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 January 2, 1999
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 (151,598,791 shares New York Stock Exchange
outstanding at February 26, 1999); Pacific Stock Exchange
Preferred Stock Purchase Rights Chicago Stock Exchange
$2.08 Cumulative Convertible Preferred Stock, New York Stock Exchange
Series A - no par value
$1.40 Convertible Preferred Dividend Stock, Series B New York Stock Exchange
(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 Subsidiary Trust New York Stock Exchange
(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 $11,893,857,775 as of
February 26, 1999.
Portions of Textron's Annual Report to
Shareholders for the fiscal year ended January 2, 1999,
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 28, 1999,
are incorporated by reference in Part III of this Report.
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PART I
ITEM 1. BUSINESS OF TEXTRON
Textron is a global multi-industry company with
operations in four business segments - Aircraft, Automotive,
Industrial and Finance. Included within the business
segments are operations that are unincorporated divisions of
Textron and others that are separately incorporated
subsidiaries. A listing of the operations within each
business segment, including a description of the product
lines of each business segment, is incorporated herein by
reference to pages 60 through 62 of Textron's 1998 Annual
Report to Shareholders. Financial information by business
segment and geographic area is incorporated herein by
reference to pages 22, 54 and 55 of Textron's 1998 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 and The Cessna Aircraft Company.
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 34,000 aircraft to military and civilian customers.
Bell has three military and seven 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. Revenues of Bell accounted for approximately 15%,
18% and 20% of Textron's total revenues in 1998, 1997 and
1996, respectively.
Bell supplies advanced military helicopters, spare
parts and product support to the U.S. Government and to
military customers outside the U.S. There are more
helicopters manufactured by Bell in the inventory of the
U.S. Government than are manufactured by any other
helicopter company. 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 1998, such sales
accounted for approximately 55% of Bell's business.
Bell is teamed with The Boeing Company ("Boeing") 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. Deliveries of the V-22 to the U.S.
Marine Corps are scheduled to begin in 1999.
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In 1996, Bell and Boeing entered into a joint venture
to develop a commercial tiltrotor aircraft designated as the
Model 609. This joint venture was dissolved in February
1998, and Bell assumed control of the Model 609 program. In
November 1998, Bell entered into a new joint venture with
Agusta, Italy's leading helicopter manufacturer. The new
joint venture with Agusta will engage in the design,
manufacture, sale and customer support of the civil
tiltrotor aircraft, now designated as the BA609, and a new
medium twin-engine helicopter, in the 5 to 6 metric ton
class, to be designated the AB139.
Bell is developing a new light twin-engine helicopter,
designated the Model 427, in collaboration with Samsung
Aerospace Industries Ltd. of South Korea. The first
delivery of this eight-place aircraft is scheduled for 1999.
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 and 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.
Based on unit sales, The Cessna Aircraft Company is the
world's largest manufacturer of light and mid-size business
jets, single engine utility turboprop aircraft, and single
engine piston aircraft. Cessna also designs, manufactures
and sells general aviation aircraft propellers and related
accessories worldwide. Cessna currently has three major
aircraft product lines: Citation business jets, single
engine turboprop Caravans and Cessna single engine piston
aircraft. Revenues of Cessna accounted for approximately
18%, 17% and 14% of Textron's total revenues in 1998, 1997
and 1996, respectively.
The family of business jets currently produced by
Cessna includes the CitationJet, the Bravo, the Ultra, the
Excel, the Citation VII, and the Citation X. The Citation X
is the world's fastest business jet with a maximum operating
speed of Mach .92. In 1998, certification of the Excel was
completed and customer deliveries began. Cessna is
developing four new Citation models, to be called the
Citation CJ1, the Citation CJ2, the Ultra Encore and the
Citation Sovereign.
The Cessna Caravan is the world's best selling utility
turboprop. More than 1,000 Caravans have been sold by
Cessna since the first Caravan was delivered in 1985.
Caravans are offered in four distinct models including the
Grand Caravan, the Super Cargomaster, the Caravan
Floatplane, and the Caravan 675. Caravans are used in the
U.S. primarily to carry overnight express package shipments.
International uses of Caravans include commuter flights,
relief flights, tourism and freight.
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Cessna re-entered the single engine piston aircraft
market in 1996. In 1998, Cessna made deliveries of five
models in this product line: the four-place 172 Skyhawk, 172
Skyhawk SP and 182 Skylane, and the six-place 206 Stationair
and T206 Turbo Stationair.
Cessna markets its products worldwide primarily through
its own sales force as well as through a network of
authorized independent sales representatives. Cessna has
two U.S. and two foreign major competitors for its business
jet products. 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. The
Citation family of aircraft is supported by ten Citation
Service Centers owned and operated by Cessna, along with
authorized independent service stations and centers in more
than 15 countries throughout the world.
Cessna provides its business jet operators with factory-
direct customer support offering 24 hour a day service and
maintenance. Cessna Caravan and single-engine piston
customers receive product support through independently
owned service stations and 24 hour a day spare parts support
through Cessna.
Cessna's McCauley Propeller Systems unit provides new
propellers directly to original equipment manufacturers
("OEMs") and spare parts for service and repairs worldwide.
All new Cessna single-engine piston aircraft built in 1998
used McCauley propellers.
Automotive. The Automotive segment, organized under an
umbrella organization called Textron Automotive Company
("TAC"), consists of Textron Automotive Trim Operations, CWC
Castings Textron, Kautex Textron, McCord Winn Textron and
Micromatic Textron. These operations sell primarily to
automotive OEMs and their suppliers operating in North
America and Europe, and, to a lesser extent, South America
and Asia. TAC is headquartered in Troy, Michigan and has
over fifty facilities located in the U.S., Argentina,
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, armrests, package trays and other trim components.
In addition, TAC's Trim facilities manufacture exterior
decorative components including painted bumpers, fascia,
body side moldings and claddings, fender liners, decorative
wheel trim, signal lighting and structural composite bumper
beams. Many of these products are shipped just-in-time as
fully integrated systems. In August 1998, Textron acquired
Gerald Bloom Holdings, a U.K. company that, through its
Midland Industrial Plastics Limited subsidiary, manufactures
interior and exterior trim including door panels, instrument
panels, package shelves and truck liners. Revenues of
Textron Automotive Trim Operations accounted for 15%, 16%
and 18% of Textron's total revenues in 1998, 1997 and 1996
respectively.
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Kautex is a leading manufacturer of blow-molded plastic
fuel tank systems and other blow-molded parts for OEMs
throughout Europe, North America and South America. Kautex
supplies Volkswagen in China through a joint venture with
Changchun Junzilan Industrial Group. Kautex's manufacturing
plant in Puebla, Mexico supplies all of Volkswagen's and
DaimlerChrysler's plastic fuel tank requirements for their
Mexican production. Kautex produces fuel filler systems in
its North American operations.
CWC Castings designs and manufactures engine camshafts
and vibration damper components for OEMs and the
aftermarket. Through its Kaywood Products operation, CWC
manufactures precision machined parts and components for
assembled camshafts.
McCord Winn manufactures seating comfort systems,
windshield and headlamp washer systems, and armatures for
precision DC motors. In 1998, McCord established a
manufacturing base in Buenos Aires, Argentina, to produce
washer system components for South American OEM customers.
McCord's ASCTecT (Active Surface Control Technology) seating
comfort system, which blends microprocessor-based
electronics and a pneumatically-controlled air support
system, has generated broad potential automotive and
consumer applications. McCord continues to expand
applications of its new RitecT product, an innovative
integration of automotive cooling system components
including the fan shroud and windshield washer and coolant
reservoirs. A production program with DaimlerChrysler will
launch in 1999, and other RitecT development programs are in
progress.
Micromatic manufactures machine tools used for
precision bore and surface finishing of automobile engines.
In addition, Micromatic produces equipment for spline
rolling and gear production.
More than 100 models currently carry parts made by TAC
including DaimlerChrysler's Jeep Grand Cherokee, Voyager and
Caravan mini-vans; Ford's Mondeo, Lincoln Town Car and
Windstar mini-van; General Motors' Cadillac Seville,
Cadillac De Ville, Corvette, and Venture, Transport,
Silhouette and Sintra mini-vans; BMW's 5 series and 8
series; Mitsubishi's Galant; and VW/Audi's Golf, Passat,
Polo, T4, Beetle and A4. TAC continues its strong position
on DaimlerChrysler's LH series of cars that were redesigned
for the 1998 model year.
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 interior surface material (including
TAC's proprietary PVC-free TPU product line), seamless
passenger airbag door technology, structural molded
instrument panel systems, integrated modular assemblies, and
molded-in-color interior and exterior 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.
McCord
<PAGE>
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. The OEMs
reimburse the supplier for these costs as incurred or in the
piece prices charged by the suppliers as the goods are
shipped. In addition, automotive OEMs often require "just-
in-time" delivery, requiring the supplier to plan shipments
in advance and hold inventory.
Automotive OEMs and their suppliers are the principal
customers of TAC. The loss of the U.S. and Europe-based
automotive OEM customers and their first-tier suppliers
would have a material adverse effect on TAC. However,
because of the broad range of products sold to such
customers, it is unlikely that they 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. TAC is under
continual pressure from the OEMs to reduce costs and prices
on an annual basis.
Industrial. The Industrial segment consists of four
major product groups: Fastening Systems; Golf, Turf Care and
Specialty Products; Fluid and Power Systems; and Industrial
Components.
Textron Fastening Systems ("TFS") manufactures and
sells fasteners, fastening systems and installation tools to
the aerospace, appliance, automotive, business equipment,
construction, do-it-yourself and general industrial markets.
TFS sells to a wide range of customers throughout the world,
including OEMs, distributors and consumers. Fasteners
manufactured by TFS include rivets, threaded and non-
threaded fasteners, cold-formed components, metal stampings,
plastic components and assemblies that incorporate such
products. In addition, Textron Logistics Corporation,
created from the combination of certain fastener operations,
provides fastener inventory management programs supplying a
full range of TFS products and products from other
manufacturers, thus offering its customers the ability to
obtain all of their fastener requirements from a single
source. Revenues of TFS accounted for approximately 18%,
17% and 18% of Textron's total revenues in 1998, 1997 and
1996, respectively.
<PAGE>
In March 1998, Textron acquired the Sukosim
Verbindungselemente Group, a manufacturer of threaded
fasteners and specialty stamped components for European
automotive and construction industries. Sukosim is a world
leader in "next generation" stamping technology that can
form, in the same process, engineered fasteners with
internal threading, attached clips and locking washers. In
May 1998, Textron acquired Ring Screw Works, a supplier of
specialty threaded fasteners and inventory management to the
automotive industry. Also in May 1998, Textron acquired
Peiner Umformtechnik GmbH, a German fastener manufacturer
with special expertise in hot forging (a process not
previously used by TFS to any significant extent), which
enables the manufacture of larger products. Peiner's
customers are in the automotive, distribution, mining and
machine tool industries.
In December 1998, Textron formed a joint venture with
Taiwan-based San Shing Hardware Works Company, Ltd.,
Taiwan's largest fastener manufacturer. TFS holds an 80%
interest in the joint company, called Textron Fastening
Systems/Tri-Star Corp.
Although TFS is one of the world's largest providers of
fastener products and services, there are hundreds of
competitors of TFS, ranging from small proprietorships to
large multi-national companies. 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 TFS. However, because of
the broad range of products sold to such customers, it is
unlikely that they will cease all purchases from TFS.
The Golf, Turf Care and Specialty Products group
consists of E-Z-GO Textron, which manufactures and sells
electric-powered and gasoline-powered golf cars and
multipurpose utility vehicles, and Textron Turf Care and
Specialty Products, which designs, manufactures and sells
professional mowing and turf maintenance equipment, grass
care machinery and specialized industrial vehicles, under
the trade names Bobcat, Brouwer, Bunton, Cushman, Jacobsen,
Ransomes, Ryan and Steiner. Textron acquired Ransomes in
January 1998.
The customers of the Golf, Turf Care and Specialty
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
directly to end-users. Many sales of golf and turf care
equipment and specialty vehicles (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.
There are two major competitors and a number of smaller
competitors for golf cars, multipurpose utility vehicles and
turf maintenance equipment for golf courses. Competition is
based primarily on price, quality, product support,
performance, reliability and reputation.
<PAGE>
The Fluid and Power Systems group consists of Motion
Control Products, Power Transmission Products, Fluid
Handling Products and Textron Systems. Textron acquired
David Brown in October 1998 and reorganized the Fluid and
Power Systems group, as more fully described below, in
January 1999. David Brown has operations in 23 countries
and sales worldwide. The Fluid and Power Systems group
operations face competition from other manufacturers based
primarily on price, quality, product support, performance,
delivery and reputation.
The Motion Control Products businesses, HR Textron and
David Brown Hydraulics, design and manufacture control
systems and components for aircraft, armored vehicles and
commercial applications. HR Textron is in the process of
diversifying its business base by adapting aerospace
technology to servovalves used in industrial and automotive
applications. HR Textron's aerospace and defense products
are marketed directly to the U.S. Government, other
governments and OEMs and, in the aftermarket, both directly
and through service centers.
The Power Transmission Products businesses consist of
Textron Industrial Gears and David Brown Mobile Equipment
Drives. Textron Industrial Gears designs and manufactures
industrial gears, double enveloping worm gear speed
reducers, gear motors and gear sets, including gear systems
primarily for railroad applications, under the David Brown,
Cone Drive and Textron Industrial S.p.A. trade names. David
Brown Mobile Equipment Drives designs and manufactures
mechanical and hydraulic transmission systems. These
products are sold to a variety of customers, including OEMs,
distributors and end-users.
The Fluid and Handling Products businesses, David Brown
Union Pumps and Maag Pump Systems, design and manufacture
industrial pumps for oil, gas and petrochemical industries,
and gears, gear pumps and gear systems. These products are
sold to OEMs, distributors and end-users.
Textron Systems is a supplier of sensors, software and
electronics, and advanced materials for defense and
industrial markets. It manufactures "smart" weapons,
airborne surveillance systems, automatic aircraft landing
systems and advanced composite materials for the U.S.
Department of Defense. Current commercial products include
laser, ultrasonic and infrared sensor systems for
agricultural and industrial monitoring and control and
advanced materials such as fire protection and insulating
materials for oil and chemical companies. While Textron
Systems sells most of its products directly to customers, it
also sells an increasing number of products through a
growing, global network of sales representatives and
distributors.
The Industrial Components group consists of Greenlee
Textron, Textron Lycoming, Textron Marine & Land Systems and
Turbine Engine Components Textron, each of which is a
leading company in its industry. Products of this group are
sold to a wide variety of customers, including OEMs,
distributors and end-users. The principal competitive
factors affecting sales of the products of the Industrial
Components group are price, quality, customer service,
<PAGE>
performance, reliability, reputation and existing product
base. Textron sold its Fuel Systems Textron operation in
June 1998.
Greenlee is a worldwide market leader in powered
equipment, electrical test instruments and hand tools. The
principal applications of these products are electrical
construction and maintenance, power generation, transmission
and distribution, telecommunications, electronics, plumbing
and the mechanical trades. In August 1998, Greenlee
acquired Datacom Technologies, Inc., which designs and
manufactures certification and verification products for the
installation and management of information technology
networks.
Textron Lycoming 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 Marine & Land Systems is a world leader in the
design and construction of advanced technology air cushion
vehicles and a major supplier of high performance search and
rescue vessels, armored vehicles, suspension systems,
turrets and artillery systems. Textron Marine & Land
Systems has products operating in over 35 countries.
Turbine Engine Components 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 blades, vanes, shafts,
disks, rotors, blisks and other rotating components and the
forgings from which those products are machined. Turbine
Engine Components manufacturers its products to the
specifications of its customers.
Finance. The Finance segment consists of Textron
Financial Corporation ("TFC"). On January 6, 1999, Textron
sold substantially all the assets of Avco Financial
Services, Inc. ("AFS"), its consumer lending operation, to
Associates First Capital Corporation for $3.9 billion in
cash. Textron's financial statements have been restated to
reflect AFS as a discontinued operation.
TFC is a diversified commercial finance company
specializing in aircraft finance, golf finance, equipment
finance and revolving credit arrangements. TFC originates
and syndicates a wide variety of secured loan and lease
transactions, selectively invests in leveraged lease
transactions and provides asset management, insurance
products and third-party portfolio servicing. TFC provides
commercial financing for a wide range of customers,
including those who purchase or lease Textron products and
certain suppliers to Textron operations. TFC presently
offers its services
<PAGE>
primarily in the U.S. and, to a lesser
extent, in South America and Canada. Each TFC business unit
has a discrete market focus and specific profit objectives
and is staffed to provide responsive services to its market.
Information concerning TFC's Finance Receivables
appears on pages 41 and 42 of Textron's 1998 Annual Report
to Shareholders, which page is incorporated herein by
reference.
In February 1998, Textron acquired Systran Financial
Services. Systran provides accounts receivable financing
and other financial services to the trucking industry and is
expanding into other industries. Systran's customers range
in size from start-up companies to multi-million dollar
operations. In December 1998, Textron acquired Business
Leasing Group ("BLG") from NationsCredit Commercial
Corporation. BLG, which specializes in commercial loans
under $50,000, is being merged into TFC's existing
businesses.
The commercial finance 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.
Backlog
Information regarding Textron's backlog of government
and commercial orders at the end of the past two fiscal
years is contained on page 31 of Textron's 1998 Annual
Report to Shareholders, which page is incorporated herein by
reference.
Approximately 43% of Textron's total backlog of $7.7
billion at January 2, 1999, represents orders which are not
expected to be filled within the 1999 fiscal year. At
January 2, 1999, approximately 97% of the total government
backlog of $2.1 billion was funded.
Government Contracts
In 1998, 20% and 12% of the revenues of the Aircraft and
Industrial segments, respectively, constituting in the
aggregate 11% 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
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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 (up to a
maximum equal to the contract price) to reimbursement for
allowable costs incurred 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: (a) the contractor is
paid such amount as may be agreed upon for manufacturing
materials and partially completed products accepted by the
U.S. Government; (b) 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 (c) 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 49 of Textron's 1998
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.
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 29 and 53 of Textron's 1998 Annual Report to
Shareholders, which pages are incorporated herein by
reference.
Employees
At January 2, 1999, Textron had approximately 64,000
employees.
ITEM 2. PROPERTIES
At January 2, 1999, Textron operated a total of 160
plants located throughout the U.S. and 108 plants outside
the U.S. Of the total of 268 plants, Textron owned 147 and
the balance were leased. In the aggregate, the total
manufacturing space was approximately 35 million square
feet.
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In addition, Textron owns or leases offices, warehouse
and other space at various locations throughout the U.S. and
outside the U.S. Textron considers the productive capacity
of the plants operated by each of its business segments to
be adequate. In general, Textron's facilities 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
Textron is subject to a number of lawsuits,
investigations and claims arising out of the conduct of its
business, including those relating to commercial
transactions, government contracts, product liability, and
environmental, safety and health matters. Some seek
compensatory, treble or punitive damages in substantial
amounts; fines, penalties or restitution; or remediation of
contamination. and someSome are or purport to be class
actions. 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.
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 and other corporate
officers of Textron as of March 15, 1999. Unless
otherwise indicated, the employer is Textron.
Executive Officers:
Name Age Position
Lewis B. Campbell 52 Chairman and Chief Executive
officer since February 1999;
formerly President and Chief
Executive Officer, July 1998
to February 1999; President
and Chief Operating Officer,
1994 to July 1998; Director
since 1994.
John A. Janitz 56 President and Chief Operating
Officer since March 1999;
formerly Chairman, President and
Chief
<PAGE>
Executive Officer, Textron
Automotive Company, 1996
to March 1999; Executive Vice
President and General Manager of
TRW Inc.'s Occupant Restraint
Group, 1990 to 1996. Appointed
Director effective March 25, 1999.
John D. Butler 51 Executive Vice President
Administration and Chief Human
Resources Officer since
January 1999; formerly
Executive Vice President and
Chief Human Resources Officer,
1997 to December 1998; Vice
President Personnel of General
Motors International
Operations (Zurich,
Switzerland), 1993 to 1997.
Mary L. Howell 46 Executive Vice President
Government, International,
Communications and Investor
Relations since July 1998;
formerly Executive Vice
President Government and
International, 1995 to July
1998; Senior Vice President
Government and International
Relations, 1993 to 1995;
Wayne W. Juchatz 52 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 55 Executive Vice President and
Chief Financial Officer since
1995; formerly Executive Vice
President and Chief Financial
Officer of ConAgra, Inc., 1992
Other Corporate to 1995.
Officers:
Edward C. Arditte 43 Vice President and Treasurer
since 1997; formerly Vice
President Finance and Business
Development of Textron
Fastening Systems, 1995 to
1997; Vice President
Communications and Risk
Management of Textron Inc.,
1994 to 1995; Vice President
Investor Relations and Risk
Management, 1993 to 1994.
Frederick K. Butler 47 Vice President Business Ethics
and Corporate Secretary since
January 1999; formerly Vice
President and Secretary 1997
to 1998; 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.
John R. Curran 43 Vice President, Business
Development Industrial
Products Segment since July
1998; formerly Director,
Business Development of
Textron Industrial Products,
1995 to June 1998; Director
Tax Planning and Senior Tax
Counsel, 1994 to 1995.
<PAGE>
Peter B. S. Ellis 45 Vice President Strategy and
Business Development since March
1999; formerly Vice President
Strategic Planning, 1995 to March
1999; Managing Director
Telecommunications Practice of
Arthur D. Little, Inc., 1991
to 1995.
Douglas A. Fahlbeck 53 Vice President and Assistant
Controller since March 1999;
formerly Vice President Mergers
and Acquisitions, 1995 to March 1999;
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 56 Vice President and Deputy
General Counsel since 1984.
William B. Gauld 45 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.
Carol J. Grant 45 Vice President Human Resources
since 1997; formerly Vice
President of NYNEX (Rhode
Island Strategic Business
Unit), 1993 to 1997.
Gregory E. Hudson 52 Vice President Taxes since
1987.
William P. Janovitz 56 Vice President Financial
Management since 1997;
formerly Vice President
Financial Reporting, 1995 to
1997; Vice President and
Controller, 1983 to 1995.
Barbara B. Kacir 57 Vice President and Deputy
General Counsel - Litigation,
July 1998 to present; formerly
Deputy General Counsel -
Litigation, 1995 to July 1998;
Partner, Jones, Day, Reavis &
Pogue, 1980 to 1995.
Mary F. Lovejoy 43 Vice President Communications
and Investor Relations since
1996; formerly Vice President
Investor Relations, 1995 to
1996; Director Investor
Relations, 1993 to 1995.
Frank W. McNally 59 Vice President Employee
Relations and Benefits since
1995; formerly Staff Vice
President, Employee Relations
and Benefits, 1993 to 1995.
Gero K. H. Meyersiek 51 Vice President International
since 1996; formerly Vice
President of Textron
International Inc., 1995 to
1996; Vice President
International Business
Development of GE Financial
Services, 1991 to 1994.
Freda M. Peters 57 Vice President Executive
Development and Human
<PAGE>
Resource
Policy and Compliance since
February 1997; formerly
Director
Management/Organization
Development, 1996 to 1997;
Vice President Human Resources
of Branson Ultrasonics
Corporation (subsidiary of
Emerson Electric Company),
1985 to 1996.
Daniel L. Shaffer 62 Vice President Audit since
January 1999; formerly Vice
President Audit and Business
Ethics, 1994 to January 1999;
President of Textron's
Aircraft Engine Components
Division, 1992 to 1994.
Richard F. Smith 59 Vice President Government
Affairs since 1995; formerly
Staff Vice President
Government Affairs, March 1995
to August 1995; Director
Government Affairs, 1985 to
March 1995.
Richard L. Yates 48 Vice President and Controller
since 1995; formerly Executive
Vice President, Chief
Financial Officer and
Treasurer of The Paul Revere
Corporation, 1993 to 1995.
John F. Zugschwert 65 Vice President Government
Marketing since 1995; formerly
Staff Vice President
Government Marketing, 1993 to
1995.
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. At January 2, 1999,
there were approximately 23,000 holders of Textron Common
Stock. The information on the price range of Textron's
Common Stock and dividends paid per share appearing under
"Common Stock Information" on page 56 of Textron's 1998
Annual Report to Shareholders is incorporated herein by
reference.
ITEM 6. SELECTED FINANCIAL DATA
The information appearing under "Selected Financial
Information" on page 57 of Textron's 1998 Annual Report to
Shareholders is incorporated herein by reference.
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
"Management's Discussion and Analysis," appearing on
pages 23 through 32 of Textron's 1998 Annual Report to
Shareholders, is incorporated herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISKS
"Quantitative Risks Measures," appearing on page 29 of
Textron's 1998 Annual Report to Shareholders, is
incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements and supplementary
information contained in Textron's 1998 Annual Report to
Shareholders and the Financial Statement Schedules, as
listed in the accompanying Index to Financial Statements and
Financial Statement Schedules, are incorporated herein by
reference.
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
The information appearing under "Nominees for Director"
and "Directors Continuing in Office" on pages 2 through 6 of
Textron's Proxy Statement for the Annual Meeting of
Shareholders to be held on April 28, 1999, is incorporated
herein by reference.
Information regarding Textron's executive officers is
included on pages 12 through 15 of Part I of this Report.
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
The information appearing under "Report of the
Organization and Compensation Committee on Executive
Compensation, Executive Compensation and Performance Graph"
on pages 11 through 16 of Textron's Proxy Statement for the
Annual Meeting of Shareholders to be held on April 28, 1999,
is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The information appearing under "Security Ownership of
Certain Beneficial Holders" and "Security Ownership of
Management," on pages 9 through 11 of Textron's Proxy
Statement for the Annual Meeting of Shareholders to be held
on April 28, 1999, is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information appearing under "Transactions with
Management" on page 23 of Textron's Proxy Statement for the
Annual Meeting of Shareholders to be held on April 28, 1999,
is incorporated herein by reference.
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
3.1 Restated Certificate of Incorporation of
Textron as filed January 29, 1998.
Incorporated by reference to Exhibit 3.1 to
Textron's Annual Report on Form 10-K for the
fiscal year ended January 3, 1998.
3.2 By-Laws of Textron.
NOTE Exhibits 10.1 through 10.18 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.
<PAGE>
10.2A 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.
10.2B Amendments to Deferred Income Plan for
Textron Key Executives.
10.3 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.
10.4A 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.
10.4B Amendments to Supplemental Benefits Plan
for Textron Key Executives.
10.5A 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.
10.5B Amendment to Supplemental Retirement
Plan for Textron Key Executives.
10.6 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.
10.7A 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.
10.7B 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.
10.8A 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.
10.8B 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.
10.8C 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.
10.9A Textron 1994 Long-Term Incentive Plan
("1994 Plan"). Incorporated by reference to
Exhibit 10 to Textron's Quarterly Report on
Form 10-Q for the fiscal quarter ended July
2, 1994.
10.9B Amendment to 1994 Plan.
10.10 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.
<PAGE>
10.11 Deferred Income Plan for Non-Employee
Directors. Incorporated by reference to
Exhibit 10.14 to Textron's Annual Report on
Form 10-K for the fiscal year ended December
28, 1996.
10.12 Employment Agreement between
Textron and John D. Butler dated July 23,
1998. Incorporated by reference to Exhibit
10.2 to Textron's Quarterly Report on Form 10-
Q for the fiscal quarter ended October 3,
1998.
10.13A Employment Agreement between Textron and
Lewis B. Campbell dated July 23, 1998.
Incorporated by reference to Exhibit 10.3 to
Textron's Quarterly Report on Form 10-Q for
the fiscal quarter ended October 3, 1998.
10.13B 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.
10.14A 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.
10.14B 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.
10.14C Letter Agreement between Textron and
James F. Hardymon dated as of November 16,
1998.
10.15A Employment Agreement between Textron and
Herbert L. Henkel dated August 12, 1998.
Incorporated by reference to Exhibit 10.4 to
Textron's Quarterly Report on Form 10-Q for
the fiscal quarter ended October 3, 1998.
10.15B Retention Award granted
to Herbert L. Henkel on December 12, 1996.
Incorporated by reference to Exhibit 10.17 to
Textron's Annual Report for the fiscal year
ended January 3, 1998.
10.16 Employment Agreement between Textron and
Mary L. Howell dated July 23, 1998.
Incorporated by reference to Exhibit 10.5 to
Textron's Quarterly Report on Form 10-Q for
the fiscal quarter ended October 3, 1998.
10.17 Employment Agreement between
Textron and Wayne W. Juchatz dated July 23,
1998. Incorporated by reference to Exhibit
10.6 to Textron's Quarterly Report on Form 10-
Q for the fiscal quarter ended October 3,
1998.
10.18 Employment Agreement
between Textron and Stephen L. Key dated July
23, 1998. Incorporated by reference to
Exhibit 10.7 to Textron's Quarterly Report on
Form 10-Q for the fiscal quarter ended
October 3, 1998.
10.19 5-Year Credit Agreement dated as of
April 1, 1998, among Textron, the Banks
listed therein and Morgan Guaranty Trust
Company of New York as Administrative Agent.
Incorporated
<PAGE>
by reference to Exhibit 10.2 to
Textron's Quarterly Report on Form 10-Q for
the fiscal quarter ended April 4, 1998.
12.1 Computation of ratio of income to
combined fixed charges and preferred stock
dividends of Textron Manufacturing.
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 22 through 57 and pages
60 through 62) of Textron's 1998 Annual Report to
Shareholders.
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 (filed electronically
only).
(b) Reports on Form 8-K
During the quarter ended January 2, 1999, Textron
filed the following report on Form 8-K with the
Securities and Exchange Commission:
Current Report on Form 8-K dated October 6, 1998,
reporting under Item 5 (Other Events) and Item 7
(Financial Statements and Exhibits) that Textron
had restated its financial statements to reflect
its Avco Financial Services, Inc. unit as a
discontinued operation.
<PAGE>
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
15th day of March 1999.
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 15th
day of March 1999, by the following persons on behalf of the
registrant and in the capacities indicated:
NAME TITLE
* Chairman and Chief Executive Officer,
Lewis B. Campbell Director
* Director
H. Jesse Arnelle
* Director
Teresa Beck
* Director
R. Stuart Dickson
<PAGE>
* Director
Lawrence K. Fish
* Director
Joe T. Ford
* Director
Paul E. Gagne
* Director
John D. Macomber
* Director
Dana G. Mead
* Director
Brian H. Rowe
* Director
Sam F. Segnar
* Director
Jean Head Sisco
* Director
John W. Snow
<PAGE>
* 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>
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 33
Consolidated Statement of Income for each of the 34
three years in the period ended January 2, 1999
Consolidated Balance Sheet at January 2, 1999 35
Consolidated Statement of Cash Flows for each of 36
the three years in the period ended January 2,
1999
Consolidated Statement of Changes in Shareholders' 38
Equity for each of the three years in the period
ended January 2, 1999
Notes to Consolidated Financial Statements 39-53
Revenues and Income by Business Segment 22
Supplementary Information (Unaudited): 54
Quarterly Financial Information 1998 and 1997 56
Financial Statement Schedule for each of the three
years in the period ended January 2, 1999
I Condensed financial information of 25
registrant
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>
TEXTRON INC.
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
For each of the three years in the period ended January 2,
1999
Financial information of the Registrant is omitted
because condensed financial information of Textron
Manufacturing, which includes the Registrant and all of its
majority-owned subsidiaries other than its finance
subsidiaries (Textron Finance) is shown on pages 34 through
37 of Textron's 1998 Annual Report to Shareholders.
Management believes that the disclosure of financial
information on the basis of Textron Manufacturing 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 Textron Finance. The Registrant's investment in Textron
Finance is $473 million in 1998 and $406 million in 1997.
Textron Manufacturing received dividends of $62
million, $74 million and $29 million from Textron Finance in
1998, 1997 and 1996, respectively. Lending agreements limit
Textron Finance's net assets available for cash dividends
and other payments to Textron Manufacturing to approximately
$169 million of Textron Finance's net assets of $473 million
at year-end 1998.
Textron Manufacturing'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 Textron
Manufacturing's long-term debt, see Note 7 to the
consolidated financial statements appearing on pages 43 and
44 of Textron's 1998 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 9 to the consolidated financial
statements appearing on page 46 of Textron's 1998 Annual
Report to Shareholders.
<PAGE>
List of Exhibits
3.1 Restated Certificate of Incorporation of
Textron as filed January 29, 1998.
Incorporated by reference to Exhibit 3.1 to
Textron's Annual Report on Form 10-K for the
fiscal year ended January 3, 1998.
3.2 By-Laws of Textron.
NOTE: Exhibits 10.1 through 10.18 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.
10.2A 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.
10.2B Amendments to Deferred Income Plan for
Textron Key Executives.
10.3 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.
10.4A 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.
10.4B Amendments to Supplemental Benefits Plan
for Textron Key Executives.
10.5A 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.
10.5B Amendment to Supplemental Retirement
Plan for Textron Key Executives.
10.6 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.
10.7A 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.
10.7B 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.
10.8A 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.
10.8B 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.
10.8C 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.
10.9A Textron 1994 Long-Term Incentive Plan
("1994 Plan"). Incorporated by reference to
Exhibit 10 to Textron's Quarterly Report on
Form 10-Q for the fiscal quarter ended July
2, 1994.
10.9B Amendment to 1994 Plan.
10.10 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.
10.11 Deferred Income Plan for Non-Employee
Directors. Incorporated by reference to
Exhibit 10.14 to Textron's Annual Report on
Form 10-K for the fiscal year ended December
28, 1996.
10.12 Employment Agreement between
Textron and John D. Butler dated July 23,
1998. Incorporated by reference to Exhibit
10.2 to Textron's Quarterly Report on Form 10-
Q for the fiscal quarter ended October 3,
1998.
10.13A Employment Agreement between Textron and
Lewis B. Campbell dated July 23, 1998.
Incorporated by reference to Exhibit 10.3 to
Textron's Quarterly Report on Form 10-Q for
the fiscal quarter ended October 3, 1998.
10.13B 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.
10.14A 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.
10.14B 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.
10.14C Letter Agreement between Textron and
James F. Hardymon dated as of November 16,
1998.
10.15A Employment Agreement between Textron and
Herbert L. Henkel dated August 12, 1998.
Incorporated by reference to Exhibit 10.4 to
Textron's Quarterly Report on Form 10-Q for
the fiscal quarter ended October 3, 1998.
10.15B Retention Award granted
to Herbert L. Henkel on December 12, 1996.
Incorporated by reference to Exhibit 10.17 to
Textron's Annual Report for the fiscal year
ended January 3, 1998.
10.16 Employment Agreement between Textron and
Mary L. Howell dated July 23, 1998.
Incorporated by reference to Exhibit 10.5 to
Textron's Quarterly Report on Form 10-Q for
the fiscal quarter ended October 3, 1998.
10.17 Employment Agreement between
Textron and Wayne W. Juchatz dated July 23,
1998. Incorporated by reference to Exhibit
10.6 to Textron's Quarterly Report on Form 10-
Q for the fiscal quarter ended October 3,
1998.
10.18 Employment Agreement
between Textron and Stephen L. Key dated July
23, 1998. Incorporated by reference to
Exhibit 10.7 to Textron's Quarterly Report on
Form 10-Q for the fiscal quarter ended
October 3, 1998.
10.19 5-Year Credit Agreement dated as of
April 1, 1998, among Textron, the Banks
listed therein and Morgan Guaranty Trust
Company of New York as Administrative Agent.
Incorporated by reference to Exhibit 10.2 to
Textron's Quarterly Report on Form 10-Q for
the fiscal quarter ended April 4, 1998.
12.1 Computation of ratio of income to
combined fixed charges and preferred stock
dividends of Textron Manufacturing.
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 22 through 57 and pages
60 through 62) of Textron's 1998 Annual Report to
Shareholders.
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 (filed electronically
only).
Exhibit 3.2
TEXTRON
INC.
(a Delaware corporation)
_______________
BY-LAWS
_______________
As Amended Through December 10, 1998
<PAGE>
TABLE OF CONTENTS
_______________
PAGE
Offices
Registered Office 1
Other Offices 1
Meetings of Stock holders
Place of Meetings 1
Annual Meetings 1
Special Meetings
Notice of Meetings 4
Quorum 5
Organization 5
Voting 6
Voting Procedures and
Inspectors of Elections
List of Stockholders 7
Board of Directors
General Powers 8
Number, Qualifications and Term 8
of Office
Nomination and Election of 9
Directors
Quorum and Manner of Acting 11
Offices, Place of Meeting and 12
Records
Annual Meeting 12
Regular Meetings 12
Special Meetings; Notice 12
Organization 13
Order of Business 13
Removal of Directors 13
Resignation 14
Vacancies 14
Compensation 14
Committees
4.01. Executive Committee 14
4.02. Powers 15
4.03. Procedure; Meetings; Quorum 16
4.04. Compensation 16
4.05. Other Board Committees 16
4.06. Alternates 17
4.07. Additional Committees 17
Action by Consent or Telephone
5.01. Consent of Directors 18
5.02. Telephone Meetings 18
Officers
6.01. Number 18
6.02. Election, Qualifications and
Term of Office
6.03. Other Officers 19
6.04. Removal 19
6.05. Resignation 19
6.06. Vacancies 19
6.07. Chairman of the Board 19
6.08. Vice Chairman of the Board 20
6.09. President 20
6.10. Chief Executive Officer 20
6.11. Vice Presidents 20
6.12. Treasurer 21
6.13. Secretary 21
6.14. Controller 22
6.15. Salaries 22
Contracts, Checks, Drafts, Bank Accounts, etc.
7.01. Execution of Contracts 22
7.02. Loans 23
7.03. Checks, Drafts, etc. 23
7.04. Deposits 24
7.05. Proxies in Respect of
Securities of Other
Corporations 24
Books and Records
8.01. Place 25
8.02. Addresses of Stockholders 25
8.03. Record Dates 26
8.04. Audit of Books and Accounts 26
8.04.
Shares and Their Transfer
9.01. Certificates of Stock 26
9.02. Record 27
9.03. Transfer of Stock 27
9.04. Transfer Agent and Registrar; 27
Regulations
9.05. Lost, Destroyed or Mutilated 28
9.05. Certificates
Seal 28
Fiscal Year 28
Indemnification 29
Waiver of Notice 33
Amendments 33
<PAGE>
TEXTRON INC.
(a Delaware corporation)
_______________
BY-LAWS
ARTICLE I.
Offices
SECTION 1.01. Registered Office. The registered office of the
Corporation in the State of Delaware shall be at No. 1209 Orange Street,
City of Wilmington, County of New Castle. The name of the resident agent in
charge thereof shall be The Corporation Trust Company.
SECTION 1.02. Other Offices. The Corporation may also have an office or
offices in the City of Providence, State of Rhode Island, and at such other
place or places either within or without the State of Delaware as the Board
of Directors may from time to time determine or the business of the
Corporation require.
ARTICLE II.
Meetings Of Stockholders
SECTION 2.01. Place of Meetings. All meetings of the stockholders of
the Corporation shall be held at such place either within or without the
State of Delaware as shall be fixed by the Board of Directors and specified
in the respective notices or waivers of notice of said meetings.
SECTION 2.02. Annual Meetings. (a) The annual meeting of the
stockholders for the election of directors and for the transaction of such
other business as properly may come before the meeting shall be held at the
principal office of the Corporation in the State of Delaware, or such place
as shall be fixed by the Board of Directors, at ten o'clock in the
forenoon, local time, on the last Wednesday in April in each year, if not a
legal holiday at the place where such meeting is to be held, and, if a
legal holiday, then on the next succeeding business day not a legal holiday
at the same hour. (b) In respect of the annual meeting for any particular
year the Board of Directors may, by resolution fix a different day, time or
place (either within or without the State of Delaware) for the annual
meeting. (c) If the election of directors shall not be held on the day
designated herein or the day fixed by the Board, as the case may be, for
any annual meeting, or on the day of any adjourned session thereof, the
Board of Directors shall cause the election to be held at a special meeting
as soon thereafter as conveniently may be. At such special meeting the
stockholders may elect the directors and transact other business with the
same force and effect as at an annual meeting duly called and held. (d) At
any annual meeting, or special meeting held in lieu thereof, only such
business shall be conducted as shall have been brought before the meeting
by or at the direction of the Board of Directors or by any stockholder who
complies with the procedures set forth in this Section 2.02 (d). Except as
otherwise provided by Section 3.03, by the Certificate of Incorporation or
by law, the only business which shall be conducted at any such meeting of
the stockholders shall (i) have been specified in the written notice of the
meeting (or any supplement thereto) given pursuant to Section 2.04, (ii) be
brought before the meeting at the direction of the Board of Directors or
the chairman of the meeting or (iii) have been specified in a timely
written notice to the Secretary, in accordance with all of the following
requirements, by or on behalf of any stockholder who shall have been a
stockholder of record on the record date for such meeting and who shall
continue to be entitled to vote thereat. To be timely in the case of an
annual meeting, each such notice must be delivered to, or be mailed and
received at, the principal executive offices of the Corporation not less
than 90 days nor more than 120 days prior to the anniversary date of the
immediately preceding annual meeting of stockholders, provided, however,
that in the event the annual meeting is called for a date that is not
within 30 days of such anniversary date, such notice must be so delivered
or so mailed and received, not later than the close of business on the 10th
day following the day on which such notice of the annual meeting was mailed
or public disclosure of the date of annual meeting was first made,
whichever first occurs. To be timely in the case of a special meeting held
in lieu of an annual meeting, such notice must be delivered to or be mailed
and received at, the principal executive offices of the Corporation not
later than the close of business on the 10th day following the day on which
notice of the special meeting was mailed or such public disclosure of the
date of special meeting was first made, whichever first occurs. In no event
shall the public announcement of an
<PAGE>
adjournment of an annual meeting, or a
special meeting held in lieu thereof, commence a new period for the giving
of a stockholder's notice as described above. Such stockholder's notice to
the Secretary shall set forth: (i) a description of each item of business
proposed to be brought before the meeting; and the reasons for conducting
such business at the annual meeting; (ii) the name and address of the
stockholder proposing to bring such item of business before the meeting;
(iii) the class or series and number of shares of stock held of record,
owned beneficially and represented by proxy by such stockholder as of the
record date for the meeting (if such date shall then have been made
publicly available) and as of the date of such notice by the stockholder;
(iv) a description of all arrangements or understandings between such
stockholder and any other person or persons (including their names) in
connection with the proposal of such business by such stockholder and any
material interest of such stockholder in such business; (v) a
representation that such stockholder intends to appear in person or by
proxy at the meeting to bring such business before the meeting; and (vi)
all other information which would be required to be included in a proxy
statement filed with the Securities and Exchange Commission if, with
respect to any such item of business, such stockholder were a participant
in a solicitation subject to Section 14 of the Securities Exchange Act of
1934, as amended, and the rules and regulations thereunder (collectively,
the "Proxy Rules").
The chairman of the meeting may, if the facts warrant, determine that an
item of business was not brought before the meeting in accordance with the
foregoing procedure, and if he should so determine, he shall so declare to
the meeting and that business shall be disregarded.
SECTION 2.03. Special Meetings. A special meeting of the stockholders
for any purpose or purposes may be called at any time by the chief
executive officer or by order of the Board of Directors. The business which
may be transacted at a special meeting is limited to that set forth in the
notice of special meeting and, if the notice so provides, such other
matters as the chief executive officer or the Board of Directors may bring
before the meeting.
SECTION 2.04. Notice of Meetings. (a) Except as otherwise required by
statute, notice of each annual or special meeting of the stockholders shall
be given to each stockholder of record entitled to vote at such meeting not
less than ten days nor more than sixty days before the day on which the
meeting is to be held by delivering written notice thereof to him
personally or by mailing such notice, postage prepaid, addressed to him at
his post-office address last shown in the records of the Corporation or by
transmitting notice thereof to him at such address by telegraph, cable or
any other available method. Every such notice shall state the time and
place of the meeting and, in case of a special meeting, shall state briefly
the purposes thereof. (b) Except as otherwise required by statute, notice
of any meeting of stockholders shall not be required to be given to any
stockholders who shall attend such meeting in person or by proxy or who
shall, in person or by attorney thereunto authorized, waive such notice in
writing or by telegraph, cable or any other available method either before
or after such meeting. Notice of any adjourned meeting of the stockholders
shall not be required to be given except when expressly required by law.
SECTION 2.05. Quorum. (a) At each meeting of the stockholders, except
where otherwise provided by statute, the Certificate of Incorporation or
these By-Laws, the holders or record of a majority of the issued and
outstanding shares of stock of the Corporation entitled to vote at such
meeting, present in person or represented by proxy, shall constitute a
quorum for the transaction of business. (b) In the absence of a quorum a
majority in interest of the stockholders of the Corporation entitled to
vote, present in person or represented by proxy or, in the absence of all
such stockholders, any officer entitled to preside at, or act as secretary
of, such meeting, shall have the power to adjourn the meeting from time to
time, until stockholders holding the requisite amount of stock shall be
present or represented. At any such adjourned meeting at which a quorum
shall be present any business may be transacted which might have been
transacted at the meeting as originally called.
SECTION 2.06. Organization. At each meeting of the stockholders the
Chairman of the Board or, in his absence, the President or, in the absence
of the Chairman of the Board and the President, the Vice Chairman of the
Board or, in the absence of the Chairman of the Board, the President and
the Vice Chairman of the Board, any Vice President or, in the absence of
all such officers, a chairman chosen by a majority vote of the stockholders
entitled to vote thereat, present in person or by proxy, shall act as
chairman, and the Secretary or an Assistant Secretary of the Corporation
or, in the absence of the Secretary and all Assistant Secretaries, a person
whom the chairman of such meeting shall appoint shall act as secretary of
the meeting and keep the minutes thereof.
SECTION 2.07. Voting. (a) Except as otherwise provided by law or by the
Certificate of Incorporation or these By-Laws, at every meeting of the
stockholders each stockholder shall be entitled to one vote, in person or
by proxy, for each share of capital stock of the Corporation registered in
his name on the books of the Corporation:
(i) on the date fixed pursuant to Section 8.03 of these By-Laws as the
record date for the determination of stockholders entitled to vote at
such meeting; or
<PAGE>
(ii) if no such record date shall have been fixed, then the record date
shall be at the close of business on the day next preceding the day on
which notice of such meeting is given.
(b) Persons holding stock in a fiduciary capacity shall be entitled to vote
the shares so held. In the case of stock held jointly by two or more
executors, administrators, guardians, conservators, trustees or other
fiduciaries, such fiduciaries may designate in writing one or more of their
number to represent such stock and vote the shares so held, unless there is
a provision to the contrary in the instrument, if any, defining their
powers and duties. (c) Persons whose stock is pledged shall be entitled to
vote thereon until such stock is transferred on the books of the
Corporation to the pledgee, and thereafter only the pledgee shall be
entitled to vote. (d) Any stockholder entitled to vote may do so in person
or by his proxy appointed by an instrument in writing subscribed by such
stockholder or by his attorney thereunto authorized, or by a telegram,
cable or any other available method delivered to the secretary of the
meeting; provided, however, that no proxy shall be voted after three years
from its date, unless said proxy provides for a longer period. (e) At all
meetings of the stockholders, all matters (except where other provision is
made by law or by the Certificate of Incorporation or these By-Laws) shall
be decided by the vote of a majority in interest of the stockholders
entitled to vote thereon, present in person or by proxy, at such meeting, a
quorum being present.
SECTION 2.08. Voting Procedures and Inspectors of Elections. (a) The
Corporation shall, in advance of any meeting of stockholders, appoint one
or more inspectors to act at the meeting and make a written report thereof.
The Corporation may designate one or more persons as alternate inspectors
to replace any inspector who fails to act. If no inspector or alternate is
able to act at a meeting of stockholders, the person presiding at the
meeting shall appoint one or more inspectors to act at the meeting. Each
inspector, before entering upon the discharge of his duties, shall take and
sign an oath faithfully to execute the duties of inspector with strict
impartiality and according to the best of his ability. (b) The inspectors
shall (i) ascertain the number of shares outstanding and the voting power
of each, (ii) determine the shares represented at a meeting and the
validity of proxies and ballots, (iii) count all votes and ballots, (iv)
determine and retain for a reasonable period a record of the disposition of
any challenges made to any determination by the inspectors, and (v) certify
their determination of the number of shares represented at the meeting, and
their count of all votes and ballots. The inspectors may appoint or retain
other persons or entities to assist the inspectors in the performance of
the duties of the inspectors. (c) The date and time of the opening and the
closing of the polls for each matter upon which the stockholders will vote
at a meeting shall be announced at the meeting. No ballot, proxies or
votes, nor any revocations thereof or changes thereto, shall be accepted by
the inspectors after the closing of the polls unless the Delaware Court of
Chancery upon application by a stockholder shall determine otherwise.
SECTION 2.09. List of Stockholders. (a) It shall be the duty of the
Secretary or other officer of the Corporation who shall have charge of its
stock ledger to prepare and make, or cause to be prepared and made, at
least ten days before every meeting of the stockholders, a complete list of
the stockholders entitled to vote thereat, arranged in alphabetical order
and showing the address of each stockholder and the number of shares
registered in the name of stockholder. Such list shall be open during
ordinary business hours to the examination of any stockholder for any
purpose germane to the meeting for a period of at least ten days prior to
the election, either at a place within the city where the meeting is to be
held, which place shall be specified in the notice of the meeting or, if
not so specified, at the place where the meeting is to be held. (b) Such
list shall be produced and kept at the time and place of the meeting during
the whole time thereof and may be inspected by any stockholder who is
present. (c) Upon the willful neglect or refusal of the directors to
produce such list at any meeting for the election of directors they shall
be ineligible for election to any office at such meeting. (d) The stock
ledger shall be conclusive evidence as to who are the stockholders entitled
to examine the stock ledger and the list of stockholders required by this
Section 2.09 on the books of the Corporation or to vote in person or by
proxy at any meeting of stockholders.
ARTICLE III.
Board Of Directors.
SECTION 3.01. General Powers. The business, property and affairs of the
Corporation shall be managed by or under the direction of the Board of
Directors.
SECTION 3.02. Number, Qualifications and Term of Office. (a) The number
of directors of the Corporation which shall constitute the whole Board of
Directors shall be such number as from time to time shall be fixed by the
Board of Directors in accordance with the Certificate of Incorporation of
the Corporation. (b) No person shall be elected a director who has attained
the age of 72. (c) Each director shall hold office as set forth in the
Certificate of Incorporation of the Corporation.
<PAGE>
SECTION 3.03. Nomination and Election of Directors. Only persons who
are nominated in accordance with the following procedures shall be eligible
for election as directors. Nominations of persons for election to the Board
of Directors at a meeting of the stockholders may be made at a meeting of
stockholders by or at the direction of the Board of Directors by any
nominating committee or person appointed by the Board or at an annual
meeting or special meeting held in lieu thereof, by any stockholder of the
Corporation entitled to vote for the election of directors at such meeting
who complies with the notice procedures set forth in this Section 3.03.
Such nominations, other than those made by or at the direction of the Board
of Directors, shall be made pursuant to timely notice in writing to the
Secretary. To be timely, in the case of a nomination to be made at an
annual meeting, each such notice must be delivered to, or be mailed and
received at, the principal executive offices of the Corporation not less
than 90 days nor more than 120 days prior to the anniversary date of the
immediately preceding annual meeting of stockholders; provided, however,
that in the event the annual meeting is called for a date that is not
within 30 days of such anniversary date, such notice must be so delivered,
or so mailed and received, not later than the close of business on the 10th
day following the day on which such notice of the annual meeting was mailed
or public disclosure of the date of annual meeting was first made,
whichever first occurs. To be timely in the case of a nomination to be made
at a special meeting held in lieu of an annual meeting, such notice must be
delivered to, or be mailed and received at, the principal executive offices
of the Corporation not later than the close of business on the 10th day
following the day on which notice of the special meeting was mailed or
public disclosure of the date of special meeting was first made, whichever
first occurs. In no event, shall the public announcement of an adjournment
of an annual meeting, or a special meeting held in lieu thereof, commence a
new period for the giving of a stockholder's notice as described above.
Such stockholder's notice to the Secretary shall set forth: (a) as to each
person whom the stockholder proposes to nominate for election or re-
election as a director (i) the name, age, business address and residence
address of the person, (ii) the principal occupation or employment of the
person, (iii) the class or series and number of shares of capital stock of
the Corporation which are owned beneficially or of record by the person,
and (iv) any other information relating to such person that would be
required to be disclosed in a proxy statement or other filings required to
be made in connection with solicitations of proxies for election of
directors pursuant to the Proxy Rules, and (b) as to the stockholder giving
the notice (i) the name and record address of stockholder, (ii) the class
or series and number of shares of capital stock of the Corporation held of
record, owned beneficially and represented by proxy by such stockholder as
of the record date for the meeting (if such date shall then have been made
publicly available) and as of the date of such notice by the stockholder,
(iii) a representation that such stockholder intends to appear in person or
by proxy at the meeting to nominate the person or persons specified in the
notice, (iv) a description of all arrangements or understandings between
such stockholder and each nominee and any other person or persons (naming
such person or persons) pursuant to which the nomination or nominations are
to be made by such stockholder, and (v) such other information regarding
such stockholder that would be required to be disclosed in a proxy
statement or other filings required to be made in connection with
solicitation of proxies for election of directors pursuant to the Proxy
Rules. Such notice must be accompanied by the written consent of each
proposed nominee to being named as a nominee and to serve as a director of
the Corporation if so elected. The Corporation may require any proposed
nominee to furnish such other information as may reasonably be required by
the Corporation to determine the eligibility of such proposed nominee to
serve as a director of the Corporation. No person shall be eligible for
election as a director of the Corporation unless nominated in accordance
with the procedures set forth herein.
The chairman of the meeting may, if the facts warrant, determine that a
nomination was not made in accordance with the foregoing procedures, and if
he should so determine, he shall so declare to the meeting and the
defective nomination shall be disregarded. At each meeting of the
stockholders for the election of directors at which a quorum is present,
the persons, not exceeding the authorized number of directors as fixed by
the Board of Directors in accordance with the Certificate of Incorporation,
receiving the greatest number of votes of the stockholders entitled to vote
thereon, present in person or by proxy, shall be the directors for the term
as set forth in the Certificate of Incorporation.
SECTION 3.04. Quorum and Manner of Acting. (a) Except as otherwise
provided by statute or by the Certificate of Incorporation, a majority of
the directors at the time in office shall constitute a quorum for the
transaction of business at any meeting and the affirmative action of a
majority of the directors present at any meeting at which a quorum is
present shall be required for the taking of any action by the Board of
Directors. (b) In the event the Secretary is informed that one or more
directors will be out of the continental limits of the United States at the
date of any regular or special meeting of the Board, or if one or more of
the directors shall be disqualified to vote at such meeting, then the
required quorum shall be reduced by one for each such director so absent or
disqualified; provided, however, that in no event shall the quorum as
adjusted be less than one third of the total number of directors. (c) In
the absence of a quorum at any meeting of the Board such meeting need not
be held, or a majority of the directors present thereat or, if no director
be present, the Secretary may adjourn such meeting from time to time until
a quorum shall be present. Notice of any adjourned meeting need not be
given.
SECTION 3.05. Offices, Place of Meeting and Records. The Board of
Directors may hold meetings, have an office or offices and keep the books
and records of the Corporation at such place or places within or without
the State of Delaware as the Board may from
<PAGE>
time to time determine. The
place of meeting shall be specified or fixed in the respective notices or
waivers of notice thereof, except where otherwise provided by statute, by
the Certificate of Incorporation or these By-Laws.
SECTION 3.06. Annual Meeting. The Board of Directors shall meet for the
purpose of organization, the election of officers and the transaction of
other business, as soon as practicable following each annual election of
directors. Such meeting shall be called and held at the place and time
specified in the notice or waiver of notice thereof as in the case of a
special meeting of the Board of Directors.
SECTION 3.07. Regular Meetings. Regular meetings of the Board of
Directors shall be held at such places and at such times as the Board shall
from time to time by resolution determine. If any day fixed for a regular
meeting shall be a legal holiday at the place where the meeting is to be
held, then the meeting which would otherwise be held on that day shall be
held at said place at the same hour on the next succeeding business day.
Notice of regular meetings need not be given.
SECTION 3.08. Special Meetings; Notice. Special meetings of the Board
of Directors shall be held whenever called by the Chairman of the Board or
the President or by any two of the directors. Notice of each such meeting
shall be mailed to each director, addressed to him at his residence or
usual place of business, at least three days before the day on which the
meeting is to be held, or shall be sent to him at his residence or at such
place of business by telegraph, cable or other available means, or shall be
delivered personally or by telephone, not later than two days (or such
shorter period as the person or persons calling such meeting may deem
necessary or appropriate in the circumstances) before the day on which the
meeting is to be held. Each such notice shall state the time and place of
the meeting but need not state the purposes thereof except as otherwise
herein expressly provided. Notice of any such meeting need not be given to
any director, however, if waived by him in writing or by telegraph, cable
or otherwise, whether before or after such meeting shall be held, or if he
shall be present at such meeting.
SECTION 3.09. Organization. At each meeting of the Board of Directors
the Chairman of the Board or, in his absence, the President or, in the
absence of each of them, the Vice Chairman of the Board or, in the absence
of all such officers, a director chosen by a majority of the directors
present shall act as chairman. The Secretary or, in his absence an
Assistant Secretary or, in the absence of the Secretary and all Assistant
Secretaries, a person whom the chairman of such meeting shall appoint shall
act as secretary of such meeting and keep the minutes thereof.
SECTION 3.10. Order of Business. At all meetings of the Board of
Directors business shall be transacted in the order determined by the
Board.
SECTION 3.11. Removal of Directors. Except as otherwise provided in the
Certificate of Incorporation or in these By-Laws, any director may be
removed, with cause, at any time, by the affirmative vote of the holders of
record of a majority of the issued and outstanding stock entitled to vote
for the election of directors of the Corporation given at a special meeting
of the stockholders called and held for the purpose; and the vacancy in the
Board caused by any such removal may be filled by the Board in the manner
provided in the Certificate of Incorporation.
SECTION 3.12. Resignation. Any director of the Corporation may resign
at any time by giving written notice of his resignation to the Board of
Directors, to the Chairman of the Board, the Vice Chairman of the Board,
the President, any Vice President or the Secretary of the Corporation. Such
resignation shall take effect at the date of receipt of such notice or at
any later time specified therein; and, unless otherwise specified therein,
the acceptance of such resignation shall not be necessary to make it
effective.
SECTION 3.13. Vacancies. Any vacancy in the Board of Directors caused
by death, resignation, removal, disqualification, an increase in the number
of directors, or any other cause may be filled by the remaining directors
then in office as set forth in the Certificate of Incorporation. Each
director so elected shall hold office as set forth in the Certificate of
Incorporation.
SECTION 3.14. Compensation. Each director, in consideration of his
serving as such, shall be entitled to receive from the Corporation such
amount per annum or such fees for attendance at directors' meetings, or
both, as the Board of Directors shall from time to time determine, together
with reimbursement for the reasonable expenses incurred by him in
connection with the performance of his duties; provided that nothing herein
contained shall be construed to preclude any director from serving the
Corporation or its subsidiaries in any other capacity and receiving proper
compensation therefor.
<PAGE>
ARTICLE IV
Committees
SECTION 4.01. Executive Committee. The Board of Directors shall, by
resolution or resolutions passed by a majority of the whole Board, appoint
an Executive Committee to consist of not less than three nor more than
eight members of the Board of Directors, including the Chairman of the
Board, the Vice Chairman of the Board and the President, and shall
designate one of the members as its chairman. Notwithstanding any
limitation on the size of the Executive Committee, the Committee may invite
members of the Board to attend its meetings. In such case such invitees
shall be entitled to vote on matters considered at such meetings and shall
receive such fee, if any, as shall be fixed by the Board of Directors for
such attendance.
Each member of the Executive Committee shall hold office, so long as he
shall remain a director, until the first meeting of the Board of Directors
held after the next annual election of directors and until his successor is
duly appointed and qualified. The chairman of the Executive Committee or,
in his absence, the Chairman of the Board or a member of the Committee
chosen by a majority of the members present shall preside at meetings of
the Executive Committee and the Secretary or an Assistant Secretary of the
Corporation, or such other person as the Executive Committee shall from
time to time determine, shall act as secretary of the Executive Committee.
The Board of Directors, by action of the majority of the whole Board,
shall fill vacancies in the Executive Committee.
SECTION 4.02. Powers. During the intervals between the meetings of the
Board of Directors, the Executive Committee shall have and may exercise all
the powers of the Board of Directors in all cases in which specific
directions shall not have been given by the Board of Directors; but neither
the Executive Committee nor any other committee created under these By-Laws
shall have the power or authority to amend the Certificate of
Incorporation, adopt an agreement of merger or consolidation, recommend to
the stockholders the sale, lease or exchange of all or substantially all of
the Corporation's property and assets, recommend to the stockholders a
dissolution of the Corporation or a revocation of a dissolution, or amend
the By-Laws of the Corporation; and, unless the resolution, By-Laws, or
Certificate of Incorporation expressly so provides, no such committee shall
have the power or authority to declare a dividend or to authorize the
issuance of stock.
SECTION 4.03. Procedure; Meetings; Quorum. The Executive Committee
shall fix its own rules of procedure subject to the approval of the Board
of Directors, and shall meet at such times and at such place or places as
may be provided by such rules. At every meeting of the Executive Committee
the presence of a majority of all the members shall be necessary to
constitute a quorum and the affirmative vote of a majority of the members
present shall be necessary for the adoption by it of any resolution. In the
absence of a quorum at any meeting of the Executive Commitee such meeting
need not be held, or a majority of the members present thereat or, if no
members be present, the secretary of the meeting may adjourn such meeting
from time to time until a quorum be present.
SECTION 4.04. Compensation. Each member of the Executive Committee
shall be entitled to receive from the Corporation such fee, if any, as
shall be fixed by the Board of Directors, together with reimbursement for
the reasonable expenses incurred by him in connection with the performance
of his duties.
SECTION 4.05. Other Board Committees. The Board of Directors may from
time to time, by resolution passed by a majority of the whole Board,
designate one or more committees in addition to the Executive Committee,
each committee to consist of two or more of the directors of the
Corporation. Any such committee, to the extent provided in the resolution
or in the By-Laws of the Corporation, shall have and may exercise the
powers of the Board of Directors in the management of the business and
affairs of the Corporation.
A majority of all the members of any such committee may determine its
action and fix the time and place of its meetings, unless the Board of
Directors shall otherwise provide. The Board of Directors shall have power
to change the members of any committee at any time, to fill vacancies and
to discharge any such committee, either with or without cause, at any time.
SECTION 4.06. Alternates. The Board of Directors may, by resolution
passed by a majority of the whole Board, designate one or more directors as
alternate members of any committee who may replace any absent or
disqualified member at any meeting of the committee; provided, however,
that in the absence of any such designation of alternates the member or
members of any committee present at any meeting and not disqualified from
acting, whether or not he or they constitute a quorum, may unanimously
appoint another member of the Board to act at the meeting in the place of
any absent or disqualified member.
<PAGE>
SECTION 4.07. Additional Committees. The Board of Directors may from
time to time create such additional committees of directors, officers,
employees or other persons designated by it (or any combination of such
persons) for the purpose of advising with the Board, the Executive
Committee and the officers and employees of the Corporation in all such
matters as the Board shall deem advisable and with such functions and
duties as the Board shall by resolutions prescribe.
A majority of all the members of any such committee may determine its
action and fix the time and place of its meetings, unless the Board of
Directors shall otherwise provide. The Board of Directors shall have power
to change the members of any committee at any time, to fill vacancies and
to discharge any such committee, either with or without cause, at any time.
ARTICLE V
Action by Consent or Telephone.
SECTION 5.01. Consent of Directors. Any action required or permitted to
be taken at any meeting of the Board of Directors or of any committee
thereof may be taken without a meeting if prior to such action a written
consent thereto is signed by all members of the Board or of such committee,
as the case may be, and such written consent is filed with the minutes of
the proceedings of the Board or such committee.
SECTION 5.02. Telephone Meetings. Members of the Board of Directors or
any committee designated by the Board of Directors may participate in a
meeting of such Board or Committee by means of conference telephone or
similar communications equipment by means of which all persons
participating in the meeting can hear each other.
ARTICLE VI
Officers
SECTION 6.01. Number. The principal officers of the Corporation shall
be a Chairman of the Board, a Vice Chairman of the Board, a President, one
or more Vice Presidents (the number thereof and variations in title to be
determined by the Board of Directors), a Treasurer and a Secretary. In
addition, there may be such other or subordinate officers, agents and
employees as may be appointed in accordance with the provisions of Section
6.03. Any two or more offices, except those of President and Secretary, may
be held by the same person.
SECTION 6.02 Election, Qualifications and Term of Office. Each officer
of the Corporation, except such officers as may be appointed in accordance
with the provisions of Section 6.03, shall be elected annually by the Board
of Directors and shall hold office until his successor shall have been duly
elected and qualified, or until his death, or until he shall have resigned
or shall have been removed in the manner herein provided. The Chairman of
the Board, the Vice Chairman of the Board and the President shall be and
remain directors.
SECTION 6.03. Other Officers. The Corporation may have such other
officers, agents, and employees as the Board of Directors may deem
necessary including a Controller, one or more Assistant Controllers, one or
more Assistant Treasurers and one or more Assistant Secretaries, each of
whom shall hold office for such period, have such authority, and perform
such duties as the Board of Directors, the Chairman of the Board or the
President may from time to time determine. The Board of Directors may
delegate to any principal officer the power to appoint or remove any such
subordinate officers, agents or employees.
SECTION 6.04. Removal. Any officer may be removed, either with or
without cause, by the vote of a majority of the whole Board of Directors
or, except in case of any officer elected by the Board of Directors, by any
committee or officer upon whom the power of removal may be conferred by the
Board of Directors.
SECTION 6.05. Resignation. Any officer may resign at any time by giving
written notice to the Board of Directors, the Chairman of the Board or the
President. Any such resignation shall take effect at the date of receipt of
such notice or at any later time specified therein; and, unless otherwise
specified therein, the acceptance of such resignation shall not be
necessary to make it effective.
SECTION 6.06. Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification or any other cause shall be filled
for the unexpired portion of the term in the manner prescribed in these By-
Laws for regular election or appointment to such office.
<PAGE>
SECTION 6.07. Chairman of the Board. The Chairman of the Board shall,
when present, preside at all meetings of the Board of Directors and at all
meetings of the stockholders and shall have such additional powers and
shall perform such further duties as may from time to time be assigned to
him by the Board of Directors, the Executive Committee or the chief
executive officer of the Corporation.
SECTION 6.08. Vice Chairman of the Board. The Vice Chairman of the
Board shall, in the absence of the Chairman of the Board and the President,
preside at all meetings of the Board of Directors and at all meetings of
the stockholders and shall have such powers and shall perform such further
duties as may from time to time be assigned to him by the Board of
Directors, the Executive Committee or the chief executive officer of the
Corporation.
SECTION 6.09. President. The President shall have general direction of
the operations of the Corporation, subject to the control of the Board of
Directors, the Executive Committee or the chief executive officer of the
Corporation. He shall, in the absence of the Chairman of the Board, preside
at all meetings of the Board of Directors and at all meetings of the
stockholders and shall have such additional powers and shall perform such
further duties as may from time to time be assigned to him by the Board of
Directors, the Executive Committee or the chief executive officer of the
Corporation.
SECTION 6.10 Chief Executive Officer. The Board of Directors shall
designate either the Chairman of the Board or the President as the chief
executive officer of the Corporation. The chief executive officer shall
have direct charge of the business and affairs of the Corporation.
SECTION 6.11. Vice Presidents. Each Vice President shall have such
powers and perform such duties as the Board of Directors or the Executive
Committee may from time to time prescribe or as shall be assigned to him by
the Chairman of the Board or the President.
SECTION 6.12. Treasurer. The Treasurer shall have charge and custody
of, and be responsible for, all funds and securities of the Corporation,
and shall deposit all such funds to the credit of the Corporation in such
banks, trust companies or other depositaries as shall be selected in
accordance with the provisions of these By-Laws; he shall disburse the
funds of the Corporation as may be ordered by the Board of Directors or the
Executive Committee, making proper vouchers for such disbursements, and
shall render to the Board of Directors or the stockholders, whenever the
Board may require him so to do, a statement of all his transactions as
Treasurer or the financial condition of the Corporation; and, in general,
he shall perform all the duties incident to the office of Treasurer and
such other duties as from time to time may be assigned to him by the Board
of Directors, any Committee of the Board designated by it so to act or the
Chairman of the Board or the President.
SECTION 6.13. Secretary. The Secretary shall record or cause to be
recorded in books provided for the purpose the minutes of the meetings of
the stockholders, the Board of Directors, and all committees of which a
secretary shall not have been appointed; shall see that all notices are
duly given in accordance with the provisions of these By-Laws and as
required by law; shall be custodian of all corporate records (other than
financial) and of the seal of the Corporation and see that the seal is
affixed to all documents the execution of which on behalf of the
Corporation under its seal is duly authorized in accordance with the
provisions of these By-Laws; shall keep, or cause to be kept, the list of
stockholders as required by Section 2.09, which includes the post-office
addresses of the stockholders and the number of shares held by them,
respectively, and shall make or cause to be made, all proper changes
therein, shall see that the books, reports, statements, certificates and
all other documents and records required by law are properly kept and
filed; and, in general, shall perform all duties incident to the office of
Secretary and such other duties as may from time to time be assigned to him
by the Board of Directors, the Executive Committee or the Chairman of the
Board or the President.
SECTION 6.14. Controller. The Controller shall be in charge of the
books and records of account of the Corporation and of its statistical
records. He shall keep or cause to be kept at such office or offices as the
Board of Directors may from time to time designate complete and accurate
accounts of all assets, liabilities, receipts, disbursements and other
transactions of the Corporation; shall cause regular audits of such books
and records to be made; shall be responsible for the preparation and filing
of all reports and actions related to or based upon the books and records
of the Corporation; shall render financial statements at the annual meeting
of stockholders, if called upon so to do, or at the request of any director
or the Board of Directors; shall render to the Board of Directors such
statistical reports and analyses as the Board from time to time may
require; and, in general, shall perform all the duties incident to the
office of Controller and such other duties as from time to time may be
assigned to him by the Board of Directors, the Executive Committee or the
Chairman of the Board or the President.
<PAGE>
SECTION 6.15. Salaries. The salaries of the principal officers of the
Corporation shall be fixed from time to time by the Board of Directors, and
none of such officers shall be prevented from receiving a salary by reason
of the fact that he is also a director of the Corporation.
ARTICLE VII.
Contracts, Checks, Drafts, Bank Accounts, Etc.
SECTION 7.01. Execution of Contracts. Unless the Board of Directors or
the Executive Committee shall otherwise determine, the Chairman of the
Board, the Vice Chairman of the Board, the President, any Vice President or
the Treasurer and the Secretary or any Assistant Secretary may enter into
any contract or execute any contract or other instrument, the execution of
which is not otherwise specifically provided for, in the name and on behalf
of the Corporation. The Board of Directors, or any committee designated
thereby with power so to act, except as otherwise provided in these By-
Laws, may authorize any other or additional officer or officers or agent or
agents of the Corporation to enter into any contract or execute and deliver
any instrument in the name and on behalf of the Corporation, and such
authority may be general or confined to specific instances. Unless
authorized so to do by these By-Laws or by the Board of Directors or by any
such committee, no officer, agent or employee shall have any power or
authority to bind the Corporation by any contract or engagement or to
pledge its credit or to render it liable pecuniarily for any purpose or to
any amount.
SECTION 7.02. Loans. No loan shall be contracted on behalf of the
Corporation, and no evidence of indebtedness shall be issued, endorsed or
accepted in its name, unless authorized by the Board of Directors or
Executive Committee or other committee designated by the Board so to act.
Such authority may be general or confined to specific instances. When so
authorized, the officer or officers thereunto authorized may effect loans
and advances at any time for the Corporation from any bank, trust company
or other institution, or from any firm, corporation or individual, and for
such loans and advances may make, execute and deliver promissory notes or
other evidences of indebtedness of the Corporation, and, when authorized as
aforesaid, as security for the payment of any and all loans, advances,
indebtedness and liabilities of the Corporation, may mortgage, pledge,
hypothecate or transfer any real or personal property at any time owned or
held by the Corporation, and to that end execute instruments of mortgage or
pledge or otherwise transfer such property.
SECTION 7.03. Checks, Drafts, etc. All checks, drafts, bills of
exchange or other orders for the payment of money, obligations, notes, or
other evidence of indebtedness, bills of lading, warehouse receipts and
insurance certificates of the Corporation, shall be signed or endorsed by
such officer or officers, agent or agents, attorney or attorneys, employee
or employees, of the Corporation as shall from time to time be determined
by resolution of the Board of Directors or Executive Committee or other
committee designated by the Board so to act.
SECTION 7.04. Deposits. All funds of the Corporation not otherwise
employed shall be deposited from time to time to the credit of the
Corporation in such banks, trust companies or other depositaries as the
Board of Directors or Executive Committee or other committee designated by
the Board so to act may from time to time designate, or as may be
designated by any officer or officers or agent or agents of the Corporation
to whom such power may be delegated by the Board of Directors or Executive
Committee or other committee designated by the Board so to act and, for the
purpose of such deposit and for the purposes of collection for the account
of the Corporation, all checks, drafts, and other orders for the payment of
money which are payable to the order of the Corporation may be endorsed,
assigned and delivered by any officer, agent or employee of the Corporation
or in such other manner as may from time to time be designated or
determined by resolution of the Board of Directors or Executive Committee
or other committee designated by the Board so to act.
SECTION 7.05. Proxies in Respect of Securities of Other Corporations.
Unless otherwise provided by resolution adopted by the Board of Directors
or the Executive Committee or other committee so designated to act by the
Board, the Chairman of the Board or the Vice Chairman of the Board or the
President or any Vice President may from time to time appoint an attorney
or attorneys or agent or agents of the Corporation, in the name and on
behalf of the Corporation, to cast the votes which the Corporation may be
entitled to cast as the holder of stock or other securities in any other
corporation, association or trust any of whose stock or other securities
may be held by the Corporation, at meetings of the holders of the stock or
other securities of such other corporation, association or trust, or to
consent in writing, in the name of the Corporation as such holder, to any
action by such other corporation, association or trust, and may instruct
the person or persons so appointed as to the manner of casting such votes
or giving such consent, and may execute or cause to be executed in the name
and on behalf of the Corporation and under its corporate seal, or
otherwise, all such written proxies or other instruments as he may deem
necessary or proper in the premises.
<PAGE>
ARTICLE VIII.
Books and Records.
SECTION 8.01. Place. The books and records of the Corporation may be
kept at such places within or without the State of Delaware as the Board of
Directors may from time to time determine. The stock record books and the
blank stock certificate books shall be kept by the Secretary or by any
other officer or agent designated by the Board of Directors.
SECTION 8.02. Addresses of Stockholders. Each stockholder shall furnish
to the Secretary of the Corporation or to the transfer agent of the
Corporation an address at which notices of meetings and all other corporate
notices may be served upon or mailed to him, and if any stockholder shall
fail to designate such address, corporate notices may be served upon him by
mail, postage prepaid, to him at his post-office address last known to the
Secretary or to the transfer agent of the Corporation or by transmitting a
notice thereof to him at such address by telegraph, cable or other
available method.
SECTION 8.03. Record Dates. The Board of Directors may fix in advance a
date, not exceeding sixty days preceding the date of any meeting of
stockholders, or the date for the payment of any dividend, or the date for
the allotment of any rights, or the date when any change or conversion or
exchange of capital stock of the Corporation shall go into effect, or a
date in connection with obtaining such consent, as a record date for the
determination of the stockholders entitled to notice of, and to vote at,
any such meeting or any adjournment thereof, or entitled to receive payment
of any such dividend, or to any such allotment of rights, or to exercise
the rights in respect of any change, conversion or exchange of capital
stock of the Corporation, or to give such consent, and in each such case
such stockholders and only such stockholders as shall be stockholders of
record on the date so fixed shall be entitled to notice of, or to vote at,
such meeting and any adjournment thereof, or to receive payment of such
dividend, or to receive such allotment of rights, or to exercise such
rights or to give such consent, as the case may be, notwithstanding any
transfer of any stock on the books of the Corporation after any such record
date fixed as aforesaid.
SECTION 8.04. Audit of Books and Accounts. The books and accounts of
the Corporation shall be audited at least once in each fiscal year by
certified public accountants of good standing, elected by the Board of
Directors.
ARTICLE IX.
Shares and their Transfer.
SECTION 9.01. Certificates of Stock. Every owner of stock of the
Corporation shall be entitled to have a certificate certifying the number
of shares owned by him in the Corporation and designating the class of
stock to which such shares belong, which shall otherwise be in such form as
the Board of Directors shall prescribe. Each such certificate shall be
signed by the Chairman of the Board or the Vice Chairman of the Board or
the President or a Vice President and the Treasurer or any Assistant
Treasurer or the Secretary or any Assistant Secretary of the Corporation;
provided, however, that where such certificate is signed or countersigned
by a transfer agent or registrar the signatures of such officers of the
Corporation and the seal of the Corporation may be in facsimile form. In
case any officer or officers who shall have signed, or whose facsimile
signature or signatures shall have been used on, any such certificate or
certificates shall cease to be such officer or officers of the Corporation,
whether because of death, resignation or otherwise, before such certificate
or certificates shall have been delivered by the Corporation, such
certificate or certificates may nevertheless be issued and delivered by the
Corporation as though the person or persons who signed such certificate or
whose facsimile signature or signatures shall have been used thereon had
not ceased to be such officer or officers of the Corporation.
SECTION 9.02. Record. A record shall be kept of the name of the person,
firm or corporation owning the stock represented by each certificate for
stock of the Corporation issued, the number of shares represented by each
such certificate, and the date thereof, and, in the case of cancellation,
the date of cancellation. The person in whose name shares of stock stand on
the books of the Corporation shall be deemed the owner thereof for all
purposes as regards the Corporation.
SECTION 9.03. Transfer of Stock. Transfers of shares of the stock of
the Corporation shall be made only on the books of the Corporation by the
registered holder thereof, or by his attorney thereunto authorized, and on
the surrender of the certificate or certificates for such shares properly
endorsed.
SECTION 9.04. Transfer Agent and Registrar; Regulations. The
Corporation shall, if and whenever the Board of Directors or Executive
Committee shall so determine, maintain one or more transfer offices or
agencies, each in charge of a transfer agent
<PAGE>
designated by the Board of
Directors, where the shares of the capital stock of the Corporation shall
be directly transferable, and also if and whenever the Board of Directors
shall so determine, maintain one or more registry offices, each in charge
of a registrar designated by the Board of Directors, where such shares of
stock shall be registered. The Board of Directors may make such rules and
regulations as it may deem expedient, not inconsistent with these By-Laws,
concerning the issue, transfer and registration of certificates for shares
of the capital stock of the Corporation.
SECTION 9.05. Lost, Destroyed or Mutilated Certificates. In case of the
alleged loss or destruction or the mutilation of a certificate representing
capital stock of the Corporation, a new certificate may be issued in place
thereof, in the manner and upon such terms as the Board of Directors may
prescribe.
ARTICLE X
Seal
The Board of Directors shall provide a corporate seal, which shall be in
the form of a circle and shall bear the name of the Corporation and the
words and figures Incorporated 1967, Delaware.
ARTICLE XI
Fiscal Year
The fiscal year of the Corporation shall begin at the opening of business
on the Sunday nearest to the first day of January and end at the close of
business on the Saturday nearest to the thirty-first day of December in
each year, whether such Sunday or Saturday, as the case may be, falls in
December or in January.
ARTICLE XII
Indemnification
(a) The Corporation shall indemnify, to the full extent permitted by law,
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in
the right of the Corporation) by reason of the fact that he is or was a
director, officer or employee of the Corporation (for the purposes of this
Article XII such term includes Textron Inc., a Rhode Island corporation),
or is or was serving at the request of the Corporation as a director,
officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise (each such person being referred to
hereafter as an "Agent"), against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere
or its equivalent, shall not, of itself, create a presumption that the
person did not act in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of the Corporation,
and, with respect to any criminal action or proceeding, had reasonable
cause to believe that his conduct was unlawful.
(b) The Corporation shall indemnify, to the full extent permitted by law,
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
Corporation to procure a judgment in its favor by reason of the fact that
he is or was an Agent against expenses (including attorneys' fees) actually
and reasonably incurred by him in connection with the defense or settlement
of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation and except that no such indemnification shall be made in
respect of any claim, issue or matter as to which such person shall have
been adjudged to be liable to the Corporation unless and only to the extent
that the Court of Chancery of Delaware or the court in which such action or
suit was brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such
expenses which such Court of Chancery or such other court shall deem
proper.
(c) To the extent that an Agent shall be successful on the merits or
otherwise (including dismissal of an action without prejudice or the
settlement of an action without admission of liability) in defense of any
action, suit or proceeding referred to in paragraphs (a) and
<PAGE>
(b), or in
defense of any claim, issue or matter therein, he shall be indemnified, to
the full extent permitted by law, against expenses (including attorneys'
fees) actually and reasonably incurred by him in connection therewith.
(d) Any indemnification under paragraphs (a) and (b) (unless ordered by a
court) shall be made by the Corporation only as authorized in the specific
case upon a determination that indemnification of the Agent is proper in
the circumstances because he has met the applicable standard of conduct set
forth in paragraphs (a) and (b). Such determination shall be made (1) by
the Board of Directors by a majority vote of a quorum consisting of
directors who were not parties to such action, suit or proceeding, or (2)
if such a quorum is not obtainable, or, even if obtainable a quorum of
disinterested directors so directs, by independent legal counsel in a
written opinion, or (3) by the stockholders.
(e) Expenses (including attorneys' fees) incurred by an Agent in
defending a civil, criminal, administrative or investigative action, suit
or proceeding referred to in paragraphs (a) and (b) shall be paid by the
Corporation in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such Agent to
repay such amount if it shall ultimately be determined that he is not
entitled to be indemnified by the Corporation as authorized in this Article
XII. Notwithstanding the foregoing, no advance shall be made by the
Corporation if a determination is reasonably and promptly made by the Board
of Directors by a majority vote of a quorum of disinterested directors, or
(if such a quorum is not obtainable or, even if obtainable, a quorum of
disinterested directors so directs) by independent legal counsel in a
written opinion, that, based upon the facts known to the Board of Directors
or counsel at the time such determination is made, such Agent acted in bad
faith or in a manner that such person did not believe to be in or not
opposed to the best interests of the Corporation, or, with respect to any
criminal proceeding, that such Agent believed or had reasonable cause to
believe his conduct was unlawful. In no event shall any advance be made in
instances where the Board of Directors or independent legal counsel
reasonably determines that such person deliberately breached his duty to
the Corporation or its stockholders.
(f) The indemnifiation and advancement of expenses provided by, or
granted pursuant to, the other paragraphs of this Article XII shall not be
deemed exclusive of any other rights to which those seeking indemnification
and advancement of expenses may be entitled under any agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in
his official capacity and as to action in another capacity while holding
such office. All rights to indemnification under this Article XII shall be
deemed to be provided by a contract between the Corporation and each Agent
who serves in such capacity at any time while this Article XII is in
effect. Any repeal or modification of this Article XII shall not affect any
rights or obligations then existing.
(g) The Corporation may purchase and maintain insurance on behalf of any
person who is or was an Agent against any liability asserted against him
and incurred by him in any such capacity, or arising out of his status as
such, whether or not the Corporation would have the power to indemnify him
against such liability under the provisions of this Article XII.
(h) For purposes of this Article XII, references to "the Corporation"
shall include, in addition to the resulting or surviving corporation, any
constituent corporation (including any constituent of a constituent)
absorbed in a consolidation or merger, so that any person who is or was a
director, officer or employee of such constituent corporation, or is or was
serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, shall stand in the same position under
the provisions of this Article XII with respect to the resulting or
surviving corporation as he would have with respect to such constituent
corporation if its separate existence had continued.
(i) For purposes of this Article XII, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall include
any excise taxes assessed on a person with respect to an employee benefit
plan; and references to "serving at the request of the Corporation" shall
include any service as a director, officer or employee of the Corporation
which imposes duties on, or involves services by, such director, officer or
employee with respect to an employee benefit plan, its participants, or
beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the interests of the participants and
beneficiaries of an employee benefit plan shall be deemed to have acted in
a manner "not opposed to the best interests of the Corporation" as referred
to in this Article XII.
(j) The indemnification and advancement of expenses provided by, or
granted pursuant to, this Article XII shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be an
Agent and shall inure to the benefit of the heirs, executors and
administrators of such a person.
<PAGE>
ARTICLE XIII
Waiver of Notice
Whenever any notice whatever is required to be given by statute, these By-
Laws of the Certificate of Incorporation, a waiver thereof in writing,
signed by the person or persons entitled to said notice, whether before or
after the time stated therein, shall be deemed equivalent thereto.
ARTICLE XIV
Amendments
These By-Laws may be altered, amended or repealed, in whole or in part,
and new By-Laws may be adopted, in whole or in part, by the affirmative
vote of the holders of record of a majority of the outstanding stock of the
Corporation present in person or represented by proxy and entitled to vote
in respect thereof, given at an annual meeting or at any special meeting at
which a quorum shall be present, or by the affirmative vote of a majority
of the whole Board of Directors given at any meeting. Any By-Law made,
altered, amended or repealed by the Board of Directors shall be subject to
alteration, amendment or repeal by vote of stockholders as provided above.
<PAGE>
TEXTRON INC.
I, ,
SECRETARY of TEXTRON INC., a Delaware corporation, DO HEREBY CERTIFY that
the foregoing is a true and complete copy of the By-Laws of said
Corporation, and that such By-Laws are now in full force and effect.
IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed the
seal of said Corporation this day of , 19 .
.................
Secretary
Exhibit 10.2B
DEFERRED INCOME PLAN FOR
TEXTRON KEY EXECUTIVES
(Effective January 1, 1994)
First Amendment
Pursuant to Section 9.03 of the Deferred Income Plan for
Textron Key Executives (Restated, effective January 1, 1994)
(the "Plan"), Textron Inc. hereby amends the Plan, effective
October 26, 1996, as follows:
1. Section 3.01(a) of the Plan is hereby amended
to read in its entirety as follows:
"3.01(a) For record-keeping purposes only, Textron
shall maintain a Moody's Account, a Stock Unit
Account and an Interest Account, as is necessary,
for each Participant who has the receipt of Compensation
deferred under this Plan."
2. Section 3.11 of the Plan is hereby
amended to delete the first sentence thereof and to add a
new second sentence to read in its entirety as follows:
"A Participant who has terminated his Textron
Employment may, subject to the provisions of Section 16
of the Securities Exchange Act of 1934, once each
calendar quarter, elect to transfer, in 10% increments,
effective the first calendar day of the month following
the month in which the election is made, any amount in
his Stock Unit Account which is then nonforfeitable
according to Section 3.07, to his Interest Account.
3. Section 4.01 of the Plan is hereby amended to
delete the word "and" immediately following the words
"Moody's Plus Rate," and to delete the words "each valued as
of the Determination Date immediately following the date on
which his Textron Employment ends," and to substitute in
their place the following words, "and the amount in his
Interest Account".
4. Section 4.02(a) of the Plan is hereby amended
to delete the word "and" immediately following the words
"Moody's Plus Rate)" and to substitute in its place the
following words, "the amount in", and immediately after the
word "death" to add the following words, "and the amount in
her Interest Account".
5. Section 4.03 of the Plan is hereby amended to
delete the word "and" immediately following the words
"Moody's Plus Rate)" and to substitute in its place a ","
and to delete the words "each valued as of the Determination
Date immediately following the date on which his Textron
Employment ends," and to substitute in their place the
following words, "and the amount in his Interest Account".
6. Section 4.04 of the Plan is hereby amended to
delete the words "and the", to substitute in their place the
following words, "the amount in her", to delete the words
"(transferred immediately to an Interest Account)", and to
substitute in their place the following words, "and the
amount in her Interest Account".
7. Section 5.02 of the Plan is hereby
amended to add, immediately following the words
"Participant's Moody's Account", the following words ", his
Stock Unit Account".
8. Section 5.03(a) of the Plan is hereby
amended to delete the words "Interest shall be credited as
of each Determination Date on the unpaid balance of Plan
benefits, based on the interest rates described in Section
3.03 or Section 3.10, as appropriate.".
9. Section 5.04 of the Plan is hereby
amended to add, immediately following the words "Moody's
Account", the following words ", Stock Unit Account".
10. The Plan is hereby amended to add a new
Section 5.05 to read in its entirety as follows:
"5.05 Distributions under this Article V shall be
made on a pro rata basis from each account in which
there is an amount."
IN WITNESS WHEREOF, Textron Inc. has caused this First
Amendment to be executed by its duly authorized officer to
be effective as of October 26, 1996.
TEXTRON INC.
By:/s/Carol J. Grant
Carol J. Grant
Vice President, Human Resources
<PAGE>
DEFERRED INCOME PLAN FOR
TEXTRON KEY EXECUTIVES
(Effective January 1, 1994)
Second Amendment
Pursuant to Section 9.03 of the Deferred Income Plan for
Textron Key Executives (Restated, effective January 1, 1994)
(the "Plan"), Textron Inc. hereby amends the Plan, effective
April 23, 1997, as follows:
1. Section 1.06 of the Plan is hereby amended to
delete the second sentence thereof and to add in lieu
thereof language as follows:
"Automatic Deferred Income" means amounts in
excess of 100% of a Participant's Annual Incentive
Compensation Target, as defined in Section 4.01(a) of the
Annual Incentive Compensation Plan for Textron Employees, in
the years following a Participant's fifth full year of
participation in this Plan, but only if the Participant has
not achieved or maintained a "Minimum Stock Ownership
Level". Minimum Stock Ownership Level means a dollar value
of Textron shares as of September 30 that equals or exceeds
for the following Participants the following amounts.
Participant Minimum Stock Ownership Level
CEO & COO 5 times base salary
Other Proxy-Named Executives 3 times base salary
All other Corporate Officers 2 times base salary
Segment Heads and Group Presidents 2 times base salary
Division Presidents 1 times base salary
For purposes of this Plan, "Stock Ownership" includes shares
obtained through open market purchases, stock option
exercises, the Textron Savings Plan, and stock units in
the Deferred Income Plan and in the Supplemental Benefits
Plan.
IN WITNESS WHEREOF, Textron Inc. has caused this Second
Amendment to be executed by its duly authorized officer to
be effective as of April 23, 1997.
TEXTRON INC.
By:/s/Carol J. Grant
Carol J. Grant
Vice President, Human Resources
<PAGE>
DEFERRED INCOME PLAN FOR
TEXTRON KEY EXECUTIVES
(Effective January 1, 1994)
Third Amendment
Pursuant to Section 9.03 of the Deferred Income Plan for
Textron Key Executives (Restated, effective January 1, 1994)
(the "Plan"), Textron Inc. hereby amends the Plan, as
follows:
1. Section 3.08 of the Plan is hereby amended to
read in its entirety as follows:
"With respect to deferrals into this Plan of amounts
from the Annual Incentive Compensation Plan for Textron
Employees and the Long Term Incentive Plan for Textron
Employees, Textron shall credit stock units to a
Participant's Stock Unit Account, equal to the number
of shares the deferred amount could have purchased at
the "current value" of a share of Textron Common Stock.
The "current value" of a share of Textron Common Stock
shall be as defined in Section 3.7 of the Long Term
Incentive Plan for Textron Employees. With respect to
deferrals into this Plan of any other amounts, each
month Textron shall credit stock units to a
Participant's Stock Unit Account equal in number to the
number of shares of Textron Common Stock that the
deferred amount could have purchased at a price per
share equal to the average price per share of Textron
Common Stock contributed to the Textron Savings Plan
for that month.
2. Section 5.03(a) of the Plan is hereby amended
to delete the words "on or" immediately following the word
"begins".
IN WITNESS WHEREOF, Textron Inc. has caused this Amendment
to be executed by its duly authorized officer to be
effective as of October 27, 1998.
TEXTRON INC.
By:/s/Carol J. Grant
Carol J. Grant
Vice President, Human Resources
Exhibit 10.4B
SUPPLEMENTAL BENEFITS PLAN FOR
TEXTRON KEY EXECUTIVES
(Effective January 1, 1994)
First Amendment
Pursuant to Section 8.03 of the Supplemental Benefits Plan
for Textron Key Executives (Restated, effective January 1,
1994) (the "Plan"), Textron Inc. hereby amends the Plan,
effective October 26, 1996, as follows:
1. Section 4.06 of the Plan is hereby amended to
delete the first two sentences thereof and to add new first
and second sentences to read in as follows:
"A Participant who has terminated her Textron
Employment may, subject to the provisions of Section 16
of the Securities Exchange Act of 1934, once each
calendar quarter, elect to transfer, in 10% increments,
effective the first calendar day of the month following
the month in which the election is made, any amount in
her supplemental savings account to her fixed income
account. The cash value transferred will be determined by
multiplying the current value of Textron common stock by
the number of whole and fractional Supplemental Shares
in her Supplemental Savings Account as of the end of the
month in which the election is made times the
percentage being transferred.
IN WITNESS WHEREOF, Textron Inc. has caused this First
Amendment to be executed by its duly authorized officer to
be effective as of October 26, 1996.
TEXTRON INC.
By:/s/Carol J. Grant
Carol J. Grant
Vice President, Human Resources
<PAGE>
SUPPLEMENTAL BENEFITS PLAN FOR
TEXTRON KEY EXECUTIVES
(Effective January 1, 1994)
Second Amendment
Pursuant to Section 8.03 of the Supplemental Benefits Plan
for Textron Key Executives (Restated, effective January 1,
1994) (the "Plan"), Textron Inc. hereby amends the Plan,
effective January 1, 1997, as follows:
1. Section 2.02 of the Market Square Profit Sharing
Plan Schedule to the Plan is hereby amended by adding to the
end of said Section the following:
"The final Textron credit under the provisions of this
paragraph shall be made as of December 31, 1996."
2. Article IV of the Market Square Profit Sharing
Plan Schedule to the Plan is hereby amended by adding to the
end of said Article a new section to read in its entirety as
follows:
"4.03 The Benefits Committee may, in its sole
discretion, approve a written request by an actively
employed Participant to withdraw any or all of the value of
a Participant's accounts."
IN WITNESS WHEREOF, Textron Inc. has caused this Second
Amendment to be executed by its duly authorized officer to
be effective as of January 1, 1997.
TEXTRON INC.
By:/s/Carol J. Grant
Carol J. Grant
Vice President, Human Resources
<PAGE>
SUPPLEMENTAL BENEFITS PLAN FOR
TEXTRON KEY EXECUTIVES
(Effective January 1, 1994)
Third Amendment
Pursuant to Section 8.03 of the Supplemental Benefits Plan
for Textron Key Executives (Restated, effective January 1,
1994) (the "Plan"), Textron Inc. hereby amends the Plan, as
follows:
1. Section 4.01 of the Plan is hereby amended to
read in its entirety as follows:
"A Participant who has terminated her Textron
Employment may, subject to the provisions of Section 16
of the Securities Act of 1934, once each calendar
quarter, elect to transfer, in 10% increments,
effective the first calendar day of the month following
the month in which the election is made, any amount in
her Stock Unit Account to her general fund account."
2. Section 4.02 of the Plan is hereby amended to read in
its entirety as follows:
"Any transfer pursuant to Section 4.01 shall be made in
cash and shall be an amount equal to the product of (x)
the current value of Textron Common Stock as defined in
Section 3.06, as of the end of the month in which the
election is made, times (y) the percent being
transferred."
3. The Plan is hereby amended to add a new Section 2.04 to
read in its entirety as follows:
"The general fund account, which shall include all
amounts contributed to the Participant's supplemental
Market Square account prior to December 31,1992 and any
amount transferred pursuant to Article IV, beginning
July 1, 1998 shall be credited with earnings as if it
was invested in the George Putnam Fund of Boston
Balanced Fund."
IN WITNESS WHEREOF, Textron Inc. has caused this Amendment
to be executed by its duly authorized officer. Parts 1 and
2 of this Amendment shall be effective as of October 26,
1996. Part 3 of this Amendment shall be effective as of July
1, 1998.
TEXTRON INC.
By:/s/Carol J. Grant
Carol J. Grant
Vice President, Human Resources
Exhibit 10.5B
SUPPLEMENTAL RETIREMENT PLAN FOR
TEXTRON KEY EXECUTIVES
(Effective December 15, 1994)
First Amendment
Pursuant to Section 7.03 of the Supplemental Retirement Plan for
Textron Key Executives (Effective December 15, 1994) (the
"Plan"), Textron Inc. hereby amends the Plan, as follows:
1. Vesting in the Plan shall be changed as stated below:
Age at % of
Retirement* Benefits
65 100
64 90
63 80
62 70
61 60
60 50
*Or age at death or age at termination due to disability
whichever comes first.
2. The Organization and Compensation Committee of the
Board of Directors shall have the discretion to provide
an enhanced benefit.
3. If a Participant in the Plan terminates as a result
of a Change in Control, she shall be one hundred percent
(100%) vested.
4. The normal form of benefit payable from the Plan for
all new Participants shall be a life annuity.
IN WITNESS WHEREOF, Textron Inc. has caused this Amendment to be
executed by its duly authorized officer. Parts 1 and 2 of this
Amendment shall be effective as of April 14, 1998. Part 3 of this
Amendment shall be effective as of April 21, 1998. Part 4 of this
Amendment shall be effective as of July 22, 1998.
TEXTRON INC.
By:/s/Carol J. Grant
Carol J. Grant
Vice President, Human Resources
Exhibit 10.9B
1994 LONG-TERM INCENTIVE PLAN
(Effective April 27, 1994)
First Amendment
Pursuant to Section 4.11 of the 1994 Long-Term Incentive
Plan for Textron Employees (Effective April 27, 1994) (the
"Plan"), Textron Inc. hereby amends the Plan, effective
April 23, 1997 as follows:
1. A maximum of 30,000 PSU's can be earned by any
participant with respect to any reward cycle.
2. The Committee may use objective performance criteria to
determine how many PSU's will be earned with respect to
performance targets, for example: EPS, ROE, ROIC, Free Cash
Flow, etc.
3. The Committee may no longer approve an award in excess
of 100% for Corporate Officers.
4. If the actual results fall between the minimum and
primary performance targets, the specific award will be
based on a pre-established formula, but not more than that
derived by the formula.
5. Prior to making such awards, the Committee will certify
that the goals have been attained or satisfied.
Exhibit 10.14C
TEXTRON INC.
40 Westminster Street
Providence, Rhode Island 02903
As of November 16, 1998
Mr. James F. Hardymon
Chairman
Textron Inc.
40 Westminster Street
Providence, Rhode Island 02903
Dear Jim:
This letter will set forth the terms of our agreement with
regard to your retirement from service as the Chairman of the
Board of Directors of Textron Inc. (the "Company") and as an
employee of the Company on January 31, 1999 (the "Retirement
Date").
1. You hereby resign effective as of the Retirement Date
as an employee of the Company, as Chairman, and a member, of the
Board of Directors of the Company (the "Board"), and from any and
all other offices, employment relationships, directorships and
fiduciary capacities held with, or on behalf of, the Company and
its subsidiaries and affiliates (the "Textron Group") and any
employee benefit plan of the Textron Group.
2. You will continue to be paid your current base salary
through the Retirement Date in accordance with the Company's
normal payroll practices and will also be entitled to receive
payment of: (i) any unreimbursed business expenses incurred
through the Retirement Date, and (ii) any accrued (but unused)
vacation through the Retirement Date.
3. You will receive a cash bonus under the Company's
Annual Incentive Compensation Plan ("AIC Plan") for the 1998
fiscal year in the amount of One Million Dollars ($1,000,000).
Except with regard to amounts you elect by December 1, 1998 to
defer pursuant to the Company's Deferred Income Plan (the "DIP"),
such bonus will be paid in a cash lump sum at the time the AIC
Plan bonuses for 1998 are paid to members of the Management
Committee.
4. Immediately following your Retirement Date, you (or
your spouse) will commence receiving monthly benefits in the form
of a joint and 50% survivor annuity under the Company's Amended
and Restated Supplemental Retirement Plan for Textron Inc. Key
Executives (the "SERP") in the amounts of $179,515 per month
(subject to adjustment as provided below) while you are alive
and, after your death, $89,758 per month (subject to adjustment
as provided below) to your spouse while she is alive, provided
she is married to you on both the Retirement Date and your date
of death. Such amounts will be offset by the amounts you receive
under the Company's qualified defined benefit pension plan (the
"Pension Plan"), but already reflect the agreed upon offset of
retirement benefits from your prior employers' defined benefit
pension plans. The above amounts were calculated based on agreed
upon assumptions as to the amounts to which you and your spouse
would have been entitled if you had retired on November 30, 1999
when your benefit under the SERP was fully vested and additional
compensation was paid to you until such date. The foregoing
specified amounts assume that in January 1999 you will earn and
receive payment for 50,000 performance share units with a value
of $75 per unit. The parties agree that once the actual number
and value of such units is determined in January 1999, the
foregoing specified amounts of the SERP benefit will be adjusted
to reflect any difference between the foregoing and the actual
numbers and values of performance share units earned and
received. The SERP benefits shall be inclusive of any benefits
you would have received under the pension portion of the
Company's Supplemental Benefits Plan for Textron Key Employees
(the "SBP") and Section 5 of the offer letter dated October 20,
1989 (the "Offer Letter") as continued pursuant to Section 4(c)
of your employment agreement dated November 24, 1989 as amended
as of December 15, 1994 (the "Employment Agreement"), but shall
be in addition to your benefits under any retirement plan
qualified under Section 401(a) of the Internal Revenue Code of
1986, as amended (the "Code"), the Textron Inc. Savings Plan
portion of the SBP and the Market Square Trust portion of the
SBP.
5. Under the Company's 1994 Long-Term Incentive Plan (the
"LTIP"), you (or in the case of your death, your estate) will
receive cash payments equal, in the aggregate, to the fair market
value of your 129,000 outstanding performance share units at the
end of each of the applicable measuring periods in accordance
with the payment provisions of the LTIP. All discretionary
performance targets relating to your individual performance shall
be deemed to be fully achieved and the actual level of
achievement of all earnings per share targets shall be determined
as if you continued to be employed by the Company through the end
of the applicable measuring periods. Under the Company's 1987
and 1990 Long-Term Incentive Plans, your outstanding options to
purchase 314,650 shares of the Company's common stock (the
"Common Stock") will remain vested and exercisable in accordance
with the applicable plans and option agreements, until the
earlier of the expiration of the applicable option term or the
third anniversary of the Retirement Date (subject to the
provisions that apply in the event of your death or termination
due to total disability). In addition, promptly after the
Retirement Date, the Company shall issue you pursuant to Section
6 of the Offer Letter 100,000 shares of the Common Stock (as
previously adjusted from 50,000 shares in accordance therewith to
reflect a stock split), provided that, you may elect prior to
delivery of such shares that the number of such shares delivered
to you be reduced to pay withholding on the shares.
6. Pursuant to the grant of 500,000 retirement share units
you received on December 15, 1994 (as adjusted to reflect stock
splits, stock dividends and other similar events) with a stated
value of $49.1875 per unit (as similarly adjusted) under Section
4(h) of the Employment Agreement, which as of this date is
1,000,000 retirement share units with a stated value of
$24.593750 per unit (the "Retirement Share Units"), the Company
will pay you (or, in the event of your death, your estate) an
amount in cash on February 1, 1999 equal to 1,000,000 multiplied
by the difference between the volume weighted average price of
the Common Stock on November 16, 1998 and the stated value of
$24.593750 per unit.
7. Your retirement will be deemed to be a "normal
retirement" for all purposes under the Company's employee benefit
and equity plans and programs in which you participate and,
accordingly, all of your rights and accounts shall vest and cease
to be subject to forfeitures to the maximum extent permitted by
the terms of such plans and programs. You will, of course, be
entitled to your retirement benefits under the Company's tax-
qualified retirement plans including, but not limited to, the
Pension Plan and Savings Plan, in accordance with the terms of
such plans. You will be entitled to continued coverage under
the Survivor Benefits Plan.
8. The Company shall provide each of you and your spouse
with coverage under the Company's health plans for senior
executives until your respective sixty-fifth birthdays. You and
your spouse shall be charged for the premium for the coverage at
the same rate charged for COBRA continuation coverage. To the
extent that you or your spouse would be subject to the
limitations of Section 105(h) of the Code with regard to the
taxation of the benefits provided, such coverage shall be
provided on an insured basis.
9. The Company shall provide you with an executive office
and secretarial services for a period of one (1) year following
your retirement at such location as mutually agreed near where
you are then residing. The Company shall pay or reimburse your
tax preparation expenses (not exceeding $10,000 per year) for the
1998 and 1999 tax years and shall pay your club dues through
December 31, 1999. On the Retirement Date, the Company shall
transfer at no cost to you (other than taxes) ownership of your
current Company car to you.
10. After the Retirement Date, you shall continue to be
indemnified by the Company to the full extent provided or
permitted by the Bylaws and Charter of the Company with regard to
your activities prior to the Retirement Date as an officer or
director of the Company or other members of the Textron Group, as
well as a fiduciary of plans of the Textron Group. The Company
shall continue to cover you under directors and officers
liability insurance with regard to such activities while
potential liability exists in the same amount and to the same
extent as the Company covers its other officers and directors.
11. Your benefits under the DIP will be paid out in five
annual installments commencing in January of 2001 in accordance
with the terms of the DIP. The matching amounts credited to your
stock unit account thereunder will continue to vest after your
retirement in accordance with the DIP until such account is fully
vested.
12. In the event of your death prior to the Retirement
Date, your date of death shall be deemed to be your Retirement
Date and you shall be deemed to have vested in all of the amounts
due hereunder, which shall be paid to your estate in the cases of
Sections 3, 5, 6 and 9 hereof and otherwise as provided in the
applicable plan or program (as modified herein if applicable).
You will also be entitled in such case to the benefits under the
Survivor Benefits Plan.
13. The Company represents and warrants that this Agreement
and, in particular Sections 5 and 6 hereof, have been approved by
the full Board of Directors or a committee thereof that satisfies
the "non-employee director" requirements of Rule 16b-3 of the
Securities Exchange Act of 1934, as amended.
14. You shall not with willful intent to damage
economically or as to reputation or vindictively disparage the
Company, its subsidiaries or their respective past or present
officers, directors or employees (the "Protected Group"),
provided that the foregoing shall not apply to (i) actions or
statements taken or made by you while employed by the Company in
good faith as fulfilling your duties with the Company or
otherwise at the request of the Company, (ii) truthful statements
made in compliance with legal process or governmental inquiry,
(iii) as you in good faith deem necessary to rebut any untrue or
misleading public statements made about you or any other member
of the Protected Group, (iv) statements made in good faith by you
to rebut untrue or misleading statements made about you or any
other member of the Protected Group by any member of the
Protected Group, and (v) normal commercial puffery in a
competitive business situation.
15. Neither the Company officially nor any then member of
the Executive Leadership Team (or the equivalent) of the Company,
as such term is currently used within the Company, shall with
willful intent to damage you economically or as to reputation or
otherwise vindictively disparage you, provided the foregoing
shall not apply to (i) actions or statements taken or made in
good faith within the Company in fulfilling duties with the
Company, (ii) truthful statements made in compliance with legal
process, governmental inquiry or as required by legal filing or
disclosure requirements, (iii) as in good faith deemed necessary
to rebut any untrue or misleading statements by you as to any
member of the Protected Group or (iv) normal commercial puffery
in a competitive business situation.
16. You hereby agree that prior to and for a period of one
(1) year after the Retirement Date, you will not engage in
Competition with the Company with any of the Listed Companies,
including, but not limited to: (i) soliciting customers,
business or orders for, or selling any products and services in,
Competition with the Company for such Listed Companies, or (ii)
diverting, enticing, or otherwise taking away customers, business
or orders of the Company, or attempting to do so, in either case
in Competition with the Company for such Listed Companies.
"Competition" shall mean engaging in, as an employee, director,
partner, principal, shareholder, consultant, advisor, independent
contractor or similar capacity, with the Listed Companies,
provided that Competition shall not include: (i) holding five
percent (5%) or less of an interest in the equity or debt of any
publicly traded company, (ii) engaging in any activity with the
prior written approval of the Chief Executive Officer or the O&C
Committee, or (iii) the employment by, or provision of services
to, an investment banking firm or consulting firm that provides
services to entities that are in Competition with the Company,
provided that you do not personally represent or provide services
to such entities that are Listed Companies. The "Listed
Companies" shall be designated in writing by the Company
simultaneous with the execution of this Agreement. In the event
of your material breach or threatened material breach of this
Section, the Company, in addition to its other remedies at law or
in equity, shall be entitled to injunctive or other equitable
relief in order to enforce or prevent your violation of this
Section.
17. All amounts payable hereunder shall be subject to
required withholding and deductions in accordance with applicable
law and the Textron Group's practices.
18. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, without
reference to principles of conflict of laws.
19. This Agreement set forth the parties' entire agreement
(and supersedes any and all prior understandings) with respect to
its subject matter, including, without limitation, the Employment
Agreement and the Offer Letter, provided that Section 8 of the
Employment Agreement (regarding setoffs and legal fees) shall
apply to this Agreement. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but both
of which taken together shall constitute one and the same
document.
TEXTRON INC.
By:/s/Lewis B. Campbell
Name:
Title:
Date: November 20, 1998
Agreed & Accepted:
/s/James F. Hardymon
James F. Hardymon
Date: November 16, 1998
<TABLE>
EXHIBIT 12.1
TEXTRON MANUFACTURING
COMPUTATION OF RATIO OF INCOME TO COMBINED FIXED
CHARGES AND PREFERRED STOCK DIVIDENDS
(Unaudited)
(In millions except ratios)
<CAPTION>
Year
<C> <C> <C> <C> <C>
1998 1997 1996 1995 1994
Fixed charges:
Interest expense (1) $ 160 $ 129 $ 148 $ 178 $ 192
Distributions on preferred
securities of subsidiary
trust, net of income taxes 26 26 23 - -
Estimated interest portion of
rents 26 21 17 17 20
Total fixed charges $ 212 $ 176 $ 188 $ 195 $ 212
Income:
Income from continuing
operations before income
taxes and distributions
on preferred securities of
subsidiary trust $ 763 $ 648 $ 540 $ 413 $ 375
Fixed charges (2) 186 150 165 195 212
Eliminate equity in
undistributed
pretax income of finance
subsidiaries (51) (34) (67) (62) (58)
Adjusted income $ 898 $ 763 $ 638 $ 546 $ 529
Ratio of income to fixed charges 4.24 4.34 3.39 2.80 2.50
</TABLE>
________________________
(1) Includes interest unrelated to borrowings of $16 million in 1998;
$12 million in 1997, $11 million in 1996, $23 million in 1995, and $27
million in 1994.
(2) Adjusted to exclude distributions on preferred securities of
subsidiary trust, net of income taxes in 1998, 1997 and 1996.
<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
<C> <C> <C> <C> <C>
1998 1997 1996 1995 1994
Fixed charges:
Interest expense (1) $ 315 $ 282 $ 295 $ 325 $ 305
Distributions on preferred
securities of subsidiary
trust, net of income taxes 26 26 23 - -
Estimated interest portion of
rents 27 22 18 19 21
Total fixed charges $ 368 $ 330 $ 336 $ 344 $ 326
Income:
Income from continuing
operations before income
taxes and distributions
on preferred securities of
subsidiary trust $ 763 $ 648 $ 540 $ 413 $ 375
Fixed charges (2) 342 304 313 344 326
Adjusted income $1,105 $ 952 $ 853 $ 757 $ 701
Ratio of income to fixed charges 3.00 2.89 2.54 2.20 2.15
</TABLE>
________________________
(1) Includes interest unrelated to borrowings of $16 million in 1998,
$12 million in 1997, $11 million in 1996, $23 million in 1995, and $27
million in 1994.
(2) Adjusted to exclude distributions on preferred securities of
subsidiary trust, net of income taxes in 1998, 1997 and 1996.
Exhibit 13
BUSINESS SEGMENT DATA
For a description of the businesses comprising each segment, see pages 60
through 62.
<TABLE>
<CAPTION>
OPERATING
REVENUES OPERATING INCOME INCOME MARGINS
------------------------ ---------------------- -----------------------
(In millions) 1998 1997 1996 1998 1997 1996 1998 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Aircraft $3,189 $3,025 $2,593 $ 338 $ 313 $ 261 10.6% 10.3% 10.1%
Automotive 2,405 2,127 1,627 179 150 146 7.4 7.1 9.0
Industrial 3,722 3,181 2,959 410 346 300 11.0 10.9 10.1
Finance 367 350 327 113 108 96 30.8 30.9 29.4
- ------------------------------------------------------------------------------------------------------------------------------------
$9,683 $8,683 $7,506 1,040 917 803 10.7% 10.6% 10.7%
- ------------------------------------------------------------------------------------------------------------------------------------
Gain on sale of division 97 - -
Special charges (87) - -
Corporate expenses and other - net (127) (140) (115)
Interest expense - net (160) (129) (148)
- -----------------------------------------------------------------------------------------
Income from continuing operations
before income taxes* $ 763 $ 648 $ 540
- -----------------------------------------------------------------------------------------
</TABLE>
* Before distributions on preferred securities of subsidiary trust.
Prior year amounts have been reclassified to conform to the current year's
segment presentation.
1998 REVENUES - $9.7 BILLION 1998 OPERATING INCOME - $1.040 BILLION
[PIE CHART] [PIE CHART]
AIRCRAFT $3,189 33% AIRCRAFT $338 33%
AUTOMOTIVE $2,405 25% AUTOMOTIVE $179 17%
INDUSTRIAL $3,722 38% INDUSTRIAL $410 39%
FINANCE $367 4% FINANCE $113 11%
22 1998 TEXTRON ANNUAL REPORT
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
[BAR CHART]
RESULTS OF OPERATION
REVENUES EARNINGS PER SHARE*
96 $7,506 11% 96 $1.78 24%
97 $8,683 16% 97 $2.19 23%
98 $9,683 12% 98 $2.68 22%
*Income from continuing operations - diluted
Textron Inc.
1998 vs. 1997
Diluted earnings per share from continuing operations for 1998 were $2.68 per
share, up 22% from the 1997 amount of $2.19. Income from continuing operations
in 1998 of $443 million was up 19% from $372 million for 1997. Revenues
increased 12% to $9.7 billion in 1998 from $8.7 billion in 1997. Net income
including the results of AFS which is a discontinued operation was $608 million
vs. $558 million in 1997.
Operating income of Textron's four business segments aggregated $1.040 billion
in 1998, up 13% from 1997, as a result of continued improved financial results
across all business segments.
Total segment margins increased to 10.7% in 1998 from 10.6% in 1997.
Corporate expenses and other - net decreased $13 million due primarily to 1997
costs associated with the termination of interest rate swap agreements no longer
qualifying as accounting hedges and 1997 litigation expenses related to a
divested operation.
The higher Textron manufacturing interest expense - net - $160 million in 1998
vs. $129 million in 1997 - was due to higher average debt resulting from the
incremental debt associated with acquisitions and share repurchases, partially
offset by the payment of debt with proceeds in 1997 from the divestiture of Paul
Revere.
1997 vs. 1996
Diluted earnings per share from continuing operations for 1997 were $2.19, up
23% from the 1996 amount of $1.78. Income from continuing operations in 1997 of
$372 million was up 22% from $306 million for 1996. Revenues increased 16% to
$8.7 billion in 1997 from $7.5 billion in 1996. Net income in 1997 was $558
million versus $253 million in 1996, which reflected the impact of a $245
million loss from a discontinued operation (Paul Revere) that was disposed of
early in 1997.
Operating income of Textron's four business segments aggregated $917 million in
1997, up 14% from 1996, as a result of continued improved financial results in
the Aircraft, Industrial and Finance segments. Operating income in the
Automotive segment was essentially unchanged.
Total segment margins decreased to 10.6% in 1997 from 10.7% in 1996, due
primarily to lower margins associated with the Kautex acquisition.
Corporate expenses and other - net increased in 1997 by $25 million due to 1997
litigation expenses related to a divested operation, higher 1997 expenses
related to organizational changes and higher support costs related to
international expansion, and 1997 costs associated with the termination of
interest rate swap agreements no longer qualifying as accounting hedges.
The lower Textron manufacturing interest - $129 million in 1997 vs. $148 million
in 1996 - was due to lower average debt, resulting from the payment of debt with
proceeds from the divestiture of Paul Revere, partially offset by the
incremental debt associated with acquisitions.
[BAR CHART]
AIRCRAFT
REVENUES
96 $2,593 7%
97 $3,025 17%
98 $3,189 5%
Aircraft
1998 vs. 1997
The Aircraft segment's revenues increased $164 million (5%) and income before
special charges increased $25 million (8%) due to higher results at Cessna
Aircraft.
Cessna Aircraft's revenues increased $301 million, primarily as a result of
higher sales of business jets, single-engine aircraft and Caravans. Income
increased as a result of the higher sales combined with improved results in the
single-engine piston aircraft business.
1998 TEXTRON ANNUAL REPORT 23
<PAGE>
[BAR CHART]
OPERATING INCOME
96 $261 10%
97 $313 20%
98 $338 8%
Bell Helicopter's revenues decreased $137 million, due primarily to the
completion in 1997 of the Canadian Forces contract ($180 million), partially
offset by higher commercial spares sales ($23 million) and higher revenues to
the U.S. Government ($29 million). The higher U.S. Government revenues were due
to higher revenues on the V-22 program and the Huey and Cobra upgrade contracts
($140 million), partially offset by lower foreign military sales and lower
revenues on other U.S. Government aircraft and spares ($111 million). Bell's
income decreased due to the lower revenues and a change in product mix,
primarily resulting from lower margins on U.S. Government contracts. This
unfavorable impact was partially offset by the benefit on the 609 program from a
joint venture with an international partner and a lower level of product
development expense in 1998.
Under the joint venture agreement, Bell has received $100 million in cash
and its partner has assumed a significant portion of product development effort
for joint venture aircraft. The benefit from the joint venture contribution in
the fourth quarter 1998 ($10 million) has been recognized in relation to total
projected product development spending. The quarter also benefited by $7 million
for development spending that will be reimbursed by the venture partner.
1997 vs. 1996
The Aircraft segment's revenues and income increased $432 million (17%) and $52
million (20%), respectively, due primarily to higher results at Cessna Aircraft.
Bell Helicopter's revenues increased $27 million primarily as a result of higher
U.S. Government and commercial aircraft sales ($91 million) and higher revenues
on the Huey upgrade contract for the U.S. Marines ($28 million), partially
offset by lower revenues on the V-22 program ($80 million) and lower foreign
military sales ($23 million). Bell's commercial aircraft sales included the
completion of the three-year contract for model 412 helicopters with the
Canadian Forces. Its income increased slightly as a result of the higher
revenues, partially offset by higher product development expenses primarily
related to its new commercial aircraft models.
Cessna Aircraft's revenues increased $405 million as a result of higher sales of
business jets, including the Citation X and Bravo. Its income increased as a
result of the higher revenues, partially offset by an increased level of
expenses due to the introduction and support of new products.
[BAR CHART]
AUTOMOTIVE
REVENUES OPERATING INCOME
96 $1,627 6% 96 $146 8%
97 $2,127 31% 97 $150 3%
98 $2,405 13% 98 $179 19%
Automotive
1998 vs. 1997
The Automotive segment's revenues increased $278 million (13%), while income
before special charges increased $29 million (19%). The revenue increase was due
to higher volume at Kautex associated with capacity expansion in North America
and higher sales at the Trim operations, due primarily to increased Chrysler
production (which was depressed in 1997 by a strike at Chrysler in the second
quarter of 1997) and the contribution from acquisitions. These revenue increases
were partially offset by the impact of a strike at General Motors in 1998 and
the impact of customer price reductions. The increase in income reflected the
above factors and improved performance at Trim.
1997 vs. 1996
The Automotive segment's revenues increased $500 million (31%), primarily as a
result of the first quarter 1997 acquisition of Kautex, the third quarter 1997
acquisition of the General Rubber Goods division of Pirelli Tyres, Ltd., and the
1996 acquisitions of Valeo Wiper Systems and the remaining 50% of a joint
venture in Born, Netherlands. The benefit of the higher sales from the
acquisitions was partially offset by the unfavorable impact of a strike at a
Chrysler engine plant in the second quarter 1997 and the timing of replacement
business and new model launches. Income approximated last year's level,
reflecting the above factors, increased costs related to new model launches and
the impact of a restructuring effort which began in the second quarter 1997.
24 1998 TEXTRON ANNUAL REPORT
<PAGE>
[BAR CHART]
INDUSTRIAL
REVENUES OPERATING INCOME
96 $2,959 18% 96 $300 20%
97 $3,181 8% 97 $346 15%
98 $3,722 17% 98 $410 18%
Industrial
1998 vs. 1997
The Industrial segment's revenues and income before special charges increased
$541 million (17%) and $64 million (18%), respectively. These increases reflect
the contribution from acquisitions, primarily Ransomes, Ring Screw Works, David
Brown, Sukosim and Peiner, and internal growth combined with ongoing margin
improvement. Internal growth was driven by higher sales in the Golf and Turf and
Fluid & Power Systems businesses. These benefits were partially offset by the
divestitures of Speidel in the fourth quarter 1997 and Fuel Systems in the
second quarter 1998, the impact of a strike at General Motors on Textron
Fastening Systems and a one-month strike at a Textron Turf-Care & Specialty
Products plant in 1998. Margins, although slightly higher than last year, were
adversely impacted by the lower margins of acquisitions, the divestiture of
higher margin businesses and unfavorable contract adjustments related to certain
Industrial Component products.
1997 vs. 1996
The Industrial segment's revenues increased $222 million (8%). Income increased
$46 million (15%), reflecting higher sales from both acquisitions and organic
growth, and improved operating margins, principally in industrial components and
fastening systems. The revenue and income increases were due primarily to higher
sales in the fastening systems business ($143 million), including the second
quarter 1996 acquisition of Textron Industries S.A.S. In addition, results
benefited from the 1997 acquisitions of Maag Pump Systems, Maag Italia, S.p.A.,
and Burkland Holding, Inc., an increase in demand for aerospace components and
higher revenues on the sensor fuzed weapon contract, partially offset by the
third quarter 1996 divestiture of Textron Aerostructures and lower revenues in
marine and land systems products.
[BAR CHART]
FINANCE
REVENUES OPERATING INCOME
96 $327 5% 96 $96 9%
97 $350 7% 97 $108 13%
98 $367 5% 98 $113 5%
Finance
1998 vs. 1997
The Finance segment's revenues increased $17 million (5%), as a result of a
higher level of average receivables ($3.190 billion in 1998 vs. $3.128 billion
in 1997) and an increase in residual, prepayment and portfolio servicing income.
Income increased $5 million (5%) as the benefit of the higher revenues and a
lower provision for losses was partially offset by higher expenses related to
growth in managed receivables and growth in businesses with higher operating
expense ratios. Both years included a gain of approximately $3 million on the
securitization of Textron-related receivables.
1997 vs. 1996
The Finance Segment's revenues increased $23 million (7%), due to a higher
level of average receivables ($3.128 billion in 1997 vs. $3.036 billion in
1996) and increases in other income, due primarily to the securitization of $401
million of Textron-related receivables and increased syndication fee income.
Income increased $12 million (13%), due to the higher revenues and a lower
provision for loan losses related to the real estate portfolio, partially offset
by growth in businesses with higher operating expense ratios.
Special charges
To enhance the competitiveness and profitability of its core businesses, Textron
recorded a pretax charge of $87 million in the second quarter 1998 ($54 million
after-tax or $0.32 per diluted share). This charge was recorded to cover asset
impairments ($28 million), severance costs ($40 million), and other exit-related
costs ($9 million) associated with its decision to exit several small,
nonstrategic product lines in Automotive and the former Systems and Components
divisions which did not meet Textron's return criteria, and to realign certain
operations in the Industrial segment. The pretax charges associated with the
Automotive and Industrial segments were $25 million and $52 million,
respectively, and also included the cost of a litigation settlement of $10
million associated with the Aircraft segment.
1998 TEXTRON ANNUAL REPORT 25
<PAGE>
[DISCONTINUED OPERATIONS]
Discontinued Operations
In August 1998, Textron announced that it had reached an agreement to sell Avco
Financial Services (AFS) to Associates First Capital Corporation. The sale was
completed on January 6, 1999. AFS has been classified as a discontinued
operation for all periods.
1998 vs. 1997
Income from discontinued operations of $165 million was $21 million lower than
1997's income from discontinued operations of $186 million. The decrease was due
to (a) lower earnings in the U.S. Finance business as a result of an increase in
the provision for receivables (receivables increased in 1998 while receivables
decreased in 1997) and a decrease in the gain on sales of receivables, (b) lower
earnings in Hong Kong due to a weakening economy and (c) the unfavorable impact
of foreign exchange rates primarily in Australia and Canada. This unfavorable
impact was partially offset by an increase in insurance earnings due to improved
loss experience and an increase in capital gains.
1997 vs. 1996
Income from discontinued operations of $186 million was $6 million lower than
1996's income from discontinued operations of $192 million. The decrease
reflects first quarter 1996 income of $16 million related to Paul Revere which
was disposed of in early 1997. Income from Avco Financial Services increased $10
million reflecting the benefit from the gains on the sale of certain
underperforming branches, a higher level of finance receivables outstanding,
improved independent insurance operations, and a decrease in the average cost of
borrowed funds. These benefits were offset by an increase in the provision for
net credit losses, a decrease in the yields on finance receivables, and higher
operating expenses related to international expansion and the start-up of
centralized sales processing centers in the U.S. and Canada.
[LIQUIDITY & CAPITAL RESOURCES]
The liquidity and capital resources of Textron's (Textron or the Company)
operations are best understood by separately considering its independent
borrowing groups (Textron Manufacturing and Textron Finance). Textron
Manufacturing consists of Textron's manufacturing businesses, whose financial
results are a reflection of the ability to manage and finance the development,
production and delivery of tangible goods and services. Textron Finance business
involves commercial financing activities. Textron Finance's financial results
are a reflection of its ability to provide financial services in a competitive
marketplace, at the appropriate pricing, while managing the associated financial
risks. The fundamental differences between each borrowing group's activities
result in different measures used by investors, rating agencies and analysts.
Operating Cash Flows
Textron's financial position continued to be strong at the end of 1998. During
1998, cash flows from operations was the primary source of funds for operating
needs and capital expenditures of Textron Manufacturing. Operating activities
have generated increased cash flow in each of the past three years. The
Statement of Cash Flows for each borrowing group detailing the changes in cash
balances are on page 36. Textron Manufacturing's operating cash flow includes
dividends received from Textron Finance and from AFS which is a discontinued
operation. In addition, 1998 operating cash flow includes $100 million received
from a joint venture partner. Beginning in late 1997, the methodology used to
determine the amount of dividends to be paid to Textron Manufacturing changed
from payments based on a percentage of net income to payments based on Textron
Finance maintaining a leverage ratio of 6.5 to 1. Now that Textron's finance
operations no longer include consumer finance, this leverage ratio will be
re-evaluated in 1999.
Financing
Borrowings have historically been a secondary source of funds for Textron
Manufacturing and, along with the collection of finance receivables, are a
primary source of funds for Textron Finance. Both Textron Manufacturing and
Textron Finance have
26 1998 TEXTRON ANNUAL REPORT
<PAGE>
maintained debt levels considered consistent with maintaining investment grade
credit ratings. Both Textron Manufacturing and Textron Finance utilize a broad
base of financial sources for their respective liquidity and capital
requirements. The Company's strong credit ratings from Moody's and Standard &
Poor's provide flexibility in obtaining funds on competitive terms. The
Company's credit facilities are summarized on page 44. In addition, at the end
of 1998, Textron Manufacturing had $311 million available for the issuance of
unsecured debt securities under shelf-registration statements with the
Securities and Exchange Commission. Textron Finance has a medium-term note
facility of which $472 million was available at year-end 1998. The Company
believes that both borrowing groups, individually and in the aggregate, have
adequate credit facilities and have available access to capital markets to meet
their long-term financing needs.
Dispositions
Fuel Systems Textron was sold to Woodward Governor Company for $160 million in
cash in June 1998, at a pretax gain of $97 million ($54 million after-tax, or
$0.32 per diluted share).
In August of 1998, Textron announced that it had reached an agreement to
sell AFS to Associates First Capital Corporation for $3.9 billion. This
transaction closed on January 6, 1999. Net after-tax proceeds will approximate
$2.9 billion. Proceeds from the AFS disposition will have a significant
short-term impact on Textron's capital structure. Textron assessed the potential
incremental benefits that it could earn from investing the AFS proceeds (within
the Company's established investment policies) versus the interest cost
avoidance from the retirement of borrowings and determined that the latter
provided the greatest value to shareholders. Therefore, in early 1999, the
Company began to use the proceeds to repay long-term and short-term borrowings
of Textron Manufacturing, and Textron Finance commercial paper. Interest rate
swaps designated as hedges of retired borrowings were also terminated.
Ultimately, proceeds from the AFS disposition will be used to finance share
repurchases (including shares purchased in 1998 after the announcement of the
sale of AFS) and new acquisitions and borrowings will return to normalized
levels.
Uses of Capital
Cash flows from operations and borrowing capacity provide both borrowing groups
with the flexibility to actively manage acquisitions, dispositions and internal
investments in a changing environment. During the past three years, Textron
Manufacturing acquired 24 companies for an aggregate cost of $1.8 billion,
including notes issued for approximately $230 million. In addition,
approximately $390 million of debt was assumed as a result of these
acquisitions. The principal acquisitions in 1998 were the purchase of David
Brown Group PLC - a UK-based designer and manufacturer of industrial gears and
mechanical and hydraulic transmission systems, Ransomes PLC - a UK-based
manufacturer of commercial turf-care machinery, and Ring Screw Works - a
Michigan-based supplier of specialty threaded fasteners to the automotive
industry.
Capital spending increased in 1998 by approximately $100 million. This
increase was primarily used to expand aircraft and industrial capacity. 1999
capital spending is expected to increase from 1998, as a result of initiatives
to increase aircraft and automotive capacity and expanding Fluid & Power
capabilities.
In 1998, Textron repurchased 10.2 million shares of common stock under its
Board authorized share repurchase program. Textron's Board of Directors has
increased the cash dividend to shareholders by an average annual compound growth
rate of 13% since 1992. Textron's Board of Directors raised the dividend per
common share to $1.14 in 1998 from $1.00 in 1997. Because 1997 was a 53 week
fiscal year for Textron, the 1997 dividend payments amount includes five
payments as opposed to 1998 when three payments were paid. Dividend payments to
shareholders in 1998 amounted to $143 million, a decrease of $59 million from
1997.
FINANCIAL RISK MANAGEMENT
Interest Rate Risks
Textron's financial results are affected by changes in U.S. and foreign interest
rates. As part of managing this risk, the Company enters into interest rate
exchange agreements to convert certain variable-rate debt to long-term
fixed-rate debt and vice versa. The overall objective of Textron's interest
rate risk management is to achieve a prudent
1998 TEXTRON ANNUAL REPORT 27
<PAGE>
balance between floating and fixed-rate debt. The Company's mix of fixed and
floating rate debt is continuously monitored by management and is adjusted, as
necessary, based on evaluation of internal and external factors.
Prior to 1998, Textron Manufacturing has generally used these agreements to
alter the underlying interest rate and effective maturity of certain
variable-rate short-term borrowings (and their anticipated replacements) to that
of a fixed-rate debt instrument. By doing so, Textron Manufacturing has
effectively been able to obtain fixed-rate financing at a lower cost than had
fixed-rate debt instruments been issued. In the first quarter of 1998, Textron
Manufacturing terminated all of its outstanding fixed-pay interest rate exchange
agreements. The amortization of the termination premium increased reported
interest expense by $13 million. The difference between the rates Textron
Manufacturing received and the rates it paid on interest rate exchange
agreements did not significantly impact interest expense in 1998. Reported
interest expense was increased by $11 million in 1997 and $12 million in 1996.
In late 1998, Textron Manufacturing entered into $435 million of
variable-pay interest rate exchange agreements. These agreements were designated
as hedges of specific long-term fixed-rate debt. In connection with the
retirement of external borrowings discussed previously, $479 million of
variable-pay swaps were terminated in early 1999.
Textron Finance's strategy is to match interest-sensitive assets with
interest-sensitive liabilities to limit the Company's exposure to changes in
interest rates. As part of managing this matching strategy, Textron Finance
entered into interest rate exchange agreements. The difference between the
variable-rate Textron Finance received and the fixed rate it paid on interest
rate exchange agreements increased its reported interest expense by $2 million
in 1998; $1 million in 1997 and $3 million in 1996.
Foreign Exchange Risks and Euro Conversion
Textron's financial results are affected by changes in foreign currency
exchange rates or weak economic conditions in the foreign markets in which
products are manufactured and/or sold. Textron Manufacturing's primary currency
exposures are the German Mark, British Pound, Canadian Dollar and French Franc.
Textron Manufacturing manages its exposures to foreign currency assets and
earnings primarily by funding certain foreign currency denominated assets with
liabilities in the same currency and, as such, certain exposures are naturally
offset. In addition, as part of managing its foreign currency transaction
exposures, Textron enters into foreign currency forward exchange contracts.
These contracts are generally used to fix the local currency cost of purchased
goods or services or selling prices denominated in currencies other than the
functional currency.
During 1998, the notional amount of outstanding foreign exchange contracts
and currency swaps increased from approximately $524 million at the end of 1997
to $1.3 billion. The increase is attributable to international acquisitions that
have a high volume of cross-currency transactions, and an increased level of
foreign currency financing activity.
The recent devaluation of the Brazilian Real is expected to have a
relatively small impact on Textron because Textron's operations in Brazil are
not significant. The functional currency for Textron's Brazilian operations is
the Real. However, export sales to Brazil, which generally are denominated in
U.S. dollars, may decline in 1999, from 1998 levels.
Effective January 1, 1999, the European Economic and Monetary Union entered
into a three-year transition phase during which a common currency, the "euro"
will be introduced in participating countries. The legacy currencies will remain
legal tender for cash transactions between January 1, 1999 and January 1, 2002
at which time all legacy currencies will be withdrawn from circulation and the
new euro denominated bills and coins will be used for cash transactions. Textron
has operations within the eleven participating countries that will be utilizing
the euro as their local currency in 1999. Additionally, Textron's operations in
other European countries and elsewhere in the world will be conducting business
transactions with customers and suppliers that will be denominated in the euro.
The euro conversion is not expected to have a material impact on the company's
business.
28 1998 TEXTRON ANNUAL REPORT
<PAGE>
Quantitative Risk Measures
Textron has used a sensitivity analysis to quantify the market risk inherent in
its financial instruments. Financial instruments held by the Company that are
subject to market risk (interest rate risk and foreign exchange rate risk)
include finance receivables (excluding lease receivables), debt, interest rate
exchange agreements, foreign exchange contracts and currency swaps.
With AFS being treated as a discontinued operation in 1998, the number and
complexity of Textron's financial instruments has declined. As a result, Textron
has elected to disclose the sensitivity analysis quantitative risk measure as
opposed to the value-at-risk measure disclosed in the 1997 Annual Report. The
following table illustrates the hypothetical change in the fair value of the
Company's financial instruments at year-end assuming a 10% decrease in interest
rates and a 10% strengthening in exchange rates against the U.S. dollar. The
estimated fair value of the financial instruments were determined by discounted
cash flow analysis and by independent investment bankers. See Note 15 for
further information on determining fair value of financial instruments. This
sensitivity analysis is most likely not indicative of actual results in the
future.
<TABLE>
<CAPTION>
1998 1997
- ------------------------------------------------------------------------------------------------------------------
Hypothetical Hypothetical
Carrying Fair Change Carrying Fair Change
(In millions) Value Value In Fair Value Value Value In Fair Value
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INTEREST RATE RISK
Textron Manufacturing:
Debt $2,615 $2,706 $27 $1,221 $1,276 $35
Interest rate
exchange agreements - (11) (18) - 10 2
Textron Finance:
Finance receivables 2,774 2,837 28 2,280 2,334 20
Debt 2,829 2,836 12 2,365 2,380 9
Interest rate
exchange agreements - 1 1 - - 4
FOREIGN EXCHANGE RATE RISK
Textron Manufacturing:
Debt 319 334 33 393 393 39
Foreign exchange contracts - 9 (23) - 4 (9)
Currency swaps 14 10 84 (4) (4) -
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
OTHER MATTERS
Environmental
As with other industrial enterprises engaged in similar businesses, 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 $10 million, $10 million
and $12 million in 1998, 1997 and 1996, respectively. Textron currently projects
that expenditures for remediation will range between $10 million and $20 million
for each of the years 1999 and 2000.
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 believes that any changes to the accruals that may result from
these factors and uncertainties will not have a material effect on Textron's net
income or financial condition. Textron estimates that its accrued environmental
remediation liabilities will likely be paid over the next five to ten years.
1998 TEXTRON ANNUAL REPORT 29
<PAGE>
Year 2000 Readiness Disclosure
Introduction
Much of the world's computer hardware and software is not designed to process
date information after 1999. This is largely because computer programs have
historically used only two digits to identify the year in a date, but problems
related to processing of date information also may arise because some software
assigns special meaning to certain dates. This Year 2000 problem could, if
uncorrected, cause computers and other equipment used and manufactured by
Textron and Textron's suppliers and customers to fail to operate properly.
Year 2000 Program
In early 1997, Textron began a company-wide program (the "Program") to assess
the possible vulnerability of Textron to the Year 2000 problem and to minimize
the effect of the problem on Textron's operations. The Program is centrally
directed from the Year 2000 Program Office at Textron's corporate headquarters
and is executed at each Textron business unit. The Program addresses five "Major
Elements" at the corporate headquarters and each business unit:
Business Systems: management information systems and personal computer
applications, including the computing environments that support them.
Factory and Facilities Equipment: equipment that uses a computer to control
its operation either for producing an end-product or providing services.
End-Products: software products, delivered either alone or as a component
of another product, that are supplied to Textron customers.
Suppliers: assurance that those who sell goods and services to Textron will
not interrupt Textron operations due to the Year 2000 problem.
Customers: assurance that those who buy goods and services from Textron
will not interrupt Textron operations due to the Year 2000 problem.
For each of the Major Elements, the Program measures five "Readiness Levels":
Level I) Management has become aware of the issue. An inventory is
being taken of the items that the Year 2000 problem may
affect.
Level II) The inventory of Year 2000 items has been completed. The
priority of each item is being assessed. Actions are being
planned to assure that each item is ready for the Year 2000.
Resources are being committed to do the work.
Level III) Planning has been completed. The prescribed actions are
being performed, including testing to verify that the
actions are effective. Suppliers and customers are being
surveyed and their progress is being tracked.
Level IV) Items critical to operations have been remediated and have
been put in normal operation. Surveys of critical suppliers
and customers have been completed. Core business systems
continue to be tested. Follow-up checking of suppliers and
customers is in process. Contingency plans are being
prepared. Audits to verify readiness are being performed.
Remediation of items that are important to operations, but
not critical, is being performed.
Level V) Systems critical to operations have been tested. Audits and
associated corrective actions have been completed.
Contingency plans have been completed. Follow-up checking of
suppliers and customers has been completed. In all material
respects, Textron is ready for Year 2000.
Textron has substantially reached Readiness Level IV. Based on information
currently available, Textron estimates that it will achieve full Readiness Level
IV by June 30, 1999. Textron estimates that it will substantially reach
Readiness Level V by June 30, 1999, and achieve full Readiness Level V by
September 30, 1999. Textron intends to have a combination of independent parties
and Textron personnel complete an assessment of the implementation of the
Program at the corporate headquarters and each business unit by March 31, 1999.
30 1998 TEXTRON ANNUAL REPORT
<PAGE>
The Readiness Level of the Major Elements Items that have been inventoried
as of December 1, 1998, is shown in the following table. Major Element
inventories are under continuous review, and additional items may be identified
in the future. For the Major Elements of "Suppliers" and "Customers" the
indicated Readiness Level refers to Textron's progress in reviewing the
readiness of customers and suppliers, and not to Textron's assessment of their
readiness.
<TABLE>
<CAPTION>
MAJOR ELEMENT PERCENT OF IDENTIFIED MAJOR ELEMENT ITEMS AT READINESS LEVEL
II III IV V
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Business Systems 4% 18% 39% 39%
Factory and Facilities Equipment 3% 15% 40% 42%
End-Products 0% 1% 1% 98%
Suppliers 3% 55% 37% 5%
Customers 20% 52% 12% 1%
- ------------------------------------------------------------------------------------------
</TABLE>
Year 2000 Costs
The total cost of the Year 2000 Program for continuing operations is estimated
to be approximately $117 million. Approximately $62 million is for modifications
to existing items and other program expenses and $55 million is for replacement
systems which have been or are expected to be capitalized in accordance with
Company policy. Through December 31, 1998, total expenditures were $79 million.
The estimated future cost to complete the Program is expected to be
approximately $38 million including approximately $15 million for replacement
systems. Funds for the Program are provided from special project appropriations
totaling approximately $24 million and from normal operating and
capital budgets. The Year 2000 Program has delayed certain other
Textron information management projects. Delay of these projects
is not expected to have an adverse impact on Textron.
Risks and Contingency Plans
Year 2000 issues have the potential, if not remediated, to severely disrupt
Textron's business operations and to adversely affect Textron's financial
condition. The Year 2000 Program is expected to significantly reduce Textron's
exposure to these issues, particularly with respect to Textron's Business
Systems, Factory and Facilities Equipment, and End-Products. However, it is
possible that unanticipated problems may arise in the course of Textron's
implementation of the Year 2000 Program. In addition, while monitoring of Year
2000 readiness by Textron's suppliers and customers is a major part of the Year
2000 Program, Textron has very limited ability to ensure Year 2000 readiness by
such parties. Textron could also be affected by failure of government agencies,
in the U.S. and elsewhere, to maintain governmental services that are essential
to Textron's operations. Textron cannot identify all possible worst case Year
2000 scenarios. However, the most reasonably likely worst case scenario would be
the inability of third parties, including utilities, to deliver supplies and
services that are critical to Textron's operations and that could not quickly be
replaced by other suppliers or internally. In such a situation, operations at
the affected Textron facilities could be interrupted, with adverse effects on
Textron's financial results.
Textron is developing contingency plans to cover situations in which Year
2000 problems arise despite Textron's efforts. Such plans are expected to be
substantially ready by June 30, 1999.
Forward-looking statements contained in this report relating to Year 2000
issues, including expectations of readiness, possible effects on Textron and
similar matters, are subject to the risks described in this section.
Backlog
Textron's commercial backlog was $5.6 billion and $4.1 billion at the end of
1998 and 1997, respectively, and U.S. Government backlog was $2.1 billion at the
end of 1998 and $2.2 billion at the end of 1997. Backlog for the Aircraft
segment was approximately 78% and 79% of Textron's commercial backlog at the end
of 1998 and 1997, respectively, and 73% and 71% of Textron's U.S. Government
backlog at the end of 1998 and 1997, respectively.
1998 TEXTRON ANNUAL REPORT 31
<PAGE>
Foreign Military Sales
Certain company products are sold through the Department of Defense's Foreign
Military Sales Program. In addition, Textron sells directly to select foreign
military organizations. Sales under these programs totaled approximately 1.6% of
Textron's consolidated revenues in 1998 (0.3% in the case of foreign military
sales, and 1.3% in the case of direct sales) and 4.1% in 1997 (0.8% and 3.3%,
respectively). Such sales include military and commercial helicopters, armored
vehicles, turrets, and spare parts, and in 1998, were made primarily to the
countries of Thailand 26%, Venezuela 21%, Taiwan 15%, Colombia 6%, Ecuador 4%,
Germany 3%, South Africa 3%, Turkey 3%, Canada 3%, Israel 2%, and Japan 2%. All
sales are made in full compliance with all applicable laws and in accordance
with Textron's code of conduct.
New Accounting Pronouncements
In March 1998, the Accounting Standards Executive Committee issued Statement of
Position 98-1, "Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use." SOP 98-1 requires that companies capitalize certain
internal-use software once certain criteria are met. This statement is effective
for financial statements of fiscal years beginning after December 15, 1998.
In April 1998, the Accounting Standards Executive Committee issued
Statement of Position 98-5, "Reporting on the Costs of Start-Up Activities." SOP
98-5 will require all costs of start-up activities, including organization
costs, to be expensed as incurred. This statement is effective for financial
statements of fiscal years beginning after December 15, 1998.
In June 1998, the Financial Accounting Standards Board issued FAS 133,
"Accounting for Derivative Instruments and Hedging Activities." FAS 133 requires
an entity to recognize all derivatives as either assets or liabilities and
measure those instruments at fair value. This statement is effective for fiscal
years beginning after June 15, 1999.
Textron is evaluating the potential impact of these pronouncements on
future reporting.
* * * * *
Forward-looking Information: Certain statements in this Report, and other oral
and written statements made by Textron from time to time, are forward-looking
statements, including those that discuss strategies, goals, outlook or other
non-historical matters; or project revenues, income, returns or other financial
measures. These forward-looking statements are subject to risks and
uncertainties that may cause actual results to differ materially from those
contained in the statements, including the following: (a) the extent which
Textron is able to successfully integrate acquisitions, (b) changes in worldwide
economic and political conditions and associated impact on interest and foreign
exchange rates, (c) the occurrence of work stoppages and strikes at key
facilities of Textron or Textron's customers or suppliers, (d) the extent to
which the Company is able to successfully develop, introduce, and launch new
products and enter new markets, (e) the level of government funding for Textron
products and (f) Textron's ability to complete Year 2000 conversion without
unexpected complications and the ability of its suppliers and customers to
successfully modify their own programs. For the Aircraft Segment: (a) the timing
of certifications of new aircraft products and (b) the occurrence of a severe
downturn in the U.S. economy that discourages businesses from purchasing
business jets. For the Automotive Segment: (a) the level of consumer demand for
the vehicle models for which Textron supplies parts to automotive original
equipment manufacturers ("OEM's") and (b) the ability to offset, through cost
reductions, pricing pressure brought by automotive OEM customers. For the
Industrial Segment: the ability of Textron Fastening Systems to offset, through
cost reductions, pricing pressure brought by automotive OEM customers. For the
Finance Segment: (a) the level of sales of Textron products for which TFC offers
financing and (b) the ability of TFC to maintain credit quality and control
costs when entering new markets.
32 1998 TEXTRON ANNUAL REPORT
<PAGE>
REPORT OF Management is responsible for the integrity and objectivity of
MANAGEMENT the financial data presented in this Annual Report. The
consolidated financial statements have been prepared in
conformity with generally accepted accounting principles and
include amounts based on Management's best estimates and
judgments. The independent auditors, Ernst & Young LLP, have
audited the consolidated financial statements and have
considered the internal control structure to the extent they
believed necessary to support their report, which appears
below.
We conduct our business in accordance with the standards
outlined in the Textron Business Conduct Guidelines which is
communicated to all employees. Honesty, integrity and high
ethical standards are the core values of how we conduct
business. Every Textron division prepares and carries out an
annual Compliance Plan to ensure these values and standards
are maintained. Our internal control structure is designed to
provide reasonable assurance, at appropriate cost, that assets
are safeguarded and that transactions are properly executed
and recorded. The internal control structure includes, among
other things, established policies and procedures, an internal
audit function, and the selection and training of qualified
personnel. Textron financial managers are responsible for
implementing effective internal control systems and monitoring
their effectiveness, as well as developing and executing an
annual internal control plan.
The Audit Committee of our Board of Directors, on behalf of
the shareholders, oversees management's financial reporting
responsibilities. The Audit Committee, comprised of five
directors who are not officers or employees of the Company,
meets regularly with the independent auditors, management and
our internal auditors to review matters relating to financial
reporting, internal accounting controls and auditing. Both the
independent auditors and the internal auditors have free and
full access to senior management and the Audit Committee.
/s/ Lewis B. Campbell
Lewis B. Campbell
Chairman and
Chief Executive Officer
/s/ Stephen L. Key
Stephen L. Key
Executive Vice President and Chief Financial Officer
January 26, 1999
- -------------------------------------------------------------------------------
REPORT OF To the Board of Directors and Shareholders
INDEPENDENT Textron Inc.
AUDITORS
We have audited the accompanying consolidated balance sheets
of Textron Inc. as of January 2, 1999 and January 3, 1998, and
the related consolidated statements of income, cash flows and
changes in shareholders' equity for each of the three years in
the period ended January 2, 1999. 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 consolidated financial statements referred
to above present fairly, in all material respects, the
consolidated financial position of Textron Inc. at January 2,
1999 and January 3, 1998, and the consolidated results of its
operations and its cash flows for each of the three years in
the period ended January 2, 1999, in conformity with generally
accepted accounting principles.
/s/ Ernst & Young LLP
Boston, Massachusetts
January 26, 1999
1998 Textron Annual Report 33
<PAGE>
CONSOLIDATED STATEMENT OF INCOME
For each of the three years in the period ended January 2, 1999
(In millions except per share amounts)
<TABLE>
<CAPTION>
1998 1997 1996
-----------------------------------
<S> <C> <C> <C>
TEXTRON MANUFACTURING
Revenues $9,316 $8,333 7,179
COSTS AND EXPENSES
Cost of sales 7,572 6,836 5,837
Selling and administrative 944 828 750
Gain on sale of division (97) - -
Special charges 87 - -
Interest 160 129 148
---------------------------------------------------------------------------------------------------------------------------------
Total costs and expenses 8,666 7,793 6,735
---------------------------------------------------------------------------------------------------------------------------------
Manufacturing income 650 540 444
---------------------------------------------------------------------------------------------------------------------------------
TEXTRON FINANCE
Revenues 367 350 327
COSTS AND EXPENSES
Selling and administrative 79 66 58
Interest 155 153 147
Provision for losses on collection of finance receivables 20 23 26
----------------------------------------------------------------------------------------------------------------------------------
Total costs and expenses 254 242 231
----------------------------------------------------------------------------------------------------------------------------------
Finance income 113 108 96
---------------------------------------------------------------------------------------------------------------------------------
TOTAL COMPANY
Income from continuing operations before income taxes and distributions
on preferred securities of subsidiary trust 763 648 540
Income taxes (294) (250) (211)
Distributions on preferred securities of subsidiary trust, net of income taxes (26) (26) (23)
----------------------------------------------------------------------------------------------------------------------------------
Income from continuing operations 443 372 306
Discontinued operations, net of income taxes:
Income from operations 165 186 192
Loss on disposal - - (245)
----------------------------------------------------------------------------------------------------------------------------------
165 186 (53)
----------------------------------------------------------------------------------------------------------------------------------
NET INCOME $ 608 $ 558 $ 253
==================================================================================================================================
PER COMMON SHARE:
BASIC:
INCOME FROM CONTINUING OPERATIONS $ 2.74 $ 2.25 $ 1.82
Discontinued operations 1.03 1.13 (.31)
----------------------------------------------------------------------------------------------------------------------------------
NET INCOME $ 3.77 $ 3.38 $ 1.51
==================================================================================================================================
DILUTED:
INCOME FROM CONTINUING OPERATIONS $ 2.68 $ 2.19 $ 1.78
Discontinued operations 1.00 1.10 (.31)
----------------------------------------------------------------------------------------------------------------------------------
NET INCOME $ 3.68 $ 3.29 $ 1.47
==================================================================================================================================
</TABLE>
See notes to the consolidated financial statements.
34 1998 TEXTRON ANNUAL REPORT
<PAGE>
Balance Sheet
As of January 2, 1999 and January 3, 1998
<TABLE>
<CAPTION>
(Dollars in millions) 1998 1997
-----------------------
<S> <C> <C>
ASSETS
TEXTRON MANUFACTURING
Cash $ 31 30
Commercial and U.S. government receivables - net 1,160 920
Inventories 1,640 1,349
Investment in discontinued operations 1,176 1,214
Other current assets 348 185
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 4,355 3,698
- -----------------------------------------------------------------------------------------------------------------------------------
Property, plant, and equipment - net 2,185 1,761
Goodwill - net 2,119 1,567
Other assets 1,277 1,126
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL TEXTRON MANUFACTURING ASSETS 9,936 8,152
- -----------------------------------------------------------------------------------------------------------------------------------
TEXTRON FINANCE
Cash 22 13
Finance receivables - net 3,528 2,992
Other assets 235 173
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL TEXTRON FINANCE ASSETS 3,785 3,178
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $13,721 $11,330
===================================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
TEXTRON MANUFACTURING
Current portion of long-term debt and short-term debt $ 1,735 $ 476
Accounts payable 1,010 812
Accrued liabilities 1,174 853
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 3,919 2,141
- -----------------------------------------------------------------------------------------------------------------------------------
Accrued postretirement benefits other than pensions 762 766
Other liabilities 1,367 1,195
Long-term debt 880 745
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL TEXTRON MANUFACTURING LIABILITIES 6,928 4,847
- -----------------------------------------------------------------------------------------------------------------------------------
TEXTRON FINANCE
Other liabilities 162 88
Deferred income taxes 322 319
Debt 2,829 2,365
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL TEXTRON FINANCE LIABILITIES 3,313 2,772
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 10,241 7,619
- -----------------------------------------------------------------------------------------------------------------------------------
TEXTRON - OBLIGATED MANDATORILY REDEEMABLE PREFERRED SECURITIES OF SUBSIDIARY TRUST
HOLDING SOLELY TEXTRON JUNIOR SUBORDINATED DEBT SECURITIES 483 483
SHAREHOLDERS' EQUITY
Capital stock:
Preferred stock:
$2.08 Cumulative Convertible Preferred Stock, Series A (liquidation value - $12) 6 6
$1.40 Convertible Preferred Dividend Stock, Series B (preferred only as to dividends) 7 7
Common stock (193,277,000 and 190,689,000 shares issued) 24 24
Capital surplus 931 830
Retained earnings 3,786 3,362
Accumulated other comprehensive income (loss) (96) (62)
- -----------------------------------------------------------------------------------------------------------------------------------
4,658 4,167
Less cost of treasury shares 1,661 939
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY 2,997 3,228
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $13,721 $11,330
===================================================================================================================================
See notes to the consolidated financial statements. 1998 TEXTRON ANNUAL REPORT 35
</TABLE>
<PAGE>STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
For each of the three years in the period
ended January 2, 1999 Consolidated TEXTRON MANUFACTURING* TEXTRON FINANCE
(In millions) ------------------------------------------------------------------------
1998 1997 1996 1998 1997 1996 1998 1997 1996
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income from continuing operations $443 $372 $306 $443 $372 $306 $70 $68 $58
Adjustments to reconcile income from continuing
operations to net cash provided by operating
activities:
Earnings of Textron Finance (greater than)
less than distributions -- -- -- (8) 6 (30) -- -- --
Dividends received from discontinued
operations 187 108 95 187 108 95 -- -- --
Depreciation 292 254 213 282 243 202 10 11 11
Amortization 69 56 54 66 56 54 3 -- --
Provision for losses on receivables 21 25 29 1 2 3 20 23 26
Gain on sale of division,
net of income taxes (54) -- -- (54) -- -- -- -- --
Special charges 87 -- -- 87 -- -- -- -- --
Deferred income taxes (16) 68 15 (18) 61 6 2 7 9
Changes in assets and liabilities
excluding those related to acquisitions
and divestitures:
Decrease (increase) in commercial and
U.S. government receivables (116) 44 (33) (116) 44 (33) -- -- --
(Increase) in inventories (157) (89) (33) (157) (89) (33) -- -- --
Decrease (increase) in other assets (111) (67) (110) (130) (54) (123) 8 (1) 4
Increase (decrease) in accounts payable 46 74 62 21 70 66 37 (12) 3
Increase (decrease) in accrued liabilities 262 (103) 74 245 (99) 70 17 (4) 2
Other - net 8 1 (16) 18 8 (7) (10) (7) (8)
- ---------------------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 961 743 656 867 728 576 157 85 105
- ---------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of investments -- -- (5) -- -- (5) -- -- --
Proceeds from disposition of investments -- 251 6 -- 251 6 -- -- --
Finance receivables:
Originated or purchased (4,069) (2,712) (2,287) -- -- -- (4,069) (2,712) (2,287)
Repaid or sold 3,459 2,441 2,088 -- -- -- 3,459 2,444 2,091
Proceeds on sales of securitized assets 260 373 -- -- -- -- 260 373 --
Cash used in acquisitions (956) (364) (216) (753) (364) (216) (203) -- --
Cash flows related to disposition of businesses 117 549 180 117 549 180 -- -- --
Capital expenditures (475) (374) (312) (462) (366) (309) (13) (8) (3)
Other investing activities - net 22 48 24 37 35 28 (16) 14 (3)
- ----------------------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES (1,642) 212 (522) (1,061) 105 (316) (582) 111 (202)
- ----------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in short-term debt 1,571 (425) (85) 1,220 (484) (90) 351 59 5
Proceeds from issuance of long-term debt 438 401 345 8 201 -- 430 200 345
Principal payments on long-term debt (534) (427) (499) (190) (52) (279) (344) (375) (220)
Issuance of Textron - obligated mandatorily
redeemable preferred securities of subsidiary
trust holding solely Textron junior
subordinated debt securities -- -- 483 -- -- 483 -- -- --
Proceeds from exercise of stock options 71 38 42 71 38 42 -- -- --
Purchases of Textron common stock (712) (299) (266) (712) (299) (266) -- -- --
Purchases of Textron common stock from Paul Revere -- (29) (34) -- (29) (34) -- -- --
Dividends paid (143) (202) (148) (143) (202) (148) -- -- --
Dividends paid to Textron Manufacturing -- -- -- -- -- -- (62) (74) (29)
Capital contributions to Textron Finance -- -- -- (59) -- -- 59 -- --
- ----------------------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES 691 (943) (162) 195 (827) (292) 434 (190) 101
- ----------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH 10 12 (28) 1 6 (32) 9 6 4
Cash at beginning of year 43 31 59 30 24 56 13 7 3
- ----------------------------------------------------------------------------------------------------------------------------------
Cash at end of year $53 $43 $31 $31 $30 $24 $22 $13 $7
==================================================================================================================================
SUPPLEMENTAL INFORMATION:
Cash paid during the year for interest $345 $293 $289 $192 $140 $140 $153 $153 $149
Cash paid during the year for income taxes 260 156 167 230 112 142 30 44 25
==================================================================================================================================
</TABLE>
* "Textron Manufacturing" income from continuing operations includes income from
all entities of Textron (primarily manufacturing) other than its commercial
finance subsidiary (TFC) and the pretax income from "Textron Finance." Textron
Finance consists of Textron's wholly-owned commercial finance subsidiary, TFC.
All significant transactions between Textron Manufacturing and Textron Finance
have been eliminated from the "Consolidated" column. The principles of
consolidation are described in Note 1 to the consolidated financial statements.
36 1998 TEXTRON ANNUAL REPORT
<PAGE>
Electronic copy intentionally left blank.
1998 TEXTRON ANNUAL REPORT 37
<PAGE>
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
For each of the three years in the period ended January 2, 1999
<TABLE>
<CAPTION>
Shares outstanding* Dollars
(In thousands) (In millions)
--------------------------------------------------------------------------
1998 1997 1996 1998 1997 1996
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$2.08 PREFERRED STOCK
Beginning balance 201 243 267 $ 6 $ 7 $ 8
Conversion to common stock (23) (42) (24) - (1) (1)
- ----------------------------------------------------------------------------------------------------------------------------------
Ending balance 178 201 243 $ 6 $ 6 $ 7
==================================================================================================================================
$1.40 PREFERRED STOCK
Beginning balance 92 107 118 $ 7 $ 7 $ 7
Conversion to common stock (6) (15) (11) - - -
- ----------------------------------------------------------------------------------------------------------------------------------
Ending balance 86 92 107 $ 7 $ 7 $ 7
==================================================================================================================================
COMMON STOCK
Beginning balance 162,343 82,809 84,935 $ 24 $ 12 $ 12
Purchases (10,189) (4,121) (3,193) - - -
Stock dividend declared - 82,397 - - 12 -
Conversion of preferred stock to
common stock 123 166 71 - - -
Exercise of stock options 2,465 1,066 923 - - -
Other issuances of common stock - 26 73 - - -
- ----------------------------------------------------------------------------------------------------------------------------------
Ending balance 154,742 162,343 82,809 $ 24 $ 24 $ 12
==================================================================================================================================
CAPITAL SURPLUS
Beginning balance $ 830 $ 793 $ 750
Conversion of preferred stock to common stock 1 1 1
Exercise of stock options and other issuances 100 48 48
Stock dividend declared - (12) -
Purchases of common stock - - (6)
- ----------------------------------------------------------------------------------------------------------------------------------
Ending balance $ 931 $ 830 $ 793
- ----------------------------------------------------------------------------------------------------------------------------------
RETAINED EARNINGS
Beginning balance $3,362 $2,969 $ 2,864
Net income 608 558 253
Dividends declared:
Preferred stock (1) (1) (1)
Common stock (per share: $1.14 in 1998;
$1.00 in 1997; and $.88 in 1996) (183) (164) (147)
- ----------------------------------------------------------------------------------------------------------------------------------
Ending balance $3,786 $3,362 $ 2,969
==================================================================================================================================
TREASURY STOCK
Beginning balance $ 939 $ 612 $ 358
Purchases of common stock 722 328 259
Issuance of common stock - (1) (5)
- ----------------------------------------------------------------------------------------------------------------------------------
Ending balance $1,661 $ 939 $ 612
==================================================================================================================================
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
Beginning balance $ (62) $ 7 $ 129
Currency translation adjustment (33) (73) 35
Securities valuation adjustment - 4 (155)
Pension liability adjustment (1) - (2)
Other comprehensive income (loss) (34) (69) (122)
- ----------------------------------------------------------------------------------------------------------------------------------
Ending balance $ (96) $ (62) $ 7
- ----------------------------------------------------------------------------------------------------------------------------------
COMPREHENSIVE INCOME
Net income $ 608 $ 558 $ 253
Other comprehensive income (loss) (34) (69) (122)
- ----------------------------------------------------------------------------------------------------------------------------------
Comprehensive income $ 574 $ 489 $ 131
==================================================================================================================================
</TABLE>
*Shares issued at the end of 1998, 1997, 1996, and 1995 were as follows (in
thousands): $2.08 Preferred - 247; 270; 312; and 336 shares, respectively;
$1.40 Preferred - 573; 579; 594; and 604 shares, respectively; Common -
193,277; 190,689; 94,456; and 93,462 shares, respectively.
See notes to consolidated financial statements.
38 1998 TEXTRON ANNUAL REPORT
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. FINANCIAL SUMMARY oF SIGNIFICANT ACCOUNTING POLICIES
STATEMENT
PRESENTATION SIGNIFICANT ACCOUNTING POLICIES APPEAR IN CAPITAL
LETTERS AS AN INTEGRAL PART OF THE NOTES TO THE
FINANCIAL STATEMENTS TO WHICH THE POLICIES RELATE.
Nature of Operations and Principles of Consolidation
Textron is a global multi-industry company with
manufacturing and finance operations. Its principal
markets (listed within segments in order of the
amount of 1998 revenues) and the major locations of
such markets are as follows:
<TABLE>
<CAPTION>
Segment Principal markets Major locations
=========================================================================================================
<S> <C> <C>
Aircraft * Business jets * North America
* Commercial and military helicopters * 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, aerospace, * North America
other OEMs, distributors, and consumers * Western Europe
* Golf and turf-care products: golf courses, resort communities, * Asia/Pacific
and commercial and industrial users * South America
* Industrial components: commercial aerospace and defense
* Fluid and power systems: original equipment manufacturers,
distributors, and end-users of a wide variety of products
---------------------------------------------------------------------------------------------------------
Finance * Commercial loans and leases * North America
---------------------------------------------------------------------------------------------------------
</TABLE>
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 1996 and
Avco Financial Services is reflected as a
discontinued operation for all periods presented.
Textron consists of two borrowing groups -
Textron Parent Company Borrowing Group (Textron
Manufacturing) and Textron's finance subsidiary
(Textron Finance). Textron Manufacturing consists of
all entities of Textron (primarily manufacturing)
other than its wholly-owned commercial finance
subsidiary. Textron Finance consists of Textron
Financial Corporation (TFC).
The preparation of these financial statements in
conformity with generally accepted accounting
principles requires management to make estimates and
assumptions that affect these statements and
accompanying notes. Some of the more significant
estimates include inventory valuation, residual
values of leased assets, allowance for losses on
finance receivables, product liability, workers
compensation, environmental, and warranty reserves,
and amounts reported under long-term contracts.
Management's estimates are based on the facts and
circumstances available at the time estimates are
made, past historical experience, risk of loss,
general economic conditions and trends, and
management's assessments of the probable future
outcome of these matters. Consequently, actual
results could differ from such estimates.
2.ACQUISITIONS AND Acquisitions
DISPOSITIONS
During 1998, Textron acquired the following
companies: (a) Ransomes PLC - a UK-based manufacturer
of commercial turf-care machinery; (b) Sukosim - a
German-based fastener manufacturer, (c) Peiner - a
German-based fastener company; (d) Ring Screw Works -
a Michigan-based supplier of specialty threaded
fasteners to the automotive industry; (e) Datacom
Technologies - a Washington-based manufacturer of
cable test instruments, (f) Midland Industrial
Plastics - a UK-based manufacturer of automotive
interior and exterior trim, (g) David Brown Group PLC
- a UK-based designer and manufacturer of industrial
gears and mechanical and hydraulic transmission
systems, (h) Systran - an Oregon factoring company
and (i) Business Leasing Group, a division of
NationsCredit Commercial Corporation, specializing in
vendor finance. The total cost of these acquisitions
was approximately $1.1 billion, including notes
issued for approximately $160 million. In addition,
approximately $190 million of debt was assumed as a
result of these acquisitions.
1998 TEXTRON ANNUAL REPORT 39
<PAGE>
In 1997, Textron acquired Germany-based Kautex
Group, a worldwide supplier of blow-molded plastic
fuel tanks and other automotive components and
systems for approximately $350 million, which
includes the assumption of debt. In addition, Textron
acquired Brazil-based Brazaco Mapri Industrias,
S.A.S., South America's leading maker of fasteners
for a purchase price of $70 million paid in the first
quarter of 1998. Smaller acquisitions made in 1997
aggregated approximately $70 million.
In 1996, Textron acquired Valois Industries
(renamed Textron Industries, S.A.S.), a France-based
manufacturer of engineered fastening systems for
approximately $240 million, which includes the
assumption of debt. Other acquisitions made in 1996
aggregated approximately $130 million.
The acquisitions were accounted for as purchases
and accordingly, the results of operations of each
acquired company are included in the statement of
income from the date of acquisition.
Dispositions
On August 11, 1998, Textron announced that it had
reached an agreement to sell Avco Financial Services
(AFS) to Associates First Capital Corporation for
$3.9 billion in cash. The sale was completed on
January 6, 1999. Net after-tax proceeds will
approximate $2.9 billion. Textron has restated its
financial statements as presented herein to treat AFS
as a discontinued operation.
The operating results of AFS are summarized
below:
<TABLE>
<CAPTION>
For Each of The Three Years Ended December 31,
(In millions) 1998 1997 1996
-----------------------------------------------------
<S> <C> <C> <C>
Revenues $1,866 $1,851 $1,758
Costs and expenses 1,600 1,550 1,471
-----------------------------------------------------
Income before taxes 266 301 287
Income taxes (101) (115) (112)
-----------------------------------------------------
Net income $ 165 $ 186 $ 175
=====================================================
</TABLE>
Presented below is a summary of AFS' financial
position at December 31, 1998 and 1997:
<TABLE>
<CAPTION>
(In millions) 1998 1997
-----------------------------------------------------
<S> <C> <C>
ASSETS
Investments $ 914 $ 844
Finance receivables - net 7,678 7,234
Other assets 706 654
-----------------------------------------------------
Total assets $9,298 $8,732
=====================================================
LIABILITIES
Accounts payable $ 129 $ 123
Other liabilities 418 485
Debt 7,575 6,910
-----------------------------------------------------
Total liabilities 8,122 7,518
-----------------------------------------------------
Equity:
Common stock 1 1
Capital surplus 763 747
Retained earnings 478 509
Other (66) (43)
-----------------------------------------------------
Total equity 1,176 1,214
-----------------------------------------------------
Total liabilities and equity $9,298 $8,732
=====================================================
</TABLE>
Fuel Systems Textron was sold to Woodward
Governor Company for $160 million in cash in June
1998, at a pretax gain of $97 million ($54 million
after-tax). In 1997, Textron completed the sale of
its 83.3% owned subsidiary, the Paul Revere
Corporation to Provident Companies, Inc. Net proceeds
to Textron after adjustments and contingent payments
were approximately $800 million (which included the
value of shares of Provident common stock
subsequently sold for $245 million). In 1996, Textron
sold, for no gain or loss, its Aerostructures
division for $180 million in cash plus a subordinated
note.
40 1998 TEXTRON ANNUAL REPORT
<PAGE>
3.FINANCE
RECEIVABLES INTEREST INCOME IS RECOGNIZED IN REVENUES USING
THE INTEREST METHOD. DIRECT LOAN ORIGINATION COSTS
AND FEES RECEIVED ARE DEFERRED AND AMORTIZED OVER THE
LOANS' CONTRACTUAL LIVES. THE ACCRUAL OF INTEREST
INCOME IS SUSPENDED FOR ACCOUNTS WHICH ARE
CONTRACTUALLY DELINQUENT BY MORE THAN THREE MONTHS.
ACCRUAL OF INTEREST ON COMMERCIAL LOANS RESUMES AND
SUSPENDED INTEREST INCOME IS RECOGNIZED WHEN LOANS
BECOME CONTRACTUALLY CURRENT.
FINANCE RECEIVABLES ARE WRITTEN-OFF WHEN THEY
ARE DETERMINED TO BE UNCOLLECTIBLE. FINANCE
RECEIVABLES 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.
Commercial installment contracts have
initial terms ranging from one to 12 years.
Commercial real estate abd golf course mortgages have
initial terms ranging from three to seven years.
Finance leases have initial terms up to 12 years.
Leveraged leases have initial terms up to
approximately 30 years. Floorplan and revolving
receivables generally mature within one year. At the
end of 1998 and 1997, Textron had nonaccrual loans
and leases totaling $70 million and $86 million,
respectively. Approximately, $46 million and $64
million of these respective amounts were considered
impaired, which excludes finance leases and
homogeneous loan portfolios. The allowance for losses
on receivables related to impaired loans was $15
million and $14 million at the end of 1998 and 1997.
The average recorded investment in impaired loans
during 1998 and 1997 were $51 million and $68
million, respectively. The percentage of net
write-offs to average finance receivables was 0.5% in
1998, 0.6% in 1997 and 0.9% in 1996.
The following table 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 $3.5 billion and $2.3 billion in 1998
and 1997, respectively. In the same periods, the
ratio of cash collections to average net receivables
was approximately 108% and 76%, respectively.
<TABLE>
<CAPTION>
FINANCE RECEIVABLES
CONTRACTUAL MATURITIES LESS OUTSTANDING
----------------------FINANCE-------------------
(In millions) 1999 2000 After 2000 CHARGES 1998 1997
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Installment contracts $ 375 $272 $894 $202 $1,339 $1,141
Floorplan receivables 437 105 31 1 572 409
Revolving loans 378 21 161 4 556 452
Finance leases 134 119 264 93 424 392
Real estate and golf course
mortgages 42 66 269 2 375 345
Leveraged leases 18 25 586 283 346 330
------------------------------------------------------------------------------
$1,384 $608 $2,205 $585 3,612 3,069
=============================================================================
Less allowance for credit losses 84 77
-----------------
$3,528 $2,992
=============================================================================
The net investment in finance leases and leveraged leases were as follows:
(In millions) 1998 1997
Finance and leveraged lease receivables $ 590 $ 537
Estimated residual values on equipment and assets 559 556
------------------------------------------------------------------------------
1,149 1,093
------------------------------------------------------------------------------
Unearned income (379) (371)
------------------------------------------------------------------------------
Investment in leases 770 722
------------------------------------------------------------------------------
Deferred income taxes arising from leveraged leases (256) (256)
------------------------------------------------------------------------------
Net investment in leases $ 514 $ 466
=============================================================================
</TABLE>
1998 TEXTRON ANNUAL REPORT 41
<PAGE>
The activity in the allowance for losses on finance
receivables is as follows:
<TABLE>
<CAPTION>
(In millions) 1998 1997 1996
-----------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at the beginning of the year $77 $75 $75
Provision for losses 18 21 27
Charge-offs (21) (25) (30)
Recoveries 5 6 3
Acquisitions 5 - -
-----------------------------------------------------------------------------
Balance at the end of the year $84 $77 $75
=============================================================================
</TABLE>
Textron had both fixed-rate and variable-rate loan
commitments totaling $432 million at year-end 1998 . Because
interest rates on these commitments are not set until the
loans are funded, Textron is not exposed to interest rate
changes.
A portion of TFC's business involves financing the sale
and lease of Textron products. In 1998, 1997, and 1996 , TFC
paid Textron $980 million, $736 million, and $663 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 1998, finance receivables and operating lease
equipment of $540 million and $77 million, respectively,
($519 million and $77 million, respectively, at year-end
1997) were due from Textron or subject to recourse to
Textron.
Textron Finance manages finance receivables for a
variety of investors, participants and third party portfolio
owners. The total managed finance receivable portfolio,
including owned finance receivables, was $4,509 million and
$3,829 million, respectively for 1998 and 1997.
Textron Finance's finance receivables are diversified
geographically across the United States. There are no
significant industry or collateral concentrations at the end
of 1998.
4. INVENTORIES INVENTORIES ARE CARRIED AT THE LOWER OF COST OR MARKET.
<TABLE>
<CAPTION>
JANUARY 2, January 3,
(In millions) 1999 1998
-----------------------------------------------------------------------------
<S> <C> <C>
Finished goods $ 483 $ 454
Work in process 878 675
Raw materials 454 366
------ ------
1,815 1,495
Less progress payments and customer deposits 175 146
------ ------
$1,640 $1,349
============================================================================
</TABLE>
Inventories aggregating $1,008 million at year-end 1998
and $894 million at year-end 1997 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 $170 million and $159 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 $178 million
at year-end 1998 and $147 million at year-end 1997.
5. LONG-TERM Long-term Contracts
CONTRACTS
REVENUES UNDER FIXED-PRICE CONTRACTS ARE GENERALLY RECORDED
AS DELIVERIES ARE MADE. CERTAIN LONG-TERM FIXED-PRICE
CONTRACTS PROVIDE FOR THE PERIODIC DELIVERY AFTER A LENGTHY
PERIOD OF TIME OVER WHICH SIGNIFICANT COSTS ARE INCURRED OR
REQUIRE A SIGNIFICANT AMOUNT OF DEVELOPMENT EFFORT IN
RELATION TO TOTAL CONTRACT VOLUME. REVENUES UNDER THOSE
CONTRACTS AND ALL COST-REIMBURSEMENT-TYPE CONTRACTS ARE
RECORDED AS COSTS ARE INCURRED. REVENUES UNDER THE V-22
PRODUCTION CONTRACT WITH THE U.S. GOVERNMENT, WHICH
PRESENTLY IS A COST-REIMBURSEMENT-TYPE CONTRACT, ARE
RECORDED AS COSTS ARE INCURRED.
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.
42 1998 TEXTRON ANNUAL REPORT
<PAGE>
Long-term contract receivables at year-end 1998 and
year-end 1997 totaled $166 million and $146 million,
respectively. This includes $102 million and $111 million,
respectively, of unbilled costs and accrued profits that had
not yet met the contractual billing criteria. Long-term
contract receivables do not include significant amounts (a)
billed but unpaid due to contractual retainage provisions or
(b) subject to collection uncertainty.
6. LONG-TERM THE COST OF PROPERTY, PLANT, AND EQUIPMENT IS DEPRECIATED
ASSETS BASED ON THE ASSETS' ESTIMATED USEFUL LIVES.
<TABLE>
<CAPTION>
JANUARY 2, January 3,
(In millions) 1999 1998
-----------------------------------------------------------------------------
<S> <C> <C>
At cost:
Land and buildings $ 942 $ 808
Machinery and equipment 3,150 2,647
-----------------------------------------------------------------------------
4,092 3,455
Less accumulated depreciation 1,887 1,685
-----------------------------------------------------------------------------
$2,205 $1,770
=============================================================================
</TABLE>
GOODWILL IS AMORTIZED ON THE STRAIGHT-LINE METHOD OVER 20 TO
40 YEARS. Accumulated amortization of goodwill totaled $388
million at January 2, 1999 and $329 million at January 3,
1998.
GOODWILL IS PERIODICALLY REVIEWED 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, THE
CARRYING AMOUNT WOULD BE REDUCED TO FAIR VALUE.
Customer engineering and tooling project costs for which
customer reimbursement is anticipated are capitalized and
classified in other assets.
7. DEBT AND At the end of 1998 and 1997, debt consisted of the
CREDIT following:
FACILITIES
<TABLE>
<CAPTION>
JANUARY 2, January 3,
(In millions) 1999 1998
------------------------------------------------------------------------------------------------------
<S> <C> <C>
TEXTRON MANUFACTURING:
Short-term debt:
Borrowings under or supported by long-term credit facilities* $1,671 $ 375
Current portion of long-term debt 64 101
------------------------------------------------------------------------------------------------------
Total short-term debt 1,735 476
------------------------------------------------------------------------------------------------------
Long-term senior debt:
Medium-term notes due 1999-2011 (average rate - 9.54%) 230 230
8.75% due 2022 200 200
6.63% due 2007 200 200
Other long-term debt (average rate 7.53%) 314 216
------------------------------------------------------------------------------------------------------
944 846
------------------------------------------------------------------------------------------------------
Current portion of long-term debt (64) (101)
------------------------------------------------------------------------------------------------------
Total long-term debt 880 745
------------------------------------------------------------------------------------------------------
Total Textron Manufacturing 2,615 1,221
------------------------------------------------------------------------------------------------------
TEXTRON FINANCE:
Senior:
Borrowings under or supported by credit facilities** 1,425 1,074
6.76% average rate debt; due 1999 to 2001 472 392
5.79% average rate variable notes; due 1999 to 2001 932 899
------------------------------------------------------------------------------------------------------
Total Textron Finance 2,829 2,365
------------------------------------------------------------------------------------------------------
Total debt $5,444 $3,586
======================================================================================================
</TABLE>
*The weighted average interest rates on these borrowings,
before the effect of interest rate exchange agreements,
were 5.8%, 4.8%, and 5.0% at year-end 1998, 1997, and
1996, respectively. Comparable rates during the years
1998, 1997, and 1996 were 5.4%, 4.8%, and 5.0%,
respectively.
**The weighted average interest rates on these borrowings,
before the effect of interest rate exchange agreements,
were 6.3%, 6.1%, and 5.7% at year-end 1998, 1997, and
1996, respectively. Comparable rates during the years
1998, 1997, and 1996 were 5.8%, 5.8%, 5.7%, respectively.
1998 TEXTRON ANNUAL REPORT 43
<PAGE>
The following table shows required payments during the
next five years on debt outstanding at the end of 1998. The
payments schedule excludes amounts that may become payable
under credit facilities and revolving credit agreements.
<TABLE>
<CAPTION>
(In millions) 1999 2000 2001 2002 2003
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Textron Manufacturing $ 64 $ 82 $155 $32 $ 39
Textron Finance 559 507 338 -- --
- -------------------------------------------------------------------------------------------
$623 $589 $493 $32 $ 39
===========================================================================================
</TABLE>
Textron Manufacturing maintains credit facilities with
various banks for both short- and long-term borrowings. At
year-end, Textron Manufacturing had (a) a $1.0 billion
domestic credit agreement with 24 banks available on a fully
revolving basis until April 1, 2003, (b) $500 million credit
agreement with the same banks (terminated in January 1999),
(c) $990 million credit agreement with six banks (terminated
in January 1999), (d) $105 million in multi-currency credit
agreements with three banks available through December 29,
2002 and (e) $160 million in other credit facilities
available with various banks. At year-end 1998, $1.1 billion
of the credit facilities was not used or reserved as support
for commercial paper or bank borrowings.
Textron Finance has lines of credit with various banks
aggregating $1.2 billion at year-end 1998, of which $114
million was not used or reserved as support for commercial
paper or bank borrowings. Lending agreements limit Textron
Finance's net assets available for cash dividends and other
payments to Textron Manufacturing to approximately $169
million of Textron Finance's net assets of $473 million at
year-end 1998. Textron Finance's loan agreements also
contain provisions regarding additional debt, creation of
liens or guarantees, and the making of investments.
Textron Manufacturing has agreed to cause TFC to
maintain certain minimum levels of financial performance. No
payments from Textron Manufacturing were necessary in 1998,
1997, or 1996 for TFC to meet these standards.
8. DERIVATIVES Interest rate exchange agreements
AND FOREIGN
CURRENCY Interest rate exchange agreements are used to help manage
TRANSACTIONS interest rate risk by converting certain variable-rate debt
to fixed-rate debt and vice versa. These agreements involve
the exchange of fixed-rate interest for variable-rate
amounts over the life of the agreement without the exchange
of the notional amount. INTEREST RATE EXCHANGE AGREEMENTS
ARE ACCOUNTED FOR ON THE ACCRUAL BASIS WITH THE DIFFERENTIAL
TO BE PAID OR RECEIVED RECORDED CURRENTLY AS AN ADJUSTMENT
TO INTEREST EXPENSE. PREMIUMS PAID TO TERMINATE AGREEMENTS
DESIGNATED AS HEDGES ARE DEFERRED AND AMORTIZED TO EXPENSE
OVER THE REMAINING TERM OF THE ORIGINAL LIFE OF THE
CONTRACT. IF THE UNDERLYING DEBT IS THEN PAID EARLY,
UNAMORTIZED PREMIUMS ARE RECOGNIZED AS AN ADJUSTMENT TO THE
GAIN OR LOSS ASSOCIATED WITH THE DEBT'S EXTINGUISHMENT.
SOME AGREEMENTS THAT REQUIRE THE PAYMENT OF FIXED-RATE
INTEREST ARE DESIGNATED AGAINST SPECIFIC LONG-TERM
VARIABLE-RATE BORROWINGS, WHILE THE BALANCE IS DESIGNATED
AGAINST EXISTING SHORT-TERM BORROWINGS THROUGH MATURITY AND
THEIR ANTICIPATED REPLACEMENTS. TEXTRON CONTINUOUSLY
MONITORS VARIABLE-RATE BORROWINGS TO MAINTAIN THE LEVEL OF
BORROWINGS ABOVE THE NOTIONAL AMOUNT OF THE DESIGNATED
AGREEMENTS. IF IT IS NOT PROBABLE VARIABLE-RATE BORROWINGS
WILL CONTINUOUSLY EXCEED THE NOTIONAL AMOUNT OF THE
DESIGNATED AGREEMENTS, THE EXCESS IS MARKED TO MARKET AND
THE ASSOCIATED GAIN OR LOSS RECORDED IN INCOME.
During 1998, Textron Manufacturing terminated $275
million fixed-pay interest rate exchange agreements.
Agreements that effectively fix the rate of interest on
variable-rate borrowings are summarized as follows:
<TABLE>
<CAPTION>
JANUARY 2, 1999 January 3, 1998
----------------------------------------------------------------------------------------------------------------
FIXED-PAY INTEREST RATE EXCHANGE AGREEMENTS
WEIGHTED Weighted
WEIGHTED AVERAGE Weighted average
NOTIONAL AVERAGE REMAINING Notional average remaining
(Dollars in millions) AMOUNT INTEREST RATE TERM amount interest rate term
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Textron Manufacturing $ -- -- -- $275 9.01% 1.5
Textron Finance
(expires in 1999) 250 6.26% 0.6 450 6.02% 1.2
----------------------------------------------------------------------------------------------------------------
$250 6.26% 0.6 $725 7.15% 1.3
================================================================================================================
</TABLE>
44 1998 TEXTRON ANNUAL REPORT
<PAGE>
Textron Finance's interest rate exchange agreements
were designated against specific long-term variable-rate
notes. These agreements effectively adjusted the average
rate of interest on variable-rate notes to 6.03% from 5.96%.
During 1998, Textron Manufacturing entered into $435
million variable-pay interest rate exchange agreements.
Agreements that have the effect of varying the rate of
interest on fixed-rate borrowings are summarized as follows:
<TABLE>
<CAPTION>
JANUARY 2, 1999 January 3, 1998
--------------------------------------------------------------------------------------------------------
VARIABLE-PAY INTEREST RATE EXCHANGE AGREEMENTS
WEIGHTED Weighted
WEIGHTED AVERAGE Weighted average
NOTIONAL AVERAGE REMAINING Notional average remaining
(Dollars in millions) AMOUNT INTEREST RATE TERM amount interest rate term
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Textron Manufacturing $635 8.26% 5.5 $200 6.19% 9.9
Textron Finance
(expires in 1999) 50 5.22% 0.5 50 5.94% 1.5
--------------------------------------------------------------------------------------------------------
$685 8.04% 5.1 $250 6.14% 8.2
=========================================================================================================
</TABLE>
Textron Manufacturing's interest rate exchange
agreements were designated against specific long-term
fixed-rate debt. These agreements effectively adjusted the
average rate of interest on designated fixed-rate debt from
8.37% to 8.33%. The variable-pay interest rate exchange
agreements in effect at the end of 1998 expire as follows:
$62 million (9.73%) in 1999, $124 million (9.89%) in 2001,
and $449 million (7.70%) through 2020. Textron Finance's
interest rate exchange agreements were designated against
specific long-term fixed-rate debt. These agreements
effectively adjusted the average rate of interest on
long-term fixed-rate debt to 6.79% from 6.89%.
Textron had minimal exposure to loss from
nonperformance by the counterparties to its interest rate
exchange agreements at the end of 1998, 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.
In January 1999, Textron Manufacturing retired $479
million of fixed-rate debt and $479 million of variable-pay
swaps.
Translation of foreign currencies, foreign exchange
transactions and foreign currency exchange contracts
FOREIGN CURRENCY DENOMINATED ASSETS AND LIABILITIES ARE
TRANSLATED INTO U.S. DOLLARS WITH THE ADJUSTMENTS FROM THE
CURRENCY RATE CHANGES BEING RECORDED IN THE CURRENCY
TRANSLATION ADJUSTMENT ACCOUNT IN SHAREHOLDERS' EQUITY UNTIL
THE RELATED FOREIGN ENTITY IS SOLD OR SUBSTANTIALLY
LIQUIDATED. NON-U.S. DOLLAR FINANCING TRANSACTIONS,
INCLUDING CURRENCY SWAPS, ARE USED TO EFFECTIVELY HEDGE
LONG-TERM INVESTMENTS IN FOREIGN OPERATIONS WITH THE SAME
CORRESPONDING CURRENCY. FOREIGN CURRENCY GAINS AND LOSSES ON
THE HEDGE OF THE LONG-TERM INVESTMENTS ARE RECORDED IN THE
CURRENCY TRANSLATION ADJUSTMENT WITH THE OFFSET RECORDED AS
AN ADJUSTMENT TO THE NON-U.S. DOLLAR FINANCING LIABILITY.
FORWARD EXCHANGE CONTRACTS ARE USED TO HEDGE CERTAIN
FOREIGN CURRENCY TRANSACTIONS AND CERTAIN FIRM SALES AND
PURCHASE COMMITMENTS DENOMINATED IN FOREIGN CURRENCIES.
GAINS AND LOSSES FROM CURRENCY RATE CHANGES ON HEDGES OF
FOREIGN CURRENCY TRANSACTIONS ARE RECORDED CURRENTLY IN
INCOME. GAINS AND LOSSES RELATING TO THE HEDGE OF FIRM
SALES AND PURCHASE COMMITMENTS ARE INCLUDED IN THE
MEASUREMENT OFTHE UNDERLYING TRANSACTIONS WHEN THEY OCCUR.
Foreign exchange gains and losses included in income have
not been material.
The table on the following page summarizes by major
currency Textron's forward exchange contracts and currency
swaps in U.S. dollars. The buy amounts represent the U.S.
dollar equivalent of commitments to purchase foreign
currencies and the sell amounts represent the U.S. dollar
equivalent of commitments to sell foreign currencies. The
foreign currency amounts have been translated into a U.S.
dollar equivalent using the exchange rate at the balance
sheet date.
1998 TEXTRON ANNUAL REPORT 45
<PAGE>
<TABLE>
<CAPTION>
BUY CONTRACTS SELL CONTRACTS
CONTRACT UNREALIZED CONTRACT UNREALIZED
(In millions) AMOUNT GAIN/(LOSS) AMOUNT GAIN/(LOSS)
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
JANUARY 2, 1999
British Pound $ 45 $-- $375 $ --
Canadian Dollar 228 (9) 8 --
German Mark 135 -- 339 (5)
French Franc 1 -- 119 (4)
Other 6 -- 43 (1)
---------------------------------------------------------------------------------------
Total $415 $(9) $884 $(10)
=======================================================================================
January 3, 1998
British Pound $ 39 $-- $ 22 $ --
Canadian Dollar 129 (5) 62 --
German Mark 16 -- 150 2
French Franc -- -- 97 3
Other 2 -- 7 --
---------------------------------------------------------------------------------------
Total $186 $(5) $338 $ 5
=======================================================================================
</TABLE>
9. TEXTRON- In 1996, a trust sponsored and wholly-owned by Textron
OBLIGATED issued preferred securities to the public (for $500 million)
MANDATORILY and shares of its common securities to Textron (for $15.5
REDEEMABLE million), the proceeds of which were invested by the trust
PREFERRED in $515.5 million aggregate principal amount of Textron's
SECURITIES OF newly issued 7.92% Junior Subordinated Deferrable Interest
SUBSIDIARY Debentures, due 2045. The debentures are the sole asset of
TRUST HOLDING the trust. The proceeds from the issuance of the debentures
SOLELY were used by Textron for the repayment of long-term
TEXTRON JUNIOR borrowings and for general corporate purposes. The amounts
SUBORDINATED due to the trust under the debentures and the related income
DEBT statement amounts have been eliminated in Textron's
SECURITIES 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.
10. SHAREHOLDERS' Preferred stock
EQUITY
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 4.4 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 3.6 shares of
common stock and can be redeemed by Textron for $45 per
share.
Common stock
Textron has authorization for 500,000,000 shares of 12.5
cent per share par value common stock. New shares in
connection with a two-for-one stock split in the form of a
stock dividend were issued and distributed on May 30, 1997
to shareholders of record on the close of business on May 9,
1997. Average shares outstanding, stock options, and per
share amounts were restated for all periods.
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 10,000,000.
46 1998 TEXTRON ANNUAL REPORT
<PAGE>
PERFORMANCE SHARE UNITS AND EMPLOYEE STOCK OPTION
GRANTS ARE ACCOUNTED FOR IN ACCORDANCE WITH APB 25,
"ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES." UNDER APB 25,
BECAUSE THE EXERCISE PRICE OF 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 $77 million in 1998, $65 million
in 1997, and $45 million in 1996. To mitigate the impact of
stock price increases on compensation expense, Textron has a
cash-settlement option program on Textron's common stock.
This program generated income of approximately $40 million
in 1998, $37 million in 1997 and $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 values of
options granted after 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 $9 million or $.06 per share in
1998, $11 million or $.07 per share in 1997, and $8 million
or $.04 per share in 1996.
The assumptions used to estimate the fair value of an
option granted in 1998, 1997, and 1996, respectively, are
approximately as follows: dividend yield of 2%; expected
volatility of 18%, 16%, and 16%; risk-free interest rates of
4%, 6%, and 6%; 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 1998,
1997, and 1996, respectively, was approximately $12, $10,
and $8.
Stock option transactions during the last three years
are summarized as follows:
<TABLE>
<CAPTION>
1998 1997 1996
---------------------------------------------------------------------------------------------------
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 9,001 $36.74 9,290 $31.08 9,116 $26.05
Options granted 1,909 74.08 1,333 62.54 2,136 45.37
Options exercised (2,465) 29.52 (1,541) 24.56 (1,846) 22.89
Options canceled (103) 51.48 (81) 43.40 (116) 29.38
---------------------------------------------------------------------------------------------------
Shares under option at
end of year 8,342 47.23 9,001 36.74 9,290 31.08
===================================================================================================
Shares exercisable at
end of year 5,818 36.80 6,641 30.21 6,128 25.26
===================================================================================================
</TABLE>
Stock options outstanding at the end of 1998 and 1997
are summarized as follows:
<TABLE>
<CAPTION>
Weighted
Average Weighted Weighted
Remaining Average Average
Contractual Exercise Exercise
(Shares in thousands) Outstanding Life Price Exerciseable Price
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
JANUARY 2, 1999:
$12 - $37 3,521 5.4 $27.94 3,521 $27.94
$38 - $50 1,675 7.9 45.61 1,661 45.59
$51 - $80 3,146 9.5 69.70 636 62.98
January 3, 1998:
$11 - $32 3,952 5.6 $23.44 3,952 $23.44
$33 - $50 3,745 8.5 41.67 2,689 40.15
$51 - $68 1,304 9.9 62.87 -- --
---------------------------------------------------------------------------------------------------
</TABLE>
1998 TEXTRON ANNUAL REPORT 47
<PAGE>
Reserved shares of common stock
At year-end 1998, 3,150,000 shares of common stock were
reserved for the subsequent conversion of preferred stock
and 8,342,000 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-half of a preferred stock purchase right. One
preferred stock purchase right 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
$.05 per right.
Income per common share
In 1997, Textron adopted FAS 128 "Earnings Per Share." FAS
128 requires companies to present basic and diluted income
per share amounts. A reconciliation of income from
continuing operations and basic to diluted share amounts is
presented below.
<TABLE>
<CAPTION>
For the years ended JANUARY 2, 1999 January 3, 1998 December 28, 1996
---------------------------------------------------------------------------------------------------------------
($ In millions, AVERAGE Average Average
shares in thousands) INCOME SHARES Income Shares Income Shares
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Income from
continuing
operations $443 $372 $306
---------------------------------------------------------------------------------------------------------------
Less: Preferred
stock dividends (1) (1) (1)
---------------------------------------------------------------------------------------------------------------
BASIC
Available to common
shareholders 442 161,254 371 164,830 305 167,453
Dilutive effect of
convertible preferred
stock and stock options 1 4,120 1 4,673 1 4,199
DILUTED
Available to common
shareholders and
assumed conversions $443 165,374 $372 169,503 $306 171,652
---------------------------------------------------------------------------------------------------------------
</TABLE>
Comprehensive Income
In 1998, Textron adopted FAS 130, "Reporting Comprehensive
Income." FAS 130 establishes new rules for the reporting and
display of comprehensive income and its components. The
adoption of this Statement had no impact on Textron's net
income or shareholders' equity. FAS 130 requires unrealized
gains or losses on the Company's available-for-sale
securities and foreign currency translation adjustments,
which prior to adoption were reported separately in
shareholders' equity, to be included in other comprehensive
income. Prior year financial statements have been
reclassified to conform to the requirements of FAS 130.
48 1998 TEXTRON ANNUAL REPORT
<PAGE>
<TABLE>
<CAPTION>
OTHER COMPREHENSIVE INCOME
(In millions) 1998 1997 1996
----------------------------------------------------------------------------------------
<S> <C> <C> <C>
CURRENCY TRANSLATION ADJUSTMENT
Beginning balance $ (71) $ 2 $(33)
Change, net of income taxes (33) (73) 35
----------------------------------------------------------------------------------------
Ending balance $(104) $(71) $ 2
========================================================================================
UNREALIZED GAINS (LOSSES) ON SECURITIES
Beginning balance $ 13 $ 9 $164
Gross unrealized gains (losses)
arising during the period* 8 7 (148)
Reclassification adjustment
for realized gains in net income** (8) (3) (7)
----------------------------------------------------------------------------------------
Net unrealized gains (losses) -- 4 (155)
----------------------------------------------------------------------------------------
Ending balance $ 13 $ 13 $ 9
========================================================================================
PENSION LIABILITY ADJUSTMENT
Beginning balance $ (4) $ (4) $ (2)
Change, net of income taxes (1) -- (2)
----------------------------------------------------------------------------------------
Ending balance $ (5) $ (4) $ (4)
========================================================================================
ACCUMULATED OTHER COMPREHENSIVE
INCOME (LOSS)
Beginning balance $ (62) $ 7 $129
Other comprehensive income (loss) (34) (69) (122)
----------------------------------------------------------------------------------------
Ending balance $ (96) $(62) $ 7
========================================================================================
</TABLE>
*Net of income tax expense (benefit) of $4 million ,$4
million, and $(100) million for 1998, 1997, and 1996,
respectively.
**Net of income tax expense (benefit) of $4 million, $2
million, and $4 million for 1998, 1997, and 1996,
respectively.
11. LEASES Rental expense approximated $82 million, $65 million, and
$54 million in 1998, 1997, and 1996, respectively. Future
minimum rental commitments for noncancellable operating
leases in effect at year-end 1998 approximated $67 million
for 1999; $54 million for 2000; $39 million for 2001; $27
million for 2002; $23 million for 2003; and a total of $172
million thereafter.
12. RESEARCH AND Textron carries out research and development for itself and
DEVELOPMENT under contracts with others, primarily the U.S. Government.
Company initiated programs include independent research and
development related to government products and services, a
significant portion of which 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 1998, 1997, and 1996 were as follows:
<TABLE>
<CAPTION>
(In millions) 1998 1997 1996
----------------------------------------------------------------------------
<S> <C> <C> <C>
Company funded $219 $222 $185
Customer funded 394 380 391
----------------------------------------------------------------------------
Total research and development $613 $602 $576
============================================================================
</TABLE>
1998 TEXTRON ANNUAL REPORT 49
<PAGE>
13. PENSION In 1998, Textron adopted FAS 132 "Employers' Disclosures
BENEFITS AND about Pensions and Other Postretirement Benefits." FAS 132
POSTRETIREMENT revises disclosures about pension and other postretirement
BENEFITS OTHER benefit plans. It does not change the measurement or
THAN PENSIONS recognition of those plans. Textron has defined benefit and
defined contribution pension plans that together cover
substantially all employees. The costs of the defined
contribution plans amounted to approximately $40 million,
$36 million and $32 million in 1998, 1997, and 1996,
respectively. 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. Pension plan assets consist principally
of corporate and government bonds and common stocks. Textron
offers health care and life insurance benefits for certain
retired employees.
The following summarizes the change in the benefit
obligation; the change in plan assets; the funded status;
and reconciliation to the amount recognized in the balance
sheet for the pension and postretirement benefit plans:
<TABLE>
<CAPTION>
POSTRETIREMENT BENEFITS
PENSION BENEFITS OTHER THAN PENSIONS
----------------------------------------------------------------------------------------
JANUARY 2, January 3, JANUARY 2, January 3,
(In millions) 1999 1998 1999 1998
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CHANGE IN BENEFIT OBLIGATION
Benefit obligation at
beginning of year $3,206 $2,966 $ 640 $ 645
Service cost 83 71 6 5
Interest cost 235 223 45 46
Amendments 2 1 2 --
Effects of acquisitions 293 19 20 2
Effects of dispositions (14) (5) (3) --
Plan participants' contributions 1 1 4 4
Actuarial gains (losses) 258 148 13 (6)
Benefits paid (229) (212) (62) (56)
Foreign exchange rate changes 1 (6) -- --
----------------------------------------------------------------------------------------
Benefit obligation at end of year $3,836 $3,206 $ 665 $ 640
----------------------------------------------------------------------------------------
CHANGE IN PLAN ASSETS
Fair value of plan assets at
beginning of year $4,130 $3,640 -- --
Actual return on plan assets 557 720 -- --
Employer contributions 15 11 -- --
Plan participants' contributions 1 1 -- --
Effects of acquisitions 363 1 -- --
Effects of dispositions (12) (25) -- --
Benefits paid (229) (212) -- --
Foreign exchange rate changes (1) (6) -- --
----------------------------------------------------------------------------------------
Fair value of plan assets at
end of year $4,824 $4,130 -- --
----------------------------------------------------------------------------------------
Funded status of the plan $ 988 $ 924 $(665) $(640)
Unrecognized actuarial gain (679) (696) (78) (100)
Unrecognized prior service cost 96 105 (19) (26)
Unrecognized transition net asset (78) (97) -- --
----------------------------------------------------------------------------------------
Net amount recognized in the
consolidated balance sheet $ 327 $ 236 $(762) $(766)
========================================================================================
Amounts recognized in the
consolidated balance sheet
consists of:
Prepaid benefit cost $ 452 $ 340 $ -- $ --
Accrued benefit liability (157) (122) (762) (766)
Intangible asset 24 11 -- --
Accumulated other
comprehensive income 8 7 -- --
----------------------------------------------------------------------------------------
Net amount recognized in the
consolidated balance sheet $ 327 $ 236 $(762) $(766)
========================================================================================
</TABLE>
50 1998 TEXTRON ANNUAL REPORT
<PAGE>
The projected benefit obligation, accumulated benefit
obligation, and fair value of plan assets for the pension
plan with accumulated benefit obligations in excess of plan
assets were $267 million, $231 million, and $78 million,
respectively, as of year-end 1998, and $213 million, $178
million, and $61 million, respectively, as of year-end 1997.
The following summarizes the net periodic benefit cost
for the pension benefits and postretirement benefits plans:
<TABLE>
<CAPTION>
POSTRETIREMENT BENEFITS
PENSION BENEFITS OTHER THAN PENSIONS
----------------------------------------------------------------------------------------------------------
JANUARY 2, January 3, December 28, JANUARY 2, January 3, December 28,
(In millions) 1999 1998 1996 1999 1998 1996
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
COMPONENTS OF
NET PERIODIC
BENEFIT COST
Service cost $ 83 $ 71 $ 69 $ 6 $ 5 $ 5
Interest cost 235 223 207 45 46 51
Expected return
on plan assets (323) (298) (276) -- -- --
Amortization of
unrecognized
transition asset (17) (17) (17) -- -- --
Recognized actuarial
(gain) loss 1 1 -- (9) (9) (7)
Recognized prior
service cost 14 15 12 (4) (4) (5)
-----------------------------------------------------------------------------------------------------------
Net periodic
benefit cost $ (7) $ (5) $ (5) $38 $38 $44
===========================================================================================================
</TABLE>
Major actuarial assumptions used in accounting for
defined benefit pension plans are presented below.
<TABLE>
<CAPTION>
JANUARY 2, January 3, December 28, December 30,
1999 1998 1996 1995
-------------------------------------------------------------------------------------------------
WEIGHTED AVERAGE ASSUMPTIONS
AT YEAR-END
<S> <C> <C> <C> <C>
Discount rate 6.75% 7.25% 7.50% 7.25%
Expected return on plan assets 9.25 9.00 9.00 9.00
Rate of compensation increase 4.80 5.00 5.00 5.00
-------------------------------------------------------------------------------------------------
</TABLE>
Postretirement benefit plan discount rates are the same
as those used by Textron's defined benefit pension plans.
The 1998 health care cost trend rate, which is the
weighted average annual assumed rate of increase in the per
capita cost of covered benefits, was 6.0% for retirees age
65 and over and 6.5% 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. A
one-percentage-point change in assumed health care cost
trend rates would have the following effects:
<TABLE>
<CAPTION>
(In millions) 1% INCREASE 1% DECREASE
---------------------------------------------------------------------------------------------
<S> <C> <C>
Effect on total of service and interest cost components $ 6 $ (5)
Effect on postretirement benefit obligation 64 (52)
---------------------------------------------------------------------------------------------
</TABLE>
1998 TEXTRON ANNUAL REPORT 51
<PAGE>
14. 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) 1998 1997 1996
------------------------------------------------------------
<S> <C> <C> <C>
United States $582 $441 $393
Foreign 181 207 147
------------------------------------------------------------
Total $763 $648 $540
============================================================
</TABLE>
Income tax expense is summarized as follows:
<TABLE>
<CAPTION>
(In millions) 1998 1997 1996
-----------------------------------------------------------------------
<S> <C> <C> <C>
Federal:
Current $225 $ 82 $121
Deferred (25) 71 15
State 33 27 25
Foreign 61 70 50
-----------------------------------------------------------------------
Income tax expense $294 $250 $211
=======================================================================
</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>
1998 1997 1996
----------------------------------------------------------------------------
<S> <C> <C> <C>
Federal statutory income tax rate 35.0% 35.0% 35.0%
Increase (decrease) in taxes
resulting from:
State income taxes 2.7 2.8 3.0
Goodwill 4.3 2.7 2.8
Other - net (3.5) (1.9) (1.7)
----------------------------------------------------------------------------
Effective income tax rate 38.5% 38.6% 39.1%
============================================================================
</TABLE>
Textron's net deferred tax asset consisted of gross
deferred tax assets and gross deferred tax liabilities of
$1,775 million and $1,576 million, respectively, at the end
of 1998 and $1,517 million and $1,362 million, respectively,
at the end of 1997.
The components of Textron's net deferred tax asset were
as follows:
<TABLE>
<CAPTION>
(In millions) JANUARY 2, 1999 January 3, 1998
--------------------------------------------------------------------------------------
<S> <C> <C>
Textron Finance transactions, principally leasing $(350) $(334)
Self insured liabilities (including environmental) 205 207
Obligation for postretirement benefits 186 222
Fixed assets, principally depreciation (171) (146)
Deferred compensation 152 115
Inventory (48) (47)
Allowance for credit losses 33 25
Other, principally timing of other expense deductions 192 113
--------------------------------------------------------------------------------------
$ 199 $ 155
======================================================================================
</TABLE>
Deferred income taxes have not been provided for the
undistributed earnings of foreign subsidiaries, which
approximated $506 million at the end of 1998. Management
intends to reinvest those earnings for an indefinite period,
except for distributions having an immaterial tax effect. If
foreign subsidiaries' earnings were distributed, 1998 taxes,
net of foreign tax credits, would be increased by
approximately $68 million.
52 1998 TEXTRON ANNUAL REPORT
<PAGE>
15. FAIR VALUE OF The estimated fair value amounts shown below were determined
FINANCIAL from available market information and valuation
INSTRUMENTS 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>
JANUARY 2, 1999 January 3, 1998
---------------------------------------------------------------------------------------
ESTIMATED Estimated
CARRYING FAIR Carrying fair
(In millions) VALUE VALUE value value
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS:
Textron Finance:
Finance receivables $2,774 $2,837 $2,280 $2,334
Other 46 46 31 31
LIABILITIES:
Textron Manufacturing:
Debt 2,615 2,706 1,221 1,276
Interest rate exchange agreements -- (11) -- 10
Textron Finance:
Debt 2,829 2,836 2,365 2,380
Interest rate exchange agreements -- 1 -- --
FOREIGN EXCHANGE CONTRACTS -- 9 -- 4
CURRENCY SWAPS 14 10 (4) (4)
=======================================================================================
</TABLE>
Notes:
(i) Finance receivables - The estimated fair values of real
estate loans and commercial installment contracts were based
on discounted cash flow analyses. The estimated fair values
of variable-rate receivables 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.
(ii) Debt, interest rate exchange agreements, foreign
exchange contracts and currency swaps - 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 exchange contracts
and currency swaps were determined by Textron's foreign
exchange banks.
16. CONTIGENCIES Contingencies
AND
ENVIRONMENTAL Textron is subject to a number of lawsuits, investigations
REMEDIATION and claims arising out of the conduct of its business,
including those relating to commercial transactions,
government contracts, product liability, and environmental,
safety and health matters. Some seek compensatory, treble or
punitive damages in substantial amounts; fines, penalties or
restitution; or remediation of contamination. Some are or
purport to be class actions. 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 believes that any changes to
the accruals that may result from these factors and
uncertainties will not have a material effect on Textron's
net income or financial condition. Textron estimates that
its accrued environmental remediation liabilities will
likely be paid over the next five to ten years.
1998 TEXTRON ANNUAL REPORT 53
<PAGE>
17. SEGMENT In 1998, Textron adopted FAS 131, "Segments of an Enterprise
REPORTING and Related Information." FAS 131 established standards for
the way enterprises report information about operating
segments and related disclosures about products and
services, geographic areas, and major customers.
Textron has four reportable segments: Aircraft,
Automotive, Industrial and Finance. See Note 1 for principal
markets and pages 60 through 62 for products of Textron's
segments.
Textron's reportable segments are strategically aligned
based on the manner in which Textron manages its various
operations. The accounting policies of the segments are the
same as those described in the summary of significant
accounting policies within the notes to the consolidated
financial statements. Textron evaluates segment performance
based on operating income from operations. Segment operating
income excludes Textron Manufacturing interest expense and
special charges and gains or losses from the disposition of
businesses. The Finance segment includes interest income and
interest expense as part of operating income from
operations. Provisions for losses on finance receivables
involving the sale or lease of Textron products are recorded
by the selling manufacturing division.
The following summarizes the revenues by type of
products:
<TABLE>
<CAPTION>
REVENUES
------------------------------------------------------------------------
(In millions) 1998 1997 1996
------------------------------------------------------------------------
<S> <C> <C> <C>
Aircraft:
Fixed-Wing Aircraft $1,784 $1,483 $1,078
Rotor Aircraft 1,405 1,542 1,515
Automotive 2,405 2,127 1,627
Industrial:
Fasteners 1,758 1,498 1,355
Golf, Turf-Care & Specialty Products 719 483 477
Industrial Components 626 711 744
Fluid & Power 619 489 383
Finance 367 350 327
------------------------------------------------------------------------
$9,683 $8,683 $7,506
------------------------------------------------------------------------
</TABLE>
The following tables summarize selected financial
information by segment:
<TABLE>
<CAPTION>
PROPERTY, PLANT AND
(In millions) ASSETS EQUIPMENT EXPENDITURES
-----------------------------------------------------------------------------------------------------------
1998 1997 1996 1998 1997 1996
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Aircraft $ 2,199 $ 1,941 $ 1,856 $140 $107 $116
Automotive 1,681 1,515 1,020 111 103 60
Industrial 3,882 2,596 2,455 208 153 130
Finance 3,785 3,178 3,269 13 8 3
Corporate (including
investment in
discontinued operations) 2,717 2,557 3,161 3 3 3
Eliminations (543) (457) (247) -- -- --
-----------------------------------------------------------------------------------------------------------
$13,721 $11,330 $11,514 $475 $374 $312
-----------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
(In millions) AMORTIZATION (1) DEPRECIATION
---------------------------------------------------------------------------
1998 1997 1996 1998 1997 1996
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Aircraft $10 $10 $10 $ 82 $ 70 $ 54
Automotive 15 14 12 72 69 41
Industrial 36 29 30 124 100 103
Finance 3 -- -- 10 11 11
Corporate 5 3 2 4 4 4
---------------------------------------------------------------------------
$69 $56 $54 $292 $254 $213
---------------------------------------------------------------------------
</TABLE>
54 TEXTRON ANNUAL REPORT
<PAGE>
Geographic Data
Presented below is selected financial information by
geographic area of Textron's operations:
<TABLE>
<CAPTION>
PROPERTY, PLANT AND
(In millions) REVENUES (2) EQUIPMENT(3)
------------------------------------------------------------------------------------------------
1998 1997 1996 1998 1997 1996
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
United States $6,291 $5,550 $5,097 $1,466 $1,232 $1,176
Latin America and Mexico 634 447 275 84 40 21
Canada 589 640 684 115 92 55
Germany 575 458 216 205 138 48
France 332 301 235 82 68 71
Asia and Australia 309 447 425 3 3 3
United Kingdom 273 209 123 171 71 58
Other 680 631 451 79 126 27
------------------------------------------------------------------------------------------------
$9,683 $8,683 $7,506 $2,205 $1,770 $1,459
================================================================================================
</TABLE>
Notes:
(1) Amortization is principally amortization of goodwill.
(2) Revenues are attributed to countries based on the
location of the customer.
(3) Property, plant and equipment is based on the location
of the asset.
Revenues include sales to the U.S. Government of $1.1
billion, $1.0 billion and $1.0 billion in 1998, 1997 and
1996, respectively and sales of $1.3 billion, $1.1 billion
and $0.9 billion in 1998, 1997 and 1996, respectively to
DaimlerChrysler AG.
To enhance the competitiveness and profitability of its
core businesses, Textron recorded a pretax charge of $87
million in the second quarter of 1998 ($54 million after-tax
or $.32 per diluted share). This charge was recorded based
on the decision to exit several small, nonstrategic product
lines in Automotive and the former Systems and Components
divisions which did not meet Textron's return criteria, and
to realign certain operations in the Industrial segment. The
pretax charges associated with the Automotive and Industrial
segments were $25 million and $52 million, respectively. The
charge also included the cost of a litigation settlement of
$10 million related to the Aircraft segment. Severance costs
for approximately 1,800 personnel were included in special
charges and are based on established policies and practices.
The provision does not include costs associated with the
transfer of equipment and personnel, inventory obsolescence,
or other normal operating costs associated with the
realignment actions. Approximately 650 personnel had been
terminated by the end of 1998. Most of the remaining
terminations are expected to be completed by the end of
1999.
The following table summarizes the spending associated
with the 1998 programs (excluding the litigation
settlement):
<TABLE>
<CAPTION>
ASSET SEVERANCE
(In millions) IMPAIRMENTS COSTS OTHER TOTAL
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Initial charge $28 $40 $9 $77
Utilized in 1998 (28) (8) (1) (37)
--------------------------------------------------------------------------------------
Balance January 2, 1999 $-- $32 $8 $40
======================================================================================
</TABLE>
18. OTHER Included in accrued liabilities at the end of 1998 and 1997
INFORMATION- were the following:
TEXTRON
MANUFACTURING
CURRENT
LIABILITIES
<TABLE>
<CAPTION>
(In millions) JANUARY 2, 1999 January 3, 1998
----------------------------------------------------------------------------
<S> <C> <C>
Salary, wages and employer taxes $ 226 $170
Customer deposits 195 137
Other 753 546
----------------------------------------------------------------------------
Total accrued liabilities $1,174 $853
============================================================================
</TABLE>
1998 Textron Annual Report 55
<PAGE>
<TABLE>
<CAPTION>
QUARTERLY DATA
(Unaudited) (Dollars in millions
except per share amounts) 1998 1997
- --------------------------------------------------------------------------------------------------------------------------------
Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUES
Aircraft $ 849 $ 826 $ 858 $ 656 $ 866 $ 725 $ 755 $ 679
Automotive 670 534 583 618 583 464 523 557
Industrial 984 893 952 893 796 761 839 785
Finance 92 99 91 85 86 92 90 82
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL REVENUES $ 2,595 $ 2,352 $ 2,484 $ 2,252 $ 2,331 $ 2,042 $ 2,207 $ 2,103
============================================================================================================================
INCOME
Aircraft $ 95 $ 91 $ 91 $ 61 $ 95 $ 79 $ 79 $ 60
Automotive 51 29 43 56 39 28 33 50
Industrial 104 103 108 95 83 87 94 82
Finance 28 33 27 25 28 29 27 24
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL OPERATING INCOME 278 256 269 237 245 223 233 216
Gain on sale of division -- -- 97 -- -- -- -- --
Special charges -- -- (87) -- -- -- -- --
Corporate expenses and other - net (34) (32) (30) (31) (41) (36) (30) (33)
Interest expense - net (44) (40) (40) (36) (28) (32) (30) (39)
Income taxes (73) (70) (86) (65) (68) (58) (66) (58)
Distributions on preferred securities
of subsidiary trust, net of income
taxes (7) (6) (7) (6) (7) (6) (7) (6)
- --------------------------------------------------------------------------------------------------------------------------------
INCOME FROM CONTINUING OPERATIONS 120 108 116 99 101 91 100 80
Discontinued operations,
net of income taxes 40 34 48 43 49 47 45 45
- --------------------------------------------------------------------------------------------------------------------------------
Net income $ 160 $ 142 $ 164 $ 142 $ 150 $ 138 $ 145 $ 125
============================================================================================================================
EARNINGS PER COMMON SHARE
BASIC:
Income from continuing operations $ .76 $ .67 $ .71 $ .60 $ .62 $ .55 $ .60 $ .48
Discontinued operations .26 .20 .29 .27 .30 .28 .28 .27
- --------------------------------------------------------------------------------------------------------------------------------
Net income $ 1.02 $ .87 $ 1.00 $ .87 $ .92 $ .83 $ .88 $ .75
============================================================================================================================
Average shares outstanding
(in thousands) 157,225 162,156 163,613 162,809 163,697 164,912 165,173 165,897
- --------------------------------------------------------------------------------------------------------------------------------
DILUTED:
Income from continuing operations $ .74 $ .65 $ .70 $ .59 $ .60 $ .54 $ .59 $ .47
Discontinued operations .26 .20 .28 .26 .29 .27 .27 .26
- --------------------------------------------------------------------------------------------------------------------------------
Net income $ 1.00 $ .85 $ .98 $ .85 $ .89 $ .81 $ .86 $ .73
============================================================================================================================
Average shares outstanding
(in thousands)* 160,980 166,116 168,027 167,155 168,527 169,675 169,797 170,388
- --------------------------------------------------------------------------------------------------------------------------------
OPERATING INCOME MARGINS
Aircraft 11.2% 11.0% 10.6% 9.3% 11.0% 10.9% 10.5% 8.8%
Automotive 7.6 5.4 7.4 9.1 6.7 6.0 6.3 9.0
Industrial 10.6 11.5 11.3 10.6 10.4 11.4 11.2 10.4
Finance 30.4 33.3 29.7 29.4 32.6 31.5 30.0 29.3
OPERATING INCOME MARGIN 10.7 10.9 10.8 10.5 10.5 10.9 10.6 10.3
- --------------------------------------------------------------------------------------------------------------------------------
COMMON STOCK INFORMATION
Price range: High $79 1/4 $76 1/2 $80 5/16 $79 $65 11/16 $70 3/4 $67 11/16 $53 5/8
Low $52 1/16 $56 15/16 $69 5/8 $56 3/8 $55 1/2 $59 1/2 $49 11/16 $45
Dividends per share $ .285 $ .285 $ .285 $ .285 $ .25 $ .25 $ .25 $ .25
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* 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.
56 1998 TEXTRON ANNUAL REPORT
<PAGE>
SELECTED FINANCIAL INFORMATION
<TABLE>
<CAPTION>
(Dollars in millions except where
otherwise noted and per share amounts) 1998 1997 1996 1995 1994 1993 1992
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
REVENUES
Aircraft $ 3,189 $ 3,025 $ 2,593 $ 2,420 $ 2,186 $ 1,987 $ 1,521
Automotive 2,405 2,127 1,627 1,534 1,511 1,178 788
Industrial 3,722 3,181 2,959 2,515 2,982 3,106 3,308
Finance 367 350 327 311 277 259 258
- ---------------------------------------------------------------------------------------------------------------------------
Total revenues $ 9,683 $ 8,683 $ 7,506 $ 6,780 $ 6,956 $ 6,530 $ 5,875
===========================================================================================================================
INCOME
Aircraft $ 338 $ 313 $ 261 $ 237 $ 194 $ 172 $ 128
Automotive 179 150 146 135 132 89 68
Industrial 410 346 300 250 248 237 285
Finance 113 108 96 88 83 74 62
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL OPERATING INCOME 1,040 917 803 710 657 572 543
Gain on sale of division 97 - - - - - -
Special charges (87) - - - - - -
Corporate expenses and other - net (127) (140) (115) (119) (92) (103) (81)
Interest expense - net (160) (129) (148) (178) (190) (214) (238)
Income taxes (294) (250) (211) (165) (160) (87) (87)
Distributions on preferred
securities of subsidiary
trust, net of income taxes (26) (26) (23) - - - -
- ---------------------------------------------------------------------------------------------------------------------------
INCOME FROM CONTINUING OPERATIONS* $ 443 $ 372 $ 306 $ 248 $ 215 $ 168 $ 137
===========================================================================================================================
PER SHARE OF COMMON STOCK
Income from continuing operations-basic* $ 2.74 $ 2.25 $ 1.82 $ 1.45 $ 1.21 $ .95 $ .78
Income from continuing operations-diluted* $ 2.68 $ 2.19 $ 1.78 $ 1.43 $ 1.19 $ .94 $ .77
Dividends declared $ 1.14 $ 1.00 $ .88 $ .78 $ .70 $ .62 $ .56
Book value at year-end $ 19.27 $ 19.78 $ 19.10 $ 19.96 $ 16.72 $ 15.59 $ 14.05
Common stock price: High $ 80 5/16 $ 70 3/4 $ 48 7/8 $38 11/16 $30 5/16 $29 7/16 $22 3/8
Common stock price: Low $ 52 1/16 $ 45 $ 34 9/16 $ 24 5/16 $ 23 1/4 $20 3/16 $16 7/8
Common stock price: Year-end $75 15/16 $ 62 5/8 $46 11/16 $ 33 3/4 $25 3/16 $ 29 1/8 $22 3/8
Common shares outstanding (in thousands):
Basic average 161,254 164,830 167,453 169,848 176,474 176,071 173,334
Diluted average** 165,374 169,503 171,652 173,252 180,208 179,713 177,087
Year-end 158,549 167,315 169,745 173,340 174,616 180,509 178,366
===========================================================================================================================
FINANCIAL POSITION
Total assets $ 13,721 $ 11,330 $ 11,514 $ 11,207 $ 10,374 $ 10,462 $10,009
Debt:
Textron Manufacturing $ 2,615 $ 1,221 $ 1,507 $ 1,774 $ 1,582 $ 2,025 $ 2,283
Textron Finance $ 2,829 $ 2,365 $ 2,441 $ 2,277 $ 2,162 $ 2,037 $ 1,873
Preferred securities of subsidiary trust $ 483 $ 483 $ 483 $ - $ - $ - $ -
Shareholders' equity $ 2,997 $ 3,228 $ 3,183 $ 3,412 $ 2,882 $ 2,780 $ 2,488
Textron Manufacturing debt to total capital 43% 25% 29% 34% 35% 42% 48%
===========================================================================================================================
INVESTMENT DATA
Capital expenditures $ 475 $ 374 $ 312 $ 258 $ 274 $ 227 $ 199
Depreciation $ 292 $ 254 $ 213 $ 188 $ 201 $ 196 $ 188
Research and development $ 613 $ 602 $ 576 $ 656 $ 611 $ 514 $ 430
===========================================================================================================================
OTHER DATA
Number of employees at year-end 64,000 56,000 49,000 46,000 43,000 46,000 44,000
Number of common shareholders at year-end 23,000 24,000 25,000 26,000 27,000 28,000 30,000
- ---------------------------------------------------------------------------------------------------------------------------
*Before cumulative effect of changes in accounting principles in 1992.
**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.
1998 TEXTRON ANNUAL REPORT 57
</TABLE>
<PAGE>
58 1998 TEXTRON ANNUAL REPORT
Electronic copy intentionally left blank.
<PAGE>
1998 TEXTRON ANNUAL REPORT 59
Electronic copy intentionally left blank.
<PAGE>
TEXTRON BUSINESS DIRECTORY
<TABLE>
<CAPTION>
====================================================================================================================================
<S> <C> <C> <C>
AIRCRAFT BELL HELICOPTER TEXTRON Terry D. Stinson Vertical takeoff and landing aircraft for the U.S.
Chairman and CEO government, foreign governments and commercial
markets.
---------------------------------------------------------------------------------------------------------------------
THE CESSNA AIRCRAFT COMPANY Russell W. Meyer, Jr. Light and mid-size business jets, utility turboprops
Chairman and CEO and single-engine piston aircraft.
====================================================================================================================================
AUTOMOTIVE TEXTRON AUTOMOTIVE COMPANY John A. Janitz Automotive interior and exterior trim; fuel systems;
Acting Chairman, functional components.
President
and CEO
---------------------------------------------------------------------------------------------------------------------
CWC TEXTRON Jed A. Larsen Gray iron and ductile iron castings, primarily
President camshafts for automobile and engine manufacturers.
---------------------------------------------------------------------------------------------------------------------
KAUTEX TEXTRON (WORLDWIDE) Dr. Wolfgang Theis Blow-molded plastic fuel tank systems and other
President automotive functional components.
---------------------------------------------------------------------------------------------------------------------
MCCORD WINN TEXTRON George F. Daniels Automotive windshield and headlamp washing systems,
President seating comfort systems and electro-mechanical
KAUTEX TEXTRON Jane E. Warner components; blow-molded plastic fuel tank systems.
NORTH AMERICA President
---------------------------------------------------------------------------------------------------------------------
MICROMATIC TEXTRON Michael J. Brennan Proprietary machine tools, components and assembly
President systems for automotive and commercial markets.
---------------------------------------------------------------------------------------------------------------------
TEXTRON AUTOMOTIVE TRIM Sam Licavoli Instrument panels, door trim panels, center
President consoles, painted fascias and exterior lighting.
====================================================================================================================================
INDUSTRIAL TEXTRON INDUSTRIAL PRODUCTS Frank J. Feraco Fastening systems, fluid and power systems, golf,
President turf-care and specialty products, and industrial
components.
---------------------------------------------------------------------------------------------------------------------
TEXTRON FASTENING SYSTEMS Randy P. Smith Engineered fastening systems, components, assemblies
President and value-added services for the automotive, aerospace,
electronics, construction, do-it-yourself and
transportation markets.
---------------------------------------------------------------------------------------------------------------------
TEXTRON FASTENING SYSTEMS Randy P. Smith Markets Served; Automotive, aerospace, industrial,
AMERICAS President construction, transportation and logistics services,
including vendor-managed and inventory programs.
----------------------------------------------------------------------------------------------------------------
ADVEL CHERRY TEXTRON Edmund W. Staple TEXTRON FASTENING SYSTEMS- Charles R. O'Brien
President AUTOMOTIVE President
----------------------------------------------------------------------------------------------------------------
ELCO TEXTRON ENGINEERED William R. Jahnke TEXTRON FASTENING SYSTEMS- George W. Dettloff
PRODUCTS President INDUSTRIAL President
----------------------------------------------------------------------------------------------------------------
TEXTRON AEROSPACE Edmund W. Staple TEXTRON LOGISTICS COMPANY James R. Stenberg
FASTENERS President President
</TABLE>
60 1998 TEXTRON ANNUAL REPORT
<PAGE>
TEXTRON BUSINESS DIRECTORY
(CONTINUED)
================================================================================
<TABLE>
<CAPTION>
<S> <C> <C> <C>
INDUSTRIAL TEXTRON FASTENING SYSTEMS Peter G. Wilson Markets Served; Automotive, aerospace, industrial,
(continued) EUROPE President construction, transportation and logistics services,
including vendor-managed and inventory programs.
------------------------------------------- -----------------------------------------------------
TEXTRON FASTENING Horst Homuth TEXTRON INDUSTRIES S.A.S. Henri Gagnaire
SYSTEMS- President President
GERMANY
------------------------------------------- -----------------------------------------------------
TEXTRON FASTENING Andrew R. Taylor
SYSTEMS- Managing
UK Director
---------------------------------------------------------------------------------------------------------------------
TEXTRON FASTENING SYSTEMS Randy Teo Boon Cheong Regions Served; Hong Kong, China, Japan, South Korea,
ASIA/PACIFIC Managing Director Taiwan, Singapore, Australia.
--------------------------------------------------------------------------------------------------------------------------
FLUID AND POWER SYSTEMS Robert A. Geckle Motion control, power transmission, fluid handling
President products for the industrial, commercial, pharmaceutical,
aerospace, transportation and defense industries.
---------------------------------------------------------------------------------------------------------------------
MOTION CONTROL PRODUCTS George A. Andrews Motion control components and systems for industrial,
President defense and aerospace markets. Specific businesses
include: David Brown Hydraulics and HR Textron.
---------------------------------------------------------------------------------------------------------------------
POWER TRANSMISSION Christopher J. Brown Mechanical power transmission components and systems
PRODUCTS President for the industrial, mining, mobile equipment and
transportation markets. Specific businesses include:
Cone Drive Textron, David Brown and Textron Industrial S.p.A.
---------------------------------------------------------------------------------------------------------------------
FLUID HANDLING PRODUCTS Gregory C. Schreiber Pumps and systems used in the plastics, chemical
President oil and gas, and pharmaceutical industries. Specific
businesses include: David Brown Union Pumps and Maag
Pump Systems Textron.
---------------------------------------------------------------------------------------------------------------------
TEXTRON SYSTEMS Richard J. Millman Weapon systems, sensing systems and advanced materials
President for the defense and commercial markets.
--------------------------------------------------------------------------------------------------------------------------
GOLF, TURF-CARE AND Carl D. Burtner Golf cars, lawn and turf-care products, and multi-
SPECIALTY PRODUCTS President purpose utility vehicles.
---------------------------------------------------------------------------------------------------------------------
E-Z-GO TEXTRON L.T. Walden, Jr. Electric- and gasoline-powered golf cars and multi-
President purpose utility vehicles. Specific brand names include:
E-Z-GO and Cushman.
---------------------------------------------------------------------------------------------------------------------
TEXTRON TURF CARE AND Philip J. Tralies Professional mowing and turf maintenance equipment.
SPECIALTY PRODUCTS President Specific brand names include: Bob-Cat, Bunton, Cushman,
AMERICAS Jacobsen, Ryan, Ransomes, Steiner, Brouwer.
---------------------------------------------------------------------------------------------------------------------
TEXTRON TURF CARE AND Harold C. Pinto Turf-care machinery for the golf, municipal and
SPECIALTY PRODUCTS Managing Director commercial markets, and multi-purpose utility vehicles.
EUROPE Specific brand names include: Cushman, E-Z-GO,
Jacobsen, Ransomes, Ryan, Iseki.
==========================================================================================================================
1998 TEXTRON ANNUAL REPORT 61
</TABLE>
<PAGE>
TEXTRON BUSINESS DIRECTORY
(CONTINUED)
<TABLE>
<CAPTION>
====================================================================================================================================
<S> <C> <C> <C>
INDUSTRIAL INDUSTRIAL COMPONENTS Tools and accessories for the wire and cable industry;
(continued) components for the commercial aerospace and
defense industries.
----------------------------------------------------------------------------------------------------------------
GREENLEE TEXTRON Barclay S. Olson Products for wire and cable installation, maintenance
(INCLUDES GERMANY-BASED President and testing in residential, commercial and
KLAUKE) industrial facilities.
================================================================================================================
TEXTRON LYCOMING James A. Koerner Piston aircraft engines and replacement parts for the
President general aviation market.
----------------------------------------------------------------------------------------------------------------
TEXTRON MARINE & G.L. (Topper) Long Air cushion amphibious landing craft, search and rescue
LAND SYSTEMS President craft, armored vehicles, turrets and artillery systems
and advanced suspension systems.
----------------------------------------------------------------------------------------------------------------
TURBINE ENGINE G.L. (Topper) Long Air and land-based gas turbine engine components
COMPONENTS TEXTRON President for engine OEMs.
====================================================================================================================================
FINANCE TEXTRON FINANCIAL Stephen A. Giliotti Commercial financing for the purchase and lease
CORPORATION President of Textron and independent products including:
equipment, aircraft, golf and timeshare; also
provides syndication activity, third-party asset
management and portfolio services.
</TABLE>
62 1998 TEXTRON ANNUAL REPORT
Exhibit 21
TEXTRON INC. - Significant Subsidiaries
(as of 15 March, 1999)
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
Textron Pacific Limited Australia
Textron Systems Corporation Delaware
Turbine Engine Components Textron Inc. Delaware
Avdel Cherry Textron Inc. New York
Bell Helicopter Textron Inc. Delaware
Bell/Agusta Aerospace Company L.L.C. (55%; 45% owned by Delaware
Agusta UK Ltd.)
Bell Helicopter Services Inc. Delaware
Bell Helicopter Asia (Pte) Ltd. Singapore
Burkland Textron Inc. Michigan
Cadillac Gage Textron Inc. Michigan
The Cessna Aircraft Company Kansas
Cone Drive Operations Inc. Delaware
David Brown (Delaware) Holdings Corp. Delaware
David Brown Union Pumps Co. Delaware
Elco Textron Inc. Delaware
Greenlee Textron Inc. Delaware
Datacom Technologies, Inc. Washington
HR Textron Inc. Delaware
MAAG Pump Systems Textron Inc. North Carolina
Ring Screw Textron Inc. Michigan
Textron Asia Inc. Delaware
Textron Atlantic Inc. Delaware
Bell Helicopter Supply Center B.V. Netherlands
Brazaco-Mapri Industrias Metalurgica S.A. Brazil
Camcar Textron (Malaysia) Sdn. Bhd. Malaysia
Jacobsen E-Z-GO Textron A.G. Switzerland
Jacobsen E-Z-GO Textron B.V. Netherlands
Jacobsen E-Z-GO Textron S.r.l. Italy
Kautex Textron Iberica S.A. Spain
Kautex Argentina S.A. Argentina
Kautex do Brasil Ltda. Brazil
Kautex Portugal, Produtos Plasticos Ldas. Portugal
Kautex Textron Benelux N.V. Belgium
Kautex Textron Bohemia spol. s.r.o. Czech Republic
Klauke Handels GmbH Austria
MAAG Pump Systems Textron A.G. Switzerland
MAAG Pump Systems PTE Ltd. Singapore
Textron Acquisition Limited England
Avdel plc/Avdel plc Inc. England/Delaware
Textron Fastening Systems Limited England
Ransomes plc England
Ransomes Investment Corporation Delaware
Ransomes America Corporation Delaware
Cushman Inc. Delaware
Ransomes Inc. Wisconsin
Steiner Turf Equipment Inc. Wisconsin
Name Place of
Incorporation
Textron Fluid and Power Systems Holdings Limited England
David Brown Group plc England
David Brown Corporation plc England
Textron Golf & Turf plc England
Textron Limited England
Kautex Textron Ltd. England
Textron Automotive Company Limited England
Textron Automotive MIP Limited England
AS Textron Limited England
MIP Textron Limited England
Textron Atlantic France Inc. Delaware
Textron Atlantic Holding GmbH Germany
Gustav Klauke GmbH Germany
Gustav Klauke France S.A.R.L. France
Jacobsen E-Z-GO Textron GmbH Rasenpflegesysteme Germany
Kautex Textron Verwaltungs GmbH Germany
Kautex Textron GmbH & Co. K.G. (98%; 1% owned by each Germany
of Jacobsen E-Z-GO Textron GmbH Rasenpflegesysteme
and a subsidiary of Deutsche Bank)
MAAG Pump Systems Textron GmbH Germany
Peiner Umformtechnik GmbH Germany
Textron Verbindungstechnik Beteiligungs GmbH Germany
Textron Verbindungstechnik GmbH & Co. O.H.G. (99%; 1% Germany
owned by Jacobsen E-Z-GO Textron GmbH
Rasenpflegesysteme)
Textron Fastening Systems/Tri-Star Corp., Limited (80%; 20% British Virgin
owned by San Shing Hardware Works Co., Ltd.) Islands
Textron France Inc. Delaware
Textron France S.N.C. (85%; 15% owned by Textron France
Atlantic France Inc.)
Textron France S.A. France
Textron Industries S.A.S. France
Textron Industrial S.p.A. (85%; 15% owned by Textron Italy
International Inc.)
Textron Automotive Company Inc. Delaware
Kaywood Products Corporation Michigan
McCord Corporation Michigan
McCord Winn Textron Inc. Massachusetts
Textron Automotive Interiors Inc. Delaware
Textron Automotive Overseas Investment Inc. Delaware
Textron Automotive B.V. Netherlands
Micromatic Operations Inc. Delaware
Micro-Precision Operations Inc. Delaware
Textron Automotive (Argentina) Inc. Delaware
Textron Automotive Exteriors Inc. Delaware
Textron China Inc. Delaware
Textron FSC Inc. Barbados
Textron Far East Pte. Ltd. Singapore
Textron Financial Corporation Delaware
Systran Financial Services Corporation Delaware
Textron Funding Corporation Delaware
Avco Enterprises, Inc. California
Textron National Bank California
Textron International Inc. Delaware
Textron Logistics Company Inc. Delaware
Name Place of
Incorporation
Textron Properties Inc. Delaware
Textron Canada Limited (64.5%; 35.5% owned by Textron Inc.) Canada
Kautex Corporation Ontario
Textron Realty Corporation Delaware
Textron S.A. de C.V. (99%; 1% owned by Textron Atlantic Inc.) Mexico
Camcar Textron de Mexico, S.A. de. C.V. Mexico
Kautex Textron de Mexico, S.A. de C.V. Mexico
Kautex Textron Management Services Company de Puebla, Mexico
S.A. de C.V.
Textron Automotive Company de Mexico, S.A. de C.V. Mexico
Textron Automotive Management Services Company de Mexico, Mexico
S.A. de C.V.
Turbine Engine Components Textron (Cleveland Operations) Inc. Delaware
Turbine Engine Components Textron (Newington Operations) Inc. Connecticut
Turbine Engine Components Textron (Santa Fe Springs California
Operations) Inc.
Wolverine Metal Specialties Inc. Michigan
Xact Textron Inc. Delaware
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
26, 1999, included in the 1998 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. 33-63227, Form S-8 No. 333-
50931, Form S-8 No. 333-07121, Form S-8 No. 33-63741, Form S-8
No. 33-57025, Form S-8 No. 33-38094, and Form S-8 No. 33-19402)
of Textron Inc. and in the related Prospectuses and Prospectus
Supplements of our report dated January 26, 1999, 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 January 2, 1999.
Boston, Massachusetts
March 8, 1999
Exhibit 24.1
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 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 January 2, 1999, 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 24th day of February, 1999.
TEXTRON INC.
By: /s/Lewis B. Campbell
Lewis B. Campbell
Chairman, President and Chief
Executive Officer
ATTEST:
/s/ Frederick K. Butler
Frederick K. Butler
Vice President and Secretary
/s/ Lewis B. Campbell /s/Brian H. Rowe
Lewis B. Campbell Brian H. Rowe
Chairman, President and Chief Director
Executive Officer, Director
/s/J. Jesse Arnelle /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/Lawrence K. Fish /s/Martin D. Walker
Lawrence K. Fish Martin D. Walker
Director Director
/s/Joe T. Ford /s/Thomas B. Wheeler
Joe T. Ford Thomas B. Wheeler
Director Director
/s/Paul E. Gagne /s/Stephen L. Key
Paul E. Gagne Stephen L. Key
Director Executive Vice President
and Chief Financial Officer
/s/John D. Macomber (principal financial officer)
John D. Macomber
Director /s/Richard L. Yates
Richard L. Yates
/s/Dana G. Mead Vice President and Controller
Dana G. Mead (principal accounting officer)
Director
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 24, 1999, 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 January 2, 1999, 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 15th
day of March, 1999.
/s/Ann T. Willaman
CORPORATE SEAL Assistant Secretary
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedue contains summary financial information extracted
from Textron Inc.'s Consolidated Balance Sheet as of January
2, 1999 and Consolidated Statement of Income for the year
ended January 2, 1999 and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-02-1999
<PERIOD-END> JAN-02-1999
<CASH> 53
<SECURITIES> 0
<RECEIVABLES> 4,772
<ALLOWANCES> 84
<INVENTORY> 1,640
<CURRENT-ASSETS> 4,355
<PP&E> 4,092
<DEPRECIATION> 1,887
<TOTAL-ASSETS> 13,721
<CURRENT-LIABILITIES> 3,919
<BONDS> 5,444
<COMMON> 24
0
13
<OTHER-SE> 2,960
<TOTAL-LIABILITY-AND-EQUITY> 13,721
<SALES> 9,316
<TOTAL-REVENUES> 9,683
<CGS> 7,572
<TOTAL-COSTS> 7,572
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 20
<INTEREST-EXPENSE> 315
<INCOME-PRETAX> 763
<INCOME-TAX> 294
<INCOME-CONTINUING> 443
<DISCONTINUED> 165
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 608
<EPS-PRIMARY> 3.77
<EPS-DILUTED> 3.68
</TABLE>
