First Quarter 10-Q
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
_______________
FORM
10-Q
[X]
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF
1934
For
the fiscal quarter ended March 31, 2007
|
|
OR
|
[ ]
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF
1934
|
Commission
file number 1-5480
______________
TEXTRON
INC.
(Exact
name of registrant as specified in its charter)
_______________
Delaware
(State
or other jurisdiction of
incorporation
or organization)
|
|
05-0315468
(I.R.S.
Employer Identification No.)
|
40
Westminster Street, Providence, RI 02903
401-421-2800
(Address
and telephone number of principal executive offices)
_______________
Indicate
by check mark whether the registrant (1) has filed all reports required to
be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports) and (2) has been subject to such filing requirements
for
the past 90 days. Yes ü
No
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer or a non-accelerated filer. See definition of “accelerated
filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check
one):
Large
accelerated filer ü
Accelerated filer ___ Non-accelerated filer ___
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
Yes
__ No ü
Common
stock outstanding at April 21, 2007 - 124,595,706 shares
TEXTRON
INC.
INDEX
|
|
Page
|
PART
I.
|
FINANCIAL
INFORMATION
|
|
|
|
|
Item
1.
|
Financial
Statements
|
|
|
|
3
|
|
|
4
|
|
|
5
|
|
|
7
|
Item
2.
|
|
15
|
Item
3.
|
|
23
|
Item
4.
|
|
23
|
|
|
|
PART
II.
|
OTHER
INFORMATION
|
|
|
|
|
Item
2.
|
|
24
|
Item
5.
|
|
24
|
Item
6.
|
|
26
|
|
|
27
|
|
|
|
Consolidated
Statements
of Operations
(Unaudited)
(In
millions, except per share amounts)
|
|
Three
Months Ended
|
|
|
|
March
31,
2007
|
|
April
1,
2006
|
|
Revenues
|
|
|
|
|
|
|
|
Manufacturing
revenues
|
|
$
|
2,754
|
|
$
|
2,450
|
|
Finance
revenues
|
|
|
210
|
|
|
182
|
|
Total
revenues
|
|
|
2,964
|
|
|
2,632
|
|
Costs,
expenses and other
|
|
|
|
|
|
|
|
Cost
of sales
|
|
|
2,180
|
|
|
1,955
|
|
Selling
and administrative
|
|
|
372
|
|
|
361
|
|
Interest
expense, net
|
|
|
123
|
|
|
94
|
|
Provision
for losses on finance receivables
|
|
|
5
|
|
|
9
|
|
Total
costs, expenses and other
|
|
|
2,680
|
|
|
2,419
|
|
Income
from continuing operations before income taxes
|
|
|
284
|
|
|
213
|
|
Income
taxes
|
|
|
(86
|
)
|
|
(55
|
)
|
Income
from continuing operations
|
|
|
198
|
|
|
158
|
|
(Loss)
income from discontinued operations, net of income taxes
|
|
|
(2
|
)
|
|
10
|
|
Net
income
|
|
$
|
196
|
|
$
|
168
|
|
Basic
earnings per share:
|
|
|
|
|
|
|
|
Continuing
operations
|
|
$
|
1.58
|
|
$
|
1.21
|
|
Discontinued
operations, net of income taxes
|
|
|
(0.02
|
)
|
|
0.08
|
|
Basic
earnings per share
|
|
$
|
1.56
|
|
$
|
1.29
|
|
Diluted
earnings per share:
|
|
|
|
|
|
|
|
Continuing
operations
|
|
$
|
1.55
|
|
$
|
1.19
|
|
Discontinued
operations, net of income taxes
|
|
|
(0.02
|
)
|
|
0.07
|
|
Diluted
earnings per share
|
|
$
|
1.53
|
|
$
|
1.26
|
|
Dividends
per share:
|
|
|
|
|
|
|
|
$2.08
Preferred stock, Series A
|
|
$
|
0.52
|
|
$
|
0.52
|
|
$1.40
Preferred stock, Series B
|
|
$
|
0.35
|
|
$
|
0.35
|
|
Common
stock
|
|
$
|
0.3875
|
|
$
|
0.3875
|
|
See
Notes to the consolidated financial statements.
3.
Consolidated
Balance
Sheets
(Unaudited)
(Dollars
in millions)
|
|
March
31,
2007
|
|
December
30,
2006
|
|
Assets
|
|
|
|
|
|
|
|
Manufacturing
group
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
537
|
|
$
|
733
|
|
Accounts
receivable, less allowance for doubtful accounts of $33 and
$34
|
|
|
1,079
|
|
|
964
|
|
Inventories
|
|
|
2,342
|
|
|
2,069
|
|
Other
current assets
|
|
|
462
|
|
|
521
|
|
Total
current assets
|
|
|
4,420
|
|
|
4,287
|
|
Property,
plant and equipment, less accumulated
depreciation
and amortization of $2,198 and $2,147
|
|
|
1,776
|
|
|
1,773
|
|
Goodwill
|
|
|
1,257
|
|
|
1,257
|
|
Other
assets
|
|
|
1,252
|
|
|
1,233
|
|
Total
Manufacturing group assets
|
|
|
8,705
|
|
|
8,550
|
|
Finance
group
|
|
|
|
|
|
|
|
Cash
|
|
|
48
|
|
|
47
|
|
Finance
receivables, less allowance for losses of $94 and $93
|
|
|
8,168
|
|
|
8,217
|
|
Goodwill
|
|
|
169
|
|
|
169
|
|
Other
assets
|
|
|
612
|
|
|
567
|
|
Total
Finance group assets
|
|
|
8,997
|
|
|
9,000
|
|
Total
assets
|
|
$
|
17,702
|
|
$
|
17,550
|
|
Liabilities
and shareholders’ equity
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
Manufacturing
group
|
|
|
|
|
|
|
|
Current
portion of long-term debt and short-term debt
|
|
$
|
83
|
|
$
|
80
|
|
Accounts
payable
|
|
|
897
|
|
|
814
|
|
Accrued
liabilities
|
|
|
2,102
|
|
|
2,100
|
|
Total
current liabilities
|
|
|
3,082
|
|
|
2,994
|
|
Other
liabilities
|
|
|
2,268
|
|
|
2,329
|
|
Long-term
debt
|
|
|
1,686
|
|
|
1,720
|
|
Total
Manufacturing group liabilities
|
|
|
7,036
|
|
|
7,043
|
|
Finance
group
|
|
|
|
|
|
|
|
Other
liabilities
|
|
|
516
|
|
|
499
|
|
Deferred
income taxes
|
|
|
481
|
|
|
497
|
|
Debt
|
|
|
6,991
|
|
|
6,862
|
|
Total
Finance group liabilities
|
|
|
7,988
|
|
|
7,858
|
|
Total
liabilities
|
|
|
15,024
|
|
|
14,901
|
|
Shareholders’
equity
|
|
|
|
|
|
|
|
Capital
stock:
|
|
|
|
|
|
|
|
Preferred
stock
|
|
|
10
|
|
|
10
|
|
Common
stock
|
|
|
26
|
|
|
26
|
|
Capital
surplus
|
|
|
1,820
|
|
|
1,786
|
|
Retained
earnings
|
|
|
6,347
|
|
|
6,211
|
|
Accumulated
other comprehensive loss
|
|
|
(631
|
)
|
|
(644
|
)
|
|
|
|
7,572
|
|
|
7,389
|
|
Less
cost of treasury shares
|
|
|
4,894
|
|
|
4,740
|
|
Total
shareholders’ equity
|
|
|
2,678
|
|
|
2,649
|
|
Total
liabilities and shareholders’ equity
|
|
$
|
17,702
|
|
$
|
17,550
|
|
Common
shares outstanding
(in thousands)
|
|
|
124,506
|
|
|
125,596
|
|
See
Notes to the consolidated financial statements.
4.
Consolidated
Statements of Cash
Flows
(Unaudited)
For
the
Three Months Ended March 31, 2007 and April 1, 2006, respectively
(In
millions)
|
|
Consolidated
|
|
|
|
2007
|
|
2006
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
|
Net
income
|
|
$
|
196
|
|
$
|
168
|
|
Loss
(income) from discontinued operations
|
|
|
2
|
|
|
(10
|
)
|
Income
from continuing operations
|
|
|
198
|
|
|
158
|
|
Adjustments
to reconcile income from continuing operations to net cash (used
in)
provided by operating activities:
|
|
|
|
|
|
|
|
Earnings
of Finance group, net of distributions
|
|
|
-
|
|
|
-
|
|
Depreciation
and amortization
|
|
|
74
|
|
|
66
|
|
Provision
for losses on finance receivables
|
|
|
5
|
|
|
9
|
|
Share-based
compensation
|
|
|
8
|
|
|
7
|
|
Deferred
income taxes
|
|
|
-
|
|
|
(5
|
)
|
Changes
in assets and liabilities excluding those related to acquisitions
and
divestitures:
|
|
|
|
|
|
|
|
Accounts
receivable, net
|
|
|
(111
|
)
|
|
(104
|
)
|
Inventories
|
|
|
(288
|
)
|
|
(233
|
)
|
Other
assets
|
|
|
33
|
|
|
15
|
|
Accounts
payable
|
|
|
81
|
|
|
177
|
|
Accrued
and other liabilities
|
|
|
(12
|
)
|
|
41
|
|
Captive
finance receivables, net
|
|
|
(74
|
)
|
|
(73
|
)
|
Other
operating activities, net
|
|
|
21
|
|
|
19
|
|
Net
cash (used in) provided by operating activities of continuing
operations
|
|
|
(65
|
)
|
|
77
|
|
Net
cash used in operating activities of discontinued
operations
|
|
|
(5
|
)
|
|
(8
|
)
|
Net
cash (used in) provided by operating activities
|
|
|
(70
|
)
|
|
69
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
Finance
receivables:
|
|
|
|
|
|
|
|
Originated
or purchased
|
|
|
(2,886
|
)
|
|
(2,472
|
)
|
Repaid
|
|
|
2,340
|
|
|
2,046
|
|
Proceeds
on receivables sales and securitization sales
|
|
|
591
|
|
|
-
|
|
Capital
expenditures
|
|
|
(61
|
)
|
|
(60
|
)
|
Proceeds
on sale of property, plant and equipment
|
|
|
1
|
|
|
2
|
|
Other
investing activities, net
|
|
|
14
|
|
|
26
|
|
Net
cash used in investing activities of continuing operations
|
|
|
(1
|
)
|
|
(458
|
)
|
Net
cash provided by (used in) investing activities of discontinued
operations
|
|
|
17
|
|
|
(20
|
)
|
Net
cash provided by (used in) investing activities
|
|
|
16
|
|
|
(478
|
)
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
Decrease
in short-term debt
|
|
|
(720
|
)
|
|
(131
|
)
|
Proceeds
from issuance of long-term debt
|
|
|
874
|
|
|
556
|
|
Principal
payments and retirements of long-term debt
|
|
|
(102
|
)
|
|
(52
|
)
|
Proceeds
from employee stock ownership plans
|
|
|
26
|
|
|
107
|
|
Purchases
of Textron common stock
|
|
|
(171
|
)
|
|
(226
|
)
|
Dividends
paid
|
|
|
(49
|
)
|
|
(97
|
)
|
Dividends
paid to Manufacturing group
|
|
|
-
|
|
|
-
|
|
Net
cash (used in) provided by financing activities of continuing
operations
|
|
|
(142
|
)
|
|
157
|
|
Net
cash used in financing activities of discontinued
operations
|
|
|
-
|
|
|
(1
|
)
|
Net
cash (used in) provided by financing activities
|
|
|
(142
|
)
|
|
156
|
|
Effect
of exchange rate changes on cash and cash equivalents
|
|
|
1
|
|
|
2
|
|
Net
decrease in cash and cash equivalents
|
|
|
(195
|
)
|
|
(251
|
)
|
Cash
and cash equivalents at beginning of period
|
|
|
780
|
|
|
796
|
|
Cash
and cash equivalents at end of period
|
|
$
|
585
|
|
$
|
545
|
|
Supplemental
schedule of non-cash investing and financing activities from continuing
operations:
|
|
|
|
|
|
|
|
Capital
expenditures financed through capital leases
|
|
$
|
5
|
|
$
|
5
|
|
See
Notes to the consolidated financial statements.
5.
Consolidated
Statements of Cash Flows (Unaudited) (Continued)
For
the
Three Months Ended March 31, 2007 and April 1, 2006, respectively
(In
millions)
|
|
Manufacturing
Group*
|
|
Finance
Group*
|
|
|
|
2007
|
|
2006
|
|
2007
|
|
2006
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
$
|
196
|
|
$
|
168
|
|
$
|
35
|
|
$
|
31
|
|
Loss
(income) from discontinued operations
|
|
|
2
|
|
|
(10
|
)
|
|
-
|
|
|
-
|
|
Income
from continuing operations
|
|
|
198
|
|
|
158
|
|
|
35
|
|
|
31
|
|
Adjustments
to reconcile income from continuing operations to net
cash provided
by
operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
of Finance group, net of distributions
|
|
|
100
|
|
|
31
|
|
|
-
|
|
|
-
|
|
Depreciation
and amortization
|
|
|
65
|
|
|
56
|
|
|
9
|
|
|
10
|
|
Provision
for losses on finance receivables
|
|
|
-
|
|
|
-
|
|
|
5
|
|
|
9
|
|
Share-based
compensation
|
|
|
8
|
|
|
7
|
|
|
-
|
|
|
-
|
|
Deferred
income taxes
|
|
|
(2
|
)
|
|
(4
|
)
|
|
2
|
|
|
(1
|
)
|
Changes
in assets and liabilities excluding those related to
acquisitions
and divestitures:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
receivable, net
|
|
|
(111
|
)
|
|
(104
|
)
|
|
-
|
|
|
-
|
|
Inventories
|
|
|
(276
|
)
|
|
(214
|
)
|
|
-
|
|
|
-
|
|
Other
assets
|
|
|
33
|
|
|
14
|
|
|
-
|
|
|
(2
|
)
|
Accounts
payable
|
|
|
81
|
|
|
177
|
|
|
-
|
|
|
-
|
|
Accrued
and other liabilities
|
|
|
(21
|
)
|
|
(9
|
)
|
|
9
|
|
|
50
|
|
Captive
finance receivables, net
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Other
operating activities, net
|
|
|
11
|
|
|
16
|
|
|
9
|
|
|
3
|
|
Net
cash provided by operating activities of continuing
operations
|
|
|
86
|
|
|
128
|
|
|
69
|
|
|
100
|
|
Net
cash used in operating activities of discontinued
operations
|
|
|
(5
|
)
|
|
(8
|
)
|
|
-
|
|
|
-
|
|
Net
cash provided by operating activities
|
|
|
81
|
|
|
120
|
|
|
69
|
|
|
100
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance
receivables:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Originated
or purchased
|
|
|
-
|
|
|
-
|
|
|
(3,111
|
)
|
|
(2,700
|
)
|
Repaid
|
|
|
-
|
|
|
-
|
|
|
2,469
|
|
|
2,201
|
|
Proceeds
on receivables sales and securitization sales
|
|
|
-
|
|
|
-
|
|
|
613
|
|
|
-
|
|
Capital
expenditures
|
|
|
(59
|
)
|
|
(57
|
)
|
|
(2
|
)
|
|
(3
|
)
|
Proceeds
on sale of property, plant and equipment
|
|
|
1
|
|
|
2
|
|
|
-
|
|
|
-
|
|
Other
investing activities, net
|
|
|
-
|
|
|
(4
|
)
|
|
3
|
|
|
14
|
|
Net
cash used in investing activities of continuing operations
|
|
|
(58
|
)
|
|
(59
|
)
|
|
(28
|
)
|
|
(488
|
)
|
Net
cash provided by (used in) investing activities of
discontinued
operations
|
|
|
17
|
|
|
(20
|
)
|
|
-
|
|
|
-
|
|
Net
cash used in investing activities
|
|
|
(41
|
)
|
|
(79
|
)
|
|
(28
|
)
|
|
(488
|
)
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Decrease
in short-term debt
|
|
|
(42
|
)
|
|
(75
|
)
|
|
(678
|
)
|
|
(56
|
)
|
Proceeds
from issuance of long-term debt
|
|
|
-
|
|
|
-
|
|
|
874
|
|
|
556
|
|
Principal
payments and retirements of long-term debt
|
|
|
(1
|
)
|
|
(2
|
)
|
|
(101
|
)
|
|
(50
|
)
|
Proceeds
from employee stock ownership plans
|
|
|
26
|
|
|
107
|
|
|
-
|
|
|
-
|
|
Purchases
of Textron common stock
|
|
|
(171
|
)
|
|
(226
|
)
|
|
-
|
|
|
-
|
|
Dividends
paid
|
|
|
(49
|
)
|
|
(97
|
)
|
|
-
|
|
|
-
|
|
Dividends
paid to Manufacturing group
|
|
|
-
|
|
|
-
|
|
|
(135
|
)
|
|
(62
|
)
|
Net
cash (used in) provided by financing activities of continuing
operations
|
|
|
(237
|
)
|
|
(293
|
)
|
|
(40
|
)
|
|
388
|
|
Net
cash used in financing activities of discontinued
operations
|
|
|
-
|
|
|
(1
|
)
|
|
-
|
|
|
-
|
|
Net
cash (used in) provided by financing activities
|
|
|
(237
|
)
|
|
(294
|
)
|
|
(40
|
)
|
|
388
|
|
Effect
of exchange rate changes on cash and cash equivalents
|
|
|
1
|
|
|
2
|
|
|
-
|
|
|
-
|
|
Net
(decrease) increase in cash and cash equivalents
|
|
|
(196
|
)
|
|
(251
|
)
|
|
1
|
|
|
-
|
|
Cash
and cash equivalents at beginning of period
|
|
|
733
|
|
|
786
|
|
|
47
|
|
|
10
|
|
Cash
and cash equivalents at end of period
|
|
$
|
537
|
|
$
|
535
|
|
$
|
48
|
|
$
|
10
|
|
Supplemental
schedule of non-cash investing and financing
activities
from continuing
operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
expenditures financed through capital leases
|
|
$
|
5
|
|
$
|
5
|
|
$
|
-
|
|
$
|
-
|
|
*Textron
is segregated into a Manufacturing group and a Finance group as described in
Note 1 to the consolidated financial statements. The Finance group’s pre-tax
income in excess of dividends paid is excluded from the Manufacturing group’s
cash flows. All significant transactions between the borrowing groups have
been
eliminated from the consolidated column provided on page 5.
See
Notes to the consolidated financial statements.
6.
Notes
to the Consolidated Financial Statements
(Unaudited)
Note
1: Basis of Presentation
The
consolidated interim financial statements included in this quarterly report
should be read in conjunction with the consolidated financial statements
included in our Annual Report on Form 10-K for the year ended December 30,
2006. In the opinion of management, the interim financial statements reflect
all
adjustments (consisting only of normal recurring adjustments) that are necessary
for the fair presentation of our consolidated financial position, results of
operations and cash flows for the interim periods presented. The results of
operations for the interim periods are not necessarily indicative of the results
to be expected for the full year.
Our
financings are conducted through two separate borrowing groups. The
Manufacturing group consists of Textron Inc., consolidated with the entities
that operate in the Bell, Cessna and Industrial segments, while the Finance
group consists of the Finance segment, comprised of Textron Financial
Corporation and its subsidiaries. We designed this framework to enhance our
borrowing power by separating the Finance group. Our
Manufacturing group operations include the development, production and delivery
of tangible goods and services, while our Finance group provides financial
services. Due to the fundamental differences between each borrowing group’s
activities, investors, rating agencies and analysts use different measures
to
evaluate each group’s performance. To support those evaluations, we present
balance sheet and cash flow information for each borrowing group within the
consolidated financial statements. All significant intercompany transactions
are
eliminated from the consolidated financial statements, including retail and
wholesale financing activities for inventory sold by our Manufacturing group
that is financed by our Finance group.
Note
2: Inventories
(In
millions)
|
|
March
31,
2007
|
|
December
30,
2006
|
|
Finished
goods
|
|
$
|
729
|
|
$
|
665
|
|
Work
in process
|
|
|
1,719
|
|
|
1,562
|
|
Raw
materials
|
|
|
445
|
|
|
435
|
|
|
|
|
2,893
|
|
|
2,662
|
|
Less
progress/milestone payments
|
|
|
551
|
|
|
593
|
|
|
|
$
|
2,342
|
|
$
|
2,069
|
|
Note
3: Finance Receivables
In
the
first quarter of 2007, we adopted Financial Accounting Standards Board (“FASB”)
Staff Position No. 13-2 “Accounting for a Change or Projected Change in the
Timing of Cash Flows Relating to Income Taxes Generated by a Leveraged Lease
Transaction” (“FSP 13-2”). FSP 13-2 requires a recalculation of returns on
leveraged leases if there is a change or projected change in the timing of
cash
flows related to income taxes generated by the leveraged leases. The impact
of
any estimated change in projected cash flows must be reported as an adjustment
to the net leveraged lease investment and retained earnings at the date of
adoption. Our Finance group has leveraged leases with an initial investment
balance of $209 million that we estimate could be impacted by changes in the
timing of cash flows related to income taxes. Upon the adoption, we reduced
retained earnings for the $33 million cumulative effect of a change in
accounting principle, and reduced our investment in these leveraged leases
by
$50 million and deferred income tax liabilities by $17 million.
7.
Note
4: Comprehensive Income
Our
comprehensive income for the periods is provided below:
|
|
Three
Months Ended
|
|
(In
millions)
|
|
|
March
31,
2007
|
|
|
April
1,
2006
|
|
Net
income
|
|
$
|
196
|
|
$
|
168
|
|
Other
comprehensive income:
|
|
|
|
|
|
|
|
Recognition
of prior service cost and unrealized losses on
pension
and postretirement benefits
|
|
|
15
|
|
|
-
|
|
Other
|
|
|
(2
|
)
|
|
1
|
|
Comprehensive
income
|
|
$
|
209
|
|
$
|
169
|
|
Note
5: Earnings per Share
We
calculate basic and diluted earnings per share based on income available to
common shareholders, which approximates net income for each period. We use
the
weighted-average number of common shares outstanding during the period for
the
computation of basic earnings per share. Diluted earnings per share includes
the
dilutive effect of convertible preferred shares, stock options and restricted
stock in the weighted-average number of common shares outstanding.
The
weighted-average shares outstanding for basic and diluted earnings per share
are
as follows:
|
|
Three
Months Ended
|
|
(In
thousands)
|
|
March
31,
2007
|
|
April
1,
2006
|
|
Basic
weighted-average shares outstanding
|
|
|
125,047
|
|
|
130,093
|
|
Dilutive
effect of convertible preferred shares, stock options and
restricted
stock
|
|
|
2,390
|
|
|
2,763
|
|
Diluted
weighted-average shares outstanding
|
|
|
127,437
|
|
|
132,856
|
|
Note
6: Share-Based Compensation
The
compensation expense we recorded in net income for our share-based compensation
plans is as follows:
|
|
Three
Months Ended
|
|
(In
millions)
|
|
March
31,
2007
|
|
April
1,
2006
|
|
Compensation
expense, net of hedge income or expense
|
|
$
|
13
|
|
$
|
22
|
|
Income
tax benefit
|
|
|
(2
|
)
|
|
(13
|
)
|
Total
net compensation cost included in net income
|
|
$
|
11
|
|
$
|
9
|
|
Net
compensation costs included in discontinued operations
|
|
|
-
|
|
|
1
|
|
Net
compensation costs included in continuing operations
|
|
$
|
11
|
|
$
|
8
|
|
8.
Stock
Options
The
stock
option compensation cost calculated under the fair value approach is recognized
over the vesting period of the stock options. The weighted-average fair value
of
options granted per share was $28 and $25 in the first quarter of 2007 and
2006,
respectively. We estimate the fair value of options granted on the date of
grant
using the Black-Scholes option-pricing model. Expected volatilities are based
on
implied volatilities from traded options on our common stock, historical
volatilities and other factors. We use historical data to estimate option
exercise behavior, adjusted to reflect anticipated increases in expected
life.
The
weighted-average assumptions used in our Black-Scholes option-pricing model
for
awards issued during the respective periods are as follows:
|
|
|
|
|
|
Three
Months Ended
|
|
|
|
March
31,
2007
|
|
April
1,
2006
|
|
Dividend
yield
|
|
|
2
|
%
|
|
2
|
%
|
Expected
volatility
|
|
|
30
|
%
|
|
25
|
%
|
Risk-free
interest rate
|
|
|
5
|
%
|
|
4
|
%
|
Expected
lives (In years)
|
|
|
5.5
|
|
|
6.0
|
|
Stock
option activity under the 1999 Long-Term Incentive Plan (“Plan”) during the
three months ended March 31, 2007 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
Number
of
Options
(In
thousands)
|
|
Weighted-
Average
Exercise
Price
|
|
Weighted-
Average
Remaining
Contractual
Life
(In
years)
|
|
Aggregate
Intrinsic
Value
(In
millions)
|
|
Outstanding
at beginning of year
|
|
|
5,420
|
|
$
|
63.77
|
|
|
|
|
|
|
|
Granted
|
|
|
924
|
|
|
91.70
|
|
|
|
|
|
|
|
Exercised
|
|
|
(452
|
)
|
|
57.43
|
|
|
|
|
|
|
|
Canceled,
expired or forfeited
|
|
|
(54
|
)
|
|
76.37
|
|
|
|
|
|
|
|
Outstanding
at end of period
|
|
|
5,838
|
|
$
|
68.57
|
|
|
6.56
|
|
$
|
125
|
|
Exercisable
at end of period
|
|
|
3,972
|
|
$
|
59.65
|
|
|
5.31
|
|
$
|
119
|
|
Restricted
Stock
The
fair
value of restricted stock is based on the trading price of our common stock
on
the date of grant, less required adjustments to reflect the fair value of the
award, as dividends are not paid or accrued until the restricted stock vests.
The weighted-average grant-date fair value of restricted stock granted in the
three months ended March 31, 2007 and April 1, 2006 was approximately $86
and $82 per share, respectively.
9.
Restricted
stock activity under the Plan during the three months ended March 31, 2007
is as
follows:
|
|
|
|
|
|
(Shares
in thousands)
|
|
Number
of
Shares
|
|
Weighted-Average
Grant-Date Fair Value
|
|
Outstanding
at beginning of year, nonvested
|
|
|
1,219
|
|
$
|
65.38
|
|
Granted
|
|
|
305
|
|
|
86.08
|
|
Vested
|
|
|
(92
|
)
|
|
56.32
|
|
Forfeited
|
|
|
(42
|
)
|
|
60.32
|
|
Outstanding
at end of period, nonvested
|
|
|
1,390
|
|
$
|
70.67
|
|
Share-Based
Compensation Awards
The
value
of the share-based compensation awards that vested and/or were paid during
the
respective periods is as follows:
|
|
Three
Months Ended
|
|
(In
millions)
|
|
March
31,
2007
|
|
April
1,
2006
|
|
Subject
only to service conditions:
|
|
|
|
|
|
|
|
Value
of shares, options or units vested
|
|
$
|
25
|
|
$
|
17
|
|
Intrinsic
value of cash awards paid
|
|
$
|
4
|
|
$
|
5
|
|
Subject
to performance vesting conditions:
|
|
|
|
|
|
|
|
Value
of units vested
|
|
$
|
-
|
|
$
|
-
|
|
Intrinsic
value of cash awards paid
|
|
$
|
42
|
|
$
|
35
|
|
Intrinsic
value of amounts paid under Deferred Income Plan
|
|
$
|
2
|
|
$
|
1
|
|
Note
7: Retirement Plans
We
provide defined benefit pension plans and other postretirement benefits to
eligible employees. The components of net periodic benefit cost for these plans
for the three months ended March 31, 2007 and April 1, 2006 are as
follows:
|
|
Pension
Benefits
|
|
Postretirement
Benefits
Other
Than Pensions
|
|
(In
millions)
|
|
2007
|
|
2006
|
|
2007
|
|
2006
|
|
Service
cost
|
|
$
|
33
|
|
$
|
35
|
|
$
|
2
|
|
$
|
2
|
|
Interest
cost
|
|
|
73
|
|
|
69
|
|
|
10
|
|
|
10
|
|
Expected
return on plan assets
|
|
|
(99
|
)
|
|
(96
|
)
|
|
-
|
|
|
-
|
|
Amortization
of prior service cost (credit)
|
|
|
4
|
|
|
5
|
|
|
(1
|
)
|
|
(1
|
)
|
Amortization
of net loss
|
|
|
13
|
|
|
12
|
|
|
6
|
|
|
6
|
|
Net
periodic benefit cost
|
|
$
|
24
|
|
$
|
25
|
|
$
|
17
|
|
$
|
17
|
|
Note
8: Income Taxes
We
adopted the provisions of FASB Interpretation No. 48, “Accounting for
Uncertainty in Income Taxes - An Interpretation of FASB Statement No. 109” (“FIN
48”) at the beginning of fiscal 2007, which resulted in an increase of
approximately $22 million to our December 31, 2006 retained earnings balance.
FIN 48 provides a comprehensive model for the financial statement recognition,
measurement, presentation and disclosure of uncertain tax positions taken or
expected to be taken in income tax returns. Unrecognized tax benefits represent
tax positions for which reserves have been established.
10.
As
of the
date of adoption, our unrecognized tax benefits totaled approximately $356
million, of which $225 million in benefits, if recognized, would favorably
affect our effective tax rate in any future period. The remaining $131 million
in unrecognized tax benefits are related to discontinued operations. We do
not
believe that it is reasonably possible that our estimates of unrecognized tax
benefits will change significantly in the next 12 months.
We
conduct business globally and, as a result, file numerous consolidated and
separate income tax returns in the U.S. federal jurisdiction and various state
and foreign jurisdictions. In the normal course of business, we are subject
to
examination by taxing authorities throughout the world, including such major
jurisdictions as Belgium, Canada, Germany, the United Kingdom and the U.S.
With
few exceptions, we are no longer subject to U.S. federal, state and local,
or
non-U.S. income tax examinations for years before 1997 in these major
jurisdictions.
We
recognize interest and penalties related to unrecognized tax benefits in income
tax expense in our consolidated statements of operations. At the date of
adoption, we had $77 million of accrued interest included in other liabilities
on our consolidated balance sheet.
Note
9: Commitments and Contingencies
We
are
subject to legal proceedings and other claims arising out of the conduct of
our
business, including proceedings and claims relating to private sector
transactions; government contracts; compliance with applicable laws and
regulations; production partners; product liability; employment; and
environmental, safety and health matters. Some of these legal proceedings and
claims seek damages, fines or penalties in substantial amounts or remediation
of
environmental contamination. As
a
government contractor, we are subject to audits, reviews and investigations
to
determine whether our operations are being conducted in accordance with
applicable regulatory requirements. Under
federal government procurement regulations, certain claims brought by the U.S.
Government could result in our being suspended or debarred from U.S. Government
contracting for a period of time. On the basis of information presently
available, we do not believe that existing proceedings and claims will have
a
material effect on our financial position or results of operations.
In
connection with the 2002 recall of certain of our Lycoming turbocharged airplane
engines, a former third-party supplier filed a lawsuit against Lycoming claiming
that the former supplier had been wrongly blamed for aircraft engine failures
resulting from its crankshaft forging process and that Lycoming’s design was the
cause of the engine failures. In February 2005, a jury returned a verdict
against Lycoming for $86 million in punitive damages, $2.7 million in expert
fees and $1.7 million in increased insurance costs. The jury also found that
the
former supplier’s claim that it had incurred $5.3 million in attorneys’ fees was
reasonable. Judgment was entered on the verdict on March 29, 2005, awarding
the
former supplier $9.7 million in alleged compensatory damages and attorneys’ fees
and $86 million in alleged punitive damages. While the ultimate outcome of
the
litigation cannot be assured, management strongly disagrees with the verdict
and
believes that it is probable that the verdict will be reversed through the
appellate process.
The
Internal Revenue Service (“IRS”) has challenged both the ability to accelerate
the timing of tax deductions and the amounts of those deductions related to
certain leveraged lease transactions within the Finance segment. These
transactions, along with other transactions with similar characteristics, have
an initial investment of approximately $209 million. Resolution of these issues
may result in an adjustment to the timing of taxable income and deductions
that
reduce the effective yield of the leveraged lease transactions. In addition,
resolution of these issues could result in the acceleration of cash payments
to
the IRS. Deferred tax liabilities of $164 million are recorded on our
consolidated balance sheet related to these leases at March 31, 2007. We believe
that the proposed IRS adjustments are inconsistent with the tax law in existence
at the time the leases were originated and intend to vigorously defend our
position.
11.
Armed
Reconnaissance Helicopter Program
Bell
Helicopter is performing under a U.S. Government contract for System Development
and Demonstration (“SDD”) of the Armed Reconnaissance Helicopter (“ARH”). In the
fourth quarter of 2006, we completed certain phases of the critical design
review under the ARH SDD contract and determined the initial production
configuration of the aircraft, which included aircraft configuration changes
required by the U.S. Government. At the end of 2006, our cost estimates based
on
this configuration exceeded the fixed pricing contained in the two options
the
U.S. Government had under this program resulting in a reasonably possible
exposure in the range of no loss to a possible loss of $4 million per aircraft.
During the first quarter of 2007, the option for the first production lot (for
6-12 aircraft) expired, while the option for the second lot (for 18-36 aircraft)
will expire in December 2007. Certain additional development requirements under
the ARH SDD contract must be met before the U.S. Government can exercise the
remaining option. Based on the program status at the end of the first quarter,
we do not believe it is likely that the option for the second lot, as currently
configured, would be exercised by the U.S. Government.
In
March,
2007, we received correspondence from the U.S. Government which required that
we
provide, by April 23, 2007, a written plan describing a strategy to maximize
contract performance, while minimizing negative cost and schedule impact to
the
U.S. Government. The correspondence also indicated specific limitations of
government funding on the ARH SDD contract, but allowed us to continue program
development efforts at our risk if we so chose. The U.S. Government has
indicated that after review of our plan, it will make a decision to either
continue with ARH SDD development, or terminate the contract. We are committed
to the ARH program, and believe that the U.S. Government will continue with
the
program.
Although
not contractually obligated to do so, we have continued to work under the ARH
SDD contract, as well as efforts to secure long-lead materials for the
anticipated production aircraft, at our risk. At March 31, 2007, our costs
incurred and supplier obligations related to the ARH program in excess of
contract funding are estimated to be approximately $25 million, which have
been
expensed in the first quarter of 2007. We expect to continue to expense
development costs and supplier obligations until discussions with the U.S.
Government are resolved, because recovery of these amounts cannot be assured
at
this time.
Should
the U.S. Government choose to continue with the ARH program, production aircraft
requirements may be changed under a new or modified contract to include revised
aircraft specifications, pricing and delivery schedules. We cannot determine
the
impact of such changes until discussions with the U.S. Government are resolved.
Alternatively, should the U.S. Government choose to terminate the ARH program,
we would incur additional costs specifically related to the termination. The
timing and amount of these costs and their recoverability would depend on the
nature of the termination and costs incurred.
Note
10: Guarantees and Indemnifications
As
disclosed under the caption “Guarantees and Indemnifications” in Note 17 to the
consolidated financial statements in Textron’s 2006 Annual Report on Form 10-K,
Textron has issued or is party to certain guarantees. As of March 31, 2007,
there has been no material change to these guarantees.
We
provide limited warranty and product maintenance programs, including parts
and
labor, for certain products for periods ranging from one to five years. We
estimate the costs that may be incurred under warranty programs and record
a
liability in the amount of such costs at the time product revenue is recognized.
Factors that affect this liability include the number of products sold,
historical and anticipated rates of warranty claims, and cost per claim. We
assess the adequacy of our recorded warranty and product maintenance liabilities
periodically and adjust the amounts as necessary.
12.
Changes
in our warranty and product maintenance liabilities are as follows:
|
|
|
|
|
|
Three
Months Ended
|
|
(In
millions)
|
|
March
31,
2007
|
|
April
1,
2006
|
|
Accrual
at the beginning of period
|
|
$
|
315
|
|
$
|
318
|
|
Provision
|
|
|
45
|
|
|
50
|
|
Settlements
|
|
|
(46
|
)
|
|
(43
|
)
|
Adjustments
to prior accrual estimates
|
|
|
6
|
|
|
(10
|
)
|
Accrual
at the end of period
|
|
$
|
320
|
|
$
|
315
|
|
Note
11: Recently Announced Accounting Pronouncements
In
September 2006, the FASB issued Statement of Financial Accounting Standards
(“SFAS”) No. 157, “Fair Value Measurements.” This Statement replaces multiple
existing definitions of fair value with a single definition, establishes a
consistent framework for measuring fair value and expands financial statement
disclosures regarding fair value measurements. This Statement applies only
to
fair value measurements that already are required or permitted by other
accounting standards and does not require any new fair value measurements.
SFAS
No. 157 is effective for the first quarter of 2008, and we currently are
evaluating the impact of adoption on our financial position and results of
operations.
In
February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities - Including an amendment to FASB
Statement No. 115.” SFAS 159 allows companies to choose to measure eligible
assets and liabilities at fair value with changes in value recognized in
earnings. Fair value treatment for eligible assets and liabilities may be
elected either prospectively upon initial recognition, or if an event triggers
a
new basis of accounting for an existing asset or liability. SFAS 159 is
effective in the first quarter of 2008, and we currently are evaluating the
impact of adoption on our financial position and results of
operations.
Note
12: Segment Information
Our
four
reportable segments are: Bell, Cessna, Industrial and Finance. These segments
reflect the manner in which we manage our operations. Segment profit is an
important measure used to evaluate performance and for decision-making purposes.
Segment profit for the manufacturing segments excludes interest expense, certain
corporate expenses and special charges. The measurement for the Finance segment
includes interest income and expense and excludes special charges. Provisions
for losses on finance receivables involving the sale or lease of our products
are recorded by the selling manufacturing division when our Finance group has
recourse to the Manufacturing group.
13.
Our
revenues by segment and a reconciliation of segment profit to income from
continuing operations before income taxes are as follows:
|
|
Three
Months Ended
|
|
(In
millions)
|
|
March
31,
2007
|
|
April
1,
2006
|
|
REVENUES
|
|
|
|
|
|
|
|
MANUFACTURING:
|
|
|
|
|
|
|
|
Bell
|
|
$
|
939
|
|
$
|
783
|
|
Cessna
|
|
|
968
|
|
|
869
|
|
Industrial
|
|
|
847
|
|
|
798
|
|
|
|
|
2,754
|
|
|
2,450
|
|
FINANCE
|
|
|
210
|
|
|
182
|
|
Total
revenues
|
|
$
|
2,964
|
|
$
|
2,632
|
|
SEGMENT
OPERATING PROFIT
|
|
|
|
|
|
|
|
MANUFACTURING:
|
|
|
|
|
|
|
|
Bell
|
|
$
|
91
|
|
$
|
69
|
|
Cessna
|
|
|
155
|
|
|
117
|
|
Industrial
|
|
|
60
|
|
|
49
|
|
|
|
|
306
|
|
|
235
|
|
FINANCE
|
|
|
52
|
|
|
49
|
|
Segment
profit
|
|
|
358
|
|
|
284
|
|
Corporate
expenses and other, net
|
|
|
(50
|
)
|
|
(49
|
)
|
Interest
expense, net
|
|
|
(24
|
)
|
|
(22
|
)
|
Income
from continuing operations before income taxes
|
|
$
|
284
|
|
$
|
213
|
|
14.
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
|
Consolidated
Results of Operations
Business
Overview
In
the
first quarter, we continued to realize the benefits of our focus to drive
revenue growth and improve operational efficiencies as earnings per share from
continuing operations increased 30% to $1.55 compared to the corresponding
quarter of 2006. Revenues were $3 billion, a 13% increase over the first quarter
of last year as each of our segments reported higher revenues, while organic
revenue growth (sales from existing business, excluding the effects of foreign
exchange and mergers and acquisition activity) was nearly 11%.
Our
revenue growth was largely due to a favorable mix of Citation business jets
at
Cessna and higher armored security vehicle (“ASV”) deliveries in the Bell
segment. Increased revenues in the Industrial segment reflected higher volume
at
Kautex and increased European volume in Greenlee’s electrical tools business.
Finance revenues benefited from an increase of about $500 million in managed
receivables since the end of last year. Earnings increased due to the impact
of
the higher revenues and our improved operating performance, which drove the
increase in earnings per share. Additionally, the number of diluted
weighted-average shares outstanding has decreased by 5.4 million shares compared
to the shares outstanding in the corresponding quarter of 2006, primarily due
to
our share repurchase program. This decrease in the share base outstanding
contributed $0.06 of the earnings per share growth in the current
quarter.
Backlog
in the Cessna and Bell Helicopter businesses grew to nearly $12 billion in
the
first quarter largely due to an increase of approximately $500 million at
Cessna, as new business jet orders outpaced deliveries by nearly two to one.
The
continued strength in Citation orders gives us confidence in the sustainability
of this market cycle.
Revenues
In
the
first quarter of 2007, our revenues increased $332 million compared with the
corresponding quarter in 2006 primarily due to higher manufacturing sales volume
and product mix of $157 million, higher pricing of $71 million, favorable
foreign exchange impact of $35 million in the Industrial segment, the
reimbursement of costs related to Hurricane Katrina of $28 million and the
benefit from acquisitions of $27 million, largely due to Overwatch Systems.
Additionally, revenues in our Finance segment increased $28 million. These
increases were partially offset by the 2006 divestiture of non-core product
lines of $16 million in the Industrial segment.
Segment
Profit
Our
segment profit increased $74 million in the first quarter of 2007, compared
with
the corresponding quarter in 2006, primarily due to higher pricing of $71
million, favorable cost performance of $43 million and the net benefit from
higher volume and product mix of $14 million, partially offset by inflation
of
$50 million.
15.
Income
Taxes
A
reconciliation of the federal statutory income tax rate to the effective income
tax rate is provided below:
|
|
Three
Months Ended
|
|
|
|
March
31,
2007
|
|
April
1,
2006
|
|
Federal
statutory income tax rate
|
|
|
35.0
|
%
|
|
35.0
|
%
|
Increase
(decrease) in taxes resulting from:
|
|
|
|
|
|
|
|
State
income taxes
|
|
|
0.7
|
|
|
1.6
|
|
Foreign
tax rate differential
|
|
|
(2.1
|
)
|
|
(3.1
|
)
|
Manufacturing
deduction
|
|
|
(1.4
|
)
|
|
(0.5
|
)
|
Export
sales benefit
|
|
|
-
|
|
|
(1.1
|
)
|
Canadian
functional currency
|
|
|
(0.5
|
)
|
|
-
|
|
Favorable
tax settlements
|
|
|
-
|
|
|
(5.6
|
)
|
Other,
net
|
|
|
(1.4
|
)
|
|
(0.5
|
)
|
Effective
income tax rate
|
|
|
30.3
|
%
|
|
25.8
|
%
|
Segment
Analysis
Our
four
reportable segments are: Bell, Cessna, Industrial and Finance. These segments
reflect the manner in which we manage our operations. Segment profit is an
important measure used to evaluate performance and for decision-making purposes.
Segment profit for the manufacturing segments excludes interest expense, certain
corporate expenses and special charges. The measurement for the Finance segment
includes interest income and expense and excludes special charges.
Bell
|
|
|
|
|
|
Three
Months Ended
|
|
(In
millions)
|
|
March
31, 2007
|
|
April
1, 2006
|
|
Revenues
|
|
$
|
939
|
|
$
|
783
|
|
Segment
profit
|
|
|
91
|
|
|
69
|
|
Revenues
U.S.
Government Business
In
the
first quarter of 2007, revenues increased $129 million, compared with 2006
primarily due to higher net volume and mix of $87 million, the reimbursement
of
costs related to Hurricane Katrina of $28 million and the benefit from
acquisitions of $16 million. The volume increase is primarily due to higher
ASV
deliveries of $63 million, higher H-1 revenue of $52 million and higher
Intelligent Battlefield Systems volume of $15 million, partially offset by
lower
volume of $27 million for Joint Direct Attack Munition and Sensor Fuzed Weapon
products and $16 million in lower helicopter spares and service sales.
Commercial
Business
In
the
first quarter of 2007, commercial revenues increased $27 million, compared
with
2006 primarily due to higher pricing of $19 million and the benefit from
acquisitions of $11 million. Our commercial business volume was slightly lower
as the impact of lower Huey II kit deliveries of $22 million was largely offset
by higher volume of commercial helicopters of $13 million and other commercial
deliveries of $6 million.
16.
Segment
Profit
U.S.
Government Business
In
the
first quarter of 2007, profit in our U.S. Government business increased $12
million, compared with 2006. The increase was primarily due to improved
performance of $14 million and the impact from the higher net volume and mix
of
$7 million, partially offset by the unfavorable impact from inflation and
pricing of $6 million. The favorable performance reflected the Hurricane Katrina
cost reimbursement of $28 million and lower charges of $8 million recorded
on
the H-1 program, partially offset by higher charges recorded for the Armed
Reconnaissance Helicopter (“ARH”) program of $22 million due to a $25 million
charge in 2007 and lower V-22 profitability of $8 million.
Bell
Helicopter is performing under a U.S. Government contract for System Development
and Demonstration (“SDD”) of the ARH. In the fourth quarter of 2006, we
completed certain phases of the critical design review under the ARH SDD
contract and determined the initial production configuration of the aircraft,
which included aircraft configuration changes required by the U.S. Government.
At the end of 2006, our cost estimates based on this configuration exceeded
the
fixed pricing contained in the two options the U.S. Government had under this
program resulting in a reasonably possible exposure in the range of no loss
to a
possible loss of $4 million per aircraft. During the first quarter of 2007,
the
option for the first production lot (for 6-12 aircraft) expired, while the
option for the second lot (for 18-36 aircraft) will expire in December 2007.
Certain additional development requirements under the ARH SDD contract must
be
met before the U.S. Government can exercise the remaining option. Based on
the
program status at the end of the first quarter, we do not believe it is likely
that the option for the second lot, as currently configured, would be exercised
by the U.S. Government.
In
March,
2007, we received correspondence from the U.S. Government which required that
we
provide, by April 23, 2007, a written plan describing a strategy to maximize
contract performance, while minimizing negative cost and schedule impact to
the
U.S. Government. The correspondence also indicated specific limitations of
government funding on the ARH SDD contract, but allowed us to continue program
development efforts at our risk if we so chose. The U.S. Government has
indicated that after review of our plan, it will make a decision to either
continue with ARH SDD development, or terminate the contract. We are committed
to the ARH program, and believe that the U.S. Government will continue with
the
program.
Although
not contractually obligated to do so, we have continued to work under the ARH
SDD contract, as well as efforts to secure long-lead materials for the
anticipated production aircraft, at our risk. At March 31, 2007, our costs
incurred and supplier obligations related to the ARH program in excess of
contract funding are estimated to be approximately $25 million, which have
been
expensed in the first quarter of 2007. We expect to continue to expense
development costs and supplier obligations until discussions with the U.S.
Government are resolved, because recovery of these amounts cannot be assured
at
this time.
Should
the U.S. Government choose to continue with the ARH program, production aircraft
requirements may be changed under a new or modified contract to include revised
aircraft specifications, pricing and delivery schedules. We cannot determine
the
impact of such changes until discussions with the U.S. Government are resolved.
Alternatively, should the U. S. Government choose to terminate the ARH program,
we would incur additional costs specifically related to the termination. The
timing and amount of these costs and their recoverability would depend on the
nature of the termination and costs incurred.
Commercial
Business
In
the
first quarter of 2007, commercial profit increased $10 million, compared with
2006 primarily due to higher pricing of $19 million and favorable cost
performance of $7 million, partially offset by the net impact of lower volume
and an unfavorable product mix of $12 million and inflation of $9 million.
17.
Cessna
|
|
|
|
|
|
Three
Months Ended
|
|
(In
millions)
|
|
March
31, 2007
|
|
April
1, 2006
|
|
Revenues
|
|
$
|
968
|
|
$
|
869
|
|
Segment
profit
|
|
|
155
|
|
|
117
|
|
Revenues
Revenues
at Cessna increased $99 million in the first quarter of 2007, compared with
2006
due to favorable Citation jet mix of $63 million and pricing of $44 million.
We
delivered 67 Citation business jets in both the first quarter of 2007 and
2006.
Segment
Profit
Segment
profit increased $38 million at Cessna in the first quarter of 2007, compared
with 2006 primarily due to higher pricing of $44 million and the impact of
favorable product mix of $17 million, partially offset by inflation of $18
million and increased product development expenses of $7 million.
Industrial
|
|
|
|
|
|
Three
Months Ended
|
|
(In
millions)
|
|
March
31, 2007
|
|
April
1, 2006
|
|
Revenues
|
|
$
|
847
|
|
$
|
798
|
|
Segment
profit
|
|
|
60
|
|
|
49
|
|
Revenues
Revenues
in the Industrial segment increased $49 million in the first quarter of 2007,
compared with 2006 primarily due to favorable foreign exchange impact of $35
million, higher volume of $18 million and higher pricing of $10 million,
partially offset by the divestiture of non-core product lines of $16
million.
Segment
Profit
Segment
profit in the Industrial segment increased $11 million in the first quarter
of
2007, compared with 2006 mainly due to $19 million of improved cost performance
and higher pricing of $10 million, partially offset by $19 million of
inflation.
Finance
|
|
|
|
|
|
Three
Months Ended
|
|
(In
millions)
|
|
March
31, 2007
|
|
April
1, 2006
|
|
Revenues
|
|
$
|
210
|
|
$
|
182
|
|
Segment
profit
|
|
|
52
|
|
|
49
|
|
Revenues
Revenues
in the Finance segment increased $28 million in the first quarter of 2007,
compared with 2006. The increase was primarily due to a $33 million increase
related to higher average finance receivables and an $11 million increase from
a
higher interest rate environment, partially offset by $11 million in lower
leveraged lease earnings due to an unfavorable cumulative earnings adjustment
attributable to the recognition of a residual value impairment. Average finance
receivables increased primarily due to growth in the distribution and aviation
finance businesses.
18.
Segment
Profit
Segment
profit in the Finance segment increased $3 million in the first quarter of
2007,
compared with 2006 primarily due to a benefit from higher average finance
receivables of $16 million, partially offset by $11 million in lower leveraged
lease earnings due to an unfavorable cumulative earnings adjustment attributable
to the recognition of a residual value impairment.
The
following table presents information about the Finance segment’s portfolio
quality:
|
|
|
|
|
|
|
|
March
31,
|
|
December
30,
|
|
(Dollars
in millions)
|
|
2007
|
|
2006
|
|
Nonperforming
assets
|
|
$
|
116
|
|
$
|
113
|
|
Ratio
of nonperforming assets to total finance assets
|
|
|
1.32
|
%
|
|
1.28
|
%
|
Ratio
of allowance for losses on receivables to nonaccrual finance
receivables
|
|
|
123.2
|
%
|
|
123.1
|
%
|
60+
days contractual delinquency as a percentage of finance
receivables
|
|
|
0.80
|
%
|
|
0.77
|
%
|
The
Finance segment has continued to sustain favorable portfolio quality. Net
charge-offs for the first quarter of 2007 totaled $4 million compared with
$5
million in the corresponding period of 2006.
Liquidity
and Capital Resources
Our
financings are conducted through two separate borrowing groups. The
Manufacturing group consists of Textron Inc., consolidated with the entities
that operate in the Bell, Cessna and Industrial segments, while the Finance
group consists of the Finance segment, comprised of Textron Financial
Corporation and its subsidiaries. We designed this framework to enhance our
borrowing power by separating the Finance group. Our Manufacturing group
operations include the development, production and delivery of tangible goods
and services, while our Finance group provides financial services. Due to the
fundamental differences between each borrowing group’s activities, investors,
rating agencies and analysts use different measures to evaluate each group’s
performance. To support those evaluations, we present balance sheet and cash
flow information for each borrowing group within the consolidated financial
statements.
Through
our Finance group, we provide diversified commercial financing to third parties.
In addition, this group finances retail purchases and leases for new and used
aircraft and equipment manufactured by our Manufacturing group, otherwise known
as captive financing. In the consolidated statements of cash flows, cash
received from customers or from securitizations is reflected as operating
activities when received. However, in the cash flow information provided for
the
separate borrowing groups, cash flows related to captive financing activities
are reflected based on the operations of each group. For example, when product
is sold by our Manufacturing group to a customer that is financed by the Finance
group, the origination of the finance receivable is recorded within investing
activities as a cash outflow on our Finance group’s statement of cash flows.
Meanwhile, the Manufacturing group records the cash received from the Finance
group on the customer’s behalf within operating cash flows as a cash inflow on
our Manufacturing group’s statement of cash flows. Although cash is transferred
between the two borrowing groups, there is no cash transaction reported in
the
consolidated cash flows at the time of the original financing. These captive
financing activities, along with all significant intercompany transactions,
are
reclassified or eliminated from the consolidated statements of cash flows,
as
detailed below in the operating cash flows of continuing operations
section.
The
debt
(net of cash)-to-capital ratio for our Manufacturing group as of March 31,
2007
was 32%, compared with 29% at December 30, 2006, and the gross debt-to-capital
ratio was 40% at both March 31, 2007 and December 30, 2006. Our
Manufacturing group targets a gross debt-to-capital ratio that is consistent
with an A rated company.
19.
We
have a
policy of maintaining unused committed bank lines of credit in an amount not
less than outstanding commercial paper balances. These facilities are in support
of commercial paper and letters of credit issuances only, and neither of these
primary lines of credit was drawn at March 31, 2007 or December 30,
2006.
Our
primary committed credit facilities at March 31, 2007 include the
following:
(In
millions)
|
|
Facility
Amount
|
|
Commercial
Paper
Outstanding
|
|
Letters
of Credit
Outstanding
|
|
Amount
Not Reserved as Support for Commercial Paper and Letters of
Credit
|
|
|
|
|
|
|
|
|
|
|
|
Manufacturing
group - multi-year
facility
expiring in 2011*
|
|
$
|
1,250
|
|
$
|
-
|
|
$
|
19
|
|
$
|
1,231
|
|
Finance
group - multi-year
facility
expiring in 2011
|
|
$
|
1,750
|
|
$
|
1,035
|
|
$
|
12
|
|
$
|
703
|
|
*The
Finance group is permitted to borrow under this multi-year facility.
Both
of
these facilities were amended in April 2007, and the expiration dates were
extended by one year to 2012.
At
March 31, 2007, our Finance group had $2.6 billion in debt and $432 million
in other liabilities that are payable within the next 12 months.
Operating Cash Flows
of Continuing Operations
|
|
|
|
|
|
Three
Months Ended
|
|
(In
millions)
|
|
March
31, 2007
|
|
April
1, 2006
|
|
Manufacturing
group
|
|
$
|
86
|
|
$
|
128
|
|
Finance
group
|
|
|
69
|
|
|
100
|
|
Reclassifications
and elimination adjustments
|
|
|
(220
|
)
|
|
(151
|
)
|
Consolidated
|
|
$
|
(65
|
)
|
$
|
77
|
|
Our
consolidated operating cash flows decreased in the first quarter of 2007
compared with the first quarter of 2006 primarily due to the timing of payments
of accounts payable for the Manufacturing group and accrued interest for the
Finance group, as well as increased inventory levels to support continued growth
in our Cessna and Bell Helicopter businesses.
Reclassifications
between operating and investing cash flows and eliminations adjustments for
the
quarters are summarized below:
|
|
Three
Months Ended
|
|
(In
millions)
|
|
March
31, 2007
|
|
April
1, 2006
|
|
Reclassifications
from investing activities:
|
|
|
|
|
|
|
|
Finance
receivable originations for Manufacturing group
inventory
sales
|
|
$
|
(225
|
)
|
$
|
(228
|
)
|
Cash
received from customers and securitizations for
captive
financing
|
|
|
151
|
|
|
155
|
|
Other
|
|
|
(11
|
)
|
|
(16
|
)
|
Total
reclassifications from investing activities
|
|
|
(85
|
)
|
|
(89
|
)
|
Dividends
paid by Finance group to Manufacturing group
|
|
|
(135
|
)
|
|
(62
|
)
|
Total
reclassifications and adjustments
|
|
$
|
(220
|
)
|
$
|
(151
|
)
|
20.
In
the
first quarter of 2007, the Finance group increased the dividends it paid to
the
Manufacturing group by $73 million, compared to the corresponding quarter in
2006. The payment of these dividends represents the distribution of the Finance
group’s retained earnings to achieve its targeted leverage ratio.
Investing Cash Flows
of Continuing Operations
|
|
|
|
|
|
Three
Months Ended
|
|
(In
millions)
|
|
March
31, 2007
|
|
April
1, 2006
|
|
Manufacturing
group
|
|
$
|
(58
|
)
|
$
|
(59
|
)
|
Finance
group
|
|
|
(28
|
)
|
|
(488
|
)
|
Reclassifications
to operating activities
|
|
|
85
|
|
|
89
|
|
Consolidated
|
|
$
|
(1
|
)
|
$
|
(458
|
)
|
Our
consolidated investing cash flows increased largely due to proceeds received
from the incremental securitization of $588 million in distribution finance
receivables, partially offset by a net increase of $120 million in finance
receivable originations, net of collections.
Financing Cash Flows
of Continuing Operations
|
|
|
|
|
|
Three
Months Ended
|
|
(In
millions)
|
|
March
31, 2007
|
|
April
1, 2006
|
|
Manufacturing
group
|
|
$
|
(237
|
)
|
$
|
(293
|
)
|
Finance
group
|
|
|
(40
|
)
|
|
388
|
|
Dividends
paid by Finance group to Manufacturing group
|
|
|
135
|
|
|
62
|
|
Consolidated
|
|
$
|
(142
|
)
|
$
|
157
|
|
The
decrease in our consolidated financing cash flows during the first quarter
of
2007 is due primarily to a reduction in short-term debt issuances, net of
repayments, of $589 million, partially offset by an increase in proceeds from
the issuance of long-term debt by the Finance group of $318 million. The
reduction in short-term debt issuances was primarily related to the Finance
group where the proceeds from receivable sales and securitizations were used
to
fund receivable originations during the first quarter of 2007.
Stock Repurchases
In
the
first quarter of 2007 and 2006, we repurchased 1,762,592 and 2,576,572 shares
of
common stock, respectively, under Board-authorized share repurchase programs
for
an aggregate cost of $164 million and $219 million, respectively.
Dividends
Our
Board
of Directors approved a quarterly dividend of $0.3875 in the first quarter
of
2007 and 2006. We made dividend payments to shareholders of $49 million in
the
first quarter of 2007, compared with $97 million in the first quarter of 2006.
The decrease in dividend payments reflects the fourth quarter 2005 dividend
that
was paid in the first quarter of 2006, while the fourth quarter 2006 dividend
was paid in the fourth quarter.
Capital
Resources
Under
a
shelf registration statement previously filed with the Securities and Exchange
Commission, our Manufacturing group may issue public debt and other securities
in one or more offerings up to a total maximum offering of $2.0 billion. At
March 31, 2007, we had $1.6 billion available under this registration
statement.
Under
a
previously filed registration statement, the Finance group may issue an
unlimited amount of public debt. Our Finance group issued $530 million of term
debt and CAD 60 million of term debt during the first quarter of 2007 under
this
registration statement. We used the proceeds from these issuances to fund
receivable growth and repay short-term debt. In addition, during the first
quarter of 2007, the Finance group issued $300 million of 6%
21.
Fixed-to-Floating
Rate Junior Subordinated Notes, which mature on February 15, 2067. The Finance
group has the right to redeem the notes at par on or after February 15, 2017,
and is obligated to redeem the notes beginning on February 15, 2042, the
redemption of which must be made from the sale of certain replacement capital
securities or a capital contribution from Textron.
Foreign
Exchange Risks
Our
financial results are affected by changes in foreign currency exchange rates
and
economic conditions in the foreign markets in which our products are
manufactured and/or sold. For the first quarter of 2007, the impact of foreign
exchange rate changes from the first quarter of 2006 increased revenues by
approximately $35 million (1.3%) and increased segment profit by approximately
$2 million (0.6%).
Recently
Announced Accounting Pronouncements
In
September 2006, the Financial Accounting Standards Board (“FASB”) issued
Statement of Financial Accounting Standards (“SFAS”) No. 157, “Fair Value
Measurements.” This Statement replaces multiple existing definitions of fair
value with a single definition, establishes a consistent framework for measuring
fair value and expands financial statement disclosures regarding fair value
measurements. This Statement applies only to fair value measurements that
already are required or permitted by other accounting standards and does not
require any new fair value measurements. SFAS No. 157 is effective for the
first
quarter of 2008, and we currently are evaluating the impact of adoption on
our
financial position and results of operations.
In
February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities - Including an amendment to FASB
Statement No. 115.” SFAS 159 allows companies to choose to measure eligible
assets and liabilities at fair value with changes in value recognized in
earnings. Fair value treatment for eligible assets and liabilities may be
elected either prospectively upon initial recognition, or if an event triggers
a
new basis of accounting for an existing asset or liability. SFAS 159 is
effective in the first quarter of 2008, and we currently are evaluating the
impact of adoption on our financial position and results of
operations.
Forward-Looking
Information
Certain
statements in this Quarterly Report on Form 10-Q 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 speak only as of the date on which they are made,
and
we undertake no obligation to update or revise any forward-looking statements.
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] changes in worldwide economic and
political conditions that impact demand for our products, interest rates and
foreign exchange rates; [b] the interruption of production at Textron facilities
or Textron’s customers or suppliers; [c] Textron’s ability to perform as
anticipated and to control costs under contracts with the U.S. Government;
[d]
the U.S. Government’s ability to unilaterally modify or terminate its contracts
with Textron for the U.S. Government’s convenience or for Textron’s failure to
perform, to change applicable procurement and accounting policies, and, under
certain circumstances, to suspend or debar Textron as a contractor eligible
to
receive future contract awards; [e] changes in national or international funding
priorities and government policies on the export and import of military and
commercial products; [f] the ability to control costs and successful
implementation of various cost-reduction programs; [g] the timing of new product
launches and certifications of new aircraft products; [h] the occurrence of
slowdowns or downturns in customer markets in which Textron products are sold
or
supplied or where Textron Financial Corporation offers financing; [i] changes
in
aircraft delivery schedules or cancellation of orders; [j] the impact of changes
in tax legislation; [k] the extent to which Textron is able to pass raw material
price increases through to customers or offset such price increases by reducing
other costs; [l] Textron’s ability to offset, through cost reductions, pricing
pressure brought by original equipment manufacturer customers; [m] Textron’s
ability to realize full value of receivables; [n] the availability and cost
of
insurance; [o] increases in pension expenses and other postretirement employee
22.
costs;
[p] Textron Financial Corporation’s ability to maintain portfolio credit
quality; [q] Textron Financial Corporation’s access to debt financing at
competitive rates; [r] uncertainty in estimating contingent liabilities and
establishing reserves to address such contingencies; [s] performance of
acquisitions; [t] the efficacy of research and development investments to
develop new products; [u] the launching of significant new products or programs
which could result in unanticipated expenses; and [v] bankruptcy or other
financial problems at major suppliers or customers that could cause disruptions
in Textron’s supply chain or difficulty in collecting amounts owed by such
customers.
|
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
|
There
has been no significant change in our exposure to market risk during
the
first quarter of 2007. For discussion of our exposure to market risk,
refer to Item 7A. Quantitative and Qualitative Disclosures about
Market
Risk contained in Textron’s 2006 Annual Report on Form
10-K.
|
|
CONTROLS
AND PROCEDURES
|
|
We
have carried out an evaluation, under the supervision and with the
participation of our management, including our Chairman, President
and
Chief Executive Officer (the “CEO”) and our Executive Vice President and
Chief Financial Officer (the “CFO”), of the effectiveness of the design
and operation of our disclosure controls and procedures (as defined
in
Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of
1934, as
amended (the “Act”)) as of the end of the fiscal quarter covered by this
report. 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.
|
There
were no changes in our internal control over financial reporting
during
the fiscal quarter ended March 31, 2007 that have materially
affected, or are reasonably likely to materially affect, our internal
control over financial reporting.
|
23.
PART
II. OTHER INFORMATION
|
UNREGISTERED
SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|
|
Issuer
Repurchases of Equity Securities
|
|
Total
Number
of
Shares
Purchased
|
|
Average
Price
Paid
per
Share
(Excluding
Commissions)
|
|
Total
Number of
Shares
Purchased as
Part
of Publicly
Announced
Plan
|
|
Maximum
Number
of Shares
that
May Yet Be
Purchased
Under
the Plan
|
|
Month
1 (December 31, 2006 -
February
3, 2007)
|
|
|
606,941
|
|
$
|
93.05
|
|
|
606,941
|
|
|
3,780,859
|
|
Month
2 (February 4, 2007 -
March
3, 2007)
|
|
|
675,651
|
|
$
|
95.02
|
|
|
675,651
|
|
|
3,105,208
|
|
Month
3 (March 4, 2007 -
March
31, 2007)
|
|
|
480,000
|
|
$
|
90.48
|
|
|
480,000
|
|
|
2,625,208
|
|
Total
|
|
|
1,762,592
|
|
$
|
93.10
|
|
|
1,762,592
|
|
|
|
|
On
January 26, 2006, Textron’s Board approved a new share repurchase plan under
which Textron is authorized to repurchase up to 12 million shares of common
stock. The new plan has no expiration date.
On
March
1, 2007, Textron issued 1,000 shares of its Common Stock to James L. Ziemer
upon
his joining Textron’s Board of Directors pursuant to Textron’s practice of
issuing 1,000 shares of its Common Stock to each new non-employee Director.
The
sale or transfer of these shares is restricted, and the shares were not
registered under the Securities Act of 1933 pursuant to the exemption afforded
by section 4(2) of that Act for transactions by an issuer not involving any
public offering.
Because
this Quarterly Report on Form 10-Q is being filed within four business days
from
the date of the reportable event, we have elected to make the following
disclosures in this Quarterly Report on Form 10-Q instead of in a Current Report
on Form 8-K under Item 5.02 -- Departure of Directors or Certain Officers;
Election of Directors; Appointment of Certain Officers; Compensatory
Arrangements of Certain Officers.
At
our
annual meeting of shareholders held on April 25, 2007, shareholders approved
the
Textron Inc. Short-Term Incentive Plan and the Textron Inc. 2007 Long-Term
Incentive Plan.
Textron
Inc. Short-Term Incentive Plan
The
Textron Inc. Short-Term Incentive Plan (the “Short-Term Plan”) has materially
the same components as the previous Annual Incentive Plan, which was terminated
upon approval of the Short-Term Plan. The Short-Term Plan permits the awarding
of cash bonuses to employees of Textron and its subsidiaries based on the
achievement of pre-established performance goals. The maximum amount payable
to
any participant for any plan year is $4,000,000. The Short-Term Plan will be
administered by the Organization and Compensation Committee of our Board of
Directors (the “O&C Committee”), which may, to the extent specified in the
Short-Term Plan, delegate its responsibilities. For each executive officer
of
Textron, the O&C Committee will establish objective written performance
goals. Following the end of each plan year or other performance period, the
O&C Committee will certify the extent to which performance goals have been
achieved and compute the final amounts to be paid to each participant. Further
information on the Short-Term Plan appears on pages 46-47 of Textron’s 2007
annual meeting Proxy Statement dated March 19, 2007. The full text of the
Short-Term Plan is attached as Exhibit 10.1 to this Report.
24.
Textron
Inc. 2007 Long-Term Incentive Plan
The
Textron Inc. 2007 Long-Term Incentive Plan (the “2007 Plan”) has materially the
same components as the Textron 1999 Long-Term Incentive Plan (the “1999 Plan”),
under which no further awards will be made. The 2007 Plan authorizes the grant
of stock options, stock appreciation rights, performance stock, restricted
stock, restricted stock units, performance share units and other awards. The
2007 Plan authorizes the issuance of up to 6,000,000 shares of Textron common
stock (“Shares”), 1,500,000 of which may be issued in connection with full-value
awards such as restricted stock, restricted stock units, performance stock
and
performance share units. Only awards settled in Shares will count against these
totals. No remaining Shares available for grant from the 1999 Plan will be
brought forward to add to these totals, although any shares that become
available for issuance upon cancellation, forfeiture or expiration of awards
granted under the 1999 Plan without having been exercised or settled will be
added to the totals referred to above. In the case of awards under the 2007
Plan
that are denominated and intended to be settled in Shares but which are
forfeited or cancelled or otherwise expire without having been exercised or
settled in shares, the corresponding Shares again will be available for issuance
under the 2007 Plan. In addition to these aggregate limits, no more than 200,000
shares may be made subject to stock options or stock appreciation rights granted
to a participant in any calendar year, no more than 200,000 shares may be
granted to a participant in any calendar year in connection with awards to
be
settled in Shares other than stock options or stock appreciation rights, no
more
than $15 million may be paid to any participant in any calendar year with
respect to awards settled in cash and a maximum of 5% of the Shares available
under the 2007 Plan may be issued as restricted stock, restricted stock units,
performance stock or performance share units not subject to certain minimum
vesting conditions.
The
2007
Plan will be administered by the O&C Committee, which may, to the extent
specified in the 2007 Plan, delegate some or all of its authority under the
2007
Plan. The O&C Committee has the responsibility to select participants, which
may include employees and non-employee directors of Textron and its subsidiaries
and certain other persons.
Except
as
specifically authorized by Textron’s shareholders, no stock option or stock
appreciation right may be directly or indirectly repriced. Except in the case
of
certain substitute awards, the exercise price of a stock option may not be
less
than the closing price of a share on the date of grant. No stock option granted
under the 2007 Plan may have a term in excess of ten years, and stock options
intended to qualify as incentive stock options are subject to additional
restrictions and limitations. Further information on the 2007 Plan appears
on
pages 47-50 of Textron’s 2007 annual meeting Proxy Statement dated March 19,
2007. The full text of the 2007 Plan is attached as Exhibit 10.2 to this
Report.
25.
|
EXHIBITS
|
|
10.1
|
Textron
Inc. Short-Term Incentive Plan
|
|
10.2
|
Textron
Inc. 2007 Long-Term Incentive Plan
|
|
12.1
|
Computation
of ratio of income to fixed charges of Textron Inc. Manufacturing
Group
|
|
12.2
|
Computation
of ratio of income to fixed charges of Textron Inc. including all
majority-owned subsidiaries
|
|
31.1
|
Certification
of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
|
|
31.2
|
Certification
of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
|
|
32.1
|
Certification
of Chief Executive Officer Pursuant to 18 U.S.C. Section
1350
|
|
32.2
|
Certification
of Chief Financial Officer Pursuant to 18 U.S.C. Section
1350
|
26.
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant
has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
|
|
|
TEXTRON
INC.
|
Date:
|
April
30, 2007
|
|
s/R.
L. Yates
|
|
|
|
R.
L. Yates
Senior
Vice President and Corporate Controller
(principal
accounting officer)
|
LIST
OF EXHIBITS
The
following exhibits are filed as part of this report on Form 10-Q:
Name
of Exhibit
10.1
|
Textron
Inc. Short-Term Incentive Plan
|
|
10.2
|
Textron
Inc. 2007 Long-Term Incentive Plan
|
|
12.1
|
Computation
of ratio of income to fixed charges of Textron Inc. Manufacturing
Group
|
|
12.2
|
Computation
of ratio of income to fixed charges of Textron Inc. including all
majority-owned subsidiaries
|
|
31.1
|
Certification
of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
|
|
31.2
|
Certification
of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
|
|
32.1
|
Certification
of Chief Executive Officer Pursuant to Rule 18 U.S.C. Section
1350
|
|
32.2
|
Certification
of Chief Financial Officer Pursuant to Rule 18 U.S.C. Section
1350
|
|