[X]
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF
1934
For
the fiscal quarter ended June 30, 2007
|
OR
|
|
[ ]
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF
1934
|
Delaware
(State
or other jurisdiction of
incorporation
or organization)
|
05-0315468
(I.R.S.
Employer Identification No.)
|
Page
|
||
PART
I.
|
FINANCIAL
INFORMATION
|
|
Item
1.
|
||
3
|
||
4
|
||
5
|
||
7
|
||
Item
2.
|
14
|
|
Item
3.
|
23
|
|
Item
4.
|
23
|
|
PART
II.
|
OTHER
INFORMATION
|
|
Item
2.
|
24
|
|
Item
4.
|
25
|
|
Item
5.
|
26
|
|
Item
6.
|
26
|
|
27
|
||
Three
Months Ended
|
Six
Months Ended
|
|||||||||||||||
June
30,
2007
|
July
1,
2006
|
June
30,
2007
|
July
1,
2006
|
|||||||||||||
Revenues
|
||||||||||||||||
Manufacturing
revenues
|
$ |
2,996
|
$ |
2,628
|
$ |
5,750
|
$ |
5,078
|
||||||||
Finance
revenues
|
239
|
192
|
449
|
374
|
||||||||||||
Total
revenues
|
3,235
|
2,820
|
6,199
|
5,452
|
||||||||||||
Costs,
expenses and other
|
||||||||||||||||
Cost
of sales
|
2,374
|
2,081
|
4,554
|
4,036
|
||||||||||||
Selling
and administrative
|
429
|
376
|
801
|
737
|
||||||||||||
Interest
expense, net
|
124
|
109
|
247
|
203
|
||||||||||||
Provision
for losses on finance receivables
|
11
|
(1 | ) |
16
|
8
|
|||||||||||
Total
costs, expenses and
other
|
2,938
|
2,565
|
5,618
|
4,984
|
||||||||||||
Income
from continuing operations before income taxes
|
297
|
255
|
581
|
468
|
||||||||||||
Income
taxes
|
(82 | ) | (78 | ) | (168 | ) | (133 | ) | ||||||||
Income
from continuing operations
|
215
|
177
|
413
|
335
|
||||||||||||
Loss
from discontinued operations, net of income taxes
|
(5 | ) | (108 | ) | (7 | ) | (98 | ) | ||||||||
Net
income
|
$ |
210
|
$ |
69
|
$ |
406
|
$ |
237
|
||||||||
Basic
earnings per share:
|
||||||||||||||||
Continuing
operations
|
$ |
1.72
|
$ |
1.38
|
$ |
3.30
|
$ |
2.59
|
||||||||
Discontinued
operations, net of
income taxes
|
(0.03 | ) | (0.84 | ) | (0.05 | ) | (0.76 | ) | ||||||||
Basic
earnings per share
|
$ |
1.69
|
$ |
0.54
|
$ |
3.25
|
$ |
1.83
|
||||||||
Diluted
earnings per share:
|
||||||||||||||||
Continuing
operations
|
$ |
1.69
|
$ |
1.34
|
$ |
3.24
|
$ |
2.53
|
||||||||
Discontinued
operations, net of
income taxes
|
(0.03 | ) | (0.81 | ) | (0.05 | ) | (0.74 | ) | ||||||||
Diluted
earnings per share
|
$ |
1.66
|
$ |
0.53
|
$ |
3.19
|
$ |
1.79
|
||||||||
Dividends
per share:
|
||||||||||||||||
$2.08
Preferred stock, Series
A
|
$ |
0.52
|
$ |
0.52
|
$ |
1.04
|
$ |
1.04
|
||||||||
$1.40
Preferred stock, Series
B
|
$ |
0.35
|
$ |
0.35
|
$ |
0.70
|
$ |
0.70
|
||||||||
Common
stock
|
$ |
0.3875
|
$ |
0.3875
|
$ |
0.775
|
$ |
0.775
|
June
30,
2007
|
December
30,
2006
|
|||||||
Assets
|
||||||||
Manufacturing
group
|
||||||||
Cash
and cash equivalents
|
$ |
631
|
$ |
733
|
||||
Accounts
receivable, less allowance for doubtful accounts of $34 and
$34
|
1,075
|
964
|
||||||
Inventories
|
2,518
|
2,069
|
||||||
Other
current assets
|
510
|
521
|
||||||
Total
current
assets
|
4,734
|
4,287
|
||||||
Property,
plant and equipment, less accumulated
depreciation
and amortization
of $2,258 and $2,147
|
1,807
|
1,773
|
||||||
Goodwill
|
1,262
|
1,257
|
||||||
Other
assets
|
1,264
|
1,233
|
||||||
Total
Manufacturing group
assets
|
9,067
|
8,550
|
||||||
Finance
group
|
||||||||
Cash
|
66
|
47
|
||||||
Finance
receivables, less allowance for losses of $86 and $93
|
8,253
|
8,217
|
||||||
Goodwill
|
169
|
169
|
||||||
Other
assets
|
568
|
567
|
||||||
Total
Finance group
assets
|
9,056
|
9,000
|
||||||
Total
assets
|
$ |
18,123
|
$ |
17,550
|
||||
Liabilities
and shareholders’ equity
|
||||||||
Liabilities
|
||||||||
Manufacturing
group
|
||||||||
Current
portion of long-term debt and short-term debt
|
$ |
86
|
$ |
80
|
||||
Accounts
payable
|
936
|
814
|
||||||
Accrued
liabilities
|
2,135
|
2,100
|
||||||
Total
current
liabilities
|
3,157
|
2,994
|
||||||
Other
liabilities
|
2,328
|
2,329
|
||||||
Long-term
debt
|
1,709
|
1,720
|
||||||
Total
Manufacturing group
liabilities
|
7,194
|
7,043
|
||||||
Finance
group
|
||||||||
Other
liabilities
|
567
|
499
|
||||||
Deferred
income taxes
|
492
|
497
|
||||||
Debt
|
6,937
|
6,862
|
||||||
Total
Finance group
liabilities
|
7,996
|
7,858
|
||||||
Total
liabilities
|
15,190
|
14,901
|
||||||
Shareholders’
equity
|
||||||||
Capital
stock:
|
||||||||
Preferred
stock
|
10
|
10
|
||||||
Common
stock
|
26
|
26
|
||||||
Capital
surplus
|
1,893
|
1,786
|
||||||
Retained
earnings
|
6,509
|
6,211
|
||||||
Accumulated
other comprehensive loss
|
(564 | ) | (644 | ) | ||||
7,874
|
7,389
|
|||||||
Less
cost of treasury shares
|
4,941
|
4,740
|
||||||
Total
shareholders’ equity
|
2,933
|
2,649
|
||||||
Total
liabilities and shareholders’ equity
|
$ |
18,123
|
$ |
17,550
|
||||
Common
shares outstanding
(in thousands)
|
124,855
|
125,596
|
|
See
Notes to the consolidated financial
statements.
|
Consolidated
|
||||||||
2007
|
2006
|
|||||||
Cash
flows from operating activities:
|
||||||||
Net
income
|
$ |
406
|
$ |
237
|
||||
Loss
from discontinued operations
|
7
|
98
|
||||||
Income
from continuing operations
|
413
|
335
|
||||||
Adjustments
to reconcile income from continuing operations to net cash provided
by
operating activities:
|
||||||||
Earnings
of Finance group, net
of distributions
|
-
|
-
|
||||||
Depreciation
and
amortization
|
153
|
138
|
||||||
Provision
for losses on
finance receivables
|
16
|
8
|
||||||
Share-based
compensation
|
18
|
17
|
||||||
Deferred
income
taxes
|
10
|
2
|
||||||
Changes
in assets and
liabilities excluding those related to acquisitions and
divestitures:
|
||||||||
Accounts
receivable,
net
|
(103 | ) | (109 | ) | ||||
Inventories
|
(447 | ) | (398 | ) | ||||
Other
assets
|
49
|
25
|
||||||
Accounts
payable
|
118
|
257
|
||||||
Accrued
and other
liabilities
|
36
|
58
|
||||||
Captive
finance receivables,
net
|
(171 | ) | (205 | ) | ||||
Other
operating activities,
net
|
31
|
32
|
||||||
Net
cash provided by operating
activities of continuing operations
|
123
|
160
|
||||||
Net
cash (used in) provided by
operating activities of discontinued operations
|
(3 | ) |
65
|
|||||
Net
cash provided by operating
activities
|
120
|
225
|
||||||
Cash
flows from investing activities:
|
||||||||
Finance
receivables:
|
||||||||
Originated
or
purchased
|
(5,964 | ) | (5,475 | ) | ||||
Repaid
|
5,463
|
4,658
|
||||||
Proceeds
on receivables sales
and securitization sales
|
689
|
50
|
||||||
Capital
expenditures
|
(142 | ) | (134 | ) | ||||
Proceeds
on sale of property, plant and equipment
|
3
|
3
|
||||||
Other
investing activities, net
|
12
|
38
|
||||||
Net
cash provided by (used in)
investing activities of continuing operations
|
61
|
(860 | ) | |||||
Net
cash provided by (used in)
investing activities of discontinued operations
|
32
|
(21 | ) | |||||
Net
cash provided by (used in)
investing activities
|
93
|
(881 | ) | |||||
Cash
flows from financing activities:
|
||||||||
(Decrease)
increase in short-term debt
|
(145 | ) |
389
|
|||||
Proceeds
from issuance of long-term debt
|
1,070
|
1,034
|
||||||
Principal
payments and retirements of long-term debt
|
(992 | ) | (655 | ) | ||||
Proceeds
from employee stock ownership plans
|
69
|
143
|
||||||
Purchases
of Textron common stock
|
(221 | ) | (598 | ) | ||||
Dividends
paid
|
(97 | ) | (147 | ) | ||||
Dividends
paid to Manufacturing group
|
-
|
-
|
||||||
Capital
contributions paid to Finance group
|
-
|
-
|
||||||
Excess
tax benefits related to stock option exercises
|
12
|
18
|
||||||
Net
cash (used in) provided by
financing activities of continuing operations
|
(304 | ) |
184
|
|||||
Net
cash used in financing
activities of discontinued operations
|
-
|
(6 | ) | |||||
Net
cash (used in) provided by
financing activities
|
(304 | ) |
178
|
|||||
Effect
of exchange rate changes on cash and cash equivalents
|
8
|
7
|
||||||
Net
decrease in cash and cash equivalents
|
(83 | ) | (471 | ) | ||||
Cash
and cash equivalents at beginning of period
|
780
|
796
|
||||||
Cash
and cash equivalents at end of period
|
$ |
697
|
$ |
325
|
||||
Supplemental
schedule of non-cash investing and financing activities from continuing
operations:
|
||||||||
Capital
expenditures financed through capital leases
|
$ |
22
|
$ |
5
|
Manufacturing
Group*
|
Finance
Group*
|
|||||||||||||||
2007
|
2006
|
2007
|
2006
|
|||||||||||||
Cash
flows from operating activities:
|
||||||||||||||||
Net
income
|
$ |
406
|
$ |
237
|
$ |
76
|
$ |
67
|
||||||||
Loss
from discontinued operations
|
7
|
98
|
-
|
-
|
||||||||||||
Income
from continuing operations
|
413
|
335
|
76
|
67
|
||||||||||||
Adjustments
to reconcile income from continuing operations to net cash provided
by
operating
activities:
|
||||||||||||||||
Earnings
of Finance group, net
of distributions
|
59
|
13
|
-
|
-
|
||||||||||||
Depreciation
and
amortization
|
134
|
119
|
19
|
19
|
||||||||||||
Provision
for losses on
finance receivables
|
-
|
-
|
16
|
8
|
||||||||||||
Share-based
compensation
|
18
|
17
|
-
|
-
|
||||||||||||
Deferred
income
taxes
|
(2 | ) | (3 | ) |
12
|
5
|
||||||||||
Changes
in assets and
liabilities excluding those related to acquisitions and
divestitures:
|
||||||||||||||||
Accounts
receivable,
net
|
(103 | ) | (109 | ) |
-
|
-
|
||||||||||
Inventories
|
(438 | ) | (356 | ) |
-
|
-
|
||||||||||
Other
assets
|
24
|
18
|
20
|
1
|
||||||||||||
Accounts
payable
|
118
|
257
|
-
|
-
|
||||||||||||
Accrued
and other
liabilities
|
24
|
7
|
12
|
51
|
||||||||||||
Captive
finance receivables,
net
|
-
|
-
|
-
|
-
|
||||||||||||
Other
operating activities,
net
|
33
|
28
|
(2 | ) |
4
|
|||||||||||
Net
cash provided by operating
activities of continuing operations
|
280
|
326
|
153
|
155
|
||||||||||||
Net
cash (used in) provided by
operating activities of discontinued operations
|
(3 | ) |
69
|
-
|
(4 | ) | ||||||||||
Net
cash provided by operating
activities
|
277
|
395
|
153
|
151
|
||||||||||||
Cash
flows from investing activities:
|
||||||||||||||||
Finance
receivables:
|
||||||||||||||||
Originated
or
purchased
|
-
|
-
|
(6,489 | ) | (5,996 | ) | ||||||||||
Repaid
|
-
|
-
|
5,795
|
4,974
|
||||||||||||
Proceeds
on receivables sales
and securitization sales
|
-
|
-
|
711
|
50
|
||||||||||||
Capital
expenditures
|
(138 | ) | (129 | ) | (4 | ) | (5 | ) | ||||||||
Proceeds
on sale of property, plant and equipment
|
3
|
3
|
-
|
-
|
||||||||||||
Other
investing activities, net
|
(2 | ) | (4 | ) |
10
|
6
|
||||||||||
Net
cash (used in) provided by
investing activities of continuing operations
|
(137 | ) | (130 | ) |
23
|
(971 | ) | |||||||||
Net
cash provided by (used in)
investing activities of discontinued operations
|
32
|
(21 | ) |
-
|
-
|
|||||||||||
Net
cash (used in) provided by
investing activities
|
(105 | ) | (151 | ) |
23
|
(971 | ) | |||||||||
Cash
flows from financing activities:
|
||||||||||||||||
(Decrease)
increase in short-term debt
|
(44 | ) | (123 | ) | (101 | ) |
512
|
|||||||||
Proceeds
from issuance of long-term debt
|
1
|
-
|
1,069
|
1,034
|
||||||||||||
Principal
payments and retirements of long-term debt
|
(3 | ) | (3 | ) | (989 | ) | (652 | ) | ||||||||
Proceeds
from employee stock ownership plans
|
69
|
143
|
-
|
-
|
||||||||||||
Purchases
of Textron common stock
|
(221 | ) | (598 | ) |
-
|
-
|
||||||||||
Dividends
paid
|
(97 | ) | (147 | ) |
-
|
-
|
||||||||||
Dividends
paid to Manufacturing group
|
-
|
-
|
(135 | ) | (80 | ) | ||||||||||
Capital
contributions paid to Finance Group
|
-
|
(18 | ) |
-
|
18
|
|||||||||||
Excess
tax benefits related to stock option exercises
|
12
|
18
|
-
|
-
|
||||||||||||
Net
cash (used in) provided by
financing activities of continuing operations
|
(283 | ) | (728 | ) | (156 | ) |
832
|
|||||||||
Net
cash used in financing
activities of discontinued operations
|
-
|
(6 | ) |
-
|
-
|
|||||||||||
Net
cash (used in) provided by
financing activities
|
(283 | ) | (734 | ) | (156 | ) |
832
|
|||||||||
Effect
of exchange rate changes on cash and cash equivalents
|
9
|
6
|
(1 | ) |
1
|
|||||||||||
Net
(decrease) increase in cash and cash equivalents
|
(102 | ) | (484 | ) |
19
|
13
|
||||||||||
Cash
and cash equivalents at beginning of period
|
733
|
786
|
47
|
10
|
||||||||||||
Cash
and cash equivalents at end of period
|
$ |
631
|
$ |
302
|
$ |
66
|
$ |
23
|
||||||||
Supplemental
schedule of non-cash investing and financing activities from continuing
operations:
|
||||||||||||||||
Capital
expenditures financed through capital leases
|
$ |
22
|
$ |
5
|
$ |
-
|
$ |
-
|
(In
millions)
|
June
30,
2007
|
December
30,
2006
|
||||||
Finished
goods
|
$ |
785
|
$ |
665
|
||||
Work
in process
|
1,794
|
1,562
|
||||||
Raw
materials
|
463
|
435
|
||||||
3,042
|
2,662
|
|||||||
Less
progress/milestone payments
|
524
|
593
|
||||||
$ |
2,518
|
$ |
2,069
|
Three
Months Ended
|
Six
Months Ended
|
|||||||||||||||
(In
millions)
|
June
30,
2007
|
July
1,
2006
|
June
30,
2007
|
July
1,
2006
|
||||||||||||
Net
income
|
$ |
210
|
$ |
69
|
$ |
406
|
$ |
237
|
||||||||
Other
comprehensive income:
|
||||||||||||||||
Currency
translation
adjustment
|
27
|
-
|
29
|
(3 | ) | |||||||||||
Net
deferred gain on hedge
contracts
|
27
|
12
|
22
|
14
|
||||||||||||
Recognition
of prior service
cost and unrealized losses on
pension
and postretirement
benefits
|
14
|
-
|
29
|
-
|
||||||||||||
Other
|
(1 | ) | (4 | ) |
-
|
(2 | ) | |||||||||
Comprehensive
income
|
$ |
277
|
$ |
77
|
$ |
486
|
$ |
246
|
Three
Months Ended
|
Six
Months Ended
|
|||||||||||||||
(In
thousands)
|
June
30,
2007
|
July
1,
2006
|
June
30,
2007
|
July
1,
2006
|
||||||||||||
Basic
weighted-average shares outstanding
|
124,851
|
128,453
|
125,013
|
129,185
|
||||||||||||
Dilutive
effect of convertible preferred shares, stock options
and
restricted
stock
|
2,285
|
2,841
|
2,357
|
2,817
|
||||||||||||
Diluted
weighted-average shares outstanding
|
127,136
|
131,294
|
127,370
|
132,002
|
Three
Months Ended
|
Six
Month Ended
|
|||||||||||||||
(In
millions)
|
June
30,
2007
|
July
1,
2006
|
June
30,
2007
|
July
1,
2006
|
||||||||||||
Compensation
expense, net of hedge income or expense
|
$ |
28
|
$ |
18
|
$ |
41
|
$ |
40
|
||||||||
Income
tax benefit
|
(17 | ) | (5 | ) | (19 | ) | (18 | ) | ||||||||
Total
net compensation cost included in net income
|
$ |
11
|
$ |
13
|
$ |
22
|
$ |
22
|
||||||||
Net
compensation costs included in discontinued operations
|
$ |
-
|
$ |
1
|
$ |
-
|
$ |
2
|
||||||||
Net
compensation costs included in continuing operations
|
$ |
11
|
$ |
12
|
$ |
22
|
$ |
20
|
Number
of
Options
(In
thousands)
|
Weighted-
Average
Exercise
Price
|
Weighted-
Average
Remaining
Contractual
Life
(In
years)
|
Aggregate
Intrinsic
Value
(In
millions)
|
|||||||||||||
Outstanding
at beginning of year
|
5,420
|
$ |
63.77
|
|||||||||||||
Granted
|
929
|
91.70
|
||||||||||||||
Exercised
|
(1,159 | ) |
59.25
|
|||||||||||||
Canceled,
expired or forfeited
|
(65 | ) |
78.25
|
|||||||||||||
Outstanding
at end of period
|
5,125
|
$ |
69.67
|
6.52
|
$ |
104
|
||||||||||
Exercisable
at end of period
|
3,275
|
$ |
59.49
|
5.12
|
$ |
99
|
Pension
Benefits
|
Postretirement
Benefits
Other
Than Pensions
|
|||||||||||||||
(In
millions)
|
2007
|
2006
|
2007
|
2006
|
||||||||||||
Service
cost
|
$ |
34
|
$ |
36
|
$ |
2
|
$ |
3
|
||||||||
Interest
cost
|
73
|
69
|
11
|
10
|
||||||||||||
Expected
return on plan assets
|
(99 | ) | (96 | ) |
-
|
-
|
||||||||||
Amortization
of prior service cost (credit)
|
5
|
4
|
(1 | ) | (2 | ) | ||||||||||
Amortization
of net loss
|
12
|
12
|
5
|
5
|
||||||||||||
Net
periodic benefit cost
|
$ |
25
|
$ |
25
|
$ |
17
|
$ |
16
|
Pension
Benefits
|
Postretirement
Benefits
Other
Than Pensions
|
|||||||||||||||
(In
millions)
|
2007
|
2006
|
2007
|
2006
|
||||||||||||
Service
cost
|
$ |
67
|
$ |
71
|
$ |
4
|
$ |
5
|
||||||||
Interest
cost
|
146
|
138
|
21
|
20
|
||||||||||||
Expected
return on plan assets
|
(198 | ) | (192 | ) |
-
|
-
|
||||||||||
Amortization
of prior service cost (credit)
|
9
|
9
|
(2 | ) | (3 | ) | ||||||||||
Amortization
of net loss
|
25
|
24
|
11
|
11
|
||||||||||||
Net
periodic benefit cost
|
$ |
49
|
$ |
50
|
$ |
34
|
$ |
33
|
Six
Months Ended
|
||||||||
(In
millions)
|
June
30,
2007
|
July
1,
2006
|
||||||
Accrual
at the beginning of period
|
$ |
315
|
$ |
318
|
||||
Provision
|
93
|
95
|
||||||
Settlements
|
(89 | ) | (73 | ) | ||||
Adjustments
to prior accrual estimates
|
2
|
(19 | ) | |||||
Accrual
at the end of period
|
$ |
321
|
$ |
321
|
Three
Months Ended
|
Six
Months Ended
|
|||||||||||||||
(In
millions)
|
June
30,
2007
|
July
1,
2006
|
June
30,
2007
|
July
1,
2006
|
||||||||||||
REVENUES
|
||||||||||||||||
MANUFACTURING:
|
||||||||||||||||
Bell
|
$ |
915
|
$ |
805
|
$ |
1,854
|
$ |
1,588
|
||||||||
Cessna
|
1,203
|
1,005
|
2,171
|
1,874
|
||||||||||||
Industrial
|
878
|
818
|
1,725
|
1,616
|
||||||||||||
2,996
|
2,628
|
5,750
|
5,078
|
|||||||||||||
FINANCE
|
239
|
192
|
449
|
374
|
||||||||||||
Total
revenues
|
$ |
3,235
|
$ |
2,820
|
$ |
6,199
|
$ |
5,452
|
||||||||
SEGMENT
OPERATING PROFIT
|
||||||||||||||||
MANUFACTURING:
|
||||||||||||||||
Bell
|
$ |
59
|
$ |
65
|
$ |
150
|
$ |
134
|
||||||||
Cessna
|
200
|
153
|
355
|
270
|
||||||||||||
Industrial
|
59
|
54
|
119
|
103
|
||||||||||||
318
|
272
|
624
|
507
|
|||||||||||||
FINANCE
|
68
|
56
|
120
|
105
|
||||||||||||
Segment
profit
|
386
|
328
|
744
|
612
|
||||||||||||
Corporate
expenses and other, net
|
(66 | ) | (48 | ) | (116 | ) | (97 | ) | ||||||||
Interest
expense, net
|
(23 | ) | (25 | ) | (47 | ) | (47 | ) | ||||||||
Income
from continuing operations before
income
taxes
|
$ |
297
|
$ |
255
|
$ |
581
|
$ |
468
|
2006
|
2005
|
2004
|
||||||||||
Basic
|
||||||||||||
As
reported
|
$ |
5.53
|
$ |
3.86
|
$ |
2.73
|
||||||
Pro
forma
(unaudited)
|
$ |
2.76
|
$ |
1.93
|
$ |
1.37
|
||||||
Diluted
|
||||||||||||
As
reported
|
$ |
5.43
|
$ |
3.78
|
$ |
2.68
|
||||||
Pro
forma
(unaudited)
|
$ |
2.71
|
$ |
1.89
|
$ |
1.34
|
Three
Months Ended
|
Six
Months Ended
|
|||||||||||||||
June
30,
2007
|
July
1,
2006
|
June
30,
2007
|
July
1,
2006
|
|||||||||||||
Basic
|
||||||||||||||||
As
reported
|
$ |
1.72
|
$ |
1.38
|
$ |
3.30
|
$ |
2.59
|
||||||||
Pro
forma
|
$ |
0.86
|
$ |
0.69
|
$ |
1.65
|
$ |
1.30
|
||||||||
Diluted
|
||||||||||||||||
As
reported
|
$ |
1.69
|
$ |
1.34
|
$ |
3.24
|
$ |
2.53
|
||||||||
Pro
forma
|
$ |
0.85
|
$ |
0.67
|
$ |
1.62
|
$ |
1.27
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
|
Three
Months Ended
|
Six
Months Ended
|
|||||||||||||||
June
30,
2007
|
July
1,
2006
|
June
30,
2007
|
July
1,
2006
|
|||||||||||||
Federal
statutory income tax rate
|
35.0 | % | 35.0 | % | 35.0 | % | 35.0 | % | ||||||||
Increase
(decrease) in taxes resulting from:
|
||||||||||||||||
State
income
taxes
|
1.4
|
1.6
|
1.3
|
1.6
|
||||||||||||
Foreign
tax rate
differential
|
(1.6 | ) | (3.7 | ) | (1.6 | ) | (3.7 | ) | ||||||||
Manufacturing
deduction
|
(1.6 | ) | (0.6 | ) | (1.6 | ) | (0.6 | ) | ||||||||
Equity
hedge
income
|
(1.9 | ) | (1.0 | ) | (1.0 | ) | (0.9 | ) | ||||||||
Export
sales
benefit
|
-
|
(1.1 | ) |
-
|
(1.1 | ) | ||||||||||
Canadian
functional
currency
|
-
|
-
|
(0.3 | ) |
-
|
|||||||||||
Favorable
tax
settlements
|
(3.3 | ) |
-
|
(1.7 | ) | (2.6 | ) | |||||||||
Other,
net
|
(0.4 | ) |
0.4
|
(1.2 | ) |
0.7
|
||||||||||
Effective
income tax rate
|
27.6 | % | 30.6 | % | 28.9 | % | 28.4 | % |
Bell
|
||||||||||||||||
Three
Months Ended
|
Six
Months Ended
|
|||||||||||||||
(In
millions)
|
June
30,
2007
|
July
1,
2006
|
June
30,
2007
|
July
1,
2006
|
||||||||||||
Revenues
|
$ |
915
|
$ |
805
|
$ |
1,854
|
$ |
1,588
|
||||||||
Segment
profit
|
59
|
65
|
150
|
134
|
Cessna
|
||||||||||||||||
Three
Months Ended
|
Six
Months Ended
|
|||||||||||||||
(In
millions)
|
June
30,
2007
|
July
1,
2006
|
June
30,
2007
|
July
1,
2006
|
||||||||||||
Revenues
|
$ |
1,203
|
$ |
1,005
|
$ |
2,171
|
$ |
1,874
|
||||||||
Segment
profit
|
200
|
153
|
355
|
270
|
Industrial
|
||||||||||||||||
Three
Months Ended
|
Six
Months Ended
|
|||||||||||||||
(In
millions)
|
June
30,
2007
|
July
1,
2006
|
June
30,
2007
|
July
1,
2006
|
||||||||||||
Revenues
|
$ |
878
|
$ |
818
|
$ |
1,725
|
$ |
1,616
|
||||||||
Segment
profit
|
59
|
54
|
119
|
103
|
Finance
|
||||||||||||||||
Three
Months Ended
|
Six
Months Ended
|
|||||||||||||||
(In
millions)
|
June
30,
2007
|
July
1,
2006
|
June
30,
2007
|
July
1,
2006
|
||||||||||||
Revenues
|
$ |
239
|
$ |
192
|
$ |
449
|
$ |
374
|
||||||||
Segment
profit
|
68
|
56
|
120
|
105
|
June
30,
|
December
30,
|
|||||||
(Dollars
in millions)
|
2007
|
2006
|
||||||
Nonperforming
assets
|
$ |
89
|
$ |
113
|
||||
Nonaccrual
finance receivables
|
$ |
51
|
$ |
75
|
||||
Allowance
for losses
|
$ |
86
|
$ |
93
|
||||
Ratio
of nonperforming assets to total finance assets
|
1.00 | % | 1.28 | % | ||||
Ratio
of allowance for losses on receivables to nonaccrual finance
receivables
|
171.3 | % | 123.1 | % | ||||
60+
days contractual delinquency as a percentage of finance
receivables
|
0.56 | % | 0.77 | % |
(In
millions)
|
Facility
Amount
|
Commercial
Paper
Outstanding
|
Letters
of Credit
Outstanding
|
Amount
Not Reserved as Support for Commercial Paper and Letters of
Credit
|
||||||||||||
Manufacturing
group – multi-year
facility
expiring in
2012*
|
$ |
1,250
|
$ |
-
|
$ |
20
|
$ |
1,230
|
||||||||
Finance
group - multi-year
facility
expiring in 2012
|
$ |
1,750
|
$ |
1,624
|
$ |
12
|
$ |
114
|
Operating Cash Flows
of Continuing Operations
|
||||||||
Six
Months Ended
|
||||||||
(In
millions)
|
June
30, 2007
|
July
1, 2006
|
||||||
Manufacturing
group
|
$ |
280
|
$ |
326
|
||||
Finance
group
|
153
|
155
|
||||||
Reclassifications
and elimination adjustments
|
(310 | ) | (321 | ) | ||||
Consolidated
|
$ |
123
|
$ |
160
|
Six
Months Ended
|
||||||||
(In
millions)
|
June
30, 2007
|
July
1, 2006
|
||||||
Reclassifications
from investing activities:
|
||||||||
Finance
receivable originations
for Manufacturing group
inventory
sales
|
$ | (525 | ) | $ | (521 | ) | ||
Cash
received from customers and
securitizations for
captive
financing
|
354
|
316
|
||||||
Other
|
(4 | ) | (36 | ) | ||||
Total
reclassifications from investing activities
|
(175 | ) | (241 | ) | ||||
Dividends
paid by Finance group to Manufacturing group
|
(135 | ) | (80 | ) | ||||
Total
reclassifications and adjustments
|
$ | (310 | ) | $ | (321 | ) |
Investing Cash Flows
of Continuing Operations
|
||||||||
Six
Months Ended
|
||||||||
(In
millions)
|
June
30, 2007
|
July
1, 2006
|
||||||
Manufacturing
group
|
$ | (137 | ) | $ | (130 | ) | ||
Finance
group
|
23
|
(971 | ) | |||||
Reclassifications
to operating activities
|
175
|
241
|
||||||
Consolidated
|
$ |
61
|
$ | (860 | ) |
Financing Cash Flows
of Continuing Operations
|
||||||||
Six
Months Ended
|
||||||||
(In
millions)
|
June
30, 2007
|
July
1, 2006
|
||||||
Manufacturing
group
|
$ | (283 | ) | $ | (728 | ) | ||
Finance
group
|
(156 | ) |
832
|
|||||
Dividends
paid by Finance group to Manufacturing group
|
135
|
80
|
||||||
Consolidated
|
$ | (304 | ) | $ |
184
|
UNREGISTERED
SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|
|
ISSUER
REPURCHASES OF EQUITY
SECURITIES
|
Total
Number
of
Shares
Purchased
|
Average
Price
Paid
per
Share
(Excluding
Commissions)
|
Total
Number of
Shares
Purchased as
Part
of Publicly
Announced
Plan**
|
Maximum
Number
of Shares
that
May Yet Be
Purchased
Under
the Plan**
|
|||||||||||||
Month
1 (April 1, 2007 –
May
5, 2007)
|
53,731 | * | $ |
103.15
|
50,000 | * |
2,575,208
|
|||||||||
Month
2 (May 6, 2007 -
June
2, 2007)
|
107,700
|
$ |
105.82
|
107,700
|
2,467,508
|
|||||||||||
Month
3 (June 3, 2007 -
June
30, 2007)
|
351,000
|
$ |
108.57
|
351,000
|
2,116,508
|
|||||||||||
Total
|
512,431
|
$ |
107.42
|
508,700
|
*
|
During
the first month of the second quarter of 2007, Textron received a
total of
3,731 shares as payments for the exercise price of employee stock
options,
which are not included in the publicly announced repurchase
plan.
|
**
|
These
shares were purchased pursuant to a plan authorizing the repurchase
of up
to 12 million shares of Textron common stock that had been announced
on
January 26, 2006, and had no expiration date. On July 18, 2007,
Textron’s Board of Directors approved a new share repurchase plan under
which Textron is authorized to repurchase up to 24 million shares
of
common stock (equivalent of 12 million shares prior to the two-for-one
stock split in the form of a stock dividend to be distributed on
August
24, 2007). The new plan has no expiration date and supercedes
the existing repurchase plan, which was cancelled effective July
18,
2007.
|
2.
|
The
Textron Inc. Short-Term Incentive Plan was approved by the following
vote:
|
|||||||||||||||||
For
|
Against
|
Abstain
|
Broker
Non-Votes
|
|||||||||||||||
104,270,558
|
6,448,285
|
1,184,508
|
0
|
3.
|
The
Textron Inc. 2007 Long-Term Incentive Plan was approved by the following
vote:
|
|||||||||||||||||
For
|
Against
|
Abstain
|
Broker
Non-Votes
|
|||||||||||||||
85,343,991
|
11,142,924
|
1,138,657
|
14,278,263
|
4.
|
The
appointment of Ernst & Young LLP by the Audit Committee as Textron’s
independent registered public accounting firm for 2007 was ratified
by the
following vote:
|
|||||||||||||||||
For
|
Against
|
Abstain
|
Broker
Non-Votes
|
|||||||||||||||
109,058,147
|
1,821,746
|
1,023,667
|
0
|
5.
|
A
shareholder proposal relating to a report related to foreign military
sales was rejected by the following vote:
|
|||||||||||||||||
For
|
Against
|
Abstain
|
Broker
Non-Votes
|
|||||||||||||||
6,662,476
|
78,399,832
|
12,564,073
|
14,277,454
|
|
SIGNATURES
|
TEXTRON
INC.
|
|||
Date:
|
July
27, 2007
|
/s/R.
L. Yates
|
|
R.
L. Yates
Senior
Vice President and Corporate Controller
(principal
accounting officer)
|
|||
3.1
|
Amended
and Restated By-Laws of Textron Inc.
|
|
10.1
|
Textron
Inc. 2007 Long-Term Incentive Plan (amended and restated as of May
1,
2007)
|
|
10.2
|
Form
of Non-Qualified Stock Option Agreement
|
|
10.3
|
Form
of Incentive Stock Option Agreement
|
|
10.4
|
Form
of Restricted Stock Unit Grant Agreement
|
|
10.5
|
Textron
Spillover Savings Plan
|
|
12.1
|
Computation
of ratio of income to fixed charges of Textron Inc. Manufacturing
Group
|
|
12.2
|
Computation
of ratio of income to fixed charges of Textron Inc. including all
majority-owned subsidiaries
|
|
31.1
|
Certification
of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
|
|
31.2
|
Certification
of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
|
|
32.1
|
Certification
of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as
adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
|
32.2
|
Certification
of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as
adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
PAGE
|
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|
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|
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|
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|
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|
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|
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|
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|
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|
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|
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|
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|
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|
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|
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|
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|
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|
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|
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|
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9
|
|||||||
9
|
|||||||
9
|
|||||||
10
|
|||||||
10
|
|||||||
10
|
|||||||
10
|
|||||||
11
|
|||||||
11
|
|||||||
11
|
|||||||
11
|
|||||||
11
|
|||||||
12
|
|||||||
12
|
|||||||
12
|
|||||||
12
|
|||||||
12
|
|||||||
12
|
|||||||
12
|
|||||||
12
|
|||||||
13
|
|||||||
13
|
|||||||
13
|
|||||||
14
|
|||||||
14
|
|||||||
14
|
|||||||
14
|
|||||||
15
|
|||||||
15
|
|||||||
15
|
|||||||
15
|
|||||||
16
|
|||||||
16
|
|||||||
16
|
|||||||
17
|
|||||||
17
|
|||||||
17
|
|||||||
17
|
|||||||
18
|
|||||||
18
|
|||||||
18
|
|||||||
20
|
|||||||
21
|
.........................
|
|
Secretary
|
|
1.
Purposes of the Plan
|
|
2.
Definitions and Rules of
Construction
|
|
3.
Administration
|
|
4.
Eligibility
|
|
5.
Shares Subject to the
Plan
|
|
6.
Awards in General
|
|
7.
Terms and Conditions of
Options
|
|
8.
Terms and Conditions of Restricted Stock and Restricted Stock
Units
|
|
9.
Stock Appreciation Rights
|
|
10. Terms
and Conditions of Performance Stock and Performance Share
Units
|
|
11. Other
Awards
|
|
12. Certain
Restrictions
|
|
13.
Recapitalization or
Reorganization
|
|
14.
Term of the Plan
|
|
15.
Effective Date
|
|
16.
Amendment and
Termination
|
|
17.
Miscellaneous
|
«Fname» «Lname» | Option No.:« | NQ_No» |
«Addr1» | Plan: | 2007 |
«Addr2» | ID: | «EMPID» |
«Addr3» | Location: | «Location» |
«City», «State» «Zip» | ||
«Country» |
Shares
|
Date
Exercisable
|
Expiration
Date
|
«NQ_Shares_V1»
|
||
«NQ_Shares_V2»
|
||
«NQ_Shares_V3»
|
||
«NQ_Shares»
|
By:
|
/s/Frederick
K. Butler
|
<date> | ||
Date
|
||||
Agreed
by:
|
||||
«Fname»
«Lname»
|
Date
|
|
Please
retain a copy of this signed agreement and return the original
to
your
Human Resources Department within 60 days of receipt of this
grant.
|
1.
|
Forfeiture
of unexercised options and required repayment if you engage in certain
competitive activities
|
(a)
|
engage
in any business which competes with the Company’s business (as defined in
Paragraph 2) within the Restricted Territory (as defined in Paragraph
3);
or
|
(b)
|
solicit
customers, business or orders or sell any products and services
(i) in competition with the Company’s business within the Restricted
Territory or (ii) for any business, wherever located, that competes
with
the Company’s business within the Restricted Territory;
or
|
|
(c)
|
divert,
entice or otherwise take away customers, business or orders of the
Company
within the Restricted Territory, or attempt to do so;
or
|
|
(d)
|
promote
or assist, financially or otherwise, any firm, corporation or other
entity
engaged in any business which competes with the Company’s business within
the Restricted Territory;
|
(a)
|
the
Company shall include Textron and all subsidiary, affiliated or related
companies or operations of Textron,
and
|
(b)
|
the
Company’s business shall include the products manufactured, marketed and
sold and/or the services provided by any operation of the Company
for
which you have worked or to which you were assigned or had responsibility
(either direct or supervisory), at the time of the termination of
your
employment and any time during the two-year period prior to such
termination.
|
(a)
|
the
geographic area(s) within a one hundred (100) mile radius of any
and all
Company location(s) in or for which you have worked or to which you
were
assigned or had responsibility (either direct or supervisory), at
the time
of the termination of your employment and at any time during the
two-year
period prior to such termination;
and
|
(b)
|
all
of the specific customer accounts, whether within or outside of the
geographic area described in (a) above, with which you have had any
contact or for which you have had any responsibility (either direct
or
supervisory), at the time of termination of your employment and at
any
time during the two-year period prior to such
termination.
|
4.
|
Forfeiture
of unexercised options and required repayment if you engage in certain
solicitation
activities
|
5.
|
Forfeiture
of unexercised options and required repayment if you disclose confidential
information
|
6.
|
Organization
and Compensation Committee
Discretion
|
|
You
may be released from your obligations under Paragraph 1, 4 and 5
above
only if the Organization and Compensation Committee of the Board
of
Directors (or its duly appointed agent) determines in its sole discretion
that such action is in the best interests of
Textron.
|
7.
|
Severability
|
|
The
parties agree that each provision contained in this Agreement shall
be
treated as a separate and independent clause, and the unenforceability
of
any one clause shall in no way impair the enforceability of any of
the
other clauses herein. Moreover, if one or more of the
provisions contained in this Agreement shall for any reason be held
to be
excessively broad as to scope, activity or subject, then such provisions
shall be construed by the appropriate judicial body by limiting and
reducing it or them, so as to be enforceable to the extent compatible
with
the applicable law.
|
«Fname»
«Lname»
|
Option
No.:
|
«ISO_No»
|
«Addr1»
|
Plan:
|
2007
|
«Addr2»
|
ID:
|
«EMPID»
|
«City»,
«State» «Zip»
|
Location:
|
«Location»
|
«Country»
|
Shares
|
Date
Exercisable
|
Expiration
Date
|
«ISO_Shares_V1»
|
||
«ISO_Shares_V2»
|
||
«ISO_Shares_V3»
|
||
«ISO_Shares»
|
By:
|
/s/Frederick K. Butler |
<date>
|
||
«Fname»
«Lname»
|
Date
|
Agreed
by:
|
||||
«Fname»
«Lname»
|
Date
|
1.
|
Forfeiture
of unexercised options and required repayment if you engage in certain
competitive activities
|
|
If
at any time during the term of this Option while you are a Company
employee, or within two years after the termination of your employment,
you do any of the following
activities:
|
|
(a) |
engage
in any business which competes with the Company’s business (as defined in
Paragraph 2) within the Restricted Territory (as defined in Paragraph
3);
or
|
|
(b) |
solicit
customers, business or orders or sell any products and services
(i) in competition with the Company’s business within the Restricted
Territory or (ii) for any business, wherever located, that competes
with
the Company’s business within the Restricted Territory;
or
|
|
(c)
|
divert,
entice or otherwise take away customers, business or orders of the
Company
within the Restricted Territory, or attempt to do so;
or
|
|
(d)
|
promote
or assist, financially or otherwise, any firm, corporation or other
entity
engaged in any business which competes with the Company’s business within
the Restricted Territory;
|
(a)
|
the
Company shall include Textron and all subsidiary, affiliated or related
companies or operations of Textron,
and
|
(b)
|
the
Company’s business shall include the products manufactured, marketed and
sold and/or the services provided by any operation of the Company
for
which you have worked or to which you were assigned or had responsibility
(either direct or supervisory), at the time of the termination of
your
employment and any time during the two-year period prior to such
termination.
|
(a)
|
the
geographic area(s) within a one hundred (100) mile radius of any
and all
Company location(s) in or for which you have worked or to which you
were
assigned or had responsibility (either direct or supervisory), at
the time
of the termination of your employment and at any time during the
two-year
period prior to such termination;
and
|
(b)
|
all
of the specific customer accounts, whether within or outside of the
geographic area described in (a) above, with which you have had any
contact or for which you have had any responsibility (either direct
or
supervisory), at the time of termination of your employment and at
any
time during the two-year period prior to such
termination.
|
4.
|
Forfeiture
of unexercised options and required repayment if you engage in certain
solicitation
activities
|
5.
|
Forfeiture
of unexercised options and required repayment if you disclose confidential
information
|
6.
|
Organization
and Compensation Committee
Discretion
|
|
You
may be released from your obligations under Paragraph 1, 4 and 5
above
only if the Organization and Compensation Committee of the Board
of
Directors (or its duly appointed agent) determines in its sole discretion
that such action is in the best interests of
Textron.
|
7.
|
Severability
|
|
The
parties agree that each provision contained in this Agreement shall
be
treated as a separate and independent clause, and the unenforceability
of
any one clause shall in no way impair the enforceability of any of
the
other clauses herein. Moreover, if one or more of the
provisions contained in this Agreement shall for any reason be held
to be
excessively broad as to scope, activity or subject, then such provisions
shall be construed by the appropriate judicial body by limiting and
reducing it or them, so as to be enforceable to the extent compatible
with
the applicable law.
|
«Fname»
«Lname»
«Addr1»
«Addr2»
«Addr3»
«City»,
«State» «Zip»
«Country»
|
RS
No.: «RS_No»
Plan:
07RS
ID:
«EMPID»
Location: «Location»
|
Shares
|
Vested
Date
|
«Shares_V1»
|
|
«Shares_V2»
|
|
«Shares_V3»
|
|
«Shares»
|
By:
|
/s/Frederick
K. Butler
|
<date>
|
||
Date
|
||||
Agreed
by:
|
||||
«Fname»
«Lname»
|
Date
|
·
|
Pursuant
to the 2007 Long-Term Incentive Plan (the “Plan”), Textron has awarded to
executive the number of Restricted Stock Units set forth on the applicable
Notice of Grant signed by Textron and Grantee on the terms and conditions
herein set forth. Each Restricted Stock Unit constitutes the right
to
receive one share (a “Share”) of Common Stock. As the
applicable “Period of Restriction” lapses, Textron will issue to the
executive that number of Shares less the number of Shares needed
to
satisfy required statutory withholding. Shares may be issued in the
form
of a certificate or a notification to the executive that the Shares
are
held in a book-entry account on the executive’s
behalf.
|
·
|
If
the executive’s employment with Textron shall terminate for “Cause,” all
Shares which may be issued pursuant to the Restricted Stock Units
awarded
to the executive that are still subject to the applicable “Period of
Restriction" shall be forfeited.
|
·
|
Except
as otherwise provided herein, the executive shall not be entitled
to
receive Shares if the executive’s employment with Textron ends for any
reason prior to the end of the Period of Restriction applicable to
such
Shares, provided that if the executive’s employment ends prior to such
date and at least three years after the date of grant because of
“Disability,” death or after the executive has become eligible for “Early
or Normal Retirement,” the executive or the executive’s estate will
receive a certificate for a “Pro-Rata Portion” of such
Shares.
|
·
|
Notwithstanding
the above, the applicable Period of Restriction for the Shares which
may
be issued pursuant to this Award shall end immediately upon a “Change in
Control” of Textron, as defined in the Plan. In such instance, Textron
shall issue the Shares to the executive (or to the executive’s estate in
the event of the executive’s death prior to payment) as soon as
administratively practical after the Change in Control. Note: Sale
of a
business unit usually does not constitute a Change in Control as
defined
in the Plan. If executive’s employment with Textron is involuntarily
terminated due to the sale of a business that does not constitute
a Change
in Control as defined in the Plan, executive’s then-unissued Shares will
be forfeited.
|
·
|
The
number of Shares which may be issued pursuant to the Restricted Stock
Units awarded to the executive hereunder shall be equitably adjusted
in
the event of a stock split, stock dividend, recapitalization,
reorganization, merger, consolidation, split-up, spin-off, or any
other
corporate event affecting the Common Stock, as provided in the Plan,
in
order to preserve the benefits or potential benefits intended to
be made
available to the Grantee.
|
·
|
Nothing
in this document shall confer upon the executive the right to continue
in
the employment of Textron or affect any right that Textron may have
to
terminate the employment of the
executive.
|
·
|
The
Restricted Stock Units shall not be assignable or transferable by
the
executive. The Shares, once issued to the executive, shall be
freely transferable.
|
·
|
The
executive shall not have voting rights nor will the executive qualify
for
dividends with respect to the Shares which may be issued pursuant
to the
Restricted Stock Units during the Period of
Restriction.
|
·
|
The
Restricted Stock Units shall be subject to the terms and conditions
of the
Plan in all respects.
|
Shares
|
Vest
Dates
|
834
|
July
16, 2006
|
833
|
July
16, 2007
|
833
|
July
16, 2008
|
|
1.
Forfeiture
of RSU Shares and required repayment if you engage in certain competitive
activities
|
(a)
|
engage
in any business which competes with the Company’s business (as defined in
Paragraph 2) within the Restricted Territory (as defined in Paragraph
3);
or
|
(b)
|
solicit
customers, business or orders or sell any products and services
(i) in competition with the Company’s business within the Restricted
Territory or (ii) for any business, wherever located, that competes
with
the Company’s business within the Restricted Territory;
or
|
|
(c)
|
divert,
entice or otherwise take away customers, business or orders of the
Company
within the Restricted Territory, or attempt to do so;
or
|
(d)
|
promote
or assist, financially or otherwise, any firm, corporation or other
entity
engaged in any business which competes with the Company’s business within
the Restricted Territory;
|
(a)
|
the
Company shall include Textron and all subsidiary, affiliated or related
companies or operations of Textron,
and
|
(b)
|
the
Company’s business shall include the products manufactured, marketed and
sold and/or the services provided by any operation of the Company
for
which you have worked or to which you were assigned or had responsibility
(either direct or supervisory), at the time of the termination of
your
employment and any time during the two-year period prior to such
termination.
|
(a)
|
the
geographic area(s) within a one hundred (100) mile radius of any
and all
Company location(s) in or for which you have worked or to which you
were
assigned or had responsibility (either direct or supervisory), at
the time
of the termination of your employment and at any time during the
two-year
period prior to such termination;
and
|
(b)
|
all
of the specific customer accounts, whether within or outside of the
geographic area described in (a) above, with which you have had any
contact or for which you have had any responsibility (either direct
or
supervisory), at the time of termination of your employment and at
any
time during the two-year period prior to such
termination.
|
4.
|
Forfeiture
of RSU Shares and required repayment if you engage in certain solicitation
activities
|
TEXTRON
SPILLOVER SAVINGS PLAN
Effective
January 1, 2008
|
1.01
|
“Account”
means the bookkeeping entry used to record supplemental matching
contributions and earnings credited to a Participant under the
Plan. All amounts credited to the Account shall be unfunded
obligations of Textron: no assets shall be set aside or contributed
to the
Plan for the Participant’s benefit. A Key Executive’s Account
does not include supplemental savings benefits that were earned and
vested
(within the meaning of IRC Section 409A) before January 1, 2005,
and any
subsequent increase that is permitted to be included in such amounts
under
IRC Section 409A, which are calculated and paid solely as provided
in
Appendix A.
|
1.02
|
“Beneficiary”
means the person designated under the Plan (including any person
who is
automatically designated by the terms of the Plan) to receive any
death
benefit payable with respect to a Participant. A Participant’s
trust or estate may also be the Participant’s
Beneficiary.
|
1.03
|
“Benefits
Committee” means the Employee Benefits Committee of
Textron.
|
1.04
|
“Board”
means the Board of Directors of
Textron.
|
1.05
|
“Change
in Control” means, for any Participant who was not an employee of a
Textron Company on December 31,
2007:
|
|
(a)
|
any
“person” or “group” (within the meaning of Sections 13(d) and 14(d)(2) of
the Securities Exchange Act of 1934, as amended (the “Act”) and of IRC
Section 409A) other than Textron, any trustee or other fiduciary
holding
Textron common stock under an employee benefit plan of Textron or
a
related company, or any corporation which is owned, directly or
indirectly, by the stockholders of Textron in substantially similar
proportions as their ownership of Textron common
stock
|
|
(1)
|
becomes
(other than by acquisition from Textron or a related company) the
“beneficial owner” (as defined in Rule 13d-3 under the Act) of stock of
Textron that, together with other stock held by such person or group,
possesses more than 50% of the combined voting power of Textron’s
then-outstanding voting stock, or
|
|
(2)
|
acquires
(or has acquired during the 12-month period ending on the date of
the most
recent acquisition by such person) beneficial ownership of stock
of
Textron possessing more than 30% of the combined voting power of
Textron's
then-outstanding stock, or
|
|
(3)
|
acquires
(or has acquired during the 12-month period ending on the date of
the most
recent acquisition by such person) all or substantially all of the
total
gross fair market value of all of the assets of Textron immediately
prior
to such acquisition or acquisitions (where gross fair market value
is
determined without regard to any associated liabilities);
or
|
|
(b)
|
a
merger or consolidation of Textron with any other corporation occurs,
other than a merger or consolidation that would result in the voting
securities of Textron outstanding immediately before the merger or
consolidation continuing to represent (either by remaining outstanding
or
by being converted into voting securities of the surviving entity)
50% or
more of the combined voting power of the voting securities of Textron
or
such surviving entity outstanding immediately after such merger or
consolidation, or
|
|
(c)
|
during
any 12-month period, a majority of the members of the Board is replaced
by
directors whose appointment or election is not endorsed by a majority
of
the members of the Board of Directors before the date of their appointment
or election.
|
1.06
|
“Compensation”
means a Participant’s eligible annual compensation as defined in the
Qualified Savings Plan in which he participates, and any annual
compensation that would be eligible under the Qualified Savings Plan
if
the Participant’s deferral election under the Deferred Income Plan for
Textron Executives were disregarded, but determined (in each case)
without
regard to the Statutory Limit.
|
1.07
|
“
ERISA”
means the Employee Retirement Income Security Act of 1974, as
amended.
|
1.08
|
“Executive
Plan” means the Textron Supplemental Benefits Plan for Executives, as in
effect before January 1, 2007, and the Textron Supplemental Savings
Plan
for Executives, as in effect from January 1 through December 31,
2007.
|
1.09
|
“IRC”
means the Internal Revenue Code of 1986, as amended. References
to any section of the Internal Revenue Code shall include any final
regulations interpreting that
section.
|
1.10
|
“Key
Executive” means an employee of a Textron Company who has been and
continues to be designated as a Key Executive under the Plan by Textron’s
Chief Executive Officer and Chief Human Resources
Officer.
|
1.11
|
“Key
Executive Plan” means the Supplemental Benefits Plan for Textron Key
Executives, as in effect before January 1, 2007, and the Supplemental
Savings Plan for Textron Key Executives, as in effect from January
1
through December 31, 2007. The defined contribution provisions
of the Key Executive Plan are included in this Plan as Appendix
A.
|
1.12
|
“Participant”
means an employee of Textron who is eligible to participate in the
Plan
pursuant to Section 2.01 and whose participation has not been
terminated as provided in Section
2.01.
|
1.13
|
“Plan”
means this Textron Spillover Savings Plan, as amended and restated
from
time to time.
|
1.14
|
“Plan
Administrator” means Textron or its designees, as described in Section
7.01.
|
1.15
|
“Qualified
Savings Plan” means the Textron Savings Plan or another tax-qualified
defined contribution plan maintained by a Textron Company that has
been
designated by the Management Committee of Textron as eligible for
supplemental contributions under the Plan. Any Qualified
Savings Plan other than the Textron Savings Plan shall be identified
in an
appendix to this Plan, and the appendix shall also set forth any
special
terms or conditions that apply to participants in the Qualified Savings
Plan.
|
1.16
|
“Separation
From Service” means a Participant’s termination of employment with all
Textron Companies, other than by reason of death or Total Disability,
that
qualifies as a “separation from service” for purposes of IRC Section
409A.
|
1.17
|
“Supplemental
Shares” means phantom shares of Textron common stock accumulated and
accounted for under the Plan for the purpose of determining the cash
value
of distributions from a Participant’s
Account.
|
1.18
|
“Statutory
Limit” means the limit on eligible compensation under tax-qualified
defined contribution plans imposed by IRC Section 401(a)(17) or the
limit
on annual additions imposed by IRC Section
415.
|
1.19
|
“Textron”
means Textron Inc., a Delaware corporation, and any successor to
Textron
Inc.
|
1.20
|
“Textron
Company” means Textron or any company controlled by or under common
control with Textron within the meaning of IRC Section 414(b) or
(c).
|
1.21
|
“Total
Disability” means physical or mental incapacity of a Participant who is
employed by a Textron Company on the disability date, if the incapacity
(a) enables the Participant to receive disability benefits under the
Federal Social Security Act, and (b) also qualifies as a “disability” for
purposes of IRC Section
409A(a)(2)(C).
|
2.01
|
Eligibility
. An
employee of a Textron Company who is a United States citizen or resident
and who participates in a Qualified Savings Plan shall become a
participant in the Plan when his matching contribution under the
Qualified
Savings Plan is limited by the Statutory
Limit.
|
2.02
|
Period
of Participation
. Once an employee becomes a Participant
under Section 2.01 above, the employee shall remain a Participant
until
the employee’s Account is fully distributed, or until the employee’s
participation in the Plan is terminated by the Board (or by the Chief
Executive Officer and the Chief Human Resources Officer) effective
as of
the following January 1.
|
3.01
|
Supplemental
Matching Contribution
. If a Participant contributes at
least 10% of eligible compensation to the Textron Savings Plan during
a
calendar year, the Participant’s Account under the Plan shall be credited
with a supplemental matching contribution equal to (1) 5% [i.e.,
50% of
10%] of the Participant’s Compensation, reduced by (2) the Participant’s
actual matching contribution for the calendar year under the Textron
Savings Plan. If a Participant participates in a Qualified
Savings Plan other than the Textron Savings Plan, the Participant
shall
receive a comparable supplemental matching contribution in an amount
sufficient to restore the portion of the matching contribution lost
because of the application of the Statutory Limit to eligible compensation
under the Qualified Savings Plan. The Participant must be
employed by a Textron Company on December 31 of the calendar year
in order
to receive a supplemental matching contribution for that calendar
year.
|
3.02
|
Crediting
Contributions
. Textron shall credit the supplemental
matching contribution to a Participant’s Account after the end of the
calendar year for which the supplemental matching contribution is
made,
but not later than March 15 of the following year. The credit
shall be made as a number of Supplemental Shares determined by dividing
the amount of the supplemental matching contribution for the calendar
year
by the average of the composite closing prices of Textron common
stock, as
reported in
The Wall Street Journal
for each trading day in the
calendar year for which the credit is
made.
|
3.03
|
Crediting
Dividend Equivalents and Other Adjustments
. Textron shall credit
additional Supplemental Shares to a Participant’s Account in each calendar
quarter to reflect the dividend equivalents attributable to the
Supplemental Shares that were credited to the Participant’s Account on the
record date. The number of additional Supplemental Shares shall
be determined by dividing the dividend amount by the average of the
composite closing prices of Textron common stock, as reported in
The
Wall Street Journal
for the month in which the record date
occurs. The number of Supplemental Shares credited to a
Participant’s Account shall be adjusted, without receipt of any
consideration by Textron, on account of any stock split, stock dividend,
or similar increase or decrease affecting Textron common stock, as
if the
Supplemental Shares were actual shares of Textron common
stock.
|
3.04
|
Converting
Supplemental Shares to Cash
. All distributions from the
Plan shall be made in cash. The cash value distributed will be
determined by multiplying the current value of Textron common stock
by the
number of whole and fractional Supplemental Shares in the Participant’s
Account as of the distribution date. The current value of a
share of Textron common stock on the distribution date shall be the
average of the composite closing prices, as reported in
The Wall
Street Journal,
for the first ten trading days of the calendar month
following the Participant’s Separation From Service, death, or Total
Disability.
|
4.01
|
Vesting
Schedule
. Except as provided in Section 4.02, a
Participant’s Account shall be vested to the same extent that the
Participant’s matching contribution account under the Qualified Savings
Plan is vested. Any portion of the Participant’s Account that
is not vested at the time of the Participant’s Separation From Service
shall be forfeited.
|
4.02
|
Change
in Control
. In the event of a Change in Control, a
Participant’s Account shall become fully
vested.
|
5.01
|
Separation
From Service
. A Participant’s Account shall be distributed
in a lump sum in cash on the first business day of the seventh month
following his Separation From
Service.
|
5.02
|
Disability
or Death
. If a Participant dies or suffers a Total
Disability before his Account is distributed, the Participant’s Account
shall be distributed in a lump sum in cash on the last business day
of the
month following his death or Total Disability. The
Participant’s Beneficiary under the Plan shall be the same as the
Participant’s beneficiary under the Qualified Savings Plan. If
a Beneficiary is receiving installment payments as of December 31,
2007,
any remaining installments due after 2007 shall be aggregated and
paid in
a lump sum on the first business day of January
2008.
|
5.03
|
Administrative
Adjustments in Payment Date
. A payment is treated as being
made on the date when it is due under the Plan if the payment is
made on
the due date specified by the Plan, or on a later date that is either
(a) in the same calendar year (for a payment whose specified due date
is on or before September 30), or (b) by the 15th day of the third
calendar month following the date specified by the Plan (for a payment
whose specified due date is on or after October 1). A payment
also is treated as being made on the date when it is due under the
Plan if
the payment is made not more than 30 days before the due date specified
by
the Plan, provided that the payment is not made earlier than six
months
after the Participant’s Separation From Service. A Participant
may not, directly or indirectly, designate the taxable year of a
payment
made in reliance on the administrative rules in this
Section 5.03.
|
5.04
|
Distribution
Upon Change in Control
. Subject to the following sentence,
if a Change in Control also qualifies as a “change in control” under IRC
Section 409A, the Participant’s Account shall be paid in a lump sum in
cash on the first business day of the month following the Change
in
Control. If a Participant’s Separation From Service occurred
before the Change in Control, the lump sum payment under this
Section 5.04 shall not be made earlier than six months after the
Participant’s Separation From Service.
|
5.05
|
Distributions
Before January 1, 2008
. Distributions after 2004 and before
the effective date of the Plan were made in good faith compliance
with IRC
Section 409A and Internal Revenue Service guidance interpreting IRC
Section 409A.
|
6.01
|
No
Plan Assets
. Benefits provided under this Plan are unfunded
obligations of Textron. Nothing contained in this Plan shall
require Textron to segregate any monies from its general funds, to
create
any trust, to make any special deposits, or to purchase any policies
of
insurance with respect to such obligations. If Textron elects
to purchase individual policies of insurance on one or more of the
Participants to help finance its obligations under this Plan, such
individual policies and the proceeds of the policies shall at all
times
remain the sole property of Textron and neither the Participants
whose
lives are insured not their Beneficiaries shall have any ownership
rights
in such policies of insurance.
|
6.02
|
Top-Hat
Plan Status
. The Plan is maintained primarily for the
purpose of providing deferred compensation for a select group of
management or highly compensated employees within the meaning of
Sections
201(2), 301(a)(3), and 401(a)(1) of the Employee Retirement Income
Security Act of 1974, as amended
(“ERISA”).
|
7.01
|
Plan
Administrator’s Powers
. Textron shall have all such powers
as may be necessary to carry out the provisions hereof. Textron may
from
time to time establish rules for the administration of this Plan
and the
transaction of its business. Subject to Section 7.05, any actions
by
Textron shall be final, conclusive and binding on each Participant
and all
persons claiming by, through or under any Participant. Textron
(and any person or persons to whom it delegates any of its authority
as
plan administrator) shall have discretionary authority to determine
eligibility for Plan benefits, to construe the terms of the Plan,
and to
determine all questions arising in the administration of the
Plan.
|
7.02
|
Tax
Withholding
. Textron may withhold from benefits paid under
this Plan any taxes or other amounts required by law to be
withheld. Textron may deduct from the undistributed portion of
a Participant’s benefit any employment tax that Textron reasonably
determines to be due with respect to the benefit under the Federal
Insurance Contributions Act (FICA), and an amount sufficient to pay
the
income tax withholding related to such FICA tax. Alternatively,
Textron may require the Participant or Beneficiary to remit to Textron
or
its designee an amount sufficient to satisfy any applicable federal,
state, and local income and employment tax with respect to the
Participant’s benefit. The Participant or Beneficiary shall
remain responsible at all times for paying any federal, state, or
local
income or employment tax with respect to any benefit under this
Plan. In no event shall Textron or any employee or agent of
Textron be liable for any interest or penalty that a Participant
or
Beneficiary incurs by failing to make timely payments of
tax.
|
7.03
|
Use
of Third Parties to Assist with Plan
Administration
. Textron may employ or engage such agents,
accountants, actuaries, counsel, other experts and other persons
as it
deems necessary or desirable in connection with the interpretation
and
administration of this Plan. Textron and its committees,
officers, directors and employees shall not be liable for any action
taken, suffered or omitted by them in good faith in reliance upon
the
advice or opinion of any such agent, accountant, actuary, counsel
or other
expert. All action so taken, suffered or omitted shall be
conclusive upon each of them and upon all other persons interested
in this
Plan.
|
7.04
|
Proof
of Right to Receive Benefits
. Textron may require proof of
death or Total Disability of any Participant and evidence of the
right of
any person to receive any Plan
benefit.
|
7.05
|
Claims
Procedure
. A Participant or Beneficiary who believes that he is being
denied a benefit to which he is entitled under the Plan (referred
to
in this
Section
7.05
as a “Claimant”) may file a written request with the
Benefits Committee setting forth the claim.
The Benefits
Committee
shall consider and resolve the claim as set forth below.
|
|
(a)
|
Time
for Response
. Upon receipt of a claim, the Benefits
Committee shall advise the Claimant that a response will be forthcoming
within 90 days. The Benefits Committee may, however, extend the
re
sponse
period for
up to
an additional 90 days for reasonable cause
,
and shall notify the
Claimant of the reason for the extension and the expected response
date
. The Benefits Committee shall respond to the claim
within the specified period.
|
(b) |
Denial
. If
the claim is denied in whole or part, the Benefits Committee shall
provide
the Claimant with a written decision, using language calculated to
be
understood by the Claimant, setting forth (1) the specific reason
or
reasons for such denial; (2) the specific reference to relevant provisions
of this Plan on which such denial is based; (3) a description of
any
additional material or information necessary for the Claimant to
perfect
his claim and an explanation why such material or such information
is
necessary; (4) appropriate information as to the steps to be taken
if the
Claimant wishes to submit the claim for review; (5) the time limits
for
requesting a review of the claim; and (6) the Claimant’s right to bring an
action for benefits under Section 502(a) of
ERISA.
|
|
(c)
|
Request
for Review
. Within 60 days after the Claimant
’s
receipt of the written decision denying the claim in whole
or in
part, the Claimant may request in writing that the Benefits Committee
review the determination. The Claimant or his duly authorized
representative may, but need not, review the relevant documents and
submit
issues and comment in writing for consideration by the Benefits
Committee. If the Claimant does not request a review of the
initial determination within such 60-day period, the Claimant shall
be
barred from challenging the
determination.
|
|
(d)
|
Review
of Initial Determination
. Within 60 days after the Benefits
Committee receives a request for review, it will review the initial
determination. If special circumstances require that the 60-day
time period be extended, the Benefits Committee will so notify the
Claimant and will render the decision as soon as possible, but no
later
than 120 days after receipt of the request for
review.
|
|
(e)
|
Decision
on Review
. All decisions on review shall be final and
binding with respect to all concerned parties. The decision on
review shall set forth, in a manner calculated to be understood by
the
Claimant, (1) the specific reasons for the decision, shall including
references to the relevant Plan provisions upon which the decision
is
based; (2) the Claimant’s right to receive, upon request and free of
charge, reasonable access to and copies of all documents, records,
and
other information, relevant to his benefits; and (3) the Claimant’s right
to bring a civil action under Section 502(a) of
ERISA.
|
7.06
|
Enforcement
Following a Change in Control
. If, after a Change in
Control, any claim is made or any litigation is brought by a Participant
or Beneficiary to enforce or interpret any provision contained in
this
Plan, Textron and the “person” or “group” described in Section
1.05
shall be liable, jointly and severally,
to
reimburse the Participant or Beneficiary for the Participant’s or
Beneficiary’s reasonable attorney’s fees and costs incurred during the
Participant’s or Beneficiary’s lifetime in pursuing any such claim or
litigation, and to pay prejudgment interest at the Prime Rate as
quoted in
the Money Rates section of
The Wall Street Journal
on any money
award or judgment obtained by the Participant or Beneficiary, payable
at
the same time as the underlying award or judgment. Any
reimbursement pursuant to the preceding sentence shall be paid to
the
Participant no earlier than six months after the Participant’s Separation
From Service, and shall be paid to the Participant or Beneficiary
no later
than the end of the calendar year following the year in which the
expense
was incurred. The reimbursement shall not be subject to
liquidation or exchange for another benefit, and the amount of
reimbursable expense incurred in one year shall not affect the amount
of
reimbursement available in another
year.
|
|
Article
VIII – Amendment and
Termination
|
8.01
|
Amendment
. Subject
to subsections (a) and (b), below, the Board or its designee shall
have
the right to amend, modify, or suspend this Plan at any time by written
resolution or other formal action reflected in writing. Subject
to subsections (a) and (b), below, the Management Committee of Textron
or
its designee also shall have the right to amend, modify, or suspend
any
provisions of this Plan, by written resolution or other formal action
reflected in writing, with respect to any Participant who is not
a member
of the Management Committee or a Key
Executive.
|
|
(a)
|
No
amendment, modification, or suspension shall reduce the amount credited
to
a Participant’s Account immediately before the effective date of the
amendment, modification, or
suspension.
|
|
(b)
|
Following
a Change in Control, no amendment, modification, or suspension shall
be
made that directly or indirectly reduces any right or benefit provided
upon a Change in Control.
|
8.02
|
Termination
. The
Board or its designee shall have the right to terminate this Plan
at any
time before a Change in Control by written resolution. No
termination of the Plan shall reduce a Participant’s Account immediately
before the effective date of the
termination.
|
8.03
|
Distributions
Upon Plan Termination
. Upon the termination of the Plan by
the Board with respect to all Participants, and termination of all
arrangements sponsored by any Textron Company that would be aggregated
with the Plan under IRC Section 409A, Textron shall have the right,
in its
sole discretion, and notwithstanding any elections made by the
Participant, to pay the Participant’s vested Account in a lump sum, to the
extent permitted under IRC Section 409A. All payments that may
be made pursuant to this Section 8.03 shall be made no earlier than
the
thirteenth month and no later than the twenty-fourth month after
the
termination of the Plan. Textron may not accelerate payments
pursuant to this Section 8.03 if the termination of the Plan is proximate
to a downturn in Textron’s financial health. If Textron
exercises its discretion to accelerate payments under this Section
8.03,
it shall not adopt any new arrangement that would have been aggregated
with the Plan under IRC Section 409A within three years following
the date
of the Plan’s termination.
|
|
Article
IX – Miscellaneous
|
9.01
|
Use
of Masculine or Feminine Pronouns
. Unless a contrary or
different meaning is expressly provided, each use in this Plan of
the
masculine or feminine gender shall include the other and each use
of the
singular number shall include the
plural.
|
9.02
|
Transferability
of Plan Benefits
.
|
|
(a)
|
Textron
shall recognize the right of an alternate payee named in a domestic
relations order to receive all or a portion of a Participant’s benefit
under the Plan, provided that (1) the domestic relations order would
be a
“qualified domestic relations order” within the meaning of IRC Section
414(p) if IRC Section 414(p) were applicable to the Plan (except
that the
order may require payment to be made to the alternate payee before
the
Participant’s earliest retirement age), (2) the domestic relations order
does not purport to give the alternate payee any right to assets
of any
Textron Company, (3) the domestic relations order does not purport
to
allow the alternate payee to defer payments beyond the date when
the
benefits assigned to the alternate payee would have been paid to
the
Participant, and (4) the domestic relations order does not require
the
Plan to make a payment to an alternate payee in any form other than
a cash
lump sum.
|
|
(b)
|
Except
as provided in subsection (a) concerning domestic relations orders,
no
amount payable at any time under this Plan shall be subject in any
manner
to alienation, sale, transfer, assignment, pledge or encumbrance
of any
kind to the extent that the assignment or other action would cause
the
amount to be included in the Participant’s gross income or treated as a
distribution for federal income tax purposes. A Participant
may, with the written approval of the Benefits Committee, make an
assignment of a benefit for estate planning or similar purposes if
the
assignment does not cause the amount to be included in the Participant’s
gross income or treated as a distribution for federal income tax
purposes. Any attempt to alienate, sell, transfer, assign,
pledge or otherwise encumber any such benefit, whether presently
or
subsequently payable, shall be void unless so approved. Except
as required by law, no benefit payable under this Plan shall in any
manner
be subject to garnishment, attachment, execution or other legal process,
or be liable for or subject to the debts or liability of any Participant
or Beneficiary.
|
9.03
|
Section
409A Compliance
. The Plan is intended to comply with IRC
Section 409A and should be interpreted accordingly. Any
distribution election that would not comply with IRC Section 409A
is not
effective. To the extent that a provision of this Plan does not
comply with IRC Section 409A, such provision shall be void and without
effect. Textron does not warrant that the Plan will comply with
IRC Section 409A with respect to any Participant or with respect
to any
payment, however. In no event shall any Textron Company; any
director, officer, or employee of a Textron Company; or any member
of the
Benefits Committee be liable for any additional tax, interest, or
penalty
incurred by a Participant or Beneficiary as a result of the Plan’s failure
to satisfy the requirements of IRC Section 409A, or as a result of
the
Plan’s failure to satisfy any other requirements of applicable tax
laws.
|
9.04
|
Controlling
State Law
. This Plan shall be construed in accordance with
the laws of the State of Delaware.
|
9.05
|
No
Right to Employment
. Nothing contained in this Plan shall
be construed as a contract of employment between any Participant
and any
Textron Company, or to suggest or create a right in any Participant
of
continued employment at any Textron
Company.
|
9.06
|
Additional
Conditions Imposed
. Textron, the Chief Executive Officer
and the Chief Human Resources Officer, and the Benefits Committee
may
impose such other lawful terms and conditions on participation in
this
Plan as deemed desirable. The Chief Executive Officer, the
Chief Human Resources Officer, and members of the Benefits Committee
may
participate in this Plan.
|
TEXTRON
INC.
|
|
By:
|
|
George
E. Metzger
|
|
Vice
President Human Resources
and
Benefits
|
|
Date:
|
,
2007
|
TEXTRON
SPILLOVER SAVINGS PLAN
____________________________
APPENDIX
A
____________________________
Defined
Contribution Provisions
of
the
Supplemental
Benefits Plan for
Textron
Key Executives
(As
in effect before January 1, 2008)
|
A.
|
Key
Executive Plan
|
|
(As
in Effect Before January 1,
2007)
|
B.
|
Supplemental
Savings Plan for Textron Key
Executives
|
|
(Effective
January 1, 2007)
|
C.
|
Textron
Spillover Savings Plan
|
|
(Effective
January 1, 2008)
|
D.
|
Key
Executive Protected
Benefits
|
|
(Earned
and Vested Before 2005)
|
E.
|
Benefits
Subject To Section 409A
|
|
(Earned
or Vested From 2005 Through
2007)
|
1.01
|
“Benefits
Committee” means the Employee Benefits Committee of
Textron.
|
1.02
|
“Board”
means the Board of Directors of
Textron.
|
1.03
|
“ERISA”
means the Employee Retirement Income Security Act of 1974, as
amended.
|
1.04
|
“Included
Plan” means a Textron defined contribution plan specifically designated
by
the Management Committee under Article
IV.
|
1.05
|
“Key
Executive” means an employee of a Textron Company who has been and
continues to be designated as a Key Executive under the Plan by Textron’s
Chief Executive Officer and Chief Human Resources
Officer.
|
1.06
|
“Management
Committee” means the Management Committee of
Textron.
|
1.07
|
“Participant”
means a Key Executive who is participating in this Plan pursuant
to
Article II and, unless the context clearly indicates to the contrary,
a
former Participant who is entitled to benefits under this
Plan.
|
1.08
|
“Plan”
means this Supplemental Savings Plan for Textron Key Executives,
as
amended and restated from time to
time.
|
1.09
|
“Savings
Plan” means the Textron Savings Plan, as amended and restated from time
to
time.
|
1.10
|
“Statutory
Limit” means any limit on benefits under, or annual additions to,
qualified plans imposed by Section 401(a)(17) or 415 of the Internal
Revenue Codes of 1954 or 1986, as amended from time to
time.
|
1.11
|
“Supplemental
Shares” means fictional shares of Textron common stock accumulated and
accounted for under this Plan for the purpose of determining the
cash
value of distributions and transfers from a Participant’s supplemental
savings account.
|
1.12
|
“Textron”
means Textron Inc., a Delaware corporation, and any successor of
Textron
Inc.
|
1.13
|
“Textron
Company” means Textron or any company controlled by or under common
control with Textron.
|
|
Article
II—Participation
|
2.01
|
A
Key Executive shall participate in this Plan if the annual additions
to
her accounts under the Savings Plan or any Included Plan are limited
by
one or more Statutory Limits.
|
|
Article
III—Supplemental Savings
Benefits
|
3.01
|
Textron
shall maintain a supplemental savings account and a fixed income
account
for each Participant who participates in the Savings Plan for making
credits, payments, and transfers described in this
Article.
|
3.02
|
A
Participant who contributes at least 10% of eligible compensation
to the
Textron Savings Plan each month shall receive a supplemental savings
credit. Textron shall, as of the end of each calendar month,
credit Supplemental Shares to each supplemental savings account,
equal to
the lost employer contribution for the month divided by the average
of the
composite closing prices of Textron common stock, as reported in
The
Wall Street Journal
for the month. The lost employer
contribution for the month shall be equal to the Participant’s Savings
Plan eligible compensation for the month times the Participant’s Savings
Plan election percentage (not to exceed 10%) times 50%, less the
employer
contribution made to the Participant’s Savings Plan Account for the
month.
|
3.03
|
Textron
shall, in each calendar quarter, credit Supplemental Shares to a
Participant’s supplemental savings account equal in number to the number
of shares of Textron common stock that would have been allocated
on
account of dividends to the Participant’s supplemental savings account as
of that date, based on the average of the composite closing prices
of
Textron common stock, as reported in
The Wall Street Journal
for
the month in which the date of record
occurs.
|
3.04
|
Amounts
in the fixed income account shall earn interest at a monthly interest
rate
that is one twelfth of the average for the calendar month of the
Moody’s
Corporate Bond Yield Index as published by Moody’s Investors Service, Inc.
(or any successor thereto), or, if such monthly yield is no longer
published, a substantially similar average selected by the Benefits
Committee. Interest shall be credited on the last day of each
calendar month on the average daily balance of the fixed income account
during the month.
|
3.05
|
A
Participant who has terminated her Textron employment may, once each
calendar month, elect to transfer, in 5% increments (with a minimum
transfer of 10% of the supplemental savings account), effective the
first
calendar day of the month following the minimum notice of three business
days, any amount in her supplemental savings account to her fixed
income
account. The cash value transferred will be determined by
multiplying the current value of Textron common stock by the number
of
whole and fractional Supplemental Shares in her supplemental savings
account as of the end of the month in which the election is made
times the
percentage being transferred. If any portion of a Participant’s
accounts under the Savings Plan shall be forfeited, a proportionate
part
of the Participant’s Supplemental Shares also shall be
forfeited. The current value of a share of Textron common stock
at the transfer date shall be the average of the composite closing
prices,
as reported in
The Wall Street Journal,
for the first ten trading
days of the effective month.
|
3.06
|
The
number of Supplemental Shares credited to a Participant’s account under
this Article III shall be adjusted, without receipt of any consideration
by Textron, on account of any stock split, stock dividend, or similar
increase or decrease affecting Textron common stock, as if the
Supplemental Shares were actual shares of Textron common
stock.
|
|
Article
IV—Supplemental Included Plan
Benefits
|
4.01
|
The
Management Committee may cause this Plan to provide
supplemental benefits on account of an Included Plan by adopting
a
Schedule to this Plan. The Schedule shall specify any special
terms or conditions upon which the supplemental benefits shall be
provided. Except as specifically provided in a Schedule, all of
the terms and conditions of this Plan shall apply to the Included
Plan.
|
|
Article
V—Unfunded Plan
|
5.01
|
Benefits
to be provided under this Plan are unfunded obligations of Textron.
Nothing contained in this Plan shall require Textron to segregate
any
monies from its general funds, to create any trust, to make any special
deposits, or to purchase any policies of insurance with respect to
such
obligations. If Textron elects to purchase individual policies
of insurance on one or more of the Participants to help finance its
obligations under this Plan, such individual policies and the proceeds
therefrom shall at all times remain the sole property of Textron
and
neither the Participants whose lives are insured nor their beneficiaries
shall have any ownership rights in such policies of
insurance.
|
5.02
|
This
Plan is intended in part to provide benefits for a select group of
management employees who are highly compensated, within the meaning
of
Sections 201(2), 301(a)(3), and 401(a)(1) of the Employee Retirement
Income Security Act of 1974, as amended (“ERISA”), and in part to be an
excess benefit plan, pursuant to Section 3(36) of
ERISA.
|
5.03
|
No
Participant shall be required or permitted to make contributions
to this
Plan.
|
|
Article
VI—Plan Administration
|
6.01
|
Textron
shall be the plan administrator of this Plan and shall be solely
responsible for its general administration and interpretation. Textron
shall have all such powers as may be necessary to carry out the provisions
hereof. Textron may from time to time establish rules for the
administration of this Plan and the transaction of its business.
Subject
to Section 6.05, any action by Textron shall be final, conclusive,
and
binding on each Participant and all persons claiming by, through
or under
any Participant. Textron (and any person or persons to whom it delegates
any of its authority as plan administrator) shall have discretionary
authority to determine eligibility for Plan benefits, to construe
the
terms of the Plan, and to determine all questions arising in the
administration of the Plan, and shall make all such determinations
and
interpretations in a nondiscriminatory
manner.
|
6.02
|
(a)
Except
as provided in the following sentence, and in subsections (b), (c),
and
(d), below, the distribution of any account under Article III or
Article
IV shall be made at the same time, in the same manner, to the same
persons
and in the same proportions, as is made the payment or distribution
under
the related Savings Plan or Included Plan, or otherwise as determined
by
the Benefits Committee in its sole discretion. However, if a Participant’s
supplemental savings account contains 50 or fewer Supplemental Shares
at
termination, such Participant’s supplemental savings account shall be paid
in a single sum. Textron may withhold from benefits and
accounts under this Plan, any taxes or other amounts required by
law to be
withheld. Notwithstanding any provision to the contrary, no benefit
shall
be paid to any Participant while employed by
Textron.
|
|
(b)
Each
amount then credited to the accounts under Article III and Article
IV
shall become due and payable to the respective Participants and
beneficiaries immediately upon a Change in Control as defined in
Section
7.03.
|
6.03
|
Textron
may employ or engage such agents, accountants, actuaries, counsel,
other
experts and other persons as it deems necessary or desirable in connection
with the interpretation and administration of this Plan. Textron
shall be
entitled to rely upon all certifications made by an accountant selected
by
Textron. Textron and its committees, officers, directors and
employees shall not be liable for any action taken, suffered or omitted
by
them in good faith in reliance upon the advice or opinion of any
such
agent, accountant, actuary, counsel or other expert. All action
so taken, suffered or omitted shall be conclusive upon each of them
and
upon all other persons interested in this
Plan.
|
6.04
|
Textron
may require proof of death or total disability of any Participant,
former
Participant or beneficiary and evidence of the right of any person
to
receive any Plan benefit.
|
6.05
|
Claims
under this Plan shall be filed in writing with Textron, and shall
be
reviewed and resolved pursuant to the claims procedure in Section
7.05 of
the Textron Spillover Savings Plan.
|
|
Article
VII—Miscellaneous
|
7.01
|
Unless
a contrary or different meaning is expressly provided, each use in
this
Plan of the masculine or feminine gender shall include the other
and each
use of the singular number shall include the
plural.
|
7.02
|
(a)
Textron
shall recognize the right of an alternate payee named in a domestic
relations order to receive all or a portion of a Participant’s benefit
under the Plan, provided that (1) the domestic relations order would
be a
“qualified domestic relations order” within the meaning of IRC Section
414(p) if IRC Section 414(p) were applicable to the Plan (except
that the
order may require payment to be made to the alternate payee before
the
Participant’s earliest retirement age), (2) the domestic relations order
does not purport to give the alternate payee any right to assets
of any
Textron Company, (3) the domestic relations order does not purport to
allow the alternate payee to defer payments beyond the date when
the
benefits assigned to the alternate payee would have been paid to
the
Participant, and (4) the domestic relations order does not require
the
Plan to make a payment to an alternate payee in any form other than
a cash
lump sum.
|
|
|
(b) Except
as provided in subsection (a) concerning domestic relations orders,
no
amount payable at any time under this Plan shall be subject in any
manner
to alienation, sale, transfer, assignment, pledge or encumbrance
of any
kind to the extent that the assignment or other action would cause
the
amount to be included in the Participant’s gross income or treated as a
distribution for federal income tax purposes. A Participant
may, with the written approval of the Benefits Committee, make an
assignment of a benefit for estate planning or similar purposes if
the
assignment does not cause the amount to be included in the Participant’s
gross income or treated as a distribution for federal income tax
purposes. Any attempt to alienate, sell, transfer, assign,
pledge or otherwise encumber any such benefit, whether presently
or
subsequently payable, shall be void unless so approved. Except
as required by law, no benefit payable under this Plan shall in any
manner
be subject to garnishment, attachment, execution or other legal process,
or be liable for or subject to the debts or liability of any Participant
or beneficiary
|
7.03
|
Notwithstanding
any Plan provision to the contrary, the Board or its designee shall
have
the right to amend, modify, suspend or terminate this Plan at any
time by
written ratification of such action; provided, however, that no amendment,
modification, suspension or
termination:
|
|
(1)
|
shall
reduce an amount credited to any supplemental account under Article
III or
Article IV of this Plan immediately before the effective date of
the
amendment, modification, suspension or termination;
or
|
|
(2)
|
shall
be made to Section 6.02 or 7.03 following a Change in
Control.
|
|
If
after a Change in Control any claim is made or any litigation is
brought
by a Participant or beneficiary to enforce or interpret any provision
contained in this Plan, Textron and the “person” or “group” described in
the next following sentence shall be liable, jointly and severally,
to
indemnify the Participant or beneficiary and to pay prejudgment interest
on any recovery as provided in Section 7.06 of the Textron Spillover
Savings Plan.
|
|
For
purposes of this Plan, a “Change in Control” shall occur if (i) any
“person” or “group” (within the meaning of Sections 13(d) and 14(d)(2) of
the Securities Exchange Act of 1934, as amended (the “Act”)) other than
Textron, any trustee or other fiduciary holding Textron common stock
under
an employee benefit plan of Textron or a related company, or any
corporation which is owned, directly or indirectly, by the stockholders
of
Textron in substantially the same proportions as their ownership
of
Textron common stock, is or becomes (other than by acquisition from
Textron or a related company) the “beneficial owner” (as defined in Rule
13d-3 under the Act) of more than 30% of the then outstanding voting
stock
of Textron, or (ii) during any period of two consecutive years,
individuals who at the beginning of such period constitute the Board
(and
any new director whose election by the Board or whose nomination
for
election by Textron’s stockholders was approved by a vote of at least two
thirds of the directors then still in office who either were directors
at
the beginning of such period or whose election or nomination for
election
was previously so approved) cease for any reason to constitute a
majority
thereof, or (iii) stockholders of Textron approve a merger or
consolidation of Textron with any other corporation, other than a
merger
or consolidation which would result in the voting securities of Textron
outstanding immediately prior thereto continuing to represent (either
by
remaining outstanding or by being converted into voting securities
of the
surviving entity) more than 50% of the combined voting power of the
voting
securities of Textron or such surviving entity outstanding immediately
after such merger or consolidation, or (iv) the stockholders of Textron
approve a plan of complete liquidation of Textron or an agreement
for the
sale or disposition by Textron of all or substantially all of Textron’s
assets.
|
7.04
|
This
Plan shall be construed in accordance with the laws of the State
of
Delaware.
|
7.05
|
Nothing
contained in this Plan shall be construed as a contract of employment
between any Participant and any Textron Company, or to suggest or
create a
right in any Participant to be continued in employment as a Key Executive
or other employee of any Textron
Company.
|
7.06
|
Textron,
the Chief Executive Officer and the Chief Human Resources Officer,
and the
Benefits Committee may impose such other lawful terms and conditions
on
participation in this Plan as deemed desirable. The Chief Executive
Officer, the Chief Human Resources Officer and members of the Benefits
Committee may participate in this
Plan.
|
TEXTRON
SPILLOVER SAVINGS PLAN
____________________________
APPENDIX
A
____________________________
Market
Square Profit Sharing Plan Schedule
(As
in effect before January 1, 2008)
|
1.01
|
“Market
Square Plan” means The Market Square Profit Sharing Plan, as amended and
restated from time to time.
|
1.02
|
Textron
shall maintain a stock unit account and a fixed income account for
each
participant for making credits, payments, and transfers described
in this
Schedule.
|
1.03
|
Textron
shall, in each calendar quarter, credit Supplemental Shares to a
Participant’s stock unit account equal in number to the number of shares
of Textron common stock that would have been allocated on account
of
dividends to the Participant’s stock unit account as of that date, based
on the average of the composite closing prices of Textron common
stock, as
reported in
The Wall Street Journal
for the month in which the
date of record occurs.
|
1.04
|
Amounts
in the fixed income account shall earn interest at a monthly interest
rate
that is the average for the calendar month of the Moody’s Corporate Bond
Yield Index as published by Moody’s Investors Service, Inc. (or any
successor thereto), or, if such monthly yield is no longer published,
a
substantially similar average selected by the Benefits
Committee. Interest shall be credited on the last day of each
calendar month on the average daily balance of the fixed income account
during the month.
|
1.05
|
A
Participant who has terminated her Textron employment may, once each
calendar month, elect to transfer, in 5% increments (with a minimum
transfer of 10% of the stock unit account), effective the first calendar
day of the month following the minimum notice of three business days,
any
amount in her stock unit account to her general fund
account. The cash value transferred will be determined by
multiplying the current value of Textron common stock by the number
of
whole and fractional Supplemental Shares in her stock unit account
as of
the end of the month in which the election is made times the percentage
being transferred. The current value of a share of Textron
common stock at the transfer date shall be the average of the composite
closing prices, as reported in
The Wall Street Journal,
for the
first ten trading days of the effective
month.
|
1.06
|
The
number of Supplemental Shares credited to a Participant’s account under
this schedule shall be adjusted, without receipt of any consideration
by
Textron, on account of any stock split, stock dividend, or similar
increase or decrease affecting Textron common stock, as if the
Supplemental Shares were actually shares of Textron common
stock.
|
1.07
|
Subject
to Section 1.08, below, benefits shall become payable upon the
Participant’s termination of Textron employment or such other time as
determined by the Benefits Committee in its sole
discretion. Textron, upon the written instructions of the
Benefits Committee or its designee, shall distribute the benefits
in
accordance with any one or a combination of the following methods
after
considering any method of payment requested by the Participant or
by the
beneficiaries entitled to receive the
benefits:
|
(1)
|
Payment
in a single sum.
|
(2)
|
Payment
in a number of annual installments, each payable as soon as practicable
after the end of each successive calendar year, over a period not
exceeding the life expectancy of the payee or his primary beneficiary
(whichever is greater) determined as of the date on which the
benefits first became payable. The annual installments shall be
calculated each year by dividing the unpaid amount of the benefits
as of
January 1 of that year by the remaining number of unpaid
installments. Plan benefits payable under Section 1.07 shall
begin to be paid not later than April 1 of the calendar year that
begins
after the date the Participant attains or would have attained age
70½.
|
1.08
|
Effective
for payments commencing on or after January 1, 2008, the Benefits
Committee has exercised its discretion pursuant to Section 1.07 to
determine that all distributions shall be made or shall commence
at the
time of a Participant’s termination of employment (or in January 2008, if
later) in one of the following forms of
payment:
|
Six
Months
Ended
June
30, 2007
|
||||
Fixed
charges:
|
||||
Interest
expense*
|
$ |
54
|
||
Estimated
interest portion of
rents
|
13
|
|||
Total
fixed
charges
|
$ |
67
|
||
Income:
|
||||
Income
from continuing
operations before income taxes
|
$ |
581
|
||
Dividends
in excess of pre-tax
income of Finance group
|
15
|
|||
Fixed
charges
|
67
|
|||
Adjusted
income
|
$ |
663
|
||
Ratio
of income to fixed charges
|
9.90
|
|||
Six
Months
Ended
June
30, 2007
|
||||
Fixed
charges:
|
||||
Interest
expense*
|
$ |
255
|
||
Estimated
interest portion of
rents
|
15
|
|||
Total
fixed
charges
|
$ |
270
|
||
Income:
|
||||
Income
from continuing
operations before income taxes
|
$ |
581
|
||
Fixed
charges
|
270
|
|||
Adjusted
income
|
$ |
851
|
||
Ratio
of income to fixed charges
|
3.15
|
|||
1.
|
I
have reviewed this quarterly report on Form 10-Q of Textron
Inc.;
|
2.
|
Based
on my knowledge, this report does not contain any untrue statement
of a
material fact or omit to state a material fact necessary to make
the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
|
3.
|
Based
on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects
the
financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
report;
|
4.
|
The
registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and
have:
|
a)
|
designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to
ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is
being
prepared;
|
b)
|
designed
such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision,
to
provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting
principles;
|
c)
|
evaluated
the effectiveness of the registrant's disclosure controls and procedures
and presented in this report our conclusions about the effectiveness
of
the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation;
and
|
d)
|
disclosed
in this report any change in the registrant's internal control over
financial reporting that occurred during the registrant's most recent
fiscal quarter that has materially affected, or is reasonably likely
to
materially affect, the registrant's internal control over financial
reporting; and
|
5.
|
The
registrant's other certifying officer and I have disclosed, based
on our
most recent evaluation of internal control over financial reporting,
to
the registrant's auditors and the audit committee of the registrant's
board of directors (or persons performing the equivalent
functions):
|
a)
|
all
significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record,
process, summarize and report financial information;
and
|
b)
|
any
fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
control
over financial reporting.
|
Date:
|
July
27, 2007
|
/s/Lewis B. Campbell | |
Lewis
B. Campbell
Chairman,
President and Chief Executive
Officer
|
1.
|
I
have reviewed this quarterly report on Form 10-Q of Textron
Inc.;
|
2.
|
Based
on my knowledge, this report does not contain any untrue statement
of a
material fact or omit to state a material fact necessary to make
the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
|
3.
|
Based
on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects
the
financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
report;
|
4.
|
The
registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and
have:
|
a)
|
designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to
ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is
being
prepared;
|
b)
|
designed
such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision,
to
provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting
principles;
|
c)
|
evaluated
the effectiveness of the registrant's disclosure controls and procedures
and presented in this report our conclusions about the effectiveness
of
the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation;
and
|
d)
|
disclosed
in this report any change in the registrant's internal control over
financial reporting that occurred during the registrant's most recent
fiscal quarter that has materially affected, or is reasonably likely
to
materially affect, the registrant's internal control over financial
reporting; and
|
5.
|
The
registrant's other certifying officer and I have disclosed, based
on our
most recent evaluation of internal control over financial reporting,
to
the registrant's auditors and the audit committee of the registrant's
board of directors (or persons performing the equivalent
functions):
|
a)
|
all
significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record,
process, summarize and report financial information;
and
|
b)
|
any
fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
control
over financial reporting.
|
Date:
|
July
27, 2007
|
/s/Ted R. French | |
Ted
R. French
Executive
Vice President and Chief
Financial
Officer
|
(1)
|
The
Report fully complies with the requirements of section 13(a) or 15(d)
of
the Securities Exchange Act of 1934;
and
|
(2)
|
The
information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the
Company.
|
Date:
|
July
27, 2007
|
/s/Lewis B. Campbell | ||
Lewis
B. Campbell
|
||||
Chairman,
President and Chief Executive
Officer
|
(1)
|
The
Report fully complies with the requirements of section 13(a) or 15(d)
of
the Securities Exchange Act of 1934;
and
|
(2)
|
The
information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the
Company.
|
Date:
|
July
27, 2007
|
/s/Ted R. French | ||
Ted
R. French
|
||||
Executive
Vice President and Chief
Financial
Officer
|