Document and Entity Information
Document and Entity Information (USD $) | |||
3 Months Ended
Apr. 03, 2010 | Apr. 17, 2010
| Jul. 04, 2009
| |
Document and Entity Information [Abstract] | |||
Entity Registrant Name | TEXTRON INC | ||
Entity Central Index Key | 0000217346 | ||
Document Type | 10-Q | ||
Document Period End Date | 2010-04-03 | ||
Amendment Flag | false | ||
Document Fiscal Year Focus | 2,010 | ||
Document Fiscal Period Focus | Q1 | ||
Current Fiscal Year End Date | --01-01 | ||
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 | 273,316,122 |
Consolidated Statements of Oper
Consolidated Statements of Operations (Unaudited) (USD $) | ||
In Millions, except Per Share data | 3 Months Ended
Apr. 03, 2010 | 3 Months Ended
Apr. 04, 2009 |
Revenues | ||
Manufacturing revenues | $2,134 | $2,404 |
Finance revenues | 76 | 122 |
Total revenues | 2,210 | 2,526 |
Costs, expenses and other | ||
Cost of sales | 1,776 | 1,999 |
Selling and administrative expense | 287 | 346 |
Provision for losses on finance receivables | 55 | 76 |
Interest expense | 71 | 83 |
Interest income | (2) | (1) |
Gain on sale of assets | (50) | |
Special charges | 12 | 32 |
Total costs, expenses and other | 2,199 | 2,485 |
Income from continuing operations before income taxes | 11 | 41 |
Income tax expense (benefit) | 15 | (2) |
Income (loss) from continuing operations | (4) | 43 |
Income (loss) from discontinued operations, net of income taxes | (4) | 43 |
Net income (loss) | (8) | 86 |
Basic earnings per share | ||
Continuing operations | -0.01 | 0.18 |
Discontinued operations | -0.02 | 0.17 |
Basic earnings per share | -0.03 | 0.35 |
Diluted earnings per share | ||
Continuing operations | -0.01 | 0.18 |
Discontinued operations | -0.02 | 0.17 |
Diluted earnings per share | -0.03 | 0.35 |
Dividends per share | ||
Common stock | 0.02 | 0.02 |
Manufacturing Group | ||
Costs, expenses and other | ||
Income (loss) from continuing operations | 35 | 96 |
Income (loss) from discontinued operations, net of income taxes | (4) | 43 |
Net income (loss) | 31 | 139 |
Finance Group | ||
Costs, expenses and other | ||
Provision for losses on finance receivables | 55 | 76 |
Income (loss) from continuing operations | (39) | (53) |
Net income (loss) | ($39) | ($53) |
Consolidated Balance Sheets (Un
Consolidated Balance Sheets (Unaudited) (USD $) | ||
In Millions, except Share data in Thousands | Apr. 03, 2010
| Jan. 02, 2010
|
Assets | ||
Cash and equivalents | $1,509 | $1,892 |
Total assets | 18,110 | 18,940 |
Liabilities | ||
Total liabilities | 15,269 | 16,114 |
Shareholders' equity | ||
Common stock | 35 | 35 |
Capital surplus | 1,355 | 1,369 |
Retained earnings | 2,960 | 2,973 |
Accumulated other comprehensive loss | (1,313) | (1,321) |
Total shareholders' equity including cost of treasury shares | 3,037 | 3,056 |
Less cost of treasury shares | 196 | 230 |
Total shareholders' equity | 2,841 | 2,826 |
Total liabilities and shareholders' equity | 18,110 | 18,940 |
Common shares outstanding (in thousands) | 273,230 | 272,272 |
Manufacturing Group | ||
Assets | ||
Cash and equivalents | 1,430 | 1,748 |
Accounts receivable, net | 959 | 894 |
Inventories | 2,475 | 2,273 |
Other current assets | 1,155 | 985 |
Total current assets | 6,019 | 5,900 |
Property, plant and equipment, less accumulated depreciation and amortization of $2,693 and $2,666 | 1,940 | 1,968 |
Goodwill | 1,612 | 1,622 |
Other assets | 1,893 | 1,938 |
Total assets | 11,464 | 11,428 |
Liabilities | ||
Current portion of long-term debt | 124 | 134 |
Accounts payable | 747 | 569 |
Accrued liabilities | 1,848 | 2,039 |
Total current liabilities | 2,719 | 2,742 |
Other liabilities | 3,257 | 3,253 |
Long-term debt | 3,422 | 3,450 |
Total liabilities | 9,398 | 9,445 |
Finance Group | ||
Assets | ||
Cash and equivalents | 79 | 144 |
Finance receivables held for investment, net | 5,200 | 5,865 |
Finance receivables held for sale | 721 | 819 |
Other assets | 646 | 684 |
Total assets | 6,646 | 7,512 |
Liabilities | ||
Other liabilities | 955 | 866 |
Deferred income taxes | 105 | 136 |
Debt | 4,811 | 5,667 |
Total liabilities | $5,871 | $6,669 |
1_Consolidated Balance Sheets (
Consolidated Balance Sheets (Unaudited) (Parenthetical) (Manufacturing Group, USD $) | ||
In Millions | Apr. 03, 2010
| Jan. 02, 2010
|
Assets | ||
Accumulated depreciation and amortization | $2,693 | $2,666 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows (Unaudited) (USD $) | ||
In Millions | 3 Months Ended
Apr. 03, 2010 | 3 Months Ended
Apr. 04, 2009 |
Cash flows from operating activities: | ||
Net income (loss) | ($8) | $86 |
Income (loss) from discontinued operations | (4) | 43 |
Income (loss) from continuing operations | (4) | 43 |
Non-cash items: | ||
Depreciation and amortization | 90 | 96 |
Provision for losses on finance receivables held for investment | 55 | 76 |
Portfolio losses on finance receivables | 28 | 10 |
Other, net | 31 | 26 |
Deferred income taxes | (13) | (113) |
Changes in assets and liabilities: | ||
Accounts receivable, net | (76) | 41 |
Inventories | (211) | (248) |
Other assets | 45 | (17) |
Accounts payable | 184 | (97) |
Accrued and other liabilities | (297) | (11) |
Captive finance receivables, net | 78 | 39 |
Other operating activities, net | 1 | (6) |
Net cash provided by (used in) operating activities of continuing operations | (89) | (161) |
Net cash provided by (used in) operating activities of discontinued operations | 1 | (8) |
Net cash provided by (used in) operating activities | (88) | (169) |
Cash flows from investing activities: | ||
Finance receivables originated or purchased | (145) | (1,205) |
Finance receivables repaid | 501 | 1,354 |
Proceeds on receivables sales, including securitizations | 277 | 59 |
Capital expenditures | (38) | (69) |
Proceeds from sale of repossessed assets and properties | 32 | 68 |
Other investing activities, net | 12 | 13 |
Net cash provided by (used in) investing activities of continuing operations | 639 | 220 |
Net cash provided by investing activities of discontinued operations | 302 | |
Net cash provided by (used in) investing activities | 639 | 522 |
Cash flows from financing activities: | ||
Decrease in short-term debt | (1,612) | |
Proceeds from long-term lines of credit | 2,970 | |
Proceeds from issuance of long-term debt | 20 | 16 |
Principal payments on long-term debt | (936) | (578) |
Dividends paid | (5) | (5) |
Net cash provided by (used in) financing activities of continuing operations | (921) | 791 |
Effect of exchange rate changes on cash and equivalents | (13) | |
Net increase (decrease) in cash and equivalents | (383) | 1,144 |
Cash and equivalents at beginning of period | 1,892 | 547 |
Cash and equivalents at end of period | 1,509 | 1,691 |
Manufacturing Group | ||
Cash flows from operating activities: | ||
Net income (loss) | 31 | 139 |
Income (loss) from discontinued operations | (4) | 43 |
Income (loss) from continuing operations | 35 | 96 |
Adjustments to reconcile income (loss) from continuing operations to net cash provided by (used in) operating activities: | ||
Dividends received from Finance group | 125 | 84 |
Capital contributions paid to Finance group | (75) | |
Non-cash items: | ||
Depreciation and amortization | 82 | 88 |
Other, net | 27 | 26 |
Deferred income taxes | 16 | 8 |
Changes in assets and liabilities: | ||
Accounts receivable, net | (76) | 41 |
Inventories | (207) | (245) |
Other assets | 46 | (29) |
Accounts payable | 184 | (97) |
Accrued and other liabilities | (224) | (100) |
Other operating activities, net | 1 | (6) |
Net cash provided by (used in) operating activities of continuing operations | (66) | (134) |
Net cash provided by (used in) operating activities of discontinued operations | 1 | (8) |
Net cash provided by (used in) operating activities | (65) | (142) |
Cash flows from investing activities: | ||
Capital expenditures | (38) | (69) |
Other investing activities, net | (37) | (20) |
Net cash provided by (used in) investing activities of continuing operations | (75) | (89) |
Net cash provided by investing activities of discontinued operations | 302 | |
Net cash provided by (used in) investing activities | (75) | 213 |
Cash flows from financing activities: | ||
Decrease in short-term debt | (869) | |
Proceeds from long-term lines of credit | 1,230 | |
Principal payments on long-term debt | (11) | (35) |
Intergroup financing | (150) | 133 |
Dividends paid | (5) | (5) |
Net cash provided by (used in) financing activities of continuing operations | (166) | 454 |
Effect of exchange rate changes on cash and equivalents | (12) | (2) |
Net increase (decrease) in cash and equivalents | (318) | 523 |
Cash and equivalents at beginning of period | 1,748 | 531 |
Cash and equivalents at end of period | 1,430 | 1,054 |
Finance Group | ||
Cash flows from operating activities: | ||
Net income (loss) | (39) | (53) |
Income (loss) from continuing operations | (39) | (53) |
Non-cash items: | ||
Depreciation and amortization | 8 | 8 |
Provision for losses on finance receivables held for investment | 55 | 76 |
Portfolio losses on finance receivables | 28 | 10 |
Other, net | 4 | |
Deferred income taxes | (29) | (121) |
Changes in assets and liabilities: | ||
Other assets | (4) | 9 |
Accrued and other liabilities | (73) | 89 |
Net cash provided by (used in) operating activities of continuing operations | (50) | 18 |
Net cash provided by (used in) operating activities | (50) | 18 |
Cash flows from investing activities: | ||
Finance receivables originated or purchased | (226) | (1,325) |
Finance receivables repaid | 660 | 1,513 |
Proceeds on receivables sales, including securitizations | 277 | 59 |
Proceeds from sale of repossessed assets and properties | 32 | 68 |
Other investing activities, net | 28 | 12 |
Net cash provided by (used in) investing activities of continuing operations | 771 | 327 |
Net cash provided by (used in) investing activities | 771 | 327 |
Cash flows from financing activities: | ||
Decrease in short-term debt | (743) | |
Proceeds from long-term lines of credit | 1,740 | |
Proceeds from issuance of long-term debt | 20 | 16 |
Principal payments on long-term debt | (925) | (543) |
Intergroup financing | 150 | (112) |
Capital contributions paid to Finance group under Support Agreement | 75 | |
Capital contributions paid to Cessna Export Finance Corporation | 20 | |
Dividends paid | (125) | (84) |
Net cash provided by (used in) financing activities of continuing operations | (785) | 274 |
Effect of exchange rate changes on cash and equivalents | (1) | 2 |
Net increase (decrease) in cash and equivalents | (65) | 621 |
Cash and equivalents at beginning of period | 144 | 16 |
Cash and equivalents at end of period | $79 | $637 |
Basis of Presentation
Basis of Presentation | |
3 Months Ended
Apr. 03, 2010 | |
Basis of Presentation [Abstract] | |
Basis of Presentation | Note 1: Basis of Presentation Our consolidated financial statements include the accounts of Textron Inc. and its majority-owned subsidiaries. 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 January2, 2010. 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 reclassified certain prior period amounts to conform to the current period presentation. 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, which is also the Finance segment, consists of Textron Financial Corporation, its subsidiaries and the securitization trusts consolidated into it, along with two other 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 and financed by our Finance group. |
Special Charges
Special Charges | |
3 Months Ended
Apr. 03, 2010 | |
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 and announced the exit of portions of our commercial finance business. Our restructuring program primarily includes corporate and segment direct and indirect workforce reductions and the consolidation of certain operations. By the end of 2010, we expect to have eliminated approximately 11,000 positions worldwide representing approximately 25% of our global workforce since the inception of the program. As of April3, 2010, we have terminated approximately 10,500 employees and have exited 25 leased and owned facilities and plants under this program. Restructuring costs by segment are as follows: Severance Contract (In millions) Costs Terminations Total Three Months Ended April3, 2010 Cessna $ 8 $ 2 $ 10 Bell 1 1 Finance 3 3 Corporate (2 ) (2 ) $ 10 $ 2 $ 12 Three Months Ended April4, 2009 Cessna $ 26 $ $ 26 Industrial 1 1 Finance 2 1 3 Corporate 2 2 $ 31 $ 1 $ 32 Since the inception of the restructuring program in the fourth quarter of 2008, we have incurred the following costs through April3, 2010: Contract Severance Curtailment Asset Terminations (In millions) Costs Charges, Net Impairments and Other Total Cessna $ 93 $ 26 $ 54 $ 9 $ 182 Industrial 22 (4 ) 9 3 30 Bell 10 10 Textron Systems 6 2 1 9 Finance 29 1 11 2 43 Corporate 38 1 39 $ 198 $ 25 $ 74 $ 16 $ 313 An analysis of our restructuring reserve activity is summarized below: Severance Contract (In millions) Costs Terminations Total Balance at January2, 2010 $ 48 $ 3 $ 51 Provisions 12 2 14 Reversals (2 ) (2 ) Cash paid (20 ) (20 ) Balance at April3, 2010 $ 38 $ 5 $ 43 The specific restructuring measures and associated estimated costs are based on our best judgment under prevailing circumstances. We believe that the restructuring reserve balance is adequate to cover the costs presently accruable relating to activities formally identified and committed to under approved plans as of April3, 2010 and anticipate that all actions related to these liabilities will be completed within a 12-month period. We estimate that we will incur approximately $20million in additional pre-tax restructuring costs during the remainder of 2010, most of which will result in future cash outlays. The additional costs are expected to primarily include relocation costs at Cessna as it consolidates certain operations an |
Share-Based Compensation
Share-Based Compensation | |
3 Months Ended
Apr. 03, 2010 | |
Share-Based Compensation [Abstract] | |
Share-Based Compensation | Note 3: Share-Based Compensation Share-based compensation expense includes restricted stock and stock option awards, as well as performance share units, restricted stock units, and deferred income plan stock unit awards which are payable in cash. The compensation expense we recorded in net income for our share-based compensation plans is as follows: Three Months Ended April 3, April 4, (In millions) 2010 2009 Compensation expense (income) $ 23 $ Hedge expense (income) (2 ) 12 Income tax expense (benefit) (9 ) Total net compensation cost included in net income $ 12 $ 12 In January2010, we discontinued hedging our stock-based compensation awards and we have not entered into any new forward contracts. 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 $7 and $2 in the first quarter of 2010 and 2009, 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 changes 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 April 3, April 4, 2010 2009 Dividend yield 0.4 % 1.4 % Expected volatility 37.0 % 50.0 % Risk-free interest rate 2.6 % 2.0 % Expected lives (In years) 5.5 5.0 Stock option activity under the 2007 Long-Term Incentive Plan for the first quarter of 2010 is as follows: Weighted- Average Weighted- Remaining Number of Average Contractual Options Exercise Life (In thousands) Price (In years) Outstanding at beginning of period 8,545 $ 35.67 6 Granted 967 20.21 Exercised (59 ) 19.48 Canceled, expired or forfeited (155 ) 37.57 Outstanding at end of period 9,298 $ 34.13 6 Exercisable at end of period 7,147 $ 36.65 5 At April3, 2010, our outstanding options had an aggregate intrinsic value of $15million and our exercisable options had an aggregate intrinsic value of $5million. Restricted Stock Units There were no stock-settled restricted stock units granted in the first quarter of 2010 or 2009. Activity for restricted stock units paid in stock during the first quarter of 2010 is as follows: Weighted- Average Grant Number of Date Fair (Shares in thousands) Shares Value Outstanding at beginning of period, nonvested 1,290 $ 46.02 |
Retirement Plans
Retirement Plans | |
3 Months Ended
Apr. 03, 2010 | |
Retirement Plans [Abstract] | |
Retirement Plans | Note 4: 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 first quarter of 2010 and 2009 are as follows: Postretirement Benefits Pension Benefits Other Than Pensions (In millions) 2010 2009 2010 2009 Service cost $ 31 $ 33 $ 2 $ 2 Interest cost 79 76 8 9 Expected return on plan assets (92 ) (97 ) Amortization of prior service cost (credit) 4 5 (1 ) (1 ) Amortization of net loss 9 6 3 2 Net periodic benefit cost $ 31 $ 23 $ 12 $ 12 |
Discontinued Operations
Discontinued Operations | |
3 Months Ended
Apr. 03, 2010 | |
Discontinued Operations [Abstract] | |
Discontinued Operations | Note 5: Discontinued Operations On April3, 2009, we sold HR Textron, an operating unit previously reported within the Textron Systems segment, for $376million in cash proceeds. The sale resulted in an after-tax gain of $8 million after final settlement and net after-tax proceeds of approximately $280million. Also, in the first quarter 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 | |
3 Months Ended
Apr. 03, 2010 | |
Comprehensive Income [Abstract] | |
Comprehensive Income | Note 6: Comprehensive Income Our comprehensive income, net of taxes, is provided below: Three Months Ended April 3, April 4, (In millions) 2010 2009 Net income (loss) $ (8 ) $ 86 Other comprehensive income (loss): Recognition of prior service cost and unrealized losses on pension and postretirement benefits 10 7 Deferred gains (losses)on hedge contracts 7 (10 ) Foreign currency translation and other (9 ) 2 Comprehensive income $ $ 85 |
Income Tax Expense
Income Tax Expense (Benefit) | |
3 Months Ended
Apr. 03, 2010 | |
Income Tax Expense (Benefit) [Abstract] | |
Income Tax Expense (Benefit) | Note 7: Income Tax Expense (Benefit) Income tax expense for continuing operations of $15million for the first quarter of 2010 equated to an effective income tax rate of 136.4% (provision on income), compared with an effective income tax rate for continuing operations of 4.9% (benefit on income) for the first quarter of 2009. The increase in the effective tax rate was primarily attributable to the write-off of an $11million deferred tax asset related to a change in the tax treatment of the Medicare PartD program due to recently enacted U.S. health-care law and a prior year tax benefit due to a reduction in unrecognized tax benefits as a result of the recognition of a capital gain in connection with the sale of CESCOM. |
Earnings per Share
Earnings per Share | |
3 Months Ended
Apr. 03, 2010 | |
Earnings per Share [Abstract] | |
Earnings per Share | Note 8: Earnings Per Share We calculate basic and diluted earnings per share based on net income, which approximates income available to common shareholders for each period. Basic earnings per share is calculated using the two-class method, which includes the weighted-average number of common shares outstanding during the period and restricted stock units to be paid in stock that are deemed participating securities as they provide nonforfeitable rights to dividends. Diluted earnings per share considers the dilutive effect of all potential future common stock, including convertible preferred shares, Convertible Notes, 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 April 3, April 4, (In thousands) 2010 2009 Basic weighted-average shares outstanding 273,174 243,988 Dilutive effect of convertible preferred shares, stock options and restricted stock units 968 Diluted weighted-average shares outstanding 273,174 244,956 The potential dilutive effect of 28million weighted-average shares of convertible debt, restricted stocks units, stock options and warrants was excluded from the computation of diluted weighted-average shares outstanding for the three months ended April3, 2010 as the shares would have an anti-dilutive effect on the loss from continuing operations. In addition, stock options to purchase 7million shares of common stock outstanding are excluded from our calculation of diluted weighted-average shares outstanding for the three months ended April3, 2010 as the exercise prices were greater than the average market price of our common stock for the period. These securities will likely dilute earnings per share in the future. |
Accounts Receivable and Finance
Accounts Receivable and Finance Receivables | |
3 Months Ended
Apr. 03, 2010 | |
Accounts Receivable and Finance Receivables [Abstract] | |
Accounts Receivable and Finance Receivables | Note 9: Accounts Receivable and Finance Receivables April 3, January 2, (In millions) 2010 2010 Accounts receivable Commercial $ 525 $ 470 Accounts receivable U.S. Government contracts 456 447 Gross accounts receivable 981 917 Allowance for doubtful accounts (22 ) (23 ) Accounts receivable, net $ 959 $ 894 Finance receivables held for investment $ 5,565 $ 6,206 Allowance for loan losses (365 ) (341 ) Finance receivables held for investment, net $ 5,200 $ 5,865 During the first quarter of 2010, we reclassified $144million of captive finance receivables from held for investment to held for sale as a result of inquiries we have received to purchase these finance receivables. We determined a sale of these finance receivables would be consistent with our goal to maximize the economic value of our portfolio and accelerate cash collections. The activity in the Finance groups allowances for loan losses is provided below: Three Months Ended April 3, April 4, (In millions) 2010 2009 Reserve at the beginning of period $ 341 $ 191 Provision for losses 55 76 Net charge-offs (31 ) (47 ) Reserve at the end of period $ 365 $ 220 We periodically evaluate finance receivables held for investment, excluding homogeneous loan portfolios and finance leases, for impairment. Finance receivables classified as held for sale are reflected at the lower of cost or fair value and are excluded from this assessment. A finance receivable is considered impaired when it is probable that we will be unable to collect all amounts due according to the contractual terms of the loan agreement. Impaired finance receivables are classified as either nonaccrual or accrual loans. Nonaccrual finance receivables include accounts that are contractually delinquent by more than three months for which the accrual of interest income is suspended. Impaired accrual finance receivables represent loans with original terms that have been or are expected to be significantly modified to reflect deferred principal payments, generally at market interest rates, for which collection of principal and interest is not doubtful. Our impaired finance receivables are as follows: April 3, January 2, (In millions) 2010 2010 Impaired nonaccrual finance receivables $ 966 $ 984 Impaired accrual finance receivables 158 217 Total impaired finance receivables 1,124 1,201 Less: Impaired finance receivables without identified reserve requirements 347 362 Impaired nonaccrual finance receivables with identified reserve requirements $ 777 $ 839 Allowance for losses on impaired nonaccrual finance receivables $ 174 $ 153 The average recorded investment in impaired nonaccrual finance receivables was $975million and $311million in the first quarter of 2010 and 2009, respectively. The average recorded investment in impaired accrual finance receivables a |
Inventories
Inventories | |
3 Months Ended
Apr. 03, 2010 | |
Inventories [Abstract] | |
Inventories | Note 10: Inventories April 3, January 2, (In millions) 2010 2010 Finished goods $ 843 $ 735 Work in process 2,121 1,861 Raw materials 567 613 3,531 3,209 Progress/milestone payments (1,056 ) (936 ) $ 2,475 $ 2,273 |
Debt
Debt | |
3 Months Ended
Apr. 03, 2010 | |
Debt [Abstract] | |
Debt | Note 11: Debt Subsequent to quarter-end, we decided to pay down a portion of the outstanding amount owed under Textron Inc.s bank line of credit and repaid approximately $250million. This debt was classified as long-term debt on our balance sheet at April3, 2010. 4.5% Convertible Senior Notes Our common stock price exceeded the conversion threshold price of $17.06 per share for at least 20 trading days during the 30 consecutive trading days ended March31, 2010. Accordingly, the notes are convertible at the holders option through June30, 2010. We may deliver shares of common stock, cash or a combination of cash and shares of common stock in satisfaction of our obligations upon conversion of the Convertible Notes. We intend to settle the face value of the Convertible Notes in cash. We have continued to classify these Convertible Notes as long-term based on our intent and ability to maintain the debt outstanding for at least one year through the use of various funding sources available to us. |
Guarantees and Indemnifications
Guarantees and Indemnifications | |
3 Months Ended
Apr. 03, 2010 | |
Guarantees and Indemnifications [Abstract] | |
Guarantees and Indemnifications | Note 12: Guarantees and Indemnifications As disclosed under the caption Guarantees and Indemnifications in Note 18 to the Consolidated Financial Statements in Textrons 2009 Annual Report on Form 10-K, we have issued or are party to certain guarantees. As of April3, 2010, 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. Additionally, we may establish warranty liabilities related to the issuance of aircraft service bulletins for aircraft no longer covered under the limited warranty programs. Changes in our warranty and product maintenance liabilities are as follows: Three Months Ended April 3, April 4, (In millions) 2010 2009 Accrual at the beginning of period $ 263 $ 278 Provision 38 40 Settlements (58 ) (63 ) Adjustments to prior accrual estimates (3 ) 1 Accrual at the end of period $ 240 $ 256 |
Commitments and Contingencies
Commitments and Contingencies | |
3 Months Ended
Apr. 03, 2010 | |
Commitments and Contingencies [Abstract] | |
Commitments and Contingencies | Note 13: 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. On April6, 2010, a jury in the Philadelphia Common Pleas Court returned verdicts against Avco Corporation, which includes the Lycoming Engines operating division, for $24.7million in compensatory damages and $64million in punitive damages in an aviation products liability case involving a 1999 accident. Judgment has not been entered pending post-trial motions. While the ultimate outcome of the litigation cannot be assured, we strongly disagree with the verdicts and intend to appeal the verdicts if our post-trial motions are unsuccessful. We believe that it is probable that the verdicts will be reversed through the appellate process. |
Fair Values of Assets and Liabi
Fair Values of Assets and Liabilities | |
3 Months Ended
Apr. 03, 2010 | |
Fair Values of Assets and Liabilities [Abstract] | |
Fair Values of Assets and Liabilities | Note 14: 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, which are categorized as Level 2 based on the level of inputs used in the valuation of each asset and liability. April 3, January 2, (In millions) Borrowing Group 2010 2010 Assets Foreign currency exchange contracts Manufacturing $ 65 $ 57 Derivative financial instruments Finance 60 61 Total assets $ 125 $ 118 Liabilities Foreign currency exchange contracts Manufacturing $ 5 $ 5 Derivative financial instruments Finance 3 16 Total liabilities $ 8 $ 21 Foreign currency exchange contracts are measured at fair value using the market method valuation technique. The inputs to this technique utilize current foreign currency exchange forward market rates published by third-party leading financial news and data providers. This is observable data that represent the rates that the financial institution uses for contracts entered into at that date; however, they are not based on actual transactions so they are classified as Level 2. We record changes in the fair value of these contracts in other comprehensive income to the extent they are effective as cash flow hedges. If a contract does not qualify for hedge accounting or is designated as a fair value hedge, changes in the fair value of the contract are recorded in earnings. The Finance groups derivative contracts a |
Derivatives
Derivatives | |
3 Months Ended
Apr. 03, 2010 | |
Derivatives [Abstract] | |
Derivatives | Note 15: Derivatives The notional and fair value amounts of our derivative instruments that are designated as hedging instruments are provided below: Notional Amount Asset (Liability) April 3, January 2, April 3, January 2, (In millions) Borrowing Group 2010 2010 2010 2010 Assets Interest rate exchange contracts* Finance $ 1,305 $ 1,333 $ 40 $ 43 Cross-currency interest rate exchange contracts Finance 140 161 19 18 Foreign currency exchange contracts Manufacturing 629 696 54 54 Total in other current or other assets $ 2,074 $ 2,190 $ 113 $ 115 Liabilities Interest rate exchange contracts* Finance $ 32 $ 32 $ (3 ) $ (3 ) Foreign currency exchange contracts Manufacturing 49 80 (4 ) (5 ) Total in accrued or other liabilities $ 81 $ 112 $ (7 ) $ (8 ) * Represents a fair value hedge. The fair values of derivative instruments for the Manufacturing group are included in either other current assets or accrued liabilities in our balance sheet. For the Finance group, derivative instruments are included in either other assets or other liabilities. 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 adjustment account within other comprehensive income (OCI), produced a $29 million after-tax gain in the first quarter of 2010, resulting in an accumulated net gain balance of $17million at April3, 2010. The ineffective portion of these hedges was insignificant. Our exposure to loss from nonperformance by the counterparties to our derivative agreements at April3, 2010 is minimal. We do not anticipate nonperformance by counterparties in the periodic settlements of amounts due. We historically have 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 credit risk generally is limited to the amount by which the counterparties contractual obligations exceed our obligations to the counterparty. We continuously monitor our exposures to ensure that we limit our risks. 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. The amount of ineffectiveness on our fair value hedges i |
Segment Information
Segment Information | |
3 Months Ended
Apr. 03, 2010 | |
Segment Information [Abstract] | |
Segment Information | Note 16: 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 April 3, April 4, (In millions) 2010 2009 REVENUES Manufacturing Group Cessna $ 433 $ 769 Bell 618 742 Textron Systems 458 418 Industrial 625 475 2,134 2,404 Finance Group 76 122 Total revenues $ 2,210 $ 2,526 SEGMENT OPERATING PROFIT Manufacturing Group Cessna (a) $ (24 ) $ 90 Bell 74 69 Textron Systems 55 52 Industrial 49 (9 ) 154 202 Finance Group (58 ) (66 ) Segment profit 96 136 Special charges (12 ) (32 ) Corporate expenses and other, net (37 ) (35 ) Interest expense, net for Manufacturing group (36 ) (28 ) Income from continuing operations before income taxes $ 11 $ 41 (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. |