-----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, GgLde93yqGEc0Av05dloq+0edk2XmQWhYuKBxHZ3gjtXrOZRThAOsjd5MxCjJyHm sD8rl0hALq1as4MoI3SJ/w== 0000217346-96-000010.txt : 19960513 0000217346-96-000010.hdr.sgml : 19960513 ACCESSION NUMBER: 0000217346-96-000010 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19960330 FILED AS OF DATE: 19960510 SROS: NYSE 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-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-05480 FILM NUMBER: 96560011 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-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 _______________ FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal quarter ended March 30, 1996 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 Commission file number 1-5480 _______________ TEXTRON INC. (Exact name of registrant as specified in its charter) _______________ Delaware 05-0315468 (State or other jurisdiction of (I.R.S. Employer Identification incorporation or organization) No.) 40 Westminster Street, Providence, RI 02903 401-421-2800 (Address and telephone number of principal executive offices) _______________ 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 Common stock outstanding at April 27, 1996 - 84,075,000 shares PART I. FINANCIAL INFORMATION Item 1. FINANCIAL STATEMENTS TEXTRON INC. Consolidated Statement of Income (unaudited) (Dollars in millions except per share amounts) Three Months Ended March 30, April 1, 1996 1995 Revenues Manufacturing sales $1,700 $ 1,554 Finance revenues 514 475 Total revenues 2,214 2,029 Costs and expenses Cost of sales 1,393 1,278 Selling and administrative 331 302 Interest 183 202 Provision for losses on collection of finance receivables, less recoveries 53 39 Other 70 51 Total costs and expenses 2,030 1,872 Income from continuing operations before income taxes and distributions on preferred securities of subsidiary trust 184 157 Income taxes (72) (62) Distributions on preferred securities of subsidiary trust, net of income taxes (3) - Income from continuing operations 109 95 Discontinued operation, net of income taxes: Income from operations 16 14 Estimated loss on disposal (90) - (74) 14 Net income $ 35 $ 109 Per common share: Income from continuing operations $ 1.26 $ 1.09 Discontinued operation (0.86) .16 Net income $ 0.40 $ 1.25 Average shares outstanding* 86,680,000 87,055,000 Dividends per share: $2.08 Preferred stock, Series A $ .52 $ .52 $1.40 Preferred stock, Series B $ .35 $ .35 Common stock $ .44 $ .39 * Average shares outstanding assume full conversion of preferred stock and exercise of options. See notes to consolidated financial statements.
Item 1. FINANCIAL STATEMENTS (Continued) TEXTRON INC. Consolidated Balance Sheet (unaudited) (In millions) March 30, December 30, 1996 1995 Assets Cash $ 71 $ 84 Investments 781 778 Receivables - net: Finance 9,394 9,362 Commercial and U.S. Government 809 777 10,203 10,139 Inventories 1,368 1,284 Property, plant and equipment, less accumulated depreciation of $1,630 and $1,585 1,369 1,373 Goodwill, less accumulated amortization of $363 and $347 1,483 1,491 Investment in discontinued operation, less estimated net loss on disposal in 1996 997 1,161 Other (including net prepaid income taxes) 1,111 1,037 Total assets $ 17,383 $ 17,347 Liabilities and shareholders' equity Liabilities Accounts Payable $ 670 $ 684 Accrued postretirement benefits other than pensions 919 919 Other accrued liabilities (including income taxes) 2,197 2,121 Debt: Textron Parent Company Borrowing Group 1,464 1,774 Finance subsidiaries 8,422 8,437 9,886 10,211 Total liabilities 13,672 13,935 Textron-obligated mandatorily redeemable preferred securities of subsidiary trust holding solely subordinated debt securities of Textron 484 - Shareholders' equity Capital stock: Preferred stock 15 15 Common stock* 12 12 Capital surplus 769 750 Retained earnings 2,862 2,864 Other 32 129 3,690 3,770 Less cost of treasury shares 463 358 Total shareholders' equity 3,227 3,412 Total liabilities and shareholders' equity $ 17,383 $ 17,347 *Common shares outstanding 84,012,000 84,935,000 See notes to consolidated financial statements.
Item 1. FINANCIAL STATEMENTS (Continued) TEXTRON INC. Consolidated Statement of Cash Flows (unaudited) (In millions) Three Months Ended March 30, April 1, 1996 1995 Cash flows from operating activities: Income from continuing operations $ 109 $ 95 Adjustments to reconcile income from continuing operations to net cash provided by operating activities: Depreciation and amortization 92 82 Provision for losses on receivables 54 42 Changes in assets and liabilities excluding those related to acquisitions and divestitures: Increase in commercial and U.S. Government receivables (31) (23) Increase in inventories (82) (56) Increase in other assets (27) (5) Increase (decrease) in accounts payable (18) 32 Decrease in accrued liabilities (1) (132) Other - net 2 10 Cash provided by operating activities of continuing operations 98 45 Cash provided by operating activities of discontinued operation 189 143 Net cash provided by operating activities 287 188 Cash flows from investing activities: Purchases of investments (34) (45) Proceeds from disposition of investments 12 10 Maturities and calls of investments 10 10 Finance receivables: Originated or purchased (1,461) (1,486) Repaid or sold 1,432 1,264 Cash used in acquisitions (3) (40) Capital expenditures (52) (61) Other investing activities - net (1) (23) Cash used by investing activities of continuing operations (97) (371) Cash used by investing activities of discontinued operation (189) (183) Net cash used by investing activities (286) (554) Cash flows from financing activities: Increase (decrease) in short-term debt 130 (91) Proceeds from issuance of long-term debt 456 1,018 Principal payments on long-term debt (955) (535) Issuance of Textron-obligated mandatorily redeemable preferred securities of subsidiary trust holding solely subordinated debt securities of Textron 484 - Proceeds from exercise of stock options 18 7 Purchases of Textron common stock (110) (37) Dividends paid (37) (33) Cash provided (used) by financing activities of continuing operations (14) 329 Cash provided (used) by financing activities of discontinued operation (15) 40 Net cash provided (used) by financing activities (29) 369 Net increase (decrease) in cash (28) 3 Elimination of cash flow of discontinued operation 15 - Cash at beginning of period 84 49 Cash at end of period $ 71 $ 52 See notes to consolidated financial statements.
Item 1. FINANCIAL STATEMENTS (Continued) TEXTRON INC. Notes to Consolidated Financial Statements (unaudited) Note 1: Summary of significant accounting policies The financial statements should be read in conjunction with the financial statements included in Textron's Annual Report on Form 10-K for the year ended December 30, 1995 and Current Report on Form 8-K dated April 29, 1996. The financial statements reflect all adjustments (consisting only of normal recurring adjustments, except for recording the estimated loss on disposal of Paul Revere -- see Note 2) which are, in the opinion of management, necessary for a fair presentation of Textron's consolidated financial position at March 30, 1996, and its consolidated results of operations and cash flows for each of the respective three month periods ended March 30, 1996 and April 1, 1995. The results of operations for the three months ended March 30, 1996 are not necessarily indicative of results for the full year. Note 2: Discontinued operation On April 29, 1996, Textron announced that The Paul Revere Corporation, an 83.3% owned subsidiary, had entered into an agreement with Provident Companies, Inc. whereby Provident will acquire all of the outstanding shares of Paul Revere's common stock for $26 per share. Textron has restated its financial statements as presented herein to treat Paul Revere as a discontinued operation. For its Paul Revere shares, Textron will receive $20 per share in cash (an aggregate of $750 million) and $6 per share in Provident common stock, for a total of approximately $975 million. (The number of shares of Provident common stock to be received will be 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. Based on the $34 closing price of Provident's stock on May 8, 1996, Textron would own approximately 6.6 million of Provident shares had the closing occurred on that date.) This transaction has been approved by the Boards of Directors of Paul Revere, Provident, and Textron and is subject to regulatory approvals and the consent of Provident and Paul Revere shareholders. It is expected to close in the third quarter of 1996. The loss on sale will be approximately $90 million, net of Textron's share of Paul Revere's estimated net income for the period April 1996 through the expected closing date (approximately $40 million). Textron has recorded this net loss in its financial statements at March 30, 1996 and for the three months then ended. The operating results of Paul Revere are presented below: Three months ended (In millions) March 30, 1996 April 1, 1995 Revenues $ 383 $ 358 Costs and expenses 352 330 Income before income taxes 31 28 Income taxes (12) (11) Net income 19 17 Minority interest in net income (3) (3) Textron's equity in net income $ 16 $ 14 Item. FINANCIAL STATEMENTS (Continued) Presented below is a summary of Paul Revere's financial position at March 30, 1996: (In millions) Assets: Investments $5,187 Insurance policy acquisition costs 986 Other 863 Total assets $7,036 Liabilities: Insurance reserves $5,190 Other accrued liabilities 541 Total liabilities 5,731 Textron equity: Currency translation adjustment (12) Securities valuation adjustment 51 Capital and retained earnings 1,048 Total Textron equity 1,087 Minority interest 218 Total liabilities and equity $7,036
Note 3: Finance receivables - net March 30, December 30, 1996 1995 (In millions) Finance receivables $9,927 $9,894 Less allowance for credit losses 274 270 Less finance-related insurance reserves and claims 259 262 $9,394 $9,362
Note 4: Inventories March 30, December 30, 1996 1995 (In millions) Finished goods $392 $ 352 Work in process 938 911 Raw materials 234 217 1,564 1,480 Less progress payments and customer deposits 196 196 $1,368 $1,284
Note 5: Textron-obligated mandatorily redeemable preferred securities of subsidiary trust holding solely subordinated debt securities of Textron 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 Item 1. FINANCIAL STATEMENTS (Continued) 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, ultimately, will be used 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. Note 6: Contingencies There are pending or threatened against Textron and its subsidiaries lawsuits and other proceedings, some of which allege violations of federal government procurement regulations, involve environmental matters, or are or purport to be class actions. Among these suits and proceedings are some which seek compensatory, treble or punitive damages in substantial amounts; fines, penalties or restitution; or the remediation of allegedly hazardous wastes; or, which under federal government procurement regulations 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, or the impact of the application of such government regulations, would not have a material effect on Textron's net income or financial condition. Note 7: Financial information by borrowing group Textron consists of two borrowing groups - the Textron Parent Company Borrowing Group (comprised of all entities of Textron other than its finance subsidiaries) and its finance subsidiaries. Item 1. FINANCIAL STATEMENTS (Continued) Note 7: Condensed financial information by borrowing group (continued) TEXTRON PARENT COMPANY BORROWING GROUP (unaudited) (In millions) Three Months Ended March 30, April 1, Statement of Income 1996 1995 Revenues $1,700 $1,554 Costs and expenses Cost of sales 1,393 1,278 Selling and administrative 177 157 Interest 38 50 Total costs and expenses 1,608 1,485 92 69 Pretax income of finance subsidiaries 92 88 Income from continuing operations before income taxes and distributions on preferred securities of subsidiary trust 184 157 Income taxes (72) (62) Distributions on preferred securities of subsidiary trust, net of income taxes (3) - Income from continuing operations 109 95 Discontinued operation, net of income taxes: Income from operations 16 14 Estimated loss on disposal (90) - (74) 14 Net income $ 35 $ 109
March 30, December 30, Balance Sheet 1996 1995 Assets Cash $ 51 $ 56 Receivables - net 809 777 Inventories 1,368 1,284 Investments in finance subsidiaries 1,499 1,475 Property, plant and equipment - net 1,294 1,297 Goodwill, less accumulated amortization of $244 and $233 1,338 1,344 Investment in discontinued operation, less estimated net loss on disposal in 1996 997 1,161 Other (including net prepaid income taxes) 1,221 1,177 Total assets $8,577 $8,571 Liabilities and shareholders' equity Accounts payable and accrued liabilities (including income taxes) $3,402 $3,385 Debt 1,464 1,774 Textron-obligated mandatorily redeemable preferred securities of subsidiary trust holding solely subordinated debt securities of Textron 484 - Shareholders' equity 3,227 3,412 Total liabilities and shareholders' equity $8,577 $8,571
Item 1. FINANCIAL STATEMENTS (Continued) Note 7: Condensed financial information by borrowing group (continued) TEXTRON PARENT COMPANY BORROWING GROUP (continued) (unaudited) (In millions) Three Months Ended March 31, April 1, Statement of Cash Flows 1996 1995 Cash flows from operating activities: Income from continuing operations $109 $ 95 Adjustments to reconcile income from continuing operations to net cash provided by operating activities: Undistributed earnings of finance subsidiaries (26) (24) Depreciation and amortization 60 54 Other - net (153) (94) Net cash provided (used) by operating activities (10) 31 Net cash used by investing activities (43) (93) Net cash provided by financing activities 48 74 Net increase (decrease) in cash (5) 12 Cash at beginning of period 56 20 Cash at end of period $ 51 $ 32
Item 1 FINANCIAL STATEMENTS (Continued) Note 7: Condensed financial information by borrowing group (continued) FINANCE SUBSIDIARIES (unaudited) (In millions) Three Months Ended March 31, March 31, Statement of Income 1996 1995 Revenues $ 514 $ 475 Costs and expenses Selling and administrative 154 145 Interest 145 152 Provision for losses on collection of finance receivables, less recoveries 53 39 Other 70 51 Total costs and expenses 422 387 Income before income taxes 92 88 Income taxes (36) (35) Net income $ 56 $ 53 March 31, December 31, Balance Sheet 1996 1995 Assets Cash $ 20 $ 28 Investments 779 771 Finance receivables - net 9,397 9,370 Other 716 657 Total assets $10,912 $10,826 Liabilities and equity Accounts payable and accrued liabilities (including income taxes) $ 1,008 $ 914 Debt 8,422 8,437 Equity 1,482 1,475 Total liabilities and equity $10,912 $10,826
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS TEXTRON INC. Revenues and Income by Business Segment (In millions) Three Months Ended March 30, April 1, 1996 1995 REVENUES MANUFACTURING: Aircraft $ 626 $ 542 Automotive 415 424 Industrial 439 349 Systems and Components 220 239 1,700 1,554 FINANCE 514 475 Total revenues $2,214 $2,029 INCOME MANUFACTURING: Aircraft $ 53 $ 41 Automotive 38 37 Industrial 49 43 Systems and Components 18 19 158 140 FINANCE 92 88 Segment operating income 250 228 Corporate expenses and other - net (28) (21) Interest expense - net (38) (50) Income from continuing operations before income taxes and distributions on preferred securities of subsidiary trust $ 184 $ 157
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Financial Condition Textron Parent Company Borrowing Group: During the three months ended March 30, 1996, the Textron Parent Company Borrowing Group's operating activities used cash of $10 million versus $31 million of cash provided by operating activities during the corresponding period of 1995. Cash flows for 1996 were affected by (a) an inventory buildup at Cessna related to the new Citation X aircraft and (b) higher Automotive receivables. The Group's debt decreased by $310 million as a result of the issuance of preferred securities ($500 million -- see below) which exceeded cash used for purchases of 1.4 million shares of Textron common stock under its stock repurchase program ($110 million), capital expenditures ($47 million), and payments of dividends ($37 million). During the three months ended April 1, 1995, the Textron Parent Company Borrowing Group's operating activities provided cash of $31 million versus $34 million during the corresponding period of 1994. Such cash flows approximated last year's level as increased income was offset by increased tax payments in 1995. On February 1, 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. On February 9, 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 initially used by Textron for the repayment of long-term borrowings and, ultimately, will be used for general corporate purposes. The Textron Parent Company Borrowing Group's credit facilities not used or reserved as support for outstanding commercial paper or bank borrowings at March 30, 1996 were $786 million. Textron had $511 million available at March 30, 1996 under its shelf registration statements filed with the Securities and Exchange Commission. Of the Textron Parent Company Borrowing Group's $620 million interest rate exchange agreements outstanding at December 30, 1995, $140 million expired through April 1996. Effective February 1, 1996, Textron acquired Xact Products, Inc., a precision-formed metal parts manufacturer based in Michigan, for an aggregate cost of approximately $11 million and on April 1, 1996, it acquired Valois Industries (which has been re-named as Textron Industries, S.A.), a Paris-based manufacturer of engineered fastening systems, for an aggregate cost of approximately $245 million. Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Management believes that the Textron Parent Company Borrowing Group will continue to have adequate access to credit markets and that its credit facilities and cash flows from operations - --including dividends received from Textron's finance operations-- will continue to be more than sufficient to meet its operating needs and to finance growth. Finance subsidiaries: The finance subsidiaries paid dividends of $30 million and $29 million to the Textron Parent Company Borrowing Group during the three month periods ended March 30, 1996 and April 1, 1995, respectively. During the first quarter of 1996, the finance subsidiaries had $129 million of interest rate exchange agreements go into effect. The agreements, which have a weighted average original term of one year and expire through 1998, had the effect of fixing the rate of interest at approximately 7.5% on $129 million of variable rate borrowings at March 31, 1996. Results of Operations - Three months ended March 30, 1996 vs. Three months ended April 1, 1995 Textron reported first quarter 1996 earnings per share from continuing operations of $1.26 per share, up 16% from 1995 earnings per share from continuing operations of $1.09. Income from continuing operations in 1996 of $109 million was up from 1995 income from continuing operations of $95 million. Revenues increased 9% to $2.2 billion in 1996 from $2.0 billion in 1995. On April 29, 1996, Textron announced that The Paul Revere Corporation, an 83.3% owned subsidiary, has entered into an agreement with Provident Companies, Inc. whereby Provident will acquire all of the outstanding shares of Paul Revere's common stock for $26 per share. Textron's loss on sale of its Paul Revere shares will be approximately $90 million, net of Textron's share of Paul Revere's estimated net income for the period April 1996 through the expected closing date. Textron has recorded this net loss in its financial statements at March 30, 1996 and for the three months then ended and has restated its financial statements as presented herein to treat Paul Revere as a discontinued operation. See Note 2 to the consolidated financial statements for additional information. Including Paul Revere's net income in both years and the estimated loss on the disposal of Paul Revere in 1996, Textron's first quarter 1996 earnings per share was $0.40 as compared to 1995 earnings per share of $1.25. Net income was $35 million versus $109 million in 1995. The Aircraft segment's revenues increased $84 million (15%) as both Bell Helicopter and Cessna Aircraft posted double-digit increases. Income increased $12 million (29%), due principally to higher results at Bell Helicopter. Bell Helicopter's revenues increased primarily as a result of higher domestic and international helicopter sales, including increased deliveries on the Canadian Forces contract ($35 million). Bell's income increased due to the higher revenues, lower product development expenses related to new helicopter models, and additional income on the V-22 program. Cessna's revenues increased primarily as a result of the higher sales of business jets and Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) utility turboprop aircraft ($25 million). Its income from the higher revenues was largely offset by higher product development and selling and administrative expenses due to the introduction and support of new products. The Automotive segment's revenues decreased $9 million (2%) primarily as a result of overall lower North American automotive production and the impact of a strike at certain General Motors' plants, partially offset by the benefit of increased production on the Chrysler minivan as well as a ramp-up in sales at Textron's Saltillo, Mexico facility. Notwithstanding the lower revenues, income increased $1 million (3%) as a result of improved operating performance. The Industrial segment's revenues and income increased $90 million (26%) and $6 million (14%), respectively. These increases were due principally to higher sales in the fastening systems business ($77 million), reflecting the acquisitions in late 1995 of Elco Industries and Friedr. Boesner GmbH. In addition, income increased at E-Z-Go as a result of higher sales of golf cars and better operating performance, while revenues and income decreased at Speidel, due to lower retail demand for certain products. The Systems and Components segment's revenues and income decreased $19 million (8%) and $1 million (5%), respectively. The decreases were due principally to reduced shipments on certain commercial aerospace and U.S. Government contracts. The Finance segment's revenues increased $39 million (8%), while income increased $4 million (5%). AFS' revenues increased $35 million, primarily as a result of an increase in yields on finance receivables (18.56% in the first quarter 1996 vs. 17.72% in the first quarter 1995) and an increase in earned insurance premiums in the independent insurance operations. Its income increased $3 million due to those factors and a decrease in the average cost of borrowed funds (7.01% in the first quarter 1996 vs. 7.38% in the first quarter 1995). This favorable impact was partially offset by an increase in the ratio of net credit losses to average finance receivables (2.61% in the first quarter 1996 vs. 1.81% in the first quarter 1995) and an increase in the ratio of insurance losses to earned insurance premiums in both AFS' finance-related and its independent insurance operations. TFC's income increased $1 million, due to a higher level of finance receivables ($2.973 billion in the first quarter 1996 vs. $2.791 billion in the first quarter 1995) and higher other income, due principally to increases in arrangement fee income and residual and prepayment gains. These factors were partially offset by higher loan loss provisions, due to reserve strengthening. Discontinued operation -- Paul Revere's revenues increased $25 million (7%) due to increased premiums and fees in the individual disability and group insurance lines of business ($27 million) and a gain on the sale of its Canadian life insurance business ($2 million), partially offset by lower net realized investment gains ($4 million in 1996 vs. $6 million in 1995). Its income increased $4 million (14%), due principally to the higher revenues and an improved individual disability insurance benefit ratio. That ratio improved in the first quarter of 1996 to 84.0% from the 89.4% in the first quarter of 1995, but increased from 81.5% in the fourth quarter of 1995 as a result of lower claim termination rates on policies in previously identified problem areas, specifically those Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) issued to physicians, during 1985 - 1989, and in Florida and California. Paul Revere continued its efforts to improve operating results through new products, pricing and underwriting adjustments, and continued emphasis on claims management. Corporate expenses and other - net increased $7 million, due principally to the reclassification of certain nondebt related expenses from the interest expense line ($6 million) and a pretax charge related to the early redemption of debt ($2 million). Interest expense - net for the Textron Parent Company Borrowing Group decreased $12 million due to the reclassification, a lower average cost of borrowing, and lower average debt, due in part to the payment of debt from the proceeds from the issuance of preferred securities on February 9, 1996. PART II. OTHER INFORMATION Item 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 12.1 Computation of ratio of income to combined fixed charges and preferred securities dividends of the Textron Parent Company Borrowing Group. 12.2 Computation of ratio of income to combined fixed charges and preferred securities dividends of Textron Inc. including all majority-owned subsidiaries. 27 Financial Data Schedule (filed electronically only) (b) Reports on Form 8-K During the quarter ended March 30, 1996, Textron filed the following reports on Form 8-K: (i) Current Report on Form 8-K dated January 25, 1996, reporting Textron's consolidated results for the fourth quarter and fiscal year ended December 30, 1995, under Item 5 (Other Events) and Item 7 (Exhibits). (ii) Current Report on Form 8-K dated February 6, 1996, describing an Underwriting Agreement under Section 5 (Other Events) and filing a copy of such Underwriting Agreement under Item 7 (Exhibits). SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. TEXTRON INC. Date: May 10, 1996 s/R. L. Yates R. L. Yates Vice President and Controller (principal accounting officer) LIST OF EXHIBITS The following exhibits are filed as part of this Report on Form 10-Q: Name of Exhibit 12.1 Computation of ratio of income to combined fixed charges and preferred securities dividends of the Textron Parent Company Borrowing Group 12.2 Computation of raio of income to combined fixed charges and preferred securities dividends of Textron Inc. including all majority-owned subsidiaries 27 Financial Data Schedule (filed electronically only) EX-12 2 EXHIBIT 12.1 EXHIBIT 12.1 TEXTRON PARENT COMPANY BORROWING GROUP COMPUTATION OF RATIO OF INCOME TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS (unaudited) (In millions except ratio) Three Months Ended March 30, 1996 Fixed charges: Interest expense $ 38 Distributions on preferred securities of subsidiary trust, net of income taxes 3 Estimated interest portion of rents 4 Total fixed charges $ 45 Income: Income before income taxes and distributions on preferred securities of subsidiary trust $184 Eliminate equity in undistributed pretax income of finance subsidiaries (62) Fixed charges 45 Adjusted income $167 Ratio of income to fixed charges 3.71 EX-12 3 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 ratio) Three Months Ended March 30, 1996 Fixed charges: Interest expense $183 Distributions on preferred securities of subsidiary trust, net of income taxes 3 Estimated interest portion of rents 9 Total fixed charges $195 Income: Income before income taxes and distributions on preferred securities of subsidiary trust $184 Fixed charges 195 Adjusted income $379 Ratio of income to fixed charges 1.94 EX-27 4
5 This schedule contains summary financial information extracted from Textron Inc.'s Consolidated Balance Sheet as of March 30, 1996 and Consolidated Statement of Income for the three months ended March 30, 1996 and is qualified in its entirety by reference to such financial statements. YEAR DEC-28-1996 MAR-30-1996 71 0 10,736 274 1,368 0 2,999 1,630 17,383 0 9,886 12 0 15 3,200 17,383 1,700 2,214 1,393 1,463 0 53 183 184 72 109 (74) 0 0 35 .40 .40
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