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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended January 3, 1998
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; (163,142,742 shares New York Stock Exchange
outstanding at March 6, 1998); Pacific Stock Exchange
Preferred Stock Purchase Rights Chicago Stock Exchange
$2.08 Cumulative Convertible Preferred Stock, New York Stock Exchange
Series A - no par value
$1.40 Convertible Preferred Dividend Stock, Series B New York Stock Exchange
(preferred only as to dividends) - no par value
8.75% Debentures due July 1, 2022 New York Stock Exchange
7.92% Trust Preferred Securities of Subsidiary Trust New York Stock Exchange
(and Textron Guaranty with respect thereto)
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1)
has filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has
been subject to such filing requirements for the past 90
days. Yes X. No
Indicate by check mark if disclosure of delinquent
filers pursuant to Item 405 of Regulation S-K is not
contained herein, and will not be contained, to the best of
registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [X]
The aggregate market value of voting stock held by
non-affiliates of the registrant is $12,025,454,250 as of
March 6, 1998.
Portions of Textron's Annual Report to
Shareholders for the fiscal year ended January 3, 1998
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 22, 1998
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 four business segments - Aircraft, Automotive,
Industrial and Finance. Included within the business
segments are operations that are unincorporated divisions of
Textron and others that are separately incorporated
subsidiaries. A listing of the operations within each
business segment, including a description of the product
lines of each business segment, is incorporated herein by
reference to pages 58 and 59 of Textron's 1997 Annual Report
to Shareholders. Financial information by business segment
and geographic area is incorporated herein by reference to
pages 24 and 55 of Textron's 1997 Annual Report to
Shareholders. Additional information regarding each
business segment and Textron in general is set forth below.
Business Segments
Aircraft. The Aircraft segment consists of Bell
Helicopter Textron and The Cessna Aircraft Company. Textron
Lycoming was included in the Aircraft segment's 1997
financial results, but was transferred for operational
purposes to the Industrial segment in January 1998, and its
business is described under Industrial below.
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.
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. Revenues of Bell accounted for approximately 15%,
16%, and 18% of Textron's total revenues in 1997, 1996 and
1995, respectively.
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 1997, such sales
accounted for approximately 60% of Bell's business.
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. In February 1998, Bell and Boeing announced that the
joint venture will be dissolved and Bell will assume
complete control of the Model 609 program, although Boeing
will continue to work as a major program subcontractor.
In February 1998, Textron's Board of Directors approved
a plan to acquire a substantial portion of Boeing's
commercial helicopter business. Under the terms of the
proposed sale, Bell will acquire the Boeing MD 500 and MD
600 series product lines, assuming responsibility for the
manufacture, marketing and services/support of these single
engine, turbine-powered light helicopters. Boeing's MD
Explorer helicopter line is not included in the proposed
sale, but Bell has agreed to provide spare parts and support
for the MD Explorer after the sale is completed. The
proposed sale is subject to satisfactory due diligence and
governmental approvals.
Bell is developing a new light twin engine helicopter,
designated the Model 427, in collaboration with Samsung
Aerospace Industries Ltd. of South Korea. The first
delivery of this eight place aircraft is scheduled for the
first quarter of 1999.
In the light and medium helicopter market, Bell has two
major U.S. competitors (including Boeing)
and one major European competitor.
Certain of its competitors are substantially larger and more
diversified aircraft manufacturers. Bell markets its
products worldwide through its own sales force and through
independent representatives. Price, financing terms,
aircraft performance, reliability and product support are
significant factors in the sale of helicopters. Bell has
developed the world's largest distribution system to sell
and support helicopters, serving customers in over 120
countries.
Based on unit sales, The Cessna Aircraft Company is the
world's largest manufacturer of light and mid-size business
jets, single engine utility turboprop aircraft, and single
engine piston aircraft. Cessna also designs, manufactures
and sells general aviation aircraft propellers and related
accessories worldwide. Cessna currently has three major
aircraft product lines: Citation business jets, single
engine turboprop Caravans and Cessna single engine piston
aircraft. Revenues of Cessna accounted for approximately
14%, 12% and 10% of Textron's total revenues in 1997, 1996
and 1995, respectively.
Cessna currently produces a family of Citation business
jets including the CitationJet, the Citation Bravo, the
Citation Ultra, the Citation VII, and the Citation X. The
Citation X is the world's fastest business jet with a
maximum operating speed of Mach .92. Cessna placed 28
Citation Xs in service in 1997. Certification was completed
and
customer deliveries of the Citation Bravo began in 1997.
Cessna is scheduled to certify and begin deliveries of the
Citation Excel business jet in 1998.
The Cessna Caravan is the world's best selling utility
turboprop. More than 850 Caravans have been sold by Cessna
since the first Caravan was delivered in 1985. Caravans are
offered in four distinct models including the Grand Caravan,
Super Cargomaster, Caravan Floatplane, and the Caravan 675.
Caravans are used in the United States primarily to carry
overnight express package shipments. International uses of
Caravans include commuter flights, relief flights, tourism
and freight.
Cessna re-entered the single engine piston aircraft
market in 1996. In 1997, Cessna made deliveries of the 172
Skyhawk and the 182 Skylane, which are four-place single
engine piston aircraft. In 1998, Cessna is scheduled to
certify and begin deliveries of two six-place aircraft
models, the 206 Stationair and the T206 Turbo Stationair.
Cessna markets its products worldwide primarily through
its own sales force as well as through a network of
authorized independent sales representatives. Cessna has
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. The
Citation family of aircraft is supported by ten Cessna owned
and operated Citation Service Centers, along with Authorized
Service Stations in more than 15 countries throughout the
world.
Cessna provides its business jet operators with factory-
direct customer support offering 24 hour a day service and
maintenance. More than 40% of the worldwide Citation fleet
of more than 2,500 aircraft receive service through Cessna-
owned service centers. Cessna Caravan and piston customers
receive product support through independently owned service
stations and 24 hour a day spare parts support through
Cessna.
Cessna's McCauley Propeller Systems unit provides new
propellers directly to original equipment manufacturers
("OEMs") and spare parts for service and repairs worldwide.
All new Cessna single engine piston aircraft built in 1997
used McCauley propellers.
Automotive. The Automotive segment, organized under an
umbrella organization called Textron Automotive Company
("TAC"), consists of Textron Automotive Trim Operations, CWC
Castings Textron, Kautex Textron, McCord Winn Textron,
Micromatic Textron and Randall Textron. These operations
sell primarily to automotive OEMs and their suppliers
operating in North America and Europe, and, to a lesser
extent, South America and Asia. TAC is headquartered in
Troy, Michigan and has over fifty facilities located in the
United States, Argentina, Belgium, Brazil, Canada, China,
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.
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. Many of these products are shipped just-in-time as
fully integrated systems. Revenues of Textron Automotive
Trim Operations accounted for 13%, 15% and 15% of Textron's
total revenues in 1997, 1996 and 1995 respectively.
In January 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 technical parts for OEMs throughout
Europe, North America, Brazil and Argentina. Kautex
supplies Volkswagen in China through a joint venture with
Changchun Junzilan Industrial Group. Kautex established a
manufacturing plant in Puebla, Mexico in 1997. This
facility will supply all of Volkswagen's and Chrysler's
plastic fuel tank requirements for their Mexican production.
CWC Castings designs and manufactures engine camshafts
and vibration damper components for OEMs and the
aftermarket. In July 1997, Textron acquired Kaywood
Products Corporation, a manufacturer of precision machined
parts and components for assembled camshafts. Kaywood
operates as the Kaywood Products operation of CWC.
McCord Winn manufactures seating comfort systems,
windshield and headlamp washer systems, and armatures for
precision DC motors. In September 1997, Textron acquired
the General Rubber Goods division of Pirelli Tyres Limited,
based in Burton-on-Trent, England, a manufacturer of seat
comfort systems products for automotive and home/office
applications. The combination makes McCord Winn Textron a
leader in both the North American and European automotive
seat comfort markets. In September 1997, McCord introduced
its ASCTecTM, (Active Surface Control Technology) seating
comfort system, which blends microprocessor-based
electronics and a pneumatically-controlled air support
system. Potential applications include automobiles, airline
seating, office/home furniture and bedding products.
Micromatic manufactures machine tools used for
precision bore and surface finishing of automobile engines.
In addition, Micromatic produces equipment for spline
rolling and gear production. Randall produces fuel filler
systems.
More than 70 models currently carry parts made by TAC
including Chrysler's Jeep Grand Cherokee, Voyager and
Caravan mini-vans; Ford's Mondeo, Lincoln Town Car and
Windstar mini-van; General Motors' Cadillac Seville, newly
restyled Corvette, and Venture, Transport, Silhouette and
Sintra mini-vans; and Volkswagen's new concept
Beetle. TAC continues its strong position on Chrysler's
LH series of cars that were redesigned for the 1998 model year.
TAC's manufacturing operations are supported by a
staff of research and design specialists at TAC's Automotive
Technology Center. These specialists have developed new
processes and products, many of which are patented, that
allow TAC to offer its customers technology driven products
and processes. In the plastics and coatings area, TAC is a
recognized leader in alternative skin materials (including
non-PVC materials), spray urethane and cloth integration,
energy management foam (including head 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.
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, requiring the manufacturer to plan shipments in
advance and hold inventory.
Automotive OEMs and their suppliers are the principal
customers of TAC. The loss of the U.S. and Europe-based
automotive OEM customers and their first-tier suppliers
would have a material adverse effect on TAC. However,
because of the broad range of products sold to such
customers, it is unlikely that they would cease all
purchases from TAC.
Each of TAC's businesses faces competition from a
number of other manufacturers based primarily on price,
quality, reputation and delivery. Although TAC is one of
the largest manufacturers offering its range of products and
services, it faces strong competition in all of its market
segments. Because of the diversity of products and services
offered, no single company is a competitor in all market
segments. In certain markets, TAC also competes for
business with the OEMs' own operations.
Industrial. The Industrial segment consists of four
major product groups: Fastening Systems, Golf and Turf Care
Equipment, Fluid and Power Systems and Industrial
Components. The Fluid and Power Systems group and
Industrial Components group consist of operations that
previously constituted the Engineered Products group and the
Systems and Components segment.
Textron Fastening Systems ("TFS") manufactures and
sells fasteners, fastening systems and installation tools to
the aerospace, appliance, automotive, business equipment,
construction, do-it-yourself, general industrial and
transportation markets. TFS sells to a wide range of
customers throughout the world, including OEMs, distributors
and consumers. Fasteners manufactured by TFS include
rivets, threaded and non-threaded fasteners, cold-formed
components, metal stampings, plastic components and
assemblies that incorporate such products. Revenues of TFS
accounted for approximately 14%, 15% and 9% of Textron's
total revenues in 1997, 1996 and 1995, respectively.
In August 1997, Textron formed Textron Logistics
Corporation ("TLC") by combining certain existing fastener
operations. TLC provides full-range fastener inventory
management programs for OEMs and for retailers (such as
Sears and Home Depot), supplying TFS products and products
from other sources, thus offering its customers the ability
to obtain all of their fastener requirements from a single
source. In December 1997, Textron acquired Brazaco Mapri
Industrias Metalurgicas S.A. ("Mapri"), the largest
manufacturer of fasteners in Brazil, which is the primary
supplier to automotive OEMs in Brazil such as Fiat, Ford,
General Motors, Mercedes, and Volkswagen. Mapri, which
will operate as a unit of the Camcar operation of TFS, will
also serve as a lower-cost supplier of fasteners for the
other TFS operations.
Although TFS is one of the world's largest providers of
fastener products and services, there are hundreds of
competitors of TFS, ranging from small proprietorships to
large multi-national companies. Competition is based
primarily on price, quality, reputation and delivery. In
addition, larger customers of fastening systems tend to
procure products and services from the larger suppliers,
except for "niche" products which may be sourced from
smaller companies. Only the loss of the major OEM
automotive customers and their first-tier suppliers would
have a material adverse effect on TFS. However, because of
the broad range of products sold to such customers, it is
unlikely that they will cease all purchases from TFS.
The Golf and Turf Care Equipment group consists of E-Z-
GO Textron, which manufactures and sells electric powered
and gasoline powered golf cars and multipurpose utility
vehicles, Jacobsen Textron, which manufactures and sells
professional mowing and turf maintenance equipment, and
Ransomes plc, a multi-national engineering group that
specializes in the design, manufacture and marketing of
grass care machinery and specialized industrial vehicles.
Textron acquired Ransomes in January 1998.
The customers of the Golf and Turf Care Equipment group
consist primarily of golf courses, resort communities and
commercial and industrial users such as airports and
factories. Sales are made directly through factory
branches, through a network of distributors and directly to
end-users. Many sales of golf and turf care
equipment (both
at the distributor and end-user level) are financed through
Textron Financial Corporation, both for marketing purposes
and as an additional source of revenue to Textron.
There are two major competitors and a number of smaller
competitors for golf cars, multipurpose utility vehicles and
turf maintenance equipment for golf courses. Competition is
based primarily on price, quality, product support,
performance, reliability and reputation.
The Fluid and Power Systems group consists of Cone
Drive Textron, HR Textron, Maag Pump Systems Textron
(Switzerland) and Textron Systems. The Fluid and Power
Systems group operations face competition from other
manufacturers based primarily on price, quality, product
support, performance, delivery and reputation.
Cone Drive, which includes Textron Industrial SpA
(formerly Maag Italia), designs and manufactures double
enveloping worm gear speed reducers, gear motors and gear
sets, including gear systems primarily for railroad
applications. Maag Pump Systems manufactures gears, gear
pumps and gear systems. In December 1997, Textron acquired
the assets of Vernon Engineering Company Limited, the long-
standing distributor of the products of Maag Pump Systems in
the U.K. Cone Drive and Maag Pump Systems sell their
products to a variety of customers, including OEMs,
distributors and end-users.
HR Textron designs and manufacturers control systems
and components for aircraft, armored vehicles and commercial
applications. HR Textron is in the process of diversifying
its business base by adapting aerospace technology to
servovalves used in industrial and automotive applications.
HR Textron's aerospace and defense products are marketed
directly to the U.S. Government and OEMs and, in the
aftermarket, both directly and through service centers.
Textron Systems manufactures "smart" munitions,
airborne surveillance systems, automatic aircraft landing
systems and advanced composite materials for the U.S.
Department of Defense. Once exclusively a supplier to the
Department of Defense, Textron Systems now applies its
technologies to non-defense and international markets.
Current commercial products include laser ultrasonic systems
for industrial control, infrared sensors for medical,
industrial and agribusiness applications, and fire
protection and insulating materials for oil and chemical
companies. While Textron Systems sells most of its products
directly to customers, it also sells some products through a
growing, global network of sales representatives and
distributors.
The Industrial Components group consists of Fuel
Systems Textron, Greenlee Textron, Textron Lycoming, Textron
Marine & Land Systems and Turbine Engine Components Textron,
each of which is a leading company in its industry.
Products of this group are sold to a wide variety of
customers, including OEMs, distributors and end users,
including the military. The principal competitive factors
affecting sales of the products of the Industrial Components
group are price, quality, customer service, performance,
reliability, reputation and existing product base. The
Speidel operation, a manufacturer of watch attachments and
fashion jewelry, was sold to Herman Hirsch USA, Inc. at the
end of 1997.
Fuel Systems 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. Fuel Systems 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.
Greenlee is a worldwide market leader in powered
equipment, electrical test instruments and hand tools. The
principal applications of these products are electrical
construction and maintenance, power generation, transmission
and distribution, telecommunications, electronics, plumbing
and the mechanical trades.
Textron Lycoming is the world leader in the design,
manufacture and overhaul of reciprocating piston aircraft
engines serving the worldwide general aviation market.
Textron Lycoming sells new products directly to general
aviation airframe manufacturers, including Piper Aircraft,
Robinson Helicopter, and SOCATA, a division of Aerospatiale,
and is the exclusive supplier of engines for Cessna's new
product line of single engine aircraft. Aftermarket sales
are made to the more than 180,000 existing owners of Textron
Lycoming products through a worldwide network of
independently owned distributors.
Textron Marine & Land Systems is a world leader in the
design and construction of advanced technology air cushion
vehicles, surface effect ships, high performance search and
rescue vessels, Cadillac Gage light armored combat vehicles,
suspension systems, turrets and artillery systems. Textron
Marine & Land Systems has products operating in over 35
countries.
Turbine Engine Components is one of the world's largest
independent suppliers of internal components for gas turbine
engines for aircraft and industrial applications. Its
products include fan and compressor blades, vanes, shafts,
disks, rotors, blisks and other rotating components; the
forgings from which those products are machined; and
stationary components of turbine engines, such as frames,
diffusers, and air collectors. Turbine Engine Components
manufacturers its products to the specifications of its
customers.
Finance. The Finance segment consists of Avco
Financial Services ("AFS") and Textron Financial Corporation
("TFC"). AFS is engaged in consumer finance, insurance
services related to consumer finance, and commercial
finance. TFC is engaged in commercial finance.
AFS's consumer finance activities consist primarily of
the following: (i) loans which are unsecured or secured by
personal property for relatively small amounts and short
periods; (ii) real estate loans secured by real property for
larger amounts and for considerably longer periods; (iii)
auto financing of pre-owned autos; and (iv) retail
installment contracts, principally covering personal
property. AFS, through various insurance subsidiaries, also
offers a variety of insurance products to its consumer loan
customers and to consumer loan customers of unrelated
financial institutions. AFS's insurance products include
credit life, credit disability and casualty insurance.
AFS's consumer loan business is conducted through a
network of branch offices. At December 31, 1997, AFS
operated approximately 1,200 consumer finance offices
located in the United States, Australia, Australia, Canada,
Hong Kong, India, Ireland, New Zealand, Spain, Sweden and
the United Kingdom. Revenues of AFS's consumer lending
business (including insurance products sold to its loan
customers) accounted for approximately 14%, 16% and 17% of
Textron's total revenues in 1997, 1996 and 1995,
respectively.
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
products.
AFS's consumer finance 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. AFS's insurance
business is subject to licensing and regulation by state
authorities.
AFS's commercial business focuses primarily on
equipment leasing and inventory financing outside the United
States. During 1996 and 1997, AFS acquired or opened
commercial financing operations in Australia, Canada,
France, India, and the United Kingdom. These operations
were added to AFS's commercial businesses already being
conducted in Australia and Hong Kong. AFS's commercial
business portfolio grew to over $900 million at December 31,
1997, from approximately $300 million at December 31, 1996.
TFC is a diversified commercial finance company
specializing in aircraft finance, golf finance, vendor and
middle market equipment finance, and revolving credit
arrangements. TFC originates and syndicates a wide variety of
secured loan and lease transactions, selectively invests
in leveraged lease transactions and provides third-party
portfolio servicing. TFC provides commercial financing for
a wide range of customers, including those who purchase or
lease Textron products and certain suppliers to Textron
operations. TFC presently offers its services primarily in
the United States and, to a lesser extent, in Europe and
Canada. Each TFC business unit has a discrete market focus
and specific profit objectives and is staffed to provide
responsive services to its market.
The commercial finance businesses in which AFS and TFC
operate are highly competitive. AFS and TFC are 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,
1997 1996
(In millions)
United States $6,626 $6,925
Canada 1,239 1,079
Australia 1,174 1,067
United Kingdom 857 692
Other countries 916 659
$10,812 $10,422
At December 31, 1997, finance receivables in the United
States represented 61% 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 9% of the consolidated portfolio.
The following table presents accruing commercial loans
and all consumer 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
1997 3.42% 0.37% 2.30%
1996 3.25% 0.21% 2.32%
*Excludes commercial loans that are subject to recourse
to other Textron operating units.
The following table shows gross and net write-offs, the
percentages whichthat 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 Percentage
of average receivables of average
Years ended finance previously finance Provision
December 31, Amount receivables written off Amount receivables for losses
(In millions)
1997
Consumer 267 3.9% 48 219 3.2% 229
Commercial 32 0.9% 10 22 0.6% 27
299 2.8% 58 241 2.3% 256
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
Backlog
Information regarding Textron's backlog of government
and commercial orders at the end of the past two fiscal
years is contained on page 32 of Textron's 1997 Annual
Report to Shareholders, which page is incorporated herein by
reference.
Approximately 39% of Textron's total backlog of $6.3
billion at January 3, 1998, represents orders which are not
expected to be filled within the 1998 fiscal year. At
January 3, 1998, approximately 96% of the total government
backlog of $2.2 billion was funded.
Government Contracts
In 1997, 20% and 14% of the revenues of the Aircraft and
the Industrial 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 contract 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 51 of Textron's 1997
Annual Report to Shareholders, which page is incorporated
herein by reference.
Patents and Trademarks
Textron owns, or is licensed under, a number of patents
and trademarks throughout the world relating to products and
methods of manufacturing. Patents and trademarks have been
of value in the past and are expected to be of value in the
future; however, the loss of any single patent or group of
patents would not, in the opinion of Textron, materially
affect the conduct of its business.
Environmental Considerations
Textron's operations are subject to numerous laws and
regulations designed to protect the environment.
Compliance with such laws and expenditures for environmental
control facilities have not had, and are not expected to
have, a material effect on capital expenditures, earnings or
the competitive position of Textron. Additional
information regarding environmental matters is contained on
pages 31 and 54 of Textron's 1997 Annual Report to
Shareholders, which pages are incorporated herein by
reference.
Employees
At January 3, 1998, Textron had approximately 64,000
employees.
ITEM 2. PROPERTIES
At January 3, 1998, Textron operated a total of 139
plants located throughout the United States and 45 plants
outside the United States. Of the total of 184 plants,
Textron owned 114 and the balance were leased. In the
aggregate, the total manufacturing space was approximately
34 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 considers
the productive capacity of the plants operated by each of
its business segments to be adequate. In general, Textron's
facilities are in good condition, are considered to be
adequate for the uses to which they are being put, and are
substantially in regular use.
ITEM 3. LEGAL PROCEEDINGS
Textron is subject to a number of lawsuits,
investigations and claims arising out of the conduct of its
business, including those relating to commercial
transactions, government contracts, product liability, and
environmental, safety and health matters. Some seek
compensatory, treble or punitive damages in substantial
amounts; fines, penalties or restitution; or remediation of
contamination; and someand some are or purport to be class
actions. Under federal government procurement regulations,
some could result in suspension or debarment of Textron or
its subsidiaries from U.S. Government contracting for a
period of time. On the basis of information presently
available, Textron believes
that any liability for these suits and proceedings would
not have a material effect on Textron's net income or financial
condition.
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 March
6, 1998. Unless otherwise indicated, the employer is
Textron.
Name Age Position
James F. Hardymon 63 Chairman since 1993, and Chief
Executive Officer since 1992;
formerly President, 1989 to
1993; Director since 1989.
Lewis B. Campbell 51 President and Chief Operating
Officer since 1994; formerly
Executive Vice President and
Chief Operating Officer, 1992
to 1993; Director since 1994.
John D. Butler Executive Vice President
50 Administration and Chief Human
Resources Officer since July
1997; formerly Vice President
Personnel of General Motors
International Operations
(Zurich, Switzerland), 1993 to
June 1997.
Mary L. Howell 45 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 51 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 54 Executive Vice President and
Chief Financial Officer since
1995; formerly Executive Vice
President and Chief Financial
Officer of ConAgra, Inc., 1992
to 1995.
Herbert L. Henkel 49 President, Textron Industrial
Products since 1995; formerly
Group Vice President of
Textron Inc., 1993 to 1995;
President of the Greenlee
Textron Division, 1987 to
1993.
Edward C. Arditte Vice President and Treasurer
42 since May 1997; formerly Vice
President Finance and Business
Development of Textron
Fastening Systems, 1995 to May
1997; Vice President
Communications and Risk
Management of Textron Inc.,
1994 to 1995; Vice President
Investor Relations and Risk
Management, 1993 to 1994.
Frederick K. Butler 46 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 44 Vice President Strategic
Planning since 1995; formerly
Managing Director
Telecommunications Practice of
Arthur D. Little, Inc., 1991
to 1995.
Douglas A. Fahlbeck 52 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 55 Vice President and Deputy
General Counsel since 1984.
William B. Gauld 44 Vice President Corporate
Information Management and
Chief Information Officer
since 1995; formerly Staff
Vice President, Corporate
Information Management and
Chief Information Officer,
1994 to 1995; Chief
Information Officer of General
Electric (Electrical
Distribution and Control
business) 1992 to 1994.
Carol J. Grant 44 Vice President Human Resources
since February 1997; formerly
Vice President 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 51 Vice President Taxes since
1987.
William P. Janovitz 55 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 42 Vice President Communications
and Investor Relations since
1996; formerly Vice President
Investor Relations, 1995 to
1996; Director 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. 44 Vice President Risk Management
since January 1997; formerly
Director Risk Management, 1993
to January 1997; Vice
President and Treasurer of
Textron Financial Corporation,
1990 to 1993.
Frank W. McNally 58 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.
Gero K. H. Meyersiek 50 Vice President International
since 1996; formerly Vice
President of Textron
International Inc., 1995 to
1996; Vice President
International Business
Development of GE Financial
Services, 1991 to 1994.
Freda M. Peters 56 Vice President Executive
Development and Human Resource
Policy and Compliance since
February 1997; formerly
Director
Management/Organization
Development, 1996 to January
1997; Vice President Human
Resources of Branson
Ultrasonics Corporation
(subsidiary of Emerson
Electric Company), 1985 to
1996.
Daniel L. Shaffer 61 Vice President Audit and
Business Ethics since 1994;
formerly President of
Textron's Aircraft Engine
Components Division, 1992 to
1994.
Richard F. Smith 58 Vice President Government
Affairs since 1995; formerly
Staff Vice President
Government Affairs, March 1995
to August 1995; Director
Government Affairs, 1985 to
March 1995.
Richard L. Yates 47 Vice President and Controller
since 1995; formerly Executive
Vice President, Chief
Financial Officer and
Treasurer of The Paul Revere
Corporation, 1993 to 1995;
Senior Vice President, Chief
Financial Officer and
Treasurer of The Paul Revere
Corporation, 1991 to 1993.
John F. Zugschwert 64 Vice President Government
Marketing since 1995; formerly
Staff Vice President
Government Marketing, 1993 to
1995; Vice President
Washington Operations of Bell
Helicopter Textron, 1991 to
1993.
Textron's Board of Directors has approved a management
succession plan in which Mr. Campbell will become chief
executive officer on July 1, 1998. Mr. Hardymon will remain
chairman of Textron's Board of Directors until his
retirement at year-end 1999 at age 65.
PART II
ITEM 5. MARKETS FOR THE REGISTRANT'S COMMON
EQUITY AND RELATED STOCKHOLDER MATTERS
Textron's Common Stock is traded on the New York,
Chicago and Pacific Stock Exchanges. At January 3, 1998,
there were approximately 24,000 holders of Textron Common
Stock. The information on the price range of Textron's
Common Stock and dividends paid per share appearing under
"Common Stock Information" on page 56 of Textron's 1997
Annual Report to Shareholders is incorporated herein by
reference.
ITEM 6. SELECTED FINANCIAL DATA
The information appearing under "Selected Financial
Information" on page 57 of Textron's 1997 Annual Report to
Shareholders is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
"Management's Discussion and Analysis," appearing on
pages 25 through 32 of Textron's 1997 Annual Report to
Shareholders, is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements and supplementary
information contained in Textron's 1997 Annual report to
Shareholders and the Financial Statement schedules, as
listed in the accompanying Index to Financial Statements and
Financial Statement Schedules, are incorporated herein by
reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information appearing under "Nominees for Director"
on pages 2 through 6 of Textron's Proxy Statement for the
Annual Meeting of Shareholders to be held on April 22, 1998,
is incorporated herein by reference.
Information regarding Textron's executive officers is
included on pages 15 through 18 of Part I of this Report.
ITEM 11. EXECUTIVE COMPENSATION
The information appearing under "Report of the
Organization and Compensation Committee on Executive
Compensation, Executive Compensation and Performance Graph"
on pages 10 through 20 of Textron's Proxy Statement for the
Annual Meeting of Shareholders to be held on April 22, 1998,
is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The information appearing under "Security Ownership of
Certain Beneficial Holders" and "Security Ownership of
Management," on pages 8 through 10 of Textron's Proxy
Statement for the Annual Meeting of Shareholders to be held
on April 22, 1998, is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information appearing under "Transactions with
Management" on page 19 of Textron's Proxy Statement for the
Annual Meeting of Shareholders to be held on April 22, 1998,
is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
REPORTS ON FORM 8-K
(a) Financial Statements and Schedules
The consolidated financial statements, supplementary
information and financial statement schedules listed in the
accompanying Index to Financial Statements and Financial
Statement Schedules are filed as part of this Report.
Exhibits
3.1 Restated Certificate of Incorporation of
Textron as filed January 29, 1998.
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 10.21B 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 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.
10.8B 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.
10.9A 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.
10.9B 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.
10.9C 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.
10.10 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.
10.11 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.
10.12A 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.
10.12B 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.
10.13 Deferred Income Plan for Non-Employee
Directors. Incorporated by reference to
Exhibit 10.14 to Textron's Annual Report on
Form 10-K for the fiscal year ended December
28, 1996.
10.14A Employment Agreement between Textron and
James F. Hardymon dated November 24, 1989
("Employment Agreement"). Incorporated by
reference to Exhibit 10.9 to Textron's Annual
Report on Form 10-K for the fiscal year ended
December 30, 1989.
10.14B Amendment dated as of December 15, 1994,
to Employment Agreement. Incorporated by
reference to Exhibit 10.10B to Textron's
Annual Report on Form 10-K for the fiscal
year ended December 31, 1994.
10.15A 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.
10.15B 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.
10.16 Employment Agreement between
Textron and John D. Butler dated June 10,
1997. Incorporated by reference to Exhibit
10 to Textron's Quarterly Report on Form 10-Q
for the fiscal quarter ended June 28, 1997.
10.17 Retention Award granted to Herbert L. Henkel
on December 12, 1996.
10.18 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.
10.19A 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.
10.19B Description of modified pension arrangement.
10.20A 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.
10.20B Description of stock equivalent grant.
10.21A Employment Agreement between
Textron and William F. Wayland dated January
1, 1989 ("WFW Agreement"). Incorporated by
reference to Exhibit 10.12 to Textron's
Annual Report on Form 10-K for the fiscal
year ended December 30, 1989.
10.21B Supplement to WFW Agreement dated May 1, 1997.
10.22A Credit Agreement dated as of November 1,
1993, among Textron, the Lenders listed
therein and Bankers Trust Company as Admin
istrative 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.
10.22B 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.
10.22C 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.
10.22D Third Amendment to Credit Agreement
dated as of July 1, 1996. Incorporated by
reference to Exhibit 10.21D to Textron's
Annual Report on Form 10-K for the fiscal
year ended December 28, 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 24 through 59) of
Textron's 1997 Annual Report to Shareholders.
21 Certain subsidiaries of Textron.
Other subsidiaries, which considered in the
aggregate do not constitute a significant
subsidiary, are omitted from such list.
23 Consent of Independent Auditors.
24.1 Power of attorney.
24.2 Certified copy of a resolution of the Board
of Directors of Textron.
27 Financial Data Schedule.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the
quarter ended January 3, 1998.
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
16th day of March 1998.
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 16th
day of March 1998, by the following persons on behalf of the
registrant and in the capacities indicated:
NAME TITLE
* Chairman and Chief Executive Officer,
James F. Hardymon Director (principal executive officer)
* President and Chief Operating Officer,
Lewis B. Campbell Director
* Director
H. Jesse Arnelle
* Director
Teresa Beck
* 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
* 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
TEXTRON INC.
INDEX TO FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULES
Item 14(a)
Form Annual Report
Textron Inc. 10-K to Shareholders
Report of Independent Auditors 33
Consolidated Statement of Income for each of the 34
three years in the period ended January 3, 1998
Consolidated Balance Sheet at January 3, 1998 36
Consolidated Statement of Cash Flows for each of 38
the three years in the period ended January 3,
1998
Consolidated Statement of Changes in Shareholders' 40
Equity for each of the three years in the period
ended January 3, 1998
Notes to Consolidated Financial Statements 41-55
Revenues and Income by Business Segment 24
Supplementary Information (Unaudited):
Quarterly Financial Information 1997 and 1996 56
Financial Statement Schedules for each of the three
years in the period ended January 3, 1998
I Condensed financial information of 28
registrant
II Valuation and qualifying accounts 29
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.
TEXTRON INC.
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
For each of the three years in the period ended January 3, 1998
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 34 through 39 of Textron's 1997
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 36 and 37 of Textron's 1997 Annual Report to
Shareholders under the caption "Investments in Finance
Group."
The Parent Group received dividends of $221 million,
$124 million and $117 million from its Finance Group in
1997, 1996 and 1995, 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 January 3, 1998,
approximately $475 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 46 and 47 of Textron's 1997
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 48 of Textron's 1997 Annual
Report to Shareholders.
TEXTRON INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
For each of the three years in the period ended January 3,
1998
(In millions)
Allowance for credit losses
Changes in the allowance for credit losses for the years
indicated were as follows:
1997 1996 1995
Balance of the allowance for
credit losses at the
beginning of the year $293 $270 $250
Add - charged to income:
Consumer 229 203 149
Commercial 27 27 20
256 230 169
Deduct - balances
charged off:
Gross charge offs:
Consumer (267) (230) (177)
Commercial (32) (30) (25)
(299) (260) (202)
Recoveries:
Consumer 48 36 33
Commercial 10 3 4
58 39 37
Net charge offs (241) (221) (165)
Other 7 14 16
Balance of the allowance for
credit losses at the end of
the year $315 $293 $270
Balance of the allowance for
credit losses at the end of
the year applicable to:
Consumer $236 $218 $195
Commercial 79 75 75
$315 $293 $270
EXHIBIT LIST
Exhibits
3.1 Restated Certificate of Incorporation of
Textron as filed January 29, 1998.
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 10.21B 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 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.
10.8B 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.
10.9A 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.
10.9B 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.
10.9C 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.
10.10 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.
10.11 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.
10.12A 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.
10.12B 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.
10.13 Deferred Income Plan for Non-Employee
Directors. Incorporated by reference to
Exhibit 10.14 to Textron's Annual Report on
Form 10-K for the fiscal year ended December
28, 1996.
10.14A Employment Agreement between Textron and
James F. Hardymon dated November 24, 1989
("Employment Agreement"). Incorporated by
reference to Exhibit 10.9 to Textron's Annual
Report on Form 10-K for the fiscal year ended
December 30, 1989.
10.14B Amendment dated as of December 15, 1994,
to Employment Agreement. Incorporated by
reference to Exhibit 10.10B to Textron's
Annual Report on Form 10-K for the fiscal
year ended December 31, 1994.
10.15A 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.
10.15B 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.
10.16 Employment Agreement between
Textron and John D. Butler dated June 10,
1997. Incorporated by reference to Exhibit
10 to Textron's Quarterly Report on Form 10-Q
for the fiscal quarter ended June 28, 1997.
10.17 Retention Award granted to Herbert L. Henkel
on December 12, 1996.
10.18 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.
10.19A 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.
10.19B Description of modified pension
arrangement.
10.20A 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.
10.20B Description of stock equivalent grant
10.21A Employment Agreement between
Textron and William F. Wayland dated January
1, 1989 ("WFW Agreement"). Incorporated by
reference to Exhibit 10.12 to Textron's
Annual Report on Form 10-K for the fiscal
year ended December 30, 1989.
10.21B Supplement to WFW Agreement dated May 1,1997.
10.22A Credit Agreement dated as of November 1,
1993, among Textron, the Lenders listed
therein and Bankers Trust Company as Admin
istrative 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.
10.22B 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.
10.22C 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.
10.22D Third Amendment to Credit Agreement
dated as of July 1, 1996. Incorporated by
reference to Exhibit 10.21D to Textron's
Annual Report on Form 10-K for the fiscal
year ended December 28, 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 24 through 59) of Textron's
1997 Annual Report to Shareholders.
21 Certain subsidiaries of Textron.
Other subsidiaries, which considered in the
aggregate do not constitute a significant
subsidiary, are omitted from such list.
23 Consent of Independent Auditors.
24.1 Power of attorney.
24.2 Certified copy of a resolution of the Board
of Directors of Textron.
27 Financial Data Schedule.