SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 11-K
(Mark one)
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to ____________
Commission file number 001-5480
A. Full title of the plan and the address of the plan, if different for
that the issuer named below:
ELCO THERMOPLASTICS INC.
PROFIT SHARING PLAN
1111 Samuelson Road
P.O. Box 7009
Rockford, Illinois 61125
B. Name of issuer of securities held pursuant to the plan and address of
Its principal executive office:
TEXTRON INC.
40 Westminster Street
Providence, Rhode Island 02903
SIGNATURES
The Plan. Pursuant to the requirements of the Securities Exchange Act of 1934,
the trustees (or other persons who administer the employee benefit plan) have
duly caused this annual report to be signed on its behalf by the undersigned
hereunto duly authorized.
ELCO THERMOPLASTICS INC. PROFIT
SHARING PLAN
ELCO TEXTRON INC., Plan Administrator
DATE: June 28, 1999 By: /s/Mark S. Arnold
Mark S. Arnold
Director of Finance
Financial Statements
and Supplemental Schedules
Elco Thermoplastics, Inc.
Profit Sharing Plan
Years ended December 31, 1998 and 1997
Elco Thermoplastics, Inc. Profit Sharing Plan
Financial Statements and
Supplemental Schedules
Years ended December 31, 1998 and 1997
Contents
Report of Independent Auditors 1
Financial Statements
Statements of Net Assets Available for Benefits 2
Statements of Changes in Net Assets Available for Benefits 4
Notes to Financial Statements 6
Supplemental Schedules
Line 27a - Schedule of Assets Held for Investment Purposes 12
Line 27d - Schedule of Reportable Transactions 13
Line 27e - Schedule of Non-Exempt Transactions 15
Report of Independent Auditors
Elco Thermoplastics, Inc. Profit Sharing Plan
Administration Committee
We have audited the accompanying statements of net assets available for benefits
of the Elco Thermoplastics, Inc. Profit Sharing Plan as of December 31, 1998 and
1997, and the related statements of changes in net assets available for benefits
for the years then ended. These financial statements are the responsibility of
the Plan'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 net assets available for benefits of the Plan at
December 31, 1998 and 1997, and the changes in its net assets available for
benefits for the years then ended, in conformity with generally accepted
accounting principles.
Our audits were performed for the purpose of forming an opinion on the financial
statements taken as a whole. The accompanying supplemental schedules of assets
held for investment purposes as of December 31, 1998, reportable transactions,
and non-exempt transactions for the year then ended, are presented for purpose
of additional analysis and are not a required part of the financial statements
but are supplementary information required by the Department of Labor's Rules
and Regulations for Reporting and Disclosure under the Employee Retirement
Income Security Act of 1974. These supplemental schedules are the responsibility
of Plan's management. The Fund Information in the statement of net assets
available for benefits and statement of changes in net assets available for
benefits is presented for purposes of additional analysis rather than to present
the net assets available for benefits and changes in net assets available for
benefits of each fund. The supplemental schedules and Fund Information have been
subjected to the auditing procedures applied in our audits of the financial
statements and, in our opinion, are fairly stated in all material respects in
relation to the financial statements taken as a whole.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
May 5, 1999
<PAGE>1
<TABLE>
Elco Thermoplastics, Inc. Profit Sharing Plan
Statement of Net Assets Available for Benefits
with Fund Information
December 31, 1998
<CAPTION>
Fund Information
Money Textron
Market Balanced Equity Stock Loan Total
Fund Fund Fund Fund Fund Funds
<S> <C> <C> <C> <C> <C> <C>
Assets
Investments, at fair value:
Pegasus Equity Index Fund $ - $ - $1,394,452 $ - $ - $1,394,452
The George Putnam Fund of - 1,600,539 - - - 1,600,539
Boston
Pegasus Money Market Fund 600,222 - - - - 600,222
Textron Inc. common stock - - - 1,472,455 - 1,472,455
Participant notes - - - - 19,284 19,284
receivable
Total investments 600,222 1,600,539 1,394,452 1,472,455 19,284 5,086,952
Receivables:
Employer's contributions 36,476 57,732 63,141 73,699 - 231,048
Participant contributions 4,733 7,876 9,075 11,006 - 32,690
Total receivables 41,209 65,608 72,216 84,705 - 263,738
Net assets available
for benefits $641,431 $1,666,147 $1,466,668 $1,557,160 $19,284 $5,350,690
</TABLE>
See accompanying notes.
<PAGE>2
<TABLE>
Elco Thermoplastics, Inc. Profit Sharing Plan
Statement of Net Assets Available for Benefits
with Fund Information
December 31, 1997
<CAPTION>
Fund Information
Money Textron
Market Balanced Equity Stock Loan Total
Fund Fund Fund Fund Fund Funds
<S> <C> <C> <C> <C> <C> <C>
Assets
Investments, at fair
value:
Parkstone Equity Income $ - $357,844 $107,420 $ - $ - $465,264
Fund
Parkstone Bond Fund - 576,174 - - - 576,174
Parkstone Small
Capitalization - 55,725 - - - 55,725
Value Fund
Parkstone Mid
Capitalization Value - 123,698 1,089,902 - - 1,213,600
Fund
Parkstone Balanced
Allocation Fund - 107,044 - - - 107,044
Parkstone International
Discovery Fund - 119,803 - - - 119,803
Parkstone Government
Money Market Fund 551,375 231 95 - 22 551,723
Parkstone Prime
Obligations Money - - - 30,937 - 30,937
Market Fund
Textron Inc. common stock - - - 1,057,500 - 1,057,500
Participant notes - - - - 9,762 9,762
receivable
Total investments 551,375 1,340,519 1,197,417 1,088,437 9,784 4,187,532
Receivables:
Employer's contributions 44,807 73,425 85,389 83,475 - 287,096
Participant contributions 3,966 6,856 9,521 10,092 - 30,435
Accrued income 2,318 1 1 4,363 57 6,740
Other 390 16,297 4,289 32 - 21,008
Total receivables 51,481 96,579 99,200 97,962 57 345,279
Total assets 602,856 1,437,098 1,296,617 1,186,399 9,841 4,532,811
Liabilities
Other 113 277 239 6,842 - 7,471
Net assets available
for benefits $602,743 $1,436,821 $1,296,378 $1,179,557 $9,841 $4,525,340
</TABLE>
See accompanying notes.
<PAGE>3
<TABLE>
Elco Thermoplastics, Inc. Profit Sharing Plan
Statement of Changes in Net Assets Available for Benefits
with Fund Information
Year ended December 31, 1998
<CAPTION>
Fund Information
Money Textron
Market Balanced Equity Stock Loan Total
Fund Fund Fund Fund Fund Funds
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Interest and dividends $33,433 $142,947 $89,928 $25,280 $1,430 $293,018
Net appreciation in fair
value of investments - 11,116 94,947 255,888 - 361,951
33,433 154,063 184,875 281,168 1,430 654,969
Contributions:
Employer 50,052 82,273 91,612 103,924 - 327,861
Participants 40,791 75,878 94,072 106,119 - 316,860
90,843 158,151 185,684 210,043 - 644,721
Total additions 124,276 312,214 370,559 491,211 1,430 1,299,690
Deductions from net assets
attributed to:
Benefits paid to 50,421 136,265 159,160 115,780 1,478 463,104
participants
Other 4,360 (6,500) 2,786 9,603 987 11,236
Net increase (decrease) before 69,495 182,449 208,613 365,828 (1,035) 825,350
transfers
Interfund transfers, net (30,807) 46,877 (38,323) 11,775 10,478 -
Net increase 38,688 229,326 170,290 377,603 9,443 825,350
Net assets available for
benefits at beginning of 602,743 1,436,821 1,296,378 1,179,557 9,841 4,525,340
year
Net assets available for
benefits at end of year $641,431 $1,666,147 $1,466,668 $1,557,160 $19,284 $5,350,690
</TABLE>
See accompanying notes.
<PAGE>4
<TABLE>
Elco Thermoplastics, Inc. Profit Sharing Plan
Statement of Changes in Net Assets Available for Benefits
with Fund Information
Year ended December 31, 1997
<CAPTION>
Fund Information
Money Textron
Market Balanced Equity Stock Loan Total
Fund Fund Fund Fund Fund Funds
<S> <C> <C> <C> <C> <C> <C>
Additions to net assets attributed to:
Investment income:
Interest and dividends $27,253 $130,897 $214,259 $17,021 $303 $389,733
Net appreciation (depreciation) in
fair value of investments - 16,515 (87,698) 214,014 - 142,831
27,253 147,412 126,561 231,035 303 532,564
Contributions:
Employer 56,387 95,025 112,006 106,657 - 370,075
Participants 35,381 72,113 103,591 93,362 - 304,447
91,768 167,138 215,597 200,019 - 674,522
Other (467) (835) 5,856 (2,151) 36,751 39,154
Total additions 118,554 313,715 348,014 428,903 37,054 1,246,240
Deductions from net assets attributed to:
Benefits paid to participants 55,585 103,235 105,377 52,517 - 316,714
Net increase before transfers 62,969 210,480 242,637 376,386 37,054 929,526
Interfund transfers, net (37,489) (9,333) (106,126) 148,596 4,352 -
Net increase 25,480 201,147 136,511 524,982 41,406 929,526
Net assets available for benefits at
beginning of year 577,263 1,235,674 1,159,867 654,575 (31,565) 3,595,814
Net assets available for benefits at
end of year $602,743 $1,436,821 $1,296,378 $1,179,557 $9,841 $4,525,340
</TABLE>
See accompanying notes.
<PAGE>5
Elco Thermoplastics, Inc. Profit Sharing Plan
Notes to Financial Statements
Years ended December 31, 1998 and 1997
1. Description of the Plan
The following brief description of the Elco Thermoplastics, Inc. Profit Sharing
Plan (the Plan) is provided for general information only. Participants should
refer to the Summary Plan Description for more complete information.
General
The Plan is a defined contribution plan formed to provide profit-sharing
benefits to employees of Elco Thermoplastics Inc. (the Company), a subsidiary of
Elco Textron Inc., and to provide for participant tax-deferred savings under
Section 401(k) of the Internal Revenue Code (IRC). All full-time employees of
the Company with one year of service are eligible to participate in the Plan.
Participants have a 100% vested interest in their account balances. The Plan is
subject to the provisions of the Employee Retirement Income Security Act of 1974
(ERISA).
Contributions
Active participants may make contributions as defined in the Plan. Such
contributions may be in the form of Employee Deferral Contributions (as a
percentage of the participant's compensation) or Nondeductible Employee
Contributions. The Company will contribute an amount equal to 50% of the
Employee Deferral Contributions related to the first 4% to 6% of earnings, as
defined (3% prior to March 1, 1998). Additional Company contributions may be
made at the sole discretion of the Board of Directors. The Company made
discretionary contributions of $215,884 and $130,000 in the years ended December
31, 1998 and 1997, respectively.
Participant Notes Receivable
Participants may borrow an amount that does not exceed the lesser of $50,000 or
one-half the value of their account balance relating only to employee
contributions. Loans must be repaid within five years and bear interest at the
current prime rate plus 1%.
<PAGE>6
Investment Options
Participants are allowed to direct employer and employee contributions in 10%
increments in any of the following investment funds:
Money Market Fund - Funds are invested in the Pegasus Money Market Fund, a
mutual fund, which invests in short-term U.S. Treasury bills or notes as well
as other short-term obligations issued by or guaranteed by the U.S.
Government and other short-term obligations.
Equity Fund - Funds are invested primarily in the Pegasus Equity Index Fund,
a mutual fund, which invests in common and preferred stocks.
Balanced Fund - Funds are invested primarily in The George Putnam Fund of
Boston, which invest in a combination of common stocks (and securities
convertible into common stocks), high- and medium-grade corporate bonds,
government securities and other fixed income securities.
Textron Stock Fund - Funds are invested exclusively in Textron common stock.
Cash dividends, if any, will be reinvested in shares of Textron common stock.
Fractional interests in the shares of Textron common stock are allocated to
the participant's accounts.
Participants may change their investment options quarterly.
During October 1998, the underlying investments available to participants
changed.
Participant Accounts
Employee contributions and the Company's matching contribution are allocated to
each respective participant account. The additional Company contribution, if
any, is allocated to participant accounts based on participant compensation, as
defined by the Plan, and their years of service in relation to the total of such
amounts for all participants.
<PAGE>7
Earnings within each fund are allocated daily in the proportion that each
participant's beginning account balance (restated for transfers), plus one-half
of contributions made during the six-month period, bears to the total of such
amounts for all participants.
Benefit Payments
The benefit to which a participant is entitled is the benefit that can be
provided from the participant's account balance. On termination of service, a
participant may elect to receive either a lump-sum amount equal to the
participant's account balance, or annual installments over a period of time as
defined by the Plan.
2. Significant Accounting Policies
Valuation of Investments
The Plan's investments are stated at fair value. The shares of the registered
investment companies are valued at quoted market prices which represent the net
asset values of the shares held by the Plan at year end. Shares of Textron Inc.
common stock are valued at the last reported sale price on the last day of
business of the plan year. The Money Market Fund and participant loans are
valued at their outstanding balances which approximate fair value.
Use of Estimates
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
Administrative Expenses
Certain services are provided to the Plan without charge, and administrative
expenses are paid by the Company.
<PAGE>8
3. Termination Priorities
Although it has not expressed any intent to do so, the Company has the right
under the Plan to discontinue its contributions at any time and to terminate the
Plan subject to the provisions of ERISA.
4. Investments
The Plan's investments are held by the Trustee in a bank-administered trust
fund. Effective October 1, 1998, Trustee responsibilities and all Plan assets
were transferred from National City Bank to Putnam Fiduciary Trust Company
(Putnam).
The Plan's investments (including investments bought, sold, and held during the
year) appreciated (depreciated) in fair value by $361,951 and $142,831, as
follows:
Year ended December 31
1998 1997
Investments at fair value as determined by
quoted market prices:
Parkstone Equity Income Fund $(30,295) $20,568
Parkstone Bond Fund 23,636 13,024
Parkstone Small Capitalization Fund (4,729) (13,692)
Parkstone Balanced Allocation Fund 2,614 182
Parkstone Mid Capitalization Value Fund (115,024) (84,394)
Parkstone International Discovery Fund (675) (6,871)
Pegasus Equity Index Fund 194,784 -
The George Putnam Fund of Boston 35,752 -
Textron Inc. Common Stock 255,888 214,014
$361,951 $142,831
<PAGE>9
5. Differences Between Financial Statements
The following is a reconciliation of net assets available for benefits per the
financial statements to the Form 5500:
December 31
1998 1997
Net assets available for benefits per the
financial statements $5,134,806 $4,525,340
Amounts allocated to withdrawn participants - (40,836)
Net assets available per Form 5500 $5,134,806 $4,484,504
Year ended December 31
1998 1997
Benefits paid to participants per the
financial statements $463,104 $316,714
Add: Amounts allocated on Form 5500 to
withdrawn participants at the end of
the year - 40,836
Less: Amounts allocated on Form 5500 to
withdrawn participants at the beginning
of the year (40,836) (57,672)
$422,268 $299,878
Amounts allocated to withdrawn participants are recorded on the Form 5500 for
benefit claims that have been processed and approved for payment prior to year
end but not yet paid.
6. Related-Party Transactions
During the year, the Plan had purchase and sale transactions with mutual funds
administered by an affiliate of the Plan's trustee, and the common stock of
Textron Inc., the ultimate parent company of the Company.
<PAGE>10
7. Tax Status
The Plan has received a letter from the Internal Revenue Service dated June 12,
1995, stating that the Plan is qualified under Section 401(a) of the Internal
Revenue Code (IRC), and, therefore, the related trust is exempt from taxation.
Once qualified, the Plan is required to operate in conformity with the IRC to
maintain its qualification. The Plan Administrator believes that the Plan is
being operated in compliance with the applicable requirements of the Code and,
therefore, believes that the Plan is qualified and the related trust is exempt.
8. Year 2000 (Unaudited)
The Company has determined that it will be necessary to take certain steps in
order to ensure that the Plan's information systems are prepared to handle Year
2000 dates. The Company is taking a two-phase approach. The first phase
addresses internal systems that must be modified or replaced to function
properly. Both internal and external resources are being utilized to replace or
modify existing software applications, and test the software and equipment for
the Year 2000 modifications. The Company anticipates substantially completing
this phase of the project by mid-1999. Costs associated with modifying software
and equipment are not estimated to be significant and will be paid by the
Company.
For the second phase of the project, Plan management established formal
communications with its third-party providers to determine that they have
developed plans to address their own Year 2000 problems as they relate to the
Plan's operations. All third-party service providers have indicated that they
will be Year 2000 compliant by mid-1999. If modification of data processing
systems of either the Plan, the Company, or its service providers is not
completed on time, the Year 2000 problem could have a material impact on the
operations of the Plan. Plan management has not developed a contingency plan,
because they are confident that all systems will be Year 2000 ready.
<PAGE>11
Supplemental Schedules
<TABLE>
Elco Thermoplastics, Inc. Profit Sharing Plan
Employer Identification Number 35-1291803
Plan Number 001
Line 27a - Schedule of Assets Held for Investment Purposes
December 31, 1998
<CAPTION>
Description of
Identity of Issue, Borrower, Investment, Rate Current
Lessor, or Similar Party of Interest Cost Value
<S> <C> <C> <C>
Pegasus Money Market Fund* 600,222 units $600,222 $600,222
Mutual funds:
Pegasus Equity Index Fund* 54,921 shares 1,199,668 1,394,452
The George Putnam Fund of Boston* 88,721 shares 1,564,789 1,600,539
Textron Inc. common stock* 19,930 shares 1,013,115 1,472,455
Participant loans 7.9% to 9.5% - 19,284
$4,377,794 $5,086,952
</TABLE>
*Indicates party-in-interest to the Plan.
<PAGE>12
<TABLE>
Elco Thermoplastics, Inc. Profit Sharing Plan
Employer Identification Number 35-1291803
Plan Number 001
Line 27d - Schedule of Reportable Transactions
Year ended December 31, 1998
Current Value
<CAPTION>
of Asset on
Cost Transaction Net
Identity of Party Purchase Selling of Gain
Involved Description of Assets Price Price Asset Date (Loss)
<S> <C> <C> <C> <C> <C>
Category (i) - Individual transactions in excess of 5 percent of plan assets
Putnam* Putnam Equity Index Fund $1,089,794 $ - $1,089,794 $1,089,794 $ -
Putnam* The George Putnam Fund of Boston 1,428,195 - 1,428,195 1,428,195 -
Putnam* Pegasus Money Market Fund 578,904 - 578,904 578,904 -
First of America
Investment Parkstone Government Money
Corporation* Market Fund - 590,079 590,079 590,079 -
First of America
Investment Parkstone Mid Capitalization
Corporation* Value Fund - 1,006,899 1,317,501 1,006,899 (310,602)
First of America
Investment
Corporation* Parkstone Bond Fund - 621,614 582,282 621,614 39,332
First of America
Investment
Corporation* Parkstone Equity Income Fund - 349,703 368,727 349,703 (19,024)
Category (iii) - Series of security transactions in excess of 5 percent of plan assets
First of America
Investment Parkstone Government Money
Corporation* Market Fund 775,807 - 775,807 775,807 -
- 1,327,530 1,327,530 1,327,530 -
First of America
Investment Parkstone Prime Obligation
Corporation* Money Market Fund 405,677 - 405,677 405,677 -
- 436,614 436,614 436,614 -
First of America
Investment
Corporation* Parkstone Equity Income Fund 34,963 - 34,963 34,963 -
- 469,937 497,336 469,937 (27,399)
First of America
Investment
Corporation* Parkstone Bond Fund 21,803 - 21,803 21,803 -
- 621,614 582,282 621,613 39,332
</TABLE>
<PAGE>13
<TABLE>
Elco Thermoplastics, Inc. Profit Sharing Plan
Employer Identification Number 35-1291803
Plan Number 001
Line 27d - Schedule of Reportable Transactions
(continued)
Current
<CAPTION>
Value of
Cost Asset on Net
Identity of Purchase Selling of Transaction Gain
Party
Involved Description of Assets Price Price Asset Date (Loss)
<S> <S> <C> <C> <C> <C> <C>
Category (iii) - Series of security transactions in excess of 5 percent of plan assets (continued)
First of
America Parkstone Mid
Investment Capitalization
Corporation* Value Fund 188,789 - 188,789 188,789 -
- 1,289,347 1,628,761 1,289,347 (339,414)
Textron Inc. * Textron Inc. Common 320,018 - 320,018 320,018 -
Stock
- 160,951 114,093 160,951 46,858
First of
America
Investment Parkstone Balanced
Corporation* Allocation Fund 221,975 - 221,975 221,975 -
- 331,632 329,599 331,632 2,033
Putnam* Pegasus Equity Index 1,199,668 - 1,199,668 1,199,668 -
Fund
Putnam* The George Putnam Fund 1,564,859 - 1,564,859 1,564,859 -
of Boston
- 72 70 72 2
Putnam* Pegasus Money Market 600,836 - 600,836 600,836 -
Fund
- 614 614 614 -
</TABLE>
*Indicates party-in-interest to the Plan.
There were no category (ii) or (iv) reportable transactions for the year ended
December 31, 1998.
<PAGE>14
<TABLE>
Elco Thermoplastics, Inc. Profit Sharing Plan
Employer Identification Number 35-1291803
Plan Number 001
Line 27e - Schedule of Non-Exempt Transactions
Year ended December 31, 1998
<CAPTION>
Relationship to Plan Description of Transactions, Including
Employer or Other Maturity Date, Rate of Interest,
Identity of Party Involved Party-in-Interest Collateral, Par or Maturity Value
<S> <C> <C>
Elco Thermoplastics, Inc. Employer/Sponsor Employee contributions of $5,332.70
withheld from an April 1998 payroll were
remitted on November 3, 1998. No
adjustment for lost earnings has been
made to date.
</TABLE>
<PAGE>15
Exhibit 23
Consent of Independent Auditors
We consent to the incorporation by reference in the
Registration Statement (Form S-8 No. 333-07121) pertaining
to the Elco Thermoplastics, Inc. Profit Sharing Plan of
Textron Inc. of our report dated May 5, 1999, with respect
to the financial statements and schedules of the Elco
Thermoplastics, Inc. Profit Sharing Plan included in this
Annual Report (Form 11-K) for the year ended December 31,
1998.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
Providence, Rhode Island
June 28, 1999
