-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JihN7h+XLrIExh0nlpkvMtTGNdYWRE4a2KAxlJKqJhUz8WPEMy82y4jAh/9/V8Zm jVr4Lr2+5PMtVtQdvcvC1A== 0000217346-97-000001.txt : 19970317 0000217346-97-000001.hdr.sgml : 19970317 ACCESSION NUMBER: 0000217346-97-000001 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 12 CONFORMED PERIOD OF REPORT: 19961228 FILED AS OF DATE: 19970314 SROS: NYSE SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: TEXTRON INC CENTRAL INDEX KEY: 0000217346 STANDARD INDUSTRIAL CLASSIFICATION: AIRCRAFT & PARTS [3720] IRS NUMBER: 050315468 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-05480 FILM NUMBER: 97556923 BUSINESS ADDRESS: STREET 1: 40 WESTMINSTER ST CITY: PROVIDENCE STATE: RI ZIP: 02903 BUSINESS PHONE: 4014212800 FORMER COMPANY: FORMER CONFORMED NAME: AMERICAN TEXTRON INC DATE OF NAME CHANGE: 19710510 10-K 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 Form 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 28, 1996 Commission File Number 1-5480 Textron Inc. (Exact name of registrant as specified in charter) Delaware 05-0315468 state or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 40 Westminster Street, Providence, R.I. 02903 (401) 421-2800 (Address and telephone number of principal executive offices) ______________ Securities registered pursuant to Section 12(b) of the Act: Name of Each Exchange on Title of Class Which Registered Common Stock - par value $.125; (83,027,315 New York Stock Exchange shares outstanding at February 28, 1997) Pacific Stock Exchange Preferred Stock Purchase Rights Chicago Stock Exchange $2.08 Cumulative Convertible Preferred New York Stock Exchange Stock, Series A - no par value $1.40 Convertible Preferred Dividend Stock, New York Stock Exchange Series B (preferred only as to dividends) - no par value 8.75% Debentures due July 1, 2022 New York Stock Exchange 7.92% Trust Preferred Securities of New York Stock Exchange Subsidiary Trust (and Textron Guaranty with respect thereto) Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes x . No . Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [x] The aggregate market value of voting stock held by non-affiliates of the registrant is $8,252,124,965 as of February 28, 1997. Portions of Textron's Annual Report to Shareholders for the fiscal year ended December 28, 1996 are incorporated by reference in Parts I and II of this Report. Portions of Textron's Proxy Statement for its Annual Meeting of Shareholders to be held on April 23, 1997 are incorporated by reference in Part III of this Report. PART I ITEM 1. BUSINESS OF TEXTRON* Textron is a global multi-industry company with operations in five business segments - Aircraft, Automotive, Industrial, Systems and Components, and Finance. A listing of the Divisions within each business segment, including a description of the product lines of each Division, is incorporated herein by reference to pages 54 and 55 of Textron's 1996 Annual Report to Shareholders. Financial information by business segment and geographic area is incorporated herein by reference to pages 23 and 51 of Textron's 1996 Annual Report to Shareholders. Additional information regarding each business segment and Textron in general is set forth below. Business Segments Aircraft. The Aircraft segment consists of Bell Helicopter Textron, The Cessna Aircraft Company and Textron Lycoming. Based on unit sales, Bell is the largest supplier of helicopters, spare parts and helicopter-related services in the world. Since it was founded in 1946, Bell has delivered over 33,000 aircraft to military and civilian customers in over 120 countries. Bell has three military and six civilian helicopter models in current production. Its aircraft are turbine powered, and range in size from the five-place Bell Model 206 series to the Bell Model 412EP aircraft, which carries up to fifteen people. Bell's military business includes both U.S. Government and non- U.S. Government customers. There are more helicopters manufactured by Bell in field service in the inventory of the U.S. Government than manufactured by any other helicopter company. Currently, Bell is supplying advanced military helicopters, spare parts and product support to the U.S. and Canadian Governments and to the governments of several countries in the Pacific Rim, Middle East and Europe. Military sales to non-U.S. customers are made only with the concurrence of the U.S. Government. Bell is also a leading supplier of commercially-certified helicopters to charter, offshore, utility, corporate, police, fire, rescue and emergency medical helicopter operators. Bell's non-U.S. Government business (including non-U.S. military customers) typically represents 40% to 60% of its annual sales. In 1996, such sales accounted for approximately 60% of Bell's business. ____________________ * Reference herein to "Textron" includes Textron Inc., its divisions and subsidiaries. A Textron "Division" is an operating unit which may be comprised of an unincorporated division of Textron, a subsidiary of Textron, or an unincorporated division of a subsidiary. 2 Bell is teamed with the Helicopter Division of the Boeing Company ("Boeing Helicopters") in the development of the V-22 Osprey tiltrotor aircraft for the U.S. Department of Defense. Tiltrotor aircraft are designed to utilize the benefits of both helicopters and fixed-wing aircraft. Production of V-22 aircraft was started in 1996 upon award of a contract for the first four aircraft. In 1996, Bell and Boeing Helicopters entered into a joint venture to develop a commercial tiltrotor aircraft designated the Model 609. First delivery of this nine-place aircraft is scheduled for 2001. In 1996, Bell was also awarded a development contract to upgrade the U.S. Marines' fleet of AH-1W and UH-1N helicopters. Bell introduced two new civilian helicopter models in 1996: the single-engine Bell Model 407 (a light helicopter), and the twin- engine intermediate size Bell Model 430. Other commercial products and product improvements continue to be developed. In the light and medium helicopter market, Bell has two major U.S. competitors and one major European competitor. Certain of its competitors are substantially larger and more diversified aircraft manufacturers. Bell markets its products worldwide through its own sales force as well as through independent representatives. Price, financing terms, aircraft performance, reliability and product support are significant factors in the sale of helicopters. Bell has developed the world's largest distribution system to sell and support helicopters, serving customers in over 120 countries. Revenues of Bell accounted for approximately 16%, 18% and 16% of Textron's total revenues in 1996, 1995 and 1994, respectively. The Cessna Aircraft Company is, based on unit sales, the world's largest manufacturer of light and mid-size business jets and single-engine utility turboprop aircraft. Cessna designs, manufactures and sells general aviation aircraft, aircraft propellers, and related accessories worldwide. Based on units shipped by manufacturers, Cessna's 1996 share of all manufacturers' worldwide sales of light and mid-size jets was approximately 54%. Cessna currently has two major product lines, Citation business jets and single-engine turboprop Caravans. In addition, Cessna has reentered the business of manufacturing single-engine piston aircraft, and began deliveries in January 1997. Cessna currently produces a family of Citation business jets ranging from the CitationJet to the Citation X. The Citation X is the world's fastest business jet with a maximum operating speed of Mach .92. Certification was 3 completed and customer deliveries of the Citation X began in 1996. In addition, deliveries of the new Citation Bravo and Citation Excel business jets will commence in 1997 and 1998, respectively. The Cessna Caravan is the world's best selling utility turboprop. The delivery of the 850th Caravan will occur in early 1997. Caravan deliveries have averaged over 75 aircraft per year since the Caravan's first delivery in 1985. Caravans are used in the United States primarily to carry overnight express package shipments. International uses of Caravans include commuter airlines, relief flights, tourism and freight. Cessna markets its products worldwide primarily through its own sales force as well as through a network of authorized independent sales representatives. Cessna has four major competitors for its business jet products, two U.S. and two foreign. Cessna's aircraft compete with other aircraft that vary in size, speed, range, capacity, handling characteristics, and price. Reliability and product support are significant factors in the sale of these aircraft. Cessna provides its business jet operators with factory-direct customer support offering 24 hour a day service and maintenance. More than 40% of the worldwide Citation fleet of more than 2,400 aircraft receive service through Cessna-owned service centers. Cessna Caravan and piston customers receive product support through independently owned service stations and 24 hour spare parts support through Cessna. Revenues of Cessna accounted for approximately 12%, 10% and 10% of Textron's total revenues in 1996, 1995 and 1994, respectively. Textron Lycoming, formerly reported as part of the Systems and Components segment, is the world leader in the design, manufacture and overhaul of reciprocating piston aircraft engines serving the worldwide general aviation market. Textron Lycoming sells new products directly to general aviation airframe manufacturers, including Piper Aircraft, Robinson Helicopter, and SOCATA, a division of Aerospatiale, and is the exclusive supplier of engines for Cessna's new product line of single engine aircraft. Aftermarket sales are made to the more than 180,000 existing owners of Textron Lycoming products through a worldwide network of independently owned distributors. Textron Lycoming's McCauley Propeller Systems unit is a leader in the general aviation industry. McCauley provides new propellers directly to original equipment manufacturers ("OEMs") and sells parts for service and repairs worldwide through independently-owned distributors. The new Cessna single-engine piston aircraft will use McCauley propellers exclusively. Automotive. The Automotive segment, organized under an umbrella organization called Textron Automotive Company ("TAC"), consists of the Textron Automotive Trim Operations, CWC Castings, Kautex, McCord Winn, Micromatic and Randall. These operations sell primarily to automotive OEMs and their suppliers operating in North America and Europe and, to a lesser extent, in Latin America and Asia. TAC is headquartered in Troy, Michigan and 4 has over 45 facilities located in the United States, Belgium, Brazil, Canada, China, the Czech Republic, Germany, Mexico, the Netherlands,Portugal, Spain, and the United Kingdom. Through its Textron Automotive Trim Operations, TAC is a leading worldwide supplier of automotive interior and exterior plastic components. Interior trim products include instrument panels, door and sidewall trim, airbag doors, consoles, trim components, armrests and headliner systems. During 1996, TAC assumed 100% ownership of Textron Automotive B.V., its former joint venture in the Netherlands for the manufacture of instrument panels and, beginning in 1998, door trim. In addition, TAC's trim facilities manufacture exterior decorative components including painted bumpers and fascia, body side moldings and claddings, fender liners, decorative wheel trim, signal lighting and structural composite bumper beams. Revenues of the Textron Automotive Trim Operations accounted for 15%, 15% and 16% of Textron's total revenues in 1996, 1995 and 1994, respectively. On January 7, 1997, Textron completed the acquisition of Kautex Werke Reinold Hagen AG of Bonn, Germany and the assets of its North American affiliate, Kautex North America, Inc. (collectively "Kautex"). Kautex is a leading manufacturer of blow- molded plastic fuel tank systems and other blow-molded plastic technical parts for OEMs throughout Europe, North America and Brazil. Kautex also manufactures a broad selection of blow-molded plastic containers for a variety of industrial and consumer applications. Kautex's sales in 1996 were approximately $500 million from fifteen plants located close to automotive customers in Germany, Belgium, Brazil, Canada, China, the Czech Republic, Portugal, Spain, the United Kingdom and the United States. TAC's other operations manufacture and sell a broad variety of functional components. CWC Castings designs and manufactures engine camshafts and vibration damper components for OEMs and the aftermarket. McCord Winn manufactures seating comfort systems, windshield washer systems and armatures for precision DC motors. In 1996, McCord Winn expanded its washer systems business with the acquisition of Valeo Wiper Systems Limited in Wales (U.K.). Micromatic manufactures machine tools used in the production of automobile engines for precision bore and surface finishing, and spline and gear production. Randall produces fuel filler systems. More than 70 vehicle models currently carry parts made by TAC, including Chrysler's Jeep Grand Cherokee, Voyager and Caravan minivans, Ford's Lincoln Town Car and Windstar and Aerostar mini- vans, and GM's Cadillac Seville, Corvette and the Venture, Silhouette and Sintra mini-vans. TAC's manufacturing operations are supported by a staff of research and design specialists at TAC's Automotive Technology Center. These specialists have developed new processes and products, many of which are patented, that allow TAC to offer its customers technology driven products and processes. In the plastics and coatings area, TAC is a recognized leader in alternative skin materials (including non-PVC materials), spray urethane and cloth 5 integration, energy management foam (including impact and knee bolsters), the development of modular integrated assemblies and vertical body panels, and High Crystalline Polypropylene material for complete mold-in-color interior components. CWC Castings is a leader in the design and manufacture of automotive castings. It has developed a selective austempering heat treatment process for ductile camshafts as well as a vacuum casting system for hollow steel camshafts. McCord Winn is working with OEMs worldwide to develop advanced technologies in areas such as "intelligent" comfort seating systems, brushless motors and carbon commutation for flexible fuel applications. Micromatic machine tools are used for cylindrical form generation and surface finishing. In the automotive business, there is often a long lead time from the time a supplier is selected to supply components on a new car model to the time the supplier can begin shipping production parts. During this period, the supplier incurs engineering and development costs. Until recently, the OEMs reimbursed the supplier for these costs as incurred. Within the last few years, the OEMs have begun to require that these costs be recovered in the piece prices charged by the suppliers as the goods are shipped. In addition, automotive OEMs often require "just-in-time" delivery, so the manufacturer has to both plan shipments in advance and hold inventory. Automotive OEMs and their suppliers are the principal customers of TAC. The only customers, the loss of which would have a material adverse effect on TAC, are the U.S. and Europe-based automotive OEMs and their first-tier suppliers. However, because of the broad range of products sold to such customers, it is unlikely that such customers would cease all purchases from TAC. Each of TAC's businesses faces competition from a number of other manufacturers based primarily on price, quality, reputation and delivery. Although TAC is one of the largest manufacturers offering its range of products and services, it faces strong competition in all of its market segments. Because of the diversity of products and services offered, no single company is a competitor in all market segments. In certain markets, TAC also competes for business with the OEMs' own operations. Industrial. The Industrial segment consists of three major product groups: Fastening Systems, Golf and Turf-Care Products, and Engineered Products and Components. The Fastening Systems Group consists of the Avdel, Camcar, Elco, Textron Aerospace Fasteners (formerly, "Cherry"), Textron Industries (France) and Textron Fastening Systems-Germany Divisions. The Fastening Systems Group manufactures and sells fasteners, fastening systems and installation tools to the aerospace, appliance, automotive, construction, do-it-yourself, electronics, general industrial and transportation markets. Sales are made to a wide range of customers, including OEMs, distributors and consumers. Fasteners manufactured by the Group include rivets, threaded and non-threaded fasteners, cold-formed components, metal stampings, plastic components, and assemblies 6 which incorporate such products. Textron acquired Valois Industries (now renamed Textron Industries, S.A.S.), a France-based manufacturer of engineered fastening systems, in April 1996. The German operations of Valois and Boesner (acquired in 1995) were combined to form Textron Fastening Systems-Germany. In 1996, Textron also acquired Xact Products, a Michigan-based manufacturer of metal stampings, which is now part of the Elco operation. In addition, in 1996 certain of Randall's metal stampings operations (previously included in the Automotive segment) were combined with Elco. Although the Fastening Systems Group is one of the largest manufacturers of its products and services, there are hundreds of competitors of the Fastening Systems Group ranging from small proprietorships to large multinational companies. As is the case with all Divisions of the Industrial segment, competition is based primarily on price, quality, reputation and delivery. In addition, larger customers of fastening systems tend to procure products and services from the larger suppliers, except for "niche" products which may be sourced from smaller companies. Only the loss of the major OEM automotive customers and their first-tier suppliers would have a material adverse effect on the Fastening Systems Group. However, because of the broad range of products sold to such customers, it is unlikely that such customers will cease all purchases from the Fastening Systems Group. The Golf and Turf-Care Products Group consists of the E-Z-GO Division, which manufactures and sells electric and gasoline powered golf cars and multipurpose utility vehicles, and the Jacobsen Division, which manufactures and sells professional mowing and turf maintenance equipment. In 1996, Jacobsen acquired The Bunton Company, a leading manufacturer of commercial lawn mowers. The customers of the Golf and Turf-Care Products Group consist primarily of golf courses, resort communities and commercial and industrial users such as airports and factories. Sales are made directly through factory branches, through a network of distributors and to end-users. Many sales of golf and turf-care equipment (both at the distributor and end-user level) are financed through Textron Financial Corporation, both for marketing purposes and as an additional source of revenue to Textron. The Engineered Products and Components Group consists of Divisions manufacturing a wide range of products, including double enveloping worm gear speed reducers, gear motors and gear sets (Cone Drive); powered equipment, electrical test instruments and hand tools (Greenlee); and watch attachments and fashion jewelry (Speidel). In 1996, Greenlee purchased Gustae Klauke GmbH & Co. KG (Remschied), a Germany-based manufacturer of electrical connectors, and its related companies. Products of these Divisions are sold to a wide variety of customers, including OEMs, distributors and end-users. Also included in the Engineered Products and Components Group is HR Textron ("HRT"), formerly reported as part of the Systems and Components segment. HRT designs and manufactures control systems and components for aircraft, armored vehicles, and commercial applications. Its aerospace and defense products are marketed directly to the U.S. Government and OEMs and, in the aftermarket, both directly and through 7 service centers. In January 1997, Textron acquired Zurich, Switzerland-based Maag Pump Systems AG and Milan, Italy-based Maag Italia S.p.A., manufacturers of gears, gear pumps and gear systems. Systems and Components. The Systems and Components segment consists of four Divisions which serve both commercial and military customers, primarily in aerospace markets, with an extensive offering of systems, subsystems, components, materials and services. Fuel Systems Textron ("FST") designs, manufactures and overhauls gas turbine engine injection and metering devices, fuel distribution valves, and afterburner fuel injection systems for commercial and military aircraft, and industrial, marine, and vehicular markets. OEM sales are made directly to engine manufacturers with aftermarket overhaul and repair services sold directly to domestic end users and through a distributor for international customers. FST invests in the design and development of innovative, proprietary products, with on-site engineering support at customer facilities and an advanced product development facility to extend the customers' own design activities. Textron Marine & Land Systems ("TM&LS") is a world leader in the design and construction of advanced technology air cushion vehicles, surface effect ships, high performance search and rescue vessels, light armored combat vehicles, and suspension systems. TM&LS has products operating in over 35 countries. These products are marketed directly in the United States and through sales representatives and distributors internationally. In 1996, deliveries commenced for the Engineering/Manufacturing/Development phase of the U.S. Army's Armored Security Vehicle as a prelude to full production. In addition, a new contract for the development of a Service Life Extension Program for the Landing Craft Air Cushion (LCAC) was received, and the U.S. Coast Guard exercised an option for an additional 20 Motor Lifeboats under an existing production contract. Textron Systems is a leading supplier of "smart" munitions, airborne surveillance systems, and automatic aircraft landing systems to the U.S. Department of Defense. Textron Systems also supplies a number of key components and specialty materials for critical defense needs, including infrared detectors, high strength composites, reentry systems and materials, and high power lasers. Once exclusively a supplier to the Department of Defense, Textron Systems now applies its technologies to non-defense markets. Current commercial products include advanced composites for automotive, industrial, sporting goods and aircraft manufacturers; laser ultrasonic systems for industrial control; infrared sensors for medical and industrial applications; fire protection and insulating materials for oil and chemical companies worldwide; and unique decorative materials for automotive and other markets. While Textron Systems sells most of its products directly to its customers, it also sells some products through sales representatives and distributors. Turbine Engine Components Textron ("TECT") is one of the world's largest independent suppliers of internal components for gas turbine engines for aircraft and industrial applications. Its products include fan and compressor 8 blades, vanes, shafts, disks, rotors, blisks and other rotating components; the forgings from which those products are machined; and stationary components of turbine engines, such as frames, diffusers, and air collectors. TECT manufactures its products to the specifications of its customers, and most of its sales are made directly to its customers. The principal competitive factors affecting sales of the products of the Systems and Components segment are price, quality, customer service, performance, reliability, reputation and existing product base. In September 1996, Textron Aerostructures, which designs and manufactures structural assemblies for aircraft and space vehicles, was sold to The Carlyle Group. Finance. The Finance segment consists of Avco Financial Services ("AFS") and Textron Financial Corporation ("TFC"). AFS is primarily engaged in consumer finance and insurance activities. AFS's finance operations mainly involve loans made by the Avco Financial Services Group, consisting of consumer loans which are unsecured or secured by personal property, real estate loans secured by real property, and retail installment contracts, principally covering personal property. AFS's insurance business consists primarily of the sale of credit life, credit disability and casualty insurance, offered through the Avco Insurance Services Group, a significant part of which is directly related to AFS's finance activities. AFS's consumer finance and insurance activities are conducted through its more than 1,200 branch offices located in the United States, Australia, Canada, Hong Kong, New Zealand, Spain and the United Kingdom. In 1996, AFS acquired Tuckahoe Leasing, Inc., a Canadian provider of equipment financing, and Insurex Canada Inc., a provider of insurance premium financing. AFS's loan business is regulated by laws that, among other things, can limit maximum charges for loans and the maximum amount and term thereof. Such laws also require disclosure to customers of the interest rate and other basic terms of most credit transactions and give customers a limited right to cancel certain loans and retail installment contracts without penalty. The insurance business is subject to licensing and regulation by state authorities. The consumer finance business is highly competitive, with price and service being the principal competitive factors. AFS's competitors include not only other companies operating under consumer loan laws, but also other types of lending institutions not so regulated and usually not limited in the size of their loans, such as companies which finance the sale of their own merchandise or the merchandise of others, industrial banks, the personal loan departments of commercial banks and credit unions. AFS's strongest competition is from commercial banks and credit unions. The interest rates charged by these lenders are usually lower than the rates charged by AFS. AFS's insurance businesses, to the extent not related to AFS's finance activities, compete with many other insurance companies offering similar 9 products. Revenues of AFS accounted for approximately 19%, 20% and 17% of Textron's total revenues in 1996, 1995 and 1994, respectively. TFC is a diversified commercial finance company specializing in aircraft, golf and equipment financing and revolving credit arrangements. TFC provides commercial financing for a wide range of customers, including those who purchase or lease Textron products and certain suppliers to Textron Divisions. TFC presently offers its services primarily in the United States and, to a lesser extent, in Europe and Canada, through its 11 business units. Each TFC business unit has a discrete market focus and specific profit objectives and is staffed to provide responsive services to its market. TFC's activities are subject to a variety of federal and state regulations. The businesses in which TFC operates are highly competitive. TFC is subject to competition from various types of financing institutions, including banks, leasing companies, insurance companies, independent finance companies associated with manufacturers and finance companies that are subsidiaries of banking institutions. Competition within the commercial finance industry is primarily focused on price and service. Finance Receivables The following table presents the Finance segment's outstanding finance receivables by country: December 31, 1996 1995 (In millions) United States $7,096 $6,750 Canada 1,079 1,013 Australia 1,067 1,026 United Kingdom 692 632 Other countries 488 473 $10,422 $9,894 At December 31, 1996, finance receivables in the United States represented 68% of Textron's total finance receivables outstanding. At such date, no receivables outstanding in any one state other than California exceeded 8% of the United States portfolio. In California, outstanding receivables represented 15% of the United States portfolio and 10% of the consolidated portfolio. 10 The following table presents accruing loans on which one or more installments were more than 60 days past due on a contractual basis (expressed as a percentage of the related gross receivables outstanding): Years ended Consumer Commercial Total December, 31 loans loans loans 1996 3.25% 0.21% 2.32% 1995 2.89% 0.24% 2.10% The following table shows gross and net write-offs, the percentages which those amounts bear to average finance receivables, and the amount of the provision for losses charged to income: Gross write-offs Recoveries Net write-offs Percentage from Precentage Provision of average receivables of average for losses finance previously finance amount receivables written off amount receivables Years ended December 31, (In millions) 1996 Consumer $230 3.3% $36 $194 2.8% $203 Commercial 30 1.0% 3 27 0.9% 27 $260 2.6% $39 $221 2.2% $230 1995 Consumer $177 2.6% $33 $144 2.1% $149 Commercial 25 0.9% 4 21 0.7% 20 $202 2.1% $37 $165 1.7% $169 1994 Consumer $142 2.5% $28 $114 2.0% $136 Commercial 27 1.0% 3 24 0.4% 26 $169 2.0% $31 $138 1.6% $162
Backlog Information regarding Textron's backlog of government and commercial orders at the end of the past two fiscal years is contained on page 30 of Textron's 1996 Annual Report to Shareholders, which page is incorporated herein by reference. 11 Approximately 37% of Textron's total backlog at December 28, 1996, represents orders which are not expected to be filled within the 1997 fiscal year. At December 28, 1996, approximately 95% of the total government backlog of $2.2 billion was funded. Government Contracts In 1996, 24% and 50% of the revenues of the Aircraft and the Systems and Components segments, respectively, constituting in the aggregate 10% of Textron's consolidated revenues, were generated by or resulted from contracts with the U.S. Government. U.S. Government business is subject to competition, changes in procurement policies and regulations, the continuing availability of Congressional appropriations, world events, and the size and timing of programs in which Textron may participate. A substantial portion of Textron's government contracts are fixed-price or fixed-price incentive contracts. Contracts that contain incentive pricing terms provide for upward or downward adjustments in the prices paid by the U.S. Government upon completion of the contract or any agreed portion thereof, based on cost or other performance factors. U.S. Government contracts generally may be terminated in whole or in part at the convenience of the U.S. Government or if the contractor is in default. Upon termination of a contract for the convenience of the U.S. Government, the contractor is normally entitled to reimbursement for allowable costs incurred (up to a maximum equal to the con tract price) and an allowance for profit or adjustment for loss if the contractor would have incurred a loss had the entire contract been completed. If, however, a contract is terminated for default: (i) the contractor is paid such amount as may be agreed upon for manufacturing materials and partially completed products accepted by the U.S. Government; (ii) the U.S. Government is not liable for the contractor's costs with respect to unaccepted items and is entitled to repayment of advance payments and progress payments, if any, related to the terminated portions of the contract; and (iii) the contractor may be liable for excess costs incurred by the U.S. Government in procuring undelivered items from another source. Research and Development Information regarding Textron's research and development expenditures is contained on page 47 of Textron's 1996 Annual Report to Shareholders, which page is incorporated herein by reference. Patents and Trademarks Textron owns, or is licensed under, a number of patents and trademarks throughout the world relating to products and methods of manufacturing. Patents and trademarks have been of value in the past and are expected to be of value in the future; however, the loss of any single patent or group of patents would not, in the opinion of Textron, materially affect the conduct of its business. 12 Environmental Considerations Textron's operations are subject to numerous laws and regulations designed to protect the environment. Compliance with such laws and expenditures for environmental control facilities have not had, and are not expected to have, a material effect on capital expenditures, earnings or the competitive position of Textron. Additional information regarding environmental matters is contained on pages 30 and 50 of Textron's 1996 Annual Report to Shareholders, which pages are incorporated herein by reference. Employees At December 28, 1996, Textron had approximately 57,000 employees. Recent Development On February 26, 1997, Textron's Board of Directors declared a two-for-one split of Textron common stock in the form of a stock dividend, subject to shareholder approval of an increase in Textron's authorized number of common shares from 250 million to 500 million shares. If the increase is approved at Textron's Annual Meeting on April 23, 1997, the new shares will be distributed on June 1, 1997, to shareholders of record on the close of business on May 9, 1997. ITEM 2. PROPERTIES At December 28, 1996, Textron operated a total of 142 plants located throughout the United States and 30 plants outside the United States. Of the total of 172 plants, Textron owned 113 and the balance were leased. In the aggregate, the total manufacturing space was approximately 30 million square feet. In addition, Textron owns or leases offices, warehouse and other space at various locations throughout the United States and outside the United States. Textron also owns or leases such machinery and equipment as are necessary in the operation of its Divisions. Textron considers the productive capacity of the plants operated by each of its business segments to be adequate. In general, the plants and machinery are in good condition, are considered to be adequate for the uses to which they are being put, and are substantially in regular use. ITEM 3. LEGAL PROCEEDINGS Lawsuits and other proceedings are pending or threatened against Textron and its subsidiaries. Some allege violations of federal government procurement regulations, involve environmental matters, or are or purport to be class actions. Some seek compensatory, treble or punitive damages in substantial amounts; fines, penalties or restitution; or remediation of contamination. Under federal government procurement regulations, some could result in suspension or debarment of Textron or its subsidiaries from U.S. Government contracting for a period of time. On the basis of information presently available, Textron believes that any liability for these suits and proceedings would not have a material effect on Textron's net income or financial condition. 13 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of Textron's security holders during the last quarter of the period covered by this Report. EXECUTIVE OFFICERS OF THE REGISTRANT The following table sets forth certain information concerning the executive officers of Textron as of February 28, 1997. Unless otherwise indicated, the employer is Textron. Name Age Position James F. Hardymon 62 Chairman since 1993, and Chief Executive Officer since 1992; formerly President, 1989 to 1993; and Chief Operating Officer, 1989 to 1991; Director since 1989. Lewis B. Campbell 50 President and Chief Operating Officer since 1994; formerly Executive Vice President and Chief Operating Officer, 1992 to 1993; Vice President of General Motors (1988 to 1992) and General Manager of its GMC Truck Division (1991 to 1992); Director since 1994. Mary L. Howell 44 Executive Vice President, Government and International since 1995; formerly Senior Vice President Government and International Relations, 1993 to 1995; Vice President Government Affairs, 1985 to 1993. Wayne W. Juchatz 50 Executive Vice President and General Counsel since 1995; formerly Executive Vice President and General Counsel of R.J. Reynolds Tobacco Company, 1994 to 1995; Senior Vice President, General Counsel and Secretary of R.J. Reynolds Tobacco Company, 1987 to 1994. Stephen L. Key 53 Executive Vice President and Chief Financial Officer since 1995; formerly Executive Vice President and Chief Financial Officer of ConAgra, Inc., 1992 to 1995; Managing Partner of the New York office of Ernst & Young (formerly Arthur Young), 1988 to 1992. William F. Wayland 61 Executive Vice President Administration and Chief Human Resources Officer since 1993; formerly 14 Executive Vice President Human Resources, 1989 to 1993. Herbert L. Henkel 48 President, Textron Industrial Products since 1995; formerly Group Vice President, Textron Inc., 1993 to 1995; President of the Greenlee Textron Division, 1987 to 1993. Richard A. Watson 52 Senior Vice President and Treasurer since October 1995; formerly Senior Vice President, Financial Services, August 1995 to October 1995; Group Vice President, 1990 to August 1995. Frederick K. Butler 45 Vice President and Secretary since January 1997; formerly Group General Counsel Financial Services, 1995 to 1996; Assistant General Counsel, 1994 to 1995; Vice President and General Counsel of Paul Revere Investment Management Company, 1993 to 1994; Senior Vice President/Law of Textron Investment Management Company, 1991 to 1993. Peter B. S. Ellis 43 Vice President Strategic Planning since 1995; formerly Managing Director, Telecommunications Practice of Arthur D. Little, Inc., 1991 to 1995. Douglas A. Fahlbeck 51 Vice President Mergers and Acquisitions since 1995; formerly Executive Vice President and Chief Financial Officer of Textron Financial Corporation, 1994 to 1995; Senior Vice President and Chief Financial Officer of Textron Financial Corporation, 1985 to 1994. Arnold M. Friedman 54 Vice President and Deputy General Counsel since 1984. William B. Gauld 43 Vice President Corporate Information Management and Chief Information Officer since 1995; formerly Staff Vice President, Corporate Information Management and Chief Information Officer, 1994 to 1995; Chief Information Officer of General Electric (Electrical Distribution and Control business) 1992 to 1994; Manager, Manufacturing Systems of General Electric (Appliances), 1989 to 1992. Carol J. Grant 43 Vice President Human Resources since January 1997; formerly Vice President and Chief Executive Officer of NYNEX (Rhode Island Strategic Business Unit), 1993 to January 1997; Vice President Public Affairs and Communications of NYNEX - Rhode Island, 1991 to 1993. Gregory E. Hudson 50 Vice President Taxes since 1987. 15 William P. Janovitz 54 Vice President Financial Management since January 1997; formerly Vice President Financial Reporting, 1995 to January 1997; Vice President and Controller, 1983 to 1995. Mary F. Lovejoy 41 Vice President Communications and Investor Relations since September 1996; formerly Vice President Investor Relations, 1995 to September 1996; Director of Investor Relations, 1993 to 1995; Vice President and Senior Corporate Banker of The First National Bank of Chicago, 1991 to 1993. John W. Mayers, Jr. 43 Vice President Risk Management and Insurance since January 1997; formerly Director Risk Management and Insurance, 1993 to January 1997; Treasurer of Textron Financial Corporation, 1990 to 1993. Frank W. McNally 57 Vice President Employee Relations and Benefits since 1995; formerly Staff Vice President, Employee Relations and Benefits, 1993 to 1995; Staff Vice President Employee Relations, 1992 to 1993; Director, Employee Relations, 1991 to 1992. Gero K. H. Meyersiek 49 Vice President International since February 1996; formerly Vice President of Textron International Inc., 1995 to February 1996; Vice President, International Business Development of GE Financial Services, 1991 to 1994. Freda M. Peters 55 Vice President Executive Development and Human Resource Policy and Compliance since January 1997; formerly Director Management/Organization Development, July 1996 to January 1997; Vice President, Human Resources of Branson Ultrasonics Corporation (subsidiary of Emerson Electric Company), 1985 to July 1996. Daniel L. Shaffer 60 Vice President Audit and Business Ethics since 1994; formerly President of Textron's Aircraft Engine Components Division, 1992 to 1994; Vice President Finance of the Textron Systems Division, 1984 to 1992. Richard F. Smith 57 Vice President Government Affairs since August 1995; Staff Vice President Government Affairs, March 1995 to August 1995; Director Government Affairs, 1985 to March 1995. Richard L. Yates 46 Vice President and Controller since 1995; formerly Executive Vice President, Chief Financial Officer and Treasurer of Paul Revere, 1994 to 1995; Senior Vice President, Chief Financial Officer and Treasurer of Paul Revere, 1991 to 1994. 16 John F. Zugschwert 63 Vice President Government Marketing since 1995; Staff Vice President, Washington Operations, 1993 to 1995; Vice President, Washington Operations of Bell Helicopter Textron, 1991 to 1993. No family relationship exists between any of the individuals named above. PART II ITEM 5. MARKETS FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Textron's Common Stock is traded on the New York, Chicago and Pacific Stock Exchanges. Additional information regarding "Markets for the Registrant's Common Equity and Related Stockholder Matters" is contained on pages 52 and 53 and on the inside back cover of Textron's 1996 Annual Report to Shareholders, which pages are incorporated herein by reference. ITEM 6. SELECTED FINANCIAL DATA Information regarding "Selected Financial Data" is contained in the Selected Financial Information on page 53 of Textron's 1996 Annual Report to Shareholders, which page is incorporated herein by reference. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Management's Discussion and Analysis of Financial Condition and Results of Operations is contained on pages 24 through 30 of Textron's 1996 Annual Report to Shareholders, which pages are incorporated herein by reference. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The consolidated financial statements and the supplementary information listed in the accompanying index to financial statements and financial statement schedules are filed as part of this Report. 17 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Information regarding Textron's directors is contained on pages 2 through 7 and page 10 of Textron's Proxy Statement for the Annual Meeting of Shareholders to be held on April 23, 1997, which pages are incorporated herein by reference. Information regarding Textron's executive officers is included on pages 14 through 17 of Part I of this Report. ITEM 11. EXECUTIVE COMPENSATION Information regarding "Executive Compensation" is contained on pages 10 through 20 and pages 23 through 26 of Textron's Proxy Statement for the Annual Meeting of Shareholders to be held on April 23, 1997, which pages are incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Information regarding "Security Ownership of Certain Beneficial Holders" and "Security Ownership of Management" is contained on pages 9 and 10 of Textron's Proxy Statement for the Annual Meeting of Shareholders to be held on April 23, 1997, which pages are incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Information regarding certain relationships and related transactions is contained on pages 19 and 20 of Textron's Proxy Statement for the Annual Meeting of Shareholders to be held on April 23, 1997, which pages are incorporated herein by reference. 18 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) Financial Statements and Schedules The consolidated financial statements, supplementary information and financial statement schedules listed in the accompanying index to financial statements and financial statement schedules are filed as part of this Report. Exhibits 3.1A Restated Certificate of Incorporation of Textron as filed March 24, 1988. Incorporated by reference to Exhibit 3.1 to Textron's Annual Report on Form 10-K for the fiscal year ended January 2, 1988. 3.1B Amendment to Certificate of Designations, Preferences and Rights of Series C Junior Participating Preferred Stock as filed March 20, 1996. 3.2 By-Laws of Textron, restated December 10, 1992. Incorporated by reference to Exhibit 3.2 to Textron's Annual Report on Form 10-K for the fiscal year ended January 2, 1993. NOTE: Exhibits 10.1 through 10.20 below are management contracts or compensatory plans, contracts or agreements. 10.1 Annual Incentive Compensation Plan For Textron Employees. Incorporated by reference to Exhibit 10.1 to Textron's Annual Report on Form 10-K for the fiscal year ended December 30, 1995. 10.2 Deferred Income Plan For Textron Key Executives. Incorporated by reference to Exhibit 10.2 to Textron's Annual Report on Form 10-K for the fiscal year ended December 30, 1995. 10.3 Severance Plan For Textron Key Executives. Incorporated by reference to Exhibit 10.3 to Textron's Annual Report on Form 10-K for the fiscal year ended December 30, 1995. 10.4 Special Benefits for Textron Key Executives. Incorporated by reference to Exhibit 10.4 to Textron's Annual Report on Form 10-K for the fiscal year ended December 30, 1995. 10.5 Supplemental Benefits Plan For Textron Key Executives with Market Square Profit Sharing Plan Schedule. Incorporated by reference to Exhibit 10.5 to Textron's Annual Report on Form 10-K for the fiscal year ended December 30, 1995. 10.6 Supplemental Retirement Plan For Textron Key Executives. Incorporated by reference to Exhibit 10.6 to Textron's Annual Report on Form 10-K for the fiscal year ended December 30, 1995. 19 10.7 Survivor Benefit Plan For Textron Key Executives. Incorporated by reference to Exhibit 10.7 to Textron's Annual Report on Form 10-K for the fiscal year ended December 30, 1995. 10.8A Textron 1982 Long-Term Incentive Plan ("1982 Plan"). Incorporated by reference to Exhibit 10.5(a) to Textron's Annual Report on Form 10-K for the fiscal year ended December 31, 1988. 10.8B First Amendment to 1982 Plan. Incorporated by reference to Exhibit 10.5(b) to Textron's Annual Report on Form 10-K for the fiscal year ended January 3, 1987. 10.8C Second Amendment to 1982 Plan. Incorporated by reference to Exhibit 10.5(c) to Textron's Annual Report on Form 10-K for the fiscal year ended January 2, 1988. 10.9A Textron 1987 Long-Term Incentive Plan ("1987 Plan"). Incorporated by reference to Exhibit 10.6 to Textron's Annual Report on Form 10-K for the fiscal year ended December 30, 1989. 10.9B First Amendment to 1987 Plan. Incorporated by reference to Exhibit 10.6(b) to Textron's Annual Report on Form 10-K for the fiscal year ended December 28, 1991. 10.10A Textron 1990 Long-Term Incentive Plan ("1990 Plan"). Incorporated by reference to Exhibit 10.7 to Textron's Annual Report on Form 10-K for the fiscal year ended December 30, 1989. 10.10B First Amendment to 1990 Plan. Incorporated by reference to Exhibit 10.7(c) to Textron's Annual Report on Form 10-K for the fiscal year ended December 28, 1991. 10.10C Second Amendment to 1990 Plan. Incorporated by reference to Exhibit 10.7(c) to Textron's Annual Report on Form 10-K for the fiscal year ended January 2, 1993. 10.11 Textron 1994 Long-Term Incentive Plan. Incorporated by reference to Exhibit 10 to Textron's Quarterly Report on Form 10-Q for the fiscal quarter ended July 2, 1994. 10.12 Form of Indemnity Agreement between Textron and its directors and executive officers. Incorporated by reference to Exhibit A to Textron's Proxy Statement for its Annual Meeting of Shareholders on April 29, 1987. 10.13A Pension Plan for Directors as amended by a First Amendment (discontinued as of September 30, 1996). Incorporated by reference to Exhibit 10.14 to Textron's Annual Report on Form 10-K for the fiscal year ended December 31, 1988. 10.13B Second Amendment to Pension Plan for Directors (discontinued as of September 30, 1996). Incorporated by reference to Exhibit 10.16(b) to Textron's Annual Report on Form 10-K for the fiscal year ended December 29, 1990. 10.14 Deferred Income Plan for Non-Employee Directors. 20 10.15A Employment Agreement between Textron and James F. Hardymon dated November 24, 1989 ("Employment Agreement"). Incorporated by reference to Exhibit 10.9 to Textron's Annual Report on Form 10-K for the fiscal year ended December 30, 1989. 10.15B Amendment dated as of December 15, 1994 to Employment Agreement. Incorporated by reference to Exhibit 10.10B to Textron's Annual Report on Form 10- K for the fiscal year ended December 31, 1994. 10.16A Employment Agreement between Textron and Lewis B. Campbell dated September 22, 1992. Incorporated by reference to Exhibit 10.9 to Textron's Annual Report on Form 10-K for the fiscal year ended January 2, 1993. 10.16B Retention Award granted to Lewis B. Campbell on December 14, 1995. Incorporated by reference to Exhibit 10.16B to Textron's Annual Report on Form 10- K for the fiscal year ended December 30, 1995. 10.17 Employment Agreement between Textron and Mary L. Howell dated May 4, 1993. Incorporated by reference to Exhibit 10.11 to Textron's Annual Report on Form 10-K for the fiscal year ended January 1, 1994. 10.18 Employment Agreement between Textron and Wayne W. Juchatz dated November 1, 1995. Incorporated by reference to Exhibit 10.18 to Textron's Annual Report on Form 10-K for the fiscal year ended December 30, 1995. 10.19 Employment Agreement between Textron and Stephen L. Key dated November 1, 1995. Incorporated by reference to Exhibit 10.19 to Textron's Annual Report on Form 10-K for the fiscal year ended December 30, 1995. 10.20 Employment Agreement between Textron and William F. Wayland dated January 1, 1989. Incorporated by reference to Exhibit 10.12 to Textron's Annual Report on Form 10-K for the fiscal year ended December 30, 1989. 10.21A Credit Agreement dated as of November 1, 1993 among Textron, the Lenders listed therein and Bankers Trust Company as Administrative Agent ("Credit Agreement"). Incorporated by reference to Exhibit 10.20A to Textron's Annual Report on Form 10- K for the fiscal year ended January 1, 1994. 10.21B First Amendment dated as of October 30, 1994 to Credit Agreement. Incorporated by reference to Exhibit 10.22B to Textron's Annual Report on Form 10- K for the fiscal year ended December 31, 1994. 10.21C Second Amendment to Credit Agreement dated as of July 1, 1995. Incorporated by reference to Exhibit (b) (3) to Schedule 14D-1 filed by Textron on September 19, 1995. 10.21D Third Amendment to Credit Agreement dated as of July 1, 1996. 21 12.1 Computation of ratio of income to combined fixed charges and preferred stock dividends of the Parent Group. 12.2 Computation of ratio of income to combined fixed charges and preferred stock dividends of Textron Inc. including all majority-owned subsidiaries. 13 A portion (pages 23 and following) of Textron's 1996 Annual Report to Shareholders. Except for pages or items specifically incorporated by reference herein, such portion of Textron's 1996 Annual Report to Shareholders is furnished for the information of the Commission and is not filed as part of this Report. 21 Certain subsidiaries of Textron. Other subsidiaries, which considered in the aggregate do not constitute a significant subsidiary, are omitted from such list. 23 Consent of Independent Auditors. 24.1 Power of attorney. 24.2 Certified copy of a resolution of the Board of Directors of Textron. 27 Financial Data Schedule. (b) Reports on Form 8-K During the quarter ended December 28, 1996, Textron filed with the Securities and Exchange Commission a report on Form 8-K dated November 8, 1996, reporting, under Item 5 (Other Events) and Item 7 (Exhibits), information regarding the sale to Provident Companies, Inc. of all the outstanding shares of The Paul Revere Corporation, 83% of which are owned by Textron. 22 SIGNATURES Pursuant to the requirement of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized on this 14th day of March, 1997. TEXTRON INC. Registrant By: /s/ Michael D. Cahn Michael D. Cahn Attorney-in-fact Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below on this 14th day of March, 1997, by the following persons on behalf of the registrant and in the capacities indicated: NAME TITLE * Chairman and Chief James F. Hardymon Executive Officer, Director (principal executive officer) * President and Chief Lewis B. Campbell Operating Officer, Director * Director H. Jesse Arnelle * Director Teresa Beck 23 * Director R. Stuart Dickson * Director Paul E. Gagne * Director John D. Macomber * Director Dana G. Mead * Director Barbara Scott Preiskel * Director Brian H. Rowe * Director Sam F. Segnar * Director Jean Head Sisco 24 * Director John W. Snow * Director Martin D. Walker * Director Thomas B. Wheeler * Executive Vice President and Stephen L. Key Chief Financial Officer (principal financial officer) * Vice President and Controller Richard L. Yates (principal accounting officer) *By:/s/ Michael D. Cahn Michael D. Cahn Attorney-in-fact 25 TEXTRON INC. INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES Item 14(a) Form Annual Report Textron Inc. 10-K to Shareholders Report of Independent Auditors 31 Consolidated Statement of Income for each of the 32 three years in the period ended December 28, 1996 Consolidated Balance Sheet at December 28, 1996 and 34 December 30, 1995 Consolidated Statement of Cash Flows for each of 36 the three years in the period ended December 28, 1996 Consolidated Statement of Changes in Shareholders' 38 Equity for each of the three years in the period ended December 28, 1996 Notes to Consolidated Financial Statements 39-51 Revenues and Income by Business Segment 23 Supplementary Information (Unaudited): Quarterly Financial Information 1996 and 1995 52 Financial Statement Schedules for each of the three years in the period ended December 28, 1996 I Condensed financial information of 27 registrant II Valuation and qualifying accounts 28 All other schedules are omitted because the conditions requiring the filing thereof do not exist or because the information required is included in the financial statements and notes thereto. 26 TEXTRON INC. SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT For each of the three years in the period ended December 28, 1996 Financial information of the Registrant is omitted because condensed financial information of the Parent Group, which includes the Registrant and all of its majority-owned subsidiaries other than its finance subsidiaries (Finance Group), is shown on pages 32 through 37 of Textron's 1996 Annual Report to Shareholders. Management believes that the disclosure of financial information on the basis of the Parent Group results in a more meaningful presentation, since this group constitutes the Registrant's basic borrowing entity and the only restrictions on net assets of Textron's subsidiaries relate to its Finance Group. The Registrant's investment in its Finance Group is shown on pages 34 and 35 of Textron's 1996 Annual Report to Shareholders under the caption "Investments in Finance Group." The Parent Group received dividends of $124 million, $117 million and $106 million from its Finance Group in 1996, 1995 and 1994, respectively. The portion of the net assets of Textron's Finance Group available for cash dividends and other payments to the Parent Group is restricted by the terms of lending agreements and insurance statutory requirements. As of December 28, 1996, approximately $473 million of their net assets of $1.6 billion was available to be transferred to the Parent Group pursuant to these restrictions. The Parent Group's credit agreements contain provisions requiring it to maintain a minimum level of shareholders' equity and a minimum interest coverage ratio. For additional information concerning the Parent Group's long-term debt, see Note 9 to the consolidated financial statements appearing on pages 43 and 44 of Textron's 1996 Annual Report to Shareholders. For information concerning Textron-obligated Mandatorily Redeemable Preferred Securities of Subsidiary Trust Holding Solely Textron Junior Subordinated Debt Securities, see Note 11 to the consolidated financial statements appearing on page 45 of Textron's 1996 Annual Report to Shareholders. 27 TEXTRON INC. SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS For each of the three years in the period ended December 28, 1996 (In millions) Allowance for credit losses Changes in the allowance for credit losses for the years indicated were as follows: 1996 1995 1994 Balance of the allowance for credit losses at the beginning of the year $270 $250 $225 Add - charged to income: Consumer 203 149 136 Commercial 27 20 26 230 169 162 Deduct - balances charged off: Gross charge offs: Consumer (230) (177) (142) Commercial (30) (25) (27) (260) (202) (169) Recoveries: Consumer 36 33 28 Commercial 3 4 3 39 37 31 Net charge offs (221) (165) (138) Other 14 16 1 Balance of the allowance for credit losses at the end of the year $293 $270 $250 Balance of the allowance for credit losses at the end of the year applicable to: Consumer $218 $195 $181 Commercial 75 75 69 $293 $270 $250 28 TEXTRON INC. Index of Exhibits Annual Report on Form 10-K for the Fiscal Year Ended December 28, 1996 Exhibits Description 3.1A Restated Certificate of Incorporation of Textron as filed March 24, 1988. Incorporated by reference to Exhibit 3.1 to Textron's Annual Report on Form 10-K for the fiscal year ended January 2, 1988. 3.1B Amendment to Certificate of Designations, Preferences and Rights of Series C Junior Participating Preferred Stock as filed March 20, 1996. 3.2 By-Laws of Textron, restated December 10, 1992. Incorporated by reference to Exhibit 3.2 to Textron's Annual Report on Form 10-K for the fiscal year ended January 2, 1993. NOTE: Exhibits 10.1 through 10.20 below are management contracts or compensatory plans, contracts or agreements. 10.1 Annual Incentive Compensation Plan For Textron Employees. Incorporated by reference to Exhibit 10.1 to Textron's Annual Report on Form 10- K for the fiscal year ended December 30, 1995. 10.2 Deferred Income Plan For Textron Key Executives. Incorporated by reference to Exhibit 10.2 to Textron's Annual Report on Form 10-K for the fiscal year ended December 30, 1995. 10.3 Severance Plan For Textron Key Executives. Incorporated by reference to Exhibit 10.3 to Textron's Annual Report on Form 10-K for the fiscal year ended December 30, 1995. 10.4 Special Benefits for Textron Key Executives. Incorporated by reference to Exhibit 10.4 to Textron's Annual Report on Form 10-K for the fiscal year ended December 30, 1995. 10.5 Supplemental Benefits Plan For Textron Key Executives with Market Square Profit Sharing Plan Schedule. Incorporated by reference to Exhibit 10.5 to Textron's Annual Report on Form 10-K for the fiscal year ended December 30, 1995. 10.6 Supplemental Retirement Plan For Textron Key Executives. Incorporated by reference to Exhibit 10.6 to Textron's Annual Report on Form 10-K for the fiscal year ended December 30, 1995. 10.7 Survivor Benefit Plan For Textron Key Executives. Incorporated by reference to Exhibit 10.7 to Textron's Annual Report on Form 10-K for the fiscal year ended December 30, 1995. 10.8A Textron 1982 Long-Term Incentive Plan ("1982 Plan"). Incorporated by reference to Exhibit 10.5(a) to Textron's Annual Report on Form 10-K for the fiscal year ended December 31, 1988. 10.8B First Amendment to 1982 Plan. Incorporated by reference to Exhibit 10.5(b) to Textron's Annual Report on Form 10-K for the fiscal year ended January 3, 1987. 10.8C Second Amendment to 1982 Plan. Incorporated by reference to Exhibit 10.5(c) to Textron's Annual Report on Form 10-K for the fiscal year ended January 2, 1988. 10.9A Textron 1987 Long-Term Incentive Plan ("1987 Plan"). Incorporated by reference to Exhibit 10.6 to Textron's Annual Report on Form 10-K for the fiscal year ended December 30, 1989. 10.9B First Amendment to 1987 Plan. Incorporated by reference to Exhibit 10.6(b) to Textron's Annual Report on Form 10-K for the fiscal year ended December 28, 1991. 10.10A Textron 1990 Long-Term Incentive Plan ("1990 Plan"). Incorporated by reference to Exhibit 10.7 to Textron's Annual Report on Form 10-K for the fiscal year ended December 30, 1989. 10.10B First Amendment to 1990 Plan. Incorporated by reference to Exhibit 10.7(c) to Textron's Annual Report on Form 10-K for the fiscal year ended December 28, 1991. 10.10C Second Amendment to 1990 Plan. Incorporated by reference to Exhibit 10.7(c) to Textron's Annual Report on Form 10-K for the fiscal year ended January 2, 1993. 10.11 Textron 1994 Long-Term Incentive Plan. Incorporated by reference to Exhibit 10 to Textron's Quarterly Report on Form 10-Q for the fiscal quarter ended July 2, 1994. 10.12 Form of Indemnity Agreement between Textron and its directors and executive officers. Incorporated by reference to Exhibit A to Textron's Proxy Statement for its Annual Meeting of Shareholders on April 29, 1987. 10.13A Pension Plan for Directors as amended by a First Amendment (discontinued as of September 30, 1996). Incorporated by reference to Exhibit 10.14 to Textron's Annual Report on Form 10-K for the fiscal year ended December 31, 1988. 10.13B Second Amendment to Pension Plan for Directors (discontinued as of September 30, 1996). Incorporated by reference to Exhibit 10.16(b) to Textron's Annual Report on Form 10-K for the fiscal year ended December 29, 1990. 10.14 Deferred Income Plan for Non-Employee Directors. 10.15A Employment Agreement between Textron and James F. Hardymon dated November 24, 1989 ("Employment Agreement"). Incorporated by reference to Exhibit 10.9 to Textron's Annual Report on Form 10-K for the fiscal year ended December 30, 1989. 10.15B Amendment dated as of December 15, 1994 to Employment Agreement. Incorporated by reference to Exhibit 10.10B to Textron's Annual Report on Form 10-K for the fiscal year ended December 31, 1994. 10.16A Employment Agreement between Textron and Lewis B. Campbell dated September 22, 1992. Incorporated by reference to Exhibit 10.9 to Textron's Annual Report on Form 10-K for the fiscal year ended January 2, 1993. 10.16B Retention Award granted to Lewis B. Campbell on December 14, 1995. Incorporated by reference to Exhibit 10.16B to Textron's Annual Report on Form 10-K for the fiscal year ended December 30, 1995. 10.17 Employment Agreement between Textron and Mary L. Howell dated May 4, 1993. Incorporated by reference to Exhibit 10.11 to Textron's Annual Report on Form 10-K for the fiscal year ended January 1, 1994. 10.18 Employment Agreement between Textron and Wayne W. Juchatz dated November 1, 1995. Incorporated by reference to Exhibit 10.18 to Textron's Annual Report on Form 10-K for the fiscal year ended December 30, 1995. 10.19 Employment Agreement between Textron and Stephen L. Key dated November 1, 1995. Incorporated by reference to Exhibit 10.19 to Textron's Annual Report on Form 10-K for the fiscal year ended December 30, 1995. 10.20 Employment Agreement between Textron and William F. Wayland dated January 1, 1989. Incorporated by reference to Exhibit 10.12 to Textron's Annual Report on Form 10-K for the fiscal year ended December 30, 1989. 10.21A Credit Agreement dated as of November 1, 1993 among Textron, the Lenders listed therein and Bankers Trust Company as Administrative Agent ("Credit Agreement"). Incorporated by reference to Exhibit 10.20A to Textron's Annual Report on Form 10-K for the fiscal year ended January 1, 1994. 10.21B First Amendment dated as of October 30, 1994 to Credit Agreement. Incorporated by reference to Exhibit 10.22B to Textron's Annual Report on Form 10-K for the fiscal year ended December 31, 1994. 10.21C Second Amendment to Credit Agreement dated as of July 1, 1995. Incorporated by reference to Exhibit (b) (3) to Schedule 14D-1 filed by Textron on September 19, 1995. 10.21D Third Amendment to Credit Agreement dated as of July 1, 1996. 12.1 Computation of ratio of income to combined fixed charges and preferred stock dividends of the Parent Group. 12.2 Computation of ratio of income to combined fixed charges and preferred stock dividends of Textron Inc. including all majority-owned subsidiaries. 13 A portion (pages 23 and following) of Textron's 1996 Annual Report to Shareholders. Except for pages or items specifically incorporated by reference herein, such portion of Textron's 1996 Annual Report to Shareholders is furnished for the information of the Commission and is not filed as part of this Report. 21 Certain subsidiaries of Textron. Other subsidiaries, which considered in the aggregate do not constitute a significant subsidiary, are omitted from such list. 23 Consent of Independent Auditors. 24.1 Power of attorney. 24.2 Certified copy of a resolution of the Board of Directors of Textron. 27 Financial Data Schedule. EX-3.1 2 Exhibit 3.1B TEXTRON INC. AMENDMENT TO CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS OF SERIES C JUNIOR PARTICIPATING PREFERRED STOCK Pursuant to Section 151 of the General Corporation Law of the State of Delaware Textron Inc., a corporation organized and existing under the General Corporation Law of the State of Delaware in accordance with the provisions of Section 103 thereof (the "Corporation"), does here certify: FIRST: That the Corporation filed a Certificate of Designation, Preferences and Rights on March 11, 1986 creating a series of 500,000 shares of preferred stock designated as "Series C Junior Participating Preferred Stock" (the "Certificate of Designation"). SECOND: That as authorized and directed by a resolution adopted by the Board of Directors of the Corporation (the "Board") at a duly convened meeting of the Board held on September 27, 1995, pursuant to the authority vested in it by the provisions of the Restated Certificate of Incorporation of the Corporation, the Certificate of Designations is hereby amended to increase the number of shares constituting the series from 500,000 to 2,000,000. THIRD: That none of the shares of the Corporation's Series C Junior Participating Preferred Stock have been issued as of the date set forth below. FOURTH: That the Certificate of Designations is hereby amended to change the Rights Declaration Date (as referenced therein) from March 8, 1986 to September 27, 1995 and that the foregoing amendment to the Certificate of Designations was effected by the following resolution adopted by the Board at a duly convened meeting of the Board held on September 27, 1995, pursuant to the authority vested in it by the provisions of the Restated Certificate of Incorporation of the Corporation; FURTHER RESOLVED, that, subject to the filing of an Amendment to Certificate of Designations, Preferences and Rights of Series C Junior Participating Preferred Stock with the Secretary of State of the State of Delaware, the Certificate of Designation, Preferences and Rights of Series C Junior Participating Preferred Stock filed by the Corporation with the Secretary of State of the State of Delaware on March 11, 1986 (the "Certificate of Designations") be amended to change the Rights Declaration Date (as defined in the Certificate of Designations) from March 8, 1986 to September 27, 1995 and to increase the number of shares constituting the Series C Junior Participating Preferred Stock from 500,000 to 2,000,000. FIFTH: That the Amendment to Certificate of Designations, Preferences and Rights of Series C Junior Participating Preferred Stock has been duly adopted in accordance with the provisions of Section 151 of the General Corporation Law of the State of Delaware. SIXTH: That this Amendment to Certificate of Designations, Preferences and Rights of Series C Junior Participating Preferred Stock shall not become effective until 5:01 p.m., New York City time, on March 20, 1996. The Corporation has caused this Certificate to be signed by its Vice President and Deputy General Counsel this 12th day of March 1996. /s/ Arnold M. Friedman Vice President and Deputy General Counsel EX-10.14 3 EXHIBIT Exhibit 10.14 Deferred Income Plan for Non Employee Directors This Deferred Income Plan for Non-Employee Directors, the "Plan", is effective January 1, 1997 and replaces the plan previously in effect. Article I - Participation 1.1 Non-employee members of the Board of Directors of Textron Inc. ("Textron") may elect to defer receipt of any or all of the cash portion of the annual retainer into either a stock unit account or an interest-bearing account. The deferred stock portion of the annual retainer is automatically deferred into the stock unit account. 1.2 Each Director must have on file with Textron a Deferral Election Form indicating deferral elections for the following calendar year(s). 1.3 For any complete calendar quarters remaining in the calendar year in which an individual initially becomes a non-employee director, the Director may elect to defer his or her fees at any time before the start of each such quarter. Article II - Deferred Income Accounts 2.1 For record-keeping purposes only, Textron shall maintain a stock unit account and an interest-bearing account for each non-employee Director. 2.2 Stock Unit Account The Stock Unit Account shall consist of Stock Units, which are fictional shares of Textron common stock accumulated and accounted for the sole purpose of determining the cash payout of any distribution under this portion of the Plan. As of the end of each calendar quarter, Textron shall credit to the Stock Unit Account 125% (includes a 25% Premium contributed by Textron, the "Premium") of the amount, including both the cash portion and the deferred stock portion of the annual retainer, the Director deferred into this account during the quarter. Textron shall also credit to this account Stock Units equal to the number of shares of Textron common stock that would have been allocated on account of dividends. The number of Stock Units Textron shall credit to the Stock Unit Account will equal the number of shares of Textron common stock that could have been purchased at a price per share equal to the average price per share of Textron common stock contributed to the Textron Savings Plan during that quarter. Half of the 25% Premium contributed by Textron shall vest (become nonforfeitable) on December 31 of the calendar year in which the deferred income otherwise would have been paid, and the remaining half on the next December 31. The Premium will continue to vest after the termination of the Directorship. The Premium will vest only if the related deferred compensation is unpaid at the time of vesting. Unvested Premiums shall vest immediately upon the Director's death or total disability as determined by the Textron Benefits Committee. 2.3 Interest Account As of the end of each calendar quarter Textron shall credit to the Interest Account an amount equal to interest on the average balance in the Interest Account during such quarter. The average balance will be computed by adding the opening and closing balances for the quarter and dividing by two. Interest will be credited monthly at the greater of 8% or the Moody's Corporate Bond Yield Index rate. Article III - Payments 3.1 Payments or withdrawals from either the Stock Unit Account or the Interest Account or transfers between the two accounts shall not be allowed while the individual remains a Director of Textron. Prior to or at the time of the Director's resignation, removal, or retirement from the Board of Directors, the Director must elect a payment schedule. 3.2 Upon the Director's resignation, removal or retirement from the Board of Directors, the Director may, once each calendar quarter, elect to transfer, in 10% increments, any or all amounts in the Stock Unit Account to the Interest Account. The cash amount transferred will be determined by multiplying the current value of Textron common stock by the number of whole or fractional Stock Units in the Stock Unit Account as of the end of that calendar quarter times the percentage being transferred. The current value shall be the average of the composite closing prices, as reported in the Wall Street Journal for the ten trading days immediately following the calendar quarter in which the election to transfer was made. 3.3 Upon the Director's resignation, removal or retirement from the Board of Directors, he or she must make a payment election by completing the Payment Election Form. The Director may elect on the Payment Election Form to receive (1) the entire amount of his or her accounts as soon as practical following the end of the current quarter which will be deemed to be an election to transfer under the provisions of paragraph 3.2 in the current quarter all amounts in the Director's Stock Unit Account, (2) the entire amount of his or her accounts as soon as practical following the end of the current calendar year which will be deemed to be an election to transfer under the provisions of paragraph 3.2 in the final quarter of the current calendar year all amounts in the Director's Stock Unit Account, or (3) payment in a number of annual installments, each payable as soon as practical following the end of each successive calendar year, over a period of up to five years which will be deemed to be an election to transfer under the provisions of paragraph 3.2 in the final quarter of each respective calendar year an amount, if necessary, from the Director's Stock Unit Account sufficient to make the required payment. Annual installments shall be calculated each year by dividing the unpaid amount as of January 1 of that year by the remaining number of unpaid installments. 3.4 During the installment period, the unpaid balance in the Interest Account will continue to earn interest at the same rate as if the individual had continued as a Director. 3.5 If the Director or former Director dies before all payments have been made, payment(s) shall be made to the beneficiary designated on the Designation of Beneficiary Form. In the event of death, the Benefits Committee shall choose in its sole discretion the payment schedule after considering the method of payment that may have been requested by the Director or by the beneficiaries. The designated beneficiary may be changed from time to time by delivering a new Designation of Beneficiary Form to Textron. If no designation is made, or if the named beneficiary predeceases the Director, payment shall be made to the Director's estate. 3.6 At the discretion of Textron, the payments to be made after the Director's resignation, removal, or retirement from the Board of Directors pursuant to this Article III may be accelerated in such amounts and at such times as the Benefits Committee determines. Article IV - Miscellaneous 4.1 Benefits provided under this Plan are unfunded obligations of Textron. Nothing contained in this Plan shall require Textron to segregate any monies from its general funds with respect to such obligations. 4.2 The Textron Benefits Committee shall be the plan administrator of this Plan and shall be solely responsible for its general administration and interpretation and for carrying out the provisions hereof, and shall have all such powers as may be necessary to do so. 4.3 Unless a contrary or different meaning is expressly provided, each use in this Plan of the masculine or feminine shall include the other and each use of the singular number shall include the plural. 4.4 No benefit payable at any time under this Plan shall be subject in any manner to alienation, sale, transfer, assignment, pledge or encumbrance of any kind unless specifically approved in writing in advance by the Textron Benefits Committee or its designee. Any attempt to alienate, sell, transfer, assign, pledge or otherwise encumber any such benefit, whether presently or subsequently payable, shall be void unless so approved. Except as required by law, no benefit payable under this Plan shall in any manner be subject to garnishment, attachment, execution or other legal process, or be liable for or subject to the debts or liability of any Participant or Beneficiary. 4.5 The Board or its designee shall have the right to amend, modify, suspend or terminate this Plan at any time by written ratification of such action; provided, however, that no amendment, modification, suspension or termination shall reduce the amount credited to either the Stock Unit Account or the Interest Account immediately before the effective date of the amendment, modification, suspension or termination. 4.6 This Plan shall be construed in accordance with the laws of the State of Delaware. IN WITNESS WHEREOF, Textron Inc. has caused this restated Plan to be executed by its duly authorized officer to be effective as of January 1, 1997. TEXTRON INC. By:/s/Frederick K. Butler Frederick K. Butler Vice President and Secretary EX-10.21 4 EXHIBIT EXHIBIT 10.21D THIRD AMENDMENT TO CREDIT AGREEMENT THIS AMENDMENT is dated as of the 1st day of July, 1996 (the "Third Amendment") among TEXTRON INC., a Delaware corporation (including its successors and assigns as permitted by the Credit Agreement as defined below, "Compa ny"), THE LENDERS LISTED ON THE SIGNATURE PAGES HEREOF (indi vidually referred to herein as a "Lender" and collectively as "Lenders"), and BANKERS TRUST COMPANY ("Bankers"), as Administrative Agent for Lenders ("Agent"). RECITALS WHEREAS, Company, the lenders listed therein and Agent entered into a credit agreement dated as of November 1, 1993, as amended on October 30, 1994 and July 1, 1995 ("Credit Agreement"); and WHEREAS, Company, Lenders and Agent desire to further amend the Credit Agreement; NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, Company, Lenders and Agent agree as follows: 1. Subsection 2.8A(i) of the Credit Agreement is hereby deleted in its entirety and the following substituted therefor: "(A) Facility Fees. (i) The Company shall pay to the Agent for the account of the Banks a facility fee as set forth in the table below, accrued from and including the Effective Date to and including the Final Maturity Date, on the daily average aggregate amount of the Commitments (whether used or unused) based upon the rating issued by Standard & Poor's Corporation and Moody's Investors Service, Inc. for the Company's long-term unsecured indebtedness at the beginning of each fiscal quarter of the Company: Rating Category* Facility Fee A/A2 or higher .0900% A-/A3 .1000% BBB+/Baal .1500% BBB/Baa2 .1750% BBB-/Baa3 or lower .2000% or no rating _______________ * In the case of "split" ratings ( i.e., if the ratings of each such rating agency differ by one or more catego ries, including numerical modifiers and (+) and (-) as categories), the facility fee will be based upon the higher of the two ratings." 2. The Final Maturity Date is hereby extended to July 1, 2001 and the Facility Extension Date is hereby extended to July 1, 1997. 3. The execution and delivery of this Third Amendment by the Company is deemed a certification by the Company that (i) the representations and warranties set forth in Section 4 of the Credit Agreement, as amended by this Third Amendment, are true and correct on and as of the date hereof as if made on and as of the date hereof, (ii) there exists no Event of Default or Potential Event of Default on and as of the date hereof, (iii) between October 30, 1995 and July 1, 1996 there have been no changes in generally accepted accounting principles which have had a material effect on the Company's financial condition, and (iv) the Company has full power, authority and legal right to execute, and deliver, and perform its obligations under, this Third Amendment. 4. This Third Amendment shall not constitute a consent or waiver to or modification of any other provision, term or condition of the Credit Agreement. All terms, provisions, covenants, representations, warranties, agreements and conditions contained in the Credit Agreement, as amended hereby, shall remain in full force and effect. 5. As permitted by Section 10.16 of the Credit Agree ment, this Third Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument. This Third Amendment shall be deemed effective as of July 1, 1996, subject to the prior execution of a counterpart of this Third Amendment by each of the parties hereto and delivery of copies hereof to Company and Agent. 6. All interest, fees and other amounts accruing under the Credit Agreement on or prior to, or determined in respect of any day accruing on or prior to July 1, 1996 shall be computed and determined as provided in the Credit Agreement before giving effect to this Third Amendment. 7. THIS THIRD AMENDMENT SHALL BE GOVERNED BY, AND CON STRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE PRINCIPLES OF CONFLICT OF LAWS. WITNESS the due execution hereof by the respective duly authorized officers of the undersigned as of the date first above written. Borrower TEXTRON INC. By: /s/R. A. Watson Title: Senior Vice President and Treasurer BANK OF AMERICAN NATIONAL TRUST AND SAVINGS ASSOCATION BY: /s/Deborah J. Graziano NAME: Deborah J. Graziano TITLE: Vice President COMMITTMENT $78,947,400 PRO RATA SHARE: 5.2632% SIGNATURE PAGE TO THE THIRD AMENDMENT DATED AS OF JULY 1, 1996 TO THE TEXTRON INC. CREDIT AGREEMENT BANKERS TRUST COMPANY BY: /s/Cynthia A. Jay NAME: Cynthia A. Jay TITLE: Vice President COMMITTMENT: $69,736,850 PRO RATE SHARE: 4.6491% SIGNATURE PAGE TO THE THIRD AMENDMENT DATED AS OF JULY 1, 1996 TO THE TEXTRON INC. CREDIT AGREEMENT BANQUE NATIONALE de PARIS BY: /s/Richard L. Sted NAME: Richard L. Sted TITLE: Senior Vice President BY: /s/Richard Pace NAME: Richard Pace TITLE: Assistant Vice President COMMITTMENT: $15,789,450 PRO RATE SHARE: 1.0526% SIGNATURE PAGE TO THE THIRD AMENDMENT DATED AS OF JULY 1, 1996 TO THE TEXTRON INC. CREDIT AGREEMENT CIBC INC. BY: /s/W. B. Anderson NAME: W. B. Anderson TITLE: Director COMMITMENT: $59,210,550 PRO RATE SHARE: 3.9474% SIGNATURE PAGE TO THE THIRD AMENDMENT DATED AS OF JULY 1, 1996 TO THE TEXTRON INC. CREDIT AGREEMENT CHEMICAL BANK BY: /s/J. Treger NAME: J. Treger TITLE: Vice President COMMITMENT: $84,210,550 PRO RATE SHARE: 5.6140% SIGNATURE PAGE TO THE THIRD AMENDMENT DATED AS OF JULY 1, 1996 TO THE TEXTRON INC. CREDIT AGREEMENT MARINE MIDLAND BANK BY: /s/William M. Holland NAME: William M. Holland TITLE: Vice President COMMITMENT: $25,000,000 PRO RATE SHARE: 1.66667$ SIGNATURE PAGE TO THE THIRD AMENDMENT DATED AS OF JULY 1, 1996 TO THE TEXTRON INC. CREDIT AGREEMENT CHEMICAL BANK BY: /s/Chris Georvassilis NAME: Chris Georvassilis TITLE: Vice President COMMITMENT: $23,684,160 PRO RATE SHARE: 1.5789% SIGNATURE PAGE TO THE THIRD AMENDMENT DATED AS OF JULY 1, 1996 TO THE TEXTRON INC. CREDIT AGREEMENT CREDIT LYONNAIS NEW YORK BRANCH BY: /s/Robert Ivonevich NAME: Robert Ivonevich TITLE: Senior Vice President COMMITMENT: $15,789,450 PRO RATE SHARE: 1.0526% SIGNATURE PAGE TO THE THIRD AMENDMENT DATED AS OF JULY 1, 1996 TO THE TEXTRON INC. CREDIT AGREEMENT CREDIT SUISSE BY: /s/Juerg Johner NAME: Juerg Johner TITLE: Associate BY: /s/Edward E. Barr NAME: Edward E. Barr TITLE: Associate COMMITMENT: $25,000,000 PRO RATE SHARE: 1.6667% SIGNATURE PAGE TO THE THIRD AMENDMENT DATED AS OF JULY 1, 1996 TO THE TEXTRON INC. CREDIT AGREEMENT FIRST AMERICAN NATIONAL BY: /s/Scott M. Bane NAME: Scott M. Bane TITLE: Senior Vice President COMMITMENT: $7,894,710 PRO RATE SHARE: .5263% SIGNATURE PAGE TO THE THIRD AMENDMENT DATED AS OF JULY 1, 1996 TO THE TEXTRON INC. CREDIT AGREEMENT SUNTRUST BANK BY: /s/Susan Boyd NAME: Susan Boyd TITLE: Vice President COMMITMENT: $7,894,710 PRO RATE SHARE: .5263% SIGNATURE PAGE TO THE THIRD AMENDMENT DATED AS OF JULY 1, 1996 TO THE TEXTRON INC. CREDIT AGREEMENT DEUTSCHE BANK AG, NEW YORK BRANCH BY: /s/James Fox NAME: James FOX TITLE: Assistant Vice President BY: /s/Ralf Hoffmann NAME: Ralf Hoffmann TITLE: Vice President COMMITMENT: $59,210,550 PRO RATA SHARE: 3.9474% SIGNATURE PAGE TO THE THIRD AMENDMENT DATED AS OF JULY 1, 1996 TO THE TEXTRON INC. CREDIT AGREEMENT BANQUE PARIBAS BY: /s/John J. McCormick, III NAME: John J. McCormick, III TITLE: Vice President BY: /s/Mary T. Finnegan NAME: Mary T. Finnegan TITLE: Group Vice President COMMITMENT: $39,210,550 PRO RATA SHARE: 2.6140% SIGNATURE PAGE TO THE THIRD AMENDMENT DATED AS OF JULY 1, 1996 TO THE TEXTRON INC. CREDIT AGREEMENT CORESTATES BANK, N.A. BY: /s/John M. Fessick NAME: John M. Fessick TITLE: Vice President COMMITMENT: $7,894,710 PRO RATA SHARE: .5263% SIGNATURE PAGE TO THE THIRD AMENDMENT DATED AS OF JULY 1, 1996 TO THE TEXTRON INC. CREDIT AGREEMENT FLEET NATIONAL BANK BY: /s/Roger C. Boucher NAME: Roger C. Boucher TITLE: Vice President COMMITMENT: $48,684,160 PRO RATA SHARE: 3.2456% SIGNATURE PAGE TO THE THIRD AMENDMENT DATED AS OF JULY 1, 1996 TO THE TEXTRON INC. CREDIT AGREEMENT CITIBANK, N.A. BY: /s/W. Martens NAME: W. Martens TITLE: Attorney in Fact COMMITMENT: $59,210,550 PRO RATA SHARE: 3.9474% SIGNATURE PAGE TO THE THIRD AMENDMENT DATED AS OF JULY 1, 1996 TO THE TEXTRON INC. CREDIT AGREEMENT THE SANWA BANK, LIMITED BY: /s/Tatsumi Kimishima NAME: Tatsumi Kimishima TITLE: Senior Deputy General Manager COMMITMENT: $19,736,850 PRO RATA SHARE: 1.3158% SIGNATURE PAGE TO THE THIRD AMENDMENT DATED AS OF JULY 1, 1996 TO THE TEXTRON INC. CREDIT AGREEMENT THE FIRST NATIONAL BANK OF BOSTON BY: /s/Harvey H. Thayer, Jr. NAME: Harvey H. Thayer, Jr. TITLE: Director COMMITMENT: $61,842,110 PRO RATA SHARE: 4.1228% SIGNATURE PAGE TO THE THIRD AMENDMENT DATED AS OF JULY 1, 1996 TO THE TEXTRON INC. CREDIT AGREEMENT THE BANK OF NEW YORK BY: /s/David C. Judge NAME: David C. Judge TITLE: Vice President COMMITMENT: $59,210,550 PRO RATA SHARE: 3.9474% SIGNATURE PAGE TO THE THIRD AMENDMENT DATED AS OF JULY 1, 1996 TO THE TEXTRON INC. CREDIT AGREEMENT BANK OF TOKYO-MITSUBISHI TRUST COMPANY BY: /s/G. Stewart NAME: G. Stewart TITLE: Assistant Vice President and Manager COMMITMENT: $22,368,400 PRO RATA SHARE: 1.4912% SIGNATURE PAGE TO THE THIRD AMENDMENT DATED AS OF JULY 1, 1996 TO THE TEXTRON INC. CREDIT AGREEMENT NATIONAL WESTMINSTER BANK PLC. BY: /s/Maria Amaral-LeBlanc NAME: Maria Amaral-LeBlanc TITLE: Vice President COMMITMENT: $15,789,450 PRO RATA SHARE: 1.0526% SIGNATURE PAGE TO THE THIRD AMENDMENT DATED AS OF JULY 1, 1996 TO THE TEXTRON INC. CREDIT AGREEMENT ROYAL BANK OF CANADA BY: /s/Michael Korine NAME: Michael Korine TITLE: Senior Manager COMMITMENT: $59,210,550 PRO RATA SHARE: 3.9474% SIGNATURE PAGE TO THE THIRD AMENDMENT DATED AS OF JULY 1, 1996 TO THE TEXTRON INC. CREDIT AGREEMENT UNION BANK OF SWITZERLAND BY: /s/Laurent J. Chaix NAME: Lauren J. Chaix TITLE: Vice President BY: /s/Robert A. High NAME: Robert A. High TITLE: Assistant Treasurer COMMITMENT: $25,000,000 PRO RATA SHARE: 1.6667% SIGNATURE PAGE TO THE THIRD AMENDMENT DATED AS OF JULY 1, 1996 TO THE TEXTRON INC. CREDIT AGREEMENT THE FIRST NATIONAL BANK OF CHICAGO BY: /s/Daniel J. Lenckos NAME: Daniel J. Lenckos TITLE: Vice President COMMITMENT: $78,947,400 PRO RATA SHARE: 5.2632% SIGNATURE PAGE TO THE THIRD AMENDMENT DATED AS OF JULY 1, 1996 TO THE TEXTRON INC. CREDIT AGREEMENT THE BANK OF NOVA SCOTIA BY: /s/M. R. Bradley NAME: M. R. Bradley TITLE: Authorized Signatory COMMITMENT: $20,000,000 PRO RATA SHARE: 1.3333% SIGNATURE PAGE TO THE THIRD AMENDMENT DATED AS OF JULY 1, 1996 TO THE TEXTRON INC. CREDIT AGREEMENT MORGAN GUARANTY TRUST COMPANY OF NEW YORK BY: /s/Adam J. Silver NAME: Adam J. Silver TITLE: Associate COMMITMENT: $78,947,400 PRO RATA SHARE: 5.2632% SIGNATURE PAGE TO THE THIRD AMENDMENT DATED AS OF JULY 1, 1996 TO THE TEXTRON INC. CREDIT AGREEMENT BANK OF MONTREAL/HARRIS TRUST AND SAVINGS BANK BY: /s/Marc Heyden NAME: Marc Heyden TITLE: Director COMMITMENT: $19,736,850 PRO RATA SHARE: 1.3158% SIGNATURE PAGE TO THE THIRD AMENDMENT DATED AS OF JULY 1, 1996 TO THE TEXTRON INC. CREDIT AGREEMENT SWISS BANK CORPORATION BY: /s/James J. Diaz NAME: James J. Diaz TITLE: Director, Banking Finance Support, N.A. BY: /s/Stephanie W. Kim NAME: Stephanie W. Kim TITLE: Associate Director COMMITMENT: $59,210,550 PRO RATA SHARE: 3.9474% SIGNATURE PAGE TO THE THIRD AMENDMENT DATED AS OF JULY 1, 1996 TO THE TEXTRON INC. CREDIT AGREEMENT ABN-AMRO BANK, N.V. Boston Branch By: ABN AMRO North American, Inc., as Agent BY: /s/James E. Davis NAME: James E. Davis TITLE: Vice President and Director BY: /s/Carol A. Levine NAME: Carol A. Levine TITLE: Senior Vice President and Managing Director COMMITMENT: $55,263,166 PRO RATA SHARE: 3.6842% SIGNATURE PAGE TO THE THIRD AMENDMENT DATED AS OF JULY 1, 1996 TO THE TEXTRON INC. CREDIT AGREEMENT WELLS FARGO BANK, NATIONAL ASSOCIATION BY: /s/Bruce L. Gregory NAME: Bruce L. Gregory TITLE: Vice President COMMITMENT: $35,526,315 PRO RATA SHARE: 2.3684% SIGNATURE PAGE TO THE THIRD AMENDMENT DATED AS OF JULY 1, 1996 TO THE TEXTRON INC. CREDIT AGREEMENT THE FUJI BANK, LTD., NEW YORK BRANCH BY: /s/Gina Kearns NAME: Gina Kearns TITLE: Vice President and Manager COMMITMENT: $22,368,400 PRO RATA SHARE: 1.4912% SIGNATURE PAGE TO THE THIRD AMENDMENT DATED AS OF JULY 1, 1996 TO THE TEXTRON INC. CREDIT AGREEMENT THE INDUSTRIAL BANK OF JAPAN TRUST COMPANY BY: /s/John V. Veltri NAME: John V. Veltri TITLE: Senior Vice President COMMITMENT: $22,368,400 PRO RATA SHARE: 1.4912% SIGNATURE PAGE TO THE THIRD AMENDMENT DATED AS OF JULY 1, 1996 TO THE TEXTRON INC. CREDIT AGREEMENT MELLON BANK, N.A. BY: /s/R. Jane Westrich NAME: R. Jane Westrich TITLE: Vice President COMMITMENT: $34,210,550 PRO RATA SHARE: 2.2807% SIGNATURE PAGE TO THE THIRD AMENDMENT DATED AS OF JULY 1, 1996 TO THE TEXTRON INC. CREDIT AGREEMENT NATIONS BANK BY: /s/Eric C. Stephenson NAME: Eric C. Stephenson TITLE: Vice President COMMITMENT: $82,894,710 PRO RATA SHARE: 5.5263% SIGNATURE PAGE TO THE THIRD AMENDMENT DATED AS OF JULY 1, 1996 TO THE TEXTRON INC. CREDIT AGREEMENT COMMERZBANK AKTIENGESELLSCHAFT BY: /s/ Juergen Boysen NAME: Juergen Boysen TITLE: Senior Vice President BY: /s/Robert Donohue NAME: Robert Donohue TITLE: Vice President COMMITMENT: $19,736,850 PRO RATA SHARE: 1.315790% SIGNATURE PAGE TO THE THIRD AMENDMENT DATED AS OF JULY 1, 1996 TO THE TEXTRON INC. CREDIT AGREEMENT THE TORONTO-DOMINION BANK BY: /s/L. Merghart NAME: L. Merghart TITLE: Director COMMITMENT: $21,052,599 PRO RATA SHARE: 1.4035% SIGNATURE PAGE TO THE THIRD AMENDMENT DATED AS OF JULY 1, 1996 TO THE TEXTRON INC. CREDIT AGREEMENT THE CHASE MANHATTAN BANK, N.A. BY: /s/J. Treger NAME: J. Treger TITLE: Vice President COMMITMENT: $59,210,550 PRO RATA SHARE: 3.9474% SIGNATURE PAGE TO THE THIRD AMENDMENT DATED AS OF JULY 1, 1996 TO THE TEXTRON INC. CREDIT AGREEMENT EX-12.1 5 EXHIBIT EXHIBIT 12.1 PARENT GROUP COMPUTATION OF RATIO OF INCOME TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS (Unaudited) (In millions except ratios)
Year 1996 1995 1994 1993 1992 Fixed charges: Interest expense (1) $ 148 $ 178 $ 192 $ 218 $ 242 Distributions on preferred securities of subsidiary trust, net of income taxes 23 - - - - Estimated interest portion of rents 17 17 20 21 19 Total fixed charges $ 188 $ 195 $ 212 $ 239 $ 261 Income: Income from continuing operations before income taxes and distributions on preferred securities of subsidiary trust (2) $ 827 $ 690 $ 623 $ 470 $ 412 Fixed charges 188 195 212 239 261 Eliminate equity in undistributed pretax income of finance subsidiaries (259) (248) (225) (195) (177) Adjusted income $ 756 $ 637 $ 610 $ 514 $ 496 Ratio of income to fixed charges 4.02 3.27 2.88 2.15 1.90
________________________ (1) Includes interest unrelated to borrowings of $11 million in 1996, $23 million in 1995, $27 million in 1994, $25 million in 1993, and $30 million in 1992. (2) Excludes the cumulative effect of changes in accounting principles in 1992. EX-12.2 6 EXHIBIT 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)
Year 1996 1995 1994 1993 1992 Fixed charges: Interest expense (1) $ 731 $ 791 $ 651 $ 650 $ 731 Distributions on preferred securities of subsidiary trust, net of income taxes 23 - - - - Estimated interest portion of rents 35 34 36 38 36 Total fixed charges $ 789 $ 825 $ 687 $ 688 $ 767 Income: Income from continuing operations before income taxes and distributions on preferred securities of subsidiary trust (2) $ 827 $ 690 $ 623 $ 470 $ 412 Fixed charges 789 825 687 688 767 Adjusted income $1,616 $1,515 $1,310 $1,158 $1,179 Ratio of income to fixed charges 2.05 1.84 1.91 1.68 1.54
________________________ (1) Includes interest unrelated to borrowings of $11 million in 1996, $23 million in 1995, $27 million in 1994, $25 million in 1993, and $30 million in 1992. (2) Excludes the cumulative effect of changes in accounting principles in 1992. EX-13 7 PORTIONS OF ANNUAL REPORT 23 - ------------------------------------------------------------------------------- Business Segment Data For a description of the businesses comprising each segment, see pages 54 and 55.
Revenues Operating Income Operating Income Margins --------------------------- ------------------------- ------------------------ (In millions) 1996 1995 1994 1996 1995 1994 1996 1995 1994 - --------------------------------------------------------------------------------------------------------------------- Aircraft $2,703 $2,519 $2,290 $ 271 $ 245 $ 197 10.0% 9.7% 8.6% Automotive 1,627 1,534 1,511 146 135 132 9.0 8.8 8.7 Industrial 2,196 1,560 1,539 233 177 157 10.6 11.3 10.2 Systems and Components 653 855 1,338 57 65 88 8.7 7.6 6.6 Finance 2,095 1,985 1,672 383 365 331 18.3 18.4 19.8 - --------------------------------------------------------------------------------------------------------------------- $9,274 $8,453 $8,350 1,090 987 905 11.8 11.7 10.8 - ------------------------------===========================------------------------------------------------------------ Corporate expenses and other - net (115) (119) (92) Interest expense - net (148) (178) (190) - ---------------------------------------------------------------------------------------- Income from continuing operations before income taxes $ 827 $ 690 $ 623 ======================================================================================== Before distributions on preferred securities of subsidiary trust in 1996. Income of the Finance segment is net of interest expense. Prior year amounts have been reclassified to conform to the current year's segment presentation as more fully described on page 24.
1996 Revenues - $9.3 billion 1996 Operating Income - $1.1 billion - -------------------------------- ---------------------------------------- [GRAPH] [GRAPH] Aircraft 29% Aircraft 25% Automotive 17% Automotive 14% Industrial 24% Industrial 21% Systems & Components 7% Systems & Components 5% Finance 23% Finance 35%
Identifiable Assets Capital Expenditures Depreciation ---------------------------- ----------------------- --------------------- (In millions) 1996 1995 1994 1996 1995 1994 1996 1995 1994 - --------------------------------------------------------------------------------------------------------------------- Aircraft $ 1,896 $ 1,782 $ 1,680 $119 $ 75 $ 79 $ 55 $ 50 $ 50 Automotive 1,020 861 849 60 78 85 41 39 37 Industrial 1,811 1,372 975 110 81 76 76 50 47 Systems and Components 604 963 1,067 17 18 24 26 31 50 Finance 11,409 10,816 9,900 34 23 22 21 20 18 - --------------------------------------------------------------------------------------------------------------------- Corporate, including investment in discontinued operation 1,742 1,932 1,665 3 4 8 4 5 4 Eliminations (247) (75) (33) - - - - - - - --------------------------------------------------------------------------------------------------------------------- $18,235 $17,651 $16,103 $343 $279 $294 $223 $195 $206 ===================================================================================================================== Prior year amounts have been reclassified to conform to the current year's segment presentation as more fully described on page 24.
T E X T R O N 2 3 24 - ------------------------------------------------------------------------------- Management's Discussion and Analysis Results of Operations Revenues [GRAPH] Year 1994 1995 1996 Amount ($ in millions) $8,350 $8,453 $9,274 Change from prior year 6% 1% 10% Earnings per Share [GRAPH] [FN] from continuing operations Year 1994 1995 1996 Amount ($ in millions) $4.06 $4.79 $5.60 Change from prior year 22% 18% 17% Aircraft Revenues [GRAPH] Year 1994 1995 1996 Amount ($ in millions) $2,290 $2,519 $2,703 Change from prior year 10% 10% 7% Operating Income [GRAPH] Year 1994 1995 1996 Amount ($ in millions) $197 $245 $271 Change from prior year 22% 24% 11% Textron Inc. 1996 vs. 1995 *Earnings per share from continuing operations in 1996 were $5.60 per share, up 17% from the 1995 amount of $4.79. Income from continuing operations in 1996 of $482 million was up from $416 million for 1995. Revenues increased 10% to $9.3 billion in 1996 from $8.5 billion in 1995. Net income in 1996 was $253 million vs. $479 million in 1995, reflecting the impact of a $229 million loss from discontinued operation in 1996. *Operating income of Textron's five business segments aggregated $1.1 billion in 1996, up 10% from 1995, as a result of continued improved financial results of its four core business segments - Aircraft, Automotive, Industrial, and Finance. *The lower interest of the Parent Group - $148 million in 1996 vs. $178 million in 1995 - was due to lower average debt, due in part to the payment of debt with the proceeds from the issuance of preferred securities in February 1996. *Business segment data for prior years has been reclassified to reflect the transfer of certain businesses to the Aircraft and Industrial segments to better align the overall groupings of businesses with the markets they serve. The Aircraft segment now includes Textron Lycoming and the Industrial segment now includes HR Textron and the metal cutting business of Randall. 1995 vs. 1994 *Earnings per share from continuing operations in 1995 were $4.79 per share, up 18% from the 1994 amount of $4.06. Income from continuing operations in 1995 of $416 million was up from $366 million in 1994. Revenues increased 1% to $8.5 billion in 1995. Excluding the effects of the Textron Lycoming Turbine Engine and Homelite divisions, which were sold in 1994, revenues were up 9%. Net income in 1995 was $479 million vs. $433 million in 1994. *Operating income of Textron's five business segments aggregated $1.0 billion in 1995, up 9% from 1994. An increase of 15% in the aggregate income of the Aircraft, Industrial, and Finance segments more than offset lower results in the Systems and Components segment. Operating income in the Automotive segment was essentially unchanged. *Corporate expenses and other - net increased in 1995 by $27 million due in large part to an increase in compensation expense tied directly to changes in the market value of Textron's common stock ($17 million). To mitigate the impact on compensation expense of future increases in stock price, Textron entered into a cash-settlement option program on Textron's common stock in November 1995. *The lower interest expense of the Parent Group - $178 million in 1995 vs. $192 million in 1994 - reflected a lower level of average borrowing, notwithstanding the incremental borrowing associated with acquisitions in the fourth quarter of 1995, partially offset by an increased cost of borrowing. Aircraft 1996 vs. 1995 The Aircraft segment's revenues and income increased $184 million (7%) and $26 million (11%), respectively. *Bell Helicopter's revenues decreased primarily as a result of lower sales of military helicopters to the U.S. government ($136 million) and lower revenues on the V-22 program ($69 million), partially offset by higher domestic and international helicopter sales, including increased deliveries on the Canadian Forces contract ($119 million), and increased military and commercial spares sales ($41 million). Bell's income decreased slightly, as the impact of lower revenues and costs associated with the introduction of new commercial aircraft models was partially offset by additional income on the V-22 program. 2 4 T E X T R O N 25 - ------------------------------------------------------------------------------- Automotive Revenues [GRAPH] Year 1994 1995 1996 Amount ($ in millions) $1,511 $1,534 $1,627 Change from prior year 28% 2% 6% Operating Income [GRAPH] Year 1994 1995 1996 Amount ($ in millions) $132 $135 $146 Change from prior year 48% 2% 8% Industrial Revenues [GRAPH] Year 1994 1995 1996 Amount ($ in millions) $1,539 $1,560 $2,196 Change from prior year 13% 1% 41% Operating Income [GRAPH] Year 1994 1995 1996 Amount ($ in millions) $157 $177 $233 Change from prior year 21% 13% 32% *Cessna's revenues increased primarily as a result of higher sales of business jets, principally the Citation X and Citation VII models, and utility turboprop aircraft. Its income increased as a result of the higher revenues, partially offset by higher product development and selling and administrative expenses due to the introduction and support of new products. 1995 vs. 1994 The Aircraft segment's revenues and income increased $229 million (10%) and $48 million (24%), respectively. *Bell Helicopter's revenues increased, primarily as a result of higher international aircraft sales ($199 million) and higher revenues under the V-22 engineering and manufacturing development contract ($97 million), partially offset by lower sales to foreign military customers and to the U.S. government ($95 million). Bell's income increased primarily as a result of the higher revenues. *Cessna's revenues and income increased primarily as a result of higher sales of utility turboprop aircraft. Increased product development expenses, principally related to the Bravo and Excel Citation aircraft ($32 million), were partially offset by reduced JPATS bid and proposal expenses and product support costs ($23 million). Automotive 1996 vs. 1995 The Automotive segment's revenues increased $93 million (6%) and income increased $11 million (8%). The improved results reflected the increased production of models with Textron content, particularly light trucks at Chrysler, and the benefits of the acquisitions of Valeo Wiper Systems and the remaining 50% of a joint venture in Born, Netherlands. Excluding the impact of the 1997 acquisition of Kautex, automotive sales are expected to be lower in 1997 than in 1996 as a result of the timing of replacement business and customer launches. The Kautex acquisition will more than offset the impact of these lower sales and will contribute positively to income, albeit at lower margins. 1995 vs. 1994 The Automotive segment's revenues increased $23 million (2%) despite a reduction in North American automotive production, due to higher production of models with Textron content. Income increased $3 million (2%), due to the higher sales, partially offset by start-up costs related to the launch of new products and facilities. Industrial 1996 vs. 1995 The Industrial segment's revenues increased $636 million (41%) and income increased $56 million (32%). The increases were principally due to higher sales in the fastening systems business ($558 million), reflecting the fourth quarter 1995 acquisitions of Elco Industries and Boesner, and the first half 1996 acquisitions of Textron Industries S.A.S. and Xact Products. In addition, the year's results benefited from higher sales and improved performance at E-Z-GO, and continued strong performance in the contractor tool business, including the contribution from the Klauke acquisition. 1995 vs. 1994 The Industrial segment's revenues increased $21 million (1%) and income increased $20 million (13%). The increases were due principally to higher sales in the fastening systems business ($162 million), reflecting Avdel's results for the full year in 1995 compared with nine months in 1994, and the acquisition of Elco Industries in October 1995. In addition, sales were higher and performance was better in the turf care equipment and contractor tool businesses. Partially offsetting these increases was the divestiture of the Homelite division in August 1994 ($189 million of sales and $14 million of income). Excluding the impact of Homelite, revenues and income increased 16% and 24%, respectively. T E X T R O N 2 5 26 - ------------------------------------------------------------------------------- Systems and Components Revenues [GRAPH] Year 1994 1995 1996 Total $1,338 $855 $653 Change from prior year (19%) (36%) (24%) Operating Income [GRAPH] Year 1994 1995 1996 Amount ($ in millions) $88 $65 $57 Change from prior year (25%) (26%) (12%) Finance Revenues [GRAPH] Year 1994 1995 1996 Total $1,672 $1,985 $2,095 Change from prior year 4% 19% 6% Operating Income [GRAPH] Year 1994 1995 1996 Amount ($ in millions) $331 $365 $383 Change from prior year 15% 10% 5% Systems and Components 1996 vs. 1995 The Systems and Components segment's revenues and income decreased $202 million (24%) and $8 million (12%), respectively, due principally to reduced shipments on certain U.S. government and commercial aerospace contracts and the impact of the divestiture of the Textron Aerostructures division in the third quarter of 1996. 1995 vs. 1994 The Systems and Components segment's revenues decreased $483 million (36%) and income decreased $23 million (26%). The decrease in revenues was due to the divestiture of the Lycoming Turbine Engine division ($379 million) and to reduced shipments on certain U.S. government and commercial aerospace contracts. The income decrease was also due to the October 1994 divestiture of Lycoming Turbine Engine ($30 million, the after-tax effect of which was immaterial to net income due to the nontax deductibility of goodwill). These unfavorable factors were partially offset by provisions in 1994 for legal matters and the consolidation of certain manufacturing operations ($22 million). Finance 1996 vs. 1995 The Finance segment's revenues increased $110 million (6%), while income increased $18 million (5%). *Avco Financial Services' (AFS) revenues increased $96 million, primarily as a result of an increase in yields on finance receivables (18.52% in 1996 vs. 18.20% in 1995), an increase in earned premiums in both the finance-related and the independent insurance operations and an increase in capital gains, due primarily to a higher volume of sales in the bond investment portfolio. Its income increased $11 million due to those factors, a decrease in the average cost of borrowed funds (6.88% in 1996 vs. 7.32% in 1995) and an increase in investment income due to a higher level of invested assets. This favorable impact was partially offset by an increase in the ratio of net credit losses to average finance receivables (2.82% in 1996 vs. 2.10% in 1995) and the strengthening of the allowance for credit losses (3.01% of average finance receivables at December 31, 1996 vs. 2.82% at December 31, 1995), and an increase in the ratio of insurance losses to earned insurance premiums. The general proliferation of credit cards and the resulting increase in the level of consumer debt in the U.S. and Canada has continued to burden the consumer finance customer, resulting in higher delinquencies and charge-offs, and has provided the consumer an alternate source of funds, thereby reducing AFS' receivable growth. *Textron Financial Corporation's (TFC) income increased $7 million on higher revenues of $14 million, due to a higher level of finance receivables (average receivables were $3.036 billion in 1996 vs. $2.839 billion in 1995) and higher fee income, partially offset by lower yields (10.03% in 1996 and 10.34% in 1995) predominantly on floating rate receivables, reflecting a decline in the prevailing interest rate environment. The income increase reflected the higher revenues, partially offset by a higher provision for loan losses, principally due to charge-offs of nonperforming equipment loans. 1995 vs. 1994 The Finance segment's revenues increased $313 million (19%), while income increased $34 million (10%). *AFS' revenues increased $276 million due primarily to (a) a higher level of finance receivables outstanding (average receivables were $6.867 billion in 1995 vs. $5.696 billion in 1994), (b) an increase in earned insurance premiums ($62 million), and (c) an increase in investment income ($11 million), due primarily to higher yields (7.78% in 1995 vs. 7.06% in 1994) and a higher level of invested assets. These higher revenues were partially offset by a decrease in yields on finance receivables (18.20% in 1995 vs. 18.39% in 1994), due primarily to an increase in the level of retail installment contracts outstanding. AFS' income increased $28 million, due primarily to those factors and a decrease in the ratio of operating expenses to revenues (32.25% in 1995 vs. 33.67% in 1994). This favorable impact was partially offset by an increase in the average cost of borrowed funds (7.32% in 1995 vs. 6.63% in 1994) and an increase in the 2 6 T E X T R O N 27 - ------------------------------------------------------------------------------- ratio of net credit losses to average finance receivables (2.10% in 1995 vs. 1.99% in 1994). The increase in delinquencies and net credit losses, which began during the latter part of 1995, was due to economic slowdowns in the U.S. and other countries in which AFS operates. *TFC's income increased $6 million on higher revenues of $37 million primarily due to (a) higher yields on finance receivables (10.34% in 1995 vs. 9.45% in 1994), (b) a higher level of finance receivables outstanding (average receivables were $2.839 billion in 1995 vs. $2.641 billion in 1994), and (c) a lower provision for loan losses ($6 million), reflecting an improvement in the equipment portfolio and stabilization of nonperforming real estate assets. These factors were partially offset by increased interest expense. Liquidity & Capital Resources Financing for Textron is conducted through two borrowing groups: The Textron Parent Company Borrowing Group (Parent Group) and Textron's finance subsidiaries (Finance Group). Each group's debt is supported by its own respective assets and cash flows. The liquidity and capital resources of Textron's operations are best understood by separately considering its independent borrowing groups. The Parent Group consists of all entities of Textron (primarily manufacturing) other than its finance subsidiaries. The Finance Group consists of Textron's finance subsidiaries - AFS and TFC. Parent Group Management believes that the Parent Group will continue to have adequate access to credit markets and that its credit facilities and cash flows from operations--including dividends received from the Finance Group - will continue to be more than sufficient to meet its operating needs and to finance growth. Information about the cash flows of this group is set forth in its statement of cash flows on page 37. *Cash flows from operating activities in 1996 of $576 million were up from the 1995 level primarily due to increased income from continuing operations. *The Group's debt decreased by $267 million in 1996, as cash provided by operations, the issuance of preferred securities, and the sale of Textron Aerostructures exceeded cash used for (a) capital expenditures, (b) repurchases of Textron common stock, (c) financing acquisitions, and (d) payments of dividends. The Parent Group's ratio of debt to total capital decreased to 29% at year-end 1996, from 34% at year-end 1995. *Capital expenditures: See the table on page 23 for capital expenditures by business segment for 1996, 1995, and 1994. Such expenditures continue to reflect Textron's growth strategy in its Aircraft, Automotive, and Industrial segments. Including the effect of 1997 acquisitions, aggregate capital expenditures for 1997 are expected to exceed the level of spending in 1996, as Textron invests in new Cessna aircraft models in the Aircraft segment and increased capacity and improved manufacturing productivity in the Industrial and Automotive segments. *Acquisitions: During the three year period ended December 28, 1996, the Parent Group acquired nine entities for an aggregate of approximately $620 million including the assumption of certain liabilities. The acquisitions were accounted for as purchases and accordingly, the results of operations of each acquired company is included in the statement of income from the date of acquisition. In early 1997, the Parent Group acquired the Kautex Group and Maag Pump Systems for an aggregate of approximately $390 million including the assumption of certain liabilities. *Dispositions: In September 1996, the Parent Group sold its Aerostructures division for $180 million in cash plus a subordinated note. In 1994, the Parent Group sold its Homelite and Lycoming Turbine Engine divisions; cash proceeds aggregated $495 million. On April 29, 1996, The Paul Revere Corporation, an 83.3% owned subsidiary, entered into an agreement with Provident Companies, Inc. whereby Provident will acquire all of the outstanding shares of Paul Revere's common stock. The agreement was revised in November 1996. For each of its Paul Revere shares, Textron will receive approximately $20 per share in cash ($750 million) and shares of Provident common stock. Textron has agreed to provide additional capital to Paul Revere, the amount of which will depend upon a final determination of the required levels of Paul Revere's statutory reserves, subject to certain limits. Textron also agreed to grant certain other concessions to Provident. Proceeds are expected to be used for T E X T R O N 2 7 28 - ------------------------------------------------------------------------------- general corporate purposes including debt reduction, purchases of Textron common stock, and financing acquisitions. The final determination of the required capital contribution to Paul Revere and the share value of Provident stock received by Textron at closing will affect Textron's reported loss from discontinued operation in 1997. The transaction remains subject to the approval of the Commonwealth of Massachusetts Division of Insurance. The transaction is targeted to close early in 1997. For further information, see Note 2 to the consolidated financial statements. *Share repurchase program: In September 1996, Textron's Board of Directors authorized the repurchase of an additional five million shares of common stock under its share repurchase program. Textron has approximately seven million shares remaining under its share repurchase program. *Debt and credit facilities: The Parent Group has a $1.5 billion domestic credit facility with 36 banks. At year-end 1996, $889 million of the credit facility was not used or reserved as support for commercial paper or bank borrowings. During 1996, Textron entered into two separate five-year multi- currency credit agreements with 25 banks aggregating $800 million to be used for its foreign operations. At year-end 1996, approximately 65% of total foreign currency borrowings of $267 million under these facilities were denominated in French francs. In February 1996, a new shelf registration statement became effective, covering, in addition to the remaining unused $211 million of unsecured debt securities previously registered, an aggregate amount of $800 million of (a) debt issuable by Textron and (b) preferred securities issuable by entities formed by Textron on behalf of which Textron would provide certain guarantees. Also in February 1996, a trust sponsored by Textron issued $500 million of such preferred securities, the proceeds of which were invested by the trust in Textron's newly issued 7.92% Junior Subordinated Deferrable Interest Debentures due 2045. The proceeds from the issuance of the debentures were used by Textron for the repayment of long-term borrowings. Textron had $511 million available at year-end 1996 under its shelf registration statement with the Securities and Exchange Commission. *Interest rate exchange agreements: The difference between the variable rate the Parent Group received and the fixed rate it paid on interest rate exchange agreements increased its reported interest expense by $12 million in 1996, $14 million in 1995, and $27 million in 1994. Finance Group Information about the cash flows of this Group is set forth in its statement of cash flows on page 37. *Dividends: The amount of the net assets of the Finance Group available for cash dividends and other payments to the Parent Group is governed by the terms of lending agreements. The Finance Group paid dividends to the Parent Group of $124 million, $117 million, and $106 million in 1996, 1995, and 1994, respectively. *Capital resources: AFS and TFC each utilize a broad base of financial sources for their respective liquidity and capital requirements. Cash is provided from both operations and several different sources of borrowings, including unsecured borrowings under bank lines of credit, the issuance of commercial paper and short-term bank debt, and sales of medium- and long-term debt in the U.S. and foreign financial markets. During 1996, the net proceeds from medium- and long-term financing sources, including the issuances described below, totaled $1.2 billion. Debt increased by $402 million in 1996, due principally to receivable growth. *Debt and credit facilities: During 1996, AFS issued $839 million of unsecured debt securities, including $337 million under its shelf registration statements. At year-end 1996, AFS had $1.0 billion available for unsecured debt securities under its shelf registration statement with the Securities and Exchange Commission and $547 million available for similar securities under its shelf registration statement with the Canadian provincial security exchanges. TFC has a medium-term note facility for $500 million; $292 million was available at year-end 1996. 2 8 T E X T R O N 29 - ------------------------------------------------------------------------------- By utilizing medium- and long-term fixed rate financing, as well as interest rate exchange agreements, Textron's Finance Group effectively had a combined ratio of variable rate debt to total debt of 51% at year-end 1996. *Acquisitions: During the three year period ended December 31, 1996, the Finance Group acquired (a) Insurex Canada Inc., (b) Tuckahoe Leasing Inc., and (c) HFC of Australia Ltd. for an aggregate of approximately $50 million. *Interest rate exchange agreements: The difference between the variable rate the Finance Group received and the fixed rate it paid on interest rate exchange agreements increased its reported interest expense by $19 million in 1996, $13 million in 1995, and $21 million in 1994. *Investment in real estate: The Finance Group has substantial amounts of finance receivables backed up or secured by real estate, including leveraged leases which were approximately 70% collaterized by real estate. Residential real estate loans are geographically dispersed and loan amounts are limited to a maximum of 85% of the property's appraised market value, although most loans are made at significantly lower loan to value ratios. Commercial real estate loans consist principally of first mortgages on income producing properties and are diversified both geographically and by type of property financed. Nonearning commercial real estate loans were $60 million at year-end 1996 ($72 million at year-end 1995). For further information about finance receivables, see Note 4 to the consolidated financial statements. Foreclosed real estate: At year-end 1996, real estate classified in other assets aggregated $66 million ($71 million at year-end 1995). Reserves for nonperforming real estate: While realization of nonperforming real estate assets is subject to uncertainties including prevailing economic conditions and the status of the real estate market, Textron believes that its reserves have been determined on reasonable bases and are adequate. Subsequent evaluations of nonperforming assets, in light of factors then prevailing, including economic conditions, may require increases in the reserves for such assets. *FAS 125: In June 1996, the Financial Accounting Standards Board issued Statement No. 125, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities" (FAS 125). FAS 125, which is effective for transfers and servicing of financial assets and extinguishments of liabilities occurring after December 31, 1996, is not expected to have a material impact on Textron's results of operations or cash flows. Other Matters *Net deferred tax assets: Textron has recognized net deferred tax assets of $327 million at year-end 1996 attributable to temporary differences between the financial reporting basis and income tax basis of certain assets and liabilities. Management believes that such net deferred tax assets will be realized based on Textron's history of earnings and its expectations for the future. *Interest rate management: Textron uses interest rate exchange agreements to help manage interest rate risk by converting certain variable-rate debt to fixed-rate debt. The agreements do not involve a high degree of complexity or risk and are not used to speculate for profit. For further information about these agreements and the debt and credit facilities of the Parent Group and the Finance Group, see Note 9 and Note 10 to the consolidated financial statements. *Foreign currency rate management: Textron uses foreign currency forward exchange contracts to manage exposures to changes in currency exchange rates associated with firm commitments for commercial purchase and sale transactions. Those financial instruments generally are used to fix the local currency cost of purchased goods or services or selling prices denominated in currencies other than the functional currency. Exchange rate exposures that result from net investments in foreign affiliates are managed principally by funding certain local currency denominated assets with debt denominated in those same currencies. T E X T R O N 2 9 30 - ------------------------------------------------------------------------------- *Environmental: Textron is involved in a number of remedial actions under various federal and state laws and regulations relating to the environment which impose liability on companies to clean up, or contribute to the cost of cleaning up, sites on which their hazardous wastes or materials were disposed or released. Expenditures to evaluate and remediate contaminated sites approximated $12 million, $15 million, and $14 million in 1996, 1995, and 1994, respectively. Textron currently projects that expenditures for remediation will range between $10 million and $20 million for each of the years 1997 and 1998. In October 1996, the Accounting Standards Executive Committee issued Statement of Position, "Environmental Remediation Liabilities" (SOP 96-1). The SOP provides an overview of federal environmental laws, accounting guidance on issues relating to the recognition, measurement, and disclosure of environmental liabilities, and audit guidance. The adoption of SOP 96-1 at the beginning of 1997 will not have a material effect on Textron's liquidity, net income, or financial condition. For further information about environmental matters, see Note 19 to the consolidated financial statements. *Backlog: Textron's commercial backlog was $3.1 billion and U.S. government backlog was $2.2 billion and $1.7 billion at the end of 1996 and 1995, respectively. Backlog for the Aircraft segment was approximately 73% of Textron's commercial backlog and 71% and 72% of Textron's U.S. government backlog at the end of 1996 and 1995, respectively. *Foreign military sales: Certain of Textron's products are sold through the Department of Defense's Foreign Military Sales Program. In addition, Textron sells directly to select foreign military organizations, primarily Canada. Sales under these programs totaled approximately 4.7% of Textron's consolidated revenues in 1996 and 5.0% in 1995. Such sales, which include spare parts, are made only after approval of applicable United States Government Agencies. 3 0 T E X T R O N 31 - ------------------------------------------------------------------------------- Report of Management The consolidated financial statements of Textron Inc. have been prepared by management and have been audited by Textron's independent auditors, Ernst & Young LLP, whose report appears below. Management is responsible for the consolidated financial statements, which have been prepared in conformity with generally accepted accounting principles and include amounts based on management's best estimates and judgments. Management is also responsible for maintaining internal control systems designed to provide reasonable assurance, at appropriate cost, that assets are safeguarded and that transactions are executed and recorded in accordance with established policies and procedures. Textron's systems are under continuing review and are supported by, among other things, business conduct and other written guidelines, an internal audit function and the selection and training of qualified personnel. The Board of Directors, through its Audit Committee, oversees management's financial reporting responsibilities. The Audit Committee, comprised of four outside directors, meets regularly with the independent auditors, representatives of management and the internal auditors to discuss and make inquiries into their activities. Both the independent auditors and the internal auditors have free access to the Audit Committee, with and without management representatives in attendance. /s/ James F. Hardymon /s/ Lewis B. Campbell James F. Hardymon Lewis B. Campbell Chairman and Chief Executive Officer President and Chief Operating Officer /s/ Stephen L. Key Stephen L. Key Executive Vice President and Chief Financial Officer January 23, 1997 - ------------------------------------------------------------------------------- Report of Independent Auditors To the Board of Directors and Shareholders Textron Inc. We have audited the accompanying consolidated balance sheet of Textron Inc. as of December 28, 1996 and December 30, 1995, and the related consolidated statements of income, cash flows and changes in shareholders' equity for each of the three years in the period ended December 28, 1996. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Textron Inc. at December 28, 1996 and December 30, 1995, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 28, 1996, in conformity with generally accepted accounting principles. /s/ Ernst & Young LLP Boston, Massachusetts January 23, 1997 T E X T R O N 3 1 32 - ------------------------------------------------------------------------------------------------------------------------------------
Statement of Income For each of the three years in the period ended December 28, 1996 Consolidated ------------------------------------------ (In millions except per share amounts) 1996 1995 1994 - ------------------------------------------------------------------------------------------------------------------------------------ Revenues Manufacturing sales $7,179 $6,468 $6,680 Finance revenues 2,095 1,985 1,672 - ------------------------------------------------------------------------------------------------------------------------------------ Total revenues 9,274 8,453 8,352 - ------------------------------------------------------------------------------------------------------------------------------------ Costs and expenses Cost of sales 5,837 5,294 5,514 Selling and administrative 1,374 1,274 1,212 Interest 731 791 651 Provision for losses on collection of finance receivables 230 169 162 Other 275 235 190 - ------------------------------------------------------------------------------------------------------------------------------------ Total costs and expenses 8,447 7,763 7,729 - ------------------------------------------------------------------------------------------------------------------------------------ 827 690 623 Pretax income of the Finance Group - - - - ------------------------------------------------------------------------------------------------------------------------------------ Income from continuing operations before income taxes and distributions on preferred securities of subsidiary trust 827 690 623 Income taxes (322) (274) (257) Distributions on preferred securities of subsidiary trust, net of income taxes (23) - - - ------------------------------------------------------------------------------------------------------------------------------------ Income from continuing operations 482 416 366 Discontinued operation, net of income taxes: Income from operations 16 63 67 Estimated loss on disposal (245) - - - ------------------------------------------------------------------------------------------------------------------------------------ (229) 63 67 Net income $ 253 $ 479 $ 433 ==================================================================================================================================== Per common share: Income from continuing operations $ 5.60 $ 4.79 $ 4.06 Discontinued operation (2.66) .72 .74 ======================================================================================================================== Net income $ 2.94 $ 5.51 $ 4.80 ======================================================================================================================== "Parent Group" includes all entities of Textron (primarily manufacturing) other than its finance subsidiaries. The Parent Group's investment in Textron's finance subsidiaries is reflected on a one-line basis under the equity method of accounting. "Finance Group" consists of Textron's wholly-owned finance subsidiaries, AFS and TFC. All significant transactions between the Parent Group and the Finance Group have been eliminated from the "Consolidated" column. The principles of consolidation are described in Note 1 to the consolidated financial statements. The fiscal year-end for the Finance Group is December 31 for all periods presented. See notes to the consolidated financial statements. 3 2 T E X T R O N 33 - ------------------------------------------------------------------------------------------------------------------------------------ Statement of Income For each of the three years in the period ended December 28, 1996 Parent Group Finance Group - -------------------------------------------------------------------------------------------------------------------------- (In millions except per share amounts) 1996 1995 1994 1996 1995 1994 - -------------------------------------------------------------------------------------------------------------------------- Revenues Manufacturing sales $7,179 $6,468 $6,680 $ - $ - $ - Finance revenues - - - 2,095 1,985 1,672 - -------------------------------------------------------------------------------------------------------------------------- Total revenues 7,179 6,468 6,680 2,095 1,985 1,672 - -------------------------------------------------------------------------------------------------------------------------- Costs and expenses Cost of sales 5,837 5,294 5,514 - - - Selling and administrative 750 671 682 624 603 530 Interest 148 178 192 583 613 459 Provision for losses on collection of finance receivables - - - 230 169 162 Other - - - 275 235 190 - -------------------------------------------------------------------------------------------------------------------------- Total costs and expenses 6,735 6,143 6,388 1,712 1,620 1,341 - -------------------------------------------------------------------------------------------------------------------------- 444 325 292 383 365 331 Pretax income of the Finance Group 383 365 331 - - - - -------------------------------------------------------------------------------------------------------------------------- Income from continuing operations before income taxes and distributions on preferred securities of subsidiary trust 827 690 623 383 365 331 Income taxes (322) (274) (257) (149) (142) (128) Distributions on preferred securities of subsidiary trust, net of income taxes (23) - - - - - - -------------------------------------------------------------------------------------------------------------------------- Income from continuing operations 482 416 366 234 223 203 Discontinued operation, net of income taxes: Income from operations 16 63 67 - - - Estimated loss on disposal (245) - - - - - - -------------------------------------------------------------------------------------------------------------------------- (229) 63 67 - - - Net income $ 253 $ 479 $ 433 $ 234 $ 223 $ 203 ========================================================================================================================== "Parent Group" includes all entities of Textron (primarily manufacturing) other than its finance subsidiaries. The Parent Group's investment in Textron's finance subsidiaries is reflected on a one-line basis under the equity method of accounting. "Finance Group" consists of Textron's wholly-owned finance subsidiaries, AFS and TFC. All significant transactions between the Parent Group and the Finance Group have been eliminated from the "Consolidated" column. The principles of consolidation are described in Note 1 to the consolidated financial statements. The fiscal year-end for the Finance Group is December 31 for all periods presented. See notes to the consolidated financial statements.
T E X T R O N 3 3 34 - ------------------------------------------------------------------------------------------------------------------------------------
Balance Sheet As of December 28, 1996 and December 30, 1995 Consolidated ----------------------------------------------------- (Dollars in millions) 1996 1995 - ------------------------------------------------------------------------------------------------------------------------------------ ASSETS Cash $ 47 $ 84 Investments 820 778 Receivables - net: Finance 9,856 9,362 Commercial and U.S. government 882 777 - ------------------------------------------------------------------------------------------------------------------------------------ 10,738 10,139 Inventories 1,192 1,284 Investments in Finance Group - - Investment in discontinued operation 770 1,118 Property, plant, and equipment - net 1,539 1,373 Goodwill - net 1,609 1,491 Other (including net prepaid income taxes) 1,520 1,384 - ------------------------------------------------------------------------------------------------------------------------------------ Total Assets $18,235 $17,651 ==================================================================================================================================== Liabilities and shareholders' equity Liabilities Accounts payable $ 850 $ 684 Accrued postretirement benefits other than pensions 817 919 Other accrued liabilities (including income taxes) 2,556 2,425 Debt 10,346 10,211 - ------------------------------------------------------------------------------------------------------------------------------------ Total Liabilities 14,569 14,239 ==================================================================================================================================== Textron - Obligated mandatorily redeemable preferred securities of subsidiary trust holding solely Textron junior subordinated debt securities 483 - Shareholders' equity Capital stock: Preferred stock: $2.08 Cumulative Convertible Preferred Stock, Series A (liquidation value - $16) 7 8 $1.40 Convertible Preferred Dividend Stock, Series B (preferred only as to dividends) 7 7 Common stock (94,456,000 and 93,462,000 shares issued) 12 12 Capital surplus 793 750 Retained earnings 2,969 2,864 Other 7 129 - ------------------------------------------------------------------------------------------------------------------------------------ 3,795 3,770 Less cost of treasury shares 612 358 - ------------------------------------------------------------------------------------------------------------------------------------ Total shareholders' equity 3,183 3,412 - ------------------------------------------------------------------------------------------------------------------------------------ Total liabilities and shareholders' equity $18,235 $17,651 ==================================================================================================================================== "Parent Group" includes all entities of Textron (primarily manufacturing) other than its finance subsidiaries. The Parent Group's investment in Textron's finance subsidiaries is reflected on a one-line basis under the equity method of accounting. "Finance Group" consists of Textron's wholly-owned finance subsidiaries, AFS and TFC. All significant transactions between the Parent Group and the Finance Group have been eliminated from the "Consolidated" column. The principles of consolidation are described in Note 1 to the consolidated financial statements. The fiscal year-end for the Finance Group is December 31 for all periods presented. See notes to the consolidated financial statements. 3 4 T E X T R O N 35 - ------------------------------------------------------------------------------------------------------------ Balance Sheet As of December 28, 1996 and December 30, 1995 Parent Group Finance Group - ------------------------------------------------------------------------------------------------------------ (Dollars in millions) 1996 1995 1996 1995 - ------------------------------------------------------------------------------------------------------------ Assets Cash $ 24 $ 56 $ 23 $ 28 Investments 6 7 814 771 Receivables - net: Finance - - 9,860 9,370 Commercial and U.S. government 882 777 - - - ------------------------------------------------------------------------------------------------------------ 882 777 9,860 9,370 Inventories 1,192 1,284 - - Investments in Finance Group 1,600 1,475 - - Investment in discontinued operation 770 1,118 - - Property, plant, and equipment - net 1,454 1,297 85 76 Goodwill - net 1,466 1,344 143 147 Other (including net prepaid income taxes) 1,263 1,170 484 434 - ------------------------------------------------------------------------------------------------------------ Total assets $8,657 $8,528 $11,409 $10,826 ============================================================================================================ Liabilities and shareholders' equity Liabilities Accounts payable $ 724 $ 576 $ 130 $ 112 Accrued postretirement benefits other than pensions 782 883 35 36 Other accrued liabilities (including income taxes) 1,978 1,883 805 766 Debt 1,507 1,774 8,839 8,437 - ------------------------------------------------------------------------------------------------------------ Total liabilities 4,991 5,116 9,809 9,351 ============================================================================================================ Textron - obligated mandatorily redeemable preferred securities of subsidiary trust holding solely Textron junior subordinated debt securities 483 - - - Shareholders' equity Capital stock: Preferred stock: $2.08 Cumulative Convertible Preferred Stock, Series A (liquidation value - $16) 7 8 - - $1.40 Convertible Preferred Dividend Stock, Series B (preferred only as to dividends) 7 7 - - Common stock (94,456,000 and 93,462,000 shares issued) 12 12 1 1 Capital surplus 793 750 800 798 Retained earnings 2,969 2,864 787 676 Other 7 129 12 - - ------------------------------------------------------------------------------------------------------------ 3,795 3,770 1,600 1,475 Less cost of treasury shares 612 358 - - - ------------------------------------------------------------------------------------------------------------ Total shareholders' equity 3,183 3,412 1,600 1,475 - ------------------------------------------------------------------------------------------------------------ Total liabilities and shareholders' equity $8,657 $8,528 $11,409 $10,826 ============================================================================================================ "Parent Group" includes all entities of Textron (primarily manufacturing) other than its finance subsidiaries. The Parent Group's investment in Textron's finance subsidiaries is reflected on a one-line basis under the equity method of accounting. "Finance Group" consists of Textron's wholly-owned finance subsidiaries, AFS and TFC. All significant transactions between the Parent Group and the Finance Group have been eliminated from the "Consolidated" column. The principles of consolidation are described in Note 1 to the consolidated financial statements. The fiscal year-end for the Finance Group is December 31 for all periods presented. See notes to the consolidated financial statements.
T E X T R O N 3 5 36 - ------------------------------------------------------------------------------------------------------------------------------------
Statement of Cash Flows For each of the three years in the period ended December 28, 1996 Consolidated ------------------------------------------------------------------------------ (In millions) 1996 1995 1994 - ------------------------------------------------------------------------------------------------------------------------------------ Cash flows from operating activities: Income from continuing operations $ 482 $ 416 $ 366 Adjustments to reconcile income from continuing operations to net cash provided by operating activities: Undistributed earnings of Finance Group - - - Depreciation and amortization 387 342 338 Provision for losses on receivables 233 172 169 Deferred income taxes 11 28 53 Changes in assets and liabilities excluding those related to acquisitions and divestitures: Increase in commercial and U.S. government receivables (33) (40) (163) Decrease (increase) in inventories (33) (28) 64 Decrease (increase) in other assets (125) 25 (51) Increase (decrease) in accounts payable 79 54 86 Increase (decrease) in accrued liabilities 57 (96) 100 Other - net (82) 35 (28) - ------------------------------------------------------------------------------------------------------------------------------------ Cash provided by operating activities of continuing operations 976 908 934 Cash provided by operating activities of discontinued operation 516 349 314 - ------------------------------------------------------------------------------------------------------------------------------------ Net cash provided by operating activities 1,492 1,257 1,248 - ------------------------------------------------------------------------------------------------------------------------------------ Cash flows from investing activities: Purchases of investments (293) (188) (189) Proceeds from disposition of investments 204 96 65 Maturities and calls of investments 50 55 56 Finance receivables: Originated or purchased (6,890) (6,237) (6,020) Repaid or sold 6,310 5,731 4,834 Cash used in acquisitions (224) (252) (9) Proceeds from sales of businesses 180 - 492 Capital expenditures (343) (279) (294) Other investing activities - net 25 30 2 - ------------------------------------------------------------------------------------------------------------------------------------ Cash provided (used) by investing activities of continuing operations (981) (1,044) (1,063) Cash used by investing activities of discontinued operation (603) (420) (520) - ------------------------------------------------------------------------------------------------------------------------------------ Net cash provided (used) by investing activities (1,584) (1,464) (1,583) - ------------------------------------------------------------------------------------------------------------------------------------ Cash flows from financing activities: Increase (decrease) in short-term debt 240 (253) 449 Proceeds from issuance of long-term debt 2,089 2,984 2,078 Principal payments on long-term debt (2,438) (2,347) (2,072) Issuance of Textron - obligated mandatorily redeemable preferred securities of subsidiary trust holding solely Textron junior subordinated debt securities 483 - - Proceeds from exercise of stock options 42 42 12 Purchases of Textron common stock (266) (100) (166) Purchases of Textron common stock from Paul Revere (34) (22) (25) Dividends paid (148) (133) (124) Dividends paid to Parent Group - - - - ------------------------------------------------------------------------------------------------------------------------------------ Cash provided (used) by financing activities of continuing operations (32) 171 152 Cash provided by financing activities of discontinued operation 72 86 206 - ------------------------------------------------------------------------------------------------------------------------------------ Net cash provided (used) by financing activities 40 257 358 - ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in cash (52) 50 23 Elimination of cash flow of discontinued operation 15 (15) - Cash at beginning of year 84 49 26 - ------------------------------------------------------------------------------------------------------------------------------------ Cash at end of year $ 47 $ 84 $ 49 ==================================================================================================================================== Supplemental information from continuing operations: Cash paid during the year for interest $ 723 $ 765 $ 624 Cash paid during the year for income taxes 278 276 194 ==================================================================================================================================== "Parent Group" includes all entities of Textron (primarily manufacturing) other than its finance subsidiaries. The Parent Group's investment in Textron's finance subsidiaries is reflected on a one-line basis under the equity method of accounting. "Finance Group" consists of Textron's wholly-owned finance subsidiaries, AFS and TFC. All significant transactions between the Parent Group and the Finance Group have been eliminated from the "Consolidated" column. The principles of consolidation are described in Note 1 to the consolidated financial statements. The fiscal year-end for the Finance Group is December 31 for all periods presented. See notes to the consolidated financial statements. 3 6 T E X T R O N 37 - ------------------------------------------------------------------------------------------------------------------------------------ Statement of Cash Flows For each of the three years in the period ended December 28, 1996 Parent Group Finance Group - ------------------------------------------------------------------------------------------------------------------------- (In millions) 1996 1995 1994 1996 1995 1994 - ------------------------------------------------------------------------------------------------------------------------- Cash flows from operating activities: Income from continuing operations $ 482 $ 416 $ 366 $ 234 $ 223 $ 203 Adjustments to reconcile income from continuing operations to net cash provided by operating activities: Undistributed earnings of Finance Group (110) (106) (97) - - - Depreciation and amortization 256 221 238 131 121 100 Provision for losses on receivables 3 3 8 230 169 162 Deferred income taxes 5 18 32 6 10 21 Changes in assets and liabilities excluding those related to acquisitions and divestitures: Increase in commercial and U.S. government receivables (33) (40) (146) - - - Decrease (increase) in inventories (33) (28) 64 - - - Decrease (increase) in other assets (123) 49 (87) (11) (1) 5 Increase (decrease) in accounts payable 66 58 76 20 (28) 24 Increase (decrease) in accrued liabilities 70 (116) 78 (15) (9) 37 Other - net (7) 61 6 (75) (27) (56) - ------------------------------------------------------------------------------------------------------------------------- Cash provided by operating activities of continuing operations 576 536 538 520 458 496 Cash provided by operating activities of discontinued operation - - - - - - - ------------------------------------------------------------------------------------------------------------------------- Net cash provided by operating activities 576 536 538 520 458 496 - ------------------------------------------------------------------------------------------------------------------------- Cash flows from investing activities: Purchases of investments (5) (9) (1) (288) (179) (188) Proceeds from disposition of investments 6 30 9 198 66 56 Maturities and calls of investments - - - 50 55 56 Finance receivables: Originated or purchased - - - (6,890) (6,237) (6,020) Repaid or sold - - - 6,314 5,762 4,838 Cash used in acquisitions (216) (212) (9) (8) (40) - Proceeds from sales of businesses 180 - 492 - - - Capital expenditures (309) (256) (272) (34) (23) (22) Other investing activities - net 28 10 5 (3) 20 (2) - ------------------------------------------------------------------------------------------------------------------------- Cash provided (used) by investing activities of continuing operations (316) (437) 224 (661) (576) (1,282) Cash used by investing activities of discontinued operation - - - - - - - ------------------------------------------------------------------------------------------------------------------------- Net cash provided (used) by investing activities (316) (437) 224 (661) (576) (1,282) - ------------------------------------------------------------------------------------------------------------------------- Cash flows from financing activities: Increase (decrease) in short-term debt (48) (15) (36) 288 (238) 485 Proceeds from issuance of long-term debt 905 1,147 612 1,184 1,837 1,467 Principal payments on long-term debt (1,226) (982) (1,027) (1,212) (1,365) (1,045) Issuance of Textron - obligated mandatorily redeemable preferred securities of subsidiary trust holding solely Textron junior subordinated debt securities 483 - - - - - Proceeds from exercise of stock options 42 42 12 - - - Purchases of Textron common stock (266) (100) (166) - - - Purchases of Textron common stock from Paul Revere (34) (22) (25) - - - Dividends paid (148) (133) (124) - - - Dividends paid to Parent Group - - - (124) (117) (106) - ------------------------------------------------------------------------------------------------------------------------- Cash provided (used) by financing activities of continuing operations (292) (63) (754) 136 117 801 Cash provided by financing activities of discontinued operation - - - - - - - ------------------------------------------------------------------------------------------------------------------------- Net cash provided (used) by financing activities (292) (63) (754) 136 117 801 - ------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in cash (32) 36 8 (5) (1) 15 Elimination of cash flow of discontinued operation - - - - - - Cash at beginning of year 56 20 12 28 29 14 - ------------------------------------------------------------------------------------------------------------------------- Cash at end of year $ 24 $ 56 $ 20 $ 23 $ 28 $ 29 ========================================================================================================================= Supplemental information from continuing operations: Cash paid during the year for interest $ 140 $ 161 $ 177 $ 583 $ 604 $ 447 Cash paid during the year for income taxes 142 131 84 136 145 110 ========================================================================================================================= "Parent Group" includes all entities of Textron (primarily manufacturing) other than its finance subsidiaries. The Parent Group's investment in Textron's finance subsidiaries is reflected on a one-line basis under the equity method of accounting. "Finance Group" consists of Textron's wholly-owned finance subsidiaries, AFS and TFC. All significant transactions between the Parent Group and the Finance Group have been eliminated from the "Consolidated" column. The principles of consolidation are described in Note 1 to the consolidated financial statements. The fiscal year-end for the Finance Group is December 31 for all periods presented. See notes to the consolidated financial statements.
T E X T R O N 3 7 38 - --------------------------------------------------------------------------------------------------------------------------
Consolidated Statement of Changes in Shareholders' Equity Shares outstanding Dollars (In thousands) (In millions) ---------------------------- -------------------------------- For each of the three years in the period ended December 28, 1996 1996 1995 1994 1996 1995 1994 - -------------------------------------------------------------------------------------------------------------------------- $2.08 Preferred stock Beginning balance 267 297 321 $ 8 $ 9 $ 9 Conversion to common stock (24) (30) (24) (1) (1) - - -------------------------------------------------------------------------------------------------------------------------- Ending balance 243 267 297 $ 7 $ 8 $ 9 ========================================================================================================================== $1.40 Preferred stock Beginning balance 118 126 138 $ 7 $ 7 $ 7 Conversion to common stock (11) (8) (12) - - - - -------------------------------------------------------------------------------------------------------------------------- Ending balance 107 118 126 $ 7 $ 7 $ 7 ========================================================================================================================== Common stock Beginning balance 84,935 85,497 88,413 $ 12 $ 12 $ 12 Purchases (3,193) (1,734) (3,346) - - - Conversion of preferred stock to common stock 71 81 75 - - - Exercise of stock options 923 1,091 349 - - - Other issuances of common stock 73 - 6 - - - - -------------------------------------------------------------------------------------------------------------------------- Ending balance 82,809 84,935 85,497 $ 12 $ 12 $ 12 ========================================================================================================================== Capital surplus Beginning balance $ 750 $ 702 $ 687 Conversion of preferred stock to common stock 1 1 1 Exercise of stock options 48 47 14 Purchases of common stock (6) - - - -------------------------------------------------------------------------------------------------------------------------- Ending balance $ 793 $ 750 $ 702 ========================================================================================================================== Retained earnings Beginning balance $2,864 $2,518 $2,209 Net income 253 479 433 Dividends declared: Preferred stock (1) (1) (1) Common stock (per share: $1.76 in 1996; $1.56 in 1995; and $1.40 in 1994) (147) (132) (123) - -------------------------------------------------------------------------------------------------------------------------- Ending balance $2,969 $2,864 $2,518 ========================================================================================================================== Treasury stock Beginning balance $ 358 $ 258 $ 92 Purchases of common stock 259 100 166 Issuance of common stock for acquisitions (5) - - - -------------------------------------------------------------------------------------------------------------------------- Ending balance $ 612 $ 358 $ 258 ========================================================================================================================== Other Beginning balance $ 129 $ (108) $ (52) Currency translation adjustment 35 5 1 Securities valuation adjustment (155) 216 (71) Pension liability adjustment (2) 3 - Shares allocated to ESOP participants' accounts - 13 14 - -------------------------------------------------------------------------------------------------------------------------- Ending balance $ 7 $ 129 $ (108) ========================================================================================================================== Shares issued at the end of 1996, 1995, 1994, and 1993 were as follows (in thousands): $2.08 Preferred - 312; 336; 366; and 390 shares, respectively; $1.40 Preferred - 594; 604; 613; and 625 shares, respectively; Common - 94,456; 93,462; 92,284; and 91,859 shares, respectively. Includes net unrealized gains relating to the transfer of all of Paul Revere's debt securities from the held to maturity category to the available for sale category of its investment portfolio ($133 million) partially offset by an adjustment to deferred policy acquisition costs ($73 million). See notes to consolidated financial statements.
3 8 T E X T R O N 39 - ------------------------------------------------------------------------------ Notes to Consolidated Financial Statements - ------------------------------------------------------------------------------ 1. Financial Statement Presentation Summary of Significant Accounting Policies SIGNIFICANT ACCOUNTING POLICIES APPEAR IN CAPITAL LETTERS AS AN INTEGRAL PART OF THE NOTES TO THE FINANCIAL STATEMENTS TO WHICH THE POLICIES RELATE. Principles of consolidation The consolidated financial statements include the accounts of Textron and all of its majority- and wholly-owned subsidiaries. All significant intercompany transactions are eliminated. Paul Revere is reflected as a discontinued operation for all periods presented. Textron consists of two borrowing groups - the Textron Parent Company Borrowing Group (Parent Group) and Textron's finance subsidiaries (Finance Group). The Parent Group consists of all entities of Textron (primarily manufacturing) other than its wholly-owned finance subsidiaries, which are included on a one-line basis under the equity method of accounting. The Finance Group consists of Avco Financial Services (AFS) and Textron Financial Corporation (TFC). Prior-period data shown in the financial statements and the related notes have been reclassified, as appropriate. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in these statements and accompanying notes. Consequently, actual results could differ from such estimates. - ------------------------------------------------------------------------------ 2. Acquisitions, Dispositions, and Discontinued Operation Acquisitions In early 1997, Textron acquired the Germany-based Kautex Group, a worldwide supplier of blow-molded plastic fuel tanks and other automotive components and systems and Switzerland-based Maag Pump Systems AG and Italy-based Maag Italia S.p.A., manufacturers of gears, gear pumps, and gear systems for an aggregate of approximately $390 million. In 1996, Textron acquired (a) Xact Products Inc., a U.S. based precision-formed metal parts manufacturer, (b) Valois Industries (which has been re-named Textron Industries, S.A.S.), a France-based manufacturer of engineered fastening systems, (c) Klauke, a German manufacturer of electrical connectors, sleeves, and battery-powered tools for the utility and electrical contracting markets, (d) the UK-based automotive windshield and headlamp washer systems business of Valeo Wiper Systems Ltd., (e) The Bunton Company, a Kentucky-based manufacturer of rotary lawn-care equipment for commercial markets, (f) Insurex Canada Inc., a provider of insurance premium financing, (g) Tuckahoe Leasing Inc., a Canadian provider of equipment financing, and (h) the remaining 50% of a joint venture in Born, Netherlands. The aggregate cost of these acquisitions was approximately $370 million. In 1995, Textron acquired (a) Elco Industries, (b) Friedr. Boesner GmbH, and (c) the stock of HFC of Australia Ltd. for an aggregate of approximately $300 million. The acquisitions were accounted for as purchases and accordingly, the results of operations of each acquired company is included in the statement of income from the date of acquisition. Dispositions In 1996, Textron sold its Aerostructures division for $180 million in cash plus a subordinated note. No gain or loss resulted from the sale. In 1994, Textron sold its Homelite and Lycoming Turbine Engine divisions for aggregate cash proceeds of $495 million. Discontinued operation On April 29, 1996, The Paul Revere Corporation, an 83.3% owned subsidiary, entered into an agreement with Provident Companies, Inc. whereby Provident will acquire all of the outstanding shares of Paul Revere's common stock. For each of its Paul Revere shares, Textron will receive approximately $20 per share in cash ($750 million) and shares of Provident common stock determined in accordance with an exchange ratio based upon closing prices of Provident common stock prior to the closing of the transaction, subject to certain limitations. T E X T R O N 39 40 - ------------------------------------------------------------------------------ In November 1996, the agreement with Provident was revised. Under the revised agreement, Textron agreed to provide additional capital to Paul Revere, the amount of which will depend upon a final determination of the required levels of Paul Revere's statutory reserves, subject to certain limits. Textron also agreed to grant certain other concessions to Provident. The transaction remains subject to the approval of the Commonwealth of Massachusetts Division of Insurance. The transaction is targeted to close early in 1997. Based on the $531/2 closing price of Provident's stock on February 13, 1997, Textron would receive approximately 5.9 million of Provident shares. Proceeds are expected to be used for general corporate purposes including debt reduction, purchases of Textron common stock, and financing acquisitions. Textron's estimated loss from discontinued operations includes Textron's share of Paul Revere's estimated net loss for the period April 1996 through the expected closing date (approximately $165 million). The final determination of the required capital contribution to Paul Revere and the share value of Provident stock received by Textron at closing will affect Textron's reported loss from discontinued operation in 1997. Paul Revere's revenues for 1996 and 1995 were $1.6 billion and $1.5 billion, respectively. - ------------------------------------------------------------------------------ 3. Investments SECURITIES CLASSIFIED AS AVAILABLE FOR SALE ARE REPORTED AT ESTIMATED FAIR VALUE. UNREALIZED GAINS AND LOSSES RELATED TO THESE SECURITIES, NET OF APPLICABLE INCOME TAXES, ARE REPORTED AS A SEPARATE COMPONENT OF SHAREHOLDERS' EQUITY. NET REALIZED GAINS OR LOSSES RESULTING FROM SALES OR CALLS OF INVESTMENTS ARE INCLUDED IN REVENUES AND ARE NOT SIGNIFICANT FOR ALL YEARS PRESENTED. THE COST OF SECURITIES SOLD IS DETERMINED PRIMARILY USING THE SPECIFIC IDENTIFICATION METHOD. The amortized cost and estimated fair value of investments at the end of 1996 and 1995 were as follows:
Gross Gross Amortized unrealized unrealized Estimated (In millions) cost gains losses fair value - -------------------------------------------------------------------------------------------------------------------- December 28, 1996 Securities available for sale: Obligations of U.S. and foreign governments and government agencies $227 $10 $1 $236 Public utility securities 53 1 - 54 Corporate securities 315 4 2 317 Mortgage-backed securities 180 1 1 180 Marketable equity securities 23 2 - 25 - -------------------------------------------------------------------------------------------------------------------- $798 $18 $4 812 ================================================================================================= Other investments, at cost (estimated fair value: $8) 8 - -------------------------------------------------------------------------------------------------------------------- $820 ==================================================================================================================== December 30, 1995 Securities available for sale: Obligations of U.S. and foreign governments and government agencies $237 $13 $1 $249 Public utility securities 61 2 - 63 Corporate securities 379 16 2 393 Mortgage-backed securities 40 - - 40 Marketable equity securities 21 3 - 24 - -------------------------------------------------------------------------------------------------------------------- $738 $34 $3 769 ================================================================================================= Other investments, at cost (estimated fair value: $9) 9 - -------------------------------------------------------------------------------------------------------------------- $778 ====================================================================================================================
The amortized cost and estimated fair value of debt securities at the end of 1996, grouped by contractual maturity date, were as follows:
Amortized Estimated (In millions) cost fair value - -------------------------------------------------------------------------------------------------------------------- Due in 1997 $146 $146 Due 1998 to 2001 260 266 Due 2002 to 2006 133 137 Due after 2006 56 58 - -------------------------------------------------------------------------------------------------------------------- 595 607 - -------------------------------------------------------------------------------------------------------------------- Mortgage-backed securities 180 180 - -------------------------------------------------------------------------------------------------------------------- $775 $787 ====================================================================================================================
4 0 T E X T R O N 41 - ------------------------------------------------------------------------------ 4. Finance Receivables TEXTRON RECOGNIZES INTEREST INCOME IN REVENUES USING THE INTEREST METHOD. DIRECT LOAN ORIGINATION COSTS AND FEES RECEIVED ARE DEFERRED AND AMORTIZED OVER THE LOANS' CONTRACTUAL LIVES. TEXTRON SUSPENDS ACCRUAL OF INTEREST INCOME FOR ACCOUNTS WHICH ARE CONTRACTUALLY DELINQUENT BY MORE THAN THREE MONTHS (COMMERCIAL) OR THREE PAYMENTS (CONSUMER). ACCRUAL OF INTEREST ON COMMERCIAL LOANS RESUMES AND SUSPENDED INTEREST INCOME IS RECOGNIZED WHEN LOANS BECOME CONTRACTUALLY CURRENT. INTEREST INCOME ON DELINQUENT CONSUMER LOANS IS RECOGNIZED WHEN COLLECTED. FINANCE RECEIVABLES ARE WRITTEN OFF WHEN THEY ARE DETERMINED TO BE UNCOLLECTIBLE, BUT IN ANY EVENT, ALL CONSUMER RECEIVABLES FOR WHICH AN AMOUNT AGGREGATING A FULL CONTRACTUAL PAYMENT HAS NOT BEEN RECEIVED FOR SIX CONSECUTIVE MONTHS ARE WRITTEN OFF. FINANCE RECEIVABLES, PRIMARILY COMMERCIAL FINANCE RECEIVABLES AND CONSUMER REAL ESTATE LOANS, ARE WRITTEN DOWN TO THE FAIR VALUE OF THE RELATED COLLATERAL (LESS ESTIMATED COSTS TO SELL) WHEN THE COLLATERAL IS REPOSSESSED OR WHEN NO PAYMENT HAS BEEN RECEIVED FOR SIX MONTHS, UNLESS MANAGEMENT DEEMS THE LOANS COLLECTIBLE. FORECLOSED REAL ESTATE LOANS AND REPOSSESSED ASSETS ARE TRANSFERRED FROM FINANCE RECEIVABLES TO OTHER ASSETS AT THE LOWER OF FAIR VALUE (LESS ESTIMATED COSTS TO SELL) OR THE OUTSTANDING LOAN BALANCE. PROVISIONS FOR LOSSES ON FINANCE RECEIVABLES ARE CHARGED TO INCOME IN AMOUNTS SUFFICIENT TO MAINTAIN THE ALLOWANCE AT A LEVEL CONSIDERED ADEQUATE TO COVER LOSSES IN THE EXISTING RECEIVABLE PORTFOLIO. MANAGEMENT EVALUATES THE ALLOWANCE BY EXAMINING CURRENT DELINQUENCIES, THE CHARACTERISTICS OF THE EXISTING ACCOUNTS, HISTORICAL LOSS EXPERIENCE, THE VALUE OF THE UNDERLYING COLLATERAL, AND GENERAL ECONOMIC CONDITIONS AND TRENDS. The maximum term of consumer loans and retail installment contracts is ten years, but approximately 90% of the contracts have terms of four years or less. Consumer real estate loans have a maximum term of 15 years. Nonearning consumer loans were $141 million at the end of 1996 ($115 million at the end of 1995). Commercial installment contracts have initial terms ranging from one to 12 years. Commercial real estate loans have initial terms ranging from three to five years. Finance leases have initial terms up to 12 years. Leveraged leases have initial terms up to approximately 30 years. Floorplan and other receivablesgenerally mature within one year. Nonearning commercial loans were $91 million at the end of 1996 ($99 million at the end of 1995). The table below displays the contractual maturity of the finance receivables. It does not necessarily reflect future cash collections because of various factors including the refinancing of receivables and repayments prior to maturity. Cash collections from receivables, excluding finance charges, were $6.3 billion and $5.7 billion in 1996 and 1995, respectively. In the same periods, the ratio of cash collections to average net receivables was approximately 65% and 63%, respectively.
Finance receivables Contractual maturities Less outstanding -------------------------------- finance --------------------- (In millions) 1997 1998 After 1998 charges 1996 1995 - -------------------------------------------------------------------------------------------------------------------- Consumer: Consumer loans $1,880 $1,274 $1,296 $1,244 $ 3,206 $3,021 Real estate loans 683 472 3,728 2,336 2,547 2,513 Retail installment contracts 881 373 385 430 1,209 1,136 Other 146 75 116 46 291 264 - -------------------------------------------------------------------------------------------------------------------- 3,590 2,194 5,525 4,056 7,253 6,934 - -------------------------------------------------------------------------------------------------------------------- Commercial: Installment contracts 383 323 760 255 1,211 1,095 Real estate loans 43 61 300 2 402 426 Finance leases 176 147 358 125 556 523 Leveraged leases 11 9 606 299 327 327 Floorplan and other receivables 483 82 116 8 673 589 - -------------------------------------------------------------------------------------------------------------------- 1,096 622 2,140 689 3,169 2,960 - -------------------------------------------------------------------------------------------------------------------- $4,686 $2,816 $7,665 $4,745 10,422 9,894 - ----------------------------------------=============================================== Less allowance for credit losses 293 270 Less finance-related insurance reserves and claims 273 262 - -------------------------------------------------------------------------------------------------------------------- $ 9,856 $9,362 ====================================================================================================================
Textron had both fixed rate and variable rate loan commitments totaling $751 million at year-end 1996. Because interest rates on these commitments are not set until the loans are funded, Textron is not exposed to interest rate changes. T E X T R O N 4 1 42 - ------------------------------------------------------------------------------- A portion of TFC's business involves financing the sale and lease of Textron products. In 1996, 1995, and 1994, TFC paid Textron $663 million, $461 million, and $595 million, respectively, for receivables and operating lease equipment. Operating agreements with Textron specify that TFC generally has recourse to Textron with respect to these purchases. At year-end 1996, finance receivables and operating lease equipment of $713 million and $86 million, respectively, ($646 million and $77 million, respectively, at year-end 1995) were due from Textron or subject to recourse to Textron. - ------------------------------------------------------------------------------- 5. Inventories INVENTORIES ARE CARRIED AT THE LOWER OF COST OR MARKET.
December 28, December 30, (In millions) 1996 1995 - ------------------------------------------------------------------------------------ Finished goods $ 364 $ 352 Work in process 769 911 Raw materials 259 217 - ------------------------------------------------------------------------------------ 1,392 1,480 Less progress payments and customer deposits 200 196 - ------------------------------------------------------------------------------------ $1,192 $1,284 ====================================================================================
Inventories aggregating $848 million at year-end 1996 and $754 million at year-end 1995 were valued by the last-in, first-out (LIFO) method. (Had such LIFO inventories been valued at current costs, their carrying values would have been approximately $143 million and $139 million higher at those respective dates.) The remaining inventories, other than those related to certain long-term contracts, are valued generally by the first-in, first-out method. Inventories related to long-term contracts, net of progress payments and customer deposits, were $181 million at year-end 1996 and $393 million at year-end 1995. The decrease in long-term contract inventory is primarily attributable to the sale of Textron Aerostructures in 1996. - ------------------------------------------------------------------------------ 6. Long-term Contracts FIXED-PRICE CONTRACT SALES ARE GENERALLY RECORDED AS DELIVERIES ARE MADE. COST REIMBURSEMENT CONTRACT SALES ARE RECORDED AS COSTS ARE INCURRED AND FEES ARE EARNED. CERTAIN CONTRACTS ARE AWARDED WITH FIXED-PRICE INCENTIVE FEES. INCENTIVE FEES ARE CONSIDERED WHEN ESTIMATING REVENUES AND PROFIT RATES, AND ARE RECORDED WHEN THESE AMOUNTS ARE REASONABLY DETERMINED. LONG-TERM CONTRACT PROFITS ARE BASED ON ESTIMATES OF TOTAL SALES VALUE AND COSTS AT COMPLETION. SUCH ESTIMATES ARE REVIEWED AND REVISED PERIODICALLY THROUGHOUT THE CONTRACT LIFE. REVISIONS TO CONTRACT PROFITS ARE RECORDED WHEN THE REVISIONS ARE MADE. ESTIMATED CONTRACT LOSSES ARE RECORDED WHEN IDENTIFIED. Long-term contract receivables at year-end 1996 and year-end 1995 totaled $127 million and $175 million, respectively. This includes $56 million and $81 million, respectively, of unbilled costs and accrued profits that had not yet met the contractual billing criteria. An estimated $5 million and $40 million, respectively, of these unbilled amounts are not expected to be collected within one year. Long-term contract receivables do not include significant amounts (a) billed but unpaid due to contractual retainage provisions or (b) subject to collection uncertainty. - ------------------------------------------------------------------------------ 7. Property, Plant, and Equipment TEXTRON DEPRECIATES THE COST OF PROPERTY, PLANT, AND EQUIPMENT BASED ON THE ASSETS' ESTIMATED USEFUL LIVES.
December 28, December 30, (In millions) 1996 1995 - ------------------------------------------------------------------------------------ At cost: Land and buildings $ 753 $ 726 Machinery and equipment 2,450 2,232 - ------------------------------------------------------------------------------------ 3,203 2,958 Less accumulated depreciation 1,664 1,585 - ------------------------------------------------------------------------------------ $1,539 $1,373 ==================================================================================== 4 2 T E X T R O N 43 - ------------------------------------------------------------------------------ 8. Goodwill TEXTRON AMORTIZES GOODWILL ON THE STRAIGHT-LINE METHOD. GOODWILL RELATED TO MANUFACTURING OPERATIONS IS AMORTIZED OVER 20 TO 40 YEARS AND GOODWILL RELATED TO FINANCE SUBSIDIARIES GENERALLY IS AMORTIZED OVER 25 YEARS. TEXTRON PERIODICALLY REVIEWS GOODWILL FOR IMPAIRMENT BY COMPARING THE CARRYING AMOUNT TO THE ESTIMATED FUTURE UNDISCOUNTED CASH FLOWS OF THE BUSINESSES ACQUIRED. IF THIS REVIEW INDICATES THAT GOODWILL IS NOT RECOVERABLE, TEXTRON WOULD REDUCE ITS CARRYING AMOUNT TO FAIR VALUE (GENERALLY DETERMINED BASED ON FUTURE DISCOUNTED CASH FLOWS) THROUGH A NONCASH CHARGE TO EARNINGS. Goodwill at the end of 1996 and 1995 is summarized as follows:
December 28, December 30, (In millions) 1996 1995 - ------------------------------------------------------------------------------------ Goodwill $2,013 $1,838 Less accumulated amortization 404 347 - ------------------------------------------------------------------------------------ Goodwill, net $1,609 $1,491 ====================================================================================
- ------------------------------------------------------------------------------ 9. Debt and Credit Facilities At the end of 1996 and 1995, debt consisted of the following:
December 28, December 30, (In millions) 1996 1995 - ------------------------------------------------------------------------------------------------------ Parent Group: Senior: Borrowings under or supported by long-term credit facilities $ 878 $ 882 Medium-term notes; due 1997 to 2011 (average rate - 9.52%) 291 333 8.75% - 10.04%; due 2001 to 2022 209 254 Other notes (average rate - 7.17%) 100 276 - ------------------------------------------------------------------------------------------------------ Total senior 1,478 1,745 - ------------------------------------------------------------------------------------------------------ Subordinated - 8.86% - 8.97%; due 1998 to 1999 29 29 - ------------------------------------------------------------------------------------------------------ Total Parent Group 1,507 1,774 - ------------------------------------------------------------------------------------------------------ Finance Group: Senior: Borrowings under or supported by credit facilities 3,781 3,424 4.90% - 5.91%; due 1997 to 2000 1,181 896 6.00% - 6.99%; due 1997 to 2002 1,330 1,067 7.00% - 8.87%; due 1997 to 2000 1,595 2,289 9.17% - 10.86%; due 1997 to 1998 29 129 Variable rate notes; due 1997 to 2000 (average rate - 5.83%) 922 597 - ------------------------------------------------------------------------------------------------------ Total senior 8,838 8,402 - ------------------------------------------------------------------------------------------------------ Senior subordinated - 10.28%; due 1998 1 35 - ------------------------------------------------------------------------------------------------------ Total Finance Group 8,839 8,437 - ------------------------------------------------------------------------------------------------------ Total debt $10,346 $10,211 ====================================================================================================== The weighted average interest rates on these borrowings, before the effect of interest rate exchange agreements, were 5.0%, 6.1%, and 6.2% at year-end 1996, 1995, and 1994, respectively. Comparable rates during the years 1996, 1995, and 1994 were 5.0%, 6.1%, and 4.4%, respectively. The weighted average interest rates on these borrowings, before the effect of interest rate exchange agreements, were 5.5%, 6.3%, and 6.1% at year-end 1996, 1995, and 1994, respectively. Comparable rates during the years 1996, 1995, and 1994 were 5.8%, 6.4%, and 4.7%, respectively.
The following table shows required payments and sinking fund requirements during the next five years on debt outstanding at the end of 1996. The payments schedule excludes amounts that may become payable under credit facilities and revolving credit agreements.
(In millions) 1997 1998 1999 2000 2001 - ------------------------------------------------------------------------------------------------------------ Parent Group $ 80 $ 25 $ 56 $ 53 $136 Finance Group 1,034 846 1,216 1,342 420 - ------------------------------------------------------------------------------------------------------------ $1,114 $871 $1,272 $1,395 $556 ============================================================================================================ T E X T R O N 4 3 44 - ------------------------------------------------------------------------------ The Parent Group maintains credit facilities with various banks for both short- and long-term borrowings. The Parent Group has a $1.5 billion domestic credit agreement with 36 banks available on a fully revolving basis until July 1, 2001. At year-end 1996, $889 million of the credit facility was not used or reserved as support for commercial paper or bank borrowings. In 1996, Textron entered into a five-year multi-currency credit agreement with 14 banks for $350 million for its foreign operations; $83 million was available at year-end 1996. Textron entered into a separate five-year multi-currency credit agreement, effective December 30, 1996, with 22 banks for an additional $450 million to be used for its foreign operations. The Finance Group has lines of credit with various banks aggregating $4.6 billion at year-end 1996, of which $223 million was not used or reserved as support for commercial paper or bank borrowings. Lending agreements limit the Finance Group's net assets available for cash dividends and other payments to the Parent Group to approximately $473 million of the Finance Group's net assets of $1.6 billion at year-end 1996. The Finance Group's loan agreements also contain provisions regarding additional debt, creation of liens or guarantees, and the making of investments. The Parent Group has agreed to cause TFC to maintain certain minimum levels of financial performance. No payments from the Parent Group were necessary in 1996, 1995, or 1994 for TFC to meet these standards. - ------------------------------------------------------------------------------ 10. Derivatives and Foreign Currency Transactions Interest rate exchange agreements Textron uses interest rate exchange agreements to help manage interest rate risk by converting certain variable-rate debt to fixed-rate debt. The agreements do not involve a high degree of complexity or risk and are not used to speculate for profit. TEXTRON'S INTEREST RATE EXCHANGE AGREEMENTS ARE ACCOUNTED FOR ON THE ACCRUAL BASIS. SOME AGREEMENTS ARE DESIGNATED AGAINST SPECIFIC LONG-TERM VARIABLE RATE BORROWINGS, WHILE THE BALANCE IS DESIGNATED AGAINST EXISTING SHORT-TERM VARIABLE-RATE BORROWINGS THROUGH MATURITY AND THEIR ANTICIPATED REPLACEMENTS. TEXTRON CONTINUOUSLY MONITORS VARIABLE-RATE BORROWINGS TO MAINTAIN THE LEVEL OF BORROWING ABOVE THE NOTIONAL AMOUNT OF THE DESIGNATED AGREEMENTS. IF VARIABLE-RATE BORROWINGS WERE TO BECOME LESS THAN THE NOTIONAL AMOUNT OF THE DESIGNATED AGREEMENTS, THE EXCESS WOULD BE MARKED TO MARKET AND THE ASSOCIATED GAIN OR LOSS RECORDED IN INCOME. PREMIUMS PAID TO TERMINATE THESE AGREEMENTS ARE DEFERRED AND AMORTIZED TO EXPENSE OVER THE AGREEMENTS' ORIGINAL TERMS. IF THE UNDERLYING DEBT IS PAID EARLY, UNAMORTIZED PREMIUMS ARE RECOGNIZED AS AN ADJUSTMENT TO THE GAIN OR LOSS ASSOCIATED WITH THE DEBT'S EXTINGUISHMENT. During 1996, the Finance Group had $462 million of interest rate exchange agreements go into effect. Interest rate exchange agreements in effect at the end of 1996 and 1995 had weighted average remaining terms of 3.2 years and 3.1 years, respectively, for the Parent Group and 1.2 years and 2.1 years, respectively, for the Finance Group. The agreements, which effectively fix the rate of interest on variable-rate borrowings, are summarized as follows:
December 28, 1996 December 30, 1995 - ------------------------------------------------------------------------------------------------------------ Interest rate exchange agreements Weighted Weighted Notional average Notional average (Dollars in millions) amount interest rate amount interest rate - ------------------------------------------------------------------------------------------------------------ Parent Group $ 453 8.53% $ 602 8.80% Finance Group 1,443 7.50 1,338 7.79 - ------------------------------------------------------------------------------------------------------------ $1,896 7.75 $1,940 8.10 ============================================================================================================ The Parent Group's interest rate exchange agreements were designated against existing and anticipated short-term variable-rate borrowings. These agreements effectively adjusted the average rate of interest on short-term variable-rate notes to 6.4% from 5.0%. The interest rate exchange agreements in effect at the end of 1996 expire as follows: $22 million (6.2%) in 1997; $100 million (8.4%) in 1998; $25 million (7.4%) in 1999; $250 million (8.6%) in 2000; and $56 million (9.3%) thereafter. $300 million of the Finance Group's interest rate exchange agreements were designated against specific long-term variable-rate notes and the balance against existing short-term variable-rate borrowings or their anticipated replacements. These agreements effectively adjusted the average rate of interest on long-term variable-rate notes to 6.0% from 5.8% and on short-term variable-rate borrowings to 5.9% from 5.4%. The interest rate exchange agreements in effect at the end of 1996 expire as follows: $378 million (8.4%) in 1997; $603 million (7.4%) in 1998; $436 million (6.8%) in 1999; and $26 million (6.8%) in 2000.
4 4 T E X T R O N 45 - ------------------------------------------------------------------------------ Textron had no exposure to loss from nonperformance by the counterparties to its interest rate exchange agreements at the end of 1996 or 1995, and does not anticipate nonperformance by counterparties in the periodic settlements of amounts due. Textron currently minimizes this potential for risk by entering into contracts exclusively with major, financially sound counterparties having no less than a long-term bond rating of "A," by continuously monitoring the counterparties' credit ratings, and by limiting exposure with any one financial institution. The credit risk generally is limited to the amount by which the counterparties' contractual obligations exceed Textron's obligations to the counterparty. Translation of foreign currencies, foreign exchange transactions and foreign currency exchange contracts TEXTRON'S INCOME EXCLUDES ADJUSTMENTS RELATED TO THE TRANSLATION OF ITS FOREIGN OPERATIONS' FINANCIAL STATEMENTS. THE ADJUSTMENTS ACCUMULATE IN A SEPARATE COMPONENT OF SHAREHOLDERS' EQUITY UNTIL THE RELATED FOREIGN ENTITY IS SOLD OR SUBSTANTIALLY LIQUIDATED. Foreign exchange gains and losses included in income (primarily related to foreign currency denominated transactions) have not been material. TEXTRON ENTERS INTO FORWARD EXCHANGE CONTRACTS TO HEDGE THE RISK ASSOCIATED WITH CURRENCY FLUCTUATIONS ON CERTAIN FIRM SALES AND PURCHASE COMMITMENTS DENOMINATED IN FOREIGN CURRENCIES. THE GAINS AND LOSSES RESULTING FROM THE IMPACT OF CURRENCY EXCHANGE RATE MOVEMENTS ON THESE CONTRACTS ARE RECORDED WHEN THE UNDERLYING TRANSACTIONS OCCUR. Textron had foreign currency forward exchange contracts totaling approximately $124 million and $191 million at the end of 1996 and 1995, respectively. Unrealized losses relating to these contracts aggregated $2 million and $6 million on those dates. - ------------------------------------------------------------------------------ 11. Textron-obligated Mandatorily Redeemable Preferred Securities of Subsidiary Trust Holding Solely Textron Junior Subordinated Debt Securities On February 9, 1996, a trust sponsored and wholly-owned by Textron issued preferred securities to the public (for $500 million) and shares of its common securities to Textron (for $15.5 million), the proceeds of which were invested by the trust in $515.5 million aggregate principal amount of Textron's newly issued 7.92% Junior Subordinated Deferrable Interest Debentures, due 2045. The debentures are the sole asset of the trust. The proceeds from the issuance of the debentures were used by Textron for the repayment of long-term borrowings and for general corporate purposes. The amounts due to the trust under the debentures and the related income statement amounts have been eliminated in Textron's consolidated financial statements. The preferred securities accrue and pay cash distributions quarterly at a rate of 7.92% per annum. Textron has guaranteed, on a subordinated basis, distributions and other payments due on the preferred securities. The guarantee, when taken together with Textron's obligations under the debentures and in the indenture pursuant to which the debentures were issued and Textron's obligations under the Amended and Restated Declaration of Trust governing the trust, provides a full and unconditional guarantee of amounts due on the preferred securities. The preferred securities are mandatorily redeemable upon the maturity of the debentures on March 31, 2045, or earlier to the extent of any redemption by Textron of any debentures. The redemption price in either such case will be $25 per share plus accrued and unpaid distributions to the date fixed for redemption. - ------------------------------------------------------------------------------ 12. Shareholders' Equity Preferred stock Textron has authorization for 15,000,000 shares of preferred stock. Each share of $2.08 Preferred Stock ($23.63 approximate stated value) is convertible into 2.2 shares of common stock and can be redeemed by Textron for $50 per share. Each share of $1.40 Preferred Dividend Stock ($11.82 approximate stated value) is convertible into 1.8 shares of common stock and can be redeemed by Textron for $45 per share. Common stock Textron has authorization for 250,000,000 shares of 12.5 cent per share par value common stock. T E X T R O N 4 5 46 - ------------------------------------------------------------------------------ Performance share units and stock options Textron's 1994 Long-Term Incentive Plan authorizes awards to key employees in two forms: (a) performance share units and (b) options to purchase Textron common stock. The total number of shares of common stock for which options may be granted under the plan is 5,000,000. TEXTRON ACCOUNTS FOR PERFORMANCE SHARE UNITS AND EMPLOYEE STOCK OPTION GRANTS IN ACCORDANCE WITH APB 25, "ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES". UNDER APB 25, BECAUSE THE EXERCISE PRICE OF TEXTRON'S EMPLOYEE STOCK OPTIONS EQUALS THE MARKET PRICE ON THE DATE OF GRANT, NO COMPENSATION EXPENSE IS RECOGNIZED FOR STOCK OPTION AWARDS. COMPENSATION EXPENSE FOR PERFORMANCE SHARE UNITS IS MEASURED BASED ON THE VALUE OF TEXTRON STOCK UNDERLYING THE AWARDS. Compensation expense under Textron's performance share program was approximately $45 million in 1996, $23 million in 1995, and $4 million in 1994. To mitigate the impact of stock price increases on compensation expense, Textron entered into a cash-settlement option program on Textron's common stock in November 1995. This program generated income of approximately $21 million in 1996. Pro forma information regarding net income and earnings per share is required by FAS 123, "Accounting for Stock-Based Compensation" and has been determined under the fair value method of that Statement. For the purpose of developing the pro forma information, the fair value of options granted in 1996 and 1995 are estimated at the date of grant using the Black-Scholes option-pricing model. The estimated fair values are amortized to expense over the options' vesting period. Using this methodology, net income would have been reduced by $10 million or $.12 per share in 1996. The pro forma effect on 1995 net income was not material. The 1996 and 1995 pro forma effect on net income is not necessarily representative of the effect in future years because it does not take into consideration pro forma compensation expense related to grants made prior to 1995. The assumptions used to estimate the fair value of option for grants in 1996 and 1995, respectively, are approximately as follows: dividend yield of 2%, expected volatility of 16%; risk-free interest rates of 6% and 5%, and weighted average expected lives of 3.5 years. Under these assumptions, the weighted-average fair value of an option to purchase one share granted in 1996 and 1995, respectively, was approximately $20 and $16. Stock option transactions during the last three years are summarized as follows:
1996 1995 1994 ------------------------------------------------------------------------------- Weighted Weighted Weighted Average Average Average Exercise Exercise Exercise (Shares in thousands) Shares Price Shares Price Shares Price - --------------------------------------------------------------------------------------------------------------------- Shares under option at beginning of year 4,558 $52.09 4,696 $44.31 3,997 $42.02 Options granted 1,068 90.73 1,062 72.11 1,124 49.40 Options exercised (923) 45.78 (1,098) 38.26 (349) 33.40 Options canceled (58) 58.76 (102) 51.13 (76) 49.22 - --------------------------------------------------------------------------------------------------------------------- Shares under option at end of year 4,645 62.15 4,558 52.09 4,696 44.31 ===================================================================================================================== Shares exercisable at end of year 3,064 50.51 2,944 45.38 2,957 39.98 =====================================================================================================================
Stock options outstanding at the end of 1996 and 1995 are summarized as follows:
Weighted Average Weighted Weighted Range of Exercise Remaining Average Average Prices Contractual Exercise Exercise (Shares in thousands) Outstanding Life Price Exercisable Price - --------------------------------------------------------------------------- ------------------------------- December 28, 1996: $21.00 - $63.94 2,646 6.6 $46.48 2,596 $46.30 $68.19 - $79.63 969 9.0 73.89 468 73.86 $80.56 - $92.56 1,030 9.9 91.37 - - December 30, 1995: $21.00 - $63.94 3,598 7.5 46.28 2,994 45.38 $68.19 - $73.94 960 9.9 73.86 - - ================================================================================================================== 4 6 T E X T R O N 47 - ------------------------------------------------------------------------------ Reserved shares of common stock At year-end 1996, 1,755,000 shares of common stock were reserved for the subsequent conversion of preferred stock, including preferred stock held as treasury shares, and 4,645,000 shares were reserved for the exercise of stock options. Preferred stock purchase rights Each outstanding share of Textron common stock has attached to it one preferred stock purchase right, which entitles the holder to buy one one-hundredth of a share of Series C Junior Participating Preferred Stock at an exercise price of $250. The rights become exercisable only under certain circumstances related to a person or group acquiring or offering to acquire a substantial block of Textron's common stock. In certain circumstances, holders may acquire Textron stock, or in some cases the stock of an acquiring entity, with a value equal to twice the exercise price. The rights expire in September 2005 but may be redeemed earlier for $.05 per right. Income per common share INCOME PER COMMON SHARE IS BASED ON AVERAGE COMMON SHARES OUTSTANDING DURING EACH YEAR ASSUMING FULL CONVERSION OF OUTSTANDING PREFERRED STOCK AND EXERCISE OF STOCK OPTIONS. Average shares were 86,029,000 in 1996; 86,894,000 in 1995; and 90,119,000 in 1994. - ------------------------------------------------------------------------------ 13. Leases Rental expense approximated $106 million, $104 million, and $108 million in 1996, 1995, and 1994, respectively. Future minimum rental commitments for noncancellable operating leases in effect at year-end 1996 approximated $88 million for 1997; $69 million for 1998; $53 million for 1999; $40 million for 2000; $32 million for 2001; and a total of $256 million thereafter. - ------------------------------------------------------------------------------ 14. Research and Development Textron carries out research and development under both company initiated programs and contracts with others, primarily the U.S. government. Company initiated programs include research and development for commercial products and independent research and development related to government products and services. A significant portion of the cost of independent research and development is recoverable from the U.S. government through overhead cost allowances. RESEARCH AND DEVELOPMENT COSTS FOR WHICH TEXTRON IS RESPONSIBLE ARE EXPENSED AS INCURRED. THESE COMPANY FUNDED COSTS INCLUDE AMOUNTS FOR COMPANY INITIATED PROGRAMS, THE COST SHARING PORTIONS OF CUSTOMER INITIATED PROGRAMS, AND LOSSES INCURRED ON CUSTOMER INITIATED PROGRAMS. The company funded and customer funded research and development costs for 1996, 1995, and 1994 were as follows:
(In millions) 1996 1995 1994 - ------------------------------------------------------------------------------------------------------ Company funded $185 $181 $187 Customer funded 391 475 424 - ------------------------------------------------------------------------------------------------------ Total research and development $576 $656 $611 ======================================================================================================
- ------------------------------------------------------------------------------ 15. Pension Benefits Textron has defined benefit and defined contribution pension plans which together cover substantially all employees. The costs of the defined contribution plans are funded as accrued and amounted to approximately $49 million, $32 million, and $34 million for 1996, 1995, and 1994, respectively. Of these totals, $31 million, $14 million, and $18 million, respectively, are related to the employee stock ownership plan. Defined benefits under salaried plans are based on salary and years of service. Hourly plans generally provide benefits based on stated amounts for each year of service. Textron's funding policy is consistent with federal law and regulations. Plan assets consist principally of corporate and government bonds and common stocks. Pension income in 1996, 1995, and 1994 included the following components:
(In millions) 1996 1995 1994 - ---------------------------------------------------------------------------------------------------------- Service cost - benefits earned during the year $ 70 $ 56 $ 69 Interest cost on projected benefit obligation 208 210 199 Actual return on plan assets (495) (747) (20) Amortization of unrecognized transition net asset (17) (17) (15) Net amortization and deferral of actuarial gains (losses) 230 483 (233) - ---------------------------------------------------------------------------------------------------------- Net pension income $ (4) $ (15) $ - ==========================================================================================================
T E X T R O N 4 7 48 - ------------------------------------------------------------------------------ The following table sets forth the funded status of Textron's pension plans.
December 28, 1996 December 30, 1995 - ------------------------------------------------------------------------------------------------------------------------- Assets Accumulated Assets Accumulated exceed benefits exceed benefits accumulated exceed accumulated exceed (In millions) benefits assets benefits assets - ------------------------------------------------------------------------------------------------------------------------- Actuarial present value of: Vested benefit obligation $2,410 $ 197 $2,121 $ 426 Nonvested benefit obligation 67 19 91 35 - ------------------------------------------------------------------------------------------------------------------------- Accumulated benefit obligation 2,477 216 2,212 461 Additional amounts related to projected pay increases 254 35 243 23 - ------------------------------------------------------------------------------------------------------------------------- Projected benefit obligation 2,731 251 2,455 484 Plan assets at fair value 3,534 124 3,180 373 - ------------------------------------------------------------------------------------------------------------------------- Plan assets in excess of (less than) projected benefit obligation 803 (127) 725 (111) Unrecognized net actuarial (gains) losses (472) 30 (312) (26) Unrecognized prior service cost 93 21 18 58 Unrecognized transition net obligation (net asset) (120) 5 (132) (1) Adjustment required to recognize minimum liability - (24) - (24) - ------------------------------------------------------------------------------------------------------------------------- Net pension asset (liability) recognized on the consolidated balance sheet $ 304 $ (95) $ 299 $(104) =========================================================================================================================
Major actuarial assumptions used in accounting for the defined benefit pension plans are shown in the following table. Net pension income is determined using these assumptions as of the end of the prior year. The funded status of the plans is determined using these assumptions as of the end of the current year.
December 28, December 30, December 31, January 1, 1996 1995 1994 1994 - ---------------------------------------------------------------------------------------------------------------------- Discount rate 7.50% 7.25% 8.25% 7.25% Weighted average long-term rate of compensation increase 5.00 5.00 5.00 5.00 Long-term rate of return on plan assets 9.00 9.00 9.00 9.00 ======================================================================================================================
- ------------------------------------------------------------------------------ 16. Postretirement Benefits Other than Pensions Textron offers health care and life insurance benefits for certain retired employees. Postretirement benefits costs other than pension-related expenses in 1996, 1995, and 1994 included the components shown in the following table. Textron's postretirement benefit plans other than pensions are unfunded.
(In millions) 1996 1995 1994 - ------------------------------------------------------------------------------------------------------------- Service cost - benefits earned during the year $ 5 $ 5 $ 9 Interest cost on accumulated postretirement benefit obligation 53 58 61 Net amortization (13) (14) (10) - ------------------------------------------------------------------------------------------------------------- Postretirement benefit costs $ 45 $ 49 $ 60 =============================================================================================================
The following table sets forth the status of these plans at the end of 1996 and 1995:
December 28, December 30, (In millions) 1996 1995 - ------------------------------------------------------------------------------------------------------------------ Actuarial present value of benefits attributed to: Retirees $522 $608 Fully eligible active plan participants 66 89 Other active plan participants 85 97 - ------------------------------------------------------------------------------------------------------------------ Accumulated postretirement benefit obligation 673 794 Unrecognized net actuarial gains 114 101 Unrecognized prior service cost benefit 30 24 - ------------------------------------------------------------------------------------------------------------------ Postretirement benefit liability recognized on the consolidated balance sheet $817 $919 ==================================================================================================================
The discount rates used to determine postretirement benefit costs other than pensions and the status of those plans were the same as those used for Textron's defined benefit pension plans. 4 8 T E X T R O N 49 - ------------------------------------------------------------------------------ The 1996 health care cost trend rate, which is the weighted average annual assumed rate of increase in the per capita cost of covered benefits, was 6.5% for retirees age 65 and over and 9.0% for retirees under age 65. Both rates are assumed to decrease gradually to 5.5% by 2001 and 2003, respectively, and then remain at that level. Increasing the health care cost trend rates by one percentage point in each year would have increased the accumulated postretirement benefit obligation as of year-end 1996 by $61 million and the aggregate of the service and interest cost components of postretirement benefit costs for 1996 by $5 million. - ------------------------------------------------------------------------------ 17. Income Taxes Textron files a consolidated federal income tax return for all U.S. subsidiaries and separate returns for foreign subsidiaries. TEXTRON RECOGNIZES DEFERRED INCOME TAXES FOR TEMPORARY DIFFERENCES BETWEEN THE FINANCIAL REPORTING BASIS AND INCOME TAX BASIS OF ASSETS AND LIABILITIES BASED ON ENACTED TAX RATES EXPECTED TO BE IN EFFECT WHEN AMOUNTS ARE LIKELY TO BE REALIZED OR SETTLED. The following table shows income from continuing operations before income taxes and distributions on preferred securities of subsidiary trust:
(In millions) 1996 1995 1994 - ------------------------------------------------------------------------------------------ United States $528 $476 $446 Foreign 299 214 177 - ------------------------------------------------------------------------------------------ Total $827 $690 $623 ==========================================================================================
Income tax expense is summarized as follows:
(In millions) 1996 1995 1994 - ------------------------------------------------------------------------------------------ Federal: Current $169 $137 $103 Deferred 11 31 57 State 31 32 32 Foreign 111 74 65 - ------------------------------------------------------------------------------------------ Income tax expense $322 $274 $257 ==========================================================================================
The following reconciles the federal statutory income tax rate to the effective income tax rate reflected in the consolidated statement of income:
1996 1995 1994 - ------------------------------------------------------------------------------------------ Federal statutory income tax rate 35.0% 35.0% 35.0% Increase (decrease) in taxes resulting from: State income taxes 2.4 2.9 3.3 Goodwill 2.3 2.5 5.9 Other - net (.8) (.7) (2.9) - ------------------------------------------------------------------------------------------ Effective income tax rate 38.9% 39.7% 41.3% ==========================================================================================
Textron's net deferred tax asset consisted of gross deferred tax assets and gross deferred tax liabilities of $1,467 million and $1,140 million, respectively, at the end of 1996 and $1,340 million and $1,009 million, respectively, at the end of 1995. The components of Textron's net deferred tax asset were as follows:
December 28, December 30, (In millions) 1996 1995 - ------------------------------------------------------------------------------------------------------ Finance Group transactions, principally leasing $(324) $(324) Obligation for postretirement benefits other than pensions 321 364 Self insured liabilities 152 162 Fixed assets, principally depreciation (146) (142) Deferred compensation and vacation pay 103 86 Allowance for credit losses 86 85 Other, principally timing of other expense deductions 135 100 - ------------------------------------------------------------------------------------------------------ $ 327 $ 331 ======================================================================================================
Deferred income taxes have not been provided for the undistributed earnings of foreign subsidiaries, which approximated $845 million at the end of 1996. Management intends to reinvest those earnings for an indefinite period, except for distributions having an immaterial tax effect. If foreign subsidiaries' earnings were distributed, 1996 taxes, net of foreign tax credits, would be increased by approximately $49 million, primarily because of foreign withholding taxes. T E X T R O N 4 9 50 - ------------------------------------------------------------------------------ 18. Fair Value of Financial Instruments The estimated fair value amounts shown below were determined from available market information and valuation methodologies. Because considerable judgment is required in interpreting market data, the estimates are not necessarily indicative of the amounts that could be realized in a current market exchange.
December 28, 1996 December 30, 1995 - ------------------------------------------------------------------------------------------------------------------ Estimated Estimated Carrying fair Carrying fair (In millions) value value value value - ------------------------------------------------------------------------------------------------------------------ Assets: Investments $ 820 $ 820 $ 778 $ 778 Finance receivables: Consumer loans 6,471 6,451 6,475 6,457 Commercial loans 2,227 2,270 2,050 2,087 Liabilities: Debt: Parent Group: Debt 1,507 1,565 1,774 1,873 Interest rate exchange agreements - 37 - 57 Finance Group: Debt 8,839 8,882 8,437 8,557 Interest rate exchange agreements - 18 - 5 Foreign currency exchange contracts - 2 - 6 ==================================================================================================================
Notes: (i) Investments -- The estimated fair values of investment securities were based on available quoted market prices, appraisals, prices from independent brokers, or discounted cash flow analyses. (ii) Finance receivables -- The estimated fair values of fixed-rate consumer loans, real estate loans and commercial installment contracts were based on discounted cash flow analyses. The estimated fair values of variable-rate receivables and fixed-rate retail installment contracts approximated the net carrying value. The estimated fair values of nonperforming loans were based on discounted cash flow analyses using risk-adjusted interest rates or the fair value of the related collateral. (iii) Debt, interest rate exchange agreements, and foreign currency exchange contracts -- The estimated fair value of fixed-rate debt was determined by independent investment bankers or discounted cash flow analyses. The estimated fair values of variable-rate debt approximated their carrying values. The estimated fair values of interest rate exchange agreements were determined by independent investment bankers and represent the estimated amounts that Textron or its counterparty would be required to pay to assume the other party's obligations under the agreements. The estimated fair values of the foreign currency exchange contracts were determined by Textron's foreign exchange banks. - ------------------------------------------------------------------------------ 19. Contingencies and Environmental Remediation Contingencies Lawsuits and other proceedings are pending or threatened against Textron and its subsidiaries. Some allege violations of federal government procurement regulations, involve environmental matters, or are or purport to be class actions. Some seek compensatory, treble or punitive damages in substantial amounts; fines, penalties or restitution; or remediation of contamination. Under federal government procurement regulations, some could result in suspension or debarment of Textron or its subsidiaries from U.S. government contracting for a period of time. On the basis of information presently available, Textron believes that any liability for these suits and proceedings would not have a material effect on Textron's net income or financial condition. Environmental Remediation ENVIRONMENTAL LIABILITIES ARE RECORDED BASED ON THE MOST PROBABLE COST IF KNOWN OR ON THE ESTIMATED MINIMUM COST, DETERMINED ON A SITE-BY-SITE BASIS. TEXTRON'S ENVIRONMENTAL LIABILITIES ARE UNDISCOUNTED AND DO NOT TAKE INTO CONSIDERATION POSSIBLE FUTURE INSURANCE PROCEEDS OR SIGNIFICANT AMOUNTS FROM CLAIMS AGAINST OTHER THIRD PARTIES. Textron's accrued estimated environmental liabilities are based on assumptions which are subject to a number of factors and uncertainties. Circumstances which can affect the accruals' reliability and precision include identification of additional sites, environmental regulations, level of cleanup required, technologies available, number and financial condition of other contributors to remediation, and the time period over which remediation may occur. Textron estimates that its accrued environmental remediation liabilities will likely be paid over the next five to ten years. 5 0 T E X T R O N 51 - ------------------------------------------------------------------------------ 20. Geographic and Business Segment Data Presented below and on page 23 is selected financial information by geographic area and business segment, and a description of the nature of Textron's operations.
Geographic areas Revenues by origin Income by origin (In millions) ------------------------------ ------------------------------ 1996 1995 1994 1996 1995 1994 - ------------------------------------------------------------------------------------------------------------------------ United States $7,000 $6,841 $7,111 $ 791 $ 773 $ 728 Other North America 1,043 807 690 125 87 85 Western Europe 767 393 318 101 63 46 Asia/Pacific 464 412 231 73 64 46 - ------------------------------------------------------------------------------------------------------------------------ $9,274 $8,453 $8,350 1,090 987 905 - ---------------------------------------------------==============================--------------------------------------- Corporate expenses and other - net (115) (119) (92) Interest expense - net (148) (178) (190) - ------------------------------------------------------------------------------------------------------------------------ Income from continuing operations before income taxes and distributions on preferred securities of subsidiary trust $ 827 $ 690 $ 623 ======================================================================================================================== Destination of U.S. exports (In millions) 1996 1995 1994 - ------------------------------------------------------------------------------------------------------------------------ North America $ 342 $ 280 $ 398 Western Europe 256 306 427 Asia/Pacific 253 235 161 South America 92 110 118 Middle East 55 43 62 Other locations 43 26 30 - ------------------------------------------------------------------------------------------------------------------------ $1,041 $1,000 $1,196 ======================================================================================================================== Identifiable assets (In millions) 1996 1995 1994 - ------------------------------------------------------------------------------------------------------------------------ United States $12,103 $12,080 $11,520 Western Europe 1,662 1,077 949 Asia/Pacific 1,522 1,348 766 Other North America 1,436 1,337 1,262 Corporate, including investment in discontinued operation 1,742 1,932 1,665 Eliminations (230) (123) (59) - ------------------------------------------------------------------------------------------------------------------------ $18,235 $17,651 $16,103 ========================================================================================================================
Notes: (i) Revenues include sales to the U.S. government of $1.0 billion, $1.3 billion, and $1.6 billion in 1996, 1995, and 1994, respectively. (ii) Revenues between geographic areas, predominantly revenues of U.S. divisions, were approximately 5% in each of the years 1996, 1995, and 1994. (iii) Assets in foreign locations relate principally to the Finance segment. Nature of operations Textron is a global multi-industry company with manufacturing and finance operations. See pages 54 and 55 for a description of Textron's principal products. Its principal markets (listed within segments in order of the amount of 1996 revenues) and the major locations of such markets are as follows:
Segment Principal markets Major locations ====================================================================================================================== Aircraft * Commercial and military helicopters * North America * Business jets * Asia/Pacific * General aviation * South America * Overnight express package carriers * Western Europe * Commuter airlines, relief flights, tourism, and freight - ---------------------------------------------------------------------------------------------------------------------- Automotive * Automotive original equipment manufacturers and their suppliers * North America * Western Europe - ---------------------------------------------------------------------------------------------------------------------- Industrial * Fastening systems: automotive, electronics, * North America aerospace, other OEMs, distributors, and * Western Europe consumers * Asia/Pacific * Golf and turf-care products: golf courses, resort communities, and commercial and industrial users * Engineered products and components: original equipment manufacturers, distributors, and end-users of a wide variety of products - ---------------------------------------------------------------------------------------------------------------------- Systems and Components * Commercial aerospace * North America * Defense * Western Europe - ---------------------------------------------------------------------------------------------------------------------- Finance * Consumer loans * North America * Commercial loans * Asia/Pacific * Western Europe - ----------------------------------------------------------------------------------------------------------------------
T E X T R O N 5 1 52 - -----------------------------------------------------------------------------------------------------------------------------
Quarterly Data 1996 1995 (Unaudited) ----------------------------- ------------------------------ (Dollars in millions except per share amounts) Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 - ------------------------------------------------------------------------------------------------------------------------ Revenues Aircraft $ 762 $ 638 $ 649 $ 654 $ 661 $ 633 $ 660 $ 565 Automotive 428 355 439 405 395 340 386 413 Industrial 561 554 604 477 427 357 390 386 Systems and Components 139 175 175 164 222 228 215 190 Finance 538 526 517 514 524 499 487 475 - ------------------------------------------------------------------------------------------------------------------------ Total revenues $ 2,428 $ 2,248 $2,384 $ 2,214 $ 2,229 $ 2,057 $2,138 $ 2,029 ======================================================================================================================== Income Aircraft $ 79 $ 69 $ 67 $ 56 $ 67 $ 69 $ 66 $ 43 Automotive 41 27 41 37 39 25 35 36 Industrial 57 58 64 54 44 40 45 48 Systems and Components 11 19 16 11 16 18 18 13 Finance 98 98 95 92 94 96 87 88 - ------------------------------------------------------------------------------------------------------------------------ Total operating income 286 271 283 250 260 248 251 228 Corporate expenses and other - net (29) (28) (30) (28) (32) (32) (28) (27) Interest expense - net (37) (36) (37) (38) (45) (43) (46) (44) Income taxes (85) (81) (84) (72) (73) (69) (70) (62) Distributions on preferred securities of subsidiary trust, net of income taxes (7) (6) (7) (3) - - - - - ------------------------------------------------------------------------------------------------------------------------ Income from continuing operations 128 120 125 109 110 104 107 95 Discontinued operation, net of income taxes: Income from operations - - - 16 17 18 14 14 Estimated loss on disposal - (155) - (90) - - - - - ------------------------------------------------------------------------------------------------------------------------ - (155) - (74) 17 18 14 14 - ------------------------------------------------------------------------------------------------------------------------ Net income $ 128 $ (35) $ 125 $ 35 $ 127 $ 122 $ 121 $ 109 ========================================================================================================================= Earnings per common share Income from continuing operations $ 1.50 $ 1.40 $ 1.44 $ 1.26 $ 1.26 $ 1.20 $ 1.23 $ 1.09 Discontinued operation - (1.81) - (.86) .19 .21 .17 .16 - ------------------------------------------------------------------------------------------------------------------------- Net income $ 1.50 $ (.41) $ 1.44 $ .40 $ 1.45 $ 1.41 $ 1.40 $ 1.25 ========================================================================================================================= Average shares outstanding (in thousands) 85,130 85,790 86,575 86,680 87,345 86,692 86,679 87,055 - ------------------------------------------------------------------------------------------------------------------------- Operating income margins Aircraft 10.4% 10.8% 10.3% 8.6% 10.1% 10.9% 10.0% 7.6% Automotive 9.6 7.6 9.3 9.1 9.9 7.4 9.1 8.7 Industrial 10.2 10.5 10.6 11.3 10.3 11.2 11.5 12.4 Systems and Components 7.9 10.9 9.1 6.7 7.2 7.9 8.4 6.8 Finance 18.2 18.6 18.4 17.9 17.9 19.2 17.9 18.5 Operating income margin 11.8 12.1 11.9 11.3 11.7 12.1 11.7 11.2 - ------------------------------------------------------------------------------------------------------------------------- Common stock information Price range: High $97-3/4 $87-7/8 $ 89 $85-3/4 $77-3/8 $70-1/8 $ 61 $57-1/8 Low $84-3/4 $ 73 $ 88 $69-1/8 $65-1/2 $57-7/8 $ 56 $48-5/8 Dividends per share $ .44 $ .44 $ .44 $ .44 $ .39 $ .39 $ .39 $ .39 - ------------------------------------------------------------------------------------------------------------------------- Assumes full conversion of outstanding preferred stock and exercise of stock options. Prior year amounts have been reclassified to conform to the current year's segment presentation.
5 2 T E X T R O N 53 - ----------------------------------------------------------------------------------------------------------------------
Selected Financial Information (Dollars in millions except where otherwise noted and per share amounts) 1996 1995 1994 1993 1992 1991 - ---------------------------------------------------------------------------------------------------------------------- Revenues Aircraft $ 2,703 $ 2,519 $ 2,290 $ 2,077 $ 1,617 $ 1,352 Automotive 1,627 1,534 1,511 1,178 788 661 Industrial 2,196 1,560 1,539 1,363 1,309 1,275 Systems and Components 653 855 1,338 1,653 1,902 1,922 Finance 2,095 1,985 1,672 1,610 1,622 1,548 - ---------------------------------------------------------------------------------------------------------------------- Total revenues $ 9,274 $ 8,453 $ 8,350 $ 7,881 $ 7,238 $ 6,758 ====================================================================================================================== Income Aircraft $ 271 $ 245 $ 197 $ 162 $ 136 $ 121 Automotive 146 135 132 89 68 50 Industrial 233 177 157 130 116 99 Systems and Components 57 65 88 117 161 204 Finance 383 365 331 289 250 226 - ---------------------------------------------------------------------------------------------------------------------- Total operating income 1,090 987 905 787 731 700 Corporate expenses and other - net (115) (119) (92) (103) (81) (89) Interest expense - net (148) (178) (190) (214) (238) (213) Income taxes (322) (274) (257) (171) (160) (160) Distributions on preferred securities of subsidiary trust, net of income taxes (23) - - - - - - ---------------------------------------------------------------------------------------------------------------------- Income from continuing operations $ 482 $ 416 $ 366 $ 299 $ 252 $ 238 ====================================================================================================================== Per share of common stock Income from continuing operations $ 5.60 $ 4.79 $ 4.06 $ 3.32 $ 2.84 $ 2.71 Dividends declared $ 1.76 $ 1.56 $ 1.40 $ 1.24 $ 1.12 $ 1.03 Book value at year-end $ 38.20 $ 39.92 $ 33.45 $ 31.18 $ 28.11 $ 33.65 Common stock price: High $ 97-3/4 $77-3/8 $60-5/8 $58-7/8 $44-3/4 $39-1/2 Low $ 69-1/8 $48-5/8 $46-1/2 $40-3/8 $33-3/4 $ 25 Year-end $ 93-3/8 $67-1/2 $50-3/8 $58-1/4 $44-3/4 $38-1/2 Common shares outstanding (in thousands) : Average 86,029 86,894 90,119 90,052 88,580 87,563 Year-end 85,158 86,950 87,253 90,499 89,418 88,261 ====================================================================================================================== Financial position Total assets $ 18,235 $17,651 $16,103 $15,372 $14,710 $12,283 Debt: Parent Group $ 1,507 $ 1,774 $ 1,582 $ 2,025 $ 2,283 $ 1,820 Finance Group $ 8,839 $ 8,437 $ 7,760 $ 6,847 $ 6,440 $ 5,664 Preferred securities of subsidiary trust $ 483 $ - $ - $ - $ - $ - Shareholders' equity $ 3,183 $ 3,412 $ 2,882 $ 2,780 $ 2,488 $ 2,928 Parent Group debt to total capital 29% 34% 35% 42% 48% 45% ====================================================================================================================== Investment data Capital expenditures $ 343 $ 279 $ 294 $ 246 $ 215 $ 152 Depreciation $ 223 $ 195 $ 206 $ 201 $ 194 $ 177 Research and development $ 576 $ 656 $ 611 $ 514 $ 430 $ 457 ====================================================================================================================== Other data Number of employees at year-end 57,000 54,000 50,000 53,000 51,000 49,000 Number of common shareholders at year-end 25,000 26,000 27,000 28,000 30,000 31,000 - ---------------------------------------------------------------------------------------------------------------------- Before cumulative effect of changes in accounting principles in 1992. Assumes full conversion of outstanding preferred stock and exercise of stock options. Prior year amounts have been reclassified to conform to the current year's segment presentation.
T E X T R O N 5 3 54 - ------------------------------------------------------------------------------- Directory of Divisions - ----------------------------------------------------------------------------------------------------------------------------- Aircraft Bell Helicopter Textron Webb F. Joiner Vertical takeoff and landing aircraft and spare Chairmand and parts for the U.S. Government, foreign governments Chief Executive and commercial markets Officer ----------------------------------------------------------------------------------------------------------- The Cessna Aircraft Company Russell W. Meyer, Jr. Light and mid-size business jets, utility turboprops Chairman and and single-engine piston aircraft. Chief Executive Officer ----------------------------------------------------------------------------------------------------------- Textron Lycoming David G. Assard Piston aircraft engines and replacement parts for President the general aviation market. - ----------------------------------------------------------------------------------------------------------------------------- Automotive Textron Automotive Company John A. Janitz Automotive interior, exterior and functional Chairman, President components and systems. Chief Executive Officer ----------------------------------------------------------------------------------------------------------- CWC Castings Textron John L. Kelly Gray iron and ductile iron castings, primarily President camshafts for automobile and engine manufacturers. ----------------------------------------------------------------------------------------------------------- Kautex Werke Dr. Wolfgang Theis Blow-molded plastic fuel tank system and other Reinold Hagen AG (Germany) Chairman automotive components. ----------------------------------------------------------------------------------------------------------- McCord Winn Textron George F. Daniels Automotive seating comfort systems, windshield and President headlamp washing systems and electro-mechanical components. ----------------------------------------------------------------------------------------------------------- Micromatic Textron Michael J. Brennan Proprietary machine tools, components and assembly President systems for automotive and commercial markets. ----------------------------------------------------------------------------------------------------------- Randall Textron Jane L. Warner Fuel filler assemblies and fuel delivery systems for President automotive market. ----------------------------------------------------------------------------------------------------------- Textron Automotive Sam Licavoli Instrument panels, door panels, armrests, airbag Trim Operations President doors, center consoles, headliners, exterior trim and lighting components - ----------------------------------------------------------------------------------------------------------------------------- Industrial Textron Fastening Systems Fastening systems, synergistic assemblies, components and installation tools serving the automotive, aerospace, electronics, construction, do- it yourself and transportation markets. ------------------------------------------------- ----------------------------------------------------- Avdel Textron John C. Castle Textron Aerospace Fasteners George A. Andrews President President ------------------------------------------------- ----------------------------------------------------- Camcar Textron James R. MacGilvray Textron Fastening Systems - Horst Homuth President Germany General Manager ------------------------------------------------- ----------------------------------------------------- Elco Textron John C. Lutz Textron Industries S.A.S. John C. Castle President and (France) President Chief Executive (Acting) Officer 5 4 T E X T R O N 55 - ------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- Industrial Cone Drive Textron John G. Melvin Double-enveloping worm gear speed reducers, gear (continued) President motors and gear sets. ----------------------------------------------------------------------------------------------------------- E-Z-GO Textron L.T. Walden, Jr. Electric- and gasoline-powered golf cars and President multipurpose utility vehicles. ----------------------------------------------------------------------------------------------------------- Greenlee Textron Barclay S. Olson Products for wire and cable installation and President maintenance in residential, commercial and industrial facilities. ----------------------------------------------------------------------------------------------------------- HR Textron Bradley W. Spahr Motion control components and systems for industrial, President defense and aerospace markets. ----------------------------------------------------------------------------------------------------------- Jacobsen Textron Philip J. Tralies Professional mowing and turf maintenance equipment. President ----------------------------------------------------------------------------------------------------------- Maag Italia Textron S.p.A. Dr. Giovanni P. Traction gears for the railway industry. (Italy) Agostini President ----------------------------------------------------------------------------------------------------------- Maag Pump Systems Textron AG Dr. Frank Brinken Gear pumps and systems used for processing (Switzerland) President applications in the plastics, chemical and pharmaceutical industries. ----------------------------------------------------------------------------------------------------------- Speidel Textron William R. Jahnke Watch attachments and fashion jewelry products. President - ----------------------------------------------------------------------------------------------------------------------------- Systems and Fuel Systems Textron Michael Boston Fuel systems components for aircraft and industrial Components President gas turbine engines. ----------------------------------------------------------------------------------------------------------- Textron Marine & Land Systems John J. Kelly Air cushion amphibious landing craft, combat vehicles President and advanced suspension systems. ----------------------------------------------------------------------------------------------------------- Textron Systems Richard J. Millman Weapon and electronic systems, advanced materials President and coatings, and high-tech commercial products. ----------------------------------------------------------------------------------------------------------- Turbine Engine G.L. (Topper) Long Air and land-based gas turbine engine components for Components Textron President engine OEMs. - ----------------------------------------------------------------------------------------------------------------------------- Finance Avco Financial Services Warren R. Lyons International consumer financing, and credit and Chairman property casualty insurance. ----------------------------------------------------------------------------------------------------------- Textron Financial Corporation Stephen A. Giliotti Commercial financing for the purchase of Textron and President third-party products.
T E X T R O N 5 5 56 - ------------------------------------------------------------------------------- Board of Directors James F. Hardymon Chairman and Chief Executive Officer Textron Inc. Lewis B. Campbell President and Chief Operating Officer Textron Inc. H. Jesse Arnelle , Senior Partner Arnelle, Hastie, McGee, Willis & Greene Teresa Beck Chief Financial Officer American Stores Company R. Stuart Dickson , Formerly Chairman Ruddick Corporation Paul E. Gagne , President and Chief Executive Officer Avenor Inc. John D. Macomber , Principal JDM Investment Group Dana G. Mead Chairman and Chief Executive Officer Tenneco Inc. Barbara Scott Preiskel , Formerly Senior Vice President and General Counsel Motion Picture Association Brian H. Rowe , Retired Chairman GE Aircraft Engines Sam F. Segnar , Retired Chairman and Chief Executive Officer Enron Corporation Jean Head Sisco , Partner Sisco Associates John W. Snow , Chairman, President and Chief Executive Officer CSX Corporation Martin D. Walker , Chairman M.A. Hanna Company Thomas B. Wheeler , Chairman and Chief Executive Officer Massachusetts Mutual Life Insurance Company [FN] Numbers indicate committee memberships Executive Committee: Chairman, James F. Hardymon Audit Committee: Chairman, Jean Head Sisco Nominating and Board Affairs Committee: Chairman, Barbara Scott Preiskel Organization and Compensation Committee: Chairman, Martin D. Walker Pension Committee: Chairman, Thomas B. Wheeler - ------------------------------------------------------------------------------- Management Committee James F. Hardymon Chairman and Chief Executive Officer Lewis B. Campbell President and Chief Operating Officer Mary L. Howell Executive Vice President Government and International Wayne W. Juchatz Executive Vice President and General Counsel Stephen L. Key Executive Vice President and Chief Financial Officer William F. Wayland Executive Vice President Administration and Chief Human Resources Officer - ------------------------------------------------------------------------------- Operating Committee Lewis B. Campbell President and Chief Operating Officer Carol J. Grant Vice President Human Resources Herbert L. Henkel President Textron Industrial Products John A. Janitz Chairman, President and Chief Executive Officer Textron Automotive Company Webb F. Joiner Chairman and Chief Executive Officer Bell Helicopter Textron Warren R. Lyons Chairman Avco Financial Services Russell W. Meyer, Jr. Chairman and Chief Executive Officer Cessna Aircraft Company Gero K.H. Meyersiek Vice President International Terry D. Stinson President and Chief Operating Officer Bell Helicopter Textron Richard L. Yates Vice President and Controller - ------------------------------------------------------------------------------- Corporate Staff Officers Frederick K. Butler Vice President and Secretary Peter B.S. Ellis Vice President Strategic Planning Douglas A. Fahlbeck Vice President Mergers and Acquisitions Arnold M. Friedman Vice President and Deputy General Counsel William B. Gauld Vice President Corporate Information Management and Chief Information Officer Gregory E. Hudson Vice President Taxes William P. Janovitz Vice President Financial Management Mary F. Lovejoy Vice President Communications and Investor Relations John W. Mayers, Jr. Vice President Risk Management and Insurance Frank W. McNally Vice President Employee Relations and Benefits Freda M. Peters Vice President Executive Development and Human Resource Policy and Compliance Daniel L. Shaffer Vice President Audit and Business Ethics Richard F. Smith Vice President Government Affairs Richard A. Watson Senior Vice President and Treasurer John F. Zugschwert Vice President Government Marketing [FN] Service with Textron and its subsidiaries/divisions: 5-9 years 10-19 years 20 years and over - ------------------------------------------------------------------------------- International Advisory Council Richard R. Burt Chairman IEP Advisors Inc. USA Lewis B. Campbell President and COO Textron Inc. USA Cheng Wai Keung Chairman and Managing Director Wing Tai Holdings Limited Singapore Jean Gandois President National Council of French Employers France David A. Gledhill Former Chairman Swire Group Hong Kong Carl H. Hahn Former Chairman of Board of Management Volkswagen AG Germany James F. Hardymon Chairman and CEO Textron Inc. USA Mary L. Howell Executive Vice President Government and International Textron Inc. USA Jeffrey Koo Chairman and CEO Chinatrust Commercial Bank Taiwan Gero K.H. Meyersiek Vice President International Textron Inc. USA Marcilio Marques Moreira Former Finance Minister Brazil Andrzej Olechowski Chairman Central Europe Trust Poland Sir Charles Powell Director Jardines Matheson Holdings Ltd. United Kingdom Ratan N. Tata Chairman Tata Industries Limited India Horst Teltschik Member of the Board of Management BMW AG Germany 5 6 T E X T R O N Inside Back Cover - ------------------------------------------------------------------------------- Shareholder Information Corporate Headquarters Textron Inc. 40 Westminster Street Providence, Rhode Island 02903 (401) 421-2800 Annual Meeting Textron's annual meeting of shareholders will be held on Wednesday, April 23, 1997 at 10:30 a.m. at The Worthington Hotel, Ft. Worth, Texas. Transfer Agent, Registrar and Dividend Paying Agent For shareholder services such as change of address, lost certificates or dividend checks, change in registered ownership, preferred stock conversion services or the Dividend Reinvestment Plan, write or call: First Chicago Trust Company of New York P.O. Box 2500 Jersey City, New Jersey 07303-2500 1-800-519-3111 Dividend Reinvestment Plan Textron's Dividend Reinvestment Plan offers shareholders of common stock a convenient way to purchase additional shares of Textron common stock without paying brokerage, commission or other service fees. More information and an authorization form may be obtained by writing or calling First Chicago Trust Company of New York. (Please see First Chicago's address and telephone number above.) Stock Exchange Information (Symbol: TXT) Textron common stock is listed on the New York, Chicago and Pacific Stock Exchanges. Textron's preferred stocks ($2.08 and $1.40) are traded only on the New York Stock Exchange. Investor Relations/Public Relations Textron Inc. Communications and Investor Relations Department 40 Westminster Street Providence, Rhode Island 02903 Investors and security analysts should call: (401) 457-2353 Members of the news media should call: (401) 457-2354 For more information regarding Textron and its divisions, visit our worldwide web site on the internet at http://www.textron.com Company Publications and General Information To receive a copy, without charge, of Textron's reports on Form 10-K and 10-Q, proxy statement, Annual Report and the most recent company news and earnings press releases, please call 1-888-TXT-LINE or direct written correspondence to Textron. (Please see Textron's Communications and Investor Relations Department address above.) EX-21 8 EXHIBIT March 14, 1997 Exhibit 21 TEXTRON INC. - Significant Subsidiaries (as of March 14, 1997) Set forth below are the names of certain subsidiaries of Textron Inc. Other subsidiaries, which considered in the aggregate, do not constitute a significant subsidiary, are omitted from such list. Name Place of Incorporation Avco Corporation Delaware ARS Two Inc. Delaware Avco Community Developers, Inc. California Textron Pacific Limited Australia Textron Systems Corporation Delaware Turbine Engine Components Textron Inc. Delaware Avco Financial Services, Inc. Delaware Avdel Cherry Textron Inc. New York Bell Helicopter Services Inc. Delaware Bell Helicopter Asia (Pte) Ltd. Singapore Bell Helicopter Textron Inc. Delaware Cadillac Gage Textron Inc. Michigan The Cessna Aircraft Company Kansas Cone Drive Operations Inc. Delaware Elco Textron Inc. Delaware Fuel Systems Textron Inc. Delaware Greenlee Textron Inc. Delaware HR Textron Inc. Delaware Maag Pump Systems of America, Inc. North Carolina McCord Corporation Michigan Textron Automotive Interiors Inc. Delaware Davidson Overseas Investment Inc. Delaware Textron Automotive B.V. Netherlands Textron Automotive Functional Components Inc. - Massachusetts McCord Winn Division Micromatic Operations Inc. Delaware Micro-Precision Operations Inc. Delaware The Paul Revere Corporation (83%, ) Massachusetts The Paul Revere Life Insurance Company Massachusetts The Paul Revere Protective Life Insurance Delaware Company The Paul Revere Variable Annuity Insurance Massachusetts Company The Paul Revere Equity Sales Company Massachusetts The Paul Revere Investment Management Company Massachusetts Textron Atlantic Inc. Delaware Avdel plc United Kingdom Bell Helicopter Supply Center B.V. Netherlands Camcar Textron (Malaysia) Sdn. Bhd. Malaysia Jacobsen E-Z-GO Textron B.V. Netherlands Jacobsen E-Z-GO Textron A.G. Switzerland Jacobsen E-Z-GO Textron A/S Denmark Jacobsen E-Z-GO Textron S.R.L. Italy Klauke Handelsges, m.b.H. Austria Maag Pump Systems AG Switzerland Maag Pump Systems PTE Ltd. Singapore Marly ORAG S.A. France Name Place of Incorporation Textron Atlantic Inc. (continued) Delaware Textron Atlantic Belgium S.A. Belgium Textron Atlantic France Inc. Delaware Textron Atlantic Holding GmbH Germany Gustav Klauke GmbH Germany Gustav Klauke France SARL France Jacobsen E-Z-GO Textron GmbH Rasenpflegesysteme Germany Maag Pump Systems GmbH Germany Textron Automotive GmbH Germany Kautex Werke Reinold Hagen A.G. Germany Kautex Benelux N.V. Belgium Kautex Iberica S.A. Spain Textron Verbindungstechnik GmbH Germany Textron Verbindungstechnik OHG Germany Textron France Inc. Delaware Textron France S.N.C. France Textron France S.A. France Textron Industries S.A.S. France Textron Italia SpA Italy Maag Italia SpA Italy Textron Limited United Kingdom Textron Automotive Company Inc. Delaware Textron Automotive Exteriors Inc. Delaware Textron Automotive Management Services Inc. Delaware Textron FSC Inc. Barbados Textron Financial Corporation Delaware Cessna Finance Corporation Kansas Textron International Inc. Delaware Textron Properties Inc. Delaware Textron Canada Limited Canada Kautex Corporation Ontario Textron Realty Corporation Delaware Textron Realty Operations (Wheatfield) Inc. Delaware Textron S.A. de C.V. Mexico Textron Automotive Company de Mexico, S.A. de C.V. Mexico Textron Automotive Management Services Company Mexico de Mexico, S.A. de C.V. Turbine Engine Components Textron (Cleveland Delaware Operations) Inc. Turbine Engine Components Textron (Newington Connecticut Operations) Inc. Turbine Engine Components Textron (Santa Fe Springs California Operations) Inc. Wolverine Metal Specialties Inc. Michigan Xact Textron Inc. Delaware ______________________________ Notes: A list of the principal subsidiaries of Avco Financial Services, Inc. is attached hereto as Exhibit 1. Remaining 17% of share capital is publicly traded on The New York Stock Exchange. 85% of the capital stock of Textron France S.N.C. is held by Textron France Inc. and the remaining 15% by Textron Atlantic France Inc. 85% of the capital stock of Textron Italia SpA is held by Textron Atlantic Inc. and the remaining 15% by Textron International Inc. 64.5% of the capital stock of Textron Canada Limited is held by Textron Properties Inc. and the remaining 35.5% by Textron Inc. Exhibit 1 Set forth below are the principal subsidiaries of Avco Financial Services, Inc.: Name Jurisdiction AFS Corporation Delaware Avco DC Corporation Delaware Avco Enterprises, Inc. California Avco Financial Services Canada Limited Ontario Avco Financial Services International, Inc. Nebraska Avco Financial Services Ltd. Australian Capital Territory Avco Financial Services Limited New Zealand Avco Group Limited United Kingdom Avco National Bank California Balboa Insurance Company California Balboa Life Insurance Company California Family Insurance Corporation Wisconsin Meritplan Insurance Company California Newport Insurance Company Arizona ______________________________ Owned by Avco Financial Services International, Inc. Owned by AFS Corporation and Avco DC Corporation Owned by Avco Financial Services, Inc. Owned by Avco Enterprises, Inc., a wholly-owned subsidiary of Avco Financial Services, Inc. Owned by Balboa Insurance Company EX-23 9 EXHIBIT Exhibit 23 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in this Annual Report (Form 10-K) of Textron Inc. of our report dated January 23, 1997, included in the 1996 Annual Report to Shareholders of Textron Inc. Our audits also included the financial statement schedules of Textron Inc. listed in the accompanying Index to Financial Statements and Financial Statement Schedules. These schedules are the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits. In our opinion, the financial statement schedules referred to above, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein. We also consent to the incorporation by reference in the Registration Statements (Form S-3 No. 33-46501, Form S-3 No. 33- 63227, Form S-8 No. 2-78073, Form S-8 No. 2-95413, Form S-8 No. 33-00668, Form S-8 No. 33-19402, Form S-8 No. 33-37139, Form S-8 No. 33-38094, Form S-8 No. 33-57025, Form S-8 No. 33-63741 and Form S-8 No. 33-07121) of Textron Inc. and in the related Prospectuses and Prospectus Supplements of our report dated January 23, 1997, with respect to the consolidated financial statements and schedules of Textron Inc. included or incorporated by reference in this Annual Report (Form 10-K) for the year ended December 28, 1996. /s/ERNST & YOUNG Boston, Massachusetts March 13, 1997 EX-24.1 10 EXHIBIT POWER OF ATTORNEY The undersigned, Textron Inc. ("Textron") a Delaware corporation, and the undersigned directors and officers of Textron, do hereby constitute and appoint Wayne W. Juchatz, Arnold M. Friedman, Michael D. Cahn, W. Robert Kemp and Ann T. Willaman, and each of them, with full powers of substitution, their true and lawful attorneys and agents to do or cause to be done any and all acts and things and to execute and deliver any and all instruments and documents which said attorneys and agents, or any of them, may deem necessary or advisable in order to enable Textron to comply with the Securities and Exchange Act of 1934, as amended, and any requirements of the Securities and Exchange Commission in respect thereof, in connection with the filing of Textron's Annual Report on Form 10-K for the fiscal year ended December 28, 1996, including specifically, but without limitation, power and authority to sign the names of the undersigned directors and officers in the capacities indicated below and to sign the names of such officers on behalf of Textron to such Annual Report filed with the Securities and Exchange Commission, to any and all amendments to such Annual Report, to any instruments or documents or other writings in which the original or copies thereof are to be filed as a part of or in connection with such Annual Report or amendments thereto, and to file or cause to be filed the same with the Securities and Exchange Commission; and each of the undersigned hereby ratifies and confirms all that such attorneys and agents, and each of them, shall do or cause to be done hereunder and such attorneys and agents, and each of them, shall have, and may exercise, all of the powers hereby conferred. IN WITNESS WHEREOF, Textron has caused this Power of Attorney to be executed and delivered in its name and on its behalf by the undersigned duly authorized officer and its corporate seal affixed, and each of the undersigned has signed his or her name thereto, on this 26th day of February, 1997. TEXTRON INC. By: /s/James F. Hardymon James F. Hardymon Chairman and Chief Executive Officer ATTEST: /s/Frederick K. Butler Frederick K. Butler Vice President and Secretary /s/James F. Hardymon /s/Barbara Scott Preiskel James F. Hardymon Barbara Scott Preiskel Chairman and Chief Director Executive Officer, Director (principal executive officer) /s/Lewis B. Campbell /s/Brian H. Rowe Lewis B. Campbell Brian H. Rowe President and Chief Operating Director Officer, Director /s/H. Jesse Arnell /s/Sam F. Segnar H. Jesse Arnelle Sam F. Segnar Director Director /s/Teresa Beck /s/Jean Head Sisco Teresa Beck Jean Head Sisco Director Director /s/R. Stuart Dickson /s/John W. Snow R. Stuart Dickson John W. Snow Director Director /s/Paul E. Gagne /s/Martine D. Walker Paul E. Gagne Martin D. Walker Director Director /s/John D. Macomber /s/Thomas B. Wheeler John D. Macomber Thomas B. Wheeler Director Director /s/Dana G. Mead /s/Stephen L. Key Dana G. Mead Stephen L. Key Director Executive Vice President and Chief Financial Officer (principal financial officer) /s/Richard L. Yates Richard L. Yates Vice President and Controller (principal accounting officer) EX-24.2 11 EXHIBIT Exhibit 24.2 TEXTRON INC. Assistant Secretary's Certificate I, ANN T. WILLAMAN, a duly elected Assistant Secretary of TEXTRON INC., a Delaware corporation (hereinafter, the "Corporation"), DO HEREBY CERTIFY that set forth below is a true and correct copy of a resolution passed at a meeting of the Corporation's Board of Directors held on February 28, 1997, at which a quorum was present and voted throughout: RESOLVED, that the officers of the Corporation be, and they hereby are, authorized in the name and on behalf of the Corporation to execute and deliver a power of attorney appointing Wayne W. Juchatz, Arnold M. Friedman, Michael D. Cahn and Ann T. Willaman, or any of them, to act as attorneys-in-fact for the Corporation for the purpose of executing and filing the Corporation's Annual Report on Form 10-K for its fiscal year ended December 28, 1996, and any and all amendments thereto. I DO HEREBY FURTHER CERTIFY that the foregoing resolution has been neither amended nor modified, and remains in full force and effect as of the date hereof. IN WITNESS WHEREOF, I have hereunto set my hand and caused the Corporate seal of TEXTRON INC. to be affixed as of the 14th day of March, 1997. /s/Ann T. Willaman Ann T. Willaman CORPORATE SEAL Assistant Secretary EX-27 12 EXHIBIT
5 This schedule contains summary financial information extracted from Textron Inc.'s Consolidated Balance Sheet as of December 28, 1996 and Consolidated Statement of Income for the year ended December 28, 1996 and is qualified in its entirety by reference to such financial statements. 12-MOS DEC-28-1996 DEC-28-1996 47 0 11,304 293 1,192 0 3,203 1,664 18,235 0 10,346 12 0 14 3,157 18,235 7,179 9,274 5,837 6,112 0 230 731 827 322 482 (229) 0 0 253 2.94 2.94
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