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 TEXTRON INC.
PROFIT SHARING AND SAVINGS 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 TEXTRON INC. PROFIT SHARING
AND SAVINGS 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 Textron Inc.
Profit Sharing and Savings Plan
Years ended December 31, 1998 and 1997
Elco Textron Inc.
Profit Sharing and Savings 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 11
Line 27d - Schedule of Reportable Transactions 12
Report of Independent Auditors
Administrative Committee
Elco Textron Inc. Profit Sharing and Savings Plan
We have audited the accompanying statements of net assets available for benefits
of the Elco Textron Inc. Profit Sharing and Savings 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, and reportable
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. The Fund Information in the statements of net assets
available for benefits and statements 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 Textron Inc.
Profit Sharing and Savings Plan
Statement of Net Assets Available for Benefits
December 31, 1998
<CAPTION>
Fund Information
Money George Textron Equity
Market Putnam Bond Stock Index Voyager Loan Total
Fund Fund Fund Fund Fund Fund Fund Funds
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Assets
Investments, at
fair value:
Shares of registered
investment companies:
Fixed income $5,494,727 $ - $13,825,588 $ - $ - $ - $ - $19,320,315
Balanced - 43,304,457 - - 3,229,664 2,887,088 - 49,421,209
Textron Inc. common - - - 21,091,557 - - - 21,091,557
stock
Participant notes - - - - - - 2,247,552 2,247,552
receivable
Total investments 5,494,727 43,304,457 13,825,588 21,091,557 3,229,664 2,887,088 2,247,552 92,080,633
Receivables:
Interest and dividends - - - 81,449 - - - 81,449
Due from broker - - - 179,461 - - - 179,461
Total receivables - - - 260,910 - - - 260,910
Net assets available $5,494,727 $43,304,457 $13,825,588 $21,352,467 $3,229,664 $2,887,088 $2,247,552 $92,341,543
for benefits
</TABLE>
See accompanying notes.
<PAGE>2
<TABLE>
Elco Textron Inc.
Profit Sharing and Savings Plan
Statement of Net Assets Available for Benefits
December 31, 1997
<CAPTION>
Fund Information
Money George Textron
Market Putnam Bond Stock Loan Total
Fund Fund Fund Fund Fund Funds
<S> <C> <C> <C> <C> <C> <C>
Assets
Investments, at fair value:
Shares of registered
investment companies:
Fixed income $5,576,828 $ - $14,259,829 $ - $ - $19,836,657
Balanced - 48,397,498 - - - 48,397,498
Common stocks - 261,014 - 17,292,250 - 17,553,264
Preferred stocks - 270,272 - - - 270,272
Short-term investments 26 103,081 98 1,027 - 104,232
Participant notes receivable - - - - 1,013,556 1,013,556
Total investments 5,576,854 49,031,865 14,259,927 17,293,277 1,013,556 87,175,479
Receivables:
Interest and dividends 16,776 55,250 10,842 69,882 - 152,750
Due to (from) other fund 6,677 (6,541) 2,235 (2,371) - -
Other (7,505) 13,165 7,803 (1,170) - 12,293
Cash 2 5 485 (10) - 482
Net assets available for
benefits $5,592,804 $49,093,744 $14,281,292 $17,359,608 $1,013,556 $87,341,004
</TABLE>
See accompanying notes.
<PAGE>3
<TABLE>
Elco Textron Inc.
Profit Sharing and Savings Plan
Statement of Changes in Net Assets Available for Benefits
With Fund Information
Year ended December 31, 1998
<CAPTION>
Fund Information
Money George Textron Equity
Market Putnam Bond Stock Index Voyager Loan Total
Fund Fund Fund Fund Fund Fund Fund Funds
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Additions to net
assets attributed
to:
Investment income:
Net appreciation in
fair value of
investments $ - $576,308 $191,369 $3,997,765 $110,815 $28,328 $ - $4,904,585
Interest and
dividend income 273,187 4,181,279 960,859 393,497 208,718 199,716 112,264 6,329,520
Total additions 273,187 4,757,587 1,152,228 4,391,262 319,533 228,044 112,264 11,234,105
Deductions from net
assets attributed
to:
Benefits paid to
participants 423,182 2,872,752 1,842,803 869,870 536 527 192,004 6,201,674
Administrative
expenses 142 31,523 137 - 6 84 - 31,892
Total deductions 423,324 2,904,275 1,842,940 869,870 542 611 192,004 6,233,566
Net increase
(decrease)
before transfers (150,137) 1,853,312 (690,712) 3,521,392 318,991 227,433 (79,740) 5,000,539
Interfund transfers,
net 52,060 (7,642,599) 235,008 471,467 2,910,673 2,659,655 1,313,736 -
Net increase
(decrease) (98,077) (5,789,287) (455,704) 3,992,859 3,229,664 2,887,088 1,233,996 5,000,539
Net assets available
for benefits,
beginning of
year 5,592,804 49,093,744 14,281,292 17,359,608 - - 1,013,556 87,341,004
Net assets available
for benefits, end
of year $5,494,727 $43,304,457 $13,825,588 $21,352,467 $3,229,664 $2,887,088 $2,247,552 $92,341,543
</TABLE>
See accompanying notes.
<PAGE>4
<TABLE>
Elco Textron Inc.
Profit Sharing and Savings Plan
Statement of Changes in Net Assets Available for Benefits
With Fund Information
Year ended December 31, 1997
Fund Information
Money George Textron
Market Putnam Bond Stock Loan Total
Fund Fund Fund Fund Fund Funds
<S> <C> <C> <C> <C> <C> <C>
Additions to net assets
attributed to:
Investment income:
Net appreciation (depreciation)
in fair value of investments $(27,769) $8,012,971 $71,246 $2,179,114 $ - $10,235,562
Interest and dividend income 351,792 1,465,685 991,359 220,512 19,693 3,049,041
324,023 9,478,656 1,062,605 2,399,626 19,693 13,284,603
Contributions:
Participants 99,536 649,262 141,875 199,588 - 1,090,261
Employer 317,994 1,039,166 270,826 307,041 - 1,935,027
417,530 1,688,428 412,701 506,629 - 3,025,288
Total additions 741,553 11,167,084 1,475,306 2,906,255 19,693 16,309,891
Deductions from net assets
attributed to:
Benefits paid to participants 2,641,487 2,651,115 1,307,802 443,897 - 7,044,301
Administrative expenses 257 304,475 66,540 - - 371,272
Total deductions 2,641,744 2,955,590 1,374,342 443,897 - 7,415,573
Net increase (decrease)
before transfers (1,900,191) 8,211,494 100,964 2,462,358 19,693 8,894,318
Interfund transfers, net 456,166 (6,619,270) (2,944,364) 8,163,787 943,681 -
Net increase (decrease) (1,444,025) 1,592,224 (2,843,400) 10,626,145 963,374 8,894,318
Net assets available for benefits,
beginning of year 7,036,829 47,501,520 17,124,692 6,733,463 50,182 78,446,686
Net assets available for benefits,
end of year $5,592,804 $49,093,744 $14,281,292 $17,359,608 $1,013,55 $87,341,004
6
</TABLE>
See accompanying notes.
<PAGE>5
Elco Textron Inc.
Profit Sharing and Savings Plan
Notes to Financial Statements
Years ended December 31, 1998 and 1997
1. Description of the Plan
The following description of the Elco Textron Inc. Profit Sharing and Savings
Plan (Plan) provides only general information. Participants should refer to the
Summary Plan Description for a more complete description of the Plan.
General
The Plan is a defined contribution plan formed to provide profit-sharing
benefits to employees of Elco Textron Inc. (the Company) and Textron Inc. All
full-time employees of the Company's Corporate Division, Precision Formed
Products Division, Precision Commercial Division of Camcar, Heat Treat and
Finishes Division, Tool Manufacturing Division, Construction Products Division
and Textron Logistics Corp. are eligible to participate in the Plan, commencing
with the first annual anniversary of their employment. During 1997, the Plan was
amended such that no employee shall become a participant in the Plan after April
1, 1997. The Plan is subject to the provisions of the Employee Retirement Income
Security Act of 1974 (ERISA).
The Plan is administered by an administrative committee consisting of not fewer
than three members selected by the Board of Directors of the Company.
Contributions and Vesting
During 1997, the Plan was also amended such that all participant and employer
profit-sharing and additional employer contributions were discontinued as of
June 30, 1997. All participants became fully vested in the profit-sharing and
additional employer contributions at June 30, 1997.
Prior to June 30, 1997, the Company annually contributed to the Plan the lesser
of 10 percent of the Company's net profits for the plan year plus an additional
amount, which was authorized at the discretion of its Board of Directors, or 15
percent of the aggregate compensation paid to all Plan participants for the Plan
year. In addition, the Company could make an additional contribution in such
amount as determined at the Board's
discretion. The Company made a discretionary contribution of $562,000 during
1997. Active participants could elect to make contributions not to exceed 14
percent of their earnings prior to June 30, 1997. All contributions were
discontinued June 30, 1997, when the Plan was frozen.
<PAGE>6
Investment Options
Upon enrollment in the Plan, a participant may direct employer and employee
contributions in 10% increments in any of the six investment options: Money
Market Fund, George Putnam Fund (formerly known as the Balanced Fund), Bond Fund
(formerly known as the Mortgage and Bond Fund), Textron Stock Fund, Equity Index
Fund and the Voyager Fund.
Participants may change their investment options quarterly.
Participant Accounts
The allocation of Plan income or loss to active participants is made in the same
ratio that a participant's account bears to the sum of the balances of all
participants' accounts, taking into consideration the dates on which additional
contributions and withdrawals are made. Participant account balances are valued
daily by the Plan's recordkeeper based on the value of the number of shares
owned in each mutual fund.
The allocation of Company contributions and forfeitures is based on participant
earnings, plus years of service, as defined by the Plan document.
Payment of Benefits
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 vested
portion of his account, or periodic payments over a period of time as defined by
the Plan.
Participant Notes Receivable
Participants may borrow an amount that does not exceed the lesser of $50,000 or
one-half of their contributions. Loans must be repaid within five years and bear
interest at the current prime rate plus 1%.
<PAGE>7
2. Significant Accounting Policies
Investment Valuation
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. Common stocks and
preferred stocks are carried at fair value based on quoted market values. Short-
term investments are reported at cost, which approximates fair value.
Participant notes receivable 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 that affect the
amounts reported in the financial statements and accompanying notes. Actual
results could differ from those estimates.
Administrative Expense
Certain administrative services are provided to the Plan by the Company without
charge.
3. Investments
In accordance with the terms of the trust agreement, as amended January 1, 1976,
a trust fund administered by First of America Trust Company (FOA) had custody of
all Plan assets, except cash and participant loans. Effective January 2, 1998,
the trust agreement with FOA was terminated and NBD Bank was appointed trustee
and Putnam Fiduciary Trust Company was appointed as custodian of the Plan
assets. The fair value of individual investments that exceed five percent of the
Plan's net assets is as follows:
1998 1997
Textron Inc. Common Stock $ 21,091,557 $ 17,292,250
Pegasus Bond Fund 13,825,588 14,259,829
George Putnam Fund of Boston 43,304,457 48,409,881
Pegasus Money Market Fund 5,494,727 5,576,828
<PAGE>8
Plan investments (including investments bought, sold, as well as held during the
year) appreciated (depreciated) in fair value by $4,904,585 and $10,235,562, as
follows:
1998 1997
Investments at fair value as
determined by quoted market
prices:
Common stocks $ 3,997,765 $ 9,360,729
Mutual funds 906,820 568,420
Preferred stocks - (106,730)
U.S. Government and Agency - 238,325
obligations
Corporate obligations - 151,471
Foreign bonds - 23,347
$ 4,904,585 $10,235,562
The Plan invested in mortgage notes receivable from certain employees of the
Company in northern Illinois who may or may not be Plan participants. The Plan's
policy restricted these investments to first mortgages on personal residences,
including subsequent home improvements, and required approval by the
administrative committee. The mortgage amount could not exceed 80 percent of the
appraised value of the property for non-Plan participants. For Plan
participants, the mortgage amount could not exceed 80 percent of the appraised
value of the property plus 50 percent of the participant's vested benefit in
their profit-sharing account. The maximum amount loaned was limited to the
appraised value, but could not exceed $50,000. Interest rates ranged from 7.5%
to 8.5%. The notes were granted with maturities of up to ten years and payment
schedules based on periods of up to twenty-five years. At the maturity date,
unpaid loan balances were reviewed by the administrative committee and, upon
approval, were refinanced at prevailing interest rates. In 1997, the outstanding
mortgage notes were sold at approximate cost and the Plan no longer invests in
mortgage notes.
4. Income Tax Status
The Internal Revenue Service ruled on April 6, 1995, that the Plan qualifies
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 the Plan is being operated in compliance with the
applicable requirements of the IRC and, therefore, believes that the Plan is
qualified and the related trust is tax exempt.
<PAGE>9
5. 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., parent company of Elco Textron Inc.
6. Plan Termination
As discussed in Note 1, the Plan was frozen effective June 30, 1997, and all
participants are 100% vested in their accounts. Although it has not made a
decision to do so, the Company has the right to terminate the Plan, subject to
the provisions of ERISA.
7. 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 service 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>10
Supplemental Schedule
<TABLE>
Elco Textron Inc. Profit Sharing and Savings Plan
Employer Identification Number 36-1033080
Plan Number 010
Line 27a - Schedule of Assets Held for Investment Purposes
December 31, 1998
<CAPTION>
Par Value Current
Identity /Description or Shares Cost Value
<S> <C> <C> <C>
Common stocks -
Textron Inc.* 277,749 $15,274,171 $21,091,557
Short-term investments -
Pegasus Money Market Fund 5,494,727 5,494,727 5,494,727
Mutual funds:
Pegasus Equity Index Fund 127,202 3,117,238 3,229,664
George Putnam Fund of Boston* 2,400,469 43,199,588 43,304,457
Putnam Voyager Fund* 131,710 2,822,408 2,887,088
Pegasus Bond Fund 1,282,522 13,660,245 13,825,588
62,799,479 63,246,797
Participant notes receivable 7.9% to 9.5% - 2,247,552
$83,568,377 $92,080,633
</TABLE>
* Indicates party-in-interest to the Plan.
<PAGE>11
<TABLE>
Elco Textron Inc. Profit Sharing and Savings Plan
Employer Identification Number 36-1033080
Plan Number 010
Line 27d - Schedule of Reportable Transactions
Year ended December 31, 1998
<CAPTION>
Current Value
Identity of Assets on Net
of Party Purchase Selling Cost of Transaction Gain
Involved Description Price Price Asset Date (Loss)
Category (iii)-Series of security transactions in excess of 5% of plan assets
<S> <C> <C> <C> <C> <C>
Putnam Pegasus Bond Fund $3,177,600 $ - $3,177,600 $3,177,600 $ -
- 3,875,803 3,849,777 3,875,803 26,026
Putnam Pegasus Money 2,005,520 - 2,005,520 2,005,520 -
Market Fund - 2,103,597 2,103,597 2,103,597 -
Putnam George Putnam Fund 7,335,003 - 7,335,003 7,335,003 -
of Boston* - 12,337,019 11,865,581 12,337,019 471,438
Textron Inc. Common Stock* 4,137,453 - 4,137,453 4,137,453 -
- 4,405,205 3,434,481 4,405,205 970,724
There were no category (i), (ii) or (iv) transactions in 1998.
* Indicates party-in-interest to the Plan.
<PAGE>12
</TABLE>
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 Textron Inc. Profit Sharing and Savings Plan of
our report dated May 5, 1999, with respect to the financial
statements and schedules of the Elco Textron Inc. Profit
Sharing and Savings 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
