Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jul. 04, 2015 | Jul. 17, 2015 | |
Document and Entity Information | ||
Entity Registrant Name | TEXTRON INC | |
Entity Central Index Key | 217,346 | |
Document Type | 10-Q | |
Document Period End Date | Jul. 4, 2015 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --01-02 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 276,421,869 | |
Document Fiscal Year Focus | 2,015 | |
Document Fiscal Period Focus | Q2 |
Consolidated Statements of Oper
Consolidated Statements of Operations - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jul. 04, 2015 | Jun. 28, 2014 | Jul. 04, 2015 | Jun. 28, 2014 | |
Revenues | ||||
Manufacturing revenues | $ 3,223 | $ 3,478 | $ 6,274 | $ 6,296 |
Finance revenues | 24 | 27 | 46 | 56 |
Total revenues | 3,247 | 3,505 | 6,320 | 6,352 |
Costs and expenses | ||||
Cost of sales | 2,635 | 2,875 | 5,144 | 5,232 |
Selling and administrative expense | 329 | 353 | 666 | 655 |
Interest expense | 42 | 47 | 85 | 94 |
Acquisition and restructuring costs | 20 | 36 | ||
Total costs and expenses | 3,006 | 3,295 | 5,895 | 6,017 |
Income from continuing operations before income taxes | 241 | 210 | 425 | 335 |
Income tax expense | 72 | 65 | 128 | 103 |
Income from continuing operations | 169 | 145 | 297 | 232 |
Loss from discontinued operations, net of income taxes | (2) | (1) | (2) | (3) |
Net income | $ 167 | $ 144 | $ 295 | $ 229 |
Basic earnings per share | ||||
Continuing operations (in dollars per share) | $ 0.61 | $ 0.52 | $ 1.07 | $ 0.83 |
Discontinued operations (in dollars per share) | (0.01) | (0.01) | (0.01) | |
Basic earnings per share (in dollars per share) | 0.60 | 0.52 | 1.06 | 0.82 |
Diluted earnings per share | ||||
Continuing operations (in dollars per share) | 0.60 | 0.51 | 1.06 | 0.82 |
Discontinued operations (in dollars per share) | (0.01) | (0.01) | ||
Diluted earnings per share (in dollars per share) | 0.60 | 0.51 | 1.05 | 0.81 |
Dividends per share | ||||
Common stock (in dollars per share) | $ 0.02 | $ 0.02 | $ 0.04 | $ 0.04 |
Consolidated Statements of Comp
Consolidated Statements of Comprehensive Income - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jul. 04, 2015 | Jun. 28, 2014 | Jul. 04, 2015 | Jun. 28, 2014 | |
Consolidated Statements of Comprehensive Income | ||||
Net income | $ 167 | $ 144 | $ 295 | $ 229 |
Other comprehensive income, net of tax: | ||||
Pension and postretirement benefits adjustments, net of reclassifications | 87 | 27 | 111 | 45 |
Foreign currency translation adjustments | 10 | 2 | (46) | (4) |
Deferred gains (losses) on hedge contracts, net of reclassifications | 4 | 14 | (8) | 7 |
Other comprehensive income | 101 | 43 | 57 | 48 |
Comprehensive income | $ 268 | $ 187 | $ 352 | $ 277 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) shares in Thousands, $ in Millions | Jul. 04, 2015 | Jan. 03, 2015 |
Assets | ||
Cash and equivalents | $ 792 | $ 822 |
Inventories | 4,437 | 3,928 |
Finance receivables, net | 1,162 | 1,238 |
Total assets | 14,948 | 14,605 |
Liabilities | ||
Total liabilities | 10,346 | 10,333 |
Shareholders' equity | ||
Common stock | 36 | 36 |
Capital surplus | 1,535 | 1,459 |
Treasury stock | (427) | (340) |
Retained earnings | 4,907 | 4,623 |
Accumulated other comprehensive loss | (1,449) | (1,506) |
Total shareholders' equity | 4,602 | 4,272 |
Total liabilities and shareholders' equity | $ 14,948 | $ 14,605 |
Common shares outstanding | 276,342 | 276,582 |
Manufacturing group | ||
Assets | ||
Cash and equivalents | $ 661 | $ 731 |
Accounts receivable, net | 1,163 | 1,035 |
Inventories | 4,437 | 3,928 |
Other current assets | 512 | 579 |
Total current assets | 6,773 | 6,273 |
Property, plant and equipment, less accumulated depreciation and amortization of $3,797 and $3,685 | 2,462 | 2,497 |
Goodwill | 2,015 | 2,027 |
Other assets | 2,251 | 2,279 |
Total assets | 13,501 | 13,076 |
Liabilities | ||
Short-term debt and current portion of long-term debt | 263 | 8 |
Accounts payable | 1,129 | 1,014 |
Accrued liabilities | 2,671 | 2,616 |
Total current liabilities | 4,063 | 3,638 |
Other liabilities | 2,420 | 2,587 |
Long-term debt | 2,650 | 2,803 |
Total liabilities | 9,133 | 9,028 |
Finance group | ||
Assets | ||
Cash and equivalents | 131 | 91 |
Finance receivables, net | 1,162 | 1,238 |
Other assets | 154 | 200 |
Total assets | 1,447 | 1,529 |
Liabilities | ||
Other liabilities | 242 | 242 |
Debt | 971 | 1,063 |
Total liabilities | $ 1,213 | $ 1,305 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Millions | Jul. 04, 2015 | Jan. 03, 2015 |
Consolidated Balance Sheets | ||
Accumulated depreciation and amortization | $ 3,797 | $ 3,685 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) $ in Millions | 6 Months Ended | |
Jul. 04, 2015 | Jun. 28, 2014 | |
Cash flows from operating activities | ||
Net income | $ 295 | $ 229 |
Less: Loss from discontinued operations | (2) | (3) |
Income from continuing operations | 297 | 232 |
Non-cash items: | ||
Depreciation and amortization | 220 | 214 |
Deferred income taxes | (15) | (14) |
Other, net | 53 | 56 |
Changes in assets and liabilities: | ||
Accounts receivable, net | (144) | (96) |
Inventories | (516) | (279) |
Other assets | (24) | 16 |
Accounts payable | 123 | (98) |
Accrued and other liabilities | 27 | 208 |
Income taxes, net | 93 | 35 |
Pension, net | 40 | 17 |
Captive finance receivables, net | 53 | 67 |
Other operating activities, net | (2) | (5) |
Net cash provided by operating activities of continuing operations | 205 | 353 |
Net cash used in operating activities of discontinued operations | (3) | (2) |
Net cash provided by operating activities | 202 | 351 |
Cash flows from investing activities | ||
Capital expenditures | (173) | (172) |
Net cash used in acquisitions | (34) | (1,550) |
Finance receivables repaid | 46 | 58 |
Other investing activities, net | 26 | 16 |
Net cash provided by (used in) investing activities | (135) | (1,648) |
Cash flows from financing activities | ||
Principal payments on long-term debt and nonrecourse debt | (130) | (121) |
Increase in short-term debt | 105 | |
Proceeds from long-term debt | 9 | 1,151 |
Purchases of Textron common stock | (87) | (150) |
Dividends paid | (11) | (11) |
Other financing activities, net | 21 | 30 |
Net cash provided by (used in) financing activities | (93) | 899 |
Effect of exchange rate changes on cash and equivalents | (4) | 2 |
Net increase (decrease) in cash and equivalents | (30) | (396) |
Cash and equivalents at beginning of period | 822 | 1,211 |
Cash and equivalents at end of period | 792 | 815 |
Manufacturing group | ||
Cash flows from operating activities | ||
Net income | 285 | 222 |
Less: Loss from discontinued operations | (2) | (3) |
Income from continuing operations | 287 | 225 |
Non-cash items: | ||
Depreciation and amortization | 215 | 207 |
Deferred income taxes | (6) | (5) |
Other, net | 51 | 48 |
Changes in assets and liabilities: | ||
Accounts receivable, net | (144) | (96) |
Inventories | (525) | (272) |
Other assets | (34) | 16 |
Accounts payable | 123 | (98) |
Accrued and other liabilities | 33 | 211 |
Income taxes, net | 78 | 31 |
Pension, net | 40 | 17 |
Other operating activities, net | (2) | (1) |
Net cash provided by operating activities of continuing operations | 116 | 283 |
Net cash used in operating activities of discontinued operations | (3) | (2) |
Net cash provided by operating activities | 113 | 281 |
Cash flows from investing activities | ||
Capital expenditures | (173) | (172) |
Net cash used in acquisitions | (34) | (1,550) |
Other investing activities, net | (5) | |
Net cash provided by (used in) investing activities | (207) | (1,727) |
Cash flows from financing activities | ||
Principal payments on long-term debt and nonrecourse debt | (1) | |
Increase in short-term debt | 105 | |
Proceeds from long-term debt | 1,093 | |
Purchases of Textron common stock | (87) | (150) |
Dividends paid | (11) | (11) |
Other financing activities, net | 21 | 30 |
Net cash provided by (used in) financing activities | 28 | 961 |
Effect of exchange rate changes on cash and equivalents | (4) | 2 |
Net increase (decrease) in cash and equivalents | (70) | (483) |
Cash and equivalents at beginning of period | 731 | 1,163 |
Cash and equivalents at end of period | 661 | 680 |
Finance group | ||
Cash flows from operating activities | ||
Net income | 10 | 7 |
Income from continuing operations | 10 | 7 |
Non-cash items: | ||
Depreciation and amortization | 5 | 7 |
Deferred income taxes | (9) | (9) |
Other, net | 2 | 8 |
Changes in assets and liabilities: | ||
Other assets | 10 | |
Accrued and other liabilities | (6) | (3) |
Income taxes, net | 15 | 4 |
Other operating activities, net | (4) | |
Net cash provided by operating activities of continuing operations | 27 | 10 |
Net cash provided by operating activities | 27 | 10 |
Cash flows from investing activities | ||
Finance receivables repaid | 181 | 222 |
Finance receivables originated | (82) | (97) |
Other investing activities, net | 35 | 14 |
Net cash provided by (used in) investing activities | 134 | 139 |
Cash flows from financing activities | ||
Principal payments on long-term debt and nonrecourse debt | (130) | (120) |
Proceeds from long-term debt | 9 | 58 |
Net cash provided by (used in) financing activities | (121) | (62) |
Net increase (decrease) in cash and equivalents | 40 | 87 |
Cash and equivalents at beginning of period | 91 | 48 |
Cash and equivalents at end of period | $ 131 | $ 135 |
Basis of Presentation
Basis of Presentation | 6 Months Ended |
Jul. 04, 2015 | |
Basis of Presentation | |
Basis of Presentation | Note 1. Basis of Presentation Our Consolidated Financial Statements include the accounts of Textron Inc. (Textron) 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 January 3, 2015. 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 consolidated with its majority-owned subsidiaries that operate in the Textron Aviation, Bell, Textron Systems and Industrial segments. The Finance group, which also is the Finance segment, consists of Textron Financial Corporation and its consolidated 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 and financed by our Finance group. Use of Estimates We prepare our financial statements in conformity with generally accepted accounting principles, which require us to make estimates and assumptions that affect the amounts reported in the financial statements. Actual results could differ from those estimates. Our estimates and assumptions are reviewed periodically, and the effects of changes, if any, are reflected in the Consolidated Statements of Operations in the period that they are determined. During 2015 and 2014, we changed our estimates of revenues and costs on certain long-term contracts that are accounted for under the percentage-of-completion method of accounting. These changes in estimates increased income from continuing operations before income taxes in the second quarter of 2015 and 2014 by $36 million and $38 million, respectively, ($23 million and $24 million after tax, or $0.08 and $0.09 per diluted share, respectively). For the second quarter of 2015 and 2014, the gross favorable program profit adjustments totaled $40 million and $41 million, respectively, and the gross unfavorable program profit adjustments totaled $4 million and $3 million, respectively. Gross favorable program profit adjustments for the second quarter of 2014 included $16 million related to the settlement of the System Development and Demonstration phase of the Armed Reconnaissance Helicopter (ARH) program, which was terminated in October 2008. The changes in estimates increased income from continuing operations before income taxes in the first half of 2015 and 2014 by $54 million and $59 million, ($34 million and $37 million after tax, or $0.12 and $0.13 per diluted share, respectively). For the first half of 2015 and 2014, the gross favorable program profit adjustments totaled $73 million and $65 million, respectively, and the gross unfavorable program profit adjustments totaled $19 million and $6 million, respectively. Gross favorable program profit adjustments for the first half of 2014 included $16 million related to the ARH program as described above. Recently Issued Accounting Standards In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers, that outlines a comprehensive five-step revenue recognition model based on the principle that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. On July 9, 2015, the FASB approved a one-year deferral of the effective date of the standard to the beginning of 2018 for public companies, with an option that would permit companies to adopt the standard as early as the original effective date of 2017. The new standard may be adopted either retrospectively or on a modified retrospective basis whereby it would be applied to new contracts and existing contracts with remaining performance obligations as of the effective date, with a cumulative catch-up adjustment recorded to beginning retained earnings at the effective date for those contracts. We are currently evaluating the impacts of adoption on our consolidated financial position, results of operations and related disclosures, along with the implementation approach to be used. |
Retirement Plans
Retirement Plans | 6 Months Ended |
Jul. 04, 2015 | |
Retirement Plans | |
Retirement Plans | Note 2. 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: Three Months Ended Six Months Ended (In millions) July 4, 2015 June 28, 2014 July 4, 2015 June 28, 2014 Pension Benefits Service cost $ $ $ $ Interest cost Expected return on plan assets ) ) ) ) Amortization of prior service cost Amortization of net actuarial loss Curtailment and other charges — — Net periodic benefit cost $ $ $ $ Postretirement Benefits Other Than Pensions Service cost $ $ $ $ Interest cost Expected return on plan assets — — — — Amortization of prior service credit ) ) ) ) Amortization of net actuarial loss — — — Net periodic benefit cost (credit) $ ) $ $ ) $ In April 2015, our Bell segment announced cost reduction actions that resulted in a headcount reduction of approximately 12% of the Bell workforce. We determined that a curtailment had occurred in Bell’s pension plan as a result of this reduction, which triggered a remeasurement of the projected benefit obligation. We remeasured Bell’s pension plan incorporating a 50 basis-point increase in the discount rate to 4.75%, while other assumptions remained consistent with year-end. The remeasurement reduced our unrealized losses by approximately $98 million which was recorded in other comprehensive income in the second quarter. |
Earnings Per Share
Earnings Per Share | 6 Months Ended |
Jul. 04, 2015 | |
Earnings Per Share | |
Earnings Per Share | Note 3. Earnings Per Share We calculate basic and diluted earnings per share (EPS) based on net income, which approximates income available to common shareholders for each period. Basic EPS 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 EPS considers the dilutive effect of all potential future common stock, including stock options. In addition, diluted EPS for the three and six months ended June 28, 2014 includes the impact of the initial delivery of shares under an Accelerated Share Repurchase agreement (ASR), which was settled in December 2014 as disclosed in Note 9 of our 2014 Annual Report on Form 10-K. The weighted-average shares outstanding for basic and diluted EPS are as follows: Three Months Ended Six Months Ended (In thousands) July 4, 2015 June 28, 2014 July 4, 2015 June 28, 2014 Basic weighted-average shares outstanding Dilutive effect of: Stock options ASR — — Diluted weighted-average shares outstanding Stock options to purchase 2 million and 1 million of common shares outstanding are excluded from the calculation of diluted weighted average shares outstanding for the three and six months ended July 4, 2015, respectively, as their effect would have been anti-dilutive. For both the three and six months ended June 28, 2014, stock options to purchase 2 million of common shares outstanding are excluded from the calculation of diluted weighted average shares, as their effect would have been anti-dilutive. |
Accounts Receivable and Finance
Accounts Receivable and Finance Receivables | 6 Months Ended |
Jul. 04, 2015 | |
Accounts Receivable and Finance Receivables | |
Accounts Receivable and Finance Receivables | Note 4. Accounts Receivable and Finance Receivables Accounts Receivable Accounts receivable is composed of the following: (In millions) July 4, 2015 January 3, 2015 Commercial $ $ U.S. Government contracts Allowance for doubtful accounts ) ) Total $ $ We have unbillable receivables, primarily on U.S. Government contracts, that arise when the revenues we have appropriately recognized based on performance cannot be billed yet under terms of the contract. Unbillable receivables within accounts receivable totaled $150 million at July 4, 2015 and $151 million at January 3, 2015. Finance Receivables Finance receivables are presented in the following table: (In millions) July 4, 2015 January 3, 2015 Finance receivables * $ $ Allowance for losses ) ) Total finance receivables, net $ $ * Includes finance receivables held for sale of $33 million and $35 million at July 4, 2015 and January 3, 2015, respectively. Credit Quality Indicators and Nonaccrual Finance Receivables We internally assess the quality of our finance receivables based on a number of key credit quality indicators and statistics such as delinquency, loan balance to estimated collateral value and the financial strength of individual borrowers and guarantors. Because many of these indicators are difficult to apply across an entire class of receivables, we evaluate individual loans on a quarterly basis and classify these loans into three categories based on the key credit quality indicators for the individual loan. These three categories are performing, watchlist and nonaccrual. We classify finance receivables as nonaccrual if credit quality indicators suggest full collection of principal and interest is doubtful. In addition, we automatically classify accounts as nonaccrual once they are contractually delinquent by more than three months unless collection of principal and interest is not doubtful. Recognition of interest income is suspended for these accounts and all cash collections are used to reduce the net investment balance. We resume the accrual of interest when the loan becomes contractually current through payment according to the original terms of the loan or, if a loan has been modified, following a period of performance under the terms of the modification, provided we conclude that collection of all principal and interest is no longer doubtful. Previously suspended interest income is recognized at that time. Accounts are classified as watchlist when credit quality indicators have deteriorated as compared with typical underwriting criteria, and we believe collection of full principal and interest is probable but not certain. All other finance receivables that do not meet the watchlist or nonaccrual categories are classified as performing. Finance receivables categorized based on the credit quality indicators discussed above are summarized as follows: (In millions) July 4, 2015 January 3, 2015 Performing $ $ Watchlist Nonaccrual Total $ $ Nonaccrual as a percentage of finance receivables % % We measure delinquency based on the contractual payment terms of our finance receivables. In determining the delinquency aging category of an account, any/all principal and interest received is applied to the most past-due principal and/or interest amounts due. If a significant portion of the contractually due payment is delinquent, the entire finance receivable balance is reported in accordance with the most past-due delinquency aging category. Finance receivables by delinquency aging category are summarized in the table below: (In millions) July 4, 2015 January 3, 2015 Less than 31 days past due $ $ 31-60 days past due 61-90 days past due Over 90 days past due Total $ $ 60 + days contractual delinquency as a percentage of finance receivables % % Impaired Loans On a quarterly basis, we evaluate individual finance receivables for impairment in non-homogeneous portfolios and larger balance accounts in homogeneous loan portfolios. 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 based on our review of the credit quality indicators discussed above. Impaired finance receivables include both nonaccrual accounts and accounts for which full collection of principal and interest remains probable, but the account’s original terms have been, or are expected to be, significantly modified. If the modification specifies an interest rate equal to or greater than a market rate for a finance receivable with comparable risk, the account is not considered impaired in years subsequent to the modification. Interest income recognized on impaired loans was not significant in the first half of 2015 or 2014. A summary of impaired finance receivables, excluding leveraged leases, and the average recorded investment is provided below: (In millions) July 4, 2015 January 3, 2015 Recorded investment: Impaired loans with related allowance for losses $ $ Impaired loans with no related allowance for losses Total $ $ Unpaid principal balance $ $ Allowance for losses on impaired loans Average recorded investment A summary of the allowance for losses on finance receivables that are evaluated on an individual basis and on a collective basis is provided below. The finance receivables included in the table below specifically exclude leveraged leases in accordance with generally accepted accounting principles. (In millions) July 4, 2015 January 3, 2015 Allowance based on collective evaluation $ $ Allowance based on individual evaluation Finance receivables evaluated collectively $ $ Finance receivables evaluated individually Allowance for Losses We maintain an allowance for losses on finance receivables at a level considered adequate to cover inherent losses in the portfolio based on management’s evaluation. For larger balance accounts specifically identified as impaired, a reserve is established based on comparing the expected future cash flows, discounted at the finance receivable’s effective interest rate, or the fair value of the underlying collateral if the finance receivable is collateral dependent, to its carrying amount. The expected future cash flows consider collateral value; financial performance and liquidity of our borrower; existence and financial strength of guarantors; estimated recovery costs, including legal expenses; and costs associated with the repossession and eventual disposal of collateral. When there is a range of potential outcomes, we perform multiple discounted cash flow analyses and weight the potential outcomes based on their relative likelihood of occurrence. The evaluation of our portfolio is inherently subjective, as it requires estimates, including the amount and timing of future cash flows expected to be received on impaired finance receivables and the estimated fair value of the underlying collateral, which may differ from actual results. While our analysis is specific to each individual account, critical factors included in this analysis include industry valuation guides, age and physical condition of the collateral, payment history and existence and financial strength of guarantors. We also establish an allowance for losses to cover probable but specifically unknown losses existing in the portfolio. This allowance is established as a percentage of non-recourse finance receivables, which have not been identified as requiring specific reserves. The percentage is based on a combination of factors, including historical loss experience, current delinquency and default trends, collateral values and both general economic and specific industry trends. Finance receivables are charged off at the earlier of the date the collateral is repossessed or when no payment has been received for six months, unless management deems the receivable collectible. A rollforward of the allowance for losses on finance receivables is provided below: Six Months Ended (In millions) July 4, 2015 June 28, 2014 Balance at the beginning of period $ $ Provision for losses ) Charge-offs ) ) Recoveries Balance at the end of period $ $ |
Inventories
Inventories | 6 Months Ended |
Jul. 04, 2015 | |
Inventories | |
Inventories | Note 5. Inventories Inventories are composed of the following: (In millions) July 4, 2015 January 3, 2015 Finished goods $ $ Work in process Raw materials and components Progress/milestone payments ) ) Total $ $ |
Accrued Liabilities
Accrued Liabilities | 6 Months Ended |
Jul. 04, 2015 | |
Accrued Liabilities | |
Accrued Liabilities | Note 6. Accrued Liabilities We provide limited warranty and product maintenance programs, including parts and labor, for certain products for periods ranging from one to five years. Changes in our warranty and product maintenance contract liability are as follows: Six Months Ended (In millions) July 4, 2015 June 28, 2014 Balance at the beginning of period $ $ Provision Settlements ) ) Acquisitions Adjustments* ) ) Balance at the end of period $ $ * Adjustments include changes to prior year estimates, new issues on prior year sales and currency translation adjustments. |
Derivative Instruments and Fair
Derivative Instruments and Fair Value Measurements | 6 Months Ended |
Jul. 04, 2015 | |
Derivative Instruments and Fair Value Measurements | |
Derivative Instruments and Fair Value Measurements | Note 7. Derivative Instruments and Fair Value Measurements 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 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 exist, requiring companies to develop their own assumptions. Observable inputs that do not meet the criteria of Level 1, which 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 management’s interpretation of current market data. These unobservable inputs are utilized only 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 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. We utilize foreign currency exchange contracts to manage this volatility. Our 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. These are 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. At July 4, 2015 and January 3, 2015, we had foreign currency exchange contracts with notional amounts upon which the contracts were based of $468 million and $696 million, respectively. At July 4, 2015, the fair value amounts of our foreign currency exchange contracts were a $15 million asset and a $35 million liability. At January 3, 2015, the fair value amounts of our foreign currency exchange contracts were a $16 million asset and a $26 million liability. We primarily utilize forward exchange contracts which have maturities of no more than three years. These contracts qualify as cash flow hedges and are intended to offset the effect of exchange rate fluctuations on forecasted sales, inventory purchases and overhead expenses. At July 4, 2015, we had a net deferred loss of $21 million in Accumulated other comprehensive loss related to these cash flow hedges. Net gains and losses recognized in earnings and Accumulated other comprehensive loss on cash flow hedges, including gains and losses related to hedge ineffectiveness, were not significant in the periods presented. 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 a net investment. We record changes in the fair value of these contracts in other comprehensive income to the extent they are effective as cash flow hedges. Currency effects on the effective portion of these hedges, which are reflected in the foreign currency translation adjustments within Accumulated other comprehensive loss, were not significant in the periods presented. Assets Recorded at Fair Value on a Nonrecurring Basis During the periods ended July 4, 2015 and January 3, 2015, the Finance group’s impaired nonaccrual finance receivables of $39 million and $49 million, respectively, were measured at fair value on a nonrecurring basis using significant unobservable inputs (Level 3). Impaired nonaccrual finance receivables represent assets recorded at fair value on a nonrecurring basis since the measurement of required reserves on our impaired finance receivables is significantly dependent on the fair value of the underlying collateral. For impaired nonaccrual finance receivables secured by aviation assets, the fair values of collateral are determined primarily based on the use of industry pricing guides. Fair value measurements recorded on impaired finance receivables resulted in charges to provision for loan losses totaling $3 million and $6 million for the three and six months ended July 4, 2015 and $6 million and $11 million for the three and six months ended June 28, 2014, respectively. Assets and Liabilities Not Recorded at Fair Value The carrying value and estimated fair value of our financial instruments that are not reflected in the financial statements at fair value are as follows: July 4, 2015 January 3, 2015 (In millions) Carrying Value Estimated Fair Value Carrying Value Estimated Fair Value Manufacturing group Long-term debt, excluding leases $ ) $ ) $ ) $ ) Finance group Finance receivables, excluding leases Debt ) ) ) ) Fair value for the Manufacturing group debt is determined using market observable data for similar transactions (Level 2). At July 4, 2015 and January 3, 2015, approximately 73% and 75%, respectively, of the fair value of term debt for the Finance group was determined based on discounted cash flow analyses using observable market inputs from debt with similar duration, subordination and credit default expectations (Level 2). The remaining Finance group debt was determined based on observable market transactions (Level 1). F air value estimates for finance receivables were determined based on internally developed discounted cash flow models primarily utilizing significant unobservable inputs (Level 3), which include estimates of the rate of return, financing cost, capital structure and/or discount rate expectations of current market participants combined with estimated loan cash flows based on credit losses, payment rates and expectations of borrowers’ ability to make payments on a timely basis. |
Accumulated Other Comprehensive
Accumulated Other Comprehensive Loss and Other Comprehensive Income | 6 Months Ended |
Jul. 04, 2015 | |
Accumulated Other Comprehensive Loss and Other Comprehensive Income | |
Accumulated Other Comprehensive Loss and Other Comprehensive Income | Note 8. Accumulated Other Comprehensive Loss and Other Comprehensive Income The components of Accumulated Other Comprehensive Loss are presented below: (In millions) Pension and Postretirement Benefits Adjustments Foreign Currency Translation Adjustments Deferred Gains (Losses) on Hedge Contracts Accumulated Other Comprehensive Loss For the six months ended July 4, 2015 Balance at the beginning of the period $ ) $ $ ) $ ) Other comprehensive income (loss) before reclassifications ) ) Reclassified from Accumulated other comprehensive loss — Other comprehensive income (loss) ) ) Balance at the end of the period $ ) $ ) $ ) $ ) For the six months ended June 28, 2014 Balance at the beginning of the period $ ) $ $ ) $ ) Other comprehensive income (loss) before reclassifications ) Reclassified from Accumulated other comprehensive loss — Other comprehensive income (loss) ) Balance at the end of the period $ ) $ $ ) $ ) The before and after-tax components of Other Comprehensive Income are presented below: (In millions) Pre-Tax Amount Tax (Expense) Benefit After-Tax Amount For the three months ended July 4, 2015 Pension and postretirement benefits adjustments: Unrealized gains $ $ ) $ Amortization of net actuarial loss* ) Pension and postretirement benefits adjustments, net ) Deferred gains on hedge contracts: Current deferrals ) Reclassification adjustments ) Deferred gains on hedge contracts, net ) Foreign currency translation adjustments Total $ $ ) $ For the three months ended June 28, 2014 Pension and postretirement benefits adjustments: Amortization of net actuarial loss* $ $ ) $ Amortization of prior service credit* ) — Recognition of prior service cost ) Pension and postretirement benefits adjustments, net ) Deferred gains on hedge contracts: Current deferrals ) Reclassification adjustments ) Deferred gains on hedge contracts, net ) Foreign currency translation adjustments — Total $ $ ) $ For the six months ended July 4, 2015 Pension and postretirement benefits adjustments: Unrealized gains $ $ ) $ Amortization of net actuarial loss* ) Amortization of prior service credit* ) ) Pension and postretirement benefits adjustments, net ) Deferred gains (losses) on hedge contracts: Current deferrals ) ) Reclassification adjustments ) Deferred gains (losses) on hedge contracts, net ) ) Foreign currency translation adjustments ) ) ) Total $ $ ) $ For the six months ended June 28, 2014 Pension and postretirement benefits adjustments: Amortization of net actuarial loss* $ $ ) $ Amortization of prior service credit* ) ) Recognition of prior service cost ) Pension and postretirement benefits adjustments, net ) Deferred gains on hedge contracts: Current deferrals — Reclassification adjustments ) Deferred gains on hedge contracts, net ) Foreign currency translation adjustments ) ) Total $ $ ) $ * These components of other comprehensive income are included in the computation of net periodic pension cost. See Note 11 of our 2014 Annual Report on Form 10-K for additional information. |
Commitments and Contingencies
Commitments and Contingencies | 6 Months Ended |
Jul. 04, 2015 | |
Commitments and Contingencies | |
Commitments and Contingencies | 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 commercial and financial transactions; government contracts; alleged lack of compliance with applicable laws and regulations; production partners; product liability; patent and trademark infringement; employment disputes; 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 suspension or debarment 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. |
Segment Information
Segment Information | 6 Months Ended |
Jul. 04, 2015 | |
Segment Information | |
Segment Information | Note 10. Segment Information We operate in, and report financial information for, the following five business segments: Textron Aviation, 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 acquisition and restructuring costs related to the Beechcraft acquisition. The measurement for the Finance segment includes interest income and expense along with intercompany interest income and expense. Our revenues by segment, along with a reconciliation of segment profit to income from continuing operations before income taxes, are as follows: Three Months Ended Six Months Ended (In millions) July 4, 2015 June 28, 2014 July 4, 2015 June 28, 2014 Revenues Textron Aviation $ $ $ $ Bell Textron Systems Industrial Finance Total revenues $ $ $ $ Segment Profit Textron Aviation $ $ $ $ Bell Textron Systems Industrial Finance Segment profit Corporate expenses and other, net ) ) ) ) Interest expense, net for Manufacturing group ) ) ) ) Acquisition and restructuring costs — ) — ) Income from continuing operations before income taxes $ $ $ $ |
Basis of Presentation (Policies
Basis of Presentation (Policies) | 6 Months Ended |
Jul. 04, 2015 | |
Basis of Presentation | |
Use of Estimates | Use of Estimates We prepare our financial statements in conformity with generally accepted accounting principles, which require us to make estimates and assumptions that affect the amounts reported in the financial statements. Actual results could differ from those estimates. Our estimates and assumptions are reviewed periodically, and the effects of changes, if any, are reflected in the Consolidated Statements of Operations in the period that they are determined. During 2015 and 2014, we changed our estimates of revenues and costs on certain long-term contracts that are accounted for under the percentage-of-completion method of accounting. These changes in estimates increased income from continuing operations before income taxes in the second quarter of 2015 and 2014 by $36 million and $38 million, respectively, ($23 million and $24 million after tax, or $0.08 and $0.09 per diluted share, respectively). For the second quarter of 2015 and 2014, the gross favorable program profit adjustments totaled $40 million and $41 million, respectively, and the gross unfavorable program profit adjustments totaled $4 million and $3 million, respectively. Gross favorable program profit adjustments for the second quarter of 2014 included $16 million related to the settlement of the System Development and Demonstration phase of the Armed Reconnaissance Helicopter (ARH) program, which was terminated in October 2008. The changes in estimates increased income from continuing operations before income taxes in the first half of 2015 and 2014 by $54 million and $59 million, ($34 million and $37 million after tax, or $0.12 and $0.13 per diluted share, respectively). For the first half of 2015 and 2014, the gross favorable program profit adjustments totaled $73 million and $65 million, respectively, and the gross unfavorable program profit adjustments totaled $19 million and $6 million, respectively. Gross favorable program profit adjustments for the first half of 2014 included $16 million related to the ARH program as described above. |
Recently Issued Accounting Standards | Recently Issued Accounting Standards In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers, that outlines a comprehensive five-step revenue recognition model based on the principle that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. On July 9, 2015, the FASB approved a one-year deferral of the effective date of the standard to the beginning of 2018 for public companies, with an option that would permit companies to adopt the standard as early as the original effective date of 2017. The new standard may be adopted either retrospectively or on a modified retrospective basis whereby it would be applied to new contracts and existing contracts with remaining performance obligations as of the effective date, with a cumulative catch-up adjustment recorded to beginning retained earnings at the effective date for those contracts. We are currently evaluating the impacts of adoption on our consolidated financial position, results of operations and related disclosures, along with the implementation approach to be used. |
Retirement Plans (Tables)
Retirement Plans (Tables) | 6 Months Ended |
Jul. 04, 2015 | |
Retirement Plans | |
Components of net periodic benefit cost | Three Months Ended Six Months Ended (In millions) July 4, 2015 June 28, 2014 July 4, 2015 June 28, 2014 Pension Benefits Service cost $ $ $ $ Interest cost Expected return on plan assets ) ) ) ) Amortization of prior service cost Amortization of net actuarial loss Curtailment and other charges — — Net periodic benefit cost $ $ $ $ Postretirement Benefits Other Than Pensions Service cost $ $ $ $ Interest cost Expected return on plan assets — — — — Amortization of prior service credit ) ) ) ) Amortization of net actuarial loss — — — Net periodic benefit cost (credit) $ ) $ $ ) $ |
Earnings Per Share (Tables)
Earnings Per Share (Tables) | 6 Months Ended |
Jul. 04, 2015 | |
Earnings Per Share | |
Weighted-average shares outstanding for basic and diluted EPS | Three Months Ended Six Months Ended (In thousands) July 4, 2015 June 28, 2014 July 4, 2015 June 28, 2014 Basic weighted-average shares outstanding Dilutive effect of: Stock options ASR — — Diluted weighted-average shares outstanding |
Accounts Receivable and Finan20
Accounts Receivable and Finance Receivables (Tables) | 6 Months Ended |
Jul. 04, 2015 | |
Accounts Receivable and Finance Receivables | |
Accounts Receivable | (In millions) July 4, 2015 January 3, 2015 Commercial $ $ U.S. Government contracts Allowance for doubtful accounts ) ) Total $ $ |
Finance Receivables | (In millions) July 4, 2015 January 3, 2015 Finance receivables * $ $ Allowance for losses ) ) Total finance receivables, net $ $ * Includes finance receivables held for sale of $33 million and $35 million at July 4, 2015 and January 3, 2015, respectively. |
Finance receivables categorized based on credit quality indicators | (In millions) July 4, 2015 January 3, 2015 Performing $ $ Watchlist Nonaccrual Total $ $ Nonaccrual as a percentage of finance receivables % % |
Finance receivables by delinquency aging | (In millions) July 4, 2015 January 3, 2015 Less than 31 days past due $ $ 31-60 days past due 61-90 days past due Over 90 days past due Total $ $ 60 + days contractual delinquency as a percentage of finance receivables % % |
Summary of impaired finance receivables, excluding leveraged leases, and the average recorded investment | (In millions) July 4, 2015 January 3, 2015 Recorded investment: Impaired loans with related allowance for losses $ $ Impaired loans with no related allowance for losses Total $ $ Unpaid principal balance $ $ Allowance for losses on impaired loans Average recorded investment |
Allowance for losses on finance receivables on an individual and on a collective basis | (In millions) July 4, 2015 January 3, 2015 Allowance based on collective evaluation $ $ Allowance based on individual evaluation Finance receivables evaluated collectively $ $ Finance receivables evaluated individually |
Allowance for Losses | Six Months Ended (In millions) July 4, 2015 June 28, 2014 Balance at the beginning of period $ $ Provision for losses ) Charge-offs ) ) Recoveries Balance at the end of period $ $ |
Inventories (Tables)
Inventories (Tables) | 6 Months Ended |
Jul. 04, 2015 | |
Inventories | |
Inventories | (In millions) July 4, 2015 January 3, 2015 Finished goods $ $ Work in process Raw materials and components Progress/milestone payments ) ) Total $ $ |
Accrued Liabilities (Tables)
Accrued Liabilities (Tables) | 6 Months Ended |
Jul. 04, 2015 | |
Accrued Liabilities | |
Changes in warranty and product maintenance contract liability | Six Months Ended (In millions) July 4, 2015 June 28, 2014 Balance at the beginning of period $ $ Provision Settlements ) ) Acquisitions Adjustments* ) ) Balance at the end of period $ $ * Adjustments include changes to prior year estimates, new issues on prior year sales and currency translation adjustments. |
Derivative Instruments and Fa23
Derivative Instruments and Fair Value Measurements (Tables) | 6 Months Ended |
Jul. 04, 2015 | |
Derivative Instruments and Fair Value Measurements | |
Carrying value and estimated fair value of financial instruments | July 4, 2015 January 3, 2015 (In millions) Carrying Value Estimated Fair Value Carrying Value Estimated Fair Value Manufacturing group Long-term debt, excluding leases $ ) $ ) $ ) $ ) Finance group Finance receivables, excluding leases Debt ) ) ) ) |
Accumulated Other Comprehensi24
Accumulated Other Comprehensive Loss and Other Comprehensive Income (Tables) | 6 Months Ended |
Jul. 04, 2015 | |
Accumulated Other Comprehensive Loss and Other Comprehensive Income | |
Schedule of components of Accumulated Other Comprehensive Loss | (In millions) Pension and Postretirement Benefits Adjustments Foreign Currency Translation Adjustments Deferred Gains (Losses) on Hedge Contracts Accumulated Other Comprehensive Loss For the six months ended July 4, 2015 Balance at the beginning of the period $ ) $ $ ) $ ) Other comprehensive income (loss) before reclassifications ) ) Reclassified from Accumulated other comprehensive loss — Other comprehensive income (loss) ) ) Balance at the end of the period $ ) $ ) $ ) $ ) For the six months ended June 28, 2014 Balance at the beginning of the period $ ) $ $ ) $ ) Other comprehensive income (loss) before reclassifications ) Reclassified from Accumulated other comprehensive loss — Other comprehensive income (loss) ) Balance at the end of the period $ ) $ $ ) $ ) |
Schedule of before and after-tax components of Other Comprehensive Income | (In millions) Pre-Tax Amount Tax (Expense) Benefit After-Tax Amount For the three months ended July 4, 2015 Pension and postretirement benefits adjustments: Unrealized gains $ $ ) $ Amortization of net actuarial loss* ) Pension and postretirement benefits adjustments, net ) Deferred gains on hedge contracts: Current deferrals ) Reclassification adjustments ) Deferred gains on hedge contracts, net ) Foreign currency translation adjustments Total $ $ ) $ For the three months ended June 28, 2014 Pension and postretirement benefits adjustments: Amortization of net actuarial loss* $ $ ) $ Amortization of prior service credit* ) — Recognition of prior service cost ) Pension and postretirement benefits adjustments, net ) Deferred gains on hedge contracts: Current deferrals ) Reclassification adjustments ) Deferred gains on hedge contracts, net ) Foreign currency translation adjustments — Total $ $ ) $ For the six months ended July 4, 2015 Pension and postretirement benefits adjustments: Unrealized gains $ $ ) $ Amortization of net actuarial loss* ) Amortization of prior service credit* ) ) Pension and postretirement benefits adjustments, net ) Deferred gains (losses) on hedge contracts: Current deferrals ) ) Reclassification adjustments ) Deferred gains (losses) on hedge contracts, net ) ) Foreign currency translation adjustments ) ) ) Total $ $ ) $ For the six months ended June 28, 2014 Pension and postretirement benefits adjustments: Amortization of net actuarial loss* $ $ ) $ Amortization of prior service credit* ) ) Recognition of prior service cost ) Pension and postretirement benefits adjustments, net ) Deferred gains on hedge contracts: Current deferrals — Reclassification adjustments ) Deferred gains on hedge contracts, net ) Foreign currency translation adjustments ) ) Total $ $ ) $ * These components of other comprehensive income are included in the computation of net periodic pension cost. See Note 11 of our 2014 Annual Report on Form 10-K for additional information. |
Segment Information (Tables)
Segment Information (Tables) | 6 Months Ended |
Jul. 04, 2015 | |
Segment Information | |
Revenues by segment and reconciliation of segment profit to income from continuing operations before income taxes | Three Months Ended Six Months Ended (In millions) July 4, 2015 June 28, 2014 July 4, 2015 June 28, 2014 Revenues Textron Aviation $ $ $ $ Bell Textron Systems Industrial Finance Total revenues $ $ $ $ Segment Profit Textron Aviation $ $ $ $ Bell Textron Systems Industrial Finance Segment profit Corporate expenses and other, net ) ) ) ) Interest expense, net for Manufacturing group ) ) ) ) Acquisition and restructuring costs — ) — ) Income from continuing operations before income taxes $ $ $ $ |
Basis of Presentation (Details)
Basis of Presentation (Details) | 6 Months Ended |
Jul. 04, 2015item | |
Basis of Presentation | |
Number of borrowing groups | 2 |
Basis of Presentation (Details
Basis of Presentation (Details 2) - Contracts accounted for under percentage of completion method - USD ($) $ / shares in Units, $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jul. 04, 2015 | Jun. 28, 2014 | Jul. 04, 2015 | Jun. 28, 2014 | |
Use of Estimates | ||||
Change in Accounting Estimate Financial Effect Increase in Income from Continuing Operations before Income Taxes | $ 36 | $ 38 | $ 54 | $ 59 |
Change in Accounting Estimate Financial Effect Increase in Income from Continuing Operations after taxes | $ 23 | $ 24 | $ 34 | $ 37 |
Change in Accounting Estimate Financial Effect Increase in Earnings Per Share Diluted | $ 0.08 | $ 0.09 | $ 0.12 | $ 0.13 |
Gross Favorable Program Profit Adjustments | $ 40 | $ 41 | $ 73 | $ 65 |
Gross Unfavorable Program Profit Adjustments | $ 4 | 3 | $ 19 | 6 |
Gross favorable program profit adjustments related to the settlement of ARH program | $ 16 | $ 16 |
Retirement Plans (Details)
Retirement Plans (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jul. 04, 2015 | Jun. 28, 2014 | Jul. 04, 2015 | Jun. 28, 2014 | |
Net periodic benefit cost | ||||
Unrealized gains, pre-tax | $ 98 | $ 98 | ||
Pension Benefits | ||||
Net periodic benefit cost | ||||
Service cost | 29 | $ 27 | 59 | $ 54 |
Interest cost | 82 | 85 | 163 | 164 |
Expected return on plan assets | (121) | (117) | (242) | (228) |
Amortization of prior service cost (credit) | 4 | 4 | 8 | 8 |
Amortization of net actuarial loss | 39 | 28 | 78 | 56 |
Curtailment and other charges | 6 | 6 | ||
Net periodic benefit cost (credit) | 39 | 27 | 72 | 54 |
Postretirement Benefits Other Than Pensions | ||||
Net periodic benefit cost | ||||
Service cost | 1 | 1 | 2 | 2 |
Interest cost | 4 | 5 | 8 | 10 |
Amortization of prior service cost (credit) | (6) | (5) | (12) | (11) |
Amortization of net actuarial loss | 1 | |||
Net periodic benefit cost (credit) | $ (1) | $ 1 | (2) | $ 2 |
Bell | ||||
Net periodic benefit cost | ||||
Workforce reduction (as a percent) | 12.00% | |||
Increase to discount rate as a result of remeasurement (as a percent) | 0.50% | |||
Discount rate (as a percent) | 4.75% | |||
Unrealized gains, pre-tax | $ 98 | $ 98 |
Earnings Per Share (Details)
Earnings Per Share (Details) - shares shares in Thousands | 3 Months Ended | 6 Months Ended | ||
Jul. 04, 2015 | Jun. 28, 2014 | Jul. 04, 2015 | Jun. 28, 2014 | |
Weighted-average shares outstanding for basic and diluted | ||||
Basic weighted-average shares outstanding | 277,715 | 280,280 | 277,808 | 280,715 |
Dilutive effect of: | ||||
Stock options | 2,220 | 2,042 | 2,216 | 2,072 |
ASR | 442 | 312 | ||
Diluted weighted-average shares outstanding | 279,935 | 282,764 | 280,024 | 283,099 |
Anti-dilutive effect of weighted average shares | 2,000 | 2,000 | 1,000 | 2,000 |
Accounts Receivable and Finan30
Accounts Receivable and Finance Receivables (Details) - USD ($) $ in Millions | Jul. 04, 2015 | Jan. 03, 2015 |
Accounts Receivable | ||
Unbillable receivables within accounts receivable | $ 150 | $ 151 |
Manufacturing group | ||
Accounts Receivable | ||
Accounts Receivable, Gross | 1,194 | 1,065 |
Allowance for doubtful accounts | (31) | (30) |
Total | 1,163 | 1,035 |
Commercial | Manufacturing group | ||
Accounts Receivable | ||
Accounts Receivable, Gross | 894 | 765 |
U. S. Government Contracts | Manufacturing group | ||
Accounts Receivable | ||
Accounts Receivable, Gross | $ 300 | $ 300 |
Accounts Receivable and Finan31
Accounts Receivable and Finance Receivables (Details 2) - USD ($) $ in Millions | Jul. 04, 2015 | Jan. 03, 2015 | Jun. 28, 2014 | Dec. 28, 2013 |
Finance Receivables | ||||
Finance receivables, gross | $ 1,216 | $ 1,289 | ||
Allowance for losses | (54) | (51) | $ (54) | $ (55) |
Total finance receivables, net | 1,162 | 1,238 | ||
Finance receivables held for sale | $ 33 | $ 35 |
Accounts Receivable and Finan32
Accounts Receivable and Finance Receivables (Details 3) $ in Millions | 6 Months Ended | |
Jul. 04, 2015USD ($)item | Jan. 03, 2015USD ($) | |
Accounts Receivable and Finance Receivables | ||
Number of loan categories based on key credit quality indicators for individual loan | item | 3 | |
Finance receivables categorized based on the internally assigned credit quality | ||
Total finance receivables | $ 1,183 | $ 1,254 |
Performing | ||
Finance receivables categorized based on the internally assigned credit quality | ||
Total finance receivables | 1,014 | 1,062 |
Watchlist | ||
Finance receivables categorized based on the internally assigned credit quality | ||
Total finance receivables | 72 | 111 |
Nonaccrual | ||
Finance receivables categorized based on the internally assigned credit quality | ||
Total finance receivables | $ 97 | $ 81 |
Nonaccrual as a percentage of finance receivables | 8.20% | 6.46% |
Nonaccrual | Minimum | ||
Finance receivables categorized based on the internally assigned credit quality | ||
Number of months of contractual delinquency to classify accounts as nonaccrual unless such collection is not doubtful | 3 months |
Accounts Receivable and Finan33
Accounts Receivable and Finance Receivables (Details 4) - USD ($) $ in Millions | Jul. 04, 2015 | Jan. 03, 2015 |
Finance receivables held for investment by delinquency aging | ||
Less than 31 days past due | $ 1,016 | $ 1,080 |
31-60 days past due | 104 | 117 |
61-90 days past due | 17 | 28 |
Over 90 days past due | 46 | 29 |
Total | $ 1,183 | $ 1,254 |
60+ days contractual delinquency as a percentage of finance receivables | 5.33% | 4.55% |
Accounts Receivable and Finan34
Accounts Receivable and Finance Receivables (Details 5) - USD ($) $ in Millions | 6 Months Ended | 12 Months Ended |
Jul. 04, 2015 | Jan. 03, 2015 | |
Recorded investment: | ||
Recorded investment, impaired loans with related allowance for losses | $ 61 | $ 68 |
Recorded investment, impaired loans with no related allowance for losses | 41 | 42 |
Recorded investment, Total | 102 | 110 |
Unpaid principal balance | 108 | 115 |
Allowance for losses on impaired loans | 22 | 20 |
Average recorded investment | $ 103 | $ 115 |
Accounts Receivable and Finan35
Accounts Receivable and Finance Receivables (Details 6) - USD ($) $ in Millions | Jul. 04, 2015 | Jan. 03, 2015 |
Finance receivables | ||
Allowance based on collective evaluation | $ 32 | $ 31 |
Allowance based on individual evaluation | 22 | 20 |
Finance receivables evaluated collectively | 962 | 1,023 |
Finance receivables evaluated individually | $ 102 | $ 110 |
Accounts Receivable and Finan36
Accounts Receivable and Finance Receivables (Details 7) - USD ($) $ in Millions | 6 Months Ended | |
Jul. 04, 2015 | Jun. 28, 2014 | |
Allowance for losses | ||
Balance at the beginning of period | $ 51 | $ 55 |
Provision for losses | (1) | 6 |
Charge-offs | (2) | (10) |
Recoveries | 6 | 3 |
Balance at the end of period | $ 54 | $ 54 |
Inventories (Details)
Inventories (Details) - USD ($) $ in Millions | Jul. 04, 2015 | Jan. 03, 2015 |
Inventories | ||
Finished goods | $ 1,895 | $ 1,582 |
Work in process | 3,114 | 2,683 |
Raw materials and components | 575 | 546 |
Inventories, Gross | 5,584 | 4,811 |
Progress/milestone payments | (1,147) | (883) |
Total | $ 4,437 | $ 3,928 |
Accrued Liabilities (Details)
Accrued Liabilities (Details) - USD ($) $ in Millions | 6 Months Ended | |
Jul. 04, 2015 | Jun. 28, 2014 | |
Changes in warranty and product maintenance contract liability | ||
Balance at the beginning of period | $ 281 | $ 223 |
Provision | 150 | 151 |
Settlements | (160) | (144) |
Acquisitions | 4 | 58 |
Adjustments | (6) | (6) |
Balance at the end of period | $ 269 | $ 282 |
Minimum | ||
Accrued Liabilities | ||
Term of limited warranty and maintenance programs | 1 year | |
Maximum | ||
Accrued Liabilities | ||
Term of limited warranty and maintenance programs | 5 years |
Derivative Instruments and Fa39
Derivative Instruments and Fair Value Measurements (Details) - USD ($) $ in Millions | 6 Months Ended | |
Jul. 04, 2015 | Jan. 03, 2015 | |
Manufacturing group | ||
Fair value of derivative instruments | ||
Forward exchange contracts maximum maturity period | 3 years | |
Foreign currency exchange contracts | ||
Fair value of derivative instruments | ||
Net deferred (gain)/loss in accumulated other comprehensive loss | $ 21 | |
Foreign currency exchange contracts | Manufacturing group | ||
Fair value of derivative instruments | ||
Notional amounts | 468 | $ 696 |
Fair Value, Inputs, Level 2 | Foreign currency exchange contracts | Manufacturing group | ||
Fair value of derivative instruments | ||
Derivative Asset, Fair Value | 15 | 16 |
Derivative Liability, Fair Value | $ 35 | $ 26 |
Derivative Instruments and Fa40
Derivative Instruments and Fair Value Measurements (Details 2) - Fair Value, Measurements, Nonrecurring - Finance group - Unobservable Inputs (Level 3) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | |||
Jul. 04, 2015 | Jun. 28, 2014 | Jul. 04, 2015 | Jun. 28, 2014 | Jan. 03, 2015 | |
Assets measured at fair value on a nonrecurring basis | |||||
Impaired finance receivables, Balance | $ 39 | $ 39 | $ 49 | ||
Impaired finance receivables, (gain) loss | $ 3 | $ 6 | $ 6 | $ 11 |
Derivative Instruments and Fa41
Derivative Instruments and Fair Value Measurements (Details 3) - USD ($) $ in Millions | Jul. 04, 2015 | Jan. 03, 2015 |
Manufacturing group | Carrying Value | ||
Financial instruments not reflected at fair value | ||
Long-term debt, excluding leases | $ (2,740) | $ (2,742) |
Manufacturing group | Estimated Fair Value | ||
Financial instruments not reflected at fair value | ||
Long-term debt, excluding leases | $ (2,897) | $ (2,944) |
Finance group | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions | ||
Portion of fair value of term debt determined based on observable market transactions (as a percent) | 73.00% | 75.00% |
Financial instruments not reflected at fair value | ||
Debt | $ (971) | $ (1,063) |
Finance group | Carrying Value | ||
Financial instruments not reflected at fair value | ||
Finance receivables, excluding leases | 928 | 1,004 |
Debt | (971) | (1,063) |
Finance group | Estimated Fair Value | ||
Financial instruments not reflected at fair value | ||
Finance receivables, excluding leases | 937 | 1,021 |
Debt | $ (946) | $ (1,051) |
Accumulated Other Comprehensi42
Accumulated Other Comprehensive Loss and Other Comprehensive Income (Details) - USD ($) $ in Millions | 6 Months Ended | |
Jul. 04, 2015 | Jun. 28, 2014 | |
Components of Accumulated other comprehensive loss | ||
Balance at the beginning of the period | $ (1,506) | $ (1,027) |
Other comprehensive income (loss) before reclassifications | 2 | 7 |
Reclassified from Accumulated other comprehensive loss | 55 | 41 |
Other comprehensive income (loss) | 57 | 48 |
Balance at the end of the period | (1,449) | (979) |
Pension and Postretirement Benefits Adjustments | ||
Components of Accumulated other comprehensive loss | ||
Balance at the beginning of the period | (1,511) | (1,110) |
Other comprehensive income (loss) before reclassifications | 62 | 9 |
Reclassified from Accumulated other comprehensive loss | 49 | 36 |
Other comprehensive income (loss) | 111 | 45 |
Balance at the end of the period | (1,400) | (1,065) |
Foreign Currency Translation Adjustments | ||
Components of Accumulated other comprehensive loss | ||
Balance at the beginning of the period | 18 | 93 |
Other comprehensive income (loss) before reclassifications | (46) | (4) |
Other comprehensive income (loss) | (46) | (4) |
Balance at the end of the period | (28) | 89 |
Deferred Gains (Losses) on Hedge Contracts | ||
Components of Accumulated other comprehensive loss | ||
Balance at the beginning of the period | (13) | (10) |
Other comprehensive income (loss) before reclassifications | (14) | 2 |
Reclassified from Accumulated other comprehensive loss | 6 | 5 |
Other comprehensive income (loss) | (8) | 7 |
Balance at the end of the period | $ (21) | $ (3) |
Accumulated Other Comprehensi43
Accumulated Other Comprehensive Loss and Other Comprehensive Income (Details 2) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jul. 04, 2015 | Jun. 28, 2014 | Jul. 04, 2015 | Jun. 28, 2014 | |
Pension and postretirement benefits adjustments, pre-tax: | ||||
Unrealized gains, pre-tax | $ 98 | $ 98 | ||
Amortization of net actuarial loss, pre-tax | 39 | $ 28 | 78 | $ 57 |
Amortization of prior service cost (credit), pre-tax | (1) | (2) | (3) | |
Recognition of prior service cost, pre-tax | 15 | 15 | ||
Pension and postretirement benefits adjustments, net, pre-tax | 137 | 42 | 174 | 69 |
Deferred gains (losses) on hedge contracts, pre-tax: | ||||
Current deferrals, pre-tax | 3 | 13 | (18) | 2 |
Reclassification adjustments, pre-tax | 3 | 5 | 9 | 7 |
Deferred gains (losses) on hedge contracts, net, pre-tax | 6 | 18 | (9) | 9 |
Foreign currency translation adjustments, pre-tax | 9 | (43) | (7) | |
Other comprehensive income, pre-tax | 152 | 60 | 122 | 71 |
Pension and postretirement benefits adjustments, tax (expense) benefit: | ||||
Unrealized gains, tax | (36) | (36) | ||
Amortization of net actuarial loss, tax | (14) | (10) | (28) | (20) |
Amortization of prior service cost (credit), tax | 1 | 1 | 2 | |
Recognition of prior service cost, tax | (6) | (6) | ||
Pension and postretirement benefits adjustments, net, tax | (50) | (15) | (63) | (24) |
Deferred gains (losses) on hedge contracts, tax: | ||||
Current deferrals, tax | (1) | (2) | 4 | |
Reclassification adjustments, tax | (1) | (2) | (3) | (2) |
Deferred gains (losses) on hedge contracts, net, tax | (2) | (4) | 1 | (2) |
Foreign currency translation adjustments, tax | 1 | 2 | (3) | 3 |
Other comprehensive income, tax | (51) | (17) | (65) | (23) |
Pension and postretirement benefits adjustments, after-tax amount: | ||||
Unrealized gains, after-tax | 62 | 62 | ||
Amortization of net actuarial loss, after-tax | 25 | 18 | 50 | 37 |
Amortization of prior service cost (credit), after-tax | (1) | (1) | ||
Recognition of prior service cost, after-tax | 9 | 9 | ||
Pension and postretirement benefits adjustments net, after-tax | 87 | 27 | 111 | 45 |
Deferred gains (losses) on hedge contracts, after-tax: | ||||
Current deferrals, after-tax | 2 | 11 | (14) | 2 |
Reclassification adjustments, after-tax | 2 | 3 | 6 | 5 |
Deferred gains (losses) on hedge contracts, net, after-tax | 4 | 14 | (8) | 7 |
Foreign currency translation adjustments, after-tax | 10 | 2 | (46) | (4) |
Other comprehensive income | $ 101 | $ 43 | $ 57 | $ 48 |
Segment Information (Details)
Segment Information (Details) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jul. 04, 2015USD ($) | Jun. 28, 2014USD ($) | Jul. 04, 2015USD ($)segment | Jun. 28, 2014USD ($) | |
Operating and reportable business segments | ||||
Number of business operating segments | segment | 5 | |||
Number of reportable business segments | segment | 5 | |||
Revenues | ||||
Manufacturing revenues | $ 3,223 | $ 3,478 | $ 6,274 | $ 6,296 |
Finance revenues | 24 | 27 | 46 | 56 |
Total revenues | 3,247 | 3,505 | 6,320 | 6,352 |
Segment Profit | ||||
Segment profit | 306 | 304 | 565 | 523 |
Corporate expenses and other, net | (33) | (38) | (75) | (81) |
Interest expense, net for Manufacturing group | (32) | (36) | (65) | (71) |
Acquisition and restructuring costs | (20) | (36) | ||
Income from continuing operations before income taxes | 241 | 210 | 425 | 335 |
Textron Aviation | Manufacturing group | ||||
Revenues | ||||
Manufacturing revenues | 1,124 | 1,183 | 2,175 | 1,968 |
Segment Profit | ||||
Segment profit | 88 | 28 | 155 | 42 |
Bell | Manufacturing group | ||||
Revenues | ||||
Manufacturing revenues | 850 | 1,119 | 1,663 | 1,992 |
Segment Profit | ||||
Segment profit | 101 | 141 | 177 | 237 |
Textron Systems | Manufacturing group | ||||
Revenues | ||||
Manufacturing revenues | 322 | 282 | 637 | 645 |
Segment Profit | ||||
Segment profit | 21 | 34 | 49 | 73 |
Industrial | Manufacturing group | ||||
Revenues | ||||
Manufacturing revenues | 927 | 894 | 1,799 | 1,691 |
Segment Profit | ||||
Segment profit | 86 | 94 | 168 | 160 |
Finance | ||||
Revenues | ||||
Finance revenues | 24 | 27 | 46 | 56 |
Segment Profit | ||||
Segment profit | $ 10 | $ 7 | $ 16 | $ 11 |