency translation adjustment 35 5 1
Securities valuation adjustment (155) 216<F**> (71)
Pension liability adjustment (2) 3 -
Shares allocated to ESOP participants' accounts - 13 14
- --------------------------------------------------------------------------------------------------------------------------
Ending balance $ 7 $ 129 $ (108)
==========================================================================================================================
<FN>
<F*>Shares issued at the end of 1996, 1995, 1994, and 1993 were as follows (in
thousands): $2.08 Preferred - 312; 336; 366; and 390 shares, respectively;
$1.40 Preferred - 594; 604; 613; and 625 shares, respectively; Common -
94,456; 93,462; 92,284; and 91,859 shares, respectively.
<F**>Includes net unrealized gains relating to the transfer of all of Paul
Revere's debt securities from the held to maturity category to the available
for sale category of its investment portfolio ($133 million) partially offset
by an adjustment to deferred policy acquisition costs ($73 million).
See notes to consolidated financial statements.
</TABLE>
3 8 T E X T R O N
<PAGE> 39
- ------------------------------------------------------------------------------
Notes to Consolidated Financial Statements
- ------------------------------------------------------------------------------
1. Financial Statement Presentation
Summary of Significant Accounting Policies
SIGNIFICANT ACCOUNTING POLICIES APPEAR IN CAPITAL LETTERS AS AN INTEGRAL
PART OF THE NOTES TO THE FINANCIAL STATEMENTS TO WHICH THE POLICIES RELATE.
Principles of consolidation
The consolidated financial statements include the accounts of Textron and all
of its majority- and wholly-owned subsidiaries. All significant intercompany
transactions are eliminated. Paul Revere is reflected as a discontinued
operation for all periods presented.
Textron consists of two borrowing groups - the Textron Parent Company
Borrowing Group (Parent Group) and Textron's finance subsidiaries (Finance
Group). The Parent Group consists of all entities of Textron (primarily
manufacturing) other than its wholly-owned finance subsidiaries, which are
included on a one-line basis under the equity method of accounting. The
Finance Group consists of Avco Financial Services (AFS) and Textron Financial
Corporation (TFC).
Prior-period data shown in the financial statements and the related notes
have been reclassified, as appropriate.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the amounts reported in these statements and accompanying notes.
Consequently, actual results could differ from such estimates.
- ------------------------------------------------------------------------------
2. Acquisitions, Dispositions, and Discontinued Operation
Acquisitions
In early 1997, Textron acquired the Germany-based Kautex Group, a worldwide
supplier of blow-molded plastic fuel tanks and other automotive components
and systems and Switzerland-based Maag Pump Systems AG and Italy-based Maag
Italia S.p.A., manufacturers of gears, gear pumps, and gear systems for an
aggregate of approximately $390 million.
In 1996, Textron acquired (a) Xact Products Inc., a U.S. based
precision-formed metal parts manufacturer, (b) Valois Industries (which has
been re-named Textron Industries, S.A.S.), a France-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 automotive windshield and headlamp
washer systems business of Valeo Wiper Systems Ltd., (e) The Bunton Company,
a Kentucky-based manufacturer of rotary lawn-care equipment for commercial
markets, (f) Insurex Canada Inc., a provider of insurance premium financing,
(g) Tuckahoe Leasing Inc., a Canadian provider of equipment financing, and
(h) the remaining 50% of a joint venture in Born, Netherlands. The aggregate
cost of these acquisitions was approximately $370 million.
In 1995, Textron acquired (a) Elco Industries, (b) Friedr. Boesner GmbH, and
(c) the stock of HFC of Australia Ltd. for an aggregate of approximately $300
million.
The acquisitions were accounted for as purchases and accordingly, the results
of operations of each acquired company is included in the statement of income
from the date of acquisition.
Dispositions
In 1996, Textron sold its Aerostructures division for $180 million in cash
plus a subordinated note. No gain or loss resulted from the sale. In 1994,
Textron sold its Homelite and Lycoming Turbine Engine divisions for aggregate
cash proceeds of $495 million.
Discontinued operation
On April 29, 1996, The Paul Revere Corporation, an 83.3% owned subsidiary,
entered into an agreement with Provident Companies, Inc. whereby Provident
will acquire all of the outstanding shares of Paul Revere's common stock. For
each of its Paul Revere shares, Textron will receive approximately $20 per
share in cash ($750 million) and shares of Provident common stock 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.
T E X T R O N 39
<PAGE> 40
- ------------------------------------------------------------------------------
In November 1996, the agreement with Provident was revised. 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. The transaction
remains subject to the approval of the Commonwealth of Massachusetts Division
of Insurance. The transaction is targeted to close early in 1997.
Based on the $531/2 closing price of Provident's stock on February 13, 1997,
Textron would receive approximately 5.9 million of Provident shares. Proceeds
are expected to be used for general corporate purposes including debt
reduction, purchases of Textron common stock, and financing acquisitions.
Textron's estimated loss from discontinued operations includes Textron's
share of Paul Revere's estimated net loss for the period April 1996 through
the expected closing date (approximately $165 million). The final
determination of the required capital contribution to Paul Revere and the
share value of Provident stock received by Textron at closing will affect
Textron's reported loss from discontinued operation in 1997. Paul Revere's
revenues for 1996 and 1995 were $1.6 billion and $1.5 billion, respectively.
- ------------------------------------------------------------------------------
3. Investments
SECURITIES CLASSIFIED AS AVAILABLE FOR SALE ARE REPORTED AT ESTIMATED FAIR
VALUE. UNREALIZED GAINS AND LOSSES RELATED TO THESE SECURITIES, NET OF
APPLICABLE INCOME TAXES, ARE REPORTED AS A SEPARATE COMPONENT OF
SHAREHOLDERS' EQUITY. NET REALIZED GAINS OR LOSSES RESULTING FROM SALES OR
CALLS OF INVESTMENTS ARE INCLUDED IN REVENUES AND ARE NOT SIGNIFICANT FOR ALL
YEARS PRESENTED. THE COST OF SECURITIES SOLD IS DETERMINED PRIMARILY USING
THE SPECIFIC IDENTIFICATION METHOD.
The amortized cost and estimated fair value of investments at the end of 1996
and 1995 were as follows:
<TABLE>
<CAPTION>
Gross Gross
Amortized unrealized unrealized Estimated
(In millions) cost gains losses fair value
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
December 28, 1996
Securities available for sale:
Obligations of U.S. and foreign governments
and government agencies $227 $10 $1 $236
Public utility securities 53 1 - 54
Corporate securities 315 4 2 317
Mortgage-backed securities 180 1 1 180
Marketable equity securities 23 2 - 25
- --------------------------------------------------------------------------------------------------------------------
$798 $18 $4 812
=================================================================================================
Other investments, at cost (estimated fair value: $8) 8
- --------------------------------------------------------------------------------------------------------------------
$820
====================================================================================================================
December 30, 1995
Securities available for sale:
Obligations of U.S. and foreign governments
and government agencies $237 $13 $1 $249
Public utility securities 61 2 - 63
Corporate securities 379 16 2 393
Mortgage-backed securities 40 - - 40
Marketable equity securities 21 3 - 24
- --------------------------------------------------------------------------------------------------------------------
$738 $34 $3 769
=================================================================================================
Other investments, at cost (estimated fair value: $9) 9
- --------------------------------------------------------------------------------------------------------------------
$778
====================================================================================================================
</TABLE>
The amortized cost and estimated fair value of debt securities at the end of
1996, grouped by contractual maturity date, were as follows:
<TABLE>
<CAPTION>
Amortized Estimated
(In millions) cost fair value
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Due in 1997 $146 $146
Due 1998 to 2001 260 266
Due 2002 to 2006 133 137
Due after 2006 56 58
- --------------------------------------------------------------------------------------------------------------------
595 607
- --------------------------------------------------------------------------------------------------------------------
Mortgage-backed securities 180 180
- --------------------------------------------------------------------------------------------------------------------
$775 $787
====================================================================================================================
</TABLE>
4 0 T E X T R O N
<PAGE> 41
- ------------------------------------------------------------------------------
4. Finance Receivables
TEXTRON RECOGNIZES INTEREST INCOME IN REVENUES USING THE INTEREST METHOD.
DIRECT LOAN ORIGINATION COSTS AND FEES RECEIVED ARE DEFERRED AND AMORTIZED
OVER THE LOANS' CONTRACTUAL LIVES. TEXTRON SUSPENDS ACCRUAL OF INTEREST
INCOME FOR ACCOUNTS WHICH ARE CONTRACTUALLY DELINQUENT BY MORE THAN THREE
MONTHS (COMMERCIAL) OR THREE PAYMENTS (CONSUMER). ACCRUAL OF INTEREST ON
COMMERCIAL LOANS RESUMES AND SUSPENDED INTEREST INCOME IS RECOGNIZED WHEN
LOANS BECOME CONTRACTUALLY CURRENT. INTEREST INCOME ON DELINQUENT CONSUMER
LOANS IS RECOGNIZED WHEN COLLECTED.
FINANCE RECEIVABLES ARE WRITTEN OFF WHEN THEY ARE DETERMINED TO BE
UNCOLLECTIBLE, BUT IN ANY EVENT, ALL CONSUMER RECEIVABLES FOR WHICH AN AMOUNT
AGGREGATING A FULL CONTRACTUAL PAYMENT HAS NOT BEEN RECEIVED FOR SIX
CONSECUTIVE MONTHS ARE WRITTEN OFF. FINANCE RECEIVABLES, PRIMARILY COMMERCIAL
FINANCE RECEIVABLES AND CONSUMER REAL ESTATE LOANS, ARE WRITTEN DOWN TO THE
FAIR VALUE OF THE RELATED COLLATERAL (LESS ESTIMATED COSTS TO SELL) WHEN THE
COLLATERAL IS REPOSSESSED OR WHEN NO PAYMENT HAS BEEN RECEIVED FOR SIX
MONTHS, UNLESS MANAGEMENT DEEMS THE LOANS COLLECTIBLE. FORECLOSED REAL ESTATE
LOANS AND REPOSSESSED ASSETS ARE TRANSFERRED FROM FINANCE RECEIVABLES TO
OTHER ASSETS AT THE LOWER OF FAIR VALUE (LESS ESTIMATED COSTS TO SELL) OR THE
OUTSTANDING LOAN BALANCE.
PROVISIONS FOR LOSSES ON FINANCE RECEIVABLES ARE CHARGED TO INCOME IN AMOUNTS
SUFFICIENT TO MAINTAIN THE ALLOWANCE AT A LEVEL CONSIDERED ADEQUATE TO COVER
LOSSES IN THE EXISTING RECEIVABLE PORTFOLIO. MANAGEMENT EVALUATES THE
ALLOWANCE BY EXAMINING CURRENT DELINQUENCIES, THE CHARACTERISTICS OF THE
EXISTING ACCOUNTS, HISTORICAL LOSS EXPERIENCE, THE VALUE OF THE UNDERLYING
COLLATERAL, AND GENERAL ECONOMIC CONDITIONS AND TRENDS.
The maximum term of consumer loans and retail installment contracts is ten
years, but approximately 90% of the contracts have terms of four years or
less. Consumer real estate loans have a maximum term of 15 years. Nonearning
consumer loans were $141 million at the end of 1996 ($115 million at the end
of 1995).
Commercial installment contracts have initial terms ranging from one to 12
years. Commercial real estate loans have initial terms ranging from three to
five years. Finance leases have initial terms up to 12 years. Leveraged
leases have initial terms up to approximately 30 years. Floorplan and other
receivablesgenerally mature within one year. Nonearning commercial loans were
$91 million at the end of 1996 ($99 million at the end of 1995).
The table below displays the contractual maturity of the finance receivables.
It does not necessarily reflect future cash collections because of various
factors including the refinancing of receivables and repayments prior to
maturity. Cash collections from receivables, excluding finance charges, were
$6.3 billion and $5.7 billion in 1996 and 1995, respectively. In the same
periods, the ratio of cash collections to average net receivables was
approximately 65% and 63%, respectively.
<TABLE>
<CAPTION>
Finance receivables
Contractual maturities Less outstanding
-------------------------------- finance ---------------------
(In millions) 1997 1998 After 1998 charges 1996 1995
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Consumer:
Consumer loans $1,880 $1,274 $1,296 $1,244 $ 3,206 $3,021
Real estate loans 683 472 3,728 2,336 2,547 2,513
Retail installment contracts 881 373 385 430 1,209 1,136
Other 146 75 116 46 291 264
- --------------------------------------------------------------------------------------------------------------------
3,590 2,194 5,525 4,056 7,253 6,934
- --------------------------------------------------------------------------------------------------------------------
Commercial:
Installment contracts 383 323 760 255 1,211 1,095
Real estate loans 43 61 300 2 402 426
Finance leases 176 147 358 125 556 523
Leveraged leases 11 9 606 299 327 327
Floorplan and other receivables 483 82 116 8 673 589
- --------------------------------------------------------------------------------------------------------------------
1,096 622 2,140 689 3,169 2,960
- --------------------------------------------------------------------------------------------------------------------
$4,686 $2,816 $7,665 $4,745 10,422 9,894
- ----------------------------------------===============================================
Less allowance for credit losses 293 270
Less finance-related insurance
reserves and claims 273 262
- --------------------------------------------------------------------------------------------------------------------
$ 9,856 $9,362
====================================================================================================================
</TABLE>
Textron had both fixed rate and variable rate loan commitments totaling $751
million at year-end 1996. Because interest rates on these commitments are not
set until the loans are funded, Textron is not exposed to interest rate
changes.
T E X T R O N 4 1
<PAGE> 42
- -------------------------------------------------------------------------------
A portion of TFC's business involves financing the sale and lease of Textron
products. In 1996, 1995, and 1994, TFC paid Textron $663 million, $461
million, and $595 million, respectively, for receivables and operating lease
equipment. Operating agreements with Textron specify that TFC generally has
recourse to Textron with respect to these purchases. At year-end 1996,
finance receivables and operating lease equipment of $713 million and $86
million, respectively, ($646 million and $77 million, respectively, at
year-end 1995) were due from Textron or subject to recourse to Textron.
- -------------------------------------------------------------------------------
5. Inventories
INVENTORIES ARE CARRIED AT THE LOWER OF COST OR MARKET.
<TABLE>
<CAPTION>
December 28, December 30,
(In millions) 1996 1995
- ------------------------------------------------------------------------------------
<S> <C> <C>
Finished goods $ 364 $ 352
Work in process 769 911
Raw materials 259 217
- ------------------------------------------------------------------------------------
1,392 1,480
Less progress payments and customer deposits 200 196
- ------------------------------------------------------------------------------------
$1,192 $1,284
====================================================================================
</TABLE>
Inventories aggregating $848 million at year-end 1996 and $754 million at
year-end 1995 were valued by the last-in, first-out (LIFO) method. (Had such
LIFO inventories been valued at current costs, their carrying values would
have been approximately $143 million and $139 million higher at those
respective dates.) The remaining inventories, other than those related to
certain long-term contracts, are valued generally by the first-in, first-out
method.
Inventories related to long-term contracts, net of progress payments and
customer deposits, were $181 million at year-end 1996 and $393 million at
year-end 1995. The decrease in long-term contract inventory is primarily
attributable to the sale of Textron Aerostructures in 1996.
- ------------------------------------------------------------------------------
6. Long-term Contracts
FIXED-PRICE CONTRACT SALES ARE GENERALLY RECORDED AS DELIVERIES ARE MADE.
COST REIMBURSEMENT CONTRACT SALES ARE RECORDED AS COSTS ARE INCURRED AND FEES
ARE EARNED. CERTAIN CONTRACTS ARE AWARDED WITH FIXED-PRICE INCENTIVE FEES.
INCENTIVE FEES ARE CONSIDERED WHEN ESTIMATING REVENUES AND PROFIT RATES, AND
ARE RECORDED WHEN THESE AMOUNTS ARE REASONABLY DETERMINED.
LONG-TERM CONTRACT PROFITS ARE BASED ON ESTIMATES OF TOTAL SALES VALUE AND
COSTS AT COMPLETION. SUCH ESTIMATES ARE REVIEWED AND REVISED PERIODICALLY
THROUGHOUT THE CONTRACT LIFE. REVISIONS TO CONTRACT PROFITS ARE RECORDED WHEN
THE REVISIONS ARE MADE. ESTIMATED CONTRACT LOSSES ARE RECORDED WHEN
IDENTIFIED.
Long-term contract receivables at year-end 1996 and year-end 1995 totaled
$127 million and $175 million, respectively. This includes $56 million and
$81 million, respectively, of unbilled costs and accrued profits that had not
yet met the contractual billing criteria. An estimated $5 million and $40
million, respectively, of these unbilled amounts are not expected to be
collected within one year. Long-term contract receivables do not include
significant amounts (a) billed but unpaid due to contractual retainage
provisions or (b) subject to collection uncertainty.
- ------------------------------------------------------------------------------
7. Property, Plant, and Equipment
TEXTRON DEPRECIATES THE COST OF PROPERTY, PLANT, AND EQUIPMENT BASED ON THE
ASSETS' ESTIMATED USEFUL LIVES.
<TABLE>
<CAPTION>
December 28, December 30,
(In millions) 1996 1995
- ------------------------------------------------------------------------------------
<S> <C> <C>
At cost:
Land and buildings $ 753 $ 726
Machinery and equipment 2,450 2,232
- ------------------------------------------------------------------------------------
3,203 2,958
Less accumulated depreciation 1,664 1,585
- ------------------------------------------------------------------------------------
$1,539 $1,373
====================================================================================
4 2 T E X T R O N
<PAGE> 43
- ------------------------------------------------------------------------------
8. Goodwill
TEXTRON AMORTIZES GOODWILL ON THE STRAIGHT-LINE METHOD. GOODWILL RELATED TO
MANUFACTURING OPERATIONS IS AMORTIZED OVER 20 TO 40 YEARS AND GOODWILL
RELATED TO FINANCE SUBSIDIARIES GENERALLY IS AMORTIZED OVER 25 YEARS.
TEXTRON PERIODICALLY REVIEWS GOODWILL FOR IMPAIRMENT BY COMPARING THE
CARRYING AMOUNT TO THE ESTIMATED FUTURE UNDISCOUNTED CASH FLOWS OF THE
BUSINESSES ACQUIRED. IF THIS REVIEW INDICATES THAT GOODWILL IS NOT
RECOVERABLE, TEXTRON WOULD REDUCE ITS CARRYING AMOUNT TO FAIR VALUE
(GENERALLY DETERMINED BASED ON FUTURE DISCOUNTED CASH FLOWS) THROUGH A
NONCASH CHARGE TO EARNINGS.
Goodwill at the end of 1996 and 1995 is summarized as follows:
</TABLE>
<TABLE>
<CAPTION>
December 28, December 30,
(In millions) 1996 1995
- ------------------------------------------------------------------------------------
<S> <C> <C>
Goodwill $2,013 $1,838
Less accumulated amortization 404 347
- ------------------------------------------------------------------------------------
Goodwill, net $1,609 $1,491
====================================================================================
</TABLE>
- ------------------------------------------------------------------------------
9. Debt and Credit Facilities
At the end of 1996 and 1995, debt consisted of the following:
<TABLE>
<CAPTION>
December 28, December 30,
(In millions) 1996 1995
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
Parent Group:
Senior:
Borrowings under or supported by long-term credit facilities<F*> $ 878 $ 882
Medium-term notes; due 1997 to 2011 (average rate - 9.52%) 291 333
8.75% - 10.04%; due 2001 to 2022 209 254
Other notes (average rate - 7.17%) 100 276
- ------------------------------------------------------------------------------------------------------
Total senior 1,478 1,745
- ------------------------------------------------------------------------------------------------------
Subordinated - 8.86% - 8.97%; due 1998 to 1999 29 29
- ------------------------------------------------------------------------------------------------------
Total Parent Group 1,507 1,774
- ------------------------------------------------------------------------------------------------------
Finance Group:
Senior:
Borrowings under or supported by credit facilities<F**> 3,781 3,424
4.90% - 5.91%; due 1997 to 2000 1,181 896
6.00% - 6.99%; due 1997 to 2002 1,330 1,067
7.00% - 8.87%; due 1997 to 2000 1,595 2,289
9.17% - 10.86%; due 1997 to 1998 29 129
Variable rate notes; due 1997 to 2000 (average rate - 5.83%) 922 597
- ------------------------------------------------------------------------------------------------------
Total senior 8,838 8,402
- ------------------------------------------------------------------------------------------------------
Senior subordinated - 10.28%; due 1998 1 35
- ------------------------------------------------------------------------------------------------------
Total Finance Group 8,839 8,437
- ------------------------------------------------------------------------------------------------------
Total debt $10,346 $10,211
======================================================================================================
<FN>
<F*> The weighted average interest rates on these borrowings, before the effect
of interest rate exchange agreements, were 5.0%, 6.1%, and 6.2% at year-end
1996, 1995, and 1994, respectively. Comparable rates during the years 1996,
1995, and 1994 were 5.0%, 6.1%, and 4.4%, respectively.
<F**>The weighted average interest rates on these borrowings, before the effect
of interest rate exchange agreements, were 5.5%, 6.3%, and 6.1% at year-end
1996, 1995, and 1994, respectively. Comparable rates during the years 1996,
1995, and 1994 were 5.8%, 6.4%, and 4.7%, respectively.
</TABLE>
The following table shows required payments and sinking fund requirements
during the next five years on debt outstanding at the end of 1996. The
payments schedule excludes amounts that may become payable under credit
facilities and revolving credit agreements.
<TABLE>
<CAPTION>
(In millions) 1997 1998 1999 2000 2001
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Parent Group $ 80 $ 25 $ 56 $ 53 $136
Finance Group 1,034 846 1,216 1,342 420
- ------------------------------------------------------------------------------------------------------------
$1,114 $871 $1,272 $1,395 $556
============================================================================================================
T E X T R O N 4 3
<PAGE> 44
- ------------------------------------------------------------------------------
The Parent Group maintains credit facilities with various banks for both
short- and long-term borrowings. The Parent Group has a $1.5 billion domestic
credit agreement with 36 banks available on a fully revolving basis until
July 1, 2001. At year-end 1996, $889 million of the credit facility was not
used or reserved as support for commercial paper or bank borrowings. In 1996,
Textron entered into a five-year multi-currency credit agreement with 14
banks for $350 million for its foreign operations; $83 million was available
at year-end 1996. Textron entered into a separate five-year multi-currency
credit agreement, effective December 30, 1996, with 22 banks for an
additional $450 million to be used for its foreign operations.
The Finance Group has lines of credit with various banks aggregating $4.6
billion at year-end 1996, of which $223 million was not used or reserved as
support for commercial paper or bank borrowings. Lending agreements limit the
Finance Group's net assets available for cash dividends and other payments to
the Parent Group to approximately $473 million of the Finance Group's net
assets of $1.6 billion at year-end 1996. The Finance Group's loan agreements
also contain provisions regarding additional debt, creation of liens or
guarantees, and the making of investments.
The Parent Group has agreed to cause TFC to maintain certain minimum levels
of financial performance. No payments from the Parent Group were necessary in
1996, 1995, or 1994 for TFC to meet these standards.
- ------------------------------------------------------------------------------
10. Derivatives and Foreign Currency Transactions
Interest rate exchange agreements
Textron uses interest rate exchange agreements to help manage interest rate
risk by converting certain variable-rate debt to fixed-rate debt. The
agreements do not involve a high degree of complexity or risk and are not
used to speculate for profit.
TEXTRON'S INTEREST RATE EXCHANGE AGREEMENTS ARE ACCOUNTED FOR ON THE ACCRUAL
BASIS. SOME AGREEMENTS ARE DESIGNATED AGAINST SPECIFIC LONG-TERM VARIABLE
RATE BORROWINGS, WHILE THE BALANCE IS DESIGNATED AGAINST EXISTING SHORT-TERM
VARIABLE-RATE BORROWINGS THROUGH MATURITY AND THEIR ANTICIPATED REPLACEMENTS.
TEXTRON CONTINUOUSLY MONITORS VARIABLE-RATE BORROWINGS TO MAINTAIN THE LEVEL
OF BORROWING ABOVE THE NOTIONAL AMOUNT OF THE DESIGNATED AGREEMENTS. IF
VARIABLE-RATE BORROWINGS WERE TO BECOME LESS THAN THE NOTIONAL AMOUNT OF THE
DESIGNATED AGREEMENTS, THE EXCESS WOULD BE MARKED TO MARKET AND THE
ASSOCIATED GAIN OR LOSS RECORDED IN INCOME.
PREMIUMS PAID TO TERMINATE THESE AGREEMENTS ARE DEFERRED AND AMORTIZED TO
EXPENSE OVER THE AGREEMENTS' ORIGINAL TERMS. IF THE UNDERLYING DEBT IS PAID
EARLY, UNAMORTIZED PREMIUMS ARE RECOGNIZED AS AN ADJUSTMENT TO THE GAIN OR
LOSS ASSOCIATED WITH THE DEBT'S EXTINGUISHMENT.
During 1996, the Finance Group had $462 million of interest rate exchange
agreements go into effect. Interest rate exchange agreements in effect at the
end of 1996 and 1995 had weighted average remaining terms of 3.2 years and
3.1 years, respectively, for the Parent Group and 1.2 years and 2.1 years,
respectively, for the Finance Group. The agreements, which effectively fix
the rate of interest on variable-rate borrowings, are summarized as follows:
</TABLE>
<TABLE>
<CAPTION>
December 28, 1996 December 30, 1995
- ------------------------------------------------------------------------------------------------------------
Interest rate exchange agreements
Weighted Weighted
Notional average Notional average
(Dollars in millions) amount interest rate amount interest rate
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Parent Group $ 453<F*> 8.53% $ 602 8.80%
Finance Group 1,443<F**> 7.50 1,338 7.79
- ------------------------------------------------------------------------------------------------------------
$1,896 7.75 $1,940 8.10
============================================================================================================
<FN>
<F*> The Parent Group's interest rate exchange agreements were designated against
existing and anticipated short-term variable-rate borrowings. These
agreements effectively adjusted the average rate of interest on short-term
variable-rate notes to 6.4% from 5.0%. The interest rate exchange agreements
in effect at the end of 1996 expire as follows: $22 million (6.2%) in 1997;
$100 million (8.4%) in 1998; $25 million (7.4%) in 1999; $250 million (8.6%)
in 2000; and $56 million (9.3%) thereafter.
<F**>$300 million of the Finance Group's interest rate exchange agreements were
designated against specific long-term variable-rate notes and the balance
against existing short-term variable-rate borrowings or their anticipated
replacements. These agreements effectively adjusted the average rate of
interest on long-term variable-rate notes to 6.0% from 5.8% and on short-term
variable-rate borrowings to 5.9% from 5.4%. The interest rate exchange
agreements in effect at the end of 1996 expire as follows: $378 million
(8.4%) in 1997; $603 million (7.4%) in 1998; $436 million (6.8%) in 1999; and
$26 million (6.8%) in 2000.
</TABLE>
4 4 T E X T R O N
<PAGE> 45
- ------------------------------------------------------------------------------
Textron had no exposure to loss from nonperformance by the counterparties to
its interest rate exchange agreements at the end of 1996 or 1995, and does
not anticipate nonperformance by counterparties in the periodic settlements
of amounts due. Textron currently minimizes this potential for risk by
entering into contracts exclusively with major, financially sound
counterparties having no less than a long-term bond rating of "A," by
continuously monitoring the counterparties' credit ratings, and by limiting
exposure with any one financial institution. The credit risk generally is
limited to the amount by which the counterparties' contractual obligations
exceed Textron's obligations to the counterparty.
Translation of foreign currencies, foreign exchange transactions and foreign
currency exchange contracts
TEXTRON'S INCOME EXCLUDES ADJUSTMENTS RELATED TO THE TRANSLATION OF ITS
FOREIGN OPERATIONS' FINANCIAL STATEMENTS. THE ADJUSTMENTS ACCUMULATE IN A
SEPARATE COMPONENT OF SHAREHOLDERS' EQUITY UNTIL THE RELATED FOREIGN ENTITY
IS SOLD OR SUBSTANTIALLY LIQUIDATED. Foreign exchange gains and losses
included in income (primarily related to foreign currency denominated
transactions) have not been material.
TEXTRON ENTERS INTO FORWARD EXCHANGE CONTRACTS TO HEDGE THE RISK ASSOCIATED
WITH CURRENCY FLUCTUATIONS ON CERTAIN FIRM SALES AND PURCHASE COMMITMENTS
DENOMINATED IN FOREIGN CURRENCIES. THE GAINS AND LOSSES RESULTING FROM THE
IMPACT OF CURRENCY EXCHANGE RATE MOVEMENTS ON THESE CONTRACTS ARE RECORDED
WHEN THE UNDERLYING TRANSACTIONS OCCUR.
Textron had foreign currency forward exchange contracts totaling
approximately $124 million and $191 million at the end of 1996 and 1995,
respectively. Unrealized losses relating to these contracts aggregated $2
million and $6 million on those dates.
- ------------------------------------------------------------------------------
11. 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
proceeds from the issuance of the debentures were used by Textron for the
repayment of long-term borrowings and for general corporate purposes. The
amounts due to the trust under the debentures and the related income
statement amounts have been eliminated in Textron's consolidated financial
statements.
The preferred securities accrue and pay cash distributions quarterly at a
rate of 7.92% per annum. Textron has guaranteed, on a subordinated basis,
distributions and other payments due on the preferred securities. The
guarantee, when taken together with Textron's obligations under the
debentures and in the indenture pursuant to which the debentures were issued
and Textron's obligations under the Amended and Restated Declaration of Trust
governing the trust, provides a full and unconditional guarantee of amounts
due on the preferred securities. The preferred securities are mandatorily
redeemable upon the maturity of the debentures on March 31, 2045, or earlier
to the extent of any redemption by Textron of any debentures. The redemption
price in either such case will be $25 per share plus accrued and unpaid
distributions to the date fixed for redemption.
- ------------------------------------------------------------------------------
12. Shareholders' Equity
Preferred stock
Textron has authorization for 15,000,000 shares of preferred stock. Each
share of $2.08 Preferred Stock ($23.63 approximate stated value) is
convertible into 2.2 shares of common stock and can be redeemed by Textron
for $50 per share. Each share of $1.40 Preferred Dividend Stock ($11.82
approximate stated value) is convertible into 1.8 shares of common stock and
can be redeemed by Textron for $45 per share.
Common stock
Textron has authorization for 250,000,000 shares of 12.5 cent per share par
value common stock.
T E X T R O N 4 5
<PAGE> 46
- ------------------------------------------------------------------------------
Performance share units and stock options
Textron's 1994 Long-Term Incentive Plan authorizes awards to key employees in
two forms: (a) performance share units and (b) options to purchase Textron
common stock. The total number of shares of common stock for which options
may be granted under the plan is 5,000,000.
TEXTRON ACCOUNTS FOR PERFORMANCE SHARE UNITS AND EMPLOYEE STOCK OPTION GRANTS
IN ACCORDANCE WITH APB 25, "ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES". UNDER
APB 25, BECAUSE THE EXERCISE PRICE OF TEXTRON'S EMPLOYEE STOCK OPTIONS EQUALS
THE MARKET PRICE ON THE DATE OF GRANT, NO COMPENSATION EXPENSE IS RECOGNIZED
FOR STOCK OPTION AWARDS. COMPENSATION EXPENSE FOR PERFORMANCE SHARE UNITS IS
MEASURED BASED ON THE VALUE OF TEXTRON STOCK UNDERLYING THE AWARDS.
Compensation expense under Textron's performance share program was
approximately $45 million in 1996, $23 million in 1995, and $4 million in
1994. To mitigate the impact of stock price increases on compensation
expense, Textron entered into a cash-settlement option program on Textron's
common stock in November 1995. This program generated income of approximately
$21 million in 1996.
Pro forma information regarding net income and earnings per share is required
by FAS 123, "Accounting for Stock-Based Compensation" and has been determined
under the fair value method of that Statement. For the purpose of developing
the pro forma information, the fair value of options granted in 1996 and 1995
are estimated at the date of grant using the Black-Scholes option-pricing
model. The estimated fair values are amortized to expense over the options'
vesting period. Using this methodology, net income would have been reduced by
$10 million or $.12 per share in 1996. The pro forma effect on 1995 net
income was not material. The 1996 and 1995 pro forma effect on net income is
not necessarily representative of the effect in future years because it does
not take into consideration pro forma compensation expense related to grants
made prior to 1995.
The assumptions used to estimate the fair value of option for grants in 1996
and 1995, respectively, are approximately as follows: dividend yield of 2%,
expected volatility of 16%; risk-free interest rates of 6% and 5%, and
weighted average expected lives of 3.5 years. Under these assumptions, the
weighted-average fair value of an option to purchase one share granted in
1996 and 1995, respectively, was approximately $20 and $16.
Stock option transactions during the last three years are summarized as
follows:
<TABLE>
<CAPTION>
1996 1995 1994
-------------------------------------------------------------------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
(Shares in thousands) Shares Price Shares Price Shares Price
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares under option at
beginning of year 4,558 $52.09 4,696 $44.31 3,997 $42.02
Options granted 1,068 90.73 1,062 72.11 1,124 49.40
Options exercised (923) 45.78 (1,098) 38.26 (349) 33.40
Options canceled (58) 58.76 (102) 51.13 (76) 49.22
- ---------------------------------------------------------------------------------------------------------------------
Shares under option at end of year 4,645 62.15 4,558 52.09 4,696 44.31
=====================================================================================================================
Shares exercisable at end of year 3,064 50.51 2,944 45.38 2,957 39.98
=====================================================================================================================
</TABLE>
Stock options outstanding at the end of 1996 and 1995 are summarized as
follows:
<TABLE>
<CAPTION>
Weighted
Average Weighted Weighted
Range of Exercise Remaining Average Average
Prices Contractual Exercise Exercise
(Shares in thousands) Outstanding Life Price Exercisable Price
- --------------------------------------------------------------------------- -------------------------------
<S> <C> <C> <C> <C> <C>
December 28, 1996:
$21.00 - $63.94 2,646 6.6 $46.48 2,596 $46.30
$68.19 - $79.63 969 9.0 73.89 468 73.86
$80.56 - $92.56 1,030 9.9 91.37 - -
December 30, 1995:
$21.00 - $63.94 3,598 7.5 46.28 2,994 45.38
$68.19 - $73.94 960 9.9 73.86 - -
==================================================================================================================
4 6 T E X T R O N
<PAGE> 47
- ------------------------------------------------------------------------------
Reserved shares of common stock
At year-end 1996, 1,755,000 shares of common stock were reserved for the
subsequent conversion of preferred stock, including preferred stock held as
treasury shares, and 4,645,000 shares were reserved for the exercise of stock
options.
Preferred stock purchase rights
Each outstanding share of Textron common stock has attached to it one
preferred stock purchase right, which entitles the holder to buy one
one-hundredth of a share of Series C Junior Participating Preferred Stock at an
exercise price of $250. The rights become exercisable only under certain
circumstances related to a person or group acquiring or offering to acquire a
substantial block of Textron's common stock. In certain circumstances,
holders may acquire Textron stock, or in some cases the stock of an acquiring
entity, with a value equal to twice the exercise price. The rights expire in
September 2005 but may be redeemed earlier for $.05 per right.
Income per common share
INCOME PER COMMON SHARE IS BASED ON AVERAGE COMMON SHARES OUTSTANDING DURING
EACH YEAR ASSUMING FULL CONVERSION OF OUTSTANDING PREFERRED STOCK AND
EXERCISE OF STOCK OPTIONS. Average shares were 86,029,000 in 1996; 86,894,000
in 1995; and 90,119,000 in 1994.
- ------------------------------------------------------------------------------
13. Leases
Rental expense approximated $106 million, $104 million, and $108 million in
1996, 1995, and 1994, respectively. Future minimum rental commitments for
noncancellable operating leases in effect at year-end 1996 approximated $88
million for 1997; $69 million for 1998; $53 million for 1999; $40 million for
2000; $32 million for 2001; and a total of $256 million thereafter.
- ------------------------------------------------------------------------------
14. Research and Development
Textron carries out research and development under both company initiated
programs and contracts with others, primarily the U.S. government. Company
initiated programs include research and development for commercial products
and independent research and development related to government products and
services. A significant portion of the cost of independent research and
development is recoverable from the U.S. government through overhead cost
allowances.
RESEARCH AND DEVELOPMENT COSTS FOR WHICH TEXTRON IS RESPONSIBLE ARE EXPENSED
AS INCURRED. THESE COMPANY FUNDED COSTS INCLUDE AMOUNTS FOR COMPANY INITIATED
PROGRAMS, THE COST SHARING PORTIONS OF CUSTOMER INITIATED PROGRAMS, AND
LOSSES INCURRED ON CUSTOMER INITIATED PROGRAMS. The company funded and
customer funded research and development costs for 1996, 1995, and 1994 were
as follows:
</TABLE>
<TABLE>
<CAPTION>
(In millions) 1996 1995 1994
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Company funded $185 $181 $187
Customer funded 391 475 424
- ------------------------------------------------------------------------------------------------------
Total research and development $576 $656 $611
======================================================================================================
</TABLE>
- ------------------------------------------------------------------------------
15. Pension Benefits
Textron has defined benefit and defined contribution pension plans which
together cover substantially all employees. The costs of the defined
contribution plans are funded as accrued and amounted to approximately $49
million, $32 million, and $34 million for 1996, 1995, and 1994, respectively.
Of these totals, $31 million, $14 million, and $18 million, respectively, are
related to the employee stock ownership plan. Defined benefits under salaried
plans are based on salary and years of service. Hourly plans generally
provide benefits based on stated amounts for each year of service. Textron's
funding policy is consistent with federal law and regulations. Plan assets
consist principally of corporate and government bonds and common stocks.
Pension income in 1996, 1995, and 1994 included the following components:
<TABLE>
<CAPTION>
(In millions) 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost - benefits earned during the year $ 70 $ 56 $ 69
Interest cost on projected benefit obligation 208 210 199
Actual return on plan assets (495) (747) (20)
Amortization of unrecognized transition net asset (17) (17) (15)
Net amortization and deferral of actuarial gains (losses) 230 483 (233)
- ----------------------------------------------------------------------------------------------------------
Net pension income $ (4) $ (15) $ -
==========================================================================================================
</TABLE>
T E X T R O N 4 7
<PAGE> 48
- ------------------------------------------------------------------------------
The following table sets forth the funded status of Textron's pension plans.
<TABLE>
<CAPTION>
December 28, 1996 December 30, 1995
- -------------------------------------------------------------------------------------------------------------------------
Assets Accumulated Assets Accumulated
exceed benefits exceed benefits
accumulated exceed accumulated exceed
(In millions) benefits assets benefits assets
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Actuarial present value of:
Vested benefit obligation $2,410 $ 197 $2,121 $ 426
Nonvested benefit obligation 67 19 91 35
- -------------------------------------------------------------------------------------------------------------------------
Accumulated benefit obligation 2,477 216 2,212 461
Additional amounts related to projected pay increases 254 35 243 23
- -------------------------------------------------------------------------------------------------------------------------
Projected benefit obligation 2,731 251 2,455 484
Plan assets at fair value 3,534 124 3,180 373
- -------------------------------------------------------------------------------------------------------------------------
Plan assets in excess of (less than) projected
benefit obligation 803 (127) 725 (111)
Unrecognized net actuarial (gains) losses (472) 30 (312) (26)
Unrecognized prior service cost 93 21 18 58
Unrecognized transition net obligation (net asset) (120) 5 (132) (1)
Adjustment required to recognize minimum liability - (24) - (24)
- -------------------------------------------------------------------------------------------------------------------------
Net pension asset (liability) recognized on the
consolidated balance sheet $ 304 $ (95) $ 299 $(104)
=========================================================================================================================
</TABLE>
Major actuarial assumptions used in accounting for the defined benefit
pension plans are shown in the following table. Net pension income is
determined using these assumptions as of the end of the prior year. The
funded status of the plans is determined using these assumptions as of the
end of the current year.
<TABLE>
<CAPTION>
December 28, December 30, December 31, January 1,
1996 1995 1994 1994
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Discount rate 7.50% 7.25% 8.25% 7.25%
Weighted average long-term rate of compensation increase 5.00 5.00 5.00 5.00
Long-term rate of return on plan assets 9.00 9.00 9.00 9.00
======================================================================================================================
</TABLE>
- ------------------------------------------------------------------------------
16. Postretirement Benefits Other than Pensions
Textron offers health care and life insurance benefits for certain retired
employees. Postretirement benefits costs other than pension-related expenses
in 1996, 1995, and 1994 included the components shown in the following table.
Textron's postretirement benefit plans other than pensions are unfunded.
<TABLE>
<CAPTION>
(In millions) 1996 1995 1994
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost - benefits earned during the year $ 5 $ 5 $ 9
Interest cost on accumulated postretirement benefit obligation 53 58 61
Net amortization (13) (14) (10)
- -------------------------------------------------------------------------------------------------------------
Postretirement benefit costs $ 45 $ 49 $ 60
=============================================================================================================
</TABLE>
The following table sets forth the status of these plans at the end of 1996
and 1995:
<TABLE>
<CAPTION>
December 28, December 30,
(In millions) 1996 1995
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of benefits attributed to:
Retirees $522 $608
Fully eligible active plan participants 66 89
Other active plan participants 85 97
- ------------------------------------------------------------------------------------------------------------------
Accumulated postretirement benefit obligation 673 794
Unrecognized net actuarial gains 114 101
Unrecognized prior service cost benefit 30 24
- ------------------------------------------------------------------------------------------------------------------
Postretirement benefit liability recognized on the consolidated balance sheet $817 $919
==================================================================================================================
</TABLE>
The discount rates used to determine postretirement benefit costs other than
pensions and the status of those plans were the same as those used for
Textron's defined benefit pension plans.
4 8 T E X T R O N
<PAGE> 49
- ------------------------------------------------------------------------------
The 1996 health care cost trend rate, which is the weighted average annual
assumed rate of increase in the per capita cost of covered benefits, was 6.5%
for retirees age 65 and over and 9.0% for retirees under age 65. Both rates
are assumed to decrease gradually to 5.5% by 2001 and 2003, respectively, and
then remain at that level. Increasing the health care cost trend rates by one
percentage point in each year would have increased the accumulated
postretirement benefit obligation as of year-end 1996 by $61 million and the
aggregate of the service and interest cost components of postretirement
benefit costs for 1996 by $5 million.
- ------------------------------------------------------------------------------
17. Income Taxes
Textron files a consolidated federal income tax return for all U.S.
subsidiaries and separate returns for foreign subsidiaries. TEXTRON
RECOGNIZES DEFERRED INCOME TAXES FOR TEMPORARY DIFFERENCES BETWEEN THE
FINANCIAL REPORTING BASIS AND INCOME TAX BASIS OF ASSETS AND LIABILITIES
BASED ON ENACTED TAX RATES EXPECTED TO BE IN EFFECT WHEN AMOUNTS ARE LIKELY
TO BE REALIZED OR SETTLED.
The following table shows income from continuing operations before income
taxes and distributions on preferred securities of subsidiary trust:
<TABLE>
<CAPTION>
(In millions) 1996 1995 1994
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
United States $528 $476 $446
Foreign 299 214 177
- ------------------------------------------------------------------------------------------
Total $827 $690 $623
==========================================================================================
</TABLE>
Income tax expense is summarized as follows:
<TABLE>
<CAPTION>
(In millions) 1996 1995 1994
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Federal:
Current $169 $137 $103
Deferred 11 31 57
State 31 32 32
Foreign 111 74 65
- ------------------------------------------------------------------------------------------
Income tax expense $322 $274 $257
==========================================================================================
</TABLE>
The following reconciles the federal statutory income tax rate to the
effective income tax rate reflected in the consolidated statement of income:
<TABLE>
<CAPTION>
1996 1995 1994
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Federal statutory income tax rate 35.0% 35.0% 35.0%
Increase (decrease) in taxes resulting from:
State income taxes 2.4 2.9 3.3
Goodwill 2.3 2.5 5.9
Other - net (.8) (.7) (2.9)
- ------------------------------------------------------------------------------------------
Effective income tax rate 38.9% 39.7% 41.3%
==========================================================================================
</TABLE>
Textron's net deferred tax asset consisted of gross deferred tax assets and
gross deferred tax liabilities of $1,467 million and $1,140 million,
respectively, at the end of 1996 and $1,340 million and $1,009 million,
respectively, at the end of 1995.
The components of Textron's net deferred tax asset were as follows:
<TABLE>
<CAPTION>
December 28, December 30,
(In millions) 1996 1995
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
Finance Group transactions, principally leasing $(324) $(324)
Obligation for postretirement benefits other than pensions 321 364
Self insured liabilities 152 162
Fixed assets, principally depreciation (146) (142)
Deferred compensation and vacation pay 103 86
Allowance for credit losses 86 85
Other, principally timing of other expense deductions 135 100
- ------------------------------------------------------------------------------------------------------
$ 327 $ 331
======================================================================================================
</TABLE>
Deferred income taxes have not been provided for the undistributed earnings
of foreign subsidiaries, which approximated $845 million at the end of 1996.
Management intends to reinvest those earnings for an indefinite period,
except for distributions having an immaterial tax effect. If foreign
subsidiaries' earnings were distributed, 1996 taxes, net of foreign tax
credits, would be increased by approximately $49 million, primarily because
of foreign withholding taxes.
T E X T R O N 4 9
<PAGE> 50
- ------------------------------------------------------------------------------
18. Fair Value of Financial Instruments
The estimated fair value amounts shown below were determined from available
market information and valuation methodologies. Because considerable judgment
is required in interpreting market data, the estimates are not necessarily
indicative of the amounts that could be realized in a current market
exchange.
<TABLE>
<CAPTION>
December 28, 1996 December 30, 1995
- ------------------------------------------------------------------------------------------------------------------
Estimated Estimated
Carrying fair Carrying fair
(In millions) value value value value
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets:
Investments $ 820 $ 820 $ 778 $ 778
Finance receivables:
Consumer loans 6,471 6,451 6,475 6,457
Commercial loans 2,227 2,270 2,050 2,087
Liabilities:
Debt:
Parent Group:
Debt 1,507 1,565 1,774 1,873
Interest rate exchange agreements - 37 - 57
Finance Group:
Debt 8,839 8,882 8,437 8,557
Interest rate exchange agreements - 18 - 5
Foreign currency exchange contracts - 2 - 6
==================================================================================================================
</TABLE>
Notes:
(i) Investments -- The estimated fair values of investment securities were
based on available quoted market prices, appraisals, prices from independent
brokers, or discounted cash flow analyses.
(ii) Finance receivables -- The estimated fair values of fixed-rate consumer
loans, real estate loans and commercial installment contracts were based on
discounted cash flow analyses. The estimated fair values of variable-rate
receivables and fixed-rate retail installment contracts approximated the net
carrying value. The estimated fair values of nonperforming loans were based
on discounted cash flow analyses using risk-adjusted interest rates or the
fair value of the related collateral.
(iii) Debt, interest rate exchange agreements, and foreign currency exchange
contracts -- The estimated fair value of fixed-rate debt was determined by
independent investment bankers or discounted cash flow analyses. The
estimated fair values of variable-rate debt approximated their carrying
values. The estimated fair values of interest rate exchange agreements were
determined by independent investment bankers and represent the estimated
amounts that Textron or its counterparty would be required to pay to assume
the other party's obligations under the agreements. The estimated fair values
of the foreign currency exchange contracts were determined by Textron's
foreign exchange banks.
- ------------------------------------------------------------------------------
19. Contingencies and Environmental Remediation
Contingencies
Lawsuits and other proceedings are pending or threatened against Textron and
its subsidiaries. Some allege violations of federal government procurement
regulations, involve environmental matters, or are or purport to be class
actions. Some seek compensatory, treble or punitive damages in substantial
amounts; fines, penalties or restitution; or remediation of contamination.
Under federal government procurement regulations, some 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 would not have a material effect on Textron's net income or
financial condition.
Environmental Remediation
ENVIRONMENTAL LIABILITIES ARE RECORDED BASED ON THE MOST PROBABLE COST IF
KNOWN OR ON THE ESTIMATED MINIMUM COST, DETERMINED ON A SITE-BY-SITE BASIS.
TEXTRON'S ENVIRONMENTAL LIABILITIES ARE UNDISCOUNTED AND DO NOT TAKE INTO
CONSIDERATION POSSIBLE FUTURE INSURANCE PROCEEDS OR SIGNIFICANT AMOUNTS FROM
CLAIMS AGAINST OTHER THIRD PARTIES.
Textron's accrued estimated environmental liabilities are based on
assumptions which are subject to a number of factors and uncertainties.
Circumstances which can affect the accruals' reliability and precision
include identification of additional sites, environmental regulations, level
of cleanup required, technologies available, number and financial condition
of other contributors to remediation, and the time period over which
remediation may occur. Textron estimates that its accrued environmental
remediation liabilities will likely be paid over the next five to ten years.
5 0 T E X T R O N
<PAGE> 51
- ------------------------------------------------------------------------------
20. Geographic and Business Segment Data
Presented below and on page 23 is selected financial information by
geographic area and business segment, and a description of the nature of
Textron's operations.
<TABLE>
<CAPTION>
Geographic areas Revenues by origin Income by origin
(In millions) ------------------------------ ------------------------------
1996 1995 1994 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
United States $7,000 $6,841 $7,111 $ 791 $ 773 $ 728
Other North America 1,043 807 690 125 87 85
Western Europe 767 393 318 101 63 46
Asia/Pacific 464 412 231 73 64 46
- ------------------------------------------------------------------------------------------------------------------------
$9,274 $8,453 $8,350 1,090 987 905
- ---------------------------------------------------==============================---------------------------------------
Corporate expenses and other - net (115) (119) (92)
Interest expense - net (148) (178) (190)
- ------------------------------------------------------------------------------------------------------------------------
Income from continuing operations
before income taxes and distributions
on preferred securities of subsidiary trust $ 827 $ 690 $ 623
========================================================================================================================
<CAPTION>
Destination of U.S. exports
(In millions) 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
North America $ 342 $ 280 $ 398
Western Europe 256 306 427
Asia/Pacific 253 235 161
South America 92 110 118
Middle East 55 43 62
Other locations 43 26 30
- ------------------------------------------------------------------------------------------------------------------------
$1,041 $1,000 $1,196
========================================================================================================================
<CAPTION>
Identifiable assets
(In millions) 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
United States $12,103 $12,080 $11,520
Western Europe 1,662 1,077 949
Asia/Pacific 1,522 1,348 766
Other North America 1,436 1,337 1,262
Corporate, including investment in discontinued operation 1,742 1,932 1,665
Eliminations (230) (123) (59)
- ------------------------------------------------------------------------------------------------------------------------
$18,235 $17,651 $16,103
========================================================================================================================
</TABLE>
Notes:
(i) Revenues include sales to the U.S. government of $1.0 billion, $1.3
billion, and $1.6 billion in 1996, 1995, and 1994, respectively.
(ii) Revenues between geographic areas, predominantly revenues of U.S.
divisions, were approximately 5% in each of the years 1996, 1995,
and 1994.
(iii) Assets in foreign locations relate principally to the Finance segment.
Nature of operations
Textron is a global multi-industry company with manufacturing and finance
operations. See pages 54 and 55 for a description of Textron's principal
products. Its principal markets (listed within segments in order of the
amount of 1996 revenues) and the major locations of such markets are as
follows:
<TABLE>
<CAPTION>
Segment Principal markets Major locations
======================================================================================================================
<C> <S> <C>
Aircraft * Commercial and military helicopters * North America
* Business jets * Asia/Pacific
* General aviation * South America
* Overnight express package carriers * Western Europe
* Commuter airlines, relief flights, tourism,
and freight
- ----------------------------------------------------------------------------------------------------------------------
Automotive * Automotive original equipment manufacturers and
their suppliers * North America
* Western Europe
- ----------------------------------------------------------------------------------------------------------------------
Industrial * Fastening systems: automotive, electronics, * North America
aerospace, other OEMs, distributors, and * Western Europe
consumers * Asia/Pacific
* Golf and turf-care products: golf courses,
resort communities, and commercial and industrial
users
* Engineered products and components: original
equipment manufacturers, distributors, and
end-users of a wide variety of products
- ----------------------------------------------------------------------------------------------------------------------
Systems and Components * Commercial aerospace * North America
* Defense * Western Europe
- ----------------------------------------------------------------------------------------------------------------------
Finance * Consumer loans * North America
* Commercial loans * Asia/Pacific
* Western Europe
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
T E X T R O N 5 1
<PAGE> 52
<TABLE>
- -----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Quarterly Data
1996 1995
(Unaudited) ----------------------------- ------------------------------
(Dollars in millions except per share amounts) Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues
Aircraft $ 762 $ 638 $ 649 $ 654 $ 661 $ 633 $ 660 $ 565
Automotive 428 355 439 405 395 340 386 413
Industrial 561 554 604 477 427 357 390 386
Systems and Components 139 175 175 164 222 228 215 190
Finance 538 526 517 514 524 499 487 475
- ------------------------------------------------------------------------------------------------------------------------
Total revenues $ 2,428 $ 2,248 $2,384 $ 2,214 $ 2,229 $ 2,057 $2,138 $ 2,029
========================================================================================================================
Income
Aircraft $ 79 $ 69 $ 67 $ 56 $ 67 $ 69 $ 66 $ 43
Automotive 41 27 41 37 39 25 35 36
Industrial 57 58 64 54 44 40 45 48
Systems and Components 11 19 16 11 16 18 18 13
Finance 98 98 95 92 94 96 87 88
- ------------------------------------------------------------------------------------------------------------------------
Total operating income 286 271 283 250 260 248 251 228
Corporate expenses and other - net (29) (28) (30) (28) (32) (32) (28) (27)
Interest expense - net (37) (36) (37) (38) (45) (43) (46) (44)
Income taxes (85) (81) (84) (72) (73) (69) (70) (62)
Distributions on preferred securities
of subsidiary trust, net of income taxes (7) (6) (7) (3) - - - -
- ------------------------------------------------------------------------------------------------------------------------
Income from continuing operations 128 120 125 109 110 104 107 95
Discontinued operation, net of income taxes:
Income from operations - - - 16 17 18 14 14
Estimated loss on disposal - (155) - (90) - - - -
- ------------------------------------------------------------------------------------------------------------------------
- (155) - (74) 17 18 14 14
- ------------------------------------------------------------------------------------------------------------------------
Net income $ 128 $ (35) $ 125 $ 35 $ 127 $ 122 $ 121 $ 109
=========================================================================================================================
Earnings per common share
Income from continuing operations $ 1.50 $ 1.40 $ 1.44 $ 1.26 $ 1.26 $ 1.20 $ 1.23 $ 1.09
Discontinued operation - (1.81) - (.86) .19 .21 .17 .16
- -------------------------------------------------------------------------------------------------------------------------
Net income $ 1.50 $ (.41) $ 1.44 $ .40 $ 1.45 $ 1.41 $ 1.40 $ 1.25
=========================================================================================================================
Average shares outstanding (in thousands)<F*> 85,130 85,790 86,575 86,680 87,345 86,692 86,679 87,055
- -------------------------------------------------------------------------------------------------------------------------
Operating income margins
Aircraft 10.4% 10.8% 10.3% 8.6% 10.1% 10.9% 10.0% 7.6%
Automotive 9.6 7.6 9.3 9.1 9.9 7.4 9.1 8.7
Industrial 10.2 10.5 10.6 11.3 10.3 11.2 11.5 12.4
Systems and Components 7.9 10.9 9.1 6.7 7.2 7.9 8.4 6.8
Finance 18.2 18.6 18.4 17.9 17.9 19.2 17.9 18.5
Operating income margin 11.8 12.1 11.9 11.3 11.7 12.1 11.7 11.2
- -------------------------------------------------------------------------------------------------------------------------
Common stock information
Price range: High $97-3/4 $87-7/8 $ 89 $85-3/4 $77-3/8 $70-1/8 $ 61 $57-1/8
Low $84-3/4 $ 73 $ 88 $69-1/8 $65-1/2 $57-7/8 $ 56 $48-5/8
Dividends per share $ .44 $ .44 $ .44 $ .44 $ .39 $ .39 $ .39 $ .39
- -------------------------------------------------------------------------------------------------------------------------
<FN>
<F*>Assumes full conversion of outstanding preferred stock and exercise of stock
options.
Prior year amounts have been reclassified to conform to the current year's
segment presentation.
</TABLE>
5 2 T E X T R O N
<PAGE> 53
<TABLE>
- ----------------------------------------------------------------------------------------------------------------------
<CAPTION>
Selected Financial Information
(Dollars in millions except where otherwise
noted and per share amounts) 1996 1995 1994 1993 1992 1991
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Revenues
Aircraft $ 2,703 $ 2,519 $ 2,290 $ 2,077 $ 1,617 $ 1,352
Automotive 1,627 1,534 1,511 1,178 788 661
Industrial 2,196 1,560 1,539 1,363 1,309 1,275
Systems and Components 653 855 1,338 1,653 1,902 1,922
Finance 2,095 1,985 1,672 1,610 1,622 1,548
- ----------------------------------------------------------------------------------------------------------------------
Total revenues $ 9,274 $ 8,453 $ 8,350 $ 7,881 $ 7,238 $ 6,758
======================================================================================================================
Income
Aircraft $ 271 $ 245 $ 197 $ 162 $ 136 $ 121
Automotive 146 135 132 89 68 50
Industrial 233 177 157 130 116 99
Systems and Components 57 65 88 117 161 204
Finance 383 365 331 289 250 226
- ----------------------------------------------------------------------------------------------------------------------
Total operating income 1,090 987 905 787 731 700
Corporate expenses and other - net (115) (119) (92) (103) (81) (89)
Interest expense - net (148) (178) (190) (214) (238) (213)
Income taxes (322) (274) (257) (171) (160) (160)
Distributions on preferred securities of
subsidiary trust, net of income taxes (23) - - - - -
- ----------------------------------------------------------------------------------------------------------------------
Income from continuing operations<F*> $ 482 $ 416 $ 366 $ 299 $ 252 $ 238
======================================================================================================================
Per share of common stock
Income from continuing operations<F*> $ 5.60 $ 4.79 $ 4.06 $ 3.32 $ 2.84 $ 2.71
Dividends declared $ 1.76 $ 1.56 $ 1.40 $ 1.24 $ 1.12 $ 1.03
Book value at year-end $ 38.20 $ 39.92 $ 33.45 $ 31.18 $ 28.11 $ 33.65
Common stock price: High $ 97-3/4 $77-3/8 $60-5/8 $58-7/8 $44-3/4 $39-1/2
Low $ 69-1/8 $48-5/8 $46-1/2 $40-3/8 $33-3/4 $ 25
Year-end $ 93-3/8 $67-1/2 $50-3/8 $58-1/4 $44-3/4 $38-1/2
Common shares outstanding
(in thousands)<F**> : Average 86,029 86,894 90,119 90,052 88,580 87,563
Year-end 85,158 86,950 87,253 90,499 89,418 88,261
======================================================================================================================
Financial position
Total assets $ 18,235 $17,651 $16,103 $15,372 $14,710 $12,283
Debt:
Parent Group $ 1,507 $ 1,774 $ 1,582 $ 2,025 $ 2,283 $ 1,820
Finance Group $ 8,839 $ 8,437 $ 7,760 $ 6,847 $ 6,440 $ 5,664
Preferred securities of subsidiary trust $ 483 $ - $ - $ - $ - $ -
Shareholders' equity $ 3,183 $ 3,412 $ 2,882 $ 2,780 $ 2,488 $ 2,928
Parent Group debt to total capital 29% 34% 35% 42% 48% 45%
======================================================================================================================
Investment data
Capital expenditures $ 343 $ 279 $ 294 $ 246 $ 215 $ 152
Depreciation $ 223 $ 195 $ 206 $ 201 $ 194 $ 177
Research and development $ 576 $ 656 $ 611 $ 514 $ 430 $ 457
======================================================================================================================
Other data
Number of employees at year-end 57,000 54,000 50,000 53,000 51,000 49,000
Number of common shareholders at year-end 25,000 26,000 27,000 28,000 30,000 31,000
- ----------------------------------------------------------------------------------------------------------------------
<FN>
<F*>Before cumulative effect of changes in accounting principles in 1992.
<F**>Assumes full conversion of outstanding preferred stock and exercise of
stock options.
Prior year amounts have been reclassified to conform to the current year's
segment presentation.
</TABLE>
T E X T R O N 5 3
<PAGE> 54
- -------------------------------------------------------------------------------
<TABLE>
Directory of Divisions
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Aircraft Bell Helicopter Textron Webb F. Joiner Vertical takeoff and landing aircraft and spare
Chairmand and parts for the U.S. Government, foreign governments
Chief Executive and commercial markets
Officer
-----------------------------------------------------------------------------------------------------------
The Cessna Aircraft Company Russell W. Meyer, Jr. Light and mid-size business jets, utility turboprops
Chairman and and single-engine piston aircraft.
Chief Executive
Officer
-----------------------------------------------------------------------------------------------------------
Textron Lycoming David G. Assard Piston aircraft engines and replacement parts for
President the general aviation market.
- -----------------------------------------------------------------------------------------------------------------------------
Automotive Textron Automotive Company John A. Janitz Automotive interior, exterior and functional
Chairman, President components and systems.
Chief Executive
Officer
-----------------------------------------------------------------------------------------------------------
CWC Castings Textron John L. Kelly Gray iron and ductile iron castings, primarily
President camshafts for automobile and engine manufacturers.
-----------------------------------------------------------------------------------------------------------
Kautex Werke Dr. Wolfgang Theis Blow-molded plastic fuel tank system and other
Reinold Hagen AG (Germany) Chairman automotive components.
-----------------------------------------------------------------------------------------------------------
McCord Winn Textron George F. Daniels Automotive seating comfort systems, windshield and
President headlamp washing systems and electro-mechanical
components.
-----------------------------------------------------------------------------------------------------------
Micromatic Textron Michael J. Brennan Proprietary machine tools, components and assembly
President systems for automotive and commercial markets.
-----------------------------------------------------------------------------------------------------------
Randall Textron Jane L. Warner Fuel filler assemblies and fuel delivery systems for
President automotive market.
-----------------------------------------------------------------------------------------------------------
Textron Automotive Sam Licavoli Instrument panels, door panels, armrests, airbag
Trim Operations President doors, center consoles, headliners, exterior trim
and lighting components
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Industrial Textron Fastening Systems Fastening systems, synergistic assemblies, components and installation
tools serving the automotive, aerospace, electronics, construction, do-
it yourself and transportation markets.
------------------------------------------------- -----------------------------------------------------
<S> <C> <C> <C> <C>
Avdel Textron John C. Castle Textron Aerospace Fasteners George A. Andrews
President President
------------------------------------------------- -----------------------------------------------------
Camcar Textron James R. MacGilvray Textron Fastening Systems - Horst Homuth
President Germany General Manager
------------------------------------------------- -----------------------------------------------------
Elco Textron John C. Lutz Textron Industries S.A.S. John C. Castle
President and (France) President
Chief Executive (Acting)
Officer
5 4 T E X T R O N
<PAGE> 55
- -------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Industrial Cone Drive Textron John G. Melvin Double-enveloping worm gear speed reducers, gear
(continued) President motors and gear sets.
-----------------------------------------------------------------------------------------------------------
E-Z-GO Textron L.T. Walden, Jr. Electric- and gasoline-powered golf cars and
President multipurpose utility vehicles.
-----------------------------------------------------------------------------------------------------------
Greenlee Textron Barclay S. Olson Products for wire and cable installation and
President maintenance in residential, commercial and industrial
facilities.
-----------------------------------------------------------------------------------------------------------
HR Textron Bradley W. Spahr Motion control components and systems for industrial,
President defense and aerospace markets.
-----------------------------------------------------------------------------------------------------------
Jacobsen Textron Philip J. Tralies Professional mowing and turf maintenance equipment.
President
-----------------------------------------------------------------------------------------------------------
Maag Italia Textron S.p.A. Dr. Giovanni P. Traction gears for the railway industry.
(Italy) Agostini
President
-----------------------------------------------------------------------------------------------------------
Maag Pump Systems Textron AG Dr. Frank Brinken Gear pumps and systems used for processing
(Switzerland) President applications in the plastics, chemical and
pharmaceutical industries.
-----------------------------------------------------------------------------------------------------------
Speidel Textron William R. Jahnke Watch attachments and fashion jewelry products.
President
- -----------------------------------------------------------------------------------------------------------------------------
Systems and Fuel Systems Textron Michael Boston Fuel systems components for aircraft and industrial
Components President gas turbine engines.
-----------------------------------------------------------------------------------------------------------
Textron Marine & Land Systems John J. Kelly Air cushion amphibious landing craft, combat vehicles
President and advanced suspension systems.
-----------------------------------------------------------------------------------------------------------
Textron Systems Richard J. Millman Weapon and electronic systems, advanced materials
President and coatings, and high-tech commercial products.
-----------------------------------------------------------------------------------------------------------
Turbine Engine G.L. (Topper) Long Air and land-based gas turbine engine components for
Components Textron President engine OEMs.
- -----------------------------------------------------------------------------------------------------------------------------
Finance Avco Financial Services Warren R. Lyons International consumer financing, and credit and
Chairman property casualty insurance.
-----------------------------------------------------------------------------------------------------------
Textron Financial Corporation Stephen A. Giliotti Commercial financing for the purchase of Textron and
President third-party products.
</TABLE>
T E X T R O N 5 5
<PAGE> 56
- -------------------------------------------------------------------------------
Board of Directors
James F. Hardymon <F1>
Chairman and Chief
Executive Officer
Textron Inc.
Lewis B. Campbell <F1>
President and Chief
Operating Officer
Textron Inc.
H. Jesse Arnelle <F4>,<F5>
Senior Partner
Arnelle, Hastie, McGee,
Willis & Greene
Teresa Beck
Chief Financial Officer
American Stores Company
R. Stuart Dickson <F1>,<F2>
Formerly Chairman
Ruddick Corporation
Paul E. Gagne <F1>,<F2>
President and Chief
Executive Officer
Avenor Inc.
John D. Macomber <F3>,<F4>
Principal
JDM Investment Group
Dana G. Mead
Chairman and Chief
Executive Officer
Tenneco Inc.
Barbara Scott Preiskel <F3>,<F4>
Formerly Senior Vice President
and General Counsel
Motion Picture Association
Brian H. Rowe <F3>,<F5>
Retired Chairman
GE Aircraft Engines
Sam F. Segnar <F3>,<F4>
Retired Chairman and
Chief Executive Officer
Enron Corporation
Jean Head Sisco <F1>,<F2>
Partner
Sisco Associates
John W. Snow <F1>,<F5>
Chairman, President and Chief
Executive Officer
CSX Corporation
Martin D. Walker <F1>,<F4>
Chairman
M.A. Hanna Company
Thomas B. Wheeler <F2>,<F5>
Chairman and Chief Executive
Officer
Massachusetts Mutual Life
Insurance Company
[FN]
Numbers indicate committee
memberships
<F1> Executive Committee:
Chairman,
James F. Hardymon
<F2> Audit Committee:
Chairman,
Jean Head Sisco
<F3> Nominating and Board Affairs
Committee:
Chairman,
Barbara Scott Preiskel
<F4> Organization and
Compensation Committee:
Chairman,
Martin D. Walker
<F5> Pension Committee:
Chairman,
Thomas B. Wheeler
- -------------------------------------------------------------------------------
Management Committee
James F. Hardymon<F*>
Chairman and Chief
Executive Officer
Lewis B. Campbell
President and Chief
Operating Officer
Mary L. Howell<F**>
Executive Vice President
Government and
International
Wayne W. Juchatz
Executive Vice President and
General Counsel
Stephen L. Key
Executive Vice President and
Chief Financial Officer
William F. Wayland<F**>
Executive Vice President
Administration and Chief
Human Resources Officer
- -------------------------------------------------------------------------------
Operating Committee
Lewis B. Campbell
President and Chief
Operating Officer
Carol J. Grant
Vice President
Human Resources
Herbert L. Henkel<F*>
President
Textron Industrial Products
John A. Janitz
Chairman, President and Chief
Executive Officer
Textron Automotive Company
Webb F. Joiner<F***>
Chairman and Chief
Executive Officer
Bell Helicopter Textron
Warren R. Lyons<F**>
Chairman
Avco Financial Services
Russell W. Meyer, Jr.<F***>
Chairman and Chief
Executive Officer
Cessna Aircraft Company
Gero K.H. Meyersiek
Vice President International
Terry D. Stinson<F*>
President and Chief
Operating Officer
Bell Helicopter Textron
Richard L. Yates<F**>
Vice President and Controller
- -------------------------------------------------------------------------------
Corporate Staff Officers
Frederick K. Butler<F**>
Vice President and Secretary
Peter B.S. Ellis
Vice President Strategic
Planning
Douglas A. Fahlbeck<F**>
Vice President Mergers and
Acquisitions
Arnold M. Friedman<F***>
Vice President and Deputy
General Counsel
William B. Gauld
Vice President Corporate
Information Management
and Chief Information
Officer
Gregory E. Hudson<F**>
Vice President Taxes
William P. Janovitz<F**>
Vice President
Financial Management
Mary F. Lovejoy
Vice President
Communications and
Investor Relations
John W. Mayers, Jr.<F**>
Vice President Risk
Management and
Insurance
Frank W. McNally<F*>
Vice President Employee
Relations and Benefits
Freda M. Peters
Vice President
Executive Development and
Human Resource
Policy and Compliance
Daniel L. Shaffer<F**>
Vice President Audit and
Business Ethics
Richard F. Smith<F**>
Vice President Government
Affairs
Richard A. Watson<F***>
Senior Vice President and
Treasurer
John F. Zugschwert<F*>
Vice President Government
Marketing
[FN]
Service with Textron and its
subsidiaries/divisions:
<F*>5-9 years
<F**>10-19 years
<F***>20 years and over
- -------------------------------------------------------------------------------
International Advisory Council
Richard R. Burt
Chairman
IEP Advisors Inc.
USA
Lewis B. Campbell
President and COO
Textron Inc.
USA
Cheng Wai Keung
Chairman and Managing
Director
Wing Tai Holdings Limited
Singapore
Jean Gandois
President
National Council of
French Employers
France
David A. Gledhill
Former Chairman
Swire Group
Hong Kong
Carl H. Hahn
Former Chairman of Board
of Management
Volkswagen AG
Germany
James F. Hardymon
Chairman and CEO
Textron Inc.
USA
Mary L. Howell
Executive Vice President
Government and
International
Textron Inc.
USA
Jeffrey Koo
Chairman and CEO
Chinatrust Commercial Bank
Taiwan
Gero K.H. Meyersiek
Vice President International
Textron Inc.
USA
Marcilio Marques Moreira
Former Finance Minister
Brazil
Andrzej Olechowski
Chairman
Central Europe Trust
Poland
Sir Charles Powell
Director
Jardines Matheson
Holdings Ltd.
United Kingdom
Ratan N. Tata
Chairman
Tata Industries Limited
India
Horst Teltschik
Member of the Board
of Management
BMW AG
Germany
5 6 T E X T R O N
<PAGE> Inside Back Cover
- -------------------------------------------------------------------------------
Shareholder Information
Corporate Headquarters
Textron Inc.
40 Westminster Street
Providence, Rhode Island 02903
(401) 421-2800
Annual Meeting
Textron's annual meeting of shareholders will be held on Wednesday, April 23,
1997 at 10:30 a.m. at The Worthington Hotel, Ft. Worth, Texas.
Transfer Agent, Registrar and Dividend Paying Agent
For shareholder services such as change of address, lost certificates or
dividend checks, change in registered ownership, preferred stock conversion
services or the Dividend Reinvestment Plan, write or call:
First Chicago Trust Company of New York
P.O. Box 2500
Jersey City, New Jersey 07303-2500
1-800-519-3111
Dividend Reinvestment Plan
Textron's Dividend Reinvestment Plan offers shareholders of common stock a
convenient way to purchase additional shares of Textron common stock without
paying brokerage, commission or other service fees. More information and an
authorization form may be obtained by writing or calling First Chicago Trust
Company of New York. (Please see First Chicago's address and telephone number
above.)
Stock Exchange Information (Symbol: TXT)
Textron common stock is listed on the New York, Chicago and Pacific Stock
Exchanges.
Textron's preferred stocks ($2.08 and $1.40) are traded only on the New York
Stock Exchange.
Investor Relations/Public Relations
Textron Inc.
Communications and Investor Relations Department
40 Westminster Street
Providence, Rhode Island 02903
Investors and security analysts should call: (401) 457-2353
Members of the news media should call: (401) 457-2354
For more information regarding Textron and its divisions, visit our worldwide
web site on the internet at http://www.textron.com
Company Publications and General Information
To receive a copy, without charge, of Textron's reports on Form 10-K and
10-Q, proxy statement, Annual Report and the most recent company news and
earnings press releases, please call 1-888-TXT-LINE or direct written
correspondence to Textron. (Please see Textron's Communications and Investor
Relations Department address above.)
March 14, 1997
Exhibit 21
TEXTRON INC. - Significant Subsidiaries
(as of March 14, 1997)
Set forth below are the names of certain subsidiaries of
Textron Inc. Other subsidiaries, which considered in the
aggregate, do not constitute a significant subsidiary, are
omitted from such list.
Name Place of
Incorporation
Avco Corporation Delaware
ARS Two Inc. Delaware
Avco Community Developers, Inc. California
Textron Pacific Limited Australia
Textron Systems Corporation Delaware
Turbine Engine Components Textron Inc. Delaware
Avco Financial Services, Inc. Delaware
Avdel Cherry Textron Inc. New York
Bell Helicopter Services Inc. Delaware
Bell Helicopter Asia (Pte) Ltd. Singapore
Bell Helicopter Textron Inc. Delaware
Cadillac Gage Textron Inc. Michigan
The Cessna Aircraft Company Kansas
Cone Drive Operations Inc. Delaware
Elco Textron Inc. Delaware
Fuel Systems Textron Inc. Delaware
Greenlee Textron Inc. Delaware
HR Textron Inc. Delaware
Maag Pump Systems of America, Inc. North Carolina
McCord Corporation Michigan
Textron Automotive Interiors Inc. Delaware
Davidson Overseas Investment Inc. Delaware
Textron Automotive B.V. Netherlands
Textron Automotive Functional Components Inc. - Massachusetts
McCord Winn Division
Micromatic Operations Inc. Delaware
Micro-Precision Operations Inc. Delaware
The Paul Revere Corporation (83%, ) Massachusetts
The Paul Revere Life Insurance Company Massachusetts
The Paul Revere Protective Life Insurance Delaware
Company
The Paul Revere Variable Annuity Insurance Massachusetts
Company
The Paul Revere Equity Sales Company Massachusetts
The Paul Revere Investment Management Company Massachusetts
Textron Atlantic Inc. Delaware
Avdel plc United Kingdom
Bell Helicopter Supply Center B.V. Netherlands
Camcar Textron (Malaysia) Sdn. Bhd. Malaysia
Jacobsen E-Z-GO Textron B.V. Netherlands
Jacobsen E-Z-GO Textron A.G. Switzerland
Jacobsen E-Z-GO Textron A/S Denmark
Jacobsen E-Z-GO Textron S.R.L. Italy
Klauke Handelsges, m.b.H. Austria
Maag Pump Systems AG Switzerland
Maag Pump Systems PTE Ltd. Singapore
Marly ORAG S.A. France
<PAGE>
Name Place of
Incorporation
Textron Atlantic Inc. (continued) Delaware
Textron Atlantic Belgium S.A. Belgium
Textron Atlantic France Inc. Delaware
Textron Atlantic Holding GmbH Germany
Gustav Klauke GmbH Germany
Gustav Klauke France SARL France
Jacobsen E-Z-GO Textron GmbH Rasenpflegesysteme Germany
Maag Pump Systems GmbH Germany
Textron Automotive GmbH Germany
Kautex Werke Reinold Hagen A.G. Germany
Kautex Benelux N.V. Belgium
Kautex Iberica S.A. Spain
Textron Verbindungstechnik GmbH Germany
Textron Verbindungstechnik OHG Germany
Textron France Inc. Delaware
Textron France S.N.C. France
Textron France S.A. France
Textron Industries S.A.S. France
Textron Italia SpA Italy
Maag Italia SpA Italy
Textron Limited United Kingdom
Textron Automotive Company Inc. Delaware
Textron Automotive Exteriors Inc. Delaware
Textron Automotive Management Services Inc. Delaware
Textron FSC Inc. Barbados
Textron Financial Corporation Delaware
Cessna Finance Corporation Kansas
Textron International Inc. Delaware
Textron Properties Inc. Delaware
Textron Canada Limited Canada
Kautex Corporation Ontario
Textron Realty Corporation Delaware
Textron Realty Operations (Wheatfield) Inc. Delaware
Textron S.A. de C.V. Mexico
Textron Automotive Company de Mexico, S.A. de C.V. Mexico
Textron Automotive Management Services Company Mexico
de Mexico, S.A. de C.V.
Turbine Engine Components Textron (Cleveland Delaware
Operations) Inc.
Turbine Engine Components Textron (Newington Connecticut
Operations) Inc.
Turbine Engine Components Textron (Santa Fe Springs California
Operations) Inc.
Wolverine Metal Specialties Inc. Michigan
Xact Textron Inc. Delaware
______________________________
Notes:
A list of the principal subsidiaries of Avco Financial
Services, Inc. is attached hereto as Exhibit 1.
Remaining 17% of share capital is publicly traded on The New
York Stock Exchange.
85% of the capital stock of Textron France S.N.C. is held by
Textron France Inc. and the remaining 15% by Textron Atlantic
France Inc.
85% of the capital stock of Textron Italia SpA is held by
Textron Atlantic Inc. and the remaining 15% by Textron
International Inc.
64.5% of the capital stock of Textron Canada Limited is held
by Textron Properties Inc. and the remaining 35.5% by Textron
Inc.
<PAGE>
Exhibit 1
Set forth below are the principal subsidiaries of Avco Financial
Services, Inc.:
Name Jurisdiction
AFS Corporation Delaware
Avco DC Corporation Delaware
Avco Enterprises, Inc. California
Avco Financial Services Canada Limited Ontario
Avco Financial Services International, Inc. Nebraska
Avco Financial Services Ltd. Australian
Capital
Territory
Avco Financial Services Limited New Zealand
Avco Group Limited United Kingdom
Avco National Bank California
Balboa Insurance Company California
Balboa Life Insurance Company California
Family Insurance Corporation Wisconsin
Meritplan Insurance Company California
Newport Insurance Company Arizona
______________________________
Owned by Avco Financial Services International, Inc.
Owned by AFS Corporation and Avco DC Corporation
Owned by Avco Financial Services, Inc.
Owned by Avco Enterprises, Inc., a wholly-owned subsidiary of
Avco Financial Services, Inc.
Owned by Balboa Insurance Company
Exhibit 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Annual
Report (Form 10-K) of Textron Inc. of our report dated January
23, 1997, included in the 1996 Annual Report to Shareholders of
Textron Inc.
Our audits also included the financial statement schedules of
Textron Inc. listed in the accompanying Index to Financial
Statements and Financial Statement Schedules. These schedules
are the responsibility of the Company's management. Our
responsibility is to express an opinion based on our audits. In
our opinion, the financial statement schedules referred to above,
when considered in relation to the basic financial statements
taken as a whole, present fairly in all material respects the
information set forth therein.
We also consent to the incorporation by reference in the
Registration Statements (Form S-3 No. 33-46501, Form S-3 No. 33-
63227, Form S-8 No. 2-78073, Form S-8 No. 2-95413, Form S-8 No.
33-00668, Form S-8 No. 33-19402, Form S-8 No. 33-37139, Form S-8
No. 33-38094, Form S-8 No. 33-57025, Form S-8 No. 33-63741 and
Form S-8 No. 33-07121) of Textron Inc. and in the related
Prospectuses and Prospectus Supplements of our report dated
January 23, 1997, with respect to the consolidated financial
statements and schedules of Textron Inc. included or incorporated
by reference in this Annual Report (Form 10-K) for the year ended
December 28, 1996.
/s/ERNST & YOUNG
Boston, Massachusetts
March 13, 1997
POWER OF ATTORNEY
The undersigned, Textron Inc. ("Textron") a Delaware
corporation, and the undersigned directors and officers of
Textron, do hereby constitute and appoint Wayne W. Juchatz, Arnold
M. Friedman, Michael D. Cahn, W. Robert Kemp and Ann T. Willaman,
and each of them, with full powers of substitution, their true and
lawful attorneys and agents to do or cause to be done any and all
acts and things and to execute and deliver any and all instruments
and documents which said attorneys and agents, or any of them, may
deem necessary or advisable in order to enable Textron to comply
with the Securities and Exchange Act of 1934, as amended, and any
requirements of the Securities and Exchange Commission in respect
thereof, in connection with the filing of Textron's Annual Report
on Form 10-K for the fiscal year ended December 28, 1996,
including specifically, but without limitation, power and
authority to sign the names of the undersigned directors and
officers in the capacities indicated below and to sign the names
of such officers on behalf of Textron to such Annual Report filed
with the Securities and Exchange Commission, to any and all
amendments to such Annual Report, to any instruments or documents
or other writings in which the original or copies thereof are to
be filed as a part of or in connection with such Annual Report or
amendments thereto, and to file or cause to be filed the same with
the Securities and Exchange Commission; and each of the
undersigned hereby ratifies and confirms all that such attorneys
and agents, and each of them, shall do or cause to be done
hereunder and such attorneys and agents, and each of them, shall
have, and may exercise, all of the powers hereby conferred.
IN WITNESS WHEREOF, Textron has caused this Power of Attorney
to be executed and delivered in its name and on its behalf by the
undersigned duly authorized officer and its corporate seal
affixed, and each of the undersigned has signed his or her name
thereto, on this 26th day of February, 1997.
TEXTRON INC.
By: /s/James F. Hardymon
James F. Hardymon
Chairman and Chief
Executive Officer
ATTEST:
/s/Frederick K. Butler
Frederick K. Butler
Vice President and Secretary
/s/James F. Hardymon /s/Barbara Scott Preiskel
James F. Hardymon Barbara Scott Preiskel
Chairman and Chief Director
Executive Officer, Director
(principal executive officer)
/s/Lewis B. Campbell /s/Brian H. Rowe
Lewis B. Campbell Brian H. Rowe
President and Chief Operating Director
Officer, Director
/s/H. Jesse Arnell /s/Sam F. Segnar
H. Jesse Arnelle Sam F. Segnar
Director Director
/s/Teresa Beck /s/Jean Head Sisco
Teresa Beck Jean Head Sisco
Director Director
/s/R. Stuart Dickson /s/John W. Snow
R. Stuart Dickson John W. Snow
Director Director
/s/Paul E. Gagne /s/Martine D. Walker
Paul E. Gagne Martin D. Walker
Director Director
/s/John D. Macomber /s/Thomas B. Wheeler
John D. Macomber Thomas B. Wheeler
Director Director
/s/Dana G. Mead /s/Stephen L. Key
Dana G. Mead Stephen L. Key
Director Executive Vice President
and Chief Financial Officer
(principal financial officer)
/s/Richard L. Yates
Richard L. Yates
Vice President and Controller
(principal accounting officer)
Exhibit 24.2
TEXTRON INC.
Assistant Secretary's Certificate
I, ANN T. WILLAMAN, a duly elected Assistant Secretary of
TEXTRON INC., a Delaware corporation (hereinafter, the
"Corporation"), DO HEREBY CERTIFY that set forth below is a true
and correct copy of a resolution passed at a meeting of the
Corporation's Board of Directors held on February 28, 1997, at
which a quorum was present and voted throughout:
RESOLVED, that the officers of the Corporation be,
and they hereby are, authorized in the name and on
behalf of the Corporation to execute and deliver a power
of attorney appointing Wayne W. Juchatz, Arnold M.
Friedman, Michael D. Cahn and Ann T. Willaman, or any of
them, to act as attorneys-in-fact for the Corporation
for the purpose of executing and filing the
Corporation's Annual Report on Form 10-K for its fiscal
year ended December 28, 1996, and any and all amendments
thereto.
I DO HEREBY FURTHER CERTIFY that the foregoing resolution has
been neither amended nor modified, and remains in full force and
effect as of the date hereof.
IN WITNESS WHEREOF, I have hereunto set my hand and caused
the Corporate seal of TEXTRON INC. to be affixed as of the 14th
day of March, 1997.
/s/Ann T. Willaman
Ann T. Willaman
CORPORATE SEAL Assistant Secretary
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Textron
Inc.'s Consolidated Balance Sheet as of December 28, 1996 and Consolidated
Statement of Income for the year ended December 28, 1996 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-28-1996
<PERIOD-END> DEC-28-1996
<CASH> 47
<SECURITIES> 0
<RECEIVABLES> 11,304
<ALLOWANCES> 293
<INVENTORY> 1,192
<CURRENT-ASSETS> 0
<PP&E> 3,203
<DEPRECIATION> 1,664
<TOTAL-ASSETS> 18,235
<CURRENT-LIABILITIES> 0
<BONDS> 10,346
<COMMON> 12
0
14
<OTHER-SE> 3,157
<TOTAL-LIABILITY-AND-EQUITY> 18,235
<SALES> 7,179
<TOTAL-REVENUES> 9,274
<CGS> 5,837
<TOTAL-COSTS> 6,112
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 230
<INTEREST-EXPENSE> 731
<INCOME-PRETAX> 827
<INCOME-TAX> 322
<INCOME-CONTINUING> 482
<DISCONTINUED> (229)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 253
<EPS-PRIMARY> 2.94
<EPS-DILUTED> 2.94
</TABLE>
