Document and Company Informatio
Document and Company Information (USD $) | |||
9 Months Ended
Oct. 03, 2009 | Oct. 17, 2009
| Jul. 04, 2009
| |
Document And Company Information [Abstract] | |||
Entity Registrant Name | TEXTRON INC | ||
Entity Central Index Key | 0000217346 | ||
Document Type | 10-Q | ||
Document Period End Date | 2009-10-03 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --01-02 | ||
Entity Well-known Seasoned Issuer | Yes | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Filer Category | Large Accelerated Filer | ||
Entity Public Float | $2,512,000,000 | ||
Entity Common Stock, Shares Outstanding | 271,117,282 |
Consolidated Statements of Oper
Consolidated Statements of Operations (Unaudited) (USD $) | ||||
In Millions, except Per Share data | 3 Months Ended
Oct. 03, 2009 | 3 Months Ended
Sep. 27, 2008 | 9 Months Ended
Oct. 03, 2009 | 9 Months Ended
Sep. 27, 2008 |
Segment Manufacturing Group | ||||
Costs, expenses and other | ||||
Income (loss) from continuing operations | $149 | $631 | ||
Income (loss) from discontinued operations, net of income taxes | 45 | 15 | ||
Net income | 194 | 646 | ||
Segment Finance Group | ||||
Costs, expenses and other | ||||
Provision for losses on finance receivables | 206 | 101 | ||
Income (loss) from continuing operations | (162) | 49 | ||
Net income | (162) | 49 | ||
Series A, $2.08 Preferred stock | Consolidated | ||||
Dividends per share | ||||
Preferred Stock Dividends per share | 0.52 | 0.52 | 1.56 | 1.56 |
Series B, $1.40 Preferred stock | Consolidated | ||||
Dividends per share | ||||
Preferred Stock Dividends per share | 0.35 | 0.35 | 1.05 | 1.05 |
Consolidated | ||||
Revenues | ||||
Manufacturing revenues | 2,478 | 3,287 | 7,408 | 9,886 |
Finance revenues | 71 | 184 | 279 | 575 |
Total revenues | 2,549 | 3,471 | 7,687 | 10,461 |
Costs, expenses and other | ||||
Cost of sales | 2,048 | 2,595 | 6,148 | 7,804 |
Selling and administrative | 348 | 419 | 1,034 | 1,203 |
Interest expense, net | 73 | 102 | 230 | 318 |
Provision for losses on finance receivables | 43 | 34 | 206 | 101 |
Gain on sale of assets | 0 | 0 | (50) | 0 |
Special charges | 42 | 0 | 203 | 0 |
Total costs, expenses and other | 2,554 | 3,150 | 7,771 | 9,426 |
Income (loss) from continuing operations before income taxes | (5) | 321 | (84) | 1,035 |
Income tax expense (benefit) | (11) | 116 | (71) | 355 |
Income (loss) from continuing operations | 6 | 205 | (13) | 680 |
Income (loss) from discontinued operations, net of income taxes | (2) | 1 | 45 | 15 |
Net income | $4 | $206 | $32 | $695 |
Basic earnings per share | ||||
Basic earnings per share, Continuing operations | 0.02 | 0.85 | -0.05 | 2.75 |
Basic earnings per share, Discontinued operations | -0.01 | $0 | 0.17 | 0.06 |
Basic earnings per share | 0.01 | 0.85 | 0.12 | 2.81 |
Diluted earnings per share | ||||
Diluted earnings per share, Continuing operations | 0.02 | 0.83 | -0.05 | 2.7 |
Diluted earnings per share, Discontinued operations | -0.01 | $0 | 0.17 | 0.06 |
Diluted earnings per share | 0.01 | 0.83 | 0.12 | 2.76 |
Dividends per share | ||||
Dividends per share of common stock | 0.02 | 0.23 | 0.06 | 0.69 |
Consolidated Balance Sheets (Un
Consolidated Balance Sheets (Unaudited) (USD $) | ||
In Millions, except Share data in Thousands | Oct. 03, 2009
| Jan. 03, 2009
|
Segment Manufacturing Group | ||
Assets | ||
Cash and cash equivalents | $2,037 | $531 |
Accounts receivable, net | 926 | 894 |
Inventories | 2,716 | 3,093 |
Other current assets | 493 | 584 |
Assets of discontinued operations | 60 | 334 |
Total current assets | 6,232 | 5,436 |
Property, plant and equipment, less accumulated depreciation and amortization of $2,627 and $2,436 | 1,988 | 2,088 |
Goodwill | 1,703 | 1,698 |
Other assets | 1,901 | 1,465 |
Total assets | 11,824 | 10,687 |
Liabilities | ||
Current portion of long-term debt and short-term debt | 134 | 876 |
Accounts payable | 664 | 1,101 |
Accrued liabilities | 2,205 | 2,609 |
Liabilities of discontinued operations | 122 | 195 |
Total current liabilities | 3,125 | 4,781 |
Other liabilities | 2,991 | 2,926 |
Long-term debt | 3,624 | 1,693 |
Total liabilities | 9,740 | 9,400 |
Segment Finance Group | ||
Assets | ||
Cash and cash equivalents | 539 | 16 |
Finance receivables held for investment, net | 5,796 | 6,724 |
Finance receivables held for sale | 998 | 1,658 |
Other assets | 801 | 946 |
Total assets | 8,134 | 9,344 |
Liabilities | ||
Other liabilities | 362 | 540 |
Deferred income taxes | 226 | 337 |
Debt | 6,668 | 7,388 |
Total liabilities | 7,256 | 8,265 |
Consolidated | ||
Assets | ||
Cash and cash equivalents | 2,576 | 547 |
Total assets | 19,958 | 20,031 |
Liabilities | ||
Total liabilities | 16,996 | 17,665 |
Shareholders' equity | ||
Preferred stock | 2 | 2 |
Common stock | 35 | 32 |
Capital surplus | 1,379 | 1,229 |
Retained earnings | 3,042 | 3,025 |
Accumulated other comprehensive loss | (1,232) | (1,422) |
Total shareholders' equity including cost of treasury shares | 3,226 | 2,866 |
Less cost of treasury shares | 264 | 500 |
Total shareholders' equity | 2,962 | 2,366 |
Total liabilities and shareholders' equity | $19,958 | $20,031 |
Common shares outstanding (in thousands) | 271,016 | 242,041 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) (Unaudited) (Segment Manufacturing Group, USD $) | ||
In Millions | Oct. 03, 2009
| Jan. 03, 2009
|
Assets | ||
Accumulated depreciation and amortization | $2,627 | $2,436 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows (Unaudited) (USD $) | ||
In Millions | 9 Months Ended
Oct. 03, 2009 | 9 Months Ended
Sep. 27, 2008 |
Segment Manufacturing Group | ||
Cash flows from operating activities: | ||
Net income (loss) | $194 | $646 |
Income from discontinued operations | 45 | 15 |
Income (loss) from continuing operations | 149 | 631 |
Adjustments to reconcile income (loss) from continuing operations to net cash provided by (used in) operating activities: | ||
Dividends received from the Finance group | 284 | 142 |
Capital contributions paid to Finance group | (197) | 0 |
Non-cash items: | ||
Depreciation and amortization | 270 | 262 |
Asset impairment charges | 54 | 0 |
Gains on extinguishment of debt | (3) | 0 |
Share-based compensation | 24 | 39 |
Amortization of interest expense on convertible notes | 13 | 0 |
Deferred income taxes | (22) | 11 |
Changes in assets and liabilities: | ||
Accounts receivable, net | (14) | (83) |
Inventories | 372 | (773) |
Other assets | (73) | 59 |
Accounts payable | (444) | 220 |
Accrued and other liabilities | (149) | 114 |
Other operating activities, net | 53 | 33 |
Net cash provided by (used in) operating activities of continuing operations | 317 | 655 |
Net cash used in operating activities of discontinued operations | (17) | (21) |
Net cash provided by (used in) operating activities | 300 | 634 |
Cash flows from investing activities: | ||
Net cash used in acquisitions | 0 | (109) |
Capital expenditures | (165) | (310) |
Proceeds from sale of property, plant and equipment | 3 | 4 |
Other investing activities, net | (49) | 0 |
Net cash provided by (used in) investing activities of continuing operations | (211) | (415) |
Net cash provided by (used in) investing activities of discontinued operations | 239 | (10) |
Net cash provided by (used in) investing activities | 28 | (425) |
Cash flows from financing activities: | ||
Increase (decrease) in short-term debt | (869) | 240 |
Proceeds from long-term lines of credit | 1,230 | 0 |
Payments on long-term lines of credit | (58) | 0 |
Proceeds from issuance of long-term debt | 595 | 0 |
Principal payments on long-term debt | (212) | (44) |
Payments on borrowings against officers life insurance policies | (411) | 0 |
Intergroup financing | 133 | 0 |
Proceeds from issuance of convertible notes, net of fees paid | 582 | 0 |
Purchase of convertible note hedge | (140) | 0 |
Proceeds from issuance of common stock and warrants | 333 | 0 |
Proceeds from option exercises | 0 | 40 |
Excess tax benefit on stock options | 0 | 10 |
Purchases of Textron common stock | 0 | (533) |
Dividends paid | (16) | (172) |
Net cash provided by (used in) financing activities of continuing operations | 1,167 | (459) |
Net cash used in financing activities of discontinued operations | 0 | (2) |
Net cash provided by (used in) financing activities | 1,167 | (461) |
Effect of exchange rate changes on cash and cash equivalents | 11 | 2 |
Net increase (decrease) in cash and cash equivalents | 1,506 | (250) |
Cash and cash equivalents at beginning of period | 531 | 471 |
Cash and cash equivalents at end of period | 2,037 | 221 |
Segment Finance Group | ||
Cash flows from operating activities: | ||
Net income (loss) | (162) | 49 |
Income (loss) from continuing operations | (162) | 49 |
Non-cash items: | ||
Depreciation and amortization | 27 | 31 |
Provision for losses on finance receivables held for investment | 206 | 101 |
Portfolio losses on finance receivables | 114 | 0 |
Gains on extinguishment of debt | (48) | 0 |
Deferred income taxes | (116) | (27) |
Changes in assets and liabilities: | ||
Other assets | 8 | 11 |
Accrued and other liabilities | 80 | (6) |
Other operating activities, net | 25 | (5) |
Net cash provided by (used in) operating activities of continuing operations | 134 | 154 |
Net cash provided by (used in) operating activities | 134 | 154 |
Cash flows from investing activities: | ||
Finance receivables originated or purchased | (3,074) | (9,489) |
Finance receivables repaid | 3,860 | 8,602 |
Proceeds on receivables sales, including securitizations | 252 | 746 |
Capital expenditures | 0 | (8) |
Proceeds from sale of repossessed assets and properties | 176 | 0 |
Retained interests | 117 | 11 |
Purchase of marketable securities | 0 | (100) |
Other investing activities, net | 32 | 13 |
Net cash provided by (used in) investing activities of continuing operations | 1,363 | (225) |
Net cash provided by (used in) investing activities | 1,363 | (225) |
Cash flows from financing activities: | ||
Increase (decrease) in short-term debt | (768) | 30 |
Proceeds from long-term lines of credit | 1,740 | 0 |
Proceeds from issuance of long-term debt | 46 | 1,461 |
Principal payments on long-term debt | (1,823) | (1,201) |
Intergroup financing | (112) | 0 |
Capital contributions paid to Finance group | 217 | 0 |
Dividends paid | (284) | (142) |
Net cash provided by (used in) financing activities of continuing operations | (984) | 148 |
Net cash provided by (used in) financing activities | (984) | 148 |
Effect of exchange rate changes on cash and cash equivalents | 10 | (1) |
Net increase (decrease) in cash and cash equivalents | 523 | 76 |
Cash and cash equivalents at beginning of period | 16 | 60 |
Cash and cash equivalents at end of period | 539 | 136 |
Consolidated | ||
Cash flows from operating activities: | ||
Net income (loss) | 32 | 695 |
Income from discontinued operations | 45 | 15 |
Income (loss) from continuing operations | (13) | 680 |
Non-cash items: | ||
Depreciation and amortization | 297 | 293 |
Provision for losses on finance receivables held for investment | 206 | 101 |
Portfolio losses on finance receivables | 114 | 0 |
Asset impairment charges | 54 | 0 |
Gains on extinguishment of debt | (51) | 0 |
Share-based compensation | 24 | 39 |
Amortization of interest expense on convertible notes | 13 | 0 |
Deferred income taxes | (138) | (16) |
Changes in assets and liabilities: | ||
Accounts receivable, net | (14) | (83) |
Inventories | 368 | (787) |
Other assets | (57) | 78 |
Accounts payable | (444) | 220 |
Accrued and other liabilities | (69) | 108 |
Captive finance receivables, net | 187 | (8) |
Other operating activities, net | 78 | 28 |
Net cash provided by (used in) operating activities of continuing operations | 555 | 653 |
Net cash used in operating activities of discontinued operations | (17) | (21) |
Net cash provided by (used in) operating activities | 538 | 632 |
Cash flows from investing activities: | ||
Finance receivables originated or purchased | (2,613) | (8,766) |
Finance receivables repaid | 3,250 | 8,000 |
Proceeds on receivables sales, including securitizations | 202 | 633 |
Net cash used in acquisitions | 0 | (109) |
Capital expenditures | (165) | (318) |
Proceeds from sale of property, plant and equipment | 3 | 4 |
Proceeds from sale of repossessed assets and properties | 176 | 0 |
Retained interests | 117 | 11 |
Purchase of marketable securities | 0 | (100) |
Other investing activities, net | 32 | 19 |
Net cash provided by (used in) investing activities of continuing operations | 1,002 | (626) |
Net cash provided by (used in) investing activities of discontinued operations | 239 | (10) |
Net cash provided by (used in) investing activities | 1,241 | (636) |
Cash flows from financing activities: | ||
Increase (decrease) in short-term debt | (1,637) | 270 |
Proceeds from long-term lines of credit | 2,970 | 0 |
Payments on long-term lines of credit | (58) | 0 |
Proceeds from issuance of long-term debt | 641 | 1,461 |
Principal payments on long-term debt | (2,035) | (1,245) |
Payments on borrowings against officers life insurance policies | (411) | 0 |
Proceeds from issuance of convertible notes, net of fees paid | 582 | 0 |
Purchase of convertible note hedge | (140) | 0 |
Proceeds from issuance of common stock and warrants | 333 | 0 |
Proceeds from option exercises | 0 | 40 |
Excess tax benefit on stock options | 0 | 10 |
Purchases of Textron common stock | 0 | (533) |
Dividends paid | (16) | (172) |
Net cash provided by (used in) financing activities of continuing operations | 229 | (169) |
Net cash used in financing activities of discontinued operations | 0 | (2) |
Net cash provided by (used in) financing activities | 229 | (171) |
Effect of exchange rate changes on cash and cash equivalents | 21 | 1 |
Net increase (decrease) in cash and cash equivalents | 2,029 | (174) |
Cash and cash equivalents at beginning of period | 547 | 531 |
Cash and cash equivalents at end of period | $2,576 | $357 |
Basis of Presentation
Basis of Presentation | |
9 Months Ended
Oct. 03, 2009 | |
Basis of Presentation [Abstract] | |
Basis of Presentation | Note 1: Basis of Presentation Our consolidated financial statements include the accounts of Textron Inc. and all of its majority-owned subsidiaries, along with any variable interest entities for which we are the primary beneficiary. We have prepared these unaudited consolidated financial statements in accordance with accounting principles generally accepted in the U.S. for interim financial information. Accordingly, these interim financial statements do not include all of the information and footnotes required by accounting principles generally accepted in the U.S. for complete financial statements. 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 January3, 2009. 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. We have evaluated subsequent events up to the time of our filing with the Securities and Exchange Commission on October30, 2009, which is the date that these financial statements were issued. Our financings are conducted through two separate borrowing groups. The Manufacturing group consists of Textron Inc. consolidated with its majority-owned subsidiaries that operate in the Cessna, Bell, Textron Systems and Industrial segments. The Finance group consists of Textron Financial Corporation, its subsidiaries and the securitization trusts consolidated into it, along with two finance subsidiaries owned by Textron Inc. 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 groups activities, investors, rating agencies and analysts use different measures to evaluate each groups 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. As discussed in Note 4: Discontinued Operations, on April3, 2009, we sold HR Textron and in November2008, we completed the sale of our Fluid Power business unit. Both of these businesses have been classified as discontinued operations, and all prior period information has been recast to reflect this presentation. |
Special Charges
Special Charges | |
9 Months Ended
Oct. 03, 2009 | |
Special Charges [Abstract] | |
Special Charges | Note 2: Special Charges In the fourth quarter of 2008, we initiated a restructuring program to reduce overhead costs and improve productivity across the company, which includes corporate and segment direct and indirect workforce reductions and streamlining of administrative overhead, and announced the exit of portions of our commercial finance business. This program was expanded in the first half of 2009 to include additional workforce reductions, primarily at Cessna, and the cancellation of the Citation Columbus development project. In the third quarter of 2009, the program was further expanded to include additional headcount reductions at Corporate and Bell. We expect to eliminate approximately 10,700 positions worldwide representing approximately 25% of our global workforce at the inception of the program. As of October3, 2009, we have terminated approximately 10,100 employees and have exited 22 owned and leased facilities and plants under this program. Restructuring costs by segment are as follows: Contract Severance Curtailment Asset Terminations Total (In millions) Costs Charges, Net Impairments and Other Restructuring Three Months Ended October3, 2009 Cessna $ 10 $ $ 2 $ 5 $ 17 Industrial 1 1 Bell 8 8 Textron Systems 1 1 Finance 1 1 Corporate 14 14 $ 35 $ $ 2 $ 5 $ 42 Nine Months Ended October3, 2009 Cessna $ 74 $ 26 $ 54 $ 6 $ 160 Industrial 6 (4 ) 1 3 Bell 8 8 Textron Systems 2 2 4 Finance 7 1 1 9 Corporate 19 19 $ 116 $ 25 $ 54 $ 8 $ 203 We record restructuring costs in special charges as these costs are generally of a nonrecurring nature and are not included in segment profit, which is our measure used for evaluating performance and for decision-making purposes. Severance costs related to an approved restructuring program are classified as special charges unless the costs are for volume-related reductions of direct labor that are deemed to be of a temporary or cyclical nature. Most of our severance benefits are provided for under existing severance programs and the associated costs are accrued when they are probable and estimable. Special one-time termination benefits are accounted for once an approved plan is communicated to employees that establishes the terms of the benefit arrangement, the number of employees to be terminated, along with their job classification and location, and the expected completion date. We recorded net curtailment charges of $25million for our pension and other postretirement benefit plans in the second quar |
Retirement Plans
Retirement Plans | |
9 Months Ended
Oct. 03, 2009 | |
Retirement Plans [Abstract] | |
Retirement Plans | Note 3: 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 are as follows: Postretirement Benefits Pension Benefits Other Than Pensions October 3, September 27, October 3, September 27, (In millions) 2009 2008 2009 2008 Three Months Ended Service cost $ 27 $ 35 $ 2 $ 2 Interest cost 78 75 9 11 Expected return on plan assets (96 ) (101 ) Amortization of prior service cost (credit) 4 5 (1 ) (1 ) Amortization of net loss 1 5 2 4 Net periodic benefit cost $ 14 $ 19 $ 12 $ 16 Nine Months Ended Service cost $ 90 $ 106 $ 6 $ 7 Interest cost 233 227 28 32 Expected return on plan assets (291 ) (304 ) Amortization of prior service cost (credit) 13 15 (4 ) (4 ) Amortization of net loss 9 14 6 12 Net periodic benefit cost $ 54 $ 58 $ 36 $ 47 |
Discontinued Operations
Discontinued Operations | |
9 Months Ended
Oct. 03, 2009 | |
Discontinued Operations [Abstract] | |
Discontinued Operations | Note 4: Discontinued Operations On April3, 2009, we sold HR Textron, an operating unit previously reported within the Textron Systems segment, for $376million in cash. The sale resulted in an after-tax gain of $8million after final settlement and net after-tax proceeds of approximately $280million. In November2008, we completed the sale of the Fluid and Power business unit and received approximately $527million in cash and a six-year note with a face value of $28million. In connection with the final settlement of the transaction in the third quarter of 2009, we also received a five-year note with a face value of $30million which had no significant impact on the net gain from disposition. Results of our discontinued businesses are as follows: Three Months Ended Nine Months Ended October 3, September 27, October 3, September 27, (In millions) 2009 2008 2009 2008 Revenue $ $ 236 $ 48 $ 683 Income (loss)from discontinued operations before income taxes $ $ 21 $ (1 ) $ 46 Income tax expense (benefit) (1 ) 20 (40 ) 31 (1 ) 1 39 15 Gain (loss)on sale, net of income taxes (1 ) 6 Income (loss)from discontinued operations, net of income taxes $ (2 ) $ 1 $ 45 $ 15 In the first half of 2009, we had a $34million tax benefit from the reduction in tax contingencies as a result of the HR Textron sale and a valuation allowance reversal on a previously established deferred tax asset. |
Comprehensive Income
Comprehensive Income | |
9 Months Ended
Oct. 03, 2009 | |
Comprehensive Income [Abstract] | |
Comprehensive Income | Note 5: Comprehensive Income Our comprehensive income for the periods is provided below: Three Months Ended Nine Months Ended October 3, September 27, October 3, September 27, (In millions) 2009 2008 2009 2008 Net income $ 4 $ 206 $ 32 $ 695 Other comprehensive income, net of income taxes: Unrealized gain on pension, net of income taxes of $48 82 Pension curtailment, net of income taxes of $10 15 Recognition of prior service cost and unrealized losses on pension and postretirement benefits 4 8 16 28 Net deferred gain (loss)on hedge contracts 24 (26 ) 54 (43 ) Net deferred gain (loss)on retained interests 8 (1 ) (1 ) (1 ) Foreign currency translation and other (10 ) (66 ) 24 (71 ) Comprehensive income $ 30 $ 121 $ 222 $ 608 |
Earnings Per Share
Earnings Per Share | |
9 Months Ended
Oct. 03, 2009 | |
Earnings Per Share [Abstract] | |
Earnings per Share | Note 6: Earnings per Share In the first quarter of 2009, we adopted the new accounting standard for determining whether instruments granted in share-based payment transactions are participating securities. This new standard requires us to include any unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents as participating securities in our computation of basic earnings per share pursuant to the two-class method. We have granted certain restricted stock units that are deemed participating securities, and as a result, prior period basic and diluted weighted-average shares outstanding have been recast to conform to the new calculation. The adoption of this standard resulted in a $0.01 reduction in diluted earnings per share from continuing operations for the three and nine months ended September27, 2008. 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 and the restricted stock units discussed above for the computation of basic earnings per share using the two-class method. Diluted earnings per share includes the dilutive effect of convertible preferred shares, Convertible Notes (defined below), stock options and warrants and restricted stock units 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 Nine Months Ended October 3, September 27, October 3, September 27, (In thousands) 2009 2008 2009 2008 Basic weighted-average shares outstanding 271,224 243,753 260,099 247,370 Dilutive effect of : Convertible Notes and warrants 5,906 Convertible preferred shares, stock options and restricted stock units 1,299 3,429 4,382 Diluted weighted-average shares outstanding 278,429 247,182 260,099 251,752 The potential dilutive effect of 3.5million weighted-average shares of restricted stocks units, stock options and warrants, convertible preferred stock and Convertible Notes was excluded from the computation of diluted weighted-average shares outstanding for the nine months ended October3, 2009 as the shares would have an anti-dilutive effect on the loss from continuing operations. We did not include stock options to purchase 8million and 9million shares of common stock outstanding in our calculation of diluted weighted-average shares outstanding for the three and nine months ended October3, 2009 as the exercise prices were greater than the average market price of our common stock for those periods. These securities could potentially dilute earnings per share in the future. On May5, 2009, we issued 4.50% Convertible Senior Notes (the Convertible Notes) due 2013, as discussed in Note 9: Debt. In connection with the issuance of these notes, we entered int |
Accounts Receivable Finance Rec
Accounts Receivable Finance Receivables and Securitizations | |
9 Months Ended
Oct. 03, 2009 | |
Accounts Receivable, Finance Receivables and Securitizations [Abstract] | |
Accounts Receivable, Finance Receivables and Securitizations | Note 7: Accounts Receivable, Finance Receivables and Securitizations Accounts Receivable October 3, January 3, (In millions) 2009 2009 Accounts receivable - Commercial $ 500 $ 496 Accounts receivable - U.S. Government contracts 451 422 951 918 Allowance for doubtful accounts (25 ) (24 ) $ 926 $ 894 Finance Receivables We evaluate finance receivables on a managed as well as owned basis since we retain subordinated interests in finance receivables sold in securitizations resulting in credit risk. In contrast, we do not have a retained financial interest or credit risk in the performance of the serviced portfolio and, therefore, performance of these portfolios is limited to billing and collection activities. Our Finance group manages and services finance receivables for a variety of investors, participants and third-party portfolio owners. A reconciliation of our managed and serviced finance receivables to finance receivables held for investment, net is provided below: October 3, January 3, (In millions) 2009 2009 Total managed and serviced finance receivables $ 8,999 $ 12,173 Less: Nonrecourse participations sold to independent investors 772 820 Less: Third-party portfolio servicing 318 532 Total managed finance receivables 7,909 10,821 Less: Securitized receivables 813 2,248 Owned finance receivables 7,096 8,573 Less: Finance receivables held for sale 998 1,658 Finance receivables held for investment 6,098 6,915 Allowance for loan losses (302 ) (191 ) Finance receivables held for investment, net $ 5,796 $ 6,724 Finance receivables held for investment at October3, 2009 and January3, 2009 include approximately $549million and $1.1billion, respectively, of finance receivables that have been legally sold to special purpose entities and are consolidated subsidiaries of Textron Financial Corporation. The assets of these special purpose entities are pledged as collateral for $443 million and $853million of debt at October3, 2009 and January3, 2009, respectively, which is reflected as securitized on-balance sheet debt. In connection with our fourth quarter 2008 plan to exit portions of the commercial finance business, we classified certain finance receivables as held for sale. As a result of our marketing efforts for these finance receivables, we determined that the markets for certain classes of finance receivables were illiquid and inactive during the first half of 2009. We realized that, given market conditions, we were likely to be able to generate more cash flow from the loans obligors and/or the underlying collateral than from a buyer of the portfolio. We reached this conclusion based on our evaluation of the obligors ability to repay the loans as compared to our evaluation of both the existence of potential buyers for these assets and market prices. Accordingly, sin |
Inventories
Inventories | |
9 Months Ended
Oct. 03, 2009 | |
Inventories [Abstract] | |
Inventories | Note 8: Inventories October 3, January 3, (In millions) 2009 2009 Finished goods $ 908 $ 1,081 Work in process 2,062 1,866 Raw materials 637 765 3,607 3,712 Progress/milestone payments (891 ) (619 ) $ 2,716 $ 3,093 |
Debt
Debt | |
9 Months Ended
Oct. 03, 2009 | |
Debt [Abstract] | |
Debt | Note 9: Debt On September14, 2009, we issued $600million of senior notes under our existing registration statement, comprised of $350million of 6.20% notes due 2015 and $250million of 7.25% notes due 2019. Concurrently, Textron Inc. and Textron Financial Corporation announced separate cash tender offers for up to $650million aggregate principal amount of five separate series of outstanding debt securities with maturity dates ranging from November2009 to June2012. The primary purpose of these transactions was to lengthen the maturity profile of our indebtedness. In connection with these transactions, Textron Inc. extinguished $122million of its $250million 4.5% notes due 2010 as of October3, 2009, and recognized a $3million pre-tax loss on the early extinguishment of this debt, which is included in selling, general and administrative expense. Subsequent to the end of the quarter, in connection with the tender offers, on October13, 2009, Textron Inc. extinguished $146million of its $300million 6.5% notes due 2012 and Textron Financial Corporation extinguished $319million of its medium-term notes with interest rates ranging from 4.6% to 6.0% and maturity dates ranging from November2009 to February2011. The related pre-tax loss on these extinguishments totaled $9million and will be recognized in the fourth quarter of 2009. For the nine months ended October3, 2009, Textron Financial Corporation has extinguished through open market purchases an additional $595million of its debt and has recognized a pre-tax gain of $9million and $48million for the three and nine months ended October3, 2009. In the third quarter of 2009, Textron Inc. extinguished through open market purchases an additional $62million of its debt and recognized a pre-tax gain of $6million. Our debt and credit facilities are summarized below: October 3, January 3, (In millions) 2009 2009 Manufacturing group: Short-term debt: Commercial paper $ $ 867 Current portion of long-term debt 134 9 Total short-term debt 134 876 Long-term senior debt: Medium-term notes due 2010 to 2011 14 17 4.50% due 2010 128 250 Credit line borrowings due 2012 1,172 6.50% due 2012 300 300 3.875% due 2013 379 429 4.50% convertible senior notes due 2013 463 6.20% due 2015 350 5.60% due 2017 350 350 7.25% due 2019 250 6.625% due 2020 240 219 Other 112 137 3,758 1,702 Current portion of long-term debt (134 ) (9 ) Total long-term debt 3,624 1,693 Total Manufacturing group debt $ 3,758 $ 2,569 Finance group: Commercial paper $ $ 743 Other short-term debt 25 Medium-term fixed-rate and variable-rate notes: Due 2009 756 1,534 Due 2010 1,969 2,315 Due 2011 579 727 Due 2012 55 52 Due 2013 and the |
Guarantees and Indemnifications
Guarantees and Indemnifications | |
9 Months Ended
Oct. 03, 2009 | |
Guarantees and Indemnifications [Abstract] | |
Guarantees and Indemnifications | Note 10: Guarantees and Indemnifications As disclosed under the caption Guarantees and Indemnifications in Note 18 to the Consolidated Financial Statements in Textrons 2008 Annual Report on Form 10-K, we have issued or are party to certain guarantees, including a performance guarantee related to the VH-71 helicopter program. In June2009, we received notification that the VH-71 helicopter program was terminated for convenience by the U.S. Government, and the related performance guarantee was cancelled in October. As of October3, 2009, there has been no other material change to our guarantees. Warranty and Product Maintenance Programs 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. Changes in our warranty and product maintenance liabilities are as follows: Nine Months Ended October 3, September 27, (In millions) 2009 2008 Accrual at the beginning of period $ 278 $ 313 Provision 129 145 Settlements (168 ) (149 ) Adjustments to prior accrual estimates 18 (12 ) Reclassification adjustments (5 ) Accrual at the end of period $ 257 $ 292 |
Commitments and Contingencies
Commitments and Contingencies | |
9 Months Ended
Oct. 03, 2009 | |
Commitments And Contingencies [Abstract] | |
Commitments and Contingencies | Note 11: 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 commercial and financial 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. ARH Program Termination On October16, 2008, we received notification from the U.S. Department of Defense that it would not certify the continuation of the Armed Reconnaissance Helicopter (ARH)program to Congress under the Nunn-McCurdy Act, resulting in the termination of the program for the convenience of the Government. The ARH program included a development phase, covered by the System Development and Demonstration (SDD)contract, and a production phase. We submitted our claim for the termination costs for the SDD contract in October2009, and believe that these costs are fully recoverable from the U.S. Government. Prior to termination of the program, we obtained inventory and incurred vendor obligations for long-lead time materials related to the anticipated Low Rate Initial Production (LRIP)contracts to maintain the program schedule based on our belief that the LRIP contracts would be awarded. We have since terminated these vendor contracts and are negotiating to settle our termination obligations, which we estimate may cost up to approximately $75million. We continue to evaluate the utility of the related inventory to other Bell programs, customers, or vendors. This review and the related discussions with vendors are ongoing. We estimate that our potential loss resulting from our LRIP-related vendor obligations will be between approximately $50million and $75million. At October3, 2009, our reserves related to this program totaled $50million. In October2009, we filed a claim with the U.S. Government to request reimbursement of costs expended in support of the LRIP program. |
Fair Values of Assets and Liabi
Fair Values of Assets and Liabilities | |
9 Months Ended
Oct. 03, 2009 | |
Fair Values of Assets and Liabilities [Abstract] | |
Fair Values of Assets and Liabilities | Note 12: Fair Values of Assets and Liabilities We measure fair value at the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. We prioritize the assumptions that market participants would use in pricing the asset or liability (the inputs) into a three-tier fair value hierarchy. This fair value hierarchy gives the highest priority (Level 1) to quoted prices in active markets for identical assets or liabilities and the lowest priority (Level 3) to unobservable inputs in which little or no market data exists, requiring companies to develop their own assumptions. Observable inputs that do not meet the criteria of Level 1, and include quoted prices for similar assets or liabilities in active markets or quoted prices for identical assets and liabilities in markets that are not active, are categorized as Level 2. Level 3 inputs are those that reflect our estimates about the assumptions market participants would use in pricing the asset or liability, based on the best information available in the circumstances. Valuation techniques for assets and liabilities measured using Level 3 inputs may include methodologies such as the market approach, the income approach or the cost approach, and may use unobservable inputs such as projections, estimates and managements interpretation of current market data. These unobservable inputs are only utilized to the extent that observable inputs are not available or cost-effective to obtain. Assets and Liabilities Recorded at Fair Value on a Recurring Basis The table below presents the assets and liabilities measured at fair value on a recurring basis categorized by the level of inputs used in the valuation of each asset and liability. October 3, 2009 January 3, 2009 (In millions) (Level 1) (Level 2) (Level 3) (Level 1) (Level 2) (Level 3) Assets Manufacturing group Foreign currency exchange contracts $ $ 43 $ $ $ 2 $ Forward contracts for Textron Inc. stock 6 Finance group Derivative financial instruments 78 133 Retained interests in securitizations 88 12 Total assets $ 6 $ 121 $ 88 $ $ 135 $ 12 Liabilities Manufacturing group Forward contracts for Textron Inc. stock $ $ $ $ 98 $ $ Foreign currency exchange contracts 24 84 Finance group Derivative financial instruments 5 21 Total liabilities $ $ 29 $ $ 98 $ 105 $ Foreign currency exchange contracts are measured at fa |
Derivatives
Derivatives | |
9 Months Ended
Oct. 03, 2009 | |
Derivatives [Abstract] | |
Derivatives | Note 13: Derivatives Fair Value Hedges Our Finance group enters into interest rate exchange contracts to mitigate exposure to changes in the fair value of its fixed-rate receivables and debt due to fluctuations in interest rates. By using these contracts, we are able to convert our fixed-rate cash flows to floating-rate cash flows. Cash Flow Hedges We experience variability in the cash flows we receive from our Finance groups investments in interest-only securities due to fluctuations in interest rates. To mitigate our exposure to this variability, our Finance group enters into interest rate exchange, cap and floor agreements. The combination of these instruments converts net residual floating-rate cash flows expected to be received by our Finance group to fixed-rate cash flows. Changes in the fair value of these instruments are recorded net of the income taxes in other comprehensive income (OCI). Our exposure to loss from nonperformance by the counterparties to our derivative agreements at October3, 2009 is minimal. We do not anticipate nonperformance by counterparties in the periodic settlements of amounts due. We have historically minimized this potential for risk by entering into contracts exclusively with major, financially sound counterparties having no less than a long-term bond rating of A. The recent uncertainty in the financial markets has negatively affected the bond ratings of all of our counterparties, and we continuously monitor our exposures to ensure that we limit our risks. The credit risk generally is limited to the amount by which the counterparties contractual obligations exceed our obligations to the counterparty. We manufacture and sell our products in a number of countries throughout the world, and, therefore, we are exposed to movements in foreign currency exchange rates. The primary purpose of our foreign currency hedging activities is to manage the volatility associated with foreign currency purchases of materials, foreign currency sales of products, and other assets and liabilities created in the normal course of business. We primarily utilize forward exchange contracts and purchased options with maturities of no more than 18months that qualify as cash flow hedges. These are intended to offset the effect of exchange rate fluctuations on forecasted sales, inventory purchases and overhead expenses. At October3, 2009, we had a net deferred gain of $14million in OCI related to these cash flow hedges. As the underlying transactions occur, we expect to reclassify a $5million loss into earnings in the next 12months and $19million of gains in the following 12-month period. Net Investment Hedges We hedge our net investment position in major currencies and generate foreign currency interest payments that offset other transactional exposures in these currencies. To accomplish this, we borrow directly in foreign currency and designate a portion of foreign currency debt as a hedge of net investments. We also may utilize currency forwards as hedges of our related foreign net investments. Currency effects on the effective portion of these hedges, which are reflected in the cumulative translation adjust |
Recently Issued Accounting Pron
Recently Issued Accounting Pronouncements | |
9 Months Ended
Oct. 03, 2009 | |
Recently Issued Accounting Pronouncements [Abstract] | |
Recently Issued Accounting Pronouncements | Note 14: Recently Issued Accounting Pronouncements In June2009, the Financial Accounting Standards Board (FASB)issued Statement of Financial Accounting Standard (SFAS)No.166, Accounting for Transfers of Financial Assets an amendment of FASB Statement No.140. This standard eliminates the concept of a qualifying special-purpose entity (QSPE)and its exclusion from consolidation by the primary beneficiary in that variable interest entity (VIE)or the transferor of financial assets to the VIE. The new accounting guidance also requires that former QSPEs be reevaluated for consolidation. This standard is effective beginning in the first quarter of 2010 and early application is prohibited. The adoption of this standard will result in the consolidation of any remaining off-balance sheet securitization trusts, which include securitized finance receivables and related debt. The adoption of this standard will not have a material impact on our financial position, results of operations or liquidity. Also in June2009, the FASB Issued SFAS No.167, Amendments to FASB Interpretation No 46(R). This standard changes the approach to determining the primary beneficiary of a VIE and requires companies to more frequently assess whether they must consolidate VIEs. This standard is effective beginning in the first quarter of 2010 and early application is prohibited. The adoption of this standard is not expected to have any significant impact on our financial position or results of operations. |
Segment Information
Segment Information | |
9 Months Ended
Oct. 03, 2009 | |
Segment Information [Abstract] | |
Segment Information | Note 15: Segment Information We operate in, and report financial information for, the following five business segments: Cessna, Bell, Textron Systems, Industrial and Finance. Segment profit is an important measure used for evaluating 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. Our revenues by segment and a reconciliation of segment profit to income (loss)from continuing operations before income taxes are as follows: Three Months Ended Nine Months Ended October3, September27, October3, September27, (In millions) 2009 2008 2009 2008 REVENUES MANUFACTURING: Cessna $ 825 $ 1,418 $ 2,465 $ 4,165 Bell 628 702 2,040 1,974 Textron Systems 502 441 1,397 1,427 Industrial 523 726 1,506 2,320 2,478 3,287 7,408 9,886 FINANCE 71 184 279 575 Total revenues $ 2,549 $ 3,471 $ 7,687 $ 10,461 SEGMENT OPERATING PROFIT MANUFACTURING: Cessna (a) $ 32 $ 238 $ 170 $ 707 Bell 79 63 220 184 Textron Systems 68 67 175 194 Industrial 6 6 9 91 185 374 574 1,176 FINANCE (64 ) 18 (229 ) 73 Segment profit 121 392 345 1,249 Special charges (42 ) (203 ) Corporate expenses and other, net (44 ) (39 ) (124 ) (123 ) Interest expense, net for Manufacturing group (40 ) (32 ) (102 ) (91 ) Income (loss)from continuing operations before income taxes $ (5 ) $ 321 $ (84 ) $ 1,035 (a) During the first quarter of 2009, we sold the assets of CESCOM, Cessnas aircraft maintenance tracking service line, resulting in a pre-tax gain of $50million. |