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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 28, 2002
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 12 1/2(cent)(135,966,744 shares New York Stock Exchange
outstanding at February 15, 2003); Pacific Stock Exchange
Preferred Stock Purchase Rights Chicago Stock Exchange
$2.08 Cumulative Convertible Preferred Stock, New York Stock Exchange
Series A - no par value
$1.40 Convertible Preferred Dividend Stock, Series B New York Stock Exchange
(preferred only as to dividends) - no par value
8 3/4% Debentures due July 1, 2022 New York Stock Exchange
7.92% Trust Preferred Securities of Subsidiary Trust New York Stock Exchange
(and Textron Guaranty with respect thereto)
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]
Indicate by check mark whether the registrant is an accelerated filer
(as defined in Exchange Act Rule 12b-2.) Yes [X]. No [ ].
The aggregate market value of voting stock held by non-affiliates of
the registrant is $5,098,198,494 as of February 15, 2003.
Portions of Textron's Annual Report to Shareholders for the fiscal year
ended December 28, 2002, are incorporated by reference in Parts I and II of this
Report. Portions of Textron's Proxy Statement for its Annual Meeting of
Shareholders to be held on April 23, 2003, are incorporated by reference in Part
III of this Report.
PART I
ITEM 1. BUSINESS OF TEXTRON
BUSINESS SEGMENTS
We are a global multi-industry company with operations in five business
segments - Aircraft, Fastening Systems, Industrial Components, Industrial
Products and Finance. Our business segments include operations that are
unincorporated divisions of Textron Inc. or its subsidiaries and others that are
separately incorporated subsidiaries.
AIRCRAFT SEGMENT
Bell Helicopter
Bell is one of the largest suppliers of helicopters, tiltrotors, spare
parts and helicopter-related services in the world. Bell manufactures military
and commercial helicopters and military tiltrotors. A commercial tiltrotor model
is also in development. Bell's revenues accounted for approximately 15%, 13% and
12% of our total revenues in 2002, 2001 and 2000.
Bell supplies advanced military helicopters and support (including
spare parts, support equipment, technical data, trainers, pilots and maintenance
training, component repairs, aircraft modifications, contractor maintenance and
field and product support engineering services) to the U.S. Government and to
military customers outside the U.S. Bell is one of the leading suppliers of
helicopters to the U.S. Government and, in association with The Boeing Company,
the only supplier of tiltrotors. Bell makes military sales to non-U.S. customers
only with the concurrence of the U.S. State Department.
Bell is teamed with The Boeing Company to develop, produce and provide
life cycle support for the V-22 Osprey tiltrotor aircraft for the U.S.
Department of Defense. Tiltrotor aircraft are designed to provide the benefits
of both helicopters and fixed-wing aircraft. In December 2001, the Department of
Defense signed an Acquisition Decision Memorandum allowing the V-22 program to
proceed at low-rate production levels and requiring additional flight testing.
In May 2002, the V-22 returned to flight as part of this test program. In August
2002, Bell was awarded a modification to its contract for the next two lots,
totaling twenty aircraft.
Bell is engaged in the engineering and manufacturing development stage
of the H-1 upgrade program for the U.S. Marine Corps. This program will produce
an advanced attack and a
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utility model helicopter, the AH-1Z and UH-1Y, which are uniquely designed to
have 84% parts commonality.
Bell is also a leading supplier of commercially certified helicopters
to corporate, offshore, utility, charter, police, fire, rescue and emergency
medical helicopter operators.
Bell is a member of Bell/Agusta Aerospace Company, L.L.C., a joint
venture with Agusta, Italy's leading helicopter manufacturer, for the design,
manufacture, sale and customer support of a commercial tiltrotor, the BA609, and
a new medium twin-engine helicopter, the AB139. BA609 development is progressing
with ground run testing having commenced in December 2002. AB139 certification
is expected in late 2003 or early 2004 with deliveries beginning immediately
thereafter. The AB139 was recommended by Integrated Coast Guard Systems to be
the new helicopter solution for the U.S. Coast Guard's Deepwater Program.
In the light and medium helicopter market segments, Bell has two major
U.S. competitors and one major European competitor. Bell markets its products
around the world through its own sales force and through independent
representatives. Price, financing terms, aircraft performance, reliability and
product support are significant factors in the sale of helicopters. Bell has
developed the world's largest distribution system to sell and support
helicopters, serving customers in over 100 countries.
Cessna Aircraft Company
Based on unit sales, Cessna is the world's largest manufacturer of
general aviation aircraft. Cessna currently has four major product lines:
Citation business jets, single engine turboprop Caravans, Cessna single engine
piston aircraft and after-market services. Cessna's revenues accounted for
approximately 31%, 26% and 23% of our total revenues in 2002, 2001 and 2000.
The family of business jets currently produced by Cessna includes the
Citation CJ1, Citation CJ2, Citation Bravo, Citation Encore, Citation Excel, and
Citation X. The Citation X is the world's fastest business jet with a maximum
operating speed of Mach .92. By the end of 2002, Cessna had delivered its
3,868th business jet. Under development are the mid-size Citation Sovereign, the
light-size Citation CJ3 and entry-level Citation Mustang. First customer
deliveries of the Citation Sovereign and Citation CJ3 are scheduled in early and
late 2004, respectively. First customer deliveries of the Citation Mustang are
anticipated in the fourth quarter 2006.
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The Cessna Caravan is the world's best selling utility turboprop. More
than 1,356 Caravans have been sold by Cessna since the first Caravan was
delivered in 1985. Caravans are offered in four models: the Grand Caravan, the
Super Cargomaster, the Caravan Floatplane and the Caravan 675. Caravans are used
in the U.S. primarily to carry overnight express package shipments.
International uses of Caravans include humanitarian flights, tourism and
freight.
Cessna now has six models in its single engine piston product line: the
four-place 172 Skyhawk, 172 Skyhawk SP, 182 Skylane and Turbo 182 Skylane, and
the six-place 206 Stationair and T206 Turbo Stationair. By the end of 2002,
Cessna had delivered 4,327 single engine piston aircraft since deliveries were
restarted in 1997.
Reliability and product support are significant factors in the sale of
these aircraft. The Citation family of aircraft is supported by 11 Citation
Service Centers owned and operated by Cessna, along with authorized independent
service stations and centers in more than 16 countries throughout the world. The
Cessna-owned Service Centers provide customers 24 hour a day service and
maintenance. Cessna Caravan and single engine piston customers receive product
support through independently owned service stations and 24 hour a day spare
parts support through Cessna.
Cessna markets its products worldwide primarily through its own sales
force, as well as through a network of authorized independent sales
representatives, depending upon the product line. Cessna has several competitors
in the business jet market. Cessna's aircraft compete with other aircraft that
vary in size, speed, range, capacity, handling characteristics, and price.
Cessna engages in the business jet fractional ownership market through
a joint venture with TAG Aviation S.A., a worldwide aircraft management and
charter enterprise. This program, called CitationShares, offers shares of
Citation aircraft primarily in the eastern United States.
Cessna's results include the Lycoming engine business. Lycoming is the
world leader in the design, manufacture and overhaul of reciprocating piston
aircraft engines for the global general aviation market. Lycoming has delivered
more than 300,000 horizontally opposed engines. Lycoming sells new products
directly to general aviation airframe manufacturers, including The New Piper
Aircraft, Robinson Helicopter, and EADS SOCATA, a division of Aerospatiale.
Lycoming is also the exclusive supplier of engines for Cessna's product line of
new single engine aircraft. Aftermarket sales are made to the more than 180,000
existing owners of Lycoming products through a worldwide network of
independently owned distributors.
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FASTENING SYSTEMS SEGMENT
Our Fastening Systems segment, Textron Fastening Systems (TFS),
manufactures and sells fasteners, fastening systems, engineered assemblies and
automation equipment to the aerospace, automotive, business equipment,
construction, consumer goods, electronics, electrical equipment, industrial
equipment, medical, non-automotive transportation, and telecommunications
markets. Some of our TFS operations are unincorporated divisions of Textron Inc.
or its subsidiaries and others are separately incorporated subsidiaries. TFS
also has non-controlling ownership interests in three other companies. TFS is
headquartered in Troy, Michigan, and has facilities located in the following 18
countries: Australia, Austria, Brazil, Canada, China, France, Germany, Hong
Kong, Italy, Japan, Korea, Malaysia, Mexico, Singapore, Spain, Taiwan, the U.K.
and the U.S.
TFS is a major global supplier and distributor of engineered fasteners,
components and services to original equipment manufacturers, contract producers,
component manufacturers and distributors. TFS provides products, services and
solutions that simplify manufacturing processes and maximize efficiencies
resulting in lower total system costs to the customer. Revenues of TFS accounted
for approximately 16%, 14% and 15% of our total revenues in 2002, 2001 and 2000.
TFS produces engineered threaded fasteners, blind fastening
installation tools, aerospace fasteners, construction fasteners and tooling,
cold formed components, clips, cage nuts, engineered and laser weld assemblies,
metal stampings, blind fastening systems, and precision fine blanked products.
These products are produced and sold under a variety of brand names including
Avdel, Boesner, BSK, Camcar, Cherry, Elco, Ring Screw, Sukosim, Valmex and VBF.
TFS also provides its customers with supply chain management services through
global vendor managed inventory programs, plant provider programs, warehouse and
JIT (just-in-time) programs, and sourcing. TFS offers a wide range of design and
engineering services to its customers, and derives a portion of its revenue from
licensing selected intellectual property assets to third parties.
Although TFS is one of the world's largest providers of fastener
products, engineered assemblies and services, TFS has hundreds of competitors,
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 and engineered assemblies tend
to procure products and services from the larger suppliers, except for "niche"
products that may be sourced from smaller companies. Only the loss of a customer
that is a major original equipment
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manufacturer would have a material adverse effect on TFS. However, because of
the broad range of products sold to such customers, it is unlikely that these
customers will cease all purchases from TFS.
INDUSTRIAL PRODUCTS SEGMENT
E-Z-Go
E-Z-Go designs, manufactures and sells golf cars and off-road utility
vehicles powered by electric and internal combustion engines under the E-Z-Go
name, as well as multipurpose utility vehicles under the E-Z-Go and Cushman
brand names.
E-Z-Go's commercial customers consist primarily of golf courses, resort
communities and municipalities, as well as commercial and industrial users such
as airports and factories. E-Z-Go's off-road utility vehicles and golf cars are
also sold into the consumer market. Sales are made through a network of
distributors and directly to end-users. Many of E-Z-Go's sales are financed
through Textron Financial Corporation.
E-Z-Go has two major competitors for golf cars, and a number of smaller
competitors for utility vehicles. Competition is based primarily on price,
quality, product support, performance, reliability and reputation.
Greenlee
Our Greenlee group consists of Greenlee and Klauke. These businesses
manufacture powered equipment, electrical test instruments, hand and hydraulic
powered tools and electrical connectors under the Greenlee, Fairmont and Klauke
brand names. The products are principally used in electrical construction and
maintenance, telecommunications and plumbing industries, and are distributed
through a global network of sales representatives and distributors. Our Greenlee
group faces competition from numerous manufacturers based primarily on price,
quality, performance, reliability, delivery and reputation.
Jacobsen
Jacobsen designs, manufactures and sells professional turf maintenance
equipment, lawn care machinery and specialized industrial vehicles. Major brand
names include Ransomes, Jacobsen, Cushman, Ryan, Steiner, Brouwer, Bunton and
Bob-Cat.
Jacobsen's commercial customers consist primarily of golf courses,
resort communities and municipalities, as well as commercial and industrial
users such as airports, factories and
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professional lawn care services. Sales are made through a network of
distributors and directly to end-users. Many sales are financed through Textron
Financial Corporation as an additional source of revenue to Textron and for
marketing purposes.
Jacobsen has two major competitors for professional turf maintenance
equipment, and a number of smaller competitors for specialized industrial
vehicles and professional lawn care machinery. Competition is based primarily on
price, quality, product support, performance, reliability and reputation.
OmniQuip
OmniQuip produces telescopic material handlers under the trade names
SkyTrak and Lull. OmniQuip divested its Snorkel aerial work platform product
line in December 2002.
Large national equipment rental fleets account for approximately 17% of
OmniQuip's sales. Remaining sales are through independent distributors and
rental centers. End-users are usually construction sub-contractors such as
masons, framers, steel erectors and roofers. OmniQuip competes in a fragmented
market against a variety of manufacturers. Competition is based primarily on
price, quality, product support, performance, delivery and reputation.
Tempo
Our Tempo group supplies test and measurement equipment to the data,
signal and voice market. InteSys Technologies, a leading source of
injection-molded components and assemblies for telecommunications and other
markets, also is part of the Tempo group.
Tempo and InteSys products are distributed through a global network of
distributors and sales representatives and directly to original equipment
manufacturers. The Tempo group faces competition from numerous manufacturers
based primarily on price, quality, performance, reliability, delivery and
reputation.
Textron Systems
Textron Systems, a primary supplier to the defense and aerospace
markets, manufactures "smart" weapons, airborne and ground-based surveillance
systems, aircraft landing systems, hovercraft, search and rescue vessels,
armored vehicles and turrets, and aircraft and missile control actuators, valves
and related components. While Textron Systems sells most of its products
directly to U.S. customers, it also sells an increasing number of products
through a
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growing, global network of sales representatives and distributors. Textron
Systems operates in over thirty-five countries.
Actuation products for the aerospace, defense and industrial markets
are sold under trade names of HR Textron and APCO. Specialty marine, land
vehicle, and turret products are sold under trade names of Textron Marine & Land
Systems and Cadillac Gage. Weapons, surveillance, and landing systems are sold
under the Textron Systems name.
INDUSTRIAL COMPONENTS SEGMENT
Kautex
Kautex is a leading manufacturer of blow-molded fuel systems and other
blow-molded parts for automobile original equipment manufacturers and other
industrial customers throughout Europe, North America, South America and parts
of Asia. In 2001, Kautex established a majority-owned joint venture in
Hiroshima, Japan, to manufacture fuel systems for Mazda, and production began in
early 2002. In 2002, Kautex established a wholly owned subsidiary in Shanghai,
China, and has begun to supply the General Motors joint venture in Shanghai. In
Germany, Kautex produces containers and sheeting for household and industrial
uses. In North America, Kautex also produces metal fuel filler systems.
Kautex also manufactures windshield and headlamp washer systems, engine
camshafts and vibration damper components, automatic assembly machines and
systems, perishable tools and abrasives, and hydraulic components for the North
American industrial markets. Revenues of Kautex accounted for approximately 12%,
9% and 9% of our total revenue in 2002, 2001 and 2000.
Kautex has a number of competitors worldwide, some of whom are owned by
the automotive original equipment manufacturers that comprise Kautex's targeted
customer base. Competition is typically based on a number of factors including
price, quality, reputation, prior experience and available manufacturing
capacity.
Textron Fluid Handling Products
Our Textron Fluid Handling Products business, which includes David
Brown Union Pumps, David Brown Hydraulics, Maag Pump Systems, and David Brown
Guinard Pumps, designs and manufactures industrial pumps for oil, gas,
petrochemical and polymer industries. These products are sold to original
equipment manufacturers, distributors and end-users. Textron
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Fluid Handling Products faces competition from other manufacturers based
primarily on price, quality, product support, performance, delivery and
reputation.
Textron Power Transmission
Textron Power Transmission offers products under the brand names David
Brown, Cone Drive, and Benzlers. Textron Power Transmission designs and
manufactures industrial gears, double enveloping worm gear speed reducers,
mechanical and hydraulic transmission systems, gear motors and gear sets. These
products are sold to a variety of customers, including original equipment
manufacturers, distributors and end-users. Textron Power Transmission faces
competition from other manufacturers based primarily on price, quality, product
support, delivery and reputation.
FINANCE SEGMENT
Our Finance segment consists of Textron Financial Corporation and its
subsidiaries. Textron Financial Corporation is a diversified commercial finance
company with core operations in six segments:
- - Aircraft Finance provides financing for new and used Cessna business jets
and piston-engine airplanes, Bell helicopters, and other general aviation
aircraft;
- - Resort Finance extends loans to developers of vacation interval resorts and
recreational and residential land lots, secured primarily by notes
receivable and interval and land lot inventory;
- - Distribution Finance offers inventory finance programs for dealers of
Textron manufactured products and for dealers of a variety of other
household, housing, leisure, agricultural and technology products;
- - Golf Finance makes mortgage loans for the acquisition and refinancing of
golf courses and provides term financing for E-Z-GO Golf Cars and Textron
Turf Care equipment;
- - Asset-Based Lending pursues two types of lending secured primarily by
accounts receivable and inventory: general purpose asset-based lending,
which provides asset-based loans to smaller middle-market companies that
manufacture or distribute finished goods, and specialty asset-based
lending, which factors freight bills and utility service receivables, and
extends asset-based loans to small niche-oriented finance companies; and
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- - Structured Capital engages in tax-oriented, long-term leases of
large-ticket equipment and real estate, primarily with investment grade
lessees.
Textron Financial Corporation's other financial services and products
include transaction syndication, equipment appraisal and disposition, and
portfolio servicing. Some of these ancillary services are offered through Asset
Control LLC and TBS Business Services, Inc.
Textron Financial Corporation's financing activities are confined
almost exclusively to secured lending and leasing to commercial markets. Textron
Financial Corporation's services are offered primarily in North America.
However, Textron Financial Corporation does finance Textron products worldwide,
principally Bell helicopters and Cessna aircraft. Of the $1.2 billion of
Textron's sales that were financed by Textron Financial Corporation in 2002,
$104 million were operating leases.
Textron Financial Corporation's nonperforming assets include nonaccrual
finance receivables and repossessed assets with the exception of certain finance
receivables for which Textron Financial Corporation has recourse to Textron.
While Textron Financial Corporation does not classify these accounts as
nonperforming assets, these accounts are evaluated for collectibility, and any
allowance for loan losses deemed necessary is established at the manufacturing
level. During 2002, nonperforming assets increased $84 million to 3.33% ($218
million) of finance assets from 2.13% ($134 million) at December 29, 2001. The
significant components of this increase include $35 million in resort finance,
$21 million in aircraft finance, $17 million in media finance and $12 million in
franchise finance. Textron Financial Corporation estimates that nonperforming
assets will generally be in the range of 2% to 4% of finance assets depending on
economic conditions. Textron Financial Corporation expects modest improvements
in portfolio quality as it liquidates certain portfolios. However, a prolonged
economic downturn could have a negative effect on the overall portfolio quality.
The allowance for losses on receivables as a percentage of nonaccrual finance
receivables was 92% at December 28, 2002, compared to 126% at December 29, 2001.
The decrease in the percentage represents an increase in nonaccrual finance
receivables at December 28, 2002, supported by strong collateral.
The commercial finance businesses in which Textron Financial
Corporation operates are highly fragmented and extremely competitive. Textron
Financial Corporation is subject to competition from various types of financing
institutions, including banks, leasing companies, insurance companies,
commercial finance companies and finance operations of equipment
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vendors. Competition within the commercial finance industry is primarily focused
on price, terms, structure and service.
BACKLOG
Information regarding our backlog of government and commercial orders
at the end of the past two fiscal years is contained on page 33 of our 2002
Annual Report to Shareholders. This page is incorporated by reference into this
Annual Report on Form 10-K.
Approximately 55% of our total backlog of $7.7 billion at December 28,
2002, represents orders which are not expected to be filled within our 2003
fiscal year. At December 28, 2002, approximately 95% of the total government
backlog of $1.6 billion was funded.
U.S. GOVERNMENT CONTRACTS
In 2002, 18% of the revenues of our Aircraft segment and 24% of the
revenues of our Industrial Products segment, constituting in the aggregate 13%
of our consolidated revenues, were generated by or resulted from contracts with
the U.S. Government. U.S. Government business is subject to competition, changes
in procurement policies and regulations, the continuing availability of
Congressional appropriations, world events, and the size and timing of programs
in which Textron may participate.
Our contracts with the U.S. Government generally may be terminated in
whole or in part at the convenience of the U.S. Government or if we are in
default. If, the U.S. Government terminates a contract for convenience, we
normally will be entitled to payment for unreimbursed costs of performance under
the contract plus profit on those costs, adjusted to reflect any rate of loss
had the contract been completed, plus termination costs. If, however, the U.S.
Government terminates a contract for default, generally: (a) we will be paid an
agreed-upon amount for manufacturing materials and partially completed products
accepted by the U.S. Government; (b) the U.S. Government will not be liable for
our costs with respect to unaccepted items and will be entitled to repayment of
advance payments and progress payments related to the terminated portions of the
contract; and (c) we might be liable for excess costs incurred by the U.S.
Government in procuring undelivered items from another source.
RESEARCH AND DEVELOPMENT
Information regarding our research and development expenditures is
contained on page 66 of our 2002 Annual Report to Shareholders. This page is
incorporated by reference into this Annual Report on Form 10-K.
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PATENTS AND TRADEMARKS
We own, or are licensed under, numerous patents throughout the world
relating to products, services and methods of manufacturing. Patents have been
of value in the past and are expected to be of value in the future. However, the
loss of any single patent or group of patents would not, in our opinion,
materially affect the conduct of our business.
We also own trademarks, trade names and service marks that are
important to our business. Some of these trademarks, trade names and service
marks are used in this Annual Report on Form 10-K: AB139; Avdel; BA609; Bell
Helicopter; Benzlers; Bob-Cat; Boesner; Brouwer; BSK; Bunton; Cadillac Gage;
Camcar; Caravan 675; Caravan Floatplane; Cessna; Cessna Aircraft Company; Cessna
Caravan; Cherry; Citation Bravo; Citation CJ1; Citation CJ2; Citation CJ3;
Citation Encore; Citation Excel; Citation Mustang; CitationShares; Citation
Sovereign; Citation X; Cone Drive; Cushman; CWC; David Brown; David Brown
Guinard Pumps; David Brown Hydraulics; David Brown Union Pumps; Elco; E-Z-GO;
Fairmont; Grand Caravan; Greenlee; HR Textron; InteSys Technologies; Jacobsen;
Kautex; Klauke; Lull; Lycoming; Maag Pump Systems; Micromatic; OmniQuip;
Ransomes; Ring Screw; RITec; Ryan; 172 Skyhawk; 172 Skyhawk SP; 182 Skylane; Sky
Trak; 206 Stationair; Steiner; Sukosim; Super Cargomaster; T206 Turbo
Stationair; Tempo; Textron; Textron Fastening Systems; Textron Financial
Corporation; Textron Fluid Handling Products; Textron Golf, Turf and Specialty
Products; Textron Marine & Land Systems; Textron Power Transmission; Textron
Systems; Turbo 182 Skylane; V-22 Osprey; Valmex; VBF; and their related
trademark designs and logotypes (and variations of the foregoing) are
trademarks, trade names or service marks of Textron Inc., its subsidiaries,
affiliates, or joint ventures.
ENVIRONMENTAL CONSIDERATIONS
Our operations are subject to numerous laws and regulations designed to
protect the environment. Compliance with these laws and expenditures for
environmental control facilities have not had a material effect on our capital
expenditures, earnings or competitive position. Additional information regarding
environmental matters is contained on page 33 of our 2002 Annual Report to
Shareholders. This page is incorporated by reference into this Annual Report on
Form 10-K.
EMPLOYEES
At December 28, 2002, we had approximately 49,000 employees.
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AVAILABLE INFORMATION
We make available free of charge on our Internet website
(http://www.Textron.com) our annual report on Form 10-K, quarterly reports on
Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or
furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of
1934 as soon as reasonably practicable after we electronically file such
material with, or furnish it to, the Securities and Exchange Commission.
FORWARD-LOOKING INFORMATION
Certain statements in this Annual Report on Form 10-K and other oral
and written statements made by Textron from time to time are forward-looking
statements, including those that discuss strategies, goals, outlook or other
non-historical matters; or project revenues, income, returns or other financial
measures. These forward-looking statements are subject to risks and
uncertainties that may cause actual results to differ materially from those
contained in the statements, including the following: (a) the extent to which
Textron is able to achieve savings from its restructuring plans; (b) uncertainty
in estimating the amount and timing of restructuring charges and related costs;
(c) changes in worldwide economic and political conditions that impact interest
and foreign exchange rates; (d) the occurrence of work stoppages and strikes at
key facilities of Textron or Textron's customers or suppliers; (e) government
funding and program approvals affecting products being developed or sold under
government programs; (f) cost and delivery performance under various program and
development contracts; (g) the adequacy of cost estimates for various customer
care programs including servicing warranties; (h) the ability to control costs
and successful implementation of various cost reduction programs; (i) the timing
of certifications of new aircraft products; (j) the occurrence of further
downturns in customer markets to which Textron products are sold or supplied or
where Textron Financial offers financing; (k) Textron's ability to offset,
through cost reductions, raw material price increases and pricing pressure
brought by original equipment manufacturer customers; (l) the availability and
cost of insurance; (m) pension plan income falling below current forecasts; (n)
Textron Financial's ability to maintain portfolio credit quality; (o) Textron
Financial's access to debt financing at competitive rates; and (p) uncertainty
in estimating contingent liabilities and establishing reserves tailored to
address such contingencies.
ITEM 2. PROPERTIES
At December 28, 2002, we operated a total of 142 plants located
throughout the U.S. and 103 plants outside the U.S. Of the total of 245 plants,
we owned 121 and the balance were leased. In the aggregate, the total
manufacturing space was approximately 31 million square feet.
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In addition, we own or lease offices, warehouse and other space at
various locations throughout the U.S. and outside the U.S. We consider the
productive capacity of the plants operated by each of our business segments to
be adequate. In general, our facilities are in good condition, are considered to
be adequate for the uses to which they are being put, and are substantially in
regular use.
ITEM 3. LEGAL PROCEEDINGS
On April 26, 2002, a lawsuit was filed in the United States District
Court in Rhode Island on behalf of Joel Rosen, who claims to be a Textron
shareholder, suing on his own behalf and on behalf of a purported class of
Textron shareholders. The defendants are Textron and certain present and former
officers of Textron and Bell Helicopter. The lawsuit alleged that the defendants
violated the federal securities laws by making material misrepresentations or
omissions between October 19, 2000, and September 26, 2001, in connection with
Bell Helicopter's V-22 and H-1 programs. The complaint sought unspecified
compensatory damages. An identical complaint was subsequently filed by another
Textron shareholder. On September 26, 2002, the Court consolidated the two cases
and appointed as lead plaintiff three affiliated pension funds for International
Brotherhood of Teamsters, Local 710 (referred to as "Local 710 Pension Fund.") A
consolidated amended complaint was filed on December 13, 2002. The amended
complaint is substantially similar to the original complaint, alleging that the
defendants failed to make certain accounting adjustments in response to alleged
problems with Bell Helicopter's V-22 and H-1 programs; in addition, plaintiffs
allege that the company failed to timely write down certain assets of its
OmniQuip unit. The amended complaint seeks unspecified compensatory damages.
Textron believes the lawsuit is without merit and intends to defend it
vigorously.
On July 26, 2002, a purported class action lawsuit was filed in the
United States District Court in Rhode Island by Linda Lalande, who claims to
have been a participant in the Textron Savings Plan between January 1, 2000 and
December 31, 2001. The complaint named Textron, the Textron Savings Plan and the
Plan's trustee as defendants. The complaint alleged breach of certain fiduciary
duties under ERISA, based on the amount of Plan assets invested in Textron stock
during 2000 and 2001. An identical lawsuit was subsequently filed by another
individual who also alleged that she has participated in a Textron savings plan
during the applicable period. On December 27, 2002, a consolidated amended
complaint was filed that is substantively the same as the earlier filed
complaints. The amended complaint seeks equitable relief and compensatory
damages on behalf of various Textron benefit plans and the participants and
beneficiaries of those plans during 2000 and 2001, to compensate for alleged
losses relating to
14
Textron stock held as an asset of those plans. Textron believes this lawsuit is
without merit and intends to defend it vigorously.
We are subject to actual and threatened legal proceedings arising out
of the conduct of our business. These proceedings include claims arising from
private transactions, government contracts, product liability, employment and
environmental, safety and health matters. Some of these legal proceedings seek
damages, fines or penalties in substantial amounts or remediation of
environmental contamination. Under federal government procurement regulations,
certain claims brought by the U.S. Government could result in our suspension or
debarment from U.S. Government contracting for a period of time. On the basis of
information presently available, we believe that these legal proceedings will
not have a material effect on our financial position or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of our security holders during the
last quarter of the period covered by this Annual Report on Form 10-K.
15
EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information concerning our
executive officers as of February 27, 2003. Unless otherwise indicated, the
employer is Textron Inc.
Name Age Position
- ---- --- --------
Lewis B. Campbell 56 Chairman, President and Chief Executive Officer since September 2001.
Formerly, Chairman and Chief Executive Officer 1999 to September 2001;
President and Chief Executive Officer, 1998 to 1999; President and Chief
Operating Officer, 1994 to 1998; Director since 1994.
John D. Butler 55 Executive Vice President Administration and Chief Human Resources
Officer since 1999. Formerly, Executive Vice President and Chief Human
Resources Officer, 1997 to 1998.
Ted R. French 48 Executive Vice President and Chief Financial Officer since 2000.
Formerly, President, Financial Services and Chief Financial Officer, CNH
Global N.V. and its predecessor, Case Corporation, 1992 to 2000.
Mary L. Howell 50 Executive Vice President Government, Strategy Development and
International, Communications and Investor Relations, since 2000.
Formerly, Executive Vice President Government, International,
Communications and Investor Relations 1998 to 2000; Executive Vice
President Government and International, 1995 to 1998.
Steven R. Loranger 51 Executive Vice President and Chief Operating Officer since November,
2002. Formerly, President and Chief Executive Officer of Honeywell
Engines, Systems and Services, 2001 to November 2002; President and
Chief Executive Officer of Honeywell Engines and Systems 1999 to 2001;
President and Chief Executive Officer Allied Signal Engines, 1997 to
1999.
Terrence O'Donnell 58 Executive Vice President and General Counsel since 2000; Partner,
Williams & Connolly, since 1992.
16
PART II
ITEM 5. MARKETS FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Our Common Stock is traded on the New York, Chicago and Pacific Stock
Exchanges. At December 28, 2002, there were approximately 20,000 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 68 of our 2002 Annual Report to Shareholders is incorporated by reference
into this Annual Report on Form 10-K.
ITEM 6. SELECTED FINANCIAL DATA
The information appearing under "Selected Financial Information" on
page 69 of our 2002 Annual Report to Shareholders is incorporated by reference
into this Annual Report on Form 10-K.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
"Management's Discussion and Analysis," appearing on pages 19 through
34 of our 2002 Annual Report to Shareholders is incorporated by reference into
this Annual Report on Form 10-K.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
"Quantitative Risks Measures," appearing on page 32 of our 2002 Annual
Report to Shareholders is incorporated by reference into this Annual Report on
Form 10-K.
17
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements, together with the report thereon
of Ernst & Young LLP dated January 23, 2003, and supplementary information
contained in our 2002 Annual Report to Shareholders and the Financial Statement
Schedules, as listed in the Index to Financial Statements and Financial
Statement Schedules attached to this Annual Report on Form 10-K, are
incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information appearing under "Nominees for Director" and "Directors
Continuing in Office" in the Proxy Statement for our Annual Meeting of
Shareholders to be held on April 23, 2003, is incorporated by reference into
this Annual Report on Form 10-K.
Information regarding Textron's executive officers is contained in Part
I of this Annual Report on Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION
The information appearing under "Report of the Organization and
Compensation Committee on Executive Compensation," "Executive Compensation" and
"Performance Graph" in the Proxy Statement for our Annual Meeting of
Shareholders to be held on April 23, 2003, is incorporated by reference into
this Annual Report on Form 10-K.
18
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information appearing under "Security Ownership of Certain
Beneficial Holders," "Security Ownership of Management," and "Equity
Compensation Plan Information" in the Proxy Statement for our Annual Meeting of
Shareholders to be held on April 23, 2003, is incorporated by reference into
this Annual Report on Form 10-K.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information appearing under "Transactions with Management" in the
Proxy Statement for our Annual Meeting of Shareholders to be held on April 23,
2003, is incorporated by reference into this Annual Report on Form 10-K.
ITEM 14. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Within the 90 days prior to the date of this report, we carried out an
evaluation, under the supervision and with the participation of our management,
including our Chairman, President and Chief Executive Officer (our "CEO") and
our Executive Vice President and Chief Financial Officer (our "CFO"), of the
effectiveness of the design and operation of our disclosure controls and
procedures (as defined in Rule 13a-14(c) under the Securities Exchange Act of
1934 (the "Act")). Based upon that evaluation, our CEO and CFO concluded that
our disclosure controls and procedures are effective in providing reasonable
assurance that (a) the information required to be disclosed by us in the reports
that we file or submit under the Act is recorded, processed, summarized and
reported within the time periods specified in the Securities and Exchange
Commission's rules and forms, and (b) such information is accumulated and
communicated to our management, including our CEO and CFO, as appropriate to
allow timely decisions regarding required disclosure.
Changes in Internal Controls
There have been no significant changes in our internal controls or in
other factors that could significantly affect these controls subsequent to the
date of their evaluation.
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
19
a) FINANCIAL STATEMENTS AND SCHEDULES
The consolidated financial statements, supplementary information and
financial statement schedules listed in the accompanying Index to Financial
Statements and Financial Statement Schedules are filed as part of this Report.
EXHIBITS
3.1 Restated Certificate of Incorporation of Textron as filed
January 29, 1998. Incorporated by reference to Exhibit 3.1 to
Textron's Annual Report on Form 10-K for the fiscal year ended
January 3, 1998.
3.2 By-Laws of Textron. Incorporated by reference to Exhibit 3.2
to Textron's Annual Report on Form 10-K for the fiscal year
ended January 1, 2000.
4.1 Indenture dated as of December 9, 1999, between Textron
Financial Corporation and SunTrust Bank (formerly known as Sun
Trust Bank, Atlanta) (including form of debt securities).
Incorporated by reference to Exhibit 4.1 to Amendment No. 2 to
Textron Financial Corporation's Registration Statement on Form
S-3 (No. 333-88509).
4.2 Indenture dated as of November 30, 2001, between Textron
Financial Canada Funding Corp. and SunTrust Bank, guaranteed
by Textron Financial Corporation. Incorporated by reference to
Exhibit 4.2 to Amendment No. 1 to Textron Financial
Corporation's Registration Statement on Form S-3 (No.
333-72676).
4.3 Support Agreement dated as of May 25, 1994, between Textron
Inc. and Textron Financial Corporation. Incorporated by
reference to Exhibit 10.1 to Textron Financial Corporation's
Registration Statement on Form 10.
NOTE: Instruments defining the rights of holders of certain issues
of long-term debt of Textron have not been filed as exhibits
to this Report because the authorized principal amount of any
one of such issues does not exceed 10% of the total assets of
Textron and its subsidiaries on a consolidated basis. Textron
agrees to furnish a copy of each such instrument to the
Commission upon request.
NOTE: Exhibits 10.1 through 10.17 below are management contracts or
compensatory plans, contracts or agreements.
20
10.1A Annual Incentive Compensation Plan for Textron Employees.
Incorporated by reference to Exhibit 10.1 to Textron's Annual
Report on Form 10-K for the fiscal year ended December 30,
1995.
10.1B Amendment to Annual Incentive Compensation Plan for Textron
Employees. Incorporated by reference to Exhibit 10.1 to
Textron's Quarterly Report on Form 10-Q for the fiscal quarter
ended July 3, 1999.
10.2 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 29, 2001.
10.3 Supplemental Benefits Plan for Textron Key Executives with
Market Square Profit Sharing Plan Schedule. Incorporated by
reference to Exhibit 10.4 to Textron's Annual Report on Form
10-K for the fiscal year ended December 30, 2000.
10.4A 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.
10.4B Amendment to Supplemental Retirement Plan for Textron Key
Executives. Incorporated by reference to Exhibit 10.5B to
Textron's Annual Report on Form 10-K for the fiscal year ended
January 2, 1999.
10.4C Amendment to Supplemental Retirement Plan for Textron Key
Executives. Incorporated by reference to Exhibit 10.4 to
Textron's Quarterly Report on Form 10-Q for the fiscal quarter
ended July 3, 1999.
10.4D Amendment to Supplemental Retirement Plan for Textron Key
Executives. Incorporated by reference to Exhibit 10.5D to
Textron's Annual Report on Form 10-K for the fiscal year ended
January 1, 2000.
10.5A 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.
10.5B Amendment to Survivor Benefit Plan for Textron Key Executives.
Incorporated by reference to Exhibit 10.5 to Textron's
Quarterly Report on Form 10-Q for the fiscal quarter ended
July 3, 1999.
10.6A 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.
21
10.6B 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.
10.6C 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.
10.7A Textron 1994 Long-Term Incentive Plan ("1994 Plan").
Incorporated by reference to Exhibit 10 to Textron's Quarterly
Report on Form 10-Q for the fiscal quarter ended July 2, 1994.
10.7B Amendment to 1994 Plan. Incorporated by reference to Exhibit
10.9B to Textron's Annual Report on Form 10-K for the fiscal
year ended January 2, 1999.
10.7C Amendment to 1994 Plan. Incorporated by reference to Exhibit
10.6 to Textron's Quarterly Report on Form 10-Q for the fiscal
quarter ended July 3, 1999.
10.7D Amendment to 1994 Plan. Incorporated by reference to Exhibit
10.8D to Textron's Annual Report on Form 10-K for the fiscal
year ended January 1, 2000.
10.8A Textron 1999 Long Term Incentive Plan. Incorporated by
reference to Exhibit 10.9 to Textron's Annual Report on Form
10-K for the fiscal year ended January 1, 2000.
10.8B Amendment to 1999 Plan. Incorporated by reference to Exhibit
10.9B to Textron's Annual Report on Form 10-K for the fiscal
year ended December 29, 2001.
10.9 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.
10.10 Deferred Income Plan for Non-Employee Directors.
10.11 Employment Agreement between Textron and Kenneth C. Bohlen
dated July 18, 2000. Incorporated by reference to Exhibit 10.2
to Textron's Quarterly Report on Form 10-Q for the fiscal
quarter ended July 1, 2000.
10.12A Employment Agreement between Textron and John D. Butler dated
July 23, 1998. Incorporated by reference to Exhibit 10.2 to
Textron's Quarterly Report on Form 10-Q for the fiscal quarter
ended October 3, 1998.
22
10.12B Restricted Stock Equivalent Award granted to John Butler on
January 15, 2002. Incorporated by reference to Exhibit 10.1 of
Textron's Quarterly Report on Form 10-Q for the fiscal quarter
ended March 30, 2002.
10.13A Employment Agreement between Textron and Lewis B. Campbell
dated July 23, 1998. Incorporated by reference to Exhibit 10.3
to Textron's Quarterly Report on Form 10-Q for the fiscal
quarter ended October 3, 1998.
10.13B Retention Award granted to Lewis B. Campbell on December 14,
1995. Incorporated by reference to Exhibit 10.16B to Textron's
Annual Report on Form 10-K for the fiscal year ended December
30, 1995.
10.13C Retention Award granted to Lewis B. Campbell on June 1, 1999.
Incorporated by reference to Exhibit 10.13C to Textron's
Annual Report on Form 10-K for the fiscal year ended January
1, 2000.
10.13D Retention Award granted to Lewis B. Campbell on January 1,
2001, and revision of vesting schedule for the Retention Award
granted on June 1, 1999. Incorporated by reference to Exhibit
10.14D to Textron's Annual Report on Form 10-K for the fiscal
year ended December 30, 2000.
10.13E Amendments to Retention Awards granted to Lewis B. Campbell.
Incorporated by reference to Exhibit 10.14D to Textron's
Annual Report on Form 10-K for the fiscal year ended December
29, 2001.
10.14A Employment Agreement between Textron and Theodore R. French
dated December 21, 2000. Incorporated by reference to Exhibit
10.15A to Textron's Annual Report on Form 10-K for the fiscal
year ended December 30, 2000.
10.14B Retention Award granted to Theodore R. French on January 1,
2001. Incorporated by reference to Exhibit 10.15B to Textron's
Annual Report on Form 10-K for the fiscal year ended December
30, 2000.
10.15A Employment Agreement between Textron and Mary L. Howell dated
July 23, 1998. Incorporated by reference to Exhibit 10.5 to
Textron's Quarterly Report on Form 10-Q for the fiscal quarter
ended October 3, 1998.
10.15B Restricted Stock Equivalent Award granted to Mary L. Howell on
January 15, 2002. Incorporated by reference to Exhibit 10.2 of
Textron's Quarterly Report on Form 10-Q for the fiscal quarter
ended March 30, 2002.
23
10.16A Employment Agreement between Textron and Terrence O'Donnell
dated March 10, 2000. Incorporated by reference to Exhibit
10.1 to Textron's Quarterly Report on Form 10-Q for the fiscal
quarter ended July 1, 2000.
10.16B Restricted Stock Equivalent Award granted to Terrence
O'Donnell on January 15, 2002. Incorporated by reference to
Exhibit 10.3 of Textron's Quarterly Report on Form 10-Q for
the fiscal quarter ended March 30, 2002.
10.17 Director Stock Awards
10.18 5-Year Credit Agreement dated as of April, 1998, among
Textron, the Banks listed therein and Morgan Guaranty Trust
Company of New York as Administrative Agent. Incorporated by
reference to Exhibit 10.2 to Textron's Quarterly Report on
Form 10-Q for the fiscal quarter ended April 4, 1998.
12.1 Computation of ratio of income to combined fixed charges and
preferred stock dividends of Textron Manufacturing.
12.2 Computation of ratio of income to combined fixed charges and
preferred stock dividends of Textron Inc. including all
majority-owned subsidiaries.
13 A portion (pages 18 through 69) of Textron's 2002 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 Power of attorney.
99.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
99.2 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
b) REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the quarter ended December 28,
2002.
24
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 27th day of February 2003.
TEXTRON INC.
Registrant
By: s/Ted R. French
---------------
Ted R. French
Executive Vice President
and Chief Financial Officer
25
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed below on this 27th day of February 2003, by the
following persons on behalf of the registrant and in the capacities indicated:
NAME TITLE
---- -----
s/Lewis B. Campbell Chairman, President and Chief Executive Officer,
- -----------------------------------
Lewis B. Campbell Director
* Director
- -----------------------------------
H. Jesse Arnelle
* Director
- -----------------------------------
Teresa Beck
* Director
- -----------------------------------
R. Stuart Dickson
* Director
- -----------------------------------
Lawrence K. Fish
* Director
- -----------------------------------
Joe T. Ford
* Director
- -----------------------------------
Paul E. Gagne
* Director
- -----------------------------------
John D. Macomber
* Director
- -----------------------------------
Lord Powell of Bayswater KCMG
26
NAME TITLE
---- -----
* Director
- -----------------------------------
Brian H. Rowe
* Director
- -----------------------------------
Sam F. Segnar
* Director
- -----------------------------------
Martin D. Walker
* Director
- -----------------------------------
Thomas B. Wheeler
s/Ted R. French Executive Vice President and
- ----------------------------------- Chief Financial Officer
Ted R. French (principal financial officer)
s/Richard L. Yates Vice President and Controller
- ----------------------------------- (principal accounting officer)
Richard L. Yates
*By: s/Michael D. Cahn
--------------------------
Michael D. Cahn
Attorney-in-fact
27
CERTIFICATIONS
I, Lewis B. Campbell, Chairman, President and Chief Executive Officer of Textron
Inc. (the "Company") certify that:
1. I have reviewed this annual report on Form 10-K of Textron Inc.;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this annual report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of
the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have identified
for the registrant's auditors any material weaknesses in internal
controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
annual report whether there were significant changes in internal controls
or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
Date: February 27, 2003 s/Lewis B. Campbell
---------------------------------------
Lewis B. Campbell
Chairman, President and Chief Executive
Officer
28
I, Ted R. French, Executive Vice President and Chief Financial Officer of
Textron Inc. (the "Company") certify that:
1. I have reviewed this annual report on Form 10-K of Textron Inc.;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this annual report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of
the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have identified
for the registrant's auditors any material weaknesses in internal
controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
annual report whether there were significant changes in internal controls
or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
Date: February 27, 2003 s/Ted R. French
---------------------------------
Ted R. French
Executive Vice President and Chief
Financial Officer
29
TEXTRON INC.
INDEX TO FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULES
ITEM 15(a)
2002 ANNUAL REPORT TO
SHAREHOLDERS PAGE
---------------------
Report of Independent Auditors 35
Consolidated Statements of Operations for each of the years 36
in the three-year period ended December 28, 2002
Consolidated Balance Sheets at December 28, 2002 and 37
December 29, 2001
Statements of Cash Flows for each of the years in the 38
three-year period ended December 28, 2002
Consolidated Statements of Changes in Shareholders' Equity 40
for each of the years in the three-year period ended December 28, 2002
Notes to Consolidated Financial Statements 41
Business Segment Data 18
Supplementary Information (Unaudited):
Quarterly Data for 2002 and 2001 68
All 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.
30
EXHIBIT LIST
EXHIBITS
3.1 Restated Certificate of Incorporation of Textron as filed
January 29, 1998. Incorporated by reference to Exhibit 3.1 to
Textron's Annual Report on Form 10-K for the fiscal year ended
January 3, 1998.
3.2 By-Laws of Textron. Incorporated by reference to Exhibit 3.2
to Textron's Annual Report on Form 10-K for the fiscal year
ended January 1, 2000.
4.1 Indenture dated as of December 9, 1999, between Textron
Financial Corporation and SunTrust Bank (formerly known as Sun
Trust Bank, Atlanta) (including form of debt securities).
Incorporated by reference to Exhibit 4.1 to Amendment No. 2 to
Textron Financial Corporation's Registration Statement on Form
S-3 (No. 333-88509).
4.2 Indenture dated as of November 30, 2001, between Textron
Financial Canada Funding Corp. and SunTrust Bank, guaranteed
by Textron Financial Corporation. Incorporated by reference to
Exhibit 4.2 to Amendment No. 1 to Textron Financial
Corporation's Registration Statement on Form S-3 (No.
333-72676).
4.3 Support Agreement dated as of May 25, 1994, between Textron
Inc. and Textron Financial Corporation. Incorporated by
reference to Exhibit 10.1 to Textron Financial Corporation's
Registration Statement on Form 10.
NOTE: Instruments defining the rights of holders of certain issues
of long-term debt of Textron have not been filed as exhibits
to this Report because the authorized principal amount of any
one of such issues does not exceed 10% of the total assets of
Textron and its subsidiaries on a consolidated basis. Textron
agrees to furnish a copy of each such instrument to the
Commission upon request.
NOTE: Exhibits 10.1 through 10.17 below are management contracts or
compensatory plans, contracts or agreements.
10.1A Annual Incentive Compensation Plan for Textron Employees.
Incorporated by reference to Exhibit 10.1 to Textron's Annual
Report on Form 10-K for the fiscal year ended December 30,
1995.
10.1B Amendment to Annual Incentive Compensation Plan for Textron
Employees. Incorporated by reference to Exhibit 10.1 to
Textron's Quarterly Report on Form 10-Q for the fiscal quarter
ended July 3, 1999.
10.2 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 29, 2001.
10.3 Supplemental Benefits Plan for Textron Key Executives with
Market Square Profit Sharing Plan Schedule. Incorporated by
reference to Exhibit 10.4 to Textron's Annual Report on Form
10-K for the fiscal year ended December 30, 2000.
10.4A 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.
10.4B Amendment to Supplemental Retirement Plan for Textron Key
Executives. Incorporated by reference to Exhibit 10.5B to
Textron's Annual Report on Form 10-K for the fiscal year ended
January 2, 1999.
10.4C Amendment to Supplemental Retirement Plan for Textron Key
Executives. Incorporated by reference to Exhibit 10.4 to
Textron's Quarterly Report on Form 10-Q for the fiscal quarter
ended July 3, 1999.
10.4D Amendment to Supplemental Retirement Plan for Textron Key
Executives. Incorporated by reference to Exhibit 10.5D to
Textron's Annual Report on Form 10-K for the fiscal year ended
January 1, 2000.
10.5A 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.
10.5B Amendment to Survivor Benefit Plan for Textron Key Executives.
Incorporated by reference to Exhibit 10.5 to Textron's
Quarterly Report on Form 10-Q for the fiscal quarter ended
July 3, 1999.
10.6A 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.
10.6B 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.
10.6C 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.
10.7A Textron 1994 Long-Term Incentive Plan ("1994 Plan").
Incorporated by reference to Exhibit 10 to Textron's Quarterly
Report on Form 10-Q for the fiscal quarter ended July 2, 1994.
10.7B Amendment to 1994 Plan. Incorporated by reference to Exhibit
10.9B to Textron's Annual Report on Form 10-K for the fiscal
year ended January 2, 1999.
10.7C Amendment to 1994 Plan. Incorporated by reference to Exhibit
10.6 to Textron's Quarterly Report on Form 10-Q for the fiscal
quarter ended July 3, 1999.
10.7D Amendment to 1994 Plan. Incorporated by reference to Exhibit
10.8D to Textron's Annual Report on Form 10-K for the fiscal
year ended January 1, 2000.
10.8A Textron 1999 Long Term Incentive Plan. Incorporated by
reference to Exhibit 10.9 to Textron's Annual Report on Form
10-K for the fiscal year ended January 1, 2000.
10.8B Amendment to 1999 Plan. Incorporated by reference to Exhibit
10.9B to Textron's Annual Report on Form 10-K for the fiscal
year ended December 29, 2001.
10.9 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.
10.10 Deferred Income Plan for Non-Employee Directors.
10.11 Employment Agreement between Textron and Kenneth C. Bohlen
dated July 18, 2000. Incorporated by reference to Exhibit 10.2
to Textron's Quarterly Report on Form 10-Q for the fiscal
quarter ended July 1, 2000.
10.12A Employment Agreement between Textron and John D. Butler dated
July 23, 1998. Incorporated by reference to Exhibit 10.2 to
Textron's Quarterly Report on Form 10-Q for the fiscal quarter
ended October 3, 1998.
10.12B Restricted Stock Equivalent Award granted to John Butler on
January 15, 2002. Incorporated by reference to Exhibit 10.1 of
Textron's Quarterly Report on Form 10-Q for the fiscal quarter
ended March 30, 2002.
10.13A Employment Agreement between Textron and Lewis B. Campbell
dated July 23, 1998. Incorporated by reference to Exhibit 10.3
to Textron's Quarterly Report on Form 10-Q for the fiscal
quarter ended October 3, 1998.
10.13B Retention Award granted to Lewis B. Campbell on December 14,
1995. Incorporated by reference to Exhibit 10.16B to Textron's
Annual Report on Form 10-K for the fiscal year ended December
30, 1995.
10.13C Retention Award granted to Lewis B. Campbell on June 1, 1999.
Incorporated by reference to Exhibit 10.13C to Textron's
Annual Report on Form 10-K for the fiscal year ended January
1, 2000.
10.13D Retention Award granted to Lewis B. Campbell on January 1,
2001, and revision of vesting schedule for the Retention Award
granted on June 1, 1999. Incorporated by reference to Exhibit
10.14D to Textron's Annual Report on Form 10-K for the fiscal
year ended December 30, 2000.
10.13E Amendments to Retention Awards granted to Lewis B. Campbell.
Incorporated by reference to Exhibit 10.14D to Textron's
Annual Report on Form 10-K for the fiscal year ended December
29, 2001.
10.14A Employment Agreement between Textron and Theodore R. French
dated December 21, 2000. Incorporated by reference to Exhibit
10.15A to Textron's Annual Report on Form 10-K for the fiscal
year ended December 30, 2000.
10.14B Retention Award granted to Theodore R. French on January 1,
2001. Incorporated by reference to Exhibit 10.15B to Textron's
Annual Report on Form 10-K for the fiscal year ended December
30, 2000.
10.15A Employment Agreement between Textron and Mary L. Howell dated
July 23, 1998. Incorporated by reference to Exhibit 10.5 to
Textron's Quarterly Report on Form 10-Q for the fiscal quarter
ended October 3, 1998.
10.15B Restricted Stock Equivalent Award granted to Mary L. Howell on
January 15, 2002. Incorporated by reference to Exhibit 10.2 of
Textron's Quarterly Report on Form 10-Q for the fiscal quarter
ended March 30, 2002.
10.16A Employment Agreement between Textron and Terrence O'Donnell
dated March 10, 2000. Incorporated by reference to Exhibit
10.1 to Textron's Quarterly Report on Form 10-Q for the fiscal
quarter ended July 1, 2000.
10.16B Restricted Stock Equivalent Award granted to Terrence
O'Donnell on January 15, 2002. Incorporated by reference to
Exhibit 10.3 of Textron's Quarterly Report on Form 10-Q for
the fiscal quarter ended March 30, 2002.
10.17 Director Stock Awards
10.18 5-Year Credit Agreement dated as of April, 1998, among
Textron, the Banks listed therein and Morgan Guaranty Trust
Company of New York as Administrative Agent. Incorporated by
reference to Exhibit 10.2 to Textron's Quarterly Report on
Form 10-Q for the fiscal quarter ended April 4, 1998.
12.1 Computation of ratio of income to combined fixed charges and
preferred stock dividends of Textron Manufacturing.
12.2 Computation of ratio of income to combined fixed charges and
preferred stock dividends of Textron Inc. including all
majority-owned subsidiaries.
13 A portion (pages 18 through 69) of Textron's 2002 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 Power of attorney.
99.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
99.2 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002