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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 1, 2000
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)
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Securities registered pursuant to Section 12(b) of the Act:
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<CAPTION>
Name of Each Exchange on
TITLE OF CLASS Which
-------------- Registered
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CommonStock - par value 12 1/2(cent) (146,644,476 shares New York Stock Exchange
outstanding at February 25, 2000); 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 3/4% 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)
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Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes [X]. No [ ].
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
The aggregate market value of voting stock held by non-affiliates of
the registrant is $8,786,671,897 as of February 25, 2000.
Portions of Textron's Annual Report to Shareholders for the fiscal
year ended January 1, 2000, 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 26, 2000, are incorporated by reference in Part
III of this Report.
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PART I
ITEM 1. BUSINESS OF TEXTRON
We are a global multi-industry company with operations in four
business segments - Aircraft, Automotive, Industrial and Finance. Our products
include commercial and military helicopters, light and mid-size business jets,
plastic fuel tanks, automotive trim products, golf cars and utility vehicles,
turf-care equipment, industrial pumps and gears, engineered fastening systems
and solutions, and other industrial products. We also are a leading commercial
finance company for select markets. Our business segments include operations
that are unincorporated divisions of Textron Inc. or its subsidiaries and others
that are separately incorporated subsidiaries.
BUSINESS SEGMENTS
This section contains a description of the business done by each of our
business segments. Financial information by business segment and geographic area
appears on pages 28, 60 and 61 of our 1999 Annual Report to Shareholders. Those
pages of our Annual Report to Shareholders are incorporated by reference into
this Annual Report on Form 10-K.
AIRCRAFT SEGMENT. Our Aircraft segment consists of Bell Helicopter
Textron Inc. and The Cessna Aircraft Company.
Bell Helicopter Textron
Based on unit sales, Bell is the largest supplier of helicopters, spare
parts and helicopter-related services in the world. Since Bell was founded in
1946, it has delivered over 34,000 aircraft to military and civilian customers.
Bell currently manufactures four military and six civilian helicopter models.
Current Bell aircraft are turbine powered and range in size from the five-place
Bell Model 206 series to the Bell Model 412EP aircraft, which carries up to
fifteen people. Bell's revenues accounted for approximately 13%, 15% and 18% of
our total revenues in 1999, 1998 and 1997.
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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. Bell makes
military sales to non-U.S. customers 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 50% to 65% of its annual
sales.
Bell is teamed with The Boeing Company 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 began in 1999.
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 will engage in
the design, manufacture, sale and customer support of the commercial 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 has developed a new light twin-engine helicopter, designated the
Model 427, in collaboration with Samsung Aerospace Industries Ltd. of South
Korea. Bell has begun manufacturing the Model 427 and will begin deliveries in
2000.
In July 1999, we acquired Edwards & Associates, Inc., a leading company
in the manufacture, sale and assembly of helicopter customization kits and
accessories and the sale of used Bell helicopters.
In the light and medium helicopter market segments, Bell has two major
U.S. competitors and one major European competitor. Some of its competitors are
substantially larger and more
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diversified aircraft manufacturers. Bell markets its products around the world
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.
The Cessna Aircraft Company
Based on unit sales, Cessna 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. Cessna's
revenues accounted for approximately 19%, 18% and 17% of our total revenues in
1999, 1998 and 1997.
The family of business jets currently produced by Cessna includes the
CitationJet, the Citation Bravo, the Citation Ultra, the Citation 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 1999, Cessna delivered its
3,000th business jet. 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 1,100 Caravans have been sold by Cessna since the first Caravan was
delivered in 1985. Caravans are offered in four distinct models: 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, humanitarian
flights, tourism and freight.
Cessna re-entered the single engine piston aircraft market in 1996 and
now has 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. In 1999, Cessna delivered its 2,000th single engine piston aircraft
since production was restarted.
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
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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 and spare parts for service and
repairs worldwide. All new Cessna single engine piston aircraft built in 1998
and 1999 used McCauley propellers.
AUTOMOTIVE SEGMENT. Our Automotive segment, organized under an umbrella
organization called Textron Automotive Company Inc., consists of Textron
Automotive Trim, CWC Textron, Kautex Textron, McCord Winn Textron and Micromatic
Textron. Some of our Automotive operations are unincorporated divisions of
Textron Inc. or its subsidiaries and others are separately incorporated
subsidiaries. These operations sell primarily to automotive original equipment
manufacturers and their suppliers operating in North America and Europe, and, to
a lesser extent, South America and Asia. Textron Automotive is headquartered in
Troy, Michigan and has over sixty manufacturing facilities located in Argentina,
Belgium, Brazil, Canada, China, the Czech Republic, Germany, India, Italy,
Mexico, the Netherlands, Portugal, Spain, the United Kingdom and the U.S.
Through its Textron Automotive Trim operations, Textron Automotive is a
leading worldwide supplier of automotive interior and exterior plastic
components and systems. Interior trim products include instrument panels, door
and sidewall trim, airbag doors, consoles, armrests, package trays and other
trim components. In addition, Textron Automotive'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
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systems. Revenues of Textron Automotive Trim Operations accounted for 16%, 15%
and 16% of our total revenues in 1999, 1998 and 1997.
In May 1999, Textron Automotive formed a joint venture in Italy with
Gallino Plasturgia S.r.l., a wholly-owned subsidiary of BREED Technologies,
Inc., and Magneti Marelli S.p.A. The joint venture, Textron Breed Automotive
S.r.l., has six manufacturing and administrative facilities in Italy and
manufactures automotive plastic parts, including instrument panels, bumpers, and
exterior and interior trim parts for sale to original equipment manufacturers
such as Fiat Auto. The automotive parts manufactured by Textron Breed Automotive
will also be incorporated into interior cockpit modules assembled by a second
joint venture, Magneti Marelli Integra S.p.A, between Textron Breed Automotive
and Magneti Marelli.
CWC Textron designs and manufactures engine camshafts and vibration
damper components for original equipment manufacturers and the aftermarket.
Through its Kaywood Products operation, CWC manufactures precision machined
parts and components for assembled camshafts.
Kautex Textron is a leading manufacturer of blow-molded plastic fuel
tank systems and other blow-molded parts for original equipment manufacturers
throughout Europe, North America, South America and parts of Asia. 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 plastic fuel tanks and metal fuel filler
systems in its North American operations.
McCord Winn Textron manufactures seating comfort systems, windshield
and headlamp washer systems, and armatures for precision direct current motors.
McCord Winn's ASCTec (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 Winn continues to expand applications of its new RITec
(Reservoir Integrated Technology) product, an innovative integration of
automotive cooling system components including the fan shroud and windshield
washer and coolant reservoirs. McCord Winn launched a RITec production program
with DaimlerChrysler in 1999, and other RITec development programs are in
progress.
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Micromatic Textron manufactures machine tools used for precision bore
and surface finishing of automobile engines. In addition, Micromatic produces
equipment for spline rolling and gear production. In April 1999, Micromatic
acquired the assets of Bates Technologies, Inc. an Indiana manufacturer of
honing products, including stones, abrasives and tooling, for the automotive and
other industries.
More than 100 models currently contain parts made by Textron Automotive
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; Fiat's Punto
and Bravo/Brava; and VW/Audi's Golf, Passat, Polo, T4, Beetle and A4. Textron
Automotive continues its strong position on DaimlerChrysler's LH series of cars.
Textron Automotive's manufacturing operations are supported by a staff
of research and design specialists at its Automotive Technology Center. These
specialists have developed new processes and products, many of which are
patented, that allow Textron Automotive to offer its customers technology-driven
products and processes. In the plastics and coatings area, Textron Automotive is
a recognized leader in interior surface material (including Textron Automotive's
proprietary PVC-free thermoplastic polyurethane 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 Winn is working with original equipment manufacturers
world-wide to develop advanced technologies in areas such as "intelligent"
comfort seating systems, brushless motors and carbon commutation for flexible
fuel applications.
In the automotive business, there is often a long lead time from the
time a supplier is selected to supply components on a new model to the time the
supplier can begin shipping production parts. During this period, the supplier
incurs engineering and development costs. The original equipment manufacturers
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
original
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equipment manufacturers often demand just-in-time delivery, requiring the
supplier to plan shipments in advance and hold inventory.
Automotive original equipment manufacturers and their suppliers are the
principal customers of Textron Automotive. The loss of U.S. and Europe-based
automotive original equipment manufacturers and their first-tier suppliers would
have a material adverse effect on Textron Automotive. However, because of the
broad range of products sold to such customers, it is unlikely that they would
cease all purchases from Textron Automotive.
Each of Textron Automotive's businesses faces competition from a number
of other manufacturers based primarily on price, quality, reputation and
delivery. Although Textron Automotive 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, Textron Automotive also competes for business with the original
equipment manufacturers' own operations. Textron Automotive is under continual
pressure from the original equipment manufacturers to reduce costs and prices on
an annual basis.
INDUSTRIAL SEGMENT. Our Industrial segment consists of Textron
Fastening Systems and Textron Industrial Products, and includes some operations
that are divisions of Textron Inc. or its subsidiaries and others that are
separately incorporated subsidiaries.
Textron Fastening Systems
Textron Fastening Systems (TFS) manufactures and sells fasteners,
fastening systems, engineered assemblies and installation tools to the
aerospace, appliance, automotive, business equipment, telecommunications,
electronics, medical, construction, do-it-yourself and general industrial
markets. TFS sells to a wide range of customers throughout the world, including
original equipment manufacturers, 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. TFS provides value-added products, services and
solutions that simplify manufacturing processes and maximize efficiencies
resulting in lower total system costs to the customer. In addition, TFS 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
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from a single source. Revenues of TFS accounted for approximately 18%, 18% and
17% of our total revenues in 1999, 1998 and 1997.
In April 1999, we acquired Flexalloy, Inc., one of the largest North
American providers of vendor managed inventory for fasteners and other related
products. Flexalloy provides approximately 300 customers with value-added
services complementary to TFS's existing products, including inventory
management systems, sourcing and purchasing expertise, just-in-time delivery
capabilities, fastener engineering, quality assurance testing, and kitting and
assembly services. Our existing vendor managed inventory operation, Textron
Logistics, was combined with Flexalloy to create one of the leading
non-automotive vendor managed inventory providers, with particular emphasis on
truck manufacturers and retail establishments. TFS continues to provide vendor
managed inventory services to General Motors, Ford, DaimlerChrysler and to U.S.
operations of non-U.S. auto makers.
In May 1999, Textron Fastening Systems/Tri-Star Corp., our Taiwanese
joint venture with Taiwan-based San Shing Hardware Works Company, Ltd., Taiwan's
largest fastener manufacturer, commenced operations. We hold an 80% interest in
the joint venture company, which will initially manufacture bolts for the
automotive, electronics and appliance industries and will, thereafter, serve as
a low-cost manufacturing site for a broad range of TFS products.
In August 1999, we acquired the assets of Aylesbury Automation Limited,
a U.K.-based manufacturer of self-piercing and cold-forged rivets, and
automation systems for a variety of applications including automotive and
electronics. Aylesbury's key product lines include self-piercing rivets sold
under the brand name Fastriv, and automation systems which include delivery
systems for installing Fastriv rivets, vibratory parts feeders, rotary tables
and elevators for use in various industrial processes, as well as standard,
automated rivet setting machines. Self-piercing rivet technology provides a
stronger solution for fastening dissimilar metals than can be achieved with
welding or traditional fasteners.
In October 1999, we acquired InteSys Technologies, Inc., an
Arizona-based provider of plastic and metal engineered assemblies for the
telecommunications, automotive, computer/business machines, medical and general
consumer industries. InteSys provides innovative, state-of-the-art design,
plastic injection molding and assembly to customers such as Nokia, Alco, Bosch,
Hewlett Packard, IBM, Motorola and General Motors.
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In December 1999, we acquired Optical Boring Company and a 70% interest
in Cam Tooling LLC (to augment the 30% interest we already owned). Optical
Boring and Cam Tooling are engaged in the proprietary design and manufacture of
fastener tooling, specializing in critical part carbide and steel dies,
anti-crossthread dies, die assemblies, hex punch pins and segmented punch
assemblies, paint scraper forming inserts and extrusion tooling.
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 that may be sourced from smaller
companies. Only the loss of a customer that is a major original equipment
manufacturer would have a material adverse effect on TFS. However, because of
the broad range of products sold to such customers, it is unlikely that these
customers will cease all purchases from TFS.
Textron Industrial Products
Textron Industrial Products is comprised of the following groups:
Textron Fluid and Power Systems; Textron Golf, Turf Care and Specialty Products;
Greenlee Textron; OmniQuip Textron; and Textron Industrial Components.
TEXTRON FLUID AND POWER SYSTEMS
Our Fluid and Power Systems group consists of Textron Motion Control,
Textron Power Transmission, Textron Fluid Handling and Textron Systems. These
operations face competition from other manufacturers based primarily on price,
quality, product support, performance, delivery and reputation.
Our Textron Motion Control businesses, HR Textron and David Brown
Hydraulics, design and manufacture control systems and components for aircraft,
armored vehicles and commercial applications. These businesses are in the
process of diversifying their business base by adapting aerospace technology to
servovalves used in industrial and automotive applications. Aerospace and
defense products are marketed directly to the U.S. Government, other governments
and original equipment manufacturers and, in the aftermarket, both directly and
through service centers. In June 1999, we acquired Energy Mfg. Co., Inc. and
Williams Machine
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& Tool Co., each manufacturers of mobile hydraulic cylinders and hydraulic
valves, pumps and reservoirs for the truck hoist market.
Our Textron Power Transmission businesses are 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. In December 1999, we acquired AB Benzlers, a Swedish manufacturer
of helical, worm and environmental gears, speed reducers, screw jacks and
frequency inverters, and its European, Asian and Australian distribution
subsidiaries. David Brown Mobile Equipment Drives designs and manufactures
mechanical and hydraulic transmission systems. These products are sold to a
variety of customers, including original equipment manufacturers, distributors
and end-users.
Our Textron Fluid and Handling 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 original equipment manufacturers, distributors and end-users. In
March 1999, we acquired the Fluid Systems Division of LCI Corporation
International, which designs and manufactures polymer filtration products and
systems, including pumping products, screen changers, static mixers and heat
exchangers. This operation has been added to Maag Pump Systems. In December
1999, we acquired KSB Annecy SAS, a French manufacturer of pumps for the oil,
gas and nuclear industries that we renamed David Brown Guinard Pumps SAS.
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. 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.
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TEXTRON GOLF, TURF CARE AND SPECIALTY PRODUCTS
Our Golf, Turf Care and Specialty Products group consists of E-Z-GO
Textron and Textron Turf Care and Specialty Products. E-Z-GO Textron designs,
manufactures and sells electric-powered and gasoline-powered golf cars and
multipurpose utility vehicles. Textron Turf Care and Specialty Products designs,
manufactures and sells professional turf maintenance equipment, lawn care
machinery and specialized industrial vehicles under the trade names Bob-Cat,
Brouwer, Bunton, Cushman, Jacobsen, Ransomes, Ryan and Steiner.
The customers of our Golf, Turf Care and Specialty Products group
consist primarily of golf courses, resort communities, and commercial and
industrial users such as airports, factories and professional lawn care
services. Sales are made 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.
Our Golf, Turf Care and Specialty Products group has two major
competitors for golf cars, two major competitors for professional turf
maintenance equipment, and a number of smaller competitors for multipurpose
utility vehicles and professional lawn care machinery. Competition is based
primarily on price, quality, product support, performance, reliability and
reputation.
GREENLEE TEXTRON
Our Greenlee Textron group consists of Greenlee Textron and several
operations reporting through Greenlee, including Datacom Technologies, Fairmont
and Klauke. These businesses manufacture powered equipment, electrical test
instruments, hand and hydraulic powered tools, electrical connectors and
certification and verification products for information technology networks. The
products are principally used in electrical construction and maintenance,
telecommunications, electronics, plumbing, and power generation and
transmission. In October 1999, we acquired Progressive Electronics, which
designs and manufactures test and measurement equipment for the
telecommunications, electrical, electronic, voice/data, HVAC, security alarm and
irrigation industries. In December 1999, we acquired Rifocs Corp., which
manufactures fiber optic test and measurement instruments and components for
industrial, commercial and aerospace defense technologies. Our Greenlee Textron
group faces competition
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from numerous other manufacturers based primarily on price, quality,
performance, reliability, delivery and reputation.
OMNIQUIP TEXTRON
We acquired OmniQuip International, Inc. in September 1999. OmniQuip
produces telescopic material handlers, aerial work platforms and compact
construction equipment under the trade names SkyTrak, Lull and Snorkel. It has
16 facilities located in the U.S., U.K., Australia and New Zealand employing
approximately 1,700 people. Large national equipment rental fleets account for
more than 50% of sales. Remaining sales are to end-users through independent
distributors and rental centers. End-users are usually construction
sub-contractors such as masons, framers, steel erectors and roofers. OmniQuip
competes in a fragmented market against a variety of manufacturers. Competition
is based primarily on price, quality, product support, performance, delivery and
reputation.
TEXTRON INDUSTRIAL COMPONENTS
Our Industrial Components group consists of 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 original equipment manufacturers, the U.S. and
foreign governments, distributors and end-users. The principal competitive
factors affecting sales of the products of the Textron Industrial Components
group are price, quality, customer service, performance, reliability, reputation
and existing product base.
Textron Lycoming is the world leader in the design, manufacture and
overhaul of reciprocating piston aircraft engines serving the world-wide 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 world-wide network of independently owned distributors.
Textron Marine & Land Systems is a world leader in the design and
construction of advanced technology, specialty marine and land systems. Textron
Marine & Land Systems manufactures high performance hovercraft, such as air
cushion landing craft and search and
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rescue vessels, and the Cadillac Gage family of armored vehicles and turrets,
with 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 SEGMENT. Our Finance segment consists of Textron Financial
Corporation (TFC) and its subsidiaries. TFC is a diversified commercial finance
company with core operations in three active segments: term loans and leases,
revolving credit and specialty finance. Term lending and leasing activity is
focused in aircraft, equipment and golf finance. Revolving credit products
consist primarily of dealer inventory finance, asset-based lending and
factoring, and working capital loans. Specialty finance operations include
broadcast media finance, franchise finance, resort receivables finance and
structured investment grade transactions. TFC's other financial services and
products include transaction syndications, equipment appraisal and management,
portfolio servicing and insurance brokerage.
TFC's financing activities are confined almost exclusively to
commercial markets and to lease and secured lending products. TFC's services are
offered primarily in North America and, to a minor extent, in South America,
Europe and Australia. However, TFC does finance Textron products, principally
Bell helicopters and Cessna aircraft, world-wide.
In March 1999, we acquired a specialized equipment financing portfolio
from Southern Capital Corporation. In July 1999, we acquired RFC Capital, a
revolving credit finance company serving commercial customers in the
telecommunications industry. In October 1999, we acquired the aircraft and
franchise finance divisions of Green Tree Financial Servicing Corporation. In
November 1999, we acquired Litchfield Financial Corporation, a commercial
finance company specializing in financing arrangements for vacation interval
sales, land lot sales and other receivables-oriented transactions.
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
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companies, insurance companies, commercial finance companies and finance
companies that are subsidiaries of banking institutions. Competition within the
commercial finance industry is primarily focused on price, terms 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 37 of
Textron's 1999 Annual Report to Shareholders, which page is incorporated herein
by reference.
Approximately 49% of Textron's total backlog of $9.1 billion at January
1, 2000, represents orders which are not expected to be filled within the 2000
fiscal year. At January 1, 2000, approximately 98% of the total government
backlog of $2.0 billion was funded.
GOVERNMENT CONTRACTS
In 1999, 23% of the revenues of our Aircraft segment and 9% of the
revenues of our Industrial segment, constituting in the aggregate 11% of our
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.
Our contracts with the U.S. Government generally may be terminated in
whole or in part at the convenience of the U.S. Government or if we are in
default. If the U.S. Government terminates a contract for convenience, we
normally will be entitled (up to a maximum equal to the contract price) to
reimbursement for allowable costs incurred, increased or decreased by our
expected profit or loss had the contract been completed. If, however, the U.S.
Government terminates a contract for default: (a) we will be paid an agreed-upon
amount for manufacturing materials and partially completed products accepted by
the U.S. Government; (b) the U.S. Government will not be liable for our costs
with respect to unaccepted items and will be entitled to repayment of advance
payments and progress payments related to the terminated portions of the
contract; and (c) we might be liable for excess costs incurred by the U.S.
Government in procuring undelivered items from another source.
15
<PAGE> 16
RESEARCH AND DEVELOPMENT
Information regarding our research and development expenditures is
contained on page 55 of our 1999 Annual Report to Shareholders. This page is
incorporated herein by reference into this Annual Report on Form 10-K.
PATENTS AND TRADEMARKS
We own, or are licensed under, numerous patents throughout the world
relating to products, services and methods of manufacturing. Patents 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 our opinion,
materially affect the conduct of our business.
We also own trademarks, trade names and service marks that are
important to our business. Some of these trademarks, trade names and service
marks are used in this Annual Report on Form 10-K: Textron, Textron Automotive
Company, Textron Automotive Trim, Textron Fastening Systems, Textron Golf, Turf
Care and Specialty Products, Textron Fluid and Power Systems, Textron Industrial
Components, Textron Marine & Land Systems, Textron Financial Corporation, AB139,
BA609, Bell Helicopter Textron, Bell Model 206, Bell Model 412EP, Bell Model
427, V-22 Osprey, The Cessna Aircraft Company, Cessna Caravan, 172 Skyhawk, 172
Skyhawk SP, 182 Skyhawk, 206 Stationair, T206 Turbo Stationair, Cessna Citation,
CitationJet, Citation Bravo, Citation Ultra, Citation Excel, Citation VII,
Citation X, Citation CJ1, Citation CJ2, Citation Encore, Citation Sovereign,
McCauley Propeller, CWC, Kautex Textron, McCord Winn Textron, Micromatic
Textron, Kaywood Products, ASCTec, RITec, Cam Tooling, Fastriv, Flexalloy,
InteSys, Optical Boring, Tri-Star Corp., Bob-Cat, Brouwer, Bunton, Cushman,
E-Z-GO, Jacobsen, Ransomes, Ryan, Steiner, AB Benzlers, Cone Drive, David Brown,
David Brown Guinard Pumps, David Brown Hydraulics, David Brown Mobile Equipment
Drives, David Brown Union Pumps, HR Textron, Maag Pump Systems, Textron
Industrial S.p.A., Textron Motion Control, Textron Power Transmission, Textron
Fluid Handling, Textron Systems, Lull, OmniQuip Textron, Sky Trak, Snorkel,
Cadillac Gage, Textron Lycoming, Datacom, Fairmont, Greenlee Textron, Klauke,
Progressive Electronics, Rifocs, RFC Capital, Litchfield Financial Corporation
and their related trademark designs and logotypes (and variations of the
foregoing) are trademarks, trade names or service marks of Textron Inc., its
subsidiaries, affiliates, or joint ventures.
16
<PAGE> 17
ENVIRONMENTAL CONSIDERATIONS
Our operations are subject to numerous laws and regulations designed to
protect the environment. Compliance with these laws and expenditures for
environmental control facilities have not had a material effect on our capital
expenditures, earnings or competitive position. Additional information regarding
environmental matters is contained on pages 36 and 53 of our 1999 Annual Report
to Shareholders. These pages are incorporated by reference into this Annual
Report on Form 10-K.
EMPLOYEES
At January 1, 2000, we had approximately 68,000 employees.
ITEM 2. PROPERTIES
At January 1, 2000, we operated a total of 204 plants located throughout
the U.S. and 126 plants outside the U.S. Of the total of 330 plants, we owned
171 and the balance were leased. In the aggregate, the total manufacturing space
was approximately 38 million square feet.
In addition, we own or lease offices, warehouse and other space at
various locations throughout the U.S. and outside the U.S. We consider the
productive capacity of the plants operated by each of our business segments to
be adequate. In general, our 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
We are subject to legal proceedings arising out of the conduct of our
business. These proceedings include claims arising from private transactions,
government contracts, product liability, and environmental, safety and health
matters. Some of these legal proceedings seek damages, fines or penalties in
substantial amounts or remediation of environmental contamination. Under federal
government procurement regulations, certain claims brought by the U.S.
Government could result in our suspension or debarment from U.S. Government
contracting for a period of time. On the basis of information presently
available, we believe that these suits and proceedings will not have a material
effect on our net income or financial condition.
17
<PAGE> 18
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of our security holders during the
last quarter of the period covered by this Annual Report on Form 10-K.
EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information concerning our
executive officers as of March 15, 2000. Unless otherwise indicated, the
employer is Textron Inc.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Lewis B. Campbell 53 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 57 President and Chief Operating Officer since March 1999; formerly
Chairman, President and Chief 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 52 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 47 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.
Stephen L. Key 56 Executive Vice President and Chief Financial Officer since 1995;
formerly Executive Vice President and Chief Financial Officer of
ConAgra, Inc., 1992 to 1995.
Terrence O'Donnell 56 Executive Vice President and General Counsel since March 2000; Partner,
Williams & Connolly since 1992.
</TABLE>
18
<PAGE> 19
PART II
ITEM 5. MARKETS FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Our Common Stock is traded on the New York, Chicago and Pacific Stock
Exchanges. At January 1, 2000, there were approximately 22,000 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 62 of our 1999 Annual Report to Shareholders is incorporated by reference
into this Annual Report on Form 10-K.
On December 16, 1999, we issued 432,288 shares of Textron Common Stock
in exchange for all the outstanding shares of Rifocs Corp. This issuance of
Textron Common Stock was exempt from registration under the Securities Act of
1933 pursuant to Section 4(2) of that Act because it did not involve a public
offering.
ITEM 6. SELECTED FINANCIAL DATA
The information appearing under "Selected Financial Information" on page
63 of our 1999 Annual Report to Shareholders is incorporated by reference into
this Annual Report on Form 10-K.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
"Management's Discussion and Analysis," appearing on pages 29 through 38
of our 1999 Annual Report to Shareholders is incorporated by reference into this
Annual Report on Form 10-K.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
"Quantitative Risks Measures," appearing on page 36 of our 1999 Annual
Report to Shareholders is incorporated by reference into this Annual Report on
Form 10-K.
19
<PAGE> 20
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements and supplementary information
contained in our 1999 Annual Report to Shareholders and the Financial Statement
Schedules, as listed in the Index to Financial Statements and Financial
Statement Schedules attached to this Annual Report on Form 10-K, 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 3 through 6 of the Proxy Statement for our Annual
Meeting of Shareholders to be held on April 26, 2000, is incorporated by
reference into this Annual Report on Form 10-K.
Information regarding Textron's executive officers is included on page
18 of Part I of this Annual Report on Form 10-K.
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 21 of the Proxy Statement for our Annual
Meeting of Shareholders to be held on April 26, 2000, is incorporated by
reference into this Annual Report on Form 10-K.
20
<PAGE> 21
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 page 10 of the
Proxy Statement for our Annual Meeting of Shareholders to be held on April 26,
2000, is incorporated by reference into this Annual Report on Form 10-K.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information appearing under "Transactions with Management" on page
20 of the Proxy Statement for our Annual Meeting of Shareholders to be held on
April 26, 2000, is incorporated by reference into this Annual Report on Form
10-K.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 10-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 10.17 below are management
contracts or compensatory plans, contracts or
agreements.
10.1A 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.
21
<PAGE> 22
10.1B Amendment to Annual Incentive Compensation Plan for
Textron Employees. Incorporated by reference to
Exhibit 10.1 to Textron's Quarterly Report on Form
10-Q for the fiscal quarter ended July 3, 1999.
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. Incorporated by reference to Exhibit
10.2B to Textron's Annual Report on Form 10-K for the
fiscal year ended January 2, 1999.
10.2C Amendment to Deferred Income Plan for Textron Key
Executives. Incorporated by reference to Exhibit 10.2
to Textron's Quarterly Report on Form 10-Q for the
fiscal quarter ended July 3, 1999.
10.2D Amendment 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. Incorporated by reference to Exhibit
10.4B to Textron's Annual Report on Form 10-K for the
fiscal year ended January 2, 1999.
10.4C Amendment to Supplemental Benefits Plan for Textron
Key Executives. Incorporated by reference to Exhibit
10.3 to Textron's Quarterly Report on Form 10-Q for
the fiscal quarter ended July 3, 1999.
10.4D Amendment 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. Incorporated by reference to Exhibit
10.5B to Textron's Annual Report on Form 10-K for the
fiscal year ended January 2, 1999.
22
<PAGE> 23
10.5C Amendment to Supplemental Retirement Plan for Textron
Key Executives. Incorporated by reference to Exhibit
10.4 to Textron's Quarterly Report on Form 10-Q for
the fiscal quarter ended July 3, 1999.
10.5D Amendment to Supplemental Retirement Plan for Textron
Key Executives.
10.6A 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.
10.6B Amendment to Survivor Benefit Plan for Textron Key
Executives. Incorporated by reference to Exhibit 10.5
to Textron's Quarterly Report on Form 10-Q for the
fiscal quarter ended July 3, 1999.
10.7A 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.
10.7B 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.
10.7C 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.
10.8A 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.
10.8B Amendment to 1994 Plan. Incorporated by reference to
Exhibit 10.9B to Textron's Annual Report on Form 10-K
for the fiscal year ended January 2, 1999.
10.8C Amendment to 1994 Plan. Incorporated by reference to
Exhibit 10.6 to Textron's Quarterly Report on Form
10-Q for the fiscal quarter ended July 3, 1999.
10.8D Amendment to 1994 Plan.
10.9 Textron 1999 Long Term Incentive Plan
10.10 Form of Indemnity Agreement between Textron and its
directors and executive officers. Incorporated by
reference to Exhibit A to Textron's
23
<PAGE> 24
Proxy Statement for its Annual Meeting of
Shareholders on April 29, 1987.
10.11 Deferred Income Plan for Non-Employee Directors.
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.
10.13C Retention Award granted to Lewis B. Campbell on
June 1, 1999.
10.14 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.
10.15 Employment Agreement between Textron and John A.
Janitz dated May 25, 1999.
10.16 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.
10.17 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.
10.18 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
24
<PAGE> 25
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 28 through 63 and pages 66 through
68) of Textron's 1999 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
No reports on Form 8-K were filed during the quarter ended
January 1, 2000.
25
<PAGE> 26
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 17th day of March 2000.
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 17th day of March 2000, by the
following persons on behalf of the registrant and in the capacities indicated:
NAME TITLE
---- -----
* Chairman and Chief Executive Officer, Director
- ---------------------
Lewis B. Campbell
* President and Chief Operating Officer, Director
- ---------------------
John A. Janitz
* Director
- ---------------------
H. Jesse Arnelle
26
<PAGE> 27
* Director
- ---------------------
Teresa Beck
* Director
- ---------------------
R. Stuart Dickson
* Director
- ---------------------
Lawrence K. Fish
* Director
- ---------------------
Joe T. Ford
* Director
- ---------------------
Paul E. Gagne
* Director
- ---------------------
John D. Macomber
* Director
- ---------------------
Brian H. Rowe
* Director
- ---------------------
Sam F. Segnar
27
<PAGE> 28
Director
- ---------------------
Jean Head Sisco
* Director
- ---------------------
Martin D. Walker
* Director
- ---------------------
Thomas B. Wheeler
* Executive Vice President and
- --------------------- Chief Financial Officer
Stephen L. Key (principal financial officer)
* Vice President and Controller
- --------------------- (principal accounting officer)
Richard L. Yates
*By: /s/ Michael D. Cahn
Michael D. Cahn
Attorney-in-fact
28
<PAGE> 29
TEXTRON INC.
INDEX TO FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULES
ITEM 14(a)
<TABLE>
<CAPTION>
Form Annual Report to
TEXTRON INC. 10-K Shareholders
- ------------ ---- ----------------
<S> <C> <C>
Report of Independent Auditors 39
Consolidated Statement of Income for each of the three years 40
in the period ended January 1, 2000
Consolidated Balance Sheet at January 1, 2000 41
Consolidated Statement of Cash Flows for each of the three 42
years in the period ended January 1, 2000
Consolidated Statement of Changes in Shareholders' Equity 44
for each of the three years in the period ended January
1, 2000
Notes to Consolidated Financial Statements 45-61
Revenues and Income by Business Segment 28
Supplementary Information (Unaudited):
Quarterly Financial Information 1999 and 1998 62
Financial Statement Schedule for each of the three years in
the period ended January 1, 2000
I Condensed financial information of registrant 30
</TABLE>
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.
29
<PAGE> 30
TEXTRON INC.
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
For each of the three years in the period ended January 1, 2000
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 40 through 44 of Textron's 1999 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 $869
million in 1999 and $473 million in 1998.
Textron Manufacturing received dividends of $36 million, $62 million
and $74 million from Textron Finance in 1999, 1998 and 1997, respectively.
Lending agreements limit Textron Finance's net assets available for cash
dividends and other payments to Textron Manufacturing to approximately $332
million of Textron Finance's net assets of $869 million at year-end 1999.
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 49 and 50 of Textron's 1999 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 10 to the consolidated financial
statements appearing on page 53 of Textron's 1999 Annual Report to Shareholders.
30
<PAGE> 31
EXHIBITS EXHIBIT INDEX
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 10.17 below are management contracts
or compensatory plans, contracts or agreements.
10.1A 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.
10.1B Amendment to Annual Incentive Compensation Plan for Textron
Employees. Incorporated by reference to Exhibit 10.1 to
Textron's Quarterly Report on Form 10-Q for the fiscal
quarter ended July 3, 1999.
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. Incorporated by reference to Exhibit 10.2B to
Textron's Annual Report on Form 10-K for the fiscal year
ended January 2, 1999.
10.2C Amendment to Deferred Income Plan for Textron Key
Executives. Incorporated by reference to Exhibit 10.2 to
Textron's Quarterly Report on Form 10-Q for the fiscal
quarter ended July 3, 1999.
10.2D Amendment to Deferred Income Plan for Textron Key
Executives.
<PAGE> 32
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. Incorporated by reference to Exhibit 10.4B to
Textron's Annual Report on Form 10-K for the fiscal year
ended January 2, 1999.
10.4C Amendment to Supplemental Benefits Plan for Textron Key
Executives. Incorporated by reference to Exhibit 10.3 to
Textron's Quarterly Report on Form 10-Q for the fiscal
quarter ended July 3, 1999.
10.4D Amendment 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. Incorporated by reference to Exhibit 10.5B to
Textron's Annual Report on Form 10-K for the fiscal year
ended January 2, 1999.
10.5C Amendment to Supplemental Retirement Plan for Textron Key
Executives. Incorporated by reference to Exhibit 10.4 to
Textron's Quarterly Report on Form 10-Q for the fiscal
quarter ended July 3, 1999.
10.5D Amendment to Supplemental Retirement Plan for Textron Key
Executives.
10.6A 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.
10.6B Amendment to Survivor Benefit Plan for Textron Key
Executives. Incorporated by reference to Exhibit 10.5 to
Textron's Quarterly Report on Form 10-Q for the fiscal
quarter ended July 3, 1999.
<PAGE> 33
10.7A 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.
10.7B 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.
10.7C 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.
10.8A 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.
10.8B Amendment to 1994 Plan. Incorporated by reference to Exhibit
10.9B to Textron's Annual Report on Form 10-K for the fiscal
year ended January 2, 1999.
10.8C Amendment to 1994 Plan. Incorporated by reference to Exhibit
10.6 to Textron's Quarterly Report on Form 10-Q for the
fiscal quarter ended July 3, 1999.
10.8D Amendment to 1994 Plan.
10.9 Textron 1999 Long Term Incentive 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
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
<PAGE> 34
Annual Report on Form 10-K for the fiscal year ended
December 30, 1995.
10.13C Retention Award granted to Lewis B. Campbell on June 1,
1999.
10.14 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.
10.15 Employment Agreement between Textron and John A. Janitz
dated May 25, 1999.
10.16 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.
10.17 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.
10.18 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 28 through 63 and pages 66 through 68) of
Textron's 1999 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.
<PAGE> 35
27 Financial Data Schedule (filed electronically only).
<PAGE> 1
Exhibit 3.2
================================================================================
TEXTRON
INC.
(A DELAWARE CORPORATION)
-------
BY-LAWS
-------
As Amended Through May 26, 1999
================================================================================
<PAGE> 2
TABLE OF CONTENTS
------------
PAGE
OFFICES
1.01. Registered Office............................................ 1
1.02. Other Offices................................................ 1
MEETINGS OF STOCKHOLDERS
2.01. Place of Meetings............................................ 1
2.02. Annual Meetings.............................................. 1
2.03. Special Meetings............................................. 4
2.04. Notice of Meetings........................................... 4
2.05. Quorum....................................................... 4
2.06. Organization................................................. 5
2.07. Voting....................................................... 5
2.08. Voting Procedures and Inspectors of Elections................ 6
2.09. List of Stockholders......................................... 7
BOARD OF DIRECTORS
3.01. General Powers............................................... 8
3.02. Number, Qualifications and Term of Office.................... 8
3.03. Nomination and Election of Directors......................... 8
3.04. Quorum and Manner of Acting.................................. 11
3.05. Offices, Place of Meeting and Records........................ 11
3.06. Annual Meeting............................................... 12
3.07. Regular Meetings............................................. 12
3.08. Special Meetings; Notice..................................... 12
3.09. Organization................................................. 13
3.10. Order of Business............................................ 13
3.11. Removal of Directors......................................... 13
3.12. Resignation.................................................. 13
3.13. Vacancies.................................................... 13
3.14. Compensation................................................. 14
COMMITTEES
4.01. Executive Committee.......................................... 14
4.02. Powers....................................................... 15
4.03. Procedure; Meetings; Quorum.................................. 15
4.04. Compensation................................................. 16
4.05. Other Board Committees....................................... 16
4.06. Alternates................................................... 16
4.07. Additional Committees........................................ 17
<PAGE> 3
PAGE
ACTION BY CONSENT OR TELEPHONE
5.01. Consent of Directors......................................... 17
5.02. Telephone Meetings........................................... 17
OFFICERS
6.01. Number....................................................... 18
6.02. Election, Qualifications and Term of Office.................. 18
6.03. Other Officers............................................... 18
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................................... 19
6.09. President.................................................... 20
6.10. Chief Executive Officer...................................... 20
6.11. Vice Presidents.............................................. 20
6.12. Treasurer.................................................... 20
6.13. Secretary.................................................... 21
6.14. Controller................................................... 21
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..................................................... 23
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................................................. 25
8.04. Audit of Books and Accounts.................................. 26
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; Regulations.................... 27
9.05. Lost, Destroyed or Mutilated Certificates.................... 27
SEAL................................................................. 28
FISCAL YEAR.......................................................... 28
<PAGE> 4
PAGE
INDEMNIFICATION...................................................... 28
WAIVER OF NOTICE..................................................... 33
AMENDMENTS........................................................... 33
<PAGE> 5
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 on such day, at such time and
in such place (either within or without the State of Delaware) as shall be fixed
by the Board of Directors. (b) If the election of directors shall not be held on
the day fixed by
<PAGE> 6
2
the Board of Directors 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. (c)
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(c). 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,
<PAGE> 7
3
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 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
<PAGE> 8
4
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
<PAGE> 9
5
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> 10
6
(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
<PAGE> 11
7
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
<PAGE> 12
8
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.
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
<PAGE> 13
9
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
<PAGE> 14
10
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
<PAGE> 15
11
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 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.
<PAGE> 16
12
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.
<PAGE> 17
13
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
<PAGE> 18
14
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.
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 ap-
<PAGE> 19
15
pointed 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
<PAGE> 20
16
quorum at any meeting of the Executive Committee 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
<PAGE> 21
17
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.
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
<PAGE> 22
18
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
<PAGE> 23
19
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.
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.
<PAGE> 24
20
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
<PAGE> 25
21
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
<PAGE> 26
22
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.
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
<PAGE> 27
23
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
<PAGE> 28
24
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> 29
25
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
<PAGE> 30
26
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
<PAGE> 31
27
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 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
<PAGE> 32
28
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
<PAGE> 33
29
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
<PAGE> 34
30
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 (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 obtaina-
<PAGE> 35
31
ble 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 indemnification 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 (includ-
<PAGE> 36
32
ing 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> 37
33
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> 38
34
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
<PAGE> 1
Exhibit 10.2D
DEFERRED INCOME PLAN FOR
TEXTRON KEY EXECUTIVES
(RESTATED EFFECTIVE JANUARY 1, 1994)
FIFTH 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 by changing the third
sentence to read in its entirety as follows:
"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 of the composite
closing prices of Textron Common Stock, as reported in the Wall Street Journal
for the month the contribution is credited."
2. Section 3.09 of the Plan is hereby amended to read in its entirety
as follows:
"From time to time, 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 would have been allocated on account of dividends to the Participant's
Stock Unit Account as of that date, based on the average of the composite
closing prices of Textron Common Stock, as reported in the Wall Street Journal
for the month in which the date of record occurs."
3. Section 3.11 of the Plan is hereby amended by changing the second
sentence to read
in its entirety as follows:
"A Participant who has terminated her Textron employment may, after a period of
30 days, 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 minimum notice of 3
business days, any amount in her Stock Unit Account to her Interest Account."
IN WITNESS WHEREOF, Textron Inc. has caused this Fifth Amendment to be executed
by its duly authorized officer. Parts 1 and 2 of this Amendment shall be
effective as of September 1, 1999. Part 3 shall effective as of October 1, 1999
TEXTRON INC.
By: ____________________________________________
George Metzger
Vice President, Human Resources and Benefits
<PAGE> 1
Exhibit 10.4D
SUPPLEMENTAL BENEFITS PLAN
FOR TEXTRON KEY EXECUTIVES
(RESTATED EFFECTIVE JANUARY 1, 1994)
FIFTH 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 4.03 of the Plan is hereby amended to read in its entirety
as follows:
"Beginning September 1, 1999, Textron shall, as of the end of each calendar
month, credit Supplemental Shares to each supplemental savings account, equal to
the lost employer contribution for the month divided by the average of the
composite closing prices of Textron Common Stock, as reported in the Wall Street
Journal for the month. The lost employer contribution for the month shall be
equal to the Participant's Eligible Compensation for the month times the
Participant's Savings Plan election percentage (not to exceed 10%) times 50%,
less the employer contribution made to the Participant's Savings Plan account
for the month."
2. Section 4.04 of the Plan is hereby amended to read in its entirety
as follows:
"Beginning September 1, 1999, Textron shall, in each calendar quarter, credit
Supplemental Shares to a Participant's supplemental savings account equal in
number to the number of shares of Textron Common Stock that would have been
allocated on account of dividends to the Participant's supplemental savings
account as of that date, based on the average of the composite closing prices of
Textron Common Stock, as reported in the Wall Street Journal for the month in
which the date of record occurs."
3. Section 4.06 of the Plan is hereby amended by changing the first
sentence to read in its entirety as follows:
"A Participant who has terminated her Textron employment may, after a period of
30 days, 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 minimum notice of 3
business days, any amount in her supplemental savings account to her fixed
income account."
4. Section 4.01 of the Market Square Profit Sharing Plan Schedule to
the Plan is hereby amended to read in its entirety as follows:
"A Participant who has terminated her Textron employment may, after a period of
30 days, 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 minimum notice of 3
business days, any amount in her Stock Unit Account to her general fund
account."
5. Section 3.01 of the Plan is hereby amended to read in its entirety
as follows:
"Textron shall pay on account of each Participant who begins to receive payments
under one or more of the Pension Plans the amount, if any, by which (1) the
normal, early or vested retirement pension that would have been payable on the
Participant's account under the Pension Plans using compensation as defined in
this Plan, exceeds (2) the normal, early or vested retirement pension calculated
under the Pension Plans on the Participant's account."
<PAGE> 2
6. A new Section 1.05 is hereby added to the Plan as follows and
existing Sections 1.05 through 1.17 are renumbered accordingly.
"`Compensation' means base salary, accrued annual incentive compensation,
performance units, and performance share units, whether or not deferred under
the Deferred Income Plan for Textron Key Executives. However, for any Key
Executive who is first awarded performance share units after October 26,1999,
performance share units shall not be included in Compensation."
IN WITNESS WHEREOF, Textron Inc. has caused this Fifth Amendment to be executed
by its duly authorized officer. Parts 1 and 2 shall be effective as of
September 1, 1999. Parts 3 and 4 shall be effective as of October 1, 1999 Part 5
and 6 shall be effective as of October 26, 1999.
TEXTRON INC.
By: ____________________________________________
George Metzger
Vice President, Human Resources and Benefits
<PAGE> 1
Exhibit 10.5D
SUPPLEMENTAL RETIREMENT PLAN
FOR TEXTRON KEY EXECUTIVES
(EFFECTIVE DECEMBER 15, 1994)
THIRD 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:
Section 1.05 of the Plan is hereby amended to read in its entirety as follows:
"`Compensation' means base salary, accrued annual incentive compensation,
performance units, and performance share units, whether or not deferred under
the Deferred Income Plan for Textron Key Executives. However, for any Key
Executive who is first awarded performance share units after October 26, 1999,
performance unit and performance share units shall not be included in
Compensation"
IN WITNESS WHEREOF, Textron Inc. has caused this Third Amendment to be executed
by its duly authorized officer effective as of October 26, 1999.
TEXTRON INC.
By: ____________________________________________
George Metzger
Vice President, Human Resources and Benefits
<PAGE> 1
Exhibit 10.8D
TEXTRON INC.
1994 LONG-TERM INCENTIVE PLAN AMENDMENT
* Earned performance share units are valued by using the average of the
composite closing prices for the first ten trading days following the end
of the award period (i.e. first ten days in January).
* Because of Y2K concerns (market uncertainty) the O&C Committee recommends
that the Board of Directors amend the 1994 Long-Term Incentive Plan to
shift the valuation to the first ten trading days in December, 1999. Award
payments would still be made in January as is Textron's normal practice.
* The O&C Committee recommends that the Board of Directors amend the 1994
Long-Term Incentive Plan as follows:
FOR APPROVAL
The Board of Directors hereby amends the 1994 Long-Term Incentive Plan as
follows:
"Current Value" as defined in section 3.7 of the Textron 1994 Long-Term
Incentive Plan shall mean the average of the composite closing prices, as
reported in the Wall Street Journal, for the first ten trading days in
December 1999 for performance share units earned for the cycle ending with
fiscal year 1999 only.
<PAGE> 1
Exhibit 10.9
1999 LONG-TERM INCENTIVE PLAN FOR TEXTRON EMPLOYEES
Article I - General
1.1 PURPOSE. This plan authorizes the grant of stock options ("Options"),
performance share units ("Performance Share Units") and restricted stock
("Restricted Stock") to officers and other selected employees of Textron Inc.
("Textron") and its related companies to induce them to continue as Textron
employees and to reward them for improvement in Textron's long-term performance.
1.2 ADMINISTRATION. (a) The Board of Directors of Textron (the "Board") shall
appoint from among its members a committee (the "Committee") consisting of no
fewer than three directors, none of whom shall be eligible, and none of whom
shall have been eligible at any time within one year prior to or after
exercising discretion in administering the Plan, for any award under the Plan or
under any other employee benefit plan of Textron or any related company, and all
of whom shall certify that they are "outside directors" as defined by the Code.
Unless otherwise specified by the Board, the Committee, for purpose hereof,
shall mean the Organization and Compensation Committee of the Board.
(b) The Committee shall have the power subject to and within the limits of the
Plan:
(1) to determine from time to time which eligible persons shall be
granted Options under the Plan, which Options shall be "Incentive Options" and
which shall be "Non-Qualified Options," as each is hereafter defined, the term
of each Option within which all or portions of the Option may be exercised and
the number of shares covered by each Option;
(2) to determine from time to time which eligible persons shall be
granted Performance Share Units under the Plan, to fix the number of Performance
Share Units covered by each grant and conditions of each grant;
(3) to determine from time to time which eligible persons shall be
granted shares of Restricted Stock under the Plan, to fix the number of shares
of Restricted Stock covered by each grant and the conditions of the grant;
(4) to construe and interpret the Plan and to establish, amend and
revoke rules and regulations for its administration. The Committee, in exercise
of this power, shall generally determine all questions of policy and expediency
that may arise and may correct any defect, omission or inconsistency in the Plan
or in any agreement evidencing an award hereunder in a manner and to the extent
it shall deem necessary or expedient to make the Plan fully effective;
(5) to prescribe the terms and provisions of any award under an Option,
Performance Share Unit or share of Restricted Stock granted pursuant to this
Plan;
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<PAGE> 2
(6) generally, to exercise such powers and to perform such acts in
connection with the Plan as are deemed necessary or expedient to promote the
best interests of Textron.
(c) The Board at any time may designate one or more officers or committees of
Textron to act in place of the Committee in making any determination or taking
any action under the Plan. The Benefits Committee of Textron shall have the
authority to adopt one or more sub-plans of the Plan applicable to employees
located in countries other than the United States for the purpose of complying
with applicable laws and regulations of such countries. Notwithstanding the
above, all decisions concerning the Plan relate to persons who are Directors or
Corporate Officers of Textron shall be made by the Committee.
(d) The Board at any time may revest administration of the Plan, including all
powers and duties of the Committee, in the Board, provided that in any matter
relating to administration of the Plan, a majority of the Board and a majority
of the directors acting on such matter shall not be eligible, and shall not have
been eligible at any time within one year prior thereto, for a grant under the
Plan or under any other employee benefit plan of Textron or any related company.
In such all references herein to the Committee shall be deemed to refer to the
Board.
(e) All actions of the Board, the Committee or any designate under Section 1.2
in connection with the plan shall be final, conclusive and binding. No member
of the Board, the Committee or any designated committee, nor any designated
officer, shall be liable for any action taken or decision made in good faith
relating to the Plan or any grant or award hereunder.
1.3 ELIGIBILITY. The Committee may grant options, Performance Share Units or
shares of Restricted Stock under the Plan to any full-time employee of Textron
or any related company (determined at the date of grant) who is a corporate,
division, segment or subsidiary officer, administrative or professional
employee, or other selected employee capable of making a substantial
contribution to the success of Textron. Options, Performance Share Units and
shares of Restricted Stock may be granted to full-time employees who are also
members of the Board. In making grants and determining their form and amount,
the Committee shall consider functions and responsibilities of the employee, the
employee's potential contributions to profitability and sound growth of Textron
and such other factors, as the Committee deems relevant.
1.4 GRANTS. Grants under the Plan may be comprised of any of the following:
(a) Options as described in Article II;
(b) Performance Share Units as described in Article III; and
(c) Restricted Stock as described in Article IV.
1.5 Effective Date of Plan. The Plan shall be submitted to Textron shareholders
for approval at the annual meeting on April 28, 1999, or at any adjournment of
such meeting, and shall become effective immediately following its approval by
the affirmative vote of the holders of a majority of the shares present and
entitled to vote at such meeting.
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<PAGE> 3
1.6 AGGREGATE LIMITATION ON GRANTS. (a) Shares of Common Stock, which may be
issued pursuant to grants under the Plan may be either authorized and unissued
shares of Common Stock or authorized and issued shares of Common Stock purchased
or acquired by Textron for this or any other purpose. Subject to Section 6.9(a)
(relating to adjustments upon changes in stock), the maximum number of shares of
Common Stock which may be subject to Options under the Plan shall be 8,000,000,
the maximum number of Performance Share Units which may be granted under the
Plan shall be 1,000,000 and the maximum number of shares of Restricted Stock
which may be granted under the Plan shall be 500,000.
(b) In the event that (1) any Option granted under the Plan expires unexercised
or its terminated or cancelled for any reason without having been exercised in
full, (2) all or any part of any Performance Share Units granted under the Plan
are terminated or unearnable for any reason, or (3) any grant of Restricted
Stock under the Plan are terminated or does not vest for any reason, the number
of shares of Common Stock therefore subject to such Option, or grant of
Restricted Stock, or the number of such Performance Share Units, or the
unexercised, terminated or cancelled or unearnable portion thereof, shall be
added to the remaining number of shares of common Stock, Performance Share
Units, or Restricted Stock, respectively, available for grant under the Plan.
1.7 ADDITIONAL DEFINITIONS. For purposes of this Plan, the following terms shall
have the meaning specified in this Section 1.7:
(a) "Award Period" shall mean the period during which Performance Targets
or Performance Measures are to be accomplished.
(b) "Cause" shall mean a degree of less than acceptable performance as is
determined by the Committee.
(c) "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
(d) "Common Stock" shall mean shares of Textron common stock.
(e) "Current Value" of a share of Common Stock on any date shall mean the
average of the composite closing prices for Textron common stock, as
reported in The Wall Street Journal, for ten trading days next
following that date.
(f) "Corporate Officer" shall mean corporate officers of Textron who are
not assistant corporate officers.
(g) "Director" shall mean a member of the Board of Directors of Textron.
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<PAGE> 4
(h) "Early Retirement" shall mean the attainment of any of the following
requirements: age 55 with 10 years of Vesting Service, age 60, or 20
years of Vesting Service. For the purposes of this Plan, "Vesting
Service" shall have the meaning ascribed to it in Addendum A of the
Textron Master Retirement Plan (January 1, 1998 Restatement).
(i) "Fair Market Value" shall mean (except as may be required by Section
422 or any other applicable law) the simple average of the high and
low prices of the Common Stock on the New York Stock Exchange
Composite Transactions Listing on a particular date.
(j) "Incentive Options" shall mean Options, which are incentive stock
options under section 422 of the Code.
(k) "Non-Qualified Options" shall mean Options which are not Incentive
Options.
(l) "Options" shall mean options to purchase shares of Common Stock, which
are granted pursuant to this Plan.
(m) "Performance-Based Exception" shall mean the performance-based
exception from the tax deductibility limitations of Code section
162(m).
(n) "Performance Measures" shall mean the performance standards described
in Section 3.4 of this Plan.
(o) "Performance Share Units" shall mean fictional shares of Common Stock
accumulated and accounted for under this Plan for the sole purpose of
determining the cash amount of any distribution on account of awards
earned pursuant to Article III of this Plan.
(p) "Performance Targets" shall mean the performance standards described
in Article V of this Plan.
(q) "Period of Restriction" shall mean the period during which the
transfer of shares of Restricted Stock is limited in some way (based
upon the passage of time, the achievement of performance goals, or
upon the occurrence of other events as determined by the Board, at its
discretion), and during which the shares of Restricted Stock are
subject to a substantial risk forfeiture, as provided in Article IV
herein.
(r) "Plan" shall mean the 1999 Long-Term Incentive Plan for Textron
Employees.
(s) "Restricted Stock" shall mean an award of Common Stock granted under
Article IV of the Plan.
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<PAGE> 5
(t) "Total Disability" shall mean a permanent mental or physical
disability as determined by the Committee.
Article II - Options
2.1 GRANT OF OPTIONS. The Committee may from time to time, subject to the
provisions of the Plan and such other terms and conditions as it may prescribe,
grant to eligible employees one or more Options to purchase shares of Common
Stock under the Plan. A maximum of 75,000 Options can be granted to any eligible
employee during any calendar year, in each case subject to adjustments provided
in Section 7.9 of this Plan. Options granted hereunder may be Incentive Options
under Section 422 of the Code (Section 422). Options granted hereunder which are
not Incentive Options are referred to as "Non-Qualified Options."
2.2 OPTION AGREEMENTS. The grant of an Option shall be evidenced by a written
Option Agreement, executed by Textron and the optionee, stating the number of
shares of Common Stock subject to the Option, designating whether and to what
extent the Option is an Incentive Option and containing such investment
representations and other terms and conditions as the Committee may from time to
time determine, or as may be required by Section 422 or any other applicable
law.
2.3 OPTION PRICE. The purchase price for the Common Stock covered by any Option
granted under the Plan shall in no case be less than 100% of the Fair Market
Value of such Common Stock at the time the Option is granted. The purchase price
of the shares as to which an Option shall be exercised shall be paid in full at
the time of exercise at the election of the optionee (1) in cash, (2) by
tendering to Textron Shares of Common Stock then owned by the optionee having a
Fair Market Value equal to such purchase price, or (3) partly cash and partly in
shares of Common Stock valued at Fair Market Value. The Committee may also allow
cashless exercise as permitted under the Federal Reserve Board's Regulation T,
subject to applicable securities law restrictions, or by any other means which
the Committee determines to be consistent with the Plan's purpose and applicable
law.
2.4 TERM OF OPTION. The term of each Option granted under the Plan shall be for
such period, as the Committee shall determine but no more than 10 years from the
date of grant thereof in the case of an Incentive Option. Each Option shall be
subject to earlier termination as provided in Section 2.6 or 2.7, if applicable.
2.5 EXERCISE OF OPTION. Each Option granted under the Plan shall be exercisable
on such date or dates during the term thereof and for such number of shares of
Common Stock as may be provided in the Option Agreement evidencing its grant
provided that an Option shall not be exercisable for less than 50 shares (or the
remaining number of shares subject to the Option if that number is less than
50). No option shall be exercisable for at least six months after the date of
its issuance, except as otherwise provided in this Plan. To exercise an Option
as to all or part of the shares covered thereby, an optionee shall furnish to
the Secretary of Textron at Textron's principal office written notice of such
exercise together with the purchase price for the shares. The notice shall
specify the
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<PAGE> 6
number of shares then being purchased. In the discretion of the Committee, the
Option Agreement may provide that shares may be issued in the name of the
optionee and another person jointly with rights of survivorship. During the life
of an optionee, an Option shall be exercisable only by the optionee or by the
optionee's guardian or legal representative.
2.6 TERMINATION OF EMPLOYMENT. (a) If an optionee's employment with Textron or a
related company shall terminate for Cause, as determined by the Committee, all
Options held by the optionee shall expire immediately.
(b) If the employment with Textron and its related companies of an optionee who
is not described in Section 2.6(a) shall end after the optionee has become
eligible for Early Retirement, the optionee shall have the right to exercise
each Option granted to the optionee within 36 months after the end of the
optionee's employment (or within such shorter period as may be specified in the
related Option Agreement) to the extent the Option is exercisable at the time of
exercise.
(c) If an optionee's employment with Textron and its related companies
shall end as a result of the optionee's Total Disability, the optionee shall
have the right to exercise each Option granted to the optionee as to all
unexercised shares until the expiration of its term.
(d) If an optionee shall die while employed by Textron or a related company or
while any option granted to the optionee is still exercisable under section
2.6(b), (c) or (e), any such Option may be exercised as to all unexercised
shares within a period of one year from the date of the optionee's death by the
executor or administrator of the optionee's estate or by the person or persons
whom the optionee shall have transferred such right by will or by the laws of
descent or distribution.
(e) If an optionee's employment with Textron and its related companies shall end
for any reason not specified in Sections 2.6(a), (b) or (d), the optionee shall
have the right to exercise each Option granted to the optionee within three
months after his or her termination of employment (or within such later time, up
to 36 months after his or her termination of employment, as the Committee may
determine) but, unless otherwise determined by the Committee, only to the extent
the Option is exercisable at the time of such termination of employment.
(f) Notwithstanding anything in the contrary in this Section 2.6, in no event
shall an Option be exercisable after the expiration of its term.
2.7 INCENTIVE OPTIONS. (a) Incentive Options shall be subject to the additional
terms and conditions of this Section 2.7.
(b) No Incentive Option shall be issued hereunder to any individual who, at the
time the Incentive Option is granted, owns stock processing more than ten
percent of the total combined voting power of all classes of stock of Textron or
any related company.
(c) To the extent that the aggregate fair Market Value (determined as of the
time the Incentive Option is granted) of the Common Stock with respect to which
any Incentive
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<PAGE> 7
Stock Options granted are exercisable for the first time by an optionee during
any calendar year (under all employee benefit plans of Textron and its related
companies) exceeds $100,000 (or such larger maximum as may be permitted under
the Code for Incentive Stock Options granted to an individual employee at the
time the Incentive Option is granted), such options shall be treated as
Non-Qualified Options.
(d) Any optionee who disposes of shares of Common Stock acquired by or pursuant
to exercise of an Incentive Option by sale, exchange, gift or other disposition
described in Section 424 (c) of the Code, either (1) within two years after the
date of the grant of the Incentive Option under which the shares were acquired,
or (2) within one year of the acquisition of such shares, shall notify the
Secretary of Textron at Textron's principal office of such disposition, the
amount realized, the exercise price and the date of exercise of such shares.
Textron shall have the right to withhold from other sums which it may owe to the
optionee, or to accept remittance by the optionee of the sums in lieu of, an
amount sufficient to satisfy any federal, state and local withholding tax
requirements to such a disposition.
(e) The Option Agreement with respect to Incentive Options shall contain such
other provisions as may be required by Section 422 or any other applicable law.
Article III - Performance Share Units
3.1 AWARD OF PERFORMANCE SHARE UNITS. (a) The Committee may, from time to time,
subject to the provisions of the Plan and such other terms and conditions as the
Committee may prescribe, grant to eligible employees one or more Performance
Share Units. Such grants shall be evidenced in writing. A maximum of 60,000
Performance Share Units may be granted to any eligible employee for any Award
Period, in each case subject to adjustment as provided in Section 7.9 of this
Plan.
(b) The existence of the Performance Share Units is for record keeping purposes
only and does not require and segregation of assets.
3.2 CONDITIONS OF GRANT. When a grant of Performance Share Units is made, the
Committee shall determine: (1) the number of Performance Share Units included in
this grant; (2) the Performance Targets or Performance Measures as described
further in Section 3.4; and (3) the Award Period during which the Performance
Targets or Performance Measurements are to be accomplished.
3.3 PAYMENT FOR PERFORMANCE SHARE UNITS. Payment in respect of earned
Performance Share Units shall be due not more than 90 days after the Award
Period for such Performance Share Units has ended. Such payment shall be in the
amount determined under Section 3.6, or in a greater amount pursuant to the last
two sentences of Section 3.4, and shall be made in one or more equal annual
installments subject to such terms and conditions as the Committee shall
specify. Payments for Performance Share Units shall be made in cash.
3.4 PERFORMANCE MEASURES AND PERFORMANCE TARGETS. Upon making a grant of
Performance Share Units, the Committee shall establish the applicable
Performance
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<PAGE> 8
Measures or Performance Targets to be attained for the Award Period as a
Condition of the related Performance Shares being earned in whole or part.
Performance Targets shall be established only in terms of the standards set
forth in Article V of this Plan. Attainment of a primary Performance Target in
an Award Period shall result in the earning of all of the Performance Share
Units related to that Performance Target. For Corporate Officers only, Awards
may not exceed 100% of the value of Performance Share Units related to the
applicable Performance Targets. Failure to attain a minimum Performance Target
in an Award Period shall result in the failure to earn any of the Performance
Share Units related to that Performance Target. Attainment between a primary and
minimum Performance target in an Award Period shall result in the earning of a
portion of the Performance Share Units related to those Performance Targets,
determined by a pre-established mathematical formula which shall be determined
by the Committee. The Committee may determine an award less than that determined
by the formula, but may not, however, determine an award more than that derived
by the formula. Performance Measures may be expressed in terms of any standard,
financial or otherwise, as the Committee may determine. Performance Share Units
related to one or more Performance Measures shall be earned only as determined
by the Committee and may not exceed 100% of the value of such Performance Share
Units.
3.5 TERMINATION OF EMPLOYMENT. (a) If a grantee's employment with Textron or
related company shall terminate for Cause, as determined by the Committee, all
of the grantee's outstanding performance Share Units will be cancelled
immediately.
(b) If the employment with Textron and its related companies of the grantee who
is not described in Section 3.5(a) shall end during an Award Period but no more
than one year after its beginning:
(1) due to death or Total Disability, or after the guarantee has become
eligible for Early retirement, the grantee or the grantee's successor in
interest shall be entitled to payment on account of the Performance Share Units
earned during that Award Period, if any, on a pro rata basis, or
(2) otherwise than as described in Section 3.5(b)(1), the grantee or the
grantee's successor in interest shall be entitled to payment on account of the
Performance Share Units earned during that Award Period on a pro rata basis only
as determined by the Committee.
(c) If a grantee's employment with Textron and its related companies shall end
during an Award Period but one year or less after its beginning, all of the
grantee's Performance Share Units relating to that Award Period shall be
cancelled.
3.6 AMOUNT OF PAYMENT FOR SHARE UNITS. Any payment with respect to earned
Performance Share Units shall be made in cash and shall be in an amount equal to
the product of (1) the Current Value of Textron Common Stock on the date on
which they are deemed earned, times (2) the number of whole and fractional
Performance Share Units which have been earned. For purposes of this Plan,
earned Performance Share Units shall be
8
<PAGE> 9
deemed earned as of the last day of the applicable Award Period unless the
Committee determines otherwise.
Article IV - Restricted Stock
4.1 GRANT OF RESTRICTED STOCK. Subject to the terms and provisions of the Plan,
the Committee, at any time and from time to time, may grant Shares of Restricted
Stock to eligible employees in such amounts, as the Board shall determine. A
maximum of 200,000 shares of Restricted Stock may be granted to any eligible
employee in any one calendar year, in each case subject to adjustment as
provided in Section 6.9 of this Plan.
4.2 RESTRICTED STOCK AGREEMENT. Each Restricted Stock grant shall be evidenced
by a Restricted Stock Award Agreement that shall specify the Period(s) of
Restriction, the number of Shares Restricted Stock granted, and such other
provisions as the Committee shall determine.
4.3 TRANSFERABILITY. Except as provided in this Article IV, the Shares of
Restricted Stock granted herein may not be sold, transferred, pledged, assigned,
or otherwise alienated or hypothecated until the end of the applicable Period of
Restriction established by the Committee in its sole discretion and set forth in
the Restricted Stock Award Agreement. All rights with respect to the Restricted
Stock granted to an eligible employee under the Plan shall be available during
his or her lifetime only to such eligible employee.
4.4 OTHER RESTRICTIONS. The Committee shall impose such other conditions and/or
restrictions on any Shares of Restricted Stock granted pursuant to the Plan as
it may deem advisable including, without limitation, continued employment with
Textron, a requirement that eligible employees pay a stipulated purchase price
for each Share of Restricted Stock, restrictions based upon the achievement of
specific performance goals (company-wide, divisional, and/or individual),
time-based restrictions on vesting following the attainment of performance
goals, and/or restrictions under applicable federal or state securities laws.
With respect to awards of Restricted Stock based on Performance targets, the
Committee will establish Performance targets in accordance with the standards
set forth in Article V of this Plan.
Textron may retain the certificates representing Shares of Restricted Stock
in its possession until such time as all conditions and/or restrictions
applicable to such Shares have been satisfied.
Except as otherwise provided in this Article IV or pursuant to Section 7.2
of the Plan, or as restricted by applicable law, Shares of Restricted Stock
covered by each Restricted Stock grant made under the Plan shall become freely
transferable by the eligible employee after the last day of the applicable
Period of Restriction.
4.5 VOTING RIGHTS. Eligible employees holding Shares of Restricted Stock granted
hereunder may be granted the right to exercise full voting rights with respect
to those Shares during the Period of Restriction.
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<PAGE> 10
4.6 DIVIDENDS AND OTHER DISTRIBUTIONS. During the Period of Restriction,
eligible employees holding Shares of Restricted Stock granted hereunder may be
credited with regular cash dividends paid with respect to the underlying Shares
while they are so held. The Committee may apply any restrictions to the
dividends that the Committee deems appropriate. Without limiting the generality
of the preceding sentence, if the grant or vesting of Restricted Shares granted
to an eligible employee is designated to comply with requirements of the
Performance-Based Exception, the Committee may apply any restrictions it deems
appropriate to the payment of dividends declared with respect to such Restricted
Shares, such that the dividends and/or the Restricted Shares maintain
eligibility for the Performance-Based Exception.
4.7 TERMINATION OF EMPLOYMENT/DIRECTORSHIP. Each Restricted Stock Award
Agreement shall set forth the extent to which the eligible employee shall have
the right to receive un-vested Restricted Stock following termination of the
eligible employee's employment or directorship with Textron. Such provisions
shall be determined in the sole discretion of the Committee, shall be included
in the Award Agreement entered into with each eligible employee, need not be
uniform among all Shares of Restricted Stock issued pursuant to the Plan, and
may reflect distinctions based on the reasons for termination; provided, however
that, except in the cases of terminations connected with a Change in Control and
terminations by reason or death or Total Disability, and certain terminations
without Cause, the vesting of shares of Restricted Stock which qualify for the
Performance-Based Exception and which are held by eligible employees shall occur
at the time they otherwise would have, but for the termination.
Article V - Performance-Based Exception
Unless and until the Committee proposes for shareholders to vote and
shareholders approve a change in the general Performance Targets set forth in
this Article V, the attainment of which may determine the degree of payout
and/or vesting with respect to awards to eligible employees which are designed
to qualify for the Performance-Based Exception (such as Performance Share Units
under Article III of this Plan, and, if the Committee so determines, Restricted
Stock under Article IV of this Plan), the Performance Targets to be used for
purposes of such grants shall be chosen from among:
(a) Textron's earnings per share;
(b) Net operating profit;
(c) After-tax profit;
(d) Return on equity;
(e) Return on invested capital;
(f) Economic profit;
(g) Margins;
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<PAGE> 11
(h) Cash flow; and
(i) Shareholder value.
The Committee shall have the discretion to adjust the determinations of the
degree of attainment of the pre-established Performance Targets; provided,
however, that awards which are designed to qualify for the Performance-Based
Exception, and which are held by eligible employees, may not be adjusted upward
(the Committee shall retain the discretion to adjust such awards downward).
In the event that applicable tax and/or securities laws change to permit
Committee discretion to alter the governing Performance Targets without
obtaining shareholder approval of such changes, the Committee shall have sole
discretion to make such changes without obtaining shareholder approval. In
addition, in the event that the Committee deter-mines that it is advisable to
grant awards, which shall not qualify for the Performance-Based Exception, the
Committee may make such grants without satisfying the requirements of Code
Section 162(m).
Article VI - Beneficiaries
6.1 A Participant may designate one or more Beneficiaries to receive Plan
benefits payable on the Participant's account after his or her death. A
Beneficiary may designate one or more Beneficiaries to receive any unpaid Plan
benefits to the extent this designation does not contravene any designation
filed by the deceased Participant through whom the Beneficiary himself or
herself claims under this Plan. Beneficiaries shall be designated only upon
forms made available by or satisfactory to the Benefits Committee or its
designee, and filed by the Participant or Beneficiary with that committee or
designee.
6.2 At any time prior to his or her death, a Participant or Beneficiary may
change his own designation of Beneficiary by filing a substitute designation of
Beneficiary with the Benefits Committee or its designee.
6.3 In the absence of an effective designation of Beneficiary, or if all persons
so designated shall have predeceased the Participant or shall have died before
the complete distribution of Plan benefits, the balance of Plan benefits shall
be paid to the Participant's surviving spouse or, if none, to the Participant's
issue per stirpes or, if no issue, to the executor or administrator of the
Participant's or Beneficiary's estate, or as otherwise determined by the
Benefits Committee in its sole discretion.
6.4 If a Participant's Compensation or a Plan benefit is community property, any
designation of Beneficiary shall be valid or effective only as permitted under
applicable law.
6.5 If a Plan benefit is payable to a minor or person declared incompetent or to
a person incapable of handling the disposition of his property, the Benefits
Committee may direct Textron to pay such Plan benefit to the guardian, legal
representative or person having the care and custody of such minor, incompetent
or person. The Benefits Committee may
11
<PAGE> 12
require proof of incompetency, minority, incapacity or guardianship as it deems
appropriate prior to distribution of the Plan benefit. Such distribution shall
completely discharge the Benefits Committee and any Textron Company from all
liability with respect to such benefit.
Article VII - Miscellaneous
7.1 GENERAL RESTRICTION. Each grant or award under the Plan shall be subject to
the requirement that, if at any time the Committee shall determine that any
listing or registration of the shares of Common Stock or any consent or approval
of any governmental body, or any other agreement or consent, is necessary or
desirable as a condition of a grant, an award or issuance of Common Stock or
cash in satisfaction thereof, such grant or award may not be consummated unless
each such requirement is satisfied in a manner acceptable to the Committee.
7.2 RESTRICTIONS ON SHARE TRANSFERABILITY. The Committee may impose such
restrictions on any shares of Common Stock acquired pursuant to this Plan as it
may seem advisable, including, without limitation, restrictions under federal
securities laws, under the requirements of any stock exchange or market upon
which such shares are then listed or traded, and under any blue sky or state
securities laws applicable to such shares.
7.3 NON-ASSIGNABILITY. No award under the Plan shall be assignable or
transferable by the recipient thereof, except by will or by laws of descent and
distribution.
7.4 WITHHOLDING TAXES. Whenever Textron proposes to or is required to issue or
transfer shares of Common Stock under the Plan, Textron shall have the right to
withhold or to require the participant to remit to Textron an amount sufficient
to satisfy any federal, state and local withholding tax requirements. A
participant may elect to use company shares to satisfy tax withholding
obligations on the exercise of non-qualified options and the vesting of
restricted stock to meet the minimum statutory tax withholding requirements.
Whenever under the Plan payments by Textron are to be made in cash, such
payments shall be net of an amount sufficient to satisfy any federal, state and
local withholding tax requirements.
7.5 NO RIGHT TO EMPLOYMENT. Nothing in the Plan or in any agreement entered into
pursuant to it shall confer upon any participant the right to continue in the
employment of Textron or a related company or affect any right which Textron or
a related company may have to terminate the employment of such participant.
7.6 NON-UNIFORM DETERMINATION. The determinations under the Plan of the
Committee or of any designate (including without limitation its determinations
of the persons to receive grants or awards, the form, amount, timing and payment
of such grants or awards, the terms and provisions of such grants or awards, and
the establishment of Performance Measures or Performance Targets) need not be
uniform and may be made by it selectively among persons who receive, or are
eligible to receive, awards under the Plan, whether or not such persons are
similarly situated.
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<PAGE> 13
7.7 NO RIGHTS AS SHAREHOLDERS. Recipients of grants or awards under the Plan
shall have no rights as shareholders of Textron unless and until certificates
for shares of Common Stock are issued to them, except for such voting rights and
dividend rights as may be provided for in a Restricted Stock award agreement.
7.8 RELATED COMPANY. As used in the Plan, "related company" means any
corporation in which Textron at the time in question owns, directly or
indirectly, stock processing 50 percent or more of the total combined voting
power of all classes of stock and any corporation which at the time in question
owns, directly or indirectly, a similar interest in Textron.
7.9 ADJUSTMENTS FOR CERTAIN CHANGES. (a) The aggregate number of shares of
Common Stock, of Performance Share Units and of Restricted Stock available for
grant under the Plan, the number of shares of Common Stock covered by each
outstanding Option, Performance Share Unit or award of Restricted Stock and the
price per share thereof, and the maximum number of Options, Performance Share
Units, or shares of Restricted Stock that can be awarded to any eligible
employee shall all be proportionately adjusted for an increase or decrease in
the number of issued shares of Common Stock resulting from a stock split, stock
dividend or any other increase or decrease in such shares effective without
receipt of consideration by Textron.
(b) The Committee may, in its discretion and for purposes of determining whether
Performance Measures or Performance Targets have been met, equitably restate
Textron's earnings per share, net operating profit, return on equity or any
other standard utilized in establishing the Performance Measures or Performance
Targets in order to take into account the effect, if any, of (1) acquisitions or
dispositions of businesses by Textron, (2) extraordinary and non-recurring
events, (3) a change in capitalization described in Section 7.9 (a), or (4) any
change in accounting practices, tax laws or other laws or regulations that, in
the opinion of the Committee, significantly affects the financial performance of
Textron.
7.10 CHANGE IN CONTROL. (a) Not withstanding any other provision of this Plan,
in the event of a change in control as defined in Section 7.10(b):
(1) the Award Period for each outstanding Performance Share Unit shall end,
and each such unit shall be deemed to have been earned, as of the end of the
Award Period and shall be payable immediately and in full; and
(2) each unexpired Option shall be exercisable, beginning immediately, as to
all remaining shares subject to the Option and
(3) each share of Restricted Stock subject to an outstanding grant shall
become immediately vested and all restrictions on transferability (except those
as shall be imposed by applicable law) shall be removed.
(b) For purposes of this Plan, a "Change in Control" shall occur if (i) any
"person" or "group" (within the meaning of Sections 13 (d) and 14 (d)(2) of the
Securities Exchange Act of 1934, as amended (the "Act")) other than Textron, any
"person" who on April 27,
13
<PAGE> 14
1994 was a director or officer of Textron, any trustee or other fiduciary
holding Common Stock under an employee benefit plan of Textron, or related
company, or any corporation which is owned, directly or indirectly, by the
stockholders of Textron in substantially the same proportions as their ownership
of Common Stock, is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Act) of more than thirty percent (30%) of the then outstanding voting
stock of Textron, or (ii) during any period of two consecutive years,
individuals who are at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority thereof, or (iii) the shareholders of Textron approve a
merger or consolidation which would result in the voting securities of Textron
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) more than fifty percent (50%) of the combined voting power of
the voting securities of Textron or such surviving entity outstanding
immediately after such merger or consolidation, or (iv) the shareholders of
Textron approve a plan of complete liquidation of Textron or an agreement for
the sale or disposition by Textron of all or substantially all of Textron's
assets.
7.11 AMENDMENT OR TERMINATION OF THE PLAN. The Board, without further approval
of the shareholders, may at any time terminate the Plan or any part thereof and
may from time to time amend the Plan as it may deem advisable including with
respect to Incentive Options any changes deemed necessary or desirable to comply
with Section 422 and any regulations thereunder; provided, however, that without
shareholder approval, the Board may not (a) increase the aggregate number of
shares of Common Stock which may be is-sued under the Plan (other than increases
permitted under section 4.9(a)) or (b) extend the period during which an
Incentive Option may be exercised beyond ten years. Termination or amendment of
the Plan shall not, without the consent of the individual, affect any right of
such individual (including without limitation any right under Section 4.10)
under an award previously granted.
7.12 COMPLIANCE WITH CODE SECTION 162(m). At all times when Code section 162(m)
is applicable, all awards under this Plan shall comply with the requirements of
Code section 162(m); provided, however, that in the event the Committee
determines that such compliance is not desired with respect to any award or
grant under the Plan, then compliance with Code section 162(m) shall not be
required. In addition, in the event that changes are made to section 162(m) to
permit greater flexibility with respect to awards or grants available under the
plan, the Committee may, subject to this Article VI, make adjustments it deems
appropriate.
14
<PAGE> 1
Exhibit 10.11
DEFERRED INCOME PLAN FOR NON-EMPLOYEE DIRECTORS
This Deferred Income Plan for Non-Employee Directors, the "Plan", is effective
as of January 1, 1998 and replaces the plan previously in effect.
ARTICLE I - PARTICIPATION
1.1 Non-employee members of the Board of Directors of Textron Inc.
("Textron") may elect to defer receipt of any or all of the cash
portion of the annual retainer into either a stock unit account or
an interest-bearing account. The deferred stock portion of the
annual retainer is automatically deferred into the stock unit
account. The Annual Stock Unit Grant is automatically deferred
into the stock unit account.
1.2 Each Director must have on file with Textron a Deferral Election
Form indicating deferral elections for the following calendar
year(s).
1.3 For any complete calendar quarters remaining in the calendar year
in which an individual initially becomes a non-employee director,
the Director may elect to defer his or her fees at any time before
the start of each such quarter.
ARTICLE II - DEFERRED INCOME ACCOUNTS
2.1 For record-keeping purposes only, Textron shall maintain a stock
unit account and an interest-bearing account for each non-employee
Director.
2.2 Stock Unit Account
The Stock Unit Account shall consist of Stock Units, which are
fictional shares of Textron common stock accumulated and accounted
for the sole purpose of determining the cash payout of any
distribution under this portion of the Plan.
As of the end of each calendar quarter, Textron shall credit to
the Stock Unit Account 125% (includes a 25% Premium contributed by
Textron, the "Premium") of the amount, including both the cash
portion and the deferred stock portion of the annual retainer, the
Director deferred into this account during the quarter. Textron
shall credit no Premium with respect to the Annual Stock Unit
Grant. Textron shall also credit to this account Stock Units equal
to the number of shares of Textron common stock that would have
been allocated on account of dividends.
The number of Stock Units Textron shall credit to the Stock Unit
Account will equal the number of shares of Textron common stock
that could have been purchased at a price per share equal to the
average price per share of Textron common stock contributed to the
Textron Savings Plan during that quarter.
Half of the 25% Premium contributed by Textron shall vest (become
nonforfeitable) on December 31 of the calendar year in which the
deferred
October 1998
<PAGE> 2
income otherwise would have been paid, and the remaining half on
the next December 31. The Premium will continue to vest after the
termination of the Directorship. The Premium will vest only if the
related deferred compensation is unpaid at the time of vesting.
Unvested Premiums shall vest immediately upon the Director's death
or total disability as determined by the Textron Benefits
Committee.
2.3 Interest Account
As of the end of each calendar quarter Textron shall credit to the
Interest Account an amount equal to interest on the average
balance in the Interest Account during such quarter. The average
balance will be computed by adding the opening and closing
balances for the quarter and dividing by two. Interest will be
credited monthly at the greater of 8% or the Moody's Corporate
Bond Yield Index rate.
ARTICLE III - PAYMENTS
3.1 Payments or withdrawals from either the Stock Unit Account or the
Interest Account or transfers between the two accounts shall not
be allowed while the individual remains a Director of Textron.
Prior to or at the time of the Director's resignation, removal, or
retirement from the Board of Directors, the Director must elect a
payment schedule.
3.2 Upon the Director's resignation, removal or retirement from the
Board of Directors, the Director may, once each calendar quarter,
elect to transfer, in 10% increments, any or all amounts in the
Stock Unit Account to the Interest Account. The cash amount
transferred will be determined by multiplying the current value of
Textron common stock by the number of whole or fractional Stock
Units in the Stock Unit Account as of the end of that calendar
quarter times the percentage being transferred. The current value
shall be the average of the composite closing prices, as reported
in the WALL STREET JOURNAL for the ten trading days immediately
following the calendar quarter in which the election to transfer
was made.
3.3 Upon the Director's resignation, removal or retirement from the
Board of Directors, he or she must make a payment election by
completing the Payment Election Form. The Director may elect on
the Payment Election Form to receive (1) the entire amount of his
or her accounts as soon as practical following the end of the
current quarter which will be deemed to be an election to transfer
under the provisions of paragraph 3.2 in the current quarter all
amounts in the Director's Stock Unit Account, (2) the entire
amount of his or her accounts as soon as practical following the
end of the current calendar year which will be deemed to be an
election to transfer under the provisions of paragraph 3.2 in
2 October 1998
<PAGE> 3
the final quarter of the current calendar year all amounts in the
Director's Stock Unit Account, or (3) payment in a number of
annual installments, each payable as soon as practical following
the end of each successive calendar year, over a period of up to
five years which will be deemed to be an election to transfer
under the provisions of paragraph 3.2 in the final quarter of each
respective calendar year an amount, if necessary, from the
Director's Stock Unit Account sufficient to make the required
payment. Annual installments shall be calculated each year by
dividing the unpaid amount as of January 1 of that year by the
remaining number of unpaid installments.
3.4 During the installment period, the unpaid balance in the Interest
Account will continue to earn interest at the same rate as if the
individual had continued as a Director.
3.5 If the Director or former Director dies before all payments have
been made, payment(s) shall be made to the beneficiary designated
on the Designation of Beneficiary Form. In the event of death, the
Benefits Committee shall choose in its sole discretion the payment
schedule after considering the method of payment that may have
been requested by the Director or by the beneficiaries.
The designated beneficiary may be changed from time to time by
delivering a new Designation of Beneficiary Form to Textron. If no
designation is made, or if the named beneficiary predeceases the
Director, payment shall be made to the Director's estate.
3.6 At the discretion of Textron, the payments to be made after the
Director's resignation, removal, or retirement from the Board of
Directors pursuant to this Article III may be accelerated in such
amounts and at such times as the Benefits Committee determines.
ARTICLE IV - MISCELLANEOUS
4.1 Benefits provided under this Plan are unfunded obligations of
Textron. Nothing contained in this Plan shall require Textron to
segregate any monies from its general funds with respect to such
obligations.
4.2 The Textron Benefits Committee shall be the plan administrator of
this Plan and shall be solely responsible for its general
administration and interpretation and for carrying out the
provisions hereof, and shall have all such powers as may be
necessary to do so.
4.3 Unless a contrary or different meaning is expressly provided, each
use in this Plan of the masculine or feminine shall include the
other and each use of the singular number shall include the
plural.
4.4 No benefit payable at any time under this Plan shall be subject in
any manner to alienation, sale, transfer, assignment, pledge or
encumbrance of any kind unless specifically approved in writing in
advance by the Textron Benefits Committee or its designee. Any
attempt to alienate, sell, transfer, assign, pledge or otherwise
encumber any such benefit, whether presently or subsequently
payable, shall be void unless so approved. Except as required by
3 October 1998
<PAGE> 4
law, no benefit payable under this Plan shall in any manner be
subject to garnishment, attachment, execution or other legal
process, or be liable for or subject to the debts or liability of
any Participant or Beneficiary.
4.5 The Board or its designee shall have the right to amend, modify,
suspend or terminate this Plan at any time by written ratification
of such action; provided, however, that no amendment,
modification, suspension or termination shall reduce the amount
credited to either the Stock Unit Account or the Interest Account
immediately before the effective date of the amendment,
modification, suspension or termination.
4.6 This Plan shall be construed in accordance with the laws of the
State of Delaware.
4 October 1998
<PAGE> 1
EXHIBIT 10.13C
Lewis B. Campbell
Restricted Stock Awards
June 1, 1999
The Board of Directors approved an award of 200,000 shares of restricted stock
to Lewis B. Campbell (the "Executive") under the 1999 Long-Term Incentive Plan.
The terms of the awards are as follows:
* The Executive will be granted restricted shares of Textron common stock
provided he is still employed by Textron in accordance with the following
schedule and EPS from continuing operations increases at an average annual
growth rate of 8% or more over the vesting period using 1998 EPS of $2.68
as the base amount.
RESTRICTED SHARES VESTING DATES
----------------- -------------
50,000 May 18, 2003 (57th birthday)
50,000 May 18, 2006 (60th birthday)
50,000 May 18, 2008 (62nd birthday)
50,000 May 18, 2011 (65th birthday)
-------
200,000
* Textron shall retain the certificates representing the shares of restricted
stock in its possession until such time as all restrictions applicable to
such shares have lapsed.
* Except as otherwise provided herein, the Executive shall not be entitled to
receive the restricted shares if the EPS performance objective for the
respective shares is not achieved or if his employment with Textron ends
for any reason prior to the respective vesting date, provided that if the
Executive's employment ends prior to such date because of his death,
"Disability" (Attachment A), his involuntary termination by Textron without
"Cause" (Attachment A) or by the Executive for "Good Reason" (Attachment
A), the shares shall immediately become fully vested. In the event of such
termination, the shares shall be issued within 30 days following
termination of employment.
* Notwithstanding the above, all unvested shares shall immediately vest upon
a "Change in Control" (Attachment A).
* Effective June 1, 1999 dividends shall be credited to the Executive and
such dividends are to be accounted for as if reinvested in actual Textron
common stock. Such dividends will vest immediately but payment will be
deferred until the earlier of the restricted shares vest date or
termination of employment.
* The number of restricted shares awarded to the Executive hereunder shall be
proportionately adjusted for any increase or decrease in the number of
issued shares of Textron common stock resulting from a stock split, stock
dividend or any other increase or decrease in such share effective without
receipt of consideration by Textron.
* With respect to withholding required upon the lapse of restrictions on the
restricted stock, the Executive may elect, subject to the approval of the
Board, to satisfy the withholding requirement, in whole or in part, by
having Textron withhold shares having a fair market value on the date the
tax is to be determined equal to the minimum statutory total tax which
could be imposed on the transaction. Such election shall be irrevocable,
made in writing, signed by the Executive, and shall be subject to any
restrictions or limitations that the Board in its sole discretion, deems
appropriate.
- ------------------------ --------------
John D. Butler Date
<PAGE> 2
Attachment A
Lewis B. Campbell
Restricted Stock Awards
June 1, 1999
"DISABILITY"
------------
"Disability" shall mean, for purposes of this award, the inability of the
Executive, due to injury, illness, disease or bodily or mental infirmity, to
engage in the performance of his material duties of employment with the Company
for a period of more than one hundred eighty (180) consecutive days or for a
period that is reasonably expected to exist for a period of more than one
hundred eighty (180) consecutive days, provided that interim returns to work of
less than ten (10) consecutive business days in duration shall not be deemed to
interfere with a determination of consecutive absent days if the reason for
absence before and after the interim return are the same. The existence or
non-existence of a Disability shall be determined by a physician agreed upon a
good faith by the Executive (or his representatives) and Textron.
"CAUSE"
-------
"Cause" shall mean: (i) an act or acts of willful misrepresentation, fraud or
willful dishonesty (other than good faith expense account disputes) by the
Executive which in any case is intended to result in his or another person or
entity's substantial personal enrichment at the expense of the Company; (ii) any
willful misconduct by the Executive with regard to the Company, its business,
assets or employees that has, or was intended to have, a material adverse impact
(economic or otherwise) on the Company; (iii) any material, willful and knowing
violation by the Executive of (x) the Company's Business Conduct Guidelines, or
(y) any of his fiduciary duties to the Company which in either case has, or was
intended to have, a material adverse impact (economic or otherwise) on the
Company; (iv) the willful or reckless behavior of the Executive with regard to a
matter of a material nature which has a material adverse impact (economic or
otherwise) on the Company; (v) the executive's willful failure to attempt to
perform his duties or his willful failure to attempt to follow the legal written
direction of the Board, which in either case is not remedied within ten (10)
days after receipt by the Executive of a written notice from the Company
specifying the details thereof; or (vi) the Executive's conviction of, or
pleading NOLO CONTENDERE or guilty to, a felony (other than (x) a traffic
infraction or (y) vicarious liability solely as a result of his position
provided the Executive did not have actual knowledge of the actions or inactions
creating the violation of the law or the Executive relied in good faith on the
advice of counsel with regard to the legality of such action or inaction (or the
advice of other specifically qualified professionals as to the appropriate or
proper action or inaction to take with regard to matters which are not matters
of legal interpretation); No action or inaction should be deemed willful if not
demonstrably willful and if taken or not taken by the Executive in good faith as
not being adverse to the best interests of the Company. Reference in this
paragraph to the Company shall also include direct and indirect subsidiaries of
the Company, and materiality and material adverse impact shall be measured based
on the action or inaction and the impact upon, and not the size of, the Company
taken as a whole, provided that after a Change in Control, the size of the
Company, taken as a whole, shall be a relevant factor in determining materiality
and material adverse impact.
"GOOD REASON"
-------------
"Good Reason" shall mean, without the Executive's express written consent, the
occurrence of any one or more of the following: (i) the assignment to the
Executive of duties materially inconsistent with the Executive's then
authorities, duties, responsibilities, and status (including offices, titles,
and reporting requirements), or any reduction in the Executive's then title,
position, reporting lines or a material reduction (other than temporarily while
Disabled or otherwise incapacitated) in his then status, authorities, duties, or
responsibilities or, if then a director of the Company, failure to be nominated
or reelected as a director of the Company or removal as such; (ii) relocation of
the Executive from the principal office of the Company (excluding reasonable
travel on the Company's business to an extent substantially consistent with the
Executive's business obligations) or relocation of the principal office of the
Company to a location which is at least fifty (50) miles from the Company's
current headquarters, provided, however, if the Executive at the time of the
relocation is not located at the principal office, such relocation provision
shall apply based on his then location but shall not cover a relocation to the
principal office prior to a Change in Control; (iii) a reduction by the Company
in the Executive's Base Salary; (iv) a reduction in the Executive's aggregate
level of participation in any of the Company's short and/or long-term incentive
compensation plans, or employee benefit or retirement plans, policies,
practices, or arrangements in which the Executive participated as of the
Effective Date, or, after a Change in Control, participated immediately prior to
the Change in Control; (v) the failure of the Company to obtain and deliver to
the Executive a satisfactory written agreement from any successor to the Company
to assume and agree to perform this Agreement; or (vi) any other material breach
by the Company of this Agreement.
<PAGE> 3
Attachment A
Page 2
"CHANGE IN CONTROL"
-------------------
A "Change in Control" of the Company shall be deemed to have occurred as of the
first day any one or more of the following conditions shall have been satisfied:
(a) Any person" or "group" (within the meaning of Section 13(d) and
14(d)(2) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) other than the Company, any trustee or other
fiduciary holding Company common stock under an employee benefit plan
of the Company or a related company, or any corporation which is
owned, directly or indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of the Company's
common stock, is or becomes the beneficial owner (as defined in Rule
13d-3 under the Exchange Act) of more than thirty percent (30%) of the
then outstanding voting stock;
(b) During any period of two (2) consecutive years, individuals who at the
beginning of such period constitute the Board and any new director
whose election by the Board or nomination for election by the
Company's stockholders was approved by a vote of at least two-thirds
of the directors then still in office who either were directors at the
beginning of the two year period or whose election or nomination for
election was previously so approved, cease for any reason to
constitute at least a majority of the Board;
(c) The consummation of a merger or consolidation of the Company with any
other corporation, other than a merger or consolidation which would
result in the voting securities of the Company outstanding immediately
prior thereto continuing to represent (either by remaining outstanding
or being converted into voting securities of the surviving entity)
more than fifty percent (50%) of the combined voting securities of the
Company or such surviving entity outstanding immediately after such
merger or consolidation; or
(d) The approval of the stockholders of the Company of a plan of complete
liquidation of the Company or an agreement for the sale or disposition
by the Company of all or substantially all of its assets.
<PAGE> 1
EXHIBIT 10.15
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT, is entered into as of this 25th day of May,
1999 by and between Textron Inc. (the "Company"), a Delaware corporation having
its principal office at 40 Westminster Street, Providence, Rhode Island 02903
and John A. Janitz (the "Executive").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Company desires to employ the Executive and the Executive
is willing to be employed by the Company; and
WHEREAS, the Company and the Executive desire to set forth the terms
and conditions of such employment.
NOW THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements of the parties set forth in this Agreement, and of
other good and valuable consideration, the adequacy and receipt of which is
acknowledged, the parties hereto agree as follows:
1. TERM OF EMPLOYMENT
The Company hereby agrees to employ the Executive and the
Executive hereby accepts employment, in accordance with the terms and conditions
set forth herein, for a term (the "Employment Term") commencing on the date
hereof (the "Effective Date") and terminating, unless otherwise terminated
earlier in accordance with Section 5 hereof, on the third anniversary of the
Effective Date (the "Original Employment Term"), provided that the Employment
Term shall be automatically extended, subject to earlier termination as provided
in Section 5 hereof, for successive additional one (1) year periods (the
"Additional Terms"), unless, at least ninety (90) days prior to the end of the
Original Employment Term or the then Additional Term, the Company or the
Executive has notified the other in writing that the Employment Term shall
terminate at the end of the then current term.
2. POSITION AND RESPONSIBILITIES
During the Employment Term, the Executive shall serve as the
President and Chief Operating Officer of the Company or in such higher capacity
as agreed by the Company and the Executive. The Executive shall report
exclusively to the Chief Executive Officer and the Board of Directors of the
Company (the "Board"). The Executive shall, to the extent appointed or elected,
serve on the Board as a director and as a member of any committee of the Board,
in each case, without additional compensation. The Executive shall, to the
extent appointed or elected, serve as a director or as a member of any committee
of the board (or the equivalent
<PAGE> 2
bodies in a non-corporate subsidiary or affiliate) of any of the Company's
subsidiaries or affiliates and as an officer or employee (in a capacity
commensurate with his position with the Company) of any such subsidiaries or
affiliates, in all cases, without additional compensation or benefits and any
compensation paid to the Executive, or benefits provided to the Executive, in
such capacities shall be a credit with regard to the amounts due hereunder from
the Company. The Executive shall have duties, authorities and responsibilities
generally commensurate with the duties, authorities and responsibilities of
persons in similar capacities in similarly sized companies, subject to the
By-laws of the Company the organizational structure of the Company. The
Executive shall devote substantially all of his business time, attention and
energies to the performance of his duties hereunder, provided the foregoing will
not prevent the Executive from participating in charitable, community or
industry affairs, from managing his and his family's personal passive
investments, and (with the consent of the Chief Executive Officer or the
Organization and Compensation Committee (or its successor) of the Board (the
"O&C Committee"), which consent will not be unreasonably withheld, conditioned
or delayed) serving on the board of directors of other companies, provided that
these activities do not materially interfere with the performance of his duties
hereunder or create a potential business conflict or the appearance thereof.
3. COMPENSATION AND BENEFITS
During the Employment Term, the Company shall pay and provide the
Executive the following:
3.1 BASE SALARY. The Company shall pay the Executive an
initial base salary (the "Base Salary") at a rate of $600,000. Base Salary shall
be paid to the Executive in accordance with the Company's normal payroll
practices for executives. Base Salary shall be reviewed at least annually by the
O&C Committee (or as otherwise designated by the Board) to ascertain whether, in
the judgment of the reviewing committee, such Base Salary should be increased.
If so increased, Base Salary shall not be thereafter decreased and shall
thereafter, as increased, be the Base Salary hereunder.
3.2 ANNUAL BONUS. The Company shall provide the Executive with
the opportunity to earn an annual cash bonus under the Company's current annual
incentive compensation plan for executives or a replacement plan therefor at a
level commensurate with his position, provided that the minimum annual target
award payable upon the achievement of reasonably attainable objective
performance goals shall be at least seventy percent 70% of Base Salary.
3.3 LONG-TERM INCENTIVES. The Company shall provide the
Executive the opportunity to earn long-term incentive awards under the current
equity and cash based plans and programs or replacements therefor.
3.4 EMPLOYEE BENEFITS. The Executive shall, to the extent
eligible, be entitled
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to participate at a level commensurate with his position in all employee benefit
welfare and retirement plans and programs, as well as equity plans, generally
provided by the Company to its senior executives in accordance with the terms
thereof as in effect from time to time.
3.5 VACATION. The Executive shall be entitled to paid vacation
in accordance with the standard written policies of the Company with regard to
vacations of executives, but in no event less than four (4) weeks per calendar
year.
3.6 PERQUISITES. The Company shall provide to the Executive,
at the Company's cost, all perquisites to which other senior executives of the
Company are generally entitled to receive and such other perquisites which are
suitable to the character of the Executive's position with the Company and
adequate for the performance of his duties hereunder. To the extent legally
permissible, the Company shall not treat such amounts as income to the
Executive.
3.7 RIGHT TO CHANGE PLANS. The Company shall not be obligated
by reason of this Section 3 to institute, maintain, or refrain from changing,
amending, or discontinuing any benefit plan, program, or perquisite, so long as
such changes are similarly applicable to executive employees generally.
4. EXPENSES
Upon submission of appropriate documentation, in accordance
with its policies in effect from time to time, the Company shall pay, or
reimburse, the Executive for all ordinary and necessary expenses, in a
reasonable amount, which the Executive incurs in performing his duties under
this Agreement including, but not limited to, travel, entertainment,
professional dues and subscriptions, and all dues, fees, and expenses associated
with membership in various professional, business, and civic associations and
societies in which the Executive participates in accordance with the Company's
policies in effect from time to time.
5. TERMINATION OF EMPLOYMENT
The Executive's employment with the Company (including but not limited
to any subsidiary or affiliate or the Company) and the Employment Term shall
terminate upon the occurrence of the first of the following events:
(a) Automatically on the date of the Executive's death.
(b) Upon thirty (30) days written notice by the Company to the
Executive of a termination due to Disability, provided such
notice is delivered during the period of Disability. The term
"Disability" shall mean, for purposes of this Agreement, the
inability of the Executive, due to injury, illness, disease or
bodily or mental infirmity, to engage in the performance of
his material duties of employment with
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the Company as contemplated by Section 2 herein for a period
of more than one hundred eighty (180) consecutive days or for
a period that is reasonably expected to exist for a period of
more than one hundred eighty (180) consecutive days, provided
that interim returns to work of less than ten (10) consecutive
business days in duration shall not be deemed to interfere
with a determination of consecutive absent days if the reason
for absence before and after the interim return are the same.
The existence or non-existence of a Disability shall be
determined by a physician agreed upon in good faith by the
Executive (or his representatives) and the Company. It is
expressly understood that the Disability of the Executive for
a period of one hundred eighty (180) consecutive days or less
shall not constitute a failure by him to perform his duties
hereunder and shall not be deemed a breach or default and the
Executive shall receive full compensation for any such period
of Disability or for any other temporary illness or incapacity
during the term of this Agreement.
(c) Immediately upon written notice by the Company to the
Executive of a termination due to his retirement at or after
the Executive's attainment of age sixty-five (65).
(d) Immediately upon written notice by the Company to the
Executive of a termination for Cause, provided such notice is
given within ninety (90) days after the discovery by the Board
or the Chief Executive Officer of the Cause event and has been
approved by the O&C Committee at a meeting at which the
Executive and his counsel had the right to appear and address
such meeting after receiving at least five (5) business days
written notice of the meeting and reasonable detail of the
facts and circumstances claimed to provide a basis for such
termination. The term "Cause" shall mean, for purposes of this
Agreement: (i) an act or acts of willful misrepresentation,
fraud or willful dishonesty (other than good faith expense
account disputes) by the Executive which in any case is
intended to result in his or another person or entity's
substantial personal enrichment at the expense of the Company;
(ii) any willful misconduct by the Executive with regard to
the Company, its business, assets or employees that has, or
was intended to have, a material adverse impact (economic or
otherwise) on the Company; (iii) any material, willful and
knowing violation by the Executive of (x) the Company's
Business Conduct Guidelines, or (y) any of his fiduciary
duties to the Company which in either case has, or was
intended to have, a material adverse impact (economic or
otherwise) on the Company; (iv) the willful or reckless
behavior of the Executive with regard to a matter of a
material nature which has a material adverse impact (economic
or otherwise) on the Company; (v) the Executive's willful
failure to attempt to perform his duties under Section 2
hereof or his willful failure to attempt to follow the legal
written direction of the Board, which in either case is not
remedied within ten (10) days after receipt by the Executive
of a written notice from the Company specifying the details
thereof; (vi) the
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Executive's conviction of, or pleading NOLO CONTENDERE or
guilty to, a felony (other than (x) a traffic infraction or
(y) vicarious liability solely as a result of his position
provided the Executive did not have actual knowledge of the
actions or inactions creating the violation of the law or the
Executive relied in good faith on the advice of counsel with
regard to the legality of such action or inaction (or the
advice of other specifically qualified professionals as to the
appropriate or proper action or inaction to take with regard
to matters which are not matters of legal interpretation)); or
(vii) any other material breach by the Executive of this
Agreement that is not cured by the Executive within twenty
(20) days after receipt by the Executive of a written notice
from the Company of such breach specifying the details
thereof. No action or inaction should be deemed willful if not
demonstrably willful and if taken or not taken by the
Executive in good faith as not being adverse to the best
interests of the Company. Reference in this paragraph (d) to
the Company shall also include direct and indirect
subsidiaries of the Company, and materiality and material
adverse impact shall be measured based on the action or
inaction and the impact upon, and not the size of, the Company
taken as a whole, provided that after a Change in Control, the
size of the Company, taken as a whole, shall be a relevant
factor in determining materiality and material adverse impact.
(e) Upon written notice by the Company to the Executive of an
involuntary termination without Cause. A notice by the Company
of non-renewal of the Employment Term pursuant to Section 1
above shall be deemed an involuntary termination of the
Executive by the Company without Cause as of the end of the
Employment Term, but the Executive may terminate at any time
after the receipt of such notice and shall be treated as if he
was terminated without Cause as of such date.
(f) Upon twenty (20) days written notice by the Executive to the
Company of a termination for Good Reason (which notice sets
forth in reasonable detail the facts and circumstances claimed
to provide a basis for such termination) unless the Good
Reason event is cured within such twenty (20) day period. The
term "Good Reason" shall mean, for purposes of this Agreement,
without the Executive's express written consent, the
occurrence of any one or more of the following: (i) the
assignment to the Executive of duties materially inconsistent
with the Executive's then authorities, duties,
responsibilities, and status (including offices, titles, and
reporting requirements), or any reduction in the Executive's
then title, position, reporting lines or a material reduction
(other than temporarily while Disabled or otherwise
incapacitated) in his then status, authorities, duties, or
responsibilities or, if then a director of the Company,
failure to be nominated or reelected as a director of the
Company or removal as such; (ii) relocation of the Executive
from the principal office of the Company (excluding reasonable
travel on the Company's business to an extent substantially
consistent with the
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Executive's business obligations) or relocation of the
principal office of the Company to a location which is at
least fifty (50) miles from the Company's current
headquarters, provided, however, if the Executive at the time
of the relocation is not located at the principal office, such
relocation provision shall apply based on his then location
but shall not cover a relocation to the principal office prior
to a Change in Control; (iii) a reduction by the Company in
the Executive's Base Salary; (iv) a reduction in the
Executive's aggregate level of participation in any of the
Company's short and/or long-term incentive compensation plans,
or employee benefit or retirement plans, policies, practices,
or arrangements in which the Executive participated as of the
Effective Date, or, after a Change in Control, participated
immediately prior to the Change in Control; (v) the failure of
the Company to obtain and deliver to the Executive a
satisfactory written agreement from any successor to the
Company to assume and agree to perform this Agreement; or (vi)
any other material breach by the Company of this Agreement.
(g) Upon written notice by the Executive to the Company of the
Executive's voluntary termination of employment without Good
Reason (which the Company may, in its sole discretion, make
effective earlier than any notice date). A notice by the
Executive of non-renewal of the Employment Term pursuant to
Section 1 above shall be deemed a voluntary termination by the
Executive without Good Reason as of the end of the Employment
Term.
SECTION 6. CONSEQUENCES OF A TERMINATION OF EMPLOYMENT
6.1 TERMINATION DUE TO DEATH OR RETIREMENT. If the Employment Term ends
on account of the Executive's termination due to death pursuant to Section 5(a)
above or retirement pursuant to Section 5(c) above, the Executive (or the
Executive's surviving spouse, or other beneficiary as so designated by the
Executive during his lifetime, or to the Executive's estate, as appropriate)
shall be entitled, in lieu of any other payments or benefits, to (i) payment
promptly of any unpaid Base Salary, unpaid annual incentive compensation (for
the preceding fiscal year) and any accrued vacation, (ii) reimbursement for any
unreimbursed business expenses incurred prior to the date of termination, and
(iii) any amounts, benefits or fringes due under any equity, benefit or fringe
plan, grant or program in accordance with the terms of said plan, grant or
program but without duplication (collectively, the "Accrued Obligations").
6.2 TERMINATION DUE TO DISABILITY. If the Employment Term ends as a
result of Disability pursuant to Section 5(b) above, the Executive shall be
entitled, in lieu of any other payments or benefits, to any Accrued Obligations.
6.3 INVOLUNTARY TERMINATION BY THE COMPANY WITHOUT CAUSE OR TERMINATION
BY THE EXECUTIVE FOR GOOD REASON. If the Executive is involuntarily terminated
by the Company without Cause in accordance with Section 5(e) above or the
Executive terminates his
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employment for Good Reason in accordance with Section 5(f) above, the Executive
shall be entitled, in lieu of any other payments or benefits, subject to Section
7(b) hereof, to any Accrued Obligations and the following:
(a) Payment of the Prorated Portion (as determined in the next
sentence) of the earned annual incentive compensation award
for the fiscal year in which the Executive's termination
occurs, payable promptly after the end of such fiscal year.
"Prorated Portion" shall be determined by multiplying such
amount by a fraction, the numerator of which is the number of
days during the fiscal year of termination that the Executive
is employed by the Company, and the denominator of which is,
365.
(b) Continued payment off payroll for two years (in approximately
equal monthly installments) of an amount equal to two times
the sum of (i) the Executive's Base Salary and (ii) the higher
of (x) the Executive's target incentive compensation
established for the fiscal year in which the Executive's
termination occurs or (y) a multiple thereof equal to the
product of such target amount and the multiple of target
earned by the Executive for the prior fiscal year (whether or
not deferred).
(c) Payment of the premium for COBRA continuation health coverage
for the Executive and the Executive's dependents until the
earliest of (i) eighteen (18) months after such termination,
(ii) until no longer eligible for COBRA continuation benefit
coverage or (iii) the Executive commences other substantially
full-time employment.
6.4 TERMINATION BY THE COMPANY FOR CAUSE OR TERMINATION BY THE
EXECUTIVE WITHOUT GOOD REASON. If the Executive is terminated by the Company for
Cause or the Executive terminates his employment without Good Reason, the
Executive shall be entitled to receive all Accrued Obligations.
SECTION 7. NO MITIGATION/NO OFFSET/RELEASE
(a) In the event of any termination of employment hereunder, the
Executive shall be under no obligation to seek other
employment and there shall be no offset against any amounts
due the Executive under this Agreement on account of any
remuneration attributable to any subsequent employment that
the Executive may obtain. The amounts payable hereunder shall
not be subject to setoff, counterclaim, recoupment, defense or
other right which the Company may have against the Executive
or others, except as specifically set forth in Section 9
hereof or upon obtaining by the Company of a final
unappealable judgement against the Executive.
(b) Any amounts payable and benefits or additional rights provided
pursuant to
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Section 6.3 or Section 8.1 beyond and Accrued Obligations and
beyond the sum of any amounts due (without execution of a
release) under the Company severance program then in effect,
or, if greater, three (3) months Base Salary as severance,
shall only be payable if the Executive delivers to the Company
a release of all claims of the Executive (other than those
specifically payable or providable hereunder on or upon the
applicable type of termination and any rights of
indemnification under the Company's organizational documents)
with regard to the Company, its subsidiaries and related
entities and their respective past or present officers,
directors and employees in such form as reasonably requested
by the Company.
(c) Upon any termination of employment, upon the request of the
Company, the Executive shall deliver to the Company a
resignation from all offices and directorships and fiduciary
positions of the Executive in which the Executive is serving
with, or at the request of, the Company or its subsidiaries,
affiliates or benefit plans.
(d) The amounts and benefits provided under Sections 6 and 8
hereof are intended to be inclusive and not duplicative of the
amounts and benefits due under the Company's employee benefit
plans and programs to the extent they are duplicative.
8. CHANGE IN CONTROL
8.1 EMPLOYMENT TERMINATION IN CONNECTION WITH A CHANGE IN CONTROL. In
the event of a Qualifying Termination (as defined below) during the period
commencing one-hundred eighty (180) days prior to the effective date of a Change
in Control and terminating on the second anniversary of the effective date of a
Change in Control (the "Change in Control Protection Period"), then in lieu of
the benefits provided to the Executive under Section 6.3 of this Agreement, the
Company shall pay the Executive the following amounts within (except as
otherwise provided) thirty (30) business days of the Qualifying Termination (or,
if later, the effective date of the Change in Control; in which case any amounts
or benefits previously paid, pursuant to Section 6 shall be setoff against those
under this Section 8) and provide the following benefits:
(a) Any Accrued Obligations.
(b) A lump-sum cash payment equal to three (3) times the highest
rate of the Executive's Base Salary rate in effect at any time
up to and including the date of the Executive's termination.
(c) A lump-sum cash payment equal to the Prorated Portion of the
greater of: (i) the Executive's target annual incentive
compensation award established for the fiscal
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year during which the Executive's award termination occurs, or
(ii) the Executive's earned annual incentive award for the
fiscal year prior to the fiscal year in which the earlier of
the Change in Control or the Qualifying Termination occurs
(whether or not deferred).
(d) A lump-sum cash payment equal to three (3) times the greater
of: (i) the Executive's highest annual incentive compensation
earned over the three (3) fiscal years ending prior to the
earlier of the Change in Control or the Qualifying Termination
(whether or not deferred); or (ii) the Executive's target
incentive compensation established for the fiscal year in
which the Executive's date of termination occurs.
(e) To the extent the Executive is eligible, was eligible prior or
after the Change in Control (or, if earlier, the Qualifying
Termination) or if the Executive would be eligible with credit
for an additional three (3) years of age and service credit,
coverage under all applicable retiree health and other retiree
welfare plans for the Executive and the Executive's eligible
dependents (including an adjustment to the extent necessary to
put the Executive on the same after tax basis as if the
Executive had been eligible for such coverage).
(f) To the extent eligible prior or after the Change in Control
(or, if earlier, the Qualifying Termination), continued
participation, (coordinated with (e) above to the extent
duplicative), at no additional after tax cost to the Executive
than the Executive would have as an employee, in all welfare
plans, until three (3) years after the date of termination,
provided, however, that in the event the Executive obtains
other employment that offers substantially similar or improved
benefits, as to any particular welfare plan, such continuation
of coverage by the Company for such similar or improved
benefit under such plan shall immediately cease. To the extent
such coverage cannot be provided under the Company's welfare
benefit plans without jeopardizing the tax status of such
plans, for underwriting reasons or because of the tax impact
on the Executive, the Company shall pay the Executive an
amount such that the Executive can purchase such benefits
separately at no greater after tax cost to him than he would
have had if the benefits were provided to him as an employee.
(g) A lump-sum cash payment of the actuarial present value
equivalent (as determined in accordance with the most
favorable (to the Executive) overall actuarial assumptions and
subsidies in any of the Company's tax-qualified or
nonqualified type defined benefit pension plans in which the
Executive then participates) of the accrued benefits accrued
by the Executive as of the date of termination under the terms
of any nonqualified defined benefit type retirement plan,
including but not limited to, the Amended and Restated
Supplemental
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Executive Retirement Plan for Textron Inc. Key Executives and
the Supplemental Benefits Plan and assuming the benefit was
fully vested without regard to any minimum age or service
requirements. For this purpose, such benefits shall be
calculated under the assumption that the Executive's
employment continued following the date of termination for
three (3) full years (i.e., three (3) additional years of age
(including, but not limited to, for purposes of determining
the actuarial present value), compensation and service credits
shall be added).
(h) Three (3) times the amount of the maximum Company contribution
or match to any defined contribution type plan in which the
Executive participates.
(i) A lump-sum cash payment of the product of (i) the Interest
Factor (as determined in the next sentence) multiplied by (ii)
the Executive's entire account balance under the Deferred
Income Plan (or any replacement therefor), plus an additional
amount equal to three (3) times the match which the Company
made for the Executive to such plan for the fiscal year ending
immediately prior to the earlier of the Change in Control or
the Qualifying Termination. The "Interest Factor" shall be
equal to one (1) plus three (3) times the rate of earnings of
the Executive's account under such plan for the fiscal year
ending immediately prior to his termination.
(j) Immediate full vesting of any outstanding stock options,
performance share units and other equity awards (and lapse of
any forfeiture provisions) to the extent permitted under the
plan or grant, or if full vesting is not permitted with regard
to stock options, a cash payment equal to the difference
between the fair market value of the shares covered by the
unvested options and the exercise price of such unvested
options on such unvested options on the date of termination
(or, if later, the date of the Change in Control).
(k) Outplacement services at a level commensurate with the
Executive's position, including use of an executive office and
secretary, for a period of one (1) year commencing on the date
of termination but in no event extending beyond the date on
which the Executive commences other full time employment.
(l) Continuation of participation for three (3) additional years
in the Company's programs with regard to tax preparation
assistance and financial planning assistance, club dues and
automobile (but based on the automobile then being used and no
new one), in accordance with the Company's programs in effect
at the time of the Change in Control.
For purposes of this Section 8, a Qualifying Termination shall mean any
termination of the Executive's employment (i) by the Company without Cause, or
(ii) by the Executive for Good Reason.
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8.2 DEFINITION OF "CHANGE IN CONTROL." A Change in Control of the
Company shall be deemed to have occurred as of the first day any one or more of
the following conditions shall have been satisfied:
(a) Any "person" or "group" (within the meaning of Section 13(d)
and 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) other than the Company, any
trustee or other fiduciary holding Company common stock under
an employee benefit plan of the Company or a related company,
or any corporation which is owned, directly or indirectly, by
the stockholders of the Company in substantially the same
proportions as their ownership of the Company's common stock,
is or becomes the beneficial owner (as defined in Rule 13d-3
under the Exchange Act) of more than thirty percent (30%) of
the then outstanding voting stock;
(b) During any period of two (2) consecutive years, individuals
who at the beginning of such period constitute the Board and
any new director whose election by the Board or nomination for
election by the Company's stockholders was approved by a vote
of at least two-thirds of the directors then still in office
who either were directors at the beginning of the two year
period or whose election or nomination for election was
previously so approved, cease for any reason to constitute at
least a majority of the Board;
(c) The consummation of a merger or consolidation of the Company
with any other corporation, other than a merger or
consolidation which would result in the voting securities of
the Company outstanding immediately prior thereto continuing
to represent (either by remaining outstanding or being
converted into voting securities of the surviving entity) more
than fifty percent (50%) of the combined voting securities of
the Company or such surviving entity outstanding immediately
after such merger or consolidation; or
(d) The approval of the stockholders of the Company of a plan of
complete liquidation of the Company or an agreement for the
sale or disposition by the Company of all or substantially all
of its assets.
8.3 EXCISE TAX EQUALIZATION PAYMENT. In the event that the Executive
becomes entitled to payments and/or benefits which would constitute "parachute
payments" within the meaning of Section 280G(b)(2) of the Code, the provisions
of Exhibit A will apply.
9. NONCOMPETITION, CONFIDENTIALITY AND NONDISPARAGEMENT
9.1 AGREEMENT NOT TO COMPETE.
(a) The Executive agrees that for a period of two (2) years after
the termination of
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the Executive's employment, the Executive will not engage in
Competition with the Company with the Listed Companies,
provided that after the Executive's termination of employment
the Listed Companies shall be limited to those effectively
listed at the time of his termination and still on such list
at the time of any alleged activity of the Executive,
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.
(b) The Executive agrees that if, while he is receiving severance
pay from the Company pursuant to Section 6.3(b), the
Executive: (i) violates (a) above, or (ii) otherwise engages
in Competition in the Restricted Territory, whether or not
with the Listed Companies, Section 9.6(b) hereof shall apply.
(c) The Executive agrees that the restrictions contained in this
Section 9 are necessary for the protection of the business and
goodwill of the Company because of the trade secrets within
the Executive's knowledge and are considered by the Executive
to be reasonable for such purpose.
9.2 DEFINITIONS.
(a) "Competition" shall mean engaging in, as an employee,
director, partner, principal, shareholder, consultant,
advisor, independent contractor or similar capacity, with (a)
the Listed Companies or (b) in any business, activity or
conduct which directly competes with the business of the
Company, provided that, with regard to the period after
termination of the Executive's employment, Section 9.1(b)(ii)
shall only apply to business lines in which the Company is
engaged both at the time of termination of employment and at
the time of the determination and which during the last fiscal
year ending prior to the date of such termination represented
at least five percent (5%) of the Company's revenues (the
"Prohibited Lines"). Notwithstanding anything else in this
Section 9, Competition shall not include: (A) (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, (iii) the practice of law in a law firm
that represents entities in Competition with the Company,
provided that the Executive does not personally represent such
entities, or (iv) 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 the Executive does not personally
represent or provide services to such entities that are Listed
Companies or otherwise with regard to businesses in
Competition with the Prohibited Lines,
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or (B) with regard to Section 9.1(b)(ii), (i) being employed
by, or consulting for, a non-Competitive division or business
unit of an entity which is in Competition with the Company
(and participating in such entity's employee equity plans),
(ii) being employed by, or consulting for, an entity which had
annual revenues in the last fiscal year prior to the Executive
being employed by, or consulting for, the entity generated
through business lines in Competition with the Prohibited
Lines of the Company that do not exceed five percent (5%) of
such entity's total annual revenues, provided that revenues
within the Executive's area of responsibility or authority are
not more than ten percent (10%) composed of the revenues from
the businesses in Competition with the Prohibited Lines, or
(iii) any activities conducted after a Change in Control of
the Company.
(b) The Restricted Territory shall mean any geographic area in
which the Company with regard to the Prohibited Lines did more
than nominal business.
(c) Listed Companies shall mean those entities which are within
the "peer group" established by the Company for the
performance graphs in its proxy statement pursuant to Item
402(l) of Regulation S-K under the Exchange Act and which are
in a list of no more than five (5) entities established by the
Company from time to time and available from the Chief Human
Resources Officer, provided that the addition of any entity to
the list shall not be effective until sixty (60) days after it
is so listed.
(d) For purposes of this Section 9, "Company" shall mean the
Company and its subsidiaries and affiliates.
9.3 AGREEMENT NOT TO ENGAGE IN CERTAIN SOLICITATION. The
Executive agrees that the Executive will not, during the Executive's employment
with the Company or during the two (2) year period thereafter, directly or
indirectly, solicit or induce, or attempt to solicit or induce, any non-clerical
employee(s), sales representative(s), agent(s), or consultant(s) of the Company
to terminate such person's employment, representation or other association with
the Company for the purpose of affiliating with any entity with which the
Executive is associated ("Solicitation").
9.4 CONFIDENTIAL INFORMATION.
(a) The Executive specifically acknowledges that any trade secrets
or confidential business and technical information of the
Company or its vendors, suppliers or customers, whether
reduced to writing, maintained on any form of electronic
media, or maintained in mind or memory and whether compiled by
the Executive or the Company (collectively, "Confidential
Information"), derives independent economic value from not
being readily known to or ascertainable by proper means by
others; that reasonable efforts have been made by the Company
to
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maintain the secrecy of such information; that such
information is the sole property of the Company or its
vendors, suppliers, or customers and that any retention, use
or disclosure of such information by the Executive during the
Employment Term (except in the course of performing duties and
obligations of employment with the Company) or any time after
termination thereof, shall constitute misappropriation of the
trade secrets of the Company or its vendors, suppliers, or
customers, provided that Confidential Information shall not
include: (i) information that is at the time of disclosure
public knowledge or generally known within the industry, (ii)
information deemed in good faith by the Executive, while
employed by the Company, desirable to disclose in the course
of performing the Executive's duties, (iii) information the
disclosure of which the Executive in good faith deems
necessary in defense of the Executive's rights provided such
disclosure by the Executive is limited to only disclose as
necessary for such purpose, or (iv) information disclosed by
the Executive to comply with a court, or other lawful
compulsory, order compelling him to do so, provided the
Executive gives the Company prompt notice of the receipt of
such order and the disclosure by the Executive is limited to
only disclosure necessary for such purpose.
(b) The Executive acknowledges that the Company from time to time
may have agreements with other persons or with the United
States Government, or agencies thereof, that impose
obligations or restrictions on the Company regarding
inventions made during the course of work under such
agreements or regarding the confidential nature of such work.
If the Executive's duties hereunder will require disclosures
to be made to him subject to such obligations and
restrictions, the Executive agrees to be bound by them.
9.5 SCOPE OF RESTRICTIONS. If, at the time of enforcement of
this Section 9, a court holds that the restrictions stated herein are
unreasonable under circumstances then existing, the parties hereto agree that
the maximum period, scope or geographical area reasonable under such
circumstances shall be substituted for the stated period, scope or area and that
the court shall be allowed to revise the restrictions contained herein to cover
the maximum period, scope and area permitted by law.
9.6 REMEDIES.
(a) In the event of a material breach or threatened material
breach of Section 9.1(a), Section 9.3, Section 9.4 or Section
9.10, 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 any violations of the
provisions of this Section 9. Except as specifically provided
with regard to Listed Companies, the Company agrees that it
will not assert to enjoin or otherwise limit the Executive's
activities based on an argument of inevitable disclosure of
confidential
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<PAGE> 15
information.
(b) In the event Section 9.1(b) applies, the Company may
immediately cease payment to the Executive of all future
amounts due under Sections 6.3(a) or (b) as well as otherwise
specifically provided in any other plan, grant or program.
(c) Upon written request of the Executive, the Company shall
within thirty (30) days notify the Executive in writing
whether or not in good faith it believes any proposed
activities would be in Competition and, if it so determines or
does not reply within thirty (30) days, it shall be deemed to
waive any right to treat such activities as Competition unless
the facts are otherwise than as presented by the Executive or
there is a change thereafter in such activities. The Executive
shall promptly provide the Company with such information as it
may reasonably request to evaluate whether or not such
activities are in Competition.
9.7 UNIFORMITY. In no event shall any definitions of
Competition or Solicitation (or a similar provision) as it applies to the
Executive with regard to any plan of program or grant of the Company be
interpreted to be any broader than as set forth in this Section 9.
9.8 DELIVERY OF DOCUMENTS. Upon termination of this Agreement
or at any other time upon request by the Company, the Executive shall promptly
deliver to the Company all records, files, memoranda, notes, designs, data,
reports, price lists, customer lists, drawings, plans, computer programs,
software, software documentation, sketches, laboratory and research notebooks
and other documents (and all copies or reproductions of such materials in his
possession or control) belonging to the Company. Notwithstanding the foregoing,
the Executive may retain his rolodex and similar phone directories
(collectively, the "Rolodex") to the extent the Rolodex does not contain
information other than name, address, telephone number and similar information,
provided that, at the request of the Company, the Executive shall provide the
Company with a copy of the Rolodex.
9.9 NONDISPARAGEMENT.
(a) During the Employment Term and thereafter, the Executive 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 the Executive while employed by the Company
in good faith as fulfilling the Executive's 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 the Executive in good faith
deems necessary to rebut any untrue or misleading public
statements made about him or any other member of the Protected
Group, (iv) statements made in good faith by the Executive to
rebut untrue or misleading statements
15
<PAGE> 16
made about him 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. No member of the
Protected Group shall be a third party beneficiary of this
Section 9.9(a).
(b) During the Employment Term and thereafter, 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 the Executive economically or as to reputation or
otherwise vindictively disparage the Executive, 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 the Executive as to any member of the Protected
Group, or (iv) normal commercial puffery in a competitive
business situation.
(c) In the event of a material breach or threatened material
breach of clauses (a) or (b) above, the Company or the
Executive, as the case may be, in addition to its or the
Executive's other remedies at law or in equity, shall be
entitled to injunctive or other equitable relief in order to
enforce or prevent any violations of this Section 9.9.
9.10 POOLING OF INTERESTS. If the Company is involved in any
proposed business combination that is contemplated to be accounted for as a
pooling of interests, the Executive agrees to cooperate with the reasonable
requests of the Company with regard to the exercise of stock options, the sale
of Company stock or other matters that could affect the ability of the
combination to be accounted for as a pooling of interests.
100 LIABILITY INSURANCE
The Company shall cover the Executive under directors and
officers liability insurance both during and, while potential liability exists,
after the Employment Term in the same amount and to the same extent, if any, as
the Company covers its other officers and directors.
110 ASSIGNMENT
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11.1 ASSIGNMENT BY THE COMPANY. This Agreement may and shall
be assigned or transferred to, and shall be binding upon and shall inure to the
benefit of, any successor of the Company, and any such successor shall be deemed
substituted for all purposes of the "Company" under the terms of this Agreement.
As used in this Agreement, the term "successor" shall mean any person, firm,
corporation or business entity which at any time, whether by merger, purchase,
or otherwise, acquires all or substantially all of the assets of the Company.
Notwithstanding such assignment, the Company shall remain, with such successor,
jointly and severally liable for all its obligations hereunder. Except as herein
provided, this Agreement may not otherwise be assigned by the Company.
11.2 ASSIGNMENT BY THE EXECUTIVE. This Agreement is not
assignable by the Executive. This Agreement shall inure to the benefit of and be
enforceable by the Executive's personal or legal representatives, executors, and
administrators, successors, heirs, distributees, devisees, and legatees. If the
Executive should die while any amounts payable to the Executive hereunder remain
outstanding, all such amounts, unless otherwise provided herein, shall be paid
in accordance with the terms of this Agreement to the Executive's devisee,
legatee, or other designee or, in the absence of such designee, to the
Executive's estate.
120 LEGAL REMEDIES
12.1 PAYMENT OF LEGAL FEES. The Company shall pay the
Executive's reasonable legal fees and costs associated with entering into this
Agreement. To the fullest extent permitted by law, the Company shall promptly
pay upon submission of statements all legal and other professional fees, costs
of litigation, prejudgment interest, and other expenses incurred in connection
with any dispute arising hereunder; provided, however, the Company shall be
reimbursed by the Executive for (i) the fees and expenses advanced in the event
the Executive's claim is in a material manner in bad faith or frivolous and the
arbitrator or court, as applicable, determines that the reimbursement of such
fees and expenses is appropriate, or (ii) to the extent that the arbitrator or
court, as appropriate, determines that such legal and other professional fees
are clearly and demonstrably unreasonable.
12.2 ARBITRATION. All disputes and controversies arising under
or in connection with this Agreement, other than the seeking of injunctive or
other equitable relief pursuant to Section 9 hereof, shall be settled by
arbitration conducted before a panel of three (3) arbitrators sitting in New
York City, New York, or such other location agreed by the parties hereto, in
accordance with the rules for expedited resolution of commercial disputes of the
American Arbitration Association then in effect. The determination of the
majority of the arbitrators shall be final and binding on the parties. Judgment
may be entered on the award of the arbitrator in any court having proper
jurisdiction. All expenses of such arbitration, including the fees and expenses
of the counsel of the Executive, shall be borne by the Company and the Executive
shall be entitled to reimbursement of his expenses as provided in Section 12.1
hereof.
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<PAGE> 18
12.3 NOTICE. Any notices, requests, demands, or other
communications provided for by this Agreement shall be sufficient if in writing
and if delivered personally, sent by telecopier, sent by an overnight service or
sent by registered or certified mail. Notice to the Executive not delivered
personally (or by telecopy where the Executive is known to be) shall be sent to
the last address on the books of the Company, and notice to the Company not
delivered personally (or by telecopy to the known personal telecopy of the
person it is being sent to) shall be sent to it at its principal office. All
notices to the Company shall be delivered to the Chief Executive Officer with a
copy to the [senior legal officer]. Delivery shall be deemed to occur on the
earlier of actual receipt or tender and rejection by the intended recipient.
[12.4 CONTINUED PAYMENTS. In the event after a Change in
Control either party files for arbitration to resolve any dispute as to whether
a termination is for Cause or Good Reason, until such dispute is determined by
the arbitrators, the Executive shall continue to be treated economically and
benefit wise in the manner asserted by him in the arbitration effective as of
the date of the filing of the arbitration, subject to the Executive promptly
refunding any amounts paid to him, paying the cost of any benefits provided to
him and paying to the Company the profits in any stock option or other equity
awards exercised or otherwise realized by him during the pendency of the
arbitration which he is ultimately held not to be entitled to; provided the
arbitrators may terminate such payments and benefits in the event that they
determine at any point that the Executive is intentionally delaying conclusion
of the arbitration.]
130 MISCELLANEOUS
13.1 ENTIRE AGREEMENT. This Agreement, except to the extent
specifically provided otherwise herein, supersedes any prior agreements or
understandings, oral or written, between the parties hereto or between the
Executive and the Company, with respect to the subject matter hereof and
constitutes the entire Agreement of the parties with respect to the subject
matter hereof. To the extent any severance plan or program of the Company that
would apply to the Executive is more generous to the Executive than the
provisions hereof, the Executive shall be entitled to any additional payments or
benefits which are not duplicative, but shall otherwise not be eligible for such
plan or program.
13.2 MODIFICATION. This Agreement shall not be varied,
altered, modified, canceled, changed, or in any way amended, nor any provision
hereof waived, except by mutual agreement of the parties in a written instrument
executed by the parties hereto or their legal representatives.
13.3 SEVERABILITY. In the event that any provision or portion
of this Agreement shall be determined to be invalid or unenforceable for any
reason, the remaining provisions of this Agreement shall be unaffected thereby
and shall remain in full force and effect.
13.4 COUNTERPARTS. This Agreement may be executed in two (2)
or more counterparts, each of which shall be deemed to be an original, but all
of which together will
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constitute one and the same Agreement.
13.5 TAX WITHHOLDING. The Company may withhold from any
benefits payable under this Agreement all federal, state, city, or other taxes
as may be required pursuant to any law or governmental regulation or ruling.
13.6 BENEFICIARIES. The Executive may designate one or more
persons or entities as the primary and/or contingent beneficiaries of any
amounts to be received under this Agreement. Such designation must be in the
form of a signed writing acceptable to the Board or the Board's designee. The
Executive may make or change such designation at any time.
13.7 REPRESENTATION. The Executive represents that the
Executive's employment by the Company and the performance by the Executive of
his obligations under this Agreement do not, and shall not, breach any agreement
that obligates him to keep in confidence any trade secrets or confidential or
proprietary information of his or of any other party, to write or consult to any
other party or to refrain from competing, directly or indirectly, with the
business of any other party. The Executive shall not disclose to the Company,
and the Company shall not request that the Executive disclose, any trade secrets
or confidential or proprietary information of any other party.
140 GOVERNING LAW
The provisions of this Agreement shall be construed and enforced in
accordance with the laws of the state of Delaware, without regard to any
otherwise applicable principles of conflicts of laws.
IN WITNESS WHEREOF, the Executive and the Company have executed this
Agreement, as of the day and year first above written.
----------------------------------
TEXTRON INC.
By:-------------------------------
Name:
Title:
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<PAGE> 20
EXHIBIT A
---------
PARACHUTE GROSS UP
------------------
(a) In the event that the Executive shall become entitled to payments
and/or benefits provided by this Agreement or any other amounts in the "nature
of compensation" (whether pursuant to the terms of this Agreement or any other
plan, arrangement or agreement with the Company, any person whose actions result
in a change of ownership or effective control covered by Section 280G(b)(2) of
the Code or any person affiliated with the Company or such person) as a result
of such change in ownership or effective control (collectively the "Company
Payments"), and such Company Payments will be subject to the tax (the "Excise
Tax") imposed by Section 4999 of the Code (and any similar tax that may
hereafter be imposed by any taxing authority) the Company shall pay to the
Executive at the time specified in subsection (d) below an additional amount
(the "Gross-up Payment") such that the net amount retained by the Executive,
after deduction of any Excise Tax on the Company Payments and any U.S. federal,
state, and for local income or payroll tax upon the Gross-up Payment provided
for by this paragraph (a), but before deduction for any U.S. federal, state, and
local income or payroll tax on the Company Payments, shall be equal to the
Company Payments.
(b) For purposes of determining whether any of the Company Payments
and Gross-up Payments (collectively the "Total Payments") will be subject to the
Excise Tax and the amount of such Excise Tax, (x) the Total Payments shall be
treated as "parachute payments" within the meaning of Section 280G(b)(2) of the
Code, and all "parachute payments" in excess of the "base amount" (as defined
under Code Section 280G(b)(3) of the Code) shall be treated as subject to the
Excise Tax, unless and except to the extent that, in the opinion of the
Company's independent certified public accountants appointed prior to any change
in ownership (as defined under Code Section 280G(b)(2)) or tax counsel selected
by such accountants (the "Accountants") such Total Payments (in whole or in
part) either do not constitute "parachute payments," represent reasonable
compensation for services actually rendered within the meaning of Section
280G(b)(4) of the Code in excess of the "base amount" or are otherwise not
subject to the Excise Tax, and (y) the value of any non-cash benefits or any
deferred payment or benefit shall be determined by the Accountants in accordance
with the principles of Section 280G of the Code.
(c) For purposes of determining the amount of the Gross-up Payment,
the Executive shall be deemed to pay U.S. federal income taxes at the highest
marginal rate of U.S. federal income taxation in the calendar year in which the
Gross-up Payment is to be made and state and local income taxes at the highest
marginal rate of taxation in the state and locality of the Executive's residence
for the calendar year in which the Company Payment is to be made, net of the
maximum reduction in U.S. federal income taxes which could be obtained from
deduction of such state and local taxes if paid in such year. In the event that
the Excise Tax is subsequently determined by the Accountants to be less than the
amount taken into account hereunder at the time the Gross-up Payment is made,
the Executive shall repay to the Company, at the time that the amount of such
reduction in Excise Tax is finally determined, the portion of the prior Gross-up
Payment attributable to such reduction (plus the portion of the Gross-up
<PAGE> 21
Payment attributable to the Excise Tax and U.S. federal, state and local income
tax imposed on the portion of the Gross-up Payment being repaid by the Executive
if such repayment results in a reduction in Excise Tax or a U.S. federal, state
and local income tax deduction), plus interest on the amount of such repayment
at the rate provided in Section 1274(b)(2)(B) of the Code. Notwithstanding the
foregoing, in the event any portion of the Gross-up Payment to be refunded to
the Company has been paid to any U.S. federal, state and local tax authority,
repayment thereof (and related amounts) shall not be required until actual
refund or credit of such portion has been made to the Executive, and interest
payable to the Company shall not exceed the interest received or credited to the
Executive by such tax authority for the period it held such portion. The
Executive and the Company shall mutually agree upon the course of action to be
pursued (and the method of allocating the expense thereof) if the Executive's
claim for refund or credit is denied.
In the event that the Excise Tax is later determined by the Accountant
or the Internal Revenue Service to exceed the amount taken into account
hereunder at the time the Gross-up Payment is made (including by reason of any
payment the existence or amount of which cannot be determined at the time of the
Gross-up Payment), the Company shall make an additional Gross-up Payment in
respect of such excess (plus any interest or penalties payable with respect to
such excess) at the time that the amount of such excess is finally determined.
(d) The Gross-up Payment or portion thereof provided for in subsection
(c) above shall be paid not later than the thirtieth (30th) day following an
event occurring which subjects the Executive to the Excise Tax; provided,
however, that if the amount of such Gross-up Payment or portion thereof cannot
be finally determined on or before such day, the Company shall pay to the
Executive on such day an estimate, as determined in good faith by the
Accountant, of the minimum amount of such payments and shall pay the remainder
of such payments (together with interest at the rate provided in Section
1274(b)(2)(B) of the Code), subject to further payments pursuant to subsection
(c) hereof, as soon as the amount thereof can reasonably be determined, but in
no event later than the ninetieth day after the occurrence of the event
subjecting the Executive to the Excise Tax. In the event that the amount of the
estimated payments exceeds the amount subsequently determined to have been due,
such excess shall constitute a loan by the Company to the Executive, payable on
the fifth day after demand by the Company (together with interest at the rate
provided in Section 1274(b)(2)(B) of the Code).
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(e) In the event of any controversy with the Internal Revenue Service
(or other taxing authority) with regard to the Excise Tax, the Executive shall
permit the Company to control issues related to the Excise Tax (at its expense),
provided that such issues do not potentially materially adversely affect the
Executive, but the Executive shall control any other issues. In the event the
issues are interrelated, the Executive and the Company shall in good faith
cooperate so as not to jeopardize resolution of either issue, but if the parties
cannot agree the Executive shall make the final determination with regard to the
issues. In the event of any conference with any taxing authority as to the
Excise Tax or associated income taxes, the Executive shall permit the
representative of the Company to accompany the Executive, and the Executive and
the Executive's representative shall cooperate with the Company and its
representative.
(f) The Company shall be responsible for all charges of the
Accountant.
(g) The Company and the Executive shall promptly deliver to each other
copies of any written communications, and summaries of any verbal
communications, with any taxing authority regarding the Excise Tax covered by
this Exhibit A.
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Attachment A
John A. Janitz
Restricted Stock Awards
June 1, 1999
"DISABILITY"
------------
"Disability" shall mean, for purposes of this award, the inability of the
Executive, due to injury, illness, disease or bodily or mental infirmity, to
engage in the performance of his material duties of employment with the Company
for a period of more than one hundred eighty (180) consecutive days or for a
period that is reasonably expected to exist for a period of more than one
hundred eighty (180) consecutive days, provided that interim returns to work of
less than ten (10) consecutive business days in duration shall not be deemed to
interfere with a determination of consecutive absent days if the reason for
absence before and after the interim return are the same. The existence or
non-existence of a Disability shall be determined by a physician agreed upon a
good faith by the Executive (or his representatives) and Textron.
"CAUSE"
-------
"Cause" shall mean: (i) an act or acts of willful misrepresentation, fraud or
willful dishonesty (other than good faith expense account disputes) by the
Executive which in any case is intended to result in his or another person or
entity's substantial personal enrichment at the expense of the Company; (ii) any
willful misconduct by the Executive with regard to the Company, its business,
assets or employees that has, or was intended to have, a material adverse impact
(economic or otherwise) on the Company; (iii) any material, willful and knowing
violation by the Executive of (x) the Company's Business Conduct Guidelines, or
(y) any of his fiduciary duties to the Company which in either case has, or was
intended to have, a material adverse impact (economic or otherwise) on the
Company; (iv) the willful or reckless behavior of the Executive with regard to a
matter of a material nature which has a material adverse impact (economic or
otherwise) on the Company; (v) the executive's willful failure to attempt to
perform his duties or his willful failure to attempt to follow the legal written
direction of the Board, which in either case is not remedied within ten (10)
days after receipt by the Executive of a written notice from the Company
specifying the details thereof; or (vi) the Executive's conviction of, or
pleading NOLO CONTENDERE or guilty to, a felony (other than (x) a traffic
infraction or (y) vicarious liability solely as a result of his position
provided the Executive did not have actual knowledge of the actions or inactions
creating the violation of the law or the Executive relied in good faith on the
advice of counsel with regard to the legality of such action or inaction (or the
advice of other specifically qualified professionals as to the appropriate or
proper action or inaction to take with regard to matters which are not matters
of legal interpretation); No action or inaction should be deemed willful if not
demonstrably willful and if taken or not taken by the Executive in good faith as
not being adverse to the best interests of the Company. Reference in this
paragraph to the Company shall also include direct and indirect subsidiaries of
the Company, and materiality and material adverse impact shall be measured based
on the action or inaction and the impact upon, and not the size of, the Company
taken as a whole, provided that after a Change in Control, the size of the
Company, taken as a whole, shall be a relevant factor in determining materiality
and material adverse impact.
"GOOD REASON"
-------------
"Good Reason" shall mean, without the Executive's express written consent, the
occurrence of any one or more of the following: (i) the assignment to the
Executive of duties materially inconsistent with the Executive's then
authorities, duties, responsibilities, and status (including offices, titles,
and reporting requirements), or any reduction in the Executive's then title,
position, reporting lines or a material reduction (other than temporarily while
Disabled or otherwise incapacitated) in his then status, authorities, duties, or
responsibilities or, if then a director of the Company, failure to be nominated
or reelected as a director of the Company or removal as such; (ii) relocation of
the Executive from the principal office of the Company (excluding reasonable
travel on the Company's business to an extent substantially consistent with the
Executive's business obligations) or relocation of the principal office of the
Company to a location which is at least fifty (50) miles from the Company's
current headquarters, provided, however, if the Executive at the time of the
relocation is not located at the principal office, such relocation provision
shall apply based on his then location but shall not cover a relocation to the
principal office prior to a Change in Control; (iii) a reduction by the Company
in the Executive's Base Salary; (iv) a reduction in the Executive's aggregate
level of participation in any of the Company's short and/or long-term incentive
compensation plans, or employee benefit or retirement plans, policies,
practices, or arrangements in which the Executive participated as of the
Effective Date, or, after a Change in Control, participated immediately prior to
the Change in Control; (v) the failure of the Company to obtain and deliver to
the Executive a satisfactory written agreement from any successor to the Company
to assume and agree to perform this Agreement; or (vi) any other material breach
by the Company of this Agreement.
<PAGE> 24
Attachment A
Page 2
"CHANGE IN CONTROL"
-------------------
A "Change in Control" of the Company shall be deemed to have occurred as of the
first day any one or more of the following conditions shall have been satisfied:
(a) Any "person" or "group" (within the meaning of Section 13(d) and
14(d)(2) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) other than the Company, any trustee or other
fiduciary holding Company common stock under an employee benefit
plan of the Company or a related company, or any corporation which
is owned, directly or indirectly, by the stockholders of the
Company in substantially the same proportions as their ownership
of the Company's common stock, is or becomes the beneficial owner
(as defined in Rule 13d-3 under the Exchange Act) of more than
thirty percent (30%) of the then outstanding voting stock;
(b) During any period of two (2) consecutive years, individuals who at
the beginning of such period constitute the Board and any new
director whose election by the Board or nomination for election by
the Company's stockholders was approved by a vote of at least
two-thirds of the directors then still in office who either were
directors at the beginning of the two year period or whose
election or nomination for election was previously so approved,
cease for any reason to constitute at least a majority of the
Board;
(c) The consummation of a merger or consolidation of the Company with
any other corporation, other than a merger or consolidation which
would result in the voting securities of the Company outstanding
immediately prior thereto continuing to represent (either by
remaining outstanding or being converted into voting securities of
the surviving entity) more than fifty percent (50%) of the
combined voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation; or
(d) The approval of the stockholders of the Company of a plan of
complete liquidation of the Company or an agreement for the sale
or disposition by the Company of all or substantially all of its
assets.
<PAGE> 25
EXHIBIT B
John A. Janitz
Restricted Stock Awards
June 1, 1999
The Board of Directors approved an award of 120,000 shares of restricted stock
to John A. Janitz (the "Executive") under the 1999 Long-Term Incentive Plan.
These awards replace the 48,000 share equivalents retention awards previously
awarded. The terms of the awards are as follows:
* The Executive will be granted restricted shares of Textron common stock
provided he is still employed by Textron in accordance with the following
schedule and EPS from continuing operations increases at an average annual
growth rate of 8% or more over the vesting period using 1998 EPS of $2.68
as the base amount.
RESTRICTED SHARES VESTING DATES
----------------- ----------------
30,000 October 25, 2000 (58th birthday)
30,000 October 25, 2004 (62nd birthday)
15,000 October 25, 2005 (63rd birthday)
15,000 October 25, 2006 (64th birthday)
30,000 October 25, 2007 (65th birthday)
* Textron shall retain the certificates representing the shares of restricted
stock in its possession until such time as all restrictions applicable to
such shares have lapsed.
* Except as otherwise provided herein, the Executive shall not be entitled to
receive the restricted shares if the EPS performance objective for the
respective shares is not achieved or if his employment with Textron ends
for any reason prior to the respective vesting date, provided that if the
Executive's employment ends prior to such date because of his death,
"Disability" (Attachment A), his involuntary termination by Textron without
"Cause" (Attachment A) or by the Executive for "Good Reason" (Attachment
A), the shares shall immediately become fully vested. In the event of such
termination, the shares shall be issued within 30 days following
termination of employment.
* Notwithstanding the above, all unvested shares shall immediately vest upon
a "Change in Control" (Attachment A).
* Effective June 1, 1999 dividends shall be credited to the Executive and
such dividends are to be accounted for as if reinvested in actual Textron
common stock. Such dividends will vest immediately but payment will be
deferred until the earlier of the restricted shares vest date or
termination of employment.
* The number of restricted shares awarded to the Executive hereunder shall be
proportionately adjusted for any increase or decrease in the number of
issued shares of Textron common stock resulting from a stock split, stock
dividend or any other increase or decrease in such share effective without
receipt of consideration by Textron.
* With respect to withholding required upon the lapse of restrictions on the
restricted stock, the Executive may elect, subject to the approval of the
Board, to satisfy the withholding requirement, in whole or in part, by
having Textron withhold shares having a fair market value on the date the
tax is to be determined equal to the minimum statutory total tax which
could be imposed on the transaction. Such election shall be irrevocable,
made in writing, signed by the Executive, and shall be subject to any
restrictions or limitations that the Board in its sole discretion, deems
appropriate.
- ------------------------ --------------
John D. Butler Date
<PAGE> 26
November 1998
EXHIBIT C
John A. Janitz
Special Pension Arrangement
The provisions of the Executive Supplemental Retirement Plan provide for the
following vesting schedule:
AGE AT RETIREMENT % OF BENEFIT
----------------- ------------
65 100
64 90
63 80
62 70
61 60
60 50
Less than 60 0
The O & C Committee has the authority to use its discretion to provide an
enhanced benefit.
There is full vesting upon a change in control of Textron Inc. The O & C
Committee approved a modification to the definition of change in control to
include the sale of a segment.
Special Arrangement
The following special pension arrangement was approved by the O & C Committee to
amend the Executive Supplemental Retirement Plan vesting schedule:
If John A. Janitz (the "Executive") is involuntarily terminated other
than for "cause" (as defined in Attachment A) before age 60, the
Executive will receive a pension benefit equal to 25% of the full
benefit (12 1/2% of eligible compensation) under the Executive
Supplemental Retirement Plan.
In such instance, the benefit will be calculated as follows:
* 1996 Compensation will be excluded from the average pay calculation
* 1997 will be the first year included in the average pay calculation
* Average pay will be the greater of:
(1) Eligible compensation for each full and partial calendar year
divided by the number of full and partial years, or
(2) Eligible compensation for each full calendar year divided by
the number of full calendar years.
-------------------------- ------------
John D. Butler Date
<PAGE> 1
EXHIBIT 12.1
TEXTRON MANUFACTURING
COMPUTATION OF RATIO OF INCOME TO COMBINED FIXED
CHARGES AND PREFERRED STOCK DIVIDENDS
(UNAUDITED)
(In millions except ratios)
<TABLE>
<CAPTION>
Year
----------------------------------------------------
1999 1998 1997 1996 1995
---- ---- ----- ---- ----
<S> <C> <C> <C> <C> <C>
Fixed charges:
Interest expense (1) $ 56 $146 $117 $137 $168
Distributions on preferred securities of
subsidiary trust, net of income taxes 26 26 26 23 --
Estimated interest portion of rents 26 20 14 18 18
---- ----- ---- ---- ----
Total fixed charges $108 $ 192 $157 $178 $186
==== ===== ==== ==== ====
Income:
Income from continuing operations
before income taxes and distributions
on preferred securities of subsidiary
trust $623 $ 763 $648 $540 $413
Fixed charges (2) 82 166 131 155 186
Eliminate equity in undistributed pretax
income of finance subsidiaries (92) (47) (36) (64) (61)
---- ----- ---- ---- ----
Adjusted income $613 $ 882 $743 $631 $538
==== ===== ==== ==== ====
Ratio of income to fixed charges 5.68 4.59 4.73 3.54 2.89
==== ===== ==== ==== ====
</TABLE>
- ------------------------
(1) Includes interest unrelated to borrowings of $3 million in 1999, $16
million in 1998; $12 million in 1997, $11 million in 1996 and $23
million in 1995.
(2) Adjusted to exclude distributions on preferred securities of subsidiary
trust, net of income taxes in 1999, 1998, 1997 and 1996.
<PAGE> 1
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)
<TABLE>
<CAPTION>
Year
--------------------------------------------
1999 1998 1997 1996 1995
---- ----- ---- ---- ----
Fixed charges:
<S> <C> <C> <C> <C> <C>
Interest expense (1) $245 $ 301 $270 $284 $315
Distributions on preferred securities of
subsidiary trust, net of income taxes 26 26 26 23 --
Estimated interest portion of rents 27 21 14 19 19
---- ----- ---- ---- ----
Total fixed charges $298 $ 348 $310 $326 $334
==== ===== ==== ==== ====
Income:
Income from continuing operations
before income taxes and distributions
on preferred securities of subsidiary
trust $623 $ 763 $648 $540 $413
Fixed charges (2) 272 322 284 303 334
---- ----- ---- ---- ----
Adjusted income $895 $1085 $932 $843 $747
==== ===== ==== ==== ====
Ratio of income to fixed charges 3.00 3.12 3.01 2.59 2.24
==== ===== ==== ==== ====
</TABLE>
- ------------------------
(1) Includes interest unrelated to borrowings of $3 million in 1999, $16
million in 1998, $12 million in 1997, $11 million in 1996 and $23
million in 1995.
(2) Adjusted to exclude distributions on preferred securities of subsidiary
trust, net of income taxes in 1999, 1998, 1997 and 1996.
<PAGE> 1
Exhibit 13
Business Segment Data
For a description of the businesses comprising each segment, see pages 66
through 68.
<TABLE>
<CAPTION>
OPERATING
REVENUES OPERATING INCOME INCOME MARGINS
----------------------------------------------------------- ---------------------------
(In millions) 1999 1998 1997 1999 1998 1997 1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Aircraft $ 3,744 $3,189 $3,025 $ 362 $ 338 $ 313 9.7% 10.6% 10.3%
Automotive 2,916 2,405 2,127 228 179 150 7.8 7.4 7.1
Industrial 4,456 3,722 3,181 483 410 346 10.8 11.0 10.9
Finance 463 367 350 128 113 108 27.6 30.8 30.9
- ------------------------------------------------------------------------------------------------------------------------------------
$11,579 $9,683 $8,683 1,201 1,040 917 10.4% 10.7% 10.6%
====================================================================----------------------------------------------------------------
Gain on sale of division -- 97 --
Special credits/(charges) 1 (87) --
Corporate expenses and other - net (143) (141) (152)
Interest income 27 -- --
Interest expense (56) (146) (117)
- --------------------------------------------------------------------------------------------------
Income from continuing operations
before income taxes* $1,030 $ 763 $ 648
==================================================================================================
</TABLE>
*Before distributions on preferred securities of subsidiary trusts.
1999 REVENUES - $11.6 BILLION
[PIE CHART]
<TABLE>
<S> <C> <C>
Aircraft $3,744 32%
Automotive $2,916 25%
Industrial $4,456 39%
Finance $ 463 4%
</TABLE>
1999 OPERATING INCOME - $1.201 BILLION
[PIE CHART]
<TABLE>
<S> <C> <C>
Aircraft $362 30%
Automotive $228 19%
Industrial $483 40%
Finance $128 11%
</TABLE>
28 Consistent Growth
<PAGE> 2
Management's Discussion and Analysis
RESULTS OF OPERATIONS
[BAR CHART]
Revenues
<TABLE>
<S> <C> <C>
1997 $ 8,683 16%
1998 $ 9,683 12%
1999 $11,579 20%
</TABLE>
[BAR CHART]
Earnings per Share*
<TABLE>
<S> <C> <C>
1997 $2.19 23%
1998 $2.68 22%
1999 $4.05 51%
</TABLE>
*Income from continuing operations - diluted
Textron Inc.
1999 vs. 1998
- - Diluted earnings per share from continuing operations for 1999 were $4.05
per share, up 51% from the 1998 amount of $2.68. Income from continuing
operations in 1999 of $623 million was up 41% from $443 million in 1998.
Revenues increased 20% to $11.6 billion in 1999 from $9.7 billion in 1998.
- - In August 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 of AFS was completed on January 6, 1999 and
a gain of $1.62 billion on the sale of AFS was recorded in the first
quarter 1999. Textron also recorded an extraordinary loss of $43 million
(net of tax) on the early retirement of debt in the first quarter 1999.
Textron increased the gain on the sale of AFS to $1.65 billion in the
fourth quarter 1999, as a result of finalizing all activities associated
with the sale. Net income, including the gain and extraordinary loss, was
$2.23 billion vs. $608 million in 1998, which included $165 million from
AFS, a discontinued operation.
- - Operating income of Textron's four business segments aggregated $1.201
billion in 1999, up 15% from 1998, as a result of continued improved
financial results across all business segments, reflecting the benefit of
organic growth and acquisitions.
- - Total segment margins decreased to 10.4% in 1999 from 10.7% in 1998, due
primarily to lower Aircraft margins and the impact of lower margin
acquisitions.
- - Interest income and expense - the net interest expense for Textron
Manufacturing decreased $117 million as a result of the proceeds received
in January 1999 from the divestiture of AFS. Interest income increased $27
million, as a result of Textron's net investment position during the year,
while interest expense decreased $90 million due to a lower level of
average debt, resulting from the pay down of debt with the AFS proceeds,
partially offset by incremental debt associated with acquisitions and share
repurchases.
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 in 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 $11 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.
- - Interest income and expense - the net interest expense for Textron
manufacturing increased $29 million 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.
1999 Textron Annual Report 29
<PAGE> 3
AIRCRAFT
[BAR CHART]
Revenues
<TABLE>
<S> <C> <C>
1997 $ 3,025 17%
1998 $ 3,189 5%
1999 $ 3,744 17%
</TABLE>
[BAR CHART]
Operating Income
<TABLE>
<S> <C> <C>
1997 $313 20%
1998 $338 8%
1999 $362 7%
</TABLE>
Aircraft
1999 vs. 1998
The Aircraft segment's revenues and income increased $555 million (17%) and $24
million (7%), respectively, due to higher results at Cessna Aircraft.
- - Cessna Aircraft's revenues increased $435 million as a result of higher
sales of business jets, primarily the Citation X and the Citation Excel,
higher single-engine piston aircraft sales, and increased spares and
service revenues. Its income increased as a result of the higher sales,
partially offset by increased manufacturing costs associated with the
ramp-up in production of new aircraft, higher warranty expense and
increased new product development expense related to the Citation CJ2.
- - Bell Helicopter's revenues increased $120 million, due primarily to higher
revenues on the V-22 production contract ($105 million) and the Huey and
Cobra upgrade contracts ($63 million) and higher foreign military sales
($42 million), partially offset by lower commercial and U.S. Government
helicopter sales ($102 million). Bell's income was unchanged from the 1998
level. 1999 results reflected the full year recognition into income ($37
million in 1999 vs. $10 million in 1998) of cash received in the fourth
quarter of 1998 on the formation of a joint venture on the Bell Agusta
commercial tiltrotor program (BA609), partially offset by higher expense
related to new product development, while 1998 results reflected favorable
contract adjustments related to the Bell-Boeing V-22 Engineering,
Manufacturing and Development contract.
Research and development efforts for the BA609 program are provided by
each joint venture partner in accordance with work plans developed at the
time of the venture formation. Under the agreement, the venture is jointly
controlled by both partners, with the individual parties retaining
management responsibility for individual programs within the venture.
Bell's research and development effort under the program is classified as
company-funded research and development and totaled approximately $60
million in 1999. This amount is net of approximately $23 million of
reimbursements from the joint venture partner, but excludes all amounts
spent by Agusta for development activities that it is responsible for under
the joint venture agreement. In addition, a portion of Bell's development
responsibilities under the partnership agreement are being performed by
risk-sharing subcontractors. The joint venture agreement provides for the
sharing of marketing and production efforts and related profits on the
BA609 program, as well as on other aircraft under development.
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 piston aircraft and Caravans.
Income increased as a result of the higher sales combined with improved
results in the single-engine piston aircraft business.
- - 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 ($89 million) and
the Huey and Cobra upgrade contracts ($51 million), partially offset by
lower foreign military sales ($39 million) and lower revenues on other U.S.
Government aircraft and spares ($72 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 BA609 program from the joint venture
with Agusta described above, 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.
30 Consistent Growth
<PAGE> 4
AUTOMOTIVE
REVENUES
[BAR CHART]
<TABLE>
<S> <C> <C>
1997 $ 2,127 31%
1998 $ 2,405 13%
1999 $ 2,916 21%
</TABLE>
OPERATING
INCOME
[BAR CHART]
<TABLE>
<S> <C> <C>
1997 $150 3%
1998 $179 19%
1999 $228 27%
</TABLE>
Automotive
1999 vs. 1998
The Automotive segment's revenues increased $511 million (21%), while income
increased $49 million (27%). The increase in revenues was due primarily to
higher North American market penetration by Kautex and higher sales at Trim,
reflecting increased production at DaimlerChrysler, Ford and General Motors,
which was depressed in 1998 by a strike. The increase in revenues also reflected
the benefit of the Textron Breed Automotive S.r.l. joint venture and the Midland
Industrial Plastics acquisition. Despite customer price reductions, income
increased due to the contribution from higher organic sales and improved
operating performance at Trim and Kautex.
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 North American market penetration by Kautex and higher sales at Trim,
due primarily to increased Chrysler production (which was depressed 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 operating
performance at Trim.
INDUSTRIAL
REVENUES
[BAR CHART]
<TABLE>
<S> <C> <C>
1997 $ 3,181 8%
1998 $ 3,722 17%
1999 $ 4,456 20%
</TABLE>
OPERATING
INCOME
[BAR CHART]
<TABLE>
<S> <C> <C>
1997 $346 15%
1998 $410 18%
1999 $483 18%
</TABLE>
Industrial
1999 vs. 1998
The Industrial segment's revenues and income before special charges increased
$734 million (20%) and $73 million (18%), respectively.
- - Fastening Systems revenues increased $324 million (18%) as a result of the
contribution from acquisitions, primarily Flexalloy, Ring Screw Works,
Peiner, Sukosim and InteSys, partially offset by lower revenues in Europe,
which were negatively impacted by foreign exchange. Its income increased as
the benefit from acquisitions more than offset the lower revenues in
Europe. Results were also affected by unfavorable operating performance at
certain plants in Europe caused by production scheduling issues,
integration costs in the Vendor Managed Inventory business, lower income at
an automotive plant related to economic conditions in Brazil and
non-recurring costs associated with restructuring programs started in 1999.
- - Other Industrial Products revenues increased $410 million (21%) as a result
of the contribution from acquisitions, primarily David Brown, OmniQuip,
Ransomes and Progressive Electronics, and higher organic sales at Golf,
Turf Care And Specialty Products and Greenlee. Its income increased as a
result of the higher sales combined with strong margin improvement at Golf,
Turf Care And Specialty Products and Textron Systems, and a gain on the
sale of a product line. These benefits were partially offset by lower
organic sales at Power Transmission Products, reflecting a decline in the
worldwide mechanical power transmission market, and Turbine Engine
Components due to lower customer requirements, and the impact of the
divestiture of Fuel Systems in the second quarter 1998. In addition, 1998
results were depressed by a one-month strike at a Turf Care plant.
1998 vs. 1997
The Industrial segment's revenues and income before special charges increased
$541 million (17%) and $64 million (18%), respectively.
- - Fastening Systems revenues increased $260 million (17%) as a result of the
contribution from acquisitions, primarily Ring Screw Works, Sukosim and
Peiner. Its income increased as a result of the higher sales and improved
operating performance. These benefits were partially offset by a strike at
General Motors in 1998.
- - Other Industrial Products revenues increased $281 million (17%) as a result
of the contribution from acquisitions, primarily Ransomes and David Brown
and higher organic sales across all business groups. Its income increased
as a result of the higher sales combined with ongoing margin improvement,
primarily at Golf, Turf Care And Specialty Products and Textron Systems.
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 one-month strike at a Textron Turf Care And Specialty Products plant
in the second quarter 1998, and unfavorable contract adjustments related to
certain Industrial Component products.
1999 Textron Annual Report 31
<PAGE> 5
FINANCE
REVENUES
[BAR CHART]
<TABLE>
<S> <C> <C>
1997 $ 350 7%
1998 $ 367 5%
1999 $ 463 26%
</TABLE>
OPERATING
INCOME
[BAR CHART]
<TABLE>
<S> <C> <C>
1997 $108 13%
1998 $113 5%
1999 $128 13%
</TABLE>
Finance
1999 vs. 1998
The Finance segment's revenues increased $96 million (26%), while income
increased $15 million (13%). Revenues increased due to a higher level of average
receivables ($4.252 billion in 1999 vs. $3.190 billion in 1998), reflecting both
acquisitive and organic growth, and an increase in syndication and servicing fee
income. This was partially offset by lower yields on receivables, reflecting
lower prevailing interest rates. Income increased as the benefit of higher
revenues was partially offset by higher expenses related to growth in managed
receivables and a higher provision for loan losses related to growth in
receivables and higher charge-offs in the revolving credit portfolio. This was
partially offset by a lower provision for loan losses in the real estate
portfolio. Included in 1999 results was a gain of $4.7 million on the sale of an
investment in the third quarter, while third quarter 1998 results included a
gain of $3.4 million on the securitization of Textron-related receivables.
1998 vs. 1997
The Finance segment's revenues increased $17 million (5%), while income
increased $5 million (5%). Revenues increased due to 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 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. Both years
included a gain of approximately $3 million on the securitization of
Textron-related receivables.
Special (credits)/charges
As discussed in Note 16, Textron has recorded pre-tax charges of $18 million and
$87 million in 1999 and 1998, respectively, related to restructuring activities.
The charges include asset impairments, severance costs, and other exit related
costs associated with cost reduction programs and announced plant closures.
Textron continues to evaluate additional programs and expects cost reduction
efforts to continue over the next year. Additional charges may be required in
the future when such programs become finalized.
In the third quarter of 1999, Textron recorded a gain of $19 million as a
result of shares granted to Textron from Manulife Financial Corporation's
initial public offering on their demutualization of Manufacturers Life Insurance
Company.
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.
LIQUIDITY & CAPITAL RESOURCES
The liquidity and capital resources of Textron's operations are best understood
by separately considering its independent borrowing groups, Textron
Manufacturing and Textron Finance. Textron Manufacturing consists of Textron
Inc., the parent company, consolidated with the entities which operate in the
Aircraft, Automotive and Industrial business
32 Consistent Growth
<PAGE> 6
segments, 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 consists of Textron's wholly-owned commercial finance
subsidiary, Textron Financial Corporation, consolidated with its subsidiaries.
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 1999. During
1999, 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
Statements of Cash Flows for each borrowing group detailing the changes in cash
balances are on pages 42-43. Textron Manufacturing's operating cash flow
includes dividends received from Textron Finance. Beginning in early 1999, the
methodology used by Textron Finance to determine the amount of dividends to be
paid to Textron Manufacturing changed from payments based on Textron Finance
maintaining a leverage ratio of 6.5 to 1 to payments based on maintaining a
leverage ratio of 7.5 to 1.
Financing
Textron has a financial target of maintaining its debt to capital ratio in the
low to mid-30% range. Consistent with the analytical methodology used by members
of the financial community, leverage of the manufacturing operations excludes
the debt of Textron Finance for the purposes of calculating leverage pursuant to
Textron's financial targets. In turn, Textron Finance evaluates its leverage by
limiting borrowing so that its leverage will not exceed a ratio of debt to
tangible equity of 7.5 to 1. As a result, surplus capital of Textron Finance
will be returned to Textron, and additional capital required for growth will be
infused or left in the business, assuming Textron Finance's returns are
consistent with Textron's standards.
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 utilize a broad base of financial sources for their respective
liquidity and capital requirements. The Company's strong credit ratings from
Moody's (A2 - Long-Term; P1 - Short-Term), Standard & Poor's (A - Long-Term; A1
- - Short-Term) and Duff & Phelps (A - Long-Term; D1 - Short-Term) provide
flexibility in obtaining funds on competitive terms. The Company's credit
facilities are summarized on pages 49-50.
During 1999, Textron retired $553 million of long-term high coupon debt and
terminated $479 million of interest rate exchange agreements designated as
hedges of the retired borrowings. As a result, Textron recorded, as an
extraordinary item, an after-tax loss of $43 million.
During 1999, Textron issued $300 million of 6.375% senior notes which
mature in 2004. The proceeds from the sale of notes will be used for general
corporate purposes. Textron entered into two $300 million interest rate swaps in
connection with these notes. The first swap effectively converts the fixed rate
notes to floating rate. The second swap was to insulate Textron against
potentially higher floating rate interest rates around year-end 1999.
In 1999, Textron filed a shelf registration statement with the Securities
and Exchange Commission registering up to $2 billion in common stock, preferred
stock and debt securities of Textron and preferred securities of trusts
sponsored by Textron. During the third quarter of 1999, Textron issued $500
million of 6.75% senior notes due 2002 under this registration.
During the fourth quarter of 1999, Textron Finance filed a Form S-3
registration statement with the Securities and Exchange Commission under the
Securities Act of 1933. Under this shelf registration, Textron Finance may issue
debt securities in one or more offerings up to a total maximum offering price of
$3 billion. In December 1999, Textron Finance issued $600 million of fixed rate
notes and $400 million of variable rate notes under this facility, the proceeds
of which were used to refinance maturing commercial paper and long-term debt.
At year-end 1999, Textron and Textron Finance have $1.5 billion and $2
billion, respectively, available for the issuance of unsecured debt securities
under shelf-registration statements with the Securities and Exchange Commission.
In early 2000, Textron
1999 Textron Annual Report 33
<PAGE> 7
established a two billion Euro medium term note facility. Textron Finance also
has a medium-term note facility of which $115 million is available at year-end
1999. 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
On January 6, 1999, Textron completed its sale of Avco Financial Services to
Associated First Capital Corporation for $3.9 billion in cash. Net after-tax
proceeds were approximately $2.9 billion, resulting in an after-tax gain of
$1.65 billion. Proceeds from the AFS disposition had 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 used 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.
Uses of Capital
Textron measures its existing businesses, and evaluates proposed capital
projects and acquisitions on the basis of their ability to achieve a return on
invested capital (ROIC) of at least 15 percent. ROIC measures the ability of a
business or project to achieve an acceptable return on its capital irrespective
of how it is financed. Textron sets rigorous financial criteria for evaluating
potential acquisitions. Potential acquisitions must:
- - Contribute to EPS immediately, or have significant earnings growth
potential.
- - Achieve "economic profit" - earnings over and above the cost of capital,
which Textron estimates at 10 percent after tax for domestic manufacturing
(13 percent for domestic finance) - within a three-year time period. If an
acquisition cannot produce an economic profit within this time frame, it
must have a sound strategic justification (such as protecting an existing
business with acceptable returns on capital) or the capital is better
returned to shareholders.
- - Have a capability to achieve an ROIC of at least 15 percent (18% for
Textron Finance).
Acquisitions by Textron Manufacturing are evaluated on an enterprise basis,
so that the capital employed is equal to the price paid for the target company's
equity plus any debt assumed. During the past three years, Textron acquired 30
companies in the Manufacturing segments for an aggregate cost of $2.8 billion,
including notes issued for approximately $234 million, treasury stock issued for
$32 million and $571 million of debt assumed.
Acquisitions of Textron Finance are evaluated on the basis of the amount of
Textron parent company capital that Textron would have to set aside so that the
acquisition could be levered at a debt to tangible equity ratio with the Finance
Company of 7.5 to 1. During the past three years, Textron Finance acquired six
companies. The capital required for these acquisitions was $387 million. The
actual cost of the acquisitions was $1.5 billion, including debt assumed of $595
million.
Capital spending increased in 1999 by approximately $57 million. This
increase was primarily used to expand aircraft and industrial capacity. Capital
spending for 2000 is expected to increase from 1999, as a result of initiatives
to increase aircraft and automotive capacity and to expand fluid and power
capabilities.
In 1999, Textron repurchased 9.8 million shares of common stock under its
Board authorized share repurchase program at an aggregate cost of $751 million.
Textron's Board of Directors raised the annual dividend per common share to
$1.30 in 1999 from $1.14 in 1998. In 1999, dividend payments to shareholders
included four payments as opposed to 1998 when three payments were paid.
Dividend payments to shareholders in 1999 amounted to $192 million, an increase
of $49 million from 1998.
34 Consistent Growth
<PAGE> 8
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 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.
Historically, Textron Manufacturing has financed foreign acquisitions with
domestic borrowings. In most cases, such borrowings are converted synthetically
into foreign currency borrowings by means of foreign currency exchange
agreements. Under the terms of the agreements, Textron is obligated to make
floating rate foreign currency interest payments to the counterparties, and the
counterparties, in turn, are obligated to make floating rate U.S. dollar
interest payments to Textron. These payments are recorded as an adjustment to
interest expense. At year-end 1999, Textron Manufacturing has begun to utilize
actual foreign currency borrowings to finance foreign acquisitions and will
continue to use those instruments to manage its interest rate risks.
In June 1999, Textron entered into fixed rate interest rate exchange
agreements to fix the interest rate on certain foreign currency exchange
agreements and other floating rate debt. The purpose of the fixed rate interest
rate exchange agreements, which all mature by March 21, 2000, was to insulate
Textron against potentially higher interest rates around year-end 1999. The
fixed rate interest rate exchange agreements have the following notional
principal amounts: $297 million in Euros; $344 million in British Pound
sterling; and $300 million in U.S. dollars.
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 1999 or 1998.
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 has
entered into interest rate exchange agreements. At year-end 1999, Textron
Finance has also entered into a basis swap to lock-in desired spreads between
certain interest-earning assets and certain interest-bearing liabilities. 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 1999; $2 million in 1998 and $1 million in 1997.
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 European Common Currency (Euro), British Pound, and Canadian Dollar.
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.
The notional amount of outstanding foreign exchange contracts and currency
swaps was approximately $1.3 billion at year-end 1999 and 1998.
Effective January 1, 1999, the European Economic and Monetary Union entered
into a three-year transition phase during which a common currency, the Euro, was
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 began utilizing the
Euro as their local currency in 1999. Additionally, Textron's operations in
other European countries and elsewhere in the world are conducting business
transactions with customers and suppliers that are denominated in the Euro. The
Euro conversion has not had a material impact on Textron's business.
1999 Textron Annual Report 35
<PAGE> 9
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.
Presented below is a sensitivity analysis of the fair value of Textron's
financial instruments at year-end. 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 was determined by discounted cash flow analysis and by
independent investment bankers. This sensitivity analysis is most likely not
indicative of actual results in the future.
<TABLE>
<CAPTION>
1999 1998
- ------------------------------------------------------------------------------------------------------------------------------------
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 $ 1,745 $ 1,740 $ 22 $ 2,615 $ 2,706 $ 27
Interest rate
exchange agreements -- 7 (10) -- (11) (18)
Textron Finance:
Finance receivables 4,647 4,665 57 2,774 2,837 28
Debt 4,551 4,535 38 2,829 2,836 12
Interest rate
exchange agreements -- (2) 1 -- 1 1
FOREIGN EXCHANGE RATE RISK
Textron Manufacturing:
Debt 285 286 23 319 334 33
Foreign exchange contracts -- (6) (22) -- 9 (23)
Currency swaps (21) (25) 88 14 10 84
Interest rate
exchange agreements -- 1 -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
</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 $16 million, $10 million
and $10 million in 1999, 1998, and 1997, respectively. Textron currently
projects that expenditures for remediation will range between $10 million and
$15 million for each of the years 2000 and 2001.
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.
36 Consistent Growth
<PAGE> 10
Year 2000 Disclosure
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 was centrally
directed from the Year 2000 Program Office at Textron's corporate headquarters
and was executed at each Textron business unit. The Program addressed 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.
As of January 1, 2000, the Program is complete for all systems critical to
operations. Subsequent to January 1, 2000, there have been no system failures or
significant incidents reported at any Textron location. Certain activities
remain to be completed relating to further enhancements to or replacement of
non-critical systems. These are not expected to have an adverse impact on the
operations of Textron.
Year 2000 Costs
The total cost of the Year 2000 Program for continuing operations is estimated
to be approximately $115 million. Approximately $58 million is for modifications
to existing items and other program expenses and $57 million is for replacement
systems which have been or are expected to be capitalized in accordance with
Company policy. Through January 1, 2000, total expenditures were $111 million.
The estimated future cost to complete the Program is expected to be
approximately $4 million including approximately $1 million for replacement
systems. The Year 2000 Program has delayed certain other Textron information
management projects. Delay of these projects has not had an adverse impact on
Textron.
Backlog
Textron's commercial backlog was $7.2 billion and $5.6 billion at the end of
1999 and 1998, respectively, and U.S. Government backlog was $2.0 billion at the
end of 1999 and $2.1 billion at the end of 1998. Backlog for the Aircraft
segment was approximately 81% and 78% of Textron's commercial backlog at the end
of 1999 and 1998, respectively, and 80% and 73% of Textron's U.S. Government
backlog at the end of 1999 and 1998, respectively.
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 1.8% of
Textron's consolidated revenue in 1999 (0.6% in the case of foreign military
sales and 1.2% in the case of direct sales) and 1.6% in 1998 (0.3% and 1.3%,
respectively). Such sales include military and commercial helicopters, armored
vehicles, turrets, and spare parts and in 1999 were made primarily to the
countries of Venezuela (41%), Taiwan (34%), Japan (4%), Jamaica (4%), Bulgaria
(3%), Israel (2%), and Germany (2%). All sales are made in full compliance with
all applicable laws and in accordance with Textron's code of conduct.
1999 Textron Annual Report 37
<PAGE> 11
New Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board (FASB) 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. In June 1999, the FASB issued FAS 137
which deferred the effective date of FAS 133 to all fiscal quarters of all
fiscal years beginning after June 15, 2000. Textron is evaluating the potential
impact of this pronouncement on future reporting.
At the September 23, 1999 meeting, the EITF reached a consensus on Issue
99-5, "Accounting for Pre-Production Costs Related to Long-Term Supply
Arrangements." The Issue addresses pre-production costs incurred by original
equipment manufacturers (OEM) suppliers (e.g., automotive manufacturers) to
perform certain services related to the design and development of the parts they
will supply to the OEM as well as the design and development costs to build
molds, dies and other tools that will be used in producing the parts. The
consensus generally requires all design and development costs for products to be
sold under long-term supply arrangements to be expensed unless there is a
contractual guarantee that provides for specific required payments for design
and development costs.
The Task Force concluded that the provisions of this consensus should be
applied prospectively for costs incurred after December 31, 1999, with the
option to elect adoption through a cumulative effect of change in accounting
principle. At January 1, 2000, other assets includes approximately $93 million
of customer engineering costs for which customer reimbursement is anticipated
but not contractually guaranteed. Textron will comply with the provisions of
this consensus by writing-off all capitalized customer engineering costs that
would not qualify for capitalization. In the first quarter of fiscal 2000,
Textron will report a Cumulative Effect of Change in Accounting Principle of $59
million (net of tax), or approximately $0.39 per diluted share related to the
adoption of this consensus. The effect of this change in accounting on future
results will not have a significant impact on income from continuing operations
in the affected segments (principally Automotive).
* * * * *
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, and (e) the level of government funding for
Textron products. 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 Textron Financial Corporation
offers financing and (b) the ability of Textron Financial Corporation to
maintain credit quality and control costs when entering new markets.
38 Consistent Growth
<PAGE> 12
REPORT OF MANAGEMENT
Management is responsible for the integrity and objectivity of the financial
data presented in this Annual Report. The consolidated financial statements have
been prepared in conformity with accounting principles generally accepted in the
United States 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 seven 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 25, 2000
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Shareholders
Textron Inc.
We have audited the accompanying consolidated balance sheets of Textron Inc. as
of January 1, 2000 and January 2, 1999, 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 1, 2000. 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 auditing standards generally accepted
in the United States. 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 1, 2000 and January 2, 1999, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
January 1, 2000, in conformity with accounting principles generally accepted in
the United States.
/s/ Ernst & Young LLP
- ---------------------
Boston, Massachusetts
January 25, 2000
1999 Textron Annual Report 39
<PAGE> 13
Consolidated Statements of Income
For each of the three years in the period ended January 1, 2000
<TABLE>
<CAPTION>
(In millions except per share amounts) 1999 1998 1997
---------------------------------------
<S> <C> <C> <C>
TEXTRON MANUFACTURING
Revenues $ 11,116 $ 9,316 $ 8,333
COSTS AND EXPENSES
Cost of sales 9,111 7,572 6,836
Selling and administrative 1,075 958 840
Gain on sale of division -- (97) --
Special (credits)/charges, net (1) 87 --
Interest expense 56 146 117
Interest income (27) -- --
---------------------------------------------------------------------------------------------------------------------------------
Total costs and expenses 10,214 8,666 7,793
---------------------------------------------------------------------------------------------------------------------------------
Manufacturing income 902 650 540
---------------------------------------------------------------------------------------------------------------------------------
TEXTRON FINANCE
Revenues 463 367 350
COSTS AND EXPENSES
Interest 204 155 153
Selling and administrative 99 79 66
Provision for losses on collection of finance receivables 32 20 23
---------------------------------------------------------------------------------------------------------------------------------
Total costs and expenses 335 254 242
---------------------------------------------------------------------------------------------------------------------------------
Finance income 128 113 108
---------------------------------------------------------------------------------------------------------------------------------
TOTAL COMPANY
Income from continuing operations before income taxes and distributions
on preferred securities of subsidiary trusts 1,030 763 648
Income taxes (381) (294) (250)
Distributions on preferred securities of subsidiary trusts, net of income taxes (26) (26) (26)
---------------------------------------------------------------------------------------------------------------------------------
INCOME FROM CONTINUING OPERATIONS 623 443 372
---------------------------------------------------------------------------------------------------------------------------------
Discontinued operations, net of income taxes:
Income from operations -- 165 186
Gain on disposal 1,646 -- --
---------------------------------------------------------------------------------------------------------------------------------
1,646 608 558
---------------------------------------------------------------------------------------------------------------------------------
Income before extraordinary loss 2,269 608 558
Extraordinary loss from debt retirement, net of income taxes (43) -- --
---------------------------------------------------------------------------------------------------------------------------------
NET INCOME $ 2,226 $ 608 $ 558
=================================================================================================================================
PER COMMON SHARE:
BASIC:
INCOME FROM CONTINUING OPERATIONS $ 4.14 $ 2.74 $ 2.25
Discontinued operations, net of income taxes 10.94 1.03 1.13
Extraordinary loss from debt retirement, net of income taxes (.28) -- --
---------------------------------------------------------------------------------------------------------------------------------
NET INCOME $ 14.80 $ 3.77 $ 3.38
=================================================================================================================================
DILUTED:
INCOME FROM CONTINUING OPERATIONS $ 4.05 $ 2.68 $ 2.19
Discontinued operations, net of income taxes 10.70 1.00 1.10
Extraordinary loss from debt retirement, net of income taxes (.27) -- --
---------------------------------------------------------------------------------------------------------------------------------
NET INCOME $ 14.48 $ 3.68 $ 3.29
=================================================================================================================================
</TABLE>
See notes to the consolidated financial statements.
40 Consistent Growth
<PAGE> 14
Balance Sheets
As of January 1, 2000 and January 2, 1999
<TABLE>
<CAPTION>
(Dollars in millions) 1999 1998
------------------------
<S> <C> <C>
ASSETS
TEXTRON MANUFACTURING
Cash and cash equivalents $ 192 $ 31
Commercial and U.S. government receivables - net 1,363 1,160
Inventories 1,859 1,640
Other current assets 321 348
Investment in discontinued operations -- 1,176
---------------------------------------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 3,735 4,355
---------------------------------------------------------------------------------------------------------------------------------
Property, plant, and equipment - net 2,484 2,185
Goodwill - net 2,807 2,119
Other assets 1,378 1,277
---------------------------------------------------------------------------------------------------------------------------------
TOTAL TEXTRON MANUFACTURING ASSETS 10,404 9,936
---------------------------------------------------------------------------------------------------------------------------------
TEXTRON FINANCE
Cash 17 22
Finance receivables - net 5,487 3,528
Other assets (including goodwill of $211 in 1999 and $27 in 1998) 485 235
---------------------------------------------------------------------------------------------------------------------------------
TOTAL TEXTRON FINANCE ASSETS 5,989 3,785
---------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 16,393 $ 13,721
=================================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
TEXTRON MANUFACTURING
Current portion of long-term debt and short-term debt $ 688 $ 1,735
Accounts payable 1,262 1,010
Income taxes payable 87 76
Other accrued liabilities 1,219 1,098
---------------------------------------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 3,256 3,919
---------------------------------------------------------------------------------------------------------------------------------
Accrued postretirement benefits other than pensions 741 762
Other liabilities 1,336 1,367
Long-term debt 1,079 880
---------------------------------------------------------------------------------------------------------------------------------
TOTAL TEXTRON MANUFACTURING LIABILITIES 6,412 6,928
---------------------------------------------------------------------------------------------------------------------------------
TEXTRON FINANCE
Other liabilities 234 162
Deferred income taxes 307 322
Debt 4,551 2,829
---------------------------------------------------------------------------------------------------------------------------------
TOTAL TEXTRON FINANCE LIABILITIES 5,092 3,313
---------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 11,504 10,241
---------------------------------------------------------------------------------------------------------------------------------
TEXTRON FINANCE - MANDATORILY REDEEMABLE PREFERRED SECURITIES OF FINANCE SUBSIDIARY HOLDING DEBENTURES 29 --
---------------------------------------------------------------------------------------------------------------------------------
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 - $11) 5 6
$1.40 Convertible Preferred Dividend Stock, Series B (preferred only as to dividends) 7 7
Common stock (194,858,000 and 193,277,000 shares issued) 24 24
Capital surplus 1,009 931
Retained earnings 5,817 3,786
Accumulated other comprehensive income (loss) (98) (96)
---------------------------------------------------------------------------------------------------------------------------------
6,764 4,658
Less cost of treasury shares 2,387 1,661
---------------------------------------------------------------------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY 4,377 2,997
---------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 16,393 $ 13,721
=================================================================================================================================
</TABLE>
See notes to the consolidated financial statements.
1999 Textron Annual Report 41
<PAGE> 15
Statements of Cash Flows
<TABLE>
<CAPTION>
For each of the three years in the period ended January 1, 2000 CONSOLIDATED
------------------------------------
(In millions) 1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income from continuing operations $ 623 $ 443 $ 372
Adjustments to reconcile income from continuing operations to net cash
provided by operating activities:
Earnings of Textron Finance (greater than) less than distributions -- -- --
Dividends received from discontinued operations -- 187 108
Depreciation 349 292 254
Amortization 91 69 56
Provision for losses on receivables 34 21 25
Gain on sale of division, net of income taxes -- (54) --
Special (credits)/charges (1) 87 --
Deferred income taxes 63 (16) 68
Changes in assets and liabilities excluding those related to acquisitions
and divestitures:
Decrease (increase) in commercial and U.S. government receivables 34 (116) 44
Decrease (increase) in inventories 13 (157) (89)
Decrease (increase) in other assets (144) (111) (67)
Increase (decrease) in accounts payable 149 46 74
Increase (decrease) in accrued liabilities (85) 262 (103)
Other - net (10) 8 1
---------------------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 1,116 961 743
---------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from disposition of investments -- -- 251
Finance receivables:
Originated or purchased (4,920) (4,069) (2,712)
Repaid or sold 4,090 3,459 2,441
Proceeds on sales of securitized assets -- 260 373
Cash used in acquisitions (1,574) (956) (364)
Net proceeds from dispositions 2,950 117 549
Capital expenditures (532) (475) (374)
Other investing activities - net 29 22 48
---------------------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES 43 (1,642) 212
---------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in short-term debt (1,131) 1,571 (425)
Proceeds from issuance of long-term debt 3,195 438 401
Principal payments and retirements on long-term debt (2,174) (534) (427)
Proceeds from exercise of stock options 50 71 38
Purchases of Textron common stock (751) (712) (328)
Dividends paid (192) (143) (202)
Dividends paid to Textron Manufacturing -- -- --
Capital contributions to Textron Finance -- -- --
---------------------------------------------------------------------------------------------------------------------------------
NET CASH (USED) PROVIDED BY FINANCING ACTIVITIES (1,003) 691 (943)
---------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 156 10 12
Cash and cash equivalents at beginning of year 53 43 31
---------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 209 $ 53 $ 43
=================================================================================================================================
SUPPLEMENTAL INFORMATION:
Cash paid during the year for interest $ 239 $ 345 $ 293
Cash paid during the year for income taxes (includes $912 in 1999 for AFS disposal) 1,167 260 156
=================================================================================================================================
</TABLE>
*"Textron Manufacturing" income from continuing operations includes income
from of Textron Inc., the parent company, consolidated with the entities
which operate in the Aircraft, Automotive, and Industrial business segments
and the pretax income from "Textron Finance." Textron Finance consists of
Textron's wholly-owned commercial finance subsidiary, Textron Financial
Corporation, consolidated with its subsidiaries. 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.
42
<PAGE> 16
<TABLE>
<CAPTION>
For each of the three years in the period ended January 1, 2000 TEXTRON MANUFACTURING*
------------------------------------
(In millions) 1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income from continuing operations $ 623 $ 443 $ 372
Adjustments to reconcile income from continuing operations to net cash
provided by operating activities:
Earnings of Textron Finance (greater than) less than distributions (43) (8) 6
Dividends received from discontinued operations -- 187 108
Depreciation 337 282 243
Amortization 84 66 56
Provision for losses on receivables 2 1 2
Gain on sale of division, net of income taxes -- (54) --
Special (credits)/charges (1) 87 --
Deferred income taxes 68 (18) 61
Changes in assets and liabilities excluding those related to acquisitions
and divestitures:
Decrease (increase) in commercial and U.S. government receivables 34 (116) 44
Decrease (increase) in inventories 13 (157) (89)
Decrease (increase) in other assets (143) (130) (54)
Increase (decrease) in accounts payable 147 21 70
Increase (decrease) in accrued liabilities (113) 245 (99)
Other - net (1) 18 8
---------------------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 1,007 867 728
---------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from disposition of investments -- -- 251
Finance receivables:
Originated or purchased -- -- --
Repaid or sold -- -- --
Proceeds on sales of securitized assets -- -- --
Cash used in acquisitions (859) (753) (364)
Net proceeds from dispositions 2,945 117 549
Capital expenditures (521) (462) (366)
Other investing activities - net 55 37 35
---------------------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES 1,620 (1,061) 105
---------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in short-term debt (1,045) 1,220 (484)
Proceeds from issuance of long-term debt 799 8 201
Principal payments and retirements on long-term debt (974) (190) (52)
Proceeds from exercise of stock options 50 71 38
Purchases of Textron common stock (751) (712) (328)
Dividends paid (192) (143) (202)
Dividends paid to Textron Manufacturing -- -- --
Capital contributions to Textron Finance (353) (59) --
---------------------------------------------------------------------------------------------------------------------------------
NET CASH (USED) PROVIDED BY FINANCING ACTIVITIES (2,466) 195 (827)
---------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 161 1 6
Cash and cash equivalents at beginning of year 31 30 24
---------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 192 $ 31 $ 30
=================================================================================================================================
SUPPLEMENTAL INFORMATION:
Cash paid during the year for interest $ 57 $ 192 $ 140
Cash paid during the year for income taxes (includes $912 in 1999 for AFS disposal) 1,132 230 112
=================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
For each of the three years in the period ended January 1, 2000 TEXTRON FINANCE
------------------------------------
(In millions) 1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income from continuing operations $ 79 $ 70 $ 68
Adjustments to reconcile income from continuing operations to net cash
provided by operating activities:
Earnings of Textron Finance (greater than) less than distributions -- -- --
Dividends received from discontinued operations -- -- --
Depreciation 12 10 11
Amortization 7 3 --
Provision for losses on receivables 32 20 23
Gain on sale of division, net of income taxes -- -- --
Special (credits)/charges -- -- --
Deferred income taxes (5) 2 7
Changes in assets and liabilities excluding those related to acquisitions
and divestitures:
Decrease (increase) in commercial and U.S. government receivables -- -- --
Decrease (increase) in inventories -- -- --
Decrease (increase) in other assets (1) 8 (1)
Increase (decrease) in accounts payable 2 37 (12)
Increase (decrease) in accrued liabilities 28 17 (4)
Other - net (9) (10) (7)
---------------------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 145 157 85
---------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from disposition of investments -- -- --
Finance receivables:
Originated or purchased (4,920) (4,069) (2,712)
Repaid or sold 4,090 3,459 2,444
Proceeds on sales of securitized assets -- 260 373
Cash used in acquisitions (715) (203) --
Net proceeds from dispositions 5 -- --
Capital expenditures (11) (13) (8)
Other investing activities - net (26) (16) 14
---------------------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES (1,577) (582) 111
---------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in short-term debt (86) 351 59
Proceeds from issuance of long-term debt 2,396 430 200
Principal payments and retirements on long-term debt (1,200) (344) (375)
Proceeds from exercise of stock options -- -- --
Purchases of Textron common stock -- -- --
Dividends paid -- -- --
Dividends paid to Textron Manufacturing (36) (62) (74)
Capital contributions to Textron Finance 353 59 --
---------------------------------------------------------------------------------------------------------------------------------
NET CASH (USED) PROVIDED BY FINANCING ACTIVITIES 1,427 434 (190)
---------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (5) 9 6
Cash and cash equivalents at beginning of year 22 13 7
---------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 17 $ 22 $ 13
=================================================================================================================================
SUPPLEMENTAL INFORMATION:
Cash paid during the year for interest $ 182 $ 153 $ 153
Cash paid during the year for income taxes (includes $912 in 1999 for AFS disposal) 35 30 44
=================================================================================================================================
</TABLE>
See notes to the consolidated financial statements.
1999 TEXTRON ANNUAL REPORT 43
<PAGE> 17
Consolidated Statements of Changes in Shareholders' Equity
For each of the three years in the period ended January 1, 2000
<TABLE>
<CAPTION>
SHARES OUTSTANDING* DOLLARS
(In thousands) (In millions)
---------------------------------------------------------------------------
1999 1998 1997 1999 1998 1997
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$2.08 PREFERRED STOCK
Beginning balance 178 201 243 $ 6 $ 6 $ 7
Conversion to common stock (19) (23) (42) (1) -- (1)
---------------------------------------------------------------------------------------------------------------------------------
Ending balance 159 178 201 $ 5 $ 6 $ 6
=================================================================================================================================
$1.40 PREFERRED STOCK
Beginning balance 86 92 107 $ 7 $ 7 $ 7
Conversion to common stock (12) (6) (15) -- -- --
---------------------------------------------------------------------------------------------------------------------------------
Ending balance 74 86 92 $ 7 $ 7 $ 7
=================================================================================================================================
COMMON STOCK
Beginning balance 154,742 162,343 82,809 $ 24 $ 24 $ 12
Purchases (9,779) (10,189) (4,121) -- -- --
Stock dividend declared -- -- 82,397 -- -- 12
Conversion of preferred stock to common stock 129 123 166 -- -- --
Exercise of stock options 1,428 2,465 1,066 -- -- --
Other issuances of common stock 482 -- 26 -- -- --
---------------------------------------------------------------------------------------------------------------------------------
Ending balance 147,002 154,742 162,343 $ 24 $ 24 $ 24
=================================================================================================================================
CAPITAL SURPLUS
Beginning balance $ 931 $ 830 $ 793
Conversion of preferred stock to common stock 1 1 1
Exercise of stock options and other issuances 77 100 48
Stock dividend declared -- -- (12)
---------------------------------------------------------------------------------------------------------------------------------
Ending balance $ 1,009 $ 931 $ 830
=================================================================================================================================
RETAINED EARNINGS
Beginning balance $ 3,786 $ 3,362 $ 2,969
Net income 2,226 608 558
Dividends declared:
Preferred stock (1) (1) (1)
Common stock (per share: $1.30 in 1999;
$1.14 in 1998; and $1.00 in 1997) (194) (183) (164)
---------------------------------------------------------------------------------------------------------------------------------
Ending balance $ 5,817 $ 3,786 $ 3,362
=================================================================================================================================
TREASURY STOCK
Beginning balance $ 1,661 $ 939 $ 612
Purchases of common stock 748 722 328
Issuance of common stock (22) -- (1)
---------------------------------------------------------------------------------------------------------------------------------
Ending balance $ 2,387 $ 1,661 $ 939
=================================================================================================================================
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
Beginning balance $ (96) $ (62) $ 7
Currency translation adjustment 8 (33) (73)
Securities valuation adjustment (13) -- 4
Pension liability adjustment 3 (1) --
---------------------------------------------------------------------------------------------------------------------------------
Other comprehensive income (loss) (2) (34) (69)
---------------------------------------------------------------------------------------------------------------------------------
Ending balance $ (98) $ (96) $ (62)
=================================================================================================================================
COMPREHENSIVE INCOME
Net income $ 2,226 $ 608 $ 558
Other comprehensive income (loss) (2) (34) (69)
---------------------------------------------------------------------------------------------------------------------------------
Comprehensive income $ 2,224 $ 574 $ 489
=================================================================================================================================
</TABLE>
*Shares issued at the end of 1999, 1998, 1997, and 1996, were as follows (in
thousands): $2.08 Preferred - 228; 247; 270; and 312; shares, respectively;
$1.40 Preferred - 561; 573; 579; and 594 shares, respectively; Common -
194,858; 193,277; 190,689; and 94,456; shares, respectively.
See notes to consolidated financial statements.
44
<PAGE> 18
Notes to Consolidated Financial Statements
1. FINANCIAL STATEMENT PRESENTATION
Summary of Significant Accounting Policies
THE FINANCIAL STATEMENTS HAVE BEEN PREPARED IN ACCORDANCE WITH ACCOUNTING
PRINCIPLES GENERALLY ACCEPTED IN THE UNITED STATES. SIGNIFICANT ACCOUNTING
POLICIES APPEAR IN CAPITAL LETTERS AS AN INTEGRAL PART OF THE NOTES TO THE
FINANCIAL STATEMENTS TO WHICH THE POLICIES RELATE.
Cash and Cash Equivalents
CASH AND CASH EQUIVALENTS CONSIST OF CASH AND SHORT-TERM, HIGHLY LIQUID
SECURITIES WITH ORIGINAL MATURITIES OF NINETY DAYS OR LESS.
Revenue Recognition
REVENUE IS GENERALLY RECOGNIZED WHEN PRODUCTS ARE DELIVERED OR SERVICES ARE
PERFORMED. WITH RESPECT TO AIRCRAFT, DELIVERY IS UPON COMPLETION OF
MANUFACTURING, CUSTOMER ACCEPTANCE, AND THE TRANSFER OF RISKS AND REWARDS OF
OWNERSHIP. SPECIFIC POLICIES FOR THE FINANCE SEGMENT AND LONG-TERM CONTRACTS ARE
INCLUDED IN THE RELATED NOTES.
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 1999 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 and Australia
- 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 and Australia
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
- Light construction equipment: commercial customers,
national rental fleets, and the U.S. Government
- ------------------------------------------------------------------------------------------------------
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. Avco Financial Services is reflected as a
discontinued operation for all periods presented.
Textron's financings are conducted through two borrowing groups, Textron
Finance and Textron Manufacturing. This framework is designed to enhance the
Company's borrowing power by separating the Finance segment, which is a
borrowing unit of a specialized business nature. Textron Finance consists of
Textron Financial Corporation consolidated with its subsidiaries, which are the
entities through which Textron operates its Finance segment. Textron Finance
finances its operations by borrowing from its own group of external creditors.
Textron Manufacturing is Textron Inc., the parent company, consolidated with the
entities which operate in the Aircraft, Automotive and Industrial business
segments.
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 manage-
1999 Textron Annual Report 45
<PAGE> 19
ment's assessments of the probable future outcome of these matters.
Consequently, actual results could differ from such estimates.
During 1999, Textron Manufacturing entered into a promissory note agreement
with Textron Finance, whereby Textron Finance could borrow up to $1.25 billion
from Textron Manufacturing. The maximum amount outstanding under this agreement
during 1999 was $1.0 billion. The amount of interest expense/income
incurred/earned by Textron Finance and Textron Manufacturing, respectively, was
approximately $15 million for 1999. Textron Finance's operating income includes
interest expense incurred under this agreement. This agreement was cancelled
during the second quarter of 1999.
2. ACQUISITIONS AND DISPOSITIONS
Acquisitions
During 1999, Textron Manufacturing segments acquired 14 companies and entered
into two joint ventures which in turn, each acquired companies. The largest of
these acquisitions were Flexalloy Inc. - a provider of vendor managed inventory
services for the North American fastener markets; OmniQuip International, Inc. -
a leading manufacturer of light construction equipment including telescopic
material handlers, aerial work platforms and skid steer loaders and InteSys
Technologies Inc. - a provider of plastics and metal engineered assemblies. The
total cost of the acquisitions and investments in joint ventures was
approximately $1.2 billion, including treasury stock issued for $32 million and
debt assumed of $308 million.
In addition, in 1999 Textron Finance had acquisitions totaling $1.3
billion, including debt assumed of $547 million. The largest of these
acquisitions were Litchfield Financial Corporation, a commercial finance company
specializing in the vacation ownership (timeshare) industry and the aircraft and
franchise finance divisions of GreenTree Financial Servicing Corporation.
Capital contributions made by Textron Manufacturing to Textron Finance in
support of these acquisitions were $337 million.
During 1998, Textron acquired nine companies. The largest of these
acquisitions were Ransomes PLC - a UK-based manufacturer of commercial turf-care
machinery; Ring Screw Works - a Michigan-based supplier of specialty threaded
fasteners to the automotive industry; and David Brown Group PLC - a UK-based
designer and manufacturer of industrial gears and mechanical and hydraulic
transmission systems. The total cost of these acquisitions was approximately
$1.1 billion, including notes issued for approximately $160 million. In
addition, approximately $230 million of debt was assumed as a result of these
acquisitions.
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.
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 were approximately $2.9 billion, resulting in an after-tax gain of
$1.65 billion. Textron has presented AFS as a discontinued operation in these
financial statements.
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).
3. FINANCE RECEIVABLES
INTEREST INCOME IS RECOGNIZED IN REVENUES USING THE INTEREST METHOD TO PROVIDE A
CONSTANT RATE OF RETURN OVER THE TERMS OF THE RECEIVABLES. 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 RESUMES AND SUSPENDED INTEREST INCOME IS RECOGNIZED WHEN LOANS BECOME
CONTRACTUALLY CURRENT.
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
46 Consistent Growth
<PAGE> 20
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.
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.
Commercial installment contracts have initial terms ranging from one to 12
years. Commercial real estate and 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 1999 and 1998, Textron Finance had nonaccrual loans and
leases totaling $84 million and $70 million, respectively. Approximately $65
million and $46 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 $21 million and $15 million
at the end of 1999 and 1998. The average recorded investment in impaired loans
during 1999 and 1998 were $47 million and $51 million, respectively. The
percentage of net write-offs to average finance receivables was 0.5% in 1999,
0.5% in 1998, and 0.6% in 1997.
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 and
portfolio sales, were $3.9 billion and $3.4 billion in 1999 and 1998,
respectively. In the same periods, the ratio of cash collections to average net
receivables was approximately 96% and 108%, respectively.
<TABLE>
<CAPTION>
FINANCE RECEIVABLES
CONTRACTUAL MATURITIES LESS OUTSTANDING
------------------------------ FINANCE -------------------
(In millions) 2000 2001 After 2001 CHARGES 1999 1998
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Installment contracts $ 435 $ 327 $1,577 $ 202 $2,137 $1,339
Floorplan receivables 573 78 7 1 657 572
Revolving loans 614 176 619 9 1,400 556
Finance leases 153 139 323 106 509 424
Real estate and golf
course mortgages 124 38 391 4 549 375
Leveraged leases 29 11 589 281 348 346
- --------------------------------------------------------------------------------------------------------
$1,928 $ 769 $3,506 $ 603 5,600 3,612
================================================================================
Less allowance for credit losses 113 84
------------------
$5,487 $3,528
========================================================================================================
</TABLE>
The net investment in finance leases and leveraged leases were as follows:
<TABLE>
<CAPTION>
(In millions) 1999 1998
- --------------------------------------------------------------------------------
<S> <C> <C>
Finance and leveraged lease receivables $ 656 $ 590
Estimated residual values on equipment and assets 589 559
- --------------------------------------------------------------------------------
1,245 1,149
- --------------------------------------------------------------------------------
Unearned income (388) (379)
- --------------------------------------------------------------------------------
Investment in leases 857 770
- --------------------------------------------------------------------------------
Deferred income taxes arising from leveraged leases (260) (256)
- --------------------------------------------------------------------------------
Net investment in leases $ 597 $ 514
================================================================================
</TABLE>
The activity in the allowance for losses on finance receivables is as
follows:
<TABLE>
<CAPTION>
(In millions) 1999 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at the beginning of the year $ 84 $ 77 $ 75
Provision for losses 32 20 21
Charge-offs (28) (21) (25)
Recoveries 5 5 6
Acquisitions and other 20 3 --
- --------------------------------------------------------------------------------
Balance at the end of the year $ 113 $ 84 $ 77
================================================================================
</TABLE>
1999 Textron Annual Report 47
<PAGE> 21
Textron had both fixed-rate and variable-rate loan commitments totaling
$1,134 million at year-end 1999. 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 Textron Finance's business involves financing the sale and
lease of Textron products. In 1999, 1998, and 1997, Textron Finance paid Textron
$1,260 million, $980 million, and $736 million, respectively, for receivables
and operating lease equipment. Operating agreements with Textron specify that
Textron Finance generally has recourse to Textron with respect to these
purchases. At year-end 1999, finance receivables and operating lease equipment
of $841 million and $69 million, respectively, ($540 million and $77 million,
respectively, at year-end 1998) were due from Textron or subject to recourse to
Textron. Included in the finance receivables balance guaranteed by Textron are
past due loans of $72 million at the end of 1999 ($55 million at year-end 1998)
that meet the non-accrual criteria but are not classified as non-accrual by
Textron Finance due to the guarantee from Textron Manufacturing units. Textron
Finance continues to recognize income on these loans. Concurrently, Textron
Manufacturing is charged for their obligation to Textron Finance under the
guarantee so that there are no net interest earnings for the loans on a
consolidated basis.
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 $6,825 million
and $4,509 million, respectively for 1999 and 1998.
Textron Finance's finance receivables are diversified geographically across
the United States. There are no significant industry or collateral
concentrations at the end of 1999.
4. INVENTORIES
INVENTORIES ARE CARRIED AT THE LOWER OF COST OR MARKET.
<TABLE>
<CAPTION>
JANUARY 1, January 2,
(In millions) 2000 1999
- --------------------------------------------------------------------------------
<S> <C> <C>
Finished goods $ 608 $ 483
Work in process 970 878
Raw materials 489 454
- --------------------------------------------------------------------------------
2,067 1,815
Less progress payments and customer deposits 208 175
- --------------------------------------------------------------------------------
$1,859 $1,640
================================================================================
</TABLE>
Inventories aggregating $1,051 million at year-end 1999 and $1,008 million
at year-end 1998 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 $174 million and $170 million higher at those respective
dates.) The remaining inventories, other than those related to certain long-term
contracts, are valued generally by the first-in, first-out method.
Inventories related to long-term contracts, net of progress payments and
customer deposits, were $181 million at year-end 1999 and $178 million at
year-end 1998.
5. LONG-TERM 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 TO ESTIMATED SALES VALUE OR
COSTS ARE MADE. ESTIMATED CONTRACT LOSSES ARE RECORDED WHEN IDENTIFIED.
Long-term contract receivables at year-end 1999 and 1998 totaled $156
million and $166 million, respectively. This includes $112 million and $102
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.
48 Consistent Growth
<PAGE> 22
6. LONG-TERM ASSETS
THE COST OF PROPERTY, PLANT, AND EQUIPMENT IS DEPRECIATED BASED ON THE ASSETS'
ESTIMATED USEFUL LIVES.
<TABLE>
<CAPTION>
JANUARY 1, January 2,
(In millions) 2000 1999
- --------------------------------------------------------------------------------
<S> <C> <C>
At cost:
Land and buildings $1,083 $ 942
Machinery and equipment 3,499 3,150
- --------------------------------------------------------------------------------
4,582 4,092
Less accumulated depreciation 2,069 1,887
- --------------------------------------------------------------------------------
$2,513 $2,205
================================================================================
</TABLE>
GOODWILL IS AMORTIZED ON THE STRAIGHT-LINE METHOD OVER 20 TO 40 YEARS.
Accumulated amortization of goodwill totaled $463 million at January 1, 2000 and
$388 million at January 2, 1999.
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.
Effective January 2, 2000, Textron adopted Emerging Issues Task Force Issue 99-5
"Accounting for Pre-production Costs related to Long-Term Supply Agreements."
This consensus requires that all design and development costs for products sold
under long-term supply arrangements be expensed unless there is a contractual
guarantee that provides for specific required payments for these costs. Textron
will report a Cumulative Effect of Change in Accounting Principle of $59 million
(net of tax), or approximately $0.39 per diluted share in the first quarter of
2000 related to the adoption of this consensus.
7. DEBT AND CREDIT FACILITIES
At the end of 1999 and 1998, debt consisted of the following:
<TABLE>
<CAPTION>
JANUARY 1, January 2,
(In millions) 2000 1999
- -------------------------------------------------------------------------------------------
<S> <C> <C>
TEXTRON MANUFACTURING:
Short-term debt:
Borrowings under or supported by long-term credit facilities* $ 626 $ 1,671
Current portion of long-term debt 62 64
- -------------------------------------------------------------------------------------------
Total short-term debt 688 1,735
- -------------------------------------------------------------------------------------------
Long-term senior debt:
Medium-term notes due 2000-2011 (average rate - 9.71%) 63 230
6.375% due 2004 300 --
6.75% due 2002 500 --
8.75% due 2022 36 200
6.63% due 2007 32 200
Other long-term debt (average rate - 7.36%) 210 314
- -------------------------------------------------------------------------------------------
1,141 944
- -------------------------------------------------------------------------------------------
Current portion of long-term debt (62) (64)
- -------------------------------------------------------------------------------------------
Total long-term debt 1,079 880
- -------------------------------------------------------------------------------------------
Total Textron Manufacturing debt $ 1,767 $ 2,615
===========================================================================================
</TABLE>
*The weighted average interest rates on these borrowings, before the effect of
interest rate exchange agreements, were 5.8%, 5.8%, and 4.8% at year-end 1999,
1998, and 1997, respectively. Comparable rates during the years 1999, 1998, and
1997 were 4.9%, 5.4%, and 4.8%, respectively.
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) $105 million in multi-currency credit
agreements with three banks available through December 29, 2002, and (c) $241
million in other credit facilities available with various banks. At year-end
1999, $797 million of the credit facilities was not used or reserved as support
for commercial paper or bank borrowings.
1999 Textron Annual Report 49
<PAGE> 23
<TABLE>
<CAPTION>
JANUARY 1, January 2,
(In millions) 2000 1999
- --------------------------------------------------------------------------------
<S> <C> <C>
TEXTRON FINANCE:
Senior:
Borrowings under or supported by credit facilities* $1,339 $1,425
7.01% average rate debt; due 2000 to 2004 1,507 472
6.39% average rate variable notes; due 2000 to 2002 1,705 932
- --------------------------------------------------------------------------------
Total Textron Finance debt $4,551 $2,829
================================================================================
</TABLE>
*The weighted average interest rates on these borrowings, before the effect of
interest rate exchange agreements, were 6.4%, 6.3%, and 6.1% at year-end 1999,
1998, and 1997, respectively. Comparable rates during the years 1999, 1998, and
1997 were 5.4%, 5.8%, and 5.8%, respectively.
Textron Finance has lines of credit with various banks aggregating $1.2
billion at year-end 1999, of which $196 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 $332 million of Textron Finance's net
assets of $869 million at year-end 1999. Textron Finance's loan agreements also
contain provisions regarding additional debt, creation of liens or guarantees,
and the making of investments.
The following table shows required payments during the next five years on
debt outstanding at the end of 1999. The payments schedule excludes amounts that
are payable under credit facilities and revolving credit agreements.
<TABLE>
<CAPTION>
(In millions) 2000 2001 2002 2003 2004
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Textron Manufacturing $ 62 $ 56 $ 510 $ 38 $ 305
Textron Finance 508 833 1,040 213 618
- --------------------------------------------------------------------------------
$ 570 $ 889 $1,550 $ 251 $ 923
================================================================================
</TABLE>
Textron Manufacturing has agreed to cause Textron Finance to maintain
certain minimum levels of financial performance. No payments from Textron
Manufacturing were necessary in 1999, 1998, or 1997 for Textron Finance to meet
these standards.
Extraordinary Loss from Debt Retirement
During 1999, Textron retired $168 million of 6.625% debentures originally due
2007, $165 million of 8.75% debentures originally due 2022, $146 million of
medium term notes with interest rates ranging from 9.375% to 10.01%, and other
debt totaling $74 million with effective interest rates ranging from 8.25% to
10.04%. In connection with the retirement of this long-term high coupon debt,
Textron terminated $479 million of interest rate exchange agreements designated
as hedges of the retired borrowings. As a result of these transactions, Textron
recorded an after-tax loss of $43 million, which has been reflected as an
extraordinary item.
8. DERIVATIVES AND FOREIGN CURRENCY TRANSACTIONS
Interest rate exchange agreements
Textron is exposed to adverse movements in domestic and foreign interest rates.
Interest rate exchange agreements are used to help manage 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 PROBABLE THAT VARIABLE-RATE BORROWINGS WILL NOT
CONTINUOUSLY EXCEED THE NOTIONAL AMOUNT OF THE DESIGNATED AGREEMENTS, THE EXCESS
INTEREST RATE EXCHANGE AGREEMENTS ARE MARKED TO MARKET AND THE ASSOCIATED GAIN
OR LOSS IS RECORDED IN INCOME.
50 Consistent Growth
<PAGE> 24
Agreements that effectively fix the rate of interest on variable-rate
borrowings are summarized as follows:
<TABLE>
<CAPTION>
JANUARY 1, 2000 January 2, 1999
- ------------------------------------------------------------------------------------------------------------------------------------
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 $ 941 4.69% 0.3 $ -- -- --
Textron Finance 300 5.76% 0.8 250 6.26% 0.6
- ------------------------------------------------------------------------------------------------------------------------------------
$1,241 4.95% 0.4 $ 250 6.26% 0.6
====================================================================================================================================
</TABLE>
Textron Manufacturing's and Textron Finance's fixed-pay interest rate
exchange agreements were designated against specific long-term variable-rate
debt. Textron Manufacturing's agreements were entered in June 1999 to insulate
Textron against potential interest rate increases on variable-rate debt around
year-end 1999. These agreements, which expire in March 2000, effectively
adjusted the average rate of interest on variable-rate debt in 1999 to 4.69%
from 4.76%. Textron Finance's agreements effectively adjusted the average rate
of interest on variable-rate debt in 1999 to 5.64% from 5.57%. These agreements
expire as follows: $200 million (5.72%) in 2000 and $100 million (5.85%) in
2001.
Agreements that have the effect of varying the rate of interest on
fixed-rate borrowings are summarized as follows:
<TABLE>
<CAPTION>
JANUARY 1, 2000 January 2, 1999
- ------------------------------------------------------------------------------------------------------------------------------------
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 $852 6.39% 2.5 $635 8.26% 5.5
Textron Finance* 125 5.84% 0.4 50 5.22% 0.5
- ------------------------------------------------------------------------------------------------------------------------------------
$977 6.32% 2.2 $685 8.04% 5.1
====================================================================================================================================
</TABLE>
*Amounts at January 1, 2000 represent basis swaps to lock-in desired spreads
between certain interest-earning assets and certain interest-bearing
liabilities. These basis swaps require United States Prime Rate-based payments
(5.84%) and LIBOR-based receipts (6.07%) at year-end 1999.
During 1999, Textron Manufacturing terminated $479 million variable-pay
interest rate exchange agreements related to the retirement of $553 million of
debt. Textron Manufacturing's and Textron Finance's variable-pay interest rate
exchange agreements were designated against specific long-term fixed-rate debt.
Textron Manufacturing's agreements effectively adjusted the average rate of
interest on fixed-rate notes in 1999 to 5.92% from 6.18%. These agreements
expire as follows: $437 million (6.13%) in 2000, $26 million (10.64%) in 2001,
$36 million (9.77%) in 2002, and $353 million (6.06%) through 2020. Textron
Finance had agreements ($50 million notional amounts) which expired in 1999 that
adjusted the average rate of interest on fixed-rate notes during the current
year to 6.74% from 6.79%.
Textron had minimal exposure to loss from nonperformance by the
counterparties to its interest rate exchange agreements at the end of 1999, 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.
1999 Textron Annual Report 51
<PAGE> 25
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 OF THE UNDERLYING TRANSACTIONS WHEN THEY OCCUR. Foreign exchange
gains and losses included in income have not been material.
The table below 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.
<TABLE>
<CAPTION>
BUY CONTRACTS SELL CONTRACTS
----------------------------------------------------
CONTRACT UNREALIZED CONTRACT UNREALIZED
(In millions) AMOUNT GAIN/(LOSS) AMOUNT GAIN/(LOSS)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
JANUARY 1, 2000
British Pound $ 74 $ 1 $485 $ 7
Canadian Dollar 263 5 15 --
Euro 7 -- 447 18
Other 11 -- 35 --
- --------------------------------------------------------------------------------
Total $355 $ 6 $982 $ 25
================================================================================
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)
================================================================================
</TABLE>
9. TEXTRON FINANCE - MANDATORILY REDEEMABLE PREFERRED SECURITIES OF FINANCE
SUBSIDIARY HOLDING DEBENTURES
Litchfield Financial Corporation (Litchfield, a subsidiary of Textron Financial
Corporation) was acquired by Textron Financial Corporation during 1999. Prior to
the acquisition, Litchfield issued Series A Preferred Securities to the public
(for $26 million), the proceeds of which were invested by the trust in $26
million aggregate principal amount of Litchfield's newly issued 10% Series A
Junior Subordinated Debentures (Series A Debentures), due 2029. The debentures
are the sole asset of the trust. The preferred securities were recorded by
Textron Financial Corporation at the fair value of $29 million as of the
acquisition date. The amounts due to the trust under the subordinated debentures
and the related income statement amounts have been eliminated in Textron's
consolidated financial statements.
The preferred securities accrue and pay cash distributions quarterly at a
rate of 10% per annum. The trust's obligation under the Series A Preferred
Securities are fully and unconditionally guaranteed by Litchfield. The trust
will redeem all of the outstanding Series A Preferred Securities when the Series
A Debentures are paid at maturity on June 30, 2029, or otherwise become due.
Litchfield will have the right to redeem 100% of the principal plus accrued and
unpaid interest on or after June 30, 2004.
52 Consistent Growth
<PAGE> 26
10. TEXTRON-OBLIGATED MANDATORILY REDEEMABLE PREFERRED SECURITIES OF SUBSIDIARY
TRUST HOLDING SOLELY TEXTRON JUNIOR SUBORDINATED DEBT SECURITIES
In 1996, a trust sponsored and wholly-owned by Textron issued preferred
securities to the public (for $500 million) and shares of its common securities
to Textron (for $15.5 million), the proceeds of which were invested by the trust
in $515.5 million aggregate principal amount of Textron's newly issued 7.92%
Junior Subordinated Deferrable Interest Debentures, due 2045. The debentures are
the sole asset of the trust. The proceeds from the issuance of the debentures
were used by Textron for the repayment of long-term borrowings and for general
corporate purposes. The amounts due to the trust under the debentures and the
related income statement amounts have been eliminated in Textron's consolidated
financial statements.
The preferred securities accrue and pay cash distributions quarterly at a
rate of 7.92% per annum. Textron has guaranteed, on a subordinated basis,
distributions and other payments due on the preferred securities. The guarantee,
when taken together with Textron's obligations under the debentures and in the
indenture pursuant to which the debentures were issued and Textron's obligations
under the Amended and Restated Declaration of Trust governing the trust,
provides a full and unconditional guarantee of amounts due on the preferred
securities. The preferred securities are mandatorily redeemable upon the
maturity of the debentures on March 31, 2045, or earlier to the extent of any
redemption by Textron of any debentures. The redemption price in either such
case will be $25 per share plus accrued and unpaid distributions to the date
fixed for redemption.
11. SHAREHOLDERS' EQUITY
Preferred stock
Textron has authorization for 15,000,000 shares of preferred stock. Each share
of $2.08 Preferred Stock ($23.63 approximate stated value) is convertible into
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 1999 Long-Term Incentive Plan (the "1999 Plan") was approved by
shareholders in April 1999. The 1999 Plan authorizes awards to key employees of
Textron and its related companies in three forms: (a) options to purchase
Textron shares; (b) performance share units; and (c) restricted stock. The
maximum number of share awards that are authorized by the 1999 Plan are: (a)
8,000,000 options to purchase Textron shares; (b) 1,000,000 performance units;
and (c) 500,000 shares of restricted stock.
STOCK-BASED COMPENSATION AWARDS TO EMPLOYEES UNDER THE PLAN ARE ACCOUNTED
FOR USING THE INTRINSIC VALUE METHOD PRESCRIBED IN APB 25, "ACCOUNTING FOR STOCK
ISSUED TO EMPLOYEES" AND RELATED INTERPRETATIONS.
Compensation expense under Textron's performance share program, measured
under the intrinsic value method, was approximately $25 million in 1999, $77
million in 1998, and $65 million in 1997. 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 $5
million in 1999, $40 million in 1998, and $37 million in 1997. Textron did not
incur compensation expense related to common stock options in 1999, 1998, or
1997.
Pro forma information regarding net income and earnings per share has been
determined using the fair value method. 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
diluted share in 1999, $9 million or $.06 per diluted share in 1998, and $11
million or $.07 per diluted share in 1997.
The assumptions used to estimate the fair value of an option granted in
1999, 1998, and 1997, respectively, are approximately as follows: dividend yield
of 2%; expected volatility of 22%, 18%, and 16%; risk-free interest rates of 6%,
4%, and 6%, and weighted
1999 Textron Annual Report 53
<PAGE> 27
average expected lives of 3.5 years. Under these assumptions, the
weighted-average fair value of an option to purchase one share granted in 1999,
1998, and 1997 was approximately $15, $12, and $10, respectively.
At year-end 1999, 5,933,000 stock options were available for future grant
under the 1999 Plan. Stock option transactions during the last three years are
summarized as follows:
<TABLE>
<CAPTION>
1999 1998 1997
- -----------------------------------------------------------------------------------------------
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>
Options outstanding
at beginning of year 8,342 $47.23 9,001 $36.74 9,290 $31.08
Options granted 2,176 $73.75 1,909 $74.08 1,333 $62.54
Options exercised (1,451) $34.86 (2,465) $29.52 (1,541) $24.56
Options canceled (245) $67.06 (103) $51.48 (81) $43.40
- -----------------------------------------------------------------------------------------------
Options outstanding
at end of year 8,822 $55.26 8,342 $47.23 9,001 $36.74
===============================================================================================
Options exercisable
at end of year 5,815 $45.60 5,818 $36.80 6,641 $30.21
===============================================================================================
</TABLE>
Stock options outstanding at the end of 1999 are summarized as follows:
<TABLE>
<CAPTION>
Weighted
Average Weighted Weighted
Remaining Average Average
Contractual Exercise Exercise
(Shares in thousands) Outstanding Life Price Exercisable Price
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
JANUARY 1, 2000:
$13 - $37 2,564 4.6 $28.38 2,564 $28.38
$38 - $63 2,399 7.4 $53.57 2,377 $53.50
$64 - $94 3,859 9.4 $74.09 874 $74.28
- -----------------------------------------------------------------------------------------------
</TABLE>
Reserved shares of common stock
At year-end 1999, 3,023,000 shares of common stock were reserved for the
subsequent conversion of preferred stock and 8,822,000 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
A reconciliation of income from continuing operations and basic to diluted share
amounts is presented below.
<TABLE>
<CAPTION>
For the years ended JANUARY 1, 2000 January 2, 1999 January 3, 1998
- ------------------------------------------------------------------------------------------------------------------------------------
(Dollars 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 $ 623 $ 443 $ 372
- ------------------------------------------------------------------------------------------------------------------------------------
Less: Preferred stock dividends (1) (1) (1)
- ------------------------------------------------------------------------------------------------------------------------------------
BASIC
Available to common shareholders 622 150,389 442 161,254 371 164,830
Dilutive effect of convertible
preferred stock and stock options 1 3,365 1 4,120 1 4,673
DILUTED
Available to common shareholders
and assumed conversions $ 623 153,754 $ 443 165,374 $ 372 169,503
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
54 Consistent Growth
<PAGE> 28
Comprehensive Income
The components of Textron's other comprehensive income for 1999, 1998, and
1997 were as follows:
<TABLE>
<CAPTION>
(In millions) 1999 1998 1997
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CURRENCY TRANSLATION ADJUSTMENT
Beginning balance $(104) $ (71) $ 2
Change, net of income taxes (71) (33) (73)
AFS disposal 79 -- --
- --------------------------------------------------------------------------------------------------------
Ending balance $ (96) $(104) $ (71)
========================================================================================================
UNREALIZED GAINS (LOSSES) ON SECURITIES
Beginning balance $ 13 $ 13 $ 9
Gross unrealized gains (losses) arising during the period* -- 8 7
Reclassification adjustment for realized gains in net income** -- (8) (3)
AFS disposal (Net of income tax expense of $8) (13) -- --
- --------------------------------------------------------------------------------------------------------
Ending balance $ -- $ 13 $ 13
========================================================================================================
PENSION LIABILITY ADJUSTMENT
Beginning balance $ (5) $ (4) $ (4)
Change, net of income taxes 3 (1) --
- --------------------------------------------------------------------------------------------------------
Ending balance $ (2) $ (5) $ (4)
========================================================================================================
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
Beginning balance $ (96) $ (62) $ 7
Other comprehensive income (loss) (2) (34) (69)
- --------------------------------------------------------------------------------------------------------
Ending balance $ (98) $ (96) $ (62)
========================================================================================================
</TABLE>
*Net of income tax expense (benefit) of $4 million and $4 million for 1998 and
1997, respectively.
**Net of income tax expense (benefit) of $4 million and $2 million for 1998 and
1997, respectively.
12. LEASES
Rental expense approximated $94 million, $83 million, and $65 million in 1999,
1998, and 1997, respectively. Future minimum rental commitments for
noncancellable operating leases in effect at year-end 1999 approximated $80
million for 2000; $64 million for 2001; $44 million for 2002; $34 million for
2003; $29 million for 2004; and a total of $185 million thereafter.
13. RESEARCH AND DEVELOPMENT
Textron carries out research and development for itself and 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 1999, 1998, and 1997 were as
follows:
<TABLE>
<CAPTION>
(In millions) 1999 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Company funded $257 $219 $222
Customer funded 413 394 380
- --------------------------------------------------------------------------------
Total research and development $670 $613 $602
================================================================================
</TABLE>
14. PENSION BENEFITS AND POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
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, $40 million, and $36 million in 1999,
1998 and 1997, 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.
1999 Textron Annual Report 55
<PAGE> 29
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 1, January 2, JANUARY 1, January 2,
(In millions) 2000 1999 2000 1999
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CHANGE IN BENEFIT OBLIGATION
Benefit obligation at beginning of year $ 3,836 $ 3,206 $ 665 $ 640
Service cost 109 83 7 6
Interest cost 252 235 41 45
Amendments 9 2 -- 2
Effects of acquisitions 10 293 5 20
Effects of dispositions (6) (14) -- (3)
Plan participants' contributions 4 1 4 4
Actuarial (gains)/losses (299) 258 (54) 13
Benefits paid (227) (229) (65) (62)
Foreign exchange rate changes (23) 1 -- --
- --------------------------------------------------------------------------------------------------------------
Benefit obligation at end of year $ 3,665 $ 3,836 $ 603 $ 665
- --------------------------------------------------------------------------------------------------------------
CHANGE IN PLAN ASSETS
Fair value of plan assets at beginning of year $ 4,824 $ 4,130 $ -- --
Actual return on plan assets 740 557 -- --
Employer contributions 21 15 -- --
Plan participants' contributions 4 1 -- --
Effects of acquisitions 12 363 -- --
Effects of dispositions (5) (12) -- --
Benefits paid (227) (229) -- --
Foreign exchange rate changes (27) (1) -- --
- --------------------------------------------------------------------------------------------------------------
Fair value of plan assets at end of year $ 5,342 $ 4,824 $ -- --
- --------------------------------------------------------------------------------------------------------------
Funded status of the plan $ 1,677 $ 988 $ (603) $ (665)
Unrecognized actuarial gain (1,331) (679) (122) (78)
Unrecognized prior service cost 88 96 (16) (19)
Unrecognized transition net asset (61) (78) -- --
- --------------------------------------------------------------------------------------------------------------
Net amount recognized in the
consolidated balance sheet $ 373 $ 327 $ (741) $ (762)
==============================================================================================================
Amounts recognized in the consolidated
balance sheet consists of:
Prepaid benefit cost $ 506 $ 452 $ -- $ --
Accrued benefit liability (144) (157) (741) (762)
Intangible asset 7 24 -- --
Accumulated other comprehensive income 4 8 -- --
- --------------------------------------------------------------------------------------------------------------
Net amount recognized in the
consolidated balance sheet $ 373 $ 327 $ (741) $ (762)
==============================================================================================================
</TABLE>
The projected benefit obligation, accumulated benefit obligation, and fair
value of plan assets for the pension plans with accumulated benefit obligations
in excess of plan assets were $191 million, $159 million, and $16 million,
respectively, as of year-end 1999, and $267 million, $231 million, and $78
million, respectively, as of year-end 1998.
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 1, January 2, January 3, JANUARY 1, January 2, January 3,
(In millions) 2000 1999 1998 2000 1999 1998
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
COMPONENTS OF NET PERIODIC BENEFIT COST
Service cost $ 109 $ 83 $ 71 $ 7 $ 6 $ 5
Interest cost 252 235 223 41 45 46
Expected return on plan assets (378) (323) (298) -- -- --
Amortization of unrecognized transition asset (17) (17) (17) -- -- --
Recognized actuarial (gain)/loss 2 1 1 (10) (9) (9)
Recognized prior service cost 16 14 15 (4) (4) (4)
- ------------------------------------------------------------------------------------------------------------------------------------
Net periodic benefit cost $ (16) $ (7) $ (5) $ 34 $ 38 $ 38
====================================================================================================================================
</TABLE>
56 Consistent Growth
<PAGE> 30
Major actuarial assumptions used in accounting for defined benefit pension
plans are presented below.
<TABLE>
<CAPTION>
JANUARY 1, January 2, January 3, December 28,
2000 1999 1998 1996
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
WEIGHTED AVERAGE ASSUMPTIONS AT YEAR-END
Discount rate 7.50% 6.75% 7.25% 7.50%
Expected return on plan assets 9.25 9.25 9.00 9.00
Rate of compensation increase 4.80 4.80 5.00 5.00
- --------------------------------------------------------------------------------------------------------
</TABLE>
Postretirement benefit plan discount rates are the same as those used by
Textron's defined benefit pension plans.
The 1999 health care cost trend rate, which is the weighted average annual
assumed rate of increase in the per capita cost of covered benefits, was 8.0%
for retirees age 65 and over and 7.0% for retirees under age 65. Both rates are
assumed to decrease gradually to 5.5% by 2001 and 2003, respectively, and then
remain at that level. 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 $ 5 $ (5)
Effect on postretirement benefit obligation 58 (52)
- ---------------------------------------------------------------------------------------------
</TABLE>
15. 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) 1999 1998 1997
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
United States $ 831 $ 582 $ 441
Foreign 199 181 207
- ----------------------------------------------------------------------------------------------------
Total $ 1,030 $ 763 $ 648
====================================================================================================
</TABLE>
Income tax expense is summarized as follows:
<TABLE>
<CAPTION>
(In millions) 1999 1998 1997
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Federal:
Current $ 222 $ 225 $ 82
Deferred 54 (25) 71
State 36 33 27
Foreign 69 61 70
- ----------------------------------------------------------------------------------------------------
Income tax expense $ 381 $ 294 $ 250
====================================================================================================
</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>
1999 1998 1997
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Federal statutory income tax rate 35.0% 35.0% 35.0%
Increase (decrease) in taxes resulting from:
State income taxes 2.3 2.7 2.8
Goodwill 2.2 4.3 2.7
Other - net (2.5) (3.5) (1.9)
- ----------------------------------------------------------------------------------------------------
Effective income tax rate 37.0% 38.5% 38.6%
====================================================================================================
</TABLE>
Textron's net deferred tax asset consisted of gross deferred tax assets and
gross deferred tax liabilities of $1,966 million and $1,810 million,
respectively, at the end of 1999 and $1,775 million and $1,576 million,
respectively, at the end of 1998.
1999 Textron Annual Report 57
<PAGE> 31
The components of Textron's net deferred tax asset were as follows:
<TABLE>
<CAPTION>
(In millions) JANUARY 1, 2000 January 2, 1999
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
Textron Finance transactions, principally leasing $(353) $(350)
Self insured liabilities (including environmental) 184 205
Obligation for postretirement benefits 171 186
Fixed assets, principally depreciation (164) (171)
Deferred compensation 144 152
Inventory (51) (48)
Allowance for credit losses 38 33
Other, principally timing of other expense deductions 187 192
- ----------------------------------------------------------------------------------------------
$ 156 $ 199
==============================================================================================
</TABLE>
Deferred income taxes have not been provided for the undistributed earnings
of foreign subsidiaries, which approximated $500 million at the end of 1999.
Management intends to reinvest those earnings for an indefinite period, except
for distributions having an immaterial tax effect. If foreign subsidiaries'
earnings were distributed, 1999 taxes, net of foreign tax credits, would be
increased by approximately $65 million.
16. SPECIAL (CREDITS)/ CHARGES
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 $0.32 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 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.
In 1999, the Company reassessed the remaining actions anticipated in the
1998 program and determined that certain projects should be delayed or cancelled
while other provisions were no longer necessary. Specifically, provisions for
severance and exit costs associated with the decision to exit certain automotive
product lines were no longer required due to a decision to build different
products in a plant originally anticipated to be closed. In the Industrial
segment, certain cost reduction programs in the Fluid and Power Group have been
suspended as a result of management's evaluation of the opportunities presented
by the David Brown acquisition. Some smaller programs have been delayed as the
Company re-examines strategic alternatives. Others were completed at costs less
than originally anticipated.
Concurrently, the Company initiated a series of new cost reduction efforts
in the Industrial segment designed to significantly reduce headcount from levels
at the beginning of the year. Significant actions include the downsizing of an
underperforming plant in Europe and targeted headcount reductions across most
Industrial divisions. Headcount reductions were also effected at Bell
Helicopter.
As a result of the above, the Company reversed approximately $24 million of
reserves no longer deemed necessary for the 1998 program and recorded severance
accruals of approximately $21 million and recorded a charge related to asset
impairment of $5 million.
Textron recorded additional restructuring charges for the Industrial
segment, primarily for severance ($7 million) and asset impairment ($9 million)
associated with the announced closing of seven facilities. The Company continues
to evaluate additional programs and expects cost reduction efforts to continue
over the next year. Additional charges may be required in the future when such
programs become finalized. As of January 1, 2000, approximately 1,700 employees
had been terminated under these programs.
58 Consistent Growth
<PAGE> 32
The following table summarizes the activity associated with 1998 and 1999
programs:
<TABLE>
<CAPTION>
ASSET SEVERANCE &
(In millions) IMPAIRMENTS OTHER TOTAL
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Initial charge $ 28 $ 49 $ 77
Utilized in 1998 (28) (9) (37)
- --------------------------------------------------------------------------------
Balance January 2, 1999 $ -- $ 40 $ 40
Additional programs 14 28 42
Utilized in 1999 (14) (22) (36)
No longer required -- (24) (24)
- --------------------------------------------------------------------------------
Balance January 1, 2000 $ -- $ 22 $ 22
================================================================================
</TABLE>
Included in special (credits)/charges, net is a gain of $19 million as a
result of shares granted to Textron from Manulife Financial Corporation's
initial public offering on their demutualization of the Manufacturers Life
Insurance Company.
17. FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair value amounts shown below were determined from available
market information and valuation methodologies. Because considerable judgment is
required in interpreting market data, the estimates are not necessarily
indicative of the amounts that could be realized in a current market exchange.
<TABLE>
<CAPTION>
JANUARY 1, 2000 January 2, 1999
- --------------------------------------------------------------------------------------------------
ESTIMATED Estimated
CARRYING FAIR Carrying fair
(In millions) VALUE VALUE value value
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS:
Textron Finance:
Finance receivables $ 4,647 $ 4,665 $ 2,774 $ 2,837
Other 46 46 46 46
LIABILITIES:
Textron Manufacturing:
Debt 1,745 1,740 2,615 2,706
Interest rate exchange agreements -- 7 -- (11)
Textron Finance:
Debt 4,551 4,535 2,829 2,836
Interest rate exchange agreements -- (2) -- 1
FOREIGN EXCHANGE CONTRACTS -- (6) -- 9
CURRENCY SWAPS (21) (25) 14 10
==================================================================================================
</TABLE>
(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.
18. CONTINGENCIES AND ENVIRONMENTAL REMEDIATION
Contingencies
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 damages, fines or penalties in substantial amounts
or remediation of environmental contamination, and some are class actions. Under
federal government procurement regulations, certain claims 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.
1999 Textron Annual Report 59
<PAGE> 33
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.
19. SEGMENT REPORTING
Textron has four reportable segments: Aircraft, Automotive, Industrial and
Finance. See Note 1 for principal markets and pages 66 through 68 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,
special (credits)/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) 1999 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Aircraft:
Fixed-Wing Aircraft $ 2,219 $ 1,784 $ 1,483
Rotor Aircraft 1,525 1,405 1,542
Automotive:
Trim 1,796 1,481 1,372
Fuel Systems and Functional Components 1,120 924 755
Industrial:
Fasteners 2,082 1,758 1,498
Fluid & Power 895 619 489
Golf, Turf-Care and Specialty Products 773 719 483
Industrial Components and Other 706 626 711
Finance 463 367 350
- --------------------------------------------------------------------------------
$11,579 $ 9,683 $ 8,683
================================================================================
</TABLE>
60 Consistent Growth
<PAGE> 34
The following tables summarize selected financial information by segment:
<TABLE>
<CAPTION>
PROPERTY, PLANT AND
(In millions) ASSETS EQUIPMENT EXPENDITURES
- ------------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Aircraft $ 2,348 $ 2,199 $ 1,941 $ 164 $ 140 $ 107
Automotive 1,860 1,681 1,515 134 111 103
Industrial 5,142 3,882 2,596 215 208 153
Finance 5,990 3,785 3,178 11 13 8
Corporate (including investment
in discontinued operations) 1,743 2,717 2,557 8 3 3
Eliminations (690) (543) (457) -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
$ 16,393 $ 13,721 $ 11,330 $ 532 $ 475 $ 374
====================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
(In millions) AMORTIZATION* DEPRECIATION
- ------------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Aircraft $ 10 $ 10 $ 10 $ 97 $ 82 $ 70
Automotive 19 15 14 84 72 69
Industrial 50 36 29 152 124 100
Finance 7 3 -- 12 10 11
Corporate 5 5 3 4 4 4
- ------------------------------------------------------------------------------------------------------------------------------------
$ 91 $ 69 $ 56 $ 349 $ 292 $ 254
====================================================================================================================================
</TABLE>
*Amortization is principally amortization of goodwill
Geographic Data
Presented below is selected financial information by geographic area of
Textron's operations:
<TABLE>
<CAPTION>
PROPERTY, PLANT
(In millions) REVENUES(1) AND EQUIPMENT(2)
- ------------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
United States $ 7,360 $ 6,291 $ 5,550 $ 1,718 $ 1,466 $ 1,232
Latin America and Mexico 704 634 447 68 84 40
Canada 701 589 640 118 115 92
Germany 690 575 458 187 205 138
United Kingdom 475 273 209 161 171 71
Asia and Australia 435 309 447 14 3 3
France 344 332 301 82 82 68
Other 870 680 631 165 79 126
- ------------------------------------------------------------------------------------------------------------------------------------
$ 11,579 $ 9,683 $ 8,683 $ 2,513 $ 2,205 $ 1,770
====================================================================================================================================
</TABLE>
(1)Revenues are attributed to countries based on the location of the customer.
(2)Property, plant and equipment is based on the location of the asset.
Revenues include sales to the U.S. Government of $1.3 billion, $1.1
billion, and $1.0 billion in 1999, 1998, and 1997, respectively and sales of
$1.6 billion, $1.3 billion, and $1.1 billion in 1999, 1998, and 1997,
respectively to DaimlerChrysler.
20. OTHER INFORMATION - TEXTRON MANUFACTURING CURRENT LIABILITIES
Included in accrued liabilities at the end of 1999 and 1998 were the following:
<TABLE>
<CAPTION>
(In millions) JANUARY 1, 2000 January 2, 1999
- --------------------------------------------------------------------------------
<S> <C> <C>
Customer deposits $ 253 $ 195
Salary, wages and employer taxes 232 226
Reserve for warranties 193 148
Other 541 529
- --------------------------------------------------------------------------------
Total accrued liabilities $1,219 $1,098
================================================================================
</TABLE>
1999 Textron Annual Report 61
<PAGE> 35
Quarterly Data
<TABLE>
<CAPTION>
(Unaudited)
(Dollars in millions except per share amounts) 1999
- ----------------------------------------------------------------------------------------------------------------------------------
Q4 Q3 Q2 Q1
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES
Aircraft $ 1,133 $ 899 $ 885 $ 827
Automotive 763 662 757 734
Industrial 1,197 1,026 1,141 1,092
Finance 141 122 104 96
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL REVENUES $ 3,234 $ 2,709 $ 2,887 $ 2,749
==================================================================================================================================
INCOME
Aircraft $ 129 $ 91 $ 75 $ 67
Automotive 66 38 62 62
Industrial 112 116 133 122
Finance 34 38 30 26
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL OPERATING INCOME 341 283 300 277
Gain on sale of division -- -- -- --
Special credits/(charges) -- 3 (2) --
Corporate expenses and other - net (33) (37) (35) (38)
Interest income 1 4 6 16
Interest expense (29) (11) (3) (13)
Income taxes (103) (90) (97) (91)
Distributions on preferred securities of
subsidiary trusts, net of income taxes (7) (6) (7) (6)
- ----------------------------------------------------------------------------------------------------------------------------------
INCOME FROM CONTINUING OPERATIONS 170 146 162 145
- ----------------------------------------------------------------------------------------------------------------------------------
Discontinued operations, net of income taxes:
Income from operations -- -- -- --
Gain on disposal 31 -- -- 1,615
- ----------------------------------------------------------------------------------------------------------------------------------
31 -- -- 1,615
- ----------------------------------------------------------------------------------------------------------------------------------
Income before extraordinary loss 201 146 162 1,760
Extraordinary loss from debt
retirement, net of income taxes -- -- -- (43)
- ----------------------------------------------------------------------------------------------------------------------------------
Net income $ 201 $ 146 $ 162 $ 1,717
==================================================================================================================================
EARNINGS PER COMMON SHARE
BASIC:
Income from continuing operations $ 1.14 $ .97 $ 1.08 $ .95
Discontinued operations, net of income taxes .21 -- -- 10.59
Extraordinary loss from debt
retirement, net of income taxes -- -- -- (.28)
- ----------------------------------------------------------------------------------------------------------------------------------
Net income $ 1.35 $ .97 $ 1.08 $ 11.26
==================================================================================================================================
Average shares outstanding (in thousands) 148,309 150,069 150,512 152,517
- ----------------------------------------------------------------------------------------------------------------------------------
DILUTED:
Income from continuing operations $ 1.12 $ .95 $ 1.05 $ .93
Discontinued operations, net of income taxes .21 -- -- 10.34
Extraordinary loss from debt
retirement, net of income taxes -- -- -- (.27)
- ----------------------------------------------------------------------------------------------------------------------------------
Net income $ 1.33 $ .95 $ 1.05 $ 11.00
==================================================================================================================================
Average shares outstanding (in thousands)* 151,267 153,406 154,096 156,112
- ----------------------------------------------------------------------------------------------------------------------------------
OPERATING INCOME MARGINS
Aircraft 11.4% 10.1% 8.5% 8.1%
Automotive 8.7 5.7 8.2 8.4
Industrial 9.4 11.3 11.7 11.2
Finance 24.1 31.1 28.8 27.1
OPERATING INCOME MARGIN 10.5 10.4 10.4 10.1
- ----------------------------------------------------------------------------------------------------------------------------------
COMMON STOCK INFORMATION
Price range: High $ 77 3/4 $ 90 1/2 $ 97 $ 81 7/16
Low $ 68 7/16 $ 74 1/2 $ 78 5/16 $ 70
Dividends per share $ .325 $ .325 $ .325 $ .325
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
(Unaudited)
(Dollars in millions except per share amounts) 1998
- ----------------------------------------------------------------------------------------------------------------------------------
Q4 Q3 Q2 Q1
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES
Aircraft $ 849 $ 826 $ 858 $ 656
Automotive 670 534 583 618
Industrial 984 893 952 893
Finance 92 99 91 85
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL REVENUES $ 2,595 $ 2,352 $ 2,484 $ 2,252
==================================================================================================================================
INCOME
Aircraft $ 95 $ 91 $ 91 $ 61
Automotive 51 29 43 56
Industrial 104 103 108 95
Finance 28 33 27 25
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL OPERATING INCOME 278 256 269 237
Gain on sale of division -- -- 97 --
Special credits/(charges) -- -- (87)
Corporate expenses and other - net (38) (35) (34) (34)
Interest income -- -- -- --
Interest expense (40) (37) (36) (33)
Income taxes (73) (70) (86) (65)
Distributions on preferred securities of
subsidiary trusts, net of income taxes (7) (6) (7) (6)
- ----------------------------------------------------------------------------------------------------------------------------------
INCOME FROM CONTINUING OPERATIONS 120 108 116 99
- ----------------------------------------------------------------------------------------------------------------------------------
Discontinued operations, net of income taxes:
Income from operations 40 34 48 43
Gain on disposal -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------------------
40 34 48 43
- ----------------------------------------------------------------------------------------------------------------------------------
Income before extraordinary loss 160 142 164 142
Extraordinary loss from debt
retirement, net of income taxes -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Net income $ 160 $ 142 $ 164 $ 142
==================================================================================================================================
EARNINGS PER COMMON SHARE
BASIC:
Income from continuing operations $ .76 $ .67 $ .71 $ .60
Discontinued operations, net of income taxes .26 .20 .29 .27
Extraordinary loss from debt
retirement, net of income taxes -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Net income $ 1.02 $ .87 $ 1.00 $ .87
==================================================================================================================================
Average shares outstanding (in thousands) 157,225 162,156 163,613 162,809
- ----------------------------------------------------------------------------------------------------------------------------------
DILUTED:
Income from continuing operations $ .74 $ .65 $ .70 $ .59
Discontinued operations, net of income taxes .26 .20 .28 .26
Extraordinary loss from debt
retirement, net of income taxes -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Net income $ 1.00 $ .85 $ .98 $ .85
==================================================================================================================================
Average shares outstanding (in thousands)* 160,980 166,116 168,027 167,155
- ----------------------------------------------------------------------------------------------------------------------------------
OPERATING INCOME MARGINS
Aircraft 11.2% 11.0% 10.6% 9.3%
Automotive 7.6 5.4 7.4 9.1
Industrial 10.6 11.5 11.3 10.6
Finance 30.4 33.3 29.7 29.4
OPERATING INCOME MARGIN 10.7 10.9 10.8 10.5
- ----------------------------------------------------------------------------------------------------------------------------------
COMMON STOCK INFORMATION
Price range: High $ 79 1/4 $ 76 1/2 $ 80 5/16 $ 79
Low $ 52 1/16 $56 15/16 $ 69 5/8 $ 56 3/8
Dividends per share $ .285 $ .285 $ .285 $ .285
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Assumes full conversion of outstanding preferred stock and exercise of stock
options.
62 Consistent Growth
<PAGE> 36
Selected Financial Information
<TABLE>
<CAPTION>
(Dollars in millions except where
otherwise noted and per share amounts) 1999 1998 1997 1996 1995 1994
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
REVENUES
Aircraft $ 3,744 $ 3,189 $ 3,025 $ 2,593 $ 2,420 $ 2,186
Automotive 2,916 2,405 2,127 1,627 1,534 1,511
Industrial 4,456 3,722 3,181 2,959 2,515 2,982
Finance 463 367 350 327 311 277
- -------------------------------------------------------------------------------------------------------------------------
Total revenues $ 11,579 $ 9,683 $ 8,683 $ 7,506 $ 6,780 $ 6,956
=========================================================================================================================
INCOME
Aircraft $ 362 $ 338 $ 313 $ 261 $ 237 $ 194
Automotive 228 179 150 146 135 132
Industrial 483 410 346 300 250 248
Finance 128 113 108 96 88 83
- -------------------------------------------------------------------------------------------------------------------------
TOTAL OPERATING INCOME 1,201 1,040 917 803 710 657
Gain on sale of division -- 97 -- -- -- --
Special credits/(charges) 1 (87) -- -- -- --
Corporate expenses and other - net (143) (141) (152) (125) (128) (101)
Interest expense - net (29) (146) (117) (138) (169) (181)
Income taxes (381) (294) (250) (211) (165) (160)
Distributions on preferred securities of
subsidiary trusts, net of income taxes (26) (26) (26) (23) -- --
- -------------------------------------------------------------------------------------------------------------------------
INCOME FROM CONTINUING OPERATIONS* $ 623 $ 443 $ 372 $ 306 $ 248 $ 215
=========================================================================================================================
PER SHARE OF COMMON STOCK
Income from continuing operations-basic* $ 4.14 $ 2.74 $ 2.25 $ 1.82 $ 1.45 $ 1.21
Income from continuing operations-diluted* $ 4.05 $ 2.68 $ 2.19 $ 1.78 $ 1.43 $ 1.19
Dividends declared $ 1.30 $ 1.14 $ 1.00 $ .88 $ .78 $ .70
Book value at year-end $ 29.67 $ 19.27 $ 19.78 $ 19.10 $ 19.96 $ 16.72
Common stock price: High $ 97 $ 80 5/16 $ 70 3/4 $ 48 7/8 $38 11/16 $ 30 5/16
Low $ 68 7/16 $ 52 1/16 $ 45 $ 34 9/16 $ 24 5/16 $ 23 1/4
Year-end $76 11/16 $75 15/16 $ 62 5/8 $46 11/16 $ 33 3/4 $ 25 3/16
Common shares outstanding (in thousands):
Basic average 150,389 161,254 164,830 167,453 169,848 176,474
Diluted average** 153,754 165,374 169,503 171,652 173,252 180,208
Year-end 147,002 154,742 167,315 169,745 173,340 174,616
=========================================================================================================================
FINANCIAL POSITION
Total assets $ 16,393 $ 13,721 $ 11,330 $ 11,514 $ 11,207 $ 10,374
Debt:
Textron Manufacturing $ 1,767 $ 2,615 $ 1,221 $ 1,507 $ 1,774 $ 1,582
Textron Finance $ 4,551 $ 2,829 $ 2,365 $ 2,441 $ 2,277 $ 2,162
Preferred securities of subsidiary trusts:
Textron Manufacturing $ 483 $ 483 $ 483 $ 483 $ -- $ --
Textron Finance $ 29 $ -- $ -- $ -- $ -- $ --
Shareholders' equity $ 4,377 $ 2,997 $ 3,228 $ 3,183 $ 3,412 $ 2,882
Textron Manufacturing debt to total capital 27% 43% 25% 29% 34% 35%
=========================================================================================================================
INVESTMENT DATA
Capital expenditures $ 532 $ 475 $ 374 $ 312 $ 258 $ 274
Depreciation $ 349 $ 292 $ 254 $ 213 $ 188 $ 201
Research and development $ 670 $ 613 $ 602 $ 576 $ 656 $ 611
=========================================================================================================================
OTHER DATA
Number of employees at year-end 68,000 64,000 56,000 49,000 46,000 43,000
Number of common shareholders at year-end 22,000 23,000 24,000 25,000 26,000 27,000
=========================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
(Dollars in millions except where
otherwise noted and per share amounts) 1993 1992
- ---------------------------------------------------------------------
<S> <C> <C>
REVENUES
Aircraft $ 1,987 $ 1,521
Automotive 1,178 788
Industrial 3,106 3,308
Finance 259 258
- ---------------------------------------------------------------------
Total revenues $ 6,530 $ 5,875
=====================================================================
INCOME
Aircraft $ 172 $ 128
Automotive 89 68
Industrial 237 285
Finance 74 62
- ---------------------------------------------------------------------
TOTAL OPERATING INCOME 572 543
Gain on sale of division -- --
Special credits/(charges) -- --
Corporate expenses and other - net (109) (89)
Interest expense - net (208) (230)
Income taxes (87) (87)
Distributions on preferred securities of
subsidiary trusts, net of income taxes -- --
- ---------------------------------------------------------------------
INCOME FROM CONTINUING OPERATIONS* $ 168 $ 137
=====================================================================
PER SHARE OF COMMON STOCK
Income from continuing operations-basic* $ .95 $ .78
Income from continuing operations-diluted* $ .94 $ .77
Dividends declared $ .62 $ .56
Book value at year-end $ 15.59 $ 14.05
Common stock price: High $ 29 7/16 $ 22 3/8
Low $ 20 3/16 $ 16 7/8
Year-end $ 29 1/8 $ 22 3/8
Common shares outstanding (in thousands):
Basic average 176,071 173,334
Diluted average** 179,713 177,087
Year-end 180,509 178,366
=====================================================================
FINANCIAL POSITION
Total assets $ 10,462 $ 10,009
Debt:
Textron Manufacturing $ 2,025 $ 2,283
Textron Finance $ 2,037 $ 1,873
Preferred securities of subsidiary trusts:
Textron Manufacturing $ -- $ --
Textron Finance $ -- $ --
Shareholders' equity $ 2,780 $ 2,488
Textron Manufacturing debt to total capital 42% 48%
=====================================================================
INVESTMENT DATA
Capital expenditures $ 227 $ 199
Depreciation $ 196 $ 188
Research and development $ 514 $ 430
=====================================================================
OTHER DATA
Number of employees at year-end 46,000 44,000
Number of common shareholders at year-end 28,000 30,000
=====================================================================
</TABLE>
*Before cumulative effect of changes in accounting principles in 1992.
**Assumes full conversion of outstanding preferred stock and exercise of stock
options.
1999 Textron Annual Report 63
<PAGE> 37
Textron Business Directory
<TABLE>
<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 GARY W. HAY Light- and mid-size business jets, utility turboprops and
COMPANY Chief Executive Officer single-engine piston aircraft.
- ------------------------------------------------------------------------------------------------------------------------------------
AUTOMOTIVE TEXTRON AUTOMOTIVE SAM LICAVOLI Automotive interior and exterior trim; fuel systems;
Chairman, President functional components.
and CEO
-----------------------------------------------------------------------------------------------------------------
CWC TEXTRON JED A. LARSEN Gray iron and ductile iron castings, primarily camshafts for
President automobile and engine manufacturers.
-----------------------------------------------------------------------------------------------------------------
KAUTEX TEXTRON JOACHIM V. HIRSCH Fuel tank systems and other automotive functional
President and CEO components.
-----------------------------------------------------------------------------------------------------------------
MCCORD WINN TEXTRON WILLIAM N. WHITE Automotive windshield and headlamp washing systems, seating
President comfort systems and electro-mechanical components;
blow-molded modular fluid management systems.
-----------------------------------------------------------------------------------------------------------------
MICROMATIC TEXTRON MICHAEL J. BRENNAN Proprietary machine tools, components and assembly systems
President for automotive and commercial markets.
-----------------------------------------------------------------------------------------------------------------
TEXTRON AUTOMOTIVE TRIM WILLIAM F. MACLEAN Instrument panels, cockpit systems, door trim panels, center
President consoles, painted fascias and exterior lighting.
- ------------------------------------------------------------------------------------------------------------------------------------
INDUSTRIAL TEXTRON FASTENING SYSTEMS JACK W. SIGHTS Engineered fastening systems, components, assemblies and
Chairman, President value-added services for the automotive, telecommunications,
and CEO aerospace, electronics, construction, do-it-yourself and
transportation markets.
-----------------------------------------------------------------------------------------------------------------
AUTOMOTIVE SOLUTIONS CHARLES R. O'BRIEN Engineered fastening systems, components, and assemblies for
President the automotive market. Includes: Ring Screw, Elco, Camcar,
Mapri, Textron Industries S.A., Textron Fastening
Systems-Germany, Sukosim, Peiner, and Boesner.
-----------------------------------------------------------------------------------------------------------------
COMMERCIAL SOLUTIONS GEORGE W. DETTLOFF Engineered fastening systems, components, and assemblies for
President commercial markets. Includes: Avdel, Avdel Cherry, Camcar,
Elco, Textron Aerospace Fasteners, Tri-Star, and Aylesbury.
-----------------------------------------------------------------------------------------------------------------
ADVANCED SOLUTIONS GREGORY W. LAYNE Plastic and metal engineered assemblies for the
President telecommunications, automotive, computer/ business machines,
medical and general consumer industries. Includes: InteSys.
-----------------------------------------------------------------------------------------------------------------
SUPPLY CHAIN SOLUTIONS ANDREW K. RAYBURN Vendor managed inventory of fasteners and other products for
President a variety of industries, including automotive and
do-it-yourself markets. Includes: Flexalloy and Textron
Logistics Company.
</TABLE>
66 Consistent Growth
<PAGE> 38
Textron Business Directory (continued)
<TABLE>
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
INDUSTRIAL TEXTRON INDUSTRIAL PRODUCTS FRANK J. FERACO Fluid and power systems; golf, turf-care and specialty
(continued) President products; electrical tools and technologies; light
construction equipment; and industrial components.
--------------------------------------------------------------------------------------------------------------------
TEXTRON FLUID AND POWER ROBERT A. GECKLE Motion control, power transmission, fluid handling products
President for the industrial, commercial, pharmaceutical, aerospace,
transportation and defense industries.
-----------------------------------------------------------------------------------------------------------------
TEXTRON MOTION CONTROL ROBERT A. GECKLE Motion control components and systems for industrial,
(Acting President) defense and aerospace markets. Includes: David Brown
Hydraulics, HR Textron, Energy Manufacturing and Williams
Machine and Tool.
-----------------------------------------------------------------------------------------------------------------
TEXTRON POWER ANTON ELSBORG Mechanical power transmission components and systems for the
TRANSMISSION President industrial, mining, mobile equipment and transportation
markets. Includes: Cone Drive Textron, David Brown, Textron
Industrial S.p.A., AB Benzlers and Alstom Gears.
-----------------------------------------------------------------------------------------------------------------
TEXTRON FLUID HANDLING GREGORY C. SCHREIBER Pumps and systems used in the plastics, chemical, oil and
President gas, and pharmaceutical industries. Includes: David Brown
Union Pumps, Maag Pump Systems and David Brown Guinard
Pumps.
-----------------------------------------------------------------------------------------------------------------
TEXTRON SYSTEMS RICHARD J. MILLMAN Sensor-based, autonomous, real-time control systems and
President specialty materials for weapon systems, surveillance,
agriculture, pharmaceutical and industrial applications.
--------------------------------------------------------------------------------------------------------------------
TEXTRON GOLF, TURF CARE AND FRANK J. FERACO Golf cars, lawn and turf-care products, and multi-purpose
SPECIALTY PRODUCTS (Acting President) utility vehicles.
-----------------------------------------------------------------------------------------------------------------
E-Z-GO TEXTRON L.T. WALDEN, JR. Electric- and gasoline-powered golf cars and multi-purpose
President utility vehicles. Includes: E-Z-GO and Cushman.
-----------------------------------------------------------------------------------------------------------------
TEXTRON TURF CARE AND PHILIP J. TRALIES Professional mowing and turf maintenance equipment.
SPECIALTY PRODUCTS President Includes: Bob-Cat, Bunton, Cushman, Jacobsen, Ransomes,
AMERICAS Ryan, Steiner and Brouwer.
-----------------------------------------------------------------------------------------------------------------
TEXTRON TURF CARE AND HAROLD C. PINTO Turf-care machinery for the golf, municipal and commercial
SPECIALTY PRODUCTS Managing Director markets, and multi-purpose utility vehicles and cleaning
EUROPE/ASIA equipment. Includes: Cushman, E-Z-GO, Jacobsen, Ransomes,
Ryan and Iseki.
--------------------------------------------------------------------------------------------------------------------
GREENLEE TEXTRON BARCLAY S. OLSON Products for wire and cable installation, maintenance and
President testing in residential, commercial and industrial
facilities. Includes: Greenlee, Rifocs, Progressive,
Datacom, Fairmont and Klauke.
</TABLE>
1999 Textron Annual Report 67
<PAGE> 39
Textron Business Directory (continued)
<TABLE>
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
INDUSTRIAL OMNIQUIP TEXTRON P. ENOCH STIFF Light construction equipment, including telescopic material
(continued) President and CEO handlers, aerial work platforms and skid steer loaders.
-----------------------------------------------------------------------------------------------------------------
MATERIAL HANDLING JAMES WILCOX Telescopic material handlers. Includes: SKY TRAK and LULL.
TECHNOLOGIES President
-----------------------------------------------------------------------------------------------------------------
COMPACT TECHNOLOGIES JAMES HOOK Compact construction equipment. Includes: SCAT TRAK.
President
-----------------------------------------------------------------------------------------------------------------
SNORKEL INTERNATIONAL P. ENOCH STIFF Aerial work platforms. Includes: SNORKELIFT.
Acting President
-----------------------------------------------------------------------------------------------------------------
ALLIANCE RICH MUELLER Managing and developing strategic partnerships between
President OmniQuip businesses and key national rental fleets.
--------------------------------------------------------------------------------------------------------------------
TEXTRON INDUSTRIAL Components for the commercial aerospace and defense
COMPONENTS industries.
-----------------------------------------------------------------------------------------------------------------
TEXTRON LYCOMING JAMES A. KOERNER Piston aircraft engines and replacement parts for the
President general aviation market.
-----------------------------------------------------------------------------------------------------------------
TEXTRON MARINE & LASZLO G. BUJDOSO Amphibious air cushion vehicles, special usage
LAND SYSTEMS President lightweight/high strength aluminum marine systems and
lightweight armored vehicles for the U.S. and foreign
governments and commercial markets.
-----------------------------------------------------------------------------------------------------------------
TURBINE ENGINE JAMES A. KOERNER Air and land-based gas turbine engine components for engine
COMPONENTS TEXTRON President OEMs.
- ------------------------------------------------------------------------------------------------------------------------------------
FINANCE TEXTRON FINANCIAL STEPHEN A. GILIOTTI Commercial lending and leasing of Textron products, golf
CORPORATION Chairman, President courses, timeshare resorts, aircraft, franchise concepts,
and CEO telecommunications, floorplanning, factoring, vendor
programs, portfolio servicing, asset management, insurance
brokerage and syndications.
</TABLE>
TEXTRON, TAC, Textron Advanced Solutions, Textron Aerospace Fasteners, Textron
Automotive Company, Textron Automotive Solutions, Textron Automotive Trim,
Textron Commercial Solutions, Textron Fastening Systems, Textron Financial
Corporation, TFC, TFS, Textron Fluid Handling, Textron Fluid and Power Systems,
Textron Golf, Turf Care And Specialty Products, Textron Industrial Components,
Textron Industrial S.p.A., Textron Industries S.A., Textron Logistics Company,
Textron Lycoming, Textron Marine & Land Systems, Textron Motion Control, Textron
Power Transmission, Textron Supply Chain Solutions, Textron Systems, AB
Benzlers, AB139, Alstom Gears, ASCTec, Avdel, Avdel Cherry, Aylesbury, BA609,
Bell 206B Jet Ranger, Bell 206L-4 Long Ranger, Bell 212, Bell 407, Bell 412,
Bell 427, Bell 430, Bell AH-1W Super Cobra, Bell AH-1Y, Bell AH-1Z, Bell Boeing
V-22 Osprey, Bell Helicopter Textron, Bell OH-58D Kiowa Warrior, Bell TH-67
Trainer, Bell UH-1Y, Boesner, Brouwer, Bunton, Burkland, Camcar, Cam Tool,
Cessna 182 Skylane, Cessna Citation, Cessna Caravan 208, Cessna Caravan 208B,
Cessna Skyhawk 172, Cessna Skyhawk 172SP, Cessna Stationair 206, Cessna
Stationair T206, Cherry, Citation Bravo, Citation CJ1, Citation CJ2, Citation
Excel, Citation Sovereign, Citation Ultra, Citation Ultra Encore, Citation VII,
Citation X, CitationJet, Cone Drive, Cushman, CWC Textron, Datacom, David Brown,
David Brown Guinard Pumps, David Brown Hydraulics, David Brown Union Pumps,
Edwards & Associates, Elco, Energy/Williams, E-Z-GO, Fairmont, Flexalloy,
Greenlee Textron, HR Textron, InteSys, Jacobsen, Kautex Textron, Klauke, Lull,
Maag Italia, Maag Pump Systems, Mapri, McCord Winn Textron, Micromatic Textron,
OmniQuip Textron, Optical Boring, Peiner, Progressive Electronics, Ransomes,
Rifocs, Ring Screw, RITec, Ryan, Scat Trak, Sky Trak, Snorkel, Steiner, Sukosim,
The Cessna Aircraft Company, Tri-Star, Turbine Engine Components Textron,
Wildcat, Williams Machine & Tool, Wolverine, Workpro, Xact Products and their
related trademark designs and logotypes (and variations of the foregoing) are
service/trademarks or trade names of Textron Inc., its subsidiaries, affiliates,
or joint ventures.
68 Consistent Growth
<PAGE> 1
EXHIBIT 21
TEXTRON INC. - SIGNIFICANT SUBSIDIARIES
(AS OF FEBRUARY 24, 2000)
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.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C>
NAME JURISDICTION
- ----------------------------------------------------------------------------------------------------------------------------
Avco Corporation Delaware
- ----------------------------------------------------------------------------------------------------------------------------
Textron Systems Corporation Delaware
- ----------------------------------------------------------------------------------------------------------------------------
Bell Helicopter Textron Inc. Delaware
- ----------------------------------------------------------------------------------------------------------------------------
The Cessna Aircraft Company Kansas
- ----------------------------------------------------------------------------------------------------------------------------
Flexalloy Inc. Ohio
- ----------------------------------------------------------------------------------------------------------------------------
Greenlee Textron Inc. Delaware
- ----------------------------------------------------------------------------------------------------------------------------
InteSys Technologies, Inc. Massachusetts
- ----------------------------------------------------------------------------------------------------------------------------
OmniQuip Textron International Inc. Delaware
- ----------------------------------------------------------------------------------------------------------------------------
TRAK International, Inc. Delaware
- ----------------------------------------------------------------------------------------------------------------------------
Ring Screw Textron Inc. Michigan
- ----------------------------------------------------------------------------------------------------------------------------
Textron Atlantic Inc. Delaware
- ----------------------------------------------------------------------------------------------------------------------------
Textron Acquisition Limited England
- ----------------------------------------------------------------------------------------------------------------------------
Avdel plc/Avdel plc Inc. England/Delaware
- ----------------------------------------------------------------------------------------------------------------------------
Textron Fluid and Power Systems Holdings Limited England
- ----------------------------------------------------------------------------------------------------------------------------
David Brown Group plc England
- ----------------------------------------------------------------------------------------------------------------------------
David Brown Engineering Ltd. England
- ----------------------------------------------------------------------------------------------------------------------------
Textron International Holding, S.L. (87.01%; 10.80% - Textron France Holding Inc. Spain
0.53% - Textron Automotive Company Inc.; 1.66% - Textron Automotive Overseas Investment Inc.)
- ----------------------------------------------------------------------------------------------------------------------------
Kautex Textron Benelux B.V.B.A. (99.9%; 1 share - Textron International Holding, S.L.) Belgium
- ----------------------------------------------------------------------------------------------------------------------------
Textron France Holding S.A.R.L. (99.9%; 1 share - Textron Industries Management S.N.C.) France
- ----------------------------------------------------------------------------------------------------------------------------
Textron France S.A.R.L. (99.9%; 1 share - Textron Industries Management S.N.C.) France
- ----------------------------------------------------------------------------------------------------------------------------
Textron Atlantic Holding GmbH (99.99%; .01% - Textron Atlantic Inc.) Germany
- ----------------------------------------------------------------------------------------------------------------------------
Kautex Textron Verwaltungs GmbH Germany
- ----------------------------------------------------------------------------------------------------------------------------
Kautex Textron GmbH & Co. K.G. (98%; 1% - Jacobsen E-Z-GO Textron GmbH Germany
Rasenpflegesystem; 1% - Deutsche Bank subsidiary)
- ----------------------------------------------------------------------------------------------------------------------------
Textron Industries S.A.S. France
- ----------------------------------------------------------------------------------------------------------------------------
Textron Automotive Company Inc. Delaware
- ----------------------------------------------------------------------------------------------------------------------------
McCord Corporation Michigan
- ----------------------------------------------------------------------------------------------------------------------------
Textron Automotive Interiors Inc. Delaware
- ----------------------------------------------------------------------------------------------------------------------------
Textron Automotive Exteriors Inc. Delaware
- ----------------------------------------------------------------------------------------------------------------------------
Textron Capital I Delaware
- ----------------------------------------------------------------------------------------------------------------------------
Textron Financial Corporation Delaware
- ----------------------------------------------------------------------------------------------------------------------------
Cessna Finance Corporation Kansas
- ----------------------------------------------------------------------------------------------------------------------------
Textron Funding Corporation Delaware
- ----------------------------------------------------------------------------------------------------------------------------
Textron Properties Inc. Delaware
- ----------------------------------------------------------------------------------------------------------------------------
Textron Canada Limited (64.5%; 35.5% - Textron Inc.) Canada
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 1
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 25, 2000, included in the 1999
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 consent to the incorporation by reference in the Registration Statements
(Form S-3 No. 333-84599, Form S-8 No. 333-78145, 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) of Textron Inc. and in the related Prospectus and Prospectus
Supplements of our report dated January 25, 2000, 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 1, 2000.
Boston, Massachusetts
March 17, 2000
<PAGE> 1
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 1, 2000, 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 23rd day of February, 2000.
TEXTRON INC.
By: s/Lewis B. Campbell
--------------------------------------
Lewis B. Campbell
Chairman and Chief Executive Officer
ATTEST:
s/Frederick K. Butler
- ----------------------------
Frederick K. Butler
Vice President and Secretary
<PAGE> 2
s/Lewis B. Campbell s/Brian H. Rowe
- ----------------------------- -------------------------------
Lewis B. Campbell Brian H. Rowe
Chairman and Chief Executive Director
Officer, Director
s/John A. Janitz s/Sam F. Segnar
- ----------------------------- -------------------------------
John A. Janitz Sam F. Segnar
President and Chief Operating Director
Officer, Director
s/H. Jesse Arnelle
- ----------------------------- -------------------------------
H. Jesse Arnelle Jean Head Sisco
Director Director
s/Teresa Beck s/Martin D. Walker
- ----------------------------- -------------------------------
Teresa Beck Martin D. Walker
Director Director
s/R. Stuart Dickson s/Thomas B. Wheeler
- ----------------------------- -------------------------------
R. Stuart Dickson Thomas B. Wheeler
Director Director
s/Lawrence K. Fish s/Stephen L. Key
- ----------------------------- -------------------------------
Lawrence K. Fish Stephen L. Key
Director Executive Vice President
and Chief Financial Officer
(principal financial officer)
s/Joe T. Ford
- -----------------------------
Joe T. Ford
Director s/Richard L. Yates
-------------------------------
Richard L. Yates
Vice President and Controller
s/Paul E. Gagne (principal accounting officer)
- -----------------------------
Paul E. Gagne
Director
s/John D. Macomber
- -----------------------------
John D. Macomber
Director
<PAGE> 1
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 resolutions passed at a meeting of
the Corporation's Board of Directors held on February 23, 2000, 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
prepare and execute, and to file with the Securities and Exchange
Commission, the Corporation's Annual Report on Form 10-K for its
fiscal year ended January 1, 2000, and any amendments thereto.
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 1, 2000, and any amendments thereto.
I DO HEREBY FURTHER CERTIFY that the foregoing resolutions have been
neither amended nor modified, and remain 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 17th day of March, 2000.
/s/ Ann T. Willaman
CORPORATE SEAL -------------------
Assistant Secretary
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-01-2000
<PERIOD-END> JAN-01-2000
<CASH> 209
<SECURITIES> 0
<RECEIVABLES> 6,963
<ALLOWANCES> 113
<INVENTORY> 1,859
<CURRENT-ASSETS> 3,735
<PP&E> 4,582
<DEPRECIATION> 2,069
<TOTAL-ASSETS> 16,393
<CURRENT-LIABILITIES> 3,256
<BONDS> 6,318
12
0
<COMMON> 24
<OTHER-SE> 4,341
<TOTAL-LIABILITY-AND-EQUITY> 16,393
<SALES> 11,116
<TOTAL-REVENUES> 11,579
<CGS> 9,111
<TOTAL-COSTS> 9,111
<OTHER-EXPENSES> (1)
<LOSS-PROVISION> 32
<INTEREST-EXPENSE> 260
<INCOME-PRETAX> 1,030
<INCOME-TAX> 381
<INCOME-CONTINUING> 623
<DISCONTINUED> 1,646
<EXTRAORDINARY> 43
<CHANGES> 0
<NET-INCOME> 2,226
<EPS-BASIC> 14.80
<EPS-DILUTED> 14.48
</TABLE>
